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Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class Paperback – March 15, 2011
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Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class
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Authors Hacker and Pierson describe it as a thirty years war that slowly, almost imperceptibly eroded the economic and political power of the middle class. It wasn't coincidence or evolutionary change, but a deliberate, daily, stealthy grab for political and economic power that continued until one day the nation of middle class woke up to a recession that cost them their homes and livelihood while they couldn't help but notice that those who caused it, the bankers on Wall Street, strutted away keeping their own homes, jobs, bonuses, and even liberty.
"From 1979 to 2006, the top 1 percent received 35 percent of all the income growth generated in the American economy, while the highest 1/10th of 1%...received nearly 20 percent, even after taking into account all federal taxes and all government and employer-provided benefits." The middle class and the poor have been barely able to keep pace with income adjusted for inflation, as healthcare costs, homes and education skyrocketed.
So, how did such a disparity come about?
They call the change from the 1970's to the present, drift. Nixon was the last president to pass sweeping liberal legislation. With Jimmy Carter as president and a Democratic majority in Congress, one liberal proposal after another went down to defeat and the drift continued to the right as conservatives and right wing interests began to organize. The Business Roundtable, the Chamber of Commerce began to make massive fund-raising drives. Firms with high political stakes moved from New York City to Washington D.C. setting up offices on "K" Street. Lobbyists grew in number until they exceeded the members of Congress five fold. Perhaps the most important part of their success was the apathy of the American people toward politics, or the naiveté of Americans who believed that the election meant the fight was over. Lobbyists worked 365 days a year, and began to chip away at unfavorable legislation the moment after it was introduced on the floor or signed by the president.
Those who blame both parties have a point. Long the darlings of the middle class, the Democrats had to pay attention to an electorate that could raise money against them. Their labor base had long been destroyed to the point that unions had most of their membership now in the public rather than the private sector. Democrat stalwarts became "Republicans for a Day" as the authors referred to Barbara Boxer, Nancy Pelosi, Chuck Schumer, and Diane Feinstein knew that voting for the middle class and against powerful interests could mean overwhelming political challenge.
Liberal and progressive Americans were perplexed that the President's political engine seemed to be on idle after he had a majority in both houses of Congress. No one counted on the Senate's ability to throw a wrench in the works where many states reel an inordinate amount of power for their interests and small populations. Increasingly arrogant and intransigent, a 60 member majority made it ideal for them to stymie anyone's agenda. Republicans voted solidly down to the last senator, and Democrats had to scramble to get every Democrat. Add uncooperative Tea Partiers, moneyed interests pushing everyday, and "Republicans for a Day," and you have a middle class whose power and political muscle have dwindled to virtually nothing.
Hacker and Pierson present intelligent argument and discussion of how the shift of power took place. They see our recent political history as a "who-done-it" detective story, and they are in search of the causes, the motives and the outcomes. They counter the argument that it was just coincidence or social Darwinism as the vehicles that just happened to make the rich much richer than the rest of the socio-economic classes. As the argument goes, everyone benefits from the rich becoming richer--the water level rises for everyone, but the authors prove that big money and corporate power have insured through legislation that they will keep getting a bigger share of the pie than everyone else--as their yachts go through the locks, they shut out the smaller boats and dinghies. While this is not in-depth, it is never boring and will reach a wider range of readers.
The authors take an apt quote from Charles Montesquieu who wrote: "An imbalance between rich and poor is the oldest and most fatal ailment of all republics."
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The underlying argument is straightforward. The sources of American economic inequality are largely political - the result of deliberate political decisions to shape markets in ways that benefit the already-privileged at the expense of a more-or-less unaware public. The authors weave a historical narrative which Kevin Drum (who says the same things that I am saying about the book's importance) summarizes cogently here. This is not necessarily original - a lot of leftwing and left-of-center writers have been making similar claims for a long time. What is new is both the specific evidence that the authors use, and their conscious and deliberate effort to reframe what is important about American politics.
First - the evidence. Hacker and Pierson draw on work by economists like Picketty and Saez on the substantial growth in US inequality (and on comparisons between the US and other countries), but argue that many of the explanations preferred by economists (the effects of technological change on demand for skills) simply don't explain what is going on. First, they do not explain why inequality is so top-heavy - that is, why so many of the economic benefits go to a tiny, tiny minority of individuals among those with apparently similar skills. Second, they do not explain cross national variation - why the differences in the level of inequality among advanced industrialized countries, all of which have gone through more-or-less similar technological shocks, are so stark. While Hacker and Pierson agree that technological change is part of the story, they suggest that the ways in which this is channeled in different national contexts is crucial. And it is here that politics plays a key role.
Many economists are skeptical that politics explains the outcome, suggesting that conventional forms of political intervention are not big enough to have such dramatic consequences. Hacker and Pierson's reply implicitly points to a blind spot of many economists - they argue that markets are not `natural,' but instead are constituted by government policy and political institutions. If institutions are designed one way, they result in one form of market activity, whereas if they are designed another way, they will result in very different outcomes. Hence, results that appear like `natural' market operations to a neo-classical economist may in fact be the result of political decisions, or indeed of deliberate political inaction. Hacker and Pierson cite e.g. the decision of the Clinton administration not to police derivatives as an example of how political coalitions may block reforms in ways that have dramatic economic consequences.
