Beyond the Welfare State
Rawls's Radical Vision for a Better America
October 24, 2012
Oct 24, 2012
18 Min read time
Fundamental issues of political philosophy usually lurk in the background of electoral politics, but some contests push these issues into the light. Mitt Romney’s selection of Paul Ryan as his running mate, and Romney’s criticisms of “the 47 percent” of Americans who owe no federal income tax, have raised basic questions of social and economic justice for the 2012 election.
The GOP ticket has initiated a full-blown attack on the tenets of the welfare state. Romney calls for lowering corporate tax rates and individual tax rates, for making the Bush-era tax cuts on the rich permanent, abolishing estate taxes, repealing Obama’s health insurance plan, turning Medicaid into a block grant with a spending cap, and scaling back most other forms of discretionary domestic spending, with the aim of capping federal spending at 20 percent of GDP. The Romney-Ryan ticket claims this approach will reduce the long-term federal deficit, but the agenda is philosophically principled rather than merely pragmatic: Romney and Ryan oppose the very idea that the federal government should be used as an instrument to reduce inequalities and ameliorate human suffering resulting from the free market.
But, as the “47 percent” comment showed, more is involved here than old-fashioned stinginess. Romney and Ryan have embraced the more assertive right-wing view that those who earn the most money are the truly productive, independent people in society, and that anyone who benefits from government spending is sponging off the labor of others.
In the face of this assault on equal opportunity and common obligation, liberals from Barack Obama on down must explain why an energetic government, dedicated to promoting equality of opportunity and dulling the harshness of the market, is a basic requirement for a stable, free society.
Here liberals have long drawn inspiration from the great American political philosopher John Rawls and his conception of justice as fairness. His argument, originally codified in his 1971 magnum opus A Theory of Justice and then further developed in his later writings, was that a just society would need to satisfy two principles. First, it would need to guarantee equal basic liberties to all; second, it would need to ensure that socioeconomic inequality operates to the maximum advantage of the least well off (the difference principle) and that there is fair equality of opportunity in competition for jobs and offices. Rawls’s two principles, taken together, provide a benchmark for measuring the fairness of existing arrangements.
However, to treat Rawls simply as a defender of Democratic Party liberalism and the welfare state—as he is widely regarded—is to misread him. Rawls’s critique of contemporary capitalism—and the condition of democratic practice within American capitalism—runs much deeper. As he made especially clear in his late writings, he did not think that welfare-state capitalism could realize his theory of justice. The architecture of welfare-state capitalism, Rawls felt, enthroned the disproportionate political power of the rich and militated against a shared sense among citizens that they are bound in a common enterprise, which operates in accordance with fair rules and respects the basic interests of all.
Rawls argued that in a just society the political economy must be organized with an explicit aim of either sharing or else widely distributing wealth and capital. The sharing option corresponds to what Rawls termed “liberal socialism”: schemes of market socialism in which the bulk of capital is collectively owned, by one arrangement or another. The widely distributing option corresponds to “property-owning democracy”: a political-economic system aimed at distributing wealth and capital as widely as possible among citizens, while keeping it for the most part privately held.
Rawls believed that only these two forms of political economy—liberal socialism and property-owning democracy—could prevent the domination of democratic systems by elites possessing excessive wealth and economic power. In choosing between these two possible routes to justice, he thought that we should consider questions of culture, history, and political plausibility. In the United States, with its particular history and political traditions, property-owning democracy is the more plausible option.
Rawls’s ideal models must in practice admit considerable nuance. The dichotomy between socializing capital and widely distributing it while preserving private control is rejected by most recent writings on property-owning democracy. Instead, property-owning democracy, in practical terms, is a type of mixed economy, featuring a blend of collective and individual ownership. Likewise, the dichotomy between property-owning democracy and the welfare state should not be overblown. Fully developed property-owning democracies, such as traditional welfare states, require familiar features such as universal health care, unemployment insurance, income support for the poor, subsidies for child care, and high-quality public education.1
Even at their best, welfare-state programs do not treat the root causes of our political malaise.
What should be clear, however, is that Rawls’s endorsement of property-owning democracy represents a radical break with the New Deal liberalism with which he is commonly identified. If he were alive today, though he would find the Romney-Ryan platform abhorrent, he would also be sorely disappointed with the failure of the Democratic Party to present a compelling alternative. The American public in 2012 is being presented with a choice between a representative of the super-rich who has chosen to ally himself with radical right-wing conservatism, and an incumbent president whom labor activists Carl Davidson and Bill Fletcher label, somewhat generously, a “corporate liberal.”
A careful reading of Rawls, in short, leads us away from both mainstream political parties and American welfare-state capitalism, and towards building an entirely different society.
