August 14, 2014

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Joel Kotkin takes his working concept of the conflict between the Clerisy and the Yoemen and expands it into a book on the death of the middle class. A 5,000 word synopsis is here today and takes up most of Pickings.

Later in today’s post, for comic relief, a link to Robin Williams and the origins of golf. It is not language normally used in Pickings, but it does, at least, conform to Pickerhead’s usual usage.

From early in its history, the United States rested on the notion of a large class of small proprietors and owners. “The small landholders,” Jefferson wrote to his fellow Virginian James Madison, “are the most precious part of a state.” To both Jefferson and Madison, both the widespread dispersion of property and limits on its concentration—“the possession of different degrees and kinds of property”—were necessary in a functioning republic.

Jefferson, admitting that the “equal division of property” was “impractical,” also believed  “the consequences of this enormous inequality producing so much misery to the bulk of mankind” that “legislators cannot invent too many devices for subdividing property.” The notion of a dispersed base of ownership became the central principle which the Republic was, at least ostensibly, built around. As one delegate to the 1821 …New York constitutional convention put it, property was “infinitely divided” and even laborers “expect soon to be freeholders” was a bulwark for the democratic order. …

… But today, after decades of expanding property ownership, the middle orders—what might be seen as the inheritors of Jefferson’s yeoman class—now appear in a secular retreat.  Homeownership, which peaked in 2002 at nearly 70 percent, has dropped, according to the U.S. Census, to 65 percent in 2013, the lowest in almost two decade.  Although some of this may be seen as a correction for the abuses of the housing bubble, rising costs, stagnant incomes and a drop off of younger first time buyers suggest that ownership may continue to fall in years ahead.

The weakness of the property owning yeomanry comes at a time when other classes, notably the oligarchs and the Clerisy, have gained power and influence. …

… Perhaps nothing reflects the descent of the yeomanry than the fading role of the ten million small businesses with under 20 employees, which currently employ upwards of forty million Americans. Long a key source of new jobs, small business start-ups have declined as a portion of all business growth from 50 percent in the early 1980s to 35% in 2010. Indeed, a 2014 Brookings report, revealed that small business “dynamism”,  measured by the growth of new firms compared with the closing of older ones, has declined significantly over the past decade, with more firms closing than starting for the first time in a quarter century. …

… There are many explanations for this decline, including the impact of offshoring, globalization and technology.  But some reflects the impact of the ever more powerful Clerical regime, whose expansive regulatory power undermines small firms. Indeed, according to a 2010 report by the Small Business Administration, federal regulations cost firms with less than 20 employees over $10,000 each year per employee, while bigger firms paid roughly $7,500 per employee.  The biggest hit to small business comes in the form of environmental regulations, which cost 364% per employee more for small firms than large ones. Small companies spend $4,101 per employee, compared to $1,294 at medium-sized companies (20 to 499 employees) and $883 at the largest companies, to meet these requirements. …

… This reversal in class mobility and the slowing diffusion of property ownership in America, if not addressed, threatens to undermine the country’s traditional role as beacon of opportunity. Equally important, the diminution of the middle orders threatens one of the historic sources of economic vitality and innovation.

The roots of America’s middle class reflects the critical role such small holders have played throughout history.  Dynamic civilizations tend to produce more than their share of “new men.”  But nowhere was this middle class ascendency more dramatic than in Europe, first in Italy and later in northern Europe. 

Initially, this was a comparatively small, outside group, with much of the activity conducted by outsiders such as Jews and, later, Christian dissenters. They were the driving force of the expanding capitalist  market, the creators of cities and among the primary beneficiaries of economic progress. …

… Many of these displaced yeoman found a more opportune environment in America, where diffusion of ownership, as both Jefferson and Madison noted, remained central to the very concept of the nation.  Small holders served, in the words of economic historian Jonathan Hughes, as  “the seat of Republican government and democratic institutions.”

America’s focus on dispersed ownership was further enhanced by government actions throughout the country’s history.  In contrast to their counterparts in Britain, the yeomanry in the United States enjoyed access to a greater, and still largely economically underutilized land mass, as well as a persistently growing economy. “In America,” de Tocqueville noted, “land costs little, and anyone can become a landowner.”

The Homestead Act was signed by President Lincoln in 1862. By granting land to settlers across the Western states, Lincoln was extending the notion of what historian Henry Nash Smith described as a  “agrarian utopia” ever further into the continental frontier. Yet in reality the Homestead Act, which offered for a $.25 registration fee $1 per 160 acres proved more symbolic than effective, impacting perhaps at most two million people in a nation over 30 million. Railways, using their land grants, actually sold more land than the government gave away. …

… As the nation moved from its agricultural roots, the yeoman class interest in property would find a new main expression in the form of homeownership. This would represent an opportunity both to escape the crowded city or, for the migrant from rural areas, live in a less dense urban environment. This drive was supported by both conservatives and New Dealers, who promulgated legislation that expanded homeownership to record levels. “A nation of homeowners,” Franklin Roosevelt believed, “of people who own a real share in their land, is unconquerable.”

