Chrystia Freeland

Tolstoy may have been right about families – “All happy families are alike; each unhappy family is unhappy in its own way” – but the opposite of his famous first line is true when it comes to countries: The world’s disparate unhappy nations are very much alike when it comes to the causes of their unhappiness.

That’s not immediately apparent – austerity-strangled Greece, cheap-money America and military-ruled Egypt are all exhibiting quite different symptoms. But it is no accident that so many of the world’s economies are sputtering at the same time, or that so many people around the globe are angry.

One reason for the synchronized gloom, of course, is the synchronization of the global economy. But the world is suffering from more than a shared summer cold. Rather, we are all, both together and apart, trying to figure out three big questions. Our answers to them will shape the 21st century.

The first is how nation-states fit into a globalized world economy. Different countries are wrestling with different versions of this problem. Small states with their own currencies and open trade policies have just endured a version of the Asian crisis of 1998, and they have come to similar conclusions – survival requires a fortresslike national balance sheet and export-led growth. That’s why Baltic leaders, these days, sound an awful lot like Southeast Asian ones.

The rub, as Lawrence H. Summers, the former U.S. Treasury secretary, likes to point out, is that there are no Martians. Export-led growth can’t work as a policy for the whole world: Someone needs to be the net importer.

The truth of this observation is being experienced very painfully today by south Europeans, whose economies are constrained not only by inflexible labor markets – which are being reformed – but also by a currency union that has lifted north European exporters, particularly Germans, and weakened everyone else. And so the euro, which was attractive to smaller European states in part as a shelter from global economic storms like the Asian tsunami of 1998, turns out to be a perilous haven indeed.

An effective global economy will require more than a World Trade Organization and free and fair commerce between companies. What shapes trade most of all is currencies, and those are guided by national policies on exports, credit and government surpluses or deficits. If we want a global economy – and most of us seem to – we need to devise a way for the currencies of the world to work, and to work together. Call it the 21st century’s Bretton Woods moment.

The second question is even knottier. Global capitalism is the best economic system humanity has devised so far: Worldwide growth in the three decades before the financial crisis was astonishing – delivering, most strikingly, a huge rise in incomes to poor people in countries like India and China that, just a generation ago, development economists had all but given up on. Latin America has benefited, too, and even Africa, the perpetual bridesmaid, seems to be on the rise.

But 21st-century capitalism is failing at one very important task – delivering jobs and rising incomes to the middle class in rich countries. U.S. families are no better off today than they were in 1992. For ordinary Americans, it is as if the post-Cold War windfall and the technology boom never happened. Much of Europe is in the same fix, only worse, with even higher unemployment rates and a less forgiving mortgage default system. From today’s vantage point, the rise of European tigers like Iceland, Ireland and Spain feels like a mirage.

A popular meme in Western societies at the moment is to lament the mulish unwillingness of democratic majorities to support sober, centrist political leaders. Much of this refusal to follow the erstwhile wise men can surely be traced to the failure of the policies of the past few decades to deliver for the middle class.

This shortchanging has been going on for some time. If it seems new, that is because the easy money of the pre-2008 world economy hid a multitude of sins: In the United States, the middle class thought it was rich because of cheap consumer credit; in southern Europe, the middle class thought it was rich because of state jobs, state pensions and state services funded by cheap sovereign credit. Now all that credit has dried up.

As Lord Paddy Ashdown told a gathering of top Canadian civil servants in Ottawa this week: “You alienate the middle class at your peril. The middle class always leads revolutions.”

The third question is the one we speak about the least and should probably worry about the most – can rich women be persuaded to have children? Rich, here, doesn’t refer to the wives of the plutocrats, who continue to have plenty. But once a country achieves middle-income status, its middle-class women stop having many children. This demographic squeeze is another big contributor to Europe’s malaise. On current trends, it is likely to become more severe.

As countries, as middle-class individuals and as families (or as women who choose not to have them), we are struggling to find our place in a world that is in the midst of convulsive change. Lord Ashdown said that some eras are times of stability. Ours is not: “We are living in a period of history when power shifts.”

The global family of nations will be unhappy until we find a new power configuration that works. The good news – and the bad news – is that we will only be able to figure that out together. “Everything today is connected to everything else,” Lord Ashdown said. “The most important part of what you can do is what you can do with others. There is no problem anymore that is solvable alone.”

Close families and flexible labor markets don’t go together. That’s the conclusion of a fascinating paper by a quartet of transatlantic economists. Their work should be required reading for all European politicians and for the economists and pundits around the world who seek to advise them.

One truth universally acknowledged in Europe today is that the countries of the south need to overhaul their labor markets: Rigid rules on hiring and firing and on the minimum wage are blamed for the high unemployment and subpar economic growth in these states.

Economists are right to point out that inflexible labor markets exact a high economic toll. So why has there been such resistance in countries like Spain and Italy to changes that would create more jobs and stronger growth? One classic answer is the ability of vested interests – workers who do have protected jobs – to defend their own cushy deal at the expense of everyone else. Another is political dysfunction.

