Notes From Babel

Posts Tagged ‘redistribution

What Really Bothers Us: Poverty or Inequality?

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I like this hypothetical by Jason Brennan over at Bleeding Heart Libertarians, positing two competing societies, one which equalizes wealth, and the other which does not but expands economically at a much faster rate such that, within a number of years, it yields to its poor a greater absolute measure of wealth than the poor enjoy in the more equalized society.

This sets up many interesting questions.  Is a society better that views wealth inequality as intrinsically evil?  Is there any intrinsic value in property rights and owning one’s own labor?  Does it matter whether wealth inequality actually leads to greater absolute wealth, even for its poor, than if wealth were equalized?  If so, does it matter how long we’d have to wait for that greater absolute wealth to materialize?  Must it occur within a single generation?  Are there intergenerational equity arguments at stake, such that the poor are morally obligated to choose to endure wealth inequality if it meant their children would enjoy greater absolute wealth?

Not surprisingly, many of the comments on the post fight vigorously against the hypothetical, insisting it attempts to make empirical claims about the real world when it explicitly doesn’t.  But I found this comment by Andrew Levine particularly troubling:

The starting baseline still matters a lot to the answer. Developing countries rely on growth more than developed countries do. Once it’s feasible for every (or nearly every) citizen to get food, clean water, education, travel, and some other things that are taken for granted in developed countries, and which are essential to being free to pursue one’s destiny from youth to death, relative wealth becomes more important than further growth if that growth contributes to widening inequalities.

I drew precisely the opposite conclusion as Mr. Levine:  Once everyone has access to food, clean water, education, travel (!), etc., how can it be said that “relative wealth becomes more important”?  Certainly, it becomes less important, no?  Once the poor are doing ok, can’t we then, finally, start letting people keep what they earn?  If even at this point we can’t honor basic notions of procedural justice, we must be living in a society that either values substantive property rights at effectively zero, or is so incredibly petty that even though its members enjoy all the basic goods and amenities “that are taken for granted in developed countries,” they still refuse to tolerate even the existence of accumulations of earned wealth.

I do not maintain that grim a view of my fellow man, and I believe most Americans are not so petulant or discontented as to buy into such an extreme version of redistributionist justice.

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The Labor Movement, Redistributive Justice, and Procedural Fairness

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The left’s alignment with unions is more than merely political—it is ideological.  The major justification for continued existence of unions, particularly public sector unions, borrows heavily from a liberal conception of redistributive justice, as follows:

  • As a matter of first principles, all Americans are entitled to a minimum standard of living.
  • As a matter of observed fact, impersonal market forces sometimes do not result in compensation that comports with that preconceived standard of living.
  • Therefore, the market is an unsatisfactory mechanism for assigning economic values to labor.

I do not hide my antipathy for this line of reasoning, but I will not assail it here.  I want to instead press upon participants in the debate over organized labor, and particularly over public sector unions, of the impossibility of meaningful progress in that debate without acknowledging the standoff between conservative and liberal first principles.  More specifically, I contend that the labor movement will fail to win many converts because it either cannot or will not approach the issues as most Americans do:  by focusing on procedural fairness, rather than substantive outcomes.  While many people might believe they should earn more money, for example, they eschew procedurally unfair mechanisms to achieve it.  The abuse of procedural mechanisms, however, is precisely the criticism lodged against public sector unions.

As I discussed at length in a previous post, public sector unions present, at a minimum, the following forms of procedural unfairness:

  • Striking in the public sector exerts political rather than economic pressure on the government (who continues to collect taxes regardless), and is thus designed to harm the members of the public, particularly the poor, who depend on government services that unions are contracted to provide.
  • The employer with whom public employee unions negotiate—the government—is not just another industry, and thus normal market constraints are often supplanted by political restraints and more flexible accounting practices that enable unfair and unrealistic concessions in favor of unions.
  • Using their substantial political clout, public employee unions are able to influence elections and thus exert control over the representatives with whom they negotiate, resulting in less-than-arms’-length negotiations.
  • Accordingly, public employee unions are able to negotiate deals that often violate state constitutional proscriptions against retroactive compensation and incurring liabilities without voter approval.
  • Public employee unions represent one of the most powerful special interest groups by, in part, having successfully lobbied for laws requiring union dues be automatically collected from their members.
  • Public employee unions lobby against laws, such as Right to Work, that prohibit coercive and anti-competitive practices.
  • Public employee unions, unlike the general public, are permitted to press their interests upon elected officials in closed-door negotiations.
  • All this substantial political influence wielded by public sector unions constitutes an improper delegation of the police power properly held in trust by elected officials for the protection of the health, safety, welfare, and morals of the public.

