The importance of redistribution
by Linda Beale
The importance of redistribution
I have dedicated ataxingmatter to a concept I call “democratic egalitarianism”–the idea that individuals flourish best in a free society that allows them to choose democratically the rules that govern their lives, with the understanding that the institutions must be sustainable and must allow all individuals to flourish, not just a select few. It is that latter idea that supports a view of egalitarianism–not that everyone is always “exactly” an equal of others, but that the society’s resource allocation provisions have to counter the tendency for resources to concentrate in the hands of a powerful few. Since there can be no absolute equality, society’s institutions must counter the tendency for wealth and power to aggregate in the hands of those with more wealth and power by mandating downward redistribution of wealth and power.
The claim is that every decision in society is in some way redistributionist. Most redistribute upwards to those that already have wealth and power and “connections”. Society’s institutions have to counter that–at least at the margins–with downward redistribution from those with wealth and power to those without wealth and power. Hence, a progressive income tax system that taxes those at the bottom of the income distribution less than those at the top serves this underlying value. A regressive sales tax system that taxes those at the bottom more severely, in relative terms, than those at the top undermines sustainable democracy.
The US is becoming more and more a society of haves and have-nots, a society that could allow a candidate for president to make claims about merit that suggest that anyone who isn’t a successful “have more” is just plain irresponsible (Romney’s infamous 47% speech to a private group of wealthy and powerful fundraisers). The Great Recession–engendered in large part by the greed of the have-more class, especially bankers and corporate managers and owners who reap disproportionate rewards for their labor or simple ownership of assets compared to the workers who make those rewards possible–has left the US an even more unequal society than it was before, as the wealthy have mostly recovered and moved ahead, while the middle class and poor have mostly suffered, with jobs that have moved from decent to inadequate and pay scales that continue to reflect the upper class’s willingness to exploit the rest of society for their own selfish ends. (And this is true even if that upper class gives “generously” to charities that further their own interests and push their own views about education or transportation or religion onto the recipients of that “charity”.)
The Times today has a number of excerpts from commencement speeches given by nationally known figures. I found the excerpt from Ben Bernanke’s speech at Princeton worth noting. Here’s the excerpt the Times printed:
“A meritocracy is a system in which the people who are the oluckiest in their health and genetic endowment; luckiest in terms of famiy support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate–there are the folks who reap the largest rewards.
The only way for even a putative meritocracy to hope to pass ethical muster, to be considered fair, is if those who are the luckiest in all of those respects also have the greatest responsibility to work hard, to contribute to the betterment of the world and to share their luck with others.” Ben Bernanke, excerpted in Commencement Speakers: In Looser Tone, A Call to Take Risks and Be Engaged, New York Times (June 16, 2013), at Y20
This sounds well and good as far as it goes. But it suggests that this kind of society (a “meritocracy”) where people who are born into the good life are the ones that can succeed, is okay so long as these meritorious people “contribute to the betterment of the world and share their luck with others”, a phrase which sounds like a mere tithing-type responsibility to “give back.”
Nah, I don’t think so. I don’t think that goes nearly far enough. This is not a society I want to live in–where the rich get richer and exercise some royal-like “noblesse oblige” interest in the dregs of society that their very success has created.
If we are to have a society that believes in merit, then it needs to be one that recognizes that the luck of birth has nothing to do with merit but with the concentration of wealth and power in the hands of too few people. Merit, in any useful sense, is only okay so long as the ranks of those who merit success can readily expand to include those not so lucky at the outset. Else the upper class will essentially become a superior caste that enjoys all the rewards, except for the crumbs handed out as charity, and the masses will be essentially peons serving the wealthy few.
How does one maintain a notion that merit is good but avoid the problem of the lucky, powerful few ruling over everyone else? It requires a lot of work, work we haven’t been doing very well lately. It requires a decent minimum wage sufficient for people to live on. It requires government systems that actively reallocate resources towards those in need and away from those who already have plenty rather than providing millionarie congressmen millions more in agricultural subsidies for their agribusinesses as we currently do. Through a progressive (i.e., redistributive) tax system, a decent anti-trust system that prevents monopolies and even semi-monopolies, a more innovation-supporting copyright and patent system that does not allow a few well-funded groups to control too much of the new knowledge base for too long, a strong labor law system that does not allow employers to ride roughshod over workers, and a very strong sense of the public good and the need to maintain some systems of primary importance to core democratic values as public rather than private ones–like health care, education, and probably energy. We are failing on so many of these points, as anti-trust has withered to a shrunken ghost of its former self, as global MNEs exercise too much power over workers and communities, as companies are allowed to ignore the externalities of their success (government subsidies and government stability) and of their business models (environmental pollution, worker deprivation).
In particular, the tax system is so frequently under attack from the radical right because it offers an important tool for preventing oligarchy–through the estate tax, which should be strengthened rather than weakened, through the income tax, which should be made more progressive by getting rid of preferential rates for capital gains (among many other important progressive reforms), and through the provisions for standard deductions and personal exemptions and refundable credits, which can provide a part of the social safety net that any wealthy, advanced nation should provide.
