« Links for 06-12-2013 | Main | 'They Can’t Help Themselves' »

Wednesday, June 12, 2013

Hacker: Reinvigorate the Center-Left through Predistribution

Jacob Hacker:

How to reinvigorate the centre-left? Predistributionm by Jacob Hacker, guardian.co.uk: ... Center-left progressives seem to have lost their ability to provide a clear alternative to either current conservative nostrums, or the "third way" many of them staked out before the fall.
The only way out is a new governing approach – one that I have infelicitously called "predistribution", but which can be more simply summed up as "making markets work again for the middle class". Third way jujitsu rested on two maxims: let markets be markets, and use redistribution to clean up afterward. For the left, this has proved fatal... [explains why, describes predistribution]...
Predistribution may not be a catchy slogan, but the left does not need more slogans. It needs to take a cold, hard look at the concessions made to the rhetorical and political triumphs of the right. Yes, inequality is a global trend. Yes, globalization places real limits on economic strategies. Yes, labor is weaker, and must be retooled and supplemented. And yes, the state cannot do everything. But there is a vital place for active governance in the 21st century economy, and not just in softening the sharp edges of capitalism. Now more than ever, governments need to step in with boldness and optimism to make markets work for the middle class.

I don't quite agree with the description of the "third way" -- let markets work and clean up afterwards. For me, markets only work if they are reasonable approximations of the classic textbook case of "pure competition." The first step for the third way then is to correct market failures that cause significant departures from this ideal (including how income is distributed). I wish the article had done more to emphasize this aspect of the problem since it's an essential element of his call for "making markets work again for the middle class" (it does so indirectly, e.g. the call for worker organizations recognizes unequal market/negotiating power over wages, and the call for public goods and a reduction in carbon emissions, but it does not recognize this as part of the "'third way' many [center-left progressives] staked out before the fall" and I'd like to see the general market failure problem receive more emphasis).

The second thing to realize is that market outcomes depend upon the initial distribution of income and wealth. If initial allocations are highly unequal, as they are presently, the market outcome will reflect that.

How to correct this? One way is to equalize opportunity, and I fully agree with all his recommendations that push in this direction (this seems to be the essence of predistribution -- but you'll need to read the article for the full description of what predistribution means). But some correction of past inequities through post-distribution may be necessary to sufficiently equalize opportunity. Otherwise, those inequities will be perpetuated even with reasonably competitive markets and reasonably equal opportunity.

For a long time I believed that equal opportunity, sufficiently competitive markets, and equitable initial allocations of wealth would be enough. Everyone has a fair chance, so there was no reason to worry about inequality of outcomes. But it may be that even under those conditions rising inequality will continue. For example, if technology continues to wipe out the middle class even after we've provided education, health, and so on to everyone, then some degree post-distribution may be necessary to prevent an ever widening income gap. That's a position -- a fair start may still produce inequities that will subsequently be perpetuated if we don't intervene -- I've come to reluctantly.

I'm fully on board with predistribution, but the article seems to deemphasize post-distribution, in part because the wealthy have the political power to resist it:

Redistribution itself is never popular. Citizens want a job and opportunities for upward mobility more than a public cheque. Meanwhile, the super-wealthy loudly resent the increased tax bite they face – and have enormous political influence to back up their complaints.

But he does add:

Taxation and redistribution are cornerstones of progressive governance

Again, let's work on instituting the ideas behind the label "predistribution." But I think it would be a big mistake to, at the same time,  deemphasize the need for post-distribution. That day may come, but we aren't there yet.

    Posted by on Wednesday, June 12, 2013 at 08:21 AM in Economics, Income Distribution, Market Failure, Politics | Permalink  Comments (120)


    Feed You can follow this conversation by subscribing to the comment feed for this post.