The dispute over public sector unions, then, is between mainstream Americans in the private sector who believe fairness is achieved with the guarantee of fair and adequate procedures, and union supporters who believe fairness can only be determined by looking to substantive outcomes.  For the first group, public sector unions are unfair because they are given and make resort to special procedures not available to other groups.  For the second group, these various procedural objections are unpersuasive so long as public employees receive adequate compensation according to conceptions of liberal redistributive justice.

The two groups hopelessly talk past each other, then, as they are each lobbying for disparate forms of justice.  As a matter of practical reality, the two conceptions of justice are mutually exclusive:  The guarantee of procedural fairness is precisely the guarantee of fixed procedures in order to achieve particularized outcomes based on individual merit.  The guarantee of substantive fairness is precisely the guarantee of particularized procedures in order to achieve fixed outcomes based on conceptions of a “human right” to membership in the Middle Class.

It should be obvious, then, that for advocates of procedural fairness, whether public employees are overcompensated is merely a derivative claim—the principal claim is procedural unfairness.  The disparity in substantive outcomes that results between public and private employees—despite their being otherwise similarly situated—is evidence of the fundamental procedural problem.  (Incidentally, the same basic argument runs with respect to wealthy financiers.  Mainstream Americans are not overly bothered by the notion that someone, somewhere, might be very rich.  They are bothered instead by the idea that they might have become rich because of unfair tax policies, unfair regulatory schemes, or outright fraud—all of which are examples of procedural unfairness.)

This is why liberals will not answer the questions about the basic unfairness of public sector unions—they have no interest in fixing the unions.  It’s the unions who’ve got the right idea, according to liberals:  fix the value of labor in the first event to meet a basic standard of living, and then work backwards to somehow make all the math work. Instead, liberals are interested in making the rest of the workplace look more like the public sector.

The strategy seems like it would be a slam-dunk:  who wouldn’t favor an approach that would increase their compensation?  Thus, the fact that as many Americans disfavor as favor public employee unions strikes liberals as evidence of a stupid or brainwashed population captured by powerful corporate interests.  I submit instead that liberals have to this point ignored Americans’ strong predisposition toward procedural fairness, and that, provided procedural fairness is reasonably assured, Americans are willing to accept disparate outcomes—the bugbear of liberal ideology.  This is the bitter pill that liberals are reluctant to swallow, and it is why they have not made meaningful progress in advancing the dialog on public sector unions or addressing their many systemic abuses.

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Cross-Posted at The League of Ordinary Gentlemen

“Leveling Up” the Middle Class

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E.D. Kain asks whether we’re thinking about public sector pensions all wrong.  True, they generally receive higher salaries, more job security, better working conditions, greater benefits, more paid sick leave, vacation, and holidays, and better and earlier retirements than the rest of us.  But taking aim at public sector employees is exactly the wrong approach, E.D. suggests—by pitting working class against working class, they both ignore the real enemy, the rich, who casually continue to stockpile their wealth.  Thus, E.D. argues that the ideas of “austerity for all” and “upside-down egalitarianism” distract us from what we should really be working on:  infusing more wealth into the middle class:

Maybe we should be trying to bring the private sector more in line with the public sector. Maybe the logical conclusion is that private sector workers are getting screwed – and that comparisons with public sector unions simply makes this glaringly obvious. Nobody but public sector employees receive pensions anymore. And maybe this is an argument to move back to the pension model rather than an argument to get rid of public pensions. Maybe leveling the playing field is the right idea, but we should level it up rather than level it down.

I’ve written before that, despite my conservative biases, I’m mesmerized by the progressive/utopian ideas of Edward Bellamy and early Robert Heinlein, in which man is provided a comfortable living as a matter of right and left to his own devices to cultivate his productive capacity as he sees fit.  Speaking for myself, I don’t imagine I would suddenly become entirely unproductive if the government starting writing me a check each month.  Yet, I seriously question whether this applies to every American, or even a substantial majority of them.  Could we continue to support ourselves in the way we’ve grown accustomed if we all suddenly got comfortable?

