What's Wrong With America?
"The Despair Is Smoldering in Society"
Millions of Americans have seen their wages stagnate
for decades, even as the wealthiest have grown fantastically rich. Economists
Angus Deaton and Anne Case believe the health-care system is partly to blame,
and the coronavirus is highlighting the broader dangers American society is
facing.
Interview
Conducted by Benjamin Bidder und Michael Sauga
24.06.2020,
17.39 Uhr
Anne Case
and her husband Angus Deaton: "We’re against people getting rich by
burdening other people."
The college
town of Princeton is located in New Jersey, which has been hit especially hard
by the coronavirus. The Nobel laureate economist Angus Deaton, 74, and his wife
Anne Case, 61, have thus spent a lot of time at home in recent months. Both are
at particular risk from COVID-19. In spring, the couple published the book
"Deaths of Despair and the Future of Capitalism." It traces the fall
of the American working class, which has seen wages stagnate for decades. The
two believe the country's desolate health-care system is partially to blame.
DER
SPIEGEL: Ms. Case, Mr. Deaton, the whole world is wondering why the United
States has been hit so hard by the coronavirus pandemic. Do you have an
explanation?
Deaton:
We're not epidemiologists, but the pandemic is once again revealing that the
U.S. health care system is a mess. It was a mess before the pandemic, but the
pandemic is really showing how problematic it is. More than 30 million people
have lost their employment. And now, because insurance is tied to employment,
there are millions of people without health insurance.
DER SPIEGEL:
The U.S. has some of the best doctors on earth, an innovative pharmaceutical
industry and world class hospitals with the best medical technology. Where is
the problem?
Case: The
U.S. is spending around 17 percent of GDP on health care, more than any other
country in the world. But we have the lowest life expectancy of any rich
country in the world. And the health-care industry is responsible for a lot of
this.
DER
SPIEGEL: You have even called the health-care industry a "parasite on the
economy” and said it is "like a tribute to a foreign power." Isn't
that a bit of an exaggeration?
Deaton: The
man who first compared the health-care industry to a tapeworm was Warren
Buffett, the famous investor. There are many ways of figuring out what the
health-care industry ought to cost and what it delivers. Take, for example, the
comparison with Switzerland, the country with the second highest health care
expenditures as a share of GDP: They spend 12 percent of GDP, but they live six
years longer on average than Americans! If a fairy godmother were somehow to
reduce the share spent on health care in America to the Swiss level, a lot of
money would be available for other things. It would free up a trillion dollars.
That’s the "tribute” that we refer to, the waste. But we are paying it to
ourselves, or to some of ourselves, not to a foreign power.
Case: We
are not attacking the people in the industry. The doctors and nurses are doing
a tremendous job, especially during this crisis. We are attacking a system that
is no longer functional.
DER
SPIEGEL: But it’s a very American system. It stresses personal responsibility.
Deaton: I
don’t think so. It’s especially putting pressure on working-class Americans. A
family policy last year cost $20,000 a year. This may be affordable for high
paid workers, but not for those who earn less, say $30,000 a year. So as rates
kept getting larger and larger in recent years, corporations cut back on hiring
low-wage workers. In short, the cost of health care and our system of financing
it is a wrecking ball to the less-educated labor market, throwing people out of
good jobs into much worse jobs in the outsourcing sector, or out of the labor
force altogether.
Case: At
the same time, federal and state governments pay for a large chunk of medical
care for the elderly or for people without the means to pay for Medicaid. But
that is putting great financial stress on the states, because every year, the
cost of providing health care goes up. There is less money left over to repave
roads or to fund state universities. In the long run, one of the mechanisms by
which working-class children could get a good college education is being pulled
out from under them because tuitions are being raised.
Deaton:
Some of them live off government benefits. Some of them take early retirement
or live off friends or relatives. Some move into a cheaper place. There are
lots of ways of surviving.
DER
SPIEGEL: They fall into poverty?
Case: Not
necessarily. It’s more a disintegration of a way of life. One of the
consequences is that, in those areas, there is a reduction of social
integration. There are fewer marriages in the white working class, fewer people
going to church, fewer people with stable home lives and a lessened sense of
community. That puts these people at great risk.
DER
SPIEGEL: And it contributes to those deaths of despair, as you have called
them. What is behind this phenomenon?
Case: We
were puzzled by the discovery that mortality rates are no longer sinking, but
accelerating in the group of middle-aged whites with low education. They are
dying from drug overdoses, alcoholic liver disease and suicide - all deaths by
their own hand. And they have all risen dramatically since the early 1990s.
