24 April 2018

Some Thoughts about Economic Justice

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“The level of wealth inequality in the U.S. is staggering and only getting worse. What happens next is up to us.” (Oxfam USA) “The level of wealth inequality in the U.S. is staggering and only getting worse. What happens next is up to us.” (Oxfam USA) https://politicsofpoverty.oxfamamerica.org/2016/01/inequality-is-over-if-you-want-it/

Both Bible and Qur’an teach God’s imperative for economic justice. Everyone has a God-given right to the bounty God has bestowed on humankind. And we are duty-bound to share it.

More on that below, but first, the piece that got me thinking about this in the first place: a short review by Felix Salmon of Chris Hughes’ book that came out in February 2018 (Fair Shot: Rethinking Inequality and How We Earn).

Chris Hughes was Mark Zuckerberg’s roommate at Harvard and co-founded Facebook with him. After three years he left with several hundred million dollars to his name. “I have too much money,” he says. Salmon explains,


“Hughes is acutely aware of how unfair this is. ‘Most Americans cannot find $400 in the case of an emergency,’ he writes, ‘yet I was able to make half a billion dollars for three years of work.’ He’s also aware that the flip side of people like himself having too much money is that tens of millions of Americans have too little. Over 40 million Americans live below the poverty line, including one in five children under the age of 6.”


Remember the Occupy Wall Street protest movement that started in September 2011? It was set against the wealthiest 1 percent of Americans monopolizing the nation’s wealth to the detriment of the rest of the population. “We are the 99 percent!” went the slogan.

Hughes’ solution is for one percenters like himself to collectively pay a monthly grant of $500 to all working Americans making under $50,000, including those caring for small children or the elderly at home. Critics point out that this excludes the poorest of the poor and the disabled who will continue to depend on the miserly grants already in place. So in practice this would only help 42 out of 120 million American households.

Yet Hughes didn’t pull this idea of using cash grants to solve poverty out of a rabbit’s hat. As a young philanthropist, he made two exploratory trips to Kenya. First, he traveled with the renowned American economist Jeffrey Sachs and studied his Millennium Villages Project. Sach’s premise is that all the infrastructure (including good education and healthcare) needs to be set up first and then people will thrive and wealth will multiply for the benefit of all. The second trip was with economist Michael Faye, cofounder of GiveDirectly, “a nonprofit that has a much simpler strategy of supplying cash grants to people living on less than a dollar a day.” That seemed to him to be a more efficient and effective strategy to reduce poverty. So Hughes founded his own nonprofit, The Economic Security Project. The Amazon page for his book describes it as “a network of policymakers, academics, and technologists working to end poverty and rebuild the middle class through a guaranteed income.”

As I mentioned above, there are plenty of detractors and critics for this redistribution of income approach, but there is also a growing movement “for a universal basic income in America,” as Salmon notes. I’m not competent to evaluate the economic merits of this kind of proposal, but in this blog post I aim to do two things. First, I will argue how growing inequality in our nation is not just bad for our economy but it also violates our religious conscience as people of faith, Christians and Muslims in particular. Second, I point to economist Robert Reich who cogently explains that economic justice is about the rules we make up to create the “market” in the first place.


The moral disgrace of inequality

First we have to understand poverty as much more than simply the lack of money. The Indian economist Amartya Sen (b. 1933, 1998 Nobel Prize of economics) has argued that equality can only be fairly measured by people’s actual ability to achieve their own wellbeing. His groundbreaking work has considerably influenced the United Nations Development Programme. So people themselves should be at the center of any economic policy in his view.

A Brookings Institution 2016 article applies Sen’s capabilities-approach to poverty to the American situation. The authors argue that inequality can only be understood when we see poverty in five dimensions. Here is their opening paragraph:


“Poverty is typically defined in terms of a lack of adequate income, especially in U.S. policy debates. But the experience of poverty goes well beyond household finances, and can include a lack of education, work, access to healthcare, or distressed neighborhood conditions. These additional dimensions of poverty can be layered on top of income poverty; they can also put those who are not income-poor at a disadvantage.”


