Sunday, January 14, 2024

Q&A with Jeff Fuhrer




Jeff Fuhrer is the author of the new book The Myth That Made Us: How False Beliefs about Racism and Meritocracy Broke Our Economy (and How to Fix It). He is a non-resident fellow at the Brookings Institution, and was executive vice president and director of research at the Federal Reserve Bank of Boston.


Q: What inspired you to write The Myth That Made Us?


A: A combination of data and real-world experience. The data that I compiled for the book is overwhelming to me, disheartening and shocking. The history of our nation’s approach to doling out economic success to some on the one hand and denying to many on the other is dispiriting.


But my conversations with residents of lower-income communities, mostly in New England, helped to open my eyes to shortcomings of my mainstream economics training.


Economists tend to believe that there’s a good explanation for what exists, and in some cases that includes discrimination. Some believe that discrimination is inefficient (which in many ways it is!), and therefore shouldn’t exist.


They also want to strongly believe that market forces determine winners and losers, rather than that the way we have designed our economy plays a huge role in that tournament.


The more people I talked to, the more disgusted I became with the notion that lack of effort is responsible for the bulk of poverty and unsustainable incomes.


The people I have talked to—and the research bears this out in much larger numbers—are incredibly hard-working, often working at multiple jobs to survive. And they are remarkably good at managing resources, budgeting and juggling expenses, because they have to be to survive.


The more I read, the more I realized that we have created this system. It’s not the inevitable outcome for a so-called free-market capitalist society. We made it this way via a consistent set of choices that prop up large corporations and wealthy individuals.


Large corporations today make record-breaking profits, but their lower-paid workers don’t take home enough to survive. Instead, they rely on food stamps (SNAP), housing assistance, and healthcare assistance (Medicaid) to survive.


This amounts to a huge public susbsidy of large corporations. What do they do with these huge profits? About 40 percent last year were used to repurchase their own shares, artificially propping up their stock prices. Wow.


Q: The Kirkus Review of the book called it a “thoughtful call for equality of economic opportunity, both provocative and, in the end, eminently practical.” What do you think of that description?


A: I think the review is spot on in describing the book as a call for equality of opportunity.


One of my main arguments is that our economy has been designed to deny opportunity to millions, disproportionately families of color, while at the same time providing boundless opportunity to others, mostly the already wealthy and white.


The call for equality of opportunity differentiates the nature of this book’s proposals from others that are largely about redistribution—moving resources from one group to another, keeping the size of the economic pie stable. That’s the definition of a “zero-sum” game.


I have in mind something different: By providing equal access to early childhood education, stable pathways to life-sustaining employment, and opportunities to accumulate wealth, we are making long-term investments in our people that pay off dramatically, ultimately increasing the size of the economic pie and benefitting everyone.


The question of whether the call is truly “eminently practical” is difficult to answer. We live in a time of fractured politics, dwindling civility, segmentation, and “othering”—working hard to identify those whom we presume to be different from ourselves.


That doesn’t sound like an encouraging environment in which to effect significant, systemic change.


But I am hopeful that we can change the narratives that have propelled us into these circumstances—the bootstrapping narrative, the false notion that we’re post-racist (institutional racism no longer affects economic and social outcomes), and the business maxim that dictates a slavish devotion to maximizing profits and thus shareholder welfare above all else.


How do we do that? In part, through building relationships with those who are different from us.


We have changed the LGBTQ+ narrative in this country through relationships—we came to recognize that our siblings, children, parents, friends, neighbors and co-workers are members of the LGBTQ+ community. We already loved them and cared for them. Relationship broke corrosive narratives—not that it’s perfect now! But we’ve come a long way.


We can do something similar when we work alongside of or in the same company with people of race, ethnicity, or socioeconomic status different from our own. We can do the same when we build relationship with those who provide us vital health care, hospitality, and educational services who are different from us.


And we can also hope for courageous leaders who will call out the false narratives that so often guide us to stingy, small-hearted and divisive policy solutions, and point us instead to those that bring us together, recognizing that there is no “them.” There’s only “us.”


Q: How did you research the book, and did you learn anything that especially surprised you?


A: I spent quite a few years working in economic development from my perch at the Federal Reserve Bank of Boston. Spending time on the ground in lower-income communities was part of my research.


So too was speaking to researchers—Darrick Hamilton, Sandy Darity, Tom Shapiro—who have devoted their lives to understanding the huge disparites in wealth between whites and people of color. They changed my mind about the sources of these disparities, pointing me squarely toward institutional discrimination over many decades.


And then of course I pored over reams of data on income, wealth, health care, incarceration, housing, health outcomes.


Two findings surprised me most.


First, the outcomes for the aforementioned look very different in other capitalist countries (the UK, Germany, France, Spain, Sweden, etc.). They face many of the same economic pressures that we face—rapid technological change, shifting trade patterns, aging workforces—yet they made different decisions about how to respond to them.