Alberto F. Alesina, Yann Algan, Pierre Cahuc and Paola Giuliano – the four authors of “Family Values and the Regulation of Labor” – wondered whether deeper, cultural factors might also be at play.

In their cross-country comparison, the researchers found a correlation between close family ties and a preference for more regulated labor markets. In countries with weaker family ties, there was more support for more open labor markets.

That doesn’t mean the people in countries with close family ties are acting irrationally. Instead, rigid labor markets – notwithstanding their economic costs – might actually be a better choice for societies with close family ties.

Here is how Giuliano, an assistant professor at the University of California at Los Angeles, Anderson School of Management, explained the trade-offs: “Suppose you live in a strong family tie society. You don’t want to go far away from home, so you are tied to a certain geographical location. The company that dominates a specific area knows you don’t want to leave to search for a better job, so it offers you a low wage. For that reason, people in those societies may prefer more regulated labor markets.”

The work by Giuliano and her colleagues is a timely rebuke to the one-size-fits-all school of economics.

“It could be that those regulations that economists consider effective actually work in some societies and not others,” Giuliano told me by phone from Rome. “If you make the labor market more flexible, in some countries this reform will work. But if the cultural beliefs are different, the reforms can produce unexpected results.”

This cultural lens also offers a possible explanation for the remarkable tolerance of some countries, like those of southern Europe, for high unemployment. A study by the economists Samuel Bentolila and Andrea Ichino argues that close family ties are the key to this mystery as well.

“In some sense, unemployment is less painful near the Mediterranean,” they write. That is because extended family networks cushion the blow: “The evidence supports the hypothesis that extended family networks, which appear to be stronger near the Mediterranean, provide a fundamental source of insurance against unemployment in southern Europe.” If you can count on your family to support you, being unemployed isn’t as hard; but staying close to that same family may lead you to favor the rigid labor markets that contribute to your own unemployment.

Giuliano is no flat-earther. She left her native Sicily, first to study in Milan and now to work in the United States, and she took pains to insist that, like the overwhelming majority of the economic fraternity, she believes southern Europe needs to reform its labor markets.

Her point is that those reforms will work best if economists take the time to understand the cultural conditions that prompted societies to choose highly regulated systems in the first place. “Economists should understand that when they introduce reforms, they need to take into account cultural conditions,” she said.

One reason culture matters so much is that it is remarkably persistent. For a civilian, one of the most striking findings in the paper by Giuliano and her colleagues is the correlation between family patterns in the Middle Ages and current desires for labor market regulation.

Your country’s family structure centuries ago influences how you feel about the minimum wage and severance rules. And the power of culture persists even in immigration. Giuliano and her colleagues found that the attitudes and the economic circumstances of second-generation immigrants to the United States were shaped by the nature of family relations in their countries of origin – “today as well as 70 years ago, immigrants coming from strong family ties societies tended to have lower mobility rates, lower wages and a higher level of unemployment.”

These findings are most relevant to Europe and its raging debate about labor rules. But they also make interesting reading in the United States, where the most ardent advocates of liberal labor markets are also the most vocal defenders of family values. Led most recently by the scholar Charles Murray, the American right has been lamenting the decline of those family values within the white working class. Perhaps the unregulated labor markets that conservatives also champion are partly to blame.

One question Giuliano and her colleagues don’t ask is how technology might change the trade-offs between flexible labor markets and close families. Jane Austen’s heroine Elizabeth Bennet observes that distance between family members is a function of wealth. It is also a function of technology. In the age of Skype, Facebook and cheap air travel, 300 miles today may be closer than 30 miles was a century ago. This could be yet another quandary that we assume to be the province of economists and legislators, but turns out to be solved by technologists.

Spending time with top European policymakers at the moment is scary and slightly nauseating, like the final, slow-motion moments before a car accident, when you can see precisely both how you will probably crash and what it would take, if only you could force your paralyzed muscles into action, to swerve to safety.

That’s why Christine Lagarde, the formidable French chief of the International Monetary Fund, told me this week that she wants to lock Europe’s dithering leaders in a room and leave them there until they figure things out.

“If I was able to do one thing, I would lock them in a room, take the key and let them come up with a comprehensive plan,” Lagarde said, when I asked what her fantasy scenario was for Europe. “I’m sure they can make it. I know the fundamentals are solid. The numbers on an aggregate basis are good. And, as I said, we have to take the key because they cannot escape unless and until they’ve firmed up the plan. But they can do it.”

Lagarde’s dream is frustrating and encouraging in equal measure because she is right: There is a clear, credible and widely accepted path to safety for Europe. But that car crash may still happen, because no one has the power to lock Europe’s leaders in a room, and, absent that forcing mechanism, they may not muster the will or the sense of urgency to act in time.

The sticking point is not policy. Speaking on a panel with Lagarde, Jörg Asmussen, a member of the European Central Bank’s executive board and a former official at the German Ministry of Finance, outlined what Europe needs to do.

“It’s very simple,” Asmussen said. “We need a more integrated monetary union, because the monetary area that we have now is incomplete. And we have to complement it in a way to make it more stable. One point is a fiscal union. The second one is a financial market union with three key elements: a resolution regime; second element, a deposit guarantee insurance; and third, we need a centralized supervision for the large 25 banks in Europe.”

