November 20, 2024
Eduardo Porter joined the chorus of people telling us that the inequality of the last four decades was just the result of the free market in his Washington Post column. As Porter puts it:
“A paper last year by economists from Princeton and Columbia argues that Democrats started losing the working class back in the 1970s, when they bought into the notion that the government should let market forces rip, dropping the New Deal approach of improving workers’ lot via strong unions, job guarantees, minimum wages and protectionism — and instead assisting the economy’s losers via taxes and transfers.”
He then argues that this is the source of the rise in working class support for authoritarianism.
The problem with this line is that we did not let market forces rip. Government-granted patent and copyright monopolies are not the f**king market. They are hugely important in the economy, likely shifting more than $1 trillion a year ($8,000 a family) from the rest of us to those in a position to benefit from these monopolies. Higher drug prices are the most visible transfer, but these monopolies also add hugely to the price of a wide range of other items like computers, software, smartphones.
Then we also have government support for the financial industry. This was most visible during the financial crisis when the government directly saved many of the largest financial corporations in the country from bankruptcy. There are many other supports for the financial industry, such as deposit insurance, which are less visible. This sector is the source of many of the largest fortunes in the economy.
We also have rules of corporate governance that allow CEOs and other top executives to rip off the companies they work for. This allows hugely bloated pay at the top which comes at the expense of ordinary workers. These rules are not “letting the market rip.” They are written by politicians who get campaign contributions from top executives.
Also “free trade” has never meant free trade in highly paid professions like physicians’ and dentists’ services. If these highly paid professionals were subject to the same sort of competition as autoworkers and textiles workers their pay would be considerably lower, and healthcare would be cheaper for the rest of us.
I go into these issues in more detail in my book Rigged (it’s free), but the basic point should be clear. There is a widely repeated lie that inequality was driven by the natural workings of the market. The reality is that politicians of both parties worked to structure the market to bring about more unequal outcomes.
The media and most of the academic establishment actively push this lie at every opportunity. And people are pissed. To be clear, I’m sure that almost none of them know anything about patent policy or the rules of corporate governance. They just know that the rules are structured against them, and they are absolutely right. And elite outlets like the Washington Post, the New York Times, and the Atlantic won’t let anyone make this obvious point in the spaces they control.
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