FP: What evidence is there that inequality in the U.S. has gotten worse?
EL: There's a lot of evidence, and there's a shrinking school of people denying this evidence. The most powerful piece is also the most recent, and that is the distribution of growth since 2009. The paper by Saez and Piketty from Berkeley University that came out in early March is particularly instructive. It shows not only that 93 percent of the gains in the 3 percent growth America got that year went to the top 1 percent, but also that the top 0.01 percent, namely the top 15,600 families, took 37 percent of the growth. That's the top one in 10,000 people. Even in 2002-2007 inequality was getting much worse. But in this recovery it is an order of magnitude worse.
FP: Hasn't social mobility also declined?
EL: It's a triple cocktail. As America's inequality is growing to Latin American levels, social mobility has fallen to sub-European levels. And of course, median wage stagnation and the whole skills globalization problem is deeply entrenched. Far more important than whatever this month's consumer sentiment number is or last month's was -- these are the numbers we should be looking at.
FP: So historically we are declining relative to other powers. Clearly something big is changing the global economy. Domestically inequality is growing, social mobility is declining, median wages are falling, and core industries like manufacturing are shrinking. And yet, when you listen to politicians, the response is first, in the wake of crisis, we need a stimulus that'll make things go back to the way they were. Then politicians argue that we should go back to manufacturing as it was in the past and somehow wave a magic wand that will make it 1955 again with Cadillacs with big fins rolling out of factories. In the course of your reporting, did you find anybody who's coming up with a new approach? Or is the reason for your pessimism due to the fact that we are oblivious and inclined to apply old formulas to address new problems?
EL: I think it is inevitable in life that the No. 1 country, having been number one for so long, will be the most complacent. In addition, America has so many examples to draw upon of being in a tough spot and pulling out of it, so it's understandable that it has been the slowest to adapt intellectually to the challenges posed by the changing global economy. America is adapting even slower than Britain, in some respects, which might be doing the wrong thing but is at least in a panic and knows it's got to find new answers.
FP: Why do you think David Cameron has been more open to new ideas and more inclined to embrace new approaches than many of his American counterparts?
EL: Generally speaking, while agreeing with the premise of your question, I would say that Britain's prognosis is actually bleaker than the United States. But Cameron has been casting around for competitiveness policies. Take for example the immigration skills -- the points-based system -- in which Britain is looking at how to attract people who generate patents. You can tell there's some degree of thinking about what means it to be competitive, and how do we need to adapt. I'm not sure how impactful any of these measures have been, and I'm not sure how good the UK coalition is at governing. I most certainly think all this is outweighed by the UK's disastrously premature embrace of austerity. One reviewer said my book should be renamed Time to Start Drinking. If I was asked to write one on Britain I might call it Time to Start Sniffing Glue.
FP: So in the U.S., what has the political situation gotten us?
EL: People tend to make a fetish out of Washington and blame Washington on itself, as if somehow it is just in suspension from the society that elected it. But some of the reasons for my skepticism about how easy it will be for America to rejuvenate itself stem from that fact that polarization in Washington is deeply rooted in trends beyond the Beltway, in the real America. This is the case with the gradual hollowing out of the middle class and the decline in income or benefits and all the social problems that come with that.
The American system is designed to work best when there's cooperation between factions and parties and when there's some degree of working together. It's no surprise, therefore, that when you get the wrong kind of parliamentary politics, namely discipline and ideological divisions, cooperation becomes impossible, gridlock becomes the norm, and it becomes almost inconceivable to imagine the kinds of reforms that in a parliamentary system a majority government can very easily push through.
FP: What's the most broken in our system? Is it fiscal fecklessness? Is it gerrymandering? Is it the way the Senate works? Is it filibustering? Is it campaign finance?
EL: Those are all symptoms. As a foreigner, I do sometimes see campaign finance as the root of all evil, but I also understand that the First Amendment makes it very hard for people to envision a scenario where it's going to be properly controlled. And I think the Supreme Court's going in the wrong direction. But when you ask ‘What's the most broken?' there's a richness of embarrassments to select from. Take the Supreme Court, for example. I don't know how they're going to rule on "Obamacare" in June, but I do know that eight of them are pretty much spoken for and there's one swing vote.
You could also look at the polarization of the Senate, which can't be explained by gerrymandering since state boundaries are fixed. [It] now has an essential tool of paralysis -- the filibuster -- that the minority use as a matter of routine, as they do in California. I do think in this respect California is very much America's future, in positive technological ways, but also in the political sense. Sacramento is barely capable of functioning. I think Washington is taking on those features and that makes governing really difficult. If you believe that America is a story of essentially the government being out of the way and then the nation flourished, then this might all look fine. But if you have a proper understanding of American history and you know what role government played in American development and in American capitalism, then this isn't fine at all.