When in­equal­ity kills

Financial Mirror (Cyprus) - - FRONT PAGE -

This week, An­gus Deaton will re­ceive the No­bel Me­mo­rial Prize in Eco­nomics “for his anal­y­sis of consumption, poverty, and wel­fare.” De­servedly so. In­deed, soon af­ter the award was an­nounced in Oc­to­ber, Deaton pub­lished some star­tling work with Ann Case in the Pro­ceed­ings of the Na­tional Acad­emy of Sci­ences – re­search that is at least as news­wor­thy as the No­bel cer­e­mony.

Analysing a vast amount of data about health and deaths among Amer­i­cans, Case and Deaton showed de­clin­ing life ex­pectancy and health for mid­dle-aged white Amer­i­cans, es­pe­cially those with a high school ed­u­ca­tion or less. Among the causes were sui­cide, drugs, and al­co­holism.

Amer­ica prides it­self on be­ing one of the world’s most pros­per­ous coun­tries, and can boast that in ev­ery re­cent year ex­cept one (2009) per capita GDP has in­creased. And a sign of pros­per­ity is sup­posed to be good health and longevity. But, while the US spends more money per capita on med­i­cal care than al­most any other coun­try (and more as a per­cent­age of GDP), it is far from top­ping the world in life ex­pectancy. France, for ex­am­ple, spends less than 12% of its GDP on med­i­cal care, com­pared to 17% in the US. Yet Amer­i­cans can ex­pect to live three full years less than the French.

For years, many Amer­i­cans ex­plained away this gap. The US is a more het­ero­ge­neous so­ci­ety, they ar­gued, and the gap sup­pos­edly re­flected the huge dif­fer­ence in av­er­age life ex­pectancy be­tween African Amer­i­cans and white Amer­i­cans.

The racial gap in health is, of course, all too real. Ac­cord­ing to a study pub­lished in 2014, life ex­pectancy for African Amer­i­cans is some four years lower for women and more than five years lower for men, rel­a­tive to whites. This dis­par­ity, how­ever, is hardly just an in­nocu­ous re­sult of a more het­ero­ge­neous so­ci­ety. It is a symp­tom of Amer­ica’s dis­grace: per­va­sive dis­crim­i­na­tion against African Amer­i­cans, re­flected in me­dian house­hold in­come that is less than 60% that of white house­holds. The ef­fects of lower in­come are ex­ac­er­bated by the fact that the US is the only ad­vanced coun­try not to recog­nise ac­cess to health care as a ba­sic right. Some white Amer­i­cans, how­ever, have at­tempted to shift the blame for dy­ing younger to African Amer­i­cans them­selves, cit­ing their “life­styles.” It is per­haps true that un­healthy habits are more con­cen­trated among poor Amer­i­cans, a dis­pro­por­tion­ate num­ber of whom are black. But th­ese habits are a con­se­quence of eco­nomic con­di­tions, not to men­tion the stresses of racism.

The Case-Deaton re­sults show that such the­o­ries will no longer do. Amer­ica is be­com­ing a more di­vided so­ci­ety – di­vided not only be­tween whites and African Amer­i­cans, but also be­tween the 1% and the rest, and be­tween the highly ed­u­cated and the less ed­u­cated, re­gard­less of race. And the gap can now be mea­sured not just in wages, but also in early deaths. White Amer­i­cans, too, are dy­ing ear­lier as their in­comes de­cline. This ev­i­dence is hardly a shock to those of us study­ing in­equal­ity in Amer­ica. The me­dian in­come of a full-time male em­ployee is lower than it was 40 years ago. Wages of male high school grad­u­ates have plum­meted by some 19% in the pe­riod stud­ied by Case and Deaton.

To stay above wa­ter, many Amer­i­cans bor­rowed from banks at usu­ri­ous in­ter­est rates. In 2005, Pres­i­dent Ge­orge W. Bush’s ad­min­is­tra­tion made it far more dif­fi­cult for house­holds to de­clare bank­ruptcy and write off debt. Then came the fi­nan­cial cri­sis, which cost mil­lions of Amer­i­cans their jobs and homes. When un­em­ploy­ment in­sur­ance, de­signed for short-term bouts of job­less­ness in a full-em­ploy­ment world, ran out, they were left to fend for them­selves, with no safety net (be­yond food stamps), while the gov­ern­ment bailed out the banks that had caused the cri­sis.

The ba­sic perquisites of a mid­dle-class life were in­creas­ingly be­yond the reach of a grow­ing share of Amer­i­cans. The Great Re­ces­sion had shown their vul­ner­a­bil­ity. Those who had in­vested in the stock mar­ket saw much of their wealth wiped out; those who had put their money in safe gov­ern­ment bonds saw re­tire­ment in­come di­min­ish to near zero, as the Fed re­lent­lessly drove down both short- and long-term in­ter­est rates. With col­lege tu­ition soaring, the only way their chil­dren could get the ed­u­ca­tion that would pro­vide a mod­icum of hope was to bor­row; but, with ed­u­ca­tion loans vir­tu­ally never dis­charge­able, stu­dent debt seemed even worse than other forms of debt. There was no way that this mount­ing fi­nan­cial pres­sure could not have placed mid­dle-class Amer­i­cans and their fam­i­lies un­der greater stress. And it is not sur­pris­ing that this has been re­flected in higher rates of drug abuse, al­co­holism, and sui­cide.

I was chief econ­o­mist of the World Bank in the late 1990s, when we be­gan to re­ceive sim­i­larly de­press­ing news from Rus­sia. Our data showed that GDP had fallen some 30% since the col­lapse of the Soviet Union. But we weren’t con­fi­dent in our mea­sure­ments. Data show­ing that male life ex­pectancy was de­clin­ing, even as it was in­creas­ing in the rest of the world, con­firmed the im­pres­sion that things were not go­ing very well in Rus­sia, es­pe­cially out­side of the ma­jor cities.

The in­ter­na­tional Com­mis­sion on the Mea­sure­ment of Eco­nomic Per­for­mance and So­cial Progress, which I co-chaired and on which Deaton served, had ear­lier em­pha­sised that GDP of­ten is not a good mea­sure of a so­ci­ety’s well­be­ing. Th­ese new data on white Amer­i­cans’ de­clin­ing health sta­tus con­firms this con­clu­sion. The world’s quin­tes­sen­tial mid­dle-class so­ci­ety is on the way to be­com­ing its first for­mer mid­dle­class so­ci­ety.

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