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by Mark Engler
Friday, Dec. 12, 2008 at 4:23 AM
The foremost ethical question is, given that we owe most of our productivity to a common social inheritance, to what extent can we say that we have "earned" our personal wealth? There is a growing consensus in favor of a new robust public compact to regulate our shared conditions.
The following is a review of a new book called Unjust Deserts: How the
Rich Are Taking Our Common Inheritance And Why We Should Take It Back.
A version of the article is running in the current issue of The
Nation, now on news stands or on-line at: http://www.thenation.com/doc/20081215/engler
(If you have trouble with the text being restricted, you might try
going through this Google link, which leads to the full article: http://www.google.com/search?source=ig&hl=en&rlz=&=&q=Engler+%22Spreading+the+Wealth%22&btnG=Google+Search&aq=f)
My own book, How to Rule the World: The Coming Battle Over the Global
Economy, is available at: http://www.amazon.com/How-Rule-World-Mark-Engler/dp/1568583656
. If you haven't yet checked it out, there's a lot in there that is
useful for making sense of Obama's economics as well as the current
financial crisis. I hope you will take a look.
If anyone is interested to give the book as a gift for the holidays (I
couldn't think of a better possible present myself!) and would like to
order a signed copy directly from me, just send me an e-mail. I will
be happy to work out the details with you.
I hope you are well, and I welcome your comments!
Spreading the Wealth
A review of Unjust Deserts: How the Rich Are Taking Our Common
Inheritance And Why We Should Take It Back.
By Mark Engler
Adam Smith was not an economist. In the 1750s, when he was a professor
at the University of Glasgow in his native Scotland, Smith served as
the Chair of Moral Philosophy. The designation is telling. The rise of
modern economics departments in universities was a late-nineteenth and
twentieth century phenomenon. Economics in its infancy, characterized
by the pursuits of Smith, Ricardo, John Stuart Mill, and Marx, was not
a matter of graphs and econometric models. It was a broader
investigation into social life, a look at how society structured
labor, production, and exchange. And it concerned itself greatly with
the ethical implications of this structure.
Warren Buffett, ranked by Forbes in 2008 as the world’s wealthiest
man, is no moral philosopher. Yet he is capable of raising a tricky
philosophical quandary. Reflecting on his tremendous riches, he has
attributed his fortune largely to chance: “It just so happens that I
was in the right place at the right time,” Buffett has said. “I really
wouldn't have made a difference if I were born in Bangladesh. Or if I
was born here in 1700…. I just got lucky as hell…. Stick me [someplace
else] and I could say I know how to allocate capital and value
business. But they'd say, so what?”
In crediting luck, Buffett not only points to the birth lottery, in
which some people are born into more privileged circumstances than
others. He also recognizes that to a great extent he owes the
accomplishments of his professional life to the manifold contributions
of other people, known and unknown, past and present. They have
collectively done Buffett enormous favors, affording him security and
education, providing modern infrastructure, science, and
communications systems, and creating a sophisticated market in which
he could do business. Because of this, Buffett claims, “society is
responsible for a very significant percentage of what I’ve earned.”
The issue raised by the billionaire forms the core of Gar Alperovitz
and Lew Daly’s Unjust Deserts: How the Rich Are Taking Our Common
Inheritance And Why We Should Take It Back. The authors start their
book with the latter quote from Buffett, noting society’s tremendous
contributions. Then they ask, “But if this is true, doesn’t society
deserve a very significant share of what [Buffett] has received?”
The question indicates how thoroughly Alperovitz and Daly want their
new book to upend commonplace notions about the relationships between
economic growth, productivity, and wealth. Their premise, simply put,
is this: Most of us with regular work lives get up in the morning,
expend our energy and intelligence to meet a day’s challenges, and
retire, depleted, in the evening. In this respect, we toil away our
workdays just as subsistence farmers did for thousands of years. What
makes us more “productive” than these forbearers—in the sense that
they often struggled to ward off starvation, while we, relatively
speaking, are surrounded by abundance—is not our individual strength,
initiative, or daring. Rather, it is our inheritance of thousands of
years of cultural knowledge, innovation, and discovery. Owing to this
legacy, a person in the United States working the same number of hours
as a past American from as recently as 1870 will produce, on average,
some fifteen times more economic output.
