Recent years have brought a sharp uptick in the number of people interested in the policies and ideas of the political left. In order to clarify some basic points of confusion, and provide answers to some frequently asked questions, this short primer has been prepared. I encourage the reader to provide feedback if they feel that anything useful has been omitted. As always, all sources are listed at the end.
Question #1: What’s Wrong With Capitalism?
In his 1936 book The General Theory of Employment, Interest, and Money, the famed economist John Maynard Keynes noted that the main problems of laissez-faire capitalism are “its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.” History has largely validated his words, as unemployment continues to plague society, and inequality has skyrocketed to levels not seen since the Great Depression. This trend towards highly inequitable growth has amounted to a massive upward-redistribution of wealth, as top incomes have soared, while for those in the bottom-half, “growth has been non-existent for a generation.” Indeed, by some measures, the living standards of the very poorest have actually declined in recent years, while according to the Urban Institute, “nearly 40 percent of adults report that they or their families had trouble meeting at least one basic need” in 2017. As the old adage goes, “the rich get richer, and the poor get poorer.”
To Keynes’ original list, we may wish to add systemic instability (as capitalism repeatedly falls prey to the boom and bust cycle), as well as a tendency to concentrate political power in the hands of a tiny elite. While we are continuously told that free-market economics are compatible with (and possibly even essential to) political democracy, the evidence strongly contradicts this point. Let’s take the United States as our example; according to a study from Princeton University, “the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.” As the study puts it:
We believe that if policy-making is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened.
Similarly, a 2020 study, published in the Social Science Quarterly, found that “the affluent have substantial influence over policy making while average Americans have little to no influence.” This leads to widespread instability and political unrest, as 56% of the world’s people now feel that capitalism does “more harm than good in the world.” In addition, 58% of the world’s people are “dissatisfied” with how democracy is functioning in their country.
Question #2: Why is Inequality a Bad Thing?
Inequality is a problem because it has demonstrable negative effects on society-at-large. These include worse health outcomes (including shorter life expectancy, higher general mortality, and higher rates of depression and mental illness), reduced social mobility (the so-called “Great Gatsby Curve”), slower income growth for the poor, lower levels of happiness (an effect that extends throughout society), and higher rates of violent crime.
There is even some evidence that inequality may be harmful to overall economic growth, though this point is more controversial. A 2014 study from the OECD found that “income inequality has a negative and statistically significant impact on subsequent growth,” while a 2015 paper from the IMF found that “increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth — that is, when the rich get richer, benefits do not trickle down.” These findings have been corroborated by other studies (see here and here), though they remain hotly contested.
Question #3: But Don’t the Rich Benefit All of Us?
Not particularly, no. The idea that the rich will use their wealth for the benefit of society as a whole is often used to justify slashing their taxes and handing them more and more power over the rest of us; however, the evidence indicates that this view is misguided. For one thing, allowing the rich to get richer does not appear to benefit the economy. A 2020 study from the London School of Economics examined the impact of cutting taxes for the wealthy (using data from 18 OECD countries), with the following results:
We find that major reforms reducing taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. The effect remains stable in the medium term. In contrast, such reforms do not have any significant effect on economic growth and unemployment.
In other words, such policies increase inequality, without boosting growth or reducing unemployment. Similarly, a 2017 paper from the NBER found that cutting taxes for the rich has little-to-no positive impact on employment, while cutting taxes for working and middle-class people has a substantial positive impact. The true “job creators” of society are workers and consumers, not the rich.
Question #4: So What Do We Do About This?
It is important to remember that the political left is a very broad thing, encompassing many different schools of thought (including Marxists, social democrats, anarchists, and democratic socialists). These different factions obviously have very different overall policy recommendations, with some promoting social revolution, and others favoring more moderate reform. However, in spite of these differences, there are some points of general agreement.
For one thing, virtually all leftists agree that social welfare programs should be greatly expanded. Empirical evidence strongly supports the claim that welfare programs reduce poverty, with some going so far as to label them “the primary causal influence on national levels of poverty.” Welfare state generosity is directly corelated with lower poverty among OECD nations, and there is strong evidence that the United States’ disadvantage in life expectancy is related to its weak welfare state. This indicates that stronger social programs would greatly increase life expectancy. Contrary to popular belief, the welfare state also greatly reduces crime, while more generous welfare spending is associated with higher average life satisfaction among the population. To quote the linked study:
We thus echo Einstein by concluding that socialism (at least as represented by its social democratic incarnation) provides what is perhaps our best hope for improving the human condition, in so far as we agree that making “life as satisfying as possible” is the appropriate standard of evaluation.
In addition, leftists generally agree that labor unions should be significantly strengthened. Studies suggest that unions are associated with higher wages and productivity, reduced workplace fatalities, and lower rates of suicide and drug overdose. Unions also greatly reduce income inequality, improve political representation for workers, and raise the political consciousness of their members.
Focusing in on the United States, leftists support the adoption of a single-payer healthcare system, which studies suggest would save tens of thousands of lives every year, while greatly reducing healthcare spending. The current American healthcare system is “inefficient, unaffordable, unsustainable, and inaccessible to many,” and as such, it must be replaced.