DER
SPIEGEL: Why? What about the opioid epidemic?
Deaton: If
despair due to the hollowing out of the white working class wasn't there, the
drug epidemic would be much smaller. The despair is smoldering in society, and
this created an opportunity for the pharmaceutical industry, an industry that
is not appropriately regulated, which made the situation with opioids much
worse. At the height of it, there were enough prescriptions for every American
to have a month's supply. It was essentially legalized heroin.
DER
SPIEGEL: What has caused this mass-despair in white, middle-class life?
Deaton:
Look at the labor market, at wages. Life-time jobs and the meaning that comes
from a life like that is very important. Roles for men and women are defined by
it, as is their place in the community. It's almost like Marx: Social
conditions depend on the means of production. And these means of production are
being brought down by globalization, by automation, by the incredible force of
health care. And that's destroying communities.
DER
SPIEGEL: Yet where there are losers, there should be winners as well. Who is to
blame for this development?
Deaton:
Many people have said that there are two ways of getting rich: One way is by
making things, and the other is by taking things. And one of the ways of taking
things is to make the government give you special favors. Those special favors
don't create anything, but they can make you rich, at the expense of everybody
else.
Case: For
instance, the pharma companies get a law passed that Medicare has to pay for
drugs at whatever price the pharma companies choose. Or the doctors' lobby
doesn't allow as many people to go to medical school, which helps to keep
doctors salaries up. That's one of the reasons why doctors are the largest
single occupation in the top 1 percent.
DER
SPIEGEL: Would you argue that those in the top 1 percent are peculiarly prone
to rent seeking?
Deaton: No,
but many people are in the 1 percent because of rent seeking. This mechanism is
creating a lot of very wealthy people who would not be wealthy if the
government hadn't given them a license to rip off the rest. We're not among the
people who think of inequality as a causal force. It’s rent-seeking
opportunities that create inequality.
DER
SPIEGEL: How do the losers of this development react politically?
Deaton:
Well, many of them like Donald Trump (laughs)!
Case: The
election in 2016 was unique: Many people felt their voices weren't being heard
either by the Republicans or the Democrats. They tended to move either toward
Bernie Sanders on the left or to Donald Trump on the right. They wanted to
signal that things were not well with them, that they did not see the country
moving in the right direction. People did not feel like the parties in the
middle were adequately serving their needs, especially the working-class
people.
DER
SPIEGEL: It’s a phenomenon seen throughout the West – that center-left parties
are no longer champions of the working class and that their leaders are mostly
intellectuals.
Deaton: In
the United States, the Democratic Party gave up representing the unions and switched
to being a coalition of well-educated elite on the one hand and minorities on
the other. And the white working-class in the middle was just left
unrepresented. In this respect, Hillary Clinton was the worst candidate you
could possibly imagine. She's such a representative of that educated elite that
appears to have no understanding of, nor sympathy with, ordinary working-class
people.
DER
SPIEGEL: She called them "deplorables."
Deaton: It
revealed what she really thought of them. But those people do not see
themselves as deplorable at all! There are a lot of people who think they're
not represented by this educated elite, whether it's on the left or the right.
DER
SPIEGEL: So the rage of Trump supporters has a rational foundation?
Case: Oh,
certainly! They know something is wrong, and it's easy to scapegoat in such
cases. Things like: If we can just shut down immigration, then wages would
improve.
DER
SPIEGEL: The president himself seems to be the rent-seeker in chief. Is he
actually doing anything to mitigate the pain of his base?
Volunteers
distributing food to the needy in California: "There are fewer marriages
in the white working class, fewer people going to church, fewer people with
stable home lives and a lessened sense of community. That puts these people at
great risk."
Volunteers
distributing food to the needy in California: "There are fewer marriages
in the white working class, fewer people going to church, fewer people with
stable home lives and a lessened sense of community. That puts these people at
great risk." MARK RALSTON/ AFP
Deaton: He
- like inequality - is a consequence, not the cause. He certainly has changed
attitudes towards international trade. Even Democrats have picked this up. And
it's possible that the dismantling or slowing down of globalization could
benefit some white, working-class voters. On the other hand, if manufacturing
is being brought back to the U.S., robots are likely to be doing most of the
work, not the less educated.
DER
SPIEGEL: Yet Trump himself is a member of the top 1 percent. Why are those
voters attracted to Trump?
