From Redistribution to “Predistribution”—Rebuilding Worker Support for Markets and Trade

TL;DR

Discussion on predistribution as a solution to economic polarization.

Transcript

GOODMAN: Well, good afternoon from New York.  Welcome to the Council on Foreign Relations. My name is Matthew Goodman. I direct the  Greenberg Center for Geoeconomic Studies. And I also direct an initiative called RealEcon,  or Reimagining American Economic Leadership. And just a little bit of shameless advertising,  we are building a platform for ... Read More

Key Insights

• The concept of predistribution aims to address economic inequalities by altering market rules to prevent imbalances before they occur, rather than redistributing wealth after the fact.
• The rise of China as an economic power has had significant impacts on certain U.S. industries, leading to concentrated economic dislocations that were not anticipated.
• Trade adjustment assistance programs have been insufficient in addressing the broader impacts of global trade on local communities, highlighting the need for more comprehensive policy frameworks.
• The panelists argue that many market rules unintentionally disadvantage lower-income groups, suggesting a need for careful policy evaluation to ensure fair economic participation.
• Predistribution policies could include re-evaluating noncompete agreements, occupational licensing, and housing supply regulations to improve market efficiency and equity.
• Tax policy reforms, particularly those affecting foreign investments, could help rebalance trade dynamics, especially with countries like China.
• The U.S. needs to consider immigration and training policies to address the shortage of skilled workers in the context of its industrial renaissance.
• The discussion emphasizes the importance of a multifaceted approach, combining trade, tax, and labor market policies to ensure equitable economic growth.

Questions & Answers

Q: What is the concept of predistribution discussed in the video?

Predistribution involves altering the fundamental rules of the marketplace to prevent economic inequalities from arising in the first place. It contrasts with redistribution, which reallocates wealth after disparities have already occurred. Predistribution aims to create a fairer economic environment by ensuring that market rules do not unintentionally disadvantage lower-income groups.

Q: How has China's economic rise impacted the U.S. economy, according to the panel?

China's economic ascent, particularly after joining the WTO, has led to significant dislocations in certain U.S. industries. The concentrated economic impacts were more severe than anticipated, affecting specific communities and professions. The panelists argue that these impacts were not solely due to China's WTO accession but were exacerbated by it.

Q: Why do the panelists believe trade adjustment assistance is insufficient?

The panelists argue that trade adjustment assistance has been grossly inadequate in addressing the broader impacts of global trade. The assistance provided is insufficient compared to the scale of economic dislocations experienced by affected communities. The focus on government transfers fails to address the loss of vocations, identities, and community cohesion.

Q: What tax policy reforms do the panelists suggest?

The panelists suggest revising tax policies that currently favor foreign investment, particularly from countries like China. They propose eliminating tax exemptions for foreign government investments in U.S. securities, which would reduce the economic incentives for foreign countries to accumulate U.S. dollars and invest them back into the U.S. economy.

Q: How do the panelists propose addressing the shortage of skilled workers?

The panelists highlight the need for both immigration reform and enhanced training programs. They argue that the U.S. industrial renaissance requires a skilled workforce that cannot be met solely through domestic training. Therefore, skilled immigration must be part of the solution to address workforce shortages in key industries.

Q: What role do noncompete agreements and occupational licensing play in predistribution?

Noncompete agreements and occupational licensing can limit economic mobility and competition, disproportionately affecting lower-income workers. The panelists suggest revising these policies to enhance labor market efficiency and equity. For example, limiting noncompete agreements for lower-wage workers could improve job opportunities and wage growth.

Q: How does the panel view the relationship between trade policy and labor market conditions?

The panelists see trade policy and labor market conditions as interconnected. They argue that addressing trade imbalances through tax policy can have positive effects on labor markets. By reducing incentives for foreign countries to dump goods in the U.S., domestic industries can be more competitive, potentially leading to better job opportunities and wages for American workers.

Q: What challenges do the panelists identify in implementing predistribution policies?

The panelists acknowledge that even low-hanging fruit, such as revising noncompete agreements and occupational licensing, face significant challenges. Political and legal obstacles, such as regulatory authority and bipartisan support, complicate the implementation of these policies. Additionally, broader systemic changes require careful consideration of tradeoffs between efficiency and equity.

Summary & Key Takeaways

• The panel discusses the concept of predistribution, focusing on altering market rules to address economic inequalities before they occur. This approach contrasts with traditional redistribution, which reallocates wealth after disparities have emerged.

• Key issues include the impact of China's economic rise on U.S. industries, the inadequacy of trade adjustment assistance, and the need for policies that prevent economic dislocations. The panel suggests examining market rules that unintentionally harm lower-income groups.

• Proposed solutions include revising tax policies to address foreign investment imbalances, particularly with China, and improving labor market conditions through policy changes in noncompete agreements, occupational licensing, and housing supply.