Tuesday, August 27, 2013

How Dr. King Shaped My Work in Economics

I had the good fortune to be in the crowd in Washington the day the Rev. Dr. Martin Luther King Jr. gave his thrilling “I Have a Dream” speech on Aug. 28, 1963. I was 20 years old, and had just finished college. It was just a couple of weeks before I began my graduate studies in economics at the Massachusetts Institute of Technology.
The night before the March on Washington for Jobs and Freedom, I had stayed at the home of a college classmate whose father, Arthur J. Goldberg, was an associate justice of the Supreme Court and was committed to bringing about economic justice. Who would have imagined, 50 years later, that this very body, which had once seemed determined to usher in a more fair and inclusive America, would become the instrument for preserving inequalities: allowing nearly unlimited corporate spending to influence political campaigns, pretending that the legacy of voting discrimination no longer exists, and restricting the rights of workers and other plaintiffs to sue employers and companies for misconduct?
Listening to Dr. King speak evoked many emotions for me. Young and sheltered though I was, I was part of a generation that saw the inequities that had been inherited from the past, and was committed to correcting these wrongs. Born during World War II, I came of age as quiet but unmistakable changes were washing over American society.

As president of the student council at Amherst College, I had led a group of classmates down South to help push for racial integration. We couldn’t understand the violence of those who wanted to preserve the old system of segregation. When we visited an all-black college, we felt intensely the disparity in educational opportunities that had been given to the students there, especially when compared with those that we had received in our privileged, cloistered college. It was an unlevel playing field, and it was fundamentally unfair. It was a travesty of the idea of the American dream that we had grown up with and believed in.
It was because I hoped that something could be done about these and the other problems I had seen so vividly growing up in Gary, Ind. — poverty, episodic and persistent unemployment, unending discrimination against African-Americans — that I decided to become an economist, veering away from my earlier intention to go into theoretical physics. I soon discovered I had joined a strange tribe. While there were a few scholars (including several of my teachers) who cared deeply about the issues that had led me to the field, most were unconcerned about inequality; the dominant school worshiped at the feet of (a misunderstood) Adam Smith, at the miracle of the efficiency of the market economy. I thought that if this was the best of all possible worlds, I wanted to construct and live in another world.
In that odd world of economics, unemployment (if it existed) was the fault of workers. One Chicago School economist, the Nobel Prize winner Robert E. Lucas Jr., would later write: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution.” Another Nobel laureate of the Chicago School, Gary S. Becker, would attempt to show how in truly competitive labor markets discrimination couldn’t exist. While I and others wrote multiple papers explaining the sophistry in the argument, his was an argument that fell on receptive ears.
Like so many looking back over the past 50 years, I cannot but be struck by the gap between our aspirations then and what we have accomplished.
True, one “glass ceiling” has been shattered: we have an African-American president.
But Dr. King realized that the struggle for social justice had to be conceived broadly: it was a battle not just against racial segregation and discrimination, but for greater economic equality and justice for all Americans. It was not for nothing that the march’s organizers, Bayard Rustin and A. Philip Randolph, had called it the March on Washington for Jobs and Freedom.
In so many respects, progress in race relations has been eroded, and even reversed, by the growing economic divides afflicting the entire country.
The battle against outright discrimination is, regrettably far from over: 50 years after the march, and 45 years after the passage of the Fair Housing Act, major United States banks, like Wells Fargo, still discriminate on the basis of race, targeting the most vulnerable of our citizens for their predatory lending activities. Discrimination in the job market is pervasive and deep. Research suggests that applicants with African-American sounding names get fewer calls for interviews. Discrimination takes new forms; racial profiling remains rampant in many American cities, including through the stop-and-frisk policies that became standard practice in New York. Our incarceration rate is the world’s highest, although there are signs, finally, that fiscally strapped states are starting to see the folly, if not the inhumanity, of wasting so much human capital through mass incarceration. Almost 40 percent of prisoners are black. This tragedy has been documented powerfully by Michelle Alexander and other legal scholars.
The raw numbers tell much of the story: There has been no significant closing of the gap between the income of African-Americans (or Hispanics) and white Americans the last 30 years. In 2011, the median income of black families was $40,495, just 58 percent of the median income of white families.
Turning from income to wealth, we see gaping inequality, too. By 2009, the median wealth of whites was 20 times that of blacks. The Great Recession of 2007-9 was particularly hard on African-Americans (as it typically is on those at the bottom of the socioeconomic spectrum). They saw their median wealth fall by 53 percent between 2005 and 2009, more than three times that of whites: a record gap. But the so-called recovery has been little more than a chimera — with more than 100 percent of the gains going to the top 1 percent — a group where, needless to say, African-Americans cannot be found in large numbers.
Who knows how Dr. King’s life would have unfolded had it not been cut short by an assassin’s bullet? Just 39 when he was killed, he would be 84 today. While he would have likely embraced President Obama’s efforts to reform our health care system and to defend the social safety net for the elderly, the poor and the disabled, it is difficult to imagine that someone of such acute moral acumen would look at the America of today with anything short of despair.
Despite rhetoric about the land of opportunity, a young American’s life prospects are more dependent on the income and education of his parents than in almost any other advanced country. And thus, the legacy of discrimination and lack of educational and job opportunity is perpetuated, from one generation to the next.
Given this lack of mobility, the fact that even today, 65 percent of African-American children live in low-income families does not bode well for their future, or the nation’s.
Men with just a high school education have seen enormous drops in their real incomes over the past two decades, a decline that has disproportionately affected African-Americans.
While outright race-based segregation in schools was banned, in reality, education segregation has worsened in recent decades, as Gary Orfield and other scholars have documented.
Part of the reason is that the country has become more economically segregated. Poor black children are more likely to live in communities with concentrated poverty — some 45 percent do so, as opposed to 12 percent for poor white children, as the Economic Policy Institute has pointed out.
I turned 70 earlier this year. Much of my scholarship and public service in recent decades — including my service at the Council of Economic Advisers during the Clinton administration, and then at the World Bank — has been devoted to the reduction of poverty and inequality. I hope I’ve lived up to the call Dr. King issued a half-century ago.
He was right to recognize that these persistent divides are a cancer in our society, undermining our democracy and weakening our economy. His message was that the injustices of the past were not inevitable. But he knew, too, that dreaming was not enough.

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