Timothy Noah's Reading List

"This book is actually not very well known, even by economic historians. Willford King was a very influential economist in his time but he is largely forgotten. Part of why he is forgotten is because he was eclipsed by his successor at the National Bureau of Economic Research, Simon Kuznets, a Nobel prize-winning economist, and another reason he’s forgotten is he ended his life as a bit of a crank. He turned against the New Deal and was very bitter about the preeminence of Kuznets. But early on in 1915, King, who got his PhD at the University of Wisconsin, which was the white-hot centre of progressivism in the United States, wrote a book looking at income distribution based on the suggestion of his advisor Richard Ely, who was a very prominent progressive economist. It was the first reasonably accurate description of how income was distributed in the United States. You might ask, why was it only in 1915 that somebody did an extensive survey of income distribution in the United States? Questions of economic equality certainly were raised long before 1915, that’s true. But prior to the Progressive Era the perception was that what mattered was not income but wealth. That was a legacy of our agrarian economy. What mattered for farmers was not how much income they had – they didn’t really have income – what they had was land and the means to produce food for their families and food to bring to market. So what really mattered was your wealth, ie, your land. It took a long time to get used to the idea that America was not going to return to that agrarian ideal, that the Industrial Revolution, which the left initially saw as a horrible blight, had produced a new way of life. The Progressives really were the first ones who accepted that as a new reality and recognised that urban workers were not going to grow their own food, they were going to buy food for their families with the money that they earned working in factories. That’s why it took until the teens for someone to perform what one would think is the obvious task of measuring income distribution. So King wrote this book and he looked at income distribution and he found two things. One was that income distribution in the United States compared favourably with European countries. But the second thing that he found was that income distribution in the United States was fairly unequal. His numbers line up reasonably well with subsequent research that was done based on much more accurate data. King really had to cobble together his findings in all sorts of indirect ways but he got pretty close to an accurate description of income inequality in 1915, which was pretty high but nonetheless lower than it is today and lower than it would become right before the 1929 crash. Another thing about the Progressive era is that the Progressives worshipped the scientific method and they worshipped data. They were the ones who decided that there would be something called “social sciences” and they were very scientific in their orientation. King looked at state-level data and extrapolated. He took bits and pieces and did a lot of crosschecking. He did an incredibly thorough job parsing an enormous amount of data. He got pretty close to what Thomas Piketty and Emmanuel Saez were able to find in 2003 by reviewing a hundred years of IRS records. It’s worth reading to get a sense of the newness of looking at income distribution and to get a feel for what attitudes were towards this in 1915. King was nobody’s idea of a radical. He was anti-immigration, he believed in eugenics, but nonetheless he recognised that the famous 1% were pulling down a wildly disproportionate percentage of the nation’s income. Income inequality rose until World War I then it fell when the war was on. Wars are usually good for equality. The income inequality trend resumed after the war and lasted through the 1920s. It reached historic peaks in this period, even compared to today. Still, income inequality in 1929 was probably not as great as it was in the late 19th century, when the Industrial Revolution was really getting underway. But we don’t have especially good records that predate the teens. After the crash, during the Great Depression, incomes once again grew more equal and considerably more equal during World War II and through the 1950s."

"This book’s enduring contribution was the phrase “the American dream”. In fact, Adams wanted to call his book The American Dream but his publicist said no, the book will never sell if you call it that. Yet the only thing that anybody remembers of the book today is that phrase. The book is a history of the United States but what makes it worth reading today is finding out about the original conception of the American dream, which he elaborates on in his final chapter. Adams describes the American dream as having to do with a kind of classlessness, having to do with the absence of barriers for upward mobility. He said it wasn’t just about money – he had vaguely aristocratic ideas about grasping too blatantly for wealth. Adams believed in improving oneself economically but not to the exclusion of all other values. He was concerned about the excesses of capitalism but he had a vision of America as a place where people could improve their lot economically and move upward in society. In Adams’s view this was what really distinguished the United States from Old World Europe. Get the weekly Five Books newsletter We inherited his view of American mobility. But American mobility is no longer – either in absolute terms or compared to Europe – the same as it was during Adams’s lifetime. The American dream, in Adam’s words, was of “that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement… It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognised by others for what they are, regardless of the fortuitous circumstances of birth or position.” It was more realisable during his lifetime than it is today. Certain barriers were harder to cross – racial barriers, gender barriers. But those barriers weren’t based on how much money you started out with and how much money you ended up with. If you were just looking at society in economic terms then it was easier during Adams’s lifetime – obviously not during the Depression, but prior to the Depression – to move upward, as the United States was becoming a more industrialised economy. The strange thing about the process of industrialisation in the United States was that it brought one good thing and one bad thing. It increased upward mobility, as people moved off the farms and into the cities, but it also increased income inequality. Yeah, it’s easier to obtain a college education today, but it’s also true that a lot more jobs require a college education today. You have to remember back in 1900 most Americans didn’t even go to high school. I think something like 90% of all Americans at the turn of the 20th century didn’t have high-school diplomas. Obviously that meant that most of the economy operated without the assistance of people who went to high school let alone college. That changed rapidly in the early decades of the 20th century with the spread of the high-school movement, where society basically decided that high school had to be paid for by the government and everybody had to be required to go. It was a lucky thing for the United States that the high-school movement coincided with a period of rapid technological advances. The technological advances in the early 20th century were much greater than the technological advances at the end of the 20th century."

