Forum Final Response
Richard Freeman Responds
December 1, 1996
With Responses From
Dec 1, 1996
4 Min read time
I still don't think the road to salvation is through old-fashioned welfare state policies.
The first purpose of my article was to move discussion of the new inequality from analyses of fact or cause or consequence toward developing a sensible long-term plan for improving the economic position of low-wage Americans. In this minimal goal I succeeded. The commentators, some simpatico with the approach I outlined and some not, have clarified the issues in developing a war on inequality.
My second purpose was to begin to lay out a new way to address poverty. The strategies that I proposed are designed to fit naturally with a free-enterprise, market-based economy-to "level the playing field" through asset redistribution, increased opportunity to unionize, or starting-gate equality-while maintaining a modest safety net or social insurance (social wages, appropriately taxed) after that. These strategies sought to encapsulate a basic level of citizen income into private property rights early on to preserve redistributions to the low-income population and minimize interventions with markets. I made cities the focal place for policy initiative for obvious reasons.
I read the responses to this "candidate plan" as falling into two basic categories: some find the five strategies basically right (though they often doubt political feasibility). Others favor more traditional state policies. Tobin, Krugman, Heckman, and Cortes are in the first camp, Piven, Hartmann, and Piore in the second, though all have their own distinct take. The dividing line is whether one puts greater faith in government to address problems or greater faith in individuals and citizen organizations (such as Cortes's IAF), given appropriate initial conditions, to address problems.
To be sure, I agree that there can be no solution to the new inequality without government, just as there can be no property-based capitalism without government enforcing laws. And, to be sure, we need taxes to level the field and give the low-income citizens, particularly children, a fair chance in the market economy. And yes, there are good government programs, of which the EITC may be an exemplar, and good training programs. I concur with Jim Heckman that the best training is done early in life, vide starting-gate equality. But once government accomplishes a basic redistribution, I believe it should step aside and let us all compete fairly in the market (with some modest social insurance for those who fare poorly). Heidi Hartmann encapsulated the disagreement superbly. I believe that most people will prosper in an "ideal virgin capitalism." She fears it will screw us all. That is a big gap in orientation, though we favor many of the same specific policies.
I am less suspicious than Paul Krugman about the attitudes of conservatives. I have encountered the diehard effort to deny the facts but I have also talked with many businessfolk and political conservatives who recognize that we have a problem and who can and, I hope, will contribute to its solution. When I first began talking explicitly about finding policies to "raise the bottom" of the income distribution through explicit redistribution, even the big liberal foundations thought this an off-base topic. Now there are conservatives willing to enter the conversation.
I am less suspicious of schemes to "privatize social security" than Jim Tobin or most others. Sweden's Social Democrats have enacted a 2 percent mandatory tax for funding pensions above the state level, so Meidner type plans are not dead. They have to be carefully drawn up and negotiated with the business community, however, and not jammed down anyone's throats. There will be numerous opportunities in the next several years to offer redistributive alternatives to various right-wing schemas. I hope we will take those opportunities and not circle the wagons in defense of Depression Era programs. If we follow Frances Piven's road and don't take the initiative, I fear we are headed toward more and more "welfare reforms."
Everyone says "amen" to unions, but only Michael Piore addressed my scheme to give the right to legislate in this area to the states. I look at public sector labor law, legislated at the state level, and private sector law, nationally legislated, and see unions flourishing under the former and dying under the latter. I believe that unions do enough economic and social good that the more pro-union states will succeed in the market. I am dubious that world markets determine all outcomes or that we need world solutions.
Many commentators brought up the critical issue of turning ideas into political and economic reality. In a world where the wealthy own politics, it is hard to imagine things being all that different. But social change occurs discontinuously, and those changes that occur in periods of big change are the lasting ones. When the United States decides to address inequality, we must have available serious plans to turn the big changes into a long-term improvement in the economic position of the low-income citizens. And, yes, we must all try to get the country to face the new inequality honestly, and to create the constituency for it, as Cortes notes.
After reading the commentaries, I still don't think the road to salvation is through old-fashioned welfare state policies, but that something more radical is needed. Some of my conservative friends sometimes call the radical solution citizen capitalism. Some of my left-oriented friends call it propertied socialism. But, as Jim Tobin says, it don't matter what you call it . . . liberalism, conservatism, progressivism, a new-New Deal or a new-fair deal or whatever tickles your fancy. Let's keep pushing solutions and who knows? If Evander Holyfield can knock out Mike Tyson, the United States can knock out the scourge of the new inequality.
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December 01, 1996
4 Min read time