Arguments like Bellamy’s Heinlein’s and E.D.’s suggest that our future holds a world in which the middle class is guaranteed comfort, stability, and reasonably interesting and not-terribly-stressful employment.  Nay-saying curmudgeons like me think that humans tend to fall prey to their own vices; thus, to have any kind of comfort, stability, and interesting work, people require certain unpleasant kinds of motivation—competition, stress, fear of unemployment, worry about the future, etc.  In short, while there are certain people who have a burning desire to be productive, most of us have only a latent desire to be productive.  As Thomas Edison said, "most people miss opportunity because it’s dressed in overalls and looks like work." It takes unpleasant external forces to get the human productive spirit whipped up into useful action.

Yet, I think I can safely assume that this view will never enjoy unanimous support, so we are left with E.D.’s suggestion:  Why not focus our middle class energy on “leveling up” the playing field to our collective benefit?  But think about what this suggests.  Public sector compensation is not determined by market factors.  Indeed, the very definition of the public sector is that it is something outside the private sphere.  While private sector numbers are sometimes used as a touchstone, the determining factor in public sector compensation is ultimately moral/political.  This is why the left loves to grow government, as this enables politicians and bureaucrats to engineer their own version of what the middle class ought to be.  Specifically, most of today’s public sector workers came to their jobs knowing they would be paid less, but that certain benefits were more generous.  But politicians, usually left-leaning, eventually decided public employees shouldn’t have to choose between future comfort and present comfort, and that they ought to have the best of both.  But, by now, many state and local government workers make more than their private sector counterparts, and the gap continues to widen each year.  From 2000 to 2007, public employees saw a 16% increase in compensation after adjusting for inflation, compared with just 11% for private workers, according to the USA Today.

So, to suggest that we ought to reconcile our two middle classes—the public sector and the private sector—by using the public sector compensation structure as the model, is to say that all compensation in the U.S. should be determined by moral/political factors rather than market factors.  

Before considering what this means, let me say that I don’t fault E.D. for being allured to that position.  For all the talk about how we ought to let the “free market” determine winners and losers rather than politicians and bureaucrats, the free market is inscrutable and substantially unfree.  As I wrote about recently, beginning at the turn of the 20th century, our economy has become increasingly diffuse, providing few obvious connections between labor and consumption, indicating the two are only loosely or insignificantly related.  Modern labor is attenuated from its ultimate product, making the idea of the traditional work ethic prevalent in pre-20th century agrarian America less and less relevant.  The American laborer no longer provides his own essentials of survival, but instead deposits his effort into a vast and complex economic machine.  His yield, his “wage,” serves as the only symbol of his output, a rebuttable presumption of the true “value” of his labor.  How does a cubicle worker in the marketing department of the Coca-Cola corporation have any idea how much his efforts contributed to the 1.3 billion servings of cola his employer sold that day?  Next to none.  And yet he counts on his paycheck form those efforts to pay his mortgage and buy cars and iPhones and college educations for his children. 

As his commercial appetites continued to increase—goaded by our consumer economy—the American middle class begins to closely scrutinize the legitimacy of that presumption.  It was this deadly cycle that ultimately led to a new, illegitimate basis for finding “individual rights” in American politics:  If the market would not set a wage sufficient to meet the standard of living the American labor thought he should have, he would set it himself.  And the tool he would use to accomplish this was collectivism—e.g., labor unions. Like the ills of slavery, since government had aided the accession of uncorked individualism (e.g., through a national bank and internal rail and telegraph projects), it was natural and perhaps even appropriate to look to government to redress its abuses.

As E.D. suggests, the finance sector might also deserve some blame for the middle class dilemma: 

I always thought a thriving middle class was good for business, that the corporate world would want to pay people well and keep them happy so that they kept buying things. But it turns out that you don’t need a middle class to buy things, to keep the engines of commerce humming and whirring and piling up vast stores of cash. These days anyone can buy things, all it takes is a little credit card debt, maybe a second mortgage. For the truly committed consumer there’s always payday loans.

This strikes me as correct.  The middle class allowed itself to be lulled away from the bargaining table by loose credit and home equity lines of credit, and have probably been getting lousier terms from employers over the last few decades as a result. 

