The Great Inequality Debate, and the Reemergence of Distribution as a Respectable Subject of Discussion

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Posted in: Politics

For over a generation, the hope of expanding economic opportunity has been fading for the vast majority of Americans.  From the end of World War II until the beginning of Ronald Reagan’s presidency, the U.S. economy grew briskly.  More importantly, the benefits of that economic growth were widely shared, with nearly every income group in America enjoying significant increases in their real living standards.

But for most of the last thirty-plus years, as inequality became an ever-larger problem, the U.S. political discussion ignored or disparaged the very idea that inequality was a matter of serious concern.  Based largely on a sense of denial—How, people wondered, could it possibly be true that the United States of America is no longer a land of fairness and opportunity?—American politicians, on a bipartisan basis, ignored the growing problem.

Indeed, Republicans (aided by many, many Democrats) enacted an agenda that did great damage to the American middle class, and that shifted income and wealth upward to levels not seen since the Gilded Age of the 1920’s, as captured in The Great Gatsby and other depictions of grotesque excess.

Republicans show less concern than ever about the problem, and they continue to red-bait those who express concern about income inequality.  “Class warfare” is the least hateful of the right’s epithets, with claims that income redistribution is nothing less than communism commonly heard.

As I have discussed here on Verdict (for example, in a column from October 2012), Republicans have shown not just indifference to the poor, but outright hostility toward them.  Another commentator has noted that “the right’s every move” can be explained by an “unwillingness to help poor people.”  Sometimes hidden behind fig leaves, but often bluntly stated with a snarling contempt, the radical Republican agenda has become a matter of taking as much as possible from the middle class and the poor and transferring it upward to the rich.

The most surprising thing about all of this, I think, is how long it took before a serious response finally began to take shape.  Even after we saw the election of a supposed liberal in 2008, and even after we were presented with a crying need for an aggressive response to the Great Recession that began that same year, we still saw almost no movement to create an agenda to reduce inequality.  President Obama eagerly adopted an austerity agenda, for example, and he failed to push forward important reforms that could have helped to revive labor organizing in American workplaces.

The Ice Breaks: The President’s Belated Embrace of an Equality Agenda

We cannot know whether the President really wanted to do something about inequality all along, but felt constrained by political pressures, or whether, instead, he suddenly awoke to the reality that had been staring him in the face for years.  We only know that, at least rhetorically, the White House has recently begun to embrace the idea that income inequality should be addressed aggressively.

Indeed, last month, President Obama delivered an address on economic inequality (focusing on inequality’s related problem, the lack of income mobility).  Shortly thereafter, he met with the mayors of some of America’s largest cities, promising to help fight inequality.

Will this newfound concern about inequality lead to real action by the White House?  Even constrained by Republicans’ intransigence in the House of Representatives, the President could be doing much more than he has.  He also could help to build on the political momentum that has been building in the country for more progressive reforms.

The most prominent leaders of the emerging political movement to fight inequality are U.S. Senator Elizabeth Warren and New York City Mayor Bill de Blasio.  Warren has become a forthright—though often misunderstood—leader in the new politics of equality.  And for his part, de Blasio ran on an explicitly redistributive platform, and his inauguration speech sketched out a roadmap toward a new progressive politics.

With the evidence of a serious problem so overwhelmingly clear, it was inevitable that some politicians would find an audience that would be willing to fight against the heartless agenda of the right.  But why did it take so long?

The Self-Styled “Pragmatists” and “Centrists” Who Dragged Democrats to the Right

We could not have had more than three decades of anti-Robin Hood policies, helping the rich become richer at the expense of everyone else, without a bipartisan shift in perspective.  Republicans used to argue about the degree to which policies should be changed to help the middle class and poor, but they were different from today’s Republicans, who are committed to the idea that people who do not fare well in the economy are “losers” and “moochers” who should be forced to face the misery that is the just punishment for their inferiority.

Democrats, meanwhile, responded to the Reagan presidency by adopting timid, me-too responses to Republicans’ increasingly radical movements to the right.  Led by a group that insisted that their rightward shift was both pragmatic and necessary for political survival, these putative Democrats responded to Reagan’s re-election by trying to pull the party to the right, by founding the Democratic Leadership Council (DLC).

The political logic of the DLC’s founding was, at best, contestable.  As one writer recently recounted, the DLC was founded “in 1985, one year after the Democrats lost 49 states to Ronald Reagan.”  In other words, after losing to an incumbent President who was presiding over a growing economy—headwinds that no Democrat would have been able to overcome—the DLC opportunistically blamed traditional Democrats for the loss.

The contempt that the DLC’s founders felt for their liberal antagonists was palpable.  As one founder put it: “We got criticized for dividing the party.  But the truth is Walter Mondale in 1984 had a perfectly unified campaign—every interest group was behind him.”  In other words, the DLC was not merely saying that the Democrats had to become conservative, but also that traditional Democrats were merely involved in special interest politicking.  It is no coincidence that this line of attack paralleled attacks from the Republican right.  The DLC and its allies agreed with Republicans on both substance and politics.

The DLC’s supposed validation came in the election of Bill Clinton as President in 1992.  Even now, worried “centrist” Democrats are hoping against hope that Clinton can prevent the anti-inequality forces from gaining strength in their party.  As one news article put it recently:  “The announcement that Bill Clinton, the former president, would administer Mr. de Blasio’s oath of office also was taken as a sign that the mayor is a Democrat of a more pragmatic mode than some progressives may prefer.”  “Pragmatic” here means “not really all that concerned about inequality.”

