How government rigs the economy in favor of well-off workers

Loser Liberalism Versus Power Populism
By Dean Baker/truthout.org

The Democrats like to portray themselves as the party of humble masses. This is in contrast to the Republicans, who President Bush once jokingly described as the party of the "haves and have mores."

But there are two very distinct ways in which Democrats see themselves as helping out the middle class and poor. On the one hand, much of the Democratic Party leadership portrays the government as sort of a collective charity. These Democrats draw a picture that has the market determining societies' winners and losers. But, because they are nice people, they think it's appropriate to tax the winners to help out the losers. This distinguishes them from the Republicans, who want to tell the losers to get lost. This philosophy can be thought of as "loser liberalism," since it holds that the government must tax back some of the winners' money to help out those who did not do very well on their own.

This view can be contrasted with "power populism," which doesn't accept the basic government/market distinction that loser liberalism treats as its starting point. The power populists see government policy as determining who wins and loses in the market place. For example, it is government policy that makes it easy to import cars and clothes, thereby putting auto workers and apparel workers in direct competition with low-paid workers in the developing world. This trade policy makes manufacturing workers losers.

On the other hand, government policy also makes it difficult for foreign doctors and lawyers to work in the United States, unlike foreign dishwashers and custodians. Since the government protects doctors and lawyers and other highly paid professionals from foreign competition, it ensures that these people will be among the winners in the global economy.

Government policy also dictates that patent monopolies will be the primary method for financing drug research and copyright monopolies will be the main method for promoting software development, thereby enabling companies like Merck and Pfizer and individuals like Bill Gates to get very rich. There are other, more efficient mechanisms for financing research of developing drugs and software that would not create the same winners or lead to as much inequality, but the rich and powerful use their power to keep these alternatives from ever being publicly debated.

Loser liberalism is by far the predominant strain within the Democratic Party for the simple reason that these are the folks with the money. And money not only buys campaign ads, but it is the basis for being taken seriously by the media. The media feels completely justified in ignoring the positions of the presidential candidates who haven't raised the tens of millions that they have decided is necessary to win the nomination. This means candidates that don't promote loser liberalism are simply excluded from the outset.

Not only are populist candidates excluded from the debate, but political positions that are inconsistent with loser liberalism are also largely excluded from public debate. So, trade policy is consistently portrayed as a debate between "globalizers" and "free traders" who are being challenged by "protectionists." In reality, the globalizers are ardent protectionists who are happy to have highly educated professionals protected from foreign competition. They also want to increase patent protections on drugs and copyright protections on software and make poor people in the developing world pay more money for these products. They are only "free traders" when it comes to placing less educated workers in the United States in competition with workers in the developing world.

The loser liberals similarly control the debate in other areas. A modest tax on stock trades and other financial transactions, like the one that England has, could easily raise more than $100 billion a year in revenue. But, the hedge fund crew knows that this would be real money out of their pockets, so they don't even let the issue get discussed. After all, it's fine to make a bunch of stupid auto workers lose their jobs -- we can always give them "wage insurance" - but it's another matter altogether to cut into the income of the hedge fund crew.

The loser liberals also keep single payer health care insurance off the table, although they might be willing to pay somewhat higher taxes to allow a few more kids to get health care coverage. The loser liberals would never allow for a serious discussion of alternatives to patent-financed research for prescription drugs, no matter how many Vioxx-type scandals fill the newspapers. After all, we're talking about the profits for Merck and Pfizer, not pensions for steelworkers.

There is a long list of government policies, many of which are extremely harmful to the economy and society, that have the effect of redistributing income upward. Like the Republicans, the loser liberals want to make sure that these policies never come up for public debate. But, the loser liberals may be willing to pay taxes on their billions. Perhaps we should be thankful for small favors, but real change will require overturning the structures that redistribute income upward, not a modest trickle of tax revenue that allows some of this money to flow back down.

(Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org ). He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.)