"This book does have the disgrace of being called Prosperity on the eve of the bursting of the tech bubble. That’s the aspect of the book that isn’t so great. The aspect of the book that is great is the really detailed fine-grained reporting that Bob Davis and David Wessel do into the question of how living standards in the late 1990s compare to living standards a generation earlier. They compare two families – one that entered the workforce in the 1970s and one that entered the workforce in the 1990s. The stories of these families give you a good feel for how life changed during that period. In some ways it got easier but in many ways it got harder. It got harder to purchase a house, it got harder to purchase an education and there was less economic security overall. I followed through on their reporting by checking in with the Blentlinger family, who had been interviewed for Prosperity , to see how they were doing now. Davis and Wessel chose the Blentlinger family because they were right at the median in terms of income. I was pleased to discover that the Blentlingers were doing better than the median today – they’ve managed to move up and that’s the good news. The bad news was that the way the Blentlingers were able to achieve this advancement was by absenting themselves completely from the private sector economy. Jim Blentlinger’s wife was a schoolteacher and he went to work for the Tennessee Valley Authority. So today they rely on government jobs to provide the kind of security that you could get from private sector jobs in the 1970s, including a labour union, which is almost impossible to get in the private sector these days. In large part, because of those two features, the Blentlingers are now much better off. I think these stories give you a more vivid sense of many of the historic trends that I’m describing in my book. There are two kinds of personal stories in the book. One, stories about real people like the Blentlingers and a bank teller during a period when the advent of ATMs was making that job somewhat obsolete. I also tell the life story of Yves-Andre Istel, who had worked on Wall Street since the 1950s. In the book he describes the ways that the culture changed there. The other type of story I tell in the book are stories about figures who were shaping history like Horatio Alger and Walter Reuther. Alger spread ideas about upward mobility and Reuther took the labour movement about as far as it was ever going to go in the United States in a spirit of cooperation with management. Again, I think these stories give you a concrete sense of underlying trends."

"Today, when we look at the landscape in Washington, we observe that much legislation and much regulation is captive to corporations – that was not always the case. Business influence in Washington in the 1950s and 1960s was at a low point and the 1970s saw the rise of the consumer movement. This movement had so much momentum that not even a Republican like Richard Nixon in the White House could stop it. He ended up promoting it. Vogel is great at telling the very important story of how business mobilised to push back in the 1970s and what a change that was. He describes several of the fights that took place and I believe it was Vogel who provided this wonderful quote I use in my book, where some lobbyist said: “Gee, my job used to be just providing booze, broads and golf, and now I’m actually expected to make things happen here in Washington.” So there really was a substantial cultural transformation, and Vogel’s book is a pioneering work of economic history describing how that came about. What I say in my book is that there are really two divergences. There’s a skills-based divergence, which is very complicated, and then there’s a divergence between the 1% and the 99%, which is very simple. The skills-based divergence was caused by multiple factors. One factor was the decline of labour, caused in part by the rise of extensive trade with China, which represented the first time the United States was doing a lot of trade with a country that had both really low wages and so many people that bringing wages up as it industrialised was going to take a long time. So trade played some role, but not until the late 1990s. Education also played an enormous role in skills-based divergence. The high-school graduation rate levelled off in the 1970s as technological demands on the workforce were increasing. The supply and demand curves crossed for skilled labour – that bid up the price of skilled labour. Support Five Books Five Books interviews are expensive to produce. If you're enjoying this interview, please support us by donating a small amount . The divide between the 1% and the 99% was caused by two simple things. One cause was the runaway pay for CEOs, which really spun out of control in the 1980s and 90s. The other was the financialisation of the economy, the gradual deregulation of Wall Street, the conversion of investment banks from partnerships to corporations and the letting loose of a culture of leverage. Yves-Andre Istel points out that some of that change was generational. The current generation hadn’t lived through the Great Depression , therefore they aren’t as fearful of debt as earlier generations."

