December 1, 1996
With Responses From
Dec 1, 1996
5 Min read time
Worsening inequality is the result of tired old ideas about programs.
I'm sure everyone in this conversation agrees that the growth of unions and the revival of our older cities make sense as steps to reverse sharply increasing inequalities. These are not new solutions, of course, but old solutions whose importance has been underlined as the effects of union decline and urban decay have accumulated. However, I am taken aback by what is new here, namely Freeman's proposal to devolve authority over labor law from the federal government to the states. The states have generally been even more business-oriented than the national government, in large part because they are susceptible to the threats or enticements of business relocation. To make labor protections subject to the ongoing bidding wars that corporations initiate between the states is a recipe for labor helplessness.
Freeman's big idea for egalitarian reform is to shift from income redistribution to asset redistribution. This is indeed newer. But even proposals for asset redistribution have precedents that deserve scrutiny for the lessons they suggest. The idea of turning worker pension funds into a capital instrument for social ends has been around for a while. It flared and fizzled because it never seemed to capture the imagination of workers, perhaps because they were not stirred by the prospect of risking their pensions for socially desirable investment. And older ESOP schemes also evoked the promise of redistributing wealth and power, but in practice did little of either, as visions of worker power turned into mere paper ownership of firms controlled by managers and markets. The point here, I think, is generalizable: schemes for asset redistribution are inevitably swamped by the market forces they are intended to temper, so that the egalitarian terms of "virgin capitalism" have to be continually reconstructed. This is no small feat.
Asset redistribution, dependent on sharply increased inheritance and income taxes, will generate enormous opposition, and especially if it goes beyond paper rights (as the Swedish unions learned with the failure of the Meidner plan). Freeman doesn't want to talk about political feasibility. But if the game is to talk about what would be nice to have, then why not also talk about a big wealth tax that would move toward reversing asset concentration, and even provide the resources that might make possible a viable public sector?
That said, I want to agree with the argument that workers are likely to be better corporate decision-makers, simply because worker interests are multifaceted, going beyond a singular preoccupation with the bottom line and the short-term to include concerns with, for example, job security and community well-being. This is the old promise in proposals for worker ownership, and it remains compelling to me.
I am even more uneasy about Freeman's related proposals for reform of the welfare state. True, many of our current programs are badly flawed; support levels and coverage are typically inadequate, especially for the poor and unemployed, and the terms of aid can be humiliating. But I doubt that Freeman's approach will help. In fact, I worry that his call for shifting funds from the aged to the young is dangerous. It contributes to widespread efforts already afoot to discredit Social Security and Medicare. These are arguably the most popular and successful programs of the American welfare state. They have accomplished a historic reduction in old age poverty, and increased the security of working people who otherwise supported aged relatives and also faced the prospect of their own penury in old age. Now the programs are taking a terrific propaganda battering from the right, the left, and the middle.
One argument, which Freeman seems to accept, is that programs for the aged are eating up the funds that could otherwise be spent on the young and the poor. This assumes that all other important items of the budget are fixed, including expenditures on the military and corporate welfare, and the tax givebacks of the past two decades. And even if we accepted this assumption for the purpose of argument, what sensible political reason is there to think that funds taken from Social Security and Medicare would somehow, miraculously, come to be allocated to programs for the poor and the young? After all, it is these latter programs that have proved so politically vulnerable in the past two decades. Freeman wants to talk about solutions "regardless of their pedigree or feasibility." But policy proposals are obviously an aspect of political strategy. Does it make sense to begin the difficult struggle to reduce inequality in America by considering solutions which tear away at the sources of popular support for past successes?
Running through these proposals is the idea that market-conforming reforms are more viable than reforms which depend on a vigorous public sector. Thus, shifting funds from the aged to the young will contribute to economic productivity. Parts of the social wage should be made conditional on work. Asset redistribution might increase savings. But the bearing of increased economic productivity on income and wealth inequalities is by no means clear. As Freeman points out, the proportion of the population in paid employment in the United States has grown in tandem with spiraling inequalities. And this approach to reform misses or dismisses what is I think the main achievement of liberal welfare state programs, which is that they reduce inequality partly by creating a politically determined income floor which enhances worker security, and therefore worker bargaining power.
In sum, I don't think worsening inequality is the result of tired old ideas about programs. I think it is more the result of the growing power of business, and the correlative demoralization and confusion of democratic opposition. True, ideas have something to do with power, if only because they legitimate its exercise and reveal its promise. But the big ideas at work here don't seem to me to be very new. The idea of the unfettered market that legitimates rising business power is not a new idea. And the best idea to justify resistance to that power, the idea of a democratic state with the authority and resources to tame predatory market actors, is not new either.
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December 01, 1996
5 Min read time