Just Work for All

The American Dream in the 21st Century

Joshua Preiss

• Editorial: Routledge India
• Año: 2020
• ISBN:
  9781000333855
• Edición: 1
• Categoría: Philosophie
• Categoría: Philosophie politique

This is a book about the American Dream: how to understand this central principle of American public philosophy, the ways in which it is threatened by a number of winner-take-all economic trends, and how to make it a reality for workers and their families in the 21st century. Integrating political philosophy and the history of political thought with recent work in economics, political science, and sociology, this book calls for renewed political and policy commitment to "just work."

Such a commitment is essential to combat the negative moral externalities of an economy where the fruits of growth are increasingly claimed by a relatively small portion of the population: slower growth, rising inequality, declining absolute mobility, dying communities, the erosion of social solidarity, lack of faith in political leaders and institutions, exploding debt, ethnic and nationalist backlash, widespread hopelessness, and the rapid rise in what economists Angus Deaton and Anne Case call deaths of despair.

Covid-19 threatens to pour gasoline on these winner-take-all fires, further concentrating economic and political power in the hands of those best suited to withstand (and even profit from) the pandemic-driven economic crisis. In this book, the author provides a model for understanding the American Dream and making it a reality in a post-Covid-19 economy.

A tour de force, this book is essential reading for scholars and researchers of political philosophy, political economy, political theory, and economics, as well as for the layperson trying to make sense of the post-pandemic world.

1
A TALE OF TWO SOCIETIES

The liberal reward of labor… increases the industry of common people. The wages of labor are the encouragement of industry which, like every other human quality, improves in proportion to the encouragement it receives.

– Adam Smith 1999a

To be a player in the tire market in northern Ohio it was once sufficient to be the best tire maker in that part of the state. But the well-informed consumers of northern Ohio – like their counterparts everywhere else – now choose from among a handful of best tire producers worldwide.

– Robert Frank and Philip Cook 1996

As a result of these trends the benefits or rents generated by globalization and technology went disproportionately to owners of capital, including high-end human capital.

– Laura Tyson and Michael Spence 2017

In American politics, it is difficult to get stuff done and easy to block them. With its multiple branches and hurdles, the institutional structure of American government allows organized and intense interests – even quite narrow ones – to create gridlock and stalemate.

– Jacob Hacker and Paul Pierson 2010

I. Adam Smith’s well-ordered society

This chapter provides an overview of state of the art in economic and historical analysis of current trends toward winner-take-all societies (WTA). To organize this large body of data, I contrast WTA with what I call a Smithian well-ordered society (SWO). SWO draws on Adam Smith’s normative vision of a free-market society, the values that Smith uses to defend free market reforms in his mercantilist status quo. The moral core of Smith’s political economy is the elevation of the working poor (Pack 1991, Fleischacker 1999, 2004, Rothschild 2001, Rothschild and Sen 2006, Boucoyannis 2013, Schliesser 2017). A central advantage of markets, according to history’s most important proponent, is that they liberally reward market-specific virtues. Smith writes:

If we consider the general rules by which external prosperity and adversity are commonly distributed in this life, we shall find that, notwithstanding the disorder in which all things appear to be in this world, yet even here every virtue naturally meets with its proper reward… success in every sort of business. Wealth and external honours are their proper recompense, and the recompense that they seldom fail of acquiring.

(Smith 1999a, p. 92)

Market societies rely on such virtues as industry, prudence, self-command, and honesty in dealing with customers and business partners. Fortunately, Smith reasons that a well-ordered market society will also reward these virtues.¹ In most cases, the most successful individuals in markets will be the hardest working, most prudent among us. Such virtues, except in “a very extraordinary concurrence of circumstances,” will be rewarded. In her detailed analysis, Lisa Herzog summarizes Smith on virtue and markets:

For Smith it is almost a metaphysical requirement that markets reward virtuous behavior… . For a well-ordered society it is important that most individuals, most of the time, behave according to these virtues… . What makes this possible is that for Smith the virtues… have a “pull” of their own: virtuous behavior is rewarded, not only in the hereafter, but also in very concrete, down-to-earth ways in this world. Virtuous behavior thus serves as the basis for claims about what people deserve, and the social world is structured such that they generally receive it.

(Herzog 2013, p. 88, 90)

In addition to the benefits that markets convey for individual and social welfare, Smith also commends them for their broadly meritocratic nature. In short, SWO is a market society where the virtuous activity of even low-skilled workers is “liberally rewarded.” This “liberal reward of labor,” in turn, encourages “industry of the common people… which, like every other human quality, improves in proportion to the encouragement it receives” (Smith 1999a, p. 184).

In addition to pro-labor legislation, which we discuss below, Smith reasons that this inequality in power between workers and wealthy merchants and landlords is mitigated in a constantly growing economy. In such a context, what Smith calls the “progressive state,” employers will need to compete for workers, driving up wages and equalizing the benefits of production. Provided that government does not intervene to protect the rents of established firms, if a business is extremely profitable, competition will soon drive it back to an “ordinary or average” profit (Smith 1999a, p. 139). In such a state, most people possess, or could freely and with relative ease acquire, the talents and skills to command employment.² Great demand for employment, in turn, will force employers to compete with one another, raising wages to correspond with growth throughout the economy. As a result, well-ordered market societies will tend toward broad-based gains throughout, even if the engine of markets benefits from some material inequality. In SWO, the welfare of different participants in the market – in Smith’s terminology landlords, capitalists, and workers – will rise together (Smith 1999a, p. 167–190).

