The End of Loser Liberalism: Making Markets Progressive by Dean Baker

Author:Dean Baker [Baker, Dean]
Language: eng
Format: epub, pdf
Publisher: Center for Economic and Policy Research

The economics and politics of beating up professionals

The idea of deliberately trying to reduce the wages of physicians, lawyers, and other relatively high-paid professionals may seem perverse to many progressives. After all, these people make good salaries, but they are not the really big winners from the upward redistribution of the last three decades. Besides, for many progressives some of our best friends (including economists) are in these highly paid professions.

But several important points on this issue are poorly understood. First, everyone’s salary is a cost to someone else. Paying our doctors twice as much as those in other wealthy countries, which is roughly what we do, has the same impact on the living standards of non-doctors as if we imposed a tax of $100 billion a year (about $300 per person) to hand each doctor in the country a $100,000 check. A policy of taxing truck drivers and school teachers so that doctors’ pay can average more than $200,000 a year would strike almost anyone as outrageous, but policies that protect U.S. doctors from effective competition with their foreign counterparts have the same effect.

As a practical matter, highly paid professionals tend to be conservative, especially on economic issues, and so measures that reduce their pay would have political as well as economic benefits. In addition to increasing the real income of nonprofessionals, lower pay for professionals would reduce their political power (less money, less power). It might also cause many of these professionals to become less conservative when they see that their lives can be made every bit as insecure as the lives of an auto or construction worker. While it is true that excessive compensation of doctors and lawyers is dwarfed by the extremes of corporate CEOs and Wall Street financiers, doctor and lawyer pay is nonetheless a substantial drain on the incomes of ordinary workers. A progressive agenda cannot support protectionist measures that continue to redistribute income upward to professionals.

Of course, measures designed to expose highly paid professionals to more competition will inevitably impact lower-paid workers within the same and related sectors. For example, a policy that facilitates medical trade (patients traveling internationally to receive medical services) will reduce demand not only for physicians but also for a wide range of workers in health care.

There is a view among many progressives that we have to structure our policies so that they don’t harm anyone we care about. Yet, as a practical matter this is not possible. If we think that we have somehow protected all the affected parties, it is almost certainly because we have not fully considered the impact of the policy. For example, suppose we build a new airport or highway. These are great job-creating projects, but a new airport is likely to take away business and jobs from existing airports. Similarly, a new road will divert traffic from existing roads, and gas stations, motels, and stores along the older routes will lose sales.

Even if we create special funds to compensate affected workers, as has

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