New hard times
We need to open up new routes to social justice, writes Claudia Chwalisz
How to reconcile economic efficiency with social justice in a market capitalist society? For a long time the left relied on traditional ‘tax and spend’ redistribution to address these twin concerns of mitigating inequality and supporting growth in the postwar years. However, this approach has been controversial and divisive; its effectiveness is also questionable. Inequality in most major advanced economies has risen over the past few decades, wealth has concentrated in the hands of the few, and economic growth has stagnated.
The centre-left needs to look beyond statist social democracy and offer plausible reforms that address these concerns in a world that has changed profoundly since the era of ‘Beveridge plus Keynes’. We have experienced one of the most serious and destabilising financial crises of the modern era. Capitalism itself is undergoing a structural transformation. The fiscal pressures unleashed by the crisis are putting unprecedented strain on the welfare state. Meanwhile, the international context is being redefined by the growing importance of rising economic powers.
In our new book The Predistribution Agenda we explore new routes to social justice and a more equal society for the ‘new hard times’ in which we are living. Predistribution is focused on tackling inequality by putting in place reforms that promote inclusive, sustainable growth, reducing the need for post-hoc redistribution.
Rather than relying exclusively on the distributive sphere of social policy, the aim of predistribution is to address the structural context of contemporary capitalism. In our introduction to the book, we consider this as: ‘the quality of work and the satisfaction it generates, the allocation of “good” and “lousy” jobs, the prevailing framework of employment rights and market flexibilities, and the extent to which markets work in the public interest by treating all consumers, including the most vulnerable, equitably.’
Of course, we recognise that predistribution is a governing prospectus, not an election-winning slogan. The key pillars are: financial system reform, corporate governance reform, labour market reform, market redesign and tackling inherited concentrations of wealth among the privileged. One example is institutional and regulatory reforms that promote competitive, open and fair business environments. Others include improving market access, levelling the playing field for large and small businesses, and increasing labour market flexibility for workers and firms.
A core part of shifting the state’s role from compensatory approaches to a ‘pre-emptive’ strategy is the investment in human and social capital to get opportunity and social mobility flowing again. There is a risk that, in light of the crisis, states focus on protecting ‘traditional’ welfare transfers such as pensions and unemployment insurance rather than underwriting ‘equality-boosting’ programmes such as preschool education, parenting and family support, high-quality childcare, and improving the quality of vocational education.
The third way years showed that, regardless of how well targeted and resourced they are, early intervention programmes and education are only part of the solution to social and economic problems. The two strategies of social investment and predistribution need to go hand in hand; there is little purpose in improving the relative position of the most disadvantaged groups early on if they later confront a highly inegalitarian labour market and need to rely on the welfare state. The predistribution agenda is a strategy to achieve economic efficiency, social justice and sustainable, inclusive growth in the ‘new hard times’.
Claudia Chwalisz is a senior policy researcher at Policy Network and co-author with Patrick Diamond of The Predistribution Agenda: Tackling Inequality and Supporting Sustainable Growth
predistribution, responsible capitalism, Responsible Capitalism special 2015