Social Justice

Those protesters all around the big cities aren’t going away. Whether they’re right or wrong, something motivated them to be there. A lot of conservative commentators are passing the protestors off as youths who don’t feel like paying back college loans or people that took out mortgages more ambitious than their finances allowed. I think this is very inaccurate and really, really dodges the issue at hand.

People have a right to be angry at banks. Unemployment is just hovering a bit above 9% due to a balance sheet recession that many bankers were made rich from. While the economy tanked, many got big bonuses (supposedly performance-based). Any reader of this blog knows that I am a market enthusiast, but it’s hard to explain bankers getting their compensation as any sort of productive incentivizing device. Furthermore, these banks got huge bailouts from the government.

However, the protestors are wrong in confusing corporatism for capitalism. It was government who gave the banks bailout money. It was the government supporting Fannie Mae and Freddie Mac that kept artificially low interest rates and spurred a disastrous bubble in the name of ‘fairness.’ The popular radical argument on both sides these days is that the Fed was the cause of all of this (though I personally think these arguments are overstated).

So what are those in the “#OccupyWallStreet” faction hoping to accomplish? It’s unclear. Right-wingers are taking this to mean a “protest for the sake of protesting.” If a group doesn’t have clear aims in terms of policy, they’re just complaining (or so people are saying). I think this is totally unfair. The Occupiers may be foolish in trying to be overly un-organized (because then they’d be just like THE MAN!) but there’s nothing wrong with coming together because of general disdain for current conditions. A lot of the Arab Spring protests were driven my general dissatisfaction with the status quo. I’m fairly certain that the millions of protestors had incredibly varied reasons for protesting. What they shared in common was that they wanted change.

The Occupiers are just like this. The current system in America has gotten high unemployment, high debt, and frankly, rewarded a lot of people who made the problem worse. So the Occupiers are protesting the status quo.

Where I do think they are foolish is directing all of their anger at Wall Street. Wall Street created wealth and is responsible for a lot of the prosperity in America (if “Wall Street” can really even qualify as a collective noun here). The government had a lot to do with the bad stuff too.

Some opponents are saying the Occupiers are complaining about all this nonsense, yet most of them voted for Obama. Yes, Obama. The same guy who bailed out the auto companies and spent foolish money all around the place. But this doesn’t weaken the justifiability of their angst, I believe. The Tea Party was very much the same. And here’s what I’ve been waiting to get to.

The Tea Party and the Occupiers are very, very similar. Both groups were protesting the status quo with vaguely defined policy goals. The Tea Partiers wanted less government spending (from where? military? social security? medicare? they were never too clear). A lot of them voted for George Bush, the guy who did those huge wars and presided over huge deficit spending. The Occupiers want better wealth distribution and less corporatism. A lot of them voted for Obama. So yes, there’s so inconsistencies and some may say hypocrisies on both sides. But I don’t think that means they’re wrong.

I think both the Tea Party and the Occupiers are right. In fact, I’ll be as bold to say that I agree with both of the groups. Wall Street has been getting special treatment for a long time, mostly because of corporatist practices. The government has been spending beyond its means. A lot of people like to dismiss the tea party because it’s easy to characterize them as religious whackos who think any sort of government is socialism. Indeed, some people in the movement are like that. But some people in the Occupy group are just as idiotic – smelly, lazy, hippies who just like many Tea Partiers have no actual knowledge or insight for what they’re fighting for/against.

But evaluating a group based on their most absurd characters is misguided. It’s the message that we should be attacking or defending. Most importantly, we need to figure out what the policy result of these protests will be.In the case of the Tea Party, politicians were elected who mostly favored borrow-and-spend government instead of tax-and-spend government. For the Occupiers: Will corporations be so villified that business will shrink significantly in America? Or will it mean that corporations stop getting bail outs and a true free market is realized? I hope the latter.

Over at avalantern, my contemporary posted a link with this picture:

The message most people get from looking at this image is something along the lines of “wow, a small percentage of people control a large portion of the wealth in the United States.” But how important is this really? And does the United States have a uniquely inferior treatment of this inequality?

The answer to the first question, as I’ve written about before, is: not very. Wages for median family in America have indeed stagnated since the 1970’s. But in terms of standards of living almost everyone is better off compared to forty years ago. Just because rich people are even better-er off doesn’t necessarily mean an injustice. Economics is not a zero-sum game.

The answer to the second question is probably much different than most people imagine. Check out this graph from the OECD:

What sticks out to me the most is the fact that United States has the highest percentage of taxes paid by the richest decile. Furthermore, the United States does not have an absurdly different proportion of income distributed to the richest decile compared to the other profiled countries. (Note: the first graph analyzes wealth, the second graph looks at income.)

