Inequality or Interdependence

Will Hutton, journalist and chief executive of The Work Foundation

Hutton began his talk with the assertion that this is the “worst moment of friction between the United States and Western Europe in many years.” The blame, he said, lies with the “idiosyncratic” nature of contemporary U.S. conservatism compared with its traditional elements. According to Hutton, notable conservative-inspired developments over the past several years include the following:

Taxes are portrayed as inherently evil. Rejecting the importance of establishing and maintaining a social contract, today’s ruling conservatives believe that taxes are coercive because they undermine liberalism and individualism.

Companies focus solely on enriching themselves and top employees. Seeking profit maximization at all costs in order to raise share prices, public companies no longer plan for the long term or feel any responsibility to their workers or society in general.

The conception of “publicness” has changed. Conservatives are suspicious of public spending on institutions such as the postal service and the national park system that were created for the public good.

Such developments, along with a rise in derisive anti-liberal rhetoric from high-profile figures in government, finance, and media, have in fact weakened the U.S. economy and society in general, Hutton argues. On the economic front, trade deficits are mounting, unemployment is rising, and deflation looms. Exit rates from poverty have declined sharply in recent years at the same time that the rich elite has increased its share of wealth. Instead of increasing opportunity for all, as conservatives claim their policies will do, contemporary U.S. conservatism has “let people down” by focusing on short-term objectives that entrench or even widen social and economic disparities.

Hutton argued that through its de facto control of the International Monetary Fund and the World Bank (both of which generally condition loans on the adoption of aggressively free-market economic and fiscal policies, a quid pro quo known as the “Washington consensus”), the United States has bullied other nations to accept its economic ethics and culture. Other wealthy nations have failed to adequately challenge U.S. influence over international development and economic policies. As a result, globalization “has been contoured,” Hutton said, so that the United States is considered the benchmark—thus politics and social policies have been “conservatized” in Europe. This trend, he said, runs counter to European egalitarian traditions and could severely diminish the social safety nets that have kept poverty rates relatively low and guaranteed health care for all.

Hutton acknowledged that economic and social problems in Europe persist—notably high unemployment rates in several large nations—and that the West “very badly needs to reform itself.” He contended, though, that Europe should “stand behind” its own economic and social models while encouraging more transparent governance.

He concluded by stating his belief that most Americans agree him and would support a revival of the U.S. liberal tradition that embraced distinctly American values such as individualism yet sought collectivist solutions to social and economic problems. The conservatives claim that the relatively high U.S. growth rates of the 1980s and 1990s represent a vindication of their policies, but the first few years of this decade—marked by sluggish economic growth, stock market decline and stagnation, and corporate scandals—indicate serious economic and social flaws. The rash of corporate malfeasance alone proves that the current U.S. economic model is disruptive, unfair, and counterintuitive to the establishment of a truly open society, Hutton added.

Thomas I. Palley, director of OSI’s Globalization Reform Project

In a presentation entitled “Economics for an Open Society,” Thomas Palley also criticized the stridently pro-business U.S. economic model, calling it “fool’s gold” because its focus on share prices and deregulation have led to worsening income inequality, CEO pay explosion, lower productivity growth, wage stagnation, and longer working hours. The current European system is flailing as well, he said, because its macroeconomic policies have done little to lower unemployment—which Palley believes is a “politically decisive” economic indicator.

Palley proposed a new economic model combining the expansionary macroeconomic policies of the United States with Europe’s microeconomic policies, which he said currently do a much better job of maintaining protections and distributing income fairly. This model, he argued, would create a more balanced economy with greater equilibrium between rights and responsibilities, work and family, private and public sectors, workers and business, and manufacturing and services.

Palley said that in order for progressives to counter the conservative paradigm, they need to challenge the prevailing economic rhetoric. Conservatives have framed the debate as one between “free and unfree” ideals, with their policies representing the former. Similarly, conservatives’ masterful reconceptualization of the estate tax as the “death tax” and the tax on dividends as “double taxation” has garnered substantial support from people who might otherwise oppose their regressive tax-reduction policies.

Maya MacGuineas, co-director of the Retirement Security Project at the New America Foundation

Maya MacGuineas agreed with Hutton regarding the dangers and limitations of U.S. foreign policy unilateralism. She differed, however, on how the U.S. social contract should be constructed, maintaining that it must be based on specific U.S. concerns and not imported wholesale from Europe.

Traditional liberals in the United States, she said, want to expand the welfare state regardless of need—just to get support from the public for other projects they favor. Neither the means nor the ends of that policy are sustainable, she said. MacGuineas proposed a new social contract with the following focus points:

• creating a smaller, more efficient government;
• moving away from government entitlements to the wealthy (thus, greater means-testing); <
• strengthening the public safety net;
• eliminating government-mandated fiscal transfers from individuals to each other;
• increasing education spending.

Unlike Hutton, MacGuineas opposes additional restrictions on or requirements of employers. She also argued that she would seek to insure all Americans by giving individuals the opportunity to purchase their own health care policies, subsidized if necessary by the government.