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Wealth Inequality vs. Freedom and Liberty

(About a 10 minute read)

One of the more interesting notions that most of us seem to accept at one or another point in our lives is the notion that freedom and equality are incompatible.

I have heard that notion advanced in this manner: Jones has many marketable talents, while Smith has few marketable talents.  Thus, if Jones is free to make as much money as he can, he will make more money than Smith.  So, for Jones and Smith to be financially equal, something must done to limit Jones’ earnings.  But anything you do to limit Jones’ earnings deprives Jones of his freedom. Consequently, you cannot have both freedom and equality at the same time.

There is great truth in that.

Yet, the notion becomes extraordinarily problematic when we think that’s all there is to it.   For if we were to attempt to secure our freedoms and liberties by such a simple-minded principle as the notion that they can best be secured via allowing the unrestricted accumulation of wealth, we would soon enough find ourselves enslaved.

The problem is — in a nutshell — that Jones, if he gets too much wealth relative to Smith, will inevitably possess the means to subjugate Smith.

Of course, that’s not a real problem, according to some folks, because Jones is a decent old boy and would never think for a moment to use his wealth to destroy Smith’s freedoms and liberties — not even when crushing Smith and his foolish freedoms and liberties would benefit Jones.

Yes, some good folks actually believe that! And in my experience, there’s not much you can say to such folks that will convince them to change their minds once the idea has got hold of them that the only real issue here is the sacred right of Jones to earn as much money as he can, and retain nearly every last dime of it.  “Taxation is theft”, you know.

Rationality is not, on the whole, one of the distinguishing characteristics of our noble species of  poo-flinging super-sized chimpanzees.  That seems to be the case because we happily neglected to evolve our big brains in order to better discern truths.  Instead, we apparently evolved them for other reasons, which I have written about here and here, among other places.  So, I am not writing this post for those folks who are firmly convinced that the bumper-sticker insight, “taxation is theft”, is the very last and wisest word on the matter of wealth inequality.  I am writing this post for those comparatively open-minded individuals who might be looking for some thoughts about wealth inequality to mull over before arriving at any (hopefully, tentative) conclusions about it.

I believe that, to really understand wealth inequality, one needs to remember that we spent roughly 97% of our time as a species on this planet evolving to live in relatively egalitarian communities.  Communities in which there was typically (with a few exceptions) comparatively little political, social, or economic difference between folks.  Everyone was more or less equally engaged in the struggle for food to survive, whether they were hunters (mostly men) or gatherers (mostly women).

Then, about 5,500 years ago some jerk got it into their head that it would be a very good idea if most everyone else would work to support their lazy butt while they spent their hours leisurely whiling away the time ruling over them.  And thus was born the complex society.

“Complex” because there was now a relatively complex division of labor in which, instead of two basic occupations (hunter or gatherer), there were now many occupations (king, priest, lord, judge, craftsman, merchant, farmer, etc).   Moreover, the wealth, and with it, the power in those societies was now concentrated at the top.

The way in which the minority retained their positions over the majority was back then mainly three-fold, just as it still is today.  First, through ideologies justifying the power, wealth, and status of the minority.  “After the kingship descended from heaven, the kingship was in Eridug. In Eridug, Alulim became king…”,  begins the ancient Sumerian king’s list.  Thus, from the very first, the masters were using ideologies to control the masses:  e.g. “kingship descends from  heaven”, and thus you should accept it as what the gods intend for you.

Second, through rallying the people to face a dire (usually external) threat.  It is mere human nature that we are most likely to surrender our freedoms and liberties in preference for slavishly following a leader when we feel threatened by a common enemy.  Indeed, an oppressive state — and not always just an oppressive one — needs a common enemy to unify the people under its boot.

When ideologies fail, then it is time to call upon the soldiers, of course.  Propaganda, a common enemy, and ultimately, force.  The three main pillars of government from the Sumerians to the current day.

In a way, the one major change has been that the government today is largely a front for the real masters — the wealthy corporations and individuals that so many politicians are beholden to, the economic mega-elites.

It should be noted that by “wealthy individuals”, I am not referring to the folks with a few million dollars, but to the folks with hundreds or (especially) billions of dollars.  The average millionaire, in my experience, is not much of a threat to the rights, freedoms, and liberties of others and, in fact, is often enough a defender of those rights.  Call him or her a “local elite” because they are so often focused economically, socially, and politically on the communities they live and work in.  And it seems their ties to those communities generally result in their being net benefactors to them.  But perhaps most importantly, they simply do not have the resources to compete politically with the billionaire class in order to buy the government.  That, at least, is my impression.