“We need a democratically legitimized political union,” he added. “We need to start this speedily.”

That’s a plan the overwhelming majority of European leaders would agree to in principle. The problem is putting it into practice.

As Olli Rehn, the European commissioner for economic and monetary affairs, jokingly explained on the same panel: “Prime Minister Jean-Claude Juncker” of Luxembourg, the chairman of euro zone finance ministers, “put it quite well some years ago by saying that we all know what needs to be done, but we do not know how to get re-elected after that.”

Rehn’s wry comment is a reminder of the real tragedy at the heart of Europe’s troubles today: An idealistic political experiment, founded above all on the principles of democracy, peace and social inclusion, is failing because elites are unable to sell their vision to the public they were meant to serve.

Part of the problem is that the European idea, which really is a gauzy, high-concept confection, long ago devolved into a profoundly uninspiring affair of EU directives, painstakingly translated into 23 languages, and the Brussels apparatchiks, remote from the everyday life of their nations, doing the translating.

That’s where Riga, the venue for the conversation between Lagarde, Asmussen and Rehn, comes into play. The 2008 financial crisis was devastating for this country of just over 2 million. Like some of the euro zone states that today teeter on the brink, Latvia gorged itself on easy money during the credit boom of the first decade of this century. When capital abruptly flew to the world’s havens – a category that most certainly did not include the Latvian currency – Riga was pushed to the brink.

One option – which many contemporary observers thought was inevitable – was devaluation. Latvia, after all, enjoys a freedom that Greece, Ireland, Italy, Portugal and Spain do not. It controls its own currency, and printing money would have been an expedient way of both reducing its debt and instantly bolstering the country’s global competitiveness.

But Latvia chose the tougher route of internal devaluation. The country stuck with its currency peg to the euro, and instead rebuilt the confidence of the international capital markets by slashing government spending and domestic wages and prices. Over the course of the program, the Latvian government’s combination of spending cuts and tax increases amounted to 15 percent of gross domestic product.

That hurt. In the first year, unemployment jumped to more than 20 percent, and the economy shrank 18 percent. Nearly four years later, Latvia, whose overhauls were supported by funding from the IMF and the European Union, is harvesting the payoff. The economy grew 5.5 percent in 2011, the currency is stable and unemployment has subsided, to 13 percent.

“I want to congratulate Latvia for the recent successful completion of their balance of payments program which has been conducted together with the EU and the IMF and also for the successful return to the markets and the rather positive data on growth,” Rehn said. “And Latvia has shown that this kind of economic assessment is possible without currency devaluation.”

The harsh Latvian plan worked because the whole country was committed to it. And that commitment, including the painful peg to the euro, is rooted in the overarching national mission that has driven and united this small Baltic state since the collapse of the Soviet Union – to escape the legacy of communism and Russian rule and to build a modern, democratic, capitalist nation. Latvians believe they can achieve that goal by joining the European Union and eventually the euro zone.

The people on Europe’s periphery still believe in the Union’s great historical purpose. Unless the Europeans at the continent’s center regain that faith, their leaders will be unable to summon the political will to swerve out of that slow-motion car crash.

The big economic question in much of the world today is usually framed as the fight between advocates of austerity and advocates of growth. But another way to view the debate is as a contest between those who think that 21st-century government can be effective and those who don’t.

Indeed, some of America’s most outspoken capitalists have begun to fight the “Buffett Rule,” which would set a minimum tax level for millionaires, and other calls to raise taxes for those at the very top, with the argument that money is best left in the bank accounts of the superrich because they are more effective at using it than the state is.

“I’m a job creator. I’m one of the guys who can help us out. I’m a Silicon Valley guy who can invent and create,” T.J. Rodgers, chief executive of Cypress Semiconductor, told me. “If you tax me more, I will either give less to charity or I will fund venture companies less, or I will sell the stock in my own company or other companies I own, like Intel and Google. I will do one of those three things to return the money to the government.”

If that were to happen, Rodgers told me, the economy would be hurt, because he is better at investing money than government bureaucrats are.

“The money will go into cash for clunkers or another program. And somehow we’re supposed to believe that taking money from the investments, my investments, out of Silicon Valley, where they have been very, very good for the economy, and putting them into cash for clunkers, or the new scheme, whatever it is, is somehow going to make America’s economy better,” he said. “It’s just wrong. It’s going to hurt the people that they’re pandering to. It’s going to hurt the very people that think if we vote for this, then we’ll get more money. What will happen is the economy that they depend on will be less robust and they’ll be in worse shape.” “Cash for clunkers” is a term for a U.S. government program in 2009 that provided rebates to those who traded in older, fuel-guzzling cars for more efficient models.

Edward Conard, a former partner at Bain Capital, the buyout firm once led by Mitt Romney, the Republican presidential candidate, makes the same point in Unintended Consequences, a book published this month. Conard, like Rodgers, argues that society overall benefits when the rich are taxed lightly because the rich – by virtue of their wealth – have shown they are the best investors of capital.

