Saturday, November 18, 2017

Economics is All About Redistribution

And new economies need new methods of redistribution.

"Redistributionist" is a dirty word for the right, like gun-grabber, bleeding heart, tree hugger, and statist. Yet we are currently treated to the spectacle of a Republican congress redistributing income, foregone taxes, and wealth to the tune of trillions, upwards towards the wealthy and well-connected. What does repealing the estate tax have to do with putting manufacturing workers back to work, or solving the opioid crisis? Nothing, naturally.

In a state of nature, everyone has a job, which is to wrest bare sustenance from a rich, but complex and mystifying world. No one is "employed", since everyone is self-employed. And if you or the small family you rely on fail in that task, the end comes relentlessly. This represents the primitive "job guarantee". Everyone has a job, and failure to do that job is penalized harshly.

A developed economy has a different relation to work. Most people still live by their labor and wits, but there is so much wealth and technological prowess that most people's work is completely dispensible. Whether we have lawyers, rock bands, and toothpaste is a matter of significant, but not existential, importance. Even the food production system is so broadly based that no single person's work is existentially important to anyone, even themselves, given a modest safety net. And this system can support large numbers of people with no jobs at all, with ease. Yet income remains tied to work, despite the fact that we are moving to a future where the ratio of work needed to labor available is plunging, taking the labor market and incomes with it.

Who runs this system? Whom does it serve?

The trajectory of all this is quite clear. Those with wealth receive the benefits of industrial productivity, which is increasingly capital-based rather than labor-based. Those with only labor to offer, even of a specialized and educated nature, get increasingly locked out of the income / redistribution system. Whether this will lead to a Keynesian crisis of lack of overall income and spending is not clear. The rich spend much less than their income, as witnessed in the recent revelations of overseas tax shelters holding trillions. But so far, the Fed and other institutions (here federal deficits play a critical role) are working mightily to keep the system churning, despite the extensive replacement of good jobs with bad jobs, and consequent declining worker pay (relative to productivity). The system is no longer working- labor is no longer an effective way to keep everyone employed and paid in a manner that befits an advanced society as productive as ours.

This is what the current class war is all about. Republicans are shamelessly doubling down against the very voters who thought they were supporting a better deal on jobs and a restoration of the middle class. Rather, this administration is pulling every available lever to entrench the rich/capital and pull the rug out from under workers, leaving them even more powerless and destitute than before. Who would have thought?

What should we be doing instead? Some propose a basic income, whereby every citizen gets a small income, merely for existing. This neatly cuts the connection between labor and income, but has many problems. First, it is not a decent income, but extremely minimal. So it ends up being miserable welfare, at best, for the poor, and an unnecessary gift to the rich. Second, it does not provide the reciprocal benefits to society, or the individual, that work does. To let so much personal energy go to waste, paying people to do nothing, presents both a moral hazard an an enormous social loss. We can do much better.

Social Security could be cited as an example of a very successful basic income, given to all. But it is explicitly tied to previous work, and serves a specific social function of supporting those who can not work any more. Public services like roads, public buildings, scientific research, and the like are also good examples of implicit income given to all, and surely health care should come under the same universal service category. But income for working-age people represents something quite different- it is the source of their freedom, and represents their service to the larger society. We need to find a way to preserve and enhance those relations while gradually disentangling it from the semi-feudal work-as-labor model in capitalism.

Basically, people should be paid for a wider range of activities. For example, voting could be paid. Serving on juries could be paid, far better than currently. Sending children to school could be paid. Positive social activities should be paid for, not just classed as volunteer activities or duties. Perhaps the biggest opportunity is in the non-profit sector. If the government funded non-profits on a broad basis, while enforcing governance, management, and mission rules, we could end up with endless opportunities for public service and fairly paid work.

Where would the money for all this come from? The main actor in the economic system is, to be frank, the government, not the private sector. The government prints the money, runs the central bank, and has first rights to production such as defense spending, police functions, and other necessities (which becomes particularly clear in war-time). The fact that capitalist enterprise and competition has been a beneficial and innovative way to organize the private economy to provide the bulk of most people's needs does not mean this will always be the case or needs to be the sole form of work and income. As mentioned above, capital is concentrating and the need for labor is gradually uncoupling from the need to produce goods. But it shouldn't be uncoupled from doing social good. Indeed, the capitalist system has led to enormous social harm, and seems to have led to an appalling revolution in values, putting the greediest and most predatory people in the most successful positions.

Thanks to mind-boggling political and intellectual corruption by which they have gained power through a supposedly populist political movement, these arch-capitalists are right now trying to entrench their feudal powers over workers by relieving themselves of taxes, by empowering corporations to rule more of our lives, enhancing the legal immunities of corporations and relieving them of any public purpose (especially in the case of media companies), by weakening our democracy and the state, and by keeping the labor market weak and workers dependent on the private sector for income. It is the last gasp of a system that will either turn towards an even uglier feudalism, or be turned back and regulated into a progressively smaller share of our economic, social, and political lives.

  • Paradise papers and the so-called rule of law.
  • But why shelter your riches from taxes when you've got a congressman in your pocket?
  • And for that matter, why not appoint a tax evasion expert to head the IRS?
  • "The United States, he noted, currently has one of the highest levels of inequality in the history of the world."
  • Which Republicans want to make hereditary.


  1. Bill Mitchell: the robots are not coming after all, or at least not having a big effect.

  2. PostScript: Public funders such as the Corporation for Public Broadcasting and the NEA have been very successful models of how to publicly fund non-profits in a non-partisan, effective way. They are models for much broader engagement in this sphere, and are naturally targets of the right, which wants all economic activities run on the capitalist model, by capitalists.

  3. PostScript2: The ultimate point is that we need an effective job guarantee and wage floor, where everyone willing and able can find useful and decently paid work. That is only going to happen if the government provides a substantial buffer to the labor pool to set that floor, no matter what ups and downs happen in the private economy.