The Predistribution Agenda

Tackling Inequality and Supporting Sustainable Growth

Patrick Diamond, Claudia Chwalisz, Patrick Diamond, Claudia Chwalisz

• Publisher: I.B. Tauris
• Year: 2015
• Print ISBN: 9781784534417
• eBook ISBN: 9780857729101
• Edition: 1
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

The concept of predistribution is increasingly setting the agenda in progressive politics. But what does it mean? The predistributive agenda is concerned with how states can alter the underlying distribution of market outcomes so they no longer rely solely on post hoc redistribution to achieve economic efficiency and social justice. It therefore offers an effective means of tackling economic and social inequality alongside traditional welfare policies, emphasising employability, human capital, and skills, as well as structuring markets to promote greater equity. This book examines the key debates surrounding the emergence and development of predistributive thought with contributions from leading international scholars and policy-makers.

Predistribution: A New Governing Prospectus for the Centre-left

Claudia Chwalisz and Patrick Diamond

‘Predistribution’ is a new label for an idea with a long pedigree in the radical political tradition, bridging the eighteenth century political philosopher Thomas Paine with the influential twentieth century economist James Meade: the objective of radically reforming markets and property relations to systematically empower the wage-earning classes, ‘treating the root causes of inequality rather than attending only to the symptoms’.¹ A predistributive strategy is prepared to explicitly challenge unequal concentrations of capital, wealth and power promoting the goal of a ‘property-owning democracy’ where every individual has a stake in the capitalist system by virtue of being a citizen. Three centuries after Paine published The Rights of Man, advanced Western economies are still characterised by deep and enduring inequalities that reappear across generations. As such, Paine’s words still carry enormous resonance:

For all men being originally equals, no one by birth could have the right to set up his own family in perpetual preference to all others forever, and tho’ himself might deserve some decent degree of honours of his contemporaries, yet his descendants might be far too unworthy to inherit them.²

This chapter provides a synoptic introduction to the burgeoning public policy literature on predistribution and the politics that animate the idea.

‘Social Democratic Strategy’: ‘Beveridge-Plus-Keynes’

Predistribution is focused above all on an age-old social democratic concern: how to reconcile productive efficiency with social justice in a market capitalist economy. The pursuit of social justice constituted the central thread running through European social democracy since Eduard Bernstein famously articulated the case for ‘reformist socialism’ at the end of the nineteenth century, breaking with Marxist orthodoxy. What followed was decades of continuous centre-left reinvention and reform across western Europe, culminating in the ‘golden age’ of postwar social democracy summarised by Gøsta Esping-Andersen (1995) as the era of ‘Beveridge-Plus-Keynes’. Since then, the world in which social democratic politics operates has continued to change profoundly. Not only has the West experienced one of the most serious and destabilising financial crises of the modern era: capitalism itself is undergoing major structural transformation. The fiscal pressures unleashed by the crisis are placing unprecedented strain on the postwar welfare state. Meanwhile, the international context is being redefined by the growing power of emerging market economies, and the relative decline of the West. This is the time, more than ever, to construct a new strategy and governing prospectus for the centre-left in Europe.

The pivotal issue for social democracy is that while the world has been transformed, its political agenda has too often remained trapped in the doctrines and narratives of the post-1945 era. Centralising ‘statist’ social democracy remains ingrained in the ideological ‘DNA’ of most European parties. The assumption since World War II has been that a well-resourced Keynesian welfare state would achieve greater social equality, with government intervention ‘humanising’ capitalist markets. Between the 1940s and the 1970s, the corporatist social democratic model was largely successful in significantly improving life chances: narrowing the gap between rich and poor; undertaking transfers from the wealthy to the needy; insuring people against social ‘risks’ such as sickness, unemployment, and old age; and providing guaranteed access to high-quality public services, smoothing out inequalities across the life cycle.

The strategy in recent decades has, nonetheless, increasingly been found wanting: in most advanced economies, globalised markets have produced rising levels of inequality which the population finds intolerable, both economically and morally. Growing reliance on redistribution especially in countries with a high level of inequality in the primary income distribution has led to a severe backlash against the tax state, feeding resentment towards the poor, while appearing to justify the neoliberal critique of the role of government. States have sought to pursue a variety of distributive objectives, but they often spend more than they can conceivably raise in taxes given heightened ‘taxpayer resistance’, adding to the problem of rising public debt.³ Government interventions such as ‘Quantitative Easing’ (QE) after the 2008 crisis have, in turn, further accentuated inequality, boosting relative asset values and the owners of capital as real household incomes have stagnated.⁴