As Conard writes: “For every dollar earned by a successful innovator or lucky risk taker, society captures forty cents of investment. Were society to pay the incremental dollar of income to a middle-class consumer, he would charge society ninety to ninety-nine cents of consumption for every penny of investment – a steep price. It’s cheaper for society to allocate income to the rich.”

There’s a lot to unpack in this line of reasoning. For one thing, it is hard to escape the obvious self-interest – it is certainly convenient to believe that low taxes for oneself not only are a personal boon but also serve the collective good. The debate is also ideological. The right has long been campaigning to reduce the power of the state and to increase the power of the individual.

But there is also a special resonance to arguments about the relative efficacy of the private sector over the state when you hear them in the 21st-century United States from a West Coast technology entrepreneur. After all, whatever your political allegiances, it is hard to disagree that in recent decades, when it comes to transforming the world, the Valley has outdone the Beltway.

One reason for that gap may be that while our private and business lives have been transformed by the technology revolution, government largely has not. To understand what hasn’t happened – and the possibilities the future might hold – I spoke to another entrepreneur at the cutting edge of the global technology revolution: Nandan Nilekani, the co-founder of an Indian outsourcing behemoth, Infosys.

Nilekani has gone on to another pioneering job, working inside the notoriously slow-moving Indian government to create a unique digital identity for each citizen. That second career has given him a different perspective on the state: He agrees with Rodgers and Conard that it needs to be reinvented, but he also argues that it is absolutely essential, not least as a foundation for private-sector entrepreneurship.

“Just as technologies are disrupting industries – retail or publishing or whatever – technologies can also disrupt the way you do government,” Nilekani told me. “The thing is that we don’t yet know how to do it well.”

“If you have grown up using a tablet or a smartphone, with nice user interfaces, and one click, you get everything, you get maps everywhere, you’re used to a certain level of responsiveness and efficiency,” Nilekani explained. Government is often not very good at delivering either, he said, which can make us more frustrated as citizens than we are as consumers.

One response to that gap is that of Rodgers and Conard, namely to give up on the state. Nilekani advocates something different. What we need to do, he argues, is reinvent government, just as the technology revolution has forced most businesses to reinvent themselves.

Nilekani thinks this transformation of the state is one of the world’s most urgent challenges because he believes that without a powerful and effective government, private entrepreneurship is impossible.

“I think innovation is something best done effectively in the private sector,” he told me. “But it’s the role of governments to create public goods which are platforms for innovation. If you look at the U.S., the Internet was a government defense program on which today you have this huge innovation ecosystem. GPS is another example.” That system “was designed for military applications. But today it’s used for maps or car navigating systems or whatever. So the ideal is to create these global public goods or these national public goods that are platforms. And then make them open so that people can innovate.”

That’s an important paradigm shift. Instead of arguing over whether to shrink the state or expand it, or whether money is better spent by the private sector or by the state, maybe we should be focusing more on reinventing the state for the 21st century.

Are your taxes too high? When Gallup asked that question in April, tax month in the United States, 46 percent said they were. An additional 47 percent said their taxes were “about right.” Just 3 percent said their taxes were too low.

This campaign season reflects that result. Mitt Romney, the Republican candidate, is offering a 20 percent tax cut for everyone. Given the mood of the conservatives in the United States today, that may not surprise you. But even President Barack Obama, who is routinely described as a socialist by his opponents, is peddling a plan under which 99 percent of Americans would pay less than they did under the last Democrat in the White House, Bill Clinton.

This bipartisan agreement that the overwhelming majority of Americans should pay lower taxes than they did in the 1990s is remarkable for many reasons. For one thing, we are constantly hearing – and it is true – that U.S. politics is more polarized than ever. But unless you are a member of the 1 percent, on this core issue there is a lot more consensus than you might think. Political strategists on both sides, it turns out, know how to read poll data.

But the really surprising thing about the no-more-tax consensus is how much of an outlier it makes the United States compared both with the rest of the world and with itself in recent history. When it comes to foreign policy or to global economic dominance, American exceptionalism may indeed be in jeopardy. But when it comes to taxes, the United States is quite different from most other Western industrialized economies.

According to the International Monetary Fund, in 2011, among the world’s 30 leading Western economies (plus Japan), only in New Zealand and in Japan was government revenue a lower share of gross domestic product than in the United States. Countries like Australia, Estonia, Ireland and Switzerland, which tend to favor low taxes and a small state, have government revenue that accounts for more of GDP than it does in the United States.

The Internal Revenue Service is also relatively restrained compared with recent U.S. history. In 1945, at the close of World War Two, federal tax receipts were 20.4 percent of GDP (expenditures, by the way, were 41.9 percent, putting the federal budget deficit at 21.5 percent, compared with 8.7 percent in 2011). In 1952, the year the Republican Dwight Eisenhower was elected president, federal government revenue was 19 percent of GDP. In 1988, the last year of Ronald Reagan’s transformational conservative presidency, the federal tax take was 18.2 percent of GDP.

