The Pandemic Depression
The Global Economy Will Never Be the Same
Since the mid-1990s, the United States has been suffering from an epidemic of “deaths of despair”—a term we coined in 2015 to describe fatalities caused by drug overdose, alcoholic liver disease, or suicide. The inexorable increase in these deaths, together with a slowdown and reversal in the long-standing reduction in deaths from heart disease, led to an astonishing development: life expectancy at birth for Americans declined for three consecutive years, from 2015 through 2017, something that had not happened since the influenza pandemic at the end of World War I.
In the twentieth century, the United States led the way in reducing mortality rates and raising life expectancy. Many important health improvements—such as the decline in mortality from heart disease as a result of reductions in smoking and the increased use of antihypertensives and the decrease in infant mortality rates because of the development of neonatal intensive care units—originated in the United States and precipitated mortality reductions elsewhere as knowledge, medicines, and techniques spread.
Now, the United States may be leading Western nations in the opposite direction. Might American deaths of despair spread to other developed countries? On the one hand, perhaps not. Parsing the data shows just how uniquely bleak the situation is in the United States. When it comes to deaths of despair, the United States is hopefully less a bellwether than a warning, an example for the rest of the world of what to avoid. On the other hand, there are genuine reasons for concern. Already, deaths from drug overdose, alcohol, and suicide are on the rise in Australia, Canada, Ireland, and the United Kingdom. Although those countries have better health-care systems, stronger safety nets, and better control of opioids than the United States, their less educated citizens also face the relentless threats of globalization, outsourcing, and automation that erode working-class ways of life throughout the West and have helped fuel the crisis of deaths of despair in the United States.
Mortality rates in the United States fell through the last three quarters of the twentieth century. But then, in the late 1990s, the progress slowed—and soon went into reverse.
A major reason for the decline in life expectancy is increasing mortality in midlife, between the ages of 25 and 64, when the most rapidly rising causes of death are accidental poisoning (nearly always from a drug overdose), alcoholic liver disease, and suicide. Overdoses are the most prevalent of the three types of deaths of despair, killing 70,000 Americans in 2017 and more than 700,000 since 2000. The 2017 total is more than the annual deaths from AIDS at its peak in 1995 and more than the total number of U.S. deaths in the Vietnam War; the total since 2000 outstrips the number of U.S. deaths in both world wars. The U.S. suicide rate has risen by a third since 1999; there are now more suicides than deaths on the roads each year, and there are two and a half times as many suicides as murders. In 2017 alone, there were 158,000 deaths of despair, the equivalent of three fully loaded Boeing 737 MAX jets falling out of the sky every day for a year.
Younger birth cohorts—Americans born more recently—face a higher risk of dying from drugs, alcohol, or suicide at any given age than older cohorts, and their deaths rise more rapidly with age than was the case for earlier cohorts. This increase in mortality is similar for men and women, although the base rates for women are lower; women are less likely to die by suicide than men and less likely to overdose or to succumb to alcohol.
African Americans did not figure greatly in this trend until 2013; the subsequent rise in their deaths is attributable in part to a sudden slowdown in progress against heart disease and a rapid increase in deaths from drugs laced with fentanyl, a deadly opioid that hit the streets in 2013. Until then, the epidemic of deaths of despair was largely confined to white non-Hispanic Americans.
The increase in deaths of despair has been almost exclusively among Americans without a four-year college degree. A bachelor’s degree appears to be a shield against whatever is driving the increase in deaths from drugs, alcohol, and suicide. The proportion of the midlife population with an undergraduate degree has changed little in recent years, so any possible changes in the type of people who graduate from college are not what’s shaping this pattern. It was long believed that suicide was an affliction of the more educated. The suicide rates for the more and less educated in the United States are virtually identical for people born before 1945, but they diverge markedly by education for those born later in the century: for Americans born in 1970, for example, the suicide rate for non-college graduates is more than twice that of college graduates. About two-thirds of white non-Hispanic Americans do not have a bachelor’s degree, 42 percent of the adult population, and it is this group that is most at risk of deaths of despair.
The United States is not entirely alone in seeing a rise in deaths of despair. These three categories of death are, of course, present everywhere, but most rich countries show no upward trend. The exceptions are the English-speaking countries, which all show some increase since 2000, although their mortality rates from deaths of despair remain much lower than those of the United States. No other country has seen parallel increases in all three kinds of deaths of despair, nor are their rates of such deaths close to those in the United States.
