Politics

First note on specific policies: a guaranteed minimum income

The idea of providing a guaranteed minimum income to every American currently lies outside the ever-shifting window of politically plausible policy ideas. But it is hardly a fringe proposal. Various public thinkers from Friedrich von Hayek to Martin Luther King Jr. have supported the idea.

There are a variety of good practical arguments in favor of providing a guaranteed minimum income, including that it would decrease economic inequality and all of its negative externalities; strengthen families, since poverty is one of the greatest contributors to family breakdown; encourage investment in personal capital, innovation, and risk-taking, because all of these are more likely when a person is not faced with uncertainty about basic economic needs; and be more efficient than the tangle of programs that currently make up the safety net. The limited empirical evidence regarding guaranteed minimum incomes also seems to suggest that their disincentive effect on work is not as serious as might be feared.

What interests me, however, is the way that a guaranteed minimum income fits together with the post-Reagan-era vision of government sketched in previous posts. The key is recognizing that because of the centrality of the price mechanism to the efficient functioning of markets, wealth inequality in and of itself represents a non-self-correcting source of inefficient outcomes—a “market failure.”

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Politics

Specific policies: some preliminaries

The goal of the preceding posts on politics has been to start thinking through what it would look if a progressive today tried to write the kind of book that Milton Friedman wrote in Capitalism and Freedom: a general vision of government capable of displacing the discredited Reagan era vision of “small government” as good government, alongside a number of specific policies that illustrate how the vision could be made concrete.

An earlier post arrived at a first sketch of one possible vision: moving beyond the false opposition between government and markets, as well as the largely irrelevant and outdated opposition between big and small government, and instead framing economic policy decisions as a democratic choice between different forms of government action. Faced with an economic problem, we could ask ourselves not whether government should intervene—after all, government is already inextricably involved in all aspects of the economy—but rather what kind of government action would best serve our democratically chosen goals.

At this point, one option would be to say that a progressive response to Capitalism and Freedom need go no further. We could say: the progressive goal should simply be to make our democracy work, encourage the public to choose deliberately between the use of direct government action and indirect government action through markets, and let the chips fall where they may. In other words, focus on the democratic procedures and let the economic substance take care of itself.

But we can also go further. Like Friedman, we can assume that freedom will be one of our democracy’s primary political goals, and we can turn to specific illustrations of policies that would best fulfill the goals of freedom within the context of a post-Reagan era progressive vision of government.

In a few of the subsequent politics posts, I’ll start attempting to connect specific economic policies to the overarching vision of good government as not necessarily “big” or “small” but democratic and focused on freedom.

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Politics

Negative freedom, positive freedom, and opportunity

Isaiah Berlin famously distinguished “negative” and “positive” liberty. In Berlin’s distinction, the former is the classical liberal ideal of freedom from government coercion, while the latter is the communitarian ideal of collective self-determination.

There is a related but even more basic distinction between two kinds of liberty that might be called “negative” and “positive”: negative freedom from government prohibition, and positive freedom to do something, to achieve some aim. A person who has no money is free in a negative sense to buy a loaf of bread, because there is no government prohibition on the buying of bread; but this person is not free in a positive sense to buy the loaf of bread, because he is not able to do so. He cannot choose to buy the bread. Likewise, we all have the negative freedom to become the CEO of Goldman Sachs, because no law prohibits us from doing so; but we lack the positive freedom, because we lack the practical ability to make the choice.

It is sometimes assumed that the American political tradition embraces only “negative” liberty from government coercion, and not the “positive” liberty to achieve one’s aims in life. But a case could be made that the ideal of “opportunity,” a central pillar of American political culture, implies a notion of positive freedom.

When the ideology of the Reagan era speaks of “freedom,” the response should be: freedom to do what?

If the 1960s called for negative freedom from social and cultural constraints, and the 1980s called in a confused way for negative freedom from economic constraints, then perhaps some coming decade can be the time when the positive freedom of Americans finally becomes the focus of our political life.

