September 99

Views expressed are those of the authors, not necessarily of the AFSC.

Shifting Fortunes: The Perils of the Growing American Wealth Gap

Juliet Schor is an economist and senior lecturer on women's studies at Harvard University and the author of The Overspent American. The following is her foreword to Shifting Fortunes.

The official economic news is exuberant: We are in the midst of the nation's longest peacetime expansion, unemployment is disappearing, the stock market is defying gravity, consumer confidence has soared. Luxuries once reserved for the wealthy are now middle class mainstays, as households remodel their kitchens, tool around town in their spanking new sport utility vehicles, and generally live the good life. Capitalism has been kind to us.

While this picture has superficial appeal (after all, the roads are clogged with SUVs), the official discourse has a profoundly disturbing, almost Orwellian dimension. It describes the experience of the privileged minority that is doing spectacularly well. In a bizarre twist of logic, the news has been good because the punditocracy admits only good news.

Shifting Fortunes completes the picture. It reveals that financial security has become more elusive for most families and that the economic boom has been built on the sweat of the 80% of American workers who earn poverty or near-poverty wages. Underlying these trends is an inescapable fact: our economy has been getting increasingly unequal. Whether measured by wages, income, or wealth, for 25 years the share of the privileged has increased, and everyone else (a roughly 80% majority) has become relatively worse off. We are truly in a second Gilded Age.

Why does inequality matter? Some argue that it doesn't: All we need to worry about is the absolute level of material well-being. Economic growth is the solution, they say, to the problems of poverty and low incomes. There are two flaws to this popular view. First, growth no longer has the magical quality of benefiting everyone-in recent years, growth has actually been associated with the immiseration of a whole group of workers. And second, the idea that the distribution of income is irrelevant is not supported by the scholarly evidence. It seems that relative position does matter.

Health, well-being and satisfaction appear to be heavily influenced by the ways in which economic resources, prestige and social position are distributed. In more unequal societies, human well-being and quality of life appear to be lower, for a variety of reasons needing more research.

The reasons may not turn out to be so very complicated. Humans are social. We judge our own situations very much in comparison to others around us. It is not surprising that people experience less stress, more peace of mind and feel happier in an environment with more social cohesion and more equality. Perhaps it's time to make that conclusion a fundamental basis of our economic and social policy.