The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [111]
A welfare state can best perform its basic function—buffering the human consequences of the market, without unduly hampering its effectiveness—where enough widely shared social capital exists to guide the behavior of most people in a bourgeois direction. But as it performs that function, the welfare state creates the incentives that push people toward short term indolence, free riding and self-absorption—thus undermining the very norms and consuming the kind of social capital it needs to operate.
But he is even handed in this critique:
Wealthier and better-educated Americans have managed to recreate a great deal of the lifestyle of the old WASP ascendancy. . . . Political correctness serves the same basic function for this cohort that “good manners” did for an earlier elite; environmentalism increasingly stands in for the ethic of controlling impulses so as to live within limits. . . . Such behavior enables multi-generational success in a capitalist economy, and will serve the new elite well. But what remains to be seen is whether this new upper class will have the nerve, wit and sense of purpose that led the old WASP elite to develop a social matrix that offered broadly shared prosperity to generations of Americans.22
Not surprisingly, writers on the left have made the same criticism of the loss of a sense of responsibility and propriety among the rich. In his essay “For Richer” (2002), Paul Krugman describes the root cause of these losses:
The story of executive compensation is representative of a broader story. Much more than economists and free-market advocates like to imagine, wages—particularly at the top—are determined by social norms. What happened during the 1930s and 1940s was that new norms of equality were established, largely through the political process. What happened in the 1980s and 1990s was that those norms unravelled, replaced by an ethos of “anything goes.” And a result was an explosion of income at the top of the scale.23
Why does capitalism seem to corrode its own moral and social foundations? Economic growth is a matter of efficiency, and if the rate of growth were all that mattered to us, question marks about the scope for market organization of social life like those just discussed would be an academic irrelevance. For maximum growth, a market framework would unquestionably be the most efficient. How well the economy does is a question of great importance to everyone. Economic growth is, contrary to the wishful thinking of happiness campaigners, important for social welfare. Even after people have a high enough income to meet their basic needs such as enough to eat and an adequate home, acquiring more goods but also importantly more services, more variety and greater quality, continues to increase well-being. The change in the character of the increases in GDP as economies grow rich is important—services of all kinds and features of products that depend on intellect or creativity account for a growing share of our increasingly weightless economies. People continue to want the economy to grow. No politicians will win elections by calling for the economy to shrink or even stand still.
However, it’s widely believed that markets have made society worse, in a moral sense. What’s more, as the first part of this book set out, we face the acute dilemmas posed by the fact that we’ve not reached a clear threshold at which we can say people have Enough. Increasing well-being by delivering continuing economic growth will require policymakers to ensure greater sustainability in many dimensions, environmental, of course, but also financial and social. The markets we have now have not achieved this. The boom of the early years of the twenty-first century revealed the limits, not to growth, but to politics in its broadest sense. The way we manage the economy, the institutions shaping who has what, the rules set by politicians—these are responsible for the dilemmas of Enough. The final part of