Economic inequality is suddenly receiving increased attention. Even before the recent riots in Baltimore, there has been an upsurge in proposals for government action to address poverty and inequality, with some even coming from Republicans.
In recent posts (here and here), I've been writing that entities other than governments, or what we traditionally regard as the public sector, increasingly are – and I believe will be even more in the future – "doing government." It's easy to see how this is already happening in areas like the creation of currencies, while private armies and security forces have been around for eons. But can (and would) nonpublic entities arise that present a sustainable method for addressing enterprises less recognizably remunerative as, well, money-making itself or outright pillage? Can we really expect, for instance, a business model to emerge for ending poverty and inequality? Despite the disdain with which my liberal friends generally greet such musings, my answer is, quite simply, that we must.
I know this is heresy, but this might be a good time to reassess the liberal faith that government is the solution to poverty and inequality. After all, it hasn't done a very good job of it. I don't mean that in the sense conservatives do – that government anti-poverty programs don't work, or, as Ronald Reagan declared, "We fought a war on poverty, and poverty won." First, we know that numerous government programs in fact have significantly reduced poverty – most notably Social Security and Medicare, which even today lift tens of millions of older Americans out of poverty each year. Of course, not every government program has worked, but neither did the Edsel.
Second, some of the failures of government programs to end poverty have come as direct result of those who declared war on anti-poverty programs rather than on poverty itself. For instance, conservatives love to cite welfare programs as leading to the breakup of the traditional family, but this occurred at least in large part because of attempts to limit welfare and make it more punitive, such as the infamous "
man-in-the-house" rule that many Southern states used to deny benefits to any family with an employable male. Strangely enough, this conservative policy encouraged employable males not to remain with their families.
Third, while many such voices are now being raised to argue that the persistence of poverty – and anger – in places like Baltimore 50 years after the War on Poverty proves the failure of government anti-poverty programs, they just as easily argue for the success of government pro-poverty programs. Innumerable federal, state and local government policies – from zoning rules to housing projects that intentionally concentrated the poor to gasoline and highway policies that encouraged the desertification of most cities – have operated to increase poverty, exacerbate inequality and impose racial segregation. In fact, ever since the rightward ideological shift both here and abroad in the last 35 years, economic inequality has been aggravated by intentional changes in tax and transfer policies that redistribute national income back upward to the wealthiest at the expense of the poor and middle class.
Now, one response to all this is that we simply need better government policies – ones that promote the interests of the powerless rather than the powerful. And we do. But whatever happened to the leftist critique that law is inevitably made by and for the powerful? The seizure of the state by the masses in order to run a redistributionist welfare machine might have seemed like a promising trend in the upheavals of the Depression and World War II, but since then – and, more or less unrelentingly since Reagan's election – the empire has struck back, and unsurprisingly so. One liberal friend of mine who read a draft of this piece responded belligerently that I'm wrong to think that "the Kochs, Adelsons and all the other Citizens United winners" are ever going to willingly do anything to empower the powerless – but isn't that exactly what makes government a poor hope as a vehicle for redistribution?
In any event – and this is my major point – at its best, government should be seen as a second-best solution: It is the Rube Goldberg contraption we erect to remediate problems; it is not "the change" that keeps such problems from occurring. Here's a thought experiment: Which is better? A just world that produces no poverty, and thus no need for government anti-poverty programs? Or an unjust world full of poverty that is alleviated by government anti-poverty programs? Most of my liberal friends prefer the latter because without government anti-poverty programs there would be, well, no government anti-poverty programs. But wouldn't it be better for there to be no poverty to begin with? Of course, such perfection is a fantasy – but so are perfect government programs.
Imagine, instead, a game of Monopoly where the poorest player lands on my monopoly of Boardwalk and Park Place and can't pay the rent, thereby going bankrupt. But I have a sudden insight: Instead of foreclosing, I agree to waive their payment in return for 10 percent of their future income. Everyone else decides this represents a wonderful new financial instrument and adopts it themselves. This is a self-interested, not enlightened, decision since they each make more money this way. But now, no player goes bankrupt (eliminating the game's extreme Gini coefficient ending). In fact, after a while, someone would have to invent some new investment property – Revel? Taj Mahal? – to absorb all that spiraling wealth. And so economies advance, thanks not to any deus ex machina but rather to self-interested innovation – in this case, an idea designed explicitly to reduce poverty. Of course, some may complain that the game is now less fun since you don't get to destroy everyone else, but that's a slightly more justifiable gripe in a game than in, say, life.
The question, ultimately, is whether there really can be such a profit-making approach in the real world, whereby an entrepreneur can do good by doing well. In my next post, I'll discuss such potential business (rather than government) models for reducing poverty.