Prospects for a More Inclusive Capitalism

Bridging the great divide. Image by Stable Diffusion 2.1.

I’ve just completed a series of essays on the crisis of dynamism, concluding with a couple of posts on the outlook down the road. I’d now like to circle back to capitalism’s crisis of inclusion, about which I’ve written a pair of essays, and offer some thoughts about how things might develop from here. What would a more inclusive capitalism look like, and what are the chances of getting there?

Let me start by explaining what I mean when I talk about a crisis of inclusion. Concerns about inclusion these days usually refer to women, ethnic minorities, and non-heterosexuals, but the lack of inclusion that I am focused on is the new class divide that has opened up along educational lines over the past half-century. This crisis, while its roots lie in economic developments, is primarily sociological in character. It is a crisis of social disintegration: outside of capitalism’s highly educated professional and managerial elite, the social bonds that give life structure and meaning are falling apart.  

Connections to work, family, and community are unraveling:

• Labor force participation by prime-age men has fallen from 96 percent in 1970 to 88 percent today, and most of this drop occurred outside the elite. Between 1970 and 2016, participation by college-educated men slipped only slightly, from 96 to 94 percent. Over the same period, by contrast, the participation rate for men with only a high school degree fell from 98 percent all the way to 84 percent.

• The marriage rate for men with a high school education or less has fallen more than 20 percentage points in the past 40 years, compared to only a 6 point dip for college educated men.

• Nearly 60 percent of births to women with a high school education or less occurred outside of marriage; for children of college educated women, the figure is just 10 percent.

• While church attendance is down overall, it has fallen most among “moderately educated” whites — those with only a high school degree plus those with some college.

• The share of private-sector employees who are union members has tumbled from 29 percent in 1970 to 6 percent today. Fraternal organizations, once so important to working-class social life, have all but disappeared.

Health and wellbeing are in alarming decline:

• “Deaths of despair” from suicide, drugs, and alcohol are up sharply and are concentrated among people without college degrees.

• Between 1993 and 2019, Americans in extreme distress from mental health and emotional problems rose from 3.6 percent of the population to 6.4 percent. Among less educated middle-aged whites, the jump was from 4.8 to 11.5 percent.

• Almost half of the prime-age men not in the work force report that they had taken daily pain medication, and two-thirds of those take prescription meds.

• The difference in life expectancy between rich and poor is growing. For men born in 1920, the life expectancy gap between those in the top 10 percent of income and those in the bottom 10 percent was 5 years; for men born 20 years later in 1940, that gap had climbed to 12 years. Adult life expectancy for people with a college degree has continued to rise since 2010, but it has fallen for everybody else.

Anne Case, the Princeton sociologist who coined the term “deaths of despair,” sums up where things stand:

Education divides everything, including connection to the labor market, marriage, connection to institutions (like organized religion), physical and mental health, and mortality. It does so for whites, Blacks and Hispanics. There has been a profound (not yet complete) convergence in life expectancy by education. There are two Americas now: one with a B.A. and one without.

I’ve already given you my explanation for the origins of this new class divide. Ironically enough, it’s the result of a great humanitarian achievement: namely, the declining dependence of technological and economic progress on mass inputs of arduous physical labor. Made possible by the continued advance of automation, this development meant that overall social welfare rested less and less on the willingness of some men to break their bodies — whether in an instant or over the course of their working lives — in exhausting, regimented, dirty, dangerous work.

Yet this progress has come with a heavy cost. Economists refer to it bloodlessly as “declining relative demand for unskilled labor”; what it boils down to is that ordinary people once played a vital and necessary role at the forefront of capitalist development — but not anymore. Between automation and globalization, the most technologically progressive industries no longer have much need for the services of ordinary workers in rich countries (and their reliance on ordinary workers in poor countries is a stopgap on the way to more complete automation). The weaning of capitalist progress from the contributions of ordinary workers has led to the elimination of millions of factory and related jobs that had stood at the apex of working-class life, providing security and upward mobility and serving as the glue for families, communities, and a whole way of life. When those jobs disappeared, the way of life that they supported disappeared as well.

That way of life had real limitations — we should not mourn its passing — but it was based on an important and valued function in society, thereby integrating those who lived it into the larger society and offering them structure, status, and purpose. What has replaced it is … nothing: the absence of an important economic function, the collapse of structure, the diminution of status, the loss of purpose. In this scattered, disjointed, incoherent aftermath, most people are reasonably comfortable: they have more cultural freedom than their parents and grandparents, they have bigger homes and more stuff, they eat better food, they travel more, and they have no shortage of diverting entertainment. But they have lost their connection to power and social significance — to powerful employers and unions whose significance to the economy was plain to all. That loss has brought with it the fraying of all the vital connections of life — to work, family, and community. This is lack of inclusion at its most alienating and anomic.