We also generally support a strong increase in the minimum wage, which evidence suggests would substantially raise incomes, reduce poverty, improve both physical and mental health, and reduce inequality, with little-to-no impact on unemployment and cost of living. There are, of course, many other policies advocated by those on the political left, but these are some points of general agreement.
I hope that this primer has proved useful in answering some basic questions, and providing some much-needed clarification on basic points of leftist ideology. If the reader has noticed any problems or omissions, I encourage them to leave a comment and point them out.
- “The General Theory of Employment, Interest, and Money” by John Maynard Keynes
- The Quarterly Journal of Economics | Distributional National Accounts: Methods and Estimates for the United States
- RAND Corporation | Trends in Income From 1975 to 2018
- VoxEU | Economic Growth in the US: A Tale of Two Countries
- VoxEU | Alongside Rising Top Incomes, the Level of Living of America’s Poorest Has Fallen
- Urban Institute | Material Hardship Among Nonelderly Adults and Their Families in 2017: Implications for the Safety Net
- National Bureau of Economic Research | Putting the Cycle Back Into Business Cycle Analysis
- Perspectives on Politics | Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens
- Social Science Quarterly | Do the Affluent Override Average Americans? Measuring Policy Disagreement and Unequal Influence
- Reuters | Capitalism Seen Doing “More Harm Than Good” in Global Survey
- Bennett Institute (University of Cambridge) | Global Dissatisfaction With Democracy at Record High, New Cambridge Report Reveals
- Social Science and Medicine | Income Inequality and Health: A Causal Review
- Health and Place | Bring Out Your Dead: A Study of Income Inequality and Life Expectancy in the United States, 2000–2010
- Social Science and Medicine | Do People Die From Income Inequality of a Decade Ago?
- World Psychiatry | Income Inequality and Depression: A Systemic Review and Meta-Analysis of the Association and a Scoping Review of Mechanisms
- The Lancet | Income Inequality and Mental Illness-Related Morbidity and Resilience: A Systematic Review and Meta-Analysis
- Journal of Economic Perspectives | Income Inequality, Equality of Opportunity, and Intergenerational Mobility
- National Bureau of Economic Research | Understanding the Great Gatsby Curve
- VoxEu | Good for the Rich, Bad for the Poor
- Psychological Science | Income Inequality and Happiness
- Harvard Business Review | Income Inequality Makes Whole Countries Less Happy
- The Journal of Law and Economics | Inequality and Violent Crime
- OECD | Trends in Income Inequality and its Impact on Economic Growth
- International Monetary Fund (IMF) | Causes and Consequences of Income Inequality: A Global Perspective
- World Development | A Meta-Analytic Assessment of the Effects of Inequality on Growth
- Research in Economics | Growth, Inequality, and Poverty Reduction in Developing Countries: Recent Global Evidence
- London School of Economics | The Economic Consequences of Major Tax Cuts for the Rich
- National Bureau of Economic Research | Tax Cuts for Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment
- Social Forces | Do Social-Welfare Policies Reduce Poverty? A Cross-National Assessment
- Social Forces | The Welfare State and Relative Poverty in Rich Western Democracies, 1967–1997
- Comparative Political Studies | The Material Consequences of Welfare States: Benefit Generosity and Absolute Poverty in 16 OECD Countries
- Our World in Data | Why is Life Expectancy in the US Lower Than in Other Rich Countries?
- Social Science and Medicine | Shorter Lives in Stingier States: Social Policy Shortcomings Help Explain the US Mortality Disadvantage
- Journal of Criminal Justice | How Does the Welfare State Reduce Crime? The Effect of Program Characteristics and Decommodification Across 18 OECD-Countries
- Perspectives on Politics | Assessing the Welfare State: The Politics of Happiness
- The Economic Journal | Union Density Effects on Productivity and Wages
- British Medical Journal | Does ‘Right to Work’ Imperil the Right to Health? The Effect of Labor Unions on Workplace Fatalities
- American Journal of Industrial Medicine | Solidarity and Disparity: Declining Labor Union Density and Changing Racial and Educational Mortality Inequities in the United States
- Princeton University | Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data
- Perspectives on Politics | Reducing Unequal Representation: The Impact of Labor Unions on Legislative Responsiveness in the U.S. Congress
- Political Behavior | How Labor Unions Increase Political Knowledge: Evidence from the United States
- The Lancet | Improving the Prognosis of Health Care in the USA
- PLOS Medicine | Projected Costs of Single-Payer Healthcare Financing in the United States: A Systematic Review of Economic Analyses
- Annals of Internal Medicine | Envisioning a Better U.S. Health Care System for All: Coverage and Cost of Care
- National Bureau of Economic Research | Seeing Beyond the Trees: Using Machine Learning to Estimate the Impact of Minimum Wages on Labor Market Outcomes
- American Economic Journal: Applied Economics | Minimum Wages and the Distribution of Family Incomes
- Health Affairs | Effects of Minimum Wages on Population Health
- British Medical Journal | Effects of Minimum Wages by Unemployment Rates on Suicide in the USA
- IZA | Wage Inequality in Germany After the Minimum Wage Introduction
- The Quarterly Journal of Economics | The Effect of Minimum Wages on Low-Wage Jobs
- IZA | The Effect of the Minimum Wage on Prices