The Intelligent Radical's Guide to Economic Policy, by James E. Meade
The Intelligent Radical’s Guide to Economic Policy: The Mixed Economy.
by James E. Meade.
Allen & Unwin (London). 160 pp.
James Meade, a former president of the Royal Economic Society, has published (in England) one of those rare economics books that one can recommend to every thoughtful person who takes an interest in the fundamental problems of contemporary societies. Some enterprising publisher should bring it out also in the United States. So far as my acquaintance extends, nothing of this character, scope, and quality has been published on our side of the Atlantic.
One must warn, however, that whoever goes to this little book in a mind to find the answers to the great economic problems, all ripe and ready, and as easy to swallow as aspirin tablets, will go away disappointed. Who goes prepared to concentrate his own thoughts, and to seek out elements of answers through wrestling with the author, will be rewarded.
As often, the non-professional reader enters a subject most readily by a door which the specialist sees as located in the middle of the house. I recommend that, in this case, the reader begin with Chapters V and VI, on “The Distribution of Income and Property.” These chapters are, in my judgment, models of the sweet lucidity which so characterizes their author. But, whether the reader agrees with my appraisal or not, it is from these chapters that he can best decide whether this book is for him. Afterward, if interested, he can go back to Chapter I and follow the author’s sequence.
The political economy of a modern advanced society may be appraised as involving five basic targets. First: to keep the society’s production activities on a moderately stable course of efficient growth, so as to be able to supply what its people will reasonably demand of goods and services. (These will increasingly be goods and services related to education, health, travel, and leisure—all costly things.) Second: to achieve a distribution of individual incomes in reasonable accord with its socially dominant idea of justice and, if at all possible, in not unbearable tension with the ideas of justice held by significant minority groups. Third: to replace, in some considerable degree, the incentives to good work and efficient management constituted in the past by fears of severe general business contractions, unemployment, and dire need, substituting for these ancient whips and spurs the more civilized motivations of shared responsibility, pride in craftsmanship, and pride in professionalism. Fourth: so to structure and limit economic centers of power and decision that they do not overshadow the political process, reserving the greater weight in the political scene to other, not-merely-economic structures of society and citizenship. Fifth: to find tolerable methods of relating the stance and reach of such a limited particular society to other societies of near-equals and also to the far-from-equals constituted by the poorer and poorest peoples.
These five targets should not be conceived as having been enumerated in an ascribed order of value. For some societies in some generations, what little we can determine of the right and the good may lie in choosing to strive for greater achievement in spheres I have numbered later, though at substantial sacrifices in some objectives listed earlier.
Meade’s formulation of the objectives of a radical economic policy is more articulated than the above and more specifically egalitarian and libertarian. However, it is similar in thrust, with one important exception: he makes no reference to the objective I have enumerated third. Perhaps he does not think this the concern of an economist. To foster motivation toward work requiring effort and quality performance, is nevertheless one of the great problems in the successful functioning of an advanced economy—and distinctly so also in Britain and in the United States.
How Meade understands the egalitarian content of an intelligent radicalism he tells us, in principle, quite clearly:
The intelligent radical is at heart an incurable egalitarian and is appalled by the gross inequalities which he observes in modern society. But he desires to cope with them by methods which are compatible with the maintenance of a free and efficient economic system. . . . The intelligent radical has no desire to put an end to private property, since he values the independence of action and the decentralization of power that can be achieved through a wide spread of the individual ownership of private property. But he does strongly object to the existing excessive inequalities of private property and to the large concentrations of power and privilege which they involve. His ideal society is a property-owning democracy in which every able-bodied citizen is both a worker and a property-owner and in which the existing inequalities both in income and in property are greatly moderated.
On this level of generality, all well and good. However, many who take no exception to Meade’s general formulations of principle, as quoted above, will reject the particular measures he associates with these principles. This rejection will go directly to the core, his system of income distribution. The character of this system is determined by two structural members. One: in Meade’s egalitarian society, the larger part of all personal consumption spending would be financed by a “social dividend,” payable weekly to every family and single individual, solely on the basis of family size. Education and health services would be free, on a basis of qualification and need, though education partly perhaps on a repayable loan basis. The “social dividend” would be of a size to meet essential consumption spending needs, as publicly determined, and this “dividend” would accordingly be entirely non-taxable. Two: all families and single individuals would pay taxes on all income other than “the social dividend,” without any exemptions or deductions, on a graduated scale equivalent to substantially over 40 per cent of income at the lower income end (with a 75 per cent tax segment at the very beginning!) and equivalent to substantially over 75 per cent at the top. Income available for consumption, consisting of the sum of the “social dividend” plus retained earned income, would therefore be far more equally distributed than on any hitherto proposed scheme of progressive taxes, even when supplemented by a “vagabond’s wage,” or a “negative income tax,” or a “family allowance.”