Compare those figures with that of today, when a Democrat is in the White House, nearly half of Americans think their taxes are too high, and both parties are promising to keep taxes low for all, or, in the case of the Democrats, 99 percent of Americans. In 2011, government revenue was 15.4 percent of GDP, lower than it was at any time during the Eisenhower or Reagan eras. Like anorexics, who think they are grossly fat when they are very thin, the American body politic is suffering from a national version of body dysmorphia, with nearly half the country believing taxes are high, when they are comparatively and historically low.

Thomas E. Mann , the Brookings Institution scholar and co-author of an influential new book on the polarization of U.S. politics, traces American thinking about taxes to the success of conservatives, particularly of the anti-tax crusader Grover G. Norquist, in steering the national conversation.

“This is more of an elite phenomenon,” Mann said. “It’s ideological. It’s tribal now because of the Grover Norquist taxpayer pledge. It’s as if Republicans, even if they think in more pragmatic terms, are not allowed to even consider raising taxes and certainly should be pushing at all times to cut taxes further … It’s become Scripture.”

“One can’t talk rationally or on any evidence-based discussion of tax policy,” he said. “It’s assumed cutting taxes always does good.”

Mann wishes the country could have a more “rational” and “evidence-based” discussion about taxes. But perhaps the problem is the opposite. The Democrats may have lost the debate about taxes in the United States not because the country gave up on reason but because the left gave up on politics.

Conservative arguments for low taxes are sometimes couched in technocratic terms – the supply-side view that low taxes will mean higher growth for everyone – but the right has never been shy about talking about tax policy in terms of values as well. Low taxes are part of the bigger fight for personal freedom and a small state. The left, by contrast, has been more reluctant to make the case for higher taxes as the worthwhile price of better public services and a stronger social safety net.

But the IMF’s international comparison suggests that taxes really are as much the domain of the politician and the moral philosopher as they are of the economist and the accountant. Some economically successful countries that believe in a strong state levy high taxes, like Germany or Sweden. Some economically successful countries believe in a smaller state and levy lower taxes, like Australia, and, yes, the United States. Meanwhile, in economically stagnant Japan, government revenue is an even lower share of GDP than it is in the United States, while in struggling Spain it is higher, although still lower than in Canada or Germany.

Leaving the tax debate to the technocrats is tempting, but Norquist has a point. The level of taxes, and therefore the size of the state, is chiefly a political choice, and it is one the left in the United States is too scared to address head on.

Are equal rights good for the economy? Campaigns against discrimination, like the battles for women’s rights and civil rights in the 1960s and the fight for gay marriage equality today, are usually framed as struggles for justice.

We think of these issues as entirely separate from economic concerns and sometimes as even running counter to them. Equal pay legislation and rules against discrimination have often been opposed by business on the grounds they would raise costs.

But there is actually a powerful economic argument for equal rights. If you believe that talent isn’t determined by gender, race or sexual orientation, but is instead a roll of the genetic dice, then the most productive society will be the perfectly fair one. A society that is blind to gender, race and sexual orientation will choose the best person for the job – not just the best white, straight man.

That logic sounds good, and if you support equal rights for moral reasons, you will want it to be right, too. But is it? A draft paper by four U.S. economists makes the strong empirical case that it is. Fairness, they contend, has made the economy more productive. Chang-Tai Hsieh, Erik Hurst, Charles Jones and Peter Klenow argue that as much as 20 percent of the growth in productivity in the United States over the past 50 years can be attributed to expanded opportunities for women and blacks.

“Changes in things that have affected women or blacks specifically have yielded a sizable impact on overall U.S. earnings growth,” Hurst told me. “That is a big effect.”

“If we believe in a world where there was discrimination faced by women and blacks, then not having women and blacks as lawyers and doctors, for example, was costly for society, if we think they are born with the same distribution of talent as white men,” Hurst said.

Richard Florida, a professor at the Rotman School of Management at the University of Toronto and a long-standing advocate of the view that diversity is a driver of economic growth, cheered the results.

“Places that are segregated really don’t grow.”

In case you are behind in your viewing of Mad Men, the paper by Hurst et al. is a reminder of how truly supreme white men were in the United States half a century ago. In 1960, 96 percent of lawyers were white men, 94 percent of doctors were white men and 86 percent of managers were white men. The subsequent 50 years were a revolution. By 2008, white men accounted for just 61 percent of lawyers, 63 percent of doctors and 57 percent of managers.

Few women or blacks would describe the United States today as a perfectly color- or gender-neutral economy. But that huge shift over the past 50 years is a testament to the lowering of discriminatory barriers, which the economists term “a reduction in frictions.” Overall, the change was tremendously beneficial to the economy – the paper attributes as much as 20 percent of increased productivity over the past half-century to greater equality and “the resulting improved allocation of talent.”

Naturally enough, female and black workers have felt the change directly in their paychecks. According to the paper, the reduction in frictions since 1960 increased real wages for white women 39 percent; those of black women, who suffered double discrimination and therefore got a double boost, 57 percent; and those of black men 44 percent.

