The Zero-Sum Society, by Lester C. Thurow
Dividing Up the Pie
The Zero-Sum Society.
by Lester C. Thurow.
Basic Books. 230 pp. $12.95.
To Adam Smith and the classical school, economics was thought to have much to teach about the creation of wealth, but relatively little about its distribution. Economists have long since abandoned such modesty; in fact, many now think of their subject as dealing primarily with the division of scarce goods. Not surprisingly, this intellectual dispute has reverberated in the world of policy-making. On issues ranging from municipal finance to foreign aid, the central line of debate is frequently between those who wish to produce more and those who want a different allocation of the wealth we already have.
Among the most prominent of the latter is Lester C. Thurow. His writings have focused chiefly on issues of distribution and poverty, taxation, discrimination, and inequality. As a public figure, he is perhaps best-known for assisting Senator George McGovern in making income redistribution a major feature of his campaign for the Presidency in 1972. In his recent and widely-hailed book, The Zero-Sum Society, Thurow offers a new argument in behalf of such policies. Its crux is that the followers of the classical school have things backward. Today’s economics, Thurow contends, can offer little useful instruction about the creation of wealth without first being concerned with its distribution.
Thurow arrives at this conclusion by briefly examining several of the nation’s most serious economic problems. Wherever he looks he finds, with almost monotonous regularity, that the root of the problem is our failure to agree on a fair distribution of income. Are we incapable of reducing our dependence on foreign oil? The reason is that we cannot decide whose incomes should rightly increase and whose decline as we turn to alternative sources of energy. We know that curing inflation, to take another example, will necessarily entail costs for some sectors of the economy, but we cannot make up our minds which. Again, increasing our productivity will mean investing in more efficient industries and “disinvesting” in less efficient ones, and although the nation as a whole may come out ahead, certain portions—the steel companies, for example—may not; how should the winners compensate the losers?
And so Thurow goes, from environmentalism (“We cannot raise the necessary revenue to clean up the environment unless we can agree on who should pay the bill”) through regulatory policy (“Without a vision of what constitutes an equitable distribution of income, it is not possible to say whether we have a good set of rules and regulations or how this set should be modified”) and on to efforts to aid the poor and minorities (“Where should parity demands be met and where should parity demands be rejected? What principles should underly this acceptance or rejection?”). In short, no matter how various they may appear, the nation’s economic problems amount to just one: how to divide up the pie.
That is why Thurow believes the United States is now a “zero-sum society.” Its problems are solvable, but all solutions entail costs that may be as large as the benefits they confer. If some people win, others must lose, at least relatively. Moreover, no longer can the burdens be easily shifted onto the powerless, since the political system now provides—through the courts, bureaucracies, lobbying, and other means—greater opportunity to delay or alter public actions. Indeed, to forestall the possibility of economic loss, increasing numbers of groups are clamoring for (and receiving) government protection. By making it more difficult to impose the costs of solving our problems, we are, Thurow argues, creating an economy less able to perform well.
Unlike other recent economic commentators of the Left (such as Robert Heilbroner), Thurow does not believe stagnant growth is either inevitable or desirable for the United States. Nor does he appear to share the late Arthur Okun’s view that a more efficient economy may necessarily be a less equitable one. Rather, his position is just the opposite. Only by recognizing and responding to the distributional issues at the heart of our problems—by creating, in other words, a society where gains and losses can be fairly apportioned—can we escape economic paralysis. A “zero-sum society” we will always remain, but prosperity can still be had if rewards and burdens are more equitably shared.
In this, Thurow’s view is reminiscent of the arguments put forth over a generation ago in behalf of the welfare state. In Equality, for example, the British sociologist R. H. Tawney maintained that by enacting measures to eliminate the vestiges of social class, an egalitarian government would help, not hinder, economic growth. Indeed, the specific programs Thurow advocates—more government involvement in investment, an expanded program of public-sector employment, compensation and retraining schemes for displaced workers, higher taxes on the rich, special help for the poor, and so on—are nothing more than what the European welfare states have been trying for years.
Thus it is remarkable that he makes virtually no attempt to draw lessons from their experience. For what has been learned is that such measures do not guarantee economic growth and may even work against it. In Britain, the nationalized industries—Thurow’s “socialized sector of the economy”—are the weakest parts of a generally ailing economy, and repeated government efforts to channel investment along more productive lines have borne paltry fruit. In countries like Sweden or West Germany with better postwar economic records, close examination suggests that redistributive policies deserve little, if any, credit for their success. Thurow pays no attention whatsoever to those nations most committed to socializing the economy—the Communist bloc—but if he had, he would have discovered they have failed as badly in creating wealth as in establishing equity. In fact, throughout the industrialized world, growth rates differ markedly even though the distribution of income is more similar than dissimilar.
For at least two decades, the United States has also been experimenting with redistributive policies. As Thurow notes, income-transfer programs have narrowed the gap between the rich and the poor. Moreover, a host of redistributive schemes—from fuel-oil quotas to the windfall-profits tax—have supposedly shielded low- and middle-income consumers from the rising costs of energy. An even larger number of new regulatory programs decide who should pay the bill for cleaner air, purer water, safer jobs, and other amenities. So well are employees now protected from downturns in the business cycle that at least some economists believe that returning to work has become a less urgent priority. Similarly, the rapid industrial migration from Snowbelt to Sunbelt gives the lie to the notion that the shifting of jobs and capital cannot be accomplished without elaborate plans for retraining and compensation. If our economic problems remain, the reason is surely not, as Thurow thinks, that we cannot agree how to divide up the pie but rather that we can agree too easily, too frequently, and with too little regard for the consequences.
If more redistribution seems unlikely to solve our economic troubles, neither will our society be made fairer through more explicit guidelines on who should get what. One problem is determining what standard of equity should be used. Thurow himself admits that no factual or logical basis exists for such a judgment, and simply asserts we would be better off if the income distribution of all groups resembled that currently obtaining for white males, since the latter suffer none of the handicaps others do in the labor market. Even if this were so (and for significant numbers of white males, it is not), Thurow’s criterion ignores such differences among groups as age, experience, preferences, and motives—all of which ordinarily have something to do with the fairness of rewards. Moreover, it assumes that the income of white males will be regarded as a proper benchmark by those who bear the costs of economic change. But would the knowledge that he was “keeping up with whitey” really placate a steel-worker whose uncompetitive plant was closing, a car owner forced to pay more for air bags, or a pensioner whose income was no longer guaranteed to increase with the cost-of-living? Now, these groups and others appeal for fairness to the political system. Although the process of resolving claims is uncertain, untidy, and inefficient, it nonetheless provides the necessary responsiveness to different circumstances without which true equity cannot be attained.
In calling for a more explicit criterion, Thurow is seeking not just a new conception of fairness but also a more potent one. In his world, gains and losses would be assigned not by the interplay of politics, economics, and custom, but rather through the manipulations of government (abetted by the giant corporations, which Thurow admires less for their productivity than for the control they exert over their assets and employees). The Zero-Sum Society is thus not so much a plea for fairness as it is for statism. With our implicit notions of equity, we may already have traveled far in that direction, but Thurow would have us go further. He likes our current political methods of distributing income as little as he does the economic results they produce. He offers, instead, a zero-sum solution whereby some would gain power and many lose it—as dubious a recipe for real fairness as it is for greater wealth.