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Politics

What would the Capitalism and Freedom of a new progressive era say? (First sketch)

So, the preceding several posts hint at one way of attempting to move beyond the ideology of the Reagan era: begin by rejecting the ostensible significance of the distinction between big and small government, and then shift the discussion toward the question of democratic government. This would be a vision of government in which we no longer assume that markets and government are opposed, government is the problem, and markets are the solution—but instead, recognize that markets are creatures of government, and that our democratic choice has primacy over both general types of government action: direct through government spending, and indirect through government-created rules.

What are our goals as a democracy? In the American political tradition, freedom has always played a central role.

It is worth emphasizing that the debate over big versus small government is largely irrelevant to someone concerned with achieving the goals of freedom. In some contexts, addressing a problem through direct government action will make us more free; in others, addressing the problem through the rules of government-constructed markets will offer more freedom. Health insurance may be an example of the former, in part because all Americans need it at one time or another, their preferences are largely the same, and the overwhelming majority of consumers are not well-equipped to choose efficiently between the insurers that would best suit their needs. Groceries may be an example of the latter, in part because Americans have strongly divergent preferences, not all Americans need to buy any of the same groceries, and consumers are well-equipped to make efficient choices in a marketplace.

As Coase showed in “The Nature of the Firm,” sometimes markets are the most efficient way of managing a problem, and other times they are not. If markets were always the best solution, then there would be no need for firms with their centrally coordinated management: all tasks would be carried out through competitive bidding. The existence of firms, including many enormous ones (consider GE), suggests that centrally coordinated management can sometimes be more efficient than market processes, even on a large scale. In addition, looking beyond efficiency, the world around us is already full of contexts in which we choose not to allow market processes, because they would offend our values: organ donation, adoption, child labor. These marginal cases demonstrate a central point. We should recognize that we have a choice regarding when to use markets, and that the choice can and should be made in accordance with our values.

We have always been responsible, through our government, for choosing when to use markets, and what kinds of markets to use. We have always chosen the rules for markets based on the values of our democracy. But we have inherited from the classical liberal tradition a tendency to deny to ourselves that we are making these choices. We have acted too often in bad faith, imagining that a false necessity compelled us to make the choices we did, as though we were powerless to choose otherwise, or as though some universal law of economics dictated our choices—as though some arbitrarily chosen versions of nineteenth-century classical liberal markets are the only true markets, the only free markets, the only markets worthy of the name. None of this has ever been the case.

Again, contrary to the ideologies of the New Deal and of the Reagan era, neither direct government action, nor indirect government action through markets, is necessarily aligned with our freedoms.  Because there is no universal rule for determining which approach will promote freedom most in any specific context, the question that should frame our politics is not whether government is “big” (tending to rely on direct government action) or “small” (tending to rely on indirect government action through markets) but whether our government is democratic, in the sense of being responsive to the public’s values—including, perhaps above all in the American political tradition, freedom.

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Politics

Moving Beyond the Reagan Era

So: for the last thirty years, political debate in the United States has been organized around a supposed choice between big government and small government.

This debate rests on mistaken assumptions and should be abandoned. Above all, both sides of the size-of-government debate assume that there is a clear and categorical distinction between “the government” (or “government intervention,” or “regulation”) and “the market” (or “the free market,” or “private markets”). Advocates of the market argue that distributing goods and services through the market makes us more free. In the market, they say, we have choices, while when the government provides goods and services, we do not. Also, they add, businesses in the market cannot coerce us as the government can through fines and imprisonment. Advocates of government intervention, on the other hand, point to the many failures of private markets, and argue that government can correct those failures. They assume that government responds to the needs of the people in ways that private businesses do not.

But the sharp distinctions that both sides of the debate draw between the government and private markets do not exist. After the jump, I offer three reasons why.

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Politics

Interlude: the academic left, imaginary politics, and the Reagan era

So the story goes that in the two decades before Reagan’s election, the conservative movement spent its time in the electoral wilderness laying the intellectual and institutional groundwork for vengeance—that is, for a resurgent attack on the New Deal. When Reagan came to power, he was able to draw on the conservative movement’s plans and institutions, and he began to turn their ideas into actual policies.

