Washington’s Dangerous New Consensus on China
Don’t Start Another Cold War
There has been much discussion of rising economic inequality in the developed world recently, along with a generalized sense that the problem has grown to intolerable proportions. But at the same time, there has been little movement to address the situation; instead, there is tacit acceptance of many specific forms of inequality and the processes that produce it. The result is widespread discontent together with practical passivity.
One might call this a Bossuet paradox, after the seventeenth-century theologian Jacques-Bénigne Bossuet, who said, “God laughs at men who complain of the consequences while cherishing the causes.” Today, people deplore inequality in general, appalled by broad social statistics or extreme examples of wealth and poverty, but often consent to it in particular, regarding smaller variations in life outcomes as the result of presumptively legitimate individual choices and circumstances. A recent survey conducted in France on the “perception of inequality and feelings of injustice,” for example, found that nearly 90 percent of respondents thought income disparities should be reduced, and an even larger percentage felt that a just society ought to guarantee the fulfillment of everyone’s basic needs (for education, food, health care, and shelter). Yet 57 percent also felt that income inequalities were inevitable in a dynamic economy, and 85 percent said that income differences were acceptable when they rewarded individual merits.
This situation is the product of a strong general moral revulsion at excessive inequality combined with a weak consensus on the theoretical grounds for acting to reduce it. Some might think the latter means that nothing can or will be done about the problem. But during the early and middle decades of the twentieth century, Western governments managed to reduce inequality dramatically, even without a shared vision on the need to do so. They were driven by three objective factors instead: fear that lack of reform would cause social and political turmoil, the practical impacts of the two world wars, and a decline in the belief in individual responsibility for people’s destinies. Together, these led to policies such as social insurance, a minimum wage, a strong welfare state, and a progressive income tax, all of which helped make economies and societies more egalitarian.
In recent decades, however, all these objective factors have disappeared, and with them, the support for egalitarian public policy. Those concerned with combating rising inequality today, therefore, have to start at the theoretical level first, formulating a conceptual framework that justifies such efforts on their own merits.
The growth of workers’ movements in the late nineteenth and early twentieth centuries, together with the advent of universal suffrage, presented Western elites with a difficult choice: accept a fiscal revolution or risk a social one. In the most famous example, the conservative chancellor Otto von Bismarck pioneered the modern welfare state in imperial Germany, trying to counter the spread of socialist ideas by showing government concern for the working class. After 1918, fears of revolution increased, thanks to the communist seizure of power in Russia and the spread of copycat uprisings across Europe. The ravages of the Great Depression only contributed to the problem, as did the persistent fear of communism in the decades after World War II. The result was a reformism of fear, with reduction in inequality becoming a major government priority.
The experience of World War I also produced a new vision of the social bond tying countries together. In a sense, the war “nationalized” people’s lives. Just as it threatened everyone’s existence, so it fostered the idea everyone owed a debt to the broader community. Millions of deaths across the European continent, moreover, compelled people to think in new ways about what united them. “If the war didn’t happen to kill you it was bound to start you thinking,” George Orwell put it. Of course, the soldier’s lot was the hardest. Each combatant learned in the mud of the trenches that his life was just as vulnerable as that of his comrade. As one of them wrote, “The consciousness of a community of nature gave rise to a very vivid and comforting sentiment of equality.” And the war contributed to the growth of common national identities. As the German writer Robert Musil remarked, “Many German soldiers felt for the first time the exalting sense of having something in common with all other Germans. One suddenly became a simple, humble particle in an event that transcended the personal. Subsumed in the nation, one could almost feel it.”
Even the United States emerged from the war profoundly changed. The experience revolutionized American attitudes toward taxation and redistribution. When the War Revenue Act of 1917 was passed, there was talk of “conscription of income” and “conscription of wealth” at a time when young men were enlisting en masse. “Let their dollars die for their country too,” one congressman said. The call for fiscal patriotism helped legitimate the progressive income tax in the United States, and by 1944, the top marginal rate had risen as high as 94 percent.
The experience of World War I produced a new vision of the social bond tying countries together.
In the United Kingdom and continental Europe, meanwhile, an intellectual and moral revolution helped make redistribution possible: the economy and society were “de-individualized” by thinkers who rejected older views of individual responsibility and talent. The idea of a society composed of sovereign, self-sufficient individuals gave way to an approach based on interdependence. “The isolated man does not exist,” argued the French politician Léon Bourgeois, and the British philosopher L. T. Hobhouse argued similarly that every individual was shaped by the “social atmosphere” around him.
In this new context, the notions of right and duty, merit and responsibility, and autonomy and solidarity were completely redefined. During the nineteenth century, the core of the social question had focused on personal responsibility. The key activity of the state and charitable institutions was considered to be distinguishing the “deserving poor,” whose condition derived from purely external circumstances, from the “undeserving poor,” whose problems were caused by their own misconduct and bad habits. The former should be supported, it was thought, but the latter had to be punished (say, by being put in a workhouse) or simply abandoned to their fate.
