Beyond Redistribution: Binary Economics and the Crisis of the Welfare State
by Richard Coughlin
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This paper addresses two major problems of contemporary welfare states. The first concerns the increases in income inequality that have occurred over the past 10 to 15 years despite redistributive tax and spending programs. Conventional policy options to reverse this trend, including increases in taxing and spending, are constrained by popular resistance to higher taxes and retreat of leftist parties from socialist or social democratic egalitarian principles. The second problem is related to the financing of old-age pension programs in the 21st century. The immediate source of the problem is demographic, stemming from the sharp rise in the ratio of retirees to workers that all advanced societies will face over the next 10 to 30 years. Options to deal with this looming crisis include raising taxes, cutting benefit levels, or raising the age of retirement. Such measures are both politically unpalatable and may well exacerbate the problem of income inequality. Binary economics holds the potential to help solve or lessen the severity of both these crises. Expanded opportunities for capital ownership holds the potential to (1) supplement (or in some cases to eventually replace) state-funded retirement benefits; and (2) to reverse growing income inequality by providing net benefits to lower-income strata that are proportionally greater than benefits that will accrue to upper-income strata.

Richard M. Coughlin is Professor and former Chair of Sociology at the University of New Mexico. His research interests include domestic and comparative social policy, political ideology, and socio-economic theory. From 1993-96 he served as Executive Director of the Society for the Advancement of Socio-Economics. He is the author of Ideology, Public Opinion and Welfare Policy (Institute of International Studies, Berkeley, 1980), and editor of Reforming Welfare (University of New Mexico Press, 1989), and Morality, Rationality, and Efficiency (M.E. Sharpe, 1991).