Evicted (part 3)

March 1, 2021

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The renters studied by Matthew Desmond in Evicted had incomes so low that they were effectively shut out of the market for good housing. The sad fact is that they had to pay too large a portion of their income even to live in housing at the bottom of the market.

Making housing affordable

The United States does have programs that partially address the housing problem. About 15 percent of poor renters live in public housing, which has evolved from the high-rise towers of the 1950s and 60s to “low-rise, attractive buildings dispersed over several neighborhoods.” Another approach, serving 17 percent of poor renters, is a housing voucher that pays part of the cost of renting in the private market. In both cases, renters only have to pay a portion of the rent based on their income, such as 30 percent. These programs leave about two-thirds of the poor to fend for themselves.

In Milwaukee, Desmond observed some of the limitations of housing assistance. Many landlords, such as Sherrena, would not accept housing vouchers because they came with higher standards and inspection requirements they preferred not to meet. When they did take vouchers, landlords tended to charge more rent, adding to the cost of the program for taxpayers. Public housing often excluded the families that needed it most, since “Housing Authorities count evictions and unpaid debt as strikes when reviewing applications.” Families that did qualify faced waiting lists and delays that could go on for years.

Desmond recommends that the United States do what many other developed countries have done—adopt a universal housing voucher program. He describes it this way:

The idea is simple. Every family below a certain income level would be eligible for a housing voucher. They could use that voucher to live anywhere they wanted, just as families can use food stamps to buy groceries virtually anywhere, as long as their housing was neither too expensive, big, and luxurious nor too shabby and run-down. Their home would need to be decent, modest, and fairly priced. Program administrators could develop fine-grained analyses, borrowing from algorithms and other tools commonly used in the private market, to prevent landlords from charging too much and families from selecting more housing than they need. The family would dedicate 30 percent of their income to housing costs, with the voucher paying the rest.

The logic here strikes me as similar to that of the Affordable Care Act. On the one hand, we set housing standards, analogous to the minimum requirements of Obamacare insurance policies, such as coverage of pre-existing conditions. On the other hand, we provide housing subsidies for the poor, analogous to subsidies of health insurance premiums. If we only try to enforce housing standards without putting more money into the low-end market, landlords may choose to take units off the market instead of spending money on them. That aggravates the housing shortage and contributes to homelessness. Under a universal plan, landlords would be prohibited from evading the housing standards by discriminating against voucher holders. How much the voucher could be worth for a given property would have to be set carefully. Set it too low and the renter still cannot afford a decent place; set it too high and it subsidizes an overpriced or luxurious unit.

Desmond tries to answer some of the objections that taxpayers may have. Would it cost too much? Actually, only an additional $22.5 billion a year, which is much less than the cost of middle-class tax breaks like the mortgage-interest deduction. Would it reduce people’s incentive to work? That’s a more complicated question:

One study has shown that housing assistance leads to a modest reduction in work hours and earnings, but others have found no effect. In truth, the status quo is much more of a threat to self-sufficiency than any housing program could be. Families crushed by the high cost of housing cannot afford vocational training or extra schooling that would allow them to acquire new skills; and many cannot stay in one place long enough to hold down the same job. Affordable housing is a human-capital investment, just like job programs or education, one that would strengthen and steady the American workforce.

Human capital investment is an idea I take very seriously. Are we really strengthening our economy by making children live in substandard housing, in the hope that the deprivation will motivate their mothers to work more hours (probably in low-wage jobs)? Maybe that benefits low-end employers and landlords, but does it contribute to the future productivity of poor children?

Poverty and class consciousness

If poor renters are a disadvantaged class, why don’t they unite as a class, cooperating as a political force to support causes like affordable health insurance and affordable housing? Desmond discusses a few reasons why they don’t.

One reason is that they have more pressing things on their mind than political participation, like scraping together the money for next month’s rent. “Under conditions of scarcity people prioritize the now and lose sight of the future, often at great cost.”

Another reason is that substandard housing and other effects of poverty take a toll on psychological health. They make people feel worthless, defeated and powerless. That applies especially to families who have been stuck in poverty for generations, as opposed to, say, new immigrants who are experiencing more opportunities than they had in their country of origin.

A third reason is that American culture discourages the poor from thinking collectively. America is supposed to be the land of opportunity for any hardworking person of good character. Poverty is easy to associate with individual failure—laziness, immorality or poor decisions. The family stories Desmond tells intermingle social conditions and individual events, allowing us, if we choose, to focus on what individuals did wrong. Arleen shouldn’t have given up her rent-subsidized apartment to live with a friend. Crystal shouldn’t have gotten into fights with other tenants. Vanetta shouldn’t have stolen purses. Larraine shouldn’t have spent money carelessly. Lamar, Scott, Pam and Ned shouldn’t have become drug addicts. The American poor often blame themselves and one another for their problems, developing what Desmond calls a high tolerance for economic inequality and social injustice.

