Today marks the first anniversary of Occupy Wall Street, the movement that forced inequality back onto the front page. As if on cue, the Census Bureau reported last week that 2011 spelled big income gains for the top 5 percent, declines for the middle and stagnation at the bottom. Unlike the federal deficit, inequality actually is a moral failing and a national crisis. So what do we do about it? One possible answer comes from across the pond.
This month, in a speech at his country’s stock exchange, British Labour Party Leader Ed Miliband embraced a big new idea: predistribution.
The term was coined here in the US, by political scientist Jacob Hacker (you may know him as the man who came up with the public option). In a 2011 paper, Hacker noted that our discussions of government responses to inequality often begin and end with redistribution—taxing the rich to provide benefits for the rest. But Hacker argued that’s only half the equation (maybe less). He urged his fellow progressives to pay more attention to predistribution: “the way in which the market distributes its rewards in the first place.” That includes regulations that protect consumers and empower workers. “The regulation of markets to limit extremes and give the middle class more voice is hardly easy—witness the fight over financial reform in the United States,” wrote Hacker. “But it is both more popular and more effective than after-the-fact mopping up.”
Miliband agrees. In his September 6 speech, he argued that the recent years of crash and austerity have discredited key economic assumptions: the primacy of low inflation, the efficacy of trickle down, and the immutability of the economic rules of the road. After noting the terrible human cost and counterproductivity of austerity, Miliband called for a new agenda: “We need to care about predistribution as well as redistribution.… We cannot allow ourselves to be stuck with permanently being a low-wage economy.” After trying in the past “to make work pay better by spending more on transfer benefits,” said Miliband, future government needs to “also make work pay better by making work itself pay.”
In a recent interview with the Telegraph, Miliband (a former Nation intern) expanded on these ideas. Following the old Labour Party’s Thatcher-era losses, said Miliband, “New Labour accepted a “consensus around regulation” that “turned out to be really problematic”; on globalization, it became “too easy and accepting…. It’s just not true that all the top CEOs will leave the country unless we pay them whatever they demand.”
Miliband also traced his predistribution focus to the political and economic limits on how high overall taxes can go (he says “50 percent”).
But Miliband’s call for more predistribution dovetails with the left’s warnings about relying entirely on tax-and-spend, to the exclusion of regulations and protections. While conservatives fret over excessive taxation, liberals and radicals have argued that social spending alone is a poor substitute for economic democracy. Critiquing what he calls mere “pity-charity liberalism,” Nation contributor and Roosevelt Institute fellow Mike Konczal last year framed the question this way:
Do we more aggressively set up the rules to favor some outcomes over others, or do we emphasize making markets “free”…and then deal with bad outcomes after the fact? Do we want unions and regulations to create workplaces designed for human dignity, or do we let the dice roll as they may and compensate people after the fact through transfers?
Indeed, there’s no good reason for government to just sit back, let one-percenters beat up employees and customers, and then try to mitigate the harm with redistribution (Harold Meyerson’s cover story in the current American Prospect offers a damning reminder of the effects of a legal system that makes union-busting a good bargain). As Sam Pizzigati reported in The Nation, the financial crisis turned many Britons away from the view that obscene but well-taxed wealth is harmless. And innovative organizing has helped turned the UK towards greater predistribution. Among the approaches: pushing local employers—public and private—to narrow the pay ratio between the top and the bottom within their workforce. Tactics include a recognition symbol for display by supportive companies, and a series of citizens’ delegations to confront others. These activists, wrote Pizzigati, “don’t consider ‘tax and spend’ any sort of social engineering outrage. They simply consider it inadequate to the task of creating the just and sustainable society our future demands.”
Much of the British story is all too familiar. Failed austerity, political resistance to taxes and a left-of-center party that spent much of the 1990s proving its willingness to get out of the market’s way. An upsurge in grassroots activism against inequality. And an awful human toll.
“We want a market economy,” says Miliband, “not a market society.” That’s true on both sides of the pond.
Labor supporters just celebrated a major victory in Wisconsin. Check out John Nichols’s coverage here.