Putting the Lie to Mass Prosperity
George Will writes an interesting piece this morning on how the proliferation of luxury brands has robbed them of their ability to impress. That is, a generation ago, possessing certain brands was an accepted proxy for having money. Now, through credit and discounting virtually anyone can own anything. Thus a Gucci, Rolex and Lexus are robbed of some some of their appeal. They no longer signify social status. They just signify that you like owning designed brands.
Will's column reminds me of another dynamic at work in America: the repetition of the fantasy that we somehow live in a country of mass prosperity. You see this all the time in the mainstream financial press, from pundits like Ben Stein, and most recently the vast majority of Republican candidates were gushing about what a great economy we have. Trouble is, this just does not square with the facts. Right now, the top ten percent of the country controls more wealth than the other 90%. We are in the midst of a boom in housing foreclosures, credit card default rates are at an all time high, the middle bands of the income distribution have seen their incomes drop in the last twenty years and (depending on what stats you use) between 10 -15% of the nation lives in poverty. Forty seven million people lack health insurance and social mobility -- the meausure of people moving upward in the economic hierarchy -- is back at Gilded Age levels. So why all the applause for the economy?
The answer is twofold. First, there are a small group of people living incredibly well. By an measure, thanks to years of tax cuts, the rich are richer than they ever were in comparison to anyone else. They can live fabulously. More fabulously than even their rich predecessors. The lifestyles and exploits of these folks take up a disproportionate amount of media space and attention. So, watching prime time TV, it is very easy to think that a lot of people live like Frasier Crane.
Second, we often substitute the ability to buy consumer goods with wealth. We live in an age inwhich many consumer goods, particularly things like electronics, designer clothes, fancy cars and cable tv are available to many. This is due to deep discounting, low overseas labor costs and the seemingly infinite amount if credit available to Americans. Want a big house? There is a "interest only" mortgage for you. Need a Benz? Leasing makes it affordable to people who could never actually buy the car. Rolex? Gucci? Luxury vacation? Visa is there. Looking at this cornucopia of riches, it is easy to conclude that large swaths of the population are doing quite well.
Buy buying things -- particularly buying things on credit -- is not the same as wealth. Real wealth, an individuals assets minus their liabilities, is actually in decline across the economic spectrum. As Will notes, even the uber rich have negative balance sheets. Moreover, the prices of things that are actually important to most Americans such as education, healthcare and housing, have skyrocketed.
Unfortunatley, the illusion of wealth prevents us from having a real discussion of income inequality and social justice in America. When we look down out street at a row of newly leased cars and satellite dishes, it is all too easy to fall for the big lie. Trouble is, there are a significant number of powerful people who are not interested in having you believe anything else.
Will's column reminds me of another dynamic at work in America: the repetition of the fantasy that we somehow live in a country of mass prosperity. You see this all the time in the mainstream financial press, from pundits like Ben Stein, and most recently the vast majority of Republican candidates were gushing about what a great economy we have. Trouble is, this just does not square with the facts. Right now, the top ten percent of the country controls more wealth than the other 90%. We are in the midst of a boom in housing foreclosures, credit card default rates are at an all time high, the middle bands of the income distribution have seen their incomes drop in the last twenty years and (depending on what stats you use) between 10 -15% of the nation lives in poverty. Forty seven million people lack health insurance and social mobility -- the meausure of people moving upward in the economic hierarchy -- is back at Gilded Age levels. So why all the applause for the economy?
The answer is twofold. First, there are a small group of people living incredibly well. By an measure, thanks to years of tax cuts, the rich are richer than they ever were in comparison to anyone else. They can live fabulously. More fabulously than even their rich predecessors. The lifestyles and exploits of these folks take up a disproportionate amount of media space and attention. So, watching prime time TV, it is very easy to think that a lot of people live like Frasier Crane.
Second, we often substitute the ability to buy consumer goods with wealth. We live in an age inwhich many consumer goods, particularly things like electronics, designer clothes, fancy cars and cable tv are available to many. This is due to deep discounting, low overseas labor costs and the seemingly infinite amount if credit available to Americans. Want a big house? There is a "interest only" mortgage for you. Need a Benz? Leasing makes it affordable to people who could never actually buy the car. Rolex? Gucci? Luxury vacation? Visa is there. Looking at this cornucopia of riches, it is easy to conclude that large swaths of the population are doing quite well.
Buy buying things -- particularly buying things on credit -- is not the same as wealth. Real wealth, an individuals assets minus their liabilities, is actually in decline across the economic spectrum. As Will notes, even the uber rich have negative balance sheets. Moreover, the prices of things that are actually important to most Americans such as education, healthcare and housing, have skyrocketed.
Unfortunatley, the illusion of wealth prevents us from having a real discussion of income inequality and social justice in America. When we look down out street at a row of newly leased cars and satellite dishes, it is all too easy to fall for the big lie. Trouble is, there are a significant number of powerful people who are not interested in having you believe anything else.
posted by Jack Reed at 9:42 AM
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