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Income inequality isn't going away

A few months ago, there was some good discussion on the blog about the persistently large gap in income inequality. And though the Occupy movement no longer garners headlines, the problem of income inequality remains a core moral issue for many Americans. It is widely thought that Bill de Blasio's focus on the topic has aided his rise in the New York City mayoral race. Andrew Sullivan's influential blog continues its coverage of the data, which shows that just since 2009, top 1% income has grown by 31.4% and everyone else's has been basically flat. Our own E. J. Dionne continues to cover the politics of inequality, and the U.S.C.C.B. has not shied away from it in its advocacy.

Last time we talked about it on this blog, we focused on ratios of CEO-to-worker pay in a given year, and David Cloutier followed up with a longer analysis at Catholic Moral Theology. But the problem is about more than a given year -- it's about the long-term trend from the late 1970's to the present. Timothy Noah has called this period The Great Divergence, in a multifaceted analysis of the possible causes of the growing gap. To my mind, the long-term story offers a compelling moral problem for our time, and one without an easy solution.

A quick way to capture the "great divergence" is this summary of the Economic Policy Institute's report from last year, about which Jena McGregor at the Washington Post wrote:

Average CEO compensation, according to EPI’s calculations, rose 726.7 percent between the years of 1978 and 2011 — more than double the percentage increase in the Standard & Poor’s 500-stock index. Meanwhile, pay for the average private-sector nonsupervisory worker rose a startlingly meager 5.7 percent. ...

My guess is that it’s this inequality that really erodes worker satisfaction and guts employee morale far more than the discrepancy between the top and bottom in any one year’s pay.

I think she's right. Everyone expects annual ratios of 20-to-1 or even 200-to-1 in our form of capitalism. But the fact that purchasing power has not trickled down in the long run -- over my whole lifetime -- is what drains energy and optimism.

One feature of Pope Francis's pontificate has been a renewed emphasis on moral issues that had been thought of as peripheral for many Catholics. He has expanded the core of what counts as a central moral issue. But it's worth remembering that his predecessor had strong words on growing inequality, such as those quoted in the U.S.C.C.B.'s letter from Labor Day:

The dignity of the individual and the demands of justice require, particularly today, that economic choices do not cause disparities in wealth to increase in an excessive and morally unacceptable manner, and that we continue to prioritize the goal of access to steady employment for everyone. . . . Through the systemic increase of social inequality . . . not only does social cohesion suffer, thereby placing democracy at risk, but so too does the economy, through the progressive erosion of "social capital" . . . indispensable for any form of civil coexistence. (Caritas in Veritate no. 32)

Evangelical leader Jim Wallis is famous for saying, "The federal budget is a moral document." I agree. But every budget is a moral document -- from that of Wal-Mart down to that of each family's breakfast table. In a democracy, the problem of income inequality is everyone's problem. And it's not going away.

From motown to notown

Leslie Woodcock Tentler's piece on Detroit in the current issue is terrific. In following the travails of her native city, she has a good deal to say about what went wrong, what she still loves, and what might go right.

Robert N. Bellah, in writing

Now on the website, a special package of Commonweal articles from sociologist of religion Robert N. Bellah, who died at the end of July. Bellah was a contributor to the magazine since the early 1980s, writing on such subjects as the changing nature of the relationship between religion and power; American economic competitiveness and the pastoral letter Economic Justice for All; and the implications of "the Bush doctrine." You can find it here.

Weekend readings: Simone Campbell, David Brooks, Queen Elizabeth

Some items worth catching up on, before (or over) the weekend.

Sister Simone Campbell testified before the House Budget Committee this week, at a hearing that opened with Paul Ryan declaring that in America, “If you work hard and play by the rules, you can get ahead.” When Campbell's turn to speak came, she talked about the effectiveness of federal assistance programs such as the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) in improving the lives of America’s most vulnerable (watch the video below), noting that charity goes only so far. “Everyone has a right to eat, and therefore there is a governmental responsibility to ensure everyone’s capacity to eat.

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The Detroit Blues

Detroit has declared bankruptcy. Meant to clear the city's debts and inspire a new beginning, the decision will leave many current and former city workers with the short-end of the stick. Will the move revive the fortunes of what was the nation's fourth largest city? The Times story on the bankruptcy.

Here is another look at the situtation by Juan Cole, resident of Michigan and close observer of Detroit's woes. He speculates that the city's downfall rests on developments beyond the city's control: globalization, robotization, racism, etc. If Detroit has a new beginning it will be very different than the one inaugurated by Henry Ford's Model-T. Cole wonders if Detroit's fate isn't that of other large U.S. cities dependent on major industrial production. Cole's assessment.