Desmond discusses housing segregation, but he has less to say about the racial divide in our politics. The black poor mostly support the political party that represents their economic interests. The white poor are strongly drawn to the party that appeals to white privilege and Christian conservatism, despite its greater opposition to anti-poverty programs. That makes it pretty hard for the poor to see themselves as a disadvantaged class and join together for their collective advancement. Hopefully, books like this can stimulate a national discussion that can help change that.


Evicted (part 2)

February 27, 2021

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The subtitle of Matthew Desmond’s Evicted is Poverty and Profit in the American City. The author is interested not only in studying poverty, but in understanding the interaction between poor tenants and their landlords. He begins with the observation that evictions are much more common than they used to be:

Even in the most desolate areas of American cities, evictions used to be rare. They used to draw crowds. Eviction riots erupted during the Depression, even though the number of poor families who faced eviction each year was a fraction of what it is today.

Obviously, we must ask why so many renters are unable to afford their housing. But we must also ask how landlords find it profitable to rent to people who have trouble paying the rent, a situation that bears a suspicious resemblance to subprime lending to borrowers who have trouble making their loan payments. We need to understand both affordability and profitability.

Affordability

Desmond cites a common standard of affordability:

For almost a century, there has been broad consensus in America that families should spend no more than 30 percent of their income on housing. Until recently, most renting families met this goal. But times have changed—in Milwaukee and across America. Every year in this country, people are evicted from their homes not by the tens of thousands or even the hundreds of thousands but by the millions.

At the lower end of the income distribution, wages have not kept pace with the cost of decent housing. The minimum wage for both the United States as a whole and the state of Wisconsin is $7.25 an hour. Even if one works a 40-hour week—and many low-wage jobs only offer part-time hours—that’s only about $1,200 a month. 30 percent of that is only $360. Most of the poor find that they have to spend over half of their income on housing, leaving very little for other expenses.

The loss of manufacturing jobs hit cities like Milwaukee very hard. Those jobs provided an important ladder of upward mobility for people without college educations. Most of the service-sector jobs they were able to get paid less. Women, especially African-American and Hispanic women, were overrepresented in those jobs, so female-headed families were affected the most.

In addition, just when wages for low-skilled labor were declining, welfare reform pushed more poor mothers into the labor force. The Wisconsin Works program was a pioneer in this effort, and it became the state’s version of Temporary Assistance to Needy Families (TANF) when that program replaced Aid to Families with Dependent Children (AFDC) nationwide in 1997. Traditionally, society hadn’t expected unmarried mothers with children to be employed outside the home, but the new program added work requirements to public assistance benefits for able-bodied adults. If a recipient could not find regular employment, Wisconsin Works provided a community job and/or training, but income was set at $673 per month, even less than one would earn in a minimum-wage job. The program also put a five-year lifetime limitation on benefits. For some, this provided a transition out of poverty, but for many female family heads, it simply replaced welfare poverty with working poverty. It also intensified the competition for low-skill employment, helping to hold wages down.

Another development that affected the affordability of housing was the boom in subprime mortgages that led up to the financial crisis of 2008. Abandoning the caution of traditional bankers, a new gang of gung-ho lenders made quick profits by making risky loans. These were often adjustable-rate mortgages with a very low “teaser rate” to create an impression of affordability, but with the potential for large payment increases later. The lenders often didn’t care whether borrowers could make their payments or not, because they quickly sold off the mortgages to financial firms that bundled them for sale to unwary investors. Firms that rate such securities cooperated by underestimating the risks involved. When the housing bubble burst, many owners found that they owed more than their house was worth, and the market experienced a wave of defaults and foreclosures. That left cities like Milwaukee with abandoned homes and displaced homeowners thrown into the rental market. Minority families were hit the hardest, since they had few financial assets besides their homes. “Between 2007 and 2010, the average white family experienced an 11 percent reduction in wealth, but the average black family lost 31 percent of its wealth.”

Profitability

A housing market consists of many sub-markets, with profit-making opportunities at many income levels. Businesses can profit by selling luxurious housing to the wealthy or the bare necessities to the poor. By definition, the poor cannot afford to buy as much as the rich.

But Desmond makes a less obvious point, that the poor are also vulnerable to exploitation, because businesses sometimes make excessive profits by preying on the less fortunate. This is consistent with the old adage that “beggars can’t be choosers,” although Desmond doesn’t use that expression. People who are desperately needy have limited choices and bargaining power, and sometimes put up with being underpaid or overcharged. I think that orthodox neoclassical economics has had trouble acknowledging this. It prefers to describe free markets in which every participant is “free to choose” (in the words of one of Milton Friedman’s book titles), and needn’t engage in any exchange that isn’t free and fair. But freedom and bargaining power are social variables, not constants.

