Communitarian Economics

 Norton Garfinkle

Communitarian philosophy provides a value-centered guide to defining society’s common goals. Communitarian philosophy holds a centrist position on the social order that mediates between totalitarianism and libertarianism. Totalitarianism argues that the collectivity in the form of the nation state has superior needs and objectives and that individuals exist only to serve these collective needs. Libertarianism argues that the autonomous individual stands at the center of the philosophic universe and the larger community can make no legitimate demands on the individual except those necessary to maintain civil order. Communitarians seek to mediate the tension between these two forces of extreme autonomy and extreme centralized authority based upon their understanding that societies remain healthy only so long as they effectively provide a balance between the centrifugal forces of autonomy and the centripetal force of centralized authority.

Communitarian economics insists that economic policies depend critically on the common purposes to be achieved. These common purposes must be founded on the core values of the citizens of the community. Today political and economic decision structures are national rather than global in scope. For this reason, questions of economic policy must initially be examined on a country-by-country basis. Accordingly, this discussion focuses largely on one country, the United States. It is hoped that the issues stated and conclusions suggested will have relevance not only to the United States, but also to other countries.

In the United States, the core values of the American people were originally defined by the Declaration of Independence and the Constitution and Bill of Rights and have since been elaborated by the shared history of its people. These values which define the American community include the belief that the society should provide its citizens with equality of opportunity, material well-being, and the opportunity for individual self-fulfillment and should operate on the principles of fairness, justice, and compassion.

Communities are characterized by a shared history and cultural identity--a web of affect-laden relations among a group of individuals that often crisscross and reinforce one another--as well as by a commitment to a set of shared values, norms, and meanings. Communities set the context for individual actions in society and exhibit a relatively high level of responsiveness among their members. Community approbation and censure upholds members’ commitments to shared values, service to community order, and service to the common good. Healthy communities encourage individual self-development and at the same time command centripetal forces that seek to pull in members’ commitments, energies, time, and resources for what the community as a collectivity endorses as its notion of the common good.

Communitarian philosophy recognizes that individuals see themselves and act as members of more than one community and therefore experience layered loyalties to each of their communities. Communitarians believe that individuals fulfill themselves and contribute to society through participation in a single overarching community, as well as through their participation in specific community groups organized on the basis of such common characteristics as geography, gender, race, ethnic background, economic interest, professional interest, and cultural interest. Democratic societies function best when specific groups operate not as interest groups but as "community organizations" participating responsibly with other community organizations to work through solutions to transcendent national problems.

Community life depends on the acceptance of responsibility. Since individuals are participants in many communities, they should recognize their roles and take responsibility for personal behavior in every community to which they belong and not allow their commitment to one community to supersede their responsibility to others and to the overarching national and world communities. Similarly, leaders of individual communities and of political structures must also take responsibility for the general health of the overarching community as well as the specific communities they lead. These leaders should not only encourage member responsibility to their specific community but should also provide devices to help people transcend their loyalties to their most immediate communities and to reduce separatism in favor of the larger goals of the greater society.

Communitarians believe that with every right there is a responsibility and that rights and responsibilities can enhance one another if they are in proper balance. Rights of specific individuals and groups impose demands on all other community members and are effectively upheld only as long as the basic needs of all community members are attended to.

One consequence of the current tendency to sever economics from its ethical roots is that the present economic debate in the United States distorts the central issues facing the nation. The current debate centers on whether the U.S. budget should be balanced in seven years and on the extent to which social programs should be cut. On the all-important economic questions of investing for higher levels of economic growth, greater economic mobility, and a stronger civil society, the debate has little to offer. Also, the debate tends to highlight the extremes of both the liberal and conservative positions, leaving moderate Americans in a quandary.

The liberal emphasis on preserving the entitlements of the welfare state is being discredited in all of the advanced industrialized democracies: the evidence is overwhelming that there is no way to allocate the scarce resources of the society fairly if certain groups have an automatic and unlimited call on them. In American society it is becoming increasingly clear that the expanded entitlements of the elderly come at the expense of the children and probably at the expense of a healthy rate of economic growth. And the emphasis on bureaucratic solutions to economic and social problems has been rejected by citizens who claim that government programs are typically characterized by "waste, fraud, and abuse."

The conservative emphasis on reducing taxes at almost any cost is equally counterproductive. Currently the American government at all levels takes a little more than 30 percent of the GDP in taxes, as compared to nearly 38 percent for the other major industrial economies in the G-7 group (Quick and Perry, 1994). A certain minimum of revenue is required to sustain necessary government expenditures that ensure national welfare and safety, provide education to the citizens, maintain and expand the national infrastructure, and support essential government regulating activities. Reducing revenue from taxes below the necessary minimum impairs our ability to satisfy the legitimate goals of society.

Economic arrangements lie at the very heart of our society’s unwritten social contract. The American Dream is essentially an economic vision: if people work hard, abide by the rules and develop their skills and capabilities through education and dedication, they expect to reap the rewards in the form of an ever-improving standard of living and quality of life. If people’s everyday experience validates this vision, Americans will trust it and believe in it; if everyday experience violates it, then people grow cynical and mistrustful of our institutions. That is what is happening today. Current economic policies have had a negative social impact--deterioration of the quality of life of working poor families, disincentives for personal responsibility for one’s economic security, and an increasing wealth gap between upper and lower income groups--all of which is eroding the sense of community and of individual responsibility for support of society. Throughout the nation, citizens are questioning the validity of the American Dream because millions believe the economy is not working as they think it should.

Looked at from one point of view, the American economy has had a remarkably successful performance since 1982. The economy has shown positive growth in 13 out of 14 years. Within that period, the economy has been in an actual recession for only 9 months. Inflation was reduced from 5 percent in 1982 to 3 percent in 1996, and unemployment declined from almost 11 percent in 1982 to 5.5 percent in 1996.