It is clear there are growing limits to the redistributive capacities of the state given the likelihood of stagnant growth and severe fiscal constraint in the decade ahead.⁵ We have to find new routes to social justice and a more equal society for the ‘new hard times’ through which we are living.⁶ This is the context in which the debate about ‘predistribution’ has recently emerged, especially in the USA and the UK, as Yale professor Jacob Hacker coined the phrase, and renowned American economist Joseph Stiglitz has been using the term to describe his latest report, Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity.⁷ Increasingly, the debate has spread to continental Europe, where the French Prime Minister Manuel Valls has embraced “prédistribution”. It is a concept which recommends that the state should seek to prevent inequalities from occurring at the outset, rather than relying on traditional mechanisms of ‘tax-and-spend’ redistribution to tackle inequalities after they have occurred.⁸ This is a pressing issue, as the last 30 years have witnessed a dramatic rise in income inequality across the advanced capitalist democracies.⁹

The aim of predistributive policy is to promote market reforms that encourage a more equal distribution of economic power, assets and rewards even before government ‘collects taxes or pays out benefits’.¹⁰ Predistribution seeks to restructure the market economy, ensuring fairer outcomes for all can be secured without sacrificing long-term growth and productivity. This is a strategy where, as Matzner and Streek attest, ‘equality, rather than being wrought from the economy at the expense of efficiency, is built into the organisation of the production process itself’.¹¹ Rather than wholly relying on the distributive sphere of social policy, the aim of predistribution is to address the structural context of contemporary capitalism: the quality of work and the satisfaction it generates; the allocation of ‘good’ and ‘lousy’ jobs; the prevailing framework of employment rights and market flexibilities; and the extent to which markets work in the public interest by treating all consumers, including the most vulnerable, equitably. The aim of predistributive market design is to eliminate biases that benefit privileged groups, promoting public interest objectives that reduce the need for post hocgovernment intervention. This chapter argues that in addition to ‘non-monetary’ interventions, strategies of social investment complement and reinforce predistribution, in turn upgrading the productive potential of the workforce and the economy.

Of course, predistribution is a governing prospectus, not an election-winning slogan. It carries important insights about social democratic policy in the post-crisis era. Today, the traditional redistributive model of the state is facing an unprecedented crisis. The equilibrium between markets and social justice that characterised the postwar age is breaking down. The West is experiencing ‘a crisis without end’: a slow, protracted recovery, interest rates at extraordinarily low levels, a major risk of deflation, and an ongoing process of fiscal adjustment and austerity.¹² Moreover, the increasing internationalisation of economic life implies that social inequalities are no longer reversible within any single nation state. The question is whether a model of predistribution can plausibly fill the strategic void opened up by the decay of the ‘Beveridge-Plus-Keynes’ formula. A new social and economic framework focused on predistribution addresses three overriding concerns: the promotion of economic efficiency; the realisation of social justice; and the search for a new growth model after the crisis.

First, economic efficiency: predistribution provides a cogent rationale for an active state in an era where public spending is severely constrained, where many governments are implementing tough fiscal consolidation programmes, and where austerity in the light of low growth and secular stagnation is likely to remain for the foreseeable future.

The predistribution agenda acknowledges that the welfare state’s redistributive capacity was receding prior to the crisis. In part, this reflects structural changes since the 1970s and 1980s, alongside neoliberal policy regimes that have weakened the egalitarian impact of welfare systems. Demographic change with increasing old-age dependency ratios has put increased pressure on health and social care spending, reducing the resources available for policies to boost opportunity through pre-school investment, education, training and re-skilling. Unsurprisingly, many European societies have witnessed declining rates...

Table of contents

• Editorial
• In The Series
• Title Page
• Copyright Page
• Dedication
• About Policy Network
• Contents
• Tables and Figures
• Acknowledgements
• Contributors
• Preface
• Foreword: The Promise of Predistribution
• Introduction: 1. Predistribution: A New Governing Prospectus for the Centre-left
• 2. Welfare States after the Crisis
• Part I: Future Changes in Welfare Societies
• 1. Public Opinion, Predistribution and Progressive Taxation
• 2. Progressive Social Policies for Intergenerational Justice in Ageing Societies
• Part II: Welfare States after the Crisis: A Predistribution Agenda?
• 3. Predistribution and Redistribution
• 4. The Potential and Limits of Predistribution in the UK
• Part III: Predistributive Labour Market Policies
• 5. Fostering Equitable Labour Market Outcomes
• 6. Labour Market Flexibility and Income Security in Old Age
• 7. Technology, the Labour Market and Inequality
• 8. Labour Market Institutions as Pillars of Predistribution
• 9. Predistribution and Labour Market Actors
• Part IV: Predistribution and the Social Investment State
• 10. Social Investment, Skills and Inequality
• 11. Looking to the Nordics?
• 12. The Demography of Predistribution
• 13. A ‘Family Friendly’ Welfare State
• Part V: The Politics of Predistribution
• 14. The Political Economy of the Service Transition
• 15. Welfare Futures: Changing Needs, Risks and Tools
• 16. Moving Towards Welfare Societies
• Postscript: The Future of the Welfare State