The people of Texas got a taste of desperate need when millions of them lost power during the recent cold wave. They were not only deprived of heat, but many of them were exploited by utility companies trying to extract windfall profits with rate spikes. A democratic society does not have to allow the powerful to take advantage of the needy. That’s why utility companies are usually regulated. Desmond argues that society has to balance the rights of businesses to make money against the rights of citizens to obtain the necessities of life:

If we acknowledge that housing is a basic right of all Americans, then we must think differently about another right: the right to make as much money as possible by providing families with housing—and especially to profit excessively from the less fortunate. Since the founding of this country, a long line of American visionaries have called for a more balanced relationship, one that protects people from the profit motive, “not to destroy individualism,” in Franklin D. Roosevelt’s words, “but to protect it.” Child labor laws, the minimum wage, workplace safety regulations, and other protections we now take for granted came about when we chose to place the well-being of people above money.

A prime example of exploitation in housing markets is the treatment of African Americans during and after their Great Migration from the rural South to cities like Milwaukee. Segregated into ghettos and denied home mortgages even by the FHA, they became a “captive tenant base” at the mercy of inner-city landlords. Real estate speculators also made outsize profits by “blockbusting”—buying houses cheaply from white homeowners on the edge of the expanding ghetto and selling them at inflated cost and one-sided terms to black buyers without other homeownership options. The 1968 Fair Housing Act prohibited discrimination, but it persists in more subtle forms to this day.

Desmond sees racial exploitation as only the most egregious example of a more general process of slum creation. Capitalism did not start out like a game of Monopoly, where all the players get an equal amount of money and an equal chance to buy properties. Capitalism developed within societies already sharply divided between landowners and landless laborers. The transformation of landless laborers into industrial workers created windfall profits for urban landlords.

While agrarian families were driven from the land to increasingly congested cities, the competition for space drove up land values and rents. Urban landlords quickly realized that piles of money could be made by creating slums.

More recently, the failure of low-end wages to keep pace with inflation, along with welfare reform and the 2008 financial crisis, has produced a surge of low-income renters. That creates an opportunity to make large profits without providing a high quality of housing. One sign of that is the relatively high rents being charged for low-end properties.

At the time, median rent for a two-bedroom apartment in Milwaukee was $600. Ten percent of units rented at or below $480, and 10 percent rented at or above $750. A mere $270 separated some of the cheapest units in the city from some of the most expensive.

That meant that a landlord could charge almost as much rent on a dilapidated home in a poor neighborhood as on a decent home in a nicer neighborhood. Not surprisingly then, “In Sherrena’s portfolio, her worst properties yielded her biggest returns.” Squeezing as much money as possible out of needy people aggravates poverty, but it is a viable business model. That also helps explain why some landlords are comfortable accepting drug users and other troublesome tenants.

Some landlords neglected to screen tenants for the same reason payday lenders offered unsecured, high-interest loans to families with unpaid debt or lousy credit; for the same reason that the subprime industry gave mortgages to people who could not afford them….There was a business model at the bottom of every market.

A high rate of eviction has become a normal feature of the low-end rental market. Landlords charge more rent than tenants can really afford; tenants fall behind on rent; landlords refuse to maintain properties; tenants leave or are evicted; and then the cycle repeats with another needy tenant. Evicted tenants sink deeper into poverty for many reasons:

Losing your home and possessions and often your job; being stamped with an eviction record and denied government housing assistance; relocating to degrading housing in poor and dangerous neighborhoods; and suffering from increased material hardship, homelessness, depression, and illness—this is eviction’s fallout.

Desmond believes that allowing this situation to persist is fundamentally at odds with our American values. Whether you agree may depend on what you think our American values are. Democracy? Christian love? Or rugged individualism and unbridled pursuit of self interest. If the citizens of our democracy have the will to tackle slum housing, ways to do so are not too hard to imagine. Desmond’s policy recommendations will be the subject of the final post.

Continued


Evicted

February 24, 2021

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Matthew Desmond. Evicted: Poverty and Profit in the American City. New York: Crown Publishing Group, 2016.

Matthew Desmond chose to become a sociologist mainly because he wanted to study poverty. And he wanted to study it firsthand, by living alongside some of the poorest people in America. To that end, he spent over a year living in two kinds of low-end housing in Milwaukee, a trailer park on the predominantly white South Side, and a rooming house on the predominantly black North Side. (After reading Isabel Wilkerson’s Caste, I am even more troubled by the social distinctions “white” and “black”, which perpetuate the illusion that people can be divided into distinct “races” on the basis of appearances.) Desmond supplemented his observations and recorded conversations with other forms of research, including his own formal survey of renters.

Desmond brought to his research a belief that too many previous studies treat the poor “as if they lived in quarantine…cut off from the rest of society.” That makes it too easy to attribute poverty to the deficiencies of poor people themselves, or to historical forces beyond the reach of current social policies and practices. Desmond thought of it differently:

Poverty was a relationship, I thought, involving poor and rich people alike. To understand poverty, I needed to understand that relationship. This sent me searching for a process that bound poor and rich people together in mutual dependence and struggle. Eviction was such a process.

The main focus of the book is “the powerful ways the private housing sector is shaping the lives of poor American families and their communities.” Instead of assuming that the kind of housing the poor get is simply a consequence of their poverty, Desmond is interested in how the decisions of landlords, builders, and housing policymakers help create and perpetuate poverty.

