The innovation/inequality false dichotomy

At his campaign kickoff event last week, Sen. Bernie Sanders raised some eyebrows when he connected over-abundant consumer choice to child poverty:

If 99 percent of all the new income goes to the top 1 percent, you could triple it, it wouldn’t matter much to the average middle class person. The whole size of the economy and the GDP doesn’t matter if people continue to work longer hours for low wages and you have 45 million people living in poverty. You can’t just continue growth for the sake of growth in a world in which we are struggling with climate change and all kinds of environmental problems. All right? You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country.

Defending the deodorant point as “one of the most substantive of the campaign so far,” Matt Bruenig of Demos smartly framed Sanders’s argument as taking the morally righteous side in the inequality vs. innovation debate: “Whenever someone argues that we should distribute the national income more evenly so as to reduce poverty and inequality (as Sanders does),” Bruenig writes, “the very first thing someone says in response is that doing so will reduce growth and innovation. Sanders is mocking this argument, saying he’d gladly cut poverty and inequality even if it meant a reduction in superficial product innovation.”

To be sure, it’s refreshing to hear a candidate even obliquely push back against this line of argument.  Conservatives reliably play it to defeat a whole host of inequality-cutting social insurance programs, drumming up fears that business will be burdened, growth diminished, and innovation stifled.  It’s good to hear Sanders refuse to let this be the end of the argument, and to assert the moral claims of those being disserved by our economy.

Yet Sanders may be inadvertently giving credence to a false dichotomy.  That’s because, contrary to what conservatives might insist, there is no inherent tradeoff between fighting inequality and promoting economic innovation.  We don’t need to tolerate exorbitant inequality for the sake of protecting economic dynamism.  Nor do we sacrifice entrepreneurial spirit by growing our social safety net.

The truth may be just the opposite, in fact.  By tolerating poverty and deepening inequality, we shackle much of our population with economic insecurity that holds back innovation and ideas.  The lucky ones get social insurance protections — retirement plans, health insurance, family leave — through their employers, making them hesitant to take a chance on jumpstarting a novel idea.  But as I wrote in The Week last August, combating inequality via the public provision of social insurance protections “would provide greater individual economic security, allowing more people to venture out as entrepreneurs and put good ideas into practice[, and] would free individuals to take a chance at a new startup instead of playing it safe at an established firm.”  A bigger safety net, liberating individuals from job-lock and boosting their sense of economic security, would empower more people to act upon their entrepreneurial dreams.

Also at The Week, Jeff Spross surveyed the slowdown in innovation during the last thirty years and concluded that rising inequality was a big culprit.  “Our economy is giving some people lots more time, but little job security or access to knowledge and resources,” Spross wrote. “It’s giving others the security and the resources, but little of the time. [. . .] If we want more innovation and dynamism, then we need to democratize the ability and opportunity to innovate.”  Our widening income gap and the financial strain that its placing on an ever larger share of the population are suffocating our ability to break new economic ground.

And at The Atlantic, Walter Frick cited studies based on food stamps, CHIP, and Medicare showing that the availability of public benefits boosted entepreneurship.  For example, states that expanded their food stamp programs in the early 2000s saw, on average, a 16 percent rise in entrepreneurship.  And most of these entrepreneurs didn’t actually take food stamps, as Frick points out: “Simply knowing that they could fall back on food stamps if their venture failed was enough to make them more likely to take risks.”

“When governments provide citizens with economic security, they embolden them to take more risks,” Frick argues.  “Properly deployed, a robust social safety net encourages more Americans to attempt the high-wire act of entrepreneurship.”

It’s powerful to hear Bernie Sanders take on the false innovation trump-card in the debate over how far we can go in fighting inequality.  But liberals shouldn’t simply accept the zero-sum tradeoff between innovation and egalitarianism that conservatives have contrived.  There’s plenty of reason to believe that reducing inequality — and the policies favored by those (like Sanders) who worry about inequality — will make our economy more just and more dynamic.