Inequality of basic liberties
Rawls’s radicalism lies in his diagnosis of the injustice of American society. He held that inadequate social support for the poor was not the cause but merely a symptom—albeit a crucial one—of structural injustices inherent in American-style capitalism. Thus, even at their best, welfare-state programs do not treat the root causes of our political malaise.
Rawls’s critique of the U.S. political economy had a number of key components. The first is the most obvious: the use of money to influence political campaigns—both electoral campaigns and issue-based campaigns. Rawls would be appalled at the vast amounts of money being spent by corporate interests and the super-rich, constrained only by the requirement that such spending not be formally coordinated with the presidential campaigns themselves.
This political climate springs from the Supreme Court’s 2010 Citizens United ruling that rolled back even the modest limits on corporate political speech that governed previous elections. A large amount of this wealth is being invested in dislodging Barack Obama from the White House. However, the problem is ultimately bipartisan. The dependence of both parties on financial elites makes it unlikely that lawmakers will pursue reforms perceived as antagonistic to the interests of capital in general and the financial sector in particular.
Rawls would also flag the control of productive capital by a narrow class of property-owners as a violation of the first principle of justice, concerning equal basic liberties. These liberties, in Rawls’s usage, refer not only to personal liberties (freedom of movement, freedom to choose one’s employment, protection of personal property), but also to political liberties. Strikingly, whereas Rawls admits that the worth of many kinds of liberty will be unequal according to one’s social and economic position, citizens must be guaranteed the “full value of the political liberties.” This means that each citizen must have both formally equal political rights and substantively equal opportunity to participate in the political process. Vastly unequal effective capacities to participate, and in particular political inequalities that track political and economic position, simply cannot be justified.
Political scientists have identified a number of important mechanisms by which political inequalities arise in modern capitalist societies.2 One category of inequality concerns differences in time and resources to participate, propensity to participate, and capacity to participate and be taken seriously. This category tracks differences in income and education. Highly educated people with at least some discretionary time and resources are far more likely to be politically engaged—working on a campaign, belonging to a political organization, giving money to candidates, writing letters to the editor, speaking at public meetings, directly lobbying elected officials—than people with less education and fewer resources. Highly educated people are also far more likely to run for—and win—political office and gain political appointments, especially at higher levels of government. Further, labor unions—one of the primary institutions that historically have helped countervail these differences—have steadily weakened over the past forty years.
A further violation of equal basic liberties is due to the permanent political influence of private capital, and the fact that under capitalist systems democratically elected policymakers—even those on the left, and even those on what most Americans would regard as the far left—cannot successfully implement favored policies and maintain power without the cooperation of private investors. Capital can respond to restrictive policies by moving elsewhere (a major threat for smaller democracies as well as for state and local governments in the United States), or by engaging in a capital “strike” (refusing to invest). This dynamic, when combined with the direct power of money in politics, can leverage great power over politicians: a corporate interest gives substantial money to an elected official’s campaign to gain influence, then argues that it is in the interest of that official’s district to block any legislation that might adversely affect that corporation.
The right to attend a good public school has become a sort of property right that attaches to the neighborhood.
The result is not only political inequality, but also the inability of politicians to effectively govern or to advance the public interest. The permanent political power of private investors puts liberal-minded politicians at the significant disadvantage of trying to negotiate the best possible deal that is acceptable to key business interests. To pass health care reform, Obama was forced, in effect, to buy off affected interests early in the process to neutralize their opposition. Although Wall Street reform began as a direct challenge to banking interests, the Dodd-Frank bill was steadily weakened throughout the legislative process and even more so in implementation. Though financiers were in the weak political position of having wrecked the national and global economy, they were still able to avoid major regulations that might have fundamentally changed the way Wall Street operates. In the case of climate change, fossil fuel interests have successfully blocked constructive action altogether.
Concentrated private economic power weakens and at times altogether blocks constructive, democratic action in the public interest. Worse, it further weakens democracy by increasing cynicism about politics, and about the possibility of building a just society. The idea that the purpose of politics should be to reason together about public problems within a shared moral framework, with a common commitment to basic principles of justice, has come to be seen as utopian fantasy. For many Americans, whether left- or right-leaning, politics is inherently corrupt and always works to serve the interests of the most powerful.
Inequality of opportunity
Rawls maintained that American welfare-state capitalism not only threatens the “fair value of the political liberties”—his first principle of justice—but it also violates the first part of his second principle of justice—a commitment to “fair equality of opportunity.” This is understood as genuinely equal opportunity for individuals to develop their abilities and compete for “offices and positions of authority and responsibility.” Inequalities of property directly impact equality of opportunity in numerous ways; here we mention only three.