Meade’s egalitarianism is certainly radical. In its distribution of income and property, our American society is far less egalitarian. Do we really wish to move drastically in the direction he suggests? Or is it merely our intention to shield the least fortunate and least capable against dire need? Certainly, in 1975, our successful American leadership people do not seriously hunger for a society of greater economic equality. Let us put aside pretense! For people who are accounted successful among us, any serious movement toward economic equality would be crushing. Such a movement would necessarily be painfully restrictive of their present privileged access to education, health care, travel, and other leisure activities. The median income of an American family is now in the general range of $12,500. A professor of economics regards himself as moderately successful with an income of $25,000. Independent professionals now view themselves as having entered the company of the successful when their incomes reach $50,000. A trade union can pay a salary of $75,000. Business targets are even higher. To those economically successful, personal security means an acquisition of property and pension rights that will assure a successful person’s income throughout a lifetime.
These are objectives incompatible with economic equality. And they are the real, inwardly-valued objectives, in a society that seeks success in individual attainments and individual property holdings, not in any group sustenance. Among us, for almost all people, any verbal profession of egalitarianism has only such meaning or weight as is compatible with these inner attachments of personality. Who is it that we deceive when we say otherwise?
No such egalitarian pattern as Meade suggests has ever prevailed in any considerable community of an advanced modern society. In wrestling with Meade’s proposals, the thoughtful reader will need to reflect whether he does really and truly support a movement to restructure his own society on so egalitarian a plan. Is it on these economic foundations that he wishes to build his political house? If not, what are his preferred alternative foundations of public authority and popular consent? It is because Meade’s book may drive the alert and sensitive reader to reopen such questions that reading it can be extraordinarily rewarding.
In a counter-treatise, it would appear necessary to establish significantly different conclusions from those that Meade embraces, on several other issues, both great and small. Among the great are issues concerning the achieving of what he calls “responsive” prices and also his proposals for fiscal fine-tuning of economic growth.
He writes extensively (Chapters III, IV, and VIII), and in part persuasively, of the merits of having prices, both for products and for labor, responsive to supply and demand in particular markets. Much of what he recommends, for a radical fiscal and monetary technique of economic management, is dependent on the establishment of this responsiveness. However, even though we do not reject, as altogether utopian, the feasibility of achieving such flexibility in pricing, we must still ask, starting from our present practices in business and labor, “How do we get there, from here?” For such a dilemma, the Germans have the conundrum, “How does the cat get across the water?” I do not believe that Meade has shown us how to make this crossing. And he has put outside his scope the real, painful present question: Since we are not across the water, since on this side we cannot have more demand expansion without more price inflation, what are we to do now? Are we to opt for more unemployment, or should we chance more price inflation?
In respect to “fine-tuning” of economic growth, I suspect he has gone badly wrong. He proposes a “Stabilization Commission” of a kind going beyond both political practicability and economic knowledge. This commission would consist of “independent wise men.” It would have power to make changes “weekly” in taxes and in the supply of money. Politically, a commission with these powers is doubtfully compatible with a parliamentary system, and it is surely quite incompatible with our congressional system. Economically, given the present inadequacy of knowledge and reasoned conviction, it is embracing false hopes to put reliance on a commission’s discretion to make weekly changes in fiscal and monetary affairs. In the greatest economic recession of the present generation, that which began in October 1973, it took twelve months for the majority of professional economists in the United States to recognize that a serious recession was going on. It took two more months—fourteen months in all—before the White House began to acknowledge that the very name “recession” might be appropriate. How is such long-term ignorance abated by a power, in an appointed group of “independent wise men,” to make fiscal and monetary changes, from week to week?
In respect to economic growth, presently attainable fine-tuning is a delusive reliance. In respect to economic justice, stabilizing income provision should be made entirely independent of the degree of success that any economic tuning may achieve. In this latter point, one is not dissenting from Meade but, as most often, agreeing with him. He is reassuring company.