Posts Tagged ‘France’

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Economic inequality is arguably the crucial issue facing contemporary capitalism—especially in the United States but also across the entire world economy.

Over the course of the last four decades, income inequality has soared in the United States, as the share of pre-tax national income captured by the top 1 percent (the red line in the chart above) has risen from 10.4 percent in 1976 to 20.2 percent in 2014. For the world economy as a whole, the top 1-percent share (the green line), which was already 15.6 percent in 1982, has continued to rise, reaching 20.4 percent in 2016. Even in countries with less inequality—such as France, Germany, China, and the United Kingdom—the top 1-percent share has been rising in recent decades.

Clearly, many people are worried about the obscene levels of inequality in the world today.

In a famous study, which I wrote about back in 2010, Dan Ariely and Michael I. Norton showed that Americans both underestimate the current level of inequality in the United States and prefer a much more equal distribution than currently exists.*

In other words, the amount of inequality favored by Americans—their ideal or utopian horizon—hovers somewhere between the level of inequality that obtains in modern-day Sweden and perfect equality.

What about contemporary economists? What is their utopian horizon when it comes to the distribution of income?

Not surprisingly, economists are fundamentally divided. They hold radically different views about the distribution of income, which both inform and informed by their different utopian visions.

For example, neoclassical economists, the predominant group in U.S. colleges and universities, analyze the distribution of income in terms of marginal productivity theory. Within their framework of analysis, each factor of production (labor, capital, and land) receives a portion of total output in the form of income (wages, profits, or rent) within perfectly competitive markets according to its marginal contributions to production. In this sense, neoclassical economics represents a confirmation and celebration of capitalism’s “just deserts,” that is, everyone gets what they deserve.

From the perspective of neoclassical economics, inequality is simply not a problem, as long as each factor is rewarded according to its productivity. Since in the real world they see few if any exceptions to perfectly competitive markets, their view is that the distribution of income within contemporary capitalism corresponds to—or at least comes close to matching—their utopian horizon.

Other mainstream economists, especially those on the more liberal wing (such as Paul Krugman, Joseph Stiglitz, and Thomas Piketty), hold the exact same utopian horizon—of just deserts based on marginal productivity theory. However, in their view, the real world falls short, generating a distribution of income in recent years that is more unequal, and therefore less fair, than is predicted within neoclassical theory. So, bothered by the obscene levels of contemporary inequality, they look for exceptions to perfectly competitive markets.

Thus, for example, Stiglitz has focused on what he calls rent-seeking behavior—and therefore on the ways economic agents (such as those in the financial sector or CEOs) often rely on forms of power (political and/or economic) to secure more than their “just deserts.” Thus, for Stiglitz and others, the distribution of income is more unequal than it would be under perfect markets because some agents are able to capture rents that exceed their marginal contributions to production.** If such rents were eliminated—for example, by regulating markets—the distribution of income would match the utopian horizon of neoclassical economics.***

What about Marxian theory? It’s quite a bit different, in the sense that it relies on the assumptions similar to those of neoclassical theory while arriving at conclusions that are diametrically opposed. The implication is that, even if and when markets are perfect (in the way neoclassical economists assume and work to achieve), the capitalist distribution of income violates the idea of “just deserts.” That’s because Marxian economics is informed by a radically different utopian horizon.

Let me explain. Marx started with the presumption that all markets operate much in the way the classical political economists then (and neoclassical economists today) presume. He then showed that even when all commodities exchange at their values and workers receive the value of their labor power (that is, no cheating), capitalists are able to appropriate a surplus-value (that is, there is exploitation). No special modifications of the presumption of perfect markets need to be made. As long as capitalists are able, after the exchange of money for the commodity labor power has taken place, to extract labor from labor power during the course of commodity production, there will be an extra value, a surplus-value, that capitalists are able to appropriate for doing nothing.