No, by “wealthy individuals” I mean the folks who have the resources to be genuine contenders to hold the reins of  power in this — or any — country.  In the most recent national election, the Koch brothers dumped nearly a billion dollars into buying politicians from the level of “mere” state legislators all the way up to the national Congress and Senate.  And they weren’t the only economic mega-elites in the game.

We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.  — Justice Louis D. Brandeis of the U.S. Supreme Court

The problem, of course, isn’t wealth itself, but the concentration of wealth in the hands of a relatively few people.  Over time, the concentration has a natural tendency to worsen.  That is, the wealth ends up in fewer and fewer hands.  Since power follows upon riches closer than a hungry dog follows a butcher, political power, as well, tends over time to end up in fewer and fewer hands.  There seems to be a natural tendency to progress from democracy to oligarchy, and then to dictatorship.

During the same recent forty year or so period in American history when huge tax cuts  for the wealthiest individuals and corporations allowed the billionaire class to explode in size, incomes for the middle class all but became stagnant, while the poor actually lost ground.  There’s no polite way of saying this: “Trickle down economics” is an ideology of oppression used to fool people into believing that cutting taxes on the wealthy will increase job growth.

The average American today arguably works harder, struggles more financially, and has fewer back up resources for a rainy day than his or her parents and grandparents had.  As it turns out, you can’t concentrate almost all the wealth in the hands of a relatively few economic mega-elites without hurting someone.  But who would have thought that?  After all, didn’t the ideologists inform us we’d all be better off cutting taxes on the wealthy?

A comprehensive study has found that the average American now has little or no influence on their legislators, and which bills get passed into law.  Those who determine both the content and success of legislation are the economic mega-elites of America, the billionaires and the large corporations.

Strong, responsible unions are essential to industrial fair play. Without them the labor bargain is wholly one-sided. The parties to the labor contract must be nearly equal in strength if justice is to be worked out, and this means that the workers must be organized and that their organizations must be recognized by employers as a condition precedent to industrial peace.  Louis D. Brandeis

But, of course, we do not wish to believe Brandeis today because the trusty ideologists have also told us unions are a net evil.  Got to trust those boys and girls!  It’s just not true that so very many of them are employed by billionaire funded think tanks and institutions.

Now, the rarest complex societies in history have been those in which most people were more or less free.  But those rare, relatively free societies have also tended at the same time to be more egalitarian.

Tocqueville, for instance, noticed that white males living in the America of the 1830s were both freer and more equal than white males living in either the England or France of the same period.  They were also, according to him, better off economically.  Again, both male and female citizens of the Roman Republic seem to have been both freer and more equal than their counterparts living under the dictatorships of  the Roman Empire.

So the notion that freedom and equality are incompatible, while perhaps seeming to have some inexorable reason and logic on its side, does not always pan out in practice.  Apparently, sometimes quite the opposite has been the case.

About 2000 years ago, Plutarch observed, “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”  It will be interesting to see whether America has the political will to save its republic.

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Some Reactions to the Debt Ceiling Deal

We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.

The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.

From “The President Surrenders”, posted in The New York Times, by Paul Krugman.

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How can the leader of the Democratic Party wage an all-out war on the ostensible core beliefs of the Party’s voters in this manner and expect not just to survive, but thrive politically?  Democratic Party functionaries are not shy about saying exactly what they’re thinking in this regard:

Mark Mellman, a Democratic pollster, said polling data showed that at this point in his term, Mr. Obama, compared with past Democratic presidents, was doing as well or better with Democratic voters. “Whatever qualms or questions they may have about this policy or that policy, at the end of the day the one thing they’re absolutely certain of — they’re going to hate these Republican candidates,” Mr. Mellman said. “So I’m not honestly all that worried about a solid or enthusiastic base.”

In other words: it makes no difference to us how much we stomp on liberals’ beliefs or how much they squawk, because we’ll just wave around enough pictures of Michele Bachmann and scare them into unconditional submission. That’s the Democratic Party’s core calculation: from “hope” in 2008 to a rank fear-mongering campaign in 2012.

From “Democratic Politics in a Nutshell”, posted on Salon.com, by Glenn Greenwald.

