Posts Tagged ‘class’


The United States does not collect health data by class.*

However, the recently released report from the County Health Rankings and Roadmaps project (which for the first time this year include a measure of county-level inequality, depicted in the map above), conducted by the University of Wisconsin Population Health Institute, does give us some sense of the relationship between class and health outcomes in the United States.

Here are some of the key findings:

  • Rates of children in poverty are more than twice as high in the unhealthiest counties in each state as they are in the healthiest counties. (The top performing counties in the United States, the 10 percent with the lowest rates of child poverty, have child poverty rates of less than 13 percent. The worst performing counties, the 10 percent with the highest rates of child poverty, have child poverty rates of at least 38 percent.)
  • Across the nation, rates of unemployment are 1.5 times as high in the least healthy counties of each state as they are in the healthiest counties. (The top performing counties in the United States have unemployment rates of 4.1 percent or lower. The worst performing counties for unemployment have unemployment rates of 10.7 percent or higher.)
  • The top performing counties in the United States have income inequality ratios of less than 3.7, while the worst performing counties have income inequality ratios of 5.4 or higher. (Within counties in the United States, the average—median—income inequality ratio of the 80th to the 20th percentile is 4.4. The income-inequality ratio in U.S. counties ranges from 2.6 to 9.6.)

Thus, as Margot Sanger-Katz explains,

The researchers measured inequality by comparing the number of people in a given place who earned above the 80th percentile in the county with the number of people earning less than the 20th percentile. Then they measured life expectancy using a custom measurement they developed — it counts the “potential life years lost” in each community by measuring all those who died before the age of 75, and the age at which they died. So someone who died at age 70 would have five years of potential life lost. Then they adjusted the numbers according to how old people were in the county, so counties with more old people wouldn’t look sicker than counties that were younger. The study looked at only the average life span and not that of higher-income versus lower-income residents.

For every one-point increase in the ratio between high and low earners in a county, there were about five years lost for every 1,000 people. That’s about the same difference they observed when a community’s smoking rate increased by 4 percent or its obesity rate rose by 3 percent. Researchers said that inequality effect persisted even when they compared communities of similar average income and racial composition.

The question we all need to ask then is, how many potential life years have been lost to the grotesque levels of inequality (and the conditions and consequences of growing inequality, such as poverty and unemployment) we have seen emerging in recent decades in the United States?


*In contrast to other countries, such as the United Kingdom (which has issued a series of reports over the years on the relationship between health and class, including the Acheson Report, fully titled the Independent Inquiry into Inequalities in Health Report, in 1998).

fredgraph chart

The discussion of capital and labor shares puts the issue of class at the top of the agenda. No wonder, then, that mainstream economists are expending so much effort these days attempting to define away the problem.

Let me explain.

If we look at changes in capital and labor shares (measured in terms of corporate profits before tax and compensation of employees as shares of gross domestic product, as in the chart on the left), we can clearly see that, in recent decades, the profit share has been rising and the labor share has been falling. In other words, labor has been losing out to capital—and we need to focus on solving that class problem.

But, of course, the share of income accruing to capital doesn’t just show up in corporate profits; some of that capital share is also distributed to a small portion of income-earners in the corporate (both financial and nonfinancial) sector. The share of income of the top one percent (as in the chart on the right) is a good approximation. If we therefore added the top-one-percent to corporate profits, and at the same time subtracted it from the compensation of employees, the divergence between the capital and labor shares would be even greater—and the class problem would be even more acute.

MIT’s Matthew Rognlie understands this perfectly. He notes that David Ricardo pronounced the issue of how aggregate income is split between labor and capital the “principal problem of Political Economy” and that the recent explosion of research on inequality has both called into question the postwar presumption of constant capital and labor shares and emphasized the increasing share of income accruing to the richest individuals. In other words, class has once again reared its ugly head.

Instead of trying to solve this class problem, Rognlie attempts to define away the problem—first, by focusing on net income shares and, then, by including housing in capital. He concludes that, once those adjustments are made,

concern about inequality should be shifted away from the split between capital and labor, and toward other aspects of distribution, such as the within-labor distribution of income.

The problem with focusing on net income shares—that is, in the case of capital, gross profits minus depreciation—is that it confuses flows of value (corporate profits before taxes, plus incomes to the top one percent, in the way I suggested above) with expenditures (e.g., by corporations to replace the value of plant, building, and machinery that has depreciated in value during the course of production).

The problem with including housing in the capital stock is that it doesn’t form part of the capital from which capitalists derive a flow of new value added or created. Housing industry profits are already accounted for in gross corporate profits. The fact that individuals may own housing doesn’t allow them to capture any of that new value; it just allows them to enjoy the benefits of having a home and to pay the costs (to banks and other financial institutions) of financing their homeownership.

