Reliance on redistribution turns case – populist backlash hollows out redistributive policies absent underlying changes in market structure

Jacob S. Hacker, “The institutional foundations of middle-class democracy,” Progressive Governance, 2011, pp. 35-37, https://www.jacobhacker.com/assets/hacker_pn.pdf.

Three key features of these developments are crucial for grasping – and overcoming – the challenges that progressives face today. The first feature is the role of pre-distribution. When we think of government’s effects on inequality, we think of redistribution – government taxes and transfers that take from some and give to others. Yet many of the most important changes have been in what might be called “pre-distribution” – the way in which the market distributes its rewards in the first place. Policies governing financial markets, the rights of unions and the pay of top executives have all shifted in favour of those at the top, especially the financial and nonfinancial executives who make up about six in 10 of the richest 0.1% of Americans.

The moral of this story is that progressive reformers need to focus on market reforms that encourage a more equal distribution of economic power and rewards even before government collects taxes or pays out benefits. This is not just because pre-distribution is where the action is. It is also because excessive reliance on redistribution fosters backlash, making taxes more salient and feeding into the conservative critique that government simply meddles with “natural” market rewards. Further, it is because societies in which market inequality is high are, ironically, ones where creating common support for government action is often most difficult. The regulation of markets to limit extremes and give the middle class more voice is hardly easy – witness the fight over financial reform in the United States. But it is both more popular and more effective than after-the-fact mopping up.

The second feature is the problem of drift. Over the last generation, across a wide range of areas, public officials have deliberately failed to update policy in the face of changing economic circumstances, allowing outcomes to drift away from a more equal equilibrium. Although particularly pronounced in the United States, drift seems characteristic of many rich democracies today as they confront a rapidly changing economy and society. If this is so, preserving existing policies is not the only challenge. The welfare state traditionally understood remains deeply rooted. But the broader environment of the welfare state – a mixed economy characterised by a healthy civil society – is much more vulnerable.

To protect and restore these larger hallmarks of a well-functioning market democracy, progressives must preserve an effective capacity for robust governance. They should resist institutional reforms that abet gridlock. In the United States, this means altering the procedural rules that encourage the growing use of the filibuster, the Senate tradition of unlimited debate that has increasingly amounted to a universal supermajority requirement of 60 votes in the 100-member chamber. Progressives should also ensure that policies retain the capacity for over-time adjustment, whether automatically (as in benefits indexed to wages or prices) or structurally (through the preservation of basic regulatory, tax and spending powers that are too often sacrificed on the conservative altar of privatisation and delegation).

The third feature is the declining organisational might of the middle. The transformation of America’s political economy over the last generation has far less to do with the shifting demands of voters than with the changing organisational balance between concentrated economic interests and the broad public. Indeed, the sharp shift of economic policy towards business and the affluent occurred despite remarkable stability in public views on many economic issues, including views of government redistribution, progressive tax policy and the importance of key programmes of economic security. The agenda disconnect that we see today, as politicians ignore Americans’ concerns about the lack of jobs in favour of cutting programmes that the public likes and preserving tax reductions for the rich that it does not, is not new. It has characterised the politics of the last generation.

The root of the problem, once again, is organisational. Middle-class democracy rested on organisations, such as unions and cross-class civic organisations, that gave middle-class voters knowledge about what was at stake in policy debates as well as political leverage to influence these debates. Without this organisational grounding, voters simply have a very hard time drawing connections between what politicians do and the strains they face in their lives, much less formulating a broad idea of how those strains could be effectively addressed. So far, however, the most effective organising has taken place not among progressives but on the conservative side, with the rise of the loose organisation of conservative voters, right-wing media figures and corporate-funded ideological activists that travels under the “Tea Party” banner.

The Tea Party’s success is instructive. It rests on a combination of champions inside government and organisers working at the grassroots level; it has a clear agenda (scale back government) and enemy (President Obama); and it has effectively utilised both old-style organising (through local chapters) and new communications technologies. While the Tea Party cannot and should not simply be emulated by progressives, its three key features – grassroots organising linked to national reform leaders, a forward-looking vision that is directed against a perceived contemporary threat, and the use of flexible participatory modes enabled by new media – are preconditions for effective progressive organising.

Rebuilding the institutional foundations of middle-class democracy

The diagnosis outlined here is both encouraging and challenging. It is encouraging because there is nothing natural about the harsh divisions that have arisen in the United States. They are rooted in politics and policy, not the inexorable forces of globalisation or technological change. In many cases, moreover, they require not major programmes of redistribution – never easy to enact – but rather measures to reshape the market so that it distributes its rewards more broadly in the first place.

Nor does popular opinion dictate that this sort of politics and policy must reign. If progressives are losing the public, it is not mainly because citizens buy into the free-market fundamentalism of the right or are so distracted by social issues or racial animosity that they cannot see their own interests. The hallmark of contemporary public attitudes is not public conservatism but public cynicism and distrust, fuelled by the economic trend of the last generation and a sense that government is out of touch. To rebuild the middle class requires rebuilding a sense that government can make a positive difference. And that means addressing the bread-and-butter concerns of the middle class while also calling for responses to long-term threats, such as global warming and runaway health costs, that jeopardise US society.

The challenge, however, is that progressive reform will require using a broken political system to fix a broken political system. The main obstacle to change and the main vehicle for change are one and the same. This catch-22 affords no easy resolution. But it does suggest where reformers’ energies should be directed, and it points to opportunities that are too often missed by those narrowly focused on rhetorical messages and strategic moves. Perhaps the most important implication is that those seeking to achieve a new governing economic philosophy will have to rebuild the organisational foundations of democratic capitalism. An inspiring economic vision will be grounded in an institutional blueprint for using active democratic government to meet the challenges facing US society – challenges that, while frequently most pressing in the United States, are growing for all affluent democracies.