The Journal of the Unitarian Universalist Association

The New Inequality:
Creating Solutions for Poor America
By Richard B. Freeman
Boston: Beacon Press, 1999. $10

Reviewed by Harry G. Shaffer

Book Review May/June 2000

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The US has the largest number of millionaires in the world, the largest number of billionaires, the largest industrial output, and the largest total output. But, shockingly, the country also has the highest rate of poverty among all industrialized countries and the largest gap between rich and poor—a gap that has been widening steadily over the last two decades.

Harvard University economist Richard B. Freeman's The New Inequality doesn't try to analyze the causes of this ever-expanding inequality; it is, rather, a wake-up call as well as a call to arms, insisting that we find workable solutions to this most daunting economic problem of our times. Toward this end, Freeman begins by proposing some strategies and then invites a number of colleagues (among them, distinguished professors of economics at Yale University, Brandeis University, the University of Chicago, and Massachusetts Institute of Technology) to contribute short essays in which they respond to his proposals.

Freeman's own "broad strategies of reform" include a shift of social expenditures toward the young, investment in (inner) city infrastructure (mass transportation, public safety, better schools, etc.), and the strengthening of labor unions (while transferring control over labor legislation and regulation to the states). Freeman expresses confidence that both conservatives and liberals can be persuaded to support his proposals, most of which depend more on the market than on government (one striking example is his suggestion that the US replace its social security system with "a trust fund based on stocks and bonds").

Freeman's colleagues fully agree with him on the extent and the severity of the problem, but they do not agree with all his ideas. One colleague faults Freeman for his lack of focus on gender-based inequalities, particularly when it comes to the problems of single-parent families headed by women. Several colleagues praise Freeman's plan to confer more power on labor unions, but some of them sharply criticize his proposal to transfer authority over labor legislation from the federal government to the states, saying this would end uniformity of treatment and draw business to states with laws least favorable to unions. Many colleagues like the idea of shifting redistribution from the young to the old, but at least one of them cautions that this might endanger social security and welfare and thus undermine the long-needed and by now at least partially achieved protection of the elderly.

Further, while Freeman's colleagues hold a wide variety of views on how best to reduce wealth-and-income inequality in the US, virtually all agree that Freeman's own proposed solutions rely too much on the free enterprise system and the market. (Freeman indeed emphasizes that his strategies "are designed to fit naturally with a free-enterprise market-based economy" and that they are intended to "minimize intervention with markets.") Some of the colleagues confess that they put greater faith in government to address social problems; others, somewhat more accepting of Freeman's pro-market leanings, still doubt their political feasibility. So, for instance, Michael Piore (of MIT) calls for a "concerted effort to enforce minimum wage laws, equal employment opportunity legislation, unemployment insurance and social security taxes, [and] health and safety legislation. . . " Ernesto Cortes Jr. (director, Southwest Industrial Areas Foundation Network) calls for a "strategy of voter education, registration and turnout" that "would ensure the election of candidates committed to the cause of reducing income inequality." Frances Fox Piven (City University of New York) sees the greatest hope in "a democratic state with the authority and resources to tame predatory market actors." Similarly, Heidi Hartman (director, Institute for Women's Policy Research) appeals for "a strong government . . . to control the worst excesses of capital and of markets run amok." James Tobin (Yale) points out that conservatives want to keep market earnings unequal while "liberal means . . . a willingness to use the [treasury] to make economic well-being less unequal than market earnings." And Robert Reich (Brandeis, former US secretary of labor) regrets the lack of "political will to implement worthwhile ideas."

I come down on the side of Freeman's colleagues in feeling that no meaningful reform is achievable without sizable government intervention. To think otherwise is naive and utopian. The free market, after all, caused what Freeman calls "the new inequality"; it can hardly be depended on to remedy the situation. Still, while Freeman can be taken to task for having too much faith in market solutions, his book has certainly succeeded in calling attention to one of our nation's most pressing problems, and it has broadened the search for good solutions.

Harry G. Shaffer, a professor emeritus of economics at the University of Kansas, has published more than 75 articles and 11 books. His latest book, American Capitalism and the Changing Role of Government (Praeger, 1999), which is written for lay readers, delineates, in essence, our country's liberal agenda.

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