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What the Economic Left Gets Right About Politics
Concentrated economic power and class inequality are bad for America. Public goods and universal social insurance programs are beneficial.
If we are to build a new politics for America based on principles of liberal nationalism, it’s important to examine and incorporate good ideas from around the ideological spectrum that are helpful to the causes of individual freedom and national economic strength in all parts of the country.
Last week’s column examined some of the best concepts from conservatives, including notions of subsidiarity and localism, common sense and tradition, and concerns about unintended consequences in policy making. Today’s column will look at some of the best ideas emanating from the economic left—ideas that serve as good companions to those conservative ideas about markets and government by offering important corrections to private sector activities.
While conservatives remind us of the problems of big government and the benefits of local actions, the economic left reminds us about the problems of big business and the benefits of collective goods and universal social insurance protections.
The perils of concentrated economic power and class inequality. American liberals in general understand the importance that markets play in producing wealth, creating jobs, devising new products and services, and in meeting the needs of individuals and consumers. But the left side of liberalism—the populist, non-socialist left—also highlights historical examples of how market economies are prone to speculative bubbles, monopolistic behavior, mistreatment of workers, and corruption if they are not closely monitored and checked. Left-leaning economic ideas start from the premise that markets often fail and that they are not always self-correcting.
At the same time, the left highlights how concentrated economic power grows in tandem with rising economic inequality—as the fruits and profits of this economic power get turned into outsized income and wealth for a small group of people—and leads to concentrated political power as companies and the wealthy exert undue influence over the rules and laws put out by states and the federal government.
Anti-monopolists on the left correctly argue that when industries, sectors, or corporations get too big and too concentrated—think big pharma, big banks, big ag, and big tech—competition is reduced, small businesses squeezed, consumer prices hit, and workers’ bargaining and wage power diminished. This is an acute problem in rural America where family-owned farms have faced decades of pressure from gigantic multinational companies and single buyers that have dramatically undercut America’s traditional self-image as a nation of small producers and landowners.
A recent New Yorker piece highlights how laws intended to protect small dairy farmers actually screw them over in practice:
In the spring of 2020, Dairy Farmers of America, the nation’s largest dairy cooperative, purchased Dean Foods, the country’s largest milk processor, for four hundred and thirty-three million dollars. D.F.A. formed in 1998, out of a merger of four regional co-ops. Last year, its members, more than twelve thousand dairy farmers, sold fifty-six billion pounds of milk, about twenty-five per cent of the nation’s total, and the organization as a whole brought in nearly eighteen billion dollars in revenue. With the acquisition of Dean, D.F.A. gained unprecedented power as both a milk supplier and buyer. Pete Hardin, the editor and publisher of the dairy trade journal The Milkweed, told me, “It’s the poster child for agricultural concentration—and what Big Ag has become.”
For years, D.F.A. members and nonmembers alike have complained about the co-op’s growing market power. “The only reason I’m with D.F.A. is there’s no other place to go,” a dairy farmer from the Ozarks, who asked to remain anonymous, told me. “They have a ten-year exclusive contract with all the bottling plants within probably three hundred miles.” In other words, D.F.A. is the only available purchaser of his milk. An enterprise with a single buyer, called a monopsony, typically means lower prices for producers. He added that, when he started farming, in the early seventies, there were a dozen local plants that he could sell his milk to. “Over time, they kept getting squeezed out,” he said. “I’m set in steel now for ten years.”
Nationally, the four largest dairy co-ops now control more than fifty per cent of the market. They’ve been able to grow so big, in part, because of a 1922 law called the Capper-Volstead Act, which provides significant exemptions from antitrust laws for farmer-owned agricultural cooperatives. “The agricultural industry is different than other industries because Capper-Volstead allows them to combine in ways that other individuals would go to jail for,” Allee A. Ramadhan, a former Justice Department antitrust attorney who led an investigation into the dairy industry, told me.
