Obama’s 2014 pivot to greater income equality through redistribution offers a chance for conservatives to seize the initiative on the real issue: equality of opportunity.
Just before he departed for his annual Christmas break in Hawaii, President Obama declared that income inequality in modern America represents “the defining challenge of our time.”
Sure enough, over the holiday period, the New York Times ran with a scoop, “Democrats Turn to Minimum Wage as 2014 Strategy”. The party’s leaders, the NYT said, believe the issue can lift their fortunes by distracting attention from Obamacare and by driving a “wedge” between Republicans.
Meanwhile, this national narrative on inequality has been unfolding against the backdrop of New York’s new mayor Bill de Blasio promising to be the most redistributionist chief executive that a major American city has ever seen. Inaugurated on New Year’s Day, de Blasio has vowed to “fix” a city enjoying record job creation, a balanced budget, historically low crime rates and tourist visits at an all-time high.
Make no mistake, an unprecedented and dangerous shift in the mindset of the mainstream American Left is taking place. To advocate direct government action to reduce income inequality is the same as promoting greater economic equality as a primary goal of public policy. No previous American president has done that – certainly not the ultimate Third Wayer William Jefferson Clinton or even FDR battling the Great Depression.
The urge to redistribute resources, taking them from the economically productive and bestowing them on the economically inactive, is based on several false premises, but not least on the notion that wealth creation is a zero-sum game: that one person only accumulates wealth by taking it away from other people. In short, that there is a finite amount of wealth and that shifting around the distribution of it will increase fairness whilst not diminishing the overall size of the pie.
But this is false. The careers of America’s great technology entrepreneurs show that economic producers can create something out of nothing with the power of ideas – and they do not rape and pillage their fellow citizens to do so. And of course, history shows that the government deciding too aggressively how to slice the pie eventually shrinks that pie so that nobody has enough: just look at how the Soviet Union ended up.
So the new focus among influential elements within the Democrat party on the issue of nominal income equality betrays a striking economic and historical illiteracy. However, it can only be hoped that the debate around it will flush out the real challenge – and one that should unite Democrats, Republicans and any other right-thinking American: addressing the gap in equality of opportunity in modern America.
The notion of some measure of equality of opportunity is one of the core principles America was founded on. The promise of a “fair shot” for all regardless of one’s starting place in the social hierarchy was the idea that turned late nineteenth and early twentieth century America into a beacon of hope for the oppressed and dispossessed of Europe. They envisaged a land of unlimited potential where they could shake off the rigid and suffocating strictures of the class-obsessed old world, and prosper. Many did just that.
But in modern corporatist America – one where wealth and political power are concentrated in relatively few hands across big business, two entrenched political parties, and an omnipotent bureaucracy, that social mobility is a shadow of what it once was.
Why does that matter? Well, in the global race America finds itself in against emerging economic and political superpowers, it cannot afford to leave vast swathes of human potential untapped. When those born into poverty but possessing talent and drive have fewer ways out that is a problem not just for them, but for the whole country. Twentieth century America prospered because it theoretically offered everyone a chance – entrepreneurial dynamism was the great engine of that prosperity, one that lifted the whole nation with it. The grave risk for Twenty First century America is that it will entrench social hierarchies in a way that will ultimately result in a weaker, more divided and dangerous society.
Equality of opportunity is an issue on which some American conservatives have been reluctant to engage in recent times, perhaps fearing that to defend it makes them sound too liberal, too anti-business, or too hostile to the ruling classes.
But with the clear and present danger of the American Left’s new focus on using the government to promote economic equality, developing an alternative, conservative plan to increase equality of opportunity is the only intellectually coherent response.
However, there are two caveats. First, equality of opportunity should not be confused with “sameness of opportunity”. Government neither can, nor should re-engineer society to give everybody exactly the same starting point. Second, and related, greater equality of opportunity is not something that can simply be delivered by increased government spending: it is much more about achieving structural economic and institutional change.
A conservative plan to champion equality of opportunity has barely begun to be sketched but it will need to represent a programme of broad supply-side reform: one that liberates the education system, allowing it to inspire and transform the lives of far more young Americans across the social spectrum; that removes the thicket of regulations and barriers that currently discourage entrepreneurial endeavour; and one that promotes tax reform to increase the payoff from hard work.
As the New York Times article acknowledges, Democrats are setting a political trap on income inequality. To avoid it, conservatives need to radically change the terms of the debate.
Brian Cattell is the former Chairman of the Bow Group and now divides his time between New York and London.