But while I’m tentatively sympathetic to the labor movement for some of the above reasons, I believe it’s basically only justifiable on pragmatic grounds.  There is no reason why rampant individualism, whether of the late 19th and early 20th centuries or of today, is “wrong” from a legal point of view.  As leaders like Teddy Roosevelt have admonished, however, the masses will not tolerate gross income inequality for long.  If the wealthy do not moderate their own indulgences, the government, as a matter of political necessity, will have to do it.  However, getting the government involved in choosing winners and losers—or deciding the measure of those winnings—is an unpleasant and dangerous business.  It should be avoided at all costs, and probably should be abandoned once political exigencies have subsided. 

As E.D. suggests, having a strong middle class is good for everybody, but corporations won’t trickle it down unless the government or collective bargaining makes everyone else trickle it down, too.  Perhaps.  The big problem E.D. and others will have to contend with is, once you start redistributing power, how do we decide who gets more or less power, and how much more or less?  Conservatives and libertarians love leaving these decisions to nature and markets because, for all their faults, they’re procedurally fair—even though they may not be substantively fair.  If we give up or alter procedural fairness to achieve greater substantive fairness, as E.D. proposes, he will have to contend with how we can still guarantee procedural fairness.  This is the hill the left and the labor movement usually die on.

Saying Thanks to Corporate “Sociopaths”

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A couple months back, Andi and I went to wish farewell to one of many friends who are picking up and heading Out East from California.  Our friend’s dad let me borrow Thom Hartmann’s Threshold, a sort of progressivist manifesto.  Much of it is fairly predictable stuff, employing lots of distressing anecdotes developing the ultimate lesson that the Environment is good and cheesed at us meddlesome humans.  There is at least one idea, however, that I thought very interesting:

In his manuscript “Toys, War, and Faith: Democracy in Jeopardy,” Maj. William C. Gladish suggests that this special breed of person [speaking of corporate executives] is actually a rare commodity, and thus highly valued.  He notes that corporate executives make so much money because of simple supply and demand.  There are, of course, many people out there with the best education from the best schools, raised in upper-class families, who know how to play the games of status, corporate intrigue, and power.  The labor pool would seem to be quite large.  But, Gladish points outs, “There’s another and more demanding requirement to meet.  They must be willing to operate in a runaway economic and financial system that demands the exploitation of humanity and the environment for short-term gain.  This is a disturbing contradiction to their children’s interests and their own intelligence, education, cultural appreciation, and religious beliefs.

“It’s this second requirement,” Gladish notes, “that drastically reduces the number of quality candidates [for corporations] to pick from.  Most people in this group are not willing to forsake God, family, and humanity to further corporate interest in a predatory financial system.  For the small percentage of people left, the system continues to increase salaries and benefit packages to entice the most qualified and ruthless to detach themselves from humanity and become corporate executives and their hired guns.”

Without going so far as Gladish—and certainly not so far as Hartmann, who calls corporate executives “sociopaths”—I think there is something to this point.  It cannot be persuasively suggested that the entire corporate culture is full of benevolent free market warriors who want above all to keep the government at bay to leave the private sector free to  serve the public.  Nor does the trite disclaimer, that yes, there will always be some bad apples, ameliorate the condition.  It’s more than just “bad apples.”   The image of the “invisible hand” has proved too powerful for its own good, leading to overuse and oversimplification.

At bottom, it is true that a conflict of values occurs among us, as economic actors, in our respective quests for pecuniary increase.  Corporations—those legal persons among us who happen to lack the quality of being human—are authorized and duty-bound to advance but one objective.  This objective, of course, is one shared between corporations and humans.  Humans, however, are bogged down in their pursuit of money by nagging scruples such as respect for others, respect for the environment, an abiding consideration for family and community and the propagation and well-being of their offspring, etc.

A human thus must act rationally to achieve several objectives, only one of which is the accumulation of wealth.  A corporation, on the other hand, enjoys the advantage of being significantly more streamlined in its pursuits.  It is limited only to the extent it can fill its ranks with enough humans who are able to sublimate or eliminate their extraneous desires.  Thus, it seems plausible that the very existence of corporations stimulates the proliferation of individuals with a substantially redacted set of scruples and affections.

