So the exchange at Ten Miles Square between Mark Schmitt and Brink Lindsey over issues raised by Tim Noah’s new book The Great Divergence is complete, with each writer publishing three interactive posts. As you might expect from a debate between a progressive and a libertarian, there was plenty to argue about, but what Schmitt and Lindsay most exhibited was a different set of predispositions they brought to the table. Schmitt regards growing economic inequality as presumptively suspect and likely the result of public policies that are in danger of producing a “vicious circle” of privilege and barriers to upward mobility, while Lindsay simply thinks it’s worth examining and is quick to suggest that inequality is largely the product of otherwise benign economic, political and social trends.
A characteristic exchange was over the role that the decline in union power might have played in producing greater income inequality. Lindsey regards unions as instruments for forcing “above-market” business costs, and their decline as promoting greater efficiency and lower consumer prices. Schmitt responds that union “power,” such as it is, is essential to the establishment of market prices to begin with, and moreover, has been dwarfed by the ability of executives to extract “above-market” pay and benefits, with both the decline of collective baragaining and the rise of executive compensation boosting inequality without necessarily benefitting consumers or anyone else.
Both writers discuss different measurements of inequality–based on income, wealth, or consumption. Schmitt makes the excellent point that wealth inequality is largely generational, reflecting the happier circumstances that today’s seniors enjoyed when they were buying houses whose value consistently rose, planning for retirement with generous private pensions, and “making ends meet” without relying nearly as much on debt as more recent cohorts. Both writers agree that inequality in educational opportunity is an increasingly important inhibitor of social mobility. Both also agree that a major shift in immigration policy encouraging the migration of unskilled labor has worsened indicators of inequality, though Schmitt rates it as a far-less important factor than does Lindsey, and both consider the super-accumulation of wealth by the financial sector problematic, though Lindsey is more concerned with its impact on economic efficiency than on inequality.
You really should read the whole exchange, since both writers get pretty far into specialty literature and often raise issues the other correspondent does not have the time or space to address fully. I came away from the exchange more troubled than before by the structural underpinnings of inequality, and far less sanguine that Brink Lindsey that it’s somehow mostly for the best.