First, in the United States, the right to attend a good public school has become a sort of property right that attaches to the neighborhood in which one grows up. As a general rule, the higher the neighborhood’s home value, the more likely it is that its public school will provide students with a quality education and the opportunity to succeed in life. Families without sufficient wealth to acquire a home in an affluent neighborhood are thereby consigned to schools that are more likely to be under-resourced and of lower quality, with predictable harm to its students’ learning and opportunities for advancement.
Second, the children of the wealthy are better able to gain acceptance to an elite college and attend without having to take out loans. Many students from middle-class families today are acquiring crippling debts to gain a college degree—debts that constrain what kinds of careers they are likely to choose and that create a burden that may take decades to escape. Other capable students, of course, fail to enter college, let alone complete it, because of financial burdens.
A third disadvantage has to do with home ownership—the traditional linchpin of middle-class prosperity in the United States. Young adults with access to wealth—their own, or wealth passed down from parents—can afford a down payment on a home in a desirable neighborhood on manageable terms. Those who do not have access to capital either cannot acquire a home (and begin building further equity), or can do so only through subprime loans that can lead to exploitation and financial ruin.
As of 2004 (before the rise and fall of asset values later in the decade) the top one percent of households in terms of wealth controlled an average of nearly $15 million in net assets.3 Such affluent households are free from the practical problems that dominate the lives of the rest of the population. In 2009, the median household owned about $65,400 in wealth, (down from $85,500 in 2004) and nearly one-quarter of the U.S. population were net debtors.4 This maldistribution of wealth perpetuates class divisions, leading to restricted social mobility and the systemic violation of equality of opportunity. It is, therefore, unjust and must be changed.
A failure of welfare
Rawls’s further criticism of American welfare-state capitalism is that it fails even on its own terms—it does not provide adequate support for the least advantaged. Rawls’s difference principle famously holds that socio-economic inequalities are justifiable only if they are to the maximal advantage of the least well off. Although some degree of socio-economic inequality may be desirable— insofar as competitive incentives help to produce a more dynamic economy that generates greater overall well-being—inequalities that enrich the already well-off without improving the position of the least advantaged cannot be justified.
Redistribution is a strategy employed too late in a game that is already being lost.
The difference principle remains controversial among philosophers, let alone the mainstream of American political debate. Some theorists favor less stringent principles, such as principles that place more weight on ideas about “desert” (acquiring a right to disproportionately high rewards through effort) or principles that seek simply to maintain a decent social minimum for all. Even so, we contend that support for the fair value of the political liberties and for substantive equality of opportunity are in fact widely held values in the United States, even today, and that, therefore, Rawls offers a powerful critique of the American welfare state. Moreover, so long as one accepts any limits on inequality, Rawls’s worries should carry considerable force. Welfare state capitalism relies principally on “after-the-fact” redistribution to achieve fairer outcomes. Citizens obtain income and build wealth through market processes, and then taxes and transfers redistribute funds to those in need.
Merely as a matter of political psychology, relying on redistribution is a decidedly uphill battle. The well-off are inclined to think they have earned their (pre-tax) income—that it’s their money—and to resent giving up some of that income in order to help others who did not earn it. Even societies with a robust sense of social justice would struggle to realize anything like the difference principle via after-the-fact taxation. For societies with a weaker sense of social justice, such taxation typically fails to generate enough funds even to meet the basic needs of the worst-off. Worse still, dependence on redistributive, tax-and-transfer mechanisms opens the door for conservatives to drive a wedge between the “just-getting-by” working class and the out-and-out poor, undercutting the sense of solidarity needed to sustain a just society.
Ultimately, redistribution is a strategy employed too late in a game that is already being lost.
Beyond the welfare state
Property-owning democracy aims at an entirely different strategy: achieving a greater degree of equality in the pre-tax economic distribution. In other words, it aims for systematic predistribution, rather than only redistribution. Rather than trying to correct for the familiar pitched battle between the winners and losers of the market economy after the fact, it instead aims to spread the benefits of economic activity more equitably at their source. How can this be accomplished? Certainly long-term strategies for equalizing educational opportunities and investing in human capital are essential. Establishing an income floor would also help to bid up wages. But the most novel suggestion of property-owning democracy is the idea that broadened ownership of capital—so that income returns from capital are broadly rather than narrowly distributed—could lead to a more equitable pre-tax distribution. In effect, Rawls’s idea is that social justice requires the equitable predistribution of productive wealth, not just the redistribution of income.
