Direct Ways to Combat Economic Inequality

Social democrats are spurned by hard-core leftists because the former do not espouse the complete overthrow of the market.  Rather, the social democrat accepts that market economies have various things to recommend them, including efficient production of goods and provision of economic well-being to large numbers.  That economic well-being is also a crucial source of countervailing power against the potential tyranny of the state.

The point is decidedly not some claim that the market is perfect.  Far from it.  Like all sublunary things, it is very imperfect (hence its efficiencies are far from ideal, but are still a real thing given that we do not live in a frictionless world).  But non-market processes and institutions are far from perfect as well.  The idea is 1) to have checks and balances so that the worst tendencies of any and all human arrangements (from the family to the market to the state) are prevented, and 2) to use what powers we have to move from the negative goal of preventing harm to the positive goal of promoting well-being (or “flourishing” to use the term Martha Nussbaum has appropriated from Aristotle).

Central to this debate on the left is a kind of fatalism adopted by the non-social-democratic left, a fatalism that echoes the fatalism of the market fundamentalists on the right.  Right-wing fatalists, famously in Margaret Thatcher’s words, tell us that there is no alternative.  We are doomed to the market—and the market just means one thing.  Any tampering with that market, any regulation or interference, sets us on the road to serfdom.  Everything—from the EPA to state ownership of the steel factories—gets tarred with the same brush.  In Hayek’s bracing, macho, vision, there isn’t even much pretense that the market enables good lives.  It gives us freedom—and Hayekian freedom is about as conducive to happiness as Sartrean freedom.  It’s a grim world and you should just take your medicine like a man.

On the left, this becomes the doctrine that any form of capitalism is disastrous—with no distinction of any merit to be made between 1850 Manchester and 1950 Pittsburgh.  Both are equally evil, equally soul and body destroying, equally to be consigned to the dustbins of history. No remedial action is worth a damn; it all must be torn down.

Under current conditions, this view underwrites the assumption that capitalism inevitably leads to extreme inequalities in income and wealth.  Yet, as Dean Baker argues in this superb piece, such a claim flies in the face of historical and contemporary evidence.  The extreme inequalities of the Anglo-Saxon world are both only recent (ramping up since 1970) and are not found in non-Anglo-Saxon capitalist economies.

Which means that are various things the state can do in order to follow Robert Kuttner’s injunction (discussed in the last post) to use politics to tame the market.  Yes, left to itself, capitalist markets tend toward inequality (that is the major point of Piketty’s Capital in the Twenty-First Century).  But markets needn’t be left to themselves.  In fact, Baker’s point (and one that Karl Polanyi always insisted on) is that markets are never left to themselves.  There is no such thing as “the free market.”  The market is always structured, always a political and legal creation.  The issue is whether it will be structured such as to benefit the wealthy or to benefit the many.

Baker, then, admirably lists a series of ways to counteract the current movement toward increasing inequality.  He advocates for a Financial Transaction Tax; for a revamping of the current patent and copyright laws; for direct intervention in the ways that doctors, lawyers, and dentists are compensated; and a number of other measures.  And these are separate from more aggressively progressive tax rates and the kind of wealth tax that Piketty advocates.

Hardt and Negri declare themselves sympathetic to such proposals, but are also pretty clear that they consider them only half-measures, not likely to cure what ails us.  My own position is to be suspicious of any search for cures.  The struggle between rich and poor for control over resources and wealth is not going to be ended by an entrance into the utopia of the perfect social arrangements.  I think the left needs to abandon its dream that some permanent solution to social and economic conflict is on offer.  I think the left’s addiction to theory stems from this idea that we can think our way to justice.  I don’t think we lack the right ideas, the right formula.  We have just been getting beat.  The other side has out-organized, out-spent, and out-flanked us.  And what is true now has been what is always true.  They have the money and the power, we have the numbers.  Our organizational challenge is much greater than theirs—but so should be our passion because we are the ones being trashed.

Thinking about that passion issue will be the next post.

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