Enlightenment Now: The Case for Reason, Science, Humanism, and Progress

The lower line in figure 9-6 highlights the fourth way in which inequality measures understate the progress of the lower and middle classes in rich countries.⁵⁶ Income is just a means to an end: a way of paying for things that people need, want, and like, or as economists gracelessly call it, consumption. When poverty is defined in terms of what people consume rather than what they earn, we find that the American poverty rate has declined by ninety percent since 1960, from 30 percent of the population to just 3 percent. The two forces that have famously increased inequality in income have at the same time decreased inequality in what matters. The first, globalization, may produce winners and losers in income, but in consumption it makes almost everyone a winner. Asian factories, container ships, and efficient retailing bring goods to the masses that were formerly luxuries for the rich. (In 2005 the economist Jason Furman estimated that Walmart saved the typical American family $2,300 a year.)⁵⁷ The second force, technology, continually revolutionizes the meaning of income (as we saw in the discussion of the paradox of value in chapter 8). A dollar today, no matter how heroically adjusted for inflation, buys far more betterment of life than a dollar yesterday. It buys things that didn’t exist, like refrigeration, electricity, toilets, vaccinations, telephones, contraception, and air travel, and it transforms things that do exist, such as a party line patched by a switchboard operator to a smartphone with unlimited talk time.

Together, technology and globalization have transformed what it means to be a poor person, at least in developed countries. The old stereotype of poverty was an emaciated pauper in rags. Today, the poor are likely to be as overweight as their employers, and dressed in the same fleece, sneakers, and jeans. The poor used to be called the have-nots. In 2011, more than 95 percent of American households below the poverty line had electricity, running water, flush toilets, a refrigerator, a stove, and a color TV.⁵⁸ (A century and a half before, the Rothschilds, Astors, and Vanderbilts had none of these things.) Almost half of the households below the poverty line had a dishwasher, 60 percent had a computer, around two-thirds had a washing machine and a clothes dryer, and more than 80 percent had an air conditioner, a video recorder, and a cell phone. In the golden age of economic equality in which I grew up, middle-class “haves” had few or none of these things. As a result, the most precious resources of all—time, freedom, and worthy experiences—are rising across the board, a topic we will explore in chapter 17.

The rich have gotten richer, but their lives haven’t gotten that much better. Warren Buffett may have more air conditioners than most people, or better ones, but by historical standards the fact that a majority of poor Americans even have an air conditioner is astonishing. When the Gini index is calculated over consumption rather than income, it has remained shallow or flat.⁵⁹ Inequality in self-reported happiness in the American population has actually declined.⁶⁰ And though I find it distasteful, even grotesque, to celebrate declining Ginis for life, health, and education (as if killing off the healthiest and keeping the smartest out of school would be good for humanity), they have in fact declined for the right reasons: the lives of the poor are improving more rapidly than the lives of the rich.⁶¹

To acknowledge that the lives of the lower and middle classes of developed countries have improved in recent decades is not to deny the formidable problems facing 21st-century economies. Though disposable income has increased, the pace of the increase is slow, and the resulting lack of consumer demand may be dragging down the economy as a whole.⁶² The hardships faced by one sector of the population—middle-aged, less-educated, non-urban white Americans—are real and tragic, manifested in higher rates of drug overdose (chapter 12) and suicide (chapter 18). Advances in robotics threaten to make millions of additional jobs obsolete. Truck drivers, for example, make up the most common occupation in a majority of states, and self-driving vehicles may send them the way of scriveners, wheelwrights, and switchboard operators. Education, a major driver of economic mobility, is not keeping up with the demands of modern economies: tertiary education has soared in cost (defying the inexpensification of almost every other good), and in poor American neighborhoods, primary and secondary education are unconscionably substandard. Many parts of the American tax system are regressive, and money buys too much political influence. Perhaps most damaging, the impression that the modern economy has left most people behind encourages Luddite and beggar-thy-neighbor policies that would make everyone worse off.