To End Inequality, Attack Poverty, Not the 1 Percent
In June, I wrote in praise of Luigi Zingales’s book, “A Capitalism for the People.” At that time, I examined his call for elevating pro-market values over pro- business values.
Now I would like to return to the book, to analyze his discussion of an issue very much at the heart of the current electoral season -- economic inequality -- and to explain why the way Americans talk about the problem leads us in the wrong direction.
As Zingales points out, income stratification isn’t driven by those at the far right end of the curve. If you plot the distribution of income and cut off the 1 percent with the highest incomes -- if we assume that they don’t exist -- the curve doesn’t really change. (Try it, or look here.)
The bunching is below the median. If income inequality is a problem, that is where the problem exists -- not in the few that lie on the far right tail, but in the many who lie on the far left tail. Although the Gini index of income inequality has increased only slightly during the past decade, the rate of poverty has risen steadily, now standing at over 15 percent. In short, the moral dilemma of inequality arises not because some tiny number of people are too rich, but because some large number of people are too poor.
I was raised to the old-fashioned sort of liberalism that put the poor at the heart of politics. Nowadays, neither major political party talks much about poverty; it is difficult to find programmatic evidence that either party actually cares. As Peter Edelman puts it in his provocative new book “So Rich, So Poor,” “it is also not clear whether the aims of ‘the 99%’ actually include the whole 99 percent.”
Republicans have rarely paid much attention to the issue, and Democratic Party consultants tutor their candidates not to discuss poverty because “programs for the poor are poor programs” -- meaning the electoral market won’t pay for them with votes.
Money is relatively meaningless except in relation to what it can purchase. Thus, one way to understand poverty is that the poor can buy less than others. The Supplemental Nutritional Assistance Program (formerly known as food stamps) tries to alleviate income-based differences in what food can be purchased. Medicaid and, to some extent, the Affordable Care Act try to do the same with health care. (I have long believed that we should attempt to equalize buying power more directly by simply transferring cash to the poor, but such proposals tend to run afoul of worries about moral hazard, along with fears that the poor will misspend or that the bureaucratic bucket is too leaky.)
But such measures, Zingales writes, are Band-Aids. In order to repair the problem we have to know what causes it. Zingales reminds us that the principal driver of income inequality remains education. The more educated you are, the higher your earnings are likely to be.
Zingales -- a professor at the University of Chicago’s Booth School of Business and a frequent Bloomberg View contributor -- is in many ways a fan of the American educational system. He thinks it possesses virtues not captured in the comparative international testing that so enthralls the news media. For example, American students are more likely than those elsewhere in the world to challenge their teachers, and to question authority generally -- qualities that are useful not only for democratic governance but also for the spirit of entrepreneurship and innovation.
Although there is much debate over the reasons, our educational system leaves plenty of children behind. Here, as with other topics in the book, the principal solution for Zingales is competition, such as vouchers that would force public schools to persuade parents to send their children there and an easing of tenure for teachers, to simplify the dismissal of those who perform poorly.
Such sentiments are often dismissed on the left as demonizing teachers. This is unfortunate, and even silly -- a bit like saying that if you think a smaller, nimbler military is better suited to the demands of the new century you are demonizing soldiers. One needn’t be a critic of public employees or their unions to recognize that they aren’t the reason government exists.
On the other hand, the claim that public education will be improved by competition is somewhat weakly anchored. Vouchers have long been understood to help the best students, but there remains considerable debate over their efficacy in helping the worst. One can admit all the troubles Zingales and others list and yet confess that we don’t really know for sure what will work to improve education for those who are suffering the most from the ravages of poverty.
Moreover, the teacher-tenure issue is more complex than reformers seem to assume. Yes, the usual three years is probably too short a period in which to earn what amounts to a lifetime of job security, and the use of tenure to protect wrongdoers can become frightening. On the other hand, there are historical reasons that tenure policies were adopted -- in particular, a decided arbitrariness in the treatment of a (heavily female) workforce by (heavily male) supervisors and school boards.
Perhaps the world today is less arbitrary; perhaps the costs of tenure in its current form have become too high. But we shouldn’t pretend that tenure was invented as a nefarious plot to rip off taxpayers. (Where tenure has been abolished or significantly limited, demand for public employment has fallen sharply.)
This is not to say that school vouchers are a bad idea. There is a deep and indefensible hypocrisy in the Democratic Party’s stony opposition to programs that would allow poor parents to make educational choices similar to those often exercised by the party’s leaders and contributors -- especially given the party’s claims to believe in the importance of undoing inequality. Indeed, the best argument for vouchers isn’t results but equality, that is, helping the poor to afford what the well- off can buy. After all, parents of means are free to choose private schools that others would avoid.
The moral quandary posed by income stratification stems not from the buying power of the rich but from the buying power of the poor. Once we see that wealth inequality lies in what one is able to purchase, it follows readily that we cannot seriously promote equality as long as private elementary and secondary education remains the preserve of the rich. Among the poor, demand for private education is high: Whenever voucher programs are offered, low-income parents drown them in applications. Anyone who claims to speak for the 99 percent should take this demand seriously.
(Stephen L. Carter is a Bloomberg View columnist and a professor of law at Yale University. He is the author of “The Violence of Peace: America’s Wars in the Age of Obama,” and his latest novel is “The Impeachment of Abraham Lincoln.” The opinions expressed are his own.)
Today’s highlights: the editors on India’s power failures and on how Congress failed on cybersecurity; Ezra Klein on Mitt Romney’s exploding tax plan; William Pesek on higher food prices and Asia’s poor; Virginia Postrel on the historical lie behind “you didn’t build that”; Jonathan Weil on stopping wrongdoing by banks; Richard Cohen on the changing of the guard in Olympic fencing; Mohamed El-Erian on why central bankers can’t save the world; Handel Reynolds on cancers we don’t need to know about; Anthony B. Sanders on why Edward DeMarco was right to block mortgage writedowns.
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