The book makes a major contribution to this subject by combining detailed stories of tenant households with thoughtful analysis. Many readers may find the book a little hard to follow, since the author scatters both the narrative and analytic information over so many chapters. Without explaining why, he chose not to use available software that could have helped with organizational tasks, such as telling a family’s story from start to finish in one place, or bringing together generalizations about how housing markets work to further disadvantage the poor. I will organize this review differently than he does, starting with the household stories and ending with the analysis of housing markets.

North Side

Let’s meet some of the main characters, starting with the North Side of Milwaukee. Desmond has changed the names of all his subjects for the sake of confidentiality.

Sherrena was a landlord specializing in renting to the black poor. She had been a schoolteacher, but preferred the life of an independent entrepreneur. Her husband Quentin quit his own job to work as her property manager. Desmond says that Sherrena “knew the ghetto’s value and how money could be made from a property that looked worthless to people who didn’t know any better.” Poor tenants had trouble paying very much rent, but that problem was more than offset by the very low prices at which Sherrena could acquire the properties. If she bought them cheap and put as little money into them as she could get away with, she could make a good living, netting about $10,000 a month.

The same thing that made homeownership a bad investment in poor, black neighborhoods—depressed property values—made landlording there a potentially lucrative one. Property values for similar homes were double or triple in white, middle-class sections of the city; but rents in those neighborhoods were not….When it came to return on investment, it was hard to beat owning property in the inner city.

Many of Sherrena’s properties had building code violations or other deficiencies. But because tenants were vulnerable to eviction due to rent shortages or other personal problems, they were in a poor position to complain. “For many landlords, it was cheaper to deal with the expense of eviction than to maintain their properties.” Turnover was high, and evictions were a normal part of doing business.

The Hinkstons were a three-generation family living in one of Sherrena’s run-down properties, which Desmond calls the “rat hole.” The “mother hen,” Doreen, lived with her four children, the oldest of whom, Patrice, had three young children of her own. For a time, Patrice and her children had moved into the apartment upstairs, but Sherrena evicted her after her work hours were cut and she fell behind on the rent. Then all eight of them lived in the small two-bedroom, one-bath apartment, with its roaches, cracked windows, rear door off its hinges, sagging bathroom ceiling, and chronically stopped-up plumbing. They resorted to withholding rent in order to make repairs or pressure Sherrena to make them, but she started an eviction process, only relenting when Doreen agreed to make up the back rent. While this was going on, Doreen’s 19-year-old daughter, Natasha, became pregnant. She hoped to find alternative housing, but ended up bringing her baby home to the same apartment. The Hinkston women did not rely much on men to support them, having experienced too many men as economically undependable, abusive, or in trouble with the law.

Living next door to the Hinkstons was Lamar, an older man with prosthetic legs, and his two teenage sons. Lamar had joined the navy at 17, been dishonorably discharged, and become addicted to crack several years later. His feet had frozen while he was sleeping in an abandoned house, and in a state of delirium he jumped from an upper-floor window. He lost his legs, but soon overcame his crack habit. Now he lived on a small public assistance stipend and odd jobs. Sometimes Sherrena let him work off part of his rent, but she complained about the quality of his work, while he complained that she paid him too little. She was already threatening him with eviction when a fire destroyed another apartment in the same building. Lamar lost his apartment when Sherrena elected to have the whole building torn down.

Arleen was another tenant whose rent took most of her public assistance check. Like her mother before her, she was a poor single mother, in Arleen’s case with five children. She had once qualified for subsidized housing, but she gave it up because she thought she could live independently with the help of a friend. When that didn’t work out, she was unable to get back into subsidized housing, which serves only a small percentage of the poor. She rented an apartment from Sherrena, but fell seriously behind on the rent after paying for her sister’s funeral expenses. Sherrena was planning to evict her, but when she showed the apartment to a prospective tenant named Crystal, Crystal offered to let Arleen stay with her until she could find another place.

Crystal was not the easiest person to live with, since she could manifest warm Christian love one minute and become violently angry the next. She had her own troubled history, having been born premature when her mother was stabbed, and then placed in dozens of foster homes starting at age 5. At 17, she was diagnosed with a host of psychological problems, including bipolar disorder, posttraumatic stress disorder, effects of abuse and neglect, and borderline intellectual functioning. The psychologist concluded that she would need “long-term mental health treatment and supportive assistance if she [was] to be maintained in the community as an adult.” The arrangement between Crystal and Arleen unraveled after Crystal called the police, mostly because of noisy fighting in the apartment above them, but also because of a “roaring argument” with Arleen. The police pressured Sherrena to resolve the problems, and she responded by evicting all concerned. Milwaukee’s nuisance property ordinance allowed police departments to cite landlords for nuisances involving their tenants, and landlords often responded by evicting people regardless of whether they were aggressors or victims of abuse.

