Friday, December 18, 2015

All Things Being Unequal: Note for a Lecture, "E Pluribus Unum? What Keeps the United States United"

By JAMES RYERSON DEC. 15, 2015, New York Times

image from article

President Obama calls economic inequality “the defining challenge of our
time.” Pope Francis tells us that “today we also have to say ‘thou shall not’ to
an economy of exclusion and inequality.” The French economist Thomas
Piketty writes a nearly 700-­page book for Harvard University Press about
long-­term trends in inequality and, in the wake of the Occupy movement, is
rewarded with a surprise best seller. Mitt Romney, of all people, now
complains that “income inequality has gotten worse.” Economic inequality is
bad. Everybody thinks so.

This simplifies somewhat. Some poll data suggest there exists a class of
people who are not overly concerned about economic inequality, or at least not
particularly interested in having the government do anything about it. (They
are known, in statistical parlance, as “most Americans.”) Furthermore, the
undesirability of economic inequality, as opposed to that of poverty, is not 
self-evident. Even Piketty concedes that inequality “is not necessarily bad in itself.”
The question is whether it is justified.

For the economist William Watson, the answer is: It depends. His book
THE INEQUALITY TRAP: Fighting Capitalism Instead of Poverty
(University of Toronto, $32.95) is a lively and able, if familiar, defense of
market capitalism and its effects. He grants that economic disparities that
result from corrupt, coercive, anti­-competitive or criminal transactions are
“bad,” but he maintains that a great many others result from voluntary
transactions that benefit all parties involved and are “good.” Still other
economic disparities, like those that arise as byproducts of demographic
changes, are neutral. For example: The growing tendency for wealthy people to
marry other wealthy people — a development that has tracked the rise in
women’s incomes — has been estimated to account for a 26 percent increase in
household income inequality in the United States. But you would have to be
quite an extreme redistributionist to support a policy that required wealthier
people to marry poorer people.

Today’s preoccupation with economic inequality, Watson writes, breeds
an unhealthy skepticism about capitalism and shifts our focus away from the
issue of poverty and toward the wealth of the so­-called 1 percent. Though he
doesn’t blaze any new scholarly ground, anyone looking to play devil’s
advocate with Piketty­-purchasing friends would be well served by his book.

A more idiosyncratic argument is offered in ON INEQUALITY
(Princeton University, $14.95), by the philosopher Harry G. Frankfurt. To
those who think a gap between haves and have­-nots is obviously unfair,
Frankfurt poses a simple thought experiment: Imagine a policy wherein all
incomes and personal wealth are kept equally below the poverty line.
Everybody is now exactly as poor as everybody else. If this does not look like a
solution, then inequality, as such, cannot be the problem. To Frankfurt, it
seems clear that the relevant moral concern is not that people in our society
have different amounts of money, but that too many people don’t have enough.

Most critics of economic egalitarianism, convinced that the only way to
promote equal levels of wealth is to constrain people from acting freely, are
troubled by a threat to liberty. This is not what troubles Frankfurt. He worries
that a fixation on economic equality diverts our attention from fundamental
questions that ultimately have nothing to do with how much money other
people have. Namely: What is it that you want? What will satisfy you?

In this way, Frankfurt’s anti­-egalitarianism is more of a philosophical
challenge than a libertarian crusade. If your focus is on how your income
stacks up against that of everyone else, you are allowing other people’s
possessions to shape your sense of what you need and want. You are, in effect,
alienated from yourself. Frankfurt also suggests that intellectuals, in devoting
their attention to ratios of wealth, neglect a less precise but more pressing
investigation: What is enough for a good life? What, for that matter, is a good

Frankfurt’s argument is unabashedly unempirical, and he freely concedes
that economic inequality, though of no intrinsic moral concern, may have an
array of undesirable consequences that themselves need to be redressed, such
as disparities in political influence. In INCOME INEQUALITY: Why It
Matters and Why Most Economists Didn’t Notice (Yale University,
$40), the economist Matthew P. Drennan draws attention to what he believes
is another, and surprisingly overlooked, example of such a consequence:
Income inequality, he contends, was a decisive factor in precipitating the
financial crisis of 2008 and the Great Recession that followed.

Most explanations of the 2008 crash, seeking the causes of an overly
indebted economy, emphasize factors like low interest rates, relaxed
borrowing standards, mortgage securitization — anything that increased the
availability of credit. Drennan is interested in why people were moved to take
advantage of this easy money. Purchasing homes, he argues, was only part of
it. Something else was a significant driver of debt. He finds that lower­ and
middle-­class families, struggling with declining or stagnant incomes, made use
of second mortgages, home equity loans and other such instruments to
support their spending, notably on necessities like medical care and education.

Why blame unequal incomes (as opposed to low ones) for this debt­-fueled
consumption? Drennan’s answer is that prices for certain necessities like
medical care and education, which rose much faster than inflation in the years
leading up to the crash, appear to have been driven up by heightened demand
among the wealthiest 10 percent, whose share of income grew. In other words,
it was an attempt by those with less money to compensate for costs created by
others with increasingly more money that contributed to the instability of the

Unfortunately for Drennan, addressing inequality has never been an
American priority. Or has it? In AMERICA’S FOUNDING AND THE
Kansas, $39.95), the political theorist Clement Fatovic argues that a
concern with economic inequality has deep roots in the establishment of the
United States. Tea Party heroes like Thomas Jefferson and Thomas Paine, far
from seeing government promotion of economic equality as inherently at odds
with individual liberty, often considered greater equality to be a precondition
for liberty, a view that influenced such proposals as free public schools and a
more progressive tax system.

Another cherished conservative narrative — that Democrats favor a big
government to promote social welfare programs, while Republicans favor a
small government that allows the free market to work its magic — is rigorously
disputed by the political scientist Christopher G. Faricy in WELFARE FOR
THE WEALTHY: Parties, Social Spending, and Inequality in the
United States (Cambridge University, $99.99). Faricy’s contention is
that for the past four decades, Democrats and Republicans have increasingly
used big government to promote social welfare programs — but each party has
employed different tools and targeted different beneficiaries.

Democrats, as we know, use higher taxes to fund programs like Social
Security, Medicare and Medicaid, which serve society’s poor and vulnerable.
That is the public welfare state. But Republicans do much the same thing in
the service of a private welfare state: They use tax breaks to subsidize
employer­-sponsored 401(k) plans and employer­-sponsored health insurance,
which serve the better-­off. Faricy observes that tax breaks, logically speaking,
are just government spending in another guise (both cost the government
money), and that programs like the 529 college savings account, which is
supported by such a tax break, are welfare programs for rich families. (About
70 percent of that program’s benefits go to households making more than
$200,000 a year, costing the government $1 billion over the next decade.)

For Faricy, the real question is not some fanciful speculation about
whether you can tolerate a welfare state that hampers your freedom, but rather
a matter of which of these two welfare states you want: the one that spends
public money to increase economic inequality, or the one that spends public
money to reduce it.

James Ryerson is a senior staff editor in The Times’s Op­Ed

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