By Alan Bean
Check out the two graphs below. See any similarities?
Is it just a coincidence that the American incarceration rate and the Dow Jones Average have an identical trajectory between 1960 and 2000? In both cases we see decades of minor dips and blips followed by a rocket launch.
Mass incarceration is a product of the new economy. Robert Reich’s Supercapitalism provides this quick snapshot of what happened to the US economy in the Not Quite Golden Age between 1945 and 1975:
Across the economy, many assets failed to be put to their most productive uses. The potent incentive of great wealth was often absent. innovation lagged. Few major new companies were founded during this period. But most people enjoyed more security and stability, and a larger share of the nation’s income, than they ever had before or ever would again. The average real wages of hourly workers continued to rise until the early 1970s. Social tranquility was preserved and protected. Something approximating the common good was achieved. The trend toward equality would animate the civil rights movement, culminating in the Voting Rights and Civil Rights acts. The growing middle class would give voice to broad concerns such as health insurance in retirement (resulting in Medicare) and clean air and water (the Environmental Protection Act). It was not unusual for noted chief executives, acting as ‘corporate statesmen,’ to push for policies that would be in the nation’s best interest even though not necessarily to their own company’s benefit. There was great pride in American democracy and government. In a 1964 survey, three-quarters of the American public said they trusted government to do the right thing most of the time.”
This was not an idyllic time, especially if you happened to be non-white and female. In his most recent book, Aftershock, Reich briefly acknowledges the downside.
America in that era still harbored vast inequalities, of course. The very poor remained almost invisible. Through much of the era, blacks were still relegated to second-class citizenship. Few women dared aspire to professions other than teaching or nursing. But such barriers would eventually weaken or disappear. And although the era also engendered a blandness, uniformity, and materialism that many found abhorrent . . . the Great Prosperity offered more Americans more opportunities than ever before to make whatever life they wanted. And it proved that widely shared income gains were not incompatible with economic growth; they were, in fact, essential to it.
Then something happened. It started with small ripples and ended in a tidal wave of economic change. Here’s Reich’s summary of the revolution (again from Supercapitalism) that swept the world between 1975 and 2000:
The road to supercapitalism began with technologies that emerged from the Cold War–containers, cargo ships and planes, fiber-optic cables, and satellite communications systems. They allowed the creation of global supply chains. They also spurred the commercial development of computers and software that could produce items at low cost without large scale, and eventually distribute services over the Internet. All this shattered the old system of large-scale production and dramatically increased competition. It allowed big-box retailers to aggregate consumer buying power and push companies even harder for bargains. It also created profitable opportunities for entrepreneurs to knock down regulatory barriers in telecommunications, airlines, trucking, shipping, and financial services–which also increased competition. Together, emerging technologies and financial deregulation opened the way for investors to put their savings into giant mutual funds and pension funds that pressured companies for higher returns. CEOs who delivered were generously rewarded. Those who didn’t were sacked. Finally, intensifying competition for consumers and investors put pressure on companies to cut payrolls, hitting unionized workers especially hard.
In other words, America moved into a cutthroat, almost Darwinian world of winners and losers. Let me illustrate the nature of the economic shift with a second pair of graphs. First, Change in Family Income, 1947-1979:
Then, Change in Average Household Net Worth, 1983-1998:
These graphs don’t compare apples to apples, but they come pretty close. Notice that prior to the advent of what Reich calls “Supercapitalism” living standards for the poorest Americans (especially if you were born white) improved more than for any other demographic. But the move to a global, deregulated and highly competitive economy, the rich did very, well, the middle class was treading water, and conditions for the poorest 40% of the population were deteriorating rapidly (especially if you were born black).
Why did these shifts impact African Americans with such ferocity? To answer that question we need to shift away from Mr. Reich (who, as a left-leaning moderate, primarily concerns himself with the middle class) to Ira Katznelson’s When Affirmative Action was White.
Katznelson demonstrates persuasively that all the federal programs responsible for the dramatic rise in living standards for the American poor were systematically withheld from African Americans, generally as a sop to win the support of southern Democrats.
None of the legislation on social welfare, labor law, or veterans openly and unambiguously discriminated against African Americans. Nonetheless, the country’s most subjugated, destitute, and politically marginal large group was given the wrong end of the federal stick over and over again . . . Most Americans, warmly remember New Deal and Fair Deal legislation. Social Security and the GI Bill are among the most affectionately recollected statutes over the past seven decades. This entire era, to tens of millions of Americans, summons up the image of a generous federal government that made a dramatic and tangible difference in the lives of the majority of citizens . . . [However] During the foundational period of the 1930s and 1940s, these federally backed instruments, especially those created by the GI Bill for veterans, used redlining, local control [in the South], and overt discrimination to make it very difficult, often impossible, for blacks to qualify for mortgages . . . The results that can be traced directly to public policy here were profound and long-lasting. Missed chances at homeownership obviously compound over time. Renters accumulate no equity, while homeowners almost always secure financial gains that exceed inflation . . . By 1984, when GI Bill mortgages had mainly matured, the median white household had a net world of $39, 135; the comparable figure for black households was only $3,397, or just 9 percent of white holdings. Most of this difference was accounted for by the absence of homeownership . . . African Americans who were not homeowners possessed virtually no wealth at all.
The Not Quite Golden Age Robert Reich describes (1945-1975) was kind to uneducated men with strong backs and a tolerance for tough working conditions. The age of Supercapitalism has no good jobs for people in this demographic. As William Julius Wilson argues in When Work Disappears, conditions became particularly grim for inner city blacks as manufacturing jobs steadily disappeared. While educated black males generally found decent jobs and made modest progress, the folks on the lower rungs of the socio-economic ladder descended into chaos. For many, the underground economy (especially the drug trade) provided the only available access to decent money.
The age of supercapitalism, as Reich demonstrates, has been a period of cutthroat competition. CEOs who cannot provide investors with healthy returns are sacked even if the company remains profitable. Of course, they float gently to earth in golden parachutes. The same principle applies for those at the bottom of the heap. If you can get yourself an education and a job–good for you; otherwise, we’re getting your prison cell ready.
Which explains why the explosion in corporate profits reflected in the rocket-like performance of the Dow Jones Average between 1980 and 2000 tracks the massive explosion in the prison population during this period. Mass incarceration is a social adaptation to harsh economic realities.