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Previously in Politics & Prose:

  • Games of Monopoly -- April 1998
    A look at the tactics of John D. Rockefeller shows that capitalism, like history, repeats itself.

  • The Price of Longevity -- March 1998
    Medicare and what we have to look forward to.

  • The King of Drudge -- February 1998
    A review of a new biography of the man behind the assembly line -- whose ideas need to be acknowledged and abandoned.

  • Color Us Green -- January 1998
    A heretical new approach to economics puts ecology first -- and may change the way we think about growth.

  • The Deep Slumber of Decided Opinion -- December 1997
    Those who hail the virtues of trade without limits are this era's reactionaries.

  • A Barbarous Frenzy -- November 1997
    A new book documents the Rape of Nanking, China's "forgotten Holocaust."

  • Let Them Eat Empathy -- October 1997
    The era of big government has given way to the era of sharing leftovers.

    More by Jack Beatty in Atlantic Unbound

  • The Graveyard of the American Dream
    Without a return to public-sector investment the United States may follow in the path of California's decline

    by Jack Beatty

    May 13, 1998

    The capital of inequality in the 1990s is California, where income inequality -- with new immigrants at one end of the income scale and venture capitalists at the other -- has increased at more than twice the national rate since the start of the decade. (This based on a just-released Conference Board quarterly report on income inequality in America.) High in every state when compared to the mid-1970s, income inequality today remains sharpest in the Middle Atlantic region -- New York, New Jersey, and Pennsylvania -- where the incomes of the households at the eightieth percentile are more than five times higher than those at the twentieth. During the past decade inequality has declined in the Rocky Mountain states and the South Central states. The industries that were attracted by low wages in these regions, however, could someday be attracted by even lower ones in the Third World.

    The twenty-year trend toward inequality has stabilized, it now appears -- but at a point where the average hourly wage, when adjusted for inflation, is about one dollar lower than it was in 1973. The key to higher wages, not surprisingly, is education. According to the Conference Board report, each year of education results in a future gain in wages of more than ten percent; twenty years ago the gain was six percent. The report cites "growing evidence" that not just the quantity but the quality of education -- and particularly smaller class size -- also boosts later earnings. By this last criterion California could remain the capital of inequality for years to come: whereas the national average in class size is one teacher for every seventeen students, in California the ratio is one for every twenty-four. California, which before the tax revolt of the 1970s was the most progressive state in the country, now has fewer school librarians than Alabama, and 20 percent of its school children learn in temporary classrooms. California is doing its worst to assure that its children will grow up to have lower incomes than children lucky enough to live elsewhere. The Golden State is betraying its place in the national imagination. So long the cynosure of material hope, California is becoming the graveyard of the American Dream.

    Is the stark two-class split that is developing in California between the haves and the have-nots a portent of the American future, as Peter Schrag wonders in his eloquent new book, Paradise Lost? In the post-war era, California's middle-class prosperity rested on superb public schools, excellent low- or no-tuition public colleges and universities, public libraries and recreation centers, and thousands of miles of newly built public freeways. This vibrant public sector not only created but also democratized opportunity. The taxes that paid for it were investments; their return was higher future incomes. Thirty years of conservative polemic has obscured this link between public-sector investment and prosperity. Just as public investment leveraged upward mobility in the post-war era, so the nationwide decline in public investment over the past generation has leveraged the downward mobility indicated by the fall in real incomes since 1973.

    The conservative model of replacing a robust public sector with every-man-for-himself individualism has failed to deliver middle-class prosperity. That is what the statistics cited in the Conference Board report mean. We can't all be entrepreneurs, at least not without the kind of public investment by the Defense Department in research and technology that created Silicon Valley and the high-tech industry. But we can raise real incomes and mitigate inequality. The public-sector model of prosperity worked, and can work again -- provided it is paired with a resurgent labor movement. It may be the only thing, to use Schrag's subtitle, that can keep the California experience from becoming America's future.

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    More by Jack Beatty in Atlantic Unbound

    Jack Beatty is a senior editor at The Atlantic Monthly and the author of The World According to Peter Drucker (1997) and The Rascal King: The Life and Times of James Michael Curley (1992).

    Copyright © 1998 by The Atlantic Monthly Company. All rights reserved.
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