Hence, Hacker and Pierson turn to the lessons of ongoing political science research. This is both a strength and a weakness. I'll talk about the weakness below - but I found the account of the current research convincing, readable and accurate. It builds on both Hacker and Pierson's own work and the work of others (e.g. the revisionist account of American party structures from Zaller et al. and the work of Bartels). This original body of work is not written in ways that make it easily accessible to non-professionals - while Bartels' book was both excellent and influential, it was not an easy read. Winner-Take-All Politics pulls off the tricky task of both presenting the key arguments underlying work without distorting them and integrating them into a highly readable narrative.
As noted above, the book sets out (in my view quite successfully) to reframe how we should think about American politics. It downplays the importance of electoral politics, without dismissing it, in favor of a focus on policy-setting, institutions, and organization.
First and most important - policy-setting. Hacker and Pierson argue that too many books on US politics focus on the electoral circus. Instead, they should be focusing on the politics of policy-setting. Government is important, after all, because it makes policy decisions which affect people's lives. While elections clearly play an important role in determining who can set policy, they are not the only moment of policy choice, nor necessarily the most important. The actual processes through which policy gets made are poorly understood by the public, in part because the media is not interested in them (in Hacker and Pierson's words, "[f]or the media, governing often seems like something that happens in the off-season").
And to understand the actual processes of policy-making, we need to understand institutions. Institutions make it more or less easy to get policy through the system, by shaping veto points. If one wants to explain why inequality happens, one needs to look not only at the decisions which are made, but the decisions which are not made, because they are successfully opposed by parties or interest groups. Institutional rules provide actors with opportunities both to try and get policies that they want through the system and to stymie policies that they do not want to see enacted. Most obviously in the current administration, the existence of the filibuster supermajority requirement, and the willingness of the Republican party to use it for every significant piece of legislation that it can be applied to means that we are seeing policy change through "drift." Over time, policies become increasingly disconnected from their original purposes, or actors find loopholes or ambiguities through which they can subvert the intention of a policy (for example - the favorable tax regime under which hedge fund managers are able to treat their income at a low tax rate). If it is impossible to rectify policies to deal with these problems, then drift leads to policy change - Hacker and Pierson suggest that it is one of the most important forms of such change in the US.
Finally - the role of organizations. Hacker and Pierson suggest that organizations play a key role in pushing through policy change (and a very important role in elections too). They typically trump voters (who lack information, are myopic, are not focused on the long term) in shaping policy decisions. Here, it is important that the organizational landscape of the US is dramatically skewed. There are many very influential organizations pushing the interests of business and of the rich. Politicians on both sides tend to pay a lot of attention to them, because of the resources that they have. There are far fewer - and weaker - organizations on the other side of the fight, especially given the continuing decline of unions (which has been hastened by policy decisions taken and not taken by Republicans and conservative Democrats).
In Hacker and Pierson's account, these three together account for the systematic political bias towards greater inequality. In simplified form: Organizations - and battles between organizations over policy as well as elections - are the structuring conflicts of American politics. The interests of the rich are represented by far more powerful organizations than the interests of the poor and middle class. The institutions of the US provide these organizations and their political allies with a variety of tools to promote new policies that reshape markets in their interests. This account is in some ways neo-Galbraithian (Hacker and Pierson refer in passing to the notion of `countervailing powers'). But while it lacks Galbraith's magisterial and mellifluous prose style, it is much better than he was on the details.
Even so (and here begin the criticisms) - it is not detailed enough. The authors set the book up as a whodunit: Who or what is responsible for the gross inequalities of American economic life? They show that the other major suspects have decent alibis (they may inadvertently have helped the culprit, but they did not carry out the crime itself. They show that their preferred culprit had the motive and, apparently, the means. They find good circumstantial evidence that he did it. But they do not find a smoking gun. For me, the culprit (the American political system) is like OJ. As matters stand, I'm pretty sure that he committed the crime. But I'm not sure that he could be convicted in a court of law, and I could be convinced that I was wrong, if major new exculpatory evidence was uncovered.
The lack of any smoking gun (or, alternatively, good evidence against a smoking gun) is the direct result of a major failure of American intellectual life. As the authors observe elsewhere, there is no field of American political economy. Economists have typically treated the economy as non-political. Political scientists have typically not concerned themselves with the American economy. There are recent efforts to change this, coming from economists like Paul Krugman and political scientists like Larry Bartels, but they are still in their infancy. We do not have the kinds of detailed and systematic accounts of the relationship between political institutions and economic order for the US that we have e.g. for most mainland European countries. We will need a decade or more of research to build the foundations of one.
Hence, while Hacker and Pierson show that political science can get us a large part of the way, it cannot get us as far as they would like us to go, for the simple reason that political science is not well developed enough yet. We can identify the causal mechanisms intervening between some specific political decisions and non-decisions and observed outcomes in the economy. We cannot yet provide a really satisfactory account of how these particular mechanisms work across a wider variety of settings and hence produce the general forms of inequality that they point to. Nor do we yet have a really good account of the precise interactions between these mechanisms and other mechanisms.
None of this is to discount the importance of this book. If it has the impact it deserves, it will transform American public arguments about politics and policymaking. I cannot see how someone who was fair minded could come away from reading this book and not be convinced that politics plays a key role in the enormous economic inequality that we see. And even if it is aimed at a general audience, it also challenges academics and researchers in economics, political science and economic sociology both to re-examine their assumptions about how economics and politics work, and to figure out ways better to engage with the key political debates of our time as Hacker and Pierson have done. If you can, buy it.