Why Do I Object to American-Style Neo-Liberalism?

There is no doubt that American economic prosperity has been the envy of the world, and has attracted millions of deprived people from all over the world. Its economic, technological and military superiority over other nations makes it an attractive model to emulate. Yet one is aghast that amidst the phenomenal prosperity of America, considerable hunger and homelessness persists. Even in 2005, after a decade of continued economic prosperity, nearly 37 million people, one out of every eight American (but one out of four Native Americans or African Americans, and one out of five Hispanics) were poor. Among the 21 most affluent countries the United States had the highest incidence of child poverty with 18 per cent of all children poor. According to the United Nations Children’s Fund (UNICEF) the United States comes out the last but one (the United Kingdom being the last) out of twenty one world’s most advanced economies with respect to the well-being of children and young people. The six dimensions taken to measure the well- being of children include material well-being, health and safety, education, peer and family relationships, behaviors and risks, and young people’s own subjective sense of well-being.
In 2005, nearly 13 million households were food insecure, in the sense that they could not secure the minimum nutrition for a time within the year for lack of money. In a third of such households had one or more members hungry for a time; remaining two thirds of the households could avoid hunger as a result of federal assistance programs or charitable soup kitchen. Between two and seven million Americans are homeless. 47 million Americans have no health insurance. Almost one in five American adults (between 40 and 44 million) is functionally illiterate. On one of the most telling social indicators, the expectation of life at birth, which can encapsulate to a considerable extent the average standard of living of a country, the United States is almost the lowest of all the most industrialized countries of the West. On this score, Cuba, with a much lower per capita income, has the same expectation of life at birth as the United States. Similarly, infant mortality rate in America is comparable only to the poorest Western European countries and to Cuba. The infant mortality rate among the African American population is almost twice as high as amongst whites. Among all advanced industrialized countries, the rate of violent crimes is the highest in the United States. Approximately 13 million people (roughly 5 per cent of the population) are victims of crime in America every year. Annually, 13 000 deaths are caused by the illegal use of firearms in murder or non-negligent manslaughter. The number of violent crimes totals 440 000 each year. These are numbers far in excess of those killed on September 11, but thanks to the Gun Lobby, a president who has declared ‘War on Terrorism’ seems to have little to offer.
The United States has, from its very inception, shown an uncanny tolerance of highly skewed distribution of income and wealth. It now has one of the most unequal distributions of income in the world; with the lowest quintile (20 per cent) of households earning less than 4 per cent of the total household income, while the highest quintile earns as much as half. According to a Congressional Budget Office (CBO) report, the unequal distribution of income among households became substantially more pronounced between 1979 and 1997. The share of pre-tax income going to the richest fifth rose from 45.9 percent in 1979 to as much as 53.2 percent in 1997, while the share for the poorest fifth declined from 5.3 to 4 percent. During the same period the share of post-tax income going to the richest fifth increased from 42.7 percent to 49.7 percent; while the share for the poorest fifth declined from 8.3 percent to only 4.8 percent. The share of pre-tax income of the richest 1 percent rose from 9.3 percent in 1979 to 15.8 percent in 1997. During the same period the share of post-tax income of the richest 1 percent rose from 7.5 percent to 13.7 percent. In 1979 the share of the after-tax income going to the richest fifth was nearly seven times that of the poorest fifth of the households. In 1997 this multiple had risen to a little more than 10. Ultimately, federal taxes, do not seem to affect the distribution of income.
