Log cabin to White House? Not any more

The Observer (London) Sunday April 28, 2002

Internet

The State We're In, Will Hutton's explosive analysis of the British economy, caused a storm and became an instant bestseller seven years ago. Now, in The World We're In, he turns his attention to the global picture. In this exclusive extract he argues that the US can no longer lay claim to being the land of opportunity.)

America is the most unequal society in the industrialised West. The richest 20 per cent of Americans earn nine times more than the poorest 20 per cent, a scale of inequality half as great again as in Japan, Germany and France. At the very top of American society, incomes and wealth have reached stupendous proportions. The country boasts some three million millionaires, and the richest 1 per cent of the population hold 38 per cent of its wealth, a concentration more marked than in any comparable country. This inequality is the most brutal fact of American life. Nor is it excused by more mobility and opportunity than other societies, America's great conceit. The reality is that US society is polarising and its social arteries hardening. The sumptuousness and bleakness of the respective lifestyles of rich and poor represent a scale of difference in opportunity and wealth that is almost medieval - and a standing offence to the American expectation that everyone has the opportunity for life, liberty and happiness.

The chief means by which contemporary Western societies offer their citizens a chance to reach reasonable living standards and move up the social and economic hierarchy is education. At first sight, the US does well. In the schooling system, its fourth-grade students (the fourth year of primary school) do better than their international counterparts, and 37 per cent of its 18- to 21-year-olds go through higher education, one of the highest proportions in the industrialised West. Moreover, the US's university standards, especially in the top 50, are on average the best in the world. Salaries are high and the research record excellent.

But take a closer look, using more stringent criteria. As a system that offers every American a chance for educational achievement and the acquisition of formal academic or vocational qualifications - the key instrument for social mobility - the US structure fails. By twelfth grade (the year after GCSE), American students are falling behind their international peers, especially in mathematics and science.

And while in Germany, for example, 80 per cent of school-leavers go on to receive either vocational training or a degree and all except 1 per cent receive formal post-secondary education or training, in the US 46 per cent of school-leavers gain no certificate or degree - and an extraordinary 31 per cent have never received formal training or education after leaving school.

The message is stark. Those Americans who do not get to college are pushed into the labour market with a poverty of skills, educational and vocational training. Those who do get to college are overwhelmingly students from the higher socio-economic backgrounds, just as they always have been; a study in 1965 found that two-thirds of the explanation for educational achievement was accounted for by family income; a study 30 years later found exactly the same figure.

As inequality grows, the grip of the wealthy on educational advantage becomes ever more evident, for the cost of going to university over the last 25 years has exploded. The average cost of tuition fees and room and board has risen fourfold since 1977 to an average of $10,315 (£7,264) today; the overall average masks a stark contrast between the average cost of study at private universities at $17,613 (£12,403) and public universities at $7,013 (£4,938).

Yet as costs have risen, federal and state support to help fund students' costs has both declined, and been refocused on the middle class. In 1965, the Pell grant, the largest federal programme for poor students, covered 85 per cent of the cost of four years at a public university; in 2000, it covered just 39 per cent of the bill. Meanwhile, the Hope Scholarship, introduced by President Clinton, provides up to $3,000 of tax credits to fund university education but it goes mainly to families earning between $30,000 and $90,000 (£21,126 to £63,380) whose children would have gone to college anyway. States have cut their support on average by 32 per cent since 1979.

The result of this vicious scissor movement - rising costs cutting against falling state and federal support - is a calamitous drop in the chances of a poor student acquiring a university degree, and this in an environment where there are negligible alternative forms of vocational and formal education.

Borrowing money on the scale now needed to finance college is easier for students from better-off families with expectations of reasonable earnings than for students from low-income families. As Gaston Caperton, president of the College Board, admits, the US 'is not doing a good job helping low-income students succeed'. In 1979, a student aged 18 to 24 from the top income quartile was four times more likely to obtain a degree by 24 than a student from the bottom quartile. By 1994, the latest year for which we have figures, this was 10 times more likely. Given the trends in inequality, college costs and falling state support, this already disastrous ratio can only have got worse over the last eight years. American social mobility is set to decline below its already modest levels.

The unease at the way the system benefits the well-off is captured by the decision of 120 billionaires, including Warren Buffet, America's fourth richest man, to found a pressure group to oppose the elimination of taxes on capital gains and inherited wealth. Buffet's argument is that the US is developing an aristocracy of the wealthy. Just as it would be absurd to select the US Olympics team for 2020 from the children of the winners of the Olympics in 2000, he says, so it is wrong to construct a society whose likely leaders tomorrow - given the advantages that wealth confers - will be the children of today's wealthy. This offends not merely the values of democracy and equality of opportunity on which the US is constructed, but will be economically disastrous.