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Overheard: Thanks for protecting the job creators, you know for creating jobs for chauffeurs, valets, domestic help, and most importantly seamstresses who specialize in crafting $100 bills into luxurious overcoats. ~ Jim Cutler

From “US Debt Highlights ~ The Day After…”, posted on The Bis Key Chronicles, by Gandalfe

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The protracted negotiations over the debt ceiling, as well as the final package agreed to by President Obama and the congressional leadership, show what happens when a small minority is allowed to gain control over national debate. While polls consistently show that the vast majority of the public sees jobs as the main problem facing the economy, there has been a well-funded crusade to ignore public opinion and make cuts to social insurance programs and other spending the top priority for Congress and the President.

From “Statement on the Debt Ceiling Deal“, posted on The Center for Economic and Policy Research Website, by Dean Baker.

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“Shame on you! you who make unjust laws and publish burdensome decrees, depriving the poor of justice, robbing the weakest of my people of their rights, despoiling the widow and plundering the orphan. What will you do when called to account, when ruin from afar confronts you? To whom will you flee for help?”

– Isaiah 10:1-3

From “A Warning to Congress”, posted on Dover Beach, by Θεόφιλος.

 

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Dean Baker on the Budget Deal

The ability of Washington to turn everything on its head has no limits. We are in the midst of the worst economic downturn since the Great Depression. Even though the recession officially ended two years ago, there are still more than 25 million people who are unemployed, can only find part-time work or who have given up looking for work altogether. This is an outrage and a tragedy. These people’s lives are being ruined due to the mismanagement of the economy.

And we know the cause of this mismanagement. The folks who get paid to manage and regulate the economy were unable to see an $8 trillion housing bubble. They weren’t bothered by the doubling of house prices in many areas, nor the dodgy mortgages that were sold to finance these purchases. Somehow, people like former Federal Reserve Board Chairman Alan Greenspan and his sidekick and successor Ben Bernanke thought everything was fine as the Wall Street financers made billions selling junk mortgage and derivative instruments around the world.

When the bubble burst, one of the consequences was an increased budget deficit. This is kind of like two plus two equals four. The collapsing bubble tanked the economy. Tax revenue plummets and we spend more on programs like unemployment insurance and foods stamps. We did also have some tax cuts and stimulus spending to boost the economy. The result is a larger budget deficit.

All of this is about as clear as it can possibly be. The large deficit came about because the housing bubble, which was fueled by Wall Street excesses, crashed the economy. Yet, we are constantly being told by politicians from President Obama to Tea Party Republicans that we have a problem of out-of-control spending.

The claim of out-of-control spending is simply not true. It is an invention, a fabrication, a falsehood with no basis in reality that politicians are pushing to advance their agenda. And that agenda is not pretty.

According to numerous reports in the media, President Obama wants a “big deal” on the budget, which will involve cuts to Medicaid, Medicare and Social Security. The last is especially ironic, since Social Security is financed by its own designated tax. Therefore, it does not contribute to the deficit.

Dean Baker

The rest of the article is worth reading.

It seems to me Obama is just as firm of a believer as any of the Republicans in the principle that, if the rich and powerful cause the problem, the middle class and poor should pay for it.

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Dean Baker on the “Gang of Six” Budget Plan

The budget plan produced by the Senate’s “Gang of Six” offers the promise of huge tax breaks for some of the wealthiest people in the country, while lowering Social Security benefits for retirees and the disabled.

In short, this is a plan that should be expected to please the wealthy since it will mean large reductions in their tax liability in the decades ahead. On the other hand, most of the rest of the country is likely to feel the effects of lower Social Security, Medicare and Medicaid benefits, in addition to other cuts that are not yet fully specified.

Dean Baker

It is worth reading the rest of the press release, which is fairly short, but detailed.

 

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Senator Chuck Shumer on Republican Efforts to Undermine the Economy

I want to talk today about the economy and jobs, and the concerns I have that not only has the Republican agenda jeopardized our recovery, but that political gamesmanship is trumping the vital needs of hard working Americans across the country.

It is time to stop beating around the bush and call it as it is. The evidence is clear: the Republican approach of ‘cut, cut, cut’ over the last six months has undermined our economic recovery.

Toward the end of last year, the recovery was gaining momentum – GDP grew 2.6% in the third quarter and 3.1% in the fourth quarter. But in the first half of 2011, as the federal government increasingly withdrew support from the economy and Republicans continually blocked us from doing anything to create jobs, growth has fallen to less than 2%.

The Republicans can say all they want that we can cut our way to prosperity, but is at odds with all the empirical evidence we have. We know from history, as well as from what we are seeing in other parts of the world right now, that cuts on the scale they have proposed in the middle of a recession will lead to lower economic growth and less job creation, not more.