Neither graph focuses on the redistribution of wealth. The United States tends to put its tax revenue disproportionately towards defense (something that is a whole other issue altogether). But I think it’s important to highlight just how much the US taxes the rich relative to all those socially democratic European countries.

My alma mater, Swarthmore college, prides itself on being a force for social justice in the world. Swarthmore makes a big deal about being environmentally conscious, educating students to have a strong sense of  “ethical intelligence” (in the words of former college president Al Bloom) and providing generous loan-free financial aid packages so that it is financially viable for economically disadvantaged students. Swarthmore is home to the Lang Center for Civic and Social Responsibility, which supports student groups devoted to promoting social justice, encourages student engagement with issues in the local community, and works with professors to incorporate service learning into their courses.

But what are a college’s ethical obligations, and how does Swarthmore measure up? I’m actually chaperoning a week long field trip to England with a group of French students from the Lycee I’m teaching at this year, and I have limited computer access, so I don’t have time to answer the question now. But I’ve been thinking about it a lot lately, and I just wanted to get something posted so that I would have an incentive to follow up soon, since I’ve been neglecting the blog recently.

More to come soon!

Carson previously discussed the seemingly vague concept of non-aggression in certain libertarians’ philosophies. Protecting property involves state coercion just as forced taxation involves state coercion. Most libertarians would say that this isn’t comparing apples to apples. Protecting property rights is a prime role of government while wealth redistribution is just some modern gross misinterpretation of the role of the state. But, as Carson points out:

…this response doesn’t hold up, because it presupposes the institution of property rights, which are a social institution with certain rules about what it means to own something.  Among them are rules about when it is permissible to use physical force against another person.  It’s an assumption about the existence of property rights, not the non-aggression principle, that’s doing the work here.

Property rights are just as much a societal construct as the welfare state, in my opinion. “Rights” in general are just things we as a society came to agree upon all people should be privileged with (unless, of course, that person is under 18/21, mentally retarded, a convicted felon, or for a long time: not a member of the white, male, Protestant, land-owning class). They only exist because laws say they exist – and even then they can be horribly abused.

It’s hard to find a convincing justification for property rights other than the fact that they exist because they make us all better off. Without property rights, economies wouldn’t function and the prosperity that ensues from competitive capitalism would fail to emerge. Thus, we’d all be worse off. But that’s a consequentialist justification. They don’t exist because God said they do, they exist because we all realize we’re better off. Hernando de Soto believes the only thing keeping developed countries from reaching the prosperity of “the West” is well-defined property rights. But I digress.

From this, “property rights” should be given no more superiority than the right of a child to get a good education that comes via forced taxation and wealth distribution. Our societal conception of social justice is just as flimsy and societally formed as our conception of natural rights. Why should using coercion to protect Mr. Burns’s money be considered morally superior to using coercion to feed a starving child?

One thing I like about the classical liberalism is that it generally has a much more optimistic worldview than other ideologies.  Clearly, optimism is only good if it is justified, but I think that, for the most part, the optimism of classical liberalism is justified.  Without a doubt, as we conclude the first decade of the 2000’s, humanity faces plenty of challenges.  But if you look at macro trends, the world today is more peaceful and prosperous and its inhabitants have a better chance of living satisfying, interesting, and fulfilling lives than ever before.  Contrast this with pessimists on the right, who worry about a society that is rapidly becoming less religious, more tolerant, and more culturally liberal, and pessimists on the left who fret about rising levels of income inequality, potential environmental catastrophe (which I think is a warrented, although often exaggerated, concern), and globalization.

Because of the current economic downturn, this is an especially difficult time to convince people that humanity is on the right track.  I certainly do not want to diminish the very real and tragic effects of unemployment and economic insecurity resulting from the global recession.

However, looking at the state of the world from a global perspective, things are actually pretty good, as Matt Yglesias pointed out last week: “if you’re one of the 2.5 billion people who live in China or India, this is pretty much the best of times. This also seems to be the best of times for Indonesia, and Brazil the world’s fourth and fifth largest countries. That’s 43 percent of the world’s people living in four countries who’ve had a very good decade.”

So again, it’s truly tragic that many people in the developed world are losing their jobs and homes and struggling to to maintain the quality of life to which they have become accustomed.  But citizens of developing countries are pulling themselves out of poverty at an unprecedented rate, and I think that that justifies continued optimism about the progress that we will see as we head into the next decade.

Mark Thoma recently linked to an interesting piece discussing why some countries have higher social mobility than others.

As I’ve written before, I think that people are wrong to focus on relative wealth (aka inequality) than absolute wealth (aka improved standards of living). However, the element of social mobility is relevant, as it signals in a sense how much income is decided by factors like hard work and how much income is decided by factors like personal connections, having a large trust fund, etc.