Looked at from another point of view, the economy has left many Americans with the feeling that it is not fulfilling their expectations. This is most often expressed by Americans when they say that children have less opportunity than their parents did. In addressing this sentiment, we must accept the validity of the discussion that focuses on the unfairness of an increasing disparity between the rich and poor, but we must go beyond the suggestion that the problem can be solved solely by a redistribution of wealth. Clearly, we must search for solutions that increase the productivity of the economy, so that there is more to share on a fair basis for all members of society.

Communitarians understand that societal benefits can only be allocated according to the resources available to afford them. The extreme notion of entitlements--that people according to categorical identities are absolutely entitled to receive specific benefits regardless of society’s ability to pay for them--is counterproductive. Instead of supporting unlimited entitlements and rights, communitarians ask: What rights should be granted? How many? What kind? What responsibilities will be assumed by the beneficiaries? What needs are served? What societal goals are served? Since society can only spend a certain amount of the GDP on benefits, allocation of benefits must be determined by weighing all individual and group needs and setting priorities on a democratic basis.

The development of a communitarian economic platform is urgently needed as we move into the twenty-first century. In the recent economic climate characterized by slow growth and increasing globalization of capital, production, commerce, and markets, it is clear that many guiding economic principles and policies in the United States have become obsolete. It is time to rethink how we handle major economic issues such as individual and corporate taxation, social security and other public entitlements, treatment of imports and exports, trade protections, unemployment, education and training of the workforce.

Communitarians believe that if the economy is to serve the common interest and the shared values of all citizens, a specific set of common goals must be delineated. Communitarians would suggest that, in the United States, these goals must be consistent with the core American values of fairness, justice, compassion, equal opportunity, material well-being and the opportunity for individual self-fulfillment.

We propose that American economic policy incorporate the following goals that reflect these basic American values and address the critical economic, political and social dimensions of our society.

Economic goals that are consistent with communitarian principles include:

• To stimulate a robust rate of national economic growth: the more wealth that is created to go around, the better it is for everyone.
• To provide a high-employment economy so that all members of society can not only support themselves but also share in the sense of dignity that comes from work.

Political goals that are associated with the desired distribution of economic opportunity and results include:

• To support high levels of economic mobility.
• To build an effective educational structure for all citizens, not only to provide individuals with the personal benefits of education, but also to ensure that the workforce contributes to the economic productivity of the society.

Social goals that involve putting economic policy to work as a means to the end of building a strong society include:

• To offer people strong economic incentives to strengthen community life, add to the vitality of our civil society, encourage volunteerism, and otherwise strengthen the bonds that link us together as a people sharing a genuine unity of purpose.
• To create an economic structure that simultaneously advances both individual freedom and social responsibility.
• To provide a safety net to prevent the poorest and neediest in society from suffering the worst consequences of poverty and disease.
• To sustain a sense of moral legitimacy for the economy such that average citizens perceive the economic system as fair and equitable as well as efficient.

Positioning Communitarian Economics

Communitarian economics seeks to mediate the tension between the thrust toward a laissez-faire economy characterized by decentralized autonomous individual behavior and the thrust toward a command economy managed by a highly structured centralized authority. Communitarian economics adopts the positive elements from both conservative economics, with its emphasis on individual responsibility and wealth creation, and liberal economics, with its emphasis on community objectives and government responsibility for their achievement.

There is a general belief held by many economists that a successful economy must necessarily encourage extreme individualistic behavior. Fortunately, there are examples of successful market-oriented economies that encourage not only striving for individual material success but also encourage striving for the development and implementation of communitarian value systems. As John Kay has pointed out, economies operating on non-individualistic market-based economic principles, such as Japan and Switzerland, are no less successful in strictly economic terms than economies that operate on more individualistic principles (Kay, May, 1996). As we come to understand that the choices are not limited to economic societies based on libertarianism versus economic societies based on totalitarianism, each country will be able to move toward a centrist, market-based communitarian economic solution based on its own complex value system.

There are a number of ways in which communitarian economics differs from contemporary neo-classical ways of thinking about economic questions.

• Contemporary neo-classical economics prefers to focus on questions that can be answered in a value-neutral way. Communitarian economics insists that clearly defined shared societal values provide the starting-point for economic policy deliberations.
• Contemporary neo-classical economics tends to assume that the single defined goal of economic policy is to maximize the growth of the GDP. Communitarian economics assumes that the goal of growing the GDP needs to be coupled with other socioeconomic goals established by the democratic process.
• Contemporary neo-classical economics tends to assume that individual economic behavior is solely motivated by rational self-interest. Communitarian economics recognizes that human behavior in the economic sphere as well as in other areas of activity is motivated not only by rational self-interest, but also by other considerations--including community values that are reinforced by general approbation for community-defined moral behavior and general censure of community-defined immoral behavior.

There are, in addition, distinctive ways in which communitarian economics differs from the modern libertarian version of neo-classical economics.

• Libertarian neo-classical economics tends to assume that individuals have a natural right to engage in behavior that maximizes their economic gain without regard for the consequences of that behavior on other individuals and on the general society. Communitarian economics suggest that the individual has responsibilities to others as well as a responsibility to improve his own economic position.
• Libertarian neo-classical economics tends to assume that individual corporations have a natural right to maximize shareholder value as an extension of the natural right of the individual to maximize his own economic well-being. Communitarian economics suggests that the corporation has a responsibility to several stakeholder constituencies, which include employees, customers, and local and national communities, as well as shareholders.
• Libertarian neo-classical economics tends to emphasize the negative effects of government regulation in inhibiting economic growth. Communitarian economics strongly supports appropriate government regulation to maintain free and open competition and to improve the quality of life. It insists on an analysis that balances these benefits against the costs of regulation.
• Libertarian neo-classical economics tends to emphasize the negative effects of government taxation in detracting from the growth of the national economy by diminishing the funds available for investment by the private sector. Communitarian economics strongly supports the positive role of appropriate levels of government taxation to provide funds for investment to build the nation’s infrastructure and to increase the educational level of the workforce.
• Libertarian neo-classical economics tends to evaluate alternative tax structures with respect to their impact on economic growth. Communitarian economics evaluates alternative tax structures from the point of view of fairness as well as growth.