The loss of economic inclusion occurred as inclusion was improving along other dimensions — namely race, gender, and sexuality. The upshot of this less-remarked-upon intersectionality is that the group most traumatized by the fading of the American industrial economy and its working class has been white males — the group normally thought of as the excluders rather than the excluded. Everyone outside the professional and managerial elite, whatever their race or sex, has faced the headwinds created by the generally declining status and leverage of ordinary workers. But at the same time, there has been significant progress in overcoming the specific exclusion and subordination of blacks and women. For them, the past decades have thus seen gains as well as losses; for white men outside the elite, on the other hand, there has been nothing but regress as far as their relative place in society is concerned. And with their unmitigated marginalization has come dislocation, dysfunction, and increasingly deadly despair.

The way I see it, then, the emergence of the new class divide and the resulting social disintegration outside the elite are consequences of the loss of function. First, the loss of economic function as machines replaced manual labor; and rippling out from there, the loss of social function as men lost their traditionally indispensable role as providers upon which working-class family and community life was based.

Regarding the latter, we can at least imagine the reconstitution of working-class family life into something stronger, fairer, and better than before. Actually achieving what we imagine will be anything but easy, to be sure, as it requires a profound resetting of expectations about what men and women want and need from each other and an associated reworking of the division of labor within the home. Given how deep-seated the old expectations and division of labor were, we must recognize the extent of the challenge. But the raw materials are there for meeting that challenge, as men retain vitally important functions as romantic partners and fathers. What is needed are updated scripts for fulfilling these functions. (Here let me heartily recommend my friend Richard Reeves’s new book Of Boys and Men on the struggles many men are facing after losing their traditional work and family roles. His analysis of the problem is provocative and insightful, and his suggestions for a constructive way forward are both ingenious and genuinely helpful.)

But if economic exclusion is rooted in the declining importance of the economic function served by ordinary people, what remedy is there for that? Here I think our conventional framing of the problem as one of income and wealth inequality makes it difficult for us to see just how difficult the problem truly is. If the problem is simply a monetary imbalance, then rebalancing is all that’s needed to put things right. But if the role you once played in society is obsolete, and there is no new role that is commensurately important and rewarding for you to play, how can we make things better?

It's important to see how naturally industrializing capitalism, for all its backwardness and brutality, worked to integrate ordinary people into its social order and give them opportunities for status and self-respect. The emergence of mechanization and mass production technologies naturally gave rise to strong demand for able-bodied workers to man and tend the new machines and physically move goods from the factory to the customer. And since factory workers were generally recruited from the ranks of the peasantry and landless farm laborers, people who typically lived under the shadow of physical privation, the offer of a factory job — an offer all of us today would reject as unconscionable — meant a ticket to dramatic material betterment. And given a starting point in grinding material scarcity, the achievement of this betterment felt like a triumphant liberation in which workers could take genuine pride.

Furthermore, given the danger and difficulty of factory work and the meagerness of the margin that separated workers from penury, it was natural for workers to rebel against the rigors of factory discipline and demand higher pay and better working conditions. And since workers worked alongside each other in large numbers and under trying and sometimes life-threatening circumstances, it was natural for the solidarity of the foxhole to develop among them, whereupon they naturally banded together and organized on behalf of their common interests. And when the collective economic and political power of workers had waxed to the point that they could credibly threaten to strike and bring their factories to a halt, the structure of industrial production — with high fixed costs due to large capital investments, which meant that profitability depended upon maximum uninterrupted throughput — gave employers a natural incentive to share more of their enterprises’ bounty with workers in the interest of keeping the factories running.

Nobody had to plan from the top down the creation of an industrial working class. Nobody had to plan anything for workers to snatch up the jobs offered by industrial enterprises and for dramatic material uplift to ensue. Nobody had to make a plan to create incentives for workers to organize and seek improvement in the terms of their employment; the emergence of an organized labor movement was a spontaneous bottom-up reaction. And once that movement was sufficiently powerful, nobody had to plan how to create incentives for employers to play ball, as the existence of high fixed costs gave them all the incentives they needed.

