American Cities

The United States has a dual residential system; the FTE sector lives in wealthy suburbs, and the low-wage sector lives in inner cities. Urban services are old and deteriorating. City schools are old, city planners concentrated poor people in tall buildings, and public transportation is neglected. Insufficiently maintained tall buildings destroy social capital, and poor public transportation keeps low-wage workers from good jobs. Residential segregation has increased, leading to segregated schools and neighborhoods; support for inner cities is presented as helping African Americans and Latinos. The FTE sector has little personal contact with inner city problems, and does not support taxes to solve them.

Concepts of Government

This chapter describes three concepts of government. Democracy is the government of, for and by the people. It provides services to all its members and insures them against a variety of risks, ranging from bankruptcy to the accident of being born poor and with a dark skin. Autarchy is government by a person or family that takes care of itself with little or no concern for the rest of the population. Oligarchy stands in between these extremes and varies by the size of the oligarchy. The United States in the 19th century was the uneasy combination of a demographic North and an oligarchic South. The country approached democracy in the 20th century, but this trajectory reversed after 1970, leading to an oligarchic dual economy.

Conclusions

This book has described how the vanishing middle class has left behind a dual economy as depicted by the Lewis model. The FTE sector makes political choices largely for itself, neglecting the needs of the low-wage sector in order to keep their taxes low. As Lewis observed, the “capitalists” of the FTE sector want to keep wages low in the low-wage sector to provide abundant cheap labor for their businesses....

Mass Incarceration

The United States has a dual justice system; the FTE sector pays fines, and the low-wage sector goes to jail. One out of three black males spends time in prison in a new Jim Crow system. Poor white men are far less likely to be imprisoned, but they still are a majority of prisoners. This dual system is administered by all levels of government, from the Supreme Court to local police and prosecutors. Mass imprisonment destroys social capital in black, brown and white communities alike. Mass imprisonment costs the government large amounts of money that could be used elsewhere. Current policies are complicated by the growth of private prisons and restricted to helping prisoners re-join society.

Preferences of the Very Rich

This chapter surveys the political views of the top one percent of the population, the top one percent of the top one percent, and the top one percent of the top one percent of the top one percent. The higher people are in the income distribution, the more they want taxes to be low and the federal debt to be reduced. The richer they are, the less they favor income redistribution, education, infrastructure investment and universal health care. They may like some policies in the abstract, but they do not support these policies if they require increased taxes or deficit. The Koch brothers formed a secret organization, the Kochtopus, after the Powell Memo to support the political aims of the very rich.

The Investment Theory of Politics

The Median Voter Theorem does not explain American elections and policies because of low voter turn-out and high costs of information. The Constitution let states choose voting rules, allowing racial discrimination to be used to limit voting. Lack of information forces voters to choose blindly between complex alternatives. The Investment Theory of Politics is more accurate because it shifts our focus from voters to rich businesses and people who exert influence on voters by political advertising. The amount of money spent on elections determines outcomes more than candidates’ policy positions. The Investment Theory of Politics has become more important since Citizens United and the increase of dark money in politics.

The FTE Sector

The FTE sector originated in 1971 when Nixon, elected by a Southern Strategy that appealed to Southern whites, replaced Johnson’s War on Poverty with a War on Drugs. Nixon also appointed Powell to the Supreme Court shortly after Powell wrote a secret memo to the Chamber of Commerce in 1971 calling American business to arms over a perceived threat to the business community. These coincident actions were backlashes from the Civil Rights Movement of the 1960s, and they were obscured by the economic turmoil of the 1970s. Reagan appears as the originator of neo-conservatism as he broke unions and lowered taxes even though this ideology arose a decade earlier. The Reagan tax cuts and the growth of finance led to rapidly growing incomes of rich people.

A Dual Economy

This chapter explains the dual economy model, emphasizing Lewis’ assertion that the richer sector tries to keep down earnings in the poorer sector. The modern richer sector is the FTE (finance, technology and electronics) sector, containing twenty percent of the population whose incomes have risen rapidly since 1970. The low-wage sector is much larger, but has experienced stagnant earnings since 1970. The middle class is vanishing, and the American distribution of income looks like a two-humped camel. Transition from the low-wage sector is by education, which the FTE sector makes increasingly difficult by reducing funding for public schools and universities.

Public Education

The United States has a dual education system; the FTE sector sends its children to suburban public and private schools, and the low-wage sector sends its children to failing urban public schools. This dual system was created in response to the Great Migration as whites left inner cities to incoming black families. It was sustained by the Supreme Court and federal support for suburban growth. City schools are deprived of support and increasingly fail to educate black and brown children properly. Poor low-wage families with incarcerated fathers are forced to use failing schools, and their children grow up to be imprisoned. Reform efforts aim for quick results and fail spectacularly. Charter schools—private public schools—have widely varied effects.

Transition

Education is the way for low-wage workers to move into the FTE sector, as moving to the city was the way to advance in the original Lewis model. Just as slums show the difficulty migrants face in finding good jobs in cities, black and Latino graduates face difficulties finding good jobs in the FTE sector. These difficulties are increased by lack of state support for public universities, leading to increased tuition and the growth of student debt. They are increased further by for-profit colleges that often lead to debt without promising employment.