Wealth distribution in the United States is even more unequal. In 1998 the richest 1 percent of households owned 38 percent of all the wealth, while the top 5 percent owned 58 percent. Another study suggests that during 1989-2001, a third of the wealth went to the richest 1 percent of households, another third went to the next richest 9 percent and the remaining third went to 90 percent of households. The poorest fifth of households have no assets or their debts equal or exceed their debts. The wealth inequality almost doubled between the 1970s and the 1990s. If one excludes housing and concentrates on stocks, financial securities and business assets, the distribution of wealth becomes even more unequal. The richest 10 percent of households own 85 percent of all outstanding stocks and financial securities and 90 percent of all business assets. Minorities fare even worse. According to the Pew Hispanic Center, White Americans, on average, own 11 times as much wealth as Hispanic households, and 14 times that of Afro-American families. The median net worth of Hispanic households in 2002 was $7,932 against $88,651 median wealth of White households. The net worth of Afro-American households was only $5,988.
A gross inequality of income and wealth, uninhibited by state intervention, leads to unequal access to opportunity and to political power. In a country, where access to education for children depends upon the income and wealth of their parents, equality of opportunity — the very basis of democracy — becomes largely mythical. Apart from the expensive private schools to which children from rich families invariably go, gross disparities exist even in the public school system. Suburban schools have ‘clean buildings, modern sports and science facilities, and well-stocked libraries, and inner-city schools with broken windows, deteriorating buildings and empty bookshelves.’ Notwithstanding scholarships for poor deserving students at most universities, access to the top private institutions of higher studies often depends on family income and alumni connections. For instance, nearly ‘one fifth of Harvard’s students have been legacies [children of families which have given substantial gifts to the university], or the children of alumni’ even if they are significantly less qualified than other students. As Lind cogently concludes, ‘the effect of legacy preference is to retard social mobility and turn the new American oligarchy into a semi hereditary aristocracy.’
By now it is widely accepted that income inequalities have serious implications not only for health but also other social ills such as crime and violence in society. A major study, conducted at Berkeley showed how the American states with greater inequalities in their distribution of income not only had lower expectations of life and higher infant mortality rates but also had a greater proportion of babies born with low birth weights and a greater proportion of the population was unable to work due to disability. They also had higher rates of unemployment, higher rates of violent crime and homicide, and higher rates of incarceration. The states with higher inequalities had higher percentages of people receiving income assistance and food stamps, and a greater percentage of people without medical insurance. It is not surprising that these states had higher costs per person for medical care, and for police protection. Such states spent less per person on education, had fewer books per person in schools, with failing educational performances, including poorer reading and mathematics skills as well as lower rates of completion at high school.
Another study at Harvard found that the US states with high inequalities of income had relatively high overall age-adjusted death rates, high infant mortality, high death rates from heart disease, cancer and homicide among both whites and blacks.
Yet successive US governments—greatly under the influence of big business-- have done little to tackle the problem of the growing inequality in the United States. In fact, the George W. Bush administration, one of the most-business friendly administrations in post-Second World War America, has adopted tax policies, which have exacerbated the problem of inequality. For instance, as the Center for Budget and Policy Priorities, an independent think-tank indicates, Bush imposed taxes enacted in 2004 will add less than half a percent in the after-tax income of the poorest fifth of the households while adding 5.3 percent to the after-tax income of the richest one percent. This would mean that while the poorest fifth of the households on average receive a tax cut of $27, the richest fifth would get an average tax cut of $5,000. The gains from the tax cuts for the richest one percent would be as much as $35,000 and households earning a million or more will receive as much as $123,600. Republicans are also planning to completely repeal the already diminished estate tax after 2010. By 2011, heirs to the richest 600 or so estates will no longer owe any inheritance tax. This will exacerbate the income - wealth inequality even further.
In my view, a society suffering from gross inequities of income, wealth and the resulting inequality of opportunity tears a society apart. It is this risk of social disintegration that worries me in so far as the current economic policies in both China and India. Growing social discontent and increase in crime are evidently major threats to social stability in both the countries. The conventional wisdom suggests increasing expenditures on crime prevention, policing, jails and judiciary. Increased powers to the police and the philosophy of ‘zero-tolerance’ not only undermines human liberties, so essential to a democracy, but also brings about reprisals against the authorities (growing Naxalite activities in India is an example) creating a chain of violence and counter-violence so inimical to the stability of a country.