Seeing this in bullet form helps to picture what they’re saying:

    1. Low household income (below 150 percent of the federal poverty line)
    2. Limited education (less than a high school degree)
    3. Lack of health insurance
    4. Low income area (poverty rate exceeds 20 percent)
    5. Household unemployment

Taking these five dimensions into account reveals a stark reality: poverty is very much tied to race. The research was done on the basis of the 2014 American Community Survey, which included respondents from ages 25 to 61. Half of the population suffered from at least one of these disadvantages, but over 3 million black adults and 5 million Hispanic adults suffered from at least three disadvantages.

That may not seem like many people, but read on. A majority of white adults did not suffer from any of these disadvantages; still, 38 percent of them struggle with one of these. By contrast, seventy percent of black and Hispanic adults face at least one of these disadvantages. And whereas most white adults who struggle with one of these disadvantages do not struggle with additional ones, “most black and Hispanic adults with at least one disadvantage suffer at least one additional advantage.” In other words, obstacles in the way of greater well-being quickly multiply for these minorities.

That said, there are differences between these two groups: “Black residents are more likely to live in a poor area and/or a jobless family than Hispanics, who are more likely to lack a high school education and/or health insurance.”

With this in mind, we can look at income levels once again. A (March 1, 2018) Bloomberg article reports on a recent study by the left-leaning Economic Policy Institute on the basis of seventeen years of census data: “US Income Inequality Hits a Disturbing New Threshold.” Here we learn that, “Median real wages only grew 0.2 percent over the last year … Wages for African-Americans declined in most wage brackets, while women with graduate degrees made less money than men with only college degrees.” Meanwhile, “those in the 95th wage percentile saw an average pay hike of 1.5 percent over the past year.”

Two new Brookings studies (March 2018) show that it is especially black men who are likely to be left behind: “black men born to low-income parents are much more likely to end up with a low individual income than black women, white women, and – especially – white men.”

This level of injustice in a democratic nation that prides itself in the equality of all citizens before the law is morally outrageous. In the next section I dig a bit more around the connection between law and the reality of relative economic justice.


Fixing this injustice has nothing to do with releasing “market forces”

Robert Reich, a top American economist who has served three presidents (Ford, Carter, Clinton) and taught at Harvard and UC Berkeley, also declared that universal basic income for the US was “almost inevitable.” This was while he was discussing his 2013 documentary film “Inequality for All.” But my interest here is the issue of economic justice at core, which he deals with directly in his 2016 book, Saving Capitalism: For the Many, Not the Few.

Unfortunately, he writes, the dominant view of economics that splits the right from the left is that the economy runs best when the impersonal forces behind the market are left unfettered and a small government intervenes with the least possible regulation (view from the right), while the other side (the left) advocates for a larger government that steps in more often and in more areas to level the playing field. So you have to pick which side to favor: government or market.

But this is a false dichotomy, contends Reich:


“There can be no ‘free market’ without government. The ‘free market’ does not exist in the wilds beyond the reach of civilization. Competition in the wild is a contest for survival in which the largest and strongest typically win. Civilization, by contrast, is defined by rules; rules create markets, and governments generate the rules” (p. 4).


The reason why a debate framed solely by an artificial tug-or-war between market and government is that it obscures vast mechanisms of power. Rules define the market and those who create those rules are likely the people who will most benefit from them. The following quote is a bit long, but it goes a long way in explaining Reich’s reasoning:


“The size of government is not unimportant, but the rules for how the free market functions have far greater impact on an economy and a society. Surely it is useful to debate how much government should tax and spend, regulate and subsidize. Yet these issues are at the margin of the economy, while the rules are the economy. It is impossible to have a market system without such rules and without the choices that lie behind them. As the economic historian Karl Polanyi recognized, those who argue for ‘less government’ are really arguing for a different government—often one that favors them or their patrons. ‘Deregulation’ of the financial sector in the United States in the 1980s and 1990s, for example, could more appropriately be described as ‘reregulation.’ It did not mean less government. It meant a different set of rules, initially allowing Wall Street to speculate on a wide assortment of risky but lucrative bets and permitting banks to push mortgages onto people who couldn’t afford them. When the bubble burst in 2008, the government issued rules to protect the assets of the largest banks, subsidize them so they would not go under, and induce them to acquire weaker banks. At the same time, the government enforced other rules that caused millions of people to lose their homes. These were followed by additional rules intended to prevent the banks from engaging in new rounds of risky behavior (although in the view of many experts, these new rules are inadequate)” (pp. 5-6).


