After three decades of growing inequality, leading up to the crash of 2007-08, and in the midst of the Second Great Depression, what’s the path to recovery?
Stewart Lansley, in part 3 of his series, argues that we need to limit the level of inequality in order to create a viable recovery.
There has been much talk about the need to tackle growing inequality, but little real action. Ending the present crisis and building a sustainable global economy requires a much more fundamental leap that accepts that there is a limit to the level of inequality – one that is still being breached in a majority of nations – that is consistent with stability.
The successful management of economies depends especially on securing a more equal distribution of market incomes, before the application of taxes and benefits. Tackling the unequal “pre-distribution” of incomes means elected governments taking more responsibility for both the distribution of factor shares and of relative levels of pay. . .
National governments need to develop a new contract with labour that raises the wage floor, bolsters the middle and lowers the ceiling. This means the taming of excessive corporate power and a rebalancing of bargaining power in favour of the workforce. It means moving towards more progressive tax regimes with much tougher global action on tax havens.
While I’m sympathetic to Lansley’s approach, I think he limits the options unnecessarily. I’m all in favor of more equality but why is the choice only between the “faulty theory” of the recent past and what is in effect an attempt to recreate the less unequalizing form of capitalism of the postwar period? If the problem (which he identified in the first two parts of the series) is the tradeoff between “factor shares”—such that the growth in the share accruing to capital comes at the expense of the share going to labor—why not then eliminate the class conditions of that conflict?
In other words, the option Lansley leaves off the table is to move beyond capitalism, by allowing those who actually produce the surplus to appropriate and distribute it. Making that one change in society would eliminate the kind of instability Lansley correctly identifies as one of the key causes of the crash and subsequent depression. It would go a long way toward, in his words, “ending the present crisis and building a sustainable global economy.”
Let’s call this a new New Deal, a fundamental change in the way the economy is organized appropriate for the twenty-first century.