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vate individuals, corporations, and organizations are doubtlessly the
ones who make the decisions that fundamentally drive market out-
comes. These private decisions, however, are always conditioned by
the institutions and policies created by government. I discussed some
of the specific policies that have such a market conditioning impact in
Chapter 2. State action influences market decisions, meaning that an
outcome such as pretax, pre-transfer inequality is a combined result
of private and state actions. While this does not inherently mean
that both political and market power resources will influence such an
90 The Politics of Income Inequality in the United States
outcome, power resources theory strongly suggests that they should.
If lower class power resources are the driving force behind distri-
butional outcomes, the goal of greater equality should be pursued
through every possible mechanism. If the state can influence pretax,
pre-transfer income inequality, which it likely can through a variety
of policy mechanisms, then lower class political power resources in
the form of left-party strength should produce not just more gov-
ernment redistribution, but also greater pretax, pre-transfer income
equality.
This idea is not completely novel. Earlier studies in the power
resources tradition have also suggested that such a connection is pre-
dicted. Huber et al. (1993) capture this idea, stating that Social
Democratic Parties and labor movements seek to shape the labor mar-
ket itself . . . (p. 717). But this was not central to their argument and,
in fact, they argue that most of the market effect of political power
resources would be captured by employment rates, with left parties
pursuing full employment. Despite the theoretical possibility that left-
party strength would influence market inequality, previous studies have
not given much attention to testing this hypothesis, and the minimal
evidence that is available on this point has not found a connection
between party strength and market inequality. In a cross-national anal-
ysis, Bradley et al. (2003) estimate the connection between left parties
and pretax, pre-transfer inequality and find a weak correlation, but the
political power resources explanation of pretax, pre-transfer inequality
could not be disentangled from the market power resources variables.
The conclusion from their analysis is that market power resources are
by far the more powerful determinant of market inequality, and polit-
ical resources have no discernible independent impact. Others have
provided similar evidence (Wallerstein 1999).
My theoretical focus is to examine the following two questions in the
context of the post World War II United States: (1) Does labor union
strength and left-party control of government reduce market income
inequality? and (2) Does left-party strength increase government redis-
tribution? While support has been found for the central predictions of
power resources theory, this support is not unequivocal. Analyzing the
theoretical claims of power resources theory in the United States from
1947 to 2000 provides a particularly interesting context for analysis
for several reasons.
Party Dynamics and Income Inequality 91
First, the type of welfare state regime present in the United States
may make it a least likely case for the applicability of power resources
theory. According to the typology developed by Esping-Andersen
(1990), the United States is a prime example of a liberal welfare state.
Liberal welfare states typically provide benefits through means-tested
programs, small universal transfer programs, and social insurance
plans. When possible, liberal welfare states allow the market to allo-
cate economic well-being. Because liberal welfare states rely so heavily
on markets in the distributional process, the traditional predictions
of power resources theory are less likely to be borne out in a liberal
welfare state than in either social democratic (e.g., Sweden) or conser-
vative (e.g., France) welfare states, which rely more heavily on public
provision of welfare.
In fact, much of the existing literature on the American welfare state
is explicitly devoted to explaining why the American case is so different
from others. American exceptionalism is often the object of expla-
nation for scholars of the U.S. welfare state (Alesina and Glaeser 2006,
Iversen 2005, Lipset and Marks 2000, Lockhart 1991, Pontusson and
Kenworthy 2005, Quadagno 1988, Skocpol 1992). Although argu-
ments concerning the root causes of this exceptionalism vary, these
studies make clear that the U.S. welfare state developed at a slower
pace and is much smaller than its European counterparts. Given the
exceptionalism of the American welfare state, questions regarding the
ongoing causal dynamics of the U.S. welfare state are wholly legitimate.
Power resources theory has found support in cross-national studies,
but do the internal, cross-temporal dynamics of the exceptional Amer-
ican welfare state truly align with a theory primarily developed with
reference to the European continent? It may, in fact, be the case that
cross-national studies of welfare state dynamics often find support for
traditional power resources theory hypotheses in spite of including the
U.S. case rather than because of its inclusion. In other words, it may
not be fully appropriate to generalize the cross-national evidence to
cross-temporal variation in the U.S. welfare state.3 If power resources
3
Some cross-national studies, of course, rely on cross-temporal variation in addition to
cross-national variation in a cross section. The question then becomes whether more
explained variation is driven by cross-sectional or cross-temporal variation. Given
the small number of time points typically available in the cross-national literature, it
is reasonable to surmise that much of the variation that produces the results comes
92 The Politics of Income Inequality in the United States
theory truly applies to the American case, this would indeed be a strong
vindication of the theory.
While the traditional predictions of power resources theory that
left party strength will increase state redistribution and labor move-
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