Andrew Sullivan in America: Inequality? It was the saving of them
You’ve heard the spin. The booming Anglo-American economies have long performed better than their more socialist contemporaries — but the cost is too great. The inequality that is an inevitable consequence of a free market in which ability and hard work are disproportionately rewarded is a blight that new Labour and the new Democrats must reverse.
Far from helping the poor, the post-Thatcher and post-Reagan economies have trapped them in poverty and social exclusion. Only turning on the tap of more public spending, as left-liberals like Polly Toynbee argue, can undo the damage.
There’s no knowing what Bill Clinton, Tony Blair and other chin-strokers in Peter Mandelson’s new-left seminar this weekend are discussing, but this issue may be one of them.
The period of countering the post-1980s right is over. The era of actual centre-left government is here. Is this the time to go old left again, to drop the market emphasis and tight fiscal policies of the 1990s, to rescue the centre-left from the growing threat of a resurgent right? Well, one answer to that question comes in a fascinating data-dump from the American government last week. It is more information about the boom of the 1990s — captured in the census of 2000.
What it does is disprove the Toynbees and Prescotts and Huttons categorically. In fact the census statistics show that the boom of the 1990s helped women more than men, and saw poverty among single women, the elderly and children decline.
Yes, inequality grew. But that’s simply because those at the very top did spectacularly well. Those at the bottom did very well too, and those in some previously doomed groups — such as welfare mothers with children — saw serious gains.
That’s the inevitable conclusion from the facts of the boom of the 1990s — as American government spending was restrained, as budgets were balanced, markets unleashed, welfare reformed and taxes kept low.
There is no contradiction between free market economics and the empowerment of the poor and minorities. In fact, there’s a highly beneficial correlation.
First off, women did better than men as a group. Male median incomes in America actually fell 2.3% in the 1990s (mainly because the median was dragged down by vast numbers of unskilled immigrants). Women’s median incomes, in contrast, rose 7.3% and their average income rose to 73% of the male average. Second, the percentage of people in poverty in America dropped in the 1990s, from 10% to 9.2%.
That sounds like a trivial decline, but there are nuances. Those 10 years also saw the largest immigrant flux in American history — 31m new Americans — more than half from Latin America, and many unskilled and poor.
If you take that into account, as Mickey Kaus, a journalist, has noted, the poverty rate among Americans already in the country in 1990 dropped considerably.
Critically, the poverty rate among female-headed households with children under 18 — those welfare mothers beloved of the left — fell from 42.3% to 34.3%. Poverty among the old also dropped — from 13% to 10%.
These are real declines in real poverty. And they came from restraining government, not expanding it.
In fact five out of six Americans now live in counties in which the proportion of poor people is shrinking. In the 1990s lower-income counties showed bigger gains in wealth than richer ones. The middle class didn’t miss out either. The median household income in America grew by almost 10% in the 1990s.
And that, of course, underestimates the real standard of living. The phenomenal technological gains — in healthcare, media, communication, travel and entertainment — helped each new dollar to buy far more in quality than it did 10 years ago. And many of those gains were made possible by the achievements and energy of the most successful.
Only if you see politics through the prism of class envy and resentment can this picture be seen as a failure. If you want a system in which everyone gains — including the poor — then the Clinton era is a pretty solid example of what works.
Clintonism wasn’t Thatcherism, of course. It added some critical elements: welfare reform, a small shift of the burden of taxation away from the working poor, tax credits to make work more profitable than welfare, and modest investments in education. But these useful correctives to the right were central parts of the new Democrat agenda, often resisted by the left, and Clinton, to his credit, stuck with them.
Unlike Blair, Clinton had a critical ally in keeping him to the centre: for most of his term in office he had to deal with a hardline Republican Congress. This made it easier for Clinton to pull off the trick of bringing a more liberal party into more conservative territory. “Look,” he could say, “I have no choice.”
Blair, in contrast, has had to manufacture a party within his party to achieve the same thing. But neither is a fool. They know the secret of delivering growth with social inclusion — it’s the ability to co-opt those elements of your opponents’ agenda that actually work.
The perpetual issues of the global economy — immigration, terrorism — were equally absorbed into the centre-left agenda. Blair has moved almost to the right of the Tories on asylum seekers; Clinton signed the most draconian immigration bill in memory in 1996.
Above all, both men grasped that you do not make the weak strong by making the strong weak. You can siphon some of the wealth of the strong to invest in education, but your best bet is to allow free markets and free people to find their own destinies.
Above all, you need to remove the disincentives for work that the old welfare state constructed. Clinton’s signal achievement was to end welfare as it was known and reduce poverty at the same time.
Last week’s data showed that that achievement is no longer in doubt. And it wasn’t by reverting to old statist or redistributionist policies that he did it.
Silvio Berlusconi blurted the truth about this last week in The Guardian. Mandelson must know it well. But then I have a feeling Blair does, too.