A Structural Decline in US Legitimacy
David KERANS | 02.10.2011 | BUSINESS

A Structural Decline in US Legitimacy

As noted sociologist Barbara Ehrenreich detailed in a recent book (1), Americans have spent several decades cultivating cheerfulness and a positive attitude in almost all venues and with respect to most issues. At least until very recently, political life has swum with this current. Notwithstanding swelling incivility and hostility between the two main parties, the rhetoric endorsing America's exceptional greatness and foretelling its further ascent has been de rigeur in political discourse. But, as Ehrenreich warns, the hypertrophied cult of optimism carries serious consequences. It shields people from reality, short-circuits discussion of significant problems, and even corrodes our natural empathy towards each other. It also prepares the stage for painful disillusionment when reality bites. Reality has been biting relentlessly for three years now, since the financial crisis exploded with the bankruptcy of Lehman Bros. in September of 2008. As we shall see below, new polling data confirms our suspicion of a tectonic shift in Americans' political consciousness amid the duress of the long recession. And, as we shall explain, the consequences of this shift could be far more serious than current mainstream analysis allows.

A Business Cycle, or a Dead End?

An anemic job market, a moribund housing sector, shaky consumer confidence, and a flood of depressing data on related topics this year have dispelled any lingering optimism regarding a rapid recovery of the US economy from the recession. This recession is not a wave in yet another business cycle, which is ready to turn upwards sometime soon. This recession reflects structural weaknesses in the US economy which are more liable to intensify than to recede. The salient structural weakness is the erosion of mid-level white collar jobs that provided several generations of Americans with good wages and opportunities to rise up the career ladder. As Paul Krugman summarized earlier this year:

The fact is that since 1990 or so the U.S. job market has been characterized not by a general rise in the demand for skill, but by “hollowing out”: both high-wage and low-wage employment have grown rapidly, but medium-wage jobs — the kinds of jobs we count on to support a strong middle class — have lagged behind. And the hole in the middle has been getting wider. (2)

As Krugman elaborates in a companion piece:

In the 80s, the higher the skill required for an occupation, the bigger the employment gains. In the 90s, there was “hollowing out”, with the middle-skill occupations losing relative to both ends. And most recently, the hollowing seems to have spread further up the scale. (3)

To cut to the chase, the old story of machines taking the jobs of physical laborers has largely played itself out, and nowadays automation is devouring large swathes of white collar jobs. Most jobs characterized by routing are susceptible to replacement by automation, or outsourcing to countries offering cheaper wages. And the bulk of the jobs least susceptible to outsourcing are in low-wage service sectors.

Increasingly denied prosperity through traditional channels in the private and public sectors, Americans have maintained the spirit of individual enterprise, starting 700,000 or more new companies every year. Indeed, America still produces more entrepreneurs as a percentage of the population than almost any other nation. (4)But in the last few years this activity is looking ever more desperate. New businesses are not flourishing; they now create only about 2.3 million jobs per year, around 30 percent less than the average over the five years before the recession began, and only about half the peak reached in the late 1990s. (5)

Meanwhile, thanks more to tax policies than to structural shifts in employment, wealth inequality has reached astonishing proportions in the US. News articles presenting various statistics on the trend abound, so we shall confine ourselves here to just one unusual angle on the topic: in 2007, the earnings of the top 1 percent in the US were equivalent to 74 percent of taxes paid, up from 24 percent in 1976. (6) The country now ranks first of all OECD nations in terms of income inequality (and is now ahead of Pakistan and Ethiopia, among so many others, in this respect). (7)

The gaps between the haves and the have-nots are widening more quickly under the stress of the recession, which is punishing the great mass of the population. Americans' median income slumped by a painful 2.3 percent in 2010, falling back to the level of 1997 (adjusted for inflation). (8)The net worth of the middle fifth of households has dropped by a remarkable 26 percent over the last two years. (9)At the same time, US corporations have collectively achieved their highest profit margins in 80 years. (10)Strong sales overseas are not the primary reason. Layoffs and cost-cutting are driving profits, as is tax avoidance—taxes from US corporations amount to a lower percentage of GDP than any country in the OECD except for Iceland. (11)And so, while the huge mass of the population struggles, non-financial firms have accumulated nearly $2 trillion in cash or cash equivalents (not counting offshore hoards of at least $1 trillion more). (12)None of these developments points towards economic recovery.