Meanwhile, a group called Third Way, which is one of the spawn of the DLC and the Clinton inner circle, has attacked de Blasio and Warren for supposedly being crazy leftists.  Aided by their allies in the punditocracy, such as The New York Times columnist Bill Keller, they are arguing that the “left left” (in Keller’s slanted phrasing) is poised to ignore looming problems with “entitlements” and thus bankrupt the country.

I put the word “entitlements” in scare quotes because, as I have argued frequently here on Verdict (e.g., in this article from 2013), the financial realities of Social Security are quite benign, whereas the situation for Medicare and Medicaid depends entirely on the future path of healthcare-cost inflation.  And the truth is that health care costs are rising much more slowly now, just as they have been for the last six years.

The idea that the anti-inequality campaign is somehow driven by woolly-headed people who do not understand or care about budgetary realities is simply wrong.  The self-described centrists who insist that the only path forward is to take money away from senior citizens (who have little else to support themselves) deliberately distort reality.

Where Have the Academic Experts Been Hiding?  The Role of Scholars in Economics in Downplaying Inequality

Of course, political groups like the DLC and Third Way ultimately rely on academic experts to produce research to support their positions.  And what is surprising is that, especially among economists (even nominally liberal economists), there has long been a tendency to treat inequality as an unworthy subject of discussion.

This is not a matter of the conversation simply being hijacked by academic conservatives.  There are plenty of conservative economists in top-tier economics departments.  (Harvard’s Economics Department alone is the home to four of the most high-profile conservative economists in the world.)  The interesting dynamic has been the complicity of mainstream economists in taking inequality off of the agenda of “respectable” research.

Why would they do this?  The innocent (and, I think, mostly accurate) explanation is that economists, after the 1970’s, wanted to focus on how to get the economy as a whole to grow.  At that point, distribution of wealth and income was not much of an issue, as described above, because it seemed that the fruits of growth would automatically be spread widely.

The analytical move by academic economists was to say that growth and equality were simply different issues, and that the issue driving the conversation should be how to maximize growth.  That did not require that the conversation would never return to the question of inequality, but that is the way it turned out.

I certainly observed many situations, among both economists and legal scholars whose research is modeled on mainstream economic reasoning, in which anyone who even raised the question of equality was all but laughed out of the room.  The mockery was not always (or even most of the time) an attack on someone for caring about inequality; rather, it was instead a condescending statement that the offending party “just doesn’t get it.”

In other words, the ideologically neutral form of the conversation was, “Let’s talk about growth, and set inequality aside to discuss later, in a different conversation.”  Unfortunately, that quickly became, “You’re talking about the wrong thing if you try to talk about inequality,” and then, “Talking about inequality is not allowed.”

In short, even the non-conservative parts of academia have helped to feed the “centrist” obsession with repressing any discussion about inequality and redistribution.  Happily, that has started to change over the last few years, with more and more economists and legal scholars noting that the growth/distribution divide never made all that much sense, and that the social problems that are associated with gross inequality have reached crisis proportions.

That is not to say that the tide has completely turned.  The White House is strongly influenced by many groups who oppose efforts to fight inequality, and they are willing to go to great lengths to get their way.  Even so, it is a good sign that “respectable conversation” finally allows us to discuss inequality openly.   That discussion must continue, and it must lead to action.

  • Peter gelezius

    There is nothing respectable about socialism. Get off your butt and get a job. It may not be the best job,but in this country sooner or later something better comes along. And that’s a fact

  • FlameCCT

    I’m sorry sir but Progressivism is a form of Marxism, not much different from Communism and Socialism. Re-distribution of wealth through government force is a by product of the Marxist ideology.

  • Mike

    I’d add this: The idea that the unemployed and poor are “moochers” and “losers” was embedded in David Ricardo’s chapter on wage theory, when he ranted against the “poor laws” of early 19th century England. But the classical economists – Smith, Malthus, Say, Marx, and John Stuart Mill were typically populist thinkers, regarding the purpose of “political economy” to be providing equality, opportunity, and prosperity for all. Economics back then was all about distribution.
    That perspective was neutralized, however, by the neoclassical economics of Marshall, Pigou, and today’s monetarists and supply-side economists in the Samuelson tradition. Keynes did not account for the effects of wealth redistribution, so demand-side thinking isn’t enough by itself to understand distributional macroeconomics. Thus, the field of economics still hasn’t got it right. There is no “equilibrium,” capitalist economies are enormously unstable and self-destructive, and there are many ways in a modern market economy with electronic money/debt transfers for wealth and income to rapidly concentrate. Taxation is the only mechanism through which a runaway inequality cycle can be reversed and controlled.
    This is by no means understood by economists yet; and in another 4-5 years at the current rate of wealth concentration, Great Depression II will be deep. The Republicans will continue to fight economic justice, so the complete answer must be spilled out soon. There is no time to lose.

  • J. Michael Harrison

    Economics is off the track, which is why the connection between growth and inequality isn’t recognized. Neoclassical economics is ideology, which I am proving. Threw out the baby (economic rent, and Keynesian effective demand and instability) and kept the bathwater (the presumptions of full employment equilibrium and stability).
    When we all wake up, we will find, as IMF economists who recently tried to test the correlation of growth and inequality across countries and against other “causes” of growth, almost did — income distribution and growth are “two sides of the same coin.” Krugman, who wrote about these studies, didn’t get it either.
    Think about it — these are both aspects of income (growth and distribution). Ask yourself how redistribution could NOT affect growth.
    Think about it.