Are Stagnating Living Standards in the US the Worst Thing in the World?

9 02 2017


It is rare moment when I disagree with the great economic historian Adam Tooze, the author of such magisterial works as Wages of Destruction: The Making and Breaking of the Nazi Economy. Any academic who critiques such a formidable intellectual is skating on thin ice. However, I really need to dissent from something he has just said. In a thoughtful blog post on some newly published data on inequality in the United States, Adam Tooze opined that

The fact that pre-tax incomes for the least favored half of American’s citizens have not risen, but have fallen slightly over the last forty years ought to be a show stopper. Literally, all other policy discourse should surely cease.

Tooze is right to argue that the accumulating evidence that the living standard of the median American is stagnating, or at least growing at a much slower rate than it did in the long boom following 1945. He is also probably correct to link this phenomenon to rising inequality and to the post-1980 decoupling of median incomes and productivity growth (see image below, which is taken from the June 2015 issue of the HBR). I agree with Tooze that figuring out how to start increasing median living standards in the US and other advanced economies is a central challenge facing our generation.




I do not, however, agree that stagnating US living standards is a policy issue of such overwhelming importance that all other US policy discussions– ranging for marijuana legalization to police brutality towards Blacks to climate change to refugee policy should stop. Even during the Second World War, when Britain faced an existential threat, discussions of non-war policy questions continued– the famous Butler Act was passed in 1944, reshaping the education system. Is it really the case that stagnating living standards are such an emergency issue that all other policy questions should be put on the backburner until it is resolved by the leadership of the US? It is indeed unfortunate that the growth of living standards has, by many metrics, slowed down.  However, I would reject the view that it is a show-stopper that requires us to stop talking about all other issues.  Particularly when viewed from the standpoint of cosmopolitan prioritarianism, it is easy to see that stagnating median living standards in the US aren’t the worst problem in the world. I would say that malnutrition in sub-Saharan Africa is actually a worse problem.



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