Just saw Douthat's Sunday column on the causes of inequality, so I thought I'd comment on it in the light of my last post. Here's his set up:
The latest census figures show the gap between the wealthiest Americans and everybody else widening — rather than shrinking, as some economists expected — during the crash of 2008. An August report from Bank of America/Merrill Lynch suggested that middle-income Americans, buried in real-estate debt, will have to wait much longer than the rich to see their finances rebound.
This landscape will put liberalism to the test. Since Ronald Reagan was elected nearly 30 years ago, Democratic politicians have promised that their program could reverse the steady post-1970s growth of income inequality without sacrificing America’s economic dynamism.
But having promised win-win, they may deliver lose-lose. In the short run, Barack Obama could preside over an America that’s more economically stagnant and more stratified.There’s only so much that politicians can do about broad socioeconomic trends. The rise of a more unequal America is a vexingly complicated issue, whose roots may wind too deep for public policy to reach.
Liberals, though, have spent decades telling a more simplistic story, in which conservatives bear all the blame for stagnating middle-class wages and skyrocketing upper-class wealth. So it’s fair to say that if a period of Democratic dominance doesn’t close the gap between the rich and the rest of us, it will represent a significant policy failure for contemporary liberalism.
It's interesting that he admits that this problem has become more serious since Ronald Reagan was elected, but dismisses as simplistic the idea that there might be a causal relationship there. Rather this column seeks to make the case that things are too far gone for the Democrats to do anything about it. I'm not sure that Douthat grasps the irony because he refuses to admit Repubiican culpability. But really what he's saying is that Republicans have dug us into such a deep hole that the Democrats will find it impossible to dig us out, and that's great news for Republicans because the Dems will get all the blame. But let's leave that aside for now.
Decent conservatives and Libertarians will tell you that they see increasing inequality as a problem, but that they disagree with Liberals about how to solve it. In terms of the Liberty/Equality balance I've been talking about, a libertarian/conservative is someone who sees the danger as coming from large institutions so focused on promoting Equality that they create torpor where there should be initiative and creativity. "You want to solve the inequality problem?", they ask, "Well then, l increase Liberty and initiative. Big Government is never a solution; it's main function is to bog things down, not to engender dynamic improvements.
He then goes on to predict failure for the Democrats' because of their use of ineffective tactics that relate to the tax code, immigration policy, and educational reform. Democrats aren't going to increase taxes on the rich, because they are as coopted by the rich as the Republicans are. And even if they do, it won't change anything. Democrats' liberal attitudes toward immigration means that there will always a new influx of the poor, which won't help them in the numbers game. And then goes on to blame teachers' unions and the national educational establishment--both Democrat strongholds--for preventing a choice-oriented competition to produce better schools and teachers. Whatever.
The bottom line for him is summed up in his final grafs:
This is the lesson of Western Europe, where the public sector is larger and the income distribution much more egalitarian. The European experience suggests that specific policy interventions — the shape of the tax code, the design of the education system — may matter less in the long run than the sheer size of the state. If you funnel enough of a nation’s gross domestic product through a bureaucracy, the gap between the upper class and everybody else usually compresses.
But economic growth often compresses along with it. This is already the logic of our current fiscal trajectory: ever-larger government, and ever-slower growth.That combination could eventually create the more egalitarian America that Democrats have long promised to deliver. The question is whether Americans will thank them for it.
Right: Less Liberty = More Equality, but less growth = more unhappiness. But we had plenty of economic growth during the last thirty years that correlated with disconcerting levels of growth in economic inequality and economic anxiety. Maybe slower growth is an acceptable tradeoff if it means less in the way of extreme levels of both wealth and poverty. And maybe happiness is not really linked to growth.
Although it is axiomatic for American politics, economic growth is not the be-all and end-all of social happiness. People really don't need that much to live decent lives. Where real happiness, creativity, and initiatives lie is not in the economic sphere but in the cultural sphere--the sphere of soul--and that's where we have a serious social deficit--insofar as we've allowed materialistic ideas of happiness push out more soulful ones. We need more equality in the economic sphere, and to look for initiatives in the cultural sphere to deliver the soulful satisfactions that come with a life well-lived, and you don't need excessive amount of wealth to do that. But you need enough.
A win in the direction of economic equality now might mean a slight loss for Libertarian ideas of economic growth--but it's not a zero sum game, it's not about either win/lose, win/win, or lose/lose, but of adjustments to find the right balance.