Archive for March, 2014

Fairness and Liberty

Friday, March 7th, 2014

As promised, I’ve been researching the fundamental reasons why why conservatives and liberals view wealth and income inequality differently. These differences help explain how we got here. Hopefully, once we understand how we got here, we can have a thoughtful discussion about potential solutions. Much of this discussion builds on the ideas of Jonathan Haidt and his work in The Righteous Mind.

Recap

The level of income inequality in this country has reached historic proportions. Never in the history of the Republic has the gap between the rich and the poor been so broad. Even during the days of slavery, when the poor were very poor, the rich were not as rich as they are today. This isn’t an issue of poverty. The issue is that rich today are fabulously rich. Rich beyond the comprehension of the rest of the country.

There may be some dispute about why they became so rich, but the “how” is easy to document.

Government policies reduced top tax rates, made it easier to outsource manufacturing jobs to lower cost countries, and weakened unions. The recession started early for the poor and middle class. A shrinking job base eroded by outsourcing created an oversupply of labor. Too many workers for too few jobs kept wages stagnant for two decades. A simple case of supply exceeding demand demonstrated how little power the middle class and working poor had to alter their circumstances.

Increased productivity, low interest rates, and low labor costs created a new normal. Corporations generated record profits with essentially fixed labor costs. In the past, the income increases from these profits were spread across the whole worker spectrum. That came from labor being in short supply and unions ability to negotiate a more equitable share of corporate profits. Over the past two decades, all of those increases went to the top execs. At the same time, two decades of inflation ate away at the standard of living for the poor and middle class. The result was a huge transfer of wealth in the form of lost wages from the poor and middle class to the wealthy.

The result is a weak wealth-driven economy. The buying patterns of the rich are influenced by the stock market because that is where their discretionary income comes from. That makes the overall economy much more volatile. The goods and services that the wealthy purchase often make the suppliers of those services wealthy. That limits the flow of money from the wealthy to the middle class and poor.

How could we let that happen?

Why didn’t this create a populist uprising demanding a change?

Social Revolutions become Economic

The social revolution began with Ronald Reagan. He spoke to the socially conservative portion of the middle class. He leveraged the Loyalty, Authority, and Sanctity moral foundations that resonate with Conservatives, but are largely ignored by Liberals. These present themselves in areas like sexuality, drug use, religion, family life, and patriotism. He blamed liberals and government for an erosion in the moral foundation of the country. Then he went on to talk about “fairness” and “liberty”, and that’s where the economic discussion began.

Fairness

There are two kinds of fairness from a moral foundation perspective.

The first is Procedural Fairness. That’s a question of whether or not decisions being made by those in power are impartial and unbiased. Procedural Fairness in the context of our Democracy is characterized by the “rule of law”. Populist revolutions like the Tea Party and Occupy Wall Street spring up when people feel the game is rigged through things like crony capitalism.

Distributive Fairness is the question of whether everyone is getting his fair share. There are two ways to do this. Equality strives to give everyone the same share. Proportionality or Equity is where everyone gets the share that they have earned. Liberals support both equality and equity. Conservatives only care about equity. That’s why Reagan and Republicans after him were able to hold poverty programs and the social safety net up as examples of government excess. Even though liberals saw them as a way to help the poor out of poverty, conservatives only cared about proportional fairness. They are outraged by the concept that somebody might be getting something that they didn’t earn.

Again just as a reminder. I’m not trying to make value judgements here (though I might later). Just stating the facts based on academic research regarding how liberals and conservatives look at the world.

Liberty

There are also two kinds of liberty, positive and negative.

Negative Liberty is the freedom to be left alone. It is the freedom from oppression or even interference in how you would like to live your life.

Positive Liberty is having the ability to change your own condition. Proponents of Positive Liberty suggest that it is government’s responsibility to remove all obstacles that prevent all their citizens from fulfilling their full potential.

History of Liberty and Fairness

With this background of how liberals and conservatives look at the subjects of Liberty and Fairness, we can finally tackle the question of “Why did we get here?”.

LBJ and the Civil Rights Act set the stage for Ronald Reagan and eventually the breathtaking growth of the wealthy. Reagan never supported the use of federal power to provide blacks with civil rights. He opposed the landmark Voting Rights Act of 1965. Reagan said in 1980 that the Voting Rights Act had been “humiliating to the South.”

The Civil Rights Act granted Negative Liberty to African Americans by removing oppressive laws that restricted their freedoms. But Johnson realized that just changing the law wasn’t enough. Using Distributive Fairness (equality) and Positive Liberty, LBJ committed Democrats to use the power federal government to pursue policies like the War on Poverty and Affirmative Action. Conservatives reacted strongly to what they perceived as Negative Liberty (oppressive laws) and lack of Proportionality (freeloaders and dependents).

Wealthy Rule

Reagan used this outrage to blame liberals and government for “rigging the game” to reward indolence (welfare queens) and discourage personal responsibility. He painted a picture which resonated with blue collar workers who had firsthand experience with affirmative action and were anxious about contraction from manufacturing jobs moving offshore.

Reagan promised Negative Liberty (smaller government) and Proportional Fairness (rewards for hard work). Blue collar workers frightened by changes in traditional manufacturing flocked to support him in hopes that what they saw as a rigged game would change. What they didn’t realize is that the game was already rigged, but not in the way that they thought.

What Reagan and Republicans delivered was a huge head fake for the working man. Republicans only talked about social reform. Their Culture War masked a set of policies that have been almost exclusively economic. Those economic policies created the current income gap.

Thomas Frank summarized this deception in his books, Pity the Billionaire and What’s the Matter with Kansas.

Vote to stop abortion; receive a rollback in capital gains taxes. Vote to make our country strong again; receive deindustrialization. Vote to screw those politically correct college professors; receive electricity deregulation. Vote to get government off our backs; receive conglomeration and monopoly everywhere from media to meatpacking. Vote to stand tall against terrorists; receive Social Security privatization. Vote to strike a blow against elitism; receive a social order in which wealth is more concentrated than ever before in our lifetimes, in which workers have been stripped of power and CEOs are rewarded in a manner beyond imagining.

What happened was that government did not get smaller. It got bigger and less procedurally fair. It isn’t that the government rigged the game. The WEALTHY rigged the game in their favor using elections to change government policy. Private money successfully purchased a government now largely devoted to preserving the system that only benefits the wealthy. Republicans were the traditional partners of the wealthy in this effort, but Democrats were clearly willing to go along with things like NAFTA.

The irony is that our economic system has now become LESS proportional. We no longer have a meritocracy. We have an oligarchy. Wealth is a function of the accident of birth rather than a reward for hard work. The poor and middle class no longer have equal access to the resources that will change their condition because of the collapse of public education and the purchasing patterns of the wealthy.

There used to be two institutions who could to balance the power of the wealthy – unions and the government. Because of government policies, unions are no longer the force they once were. Because of Republican policies and the influence of private money, government is deadlocked in a self-serving partisan feud. Those tactics threaten to turn us from a democratic system to a parliamentary one where only the party that has a congressional majority and occupies the white house can get anything done. That works fine for the wealthy because they don’t want to see the current economic system change. It is working great for them.

Next up what we can do about it.