Communitarian economics embraces four core ideas:

1. Economic policy must maintain a balance between the common good and the personal objectives of individual citizens. Specifically, economic policy must be based upon the understanding that:

• A command economy is inherently unhealthy: a social and economic structure too constrictive of individual autonomy diminishes both individual effort and overall productivity and, as a consequence, diminishes GDP.
• While incentives for self-improvement are essential, extreme autonomy is counterproductive. Extreme autonomy does not guarantee the basic infrastructure necessary for the success of the economy, nor does it provide the safety net necessary to maintain social order and a sense of fairness in society
• National economic goals should be clearly identified and acknowledged with full public understanding and support.
• The amount of funding to achieve national goals should be linked to the amount of taxes raised. The tax structure that supplies this funding should not be so burdensome that it substantially reduces individual incentives to work.
• Priorities should be established in a democratic way to utilize the limited funds available to achieve the goals most valued by the society’s members.

1. A growth economy generates positive economic and social benefits. Specifically:

• It is to the benefit of society to have a large and growing GDP: a growth economy provides maximum opportunity to satisfy the legitimate goals of individuals and of the larger society and is conducive to social peace and social order. Economic abundance overcomes the problems that arise from conflict over scarce resources.
• A high-employment economy is a central goal of society not only to provide the satisfaction of work to its members but also to maintain social order and integrity based upon the belief in a fair society.

1. Economic policies and practices should be designed to minimize bureaucracy and maximize private and voluntary initiatives. Specifically:

• If the private economy is capable of providing a product or service effectively, the government should not attempt to compete with the private economy. Government interference in matters that can be handled through private or voluntary effort tends to weaken civic responsibility. Rather than supplant the assistance and support provided by voluntary groups and individual charitable organizations, government should support and incentivize such initiatives. Just as government creates incentives in the private sector, so it should operate as a stimulus to motivate and support the essential work of voluntary associations and not-for-profit institutions.
• When the government undertakes an economic task, it should attempt to do so by creating incentives to useful economic behavior that do not require a substantial bureaucracy to implement. Bureaucratic systems tend to utilize, command-and-control techniques that are responsive to the idiosyncratic and elitist views of officials and civil servants rather than to the actual needs and responses of the constituencies served by their programs. By contrast, moral and social incentives addressed directly to individuals and corporations tend to be internalized and to encourage increasing personal and corporate responsibility on an on-going basis.

1. Government has a distinct role to play in ensuring that economic policy is consistent with national priorities and with building a strong foundation for future growth. Specifically:

• Government’s role in enhancing national productivity should focus on three areas: supporting vigorous competitive efforts that can drive innovation and productivity gains by firms and workers; investment to increase the educational level of the population; and investment to build the infrastructure necessary for an advanced society.

Fortunately, we can expect a high level of public support for the principles and core ideas of communitarian economics, properly developed and communicated. The public intuitively understands that the goals and performance of the economy are matters of the highest concern. The goals of communitarian economics are very much the same goals that the American public most cherishes. And the public considers the core ideas of communitarian economics as passing the test of common sense.

Communitarian thinking provides the basis for a comprehensive and complete approach to building and maintaining a successful, growth-oriented market economy. The essential task facing communitarians is to translate the common sense, centrist ideas of communitarian economics into viable answers to the central economic questions facing society.

Role of Government

One place to start our discussion of specific economic policies is with an examination of the role of government in the economy. The government is one of the most important centers of power in the economy. For this reason, this paper devotes considerable attention to an analysis of the proper role of government in performing its legitimate economic functions. Government at all levels is responsible for establishing economic goals, regulating economic processes, developing and implementing a system of taxation, and judiciously allocating public revenues for national, state, and local economic and social priorities.

Government Regulation

The Federal government is responsible for maintaining the integrity of the economy through regulation of trade, commerce, and specific business practices.

1. Regulation to maintain economic growth and economic integrity: An example of effective economic regulation is the monetary policy utilized by the U.S. Federal Reserve Board to inhibit inflation, promote economic growth, and support a high-employment economy. The Federal Reserve Board utilizes indirect methods--controlling the supply of money and the level of interest rates to achieve its goals. These methods are consistent with the principles of communitarian economics because they rely on the natural responses of the private sector to the incentives created by increases and decreases in interest rates and the money supply.

2. Trade: Most trade protections were established long ago and were intended to provide temporary relief to industries while they adapt to foreign competition. Today U.S. trade protections extend to twenty-one major industries, each with annual sales of $1 billion or more. Contrary to communitarian economic principles, current industry trade protections tend to insulate industries and companies from competitive pressures to upgrade themselves. The consequences of these trade protections are to inflate artificially the rates of return of the protected companies and to leave unprotected industries at a disadvantage in market competition for capital and labor. In fact, from 1985 to 1990, employment declined in the majority of the protected sectors while their exports expanded sharply. NAFTA, the Uruguay Round of GATT, and the expanding economies of Latin America and Asia present new challenges for U.S. trade policy. New trade regulations should eliminate unproductive subsidies to favored industries and should strengthen the basic conditions that encourage free and unsubsidized competitive business practices.

3. Regulation of business practices: Government regulation of business practices is frequently criticized for reducing economic productivity. Such criticism is validly applied to programs that are focused on continuous costly interaction between government bureaucrats and corporate bureaucrats. Far more successful are those programs that utilize positive and negative incentives to achieve socially desirable goals. There is substantial benefit to be gained from comparing the effectiveness of command-and-control structures to implement specific government programs with the effectiveness of alternative, incentive-oriented methods. Some economic regulation techniques, such as antitrust laws, protect consumers from monopolies or oligopolies; these techniques are clearly necessary and are generally effective because they support an environment in which businesses contribute to economic growth by following their self-interest and competitive instincts.

4. Social regulation: The government uses regulation to achieve certain social goals, such as environmental protection, occupational safety and health, and elimination of child labor. Many social regulations perform valuable functions, while many others involve high costs and few benefits. Social regulation should not diminish the GDP beyond a reasonable point. The bureaucratic command-and-control techniques used by government to manage its regulatory programs tend to result in maximum costs, both in the expenses for government enforcement and the required industry investment for compliance. This command-and-control approach to social regulation should be replaced in most cases with more indirect or self-regulating methods. For example, anti-pollution tax credits and pollution taxes could be used as positive and negative incentives to encourage firms to be more productive in environmentally friendly ways. Equally important, publicizing pollution records of chemical manufacturers on an ongoing basis creates continuous public pressure for corporate responsibility.