Industrializing capitalism thus worked naturally to integrate large masses of ordinary people into its economic system and give them an important and increasingly well-rewarded role in society. Of course these natural workings were anything but smooth. “Class war” wasn’t just a metaphor: there was regular violence and bloodletting over workplace disputes, not to mention the global convulsions culminating in the threat of nuclear war occasioned by the Russian Revolution and the spread of avowedly socialist regimes over much of the planet. But the point is that the social democratic settlement — under which, during the middle decades of the 20th century, capitalism achieved the highest degree of inclusion it has so far managed — emerged as the win-win accommodation of capital and labor out of the logic of capitalism itself.

But this settlement fell apart in the waning decades of the 20th century as the economic structures on which it was based — and their implicit logic in favor of mutual accommodation — passed from the scene. And there is nothing in the economic logic of postindustrial capitalism that points toward a new accommodation. It does create a much larger elite than any previous social system ever managed, comprising something like a quarter of the work force, and this professional and managerial class has access to plentiful material and spiritual resources out of which to fashion challenging and fulfilling lives. But for almost everybody else, no matter what comforts and conveniences contemporary economic life affords them, there is underneath it all the haunting sense that they are superfluous.

We cannot simply conjure up a new economic role for ordinary people that is as vitally important to the progress of the overall system as factory work was in its day. Nor, I’m afraid, is there any prospect — this side of a transformative cultural revolution, at any rate — that we come to accord real status and respect to anyone who does their job well, regardless of what it is and how much it pays. Consequently, the only possible avenue to a newly inclusive capitalism is to try to generate greater status and respect for ordinary people through artifice — that is, through policy interventions.

The usual political response is to throw money at the problem, and here there are two basic approaches. One is to fatten workers’ paychecks through wage subsidies; the other is to provide some kind of unconditional basic income. If we can’t give ordinary workers a new and critically important economic role to play, we can at least give them the material recompense that higher-status employment might have provided. Each has possibilities, along with serious drawbacks.

The crisis of inclusion is not one of material privation: there are pockets of deep poverty, but the curse of advanced social disintegration is not the result of physical deprivation. Nevertheless, economic life outside the elite is characterized by an abiding and stressful precarity. It’s an ongoing struggle to keep your head above water, living paycheck to paycheck, no job security, no career path, always one stroke of bad luck away from serious trouble. This absence of basic security and stability does amount to a kind of spiritual deprivation, and buttressing households’ financial resources would therefore mark a real step forward in wellbeing — and in the direction of greater inclusion.

Furthermore, no matter how much we might wish otherwise, in our thoroughly commercialized society money and status are deeply intertwined. So, could these redistributive schemes raise ordinary people’s social status even as they pad their bank accounts? In the case of wage subsidies, I think the answer is almost certainly yes. While there is stigma and shame attached to being on the dole, the use of policy to inflate market incomes never seems to bring with it any similar penalty. Farmers in rich countries typically receive a double-digit percentage of their total revenues from price supports, and they continue to enjoy a positive social image. Lawyers and doctors are respected and envied for their high-paying, high-status jobs; they generally incur no penalty for the fact that a significant fraction of their income derives from cartelistic restrictions on supply. And closest to home, union workers back in the day took affirmative pride in their above-market wages. Accordingly, if a comprehensive scheme of wage subsidies were introduced, I expect that the beneficiaries would reap status rewards in proportion to the relative increase in their compensation. If working-class jobs could once again pay for lifestyles comparable to those of many college-educated salaried workers, what are now sharp class distinctions along educational lines might begin to blur.

A universal basic income, on the other hand, feels a lot more like the dole. Of course it’s universal, so there shouldn’t be any stigma associated just with getting the check. But it seems likely that people who lived primarily off that check — people who get by without a job or only episodic employment — would be looked down on as a result. And I’m worried that, in the present context, a significant influx of unconditional income would lead to a significant increase in the ranks of the chronically jobless. A recent study by the Federal Reserve Bank of Boston finds that the decrease in labor force participation by non-college-educated prime-age men has been driven in significant part by the relative decline in earnings from employment. It’s not especially surprising: when playing the game makes you feel like a loser compared to everybody else, you’re inclined to take your marbles and go home. So if nothing is done to boost relative earning from employment, the introduction of a UBI looks likely to allow more demoralized low-wage workers to quit.