The law’s protections were intended to give small, independent farmers the right to collectively bargain prices for processing and selling their goods, but many large co-ops, such as D.F.A., have increasingly come to resemble corporations. D.F.A. has dozens of affiliates and joint ventures, but according to its most recent financial report only about a quarter of the co-op’s profits were paid directly to its farmer-members.
Even the International Monetary Fund, not exactly a bastion of economic leftism, has raised alarms about concentrated economic power leading to unchecked price increases for consumers and a slowdown in economic recovery, particularly with a rapid period of market consolidation during the coronavirus pandemic.
Determining the proper legislative and regulatory line between the good parts of huge operations and companies—in terms of better products and services that Americans like and need—and the bad parts in terms of rising inequality and less competition is hard to figure out. But the economic left rightly reminds policy makers to at least look empirically at this market concentration and take steps to protect ordinary workers and smaller producers from the depredations of the biggest players.
The importance of public goods. The economic left also reminds us that many private businesses and big corporations operate in self-interested ways focused mostly on shareholder value with little regard for negative “externalities” such as air and water pollution, overuse of natural resources, impacts on local communities, or system-wide financial risk in the pursuit of profits.
Similarly, the left correctly recognizes that the private sector has little incentive to invest in key public goods such as education, infrastructure, research and development, or public safety and national security measures that produce long-term, society-wide benefits. As John Kenneth Galbraith defined it, public goods are “things [that] do not lend themselves to [private] production, purchase and sale. They must be provided for everyone if they are to be provided for anyone, and they must be paid for collectively or they cannot be had at all.”
What are examples of public goods? Throughout the late nineteenth and twentieth centuries in America, governments at all levels promoted important public investments, financed through progressive taxation and government borrowing, to do things such as maintain a strong military and ensure public safety measures; support public schools and access to college education; build and maintain public utilities, highways, airports, railways, and broadband infrastructure; provide health care and retirement security for Americans; invest in new energy research and other forms of innovation.
The economic left rightly argues that governments must step in to correct the failures and limitations of markets, maintain full employment, and invest in public goods such as these to benefit all people in society.
The need for universal social insurance programs. In conjunction with concerns about the downsides of private economic activity, the economic left highlights the importance of universal social programs in promoting our common welfare and ensuring that all people have adequate standards of living and protections from unemployment, a slide into poverty, sickness or injury, and the lack of income in old age.
The key insight from the economic left is that these programs should almost always be universal—meaning they are available to all people and paid for by all people—if they are to work best and maintain public support over time. Think of Social Security’s provisions for retirement income and support for survivors and those who are disabled; Medicare’s health care and long-term care provisions for the elderly; and the Affordable Care Act’s private or public health insurance options for nearly all Americans. Recent policy proposals for national paid leave and child care provisions also fall into the universal camp, along with traditional unemployment. These programs are better thought of as a form of social insurance, meaning that people and businesses directly contribute in some capacity to programs that benefit and protect all people, even if payments may be based on income and some benefits may be concentrated among those most in need.
Although most anti-poverty programs remain open to all people, social benefits are often means-tested, meaning they are targeted only to people meeting specific income or work thresholds. This makes sense given the goals of poverty reduction or state budget limitations. But even on this front we have some recent examples of universal payments as part of the Covid recovery packages that suggest changes could be made that would make income supports easier to administer with less red tape and potentially more public support.
The logic and benefit of these universal programs is clear. People get sick or hurt and everyone gets old. Some people lose jobs through no fault of their own. People need child care help to go to work. American society cannot function without protections from these life circumstances. Likewise, American workers can’t take advantage of new job possibilities without first having financial stability and guaranteed basic living standards.
As the economic left has argued for decades, universal social insurance programs serve American interests and help support all families in all parts of the country.
These are some of the best ideas coming from the economic left. Americans will be better off if they take their advice to beware of concentrated economic and political power and to invest in public goods and universal programs.
If we match these ideas with conservative ideas for administering things locally and relying more on common sense in rule making, we have the makings of a nice hybrid public philosophy that can build solid foundations for successful families and free individuals along with a strong national economy that benefits everyone and maintains America’s position in the world.