Divided Democracy

I spoke at the Compass Annual Conference - titled Born Free and Equal - today, in a break-out session hosted by Demos. The other speakers were Jon Cruddas MP, Baroness Helena Kennedy QC, and Patrick Diamond, Strategy Director at the Commission for Equality and Human Rights.

The theme of the session was the links between empowerment and fairness - or in my terms between political equality and economic equality.

Slides from my talk are here.

It was a really good session, even if we got a bit side-tracked by the 42 days issue at various points. Encouraging to here all the panelists talk about the need to link political and economic equality together more tightly than they have been in the past.

Just finished reading Larry Bartels’ Unequal Democracy: The Political Economy of the New Gilded Age.

There’s a lot to like about the book, not least the thoroughness with which it marshals data and the persuasiveness with which it makes its argument.

But I was struck how some of the most effective parts of the book involve some really very simple accounting exercises, in which Bartels provides a reckoning of what happened to inequality and incomes under different Republican and Democrat administrations.

The big idea can be summed up in a single chart: every income quintile did better (and about equally well) when a Democrat was in the White House, whereas under Republican Presidents the rich did disproportionately well and the poor disproportionately badly.

I was wondering whether anyone had done something similar for the UK - and if not, why not - when I found this excellent paper from the ever reliable IFS. Over the last 25 years, it shows something pretty similar to the US. Leaving out (and it’s a big omission) the very top and bottom, the post-1997 period under Labour has seen pretty equitable income growth after 18 years of highly unequal income growth under the Tories. The problem is that the very top and bottom have become so skewed that overall inequality hasn’t fallen.

Obama gives the commencement address at Wesleyan:

I bring this up because today, you are about to enter a world that makes it easy to get caught up in the notion that there are actually two different stories at work in our lives. 

The first is the story of our everyday cares and concerns – the responsibilities we have to our jobs and our families – the bustle and busyness of what happens in our own life.  And the second is the story of what happens in the life of our country – of what happens in the wider world.  It’s the story you see when you catch a glimpse of the day’s headlines or turn on the news at night – a story of big challenges like war and recession; hunger and climate change; injustice and inequality.  It’s a story that can sometimes seem distant and separate from our own –a destiny to be shaped by forces beyond our control.

And yet, the history of this nation tells us this isn’t so.  It tells us that we are a people whose destiny has never been written for us, but by us.

This is nice.”The main justification for participation in a democracy is, as Lord Lindsay put it, that only the wearer of the shoe knows if it is pinched”- Verba, Nie and Kim, Participation and Political Equality 

Peter Lindert in Three Centuries of Inequality in Britain and America: 

Our usual hunches about the effect of income distribution on redistributive policies are in danger of colliding with the overall empirical pattern summarized by the Robin Hood paradox….[W]hy do we observe the opposite [of what we would expect], with such less-developed and highly skewed societies yielding the least redistribution from rich to poor?The answer must lie in the relationship of the income distribution to political voice. In fact, highly skewed societies are ones in which the wealthy elite retains a high shareof political power as well as of wealth and income. The usual pressure-group models,such as median-voter models, should not be applied until they are cast in terms of theself-interests of those who actually have political voice. In the highly skewed societies,the median voter is often someone up in the top quintile of the income ranks.Here, surely, is a key to resolving the mysteries of how redistribution though government relates to overall inequality. Only when we have a tested working theory of the three-way relationship between income inequality, inequality of political voice, and redistribution through government, will we have a clear view of any of these three sides to the inequality issue.

Here’s some data I’m using in the paper on how preferences over redistribution vary among voters and non-voters. Not a very clear picture one way or the other, really. But the extent of the cross-national variation is pretty interesting.(Table on redistribution)

Paul Pierson came to talk about his new book on inequality. Couple of key takeaways:

• the reason why economists always talk about skill-biased technical change and never about politics is that they don’t believe government could have had that much of an impact
• we need a wider view of government’s role - one that recognizes the range of policies that affect income distributions; not just about taxes and transfers but about industrial relations, corporate governance and financial markets
• we need a deeper view of government’s role - in the sense of giving government more credit for it’s role in the story
• puts a lot of emphasis on the extraordinary changes in the very very top income shares - a set of changes that are very hard for regular economic analysis of returns to education to explain
• it’s a mistake to assume that government only matters when it is active. It can matter when it is inactive. “Policy drift” e.g. failure to update minimum wage, reform trade union  structures just as much a part of the story as “policy reform”.
• Progressives often imagine that it is conservatives who are actively dismantling welfare. But often, when you have a highly dynamic economic environment all that matters is that conservatives block reform: “it is progressives who are on offense and conservatives who are on defense”
• Greater success of European welfare states reflects the fact that they were both more resilient to these changes to begin with and politically more adaptable.