Perhaps at no time in history have societies more closely resembled SWO than the wealthy democratic societies of the mid-20th century. First, there were broadly shared income benefits from economic growth. In the period between World War I and World War II, most wealthy countries experienced wage compression, though the impact was much greater in a handful of countries (including France). For the majority of these countries, including the United States, this equalizing trend accelerated during World War II, and continued for decades (Atkinson 2015, p. 56–58). In this period, which economists Claudia Goldin and Robert Margo call the “Great Compression,” productivity gains mirrored gains in income for both low-income and low-skilled workers and high-skilled, high-income workers (Atkinson 2015, Goldin and Margo 1992). In the United States from the late 1940s until the early 1970s, income gains (as a percentage) grew at approximately the same rate across the income spectrum. According to Center for Budget and Policy Priorities (CBPP) analysis of US Census Bureau Data, real family income gains at the 95th percentile, the median, and the 20th percentile grew at nearly the same rate (Stone et al. 2020). Thomas Piketty and Emmanuel Saez’ analysis of federal income tax returns tells a similar story, as the share of income at the top of the income ladder changed very little in this period, after peaking in 1928 and declining substantially in the 1930s and early 1940s (Piketty and Saez 2003, 2006, Saez 2015).

Second, productivity and income growth were massive. The same CBPP data indicate that family income more than doubled at the 95th percentile, the median, and the 20th percentile from the late 1940s to the early 1970s. For Smith, the ways in which division of labor capitalizes on technological innovation drives much of the gains from markets, as the associated use of machines enables one person to do the work of many (Smith 1999a, p. 110–111). A central virtue of SWO is productivity growth through technological innovation. From 1920 to 1970 in the US, growth in output per hour increased by 2.82% per year. While some of this growth can be attributed to gains from a more educated workforce (Goldin and Katz 2010), much of it is due to gains in total factor productivity,³ or what is colloquially known as “Solow’s residual,” after Nobel Prize-winning economist Robert Solow. By this measure, productivity in this period nearly triples that during the periods 1890–1920 and 1970–2014 (Gordon 2016, p. 16). The boom started a bit later in war-devastated France, Germany, and Japan, but was even more rapid as these countries caught up to the US and the UK (Piketty 2013).

Next, as Robert Gordon notes, during this “one big wave” of American productivity and income growth, the number of hours worked per family declined significantly (Gordon 2000, 2016). Indeed, Gordon hypothesizes that the two factors are related:

Had there been no Great Depression, there would probably have been no New Deal, with its NIRA [National Industrial Recovery Act] and Wagner Act that promoted unionization and that both directly and indirectly contributed to a sharp rise in real wages and a shrinkage in average weekly hours. In turn, both higher real wages and shorter hours helped boost productivity growth – higher real wages by promoting substitution from labor to capital during 1937–1941 and shorter hours by reducing fatigue and improving efficiency.

(Gordon 2016, p. 18)

In addition, firms capitalized on the widespread electrification of manufacturing in the 1920s and the high-pressure economy of World War II to create innovative, labor-saving methods of production. Of course, such innovation creates job displacement. Outmoded technologies are replaced, and the workers who build them, or use them as part of the manufacturing process, need to move on to something else. Newer technologies frequently require fewer workers altogether. However, workers during the midcentury boom also benefited from the rapid creation of new employment opportunities and great labor market fluidity. This reality approximates Smith’s vision, where workers are able to move from one displaced job to another with relative ease. Smith reasons that as technological innovation makes the individual tasks of production simpler, the jobs themselves require little or no specialized training, training that remains well within the reach of most participants in markets. The downside of this phenomenon for Smith is a kind of “mental mutilation.”⁴ The great virtue of these trends, however, is that the fruits of productivity gains will be both substantial⁵ and widely distributed. As a result, families took the opportunity that growing wages provided by taking more time for leisure.

Without a doubt none of the wealthy, democratic countries of the mid-20th century fully realized the vision of SWO.⁶ Wealth inequality was substantial, and such concentrations of wealth helped to secure the political and bargaining power of those who controlled that wealth. While income gains as a percentage were more or less equal across the income ladder, this entailed far greater absolute gains for those at the top. Nonetheless, as Smith hoped, rapid growth helped to mitigate the economic and political advantages of the wealthy landlords and merchants by raising demand for even low-skilled domestic workers, contributing to the broad-based gains described previously. As productivity increased, therefore, wages increased along with it. Moreover, for the first time in history, we saw the development of a substantial property-owning middle class (Piketty 2013, Wolff 2014, 2017). According to Saez and Zucman, the wealth (non-human capital) share of the bottom 90% went from 20% in the 1920s to 35% in the early 1980s, while the share held by the top 0.1% fell from 25% in 1929 to 7% in 1978 (Saez and Zucman 2016). Despite differences in data sources, method, and unit of analysis, Edward Wolff’s analysis tells a similar story: a nonlinear but persistent rise in wealth across most income groups, with wealth inequality declining substantially from the 1920s on and bottoming out in 1979 (Wolff 2017, Ch. 13).

Well-ordered market societies, according to Smith, liberally reward market-specific virtues such as prudence, honesty, and a willingness to work hard. This begs a central normative question: were individuals during this period historically, uniquely virtuous? Were they simply more willing to work hard than workers before or since? I have my doubts. Insofar as they were more willing t...