Rattling The Cage: Liberalism without unions or welfare

This is the one good thing Binyamin Netanyahu has drummed into Israelis, including me: that welfare is bad for people.

By LARRY DERFNER
larry derfner 88 (photo credit: )
larry derfner 88
(photo credit: )
With the Labor Party seemingly on the verge of extinction and the economy in terrible danger, Israeli economic liberals, or progressives, are floundering. This should be our moment, they're saying - the Republican economic era is over, it's failed, it's been rejected - yet we don't have a clear alternative to present. We know what we're against, but we don't really know what we're for. So I'd like to offer an idea. The idea is wage subsidies. Large wage subsidies, when necessary, and they are necessary for low-paid workers. They would be financed by raising income tax on the rich and near-rich; by canceling monthly child allowances to the rich and near-rich; and by taking all standard fees, such as for car licenses, and making them progressive, so that the more you earn, the more you pay, and vice versa. This is how Israelis already pay for national health insurance, which may have something to do with why Israeli health care is so good, especially in comparison with other public services like schools, police protection and care for the aged and handicapped. Wage subsides wouldn't be socialism, they would be a reform of the existing mixed economy - an example of the progressive's ideology of "creating wealth like capitalists and distributing wealth like socialists." And it wouldn't be coming out of nowhere - it would be in response to the past generation in which the Israeli "we" has been sacrificed, economically and otherwise, to the Israeli "me." It would be an attempt to solve the worst socioeconomic problem of our time: the huge, growing numbers of "working poor," together with the huge, growing gap between rich and poor. This isn't an accident of history; there is an objective reason why this problem is with us now, and it's the same objective reason why liberals are having such a hard time finding a solution to it: because the great liberal economic idea of the 20th century - the labor union - has become an anachronism. THE HISTADRUT can't keep workers out of poverty. It can't promise them good wages, benefits and job security anymore, not when they're competing with Third World employees who will work for a small fraction of their pay. Not when companies open and close, change products and technologies, mutate and relocate at such blinding speed. Until a generation ago, the Histadrut, like unions in other countries, was very good at making sure workers got paid and treated decently, and thus at advancing equality - which are two core liberal principles. But unions can't do this anymore. If you don't have stable companies, you can't have stable jobs, so you can't have a union worth the name. The only employees the Histadrut can still protect work for the government and the utilities; this is because the Interior Ministry and the ports, for instance, can't be relocated to, or imported from, China and India. But in private industry, the Histadrut is finished. (So is the AFL-CIO.) There, it's every worker for himself, and the owners have all the leverage. The result: lots and lots of working poor, and a widening income gap. Socioeconomically, the 21st century is very much like the 19th. One of the 20th century's answers to the 19th century was the labor union. But since the labor union is now dying a natural death, liberals have to come up with a new answer. THE 20TH century's other answer to the 19th century was the welfare state, which has been dying an unnatural death - murder by right-wing politicians cutting taxes and social services. Insofar as the welfare state means free public schooling, national health insurance, guaranteed pensions and other "quality of life" benefits for all, this is the other great liberal institution of the 20th century, and it has to be restored. But we liberals made one big mistake, and we have to credit the conservatives for being right on it all along - we thought welfare was good for poor people, or at least that it wouldn't hurt them. We were wrong. This is the one good thing Binyamin Netanyahu has drummed into Israelis, including me: that welfare is bad for people. As he says, only work works. (Remember those words if and when Netanyahu, as the next prime minister, gives the haredim back the huge child allowances he took away from them.) So welfare isn't the answer. The problem, though, is that when you force people off welfare and into jobs, those jobs almost invariably pay miserably, they come with the bare legal minimum of social benefits - and employers can cheat their low-wage workers even out of those with virtual impunity - and the poor remain just as poor, if not poorer, than they were on welfare. So actually, Bibi wasn't entirely right - work doesn't always work. For at least a large minority of Israelis, work is humiliation. Work is bitterness. These people get underpaid and overworked by their employers, who often make far more money than they have any idea what to do with. And employees are powerless against them. For all those objective reasons, they can't unionize. Of somebody doesn't like his job, or his salary, or the way he's treated, the only power he has is to quit and look for another job - where the situation may be a little better, or a little worse, or, most likely, about the same. SO WHAT do you do? What is the Israeli liberal's answer to the economic affliction of the 21st century? Mine is wage subsidies. Since business can no longer be forced to give workers their due, the only entity with the money and power to make it happen is the state. If owners don't like to pay their workers, let them pay them indirectly through higher taxes. I know there are several objections to this idea. For instance: 1. "It'll cause inflation." Well, we can afford a little inflation, it'd be better than this massive exploitation and inequality that we've got. 2. "It'll push all wages up, and then you'll have to increase subsides at the bottom, which will push all wages further up, and it'll be an unending cycle of state spending." Well, that's an exaggeration. Wage subsides, over time, would push all wages up to some degree, but if you direct government money to the working poor, the people who will benefit first and most will be the working poor. 3. "If you tax the rich too much, they won't have money to invest, and then the economy for everyone will go to hell." Well, tell that to the Scandinavians. They pay much higher taxes than Israelis (not to mention Americans), yet they're prosperous, they have low unemployment, the best social services on earth, the highest degree of economic equality on earth - and Scandinavia's rich people are not moving overseas. If Israel's rich people don't want to pay higher taxes, let them try living in a place where rich people pay extremely low taxes, or none at all. It's called the Third World. The era of piggish capitalism is over; all that's needed is a big, fresh, socially-conscious economic ideology to replace it. Full disclosure: I didn't invent the idea of wage subsidies, nor of progressive taxes and fees to finance them; they've been around a long time. I'm just another liberal who's tired of floundering, who's trying to grab onto that big pendulum of history that's now moving left.