Pre-distribution – the next small idea
The idea of pre-distribution is that the government should take pre-emptive action to prevent poverty and inequality developing within the economy. That way, there is less need for the provision of welfare benefits and high tax rates. In other words, ‘pre-distribution’ makes redistribution less necessary.
This questioning of the welfare state is itself important. Though many Catholics on the Left try to justify the welfare state from the perspective of Catholic social teaching, the size of modern welfare states is not something with which most Catholics should feel comfortable. The British government is spending around 50 per cent of national income. The welfare state heavily discriminates against family formation. Saving is strongly discouraged and government interferes in health and education in ways that undermine family autonomy and freedom of conscience. In addition, work is strongly discouraged, especially for families with children. The withdrawal of welfare benefits and the imposition of direct and indirect taxes lead to families over most of the income spectrum losing over 75p of every extra pound they earn.
Presciently, Pope Leo XIII warned against taxes exhausting the wealth of families when they were much lower than today’s levels. And Pope John Paul II warned us that welfare functions had been removed from society and the family and given to the state. The chickens have come home to roost. Politicians of most perspectives, including many Labour politicians, recognise that we have gone too far in the direction of an over-grown welfare state and that more taxes and income transfers are not going to solve the serious problems we see in society today. In that sense, whether implicitly or explicitly, in proposing policies of ‘pre-distribution’ the Labour Party has accepted a message that Catholic social teaching has been promoting for many years: there is a limit to what the welfare state can achieve and should try to achieve. Perhaps if the conditions exist for human flourishing in the economic sense in the first place, we will achieve a better result.
Extra evidence for the ‘pre-distributionists’ comes from comparing our welfare state with that of Sweden. Sweden has been the beacon held up by supporters of social democracy. Often, when debating, I find that Sweden is hailed as the model to copy by Anglican Christian socialists. But the facts tell a different story. Sweden does have a very equal income distribution by western standards. Yet the welfare state in Britain is at least as big as Sweden’s and it also redistributes income to around the same extent as the Swedish welfare state. Sweden’s even income distribution is not caused by its welfare state and high tax rates. There is something about Swedish society that leads to a relatively egalitarian outcome in the first place.
Given all this, the Labour Party needs a new narrative, as do all parties. Whether one is looking at the problem through the lens of Catholic social teaching or from a purely practical perspective, increasing the size of the welfare state has run its course as a policy. One narrative has been provided by Phillip Blond and the Distributists. Distributism is the idea that policies should be pursued in order to ensure that centres of power and wealth are dispersed. This has a long history in Catholic social teaching. Distributism opposes big business, a big state and heavy-handed redistribution. But in my view, distributism does not offer an appropriate way forward. I dislike the local monopolies that it can create which can raise living costs and reduce opportunities for the less well-off. (I am uncomfortable with other aspects too, but that is for another day.)
Does Labour’s proposed ‘pre-distributionist’ policy fit the bill? Will it create the conditions that will enable families to flourish without huge income transfers and redistribution? Part of the policy will be to twist the arms of more firms to sign up to the living wage campaign: a level of wages higher than the minimum wage. A statutory minimum wage, sufficient to support a family, is widely supported by Left-leaning Catholics, often citing Catholic social teaching going back to the 1891 encyclical Rerum novarum or beyond. A more accurate view of Catholic social teaching places the obligation on employers rather than on legislators and makes allowance for whether the appropriate level of wages can be afforded by an enterprise.
Nevertheless, would a more widespread living wage campaign work? I have strong doubts. There are problems with the way in which the living wage demanded by campaigners is calculated: it has a large arbitrary element not related to the cost of bringing up a family. And there is a long history of studies that suggest that high minimum wages leave the most vulnerable frozen out of labour markets. Indeed, at the moment, long-term unemployment in Britain is reaching continental levels not seen in recent years.
Ed Miliband has also called for a better focus on skills training. There is nothing particularly novel – or Catholic – about this. The real debate is about whether this is better done through top-down regulation of the schooling system or by giving parents more freedom. On that issue, it is very clear where Catholic social teaching stands. Certainly, if Miliband is able to prevent private sector cartels from raising prices and preventing economic growth, this would be something to be welcomed, but his proposals for a new industrial policy do not really add anything to the debate. If anything, it is industrial policy that encourages cartels and unhealthy relationships between businesses and the state.
All parties should be uncomfortable with the size of our current welfare state and the way in which it undermines family autonomy. The response should certainly be to try to develop economic policies that promote human flourishing in the first place. To some, this may mean a much more decentralised state, lower taxes, liberalisation of planning to make housing cheaper and more parental autonomy in education. Those on the Left would naturally take a view that involved more government intervention in the economy. The Labour Party’s recognition that redistribution will not solve all our problems is certainly a step forward. But, it is not clear that what is being proposed as ‘pre-distribution’ is especially novel or that it would solve the problems Ed Miliband identifies in such a way that the burden on the welfare state would be eased.
This article was first published in The Catholic Herald.