Capitalism is unfair. It’s time to re-write the social contract.
After the last of the Occupy Wall Street encampments was broken up by the police, David Carr wrote in the New York Times that "a tipping point is at hand. Regardless of how the movement proceeds now that it is not gathered around campfires, its impact on the debate could be lasting and significant. If the coming election ends up being framed in terms of 'fairness,' the people who took to the streets...will know that even though their tents are gone, their footprint remains."
Many in the news media and elsewhere have pointed out that the Occupy Wall Street movement did not have a specific agenda. It was energized by the innate sense of fairness that most of us share. Many of us are appalled by the extreme gap between the small number of people in our society who receive most of the income and hold most of the wealth (actually, the big winners represent about .01 percent) compared to the vast majority, even many in our shrinking middle class, who are struggling to make ends meet.
It's an economic picture that the Victorian novelist Charles Dickens would recognize. An estimated 25 million people are unemployed or underemployed (last week's down-tick in the unemployment rate was due mostly to 300,000 dropouts from the labor market last month). Some 50 million people, all told, have incomes that are close to or below the poverty line, including families with 17 million children. Meanwhile, it is reported that year-end bonuses on Wall Street will be sweetened with many millions of dollars in lucrative stock options for top executives.
Capitalism (in theory) has many positive and time-tested benefits. It encourages entrepreneurship, talent, and hard work; it provides rewards for meeting the needs and wants of our citizens; it uses competition to stimulate economic progress and to regulate the market place; it is a counterweight to the ever-present risk of abusive government power; and it generously rewards "merit" (or equity) -- one of the three basic principles of fairness that are rooted in our deep sense of fairness.
However, capitalism is indifferent to two other fundamental fairness precepts that are also embedded in human nature - equality with respect to our basic needs (some fourteen biological survival imperatives are identified in my book, The Fair Society), and reciprocity - our strong sense of a mutual obligation to re-pay the benefits we receive from others. These three fairness precepts are strongly supported by the emergent science of fairness (I review the research in my book), and they represent the normative foundation for the implicit "social contract" that legitimizes a successful and harmonious society.
Capitalism in practice has had a mixed record. It produces both iPads and beggars who live in homeless shelters; it is all too easily corrupted by "crony capitalism," and what economist Jamie Galbraith calls "predatory capitalism," and Wall Street's "casino capitalism;" and it is rigged to make it easy for the rich to get richer and for the poor to be trapped in grinding poverty. As the Microsoft billionaire Bill Gates put it, "markets only work for people who have money." Over the course of history, deeply troubled societies with extremes of wealth and poverty have opted for one of two alternative solutions to the fundamental fairness issue - reform or revolution.
Let's talk about the reform option. What would a "Fair Society" look like? In fact, it would not be so very different from some of the stellar European "welfare capitalist" societies. (The ongoing European currency/debt crisis will in time be fixed.) Denmark, Norway, Sweden, the Netherlands, even Germany have achieved a better balance between the three key fairness principles: equality (providing for the basic needs of everyone), equity(rewarding merit and not subsidizing undeserved wealth), and reciprocity(a more balanced system of taxes and public service). None of these European countries is perfect, but collectively they put us to shame.
Specifically, we need to undertake a national full employment program that is committed to providing productive jobs for everyone who is able to work, and with a "living wage" not our delusional minimum wage. (This would, of course, require a sustained, multi-faceted effort, including a public-private partnership.). Beyond this, we must greatly improve the economic "safety net" for the many people in our society who cannot work, including the extreme old, the very young, and those with various "no-fault" needs, like those who are severely disabled and sick. Improvements to public services like transportation and education are also imperatives, along with repairing our deteriorating infrastructure. A commitment to providing for the basic needs of all our citizens is affordable even as we are paying down our national debt, if there were the political will to do so. (There's more on this in my book.)
Our capitalist system also needs to be reformed in order to align it more closely with merit. The model going forward should be "stakeholder capitalism." As the term implies, this is a kind of capitalism in which all of the stakeholders are empowered and can influence the way a business operates - the workers, the customers, the community, the suppliers, even government (mostly through regulations and incentives), not just the owners and shareholders who predominate in our form of capitalism. Examples of companies that practice stakeholder capitalism exist even now in our society (I describe one, the farmer-owned Organic Valley food company, in the book), and there are many more examples in other countries.
To balance the scale of benefits with a comparable obligation for reciprocity, there needs to be a top-to-bottom reform of our corrupt tax system. Yes, the rich will end up paying more, but there will also be an end to the cornucopia of tax breaks, and subsidies, and loopholes, and dubious incentives. And yes, we also have to "fix" Social Security, Medicare and Medicaid, but not with "reforms" that are in fact a hidden agenda for privatizing and destroying these programs. Beyond this, the long-simmering idea of a broad, national public service program that asks everyone to give back to our society with their time and talents could have a transformative influence.
Finally, we need major structural reforms in our dysfunctional political system - eliminating the filibuster rule in the Senate; reducing the power of money in our politics; reforms to our election campaign financing system; non-partisan redistricting to eliminate Gerrymandering; maybe even reforms to our Supreme Court with a mandatory retirement age and adding more justices. (I know, this was tried before and it failed under FDR, but it's still a good idea.)
This is, of course, just a sketch. There are many more, perhaps even better ideas out there for what we could do to affect a major course change in our society. But none of this can be accomplished without visionary and inspiring leadership and a powerful surge of public support. What we need going forward is an "Occupy Washington" movement armed with the demand for a "Fair Society." Why not start right here.