Americans placid despite growing prosperity gap

WASHINGTON D.C. - Social well-being is primarily a function of economic well-being. That at least is true in the worldview of economics, and economics is the dominant lens free-market democracies use to assess themselves. But is it as true as we’ve grown to think?

In a recent column, for example, one our best writers on economics, Robert Samuelson, wrote that American businesses were too “middle-aged” – that contrary to impressions, start-up businesses are not contributing enough to the economy and innovation is not coming fast enough.

“And society’s capacity to innovate is crucial,” he wrote. “It generates the wealth needed to raise incomes and dampen social conflicts.”

Looking back at America since World War II, one can make a strong argument that the connection between social conflict and prosperity is actually quite loose.

No period endured more unrest, including riots and years of protest, than the 1960s, a period of dazzling prosperity.  In the most tumultuous years in our history since perhaps the Civil War, unemployment was just 3.6 per cent, inflation was at 3.6 and Gross Domestic Product grew robustly at 4.9 percent.

By contrast, in 1982 unemployment was at 9.7 percent, inflation was 8.4 percent and the GDP actually shrank. Yet there was no great social conflict or tension. Indeed, we tend to now recall Ronald Reagan’s second year in office as part of the Morning in America period.

Again, in 2009, during the Great Recession, unemployment hit 9.3 percent and GDP again declined.  It was a miserable period that hasn’t yet generated any nostalgia.

But was it a period of great strife? No.

The late 1960s were obviously rare times. Deep divisions over Vietnam and civil rights boiled over, despite the country’s prosperity. However, in the decades since then, no amount of economic bad news has produced social conflict anywhere near as wrenching.

Periods of sharp frustration, where polling shows levels of trust, confidence and optimism tanking, were just as likely to be sparked by political events as bad business numbers: Watergate, the Lewinsky episode and various government shutdowns, for example.

It is also true that since the 1970s, there has been a steady, one-way decline in the trust Americans hold for government and institutions that has persisted through booms and busts. This lingering malaise is to the riots of 1968 as the flu is to Ebola.  

It hasn’t fostered protests, but it has led to a prolonged period of gridlock (because voters don’t trust either party), culture war and political polarization (though we do tend to exaggerate their depth). 

But all this just underscores the degree to which prosperity and the social mood can run on separate tracks.

In this regard, society is like individuals.

“Positive psychology” is the relatively new field that studies what makes people happy and content instead of just mental illness. An early finding was that once individuals reach a floor level of material well-being (income, shelter, food, health and stuff), further increases in wealth or income only marginally boost happiness, and even those max out pretty fast. 

Increases in happiness are much more likely to come from relationships, people and activities than money, objects or even accomplishments. Declines in material well-being have to be much steeper than we think to erase happiness.  

Perhaps there is a parallel in modern societies.  It seems like it would take a drastic decline in purely economic conditions – something like the Great Depression or more – to spark riots in the streets.

Similarly, cyclical variations in the economy don’t affect Gross National Happiness as much as we believe.  Ronald Reagan was able to declare Morning in America as much because of his pastoral abilities as through better statistics.

The good news here is that it takes a lot to destabilize, divide and depress Americans.

The bad news is that politicians have grown fat and happy knowing that voters expect very little of them, that there won’t be pitchforks in the streets, and that the political structure protects incumbents and saves rascals from being thrown out.

If the economic view of the world were correct, this would be a moment of social conflict.  

Since 1989, the real income and wealth of all Americans except those in the top five percent has either declined or stagnated (according to a comprehensive study by the Federal Reserve released last fall). 

That is an almost unparalleled period of economic anemia. On top of it, economic inequality is greater than at any time in a century.

Is it a good thing, a sign of the resilience of our system and our character, that this hasn’t generated more social conflict? Or is it a droopy sign of a middle-aged society?

[Also by Dick Meyer: Clinton launches marketing campaign]

Want to keep up with all the latest DecodeDC stories and podcasts? Sign up for our weekly newsletter at decodedc.com/newsletter.

Print this article Back to Top