The New Democratic Review: On Being "More" Equal than Others: Inequality and Democracy

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October 23, 2006

On Being "More" Equal than Others: Inequality and Democracy

In What’s the Matter with Kansas? Thomas Frank famously argued that the rise of social conservatism has been engineered by Republicans to distract the poor and middle class from voting their economic interests. I never really bought the argument because I have always believed that values, conservative or otherwise, play a real and legitimate role in political decisions. The most appropriate approach for liberals, I believe, is to address those values issues head-on.

That said—and Republican ploy or not—economic conservatives have certainly done their best to hold up their end of the fight. When pressed on the question of income inequality, economic conservatives have two basic answers: One, “there’s no such thing” and, two, “it’s not so bad, anyway”.

The “there’s no such thing” argument appears to be the most slippery—and blatantly political. At the core it rests on a definition game, the meaning of income. You can read the argument in a more political context, here. Both arguments are handily refuted by the Economic Policy Institute (yes, that liberal think tank). (CNN does a nice job of glossing the stats here.)

The other argument, that “it’s not so bad, anyway,” is at once more serious and more disturbingly narrow minded (besides being a tacit acknowledgement of widening economic disparity). The crux of the argument is that, even if the rich are getting richer, the poor are still better off than they ever were—and continue to get better. Moreover, public policy attempts to narrow that gap only undermine the fundamentally human drive to gain status through achievement; this “positional competition” is the psychological engine of progress. As Will Wilkinson puts it:

Are the external effects of positional competition really like pollution, as Layard says? Or is positional competition more like the light of the sun: it can burn you, but nothing grows without it? It’s not so easy to tell. Nobel Prize-winner Gary Becker and his

University of Chicago colleague Kevin Murphy have argued that without the motivating prospect of increased status, there would be ‘underinvestment’ in entrepreneurial activity: ‘Great scientists and outstanding entrepreneurs receive enormous prestige and status precisely in order to encourage scientific and startup activities,’ they write.[22] The benefits of such status-seeking, they say, may more than offset the negative effect of status ‘arms races’. Even if the taste for positional goods is unavoidable, Indiana University economist Richmond Harbaugh argues that fear of falling behind may induce high rates of savings—a kind of stockpiling for future status-signaling consumption races—with positive overall effects on economic growth.[23] There’s no excuse for ignoring the benefit side of the cost-benefit ledger.

To be fair, Wilkinson’s is not taking issue with equality but a certain kind of politics that attempts to dismantle the competitive machinery—both economic and political—that leads to inequality. The problem here is that, even if the poor are now much better off than they ever were, relative economic privation undermines democracy. In a capitalist society (an economic system, by the way, that I think is both inevitable and demonstrably good), money wields power. The Supreme Court even categorizes it as [political] speech. Free enterprise may supply the fertile soil for political liberty, but radical (and accelerating) inequality supply the building blocks of oligarchy.

The answer here is not the cartoon version of old-style liberalism that attempts to erase inequality by government fiat—nor is it a utopian fantasy that promises to end competitive struggle through some mass, ideological lobotomy. And, as 2006 Nobel Prize economics winner Edmund S. Phelps makes clear, it is not the "corporate capitalism" of Western Europe sometimes idealized by American liberals (but effectively copied by American megacorporations). In fact, there is no “one” answer. What is needed is a sustained, pragmatic, experimental, drive to invent new ways to put productive resources within the reach of all citizens.

Doing so is a matter of commitment, a “values” question.

Posted by stevemack at October 23, 2006 05:00 PM

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