The great social uplift that occurred then, coming to full flower after the Second World War, saw a working class—not only in America but in Europe and parts of east Asia—now enjoying benefits before available only to the affluent classes.  In 1966, author and New Yorker reporter John Brooks observed in his The Great Leap: The Past Twenty-Five Years in America, that, “The middle class was enlarging itself and ever encroaching on the two extremes—the very rich and the very poor.” Indeed, in the middle decades of the 20th Century, the share of income held by the middle class expanded while that of the wealthiest actually fell. …

… In recent decades, this vision of widening prosperity and property ownership has become increasingly threatened, as most evidenced by the housing bust of 2007-8. It also has come under increased attack from among the ranks of the clerisy. To be sure, many of those who bought homes in the last decade were not economically prepared, as some analysts suggest. But in the wake of the housing bust, the attack on homeownership expanded to include not only planners and pundits, but even parts of the investment community have seen in the yeomanry’s decline an opportunity to expand the base of renters for their own developments.

The ideal of homeownership, particularly in the suburbs, have long raised the ire of many  academics and intellectuals in particular . Some have sought to de-emphasize increased wealth and seek instead to embrace what they consider a more moral, even spiritual standard. This movement, not so far from old feudal concepts, had its earliest modern expression in E.F. Schumacher’s 1973 influential Small is Beautiful and the writings of London School of Economics’ E.J. Mishan.

Both writers rightly criticized the sometimes cruelly mechanistic nature of much technological change, but also revealed a dislike of the very kind of expansive growth that has lifted so many into the yeoman class after the Second World War, not only in America but in Europe and parts of East Asia. “The single minded pursuit for individual advancement, the search for material success,” Mishan wrote, “may be exacting a fearful toll on human happiness.”

In the search for an alternative, both writers looked not forward, but backwards. …

… Increasingly, the media and many urbanists, who see a new generation of permanent renters as part of their dream of a denser America, also embrace this vision as being more environmentally benign than traditional suburban sprawl.

The very idea of homeownership is widely ridiculed in the media as a bad investment and many journalists, both left and right, deride the investment in homes as misplaced, and suggest people invest their resources on Wall Street, which, of course, would be of great benefit to the plutocracy. One New York Times writer even suggested that people should buy housing like food, largely ignoring the societal benefits associated with homeownership on children and the stability communities.  Traditional American notion of independence, permanency and identity with neighborhood are given short shrift in this approach.

This odd alliance between the Clerisy and Wall Street works directly against the interest of the middle and aspiring working class. After all, the house is the primary asset of the middle orders, who have far less in terms of stocks and other financial assets than the highly affluent. Having deemed high-density housing and renting superior, the confluence of Clerical ideals and Wall Street money has the effect on creating an ever greater, and perhaps long-lasting, gap between the investor class and the yeomanry.

 

 

Richard Epstein on the death of Pax Americana.

Thomas Friedman, the respected New York Times columnist, tried to do a beleaguered President Barack Obama a favor by publishing a summary of an extended interview between the two men, which was grandly entitled “Obama on the World.” Friedman tried to present the President in a positive light, by calling his weak responses “feisty.” Yet there is no denying that Obama’s rudderless foreign policy has been a disaster. The international order has rapidly deteriorated since Obama entered the Oval Office. The current situation is so perilous that so long as Obama remains President, the phrase “presidential leadership” will continue to be an oxymoron.

The President suffers from two fundamental flaws. The first is that he is unwilling to make decisions. He much prefers to play the role of a disinterested observer who comments on a set of adverse events that he regards himself as powerless to shape, of which Assad’s carnage in Syria is the prime example. The second is that he fundamentally misunderstands the use of force in international affairs. He handicaps himself fatally by imposing unwise limitations on the use of American force, such as his repeated declarations that he will not send ground troops back into Iraq.

To put these points into perspective, it is important to address two issues that Friedman never raises with the President: military strength and American influence. Regarding the first, Freidman fails to discuss President Obama’s conscious decision to reduce the budgets for, and hence the size of, American military operations throughout the world. In the President’s view, cutting down on the size of the military reduces the American temptation to intervene in disputes around the globe, and thus prevents misadventures such as our interventions in Iraq and Afghanistan that have sapped American strength with little or nothing to show for it.

The second issue Friedman never addressed is the deterioration in world peace that has happened since President Obama became president. …

 

Click here for Robin Williams on Scots and the Invention of Golf

 

Fair warning: The language is not what is normally in Pickings.