But while the economy as a whole benefited, there was one group that lost out. The paper calculates that the “reduced friction” for women and blacks meant that the real wages of white men were 4.3 percent lower than they would have been without the increased competition.

That result explains a political reality that we often don’t like to admit: Gains for women and blacks have come at a price for white men, and that is surely why some of them still resist the rights revolution.

“The decline in frictions had some cost for the white men,” Hurst said. “This is why majorities tend to construct barriers to minorities – you can extract rents.”

Hurst told me that he hoped to publish the research, which was still a preliminary draft, as a National Bureau of Economic Research working paper in a couple of weeks. At the end of their paper, he and his three colleagues reveal the tantalizing next direction their research will take.

The story in their draft paper on women and blacks is positive – the United States has become fairer and therefore richer. But the four economists suspect that for one category of Americans, the poor, the external barriers to professional success have actually increased.

“We suspect that similar barriers facing children from less affluent families and from regions of the country hit by adverse economic shocks have worsened in the last few decades,” the economists write. “If so, this could explain both the adverse trends in aggregate productivity and the fortunes of less-skilled Americans over the last decades.”

Hurst made sure I understood that this final point was just a hypothesis. The economists plan to run it through their model over the next few months and report on their results later this year. But if their theory pans out, their work will tell a story about America over the past 50 years that many of us intuitively will feel to be true – a country that discriminates less and less on the basis of gender, race and now sexual orientation, but where the class divide is becoming so stark as to constitute a new form of discrimination.

The world, particularly the world economy, is pretty vulnerable at the moment. The recent French and Greek elections, and Germany’s unpredictable response to their results, have again raised the specter of a crisis in the euro zone that Robert Rubin, a former secretary of the U.S. Treasury, told me this week could be far worse than the bankruptcy of Lehman Brothers in 2008. Nor is everything fine in the United States, where disappointing job numbers for April have set off fears that the economic recovery may be weakening.

Yet, at a time when the global economy is so fragile, and in a year when it had been billed as the only election issue that matters, the United States has spent the week focused on same-sex marriage, which President Barack Obama explicitly endorsed on Wednesday after a dance of the seven veils by other members of his administration.

This focus on social issues when so much else is awry can be perplexing to outsiders: Dmitry Peskov, President Vladimir V. Putin’s press secretary, memorably sneered about the mixed-up U.S. priorities in a recent conversation with David Remnick, editor of the New Yorker.

But the often contradictory interplay between social policies and economic ones is the underlying dynamic that today drives U.S. politics. The party that juggles the two agendas most adeptly will be the one that wins the White House in November.

To understand what is going on, you have to go back to the 1960s. Since then, two big political shifts have reshaped U.S. society, politics and economics. The first is the vast expansion of individual rights and liberties. Women, ethnic minorities and, although not completely, gay men and lesbians, fought their way into the public arena. This tremendous social transformation was championed by the left, and it has largely succeeded.

Beginning in the 1980s, however, a second big shift was taking place. This was the Reagan Revolution in economic policy, which brought cuts in taxes and in regulation and a weakening of unions and the social welfare safety net. This transformation was championed by the right, and it, too, has largely won the day.

These two different victories are the back story to the big political dramas of today. They are the reason that the left and the right both feel cheated and aggrieved, and both want to win back a country they feel has been stolen from them. The right wants to win back the country from the left’s social revolution; the left wants to win it back from the right’s economic revolution.

They are also why, even as the distance between left and right has increased, the fault lines within the two parties have deepened, too. For many Americans, supporting a party that advocates both their vested economic interests and their social preferences has become hard to do.

Thomas Frank dubbed this the “What’s the Matter with Kansas?” problem in his 2004 book of the same title. Frank’s point was that the Republican Party had won support for its economic policies from the lower middle class by backing that group’s conservative social preferences. These people were so strongly opposed to the liberal social agenda imposed by coastal elites that they were willing to back the party that fought it, even if that meant voting against their economic self-interest.

Frank’s book deserved its best-seller status. But it should be read alongside a phantom companion volume titled, “What’s the Matter with Palo Alto?” or “What’s the Matter with the Upper West Side?”

That’s because, for the sake of the social values they hold dear, many members of the affluent coastal elite were willing to back a party whose policies went against their vested economic interests: the Democrats. That trade-off was particularly evident in 2008, when some of the leading lights on Wall Street, a community that has historically been staunchly Republican, defected to Barack Obama.

These awkward marriages of social and economic issues are again dominating the 2012 race. The “What’s the Matter with Kansas?” paradox was at play in the campaign of Rick Santorum, the former Pennsylvania senator and Republican runner-up, who portrayed himself as the candidate of the working man and also espoused an extremely conservative social agenda.

Winning over their own economically conflicted constituents has been harder for the Democrats: The financial crisis and its aftermath have weakened the fragile alliance between the 1 percent and the left. It is one thing to support a highly educated leader whose very biography embodies the socially liberal convictions of your class at a time when the economy is booming and George W. Bush’s tax cuts are still in place. It is quite another to back that same president when he is pledging to target beloved tax loopholes with the Buffett Rule.