Rawls was relatively clear on the limits of welfare state capitalism. But his writing about property-owning democracy was strikingly concentrated and underdeveloped. He certainly envisaged property-owning democracy as an alternative to capitalism—not just a reform strategy within it. A property-owning democracy would utilize the market while maintaining vigorous mechanisms for establishing and maintaining a wide distribution of wealth and capital. It would still be a free-market system, but in its fundamental reallocation and broad distribution of economic power, it would be indistinguishable from familiar forms of class-based capitalism.
How could Rawls’s broad vision be translated into a practical political agenda for progressives? A number of writers have developed some promising ideas. First, all children could be provided publicly financed trust funds at birth. This proposal was actually enacted, if only briefly and in a rather pale version, as the “Child Trust Fund” in the United Kingdom, which granted small capital stakes to each newborn child that he or she could access on reaching adulthood (although one of the first acts of David Cameron’s government was to cancel the scheme, which had started to operate only in 2005). Second, a universal basic income could be established. This idea would represent a scaled-up version of the Alaskan Permanent Fund, which delivers an annual income to every Alaskan. Third, the state could provide all young adults with a substantial capital stake of $80,000 with which to start their adult lives, as proposed by Bruce Ackerman and Amy Alstott. Strikingly, such large capital stakes for all young adults would not be impossible to generate under current economic conditions, if the political will existed. Under the current lopsided distribution of wealth in the United States, it would be mathematically possible, without the creation of any new money, to provide all U.S. households with capital assets of some $100,000 each, via redistribution of no more than one-third of the wealth currently held by the top one percent.5
Other writers such as Gar Alperovitz—in the spirit of James Meade—have focused on developing forms of productive capital that are broadly owned, whether by workers, by neighborhood and community organizations, or by other hybrid ownership forms. One intriguing experiment in Cleveland involves leveraging the purchasing power of hospitals and universities to create markets for start-up worker cooperatives employing residents of a single low-income district (University Circle). Other writers have proposed changing the ownership of productive capital on a much larger scale. John Roemer, for example, has suggested effectively socializing ownership of corporate stock, by giving each citizen a permanent stake in corporate ownership.
Some of these ideas are discussed further in the volume we recently edited, Property-Owning Democracy: Rawls and Beyond. We identify three general strategies for broadening property ownership: (i) to use public funds (preferably via progressive taxation) to provide capital assets to individuals; (ii) to alter the distribution and effective control of existing forms of productive capital; and (iii) to encourage new forms of productive capital that are more widely distributed from the start.
There is no doubt that United States is wealthy enough to provide every citizen with a generous share of property. Achieving this, however, will require concerted government action that challenges the current distribution of wealth and income. And it will also require injecting some utopian imagination into our stale political discourse. Why must the future be one of continued austerity for the vast majority while the wealth of the very rich remains off limits?
That is the question John Rawls challenges us to ask today.
A new politics
A just society, Rawls argued, is one whose economic system works over time to the advantage of all, especially the least well off. It is now well understood that we don’t live in a just society, that the political-economic system is dominated by a narrow elite for their own benefit. What is less clear is what could represent a plausible and feasible alternative. Property-owning democracy provides one serious alternative—one with the potential to appeal to a majority of citizens who would benefit from a systemic redistribution of the extraordinary concentration of wealth.
To be sure, property-owning democracy represents a long-term aim, not a short-term policy prescription. Moreover, property-broadening measures represent only one plank of the structural reforms that property-owning democracy would require. In a recent essay, one of us (Williamson) proposes five constitutional guarantees that, if established, would help the transition to property-owning democracy:
A right to equal public education.
A right to minimum income and/or the means for supporting oneself and one’s family at a minimal level of social acceptability.
A public system of campaign financing and explicit limitations on corporate political activity.
A right of individuals to a share of society’s productive capital and/or wealth.
A collective right to sufficient productive capital to sustain viable democratic communities at the local level.
Space does not allow us to expand on the rationale for each of these proposed constitutional guarantees, but together they would address many of the key injustices identified by Rawls’s critique of welfare-state capitalism.
Passing such guarantees, of course, won’t happen overnight. It first requires building a political movement for property-owning democracy. Such a movement must offer a morally compelling and practically realistic vision of a radically better and more just society: a vision that can sustain organizing and activism over time. To advocate massive transfers of wealth is to invite scorn from the powerful individuals and groups who benefit from the status quo, and from their ideological acolytes in the media. Property-owning democracy cannot be an uncontroversial, feel-good political project. It will have enemies. But it promises an ideal for political action that should be attractive to a broad swath of society, that delivers on America’s values of equality, freedom, and opportunity, and that tackles the structural injustices that undermine them.
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October 24, 2012
18 Min read time