The result is less income inequality, less wealth inequality, better health outcomes, dramatically lower incarceration rates, better access to education—the list goes on and on. That strongly suggested to me that it was our decisions, not our immutable fate, that led to our outcomes.

The second source of information that surprised me was the interviews with residents from low-income communities in Massachusetts (we have plenty of them, sadly). I was surprised in a number of ways.


First, the residents were incredibly generous in sharing their life stories, which were so often painful.


Second, it became completely obvious that they were working their butts off to try to survive. There was no whiff of “laziness” here.


As I say in the book, I believe laziness to be evenly distributed across income deciles—there are proportionately as many lazy rich people as there are lazy poor people. That’s not, broadly speaking, the determinant of success.


Third, they are quite aware of the narratives I discuss in the book—bootstraps, post-racism, and so on. They get it. That confirmation was important to me, because while I believe my take on narratives to be true, hearing the narratives pooh-poohed from lower-income residents adds a ring of truth to the themes in the book.


Q: How was the book’s title chosen, and what does it signify for you?


A: I began writing about the suite of narratives that are used to dismiss poor outcomes, and to craft an economy that continues to deliver them.


As suggested above, there are several such narratives. They are powerful, ubiquitous, in some cases aspirational. And we unconsciously employ them to make decisions about how the world works, and in some cases how it should work.


In those ways, they act as a Myth—a set of simplifying stories that we use to navigate the world.


The problem is that we’ve blurred the line between aspiration and reality. Of course we want to believe that individual effort is sufficient for success. But the reality is quite different.


We know that it’s absurd to claim that tens of millions of families are not making it in our economy because of lack of effort. But as is the case with so many beliefs, it’s hard to shrug them off, even in the face of compelling evidence. So we continue using them to repeat the same mistakes, over and over again.


So the Myth signifies a powerful set of simplifying stories that guide our behavior. They made our economy the way it is today. And until we dismantle some of these narratives that undergird our economy and our way of thinking about the world, we’re unlikely to move in a direction that provides more equal opportunity.


We’re big believers in do-it-yourself, in individual achievement. That’s great up to a point. And we’re way past that point.


Q: What are you working on now?


A: I’m looking in more detail at better measures of need. Most people are familiar with the poverty level and the poverty rate. The poverty level is a federally designated income level. If a family falls below that level, they are designated “poor,” and if not, they’re OK.


The poverty level for a family of two adults and two children is currently set at a bit below $30,000. It’s ridiculous to think that a family of that size could survive on such a low income. So to my mind, the poverty rate is not a useful benchmark against which to gauge need.


Instead, I have compiled data from the Census and the Economic Policy Institute that allows me to match up the cost of basic necessities—food, housing, healthcare, childcare, transportation, clothing—to a family’s total resources.


That concept includes any income they earn, plus the supports they get from state and federal government, whether in cash or in kind. The cost of basic necessities varies quite a bit by geography, and the EPI provides those data at the county level. So the matchup between actual costs and actual family resources is quite good.


What I have found so far is shocking. By the EPI’s budget measures, over 40 percent of families fall short of having the income to meet basic needs. That share is larger—over one-half—for families of color. And it looks worse for families headed by a single mother, especially if she has more than one child.


To me, it’s inconceivable that we should be fine living in an economy that leaves so many people behind.


Some are just shocked at these results, and suggest that the EPI’s budgets are just too generous. In fact, they’re based on FDA’s “thrifty” food budgets, the FDA’s fair-market rents, transportation that is limited to only work- and local shopping-related transit, health care premiums based on the ACA’s health exchanges, and so on. They’re not padded.


But even if one reduces these budgets by about 40 percent, I still find that one-third of all families fall short of this very stingy estimate of the cost of basic necessities. And it’s still about one-half for families of color.


It’s just very hard to avoid the conclusion that many families aren’t making it in the US, and we need to do something about that.


Q: Anything else we should know?


A: Some of my friends have suggested to me that this is not just a book about economics, but about sociology, political economy, economic history, and, importantly, morality. I think all of that is true, although my only real expertise lies in economics.


But I did feel a moral compunction to write this book, because so much of what I document is just wrong. It doesn’t have to be this way. It shouldn’t be this way. But we’ve made it this way.


As I say in the book, that realization is simultaneously disheartening and encouraging. If it were inevitable that a capitalist economy must work this way, I’d be incredibly discouraged.


But there is no economic theorem that says that the economy has to work the way it does in the US. It works this way because we chose to make it so. And that means we can also choose differently.


And if we do, the benefits will be enormous, not only for those currently left behind, but for the rest of us as well. Let’s hope we decide to move in the right direction.


--Interview with Deborah Kalb

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