What did the American left do during its equivalent decades in the wilderness? What did it do beginning in the 1980s, as it became increasingly clear that the American public was not on its side?

Rather than preparing the groundwork for a return to power, many of the members of the intellectual left, especially those within academia, viewed “power” itself with hostility and suspicion. Professors and students who possessed the leisure and training to participate in an ideological reformation of the American left did not do so.

Instead, they actively rejected engagement with electoral politics and committed themselves to intellectual projects that eventually came to be grouped under the banner of “theory.” This was not “political theory” as traditionally understood, not a new episode in the conversation stretching from Aristotle to Machiavelli to Rawls and Nozick. Rather, “theory” as practiced by the academic left during the Reagan era largely consisted of a variety of speculative philosophical projects with their roots in the French left’s response to German thinkers like Hegel, Marx, Freud, and Heidegger. (Much of Derrida’s mid-career work, for example, can be seen as a French leftist synthesis of the linguistic structuralism of Saussure with Heidegger’s idea that human finitude makes meaning possible. Much of Foucault’s work derives from Nietzsche’s concept of “geneology.” And so on. )

The primary focus of the academic left since the 1980s has been relentless, jargon-intensive critique of existing social power relations, such as the relationship between man and woman, straight and gay, white and black, or colonizer and colonized. These critiques have been valuable in reshaping widely held cultural assumptions about marginalized groups. There is no doubt that they played an important role in advancing the goals of the women’s rights and gay rights movements.

For several reasons, however, the critiques made by the academic left during the Reagan era failed to offer an effective challenge to the economic presuppositions of that era, much less to the electoral outcomes that effectively allowed the conservative movement to define American foreign and domestic policies for three decades.

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Politics

Background Part III: Today

The current moment in American politics is a chaotic one characterized by frequent, unpredictable alternations in power and no clear, dominant vision of governance. A similar moment appears to have occurred in the Gilded Age, when control of the House shifted back and forth for decades after the Civil War, and few presidents left a lasting ideological mark.

On the one hand, the Reagan era vision of government has collapsed. Contrary to the dreams and promises of the Reagan era, the core programs of the New Deal era remain in place, and show every indication of continuing to remain in place, because the American people support them—as President George W. Bush’s failed attempt to privatize Social Security illustrated. In addition, the conservative promise of “smaller government” rings increasingly hollow in the wake of the growth of government spending, and the worsening of deficits, under both Presidents Reagan and the second Bush. Above all, the 2008 financial crisis definitively discredited the economic assumptions of the Reagan era. Financial deregulation led to the crisis, and those who bought into the core economic assumptions of the era failed to see the crisis coming, failed to understand the nature of the crisis as it happened, and continued to make inaccurate predictions in the wake of the crisis. The predictions of generally Keynesian economists were far more accurate.

The Bush administration’s failed response to Hurricane Katrina, and the inequality laid bare in the aftermath of the hurricane, further undermined the credibility of the Reagan-era dream of enhancing freedom by disabling the government.

The economy of the Reagan era has also shown itself to be generally inferior to what preceded it. While the New Deal era was defined by rising wages, decreasing inequality, relatively low unemployment, and decades without a financial crisis in the United States, the Reagan era has offered stagnant middle-class wages, increasing consumer debt, rising inequality, declining or at least stagnating social mobility, and a steadily escalating series of speculative bubbles and financial crises. The economic policies of the Reagan era did not cause all of the weaknesses in the American economy over the last three decades. But it is likely that many of the economy’s pathologies were exacerbated by the Reagan-era embrace of deregulation, and especially financial deregulation; decreased taxation, disproportionately to the benefit of the wealthy; reduced spending on public goods; a smaller safety net; opposition to organized labor; a heavy reliance on corporate subsidies; and in macroeconomic policy, a strong dollar and a greater focus on low inflation than on low unemployment.

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