Tom Hull: Peter Gosselin: High Wire

David Warsh: Getting On With It. Starts with a line that could benefit from more elaboration than the mere mention of Fannie Mae and Freddie Mac: "It is becoming clear that the US is indeed facing its most serious economic crisis since 1932." Then this turns into a book review, principally of Peter Gosselin's High Wire: The Precarious Financial Lives of American Families, even though Warsh's interest is as much in the decline of newspapers -- Gosselin works for the Los Angeles Times. The book sounds like a reporter's version of academic Jacob Hacker's The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream.

There is relatively little in his book about the forces that have brought about the new volatility, increasing global competition and trade. He recognizes that for a quarter of a century, growth-oriented policies of deregulation, restructuring and openness have legitimately gained ground because most people have preferred being richer to being more fair. He is concerned mainly with rendering a clear accounting of the costs. It is as if he were to say of the war in Iraq, I know it was undertaken because they thought it would make everyone better off; but here is how many dead there may have been, and how they died, soldiers and civilians alike. High Wire is a remarkable act of witness.

Gosselin documents, persuasively, that life's "beta" has increased in these United States during the latest binge of globalization, an argument first advanced nearly fifteen years ago by Peter Gottschalk, of Boston College, and Robert Moffitt, of the Johns Hopkins University. The frequency has nearly doubled in which reversals of fortune turn catastrophic for everyday folk -- a lost job, a divorce, a traumatic injury, a serious illness, the death of a spouse -- thanks mainly to the erosion of the insurance principle. After more than a quarter century of globalization, there is plenty of damage to report, and it is impossible not to be moved by Gosselin's careful and mellifluous reporting. His purpose is to persuade us "to reset the balance point between what's acceptable as good for the individual and what must be recognized as good for the many."

The term "beta" seems rather spurious here: fairly clear what he means, but not why he calls it that. The less insurance people have against catastrophes and mishaps, the more important it becomes for one to save money -- in effect, to self-insure. Hence, the more important it becomes to make more and more money -- the need can be infinite because one never knows all of life's future risks. All this money-making and saving can be politically justified as a personal virtue, but spread across the entire population it becomes impossible -- as should be obvious from what's happened in the US over the last 20-30 years.

We all know that inequality has increased over the last 30-40 years, but we systematically underestimate how much because we tend to just look at tangibles like income or wealth and don't adequately factor in the costs of increased risk. Moreover, this oversight has been essential to the rise of the conservatives, who not only refuse to acknowledge it but go further -- e.g., through their gospel of personal responsibility -- in trying to make think that the inevitable victims of these risks bear some fault in their misfortune.

In a world of infinite growth people might conceivably make enough progress to, if not catch up in terms of equality, at least become sufficiently well-to-do to have little to complain about. However, we're becoming increasingly aware that we live in no such world: essential resources like oil are fixed and becoming increasingly exhausted and expensive; the carrying capacity of the earth is also limited; and in many regards our lifestyles would be richer and saner if we developed a limited set of widely attainable needs instead of dog-eat-dog struggle of capitalism. Given these limits, we're actually better off increasing social insurance: it's more efficient economically and more fair politically.

posted 2008-07-18