In her second post on Jacob Hacker and Paul Pierson’s new book, Charlotte Cavaille offers some thoughts about how to bring comparative politics back into the study of American economic inequality.
In my previous post, I summarized and lauded Hacker and Pierson’s recent book on the political origins of the dramatic increase in income inequalities in the US. The authors reject the focus on “apolitical processes of economic change” and point to the political origins of the increase in hyper-inequality. They call for students of American politics to closely examine the interactions between public policies and the economy. In this post, I reflect on the larger implications this book has for research on the causes of income inequality. Economists and political scientists, as I concluded in the previous post, ask different questions. What exact question should we (political scientists) be asking?
Option 1. The “Size” Question and the use of Comparison.
If economists point to trends buttressing income inequality, then political scientists’ job might be to ask how the political system heightens or softens this trend. Hacker and Pierson make an extensive use of international comparison to highlight how “unnatural” the American case is.
If one is to use comparison to present an empirical puzzle then one needs to bring comparison in the analysis itself. I know American politics is a sub-field of its own that only looks at America. But this book makes a strategic use of comparison with Europe to make its point clear. If it is to do so, then it should also foster a strong comparative research agenda. For example, if the situation in France allows Pierson and Hacker to claim that economic restructuring does not explain much, then they need to show that their focus on politics can also better explains the French case.
The real puzzle to me is not why the top’s share of national income has skyrocketed. Polanyi has already given us a framework that would predict the business interests’ counter-reaction to the 50’s and 60’s. Economists are convincing when pointing to the structural weakness of labor in the “new” economy. Peter Hall has theorized about changes in economic policy paradigm and the way they have favored business interests over the rest. That this has happened is of surprise to no one. What is of real surprise is the extent to which it has happened in some countries and not others, the extent to which some countries have been able to reinvent themselves in a more egalitarian way. The real puzzle is cross-national variation and this is what Hacker and Pierson need to address next.
The authors have told us where to look (policy, organized interests, political institutions) and what to look for (drift in particular). Now it is up to us to come up with the right measures and concepts that would facilitate comparison!
This might give leverage on one key weakness in the argument: why was business so efficient at collective action and coordination? Can the same story be told for the UK? Another case is France. It has undergone in the 90’s important financial de-regulation which brings it closer to the UK than Germany in terms of the structure of its financial market. However, it did not see an increase at the very top. Why?
Option 2. Not one but Many Inequalities: Explaining how they all Fit Together.
Should our theory of the causes of income inequality account for the whole distribution of income? Or is there one theory for each type of inequality? If so then maybe the very top and the very bottom (through minimum wage laws) are mainly about politics while the “middle” is mainly about a structural change in the economy.
What does it mean to focus on top incomes? I know why this concentration of income is problematic both for normative reasons and because of its impact on the distribution of political power. But what does it mean in terms of income distribution for the population as a whole? I thus intuitively agree with this comment by Tyler Cowen:
“To the extent the high incomes at the top come through capital markets, it is either value created or a transfer/redistribution. You can argue over the percentages, but to the extent it is the former it is not at the expense of the median. To the extent it is the latter, the losers will be other investors, not the median earner or household, who does not hold much in the way of stock (lower pension fund returns don’t count in the measure of median stagnation).”
I think that good data would prove Cowen wrong: investors are not always the super rich but also your grandparents’ pension funds; high CEO wages do jeopardize the long-term prospects of the company they work for, this money if reinvested in different sectors of the economy would have participated in the increase in income of the middle class etc… But I have not seen very good data or articles explaining how exactly the disconnect between productivity growth (high) and average wage growth (low) can be linked to the situation at the very, very top.
Pierson and Hacker do try to link between the top and the rest of the income distribution. More specifically they address the “trickle down” argument, namely the claim that without such gains at the top, growth might have been smaller and the rest of the population poorer in comparison. To oppose this argument they use the example of Europe. They point out that on the other side of the Atlantic, growth was as robust, without such an increase at the top. They continue by adding that GDP per hours worked rose faster in Europe than in the US, as if to say “look, it was even better over there!” (p 159). They do not explain anything however: that productivity rose faster in Europe does not explain how income was actually redistributed. Who benefited from the productivity gains?
Again, there are good reasons, independent of the (stagnating) trends in the income growth of the middle class that would warrant focusing on top incomes (especially on how little they have been taxed). However, it seems to me that to make an argument about the unequal distribution of income, more needs to be done to explain what part exactly the finance industry for example plays in the equation and how it impacts the income of other sections of the labor force.
Political science and politics: overcoming the “leftist fatigue”
Now to my last point: what can we, political scientists, do to participate in a reform of the system towards a more egalitarian outcome?
In the Politics & Society special issue, Fred Block and Frances Fox Piven point out that Hacker and Pierson’s focus on the organizational power of business interests is nothing new. Not only does it sound familiar to any close witness of Washington politics, it has also been central to the work of many political scientists in the 50s and 60s (Lindblom, Schattschneider). They attribute the field’s amnesia to three factors, the quantitative turn, the left fatigue and intellectual timidity and ask: “what can be done to ensure that Hacker and Pierson’s (rediscovery) does not suffer from the same fate of rapid disappearance from (political science)’s memory bank?” I see several ways for this not to happen:
– Increase the size of the sample through comparison, i.e. get American politics out of America! (see above)
– Improve the way we measure these political processes: how to measure business power relative to labor power? How to measure the lobbying power of conservative elites?
I thus argue in favor of an effort to “quantify” through comparison and rigorous measures. Block and Piven argue that the quantitative turn in American politics is what has hindered the study of (business) power. I think however that we need to think hard about a way to describe such political change, using these quantitative tools. The danger is that we will otherwise only be read by link-minded colleges and not by the whole field.
– a final point is to complement the focus on elite politics with one on electoral politics: why is it that the general public does not seem concerned by increasing inequalities at the top? Is it true in all Anglo-Saxon countries? Is it because standard of living has not impacted, especially thanks to extensive lines of credit to the middle class? How will this change following the current crisis? We need to give a full picture to convince readers of the size of the power asymmetry that now favors the very rich.
Let’s see how well I can stick to my own admonitions!