Friday, June 22, 2012

Liberals and Inequality

President Obama says that the rich should pay a little more in taxes to make it fair.  But liberal pundits are more direct.  They say that "inequality" is responsible for a number of social evils, and it requires a policy response.  Writes Patrick Brennan in NRO:
Nobel laureates, from our president to Paul Krugman and Joseph Stiglitz, all agree that high levels of inequality are a serious problem, if not the problem, facing our weak economy.

According to this liberal thesis, either the 2008 financial crisis and its attendant recession, or the sluggish recovery — and maybe both — can be attributed in large part to the high level of economic inequality in the United States. Further, in this view, inequality is an economic malady on its own, even in times of prosperity.
Brennan then goes on to show how these liberals are surely wrong.  The financial crisis may just possibly have been caused by inequality, specifically middle-income Americans trying to "catch up" with the rich.  But you don't have to find a reason like that.  Just good old cheap money will do it for you.

No it's pretty obvious what is going on.  If you want to justify government intervention you have to argue injustice; otherwise you will quickly find that you don't have a justification.

Here's how I look at this.  There are two competing explanations of the modern lifeworld.  One is the 200-year-old Invisible Hand.  It argues that the economy is basically just and the way to get ahead is to find something that the consumers want and sell it to them.  The other explanation is exploitation, from Marx in The Communist Manifesto.  It argues that the basic fact of human society is exploitation.  So political activists are called upon to fight for the exploited and against the exploiters and knock down the walls of privilege and injustice.

Back in 1850 the Marxians had a point.  Plantation slavery was still churning out sugar in Brazil and cotton in the American South.  And pauperized agricultural laborers were appearing in the city and working for starvation wages in the new textile factories and mines.  Something had to be done.

It turned out that the net effect of capitalism and democracy from those times has increased the daily income of the average European and North American from about $1 to $3 per head per day to the current $120 per head per day.  So, whatever the combination of Invisible Hand and exploitation and the political response, we did something right.

So the full-on exploitation theory loses some of its bite.  And if exploitation is no longer an explanation then the argument for a strong government loses its bite as well.  Maybe we could get along with a lot less government force.

Enter the inequality theory.  It provides an all-inclusive explanation for all economic ills.  And it requires educated experts to design and implement programs to correct inequality.  Thus it provides a moral justification for the Democratic Party and its over-under coalition: a ruling over-class of educated liberals extracting taxes from the rich 1% and giving it to the under-class of victims, less an appropriate finder's fee, of course.

The whole thrust of modern politics in the US--the red-state blue-state battle, the culture war, private vs. public sector--is an argument between faith in an Invisible Hand lifeworld and faith in an exploitation lifeworld.

In the Invisible Hand lifeworld if you study hard and work hard to get ahead you will achieve your goals and live a successful life.  In the exploitation lifeworld you need a community organizer to fight for your rights.

Everything else is noise.

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