Covid will eventually be, more or less, history. Life will renormalize, more or less. But something big has changed in government’s role in people’s economic lives.
For thousands of years it had very little. That really began to change with Bismarckian Germany’s pension scheme, to save the elderly from penury. It expanded greatly in the Depression, developing a broader “social safety net.”
This sparked some pushback from people seeing beneficiaries as coddled moochers — an aggravating factor being racial. On the other hand, there’s been the rise of “social justice” rhetoric targeting inequality.
Two points. First, inequality is not per se a bad thing; some people being rich is not a problem as long as everyone has enough to live decently. And secondly, “social justice” is a mistaken framing. The word justice entails concepts of deservingness. A polemical can of worms, with some, as noted, deeming safety net beneficiaries undeserving. Better to talk not of “justice” but simple humaneness. Helping people for no other reason than they’re fellow human beings.
Meantime, inequality is blamed on capitalism. Another mistake. While capitalism does produce disparate results, with some people getting rich, it’s wrong to see their wealth as “taken” from the rest. Steve Jobs got very rich by creating products which delighted customers and improved lives. Thus not a zero-sum game but win-win. That’s not universally the case, yet by and large those who earn riches do so by creating value benefiting others. Wealth is not evil.
And capitalism does not cause poverty. In fact, over the past century, average real dollar worldwide incomes increased something like sixfold. Not thanks to socialism; but masses of people being productively employed in a capitalist system, to make their own contributions to societal wealth, and enabling them to buy the resulting products. Capitalism’s critics never offer an alternative system to achieve that.
However, there are concerns that advancing technology will destroy a lot of jobs. This goes back to the Luddites. In every generation, what has actually happened is technology’s efficiency gains freeing up people to be productive in new and different ways, thus enlarging the overall pie. And despite predictions that Covid would accelerate automation, there’s actually zero evidence so far. But can this go on forever?
Good question, with artificial intelligence ultimately likely to replace human work like never before. A growing population segment already lacks the capability for productive employment. Largely due to what is really the key inequality in modern societies: educational inequality. And even if that could be remedied, it’s still doubtful there’ll be enough productive work for everyone. Perhaps if we can at last produce all we need with little human labor, we should just relax and enjoy it. The question then becomes how to distribute the fruits.
All of which brings us back to the governmental response to Covid’s economic fallout. Previously, social safety net programs tended to be massively encrusted with bureaucracy, means testing, other eligibility requirements, and so forth. Much of that out the window with governments now focused instead on just getting money into people’s hands. Arguably this has gone too far, with a lot of babies thrown out with bath water. But it represents a big paradigm shift in our view of the social safety net — in the direction of a universal basic income. Unemployment benefits have even exceeded what some people earned from jobs, which used to be a caricature lobbed by welfare state critics. Yet most Americans now seem okay with it, shrugging off such concerns.
A recent David Brooks column reflects this: “Ten years ago, I would have been aghast at this leftward shift. But like everybody else, I’ve seen inequality widen, the social fabric decay, the racial wealth gap increase. Americans are rightly convinced that the country is broken and fear it is in decline. Like a lot of people, I’ve moved left on what I think of the role of government and income redistribution issues. We surely need to invest a lot more in infrastructure and children.”*
So far at least, actual wealth redistribution is limited. President Biden is proposing tax rises only for the richest, and for corporations. But most of the new spending is being financed by borrowing. Cheap to do with interest rates at rock bottom. And our society is, on the whole, plenty rich enough to do what we’re doing. But how long can we do it this way? There have to be limits, though we don’t know where they lie, and hitting them could be a rude shock. Former Treasury Secretary Larry Summers says the lack of fiscal discipline in all this spending is totally unprecedented. In the longer term, we have to face up to paying the bills. (Which Brooks too worries about.)
We could instead inflate away the debt, shrinking the value of the dollar, so the rich would pay through devaluation of their assets. But that would be economic havoc; better to just tax them. But again, it shouldn’t be on some social justice theory, as a punitive equalizer, as if their wealth is undeserved. Rather, it should be a re-envisioning of the human responsibilities of members of society toward one another.
That could be Covid’s most lasting legacy.
*Brooks mirrored my own thinking; similarly pushed leftward; partly by how utterly vile American “conservativism” has managed to make itself.