The point is, the Marxian theory of the distribution of income identifies an unequal distribution of income that is endemic to capitalism—and thus a fundamental violation of the idea of “just deserts”—even if all markets operate according to the unrealistic assumptions of mainstream economists. And that intrinsically unequal distribution of income within capitalism becomes even more unequal once we consider all the ways the mainstream assumptions about markets are violated on a daily basis within the kinds of capitalism we witness today.

That’s because the Marxian critique of political economy is informed by a radically different utopian horizon: the elimination of exploitation. Marxian economists don’t presume that, under capitalism, the distribution of income will be equal. Nor do they promise that the kinds of noncapitalist economic and social institutions they seek to create will deliver a perfectly equal distribution of income. However, in focusing on class exploitation, they both show how the unequal distribution of income in the world today is affected by and in turn affects the appropriation and distribution of surplus-value and argue that the distribution of income would likely change—in the direction of greater equality—if the conditions of existence of exploitation were dismantled.

In my view, lurking behind the scenes of the contemporary debate over economic inequality is a raging battle between radically different utopian visions of the distribution of income.

 

*The Ariely and Norton research focused on wealth, not income, inequality. I suspect much the same would hold true if Americans were asked about their views concerning the actual and desired degree of inequality in the distribution of income.

**It is important to note that, according to mainstream economics, any economic agent can engage in rent-seeking behavior. In come cases it may be labor, in other cases capital or even land.

***More recently, some mainstream economists (such as Piketty) have started to look outside the economy, at the political sphere. They’ve long held the view that, within a democracy, if voters are dissatisfied with the distribution of income, they will support political candidates and parties that enact a redistribution of income. But that hasn’t been the case in recent decades—not in the United States, the United Kingdom, or France—and the question is why. Here, the utopian horizon concerning the economy is the neoclassical one, or marginal productivity theory, but they imagine a separate democratic politics is able to correct any imbalances generated by the economy. As I see it, this is consistent with the neoclassical tradition, in that neoclassical economists have long taken the distribution of factor endowments as a given, exogenous to the economy and therefore subject to political decisions.

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Much has been made of the rise of populism in recent years and the threat it poses to liberal democracy.

My view is that liberal critics of populism, standing on their heads, get it wrong. If made to stand on their feet, they’d have to admit that populism actually represents the failure of liberal democracy.

Populism has experienced a resurgence of late—in Hungary, Britain, France, Turkey, the United States, and elsewhere—especially the form of populism variously characterized as right-wing, nationalist, or authoritarian. It has attracted increasing support and achieved notable political victories within the institutions and procedures of liberal democracy.

The problem is that liberal democracy has failed to confront, much less solve, the problems that have led to the rise of populism in the first place.

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Consider, for example, the history of populism in the United States. The three notable periods—in the late nineteenth century (with the rise of the People’s Party, which was also known as the Populist Party), the first Great Depression (around such figures as Father Charles Coughlin and Huey P. Long), and then during the second Great Depression (starting with the Tea Party and culminating in the election of Donald Trump)—all coincided with obscene levels of inequality and severe economic crises that decimated American workers and other classes (including farmers and small businesses) across the country.

Populism has been one of the principal responses to the complex and shifting layers of discontent and resentment that the ideas and policies of the leading political parties, economic elites, and mainstream intellectuals within American democracy first created and then failed to respond to. As I explained last November,

The paradox of the 2016 presidential race is that both major party candidates claim (or at least are identified by those in the media with) support of portions of the U.S. working-class and yet neither campaign offers anything in the way of concrete policies or strategies that actually respond to the real issues and problems faced by the members of the working-class. . .

It’s no wonder, then, that over the course of the past year and a half American workers have rejected establishment politics—as offered by both Democrats and Republicans—and voted in large numbers for Bernie Sanders and Donald Trump. They’re simply fed up with an economic system that has been rigged to benefit only a small group at the top and frustrated by a set of political candidates (not to mention economists and economic pundits) who pronounce fundamental change to be undesirable and unrealistic. Better to stay the course, so the elites preach, and eventually trickledown economics will work.