Arleen embarked on a long search for housing before finding something she could barely afford, although it had no stove or refrigerator. Crystal lived at a homeless shelter for a time, where she teamed up with another homeless woman, Vanetta. Their search for housing was also long and frustrating, especially because they were trying to escape from the North Side. After they did finally get something—also without a stove and refrigerator—Crystal got into a violent conflict with a friend of Vanetta’s and got evicted. Homeless again, she turned to prostitution. Vanetta was already in legal trouble before she met Crystal, having cooperated with another woman in stealing purses from customers coming out of a store. At the time, she was facing eviction and possible homelessness because her work hours had been cut. When she was finally sentenced, she got 15 months in state prison and 66 months of extended supervision.

South Side

The other landlord featured in Evicted is Tobin, who owned a trailer park in Milwaukee but lived 70 miles away. Here the residents were white, raising the interesting question of how segregation persists in an era of fair housing laws. The racial barrier was more than financial, since the average rent was only $550 a month. The park had 131 trailers, with almost one-third of the residents behind in the rent at any one time. Tobin paid one of the long-time residents to manage the property, but came in personally to collect rent and make decisions about delinquent tenants. He could be flexible with tenants who seemed able to make up or work off back rent, but he did average several evictions every month.

Tobin netted well over $400,000 a year in income, placing him in the top 1% of earners. He did this by minimizing maintenance on his trailers, but keeping them rented by not screening his tenants very carefully. “Most impressive was his ability to transform an utterly trashed trailer into a rent-generating machine in a matter of days—and for next to nothing.” When Desmond arrived on the scene, Tobin was in danger of losing his license because of code violations and the park’s reputation for drugs, prostitution and violence. He had to enter into an agreement with the city to address the code violations, evict the most troublesome tenants, and sell the park within a year. The new management had a reputation for being tougher with tenants. Desmond observes that variations in screening practices create a “geography of advantage and disadvantage.” The poorest and most troubled renters end up clustered together in the same locations. Municipalities can ask landlords to enforce higher standards, while overlooking the question of where tenants who don’t meet those standards are going to live.

Larraine was a middle-aged woman with a learning impairment attributed to a bad fall in her childhood. She had grown up in public housing, struggled in school, and dropped out in tenth grade. She had two long-term relationships, one ending in divorce and the other in the man’s imprisonment and death from a drug overdose. Now she lived alone in the trailer that she tried to keep neat and clean. She lived on $714 a month in Supplemental Security Income and $80 worth of food stamps. She was chronically behind on rent or utilities, sometimes underpaying the rent in order to keep the gas or electricity on. She had alienated family members by borrowing money and not repaying it. When she did have cash on hand, she sometimes spent it on nonessentials rather than saving it for future expenses. (Desmond points out that SSI recipients are limited in what they can save without having their monthly payments reduced, and that people who anticipate only future hardship may grab momentary pleasures when they get the chance.) Tobin lost patience with Larraine and evicted her even after she finally managed to come up with the back rent. She lost most of her possessions when the eviction movers placed them in storage and she was unable to pay the storage bills, a common occurrence in eviction cases. With no place to go, she was taken in temporarily by other trailer park residents.

Drugs play a prominent role in the next story. Pam’s mother died in a car accident when Pam was in high school, and her father spent time in prison on drug and alcohol charges. Pam reacted badly when her brother died of a heroin overdose, and she started using crack. She spent ten months in jail for drug offenses. Now 30, she lived in the trailer park with Ned, another crack user with a daughter from a previous relationship. Pam had two daughters of her own from a drug dealer who had abused her. Ned and Pam also had a daughter together; and Pam was seven months pregnant when Tobin took them to eviction court. Both Ned and Pam had jobs, but Pam lost hers when her car broke down and she couldn’t afford to repair it. Their financial problems were aggravated by the money they spent on their drug habits. When they were evicted, they too found temporary housing with other park residents, Scott and Teddy.

Scott was a 30-year-old gay man who cared for 52-year-old Teddy, who had serious health problems. Scott differed from most of the tenants Desmond met because he had not always been poor, but had graduated from a technical college and worked as a nurse in a nursing home. He did have a troubled family history, however, since his mother “was made to marry” the man who raped her on a date, and who dropped out of her life before long. Scott also told a counselor he had been sexually abused, although he did not say who the abuser was. Scott’s downward spiral began when he slipped a disk in his back and became addicted to the opioids he was prescribed. Then he lost his job and his nursing license when he was caught stealing drugs from patients. He was in a homeless shelter when he met Teddy. The two of them decided that they could afford to live in the trailer park by combining Teddy’s SSI check with Scott’s income from odd jobs. When Scott was suffering withdrawal sickness from opioids, another trailer park resident started him on heroin.

