Wednesday, September 11, 2013

Cowen, Average Is Over

In this new Dutton release Tyler Cowen, a professor of economics at George Mason University, analyzes today’s economic reality in which Average Is Over. In its place is a world of income disparity, with big earners and big losers. This dichotomy, Cowen argues, is not likely to change in the future. Although the subtitle of the book is Powering America Beyond the Age of the Great Stagnation, future economic growth will not provide more wage equality. Since the source of this power is the use of new technologies, the economic divide will in fact only be exacerbated: “Marriages, families, businesses, countries, cities, and regions all will see a greater split in material outcomes; namely, they will either rise to the top in terms of quality or make do with unimpressive results.” (p. 4)

It’s not the case, writes Cowen, that the middle class has been decimated, but “the middle of the distribution is thinning out and this process appears to have a long ways to run. … The longer-term trend is fewer jobs in middle-skill, white-collar clerical, administrative, and sales occupations. Demand is rising for low-pay, low-skill jobs, and it is rising for high-pay, high-skill jobs, including tech and managerial jobs, but pay is not rising for the jobs in between.” (pp. 38-40) Fret not, finance remains one of those areas that recruits freshly minted college grads with a high ‘g factor’—i.e., high general intelligence (even if not high skill)—and pays them well.

What will the United States look like in twenty to forty years? Extrapolating from the present, Cowen argues that “we will move from a society based on the pretense that everyone is given an okay standard of living to a society in which people are expected to fend for themselves much more than they do now.” He imagines “a world where, say, 10 to 15 percent of the citizenry is extremely wealthy and has fantastically comfortable and stimulating lives…. Much of the rest of the country will have stagnant or maybe even falling wages in dollar terms, but a lot more opportunities for cheap fun and also cheap education. Many of these people will live quite well, and those will be the people who have the discipline to benefit from all the free or near-free services modern technology has made available. Others will fall by the wayside. … It will become increasingly common to invoke ‘meritocracy’ as a response to income inequality” and this “framing of income inequality in meritocratic terms will prove self-reinforcing. Worthy individuals will in fact rise from poverty on a regular basis, and that will make it easier to ignore those who are left behind.” (pp. 228-230)

The future Cowen paints is pretty bleak for the majority of Americans. For instance, “the less wealthy will be pushed out of the nicer living areas.” He contemplates the possibility of building some makeshift structures for the poor, including the elderly poor, “similar to the better dwellings you might find in a Rio de Janeiro favela. The quality of the water and electrical infrastructure might be low by American standards, though we could supplement the neighborhood with free municipal wireless….” (p. 244)

This is not a future I want to see. We can only hope that, as often happens, trends are disrupted.

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