"What I think is really ingenious about this book is that it squares the circle. In the 1990s Bill Clinton told us that computers had revolutionised what was required from the workforce and that all of a sudden you needed to get a college education to perform in this knowledge-based economy. Goldin and Katz actually point out that the technological changes at the beginning of the 20th century were probably a lot more dramatic. At the beginning of the 20th century you had the spread of electricity, then the advent of radio, the spread of air travel and the growth of television. And as technological change imposed greater and greater skill demands on workers, the skill level of American workers rose and rose. Why? Simultaneously the United States was experiencing the high-school movement. At the start of the 20th century very few people went to high school. Within a few decades most people were going to high school as part of a conscious policy change. Europeans snickered at Americans for the sentimental notion that there should be universal secondary education. They thought that secondary education should be for preparing the small segment of the population that was going to college. Consequently, American workers were able to meet rising technological demands in a way that European workers were not, just when high-school education became more necessary for all sorts of blue-collar work. Factory workers needed to have a fundamental understanding of how electricity worked and farmers needed to be familiar with new agricultural and marketing processes. In the United States the high-school graduation rate rose and rose, as did technological demands, until the graduation rate levelled off in the 1970s. But with the advent of the computer technological demands continued to rise – that bid up the price of skilled labour. That’s Goldin and Katz’s central insight: It wasn’t computers that caused inequality, it was the fact that for this technological revolution, as opposed to the technological revolutions that preceded it, the American K-12 [primary and secondary] education system was no longer keeping up with marketplace demands. Europeans had realised their mistake and started spreading secondary education. Secondary school attendance rates in many Western European countries now exceed those in the United States. College completion rates in many Western European countries exceed those in the United States. Yes. There are no advanced industrial economies in Western Europe that are experiencing economic inequality to the same extent the United States is and there are no countries where inequality is increasing as fast as it is in the United States. The debate is miles behind what needs to be done, but it’s picking up. There’s certainly more discussion of this issue today than there has been in the previous third of a century. For example it’s good that President Obama is calling for raising taxes on incomes above $250,000, but he also needs to talk about laying in some brackets at $1 million and $10 million and $20 million. I think they should go up to 70% top marginal rate. But that’s not really within the political mainstream right now. Here’s something that is in the political mainstream – expanding Pre-K [nursery school] education. Right now just a little more than a quarter of all four-year-olds are receiving Pre-K education. There’s no controversy about the fact that early childhood education vastly improves a child’s chances of succeeding academically. Another issue that I thought was outside the mainstream when I suggested it in my book, but then to my surprise President Obama suggested something very much like it in his State of the Union address, was the idea of price controls on college tuition increases. Obama didn’t put it so bluntly, but he did say he was putting college and universities on notice that if they could not get their tuition increases under control the federal government would use its leverage to force them to do so. Am I allowed to put in a plea for a sixth book here? Larry Bartels’s Unequal Democracy looked at economic performance under presidencies going back to 1948. What he found was under Democrats the greatest income gains went to those at the bottom and tapered off as he went up the income scale. Under Republicans, the greatest income gains went to those at the top and tapered off as you went down the income scale. It correlates perfectly with our cartoon notions of how Democrats and Republicans differ – the idea that Democrats really are the party that cares about people at the bottom and Republicans really are the party that cares about people at the top. Yes I do. I think that for the first time in 33 years there’s a national movement to address the problem. For the first time we have a president who’s not only interested in the problem but willing to discuss it out loud. We have a chairman of the council of economic advisers, Alan Kruger, who not only has looked at this problem extensively in his academic life but is continuing to research and discuss it as chairman. He issued a report a few months ago that looked at the relationship between rising income inequality and falling mobility. Certainly at the discussion level more is going on. But the most difficult task is reviving labour. As I talk about the book to various groups I find that this is the one idea that even liberals resist. They just don’t want to hear that if you really want to address income inequality you have to revive the labour movement – there is no alternative. You can’t achieve this just by sending everybody to college. You want to train as many people as you can to perform more technologically demanding work but to revive the economic condition of the middle class it is going to be necessary for people to have labour unions that defend their interests against bosses. Today it is just about impossible to organise a workplace in which the bosses are determined to keep unions out. In my book I talk about an attempt to unionise a Wal-Mart in Colorado. What that illustrates is how thoroughly the deck is stacked against labour unions today. The laws favour managers and even when the laws don’t favour managers the penalties for violating laws are so pitiful that it’s actually economically irrational for managers to obey the law. This is the most difficult challenge but it has to be done. I guess that gives you a sense of the relative difficulty of various things that I propose. The government has a huge influence over trends towards greater income equality or greater income inequality. This is not just something that the economy does all by itself. There’s a lot of research showing that these trends are heavily influenced by government action. For a long time people didn’t realise that because taxation and government benefits did not have an enormous impact on income inequality – but researchers were looking in the wrong places. Get the weekly Five Books newsletter There are all sorts of other things that the government does that do make a difference. It can’t be a coincidence that Democratic presidents have tended to foster economic equality while Republican presidents have tended to foster economic inequality. Democrats and Republicans govern in a million different ways. Fed policy has enormous impact on income inequality. The fact that Democrats are more tolerant of inflation than Republicans has meaningful distributive consequences. Monetary policy is very influential in this area. Raising the minimum wage is certainly a factor. One aspect of Obamacare that President Obama doesn’t want to talk about is that it’s fairly redistributive. It extends healthcare coverage to lower income people through the expansion of Medicaid. I think the Obama administration is a little nervous about talking about that because they don’t want to sound socialist, but Obamacare will certainly achieve a kind of invisible redistribution – it will change the distribution of benefits and the availability of medical care. The thing to be most hopeful about is that people are concerned about inequality now. They want to talk about it. They want to understand what’s causing this phenomenon. Glib explanations coming from conservatives who would like to deny the Great Divergence aren’t really persuading anybody because they are not only untrue but also unpersuasive. This problem was not created overnight and it’s not going to be solved overnight, but I think that it can be solved and we can start to see some improvement."