American Banana Republic

In yesterday's NY Times Op-ed, Kristof apologized for comparing US income inequity to that of "Banana Republics" - that is, for insulting other nations by comparing them to the US, which has now achieved wholly unprecedented levels of economic injustice.

My point was that the wealthiest plutocrats now actually control a greater share of the pie in the United States than in historically unstable countries like Nicaragua, Venezuela and Guyana. But readers protested that this was glib and unfair, and after reviewing the evidence I regretfully confess that they have a point.

That's right: I may have wronged the banana republics.

You see, some Latin Americans were indignant at what they saw as an invidious and hurtful comparison. The truth is that Latin America has matured and become more equal in recent decades, even as the distribution in the United States has become steadily more unequal.

The best data series I could find is for Argentina. In the 1940s, the top 1 percent there controlled more than 20 percent of incomes. That was roughly double the share at that time in the United States.

Since then, we've reversed places. The share controlled by the top 1 percent in Argentina has fallen to a bit more than 15 percent. Meanwhile, inequality in the United States has soared to levels comparable to those in Argentina six decades ago -- with 1 percent controlling 24 percent of American income in 2007.

This places Obama's terrible cowardice on the subject of the Bush tax cuts into context, and I encourage you to read it. But I also think you should read Charles Leduff's essay "What Killed Aiyana Stanley-Jones" from this month's _Mother Jones_. In many ways, it is the sort of piece that gets done a lot. But what's interesting about it to me is that Leduff actually asks the really pertinent question - if this can happen in Detroit, can it happen to other places that were once middle class, and aren't any more?

No one cared much about Detroit or its industrial suburbs until the Dow collapsed, the chief executives of the Big Three went to Washington to grovel, and General Motors declared bankruptcy--100 years after its founding. Suddenly, Detroit was historic, symbolic--hip, even. I began to get calls from reporters around the world wondering what Detroit was like, what was happening here. They were wondering if the Rust Belt cancer had metastasized and was creeping to Los Angeles and London and Barcelona. Was Detroit an outlier or an epicenter?

That's a good question.


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Yes, it's a really good question. I read the piece on Detroit because I was born and raised in Ann Arbor, 40 miles away, during the 1960s, and remember the riot of 1967. Now living in the St. Louis metro area, it seems like the same sort of thing could have happened here but so far hasn't, at least not quite that bad (though St. Louis City's population dropped from about 850,000 in the late 1880s to a low of around 340,000 in the 1990s, it's now coming up closer to 400,000 as parts of the city have experienced an influx of people). But I wonder how much longer we have till St. Louis or other urban areas with similar job and service losses to St. Louis go the way of Detroit. It could have been here in a larger way, and still could be here in a larger way. And in some parts of the city, it isn't much different from Detroit now.

As a sometimes libertarian, I try to resist the idea to attack people because they have become wealthy while others haven't, but the continuing and increasingly amazing imbalance of wealth distribution in the US simply cannot be a good thing.

I find myself blaming cheap energy for this imbalance. I mean after all, isn't it cheap energy, cheap transportation, and cheap, instantaneous communications that allows a mere handful of owner/commanders to spread their control over multitudes of people, whether they be in and on one continent or several? True, it isn't just cheap energy that has created this wealth imbalance, as the so-called banana republics didn't really have the huge, cheap energy supplies the US has enjoyed, and yet they too managed some serious wealth imbalance. Still, energy and cheap communications has played a large role in concentrating wealth just the same.

Is it simplistic to hope that a lower energy future can restore some of the wealth balance as folks relocalize their economies and lives? I suppose I should ask, WILL folks relocalize to the extent I hope they do just because the ability to run global corporations across oceans is diminished? But will this ability *really* be diminished? Do we see low-energy societies now where the wealth is ultra-concentrated? I fear the answer to the last question is "hell, yes we do!"

Relocalization and empowering people to control their own lives remains key I guess.

On another, more personal note, I've been looking at real estate in rural northern, New England this past week. I toured a small, 55 acre farm with a small house in need of interior renovation along with a neat garage/barn. Some of the fields are presently rented out to a neighbor/farmer. It's priced in the $110s. The local town nearby has agriculture, retail, health care, finance, human service, and tourist businesses. Still, unemployment is about 12 percent. I'd be moving from Zone 6 to Zone 4 climateas well, while more than doubling my snow too.

I may go for it just the same.

By Stephen B. (not verified) on 19 Nov 2010 #permalink

Claire, many of the cities in Ohio have gone or are going the way of St Louis as well: Cleveland, Youngstown, Dayton, Cincinnati. The wealth, such as it is, has moved to the sprawl, and the urban cores are left to rot in place. Whether the imminent energy crunch will encourage a move of the relatively well-off back into the cities (thus displacing the urban poor that live there now), or if it will push these urban centers the other way and turn them into new Detroits, only time will tell.

Interestingly, and as you probably know, parts of Detroit itself have been turned into a grand experiment in urban agriculture, as abandoned neighborhoods have been leveled and turned into mini-farms. Is it a phoenix rising from its own ashes? Probably too early to tell. And whether the experiment will transplant to other rust belt cities--also too early to tell.

Of course another way we might compare to the banana republics is in the way we're printing money (this time electronically) to cover government borrowing via the so-called QE2.

By Stephen B. (not verified) on 19 Nov 2010 #permalink

Cheap energy is only cheap in the US because of the subsidies that the government gives to the oil companies. Most countries around the world pay the real price of (for example) gas, which is normally double the US rate.