Scott and Teddy’s decision to share their trailer with Pam and Ned turned out badly. Tobin added what Pam and Ned owed him to Scott and Teddy’s bill, and then evicted them when they couldn’t pay. Teddy decided to return to his home state of Tennessee. Scott struggled to find housing, work and sobriety, and he wound up homeless when he couldn’t afford both his rent and the cost of a methadone clinic. Then he got a big break, when a homeless shelter helped him get a decent apartment with subsidized rent, and later employed him as a resident manager. He had remained sober since then. As for the couple Scott and Teddy took in, Pam’s baby was almost due when she and Ned were evicted. She gave birth in a cheap motel, having been turned away from numerous rental properties. Ned lost his construction job for missing work during the eviction, illustrating how evictions are causes as well as consequences of poverty. Eventually Ned got an apartment for them by leaving Pam off the lease, since many landlords seemed reluctant to accept her children, despite laws against such discrimination. Ned found another construction job, and Pam found work as a medical assistant.

Although the detailed accounts of these lives are one of the book’s strong points, Evicted is more than a book of stories. Next time I’ll discuss Desmond’s sociological insights into what he observed.

Continued


Viking Economics

June 25, 2017

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George Lakey. Viking Economics. Brooklyn: Melville House Publishing, 2016.

This is a book about the economies of four Nordic countries whose peoples have Viking ancestry–Norway, Sweden, Denmark and Iceland. It focuses especially on Norway, where the author, who was born in the US, has spent the most time. Lakey himself is a sociologist, not an economist. Although he draws on the work of economists, the book is not very technical. Lakey supplements his own reading and observations with many interviews and anecdotes.

For people who feel that US economic policy has been moving in the wrong direction, the Nordic countries are a good place to look for alternatives. They have been accomplishing something we have not been lately–a high level of national income without an extreme degree of economic inequality.

According to rankings by international agencies like the IMF and World Bank, the Nordic countries are among the richest in GDP per capita. Norway ranks higher than the US and the others a little lower. According to a Gallup international survey, Norway, Sweden and Denmark are all ahead of the US in median household income. So much of the income from America’s national production is concentrated at the top that households in the middle do not do as well. The Nordic countries have done a better job of maintaining a thriving middle class at a time when the American middle class has been shrinking.

Among 32 developed countries in the OECD, the four Nordic countries studied in this book rank in the top ten for economic equality. The US and the UK rank near the bottom. The OECD has also surveyed the populations of these countries on their life satisfaction. The same Nordic countries are consistently near the top of the rankings, while the United States is only a little better than average. Lakey also draws on research by Richard Wilkinson and Kate Picket on other social indicators that tend to be associated with wide disparities in income: “They find that inequality highly correlates with negative statistics in physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, violence, teenage pregnancy, and child well-being.”

Equality, productivity and innovation

Lakey acknowledges the widespread belief that differences in economic reward motivate people to do their best, and especially to devise better ways of doing things that the marketplace can reward. “The belief is that inequality motivates, by increasing both the risk and potential reward, attracting talented people who love adventure. The bold ones make the breakthroughs that propel invention and innovation. It sounds reasonable.”

Yes it does. No modern society pays all economic contributors the same. It hardly follows, however, that the extremes of wealth and poverty we see in the United States are optimal for encouraging productivity and innovation. Lakey reports, “Rates of start-up creation in Norway are among the highest in the developed world, and Norway has more entrepreneurs per capita than the United States….” He suggests a couple of ways that economic equality supports potential entrepreneurs: giving them access to education without burdening them with debt, and providing a stronger safety net so they can afford to take risks. People can leave a job to try something new without worrying about losing their health insurance, since coverage is universal. More equal societies do a better job of developing talent across the economic spectrum, and they have higher rates of social mobility.

Lakey also cites research showing a positive association between high productivity and strong unions. This may be counterintuitive, at least for Americans, since “U.S. unions sometimes defend inefficient labor practices and outmoded organization of work, even though undermining productivity–whatever it takes to keep workers in jobs.” However, Lakey argues that this is because the American system leaves workers so insecure. When union membership is higher, high wages are more universal, and the social safety net is stronger, workers have less to fear from productivity-enhancing innovation. In addition, companies may have to boost profits by increasing productivity, since it is harder for them to do it by cutting wages.

Another feature of social organization that contributes to both productivity and equality is the Nordic tradition of cooperatives. They have industrial co-ops, farm co-ops, consumer co-ops, housing co-ops, even parent co-ops providing child care. People are motivated to contribute because they know they will share in the benefits.

Nordic countries are also noted for developing the talents and productivity of women. Their rates of female employment exceed that of the United States, although women are still underrepresented in the highest managerial positions. Rates of employment for men are also higher than they are here. The Nordic countries do more to support employed parents, by subsidizing child care and providing paid family leaves for parents of both sexes. And although more adults are employed, annual work hours per worker are lower, for example 1,418 in Norway vs. 1,791 in the US in 2012. That’s 373 more hours off the job, or about 10 weeks. National production does not seem to suffer, since productivity per hour is higher in Norway.

Keeping poverty low

International comparisons of poverty rates often use a relative definition of poverty. They determine what percentage of a population lives on less than the national median income. That could be misleading if two countries have very different medians; a very poor country could appear to have little poverty if it had little variation around its very low median. For countries that are all pretty affluent, the relative definition makes for pretty fair comparisons. UNICEF calculated child poverty rates for the Nordic countries in the range of 4.7% to 7.3%. The rate for the US was 23.1%, the second worst among OECD countries. We should all think about the damage to human potential that figure represents, and its impact on our national productivity and well-being.

