America's crisis and why it matters to SA

In my post of May 4 I made reference to social problems in the US as a way to suggest that SA’s problems were not unique and that it would be useful to have some perspective on social crises. This should not be seen as an apology for whatever actual or perceived crises there may be in SA. The problem, of course, is that SA seems much more like a minimalist capitalist country, somewhat like the US, and this gives civil society a greater task than elsewhere. Anyway, one suggestion I received was to provide firm evidence of the relative decline of the US, in political economic terms. The basic point is that the US faces a multi-dimensional crisis that is evident in several areas of society. The three areas that stand out are: the growth in inequality and the crises in healthcare and in employment.

Before I proceed, I should be clear; middle-class sensibilities are such that they would accept the authority of their own kind more readily, so it is handy to submit, here, Paul Krugman’s observation that the US currently has the worst unemployment since the Depression of the 1930s, a point I made in my post of May 4. While I generally accept my own intellectual shortcomings, most of the time (and leaving room for irrationalities) I stand by what I write in these columns. So, I submit Krugman’s observation because the readers of the electronic Mail & Guardian would probably accept his views more readily. Make of that what you will … let me provide, then, a further discussion about the crisis to which I refer.

This crisis, I would argue, is tied to the liberal capitalist/minimal democracy model, the so-called “American model” that has been exported to countries around the world through the World Bank for most of the past three decades; at least since the early 1980s, in the wake of Ronald Reagan’s election to the US presidency. This model is essentially this: the population go to polls once every four years to elect a leader. The people then step aside and the state then “gets the macro-economic fundamentals right”. In other words the state sets targets like low inflation, adheres to fiscal discipline etc. Though one should not simplify these issues, the basic premise is that the state should “leave the market” to allocate resources. In this way, things like low inflation become ends in themselves, and not means to an end. Again, to satisfy middle-class sensibilities, I will remind them that the former chief economist of the World Bank, Joe Stiglitz, not a left-winger by any stretch of the imagination, warned his colleagues at the bank and the International Monetary Fund that these targets were not ends in themselves. In the case of SA, fiscal discipline (and other nostrums of market fundamentalism) achieved under the administrations of Nelson Mandela, Thabo Mbeki and, now, Jacob Zuma, has failed to reduce inequality and failed to effectively address unemployment. Contiguously, as in the US over the past decade or so, some people in SA have become extraordinarily wealthy. In the US the multidimensional crisis has caused severe hardship to the most vulnerable sectors of society, those communities that have historically been under-privileged, under-resourced and marginalised.

Liberal capitalism and structural violence in the US
Today, people in the US, especially when compared to other “highly industrialised” countries, are increasingly being exposed to some of the worst structural violence inherent in liberal capitalism’s obeisance to “the market” as the ultimate arbiter in human affairs. Though structural violence is not unique to capitalism, liberalism’s almost religious faith in the market mechanism precludes social policies directed at equality and/or direct intervention to uplift poorer sectors of society. Structural violence refers to the systematic ways in which rigid rules and inflexible social policies — those that are part of the structure of society — harm groups and individuals. The attitude that sums up structural violence was best summed up by the reference, also in the previous post, to “tough shit” as a response to unemployment at a time when the US (and the British, for that matter) government spent significant sums of money to bail out large banks and when the wealthy are given tax breaks and other kickbacks. In other words, bail out banks, give the wealthy tax breaks and let “the market” uplift the poor. In Britain the estimated cost of bank bailouts in 2009 was £850 billion, and in the US it cost the state (taxpayers) an estimated $4 trillion. Compare this rescue of the wealthy, we should make no bones of the fact that that is what it is, to the rise in inequality.

As in most political economic crises, under-resourced and marginalised groups are most severely affected. Official Bureau of Labour Statistics show that (April 2011) unemployment rates for white (historically privileged) was 8% and for black people and Latinos (both historically marginalised and under-resourced) unemployment was 16.1% and 11.7% respectively. Significantly, it was teenagers — clearly school-leavers without having completed a university degree — who were the worst affected in the population as a whole. The unemployment rates were as follows: adult men 8.8%; adult women 7.9% and teenagers 24.9%. For an overall picture of unemployment in the US, see the following chart.

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The crisis is deep and wide and has also had a serious impact on the middle class. The main fears of social scientists is that the US is becoming “a barbell society — a lot of money wealth and power at the top, increasing hollowness at the centre” with “too many people” facing collapse in the lower classes. Consider the following data from the New America Foundation, a liberal think-tank.