And we need to start asking ourselves an uncomfortable question – are Republicans slowing down the recovery on purpose for political gain in 2012? It’s one thing for them to block programs they have always opposed. But when they start to contradict themselves by opposing programs they have supported—such as pro-business tax cuts—we are left to wonder.

Senator Chuck Shumer

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Is There a Single, Most Fundamental Issue that Divides Americans Today?

One side of American politics considers the modern welfare state — a private-enterprise economy, but one in which society’s winners are taxed to pay for a social safety net — morally superior to the capitalism red in tooth and claw we had before the New Deal. It’s only right, this side believes, for the affluent to help the less fortunate.

The other side believes that people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft. That’s what lies behind the modern right’s fondness for violent rhetoric: many activists on the right really do see taxes and regulation as tyrannical impositions on their liberty.

Paul Krugmann

Is Paul Krugmann correct that the single most important and governing division in our society today is not race, nor ethnicity,  nor sexual orientation, nor religion, nor perhaps even social class, but instead the division between the “I earned it and I have the right to keep it” crowd, on the one hand, and the “modern welfare state” crowd, on the other hand?  I myself think you could make a case — I don’t know how strong of a case, but a respectable case — for Krugmann’s notion.

That is, it seems at least arguable that most — perhaps all — of the major divisions in our society today have more or less become fronts for that one fundamental division between those who think they are entitled to every last penny they own in life, and those who think they owe society some portion of the wealth they own.   For instance, don’t the Republicans use the gay rights issues to work up  support for their candidates come election time (and later more or less ignore the people who voted for them on those grounds)?  Don’t the Democrats use the same issues to the same ends — changing only which side of the issues they are on?

I don’t know whether Krugmann is entirely right, but my guess is he is at least partly right.

Yet, for a moment at least, let’s assume for the fun of it that Krugmann is substantially right.  That would mean the single most fundamental issue that divides Americans today is rooted in an absolutely absurd notion of what it means to be human.

There are things about human nature as yet unknown to scientists.  There are even things about human nature as yet unknown to the rest of us.  And finally, there are even some things — a very few things — about human nature as yet unknown to our pets.  But only the most oblivious squid living in the deepest ocean doesn’t know that humans are a social animal.

We live together and cooperate with each other to not only survive, but to also boost the quality of our lives.  It is true that a single human,  adept at surviving in nature, can live by himself in the wilderness.  But no human can live as well alone in the wilderness as he can live in a community of his fellow humans.  Humans, unlike bears, are not well adapted to living absolutely alone in nature.  We are a community animal.

It’s obvious, isn’t it, that even our so called “self-made” billionaires would never recover their current standard of living if society made them outcasts — if society cruelly transported them to the Canadian wilderness and abandoned them somewhere between the headwaters of the Yukon and the Arctic.   Please don’t tell me a man or woman is truly “self-made” until you can show me one — just one human — who has walked into the wilderness with absolutely no gifts from society,  and then returned five or seven years later — having never seen in all that time another human — but nevertheless in possession of a fine business suit, and rounded out with an education equivalent to a Harvard MBA.  That would be a self-made human.   But the rest of us must content ourselves with owing at least half our success in life to our fellow humans.

So long as we are a social species, we will owe some portion of our success to our society.   The “I earned it and I have the right to keep it” crowd is wrong:  They might have earned it, but they could not have earned it without the society they lived in and relied on to earn it.  Consequently, they do not possess sole rights to it.  Instead, they owe society some portion of it.

But how does one determine what portion of our earnings we owe to society?

 

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Paul Krugmann on Economic Morality and the Ideal Society

My vision of economic morality is more or less Rawlsian: we should try to create the society each of us would want if we didn’t know in advance who we’d be. And I believe that this vision leads, in practice, to something like the kind of society Western democracies have constructed since World War II — societies in which the hard-working, talented and/or lucky can get rich, but in which some of their wealth is taxed away to pay for a social safety net, because you could have been one of those who strikes out.

Such a society doesn’t correspond to any kind of abstract ideal, whether it’s “people should be allowed to keep what they earn” or “from each according to his ability, to each according to his needs”. It’s a very non-Utopian compromise. But it works, and it’s a pretty decent arrangement (more decent in some countries than others.)

That decency is what’s under attack by claims that it’s immoral to deprive society’s winners of any portion of their winnings. It isn’t.

Paul Krugmann