Under contemporary social conditions, the departure of people from the low end of the labor market into idleness is a move away from wellbeing. You might imagine that people could fill the extra time in their day with constructive pursuits more rewarding than a dead-end job — but in most cases, unfortunately, you’d be wrong. People end up in dead-end jobs because they lack the human capital — the abstract reasoning ability, the ability to navigate impersonal institutions, the long time horizons and discipline to pursue long-term goals — to qualify for something better. But the same deficits that make finding a good job so difficult also render people poorly equipped to make good use of free time. And so when we look at what people without jobs do with those extra hours every day, it turns out that they spend a big chunk of them sleeping and watching TV.

There’s at least the possibility, though, that once a robust UBI system is in place, and people have much more freedom than today to choose no work or less work, new institutions will emerge that encourage people to develop their capacities and serve their communities outside of paid employment. They might then find status, meaning, and purpose in pursuits outside the cash nexus. By contrast, we know that a system of wage subsidies will work to lock in the current occupational structure, with its large number of low-skill, low-autonomy, low-productivity service jobs. Instituting such a system, then, amounts to a dispiriting confession that we can’t think of better ways for most people to spend their time than in activities that do little to develop people’s potential and whose actual value-added is too meager to support a good life.

In the short term, then, the context of present-day social conditions inclines me to favor wage subsides over a UBI. Both would suffice to provide greater security and stability, but I believe that wage subsidies would help to raise the status of the jobs to which they are attached, while a UBI will leave people in low status and at the margin would likely increase the number of people trapped in dispiriting idleness. Over the longer term, though, the big drawback of wage subsidies is that they freeze in place current labor market patterns, where most people do work they don’t enjoy and that isn’t all that valuable to others. A UBI, on the other hand, at least leaves open the possibility that people will eventually develop the institutions and norms that support constructive, productive leisure — and thus that more people will spend their lives doing things they enjoy and that are genuinely valuable to others.

Besides throwing money at the problem, we could also seek to uplift the status of ordinary people by increasing their power in the employment relationship — that is, by reviving the labor movement with a new system of unions for collective representation and bargaining. This is a subject I’d like to turn to later and address in much greater detail, but for now a few quick thoughts must suffice. First of all, in the United States at least, it will be necessary to start over from scratch. Traditional Wagner Act unionism had grievous flaws even in its heyday, but at this point it is just a sad relic whose main function is to prevent badly needed experimentation in new forms of worker solidarity. Furthermore, I should note now that I don’t see a revival of unions as a panacea. After all, private-sector unions remain much more powerful in western Europe than they have become in the U.S; while European workers may enjoy some advantages as a result, the declining leverage and status of ordinary people which is at the heart of the crisis of inclusion can nevertheless be found on both sides of the Atlantic. That said, I believe this is a highly promising avenue to explore, especially in the U.S., as it addresses social disintegration head-on by reintegrating workers into institutions that allow them protect their common interests and promote their common wellbeing.

As I describe the pros and cons of various alternative reform paths in the paragraphs above, I have the uneasy feeling that I’m assuming a can opener. Given how far the leverage and status of ordinary people have fallen, and given their further political marginalization because of the growing salience of cultural divisions and the professionalization of political life, how exactly do we expect bold egalitarian reforms to be enacted?

A successful campaign to rewrite the rules of the game at such a fundamental level, uplifting and empowering ordinary people and reducing the power and privileges of our overmighty elites, would require the large-scale gathering and mobilization of countervailing power. Back in the day, the sources of such power could be found in the critical dependence of industrial might and technological progress on ordinary workers and in those workers’ experience of and energetic commitment to labor solidarity. Where are the sources of countervailing power to be found today?

I hold out some hope that countervailing power can actually be derived from ordinary people’s current lack of status and power — and from the resulting disintegration, dysfunction, and despair. Capital eventually agreed to its social-democratic accommodation with labor in order to keep the machines running and the money flowing in, because they knew that workers had the power to target their enterprises with strikes and bring the machines to a screeching halt. It is at least possible that at some point today’s elites come to see a new accommodation with the rest of society as necessary to the keep the money flowing in — this time, not because of the threat of targeted uses of power, but because chronic social disintegration and recurrent political spasms are bad for business. I hold out hope, but I’m not holding my breath.

So here, as with the crisis of dynamism, I see a continuation and deepening of the crisis as the path of least resistance. In both cases, there are possible paths forward that lead to social revitalization and renewal, but they are strewn with obstacles. In addition to those already mentioned, there is the dysfunctional nature of contemporary politics. To this, the third of three crises simultaneously afflicting our capitalist system — the crisis of liberal democracy — I will turn and discuss in my next essay.