Thursday, June 12, 2014

Avoiding Traps in Arguments About Poverty and Inequality

-- Posted by Neil H. Buchanan

Earlier this week, I published the second part of my two-part series of columns on Verdict regarding the role that "mobility" arguments play in debates over inequality and poverty.  Having first debunked (both on Verdict and the companion Dorf on Law post last Thursday) the claims that America's economy is a great "blender" in which rich and poor find their economic fates easily changed, I turned my attention to various claims about long-term trends in inequality.  At its core, my argument is that the debate over poverty and inequality is ill-served by a focus on whether income and wealth have gotten more or less equal, and on whether they will become more or less equal in the future.  Instead, the focus should be on the consequences of inequality, for whoever happens to experience those consequences at any given time, as well as for society as a whole.

Even if one agrees with me that the present and impending consequences of inequality and poverty are what ultimately matter, one might still ask, "Why would we not care about trends in poverty and inequality?  If things have gotten much worse over time, then that is a spur to action.  And if things are likely to become much better or worse in the future, then we should know about that, too."  Of course, both of those things are true, at least in extreme forms.  Indeed, I could not resist beginning that second Verdict column by comparing our current levels of inequality to Gatsby-era excess, knowing the rhetorical power of that reference.  And if it were actually true that we knew that inequality was hard-wired to all but disappear in, say, ten or twenty years, then I readily acknowledge that our political priorities would change.

Even so, I have recently found myself worried by the focus in the debate on long-term trends (looking either backward or forward), because those arguments seem to be so detached from what ought to matter.  For example, I argue in this week's column that it really should not matter whether inequality has risen or fallen over the last generation or so (even though it has clearly risen), suggesting that a focus on comparisons between 1980 and 2014, for example, somehow makes it sound as if 1980 is the right standard of comparison.  If we say, "Inequality today is unacceptable, because it has risen by some meaningful metrics since 1980," then we are likely to end up trying to get back to that earlier, arbitrary benchmark, no matter how bad things were back then.  We should, instead, be trying to make sure that our policies are minimizing the amount of, and damage from, inequality and poverty.

As I wrote and edited that column, that argument in some ways seemed so obvious that I wondered whether it was even worth making.  I ultimately decided not to drop it from the column, because sometimes obvious points need to be repeated.  After I put the column to bed, however, I remembered specifically what had made me worry that the political discussion was likely to go astray if we became side-tracked by discussions of statistical trends.

Over the past couple of weeks, there was a sudden rush of commentary about an article by Chris Giles, a columnist for the Financial Times, who claimed to have found flaws in Thomas Piketty's blockbuster book.  The fuss ended rather quickly, with Piketty emerging unscathed, but it was interesting to see that Giles's argument, other than attempting to find mere statistical gotchas, ultimately hinged on the substantive claim that Piketty was wrong to argue that inequality had become worse since 1980.  Indeed, one of the reasons that people so quickly dismissed Giles's argument is that he claimed that wealth concentration in the U.S. and Europe has been stable over the last fifty years or so, a claim so at odds with nearly every credible bit of evidence as to be laughable.

Now, it is admittedly fun to see someone make such an obviously bone-headed claim, to be lionized on the right for "taking down Piketty," and then to be exposed as a fraud.  But why act as if his claim ultimately mattered at all?  The unstated assumption appears to have been that it really would have been a big coup if Giles (or anyone) could have proved that inequality has stayed the same, rather than rising dramatically.  As a matter of political salience, that is clearly correct.  My point, however, is that this is a trap into which people who worry about inequality should not allow themselves to be drawn.

In fact, focusing on recent trends in inequality actually makes it easier for conservatives to win the long-term policy battle.  Even though they are clearly wrong to believe that inequality has not recently become much worse, if they can change the terms of debate from inequality itself to changes in inequality over time, then they can simply win by running out the clock.  That is, even if they were to "lose" over the next few years by allowing liberals to adopt weak policies that would simply arrest the rise in inequality, then conservatives could say, "Look, inequality stopped rising.  That's what you liberals were so exercised about, wasn't it?  So shut up."

Again, it is obviously advantageous politically for liberals to point out that the problem is not just poverty and inequality but rising poverty and inequality -- and, even better from a political point of view, that poverty and inequality are rising at an ever-faster rate -- but that is the trap.  Just as I have long argued that Democrats made a huge mistake by castigating Reagan and the Bushes for deficit hypocrisy, which merely reinforced the deficits-are-bad narrative that lured Obama so disastrously into his policy mistakes, it is a mistake to argue that we need to do something about poverty and inequality because they are becoming so much more extreme.  That makes it too easy to redefine what it means to succeed in a way that will leave important work undone.

Using somewhat related reasoning, I also use this week's Verdict column to question the actual importance of Piketty's main argument in his book.  Remember, his proposal to impose taxes on wealth (an idea with which I heartily agree) is based on his claim that we are on our way back to "patrimonial capitalism," in which inherited wealth inexorably sucks up more of the economy, simply by the rules of mathematics.  But again, does it really matter whether he is right or wrong?  Here, we are not being lured into thinking about accepting inequality that already exists, but we are instead being told that we need to impose taxes on wealth now in order to prevent a predicted convergence in wealth that, according to Piketty's calculations, will take generations to unfold.  His prediction ought to be an interesting curiosity, at best, not the basis for a sea-change in our political economy.

We take our victories where we find them, of course, and if this argument by Piketty has gained more traction than other arguments favoring redistribution (many of which gain support from much of Piketty's other work), then so be it.  We are now discussing wealth taxes, and we probably would not have been doing so without the unexpectedly enormous popularity of that book.  We are, however, hitching our wagon to something that might not get us to where we want to be.  If better research were to emerge, showing that Piketty's key inequality (r > g) is likely not to be true for the next few centuries, then the retort from the right will be, "You guys said you were worried that wealth concentration would become irreversible.  Well, you were wrong, so your arguments against inequality are unimportant."  Liberal redistributionists could, and should, then say that this misses the point, but they will be in a very weak position.  It is a trap.