by Linda Beale
Growing inequality calls for both “predistribution” and (rightly directed) redistribution
In putting forward my theme of democratic egalitarianism, I have often noted that there is no such thing as an economically egalitarian society–there will always be differentials among people, those differences often relate to social class and the education, privileged upbringing, and networking connections that ensure success for some and deny success to others as well as to innate abilities, so that those differences inevitably translate into some being better off economically than others.
Because of those differences, the “powers that be”–i.e., existing concentrations of financial assets, prestige and associated political power among the privileged class at the very top of the income and wealth distribution– result in redistribution upwards from poor and middle class to the upper crust. And most in that privileged upper-crust think they’ve acquired it all on the basis of their own merit and that the reason others don’t have it is because they are irresponsible, don’t work hard enough, don’t have a good business sense or are just incompetent.
(That is of course the tale told by the like of Mitt Romney at his private fundraiser in Flordia, where he revealed his utter disdain for half of the US population and his self-indulging belief that he got where he is entirely on his own merit . He can’t even see, much less acknowledge, either his silver-spoon upbringing of class, wealth and connections or the various government-subsidized upwards redistribution from which he has benefited through capital gains preferences, carried interest treatment, disregard of the harm caused by his leveraged-buyout business model, and government subsidies through high-value government contracts and low-cost government loans.)
Therefore, I have argued, democratic institutions (government, programs, policies) must target achieving a sustainable economy that provides a decent livelihood for all. They must also prevent inordinate inequality, because huge inequality among the citizenry foils all attempts to achieve either a sustainable economy or sustainable democratic institutions.
That means that government policies must focus on creating paths for redistributiondownwards from the upper crust to the middle and lower classes, undoing the corporatist top-down approach that has supported class warfare and allowed the wealthy to capture most of the productivity gains since Reagan’s presidency. Two government systems can work, on the margins, to achieve some level of downwards redistribution–benefits and taxes. Benefits do so by providing a safety net under those most vulnerable who have never achieved a sustainable economic livelihood–the unemployed and unemployable, the sick, the elderly, the children who have poor schools, poor families, and inadequate shelter, nutrition and opportunity. Taxes do so by taking more from those who have grabbed an inordinate portion of the resource pie and using those revenues to fund benefits as well as infrastructure (human and physical) that supports the efforts by ordinary Americans to achieve sustainable livelihoods.
We have been moving backwards on both of these systems. The radical right has spent the last 30-40 years pushing an agenda that ultimately wants to (i) dismantle or radically reduce benefits programs (voucherizing medicare, privatizing social security, cutting back on unemployment, allowing states to reduce medicaid and children’s health coverage, etc.) and (ii) eliminate taxes on corporations and the primary source of income of high-wealth individuals through a gradual reduction in progressive rate structure, elimination of the estate tax, elimination of capital gains taxes (and treatment of wealthy people’s wages as though they were capital gains, through provisions like stock options and carried interest). Paul Ryan’s positions on Medicare and Social Security should be a clarion-call to get out the vote–against the Romney-Ryan ticket– of every person who does not earn more than $300,000 a year. The Norquist-Koch Brothers-Karl Rove-Ryan-Romney agenda on taxes should similarly cause ordinary Americans who earn less than $300,000 a year to take to the streets and to refuse to vote for any member of the GOP.
Recall that the beginning of the current trend towards too little tax revenues and especially too little taxation of the ultra rich was radical reduction of rates with purported base-broadening (such as elimination of the capital gains preference, creation and then ramping up of the alternative minimum tax). As could be expected, lower rates lived on (and were lowered even more by Bush) but much of the base broadening was short-lived: lobbying by the privileged at the top led to a quick return to a capital gains preference and the undoing of the AMT as an inequality leveler. The Bush tax cuts rewarded corporate owners and managers and the wealthy class with extraordinary tax relief, while imposing long-term deficits on the country, behind a cheerful facade of “tax simplification” that was irrelevant for the 70% of the population that uses the standard deduction.
There is a third leg to the reduction-of-inequality stool. Tax reform that restores a truly progressive income tax is one leg. Benefit reform that builds on the achievements of the New Deal rather than destroying them is another. The third leg is what some call “predistribution”–paying attention to the means by which the uppercrust has seized all of the productivity gains and reduced the ability of everyone else to have a decent, sustainable livelihood.
British Labour leader Ed Miliband has called for predistribution as a new agenda in Britain. See Predistribution: A Big New Idea, Noted, The Nation (Oct. 8, 2012), at 5.
The term [predistribution] was coined by US political scientist Jacob Hacker, who in 2011 noted that discussions of government responses to inequality often begin and end with redistribution [downwards]–taxing the rich to provide benefits for the rest. But that’s only half the equation, Hacker said, uring progressives to pay more attention to ‘the way in which the market distributes its rewards in the first place.’ That includes regulations that protect consumers and empower workers: ‘The regulation of markets to limit extremes and give the middle class more voice is hardly easy. … But it is both more popular and more effective than after-the-fact mopping up.’
Milibrand agrees. Noting the high human cost of austerity, he said, ‘We need to care about predistribution as well as redistribution.’ After trying ‘to make work pay better by spending more on trasfer payments,’ he argued, government must ‘also make work pay better by making work itself pay.’
These concepts–predistribution (making up for malfunctioning markets to make work itself pay) and redistribution downwards (actual reallocation from market results through taxation and benefit policies)–are closely interrelated. Successful redistribution downwards augments the ability of workers to afford necessities and small luxuries, and that economic activity empowers workers in the markets and gives workers an opportunity for a voice in the markets and workplaces compared to a position where employers and owners have almost dictatorial control and can garner all the workers’ productivity gains for themselves. Focus on predistribution, however, reminds us that worker rights are essential to a sustainable, broad-based economy
What kinds of rights are we talking about? Surely a critical right is the workers’ right to collective bargaining (supported by a “yes” vote on Proposal 2 in Michigan that would put that right in the state constitution where it could not be removed by the radical right legislative block). Surely the right of the state to build infrastructure (that will create worker jobs) rather than allowing a wealthy tycoon to corner the market on international bridge crossings in Detroit and hog the revenues for himself rather than allow them to be earned by the people (Proposal 6, vote “no” so that Matty doesn’t have veto power allowing him to co-opt public infrastructure for his private profits).
Predistribution pays attention to how much ordinary workers are paid compared to how much the managers at the top get out of a company. We should be “pushing local employers to narrow the pay ratio between the top and the bottom ranks of their workforce.” Id. For too long, we have acted like it is just fine for the “market” to demand that the wealthy be allowed to exploit communities and workers for their own benefit. We need to say no.
Predistribution pays attention to regulations that protect workers–from worker safety to time off to family leave. It disregards the multinational corporations’ pleas for laws to suit them and instead asks why we should be subsidizing their ability to move active business assets to foreign countries and leave US workers unemployed. It acnkowledges that we have for too long allowed corporate owners and managers to snow us with their claims that “globalization” and “free trade” worked for our benefit, when in fact these are excuses for offshoring jobs so that the owners and managers can enjoy even higher “rent” profits. As Milbrand says, “It’s just not true that all the top CEOs will leave the country unless we pay them whatever they demand.” Id.
cross posted with ataxingmatter