While I agree with Rognlie that the “story of the postwar net capital share is not a simple one,” the fall and then recovery of the capital share (in the form of both corporate profits and one-percent incomes), which is mirrored by the rise and then fall of the wage share, can’t simply be defined away.

In other words, just as it was in the early-nineteenth century, class remains the “principal problem of Political Economy” in our own times.

economic segregation

It is not just that the economic divide in America has grown wider; it’s that the rich and poor effectively occupy different worlds, even when they live in the same cities and metros.

That’s the conclusion of a new study by Richard Florida and Charlotta Mellander [pdf]. What they do is construct an index of economic segregation based on three variables—income, education, and occupation—which are themselves highly correlated.

The ten large metropoles with the highest values on the Overall Economic Segregation Index are Austin, Columbus, San Antonio, Houston, Los Angeles, New York, Dallas, Philadelphia, Chicago, and Memphis. When the listed is expanded to cover all metro areas, a number of college towns rise to the top: Tallahassee (home to Florida State University) jumps to first place and Trenton-Ewing (Princeton University) to second, while Austin falls to third. Tucson (University of Arizona) and Ann Arbor (University of Michigan) also make the list, along with Bridgeport-Stamford-Norwalk.

The least segregated large metropoles include Orlando, Portland, Minneapolis-St. Paul, Providence, and Virginia Beach. Rustbelt metros like Cincinnati, Rochester, Buffalo, and Pittsburgh also have relatively low levels of overall economic segregation.

Another notable finding is that economic segregation tends to be more intensive in high-tech, knowledge-based metropolitan areas. It is positively correlated with high-tech industry, the “creative class” share of the workforce, and the share of college graduates. In other words, the so-called new economy is less a cure and more a cause of the new levels of class segregation in urban America.

And the implication of their analysis?

Where cities and neighborhoods once mixed different kinds of people together, they are now becoming more homogenous and segregated by income, education, and occupation. Separating across these three key dimensions of socio-economic class, this bigger sort threatens to undermine the essential role that cities have played as incubators of innovation, creativity, and economic progress.


Special mention



My post on the nature of the conflict over Greek debt seems to be getting some notice, here and on the Real-World Economics Review Blog.

Now it’s been translated into Italian.

I can’t say I have a good explanation for it. But, more than five years into the recovery from the most recent global financial crash, the specter of Marx continues to haunt contemporary capitalism.

For example, the Reuters’ John Lloyd is convinced “communism is again haunting Europe.” I suppose that was inevitable, given the landslide victory of Syriza in Greece. The irony, of course, is that Alexis Tsipras, Yanis Varoufakis, and the other members of the new government have promised nothing more than to create some breathing room (by renegotiating the external debt), ameliorate the worst effects of the previous government’s austerity policies (by providing food aid to the poor and rehiring some government workers), and modernize the state (by making it more difficult for the oligarchy to avoid paying its taxes). The fact that such proposed changes are actually haunting contemporary Europe should give us some pause.

Which reminds me of an earlier piece, by , in the Guardian, who argues that, for many in his generation, the “ideological underpinnings of capitalism have been undermined.”

Marxism in America needs to be more than an intellectual tool for mainstream commentators befuddled by our changing world. It needs to be a political tool to change that world. Spoken, not just written, for mass consumption, peddling a vision of leisure, abundance, and democracy even more real than what the capitalism’s prophets offered in 1939.

And then there’s the fact that I’ve been invited this spring to present a university-wide lecture on “Utopia and Critique: A Marxian Perspective.”

Yes, indeed, there seems to be a whole helluva lotta Marx goin’ on out there. . .

Cartoon by David Simonds. Angela Merkel's hard line on debt threatens the euro project.

Most of the commentary on the ongoing euro crisis, especially the current Greek debt negotiations, has been couched in terms of a conflict between nations. This is particularly true of mainstream economists, whose nation-state-based models downplay or ignore class, even as the policies they advocate have tremendous class implications.

So, it’s fallen to—however ironically—financial strategist and professor of finance Michael Pettis to remind us the current conflict is not between nations, but between classes.

The whole piece, beginning with the French indemnity of 1871-73, is worth a careful read. But I want to focus here on what Pettis writes about the class conditions that led to and follow on from the current crisis.

First, Pettis makes the important point that the capital flows from north to south within the euro zone were based on important class changes within Germany (he uses his native Spain throughout as his example in the south but most of his analysis follows for Greece and other countries):

It was not the German people who lent money to the Spanish people. The policies implemented by Berlin that resulted in the huge swing in Germany’s current account from deficit in the 1990s to surplus in the 2000s were imposed at a cost to German workers, and have been at least partly responsible for Germany’s extremely low productivity growth — most of Germany’s growth before the crisis can be explained by the change in its current account — rather than by rising productivity.

