All the talk in the presidential campaign about “spreading the wealth” and allegedly socialist tax policies got me thinking about the dramatic erosion of the American social compact over the past 30 years, and the impact of that attitudinal shift. The basic proposition underlying the social compact is that in return for the benefits and protections of government, individuals give up some autonomy and agree to be governed by rules and norms whose purpose is to advance the common good. Embedded in this concept is the notion that every member of a community has a set of obligations to the entire community and to all of its members.
Striking a Balance
Where to strike the balance between freedom of individual action and governmental authority is the province of democratically-elected representatives. Hence the excesses of robber-baron capitalism in the United States were partially curbed by the enactment of legislation such as the income tax (1913), Social Security Act (1935), and Fair Labor Standards Act (1938). Many of these laws were denounced by opponents at the time as tools of socialism or worse. And the public debate about the size and role of government shows no signs of going away.
A progressive income tax, which redistributes wealth (albeit imperfectly) by imposing higher rates on people with higher incomes, has been the law of the land for nearly 100 years. It is an embodiment of the fundamental social compact principle that those who have more have an obligation to contribute to the well-being of those who have less. And this actually seemed to be working for awhile: from the mid-1960s to the late ‘70s, income disparities were at historic lows.
When Greed Is Good Gained Sway
But then “trickle-down” economics – what I think of as the “greed is good” principle - gained sway. With its advent the idea behind the social compact fell by the wayside as a guiding principle of U.S. society. Corporate high-fliers were celebrated as old-fashioned American heroes. We read stories about “compassion fatigue.” Communities with large numbers of older people regularly voted down tax hikes aimed at improving schools. Politics became increasingly polarized.
Beginning around 1980, income disparities in this country accelerated dramatically. Now, according to United for a Fair Economy, we have the widest income gap since 1929, the year of the last great stock market crash. Data compiled by the Center on Budget and Policy Priorities show that from 1976 to 2006, largely as a result of government policies, the average income of the bottom 90% of the population grew just 10% while the figure for the top 1% was 232%, dramatically reversing the trend of the previous 30 years.
The Result? An Economic House of Cards
It is inevitable that the legitimacy given to the Darwinian social philosophy that underlies the tax and fiscal policies which produced these jaw-dropping numbers would be reflected across the government and the rest of society. In this context, FEMA’s egregiously inept and callous response to Katrina, to name just one glaring example, is hardly surprising.
A social compact that celebrates individual wealth accumulation over the common good also explains our nation’s crumbling bridges and roadways, eroding support for college loans for working and middle class families, and reduced public funding for nonprofit programs that serve those most in need. It is equally inevitable that the economic house of cards built by greed and hubris would eventually come tumbling down, as it has over the past several weeks.
Restoring Collective Responsibility
Why should the nonprofit world in particular care about this? It’s not just that there will be fewer philanthropic and public dollars to go around. Although that decline, which has already begun, is certain to have devastating effects. The nonprofit sector cares about the erosion of the social compact, because we understand that fewer people now see themselves has having an obligation to the common good.
And the common good is the arena where we toil. It’s the reason we’re granted tax exempt status by the government. Although there is still a great deal of individual compassion and generosity to be seen, that good will has been increasingly focused on individual causes rather than on social movements. The proliferation of new nonprofits and family foundations in recent years, while heartening in some ways, is also evidence of this shift away from collective responsibility.
For those of us who are committed to social and economic justice, the weakening of the ties that bind us represents a moral and ethical crisis more serious and insidious than the present financial mess. And that is because it is a crisis that is largely unrecognized.
In this context, the economic upheaval we’re now experiencing may be the necessary, if painful, wake-up call the country needs to set itself back on the right track, the track of authentic community.
In the ED Forum, TSNE’s Executive Director Jonathan Spack reflects on issues facing nonprofit organizations. He invites your ideas and insights in response to his columns. Follow Jonathan on Twitter @JonathanSpack.