As early as the 1950s, economists began establishing a greater role
for socially accumulated knowledge in mainstream understandings of
growth. During that decade, Nobel-Prize winning economist Robert Solow
argued that advances in knowledge are, in fact, the primary driver of
today’s growth. Alperovitz and Daly write, “Solow calculated that
nearly 90 percent of productivity growth in the first half of the
twentieth century (from 1909 to 1949) could only be attributed to
‘technological change in the broadest sense.’” This suggestion was a
radical shift away from accounts that stressed the more specific
agency of capitalists and entrepreneurs—or of laborers, for that matter
—in expanding our economy.
Hearing such a theory, one might object that all this progress in the
realm of science and technology would never happen without the grit
and determination of our hard-working innovators. Because Alexander
Graham Bell invented the telephone, a creation of tremendous social
value, he deserves to be exalted as a genius and richly rewarded for
his patent. Right?
Not necessarily. The telephone, as it turns out, was simultaneously
invented by another innovator, Elisha Gray, who visited the patent
office the same day as Bell with a superior design for transmitting
vocal sounds, but who was behind him in the completing patent process.
Five years earlier, an Italian immigrant named Antonio Meucci had
declared the invention of a “voice telegraphy device”; he merely
lacked the required to legally register his work. With or without
Bell, the telephone had arrived.
This example is not an isolated incident. As Alperovitz and Daly
write, the pattern of simultaneous invention “is so obvious to modern
scholars that it is no longer considered controversial.” New
innovations rely upon thousands of previous advances in understanding
and technical capability: “What is called an ‘invention,’ is always a
combination of diverse constituent elements, mostly drawn from
The authors allow that people who are pushing at the edges of our
knowledge should be given economic incentive to press forward. But it
takes a lot of hubris for a modern inventor, far less an entrepreneur,
to claim that his or her contributions are on par with those of past
greats. As political scientist Robert Dahl pointedly asks, “Who has
made a larger contribution to the operation of General Electric—its
chief executives or Albert Einstein or Michael Faraday or Isaac Newton?”
Yet even as mainstream economists cite the increasing role of this
socially accumulated legacy in driving our “knowledge economy,”
inequality grows ever more severe. In 2004, the top 1 percent of
American households holds almost half of all “non-retirement account
stocks, mutual funds, and trusts,” and Bill Gates’s net worth alone
“was more than twice the direct stock holdings of the entire bottom
half of the U.S. population.”
Alperovitz and Daly cloak their argument in the language of the “new.”
They cite “extraordinary developments” in the study of knowledge and
economic growth as the foundation of their contentions. But they are
actually returning the economic discussion to where it started, to
moral philosophy’s debate about the values that should inform our
The foremost ethical question they raise is, given that we owe most of
our productivity to a common social inheritance, to what extent can we
say that we have “earned” our personal wealth? If we see far it is
because we stand on the shoulders of giants, the argument goes.
Therefore, a large portion what we claim as payment for our
productivity should actually go to the Goliaths who are doing the
heavy work of holding us up. Even if your eyesight is much better than
average, your individual claim is limited.
While avoiding the Marxist tradition, Alperovitz and Daly find a long
philosophical stream, running through John Locke, David Ricardo, and
John Stuart Mill, that distinguishes between “earned” and “unearned”
gains. “Nothing is more deeply held among ordinary people than the
idea that a person is entitled to what he creates or his efforts
produce,” the authors note. But if a person reaps gains through no
effort of their own, society has a quite different view of their
deservingness, or what philosophers know as “desert.”
One complication with the “standing on the shoulders” metaphor is that
the “giants” in question are not discrete, living beings. Einstein and
Faraday and Newton are not around to claim their cut of your paycheck.
What’s left, then, is the state. Ultimately, what Alperovitz and Daly
dub the “knowledge inheritance theory of distributive justice” offers
a much deeper justification for government-imposed taxation than what
Americans are normally challenged to consider.
The closest we have come to hearing these arguments in contemporary
political debate was in the recent fight over the estate tax, a levy
dubbed by conservatives as the “death tax” and by some defenders as
the “Paris Hilton tax.” “Responsible wealth” advocate Chuck Collins,
who wrote a book with Bill Gates, Sr. in defense of the estate tax has
argued that the justice of such a tax is rooted in an appreciation of
social contributions to prosperity, an idea that has been previously
recognized in American political life.
