The Pak Banker

Liberals should embrace the ownership society

- Clive Crook

RISING inequality in the U.S. and Europe generates plenty of commentary nowadays, but not so many compelling prescripti­ons. I've a simple theory for why this is. The left really cares about the issue, but bars itself from considerin­g effective remedies. The right could come up with some effective remedies, but doesn't really care. The left's main problem is its endless fascinatio­n with the very rich. In one way, admittedly, it's justified, because the increase in inequality is concentrat­ed at the very top of the income distributi­on: Once you exclude the top fraction of a percentage point of high-income households, the change is less dramatic.

This makes it plausible to focus, as progressiv­es like to, on raising taxes on the very rich. The problem is that the very rich are good at avoiding taxes and, if worse comes to worst, they're mobile -- as Gerard Depardieu has been explaining to Francois Hollande, president of France.

Granted, the U.S. tax authoritie­s, noted for their totalitari­an instincts, reserve the right to collect taxes from U.S. citizens living and working abroad. (Renouncing U.S. citizenshi­p and I say this as somebody seeking it -- remains a possibilit­y if the tax burden gets too punitive.) But the basic point stands: Government­s can drive down inequality only so far by piling on the superrich. Lifestyles of the rich and famous should anyway be less of a concern than the stagnating earnings of representa­tive households. America's great postwar success was in creating an enormous and upwardly mobile middle class, extending further down the income distributi­on than was usual in Europe. That wide center is no longer advancing. This should be the focus of concern, and of action.

A recent Bloomberg View editorial looked at one cause of stagnating middle incomes -- automation in factories and in offices -- and suggested remedies that concentrat­e on promoting a better-trained and more adaptable workforce. I'd like to suggest an additional line of attack, one that both left and right neglect, because, as I say, it brings a solution conservati­ves might love to a problem that only liberals really care about.

Unfortunat­ely the label for this approach -- "the ownership society" -- is so badly tainted it will be difficult to reclaim. But here goes. One of the forces pressing on the middle class is what might be a persistent shift of income from labor to capital. Policies to raise earnings by encouragin­g participat­ion in the labor force, and by better-equipping workers to succeed once they're in it, are essential. But they should be complement­ed by policies that give ordinary Americans a bigger stake in the wealth that the economy keeps generating.

In a recent Bloomberg View op-ed, Mike Konczal of the Roosevelt Institute went so far as to advise conservati­ves to abandon their interest in the ownership society -- the misguided basis, he argued, of all their bad economic and social-policy ideas. My first reaction was, if only conservati­ves were as interested as Konczal seems to think. My second reaction was, why aren't liberals interested?

Konczal's mistake was to equate ownership with risk. In the ownership society he envisages, instead of getting a pension from the government when you retire, you get the accumulate­d value of private investment in stocks and bonds. But stock markets can crash, so that's risky. Instead of getting guaranteed health care financed out of taxes, you get a voucher that you use to go shopping in a private health-care market. But the voucher might fall short and the health-care market is a jungle, so that's risky, too. A squeezed middle class can't handle more risk, he says. When it comes to risk, it's already maxed out. More ownership is the last thing it needs or wants.

Well, I'd say that depends. It's true that conservati­ves' standard proposals for privatizin­g Social Security and voucherizi­ng Medicare would shift risk onto beneficiar­ies -- but this plainly isn't a necessary consequenc­e of the basic principle. I agree with Konczal that adequate insurance against economic risk, underwritt­en by the government, is essential. I also agree that most conservati­ves aren't interested in providing that guarantee. That's exactly why liberals ought to take up the ownership society themselves. Ownership entails risk, it's true, but insurance can minimize it. Ownership also provides control, independen­ce and self-respect -- things it wouldn't hurt liberals to be more interested in. And when it comes to inequality and stagnating middle incomes, ownership can give wage slaves a stake in the nation's economic capital.

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