The United Kingdom offers an informative case. Deaths of despair in England and Wales have risen steadily since 1990. There was a large upsurge in alcohol-related liver mortality in the 1990s and early years of this century, but that has subsided in recent years. Suicide rates have risen since 2000, but most of the growth in deaths of despair comes from drug overdoses. Deaths of despair are now more common in midlife than deaths from heart disease, long a major killer. But despite those unfortunate trends, the mortality rate from deaths of despair in England and Wales is still less than half of the rate in the United States. (One black spot in the United Kingdom as a whole is Scotland, where, thanks to illegal drug use, the rate of deaths from drug overdose is almost at the U.S. level.)
Apart from the United States, no other country has seen parallel increases in all three kinds of deaths of despair.
Data linking level of education to deaths of despair are not generally available in countries outside the United States. However, there are several studies indicating that the gap in the rate of mortality (from all causes of death taken together) between those with low levels of education and those with high levels has been closing over time in several European countries, including the United Kingdom, in sharp contrast to what has been happening in recent years in the United States. U.S. rates of suicide have climbed to such an extent that the country finds itself drifting away from its Western counterparts and into a group that includes the countries of eastern Europe and the former Soviet Union, which have long suffered from high suicide rates.
Trends in life expectancy at birth also reveal how the United States differs from other rich countries. In what was a startling event, life expectancy in 11 European countries declined in 2015. This decline was attributed to an influenza vaccine that was poorly matched to the virus that year; many elderly people died as a consequence. Beyond that episode, there has been a slowing of progress more generally across the continent. Once again, the United Kingdom has fared particularly badly, and its long-standing increase in life expectancy has plateaued. These dolorous trends, in the United Kingdom as in much of the rest of northern Europe, come mostly from increased mortality—or slowdowns in the decrease of mortality—among the elderly. This trend is in sharp contrast to what has happened in the United States, where the biggest increase in mortality from all causes has been among middle-aged people vulnerable to both the rise in deaths of despair and the slowdown in progress against heart disease. Those over 65 in the United States have not been affected much, although there are signs now that the youngest people still considered elderly—those between 65 and 69—are beginning to experience increases in mortality from drugs, alcohol, and suicide.
What is causing deaths of despair in the United States, and can those causes translate to other countries, either now or in the future? There has been a long-term, slow-moving undermining of the white working class in the United States. Falling wages and a dearth of good jobs have weakened the basic institutions of working-class life, including marriage, churchgoing, and community. The decline in marriage has contributed significantly to the epidemic of despair among those with less than a four-year college degree: marriage rates among that group at age 40 declined by 50 percent between 1980 and 2018. With lower wages, fewer poorly educated men are considered marriageable, and this has given rise to a pattern of serial cohabitation—when individuals live with a number of partners in succession without ever getting married—with the majority of less educated white mothers having children out of wedlock and with many fathers in midlife separated from their children, living without the benefits of a stable and supportive family life. These trends among less educated Americans—declines in wages, the quality and number of jobs, marriage, and community life—are central in instilling despair, spurring suicide and other self-inflicted harms, such as alcohol and drug abuse.
The Great Recession that began after the financial crisis of 2008 has caused much pain in the United States and elsewhere. But it did not spark the epidemic of deaths among the U.S. working class. Even though the recession worsened the conditions of many people’s lives and stoked anger and division in both the United States and Europe, it was not an immediate cause of deaths of despair. These deaths were rising long before the recession began and continued to rise smoothly and without pause after the recession ended, in 2009. The real roots of the epidemic lie in the long-term malaise that began around 1970, when economic growth in the United States slowed, inequality began to rise, younger workers realized that they would never do as well as their parents had done, and those without high-level skills fell further behind.
The roots of the epidemic lie in the long-term malaise that began around 1970.
In the United States, the median wage for men has been stagnant since the early 1970s, even though GDP has risen substantially; men without a bachelor’s degree have seen their wages fall for half a century. There are echoes of this pattern in some European countries, but they are only echoes. Some other countries have also seen slowly growing or stagnant wages over the last 20 years, including Australia, Canada, Germany, Italy, and Spain. Once again, the closest comparison to the United States is the United Kingdom, where there has been no increase in median or average earnings for more than a decade—the longest period of wage stagnation in the country since the Industrial Revolution. Still, even the British experience is but a shadow of the half century of wage stagnation and decline in the United States.