Quote from Davies Giddy in 1807:

[G] iving education to the labouring classes of the poor… would… be prejudicial to their morals and happiness; it would teach them to despise their lot in life, instead of making them good servants in agriculture, and other laborious employment to which their rank in society had destined them; instead of teaching them subordination, it would render them factious and refractory, as was evident in the manufacturing counties; it would enable them to read seditious pamphlets, vicious books, and publications against Christianity; it would render them insolent to their superiors….Beside,… it would go to burden the country with a most enormous expence, and to load the industrious orders of society with still heavier imposts.

(In Lindert, Peter H. Growing Public, Volume 1 : Social Spending and Economic Growth since the Eighteenth Century. West Nyack, NY, USA: Cambridge University Press, 2004. p 100).

Michael Pollan’s cover story for the New York Times’ magazine this past weekend has one of the nicest descriptions of what we would call everyday democracy I’ve seen. It’s worth quoting at some length:

For us to wait for legislation or technology to solve the problem of how we’re living our lives suggests we’re not really serious about changing — something our politicians cannot fail to notice. They will not move until we do. Indeed, to look to leaders and experts, to laws and money and grand schemes, to save us from our predicament represents precisely the sort of thinking — passive, delegated, dependent for solutions on specialists — that helped get us into this mess in the first place. It’s hard to believe that the same sort of thinking could now get us out of it.

Thirty years ago, Wendell Berry, the Kentucky farmer and writer, put forward a blunt analysis of precisely this mentality. He argued that the environmental crisis of the 1970s — an era innocent of climate change; what we would give to have back that environmental crisis! — was at its heart a crisis of character and would have to be addressed first at that level: at home, as it were. He was impatient with people who wrote checks to environmental organizations while thoughtlessly squandering fossil fuel in their everyday lives — the 1970s equivalent of people buying carbon offsets to atone for their Tahoes and Durangos. Nothing was likely to change until we healed the “split between what we think and what we do.” For Berry, the “why bother” question came down to a moral imperative: “Once our personal connection to what is wrong becomes clear, then we have to choose: we can go on as before, recognizing our dishonesty and living with it the best we can, or we can begin the effort to change the way we think and live.”

For Berry, the deep problem standing behind all the other problems of industrial civilization is “specialization,” which he regards as the “disease of the modern character.” Our society assigns us a tiny number of roles: we’re producers (of one thing) at work, consumers of a great many other things the rest of the time, and then once a year or so we vote as citizens. Virtually all of our needs and desires we delegate to specialists of one kind or another — our meals to agribusiness, health to the doctor, education to the teacher, entertainment to the media, care for the environment to the environmentalist, political action to the politician.

As Adam Smith and many others have pointed out, this division of labor has given us many of the blessings of civilization. Specialization is what allows me to sit at a computer thinking about climate change. Yet this same division of labor obscures the lines of connection — and responsibility — linking our everyday acts to their real-world consequences, making it easy for me to overlook the coal-fired power plant that is lighting my screen, or the mountaintop in Kentucky that had to be destroyed to provide the coal to that plant, or the streams running crimson with heavy metals as a result.

The rest of the piece is well worth a look.

Some notes on an event at the Woodrow Wilson School, themed around Prof. Larry Bartels’ new book Unequal Democracy.

Larry Bartels Tends to think that the impact of politics is underestimated in people’s explanation for why trends in US have been so different to other countries despite similarity of economic shocks across all the OECD countries. Interestingly, says he went in expecting public opinion to matter and was surprised by the extent to which policy-makers are actually constrained by it.

Paul Krugman Emphasised two issues (1) What happens to people’s incomes depending on who’s in the White House. Not entirely period effects - i.e.  not just that the US happened to have Democratic presidents at the point when inequality was flat or declining. (2) Information effects. Very poor levels of public knowledge about the Bush tax cuts.

James Stimson and Jonathan Alter also spoke.