I'm sure everyone in this
conversation agrees that the growth of unions and the revival of our older cities
make sense as steps to reverse sharply increasing inequalities. These are not
new solutions, of course, but old solutions whose importance has been underlined
as the effects of union decline and urban decay have accumulated. However, I
am taken aback by what is new here, namely Freeman's proposal to devolve authority
over labor law from the federal government to the states. The states have generally
been even more business-oriented than the national government, in large part
because they are susceptible to the threats or enticements of business relocation.
To make labor protections subject to the ongoing bidding wars that corporations
initiate between the states is a recipe for labor helplessness.
Freeman's big idea for egalitarian reform is to shift from
income redistribution to asset redistribution. This is indeed newer. But even
proposals for asset redistribution have precedents that deserve scrutiny for
the lessons they suggest. The idea of turning worker pension funds into a
capital instrument for social ends has been around for a while. It flared
and fizzled because it never seemed to capture the imagination of workers,
perhaps because they were not stirred by the prospect of risking their pensions
for socially desirable investment. And older ESOP schemes also evoked the
promise of redistributing wealth and power, but in practice did little of
either, as visions of worker power turned into mere paper ownership of firms
controlled by managers and markets. The point here, I think, is generalizable:
schemes for asset redistribution are inevitably swamped by the market forces
they are intended to temper, so that the egalitarian terms of "virgin
capitalism" have to be continually reconstructed. This is no small feat.
Asset redistribution, dependent on sharply increased inheritance
and income taxes, will generate enormous opposition, and especially if it
goes beyond paper rights (as the Swedish unions learned with the failure of
the Meidner plan). Freeman doesn't want to talk about political feasibility.
But if the game is to talk about what would be nice to have, then why not
also talk about a big wealth tax that would move toward reversing asset concentration,
and even provide the resources that might make possible a viable public sector?
That said, I want to agree with the argument that workers are
likely to be better corporate decision-makers, simply because worker interests
are multifaceted, going beyond a singular preoccupation with the bottom line
and the short-term to include concerns with, for example, job security and
community well-being. This is the old promise in proposals for worker ownership,
and it remains compelling to me.
I am even more uneasy about Freeman's related proposals for
reform of the welfare state. True, many of our current programs are badly
flawed; support levels and coverage are typically inadequate, especially for
the poor and unemployed, and the terms of aid can be humiliating. But I doubt
that Freeman's approach will help. In fact, I worry that his call for shifting
funds from the aged to the young is dangerous. It contributes to widespread
efforts already afoot to discredit Social Security and Medicare. These are
arguably the most popular and successful programs of the American welfare
state. They have accomplished a historic reduction in old age poverty, and
increased the security of working people who otherwise supported aged relatives
and also faced the prospect of their own penury in old age. Now the programs
are taking a terrific propaganda battering from the right, the left, and the
One argument, which Freeman seems to accept, is that programs
for the aged are eating up the funds that could otherwise be spent on the
young and the poor. This assumes that all other important items of the budget
are fixed, including expenditures on the military and corporate welfare, and
the tax givebacks of the past two decades. And even if we accepted this assumption
for the purpose of argument, what sensible political reason is there to think
that funds taken from Social Security and Medicare would somehow, miraculously,
come to be allocated to programs for the poor and the young? After all, it
is these latter programs that have proved so politically vulnerable in the
past two decades. Freeman wants to talk about solutions "regardless of
their pedigree or feasibility." But policy proposals are obviously an
aspect of political strategy. Does it make sense to begin the difficult struggle
to reduce inequality in America by considering solutions which tear away at
the sources of popular support for past successes?
Running through these proposals is the idea that market-conforming
reforms are more viable than reforms which depend on a vigorous public sector.
Thus, shifting funds from the aged to the young will contribute to economic
productivity. Parts of the social wage should be made conditional on work.
Asset redistribution might increase savings. But the bearing of increased
economic productivity on income and wealth inequalities is by no means clear.
As Freeman points out, the proportion of the population in paid employment
in the United States has grown in tandem with spiraling inequalities. And
this approach to reform misses or dismisses what is I think the main achievement
of liberal welfare state programs, which is that they reduce inequality partly
by creating a politically determined income floor which enhances worker security,
and therefore worker bargaining power.
In sum, I don't think worsening inequality is the result of
tired old ideas about programs. I think it is more the result of the growing
power of business, and the correlative demoralization and confusion of democratic
opposition. True, ideas have something to do with power, if only because they
legitimate its exercise and reveal its promise. But the big ideas at work
here don't seem to me to be very new. The idea of the unfettered market that
legitimates rising business power is not a new idea. And the best idea to
justify resistance to that power, the idea of a democratic state with the
authority and resources to tame predatory market actors, is not new either.
Originally published in the December 1996/
January 1997 issue of Boston Review