Wednesday, January 6, 2010

Equality and the Law

David Frum has a good column up at CNN about the interest both the right and the left should have about limiting inequality. He also has some pointed remarks about how tendencies on both sides of the political debate may have contributed to an unequal instability. Here are a key few paragraphs:

For the left:

Here's a story I heard last week from a onetime foreign investor in Argentina. The thing that drove him out of the country was a 5 percent tax on his company. Five percent may not sound like much, but what mattered was not the amount of the tax. It was the way it was imposed. The tax was not enacted by Congress. It was not even ordered by the president.

One fine day, one of his operations received a letter from a government ministry with a sudden demand for payment. As far as he could tell, the demand was ungrounded in any law. He litigated the matter and (eventually) prevailed. But a country where the government could remake the rules at any time was no country for him.

Think it could not happen here? It is happening here. It happened in the Chrysler bankruptcy, when the government muscled bondholders to surrender their legal rights in favor of politically preferred creditors. It happened to AIG bonus-holders, intimidated by Congress into surrendering their contractual earnings.

It is on the verge of happening to the pharmaceutical industry, where one preferred idea of health care reformers is informal government pressure on drug prices.

A modern economy can bear the load of even quite high government spending -- see Denmark, Sweden, Germany, etc. What it cannot bear is arbitrary power. Deals are deals, contracts are contracts, laws are laws, and they must be respected by the government as well as by the governed.

For the right:

Latin American politics has been savage on a scale hardly imaginable north of the Rio Grande: at least 9,000 -- and perhaps as many as 30,000 -- murdered in Argentina's 1976-83 "dirty war" against suspected left-wing radicals, to cite just one example.

The extreme concentration of wealth for which the continent is notorious has tended to frustrate reformists and galvanize radicals, including violent radicals. Latin American "haves" have felt threatened by attack from below since independence two centuries ago -- and they have repeatedly defended their possessions with murderous repression.

Part of the aim of a liberal republic is to have enough socio-political fluidity so that reform can happen within the political process. If a government wishes to maintain its popular legitimacy, it must seem capable of responding to real civic needs and real debate.

Republican legitimacy is also poisoned by reveling in arbitrary power. Law, in grounding the limits of governmental power, helps pave the way for wealth, both civic and commercial.

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