A different response was, of course, possible in all three circumstances. Instead of populism, marginalized classes in the United States might have been persuaded by and coalesced into a movement with utopian impulses—an association, organization, or political party that combines a critique of the existing order, including the elites that defend it, with an agenda that seeks to radically transform economic and social institutions in a progressive direction.**

As I see it, both right-wing populism and left-wing utopian movements see the existing system as “rigged” against the vast majority of people and level an indictment against “elites” that both benefit from and defend the existing system. Both responses therefore represent a failure of liberal democracy.

But the two reactions are not at all similar, even when both attempt to represent the grievances of workers and other classes that have been left behind.

There are, it seems to me, two key differences between right-wing populist and left-wing utopian movements. First, they approach the matter of alliance and opposition quite differently. Utopian movements identify a basic conflict between the people and an elite or establishment, and then challenge the claims to universality of those on top in order to form a different universality, a set of changes that will create a new humanity and realm of freedom for everyone, including the existing elites. As John Judis explains, right-wing populists exhibit a radically different approach. They

champion the people against an elite that they accuse of favouring a third group, which can consist, for instance, of immigrants, Islamists, or African American militants. Rightwing populism is triadic: it looks upward, but also down upon an out group.

The second major difference is that right-wing populists look backward, conjuring up and then offering a return to a time that is conceived to be better. For Trump, that time is the 1950s, when a much larger share of workers was employed in manufacturing, American industry successfully competed against businesses in other countries, and Wall Street played a much smaller role in the U.S. economy.***

That time was, of course, exceptional—in terms of both U.S. and world history. And it’s a vision that conveniently forgets about many other aspects of that lost time, such as worker exploitation, Jim Crow racism, and widespread patriarchy inside and outside households.

Instead of looking backward, left-wing utopian movements look forward—criticizing the existing order but also understanding that it creates some of the economic and social conditions for a better, more just society.

Liberal critics of populism understand neither their own role in producing the circumstances within which populism emerged nor the senses of injustice—especially class injustice—that fuel populism’s gathering strength.

The Left should be able to do better, both in analyzing the rise of populism as a failure of liberal democracy and in offering a utopian alternative to the status quo. But for that, it will have to look beyond the idea that populism alone represents a threat to liberal democracy.

If liberal democracy is under threat it is because of its own failures.

 

*The chart illustrating the wealth shares of the top ten percent and top one percent is from Richard Sutch, “The One Percent across Two Centuries: A Replication of Thomas Piketty’s Data on the Concentration of Wealth in the United States,” Social Science History 41 (Winter 2017): 587-613.

**Such a movement did in fact gather strength during the first Great Depression, the Thunder from the Left, which is precisely what led to the second New Deal in 1935 (after the 1934 midterm elections and before Franklin Delano Roosevelt’s 1936 reelection campaign).

***Joshua Zeitz argues that the Populists of the late nineteenth century also looked backward and that the parallels between then and now are striking:

Ordinary citizens chafed at growing economic inequality and identified powerful interests—railroads, banks, financial speculators—that seemed to control the levers of power. Many came to believe that the two major political parties, despite certain differences, were fundamentally in the pockets of the same interests and equally unresponsive to popular concerns.

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As I argued a couple of days ago, recent events—such as Brexit, Donald Trump’s presidency, and the rise of Bernie Sanders and Jeremy Corbyn—have surprised many experts and shaken up the existing common sense. In short, they’ve rocked the neoliberal boat.

The question is, where does this leave us?

Thomas Edsall thinks it means we’ve reached the end of class-based politics. I’m not convinced.

Yes, the response to the problems with neoliberal globalization has challenged and cut across traditional party families and their positions on domestic matters, in the United States as in Western Europe. But that doesn’t mean the differences between the Left and the Right have disintegrated or that class politics have become irrelevant.