The United States, perhaps unsurprisingly, is grouped with countries like the United Kingdom, France, and Italy as places with relatively low class mobility compared to countries like Denmark, Norway, and Canada.

But before we write off capitalism and trump huge Scandinavian welfare states, we need to look more into the study. Causa and Johansson, the authors of one study mentioned, found:

Across European OECD countries covered by the analysis there is a substantial wage premium associated with growing up in a higher-educated family, whereas there is a penalty with growing up in a less-educated family, even after controlling for a number of individual characteristics.

I am willing to accept that the horrible state of education – especially in lower-income parts – in America plays a large part in decreased social mobility. But it’s not for lack of effort. The United States does not lag these countries in education spending. In fact, America spends a tremendously larger amount, both in absolute terms and per GDP per capita, than the countries that have higher social mobility.

Some other findings also conclude that egalitarian governmental programs do indeed increase social mobility. Check out the post here.

Egalitarians often point to wealth inequality as a sign that society is not doing enough to improve the conditions of the poorest. But inequality and standard of living are completely different and should be treated as two separate issues.

I remember in my AP political science class we were told that psychology tests proved that people – despite what they believed – were more concerned about relative wealth than absolute wealth. In other words, picture these two situations: I get $40 and you get $70 in situation A. In situation B, I get $30 and you get $45. In Situation A, we both have more money. We are both wealthier in absolute terms. In situation B, the inequality of our respective wealths is less, but our absolute wealth is lower; on the other hand, my relative wealth is better in B than in situation A.

I think – or at least I hope – that we all can agree that situation A is a preferred outcome, since both of us have more money which means a better standard of living (in the material sense).

One of the biggest fallacies about economics is that it is a zero-sum game. What I mean by this is that if I become ten dollars richer, I have taken it away from someone else. In other words, Bill Gates having X billions of dollars means that we are X billions of dollars poorer. Au contraire!

Market economies thrive on quite the opposite; the total amount of wealth in society is never a fixed amount. The idea is, at least in theory, that instead of artificially redistributing the “slices of pie,” making “the pie” bigger is a better way to help the worst-off in society (as Rawls himself even admitted). History, I believe, is on my side when comparing capitalism with extreme socialism or communism: the poor in the Soviet Union, East Germany, North Korea, or any African socialist utopia are much worse off than in America. In the last few decades, China and India have lifted hundreds of millions of people out of poverty by embracing market reforms. At the same time, wealth inequality has increased. Shouldn’t that be considered a necessary evil instead of something to combat, at the possible expense of further growth?

In my internship this summer for an education think tank, I remember reading a great piece (though I can’t find it now) arguing that achievement gaps shouldn’t be considered as much as proficiency gaps between races/income groups. In other words, instead of caring about the difference in test scores between rich kids and poor kids, we should just be making sure that every child is proficient in all the necessary areas. Caring about the achievement gap can create a false sense of progress, as Carson noted in a previous post, because if the best-off people actually decrease their well-being the inequality has gone down without actually improving the standard of living for the worst-off.

Ok, so that’s my first point: absolute wealth should be considered over relative wealth. But the measurements by which we look at inequality also need to be reconsidered. Will Wilkinson recently wrote an excellent paper questioning the often-reported rise inequality in the United States, saying that, among other things:

  1. The level of real economic inequality is lower than popular treatments of the issue have led many of us to think.
  2. The level of economic inequality is an unreliable indicator of a society’s justice or injustice.
  3. Inequality distracts us from real injustices that are given too little attention.

Check it out if you’ve got time.

An example of a pie that can represent wealth distribution

An example of a pie that can represent wealth distribution

There’s a great exchange between W. Jerome and commenter Benjamin on W. Jerome’s recent post on the buildup of troops in Afghanistan that has coincided with Obama’s Nobel Prize (here is W. Jerome’s first post on the subject).  I voted for Obama, and although I haven’t been thrilled with lots of things he’s done as President, I’m still confident that he is better than the alternative.  He especially deserves praise for all that he has done to improve US international relations.  However, I agree with W. Jerome that it’s odd to award the Nobel Peace prize to a president who has recently doubled troop levels in Afghanistan (especially if the prize is supposed to be a repudiation of Bush’s warmongering) and who presided over two wars that have a combined death count of about 3500 in the last six months.  Sure, Obama might deserve the prize more than some previous winners like Yasser Arafat, but if the standards are that low then the prize has lost most of its meaning.