An important difference between the United States and Europe is that countries in the latter have well-developed social support systems that can mute or reverse the worst impacts of shifts in the labor market. In the United Kingdom between 1994 and 2015, for example, earnings in the bottom tenth of families grew much more slowly than earnings in the top deciles. And yet owing to the redistributive mechanisms of the British welfare state, the rate of growth in after-tax family incomes was roughly the same across all sections of the population. Nothing of the sort happened in the United States, where the social safety net is more limited. Between 1979 and 2007, for example, incomes after taxes and benefits grew by 18 percent for the bottom 20 percent of U.S. households, by 65 percent for those between the 80th and 99th percentiles, and by 275 percent for the top one percent. During this period, the system of tax and transfers became less favorable for poorer Americans.
Europe is also not experiencing the same breakdown of marriage on display in the United States. It’s common for couples to live together out of wedlock in Europe, but cohabitation there more closely resembles marriage. The kind of serial cohabitation that often occurs among less educated American men and women, many of whom have children with more than one person to whom they are not married, is much rarer across the Atlantic.
Another factor unique to the United States contributes significantly to the hollowing out of the U.S. labor market: the tremendous cost of the U.S. health-care system. The United States spends 18 percent of its GDP on health care; the second-highest percentage among countries in the Organization for Economic Cooperation and Development is in Switzerland, where that figure is 12 percent. The United Kingdom spends only ten percent; Canada, 11 percent. But Americans don’t get many health benefits in return for their huge expenditure. Life expectancy in the United States is lower than in any other rich country, levels of morbidity—the experience of ill health—are worse, and millions of people don’t have health insurance.
The crucial problem is not that the system does so little for health but that it does so much harm to the economy. If the United States were to reduce its percentage of health-care spending to the level of the Swiss percentage, it would save six percent of GDP—over $1 trillion a year, or approximately $8,600 a year for every household in the country. Savings of that kind would come to 180 percent of what the United States spends on its military. This wasteful spending on health care is a cancer that has metastasized throughout the economy. (The investor Warren Buffett has referred to its effects on U.S. business as like those of a “tapeworm.”) The cost inflates the federal deficit, compromises state budgets, and drains resources for education and other services. U.S. workers would have much better lives today if they didn’t have to pay this enormous additional tribute. Yes, the health-care industry creates employment, pays the salaries of providers, and boosts the profits and dividends of shareholders; all that waste is an income for someone. But the resources swallowed up by the health-care industry would be better used in other ways, in improving education, investing in research and development, and repairing roads, bridges, airports, and railways.
Less skilled workers lose the most in this arrangement. Uniquely among rich countries, employers in the United States are responsible for the health insurance of their employees; firms with 50 employees or more must offer health insurance. In 2018, the average annual cost of a family policy was $20,000. For the employer, this is simply a labor cost, like wages, and the employer does not care whether the price of labor takes the form of wages or health insurance or other benefits. The inexorable rise in the cost of health care invariably compromises both employment and wage growth.
The inexorable rise in the cost of U.S. health care invariably compromises both employment and wage growth.
For high-skilled workers who earn $150,000 per year, for example, the cost of health insurance is a tolerable fraction for a firm, but for a lower-skilled and lower-wage worker, the health insurance cost can be a deal breaker. The firm tries to figure out whether it can do without the worker or whether it can perhaps outsource the job to the booming industry of companies that supply low-skilled labor. Outsourcing is growing quickly in Europe, too, and health care is increasingly expensive everywhere. But because health-care costs in other countries are not borne by employers and are not tied to employment, there is no immediate link there between rising health-care costs, on the one hand, and lower wages and fewer good jobs, on the other. The high costs of health care don’t encourage Canadian and European firms to shed jobs.
Providing health care through employers would be less of a strain if U.S. health care were not so exceptionally expensive. As societies get richer, it makes sense for them to spend more of their national income on prolonging life and on making it less painful. The reduction in cancer mortality is one of the success stories of modern medicine. But not all medical expenditures produce such (or even any) benefits, and the costs of the whole system hamper the economy as a whole, contributing to falling wages, worsening jobs, declining marriages, and the consequent deaths of despair. The United States, unlike other rich countries, exercises no control over the prices of new drugs or procedures, and its health-care sector, including doctors, device manufacturers, hospitals, and pharmaceutical companies, has developed immense political power. The health-care industry has five lobbyists for every member of Congress. Although there is lobbying on behalf of health-care companies in Europe, its scale pales in comparison to that in the United States.