Here is where same-sex marriage comes in. This is a cause strongly advocated by young voters and committed progressives, two important groups in the Obama base. But it also turns out to be an issue with tremendous traction within the highly educated, individual-rights-based 1 percent.

As the NBC journalist Chuck Todd put it earlier this week, “gay money in this election has replaced Wall Street money. It has been the gay community that has put in money in a way to this president that is a very, very important part of the fund-raising operation for President Obama’s campaign.”

The good news for Obama, and the political logic behind his statement of personal conviction this week, is that “gay money” and “Wall Street money” can be one and the same. As Governor Andrew Cuomo of New York demonstrated in his push for same-sex marriage last year, even billionaires with strongly conservative economic views, like the hedge fund billionaire Paul Singer, whose son is gay, are willing to back Democrats on what they see as an issue of fundamental human rights.

America used to be Sweden: According to new research, the America of the Founding Fathers was ‘‘more egalitarian than anywhere else in the measurable world.’’

That’s an important finding, and one that will surprise most Americans today. Both inequality and American exceptionalism are high on the national political agenda. One idea that brings those issues together is the belief that Americans have an exceptional cultural tolerance for income inequality. Unlike Europeans, the thinking goes, most Americans are confident that they are ‘‘soon to be rich.’’ As a result, the conventional wisdom has it, Americans in the middle look up to their 1 percent and are loath to tax them.

But historical research by the economists Peter H. Lindert and Jeffrey G. Williamson shows that when it comes to inequality, this American exceptionalism is an inversion of the conditions that prevailed at the time of American Revolution. In that era, which is so often invoked in today’s political and social battles, America was the world’s most egalitarian society – and proud to be so.

‘‘There has been an absolute reversal,’’ Lindert told me. ‘‘Compared to any other country from which we have data, America in that era was more equal. Today, the Americans are the outliers in the other direction.’’

Nowadays, we think of the postwar era as a halcyon time for the U.S. middle class. But it turns out that, in relative terms, colonial America, too, was a great country for the 99 percent, particularly when compared with the folks back in the old country.

‘‘Americans who were free were very well-off, and better off than their counterparts in the mother country,’’ Lindert said. ‘‘Every kind of person by occupation was better off than their counterpart by occupation. The carpenters, the shopkeepers and so forth all had a slightly better income than in the mother country.’’

Slavery is America’s original sin and was the great global injustice of that age. But on a purely economic basis, even when slaves are included in the calculation of inequality, America comes out as the most egalitarian.

‘‘If one includes slaves in the overall income distribution, the American colonies in 1774 were still the most equal in their distribution of income among households, though by a finer margin,’’ Lindert said.

Members of only one group fared better in Europe than their peers in the colonies – the people at the very top.

‘‘The Duke of Bedford had no counterpart in America,’’ Lindert said. ‘‘Even the richest Charleston slave owner could not match the wealth of the landed aristocracy.’’ Indeed, England’s 1 percent were so rich that the country’s average national income was nearly as high as that of the colonies, despite the markedly greater prosperity of what today we might call the American middle class.

Today, the opposite is true, Lindert said: ‘‘The rest of the world can’t come close to the 1 percent in America.’’

This portrait of colonial America as the world’s great egalitarian exception would probably come as a surprise to most Yanks today. But though Lindert and Williamson provide us with new data, the portrait they paint fits with contemporary accounts.

In a letter he wrote from Monticello in 1814, Thomas Jefferson applauded America’s economic equality. ‘‘We have no paupers,’’ he wrote to Thomas Cooper, an Anglo-American polymath and frequent Jefferson correspondent. ‘‘The great mass of our population is of laborers; our rich, who can live without labor, either manual or professional, being few, and of moderate wealth. Most of the laboring class possess property, cultivate their own lands, have families, and from the demand for their labor are enabled to exact from the rich and the competent such prices as enable them to be fed abundantly, clothed above mere decency, to labor moderately and raise their families.’’

By contrast, Jefferson believed, as the Lindert and Williamson research confirms, that members of America’s 1 percent were worse off than their European counterparts:

‘‘The wealthy, on the other hand, and those at their ease, know nothing of what the Europeans call luxury. They have only somewhat more of the comforts and decencies of life than those who furnish them.’’

Interestingly, particularly in view of today’s inequality wars, Jefferson didn’t pull his punches about which social order was preferable. ‘‘Can any condition of society be more desirable than this?’’ he opined about egalitarian America, and then did a little calculation showing that the overall happiness of Americans far outweighed that of the English, for whom ‘‘happiness is the lot of the aristocracy only.’’

It wasn’t just the Americans who perceived their society to be more economically equal than the Old World. Foreign visitors noticed, too. After his famous journey to America in the 19th century, Alexis de Tocqueville returned home to France to report that ‘‘nothing struck me more forcibly than the general equality of conditions among people.’’

But what was obvious just before the Revolution has been largely forgotten today. ‘‘It was known by them at the time,’’ Lindert said. ‘‘Now we as a society may have lost sight of that, because we didn’t have the numbers to remind us.’’

