As the great political economist Karl Polanyi famously argued in the 1940s, even the ostensibly freest markets require the extensive exercise of the coercive power of the state— to enforce contracts, to govern the formation of unions, to spell out the rights and obligations of corporations, to shape who has standing to bring legal actions, to define what constitutes an unacceptable conflict of interest, and on and on. The libertarian vision of a night-watchman state gently policing an unfettered free market is a philosophical conceit, not a description of reality…
Even the word ‘redistribution’ is symptomatic of the pervasive distortions in contemporary discussion. It suggests the refashioning of a natural order by meddling politicians, a departure from market rewards. But the treatment of the market as some pre-political state of nature is a fiction. Politicians are there at the creation, shaping the 'natural’ order and what the markets rewards. Beginning in the late 1970s they helped shape it so more and more of the rewards would go to the top.
Jacob S. Hacker and Paul Pierson, “Winner-Take-All Politics,” 2010, pgs. 55-56
Winner-Take-All Politics: how America's super-rich got so much richer
Paul Pierson and Jacob S. Hacker’s Winner-Take-All Politics
is a fascinating attempt to explain the broadening gap between the rich
and the poor in America. Starting with the orthodox economist’s view
that political action – laws, policies and regulation – are
insufficient to explain the enormous gains made by the richest Americans
and the falling away of the rest of the pack (especially the decline in
the fortunes of the middle- and upper-middle-classes), Piersen and
Hacker take a much closer look at the politics of wealth distribution.
What follows is a number-dense (but highly readable) fine-tooth-comb
examination of the policies that effect the wealth of the super-rich –
the 1% and higher whose share of America’s wealth has ballooned to
kleptocratic heights since the 1970s. In this close-up view, the authors
uncover the subtle (and not-so-subtle) ways in which Congress tilted
the playing field.
Mostly, this consists of creatively doing nothing: for example, not
pegging the minimum wage to inflation, but inflation-indexing the
alternative minimum tax (which means that the workforce whose labor
provides wealth to the nation’s CEOs take an inflationary pay-cut every
year, while the middle-class find their taxes creeping up as they enter
the AMT bracket thanks to inflation). Or, more simply, not passing new
regulations to account for newly discovered tax loopholes such as the
one that allows billionaire hedge-fund managers to pay a mere 15% tax (a
lower rate than that paid by their janitors) or the notorious Silicon
Valley stock-option dodge.
Of course, there’s also active measures that Congress can take to widen
the rich/poor gap: starving the IRS, or “rationalizing” the Alternative
Minimum Tax such that the middle classes (and the merely wealthy) are
taxed at a higher rate to pay for tax-cuts to pay for the hyper-rich.
Piersen and Hacker don’t just look at what rules (or lack thereof)
changed America’s finances. They also want to know how the politics of
America changed to make strategic inaction and action possible – and
here their account is every bit as compelling as in their economic
analysis. They trace the shift in American politics to the rise of
TV-based election campaigning, which favors parties who have money for
expensive media campaigns (and hence those who have access to corporate
donations) over parties who can mobilize doorbell ringers (e.g. parties
with the support of organized labor).
This shift is the first in a series of dominoes whose fall Piersen and
Hacker detail, shifts such as the rise of an activist,
super-conservative Republican party, the changes in organized
evangelical protestantism, the growth of the astroturf industry and so
on. For the authors, “it’s the economy, stupid!” is incomplete – “it’s
the economy and politics, stupid!”
This is one of those books that feels like it made me smarter, like it connected things I didn’t connect before.