4. Costs of regulation: All existing and proposed government regulatory programs should be subjected to cost-benefit evaluation. Since politicians find it increasingly difficult to raise taxes to pay for new government programs, they are turning increasingly to regulatory programs that require business firms to bear the cost of new social legislation. This avoids the discipline of evaluating the benefits versus the costs of these programs and avoids the requirement that the politicians account to their constituents for the consequences of their initiatives. To remedy this, the government should provide an ongoing estimate of the total direct and indirect cost to the economy of all government regulatory programs. This would enable the politicians who impose these costs, and the citizens who ultimately bear their burden, to review the total impact of government regulation on a regular and systematic basis.

Structure Of Taxation

The Federal government is responsible for creating and maintaining a reasonable and effective tax policy. The majority of Americans support three essential communitarian ideas with respect to tax policy.

• There should be a low enough tax rate for everyone so as to encourage people to engage in maximum economic effort to fulfill their own economic goals and, indirectly, the society’s goal of a growing GDP. The marginal tax rate is the critical item: excessively high marginal tax rates are counterproductive for a high-growth economy.
• There should be an adequate tax structure to provide sufficient funds for legitimate and agreed upon national goals.
• There should be a progressive tax structure to sustain the general public belief that fairness is achieved when people with higher incomes provide a larger share of the tax dollars.

There is some value in seeing how these principles relate to the recent debate in the United States concerning income tax structure. At the center of the recent debate was a proposal to adopt a "flat tax" structure. What this debate failed to recognize was that a proposal to change the tax system could not be evaluated solely with respect to the advantages and disadvantages of the form of taxation. The question that needed to be discussed was whether this form of taxation could be made consistent with the three basic communitarian tax principles. For example, the specific proposal for a 17 percent flat federal tax failed to satisfy one communitarian principle because it did not provide adequate funding to meet the legitimate needs of society. It failed to satisfy a second principle because it increased the proportion of taxes paid by the poor and middle classes and decreased the proportion paid by the rich. Clearly the 17 percent flat tax proposal was less consistent with communitarian tax principles than the present tax structure. On the other hand, a flat federal tax plan which would exclude the first $25,000 of income and then tax the next $25,000 at 15 percent and tax all amounts above $50,000 at 30 percent would have been consistent with all three communitarian tax principles. The essential point is that communitarian tax principles provide a basis for evaluating all aspects of the current tax structure and any proposed modifications to it.

Level Of Taxation

The level of taxation is another central issue in today’s political debate. The American tax system has the lowest top marginal income tax rate, the lowest consumption tax rates, and the second-lowest payroll tax rate of the G-7 countries. Conservatives propose a substantial reduction in the level of social benefits to provide the basis for a balanced budget and substantial tax cuts. Liberals argue that the current level of benefits should be maintained or reduced only modestly without any significant change in taxation. Both sides claim that their proposals are consistent with a balanced budget, but they both fudge the numbers with a combination of unrealistic future economic assumptions and plans that call for small cuts in the next four years and the most substantial reductions in the out-years when the current executive and legislative officers will no longer be responsible for implementing the proposals. Common sense suggests that both sides are engaged in efforts to make political points with minor adjustments to the current structure rather than in efforts to provide a general approach to solving the underlying problems. Communitarian principles would suggest a more comprehensive solution based upon a firm commitment to a taxation level pegged to a fixed percentage of the GDP over extended periods. To fix the appropriate level, one should bring to bear communitarian economic ideas which suggest that the level be low enough to maintain proper incentives for individual productive effort and high enough to provide sufficient funds for agreed upon legitimate national goals. Adopting the discipline of specifying a fixed percentage of the GDP as the appropriate level of taxation would prevent politicians from changing the rules with every new annual budget. Of course unusual circumstances such as war or depression might require the government to increase or decrease the level of taxation in any single year. But these unusual circumstances would be counterbalanced in other years so that the fixed level would be maintained over extended periods. Appropriately, the democratic process would be utilized by citizens and their governments to set the priorities that would determine how the fixed percentage of the GDP would be spent to fulfill the identified objectives of society.

Government should promote an informed investment approach to fiscal discipline. This approach would limit the growth of government consumption spending plus depreciation of government investments to the growth of average per capita income. As Robert Shapiro and Lester Thurow have recently suggested, the budget could be divided formally into an Investment Account and a Consumption Account. New federal borrowing would be limited to clearly defined public investments. These clearly defined public economic investments could be funded through government borrowing because over time they pay for themselves by enhancing our national productivity, which in turn expands the tax base. But all such government investments should be charged through depreciation to the current operations budget over a reasonable period of time in the same manner as business investment is charged through depreciation to the current operating budget of the business firm. This approach would cap annual deficits; rely upon private investment to provide the training, technologies, and systems of specific value to a firm and industry; and rely on public investment for infrastructure and education to promote long-term growth.

Utilizing these guidelines for expenditure levels, Robert Shapiro’s "Cut and Invest" strategy could be used to locate and redirect additional funds for necessary expenditures. This strategy recommends that we cut or eliminate taxpayer subsidies that currently go to 120 programs in powerful industry groups and redirect these resources to (1) expand private investment by reducing the deficit; (2) undertake new forms of public investment in general education; (3) support training in the workplace; (4) support primary economic infrastructure improvements; (5) undertake social reforms to reduce welfare dependence and teenage pregnancy; and (6) provide support for moderate income families with children.