Lakey wants to correct the impression that Nordic states are just generous “welfare states,” since their strategy for fighting poverty involves much more than just handing out cash and other benefits to poor people. It is, first of all, a strategy emphasizing full employment and good wages. Norway has a pretty good record for holding unemployment down, keeping wages up, and preparing people for jobs with educational and training opportunities. “Free post-secondary schooling is available for technical fields like seafaring, business, engineering, and agriculture; for arts fields like performance and visual arts; and for professions like medicine and law.” Adult education is so common that one-sixth of the population is taking courses in any given year.

When jobs are available and wages are fairly high, the government can provide some cash assistance to families with children without worrying that the payments will destroy people’s motivation to work. That’s especially true when such benefits are universal rather than provided only to the very poor and unemployed. You have everything to gain and nothing to lose by taking a job.

Universal services and taxation

Programs designed just for the poor don’t have a very good track record for actually eliminating poverty. They tend to be inefficient because a lot of administrative effort has to go into determining eligibility, and potential recipients may try to cheat. They tend to be under-funded because popular support for them is limited (especially when there is a longstanding racial divide between the affluent and the needy). They tend to be stigmatizing for the people who participate in them. They tend to be too individualistic, helping one person at a time instead of changing social conditions more generally. “The twentieth-century descendants of the Vikings figured out that the individualistic charity model of the nineteenth century simply could not alleviate poverty. In each country, the designers turned against programs for the poor and created universal systems instead.”

Among the publicly-funded services available to Norwegians are tuition-free higher education, paid maternity and paternity leave, affordable child care, subsidized public transportation, subsidies for family farms, vocational counseling and job training, free health care and universal public pensions.

To pay for such benefits, Nordic countries tax their citizens at high rates, both through individual income taxes and corporate taxes. (In contrast, although US rates may look high on paper, the tax code has so many loopholes that revenue as a percentage of GDP is among the lowest for OECD countries.) Lakey describes the general Nordic attitude toward taxes as “To get a lot, we pay a lot.” The “lot” they get includes not only the benefits they receive personally, but the general benefits of living in a more egalitarian and less divided society.

Do high taxes inhibit economic growth, as is so often claimed by economic neoliberals in the United States? Lakey cites the work of economist Jeffrey D. Sachs, who modified his own neoliberal views after examining the evidence. He compared the Nordic countries with the Anglo-Saxon countries of Australia, Canada, Ireland, New Zealand, UK and United States, countries he characterized as “low-tax, high-income countries that share a historical lineage with nineteenth-century Britain and its theories of laissez-faire.” He concluded, “On average, the Nordic countries outperform the Anglo-Saxon ones on most measures of economic performance.”

Relevance to the United States

Maybe the culture and traditions of the Anglo-Saxon countries are so different from those of the Nordic countries that we are unable to learn much from them. On the other hand, maybe the problem isn’t as much culture and traditions as vested interests standing in the way of the public good. Lakey cites research showing that most Americans want more economic equality than they now have. “In one of the studies, participants were shown two different income distributions, in the form of pie charts. Without saying so, one chart reflected the distribution in Sweden and the second chart that of the United States. 92 percent said they preferred the first.”

Lakey also cites research by political scientists showing that in the US, the wealthy get what they want in political decision-making much more often than any other economic segment of society. He believes that politicians are so dependent on powerful financial interests that voting alone will not move a country in a more egalitarian direction. Only broad social movements featuring nonviolent direct action can bring about the desired changes.

Continued

 


Hillbilly Elegy (part 3)

September 7, 2016

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Subcultures as adaptations

J. D. Vance has vividly described the “hillbilly” culture into which he was born, but which he outgrew. He has also offered a critique of that culture, showing how its attitudes and behavioral norms can become obstacles to personal health, happiness and achievement.

As with much of the writing in the “culture of poverty” tradition, the critique can exaggerate how much the poor are responsible for their own way of life and all its problems. I fear that Vance is falling into this trap when he says that “these problems were not created by governments or corporations or anyone else. We created them, and only we can fix them.” But the cultures of “hillbillies” or inner-city blacks or Latino farmworkers are not self-contained worlds independent of the larger social environment. They are American subcultures that have always been shaped by the institutions of the dominant culture.

One does not have to be a strict social determinist to argue that subcultures adapt to the institutional realities of the surrounding society. People do create their own culture, often in surprisingly innovative ways. But they cannot do it in a social vacuum. People interact all the time with institutions like work organizations, schools, churches and governments, which provide both challenges and opportunities.  The lack of agency Vance complains about–the feeling that one lacks control over one’s life–arises especially because the poor and uneducated are in such a weak position in relation to such institutions. The poor don’t just need new attitudes and behaviors; they need empowerment.