By the middle decades of the twentieth century, in contrast, individual behavior was no longer seen as the driver of social outcomes; rather, the reverse was believed to be true. Poverty was the consequence, rather than the cause, of social dysfunctions, and the welfare state acted universally, behind a “veil of ignorance.” From unemployment to disease or disability, the problems of citizens were seen as risks largely beyond individual control, with governments required to step in and manage those risks collectively through broad programs of social insurance.
These changed attitudes about individual responsibility were accompanied by a new approach to economic performance. Instead of celebrating entrepreneurs and innovation as the factors driving economic growth, mid-twentieth-century intellectuals emphasized the roles of managers and organizations. Writers such as Peter Drucker, John Kenneth Galbraith, and Andrew Shonfield exemplified in their work a new and influential approach to corporations. “In the mature enterprise,” Galbraith wrote in 1967, “. . . power has passed, inevitably and irrevocably, from the individual to the group. That is because only the group has the information that decision requires.” Schumpeter was passé: “The entrepreneur no longer exists as an individual person in the mature industrial enterprise”; he had been replaced by the “technostructure,” a collective mind. Success depended more on the quality of a firm’s organization and the efficiency of its management than on the exceptional talents of particular individuals, even at the top of the corporate pyramid: “Retirement, death and replacement [of a CEO] . . . have no perceptible effect on the performance of General Motors or IBM.”
Within such an economic paradigm, economic efficiency was seen as a collective achievement. No one could claim the accomplishments of a company as his own. Executives were better paid than workers, but only within the framework of a functional hierarchy of skills. The management guru Drucker argued that the pay ratio between the top executive and the humblest worker in a company should be no greater than 20 to 1.
The combination of these trends created a political and intellectual basis for policies that redistributed wealth and reduced economic inequality across the advanced industrial democracies throughout the middle decades of the twentieth century, even without any theoretical consensus about justice or equality. Over the past few decades, however, each of these trends has been reversed.
After the collapse of communism, there was no longer a need for a reformism of fear. The era of revolutions, in the classical sense of the term, is now over. Social fears still exist, but they concern such things as immigration, security, and terrorism. They appeal to an authoritarian state, not a solidaristic one. Most of the countries heavily involved in the two world wars, meanwhile, have long since entered a period of peace, and their senses of a national community as an expression of a mutual debt and common destiny have been weakened. Welfare states have entered a period of deep crisis, both for financial reasons and because the notion of social risk has been eroded by a renewed belief in individual responsibility as a constitutive element of social life. And a new kind of capitalism has replaced the style of firms described by Drucker and Galbraith. Schumpeterian entrepreneurs and innovators have roared back to the fore of economic life, with individual performance and personal responsibility celebrated everywhere as central to success and efficiency.
What this means is that there are no longer strong exogenous factors driving developed countries toward policies that keep inequality in check—and unsurprisingly, in the absence of those factors, such policies have eroded, contributing to the rise in inequality everyone has noticed. If inequality is to be reduced once more, therefore, the effort will have to be grounded in a solid, shared conception of what equality involves and why it is worth promoting.
Welfare states have entered a period of deep crisis, for financial reasons and because the notion of social risk has been eroded by a renewed belief in individual responsibility.
There are two main contenders today for such a conception. One, the populist option, redefines equality as social identity or homogeneity. The other, the social-liberal option, emphasizes equality of opportunity. Both have flaws.
The populist option was first developed in Europe during the late nineteenth century, in an earlier era of intensive globalization. It could also be labeled as “national protectionism,” and it should be understood as a solidaristic alternative to unbridled capitalism. It is sustained by a purely negative definition of equality, forming a community of some by excluding others. The French activist Maurice Barrès put it bluntly: “The idea of ‘fatherland’ implies a kind of inequality, but to the detriment of foreigners.” In a new era of intensive globalization, with economic stagnation among the middle and lower classes in developed countries and the welfare state in crisis, such xenophobic views are returning on both sides of the Atlantic as a powerful political force, with outsiders—foreigners, immigrants, refugees—portrayed as enemies exploiting and undermining existing national communities.
The social-liberal option, in contrast, seeks to update and extend the traditional liberal notion of equality of opportunity, going beyond the classical negative definition of it (the elimination of barriers to upward mobility) to incorporate broader positive efforts to achieve the same underlying goal. Different avenues for activism have been suggested, linked by their common desire to block the mechanisms through which economic, social, and cultural inequalities are reproduced from generation to generation. They generally involve some sort of redistribution—of cash, of goods, of privilege, of social capital, and so forth. They all seek to equalize the conditions in which individuals compete in a fair contest for meritocratic rewards.
The vigorous implementation of all these positive variants of equality of opportunity, however, raises problems. To be treated as true equals, individuals would need to be “desocialized”—separated from their families, their inheritances, and their personal contexts. That implementation could also lead to a hierarchical and depressing society, one in which everyone’s life outcome would be determined, following his desocialization, soley by his personal attributes and efforts. Such a meritocracy could well be a harsh and unforgiving society, one in which individuals must internalize their despair over any problems they encounter.
