The conservative nanny state

Dean Baker

The experts tell us that our main political choice is between conservatives who want to leave things to the market and liberals who want the government to redistribute income. The experts are wrong. In fact, both liberals and conservatives want the government to intervene to redistribute income. The difference is the direction of the redistribution and that conservatives are smart enough to hide their role for government.

The conservatives' role for government can be seen in almost any policy they support, once we look a bit below the surface. Starting with trade policy, the conservatives say that we have to compete in a world economy without protection. Over the last quarter century, millions of manufacturing workers in the United States have lost their jobs due to competition from lower paid workers in the developing world. The conservatives tell us that these workers will simply have to upgrade their skills if they want to compete in the global economy.

There is some truth in their story. There are workers in countries like Mexico and China who are willing to do the same work at a small fraction of the wage. This leads to lower prices for manufactured goods and saves money for consumers in the United States.

But this is only part of the story. There are also millions of people in Mexico, China, and other developing countries who could have the necessary skills to be professionals at US standards, and would be willing to work in the United States at fraction of the wages of our doctors, lawyers, accountants and economists. This would provide enormous savings to consumers by lowering the cost of health care, college tuition, and many other goods and services.

But few people from Mexico and China (or even England and Germany) get the opportunity to work as professionals in the United States. This is because the government maintains extensive barriers that protect highly paid professionals from competition with their counterparts in the developing world. While conservatives used NAFTA and other trade agreements to force manufacturing workers to compete with the low paid foreign labor, they left in tact the barriers that protect the high wages of doctors and lawyers.

"In almost every area of economic policy, it is possible to find the hand of the government intervening to ensure that money flows from those at the middle and bottom to those at the top."

The economic cost of this nanny state intervention is enormous. If free trade brought the wages of US doctors down to European levels, the measure alone would save US consumers close to $80 billion a year.

But this is just the beginning of the story. For example, when the Federal Reserve Board raises interest rates to prevent inflation, this arm of the government is deliberately throwing people out of work to reduce their bargaining power. The people who get thrown out of work by the Fed's interest rate hikes tend to be manufacturing workers, sales clerks, and custodians, not doctors, lawyers and CEOs. In other words, the Fed's policy to prevent inflation is to force workers at the middle and bottom of the wage distribution to accept lower wages.

The new bankruptcy law passed last year was portrayed an effort to hold deadbeat debtors more accountable. Another way of describing this bill is an effort by the government to assist lenders who were too incompetent to assess credit risk accurately. In a market economy, businesses that exercise bad judgment are supposed to suffer the consequences. But, in the land of the conservative nanny state, these businesses ask the government to go out and collect their bad debts for them.

In almost every area of economic policy, it is possible to find the hand of the government intervening to ensure that money flows from those at the middle and bottom to those at the top. The conservatives pretend that this upward redistribution is just the natural working of the market, but this is not true - it is conscious government policy. Any serious debate over economic policy must first recognize how conservatives have managed to tilt the playing field and put their interventions up for public debate.

Only a fool plays a rigged game. If America is going to have an economy that works for the vast majority, rather than a small elite, we must identify and challenge the nanny state interventions that benefit the wealthy.


Dean Baker is the co-director of the Center for Economic and Policy Research (www.cepr.net). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. The book is available now as a free e-book http://www.conservativenannystate.org/.