Use Of Tax Dollars

The effective use of tax dollars collected by national, state, and local government is critical to the success of any economic program. Today, government spending at all levels in the U.S. claims about 33 percent of the GDP (Shapiro, 1995a, p. 3). Current uses of government revenue include:

• interest payments on government debt
• deficit reduction
• tax and spending subsidies
• military and national security forces
• public welfare programs
• investment in education, training, and the economic infrastructure
• government regulation of business practices
• government personnel and administrative expenses

Government spending levels have been largely unrelated either to the amount of money available or to an analysis of the most advantageous investments to achieve long term economic growth and maximum benefits to social welfare. Entitlements have been considered strictly as "rights" unrelated to responsibilities and have been paid regardless of whether their cost exceeds available resources.

A) Consumption Expenditures

Certain government expenditures cover current government operating expenses and transfer payments. A balanced budget standard for all such non-investment spending is needed, whereby government would be required to collect at least enough revenues every year to cover the costs of all publicly supported non-investment programs plus the interest and depreciation costs associated with government investment programs. Such a balanced budget requirement would encourage government to be responsive to changing national needs while respecting the value of strict fiscal discipline. New spending commitments could not be added without reevaluating existing ones; taxes could not be cut without also cutting spending; planning, evaluation, and priority-setting by the democratic political process would guide annual expenditures. In addition to fiscal disciplines, communitarian economics suggests that serious consideration be given to changes in the following areas of consumption budget spending:

• Deficit reduction. A balanced budget or a budget in surplus is a high priority for the consumption budget. Interest to bondholders diverts funds from investments in education and infrastructure and absorbs nearly 20 percent of all federal taxes. The endless search for new revenues to slow the annual deficit hemorrhage almost inevitably ends by increasing the tax burden on average people. Financing our huge deficits has required great amounts of foreign capital as well as domestic credit, requiring the United States to transfer more income abroad. Preoccupation with the deficit has reduced the capacity of policy makers to address new needs.
• Providing personal and national security. Military expenditures should be directly related to well defined current and future threats to national stability. Spending on police and prisons should be enhanced by programs to provide meaningful economic options for people who have none and thus turn to crime. Citizens should be encouraged to take effective responsibility for the quality of life in their own neighborhoods through such local programs as those that support community policing.
• Eliminating corporate subsidies. Eliminate tax and tariff provisions which undermine business productivity by subsidizing "favored" firms and industries. Redirect these funds to reduce the deficit or expand public investment.
• Reducing government waste. Cut total spending on government personnel and administrative expenses by shifting from inefficient bureaucratic command-and-control programs to more efficient government programs that operate by incentivizing citizens and groups to respond to market forces.
• Strengthening the safety net. Change the language of social welfare programs by calling them benefit programs rather than "Entitlement" programs. Reduce federal subsidies for affluent people who can take care of themselves by targeting the benefits from such programs to those who need help. Change the current welfare system to eliminate disincentives to work and to enhance provisions for education and training, child-support enforcement and availability of child care opportunities for parents who study, train or work. Explore how changes in the tax structure, such as the Earned Income Tax Credit, can reduce poverty among working families. Improve the Social Security System by adopting arrangements for retirement security that restore the proper balance between contributors and beneficiaries. In addition to restoring the balance between contributors and beneficiaries, it is important to address changes in the Social Security System that are economically sustainable and socially supportable by considering ways to shift a major portion of payroll taxes to a system of private savings and to reserve the use of government mandated social security payments to supplement the resources of retired people with low incomes. None of these changes can occur without taking Social Security out of the category of an "unchangeable entitlement."

B) Investment Expenditures

Government investment is a legitimate tool that can be used to increase national productivity. But public investment should be undertaken only if it holds clear potential for producing future economic benefits. Legitimate public investment does not focus on strengthening a particular firm or industry, but rather on improving the productivity of the general economy through programs that the private sector cannot create alone. Programs should be targeted to elements common to all economic enterprise such as education, basic research, physical infrastructure, and technological infrastructure. Education should be general, research basic, and infrastructure primary. Those who receive support for a project should bear part of the project’s cost as a matter of responsibility and fairness and in order to ensure their commitment to the project. An investment should hold clear potential for producing future benefits. These future benefits should be manifest through an increase in the private economy’s wealth-creating capacity in the form of human, technological, and physical resources that are critical in global competition.

It is not enough to say that government investment can play an important role in increasing the productivity of the economy. It is critical that any government productivity program must pursue techniques utilized by earlier effective programs and avoid techniques used by earlier ineffective (or indeed counterproductive) programs. We can illustrate the character both of effective and ineffective government public investment programs by looking at specific government programs in the field of education and training.

One example of a successful government sponsored general education program was the G.I. Bill of Rights after World War II, which speeded the process of extending the benefits of higher education to a much larger segment of the U.S. population. By providing money directly to the consumer, this program set in motion a set of benign market-oriented forces without resort to the typical bureaucratic command-and-control procedures that are rightly faulted for the inefficiency of many other government programs. Today some higher education is provided to close to 40 percent of all American adults--a much larger percentage than most other countries in the world. As a consequence of the expanded level of higher education triggered by the G.I. Bill, American knowledge workers today have the ability to adapt to the rapid changes in technology which are creating the opportunities for improved worker productivity throughout American industry. The American economy benefits from this improved level of productivity, and the world economy benefits from the resulting increase in global economic product. In contrast to these positive contributions, specific job training programs administered by government bureaucrats without a direct tie to the business community have generally been found to be ineffective. Typical training programs run by government bureaucrats are less effective because they tend to be unrelated to actual industry needs and to the specific skills that are typically acquired in the workplace. The keys to greater success are found in programs that provide incentives for worker training in the workplace.

Total Economic Cost Of Government

Direct government expenditures are one part of the burden that government places on the ability of the economy to grow and improve the national well-being of the country’s citizens. Government regulations that require specific actions by corporations and individuals also impose a cost on the economy. Communitarians believe that government has an important and legitimate role to play in regulating economic activities and improving the social welfare. But the economic cost of the sum total of all government regulatory and non-regulatory programs should be restrained to avoid substantial negative effects on the growth of the economy. In order to avoid such negative effects, the total economic impact of the government’s direct expenditures and regulatory programs should not grow more than the growth of the GDP. Given an appropriate baseline level, this would mean that a real growth in GDP of 3 percent, for example, would not justify a growth in the total government economic burden of more that 3 percent.

