Monday, May 7, 2012

The Myth of the American Dream

The term "The American Dream" was coined by the writer James Truslow Adams. Wikipedia provides this definition.
"The American Dream is a national ethos of the United States in which freedom includes the opportunity for prosperity and success, and an upward social mobility achieved through hard work. In the definition of the American Dream by James Truslow Adams in 1931, 'life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement’ regardless of social class or circumstances of birth'."

In his book, The Great Divergence, Timothy Noah discusses income inequality. In the process he devotes a chapter to the investigation of the viability of this "dream," and how our perceptions betray us as we try to focus on the problem of inequality.

Noah provides data on how people in the US have accepted a paradigm of dubious validity.

"A survey of twenty-seven nations from 1998 to 2001 asked participants whether they agreed with the statement "People are rewarded for intelligence and skill." The country with the highest proportion answering in the affirmative was the United States (69 percent) compared to a median among all countries of about 40 percent."

"Similarly, more than 60 percent of Americans agreed that "people get rewarded for their effort." compared to an international median of less than 40 percent."

"When participants were asked whether coming from a wealthy family was ‘essential’ or ‘very important’ to getting ahead, the percentage of American affirmatives was much lower than the international median: 19 percent versus 28 percent."

Noah then puts this optimism into a more specific economic context.

"A poll taken six years before by the Gallup organization found that 31 percent of Americans expected to get rich themselves before they die, with ‘rich’ defined by respondents....(roughly in the top 10 percent). Among those eighteen to twenty-nine, 51 percent expected to get rich."

And what is the reality?

"Only 6 percent of Americans born at the bottom of the heap (defined as the lowest fifth in income distribution....) ever make it in adulthood to the top (defined as the highest fifth in income distribution....)."

The surest way to end up in the top income quintile is to be born there.

"Parentage is a greater determinant of a man’s future earnings than it is of his height and weight. Height and weight are influenced by the genes passed from parents to children. Future earnings are not. But you wouldn’t know that from available data on economic mobility in the United States."

In other words, economic privilege, or the lack thereof, is stronger than genetics.

Noah attempts to explain how people in the US can be so confused. Partly it comes from the propaganda-like effect of writings of authors such as Horatio Alger Jr. and James Truslow Adams, neither of who could be said to have risen from the bottom. Although successful, both came from established families and attended, at least for a time, Ivy League universities. Adams, in fact, spent much of his life overseas and penned the book with the phrase "The American Dream" while living in London.

Another support for the misperception arose from the economic data available in the past. It was only in the early 1990s that quality data and analyses became available. These studies found that economic mobility, while not as high as perceived, was greater in the past and has been declining since the ‘50s and’60s.

Noah provides a graphic representation of how the US ranks against other countries in economic mobility. The metric applied is intergenerational mobility—a measure of how correlated a child’s ultimate income is with that of his parents. Another way to express this same relationship is in terms of income heritability. The larger the value, the greater is the correlation between income of parents and children.

By this measure, economic mobility in the US is considerably lower than European countries, save Italy and the UK. Usually England infects the English speaking countries it spawned uniformly with its defects, but in this instance, Canada and Australia seem to have escaped and have arrived at relatively egalitarian societies.

Noah provides this pertinent comment.

"A common American criticism of the ‘socialist’ countries of western and particularly northern Europe is that by providing guaranteed health care and a social safety net for the poor and unemployed that is more comprehensive than the one in the United States, these nations diminish their economies’ ability to create economic opportunity. That argument is refuted by the evidence presented here that western and northern European countries provide, in fact, greater opportunity than the United States to move up the economic ladder."

He seems to be suggesting that we should imbue our children with a lust for a "European Dream."

This misperception about how great the odds of success are in our society has positive as well as negative implications. People who have an irrational exuberance about success will take risks that more sentient individuals might not take. This will occasionally lead to spectacular success, although the exception does not make the rule. On the other hand the excessive belief in personal opportunity can lead to excessive guilt and disappointment when success is not attained.

"The American reluctance to regard disappointing outcomes as anything other than failed personal not only painful to the spirit; it is also an obstacle to constructive forms of collective action such as forming a labor union or organizing a political movement."

This discussion is much more than a mere aside in Noah’s investigation of income inequality.

"My interest is in a particular consequence of Americans’ overconfidence in upward mobility. It has become the rational for indifference toward income inequality—a rational built on a demonstrably false premise."

May we all have the same interest and concern.

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