Submerging Economies: Is the United States Becoming a Third World Country?
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by Chip Krakoff on September 18, 2010

The New York Times reported yesterday that one in seven Americans now lives in poverty. There are a lot of “statistics” floating around out there that I have some trouble believing. Can it really be true that one in four American women are victims of sexual assault or that 12 million illegal immigrants commit 2,200 of the roughly 15,000 murders a year in the U.S. (which would make them nearly four times as murderous as the average U.S. resident)?  But this is not one of them. This is the Census Bureau, telling us that the poverty rate has risen in each of the past three years as a result of the recession, climbing from 13.2% in 2008 to 14.3% last year, and that the number of people receiving food stamps has jumped from 39 million at the beginning of this year to 41.3 million now. The official Federal poverty level in 2009 was $22,050 in pre-tax income for a family of four, $14,570 for a couple, and $10,830 for a person living alone.

There are plenty of countries in the world where this kind of income would make you feel pretty well off. Economists reckon that when households in emerging economies reach an annual disposable income of more than $5,000 (in purchasing-power parity terms) consumer spending starts to take off, and people start to buy motorcycles, air conditioners, cars, and other big-ticket items. According to Euromonitor, 31.7% of Chinese households have between $5,000 and $15,000 in disposable income, and 14.6% of Indian households. That’s more than half a billion people, but in 10 years’ time more than 1.2 billion people in China, India, and Indonesia alone will have reached that income level, adjusted for inflation. That means, of course, that at least as many people in those countries are and will remain substantially poorer, but the trend is moving in the right direction.

If we know one thing about present trends, it’s that they never continue indefinitely, otherwise my IRA would now be worth $5 million and there would be 20 billion people on the planet, most of them starving. But it does seem clear that for one part of the world life is getting better, while for another part (my part) it is getting worse.

The Census data contain no good news for any of us, rich or poor. The worst bit of it, to me, is that median family income in 2009 was lower than in 1999. I can’t put my hands on the data right now, but I have read in several places that class rigidity in America is now more severe than in most of the rest of the world. This means that someone born into the lowest income group in the United States has a smaller chance of rising out of that group than someone born into the same conditions in England or Sweden.

Now too comes information that the United States has slipped to fourth place in the annual World Economic Forum ranking of the economic competitiveness of 139 countries. Until two years ago, the U.S. was at the top of the list. Last year Singapore leapt into first place. This year Switzerland has captured the top spot and Sweden, that bastion of socialism, came third, meaning that it is considered a better place to do business than America. According to the WEF, the U.S. has lost ground due to a “weakening of public and private institutions… [and] lingering concerns about the state of its financial markets,” while Sweden  has “the world’s most transparent and efficient public institutions, with very low levels of corruption and undue influence.” The Land of the Free is  23rd in quality of infrastructure, 40th in both corruption and protection of property rights, and 68th in wastefulness of government spending.

The World Bank, whose annual “Doing Business”  report ranks the ease of doing business in 189 countries and territories, also puts the U.S. in fourth place, after Singapore, New Zealand, and Hong Kong. We rank very highly on labor flexibility, access to credit, and investor protection, but very poorly on things like the cost and difficulty of paying taxes, for which we are in 61st place, after countries like France, Sweden, Denmark, Rwanda, and Kazakhstan.

It’s likely that someone out in the fever swamps of talk radio will take this information as proof that the Almighty is punishing us for our wicked ways, and as a clear sign that we must stamp out gay marriage, get rid of our foreign-born Marxist Muslim President, and return to the path of righteousness, but for most of us they are a sign that something is wrong with the way our country is governed.   Or, to put it more bluntly, that there is something wrong with the way we govern ourselves.

There are limits to what government can and should do. The problems have become so bafflingly complex that few people can really understand them or suggest an appropriate response, even though that hasn’t prevented everyone from Paul Krugman to Sarah Palin claiming they can. I have a growing sense, and I don’t think I am alone in this, that our government is incapable of addressing the big problems and that most of the so-called solutions they devise are wrong and self-serving, and that most of the politicians, whatever their political persuasion, are not even asking the right questions, much less coming up with good answers. This is about much more than listening to the anger of the Tea Party supporters and their opposite numbers on the Left. It is about considering these problems seriously, debating and developing possible solutions, and, above all, telling the people the truth and engaging them in the discussion. But the Democrats can offer nothing more than increasing spending and raising taxes, while the Republicans insist that cutting both taxes and spending is the only answer. Both of them are wrong.

I was in Haiti last week and asked a friend of mine who he planned to vote for in the November presidential elections. “No one,” he said. “I have never voted and I don’t plan to this time. My vote doesn’t matter. Politicians are only in it for themselves and don’t care about the people.”

The United States may not yet have arrived at that point, though I know more than a few Americans who feel the same way about their government as my Haitian friend does about his. It does make one wonder, though, how we decided we could build functioning democracies in Afghanistan, Haiti, and Iraq, when we can’t even fix the one we have at home.

Posted 09-20-2010 5:14 PM by Charles Krakoff