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Why Progressives Want to Rewrite the Rules—and the Story—of the US Economy

By May 18, 2015July 14th, 2017No Comments
de Blasio

New York City Mayor Bill de Blasio speaks about the “Progressive Agenda” along with a coalition of backers on Capitol Hill in May 2015. (AP Photo/Jacquelyn Martin)

Tuesday was quite a day for the emerging progressive offensive on economic issues. That morning in Washington the Roosevelt Institute, led by Nobel Laureate and Hillary Clinton adviser Joseph Stiglitz, unveiled an agenda to “rewrite the rules” of the economy to address the imbalance between concentrated wealth at the top and stagnation at the bottom. A few hours later New York City Mayor Bill de Blasio stood in front of the Capitol, flanked by members of Congress, labor leaders, and activists, and unveiled his own 13-point plan to right the national economy.

Though the Roosevelt Institute’s agenda reaches farther than de Blasio’s, the two plans share many specifics, from national paid sick and family leave to immigration and tax reform to stronger collective bargaining rights. And they share the underlying premise that small tweaks to the economy won’t cut it—what’s needed is a comprehensive reconsideration of the full slate of laws, policies, and practices that determine who wins and loses.

To build support for this aggressive policy agenda, progressives know that first they have to change the way we talk about inequality and its origins. More than simply laying out ideas, the two plans are meant to galvanize “a coalition that can change the national debate,” as de Blasio put it. From a movement-building perspective, the benefits of putting forward an expansive, rather than narrow vision of economic transformation are obvious; low-wage workers, immigrants, criminal-justice reformers, working parents, students, and many others might find a natural place in such a coalition.

On Wednesday I spoke with one of the authors of the Roosevelt Institute’s agenda, Mike Konczal, about the report and what’s wrong with the prevailing narratives about the economy. (Konczal is also a Nation contributor.) “There is a huge policy agenda to [the report,] but it is equally about a story and a diagnosis, and from there we’re going to figure out how collectively we’re going to solve it,” Konczal said. He added that the Institute plans to release follow up reports that dig more deeply into the policy specifics.

The following conversation has been edited for length and clarity.

* * *

Zoë Carpenter: I want to start by talking about the political moment that this report comes in on. Several years after the recession, we hear from many politicians that the economy is growing and doing just fine. On the other hand, many people are still struggling, and populist voices are getting more attention. And campaign season is underway. How does this agenda fit in?

Mike Konczal: There are a lot of reports coming out—Bill de Blasio has one, [the Center for American Progress] has one, other people have one—trying to diagnose what’s going on right now. What jumped out at us was how changes to the rules of the economy—by that we mean the regulatory and institutional frameworks in which the economy operates—have really been the major driver of inequality.

We use “inequality” as shorthand for runaway top incomes, stagnating or weak wage growth for most everyone, and a lot of people who are being particularly left behind. There are a lot of stories about inequality that involve globalization or technology; or people are making different choices; or skills, which is related to technology.

What we found is that those stories just aren’t that convincing anymore. And I think that’s one reason why there’s this moment: the idea that if everyone just worked harder, or if there’s more growth, or if we gave it time, that we would see a broader shared prosperity, I think is no longer in play. And so what our report tries to do is say, okay, what is really going on here?

We have to look at things like labor rules, taxes, rules around finance, rules around corporate governance, like CEO pay and the way firms invest or don’t invest because of shareholder pressure. We see that those are much more convincing stories. I think it also gives us a sense of agency. We made the rules that do these things, and we can make them do something else.

Let’s dig into some of the choices that have been made, particularly starting in the 1970s, which is when the report says the trend really began. Can you explain how they led to concentration of wealth at the top and stagnation at the bottom?

People use the term “deregulation,” but what we really mean is re-regulation. It’s not like there are fewer rules, necessarily. It’s that they are enforced by different people, or they work in favor of private interests or established interests.

Look at the growth of the financial sector, which contributed to the housing bubble. We know that’s destructive. Previously finance was kind of a boring job. It was well paid, but it wasn’t superstars. We look at corporate governance; CEO pay fundamentally shifts in the 1980s. Before it was something like 30 times the average salary. Now it’s something like 300 times the average salary. [In 1978 the CEO-to-worker pay ratio was about 30 to 1. In 2013 it was 296 to 1.] It’s a huge shift. And there’s a huge shift of power to shareholders, which means there’s a new kind of short-termism in a lot of the industry.

Taxes came down for the very wealthy, which gave them a huge incentive to rent-seek. If the top tax rate is 80 percent, which it was in the 1970s, a board might not pay out a superstar salary, because 80 percent is immediately going to go to the government. But now there’s a huge incentive to inflate CEO value and we don’t see any real economic boost.

There’s the active dismantling of the labor unions, and then there’s the benign neglect of not updating labor rules. The economy became much more service-oriented, and those jobs—which have traditionally been considered female—do not have strong labor protections. There’s a question of whether or not we’re going to enforce standard labor rules for those sectors. Women’s labor force participation has been falling, though it’s increasing in our peer countries. That’s entirely the result of institutions, like not having access to pre-K.