The populist vision of equality, in short, is more about exclusion than inclusion and has little attractive positive content. And although the social-liberal vision lays the basis for a number of valuable practical policies, it is unsuitable for establishing a general and universal social theory of equality, since it focuses exclusively on individuals. So something more is needed, a positive theory into which the politics of equality of opportunity could be embedded.
These days, equality is usually defined mathematically, as a comparison of the economic positions of individuals or segments of the population. This notion has its uses. But equality should also, and perhaps primarily, be defined socially, as a measure of the communal bond. A theory of equality needs to focus on the structure of society. It should rest on three principles: a recognition of people’s singularity (as opposed to individualism), the organization of reciprocity (in the relation of citizens to one another), and the constitution of commonality (for the community as a whole).
The classic modern revolutionary idea has been to abolish privilege and create a world of similar, and similarly situated, people (best expressed by the French word semblable). But similarity does not require sameness, nor does it mean lack of individuality or autonomy. Each individual can stand out by virtue of the unique qualities that he or she alone possesses, with diversity becoming the standard of equality. Each individual seeks his or her own path and control over his or her history. Everyone is similar by dint of being singular and incomparable.
Equality based on singularity requires a type of society grounded in neither abstract universalism nor identity-based communitarianism but rather the dynamic construction and recognition of specificities. Singularity is not a sign of withdrawal from society (individualism as retreat or separation). Rather, it signals an expectation of reciprocity, of mutual recognition. This marks the advent of a fully democratic age: the basis of society lies not in nature but solely in a shared philosophy of equality. Democracy as a type of political regime is mirrored by democracy as a form of society.
As for the relationships that singular individuals maintain with one another, Tocqueville argued that selfishness is “to societies what rust is to metal.” And today, the most important source of corrosion is the absence of reciprocity. Many studies have shown that political commitment is conditional: people are more likely to contribute efforts or funds if they believe that other citizens will do the same. Conversely, any perceived disruption of reciprocity can lead to withdrawal in one form or another. Inequality is felt most acutely when citizens believe that the rules apply differently to different people. They resent double standards and those who manage to manipulate the game to their own advantage. Such sentiments are a crucial source of social distrust, which in turn undermines the legitimacy of the welfare state, fosters aversion to taxes, legitimizes various forms of self-dealing (as justifiable compensation for others’ transgressions), and erodes public spirit.
A general sense that reciprocity has broken down in recent decades has fed frustrations that have been exploited by extremist political movements in many developed countries—groups that direct their fire at privileged elites and poor immigrants, both of whom are assumed to be taking advantage of the supposedly hard-working and exploited middle and working classes. Restoring reciprocity, accordingly, is a crucial first step toward creating a society of equals. Equality as reciprocity means above all equality of treatment and involvement. Abuse of the welfare and tax systems must be vigorously opposed in order to maintain confidence in these institutions, as must the provision of favors to special interests and any lack of equality or transparency in the operations of the state more generally.
The third element required for a society of equals is the development of some sense of community for society as a whole. Civil citizenship and the notion of human rights that goes along with it have reshaped the very idea of the individual. But citizenship is also a social form. The citizen is not merely an individual endowed with certain rights; he is also defined by his relation to others, his fellow citizens. What the French linguist Émile Benveniste tells us about the etymology of the word civis is especially enlightening in this regard. The Latin civis, he argued, was originally a term applied to people who shared the same habitat. Implicit in the meaning of the word was a certain idea of reciprocity. It was thus a term of relative order, as can be seen by a comparison with the root of the Sanskrit and Germanic words for “friend,” “relative,” and “ally.” The civis was a person who joined with his peers in the construction of a civitas, a common society. I propose the term “commonality” as a name for this dimension of citizenship, citizenship as a social form, as distinct from its legal definition.
Commonality is today under serious attack thanks to various forms of social separation and withdrawal. The secession of the rich into their own private havens is the most visible and shameful of these, but it is not the only one; regional separatism, for example, is also on the rise. The response to such withdrawals, moreover, is often an equally destructive quest for homogeneity and identity politics, the driving force behind many populist movements. What democracy needs instead is a more active, creative concept, a more complex understanding of what elements of life and experience can and should be held and lived in common.
Without objective factors driving support for egalitarian policies, the only way to combat economic inequality today is to frame the quest within a broader project to create a society of equals. Neither the populist alternative of searching for comfort in a homogeneous band that excludes outsiders nor the social-liberal project of trying to achieve equality of opportunity can offer what is needed. Only a more robust vision of democratic equality—based on the singularity of individuals, reciprocal relations among them, and a social commonality—can provide the foundation for broadly accepted public policies that can attack the trends toward inequality that are hollowing out contemporary economies and polities. And only such a vision can provide guidance on how to make the necessary redistributive policies just: by seeing them as a way not simply to redress economic inequalities but also to build a society that engenders social peace and cooperation.