Role Of State And Local Governments

Local, state, and federal governments have distinct roles and responsibilities for ensuring national productivity and well-being. Currently, the federal government sets minimum standards and requirements for social and economic necessities such as basic education, minimum wage levels, benefits, and trade and business practices. Federal government also raises the majority of revenues used to achieve national priorities, including those implemented on the local level. In fact, in the United States in 1991, the federal government collected two-thirds of total tax revenues, with state governments collecting one-fifth and local governments collecting one-eighth (Quick & Neugib, 1994). Particularly in light of its greater responsibility for all citizens, the federal government should evaluate outcomes and performance levels and assist states and localities to obtain information on best practices and models to achieve national standards. Rather than regulate and monitor services and local practices, the federal government can provide incentives such as matching grants and awards for innovation, to engender local initiatives. Rather than delivering services directly to the public, the federal government can inform and motivate other sectors and levels to design solutions to their own problems and enhance their own economic base.

State and local governments exercise a great deal of latitude in determining local priorities and raising additional revenues through state and local taxation. They may provide matching funds or additional resources to expand federally-supported initiatives or augment federal revenues in order to meet needs of particular concern to the communities within their jurisdiction. State and local governments have the capacity to establish a new tax mix and to adjust levels of taxation with respect to personal income, corporate operations, consumption of goods and services, and private property. State and local autonomy to set levels of taxation is beneficial because it provides both local incentives and local responsibility for addressing local concerns. This taxation system is virtually self-regulating, since local residents determine whether their tax burden is balanced by the benefits they receive. If people feel that the costs outweigh the benefits, they can either participate in advocacy or lobbying efforts on taxation and expenditures or vote for new government officials--or vote with their feet and move elsewhere.

With incentives and resources for local problem-solving and innovation, local and state governments may develop models that can be replicated in other communities. While local self-determination and innovation are welcome, there is a need for national standards regarding overall approaches, such as whether the tax structure should be regressive or progressive, or whether revenues from the sale of certain goods and services deemed detrimental to the public should be allowed. For example, while they are lucrative sources of tax revenue, gambling and the sale of tobacco should not be sanctioned by government.

Similarly, different states and localities can spend according to their particular priorities. A base for spending may be established by federal revenue-sharing, but the upper limit is decided autonomously at the state or local levels. While national standards may be established for service outcomes in the areas of public health, safety, environmental protection, and other national concerns, it is logical that service design and delivery can be the responsibility of state and local governments, which are closer to the citizens who utilize the service. The dilemma is how, if we are to be an overarching community of communities, we can equalize taxes and services in different areas so that the residents across the country may share similar expectations about government’s ability to meet their basic human needs.

The federal government should employ more flexible methods of assisting localities according to their own needs, while upholding national standards. We need to develop effective roles for government at all levels, which can help elected officials and public agencies to be more accountable and responsive to the people. Rather than institute layers of bureaucracy, different levels of government should determine how to collaborate in performing distinct parts of a total endeavor that will have broad impact. For example, the federal government might support:

• Efforts to involve local and state governments in periodic reviews of federal, state, and local government spending programs, to determine whether a program’s achievements justify the tax burden entailed in maintaining it. They can also determine whether the same results could be met by reforming the program or transferring some of its responsibilities to the private sector or from the federal to state or local governments.
• Recognition and awards for individual innovation and contribution to the community through such programs as Thanksgiving Day merit ceremonies or the government equivalent of March of Dimes contributions to specific organizations to honor them for positive community initiatives.
• Programs to ensure accountability to the public in the implementation of government programs and broad public participation in the evaluation of outcomes.

In their landmark 1992 book, Reinventing Government, Osborne and Gaebler describe numerous government reforms at all levels that improve performance, cut costs, and reduce bureaucracy by forcing government to become more catalytic, community-directed, competitive, enterprising, and results-oriented. Many of these reforms call for changes in the form and scope of government involvement in federal, state, and local programs. Other initiatives focus on the benefits of programs that synergistically engage public programs with private efforts.

Role of Corporations

Corporations stand side by side with the government as the centers of power in the economy. Communitarians believe that society provides the legal basis for corporations not simply to enable them to expand their power and increase shareholder value but also to play a positive role in relation to all their stakeholder constituencies. It is an essential idea of communitarian thinking that corporate actions should be encouraged or discouraged based upon their impact not only on shareholders, but also on employees, customers, and local and national communities.

The private sector should help to reduce the deficit by relinquishing unnecessary government subsidies which may then be redirected. Rather than expect government assistance, corporations should generate their own investment income for their own projects. They can also make a more substantial contribution to national economic and social goals by collaborating with government to create and maintain education and job training programs and programs to enhance the national infrastructure.

Since 1960, revenues from corporate tax have declined steadily as a share of total federal revenues and of the U.S. GDP. Liberals push for higher corporate tax as a way of redistributing more of the tax burden to shareholders with high incomes. Conservatives defend particular exclusions and argue for a smaller corporate tax or even its repeal as a way to increase private sector funds available for investment and to limit the government’s ability to spend money for social initiatives. One essential purpose of corporate tax reform is to promote higher U.S. business investment and the international competitiveness of U.S. firms. A second purpose is to allocate the tax burden fairly among different classes of taxpayers. To these ends, we would hope that the corporate sector would be open to changes in the form and level of corporate taxation which would restructure the tax mix to eliminate unproductive special interest tax breaks and pave the way for patterns of taxation that would encourage general economic productivity and a fair sharing of the tax burden (Warren, 1994: Hufbauer-van Rooij, 1994).

The structure of the American economy is such that businesses exist in a largely self-regulating environment ruled by competition and will continue to exist by making profits. Their principal task is to be as productive and creative as possible with the direct consequence of creating more profits for themselves and their shareholders and the additional consequence of maximizing their contribution to the GDP.

