Lib­er­als should em­brace the own­er­ship so­ci­ety

The Pak Banker - - OPINION - 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.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.