I hope I don’t have to convince you that the Tax Cut and Jobs Act of December 2017 passed by the US Congress is a great example of “reregulation” favoring the wealthiest Americans. Some large corporations raised workers salaries a bit and gave one-time bonuses away, but these benefits are marginal and limited in time, whereas billions were poured into rewarding shareholders, increasing executive pay, and investing in capital improvements.

I cannot go into any detail here, but the rules Reich is talking about concern five main areas (p. 8, Ch. 2):


    1. Property: what can be owned.” The trickiest aspect of ownership today is intellectual property: what do you include here, and how long can you keep those rights?
    2. Monopoly: what degree of market power is permissible.” Much of this debate today revolves around the great tech companies, search engines, and the like.
    3. Contracts: what can be bought and sold, and on what terms.” This is much more complex than just supply and demand. Defining these transactions must be on the basis of ethical norms agreed on by society, like you can’t sell votes, sex, babies, dangerous drugs, and “deceptive Ponzi schemes.” But too, the issue of coercion and fraud in contracts is often very tricky to define.
    4. Bankruptcy: what happens when purchasers can’t pay up.” Big corporation can get off the hook much more easily than students or homeowners saddled with impossible debt. What gives? What is fair?
    5. Enforcement: how to make sure no one cheats on any of these rules.”


A democracy, by definition, is a state run by the people. A functioning democracy ensures that “elected officials, agency heads, and judges will be making the rules roughly in accordance with the values of most citizens” and the system will “improve the well-being of the vast majority.” A failing democracy, on the other hand, will tend to benefit a certain class that because of its wealth and influence is able to ensure that the “free market” works mostly to enhance its own position and power. That’s a state of economic injustice that is only likely to worsen with time. People of faith should be standing up to denounce such a travesty of justice. This in essence was what Martin Luther King, Jr. was trying to accomplish with the poor people’s campaign he was about to launch when he was assassinated (on MLK's poor campaign, see this excellent article: it demanded "federal funding for full employment, a guaranteed annual income, anti-poverty programs, and housing for the poor."). Old Testament prophets and Jesus himself railed against the rich who exploited the poor.


Final thoughts from a Christian and Muslim perspective

Though many Muslim-majority nations suffer from as much poverty and inequalities of opportunity than other nations, the Islamic tradition, from its sacred texts to the practice of zakat (the duty to give away 2.5 percent of one’s net worth yearly to the poor and reputable Islamic causes), and to the theory and practice of “Islamic economics,” is very much focused on distributive justice. Have a look at this 2015 journal article from Malaysia entitled, “A Conceptual Framework of Distributive Justice in Islamic Economics.”

The author points to several studies over the years that argue that 1) God is the Creator and Owner of all earthly goods; 2) he has established human beings as his trustees to manage those resources equitably among themselves while ensuring that those activities are environmentally sustainable; 3) zakat is only one way to enforce distributive justice.

 Glen H. Stassen and David P. Gushee, in their classic volume (Kingdom Ethics: Following Jesus in Contemporary Context, 2nd ed.; I’m quoting from the first edition below), have a chapter on economics. They make a similar argument to the Islamic one above:


“All material goods, beginning with the most basic – food – should be viewed as God’s good gifts, divine provision for all humankind . . . The human task is to exercise our God-given dominion over such goods in such a way that they are rightly distributed to all to whom they might be addressed.

This is the fundamental mandate of economic ethics – just distribution (p. 420).”


 Individual ownership is certainly encouraged and everyone should be permitted to “delight” in God’s abundant provision of goods. But, they add, “[t]his is the case as long as this ownership is understood as bounded by deeper theological and ethical realities: the universal destination of goods, moral limits on how wealth and property are acquired, the obligation of stewardship and the quest for distributive economic justice.”

 In this light, I end here by encouraging the reader to consider carefully the analysis and concrete proposals Chris Hughes and Robert Reich have put forward. Principles of distributive justice have to be applied and adapted to very different contexts and literally fought for in the nitty gritty of democratic politics.



*** For those interested in reading more about comparative Muslim and Christian teaching on poverty and actual poverty alleviation, see my 2012 Lenten trilogy here:

A Muslim and Christian Holistic Approach to Poverty

"US Poverty Growing, Values Eroding?"

Zakat and Poverty Alleviation