It is both communitarian thinking and good business practice to utilize management approaches which encourage individuals and teams to take initiatives to improve corporate performance. Companies should endorse entrepreneurial management approaches such as participatory management to decentralize decision-making; teamwork to overcome the rigid barriers that separate people into hierarchical structures; investment in employee training to ensure that employees have the requisite skills; and continuous evaluation of business practices by results. These practices will create a spirit of community in the workplace and inspire people to work harder and invest more of their creativity because they control their own work. The economic consequences of these revitalized approaches to managing the workplace are to produce more and higher-quality products, thereby expanding the profits of the company and increasing the company’s contribution to the total GDP.

While it is unrealistic to hope for unlimited corporate altruism, it is reasonable to expect that inspired leadership and social encouragement can ensure that the profit motive will be tempered by concern for the common good. This would mean that corporations would avoid efforts to take unfair profits from the formation of monopolies or oligopolies that control prices, restrict consumer access to innovation, and ultimately have a negative impact on the GDP. A corporatist oligopolistic economy, like a command economy, is too highly controlled to be productive for the larger society. Rather than rely solely on government regulation to combat unfair business collusion, social support for self-regulating initiatives can help to maintain energetic competition.

Corporations may also be expected to resist the temptation to be profit-driven to the exclusion of community, social, and moral requirements. For example, regardless of corporate financial benefits to be gained from child labor or the promotion of products and services that are dangerous for consumers and the environment, corporations should shun profits from such practices.

Communitarians are emphatic about the importance of corporate responsiveness to a variety of stakeholders, including not only shareholders and investors, but also employees, consumers, and the communities in which business is conducted. For example, companies should conscientiously attempt to contribute to labor force job security as well as to provide worker and retiree benefits. Providing decent wages and benefits not only reduces reliance upon government revenues, but also encourages individual responsibility for saving and investment, and enables communities to plan on a reliable income from local residents. As anchors of communities, companies need to balance their own requirements for economic mobility with community requirements for stable residents. Responsible practices with respect to union negotiations, plant closings, and downsizing would take community and employee needs into account. Good business practices would also reflect community and consumer concerns about the process and outcomes of production and marketing decisions.

Today’s corporations operate in a global context, which not only expands their potential for success, but also expands the scope of their public responsibilities. Companies should be encouraged to utilize and maximize their comparative advantage within the framework of competition in a global economy. Companies can maximize their own efforts to build profits by recognizing the opportunities offered by global markets and global capital resources to develop and market innovative products, technologies, and services which provide their corporations with a distinct comparative advantage in domestic and worldwide competition. In this context, we would hope that companies would act responsibly as good corporate citizens of the world by encouraging free trade to maximize their worldwide sales and profits and, as a benign consequence, to increase the global economic product.

Role of the Individual

Within the communitarian framework, individual responsibility is key to societal well-being. Ideally, individuals should take responsibility for their personal and family welfare by seeking education, obtaining employment, and contributing to personal savings and benefit programs. Rather than focusing on demanding entitlements, individuals should utilize their multiple layers of community affiliations to participate in the democratic processes of setting national priorities and achieving national goals.

Despite the perceived failures of citizen participation in the 1960s and 1970s, the idea of citizen participation is part of the U.S. self-image, and many public and private programs require it. Advocates for democratic reform discuss the importance of getting people to participate, not just by exercising their vote, but by engaging in community-oriented activities where they can work with other members of the community to solve the problems of that community. Scholars with a communitarian orientation, such as Benjamin Barber, Michael Sandel, and Robert Bellah, agree on the need to promote meaningful and thoughtful participation. The hallmarks of strong democracy, according to Barber, are "involvement, commitment, obligation, service--common deliberation, common decision, and common work" (Barber, 1984, p. 133). In their book The Rebirth of Urban Democracy (1993, p. 5), Berry, Portnoy, and Thomson endorse the idea of strong democracy, characterized by intensive, ongoing face-to-face deliberation, as a process for community decision-making and neighborhood/government collaboration. They found that participatory democracy "nourishes the democratic spirit of individuals [and] builds community, which in turn nurtures shared values such as compassion, tolerance, and equality . . . and transforms institutions so that they become more effective instruments of democracy." For communitarians, strong democratic participation at the community level is necessary to strengthen shared values, common purposes, and a politics based on "the good society."

Role Of Specific Communities

Communitarian philosophy is centered around the belief that society functions best when its community structure is vibrant and healthy. Individuals fulfill themselves not simply by satisfying their economic self-interest, but through active participation in a number of specific communities organized not only on the basis of geographic proximity, but also on the basis of such common characteristics as gender, race, ethnic background, economic interest, professional interest, and cultural interest. Since individuals may be members of a number of different community groups as well as members of the overarching national community, they should assume the responsibility for encouraging their community organizations to work together in a positive rather than separatist spirit to find generally acceptable solutions to transcendent national problems.

It is the responsibility of specific communities to hold their elected officials accountable for "governance"--the process by which we collectively solve our problems and meet our society’s needs. This is a different approach than "governing," where community members elect representatives who then take action on behalf of their constituents. The system of governance is achieved when communities are animated by public will, "a civic sentiment, grounded in the desire and commitment to see problems resolved, situations corrected, or opportunities realized" (Jones, 1992, p.8). Public will "is an essential foundation for public policy, government action and voluntary and philanthropic initiative. It is a level of popular concern that precedes direct individual and/or group action" (Jones, 1992, Appendix C, p.27). Public will demands accountability and action from elected officials and other leaders to achieve legitimate community objectives.

People tend to mobilize and join organizations out of conscious interests, threatened interests, conflicts of interest, different kinds of instrumental and strategic interests, or a desire to reorganize structures and rules. In the 1960s and 1970s, many Americans were aligned through well-established organizations such as unions, churches, ethnic organizations, and political organizations. And these groups participated in a direct way in dealing with the issues facing their local and national communities. Today the nature of community has changed, and problems have become more complex and intertwined. Accordingly, new citizen participation mechanisms, which are being developed in a growing number of U.S. cities, are needed to work with existing organizations to deal effectively with these new complex problems. In Switzerland, which enjoys a high level of local organization, ordinary citizens participate in structures for collective decision-making that follow the principle of "subsidiarity," which ensures broad input into generating consensus at the local level and delegates decisions to higher levels only when they cannot be handled by localities.

