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The Predistribution Agenda: Tackling Inequality and Supporting Sustainable Growth.

The Predistribution Agenda: Tackling Inequality and Supporting Sustainable Growth

Claudia Chwalisz and Patrick Diamond

Policy Network/IB Tauris 2015

'Predistribution' elicits strong views in different directions, often among people who either disagree about, or don't know, what it means. There's no doubt it is a concept with a high wonkiness threshold. If you look it up on Wikipedia the entry begins: 'Predistribution is a neologism', which doesn't exactly clear things up for the uninitiated. The fact that it was claimed by Ed Miliband and his team (that includes me) during the last Parliament was thought by many to be symptomatic of the Labour leadership's excessively cerebral approach to political strategy. Others are suspicious of the term on the grounds that it suggests a return to the left's vices of the 1970s: picking winners, ideologically-motivated state intervention--an excuse for 'an economic manifesto from the last days of disco', as one critic put it.

But for many others, including the vast majority of contributors to this Policy Network volume, predistribution offers the tantalising possibility of showing the left a way to navigate a way back to ideological and policy renewal. The essence of predistribution is simple: the idea that inequality is more effectively addressed by taking action to prevent inequality emerging in the first place, rather than relying on tax and spend policies to reduce it once it has occurred (in other words, redistribution). Predistribution is not necessarily the enemy of or an alternative to redistribution. But it is a response both to some of the limitations the left has found with its existing approach to policy, and to some of the economic and social forces in advanced industrial democracies that threaten to raise inequality still further.

The left's historical reliance on redistribution to do the work of tackling inequality has a number of problems. One is that the scale of the inequality challenge has increased substantially since the late 1970s (particularly in the UK). Not only is redistribution on its own limited in its effect, because of its focus on symptoms rather than causes: in addition, because it is also faced by drivers of accelerating inequality (reduced employment protection, lower unionisation, large increases in wage premiums for skilled work, etc) it is simply less able to do the work expected of it. Hence the paradox that the Blair and Brown governments achieved more redistribution than any government in British history, but also oversaw a moderate rise in inequality. Arguably, redistribution has also suffered from rising public aversion to paying more tax, a point supported by the surveys summarized in Lucy Barnes's chapter here.

But there is another problem with relying too much on redistribution as inequality grows: it makes it difficult to build the political coalitions the left needs to win and retain power. Focusing on the casualties of rising inequality has led Labour towards providing greater financial support for both the unemployed and low-paid. Tax credits are an important legacy of New Labour, but sooner or later we need to turn to addressing the root causes of the growing low-wage, low-skill and low-security economy that make them so necessary on such a large scale. And if, as Thomas Piketty argues (backed by Alan Manning in this volume), the ongoing technological revolution is likely to exacerbate inequality further in the coming century, getting tough not just on inequality but on the causes of inequality will be an agenda that is more likely to get the support of a broad majority. Moving our focus from redistribution to predistribution is not just good policy, but essential politics for Labour and the wider left.

Jacob Hacker, the man who coined the term 'predistribution', begins this volume with a discussion of the need to revisit centre-left statecraft. In Hacker's view, the left urgently needs to change the way it approaches governing: to jettison the managerialism of the Third Way, and instead embrace an active role for the state in promoting innovation and productivity, reducing the financialisation of our economy, and 'translating growth into shared prosperity'. For Hacker, the predistributive call to arms should point progressive politicians towards 'creating public foundations of prosperity as well as restricting private activities that threaten it'. A state that rolls its sleeves up to improve the efficiency and inclusiveness of our economy has a chance of realising 'the greatest promise of predistribution: restoring the foundations of middle-class democracy'.

These are big claims. And they are not without foundation. Hacker's call for the left to focus on the task of building a different kind of economy--fairer and more efficient 'at source', with less damage to repair at the stage of tax and spend--is not only exciting from a policy and political point of view, but surely timely and correct.

The majority of chapters in this volume show what it might mean in different policy areas to take the predistribution idea seriously, and together they provide a challenging and meaty set of policy areas for us to digest. As a result, the main questions this volume raises are to do with the politics and feasibility of fulfilling the promise of Hacker's predistribution insight.