In a recent volume entitled 10 Excellent Reasons Not to Hate Taxes,
Collins quotes Andrew Carnegie, one of the key figures of our
country’s first gilded age, who approved of taxing accumulated wealth:
“Of all forms of taxation this seems the wisest,” Carnegie held. “Men
who continue hoarding great sums all of their lives, the proper use of
which for public ends would work good to the community from which it
chiefly came, should be made to feel that the community, in the form
of the State, cannot thus be deprived of its proper share.”
Suffice it to say, if Barack Obama’s innocuous suggestion that society
might “spread the wealth around” earned him rabid denunciations from
the right, Alperovitz and Daly’s arguments, if subjected to cable news
scrutiny, would plant them firmly in the socialist motherland. In
articles and in a book published in 2005, America Beyond Capitalism,
Alperovitz has rejected the Statism he saw exemplified in the former
Communist bloc, and he has expressed a desire to craft a progressive
vision that “takes us beyond both traditional systems” of socialism
and capitalism. Yet this type of “neither right nor left, but forward”
rhetoric represents a fairly weak dodge.
The actual political tradition Alperovitz and Daly seek to revive has
deep roots in classical economic writing and represents a long-
established strand of non-Marxist socialism. The authors show sympathy
for nineteenth-century American reformer Henry George, who drew an
international following with his belief that land should be the common
property of humanity. George promoted free trade and productive
business, but he wanted state control of monopolies and argued in his
best-selling Progress and Poverty for a steep tax on parasitic rent-
seeking landlords. Alperovitz and Daly also align themselves with many
of the leading lights of the Fabian Society, a group of British
intellectuals who were influential in shaping the early Labour Party
around the year 1900.
Just as unionists who believed in the productive power of labor were
critical of Henry George’s sole focus on land, the leftward ranks of
today’s political economists may be skeptical of the overwhelming
weight of “knowledge” in Alperovitz and Daly’s formulations. But most
would probably agree that the authors strike upon a vital topic when
they highlight the need for the benefits from productivity gains to be
shared throughout society.
As recently as the 1970s, there were discussions on college campuses
of how people would while away all their spare hours after modern
timesaving technology improved efficiency and inevitably shortened
their working days. Since then, productivity has indeed increased
dramatically, but working people have experienced a bitter twist:
owing largely to the waning power of organized labor, real wages have
been stagnant and hours at the office have only lengthened.
The Marxists of old criticized the gradualist tactics of Fabianism,
accusing the British reformers of being naïve utopians who wanted
socialist ends without the class struggle. Whatever the moral validity
of Alperovitz and Daly’s argument about wealth, following through on
its public policy implications will require long and hard fight. And
it’s not clear from their book that the authors are up for a rumble.
When it comes to how we might “take back our common inheritance,”
their concluding call to arms tepidly invokes a “renewed moral and
political understanding of [our] responsibilities.”
The best Alperovitz has suggested in his recent writings is that
policy-makers concern themselves more with taxing wealth than income,
and that they focus on going after the top 2 percent of households,
leaving those few elites vastly outnumbered by the remaining 98
percent of the population. This is a sound position, but it is hardly
a silver bullet. Current Democratic assurances that they will only
hike rates for those in the very top tax brackets have done little to
quell political resistance.
At the same time, the nation now seems uniquely prepared for a new
debate about value and desert. Few moments could be riper for
revisiting the connection between our economy and our social ethics.
As housing values--the bedrock asset of the American middle class--
fall, stocks plunge, and retirement investment accounts are wiped out,
there is an acute awareness that things do not find their worth just
in the market’s valuation on a given day. And even without unusually
candid voices like Warren Buffett’s fanning their doubts, Americans
have begun to conclude that CEOs are not so worthy as their bloated
compensation packages suggest.
There is a growing consensus, too, in favor of a more robust public
compact to regulate the conditions under which we are together able to
live, save, and retire. Recent scholarly notions about “the developing
trajectory of the knowledge economy” likely have less power than
Alperovitz and Daly imagine to bring about a shift toward the social.
But late in this new gilded age, a devalued and depressed American
public may nevertheless be ready to demand more.
-- Mark Engler, a writer based in New York City, is a senior analyst
with Foreign Policy In Focus and author of How to Rule the World: The
Coming Battle Over the Global Economy (Nation Books, 2008). He can be
reached via the Web site http://www.DemocracyUprising.com. Research
assistance for this article provided by Sean Nortz.
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