on serfs, stocks, and inequality
We live in an era where stockholders are aristocrats and the rest of us serfs. This is why incidentally redistributing their aristocratic wealth is not an avenue for liberation in my mind as it keeps the structural flaw of privilege classes in tact and simply tries to create a monarch (the state) with sufficient power to wrest some control from them in order to give scraps to the peasants (us)….
The problem is the structural formation of the corporation and its deleterious effects on capital (and by extension capitalism). Or at least the way the corporation is currently formatted. Or to put it more metaphysically–to sound a Rushkoffian note–we are the corporation. They are us.
I’m not sure what restructuring Chris would like to see – it’s not terribly clear from this post. Certainly I think that corporate interests often play too large a role in our politics. Our regulators are too often captured by the industry they are supposedly regulating. Nowhere has this been more apparent than during the latest Wall Street fiasco. And in this sense I can almost agree with Chris’s analysis. When we start talking about too-big-to-fail banking institutions who are at once resuscitated with billions of taxpayer dollars while at the same time lining their executives’ pockets with lavish bonuses – it certainly can appear that capitalism has failed – that we have been “taken hostage” by the corporations.
Chris likens shareholders to aristocrats and the “rest of us” to serfs. Now, I don’t know about you, but I’m a shareholder. I have a 401k. I’m not, however, an aristocrat – nor will I ever be, even once I begin owning other things – a broader portfolio, a house, and so forth.
This latest financial crisis saw people all across the board take severe hits. Shareholders on whatever scale took major losses. The only people who seemed to make out like thieves were the thieves themselves: the executives and businessmen who knowingly took bad risks or even purposefully broke the law.
G.K. Chesterton once lamented that “”The problem with capitalism is that there are not enough capitalists.” This belief has lead many down the path of distributism, socialism, (or in Freddie’s case neo-Stalinism) and many other redistributive paths toward perceived social justice. The problem always with these philosophies is that, as Will pointed out, redistribution is very difficult to manage effectively, and often enough has unintended consequences or ends up enlarging the state rather than helping those it was intended to help. Of course, this is not always the case, and nor is this meant as an indictment against all safety net or redistributive programs.
The ownership society was a somewhat vague and squandered promise of the last administration, but it has a lot of merit once you get past the stigma. Chesterton was right that capitalism produces too few capitalists, if he was wrong about the solution. Distributism promises a “third way” beyond capitalism or socialism but to my mind, distributists are essentially trying too hard. Capitalism itself can promote the sort of ownership and recapitalization that distributists are after – but welfare liberalism, in its current form, is antithetical to this process.
Will Wilkinson had an interesting (and much discussed) paper out a little while ago about income equality that I think is pertinent here. His general thesis is that while income disparity has grown, overall prosperity has also increased, and that measuring economic well-being on income disparity rather than on overall prosperity is missing the point. Certainly redistribution through higher taxes on the rich can increase income equality, but whether it will also increase overall prosperity is another question altogether. Welfare liberalism attempts to increase income equality and pays little heed to overall prosperity, imagining that equality will somehow create prosperity rather than the other way around.
The alternative is the ownership society. Wilkinson’s personal retirement accounts paper springs to mind. At the root of this concept is the idea that indeed, capitalism does produce too few actual capitalists, and that by allowing more people to become invested in private markets – through such mechanisms as personal retirement accounts – we will create a more invested populace with a greater chance to actually produce real wealth over the years.
Now, the markets are risky, and this latest crisis has once again revealed some cracks in our financial infrastructure. We obviously need to work toward better, smarter regulations. And we need to find ways to better regulate the regulators and protect against capture. (Though regulation is really, really hard to do right.) There is certainly something awfully fishy about the Goldman Sachs / Treasury revolving door, and that’s certainly not the only place where government and industry seem to be less than above board. There is the possibility that we might see a shareholder bill of rights pass though I’m not terribly familiar with the details.
However you look at it, though, contra Chris’s assertion that shareholders are the aristocrats and the rest of us serfs, in a functioning capitalist society there would be more shareholders and more shareholder protections, so that instead of clumsy, barely redistributive entitlements like Social Security, we could implement personal retirement accounts and give normal, lower-income people a stake in the private sphere that currently only the middle class and wealthy enjoy. Couple this with a means-tested safety net, and you give people a better shot at real wealth creation over the long haul as well as the necessary protection afforded by social safety nets. Capitalism has already remarkably raised our standard of living. Using it to help the poor take some ownership in the markets may not decrease income disparity, but it can certainly help overall prosperity. One of the major problems with our current economy has been our levels of personal debt. What if instead we transformed this into higher levels of savings?
Economic freedom, wide-spread ownership, and strong safety nets do not have to be mutually exclusive. Countries like Denmark have done a good job at implementing market reforms while at the same time making sure the poorest among them do not fall through the cracks. The failure in America is not a failure of capitalism, but of imagination.
Great post. Since I guess I’m the “vector guy”, I’d ask whether we have a bigger ratio of serfs:nobles today than we did in the past or fewer.
My First Job(tm) was for a little cafe/bakery. If I was a serf (sure, why not?) and my bosses were minor nobles, was this a step up from a situation where, X years earlier, all of us would have been serfs? It seems that way to me. (My bosses met at Epcot… where they both worked in the French Pavilion. Serfs.)Report
“Certainly redistribution through higher taxes on the rich can increase income equality, but whether it will also increase overall prosperity is another question altogether.”
