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Thursday, July 26, 2007
Market Interventions Vs. Redistribution
Just came back from an event sponsored by Democracy: Journal of Ideas (so pretentious- uggh) and the Brooking's Hamilton Project, which I'm not really a huge fan of either, but whatever. They're ok.
Anyway, Jared Bernstein of Economic Policy Institute gave a terrific presentation and raised an interesting point about the benefits of market interventions as opposed to tax and budget decisions. If I got him right, he believes that market interventions that get to the root of inequality are probably the only ones powerful enough to address the scale of the problem. Fiscal redistribution may not be (though I bet they're both complimentary and necessary). Plus, there's no need to constantly recalibrate policy, since the fundamentals of the economy will no longer be so conducive to inequality.
I'd add two more: first, market interventions may be more precise and responsive to local markets. For instance, unions can work out a deal that suits the interests of their industry and conforms to the conditions of a local market. It might be too much to ask of government to know what's right for every industry, everywhere. Otherwise, to be consistent, we'd have to achieve an arbitrary level of equality- which might be good for establishing a minimum past which nobody should fall, but is that appropriate for everyone else?
Market interventions also demonstrate more respect for human dignity. Redistribution programs, like wage subsidies, are paternalistic. Maybe I'm off here, but the rationale for creating them is to compensate the "losers" of trade and to ensure that they don't revolt against the market system. That sounds a whole lot like good old fashioned Bismarkian paternalism, the idea being that the people who get the checks don't really deserve them, but the upper class needs to bribe them so they keep quiet. Plus, redistribution programs disempower the recipient, who receives a check in the mail through no direct action of his or her own. It's like getting a check from Grandma because it's your birthday. Nice, and I'd spend it, but kinda humiliating when you're a bit older. That's how I'd feel, anyway.
Bargaining and wage policy instill the worker with a sense of responsibility for their earnings. You get paid what you deserve- you don't get a check from Uncle Sam, and it isn't a rather arbitrary decision based on a formula. And in the case of unions, you take part in the negotiations process, hopefully. This feeling of empowerment, while good in and of itself, could give people the confidence to participate in politics and community life. Plus, you're laying the groundwork for the organizations that foster participatory politics.
Clearly this isn't an either/or decision, but it just seems to me that all things being equal, Mr. Bernstein is right that you should go with labor market interventions.
Posted by Matt Lewis
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