Case: He
makes people feel that they have status, that they're being seen and heard.
That's incredibly important. And if people can hold on to that and have faith
in him, then even if things go against what they see as their immediate
interests, they believe that in the long run, he will restore them to some
position. People need hope.
DER
SPIEGEL: But has he ever delivered?
Case: Not
in an economic sense, probably, but in terms of how they feel about themselves
and their status, certainly.
Deaton: We
spend a lot of time in Montana when we were writing our book and we talked to a
fair number of people there. They are very Republican. The Montanans feel that
a lot of the regulations they have to obey, a lot of the environmental
regulations, the wildlife regulations, are being set not in their interests,
but in the interests of the educated elites in California and New York. Issues
like bringing the wolves back are divisive that way. Donald Trump is certainly
doing something for those kinds of concerns by dismantling regulations. I'm
sure he would kill all the wolves in Montana if he could.
DER
SPIEGEL: Is it possible to identify the point when things started to go wrong
in the U.S.?
Deaton: One
great question to ask is: Why doesn't America have a strong federal welfare
state with health care like other European countries do? One answer is the
issue of race. In the middle of the 20th century, it was the southern senators
of the Democratic party who blocked any consideration of publicly funded health
care. People don't like to pay for services that go to people that don't look
like them, especially when they are black.
DER
SPIEGEL: There have been a lot of attempts to reform the system, the latest
being Obamacare. Why did it fail?
Deaton:
Obamacare was a good proposal, but in order to get it through, all the health
care providers had to be bought off, and that made them even stronger. What
Obamacare was doing was extending insurance to many more people, but there were
no effective price controls. It got more people covered, but it made the whole
industry even more expensive, not less.
DER
SPIEGEL: If American capitalism is failing so many, is it still possible to fix
the system?
Deaton:
We’re certainly not in favor of killing robots or stopping buying cheap goods
from abroad. A really essential problem is the reduction of lobbying in
Washington. I've talked to a few politicians and they say: We need campaign
finance rules. As one congressman said to me: As long as I'm spending all my
waking hours raising money, I can't resist these people.
Case: The
other heavy lift would be change in our education system. Currently, from
kindergarten to high school, the focus is on children who will go on to
university, where only 35 to 40 percent of them currently earn a bachelor's
degree. Education is a great divide when it comes to death, when it comes to
pain, to mental health, marriage. Even in Britain, you don’t have this sharp
divide between people with an BA and people without. Many people point to
Germany as being a superior system, where there are many different
qualification levels. We need something more like that.
DER
SPIEGEL: You are critical of the political process in Washington. What has to
change in order to put powerful interest groups on the defensive?
Deaton:
Maybe this crisis will speed change up, a 50-50 chance perhaps. You know,
catastrophes are not good for reform, or at least they're very risky: Think
about the 1930s, America got Roosevelt, but you in Germany got Hitler. So, it
could strengthen populism, it could undermine democracy. Or it could make it
stronger.
DER
SPIEGEL: You seem a bit tentative, though. You criticize bottom-up
redistribution, but you’re not arguing in favor of those re-distributional
policies that some Democrats want. Why are you against more progressive income
taxation?
Deaton: As
we mentioned earlier, in our view, inequality is the result of other deeper
problems. First, we have to fix those deeper problems, and then we can worry
about the tax system.
DER
SPIEGEL: Amazon founder Jeff Bezos, to take one example, has a fortune of more
than $100 billion!
Deaton: We
have no objection to people who bring us enormous benefits getting very
wealthy. We’re against people getting rich by burdening other people. The
trouble with unfairness, though, is that everybody has different notions about
what it is. The unfairness we identify is the rich getting rich by transferring
money upwards. If you tax the rich, if you even take away all their money and
give it to the poor, each of them would get only very little money.
DER
SPIEGEL: What is your proposal?
Case: We
want to focus on the reverse procedure: We have to put a stop to very rich
people getting even richer by taking small amounts of money from millions of
us. For example, every month I get a bill from a tech company for 99 cents for
a service that I don’t remember ever asking for, and that I have no idea how to
stop and it's not worth my time trying to find out. But if, as I suspect, they
do it to millions, it is small amounts of money moving from a large number of
people to a small number of very wealthy people. That is just one example of
the sort of upward redistribution that we talk about in the book.
DER
SPIEGEL: Ms. Case, Mr, Deaton, thank you very much for this interview.
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