Fear for the Future, Blame for the Present

Sustained economic stress is new territory to the American middle class, since at least the 1970s. This by itself might be sufficient to reshape political attitudes, but fear for the future is magnifying the effect. Few can now look to the future with confidence. The continuing slump in real estate has sunk hopes of re-inflating the phantom wealth cushion that sustained middle class standards of living over the 2000s, and it looks like the slump may not reverse for many years. Housing sector oracle Robert Shiller foresees further declines of anywhere from 10-25 percent (inflation-adjusted). (14)Meanwhile, awareness that white collar jobs will continue to be on the chopping block is spreading out. So too is the prospect of slashed benefits in Medicare (state-sponsored health insurance for the elderly), Medicaid (health care for the poor), and Social Security (pensions). Dark clouds appear almost every day over these programs, with the latest being Republican budget guru Paul Ryan's proposal to eliminate federal tax breaks to companies arranging group health insurance for their employees. (14) The latest data shows health insurance premium payments rising by 8 or 9 percent this year, which is frightening enough. Premiums have more than doubled in the last ten years (not adjusting for inflation), both for family and for individual plans. (15) The prospect of applying for individual health insurance plans ought to chill anyone—insurers exploit individual applicants ruthlessly, notching profit margins approaching 40 percent on them. Trepidation concerning the future is therefore solidifying, and underlies consistently low readings of the consumer confidence index. (16)

Inevitably, the recession is prompting Americans to look for parties to blame. Naturally enough, the establishment's facile explanations for the ongoing calamity have highlighted impersonal forces like globalization and productivity-enhancing technologies, both of which take jobs away from Americans. These forces have contributed to the erosion of the middle class, it is true. But they are by no means sufficient to account for the country's predicament. It turns out, for instance, that more than 30% of the lowest paying jobs are in service sectors that do not face international competition or deploy many labor-reducing technologies. (17)

Slowly but surely, it is dawning on more and more people that enrichment of the few at the expense of the many is much more than a function of impersonal forces like globalization and technology…Economist Dean Baker (one of the relatively few to definitively predict the housing crisis) expressed popular sentiment very well in a new book:

Money does not fall up. Yet the United States has experienced a massive upward redistribution of income over the last three decades, leaving the bulk of the workforce with little to show from the economic growth since 1980. This upward redistribution was not the result of the natural workings of the market. Rather, it was the result of deliberate policy, most of which had the support of the leadership of both the Republican and Democratic parties. (18)

Reflecting a belatedly growing awareness of this tragedy, support for the notion of raising taxes on the wealthiest layer of society has finally swelled, reaching 75 percent, despite strong resistance in the media and political establishments. (19)And we have good reason to believe that beneath this mood lies a nascent critique of the whole political and economic system of the last three decades.

A Structural Decline of Legitimacy?

Any population experiencing a structural economic decline would express distaste for its political leaders, would turn them out come election time, and would hope for better results in the future. US voters have been doing just this over the last five years, with increasing intensity. But the tenor of disillusionment with the political and economic system of the country is now reaching a new stage, what I shall term a structural decline of legitimacy. In fast increasing numbers, Americans are absorbing the fact that their system is no longer capable of protecting the public's interests. They are also sensing that it cannot recover the capacity to do so without radical reforms—none of which receive meaningful discussion in Washington (socialized health insurance, abandonment of US military bases abroad, castration of the largest banks, campaign finance reform, etc.).

Polling of public opinion is capturing the speed with which people are abandoning faith in the system. Thus, an all-time record 69 percent now say they have little or no confidence in the legislative branch of government, up sharply (by 6 percentage points) from 2010; a record 57 percent have little or no confidence in the federal government to solve domestic problems (topping 2010's record reading of 53 percent); on average, Americans now believe the federal government wastes 51 cents of every tax dollar (up from 46 cents a decade ago, and 43 cents n the 1980s). Finally, 81 percent now express dissatisfaction with the way the nation is governed. This reading is more than double the level obtaining throughout the period 1984-2003. It has risen at an unprecedented rate since then, with the exception of the year 2009, reflecting the short-lived catharsis that accompanied the end of the Bush administration and the hopes people initially held out for Obama's. (20)

From Plummeting Legitimacy to, Where?