– There are 8.5 million people receiving unemployment insurance and more than 40 million receiving food stamps.
– At the current pace of job creation, the economy won’t return to full employment until 2018.
– Middle-income jobs are disappearing from the economy. The share of middle-income jobs in the US has fallen from 52% in 1980 to 42% in 2010.
– Middle-income jobs have been replaced by low-income jobs, which now make up 41% of total employment.
– 17 million Americans with college degrees are doing jobs that require less than the skill levels associated with a bachelor’s degree.
– Over the past year, nominal wages grew only 1.7% while all consumer prices, including food and energy, increased by 2.7%.
– Wages and salaries have fallen from 60% of personal income in 1980 to 51% in 2010. Government transfers have risen from 11.7% of personal income in 1980 to 18.4% in 2010, a post-war high.

How does this crisis in the US compare to other highly industrialised countries? Well, considering that SA has, since at least 1990, aspired to “the American model” and not any other, say, social democratic models in Europe, the following charts present a fairly clear picture of the crisis the US faces, when compared to other highly industrialised countries. The first compares children in poverty in the UK, Sweden, France and the US.

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The second is of the percentage of the population facing homelessness in Portugal, Italy, Belgium, Germany and the US between 1990 and 2006.

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The third chart is of the percentage of social spending as a percent of gross domestic product in Sweden, Germany, France, the UK and the US.

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Compare social spending in the US with military spending and the following picture emerges.

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Now look at the percentage of total income received by the wealthiest 1% in France, Sweden, Portugal, Italy, Sweden and the US.

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The picture that emerges is, then, of a country that faces serious unemployment (with the poor disproportionately affected) high levels of inequality (with the rich becoming richer) more people battling to make ends meet and a state that apparently serves as the executive arm of corporations — how else can one explain the bailing out of banks and corporations while poor people are dismissed as “stray animals” and unemployment as “tough shit”. Let me turn to the final issue, the crisis in healthcare. I want to start with a brief personal story.

There’s a crisis in healthcare but it’s not scandalous
Two years ago I had a rather serious bout of influenza and was treated by a hospital in Minnesota, which is generally considered to be a “liberal” state. I was between jobs and had no health insurance, and did not pay the bill for three months or four months. Within those three months I had collecting agencies call and threaten to (among other) appropriate my car in lieu of payment for influenza treatment. In this I am, or was, not alone. One study by Harvard Medical School done in 2007 revealed that 62 % of bankruptcies in the US were a result of medical expenses and “equally damning, 75 % of the people with a medically-related bankruptcy had health insurance”.

Given this crisis in the US, one Washington Post reporter, TR Reid, looked at healthcare systems around the world. During an interview with the then president of the Swiss Federation, he asked: “How many people in Switzerland go bankrupt because of medical bills?”

To which former Swiss president Pascal Couchepin replied: “Nobody. It doesn’t happen. It would be a huge scandal if it happens.”

In the US there is no scandal. Loyalty to the free-market model, with the emphasis on minimising the role of government being increasingly the most consistent factor, has remained fairly intact for almost three decades. Since the election of Reagan more than 30 years ago, the country has more or less remained right-wing. Most of the actors who drive economic policy (Paul Volcker, Lawrence Summers, Alan Greenspan) have been retained or recalled by almost every president since the Reagan era. It is during this period that the US has become one of the most unequal countries in the world. In this, the most powerful and wealthiest country in the world more and more people can simply not afford to be sick …

According to Emmanuel Saez of the University of California at Berkeley, income inequality in the US is now greater than it has ever been over the last century. It is much, much greater than it was in the 30 years after World War II. Since 1980 (the onset of the Reagan years) to 2007, the US has become a far more unequal society. This growth in inequality is reflected, to some extent, in SA — least of all because the policies implemented by the post-apartheid government have been based on “the American model”. This is the same model that collapsed so dramatically from about 2008 and for which the former chairman of the US Federal Reserve, Greenspan, accepted responsibility for his blind faith to deregulation.

In October 2008, Greenspan was questioned in the US House of Representatives Committee on Oversight and Government Reform about his role in the economic crisis that resulted in bank closures and defaults, all of which contributed to tipping the US into recession:

“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry Waxman of California, who chaired the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?” Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

If one can cut through the propaganda and media images of glamour and superficial representations of prosperity, progress and “freedom” — that which is unproblematically tied to “the American model” — a clearer picture might emerge. People in SA might, then, imagine that they don’t have it as bad as some people might insist. There is no guarantee that the leaders might take heed. In minimal democracies, elections every four years appears to be all that matters. It is hardly surprising that in the following, somewhat simple map (The Economist Intelligence Unit’s index of democracy) the US and SA are coloured with the same light blue brush.

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