On May 11, 2017, Nick Cassella writes on Civic Skunk Works:
Gross inequality persists only because of fabricated narratives
Most wealthy people share a few common traits. They’re ambitious and terribly status driven. They love to hoard the majority of capital even when their fellow citizens aren’t doing so well. And they’re also really, really good at creating justifications for why they have so much and you have so little.
To quote the American economist John Kenneth Galbraith:
“The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”
These justifications have had to change one or two times over the years—because eventually the people catch on.
During the 16th and 17th centuries in Europe, monarchs utilized the doctrine of divine rule to placate the concerns of the commoners. Here was a doctrine which had the boldness to claim that if you wanted to depose a monarch, you were acting in defiance of God’s will. You can understand why the elite found this quite an appealing strategy to disarm the people’s qualms about the status quo.
Similarly, Southern aristocrats of the 19th century relied on a whole host of dubious theories to justify profiting off of slave labor. They used Aristotle’s natural slavery argument and picked out passages of the Holy Book to support their absurd status. When all else failed, they would also stoke fears of economic collapse and societal ruin if slavery became outlawed.
And while we might like to think our times are immune to such tactics, the wealthy today have continued this distinguished human tradition.
Elites now defend incredible levels of inequality through free market ideology. They shroud this economic theory in sacrosanct ways—noting its eternal “laws” which cannot be questioned.
The rich portray the free market as a sort of impartial spectator. Therefore the outcomes it produces are considered just and defensible.
It’s a rather ingenious way to legitimize vast inequality.
Just read how the capitalist, Kevin O’Leary (known as Mr. Wonderful on the show Shark Tank), reacts to a report that shows “85 richest people on Earthare now worth as much half the world’s population.”
“This is a great thing because it inspires everybody, gets them motivation to look up to the one percent and say, ‘I want to become one of those people, I’m going to fight hard to get up to the top…”
“So somebody living on $1 a day in Africa is getting up in the morning and saying, ‘I’m going to be Bill Gates’?” [the interviewer] asked.
“That’s the motivation everybody needs,” O’Leary said. “Don’t tell me that you want to redistribute wealth again. That’s never going to happen, OK?”
That is an absurd way of viewing the ends of a capitalist economy. Yet this free market justification is commonplace in our society today. You’ve probably heard some variant of it many times throughout your life. The weirdest part, too, is that this “meritocratic” worldview is often articulated by those who aren’t benefitting from the current system.
That’s alarming. But you can’t really blame these lower-income individuals for buying this ridiculous myth—they have been hit over the head with this narrative over and over again.
Think tanks funded by the rich pump out economic papers which support free market ideology. Politicians supported by the rich control the levers of government and so perpetuate this economic system. And the media gives a platform to individuals who, unsurprisingly, echo the merits of this ideology as well.
It is ironic then, that free market political and economic theory actually “originated as an egalitarian and progressive agenda.” That is the argument put forward by Professor Elizabeth Anderson in her upcoming book, Private Government: How Employers Rule Our Lives (and Why We Don’t Talk about It).
She contends that contrary to what we may think, the early proponents of free market societies and principles, like John Locke and Adam Smith, should be thought of as “Levellers”—in the sense that they were creating a philosophy to actually oppose and prevent social hierarchies.
She summarizes their egalitarian instincts well:
“Opposition to economic monopolies was part of a broader agenda of dismantling monopolies across all domains of social life: not just the guilds, but monopolies of church and press, monopolization of the vote by the rich, and monopolization of family power by men. Eliminate monopoly, and far more people would be able to attain personal independence and become masterless men and women.”
How then did Smith’s idea of free markets end up promoting the very outcomes it intended to curb?
Stephen Macedo, who writes the introduction to Anderson’s book, points out that it was a mix of the Industrial Revolution and anti-state sentiment which really shook up the end goals of free market egalitarianism.
“It was only in the nineteenth century that free market thinking drifted away from its earlier egalitarian moorings. Following Paine, free market thinkers increasingly regarded the state as an abuser of power in the name of special interests. The other cause was the Industrial Revolution.”
During these times of great structural upheaval, the poor began to witness a huge disconnect between the egalitarian promises of market societies and the realities of their work life.
Such a disconnect between economic reality and narrative sounds quite familiar to us today.
Consider this: In 1759, the top one percent in England and Wales’ controlled around 17.5 percent of total income. Currently, the top 1 percent’s share of total US income is at 20 percent.*
It is not hyperbole to claim that America’s economic situation today resembles the one which prompted the “Levellers” of the 18th century to challenge the powers that be.
Viewed this way, the success of Thomas Pikkety’s dry critique of inequality isn’t so surprising. It also explains how Bernie Sanders and yes, Donald Trump, were so successful.
They were revealing the absurdity of the top one percent’s justification.
If history is any guide, we occupy a time ripe for dramatic structural change. People are beginning to see the free market system for what it is: an economic order that does not, in fact, promote an equal playing field but caters to the worst excesses and abuses of capitalism.
Eventually, this narrative, like many before it, will be discarded—with violence and venom.
That should keep the one percent up at night.
*I discovered this exciting research in Ganesh Sitaraman’s recent book, The Crisis of the Middle Class Constitution: Why Economic Inequality Threatens Our Republic.
The author states: “The rich portray the free market as a sort of impartial spectator. Therefore the outcomes it produces are considered just and defensible.” In reality, the so-called “free market” is rigged and economic growth is enslaved by the slavery of “past savings.”
We need to lift the artificial financial barriers that would enable the poor and others with no or few assets (the 99 percenters) to overcome the collateralization barrier that excludes the non-halves from access to wealth-creating, income-generating productive capital.
One feasible way is to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. Removing barriers that inhibit or prevent ordinary people from purchasing capital that pays for itself out of its own future earnings is paramount as an actionable policy. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction performed by successful major corporation, determined by the same expertise that determines it today — management and banks — that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk could be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.
