Overall, I think this is an awful piece of political/economic analysis. His core thesis in this piece seems to be that economic inequality in western countries has been increasing in recent times (hes a bit vague as to the timing), and that this is primarily the result of increasing political influence of large corporations, and the resulting decisions of politicians to pass laws favourable to the rich and to big businesses. This, in turn, all stems from widespread demonisation of government. You will notice that there are at least three distinct claims here: 1) That economic inequality has increased 2) That the cause of this is an increase in the political power of corporations and the rich 3) That the ultimate cause of all these developments is demonisation of government I do not think the author makes a very careful effort to defend any of his three thesis with much quality evidence, but nonetheless let me examine them in turn. 1) That economic inequality has increased This is a well established fact. Since roughly the 1970s, income and wealth inequality has increased in most developed countries, especially the US. I wont cite the relevant literature here, but this is fairly uncontroversial. 2) That the cause of this is an increase in the political power of corporations and the rich This is much more problematic. The author makes a number of claims about this: This sort of growing inequality ... happens because politicians make choices. It is about the exercise of power, who has it and who doesnt. The institutions that allow all of us to have a say in policy ... are no longer representative of the broader public but have become captives of powerful special interests. In the US, not only does corporate money corrupt the legislative process, but there are concerted efforts to rig the game before anyone actually gets to Congress. There is no question that wealthy individuals and corporations have disproportionate political influence, and that this enables them to achieve outcomes beneficial for themselves and (often) detrimental to society as a whole. What is questionable, however, is whether such tendencies have noticeably increased in recent decades. The rich and powerful have ALWAYS had more political power and influence than others. I see no evidence that this is especially worse now that it was 30 years ago, or 60 years ago, or 100 years ago. Perhaps it is, but I would need to see specific evidence of this before being convinced. The author provides no such evidence, and as such I see no reason to take his argument seriously that the reason inequality is increasing is because of corporate influence in politics. You cant explain a changing social outcome (growing inequality) by positing a static cause (political influence of the rich) in this simplistic manner. 3) That the ultimate cause of all these developments is demonisation of government This claim is so vague that it needs to be further broken down to be properly analyzed. The author says: The big lie we have been sold is that business is efficient, dynamic and adventurous while government is - by definition - inefficient, moribund and risk-averse. Virtually any sensible economist would agree that the government is good at doing some things, and private industry is better at doing other things. It seems the author also agrees with this. The relevant question, then, is to determine which tasks fit into which category, and to figure out the criteria on which we can decide this. As such, I think that merely throwing around vague phrases like demonising government is totally unhelpful and contributes nothing to the debate. The author argues: While this [privatisation] may make some sense with a government airline or a bank, there is no logical reason it should also apply unproblematically to healthcare, education, prisons, and other areas that are essential to the operation of a civilised society. This is perfectly logical. The fact that privatisation is a good idea in the case of airlines and banks does not mean that privatisation is also a good idea in the case of healthcare or prisons. But nor does the converse follow. We need to examine particular cases, and determine whether in the specific instances of healthcare, education, prisons, etc, privatization is a good idea, and if so how, and to what extent, it should be done. Economists have done much quality work addressing these questions, and while much disagreement remains, I think that on the whole economists would generally support at least a significantly greater role for private businesses, market incentives, etc, than at least the author seems to want in these sectors. But that isnt my main point here. My main point is that the author fails to provide any reason in support of his implication that privatization and market-incentives are inappropriate for the cases of healthcare, education, etc. The author then makes another argument: When the state retreats and its functions are replaced by private firms, political control shifts from elected officials responsible to the whole community to unelected managers responsible to their boards or shareholders. This is a very strange argument, because at least prima facie it is inconsistent with his previous argument that the major cause of increased inequality is greater political influence of corporations. Is he arguing that inequality is growing because government is using its power in the wrong ways to benefit businesses, or because the government is retreating so much that it is not exercising its powers much at all? Im not saying that it is impossible to reconcile these two lines of argument, but I think there is at least a potential problem here which the author makes no effort to resolve. In particular, if government is shrinking so much and doing so much less than it used to, then it seems hard to argue that the political influence in government is a major cause of rising inequality, because after all the government is (by this argument) doing so much less. On an empirical note, it is simply not true to assert that the state has retreated in the western world. In some sectors this is true, but in general regulations continue to proliferate, and government spending as a percentage of GDP has continued to grow, or at the very least stay roughly constant. It certainly hasnt fallen substantially in the past decades. The author also quotes from economist Mariana Mazzucato regarding innovation from government. I wont get into the details of this because this post is already overlong. Ill just say that this confuses the question of funding for basic research (a government function that has increased in recent decades), and the role of the private industry in applying and commercializing this basic research. To conclude, I will just reiterate my main contention here. First, I think the author raises some valid issues: inequality in the west is rising, corporations do have too much political influence, and there are many people experiencing economic hardship. Second, I think the authors proposed explanations for these facts are either trivial, wrong, or not backed up by any real evidence. Third, I think that the authors sloppy argumentation, his failure to cite evidence, his conflation of independent arguments (e.g. going from talking about privatization to tax cuts in the same sentence, which are completely different issues), and his use of vague emotive terms like demonise government, all combine to make this piece a completely useless contribution to the public debate on these important matters. In a democracy, we need to do better than this. I expect better of educated people writing serious opinion pieces for the ABC. We should demand that such people make clear arguments, cite evidence, and offer thoughtful contributions to the debate, rather than platitudes, unsubstantiated assertions, and emotive appeals. abc.net.au/news/2013-11-28/dunlop-inequality-is-a-political-problem-not-an-economic-one/5122022
Posted on: Fri, 29 Nov 2013 00:47:13 +0000
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