by Thomas R. Wells
Americans dominate global (social) media and one result of this is that the rest of the world is overexposed to Americans’ ideas, and also to their ideas about themselves. One such idea that is more or less endlessly repeated is that even middle-class Americans are actually poor these days.
I accept that many Americans are perfectly sincere in this belief but that doesn’t make it true, whether one defines poverty in terms of meeting basic needs, or as a relative decline between generations or between America and other nations. Yes – some Americans are poor, really poor by any reasonable standard. But not most Americans, or the average (median) American, which is the claim I see constantly.
The evidence shows that most Americans are richer than ever, and richer than most people in the rich world – that they consume more, live in larger homes, and so on. They are objectively some of the luckiest people in world history. On the one hand all this narcissistic whining about imaginary poverty is mildly annoying for the rest of the world to have to listen to. On the other hand, it reflects shared delusions about individual entitlements and America’s economic decline that are driving a toxic ‘doom politics’ of cynicism and resentment, while also neglecting the needs of actually poor Americans.
Two misunderstandings in particular seem to drive the mistake: that everything is more expensive these days, and that the rich took all the money.
1. Americans are poor because everything is more expensive these days
It is true that prices for many things have increased in recent decades, and this reduces the amount of those things that people can buy. However, this does not necessarily mean that Americans are objectively poor, or poorer than they used to be.
Price changes are a normal part of economic development. In particular, as an economy gets richer, food and manufactured goods get cheaper in terms of the hours of work you have to put in to get them, while labour-intensive services like education and healthcare automatically get more expensive. Most of the price increases that Americans complain about are actually an inevitable consequence of their increased prosperity. (Although some, like the extreme cost of health-care compared to other rich countries are attributable to America specific causes, such as peculiarly dysfunctional institutional arrangements.)
When prices for certain things increase, people have to make trade-offs they didn’t have to before, and this may feel unpleasant because they can’t have everything they thought they could have (or exactly the same set of things that their parents had). But they can still buy plenty of nice things, including functional substitutes as good or better than what their parents had. Altogether the bundle of valuable goods and services they can afford is much better than that available to previous generations.
And this seems to be the case. Americans live in smaller households in larger homes and drive bigger better cars than they used to. It may be that many Americans can’t afford the lifestyle which they feel they deserve (and maybe they do deserve more!), but the lifestyle they can afford is nevertheless much better than that of previous generations.
2. Inequality: America is rich, but the top 1% took it all
Inequality in America is quite high compared to other rich countries. Indeed, it seems that a disproportionate share of the economic gains of the last 40 years have accrued to the already rich, while social mobility has declined.
One can certainly complain that this is unfair, and that the average American would be even richer if economic policies had been different. But that imaginary counterfactual doesn’t mean that most Americans are actually poor against any reasonable benchmark (whether that be meeting their basic needs; the rest of the world; or Americans from previous generations).
A bigger problem is the division between the majority who enjoy housing wealth and the minority without it (especially younger people). Like every other rich country bar Singapore, America screwed up its housing market by making it too expensive to build housing where people wanted to live, and too easy for those who already lived there to block construction. It definitely needs to fix this!
However, even this very real problem does not affect most Americans. (The OECD ranks the US no 1 for housing based on criteria like space, quality, and cost.) This is because most Americans are in the lucky position of having already bought their house (or living in rent-controlled places) and so their housing costs are a quite affordable share of their income.
Why is Economic Pessimism so Entrenched Among Americans?
It may be that the mistaken perception of mass middle-class poverty in America is a problem with the mirror in which societies these days try to observe ourselves. Young Americans are disproportionately affected by the high cost of new housing, and they are also disproportionately represented in the social media space. Hence we hear a lot about their complaints and mistakenly assume that they must represent the majority experience.
Another way that social media is implicated lies in its characteristic tendency to amplify false but exciting claims, such as those ridiculous statistics claiming that “[Terrifyingly high] percent of Americans are [shocking few] months from utter destitution”.
Similar versions of these statistics appear every few months and spread quickly through old and new media. They are put out by personal finance companies who seem to have found a reliable way of generating large amounts of free media attention for very little effort. There is no transparency or rigour in their methodology, and their highly memeable findings are obvious nonsense. (Real research institutions that care about getting their methodology and facts right, like the Fed, come to very different numbers.) Nevertheless, even obvious nonsense will be believed if it is endlessly repeated and left unchallenged.
However it happened, economic pessimism now dominates America (see e.g. this recent YouGov poll, in which pessimists outnumbered optimists by 2:1). And it will likely have major consequences for the 2024 election: for which politicians win office and what their policy priorities and ideas will be. And so this mistake will have real world consequences, in America and beyond.
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Thomas Wells teaches philosophy in The Netherlands. He blogs on philosophy, politics, and economics at The Philosopher’s Beard.