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The Economic System and Social Justice

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The Economic System and Social Justice CHAPTER 4 The Economic System and Social Justice CHAPTER QUESTIONS 1. What are the perceived benefits of the market economy in the United States? 2. What are the main problems or externalities caused by market capitalism? Is poverty necessary in a market economy? 3. Why is there ongoing poverty in the United States in spite of the fact that this is the most pros - perous country in the world? 4. Why has there been increasing income and wealth inequality in the United States over the past 30 years? 5. What are the consequences of the concentration of wealth and corporate power in the United States? 6. What role does tax policy play in social and economic justice? 7. How has supply side economics limited the development of economic programs? • • • ost social workers do not think of economic policy when they think of Msocial pol icy, yet economic policies are fundamental to the issues that social workers care most about, including inequality, poverty, and ethnic dis - crimination. Many of the ideologies and beliefs discussed in Chapter 3 depend on the fairness of the economic system for their realization. These include upward mobility, equal opportunity, and the power of self-reliance and indi - vidual effort. In this chapter we will be challenging these ideologies when we discuss the economic system of the United States, known as market capitalism. 85 86 SOCIAL POLICY AND SOCIAL CHANGE TASKS OF THE ECONOMIC SYSTEM Every society must have an economic system to produce and allocate resources, including food and shelter, to its members. Since these resources are scarce, rather than infinitely abundant, not having such a system would lead to anarchy and disorder. Economic policies are socially constructed ways of developing and distributing these resources. Clearly there are various ways of organizing this system of production and distribution, some more humane than others. For example, a purely communist system, which exists primarily in reli - gious orders, would feature equal sharing of all resources. In reality, countries that have called themselves communist were more centralized sys tems, where elite leaders controlled the means of production and the distribution of resources within the country, with little or no democratic input. Another possi - ble economic system is socialism, where the government owns the means of pro - duction and oversees distribution by setting prices and wage levels. If this government is subject to regular elections, such a system would be known as democratic socialism. Conversely, dictatorships can claim to have socialist eco - nomic systems, with a centralized government owning the means of production and controlling the distribution of resources, as in Nazi Germany’s National Socialist German Workers’ Party. Mercantilism was an economic system that dominated Western Europe from 1400 to 1800. In this system colonies and col - onizers interacted in a synergetic economic system in which both parts worked together to produce and allocate resources for the whole: The so-called mother country (as in the case of England) imported raw materials from the colonies, which were not allowed to manufacture goods. Instead, England manufactured goods from these raw materials and then sold these finished goods to the colonies for a profit. The colonies existed to benefit the colonizers. At the end of the 18th century, the old mercantile economies of Western Europe were breaking down as former colonies waged successful wars of inde - pendence (including the British colonies, which became the United States). During this period of transition a new economic system emerged known as the market economy, where goods would be produced and allocated not according to government design or control but according the operations of the free mar ket, or the market economy. Before we look at the market economy in depth, let us step back to a more general look at the functions of an economic system, in order to determine what might be possible. Depending on one’s goal, various economic policies will do the job of ensuring the production and allocation of goods, as we have seen. For instance, economic systems could promote individual freedom, as we say the market economy does. Or they could promote individual gain or wealth. Or they could promote fairness and distributive justice. Chapter 4 The Economic System and Social Justice 87 John Rawls examined how a social order handles the “problem of justice.” Rawls noted that any social order must address conflict over the distribution of goods and services; who will receive what share of the goods produced, and how will rights and duties be allocated? According to Rawls, in most societies these decisions are determined by the social position into which persons are born, since “the institutions of society favor certain starting places over others.” These initial differences in circumstances over which a person has no control lead to “deep inequalities” that follow a person throughout his or her life. Ultimately, the distribution of goods, rights, and duties is therefore determined by those born into high positions of status and power. 1 Rawls’s argument is that if persons were to create a society where they did not know into which social circumstances they would be born, they would rationally choose an “initial position of equality,” rather than a system of inequality where an accident of birth could deny them resources. 2 Rawls used Locke’s concept of the social con - tract to hypothesize an analogous situation of persons who knew they would live in a society but did not know their social conditions upon birth. They func - tioned under what Rawls called “a veil of ignorance.” 3 What kind of system would they choose? According to Rawls, they would choose equality, not only in resources but in rights, power, and opportunities, because they would not agree to a system that rests in inequality—that is, a system where one person is rewarded substantially less than others. Rawls gave the following example: If a man knew he were to be wealthy, he would find taxes to support welfare pro - grams to be unjust, whereas if a man knew he were to be poor, he would find the opposite true. Rawls was making the point that many of our positions about what is just are informed by our own self-interests. Only by imagining no fore - knowledge of our circumstances can we reason to a set of just principles. He thought, for example, that persons in the original position under the veil of ignorance might decide to reward physicians at a higher level than others, because all would desire to maximize their health and longevity. Since it would be to everyone’s advantage to have physicians treating illness, this inequality would be agreed upon in advance as an incentive. Rawls summarized these prin - ciples as “justice as fairness”: 1. Each person has an equal right to liberty that is compatible with the liberty of others. 2. Any social or economic inequalities must be to everyone’s advantage. 4 In contrast to Rawls’s position is the utilitarian principle, which states that the greatest good for the greatest number should be the overarching principle of a social order. This principle was formulated by Jeremy Bentham, an 18th- and 19th-century British philosopher. 5 Bentham’s utilitarianism was expounded in 88 SOCIAL POLICY AND SOCIAL CHANGE his Introduction to the Principles of Morals and Legislation, where he argued that the principle of utility approves of an action insofar as it has an overall tendency to promote the greatest amount of happiness. Bentham’s principle has been described as the utilitarian calculus, or the greatest good for the greatest number, and was shared by other utilitarian thinkers, including his fol lower, John Stuart Mill. 6 The utilitarian principle is in direct contrast to Rawls’s principle of justice as fairness. Rawls posed the difference between the two philosophical positions in the following way: “The question is whether the imposition of disadvantages on a few can be outweighed by a greater sum of advantages enjoyed by others; or whether the weight of justice requires an equal liberty for all and permits only those economic and social inequalities which are to each person’s interest.” 7 This question goes to the heart of the values of social work: Can the good of many outweigh the disadvantage or suffering of a few? Most social workers would answer no, suggesting that the utilitarian calculus is based on majoritar - ian rather than ethical reasoning. In this chapter we will see that the utilitarian principle is central to under - standing the role of the market economy in the creation of social problems and the construction of social policies. Under this principle the welfare of the major - ity outweighs the disadvantages suffered by a minority. The principle of justice as fairness may be thought of as a principle leading to equal opportunity and social justice for everyone. MARKET CAPITALISM AND ADAM SMITH Capitalism is seen by many in the United States as the best, if not the only, nat ural way an economy can function. Market capitalism is not “natural” any more than is any other socially constructed institution. Market capitalism demands government protection of private property, including the police power of the state, in order to function. 8 Persons who claim that capitalism is the most natural economic order see it as a perfect corollary to human nature because of its dependence on competition and self-interest. Those who feel this way clearly have a fixed view of human nature that does not emphasize coop - eration or altruism. Adam Smith, an 18th-century British philosopher and the founder of micro - economic theory, was the earliest proponent of the market economy.
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