Friday, November 27, 2015

Capitalism for Growth, Goverment for Fairness

When I hear discussions of how to encourage economic growth, along with equality and fairness, I sometimes feel as if the discussants are in the grip of a category confusion, like someone who rinses their vegetables in the shower and then tries to bathe in the kitchen sink. Here's the confusion as expressed in an October 1990 opinion column by Donald Kaul, who was a prominent opinion columnist, mainly with the Des Moines Register, from the 1970s through the 1990s. Kaul wrote: 
We have come to rely upon capitalism for justice and the government for economic stimulation, precisely the opposite of what reason would suggest. Capitalism does not produce justice, any more than knife fights do. It produces winners and energy and growth. It is the job of government to channel that energy and growth into socially useful avenues, without stifling what it seeks to channel. That's the basic problem of our form of government: how to achieve a balance between economic vitality and justice. It is a problem that we increasingly ignore.
In the modern version of this category confusion, a number of politicians and my fellow citizens seem to view it as the role of companies to provide justice and fairness. Their policy prescriptions seem to be all about how companies should be held responsible for providing higher wages, a more equal distribution of wages, health insurance, pensions and retirement accounts, parental leave and sick leave, job training, healthy foods, affordable housing, a sufficient number of parking spaces cleaning up the environment, paying more taxes, and so on. 

Meanwhile, when the discussion turns to encouraging growth in the US economy, the topics that seem to come up most often are how the government can encourage growth. Sometimes the focus in on how the Federal Reserve should be boosting growth through its monetary policies. Sometimes the focus is on how government should be boosting growth through tax cuts or spending boosts, either in general terms or by subsidizing  preferred sectors of the economy like noncarbon sources of energy and building more roads and bridges.  

Striking the balance between "economic vitality and justice" (in Kaul's phrase) can be an intertwined and delicate business.  But framing the discussion in a way that government is supposed to provide growth and companies are supposed to provide fairness is topsy-turvy, and blurs the lines of responsibility in a way that does not benefit either economic growth or concerns of fairness and justice.