PREdistribution

A new word is being floated by the media: predistribution. It has landed on our shores from the other side of the Atlantic, where Ed Miliband, the U.K. Labour Party leader is apparently building a “new agenda” around it, as reported in The Nation, October 8, 2012 in its "Noted." column. 

Predistribution encapsulates the idea we have been espousing for months, which is that the overall distribution of income is not only unfair but economically unsound. In particular, noting how increasingly skewed the distribution of income has become in the U.S. (and around the world, for that matter), we have questioned the economic rationale underlying the pricing of labor in particular. We refuse to explain the stagnation of real wages since the mid-1970s -- while productivity (output per worker) has continued its upward trend -- by blaming it on objective economic laws. Rather, we see right-wing politics and power at work in all manner of well-documented ways, resulting in a concerted attack on labor and a corresponding increase in the power of the economic elites like the Bain Capital beneficiaries such as Mitt Romney. Finally, the dots are being connected. We can now see clearly that, as Warren Buffett puts it, there has been a class war and his side has won. (Actually, Buffet himself is one of the most constructive members of his class – he invests for the long term, unlike Bain Capital.)

For the country to get back on track as a functioning, full-employment social democracy, what we have to see after the election, more than redistribution by progressive taxation and government transfer payments – although there is room for those -- is recognition that the price system is not working and needs to be changed. This can best be seen as the need for a high wage policy, the other side of the coin being a reduced share of corporate profits in GDP and changes in the way top incomes are determined. The net result would be a society with a more sound distribution of income and more jobs, as we have argued at length on this blog. To the extent wages are more adequate – supported by higher minimum wage levels and a revitalized labor movement -- there will be less need for redistribution policies, which can be focused on specific subsidies where there is clear need, like health care, education and social security. 

Footnote: The moral and political appeal of this approach could be enormous:  a “populist” economics that puts well-earned higher wages into the hands of workers, rather than a “liberal” redistributive tax-and-spend, hand-out economics.