Cars, Congregations, and Conspicuous Consumption

Poor Pope Benedict. The current issue of Time magazine, highlights four “ways the pope is cleaning house,” and labels the pope emeritus the “Prada pope” for his “lavish apartment” and “custom red shoes.” Elsewhere, the Huffington Post mentions Benedict’s “luxury cars” that “included a custom-made Renault, a BMW X5, and a Mercedes.” The context is Pope Francis arriving at Castel Gandolfo in…a Ford Focus.

Happily, Francis’s stern message of the prior week is getting around. As a Reuters story says:

  As part of his drive to make the Catholic Church more austere and focus on the poor, Francis told young and trainee priests and nuns from around the world that having the latest smartphone or fashion accessory was not the route to happiness.

"It hurts me when I see a priest or a nun with the latest model car, you can't do this," he said.

"A car is necessary to do a lot of work, but please, choose a more humble one. If you like the fancy one, just think about how many children are dying of hunger in the world," he said.  

This teaching is for all Catholics, not just priests and nuns. It is of course more embarrassing for the Church when its clerics and religious spend exorbitant amounts of money on luxury goods. But it really should be obvious from our church parking lots whether we are in fact a church of the poor…or not.

The Church’s teaching about property, about modest use of goods, and of the necessity of putting surplus at the disposal of others is not new. It’s old. It’s all over Scripture and the patristic writers. It’s in Aquinas, who distinguishes between natural and artificial wealth. It’s in all the modern social encyclicals—take Pope Paul VI's straightforward claim that "the superfluous wealth of rich countries should be placed at the service of poor nations" (Populorum Progressio, no. 49) or Pope John Paul II's scathing criticism of "superdevelopment." It’s in the Catechism—paragraphs 2405 and 2407 are pretty clear. It’s entirely practical—that is, a person could go out and start living it out tomorrow. It is amazing to me that the American church sometimes pretends that this teaching simply doesn’t exist. Of course, the Church doesn't teach that everyone is supposed to be St. Francis of Assisi or Dorothy Day. But it does teach that simplicity should govern the lives of all Christians, and it does warn us—all of us—against conspicuous and never-ending consumption.

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Defending the One Percent? Mankiw on Inequality and Just Deserts

Harvard economist Greg Mankiw has written a forthcoming article, titled “Defending the One Percent,” that should be required reading for anyone interested in economic justice and inequality – perhaps especially for those like myself who will dispute Mankiw’s conclusions. As a WaPo opinion piece rightly suggests, Mankiw’s anecdotal affirmation of equality of opportunity is problematic. However, it would be wrong to dismiss the piece because of this, for it is a remarkable (and remarkably candid) laying-out of the fundamental challenges from mainstream economics to Catholic concerns about inequality.

Mankiw’s overall argument suggests that we have three possible ways of deeming whether wealth inequality is wrong: a strictly utilitarian perspective, a “veil of ignorance” perspective, and his preferred alternative, what he calls the “just-deserts” perspective, in which “people should receive compensation congruent with their contributions.” In defending the latter perspective, Mankiw makes a number of provocative claims:

He disputes the claim about inequality-of-opportunity partly on grounds that genetic inheritance plays a role in various traits that correlate with high income. He rejects claims that most high-income individuals are compensated beyond their productivity, and (rather carefully) refutes the standard arguments against such compensation. He instead argues that high compensation at the top is the result of increasing demand for high-skilled workers relative to low-skilled, and technological change which allows some of these high-skilled individuals to leverage their talents across enormously large fields of demand. If the best possible doctor could be seen by as many people as Twins catcher Joe Mauer, he would probably make more than Joe Mauer. He accepts that the wealthy benefit not only from government infrastructure and research but also from transfer payments, but suggests that the 1% already contribute disproportionately to public funds through progressive taxation, and that over time, government spending has increasingly shifted from infrastructure investment toward transfer payments.

Mankiw is a worthy conversation partner, largely because he is not a doctrinaire conservative. He actively supports Pigovian taxes on negative externalities (e.g. higher gas taxes), and is far more careful to accept the existence of distorting, “rent-seeking” problems in present systems. He accepts, for example, the claim that some activity in the financial sector is excessive not because of its primary work of efficient allocation of investment capital, but because of opportunistic use of split-second information and the like. So Mankiw is not blind to our problems. But he does want to fundamentally defend the present system as largely just and effective. I want to call attention to three underlying tenets of his argument, because I think these – and not the empirical issues above – are what should be disputed by Catholic social thought:

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Featured on the homepage

We've been running some good web-exclusive content on the homepage. Just posted: "Catholics Are Different," a special package highlighting the writing of Andrew M. Greeley in Commonweal, where over the course of six decades his work appeared. And, if you haven't already, check out Nicholas P. Cafardi's piece on the apparent unwillingness of some bishops to follow their own sexual-abuse reforms. Finally, E. J. Dionne Jr. examines a potentially unbreachable gap between libertarian theory and libertarian practice.