One of this year’s Nobel Laureates in economics is Elinor Ostrom, who before she won the prize was relatively unknown.  A cool result of her prize is the explosion of online discussion about her underappreciated but important work.  This is relatively uncommon for winners of the economics Nobel.  Academic economists tend to be a fairly tight and well-connected group, so if your work is important enough to win a Nobel then it’s likely that most economists are familiar with it (Ostrom is an exception largely because she’s a political scientist and not an economist).

There is no similarly well-connected group of people doing great work that promotes world peace.  Therefore, every time people like Obama, Al Gore, and Jimmy Carter win the Nobel Prize, it’s a missed opportunity to highlight incredible work that is not publicly understood or appreciated.  The Nobel Peace Prize can do a lot more good by raising public consciousness of people like Jody Williams and Muhammad Yunus (even if microcredit is overrated) than it can by making symbolic political gestures to honor people for whom peace is mostly just a talking point.

Like sweatshops, we should do our best not to support companies that use child labor. Right?

I’ve previously brought up my belief that sweatshops are a positive force for the people that work in them. Similarly, I believe that international activism aimed at ending child labor practices are not only misguided, but actually make the conditions of children even worse off.

Like sweatshops, children work in relatively harsh conditions because their better alternatives stink. If you take away the best alternative, you don’t make those people better off my ‘taking a stand’. You put them into even worse conditions. Such was the case when, as Oxfam documented, a closing of a “sweatshop” caused a large majority of the young women employed to go into prostitution. Sweatshops are horrible, but is prostitution better? (Read the article by Ben Powell to get a full argument in support of sweatshops.)

In America, we like to think that all children have the right to education and that kids shouldn’t have to work, especially in horrible conditions. But picture America 200 years ago (or maybe even more recently than that). Kids were working all around the country. On farms, in factories, in daddy’s blacksmith shop, etc. This was because, at the time, America hadn’t reached a stage of economic development where those families could afford to forfeit their child’s free labor so that they could get an education. Only later, when America experienced tremendous economic growth, did families have the luxury of sending their kids to school instead of using their labor for working. In short, economic growth – though sometimes slower than we have patience for – is the true remedy for improving working conditions, not labor laws.

These arguments might not seem persuasive. You might be saying “sweatshops are just one of those things I know are wrong. How can you justify these cruel practices?”

I bring up this topic because a recent article linking international activism against child labor with decreasing conditions for the people that activism is aiming to help. To sum up, when we lower the demand for the products that these children are producing, their wages and conditions consequently decrease. Why is this, and why is there nothing that we can do through interventions like boycotts and legislation? Again, I suggest reading Ben Powell’s essay.

Matt Yglesias posted a few days ago lamenting the high rate of unemployment for low-skilled American workers:

The brunt of the burden of unemployment is being borne by the least-skilled members of the workforce. In part that’s because high-skill occupational categories haven’t been hammered as heavily as construction and manufacturing…. It’s perhaps a sign of a more efficient, more flexible economy that we’re getting “better” at shifting recession-related burdens onto the low-skill people who are probably worst-positioned (in terms of savings and social capital) to deal with economic distress.

Low-skilled workers, already disadvantaged relative to other Americans, have been hit particularly hard by the recession, as Yglesias points out.  In light of this, we should support pro-employment policies so that this group of Americans will have an easier time finding jobs.  But among all the media coverage of the job creation potential of the stimulus this summer, it was easy to miss the job-killing measure that went into effect on July 24: the 70 cent hourly minimum wage increase from $6.55 to $7.25.  According to UC Irvine economist David Neumark, the wage hike will kill about 300,000 jobs for worders aged 16-24.

Granted, the number of jobs destroyed by this minimum wage hike is probably small compared to the overall low skilled unemployment effects of economic structural changes that Yglesias discusses.  Certainly the reason that the United States is hemorraging low skilled jobs at the current rate isn’t because of our minimum wage laws.  But that doesn’t change the fact that our minimum wage laws are counterproductive and hurting the very people that they are supposed to help.  It’s unfortunate that the professed concern for the poor of influential progressives like Yglesias never leads to criticism of the minimum wage.

What’s especially frustrating for those of us who really care about helping low-wage workers is that there is a program that does what the minimum wage is supposed to do (increase pay for low-wage jobs) and avoids raising employment barriers for the same group it’s intended to help: Earned Income Tax Credits, which subsidize low-skilled workers without raising costs for the employer.  Rather than pushing for increases in the minimum wage, progressives should be clamoring to increase EITC.  If being progressive is about wanting to help the poor, then this should be the progressive position.

Progressives’ continued support for minimum wage increases shows that as a group, despite their populist rhetoric, they don’t care enough about poverty to take the time to learn which policies actually help the poor and which do not.  Instead, they choose to ignore the economic evidence and continue to engage in counterproductive altruistic signaling aimed at the economically illiterate.

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