Conclusion

The communitarian viewpoint is that one cannot separate economic, social, and political issues from each other. Central to the resolution of economic issues is the necessity to determine the common ends of society that are to be served by our economic structure. These ends can be defined and prioritized only by an energetic democratic process that starts at the community level.

Communitarian economics calls for greater corporate, individual, and community group responsibility for fulfilling social goals and for increasing economic productivity. Government at all levels should provide incentives for innovation and competition; standards and models for positive national and local economic outcomes; thoughtful evaluation and prioritization of the allocation of tax revenues; and a fiscally responsible approach to balancing the benefits of all government’s regulatory and non-regulatory programs against the direct and indirect economic costs of these programs. Reforms in taxation and methods of allocating government revenues should employ a "cut and invest" strategy to reduce inappropriate subsidies and increase resources for investment in physical infrastructure and human capital. Government programs should provide incentives to individuals, reduce bureaucracy, and rely upon public accountability and involvement for their success. On a national scale, infrastructure investments for technology, transportation, and environmental systems provide benefits across industries, unify the domestic market, and enable American companies to increase their productivity on an ongoing basis. Corporate responsibility in economic affairs requires a commitment to support the moral foundations of the society as well as a commitment to improve the productivity of the corporation’s economic activities. A constant improvement in productivity not only produces a comparative economic advantage for American firms, but also ensures that American firms can continue to contribute to a growing world economy. Communitarians believe that the largest community encompasses all members of the human race and communitarian economics sees the efforts of companies and individuals throughout the world to improve their comparative economic advantage as having the benign result of expanding the world economy and therefore providing the resources for a better life for people throughout the world.

The question remains as to how we move forward in gaining acceptance of communitarian economic ideas as the basis for the economic organization of our societies. This question requires us to focus on how we and others can help to provide the intellectual, moral and political leadership to change public opinion and public policy. The intellectual developers of communitarian ideas are doing some of the necessary work by delineating the principles and benefits of communitarian economic ideas. But much of the work must fall on the shoulders of political leaders who have primary access to the media and to public attention. Fortunately, there is some positive momentum in this direction. In the United States, the United Kingdom, and elsewhere, political leaders from the left, right, and center are increasingly supporting some of the ideas of communitarian economics. Among others, these political leaders include such luminous individuals as Tony Blair in the U.K. and Bill Clinton, Jack Kemp, Al Gore, and Bill Bradley in the United States. If the intellectual developers continue to define and elaborate communitarian ideas and political leaders continue to popularize them, there is hope that these ideas will have an increasing influence in moving our societies in the positive direction of communitarian economics.

REFERENCES

Barber, Benjamin. 1984. Strong Democracy: Participatory Politics for A New Age. University of California Press.

Bellah, Robert N., Richard Madsen, William M. Sullivan, Ann Swidler, and Steven M. Tipton. 1992. The Good Society. New York: Knopf.

Berry, Jeffrey M., Kent E. Portney, and Ken Thornson. 1993. The Rebirth of Urban Democracy. Washington, DC: The Brookings Institution.

Etzioni, Amitai. 1988. The Moral Dimension: Toward a New Economics. New York: The Free Press.

Etzioni, Amitai. 1994. The Spirit of Community. New York: Simon and Schuster.

Etzioni, Amitai. 1996. The responsive community: A communitarian perspective.American Sociological Review 61 (February): 1-11.

Gruber, Jonathan. 1994. Payroll taxation in the United States: Assessing the alternatives. In Enterprise Economics and Tax Reform, Promoting U.S. Growth in the Global Economy. Vol. 3: Reforming Income and Payroll Taxes, ed. Robert J. Shapiro. Washington, DC: Progressive Foundation.

Hufbauer, G.C., and J. M. van Rooij. 1994. U.S. Taxation of international business income: Agenda for the 1990s. In Enterprise Economics and Tax Reform-, Promoting U.S. Growth in the Global Economy. Vol. 1: Reforming business taxes, ed. Robert J. Shapiro. Washington, DC: Progressive Foundation.

Jones, Sarah E. 1992. Public will. Discussion paper of the Forum on Public/Private Social Concern. The Union Institute, Washington, DC.

Kay, John. 1996. The good market. Prospect, May, pp. 39-43.

Osborne, David, and Ted Gaebler. 1992. Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector. 4th ed. Reading, MA: Addison-Wesley.

Quick, Perry, and Tom Neubig. 1994. Comparing tax burdens in the United States and the other G-7 countries. Enterprise Economics and Tax Reform: Promoting U. S. Growth in The Global Economy. Vol. 2: Comparing Tax Burdens, ed. Robert J. Shapiro. Washington, D.C.: Progressive Foundation.

Shapiro, Robert J. 1991. Paying for Progress: A Progressive Strategy for Fiscal Discipline. Washington, DC: Progressive Policy Institute.

Shapiro, Robert J. 1995a. Cut and invest: A budget strategy for the new economy. Progressive Policy Institute Policy Report No. 2. Progressive Policy Institute, Washington, DC.

Shapiro, Robert J. 1995b. Rethinking social security. The New Democrat 7, no. 5 (September/October): 14-18.

Slemrod, Joel. 1994. Tax policy in the second Clinton administration: A fantasy. In Enterprise Economics and Tax reform: Promoting U-S. growth in the global economy. Vol. 3: Reforming income and payroll taxes, ed. Robert J. Shapiro. Washington, DC: Progressive Foundation.

Thurow, Lester. 1996. Future of Capitalism. New York: William Morrow.

Warren, Alvin C. 1994. Alternatives for corporate tax reform. In Enterprise Economics and Tax Reform: Promoting U.S. Growth in the Global Economy. Vol. 1: Reforming business taxes, ed. Robert J. Shapiro. Washington, DC: Progressive Foundation.

From the Journal of Socio-Economics 26 (1997): 1-24.

Communitarian Vision

Rights and Responsibilities

Marriage and Family

Schools and Education

Criminal Justice

Diversity and Reconciliation

Civil Society

Faith-Based Social Services

The Economy

The Political Process