To take but one of Edsall’s examples, just because there’s no one-to-one correspondence between people who have lost and gained from existing forms of globalization and those who voted for or against Donald Trump doesn’t mean class has declined in political importance, much less that it’s been displaced by a simple “globalism versus nationalism” opposition. Plenty of voters in economic distress voted for Trump and for Clinton—in part because of their different ways of framing class issues, but also because class politics have always been overlain with other, salient identities, resentments, and desires. The 2016 presidential election was no exception.

What this means is battles take place not only between political parties, including newly resurgent ones, but also within those parties. Thus, for example, the mainstream of the Democratic Party was and remains wholly committed to a liberal version of neoliberalism, and its inability to respond to the “economic distress”—the class grievances—of large sections of the American working-class led to its loss last November (which means, of course, the battle inside the Democratic Party has become even more intense). Similarly, Trump’s campaign rhetoric—although certainly not his actual economic and social program—galvanized many who were dissatisfied with “business as usual” in Washington. And, of course, the response to those different positions was affected by the framing of the issue of globalization (for example, Trump’s focus on job losses versus Clinton’s call for more education and reskilling), race (Trump’s dog-whistle invoking of the “inner city” and the need to build a wall in contrast to Clinton’s calls for diversity and inclusion), and much else.

But, in contrast to what Edsall sees, the future of the American left does not lie in mimicking Emmanuel Macron’s defeat of France’s National Front. While Macron’s campaign did represent a rejection of the “racialized and xenophobic politics” that served as one of the pillars of Trump’s victory, there is nothing in Macron’s proposed domestic policy reforms that represent anything other than a French version of “left neoliberalism,” and therefore a real threat to the French working-class.

No, we’re going to have to look elsewhere for an alternative common sense.

Espen Hammer suggests we return to the “rocking of the boat” that has been the underlying aim of the great utopias that have shaped Western culture.

It has animated and informed progressive thinking, providing direction and a sense of purpose to struggles for social change and emancipation.

It is a tradition, beginning with Thomas More, that involves not only thought experiments, of what might be, but also—and perhaps even more important—a critique of the existing order, and therefore what needs to be changed.

Finally, Bhaskar Sunkara suggests that the history of socialism suggests the way forward.

Stripped down to its essence, and returned to its roots, socialism is an ideology of radical democracy. In an era when liberties are under attack, it seeks to empower civil society to allow participation in the decisions that affect our lives. A huge state bureaucracy, of course, can be just as alienating and undemocratic as corporate boardrooms, so we need to think hard about the new forms that social ownership could take.

Some broad outlines should already be clear: Worker-owned cooperatives, still competing in a regulated market; government services coordinated with the aid of citizen planning; and the provision of the basics necessary to live a good life (education, housing and health care) guaranteed as social rights. In other words, a world where people have the freedom to reach their potentials, whatever the circumstances of their birth.

As I see it, that conception of socialism—an expansion of democracy that capitalism promises but simply can’t permit—is capable of satisfying both Edsall’s aversion to a “racialized and xenophobic politics” and Hammer’s utopian “rocking of the boat.”

It’s the start of something new precisely because, in Sunkara’s words, it “allows so many now crushed by inequity to participate in the creation of a new world.”

Update

It should perhaps come as no surprise that Sunkara’s view of the contemporary relevance of socialism, appearing as it did in the New York Times, should invite a backlash reminiscent of the kind of red-baiting and ahistorical analysis that socialists and Marxists were often subjected to during the Cold War. In this case, Jonathan Chait [ht: sm] uses Venezuela as his whipping-boy, decrying the authoritarian elements of the left-wing governments of Hugo Chávez and Nicolás Maduro, without any mention of the upper-class roots of the contemporary opposition or of the crisis in Venezuelan society (exemplified in El Caracazo, in 1989) and the subsequent election of Chávez a decade later. No, Chait can’t let actual political and historical analysis get in the way of his broad-brush indictment of what he, echoing generations of liberal anticommunists, considers to be “the inherent authoritarianism that is embedded in an illiberal thought system.”

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