Thanks to Lindert and Williamson, we now do. Their historical work makes a particularly important contribution to the current debate because, as chance would have it, those who argue that inequality is as American as apple pie tend also to hold the views of the Founders in particularly high regard.

‘‘I see it as a puzzle,’’ Lindert said. ‘‘Those of us who insist that inequality is fine would also invoke a Founding Fathers’ society for which it was not true.’’

Equality, not just of opportunity but also of outcome, turns out to be one of the features that really did make the United States exceptional in the age when the country was born. That startling fact is worth bearing in mind as Americans struggle to figure out how to remain exceptional in an altogether more complicated era.

More bad news for the middle class: When the economy recovers, jobs in the middle won’t. That is the conclusion of an important new study that connects a long-term trend in the labor market with the business cycle of recession and rebound.

Nir Jaimovich, an economist at Duke University, and Henry E. Siu, an economist at the University of British Columbia, take as their starting point one of the most important continuing changes in Western developed societies. That shift is what economists, most notably David Autor of the Massachusetts Institute of Technology, have called the ‘‘polarization’’ of the job market. Maarten Goos and Alan Manning, extending the research to Britain, have more colorfully dubbed it the dual rise of ‘‘lousy and lovely’’ jobs.

Their point is that, thanks to technology, more and more ‘‘routine’’ tasks can be done by machines. The most familiar example is the increasing automation of manufacturing. But machines can now do ‘‘routine’’ white-collar jobs, too — things like the work that used to be performed by travel agents and much of the legal ‘‘discovery’’ that was done by relatively well-paid associates with expensive law degrees.

The jobs that are left are the ‘‘lovely’’ ones, at the top of the income distribution – white-collar jobs that cannot be done by machines, like designing computer software or structuring complex financial transactions. A lot of ‘‘lousy’’ jobs are not affected by the technology revolution, either – nonroutine, manual tasks like collecting the garbage or peeling and chopping onions in a restaurant kitchen.

An extensive body of economic research has shown that job polarization is happening throughout the Western developed world. It accounts for many of the social and political strains we have experienced over the past three decades, particularly the increasing divide between the people at the top and at the bottom of the economic heap, and the disappearance of those in the middle who were once both the compass and the backbone of our societies.

What’s new about Jaimovich and Siu’s work is that they have found that job polarization isn’t a slow, evolutionary process. Instead, it happens in short, sharp bursts. The middle-class frog isn’t being gradually boiled; it is being periodically grilled at a very high heat. Those spurts of change are economic downturns: Jaimovich and Siu have found that in the United States since the mid-1980s, 92 percent of job loss in middle-skill occupations has happened within 12 months of a recession.

‘‘We think of recessions as temporary, but they lead to these permanent changes,’’ Siu told me. ‘‘The big puzzle about business cycles is: Why have we had these jobless recoveries over the past three recessions? These jobless recoveries are because you have these middle-skilled jobs that are being wiped off the table.’’

Economists are often in the business of collecting empirical evidence of the trends many of us civilians have long experienced in our daily lives. That turned out to be the case when Siu shared his research findings with his family.

‘‘I told my father-in-law, who used to be an executive in the oil industry,’’ Siu said. ‘‘He said: ‘That is exactly what happened. Every vice-president had a secretary, then they fired them during the recession. But after the recession we had to pair up, and two vice-presidents had to share one secretary.’’’

Another example may have been hinted at in the March U.S. jobs report. Those figures showed a decline of 34,000 jobs in the retail sector despite recent improvements in store sales. Some economists attributed that apparent mismatch to the power of technology, in this case e-commerce.

‘‘That is certainly in line with our findings,’’ Siu said. ‘‘Salespeople are one of the prime examples of routine jobs.’’

The Jaimovich-Siu paper concludes that ‘‘jobless recoveries are evident in only the three most recent recessions, and they are due entirely to jobless recoveries in routine occupations. In this group, employment never recovers beyond its trough level, nor does it come anywhere close to its pre-recession peak.’’

This is, Siu told me, ‘‘a stark finding.’’ David E. Altig, the research director at the Federal Reserve Bank of Atlanta, who has written a blog post about the paper, echoed that view. ‘‘One of the things you certainly note is that this is the mother of all jobless recoveries,’’ he told me.

Siu urged me not to be too gloomy. ‘‘In the broad sweep of history, technology is good,’’ he reminded me. ‘‘We’ve been wrestling with this for 200 years. Remember the Luddites.’’

That is an important point. All of us, even the hollowed-out middle class, would be much worse off if the Luddites had won the day and the Industrial Revolution, whose latest wave is the past three and a half decades of technological change, had never taken hold.

But it is also true that every seismic shift, including the current one, has winners and losers. And for the losers, adapting to today’s world of lousy and lovely jobs may be even harder than it was for the artisans of the Luddite era to thrive in the Machine Age.

‘‘What might be different today is two factors,’’ Siu told me. ‘‘The pace of technological change is so much faster, and we live in such a complex society, that it is harder than ever to switch to a new occupation.’’

All of us are awaiting an economic recovery. We should be braced for one that offers scant comfort to the middle class.