Dean Baker - The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer

THE CONSERVATIVE NANNY STATE
How the Wealthy Use the Government to Stay Rich and Get Richer

By Dean Baker

Published by the Center for Economic and Policy Research
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Washington, DC 20009
202.293.5380

www.cepr.net

Cover design by Paper Cut Design

Creative Commons (cc) 2006 by Dean Baker

Notice of rights: This book has been published under a Creative Commons license. This work may be copied, redistributed, or displayed by anyone, provided that proper attribution is given.

ISBN: 978-1-4116-9395-1

Preface

This book is written in frustration and hope. People in the United States who consider themselves progressive must be frustrated over the extent to which conservative political ideologies have managed to dominate public debate about economic policy in the last quarter century. Even when progressives have won important political battles, such as the defeat of efforts to privatize Social Security, they have done so largely without a coherent ideology; rather, this success rested on the publics recognition that it stood to lose its retirement security with this reform. It also helped that the public was suspicious of the motives of the proponents of Social Security privatization. However, success in the goal-line defense of the countrys most important social program is not the same thing as a forward looking agenda.

The key flaw in the stance that most progressives have taken on economic issues is that they have accepted a framing whereby conservatives are assumed to support market outcomes, while progressives want to rely on the government. This framing leads progressives to futilely lash out against markets, rather than examining the factors that lead to undesirable market outcomes. The market is just a tool, and in fact a very useful one. It makes no more sense to lash out against markets than to lash out against the wheel.

The reality is that conservatives have been quite actively using the power of the government to shape market outcomes in ways that redistribute income upward. However, conservatives have been clever enough to not own up to their role in this process, pretending all along that everything is just the natural working of the market. And, progressives have been foolish enough to go along with this view.

The frustration with this futile debate, where conservatives like markets and progressives like government, is the driving force behind this book, along with the hope that new thinking is possible. We shall see.

I appreciate the assistance of many in the writing of this book and the conversations that led up to it. The most important people in this group are my colleagues at the Center for Economic and Policy Research. Several people gave me helpful comments and feedback on earlier drafts. This list includes Michael Meeropol, Lynn Erskine, Marcellus Andrews, Mark Weisbrot, Heather Boushey, John Schmitt, Robert Johnson, Katherine McFate, and Helene Jorgensen. Since this book draws on many books and papers written over the years, the full list is much longer, but in the interest of brevity and the fear of excluding good friends, the others will remain un-named. I also thank Helene, Fulton, and Walnut for their immense patience.

Introduction
The Government vs. the Market
A Useful Political Parable for Conservatives

Political debates in the United States are routinely framed as a battle between conservatives who favor market outcomes, whatever they may be, against liberals who prefer government intervention to ensure that families have decent standards-of-living. This description of the two poles is inaccurate; both conservatives and liberals want government intervention. The difference between them is the goal of government intervention, and the fact that conservatives are smart enough to conceal their dependence on the government.

Conservatives want to use the government to distribute income upward to higher paid workers, business owners, and investors. They support the establishment of rules and structures that have this effect. First and foremost, conservatives support nanny state policies that have the effect of increasing the supply of less-skilled workers (thereby lowering their wages), while at the same time restricting the supply of more highly educated professional employees (thereby raising their wages).

This issue is very much at the center of determining who wins and who loses in the modern economy. If government policies ensure that specific types of workers (e.g. doctors, lawyers, economists) are in relatively short supply, then they ensure that these workers will do better than the types of workers who are plentiful. It is also essential to understand that there is direct redistribution involved in this story. If restricting the supply of doctors raises the wages of doctors, then all the non-doctors in the country are worse off, just as if the government taxed all non-doctors in order to pay a tax credit to doctors. Higher wages for doctors mean that everyone in the country will be forced to pay more for health care. As conservatives fully understand when they promote policies that push down wages for large segments of the countrys work force, lower wages for others means higher living standards for those who have their wages or other income protected.

Conservatives dont only rely on the nanny state to keep the wages of professionals high, they want the nanny state to intervene through many different channels to make sure that income is distributed upward. For example, conservatives want the government to outlaw some types of contracts, such as restricting the sort of contingency-fee arrangements that lawyers make with clients when suing major corporations (conservatives call this tort reform). This nanny state restriction would make it more difficult for people to get legal compensation from corporations that have damaged their health or property.

Conservatives also think that a wide variety of businesses, from makers of vaccines to operators of nuclear power plants, cant afford the insurance they would have to buy in the private market to cover the damage they may cause to life and property. Instead, they want the nanny state to protect them from lawsuits resulting from this damage. Conservatives even think that the government should work as a bill collector for creditors who lack good judgment and make loans to people who are bad credit risks (conservatives call this bankruptcy reform).

In these areas of public policy, and other areas discussed in this book, conservatives are enthusiastic promoters of big government. They are happy to have the government intervene into the inner workings of the economy to make sure that money flows in the direction they like upward. It is accurate to say that conservatives dont like big government social programs, but not because they dont like big government. The problem with big government social programs is that they tend to distribute money downward, or provide benefits to large numbers of people. That is not the conservative agenda the agenda is getting the money flowing upward, and for this, big government is just fine.

Of course, conservatives dont own up to the fact that the policies they favor are forms of government intervention. Conservatives do their best to portray the forms of government intervention that they favor, for example, patent and copyright protection, as simply part of the natural order of things. This makes these policies much harder to challenge politically. The public rightfully fears replacing the natural workings of the market with the intervention of government bureaucrats. This stems in part from a predisposition not to have the government meddle in their lives. In addition, the public recognizes that in many cases the market will be more efficient than the government in providing goods and services.