But there is a prior niggling question that arose when I read the book, about whether all the contributors shared a common view about what predistribution is, and is not, and whether or not some of policies discussed here, with much merit in them, are being smuggled in under the predistribution banner. The core idea of predistribution is recommending prior intervention to reduce the inequalities that arise from the way markets work. Many of the policies discussed in 'The Predistribution Agenda' fall neatly into that category. But some don't. There is a range of eminently sensible and progressive supply-side interventions--to promote productivity, innovation or industrial capacity--whose distributional consequences are at the very least unclear. Similarly, social investment policies, which get a lot of coverage in this book, may be complementary to predistribution (as Claudia Chwalisz and Patrick Diamond argue in their good overview of the book) but are conceptually distinct, and may or may not be consistent with greater equality. And as Hacker himself observes, it would be a mistake to think of the main argument for predistribution in terms of avoiding the costs of redistribution: its main advantage is that it is more effective to address the root causes of inequality than compensating the losers--not that it is cheaper to do so.

Putting these definitional quibbles aside, the bulk of the volume is devoted to exploring a rich and imaginative array of policy options to improve the prospects for shared prosperity. Unsurprisingly, education is a major theme across a range of chapters. Two chapters in particular are worth noting. Evelyn Huber and John Stephens examine the interaction between skills investments and redistribution, arguing that reducing inequality through tax and transfer measures is important to boosting subsequent generations' levels of education and skills. Redistribution and predistribution thus often make good progressive bedfellows. Marius Busemeyer's excellent chapter makes the fundamental observation that simply arguing for more policy/spending on education and skills is not enough. Empirical evidence shows no necessary link between higher levels of spending on education and lower levels of inequality. What is more effective from an egalitarian point of view, he shows, is that resources be funnelled towards vocational education, and that the proportion of public funding in overall education spending is increased.

Other chapters focus on reforming welfare. Karen Anderson's chapter on pensions policy and Geoff Mulgan's on how technology can enable innovation in welfare policy are both strong, and cover a reform agenda well beyond a strictly predistributive one. The contributions of Sophie Moullin and Anke Hassel are critical and complementary, examining the record of different policies aimed at supporting children and stronger families. Indeed, family policy is one area where the predistributive instinct looks as though it could pay off handsomely (through a range of early intervention policies and support for parenting). Policy options in this area deserve to be explored much more.

A popular subject in the book is labour market reform. Many authors discuss interventions designed to institutionalise higher minimum (or living) wages, provide greater employment protection or strengthen trade unions (e.g. Dmitris Tsarouhas). Paul de Beer argues that while these kinds of recommendations will have moderate effects on inequality, a more radical route might be to think about introducing schemes for collective share ownership by employees: a renaissance of the Swedish 'Workers Fund' idea of the 1970s. What makes this idea so attractive is not only that it gives workers collective interest in the success of their company, but also that it responds directly to the Piketty fear of a world in which the returns to capital continue to outstrip wages, by hitching the incomes of workers to profits. In another interesting chapter on the effects of labour market institutions, Bazillier examines what strong employment protection does well (raising equality) and not so well (raising employment). But what it also does is promote innovation by supporting the most productive firms and investment activities. Labour market reform is therefore an important part of the story about how to produce better growth.

How feasible are all these policies? That depends, says Paul Gregg in his chapter the only one that shows scepticism about putting too many progressive eggs in the predistribution basket. Gregg warns that predistribution is by its nature less targeted than redistribution, and therefore will--in the short term at least--involve greater deadweight spending. The case for early intervention is on the side of predistribution, but its tendency towards reduced targeting may be less attractive to the voters who pay for it. In addition Gregg flags up the difficulties of building an electoral coalition behind some predistribution policies, especially when it comes to strengthening employment rights and unions. This note of caution is balanced elsewhere in the book by optimism, however. Lucy Barnes shows that electorates may not support big states and high tax, but they do back highly progressive tax structures. Both Anne Wren (in an excellent chapter on the political economy of promoting equality in the service sector) and Huber and Stephens discuss how social investment strategies can bring women into better work and thus into a political coalition to support more predistribution.

There are a few missing links in the volume. There are only passing references to how we should reform the financial services sector, or other key markets that fundamentally shape the distribution of wealth (housing, for example). We know that inheritance is a magnifier of inequality, and although there is a fascinating chapter by Vanhuysse on constructing a measure for intergenerational justice, there is little by way of policy to mitigate the concentration of wealth across generations. And there is no addressing of some of the more expensive policies that have been advanced in the name of predistribution, in particular the challenge of ensuring a broader distribution of key income-generating assets. But these are holes that future work can fill. What this volume shows is that, whether you like or hate the term, predistribution is a powerful idea, with the capacity to generate serious and innovative policy options for policy-makers, and to help solve the current impasse of the centre left in its search for new models of political economy. Chwalisz and Diamond's volume deserves to find an audience wherever the centre left needs renewing. And that's quite a few countries.

Stewart Wood is a Labour peer.
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Author:Wood, Stewart
Publication:Renewal
Article Type:Book review
Date:Mar 22, 2016
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