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Dean Baker on How We Can Make the 'Free Market' Work for the 99%

The right has been working for years to rig the market to the disadvantage of most of the population. Why can't we rig it in the other direction?

In the post-War era, as a large American middle class emerged, the top 1 percent of households took in 10.02 percent of the nation's pre-tax income. In only eight of the years between 1946 and 1980 did they grab 11 percent or more, and only in one year -- 1946 -- did they consume more than 13 percent of the pie.

After Ronald Reagan arrived on the scene, things began to change. In his final year in office, those in the top 1 percent grabbed 15.5 percent of our pre-tax income.  And in the 10 years before the Great Recession hit, households at the top of the pile grabbed 20.3 percent -- twice as large a share as they'd enjoyed when the "Greatest Generation" were making their mark on the world.

So the reality is that the "other 99 percent" have been sharing an ever smaller piece of our economic output. Was this shift an accident? Did the wealthy get smarter or start working harder? Was it an act of God?

Not according to Dean Baker. The economist has been trying for some time to get people to understand that conservatives who claim to have a profound love of free markets have no use for them; professing fealty to the markets is only a rhetorical strategy. They favor policies that distort the market in such a way that income and wealth flows to those at the top, but given that most people who cast votes in our elections are not among that rarified few, they have no desire to defend those policies on their merits. So conservatives claim that this is simply the way the "hidden hand" works, an organic process uninfluenced by policy-makers. 

This was the subject of Baker's 2006 book, The Conservative Nanny State, and it's a topic he's returned to in his latest, The End of Loser Liberalism: Making Markets Progressive. (Download a free electronic copy of the book here, or purchase a paper version here.) AlterNet caught up with Baker to discuss his new book.

Joshua Holland: Dean, you really hate it when progressives accuse the right of engaging in "free-market fundamentalism." You write that "the vast majority of the right does not give a damn about free markets," and you argue that progressives end up helping them conceal their true agenda. Can you unpack that?

Dean Baker: The right is about getting more money for the wealthy -- full stop. This is not true for every person claiming conservative principles, but it is certainly the goal of the political leadership of the right. These are not people who care about free markets, they care about redistributing money upwards. In The End of Loser Liberalism, as well as prior work, I've tried to document how in every area of public policy we see, conservatives are often happy to have the government intervene.

Just to give a couple of examples, in the case of finance, the right never wanted to see the removal of the government from the market. There were few prominent conservatives who were arguing to get the government out when the banks were teetering on the edge of collapse after the Lehman bankruptcy. They wanted the government to come in and bail them out. Similarly, almost no one advocates the end of government deposit insurance or the back-up lines of credit provided by the Fed through the discount window.

What the financial industry wants -- and what conservatives generally support-- is to have these incredibly valuable government safeguards without restrictions on the banks' behavior.

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