However well entrenched the current political disillusionment may be, we cannot with certainty forecast its duration. One senses, however, that the US system will not recover credibility with the mass of its population for a long time. Rebuilding the trust of a defrauded population would take many years, even with an enlightened leadership.

It does not follow, however, that mass movements will arise to contest the power of the wealthy and large corporations. Of the many explanations for Americans' political docility, one of the most insightful comes from Chris Hedges in his Death of the Liberal Class. (21)Hedges traces the neutering of political consciousness to the cooptation of liberal and religious institutions to state power and consumer society. Beginning during the First World War, the liberal class gradually purged and marginalized its radicals, populists, and iconoclasts. Gradually, the liberal class merged with the establishment, endorsing and legitimizing it, all the while securing universities and churches recognition, support, and protection from the political and economic establishment. In the process, the liberal class lost its ability to defend the interests of the population, and has stood by, blind or helpless, over the last few decades as American society changed its shape. In consequence, the liberal class has failed to generate progressive (or even enlightened) political consciousness beyond more than a thin layer of the population. Having been betrayed by the liberal class, the mass of the population will do nothing to defend liberal values. In place of progressive, populist resistance to the status quo, therefore, Americans will turn on their liberals and their intellectuals. They will seek salvation not in civil rights and democracy, but in racism, xenophobia, and sexism.

Events may not bear Hedges's analysis out, of course. Progressives are at least doing the ground work to build a mass movement outside the confines of the derelict Democratic Party. (22)But his thesis serves as a valuable warning regarding the vulnerability of American society to a drastic step downward.


(1) Barbara Ehrenreich, Bright-Sided. How the Relentless Promotion of Positive Thinking Has Undermined America, New York, Henry Holt, 2009.

(2) Paul Krugman, “Degrees and Dollars,” New York Times, March 6th, 2011.

(3) Paul Krugman, “Autor! Autor!,” Krugman blog, New York Times, March 6th, 2011.

(4) Data in Economist, “Special Report: The Future of Jobs”, September 10th, 2011, p. 17.

(5) See, e.g., John Bussey, “Shrinking in a Bad Economy: America's Entrepreneurial Class,” Wall Street Journal, August 12th, 2011.

(6) “Diving into the Rich Pool,” The Economist, September 24th, 2011, p. 83.

(7) Michael Winship, “Corporate America's Sunshine Patriots,” CommonDreams.org, July 21st, 2011.

(8) Zachary Roth, “Record Number of Americans Living in Poverty,” The Lookout, September 13th, 2011.

(9) Paul Hariis, “The Decline and Fall of the American Middle Class,” Guardian, September 14th, 2011.

(10) Jack Rasmus, “Double Dip Recession on the Horizon,” Z Magazine, July 2011.

(11) Winship, op. cit.

(12) Rasmus, op. cit.

(13) “Shiller: Housing Prices Probably Won't Hit Bottom for Years,” Yahoo! Finance Daily Ticker, September 27th, 2011.

(14) Donna Smith, “Ryan Targets Employer Healthcare Tax Breaks,” Reuters, September 27th, 2011.

(15) Tom Murphy, “Survey: Health Insurance Costs Surge in 2011”, AP, September 27th, 2011.

(16) Timothy R. Homan, “US Economy: Consumer Confidence Stagnates at Two-Year Low,” Bloomberg Business Week, September 27th, 2011.

(17) “Economist Osterman: Quality of Jobs Matters as Well as Quantity,” interview on Yahoo! Finance, September 14th, 2011.

(18) Dean Baker, The End of Loser Liberalism. Making Markets Progressive, Center for Economic and Policy Research, 2011.

(19) Jillian Berman, “Vast Majority of Americans Favor Buffett Rule's Millionaire Tax: Poll,” Huffington Post, September 28th, 2011.

(20) Lydia Saad, “Americans Express Historic Negativity Towards U.S. Government,” Gallup.com, September 26th, 2011.

(21)Chris Hedges, The Death of the Liberal Class, New York, Nation Books, 2010.

(22) See, e.g. Katrina vanden Heuvel, and Robert Borosage, “Can a Movement Save the American Dream?”, The Nation, September 23rd, 2011.

Tags:   Ehrenreich