A Turning of the Tide? More Belief in Government, Less Blind Faith in Markets

by Sidney Shapiro
Joseph Tomain

January 30, 2014

Suddenly politics in this country appears to have taken a turn toward democracy and away from markets.

As we develop in a book just published by Oxford University Press, discussing economic inequality. Regulation of Wall Street proceeds apace after the investment banks and mortgage lenders sank the American economy with their recklessness as they now write multi-billion dollar checks for their malfeasance. If indeed the tide has turned, the country is emerging from a cycle deemphasizing government that dates back to the election of Ronald Reagan.  

It is too early to know for sure whether the country will once again embrace government as leader and partner in order to address pressing problems that markets have caused or are unable to address.  Certainly the poisoning of drinking water in Charleston, West Virginia, the latest highly visible crisis attributable to the failure to engage in effective regulation, should help add momentum. But Tea Party-backed governors and legislatures are still in control in many of the states, and they’re so eager to please the right-wing constituencies that they’ve turned back federal dollars that would pay for health insurance for their poorest, uninsured citizens. (Although, to be fair, we are starting to see some pushback.)

What we do know is this. There is a deep ambivalence in America in that citizens see the virtues of capitalism and the promise of democracy, even though those two values can, and do, cone into conflict.  In Achieving Democracy, we argue that the last 30 years of neoliberal government has dulled our sensitivity to the positive role that good government regulation can play in our lives. For a long time, many of the loudest voices in our political system have seen value only in markets.  This is not unusual; it has happened in prior anti-government cycles as well.  Eventually, however, the flaws of relying only on a market system to achieve the country become too obvious too ignore.

Government, however, must learn from its mistakes. Conservative complaints about ineffective government are often excessive, but it cannot be denied that government at times does not work.   We therefore see the need for government to be more experimental; ready to abandon what does not work, and substitute other, smarter approaches. This is not something that government does very well, for understandable political and practical reasons.  But it is essential to achieving an appropriate mix of markets and government.  At the same time, decisions must be based on actual evidence of government performance, rather than ideology. 

Our approach, based on the pragmatism of John Dewey and later philosophical pragmatists, measures the effectiveness of government based on America’s traditional commitment to democratic values. Any policy that we adopt should be for the public good. More precisely, the public good can be represented in policies that expand democratic participation both in markets and in politics.  The legacy of the New Deal has been to create a middle class that could participate in the economic marketplace. The middle class, with the helping hand of government, was able to purchase cars, own their own homes, and send their children to both elite and non-elite colleges. The legacy of the Great Society has been to expand political participation along racial, gender, and ethnic lines.

In 2014 we confront a stagnant economy, a weakening middle class, and social problems in health and education among others. As we debate the minimum wage and as we consider immigration reform, we can apply a democratic litmus test.  Does raising the minimum wage and expanding immigration opportunities promote or hinder the basic American political commitment to democracy and to capitalism? The answer to that question reveals the better public policy choice.  If public policies favor the wealthy few and contribute to income inequality, then those policies must be recalibrated for the benefit of the many.

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Sidney A. Shapiro holds the Fletcher Chair in Administrative Law at the Wake Forest University School of Law and is the Associate Dean for Research and Development. He is a member of the board of directors of the Center for Progressive Reform.

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