The opioid epidemic in the United States is largely a failure of regulation and control in an environment where pharmaceutical companies have great political influence. Along with the rise in mortality rates since the late 1990s, the United States has witnessed a rise in morbidity with a sweeping increase in self-reported pain, disability, difficulty socializing, and inability to work. Pharmaceutical companies and their distributors took advantage of this growing desperation, pushing opioid painkillers such as OxyContin, a legal drug that is essentially FDA-approved heroin. Between 1999 and 2018, more than 200,000 Americans died from prescription opioid overdoses. As the damage caused by these drugs mounted, physicians stopped prescribing them as readily, opening a gap for illegal drugs: heroin from Mexico and, more recently, fentanyl from China, which is much more lethal. Without working-class distress, these drugs would have done great harm and killed many people; when loosed into a void of social disruption and meaninglessness, they amplified the suicides and alcohol-related deaths that would have happened without them.
The mass prescription of legalized heroin should never have happened—and it did not happen in Europe. Painkillers such as OxyContin are legal in Europe, but their use is largely confined to hospitals, which employ them to treat pain in the immediate aftermath of surgery (for example, after a hip or knee replacement). In the United States, by contrast, doctors and dentists prescribed these drugs in such large numbers that in 2010 there were enough opioids prescribed to the public to give every American adult a month’s supply. Pharmaceutical distributors flooded the market, on occasion sending millions of pills to pharmacies in towns with only a few hundred inhabitants. When the Drug Enforcement Administration tried to stop that practice, members of Congress brought pressure to remove the agents in charge, and in 2016, it passed a bill to make enforcement of controls on opioids more difficult. A subsidiary of Johnson & Johnson farmed poppies in Tasmania in the mid-1990s to provide the raw material for opioids, exploiting a loophole in international narcotic controls. Lobbyists successfully fought against attempts by the DEA to close the loophole. According to court documents, the Sackler family, which owns the privately held company Purdue Pharma, has made between $11 billion and $12 billion in profits largely from selling OxyContin since the drug’s approval in 1995. Europe, unlike the United States, does not allow pharmaceutical companies to kill people for money.
A number of practical measures would help curb the American epidemic of deaths of despair and end the United States’ status as an outlier among wealthy nations. In health care, the United States needs an agency such as the United Kingdom’s National Institute for Health and Care Excellence (NICE), which assesses the costs and benefits of treatments and has the power to prevent the adoption of treatments whose benefits fail to exceed their costs. With an agency of this kind regulating the U.S. pharmaceutical industry, the scourge of opioids would never have been unleashed on the country.
More broadly, unregulated markets for health care are not socially beneficial. The United States should follow other rich countries in providing universal health insurance and in controlling health-care costs through an agency such as NICE; the former is important, and the latter even more so. The United States currently has the worst of both worlds, where government interference, instead of controlling costs, creates opportunities for rent seeking, which inflates costs and widens inequalities.
The roots of the crisis of deaths of despair lie in the loss of good jobs for less educated Americans, in part due to globalization, outsourcing, and automation, and in part due to the cost of health care. The loss of jobs devastates many communities and destroys ways of life. There is a strong case for public policy that raises wages and builds a more comprehensive social safety net.
Capitalism needs to serve people and not have people serve it. As an economic system, it is an immensely powerful force for progress and for good. The United States doesn’t need some fantastic socialist utopia in which the state takes over industry; instead, what is required is better monitoring and regulation of the private sector, including the reining in of the health-care system. Other rich countries have a range of different ways of handling health care; any one of those would be an improvement over the current system in the United States.
The epidemic of deaths of despair in the United States neither was nor is inevitable, but other rich countries are not guaranteed to have immunity from this American disease. For now, the United States is something of an anomaly among wealthy nations, a status it owes to specific policies and circumstances. But other countries may find themselves following in American footsteps. If wage stagnation persists in Western countries and if the use of illegal drugs grows, the social dysfunctions of the United States could well spread in a more concerted way. Working classes elsewhere are also grappling with the consequences of globalization, outsourcing, and automation. The dynamic that has helped fuel the U.S. crisis of deaths of despair—of elites prospering while less educated workers get left behind—may produce similar devastating results in other wealthy countries.