These things won’t happen until people stop allowing corporate greed–and the wealth and power ambitions of the Koch brothers and their ilk–to decide the fate of the nation. We do still have the power of the ballot box. We as individuals have to work to counter the corporatist creedo that is being preached by Koch-funded think tanks and “social welfare” (really political party) groups. We have to elect people willing to fight for a sustainable democracy and to legislate against the interests of the biggest and most powerful businesses and their owners/managers. The corporatist lobby that commodifies everything is extraordinarily powerful. Fighting it isn’t easy. But it must be done.
See the Motherboard article, below, for another analysis of the “meritocracy” idea, and some insight into what the inventor of the term, Michael Young, meant to be doing in his seminal work a half century ago.
It’s first down on the 47% yard line. the libbies have the ball and four ye…downs… to advance it toward their goals
The players play for money and the watchers pay to watch, but the game hasn’t changed in a couple of hundred years no matter who scores, no matter who wins.
Is this because the players lack imagination? or the watchers?
well, the players aren’t paid for imagination, and the watchers…? well, they get their fix of drama and sometimes their side wins.
Linda, you aren’t going to get anywhere with this. You won’t pay your cleaning lady what your boss pays you, and you won’t pay any more in taxes to see that the cleaning lady’s kids don’t starve.
It’s not that you don’t care. It’s that you don’t think.
It would be better to enact and enforce laws against stealing than it is to tax the people who get rich by stealing.
but for what it’s worth, i am all for taxing the rich. they are the ones with the money. but i think we ought to tax them to pay for the things their congressmen buy but do not pay for. and i think we might want to use some of that money to find ways to help the poor that are a little more clever than welfare.
which makes some of us feel so righteous because we can help the poor by taxing the rich. just like in the fairy tale. but it keeps us from having to bother our pretty little heads actually solving the problem.
A few items:
1) The lower classes can outvote the higher any day as they win on sheer numbers – not that they vote or use their votes wisely – in their best interests
2) We measure wealth in dollars. The US government is the monopoly supplier of net dollars to the economy that do not create a personal/corporate debt like a bank loan. You can help the lower classes by supplying more dollars in the form of wages for projects and other things the government can buy. Right now there are not enough dollars being supplied to counteract demand leakage. This ability is in no way restrained by obtaining dollars from the rich through higher taxes – it is a purely political decision.
Tomorrow the government could authorize $2 Trillion on public works projects if they want with a few strokes of the pen and a few yay’s all without making a single change to the tax code. They (congress + president) are choosing not to, and mostly based on pure ignorance.
I guess I am one of those who suffer from pure ignorance. I agree that a Trillion dollars worth of public works would be a good thing, and could probably be “financed” right now just by printing the money… because putting people to work to make things that are useful.. and productive… and paying them so they can demand other things that would put others to work would soon enough raise the level of production to match the amount of money without inflation.
But there are a few if’s buried in all that. And I suspect the biggest “if” is selling it to those of us who remain in pure ignorance about what effect it would actually have in the real world.
By the way, I don’t think you’d have to spend all of the money on “public works.” A few government run medical clinics would provide some competition to the existing model… and those clinics could be run without “government subisidies” after the intitial start up. Bringing down the cost of medical care to what it is in the civilized world would make all of us about 20% richer at a stroke… except of course for the medical mafiosi.
I agree with all you said except the last item on health costs, which is not straight forward. If you reduce what the government spends on healthcare, then potentially GDP could decline as well as healthcare wages. What would happen to the economy if the government cut medicare in half, just said we are only paying half for each medical service provided?
Here is what Jamie Galbraith states on health cost assumptions from the CBO:
No, it’s not reasonable. Share of health-care cost would rise as part of total GDP and the inflation would rise to be nearer to what the rate of health-care inflation is. And if health care does get that expensive, and we’re paying 30 percent of GDP while everyone else is paying 12 percent, we could buy Paris and all the doctors and just move our elderly there.
You got a deal, Matt. I’ll go. I’d love to live in Paris. Just send me my ticket and monthly support check.
Some coffee and crousants? You got a deal
Redistribution is necessary for a more fundamental reason. If you look at the accounting, a system without it will run down and fall into a demand deprived depression without it. Rich people spend less than they take in, otherwise they wouldn’t stay rich for long. That means money is removed from the economy. Some of the fall could be made up for by increasing the velocity of the remaining money, but that just speeds up the removal of money from the economy. Do the bookkeeping. There’s a reason currencies get debased. It’s not government greed. It’s the government fighting to keep some sort of economy going.
The only real alternative is redistribution. Take the money from the rich by taxation, inflation, bankruptcy or confiscation. The alternative is long term economic stagnation.
that’s the theory. i’m not convinced. you seem to be ruling out “redistribution” by higher wages.
also, the rich may not “spend” all they get at McDonalds, but they do “spend” it on “investments” which are just another kind of spending.
and of course they also spend it on investments which are just another kind of gambling. but even there, would would suspect, hope, that the winners at the gambling might buy the occasional new car.
in any case some Democrat whose name I can’t remember lost the election to Reagan by saying “I’m going to raise your taxes…”
Linda seems to think she can save the poor with the same slogan.
by the way, i’m fine with taxing the rich to invest in the economy. a case can be made for that that even most of the rich will believe. they will not believe that they should be taxed in order to “redistribute wealth to the poor.”
hell, even the poor, most of them, don’t like welfare either. and the near poor really, really hate it. that’s why they vote for Republicans.