Inequality; Lant Pritchett is Awesome; the Injustice of Labor Market Restrictions

My new project for Cato is a paper on how to not get confused when you’re trying to think about inequality. In that context, today’s NYT Magazine focusing on inequality is pure catnip. There are, of course, completely infuriating passages, such as this one, in David Leonhardt’s profile of Larry Summers:

Summers’s favorite statistic these days is that, since 1979, the share of pretax income going to the top 1 percent of American households has risen by 7 percentage points, to 16 percent. Over the same span, the share of income going to the bottom 80 percent has fallen by 7 percentage points. It’s as if every household in that bottom 80 percent is writing a check for $7,000 every year and sending it to the top 1 percent.

WTF!? This had better be Leonhardt’s misinterpretion of something Summers is saying, and not Summers himself, since he certainly knows better. First, nation-states do not have incomes, people do. Second, because nation-states do not have incomes, the income of nation-states is not divided by anyone into “shares” that go to different segments of the population. Third, a change in the ratio of the incomes of wealthier households to the inomes of less wealthy households has a great deal to do with changes in the productivity of various forms of capital; changing inequality in income has something to do with changing inequality in production. Fourth, the “middle and lower deciles writing checks to the rich” analogy implies that there is some counterfactual set of circumstances under which “total national income” is the same, but in which the households in the bottom 80 percent of the distribution get that $7,000 and not the top 1 percent, and that this is the baseline against which we are to judge the current pattern of incomes. Mystifying.

Anyway, what I wanted to point to is the Jason DeParle profile of economist Lant Pritchett. Kerry introduced me to this guy a few months ago, and he has quickly become an intellectual hero. His book, Let Their People Come: Breaking the Deadlock on Global Labor Mobility, (which is FREE in pdf from CGD) ought to be considered required reading for intellectually serious people who care about ameliorating global poverty.  From DeParle’s outstanding profile:

The basics are simple: The rich world has lots of well-paying jobs and an aging population that cannot fill them. The poor world has desperate workers. But while goods and capital can easily cross borders, modern labor cannot. This strikes Pritchett as bad economics and worse social justice. He likens the limits on labor mobility to “apartheid on a global scale.” Think Desmond Tutu with equations.

[…]

Indeed, Pritchett attacks the primacy of nationality itself, treating it as an atavistic prejudice. Modern moral theory rejects discrimination based on other conditions of birth. If we do not bar people from jobs because they were born female, why bar them because they were born in Nepal? The name John Rawls appears on only a single page of “Let Their People Come,” but Pritchett is taking Rawlsian philosophy to new lengths. If a just social order, as Rawls theorized, is one we would embrace behind a “veil of ignorance” — without knowing what traits we possess — a world that uses the trait of nationality to exclude the neediest workers from the richest job markets is deeply unjust. (Rawls himself thought his theory did not apply across national borders.) Pritchett’s Harvard students rallied against all kinds of evils, he writes, but “I never heard the chants, ‘Hey, ho, restrictions on labor mobility have to go.’ ”

It seems to me that Pritchett in fact shows the massive tension between the nationalist assumptions of modern welfare-statist political philosophy (i.e., Rawls) and a theory of justice suitable to a global economy. If our normative framework is broadly contractualist, which I think it ought to be, and we conceive of society as a system of cooperation for mutual benefit, then the scope of the principles of justice is the scope of actual and potential cooperation. Labor market restrictions are rules that exclude persons from participating in certain institutions of market cooperation — institutions that greatly encourage the production of wealth. This kind of exclusion requires justification, not primarily because it generates inequality (which it does), but that it limits mutually beneficial interaction for both those inside and outside the political fence. The fact that citizens of a nation state democratically endorse this kind of exclusion simply establishes that citizen-centered (club membership-centered) democratic choice is unlikely to be a decent proxy for the principles of justice when the scope of cooperation is international. We would not accept a vote among the non-slave citizens of a slave society as settling the issue of  the justice of slavery. Similarly, we shouldn’t accept national democratic demand for labor-market exclusion as even roughly tracking the demands of justice.

Pritchett’s argument for a huge international guest-worker program seems to me massively more compelling than theories of global justice that basically endorse the present system of national entrapment and exclusion, and overlay it with the additional injustice of massive, forced redistribution. A good theory of global justice starts with the recognition that just societies don’t try to limit the scope of voluntary human cooperation.  

Hey, ho, restrictions on labor mobility have to go!   

Advertisements