Moreover because German capital flows to Spain ensured that Spanish inflation exceeded German inflation, lending rates that may have been “reasonable” in Germany were extremely low in Spain, perhaps even negative in real terms. With German, Spanish, and other banks offering nearly unlimited amounts of extremely cheap credit to all takers in Spain, the fact that some of these borrowers were terribly irresponsible was not a Spanish “choice.” I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who befitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between Germans and Spaniards, it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other.

This is a  conflict among economic groups, in other words, and not a national conflict, although it is increasingly hard to prevent it from becoming a national conflict.

Here, we can see that, while relative productivity in Germany was pretty constant, relative real wages were falling and corporate profits (in absolute terms) rose dramatically in the run-up to the crash of 2008:


In other words, German banks managed to capture a large portion of the growing surplus created by German workers and, instead of seeing it invested domestically, lent it abroad (to a broad array of Spanish, Greek and other borrowers)—which was the flip side of Germany’s positive current account balance (since German capitalists, benefiting from lower unit labor costs, could easily outcompete potential exporters in the European south, while German demand for European goods dropped as wages fell).

Pettis’s second point is that countries don’t lend or borrow; different classes within countries create the conditions for and engage in large-scale capital flows between countries.

But didn’t Spain have a choice? After all it seems that Spain could have refused to accept the cheap credit, and so would not have suffered from speculative market excesses, poor investment, and the collapse in the savings rate. This might be true, of course, if there were such a decision-maker as “Spain”. There wasn’t. As long as a country has a large number of individuals, households, and business entities, it does not require uniform irresponsibility, or even majority irresponsibility, for the economy to misuse unlimited credit at excessively low interest rates. Every country under those conditions has done the same. . .

And this is a point that’s often missed in the popular debate. Over and over we hear — often, ironically, from those most committed to the idea of a Europe that transcends national boundaries — that Spain must bear responsibility for its actions and must repay what it owes to Germany. But there is no “Spain” and there is no “Germany” in this story. At the turn of the century Berlin, with the agreement of businesses and labor unions, put into place agreements to restrain wage growth relative to GDP growth. By holding back consumption, those policies forced up German savings rate. Because Germany was unable to invest these savings domestically, and in fact even lowered its investment rate, German banks exported the excess of savings over investment abroad to countries like Spain. . .

Above all this is not a story about nations. Before the crisis German workers were forced to pay to inflate the Spanish bubble by accepting very low wage growth, even as the European economy boomed. After the crisis Spanish workers were forced to absorb the cost of deflating the bubble in the form of soaring unemployment. But the story doesn’t end there. Before the crisis, German and Spanish lenders eagerly sought out Spanish borrowers and offered them unlimited amounts of extremely cheap loans — somewhere in the fine print I suppose the lenders suggested that it would be better if these loans were used to fund only highly productive investments.

But many of them didn’t, and because they didn’t, German and Spanish banks — mainly the German banks who originally exported excess German savings — must take very large losses as these foolish investments, funded by foolish loans, fail to generate the necessary returns. It is no great secret that banking systems resolve losses with the cooperation of their governments by passing them on to middle class savers, either directly, in the form of failed deposits or higher taxes, or indirectly, in the form of financial repression. Both German and Spanish banks must be recapitalized in order that they can eventually recognize the inevitable losses, and this means either many years of artificially boosted profits on the back of middle class savers, or the direct transfer of losses onto the government balance sheets, with German and Spanish household taxpayers covering the debt repayments.

Finally, Pettis reminds us that the winners and losers in the current crisis are not nations but classes within nations.

The “losers” in this system have been German and Spanish workers, until now, and German and Spanish middle class savers and taxpayers in the future as European banks are directly or indirectly bailed out. The winners have been banks, owners of assets, and business owners, mainly in Germany, whose profits were much higher during the last decade than they could possibly have been otherwise.

In fact, the current European crisis is boringly similar to nearly every currency and sovereign debt crisis in modern history, in that it pits the interests of workers and small producers against the interests of bankers. The former want higher wages and rapid economic growth. The latter want to protect the value of the currency and the sanctity of debt.

The lesson, as I see it, is that focusing on the conflict between nations, and ignoring the conflict between classes, only serves to postpone a resolution of the crisis and to invigorate right-wing nationalist sentiments across Europe. It also means that, even if and when the debt crisis is resolved (for example, by revising the terms of debt repayment for Greece, Spain, and other countries), the problem of class conflict within the existing system—in both the north and the south—will still have to be addressed.