Yglesias wrote some intriguing posts on this subject a few months ago. In the first, he notes the statistical relationship between national measures of happiness and high taxation, and theorizes that greater income equality leads to happier people. Which makes sense logically. With a lot of income inequality, there are more people anxious and jealous of their neighbors, and if you’re rich you’re worried about falling into the lower rungs of society. It leads to an overall lack of trust between people and the idea we’re working toward a common prosperity.
Second, he writes about the declining marginal utility of money. Once someone is making over — for sake of argument — $500k a year, they can pretty much buy anything they need or desire. Fancy cars, large homes, extravagant vacations. All that’s left is for them to buy more of such things. So what’s better for society, that we keep tax rates low and let Mr. $500k buy a second car, or fund public transportation so a poor guy can get to work?Report
“So what’s better for society, that we keep tax rates low and let Mr. $500k buy a second car, or fund public transportation so a poor guy can get to work?”
I think that’s an awkward way of looking at it Chris because firstly who are we to put an upper cap on what people should be earning and more importantly, how efficient will we be at measuring it? (answer: not good) Instead lets agree that public transportation is a social good and use progressive taxation to fund it (along with a moderate user fee to build in some efficiency and prevent abuse). If the rich end up not being taxed down to the same level as the rest of us so much the better. If we take it all you know we’ll find ways of spending it and in most cases they won’t be good ways.Report
Beyond that, we seem to always forget that the economic impact of rich people buying lots of things they don’t need is in and of itself a sort of redistribution of wealth, creating demand and therefore jobs which are usually better than government services at meaningfully benefiting peoples’ lives.Report
I agree, and I’m not arguing for total income equality through redistributive taxation. People should of course get to keep a lot of the money they make. Our system would fall apart without the opportunity to make more.
Instead, the argument is that a more progressive tax code with subsequent redistribution is an effective means to a more just and happy society. Just, because keeping a poor man from starving is worth one less BMW in a rich man’s garage.Report
Fair enough, I also support keeping the poor man from starving. I think there should be a solid safety net that meets the very basic needs of the poor and I think that it’s only fair that it be funded progressively. What I very vehemently oppose is any policy that justifies itself on concepts of wealth equality.Report
Think of wealth equality as a bonus 🙂Report
As I said to North, the goal isn’t income equality, just moving closer to equality than we are now is enough. Rich folk will still have plenty of money to buy useless junk, just a little bit less.
But more importantly, I don’t think anyone is arguing that we’ll ever reach 100% stable employment. And unless we can do that, we’ll need a safety net. Sure you may have a job today making a BMW for our rich friend, but tomorrow we might invent a robot that takes your place. It’s not certain when or if you’ll find another job. Until then, should society just let you starve?Report
Chris, tomorrow you’ll have a job repairing the robot at half the physical labor and three times the pay.Report
But now I don’t have the money to go to the school for robot repair. Woe is me!Report
And of course that’s what the safety net is for. But the point is preventing people from starving in the street. -Not- dragging people with more money than the mean down to middle class level. If we could do it without taxing anyone then of course we should.Report
So what’s better for society, that we keep tax rates low and let Mr. $500k buy a second car, or fund public transportation so a poor guy can get to work?
Do you at least think that this is a serious question? You probably think that it’s better for society if Mr. 30Ks taxes remain low. Isn’t it conceivable that the it’s also better (for everyone! even counting the hit public transit takes) if Mr. 500Ks taxes remain low? Not just because Mr. 500K gets to keep more of his money, but because Mr. 30K and Mr. 365 and everyone else are better off. This is the claim at the heart of the humane case for low taxes, free markets, and all of that.Report
Whoah there–neo-Stalinism? I guess I missed a post, but that seems like an awfully heavy assertion to be making without a link or an explanation. Unless I’m missing something?Report
Inside joke. Sorry.Report
A well-played inside joke, I might add.Report
“When we start talking about too-big-to-fail banking institutions who are at once resuscitated with billions of taxpayer dollars…”
Then we are talking about public utilities, not capitalist entities.Report
Public utilities with the bonus of highly paid management not commensurate with their actual contributions.Report
Could it possibly be the way a society permits the use of capital that determines the economic justice?Report
Or in other words, you don’t have an academic background in economics.Report
Are you referring to me? (Cause, no, I don’t have an academic background in economics. Do you?)Report
Sorry, that was bitchy. You haven’t established what is wrong with Social Security, why it needs to be changed or why it should be transformed into a retirement plan. Let me do it for you: Social Security is how our government controls poor people. That is the key function. My thought on this issue was shaped primarily by “Regulating the Poor” by Piven & Cloward. This is a pretty damning critique and of interest to both sides of the political spectrum. Conservatives have to address the issue of how the vast majority of poor people in America will be prevented from taking direct action without entitlements. Well, how?Report
Yeah that was bitchy but I can handle bitchy.
Interesting question, too. Actually there would be an entitlement – or a benefit – vis-a-vis personal retirement accounts with safety nets. The safety nets are important still. (Read Wilkinson’s paper I link to above for a more thorough explanation).
How will the vast majority of poor people in America be prevented from taking direct action? Well – hopefully with real savings they will be less disenfranchised and less likely to take whatever sort of dangerous populist action you hint at. Also, with better health care safety nets, I imagine there will be less chance of bloody revolt. Add to this the fact that poverty in America is not really all that bad – comparatively – and I don’t think you’re likely to see any real uprising from the lower classes. I’m not arguing against safety nets, I’m arguing against massive entitlements. And Social Security – while nowhere near as insolvent as Medicare – is nevertheless a fairly ineffectual retirement program. Doesn’t it make more sense to help people save rather than just give them enough to be able to control them, as you put it?Report