The Occupy Wall Street protests are not visible in our cities now, but their remarkable impact is clear for all to see. Large questions about the fairness of our economic system, once excluded from conversations among “serious people,” have been restored to a prominent place in public discussion. But questions do not answer themselves. What can we do to reduce the stark inequalities that have grown over the past 30 years? That is the topic of this issue’s New Democracy Forum.
The conventional policy response focuses on increased taxes for top earners. In his lead article, David Grusky—Stanford professor of sociology and director of the Center for the Study of Poverty and Inequality—aims to move the debate in a different direction. He argues that an exclusive focus on a “tax-based redistributive agenda” narrows OWS’s complaint. It is also misguided. Americans do not like tax hikes. Moreover, growing income inequality has been driven largely by pre-tax income. So focusing on taxes is too little, too late. The more fundamental problem lies in the way we organize our markets: they are rife with corruption, bottlenecks, and artificial barriers to competition, all of which conspire to generate extravagant returns (“rents”) for the wealthy. Grusky points to our systems of higher education and executive compensation as striking examples. And he describes institutional reforms that would address unfair income inequality where it starts.
Respondents raise a wide range of sharp objections: that inequality is not an appropriate focus of public policy; that increased tax rates would also reduce pre-tax inequality; that markets are always politically structured and that the ideal of perfect competition as a solvent for rents is illusory; and that Grusky’s proposals do not go far enough to address the roots of unfair returns. In the end, the right answers to these questions remain unsettled. But the forum advances the debate by getting the right questions on the table.
With Madawi Al-Rasheed’s article, we shift attention to last year’s aborted revolt in Saudi Arabia. Inspired by successes in Egypt and Tunisia, Saudis began pressing for representative government, equality, and jobs. Their Arab Spring gathered momentum with online calls for nonviolent mass protest. But as Al-Rasheed shows, the protests were killed by a mix of intimidation, religious rhetoric, and economic handouts, even before Saudis moved to the streets. The protests were limited, ultimately, by the absence of a Saudi civil society—the labor unions and civic organizations so crucial to success elsewhere.
In his contribution to the forum, Glenn Loury suggests that a robust civil society—with rich public discussion—may be essential to all reform: “It doesn’t make much sense to think about rents and market failures when inequality is mainly a product of our impoverished ideas about autonomy, community, and solidarity.” Whether mainly a product or partly a product: ideas matter.