There is little that can be done to the corporation itself to improve this condition. The condition, in fact, is the same that our Founders identified in the nature of government itself.  The solution devised for the problem in government was to decentralize it and to limit its scope through federalism.  The solution our leaders have devised to prevent the accumulation of power by corporations, oddly, has been to increase the power of government.  This not only undoes the careful work of our Framers, it also makes it much more convenient for corporations to capture more influence and control.  For example, Jonathan Adler recently pointed out that, during Senator Al Franken’s opening statement during Elena Kagan’s confirmation hearings, in which the Senator railed against the recent Citizen United opinion, he asked:

“Do you think those [environmental and consumer protection] laws would have stood a chance if Standard Oil and GM could have spent millions of dollars advertising against vulnerable congressmen, by name, in the last months before their elections?” Even assuming that major corporations would be willing to risk consumer backlash by entering partisan political contests so directly, this example fails.  The federal Clean Air Act, and in particular the provisions imposing nationwide emission controls on new motor vehicles, were not opposed by the major automakers.  To the contrary, the major automakers were the primary backers of federal motor vehicle emission controls, as they sought to preempt more stringent (and potentially variable) state standards. Absent automaker support, it’s questionable whether limitations on automotive emissions would ever have passed at all.

So, to answer Senator Franken’s question: Yes. The Clean Air Act would have “stood a chance” even if GM could have spent millions of dollars on political advertising, because GM would have spent millions of dollars in support of legislators who supported federal air pollution controls.

Getting back to the contemporary fervor over wealth distribution, one helpful observation concerns the way American jobs have moved further and further from “actual” work.  In a recent episode of the NBC series Community, Troy realizes he has a gift for plumbing, but rejects the urgings to pursue this practical trade.  Instead, he vows:  “I’m gonna be sophisticated and have no job. Or a job that looks from a distance like I do nothing.”  I think this is a powerful statement about American sentiment toward labor.  For my part, I have a job that, from a distance, looks like I do nothing.  An attorney’s job is made up entirely of talking and writing.  It can take a bit of solving for X to figure out those efforts yield a net benefit to the universe, as the efforts are so attenuated from the business of corporeal stuff. I think this phenomenon holds for many of our jobs, including those of the very wealthy.

Perhaps there is a connection here:  if it all looks like we doing basically nothing, then why should the ostensible nothing performed by folks with names like Pendlebury-Davenport or a Mannering-Phipps yield so much more of the rich stuff than my ostensible nothing?  Nothing and nothing alike, we might say, so spin the wheel and spread the love around. Fat Cats.  Greedy Bastards.  Eat the Rich.

In reality, we don’t do enough solving for X.  If you have job that, from a distance, looks like you do nothing, then somewhere along the way there is probably some greedy bastard responsible for translating your otherwise useless skills into something you can hold, smell, eat, and put over your head.  Without a willingness to give up sitting for a living and take up a profession that involves building or fixing or growing something, one should proceed with caution before striking out against corporate America.

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Written by Tim Kowal

July 11, 2010 at 4:15 pm

Wealth Care

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This is spot on.  I’m embarrassed I didn’t see this before:

So let’s ask the question the left never asks: how is it possible for an insurance company to pay for these giant medical bills? What makes it possible is a whole set of statistical calculations. For every person who needs open-heart surgery or chemotherapy, there have to be a certain number of other people who are paying their premiums but haven’t gotten seriously ill. If the insurance company has gotten its calculations right, the expenses for any one person’s catastrophic care are balanced out by the premiums other people pay “just in case.”

You can see how Obama’s demands undermine this whole system. To ask insurance companies to cover a patient after the tumor is diagnosed is to ask them to take on a known expense. Combine that with another Obama demand: that insurance companies can’t charge higher rates for those who are at higher risk of getting sick. So if insurance companies have to take on a known expense and can’t charge a higher rate for it, how are they going to pay for it? By raising everyone else’s rates, redistributing their wealth to the new freeloaders.

This isn’t insurance, it’s welfare. And that’s the whole point.

Right. That’s why you need a mandate — not only to cover the costs of emergency care for the uninsured, as Romney insists, but to squeeze premiums out of people (healthy young people, mostly) who probably won’t need care at all. And what if that’s not enough of a corrective to the “maldistribution”? Well, then you add some taxes and squeeze a little more revenue that way. Why, here’s a nice tax now that already has Obama pal Deval Patrick panicking about the job losses it’ll create within Massachusetts’s medical-device industry.

But I’m sure it’ll all work out for the best. And if it doesn’t, who cares? It’s here to stay. That’s how entitlements work, you mean conservative, you.

The Max Baucus video clip, in which he explains in his own words the glorious redistributionist effect of the Wealth Care bill, is also here.

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Written by Tim Kowal

March 26, 2010 at 12:31 am