Sunday, June 30, 2013

Predistribution: Changing the marketplace to support economic justice


One of the most interesting topics in progressive circles is the concept of restructuring the marketplace to reduce inequality. The idea is called predistribution and comes from Dr. Jacob Hacker at Yale University and others. The idea is a major policy proposal of the UK labor party. Hacker previously co-authored "Winner take all Politics"  in 2010.

Predistribution is the idea of changing the political economy to benefit the poor and middle class before wages and economic rents are earned rather than after they are paid when the government must redistribute income though taxes and subsidies. The idea is to "change the rules of the game" before the game is played.

In our current political economy, nether the Democrats or the Republicans know how to grow stagnating wages (vs. productivity), increase opportunity for the middle class (and the poor ?) and decrease inequality.

The political parties instead fall back of past policies such as: using increased taxes and transfers to reduce inequality (known to work), or reducing government spending and debt to create jobs (policy may work under certain circumstances but does not reduce inequality).  And any proposal to increase taxes does not have wide political support as a large number of people believe they should keep what they earn and do not trust the government to use the money wisely.

Hacker asked why other market democracies have had a small increase in inequality and the US a very large jump in income inequality.  He also researched why the US now ranks near the bottom in economic opportunity for western market democracies. He argues that in the US more than any other country, the rich have captured the rule making process and excluded the middle class and poor.  They have manipulated the rules in the last 30 years to tilt the balance in their favor. Predistribution suggests that a different set of rules should be used.

Here are some examples of predistirbution proposals:

1) Increasing the bargaining power of labor(and perhaps labor unions).
2) Reducing corporate subsidies.
3) Eliminating fees and paperwork on small businesses.
4) Limiting corporate executive pay.
5) Increasing the minimum wage. Access to paid sick leave.
6) Quality public services: childcare, healthcare and pensions.
7) A guarenteed job with a promotion path.
8) Lifetime learning, development or education.

Many of them exist in other political economies like western Europe which have much less inequality.

Hacker wrote about the concept of predistribution in his important May 2011 paper called: The Institutional Foundations of Middle Class Democracy. In the paper, he analysis the current political economy in the US.

The paper was presented as part of publication called: "Priorities for a new political economy:Memos to the left." which collected papers for a conference on progressive governance.

Any here are some background article on predistribution. Tell us what you think.

Institutional Foundations of Middle Class Democracy by Jacob Hacker

How to reinvigorate the Center-Left. Predistribution. in the UK Guardian.

Predistribution and the living standards crisis at the Institute for Government Website.

Finally, BBC analysis radio program has a segment called "Predistribution"


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