All of these changes very clearly impact inequality, but there’s no evidence our economy is stronger. We can debate whether these changes would make the economy weaker, but there’s no sense that the pie is growing faster or that we’re a more robust or innovative economy for them.

There’re are a lot of people who are concerned about inequality but essentially want to do piecemeal, small-bore interjections into the economy. Maybe they want to provide income support or they want to redistribute more. Those are important things, but we argue that it’s a little bit like treating the symptoms of an illness. It’s incredibly important to treat the symptoms but you have to deal with the underlying problem as well. Redistribution and taxation is very important, but how the economy is structured to give workers more power or stakeholders more power is equally important to the discussion.

Are there examples of that kind of pre-distribution in other countries that you might point to as evidence that it actually works and makes an economy stronger?

Absolutely. We’ve done it in the past. Canada has a pretty vibrant labor movement. When we look at peer countries we can see things like, inequality is much lower. Top income shares are significantly lower. CEO pay is much lower. And child poverty, which is a good indicator of how things are going, is much lower as well.

That’s because countries have policies in place to set those rules. There are different countries that do varying parts of it in varying degrees. The focus of our report is national, so we dig into the American experience. But Germany has workers on their boards and they have a lot more sense of the idea that firms are not just for the short-term gain of shareholders. Scandinavian countries have a robust welfare system, and there’s very low child poverty. The UK instituted a child benefit, which we talk about in the report, which rapidly decreased their child poverty levels.

What would you tell people who are skeptical about the government’s ability to tackle some of these problems?

That’s a really tough one. If Obamacare continues to be successful and people have a more favorable opinion of it, maybe that might help. It’s a long-term battle.

Congress is very dysfunctional right now, but there’s a lot of the agenda that’s about regulators—people who are going to enforce financial-sector rules, or not enforce them. They’re going to have to make a decision on these really crucial issues. There’s a lot of stuff we’re trying to focus on at the state and local level as well, like Fight for $15 and other groups that are really becoming much more effective political agents.

In some sense we’re arguing that government policy is really a big reason for inequality, but we don’t want that to be read as this libertarian “Well let’s just get rid of the government” thing. There’s really no way to get around these decisions. The idea of a free market is a total myth, because there are rules that have really serious consequences. We’re stuck with this as a political problem, and hopefully positive things like Fight for $15 or the Affordable Care Act can at least build power, if not build mass acceptance of the role of government.

What else in the report do you find particularly compelling or has been overlooked?

Some of the policy stuff is meant to be a little vague. It’s meant to be more of a conversation starter. But I think there are some core themes or clusters of ideas that point a direction forward. Social Security, the idea that the government can really provide resources for people to live a more secure and thus a more free life, is crucial. There’s a reason Social Security has lived so long and done so well. Expanding Social Security in core ways, for the elderly but also for children, is a very powerful statement.

We focus a lot on public options, like reinforcing the role of public higher education. Having postal banks, a public option so low-income people can cash checks. We think that public options have a really powerful role to play going forward.

There’s a plank on criminal-justice reform that we think is so crucial. People talk a lot about the criminal-justice system, but what needs to become much more of a part of the conversation is the ways in which people with records get excluded from the labor market and become second class citizens.

We have a lot of stuff about women’s health and women’s access to reproductive healthcare that I think is an essential part of an economic agenda. Those things are important in and of themselves, but they’re so linked to inequality and who has power in the market place.

What’s your short-term vision for what you hope the report accomplishes, in particular regarding the dialogue around the 2016 election?

The short-term thing is to understand that inequality—and by inequality again we mean the whole economy, the runaway incomes at the top, and weak and stagnating incomes for everyone else—is a choice. We talk about it as if it’s something that happens like the tides or like hurricanes, like there’s no control over it. Establishing that as the story about what’s going on in the economy is an incredibly important thing in part because it will help dislocate counterproductive or outright malicious stories, like that businesses don’t have enough power or that technology has changed the nature of the world. Technology is important, but it’s not the fundamental story. Even things like technology are fundamentally shaped by the rules, like copyright and how we do trade.

The other thing is that I want it to be that when people—when liberals, conservatives, anyone—talk about these issues, they don’t talk about them in narrow, small ways. They don’t say, “Oh, inequality is a problem because poor people are very poor.” Or, “inequality is a problem because there’s this one thing over there.” I want people to be able to talk about inequality as one of the fundamental things that is wrong with the whole economy, and that fundamentally means the economy doesn’t work for everyone. At this point we can’t be thinking small-bore or narrow or siloed. We have to think big. And hopefully the 2016 election will reflect that, with people with big ideas having a very serious debate about the future of the economy.


IBW21 (The Institute of the Black World 21st Century) is committed to enhancing the capacity of Black communities in the U.S. and globally to achieve cultural, social, economic and political equality and an enhanced quality of life for all marginalized people.