Is "redistribution" the real issue?

[PETRUS]

Last week Thomas Edsall had a column in the New York Times where he directly stated that the difference between conservatives and liberals is the extent over which they are willing to reverse market outcomes to redistribute money from winners to losers:

“...the two sides are fighting over what the role of government in redistributing resources from the affluent to the needy should and shouldn’t be."

This was annoying not only because it is so seriously wrong, but also because this statement came from one of the more astute observers of American politics alive today.

Anyone trying to understand the role of the government in the economy should know that whatever it does or does not do by way of redistribution is trivial compared with the actions it takes to determine the initial distribution. Rich people don’t get rich exclusively by virtue of their talents and hard work; they get rich because the government made rules to allow them to get rich.

http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/do-progressives-have-to-be-loser-liberals

More at the link.

[aikoaiko]

1. "the government made rules to allow them to get rich"

There is something about this stance that bothers me, but I can't put my finger on it.

I think it is because I would not be supportive of a government or laws designed to prevent people from getting rich, per se. There may be safety laws that require business to spend their money a certain way instead of salaries or profits, but thats not about preventing people from getting rich.

[CJCRANE]

2. It's probably better to say the government "facilitates" the process

rather than "allows".

There is something about civilization that requires a government and laws to provide the stability needed for steady wealth accumulation.

[aikoaiko]

4. I agree that facilitates works better.

And yes, it is the job of our government to promote stability in things like the economy. Of course our friends on the right think that regulation causes the problems.

[PETRUS]

6. Context

The article contains some hints of what he's talking about, but not much in the way of detail. Absent a more thorough description, I can understand why you'd have that reaction.

I happen to be somewhat familiar with this economist's work, so I know what he's getting at. And my own research has led me to conclusions that are in at least partial agreement with his. What's implied, but missing, are the words "at the expense of others." In no way is the author arguing against policies that promote economic growth and wealth creation. He is arguing against policies that promote an upward distribution of income.

I don't know if you clicked through and read the article, but he does touch on a couple of examples. Another example, which has gotten a fair amount of play recently, is the existence of to-big-to-fail insurance (essentially preserving private profits but socializing risk). And now that Romney is running for president, you could probably easily find some articles explaining how it's possible for private equity firms to pursue leveraged buyouts and make a killing while driving the target company into bankruptcy. In instances like these, people are getting very rich but not creating new value and possibly even destroying value. These things are not the result of "free markets," they are possible because of law and policy.

There are many, many other examples of laws/regulations (and enforcement patterns) and policy that promote upward distribution of wealth. That's the complaint.

[aikoaiko]

7. Thank you.

I admit I didn't read the who article and merely commented on what was posted.

Yes, context is everything.

[cbrer]

3. When did

We become purists? There must be a mechanism to correct market deficiencies, when the market is skewed, or artificially manipulated. That's what redistribution amounts to. The wealthy will not stop wanting, and working towards getting the whole pie. And their vassals are making that more and more possible.

[EC]

5. No it's more like just plain distribution.

The money has to get back into circulation some how. Money doesn't do the economy any good when it is hoarded. So the only way to get it back into circulation it seems is through taxes. They aren't starting new businesses or hiring or spending, they are hoarding. When they are taxed higher, they expand business to cut their taxes.