Author Topic: The Great MacGuffin  (Read 215 times)

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Offline happyg

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The Great MacGuffin
« on: December 09, 2013, 09:27:17 PM »
4 Things the MSM Won’t Tell You About Obama’s Inequality Speech: Now that the excitement has died down  You have to admire President Obama for choosing to give a speech declaring that the fight against “growing inequality”–specifically economic inequality–is “the defining challenge of our time” and the “focus” of “all our efforts”–given that:

a. Five years into his presidency he so far hasn’t done anything to stop growing income inequality–the problem has gotten worse on his watch.

b. He doesn’t have any proposals (“It’s time to pass the Paycheck Fairness Act”) that come close to solving the problem as he defines it.

c. His one big previous initiative to reduce inequality–the Affordable Care Act–may now be hopelessly screwed up due to his own inattention and non-competence.

d. His remaining big domestic initiative–”comprehensive” immigration reform–would almost certainly make inequality worse by vastly increasing the number of unskilled workers bidding down wages at the bottom of the income scale, with the profits from the cheap labor going to business owners at the top

Given these somewhat discordant background notes, Obama’s speech goes down surprisingly well. The gushing E.J. Dionne column it seems designed to produce was more muted than expected, but Paul Krugman made up for it. You have to read it in a bad mood to hang up on its snags. Specifically:

1. A trend, not a choice: Obama says if “current trends are allowed to continue” it will feed all manner of evils. The phrase “allowed to continue” implies there’s something the polity can do to disallow or reverse those trends–echoing Krugman’s claim that “America’s growing class inequality largely reflects political choices.” But if, as Obama rightly notes, the inequality trend has continued for four decades, since before Reagan, under both Republican and Democratic presidents–and if (as Obama also notes) it’s a trend “not unique to America” but is in fact something happened “across the developed world,” in countries with varying cultures and governments, doesn’t that suggest that it is something profound and systemic, produced by global trade and technology, and not something that can be altered, except around the edges, by officials twiddling policy dials? (“Why has Washington consistently failed to act?”)

Does Krugman really think his concrete proposals– raising the minimum wage,  ”restoring labor’s bargaining power,” and spending more money on the safety net–will come close to reversing the underlying tectonic global inequality trend? I suspect not,** which is why in previous articles he has invoked gauzier forces like “social norms” and “culture” that, for example, allow corporate executive pay to soar. With a big enough cultural shift anything is possible, of course, but that’s not easy to accomplish–it’s not just a matter of “political choices” or abandoning austerity or winning the House of Representatives. And maybe there’s a reason why the culture is resistant to change.

 2. Where’s the Culture of Poverty? It’s especially hard to claim government can easily fix some of the disturbing social trends that seem to underlie the “coming apart” of the classes–especially the rise in single-parent, mainly fatherless, families. Amazingly, as Via Meadia notes, Obama mostly ignores these “social patterns” except in a fudge-paragraph where he associates them with poverty but doesn’t say which is causing which. To the extent government policy has influenced family structure it almost certainly made the problem mostly worse, with a welfare system that enabled a culture of single motherhood. The 1996 reform of welfare so far has not transformed the family structure at the bottom of the income distribution (though it does appear to have had some positive effect). That suggests the rise of single-parent families, like falling pay for unskilled work, may in part be the product of Larger Forces. For example, it’s not crazy to think that prosperity itself enables more people to get by without traditional families in the shorter term (with possibly damaging long-range consequences). But it’s hard to blame government inaction, and Republicans, for that. It’s more what Marxists would call in internal contradiction–we want prosperity but then we get the problems of prosperity, which brings us to …

3. The Trap of Merit: Obama draws a link between inequality and lack of mobility:

[W]hile we don’t promise equal outcomes, we have strived to deliver equal opportunity — the idea that success doesn’t depend on being born into wealth or privilege, it depends on effort and merit. …

In fact, we’ve often accepted more income inequality than many other nations for one big reason–because we were convinced that America is a place where even if youre born with nothing, with a little hard work you can improve your own situation over time and build something better to leave your kids. As Lincoln once said, “While we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else.”

The problem is that alongside increased inequality, we’ve seen diminished levels of upward mobility in recent years. A child born in the top 20 percent has about a 2-in-3 chance of staying at or near the top. A child born into the botton 20 percent has a less than 1-in-20 shot at making it to the top. [E.A.]

The argument is that as inequality grows it becomes harder to climb the ladder because the rungs are further apart. The problem, for this argument, is that declining mobility is also what you would expect if the meritocracy were working perfectly, without race or class prejudice (and inequality were stable or even shrinking). In a meritocracy, after all, the best rise to the top, the least talented and industrious wind up at the bottom. At some point, after a number of decades, maybe most of the talented will be at the top and the untalented at the bottom! Or at least, once the meritocratic centrifuge has sorted everyone out, there won’t be that many talented people at the bottom to rise in heartening success stories (and those stories that do turn up will mainly involve immigrants). Worse, if you grant that a reasonable share of “merit” is inherited, then you are going to wind up with a more static class structure for generation after generation. This is the scenario outlined by Harvard psychologist Richard Herrnstein. Just because it’s profoundly depressing doesn’t mean it’s not true. Yes, luck still plays a big role. No, genes aren’t everything, or even maybe a majority of everything. But they’re something, and we should think about Herrnstein before we whine that people aren’t rising to or falling from the top as much as they used to.

4. Why Care About Inequality? In one of the weakest parts of his speech, Obama gives three reasons why we should care about inequality and declining mobility. First, he argues it inhibits economic growth (when the poor, desperate to consume, “rack up” too much debt). Not implausible– but even Obama’s hard core followers can’t find much evidence for this. And face it, Obama doesn’t oppose inequality because it inhibits growth! He opposes inequality because he opposes inequality, in itself. Why? He offers two other reasons: it “is bad for our families and social cohesion,”–because “studies show” inequality undermines trust. And it distorts democracy when money talks. But really, these are second-order effects and aren’t plausibly the real reasons Obama opposes inequality (as opposed to the reasons he’s chosen to try to sell voters on opposition to inequality.

Here’s what I think is a better answer: We oppose the emerging class system because we’re Americans and we favor the social equality of individuals, not the social inequality of classes. “Whether we come from poverty or wealth … we are all equal in the eyes of God. But as Americans that is not enough. We must be equal in the eyes of each other.” (Reagan said that.) We’ve always enjoyed a great degree of social equality alongside a lot of money inequality. If the latter gets out of control, though, it will be more difficult to stop the rich from thinking they are actually better than the rest of us.

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Offline Oceander

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Re: The Great MacGuffin
« Reply #1 on: December 09, 2013, 09:34:04 PM »
Liberalism cannot ameliorate income inequality because the fundamental tenets of liberal economics require substantial government control of the economy which inevitably leads to crony capitalism and provides the politically well-connected the tools needed to lock out their competitors and guarantee them outsize incomes - incomes that have nothing to do with their own merits or the value they add to the market - while uniformly reducing the incomes the vast majority of regular people are allowed to earn.

The only way to reduce income inequality is to move to a conservative set of economic policies that remove the barriers and transaction costs that prevent start-ups and entrepreneurs from competing with the established, politically-connected, businesses.

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