Anyone who read my last post will no doubt have sensed that I’m having a lot of difficulty summoning up much enthusiasm for the current politics of the NDP in Ontario, in particular, their willingness to assign redistribution of wealth priority over the need to solve certain pressing collective action problems. Thinking about the issue reminded me of the opening paragraph of a book I read recently, by Samuel Bowles (The New Economics of Inequality and Redistribution):
Socialism, radical democracy, social democracy, and other egalitarian movements have flourished when they successfully crafted the demands of distributive justice into an economic strategy capable of addressing the problem of scarcity, and thereby promised to improve living standards on the average. Redistributing land to the tiller, social insurance, egalitarian wage policies, central planning, and providing adequate health care and schooling for all have been attractive when they promised to link a more just distribution of economic reward to enhanced performance of the economic system as a whole.
The writing here is not entirely transparent, but the central claim is an extremely important one. When trying to promote greater equality, it is a mistake to think that one can simply take the existing social product and redistribute it. Why? Because it creates too much social conflict, and will ultimately be undone. To the extent that the left has been successful in promoting greater equality, it is by proposing schemes that simultanously expand the social product and distribute the benefits in a more egalitarian fashion (relative to the background market pattern). The best example of this, to my mind, is social insurance, which achieves important efficiency gains and promotes greater equality.
From this perspective, to focus on distribution alone, or worse, to focus on distribution at the expense of efficiency, is a terrible mistake. Here’s a slightly more polemical way of making the point (this time from Robert Lucas) which I found quite striking:
Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution. In this very minute, a child is being born to an American family and another child, equally valued by God, is being born to a family in India. The resources of all kinds that will be at the disposal of this new American will be on the order of 15 times the resources available to his Indian brother. This seems to us a terrible wrong, justifying direct corrective action, and perhaps some actions of this kind can and should be taken. But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor. The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production.
This overstates the case a bit. When one is increasing production, it is perfectly legitimate – indeed, in some cases urgent – to concern oneself with how the benefits of increased production are being distributed. One cannot simply say “let’s increase production, and worry about distribution later,” because as we have seen, the increased production is not unowned, and once it is in someone’s hands, it is very difficult to redistribute. The important point, which Lucas is making (in a right-wing way) and Bowles is making (in a left-wing way), is that it is extremely pernicious to focus exclusively on distribution, or to focus on distribution at the expense of efficiency. The central challenge for the left is to think up new patterns of social organization that will make everyone better off and produce greater equality. Just imposing higher taxes on the rich manifestly fails to satisfy this criterion.
First off, I’d just like to comment that I don’t really see the NDP, Ontario or otherwise, pushing redistribution with any enthusiasm either.
As to the main point . . . well, there’s something to this. Certainly, doing “schemes that simultanously expand the social product and distribute the benefits in a more egalitarian fashion” is certainly going to be a Good Thing. And I think there are plenty of such schemes that might be advanced.
But I think this argument is seriously overstated. First of all, this sort of scheme will also create social conflict; the social conflict caused by redistributive schemes is caused because they take stuff away from elites, who are not going to care how efficient those schemes are. What they will care is that their ox is being gored. Certainly they will seize on any inefficiencies involved in a redistributive scheme as PR weapons against them, but if no such are to be found, they will, and do, simply lie. Look at the way the right in the US talk about public health insurance.
Second, I’d like to point out that this sets the bar (as usual) higher for the left than the right, since the latter have no problem with simply taking the existing social product and redistributing it, or even redistributing upwards in a way that greatly reduces efficiency–take the popularity of PPP schemes, for instance.
Which brings us to the third problem. The right have in fact been redistributing upward for decades now. So, should we just leave that alone? Try to come up with nice schemes for social insurance, but let investment income continue to be taxed at half the rate of work, and so on and so forth?
In any case, it’s almost an irrelevant distinction. It seems fairly clear that simple redistribution in itself does increase the social product; The Spirit Level is far from the only source indicating that greater equality is simply good for society in countless ways. So it’s fairly hard to find a redistribution scheme that does not also improve society.
Redistribution + social problem-solving–yes, good. This does not show that redistribution tout court is bad. Incidentally, Lucas is dead wrong–a great deal of the increase in people’s well being through industrial revolution history has come from redistribution; much of that was caused by union-type action rather than government action, but redistribution is redistribution.
“The central challenge for the left is to think up new patterns of social organization that will make everyone better off and produce greater equality.”
That’s true up to a point, and as someone sympathetic to the Left, I can agree that this is a good thing to be working on. But where both the Right and Left are equally at a loss is in comprehending how human demands for physical resources will fit into a planet of finite size. Fossil fuel-derived CO2 has the same effect on the planetary energy balance whether it got put in the atmosphere by Exxon or the Peoples Anarchist Petroleum Co-operative. We might have a preference for one agent or the other, but they’re both ultimately constrained by the same global limit on how much of the remaining fossil fuel reserve can be safely burned.
Both sides have usually dodged the need to accept limits to the physical scale of human consumption by assuming that we’re clever enough to think of something just in time, because we always have. The catch is that “always” really means the rather exceptional last couple of centuries when we managed to drill into the fossil fuel bank vault and imagined ourselves to be geniuses, as Buckminster Fuller once described it.
So the kind of thinking that would really impress me would show a way forward to both less misery for the disadvantaged and a smaller human planetary footprint. That’s really the central challenge, and it’s a much harder one.
What about taxing externalities and then sending the revenue directly to poor people? On a small scale, that could mean congestion taxes, and on a large-scale, that means carbon taxes.
I think that left-wing parties, for instance the Ontario NDP, have little interest in these kind of policies because they focus more on redistribution from the middle to the bottom, rather than the top to the middle. It seems entirely appropriate to me to “focus on the worst-off”, but there seems to be three problems here:
(1) If you tax externalities, then it benefits everyone. But the benefits are not as straight-forwardly economic as, for instance, social insurance.
(2) It seems like the contemporary left-wing impetus comes from middle and upper-middle class people resenting, justifiably, the explosion in income among the very, very wealthy. The poor probably have less political power, and cultural capital, perhaps by definition.
(3) Upper level inequality is a problem in itself, and a worsening problem.
That being said, I still think it’s a worthwhile political program, especially in the face of potentially catastrophic climate change. So how do you turn people who are angry about top level inequality into a bunch of bleeding hearts. Is that possible?
I think you make a good point here, but I think it is worth keeping in mind that “efficiency” requires putting two things into a ratio and that determining which things go in the numerator or the denominator is where the “left” (to use your term) seems to be faltering significantly. There is a paucity of ideas for the sort of double move you make in terms of increased production and new forms of redistribution (at least in my view) because there is no strategic engagement with what efficiency is for.