At one point in his childhood, Vance was called upon to testify in court against his own mother, who had physically attacked him. That was when he noticed that “the social workers and the judge and the lawyer all had TV accents. None of us did. The people who ran the courthouse were different from us. The people subjected to it were not.” On that occasion, Vance lied in order to protect his mother and keep those strange-talking outsiders from hurting his family. Vance describes his people as preferring their own form of justice. “My people were extreme, but extreme in the service of something— defending a sister’s honor or ensuring that a criminal paid for his crimes. The Blanton men, like the tomboy Blanton sister whom I called Mamaw, were enforcers of hillbilly justice, and to me, that was the very best kind.” He does not analyze this further, but an informal, homemade system of justice is a predictable adaptation for people who see the official justice system as not serving their class of people very well.

When Vance is exploring the psychology of work, he says, “When groups perceive that it’s in their interest to work hard and achieve things, members of that group outperform other similarly situated individuals. It’s obvious why: If you believe that hard work pays off, then you work hard; if you think it’s hard to get ahead even when you try, then why try at all?” I would add the sociological point that such beliefs are shaped over time by social experience. When opportunities are opening up, as they were in the heyday of manufacturing expansion, people become more optimistic. But when opportunities are shrinking, families with few generations of success to remember are easily discouraged.  Subcultures do change, but they change slowly, and mostly in response to changing conditions. Vance mentions that the emigrants from coal country who found manufacturing jobs “had largely caught up to the native population in terms of income and poverty level” within two generations. But the postwar economic progress was not sustained long enough to eradicate the culture of poverty. Generations of restricted opportunity had created it, and generations of expanded opportunity were required to repair it.

Women’s agency

Another example of how American social institutions help account for subcultural adaptations involves women and sexuality. One of the best examples of the lack of agency Vance deplores is unplanned teenage pregnancies. They figure prominently in his story, since his mother became pregnant at 18 and his grandmother at 14. If sociologists have learned anything about gender in the past half-century of intensive study, it is that the institutions of patriarchal society are largely responsible for limiting women’s agency in general, and women’s control over their own bodies specifically. A lot of early pregnancies and shaky marriages are what you get when the dominant culture glamorizes sexuality and portrays women primarily as sex objects; when schools fail to provide sex education or limit it to preaching abstinence; when churches teach that sex is too shameful to discuss and contraception is sinful; when the local economy provides few career opportunities for women, so they see no life for themselves except as mothers; when good jobs for men are also in short supply, so they express their masculinity by obtaining and controlling women, sometimes by force, but not so much by supporting their families. This is also a vicious circle, since early motherhood can offer an escape from the troubled homes created by the previous generation of young mothers.

Blaming families for their own problems is easy. No one denies that what girls and boys learn at home can shape their gender roles for a lifetime and affect whether they express their own sexuality responsibly. Parents are primary carriers of culture, to be sure, but they cannot be expected to transform their received culture singlehandedly. Expecting families to change the culture without supportive changes in other social institutions is not realistic.

The politics of pessimism

Vance concludes his book by saying, “I don’t know what the answer is, precisely, but I know it starts when we stop blaming Obama or Bush or faceless companies and ask ourselves what we can do to make things better.” I imagine that few people will disagree with his call for more personal responsibility. I do note, however, that this is essentially the Ronald Reagan philosophy of government, “Ask not what your country can do for you; ask what you can do for yourselves.” Vance does not see much for government to do about the plight of the struggling working class, since “the fault lies almost entirely with factors outside the government’s control.”

In truth, neither of the major political parties has been offering much hope to the white working class lately. Hillary Clinton does not seem to be connecting with them very well at all. Donald Trump is speaking to them directly, but appealing to their prejudices and false hopes. He encourages them to blame their problems on foreigners and immigrants, reject climate change as a hoax, and hope for a return of coal mining jobs.

But I think something is lost if citizens of a democracy become too pessimistic about their own government. Vance doesn’t want people to blame government for their problems, but he doesn’t want them to look to government for solutions either. In that respect, he can be accused of reinforcing the alienation from mainstream institutions that is a familiar trait of “hillbilly” culture. By focusing on agency as a psychological characteristic, he overlooks the value of the social agency that arises when citizens cooperate together in a common political cause.

One thing that government is going to have to do is increase support for higher education, so that students can go to college without accumulating massive debt. States have been cutting spending on education at the same time that the educational requirements of good jobs have been rising. (Vance should appreciate that need, since his own success story depended on a state-supported university and generous financial aid from a private law school.) Another thing for government to do is to promote industries that have realistic hopes of creating good jobs. The solar industry already employs a lot more people than the coal industry. Ironically, Hillary Clinton is the one calling for these things (when she can be heard over the clamor for her emails), but she is getting her least support from working-class whites who might benefit from them.

Assuming the Trump candidacy fails, as I hope it does, I would like to see the white working class join other disadvantaged groups in a progressive coalition for realistic socioeconomic change. If that seems improbable, we should remember that that’s what they did during the Roosevelt era.