Buffett and his fellow-campaigners are right, but the pass has long been sold. The Bush, Gore and Kennedy families are only three of the more famous political examples of how wealth begets both more wealth and influence. Five generations of the Bushes, for example, have been 'tapped' to become members of the Skull and Bones Club at Yale, whose initiates retain a commitment to the lifelong scratching of each other's backs while never acknowledging they were members. In itself, there is nothing remarkable about private clubs of privileged insiders in private universities; it is just that the country that boasts them should be more self-knowing about its pretensions to meritocracy.

Meanwhile, for those at the bottom, the consequence of the new conservatism that dominates the US is to make life increasingly desperate - and with progressively less opportunity. Eligibility for income support and public assistance is being steadily withdrawn; cumulatively, it had halved by 1998/9 from the levels of 20 years ago. Poorly educated and with negligible access to training programmes, the poor are locked into their status: 54 per cent of those in the bottom 20 per cent in the 1960s were still there in the 1990s; only 1 per cent had migrated to the top 20 per cent. Journalist Barbara Ehrenreich conducted her own social experiment, spending 1998 working in a series of low-wage jobs as a waitress, hotel maid, cleaning woman, nursing home aide and a Wal-Mart sales clerk. The result of her year, documented in Nickel and Dimed, is an extraordinary Orwellian testimony to how tough American working life is for the bottom 20 per cent. She had absolutely no financial margin beyond paying the rent and what she needed to survive; saving or finding the time for any training to upgrade her status was beyond her. 'Most civilised nations compensate for the inadequacy of wages by providing relatively generous public services such as health insurance, free or subsidised child care, subsidised housing and effective public transport,' she writes. 'But the United States, for all its wealth, leaves its citizens to fend for themselves - facing market- based rents on their wages alone. For millions of Americans, that $10 - or even $8 or $6 an hour - is all there is.'

Conservatives try to excuse this inequality by arguing that American income and social mobility is uniquely high, as befits an exceptional civilisation. It is not; indeed it compares badly with the Europe about whom American conservatives are so patronising. Lawrence Milshel, Jared Bernstein and John Schmitt, the three authors of The State of Working America (described by the Financial Times as the most comprehensive independent analysis of the American labour market), compare the mobility of American workers with the four biggest European economies and three Scandinavian economies.

They find that the US has the lowest share of workers moving from the bottom fifth of workers into the second fifth, the lowest share moving into the top 60 per cent and the highest share of workers unable to sustain full- time employment. The most exhaustive study by the OECD confirms the poor rates of relative upward mobility for very low-paid American workers; it also found that full-time workers in Britain, Italy and Germany enjoy much more rapid growth in their earnings than those in the US, who rank roughly equal with the French. However, downward mobility was more marked in the US; American workers are more likely to suffer a reduction in their real earnings than workers in Europe - the log cabin to White House effect in reverse.

The cumulative evidence since the Second World War is that measured mobility in the US is little different from Europe's, despite all the propaganda. Lipset and Bendix in their groundbreaking study in 1959, Social Mobility in Industrial Society, could find no evidence that American men were moving any more rapidly from manual to non-manual labour than in other industrial societies. Later studies comparing the income mobility of the US with the Nordic countries and Germany either find no difference or that the US is worse.

Leading sociologists Robert Erikson and John Goldthorpe found precisely the same result in a more detailed breakdown of mobility, whether measuring what happens inter-generationally or over one individual's lifetime. The mystery, they write, is that given that there is no evidence of American exceptionalism or increased social mobility, why the myth persists.

The answer is that nobody in the highly introverted society that the US has become can believe that foreigners might do it as well or better - and the conservative intellectual ascendancy is not going to disabuse them. The combination of reduced educational opportunity for low-income students and more advantages conferred on the rich - the great achievements of conservatism - can only have one result. America is developing an aristocracy of the rich and serfdom of the poor and, in so doing, threatening its own economic vitality.

The US itself is stirring. It is not just foreign critics who believe the US has not solved the age-old question about how to construct a just economic and social order - or operate an effective democracy. A growing number of Americans share the same view. The argument that Europe should copy the US is in important respects the wrong way round. It is European social outcomes from which the US now needs to borrow; nor is the European economy as sclerotic as US conservatives like to portray (as argued in tomorrow's extract in the Guardian ). Yet it is the US, the country which has left so many of its citizens barren and ill at ease with themselves, and which is riven by internal concern and criticism, that is held up as a model for the world. It is time for Europeans to recognise the strength of their social outcomes and defend them.

© Will Hutton 2002. Will Hutton's ground breaking book, The State We're In, affected government policy. His latest title, The World We're In, will affect us all as the future of Britain is decided. The World We're In will retail at £17.99; however, Time Warner Books UK are pleased to offer Guardian / Observer readers the special

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