After the release of the October unemployment data that reported a steeper than expected rise to 10.2%, I decided to revisit an old college text, The Zero Sum Society: Distribution and the Possibility for Change, the seminal work of MIT economist Lester Thurow. Written in 1979 and published in 1980, Thurow's work interprets macroeconomics as a zero-sum game and examines the American political environment to find explanations for the decline of the American economy. I thought it might offer some insights into our current predicament.
Just three pages and a mere seven paragraphs into the book, I came across this sentence:
And how do you evaluate vast expenditures, such as those we make on health care, where we are spending more than the rest of the world but getting less if you look at life expectancy (U.S. males are now sixteenth in the world)?
Twenty-nine years later, we are still grappling with the same question only now in terms of life expectancy US males now rank twentieth-fourth in the world. Clearly, we are not exactly making strides which only makes the eight paragraph of Thurow's classic all the more prescient and troubling.
But whatever our precise ranking at the moment, the rest of the world is catching up, and if they have not already surpassed us, they soon will. From many perspectives, this catching-up process is desirable. Most rich people find it more comfortable to live in a neighborhood with other rich people. The tension are less and life is more enjoyable. What is not so comfortable is the prospect that our rich neighbors will continue to grow so rapidly that we slip into relative backwardness.
Well, welcome to relative backwardness! We are not just being surpassed by European countries and East Asian tigers, on some metrics we are being surpassed by Latin American countries. The World Health Organization ranks the healthcare systems of Colombia, Brazil and Costa Rica as better than ours. If in 1980 we were worried about falling behind in relative terms, we should now be worried about falling behind in absolute terms. It is not just that other countries are leapfrogging us, it is the fact our living standards are being eroded. But our economic problem is really one of our politics. Where once success of the American economy was measured in terms of gains in living standards and the growth of the middle class, today only lip-service is paid to these. That the GOP long out sold the middle class should be obvious. This is, after all, a party that subscribes to an ideology where the individual trumps society and where inequality is a public good, not just an unfortunate consequence. But even much of the Democratic Party has long abandoned its New Deal principles with its Clintonian embrace of haute finance as the engine for growth. Everything else but perhaps for the pesky service sector, it seems, we outsource.
There is little doubt that macroeconomic shocks beginning in the early 1970s played a role in the erosion of American living standards. But the more fundamental factor since then has been the collapse of a political consensus that favors inclusive growth based on a broad-based prosperity. Instead our political economy, even today in the Age of Obama, favors a narrow elite. We can quibble about that size of that elite but when Representative Anna Eshoo, a liberal Democrat who represents Silicon Valley, has enough sway to insert an amendment into the healthcare bill that extends the patent protected income streams for biotech firms that produce a class of drugs called biologics from five to twelve years we should have no illusions about whom she actually represents. The interests she serves are that of her largest campaign contributor, the Biotechnology Industry Organization, the lobbying arm for the biotech industry. It is a mockery to suggest that Anna Eshoo has the interests of the American people in mind when she serves a corporate master.
The growth of the lobbyist trade is astounding and as their power rises, our living standards have fallen. Here's a quick historical overview:
After World War II, and particularly starting in the 1970s, lobbying in Washington expanded to a degree unimagined in previous generations. As the nation grew larger it also became more pluralistic. Interest groups multiplied and often were in conflict. Traditional isolationism or general indifference to foreign affairs was replaced by heightened awareness of the global involvement and reach of the United States. The dissident political movements of the 1960s demonstrated the possibilities of group political activities and prompted the rise of new groups that felt government was not being responsive to their needs and interests. The rapid evolution of efficient and cheap mass communication promoted grassroots advocacy far beyond previous levels.
Perhaps the most important change was the quiet revolution in the fundamental nature and rules of the legislative process in Washington: the fragmentation of the power of the political parties and party leaderships; the promotion of individual candidates with special agendas at odds with party preferences and priorities; and the restructuring of election campaign spending in ways that allowed groups to support particular candidates. Changes in Congress in the early 1970s, which some have described as a revolt of a new generation of younger politicians against old-guard traditional leaders, resulted in a reorganization of power within Congress, including a reduction in the power of party leaders and committee heads and an increase in the role of subcommittee heads and individual members. Instead of several dozen committees guided by the party leaderships, there were more than 200 subcommittees, often run by individual congressmen free of leadership control. Congressional staffs grew from 2,500 in 1947 to 18,000 in 2000.
These changes opened the door for interest groups, lobbyists, public relations experts, and political consultants of all kinds. The number of interest groups expanded steadily, growing by one measure from 10,300 in 1968 to 20,600 in 1988. The number of registered lobbyists in Washington grew from around 500 during World War II to more than 15,000 by the early 1990s. The number of political action committees (PACs) that financed many of the more powerful interest groups increased from a handful in 1970 to more than 4,000 in less than twenty years.
By 2005, the number of registered lobbyists had topped 35,000 (the number of lobbyists who actually do the lobbying is less - about 13,400 up 30 percent since 1998; the balance is support & research staff). The lobbying boom was caused by three factors: rapid growth in government, a pro-business Republican Party that controled both the White House and Congress, and wide acceptance among corporations that they need to hire professional lobbyists to secure their share of Federal benefits. In dollars terms according to the Center for Responsive Politics, the amount spent on lobbying Congress between 1998 and 2008 has grown from $1.44 billion to $3.3 billion. That's a CAGR of 8.65 percent. Meanwhile over that time frame, US GDP had a CAGR of just 5.07 percent.
It needs to be noted that lobbyists don't always work to get legislation passed. They more often work to get legislation killed. And to do so, they engage in delay tactics. To delay is effectively to kill. The result has been a paralysis of our politics. That this weekend the House was able to pass a measure that begins to tackle our healthcare crisis is indeed historic but given that the overwhelming percentage of Americans have long desired a more equitable health insurance scheme, it is noteworthy that the measure passed with just two votes to spare. Even more astounding is that the passage of healthcare bill is by no means assured in the United States Senate. The underlying causes of our political paralysis could not be more evident.