Friday, 27 April 2012

Exile the rich!

We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both.  (Justice Louis Brandeis)
The rich have two defining capabilities: independence from and command over others. Those two features make being rich very pleasant indeed. But they are also what make the rich bad for democracy, and indeed even for capitalism. The problems I am concerned with are not about justice. Perhaps it is wrong that some people are rich and others are poor, and perhaps it would be right to redistribute wealth from rich to poor, and from wealthy countries to poorer countries. But from my perspective that resembles debating the proper (re)arrangement of deck chairs. What I'm concerned with is the sinking ship - the threat the rich pose to liberal democracy itself. Democracies are extended moral communities whose flourishing and indeed survival depend on the interdependence and equality of their members. The rich not only have no place in this kind of community, but their very presence undermines it. Therefore, if we believe our democracy is worth preserving, we should offer the rich a choice: give up your money or give up your membership of our society.

The normative definition of the rich is always those who have ‘too much’. Yet there are various ways of defining this in the contemporary (liberal) literature on justice. Some take an egalitarian distribution of wealth as the naturally just distribution, and argue that deviations from that which lack a specific moral justification are prima facie unjust, and the greater the inequality, the greater the injustice. Others focus on how the present concentrations of wealth in our society are the legacy of a long history of theft and extortion for which restitution is required (including even libertarians, when they take their historical account of entitlement seriously).

Yet others focus on the inefficiency of great inequality. The pop utilitarian Peter Singer, for example, argues that ordinary middle-class people in the west have much more than enough (anyone with annual income over $35,000 is in the global 1%) while a great many (around 2 billion) live in appalling absolute poverty. The richer you are, the less benefit you can get from another dollar of wealth, while the poorer you are the more good that dollar could do. So the relatively rich should give away our money to the poorest people we can find, where it will do the most good. And we should keep giving up to the point that we have to sacrifice something of comparable moral significance (which seems pretty far).

These different approaches to thinking about justice problematise wealth in different ways (unfairness, illegitimacy, inefficiency, and so on). Although I won't be making direct use of any of them, it is worth noting what they all have in common: identifying the problem of the rich as 'absolutely relative'. In other words, the rich pose an objective problem of justice not because of how wealthy they are in absolute terms (how much they can buy) but because of the relation in which they stand to others. I employ the same foundational idea. Just as seawater is good for fish but poisonous to humans, so extreme wealth is wonderful for individuals but toxic for democracy. However, my approach is different from that of the justice theorists because I am not directly concerned with identifying injustices in the distribution of wealth, nor with making its distribution more just, for example by making the rich give their money to the poor.

The Bourgeois Character of Democracy


Democracy as we know it is the invention of the American republic, and, as Alexis de Tocqueville analysed, fundamentally government by and for the middle-classes, the bourgeoisie. This is a fact. The flourishing democratic societies of the world are all politically dominated by a middle class - as the political scientist Barrington Moore put it succinctly, "No bourgeoisie, no democracy." The mere possession of formal democratic institutions like parliaments and elections is demonstrably insufficient for a flourishing democratic society, as poor countries like India demonstrate (with state oppression and impunity comparable with that of China). 

Successful democracies are bourgeois because middle-class circumstances are particularly amenable to the spirit of democracy. The bourgeoisie live in circumstances of moderate abundance: neither so poor as to be utterly dominated by circumstances or powerful persons, nor so well-off as to be free from inter-dependence on the goodwill of other people for success. This is the sweet spot of sufficient independence to think for oneself, and sufficient inter-dependence to be sensitive to the interests and concerns of other people, that cultivates the civic habits and dispositions on which a flourishing democratic polity depends.

A democratic society is organic, not a construct of high theory. Its heart is equality of political status, which sounds like it's only worth the paper it's written on, but which is actually all about the freedom of all from domination, whether by government or other people. A real democracy must pass what the political philosopher Philip Pettit calls the 'eye test': Is every person free to look any other in the eye, without fear and trembling?

The brain of a democracy is its ability to make legitimate collective choices in a way that everyone accepts even when they disagree about the conclusions. Again, that sounds like an abstract adding machine (and social choice theorists' terminology doesn't help!). But actually it's about community and common sense. The brain works so long as everyone recognizes that we are all in this together, and that we have a shared interest in and commitment to making things better for everyone, even though we disagree about how to do so. The members of a bourgeois society have an orientation to co-operation, even with those we disagree with, because we are fixed in relations of interdependence with each other and have no choice but to try to make this society work.

So what's the problem with the rich? Their circumstances of life are distinctly different from the bourgeoisie. At the extreme, the combined assets of Walmart's Walton family have been calculated to be equal to that of the bottom 150 million Americans combined. Great wealth changes people and their relationship to society as a whole.

The rich are independent of the rest of us. Obviously they are materially independent so long as their property rights remain recognized. They can achieve what they want by themselves, that is by buying it from others or paying someone else to do it for them. But this power of command also generates a social distance from society that allows them to become 'ethically independent'. Since they don't depend on the goodwill of others to succeed - for example, few of them have recognisable jobs - they may become less concerned in general about whether they deserve goodwill. 

They are thereby freed from the disciplinary power of bourgeois social norms and standards (and, it often seems, even from the laws that apply to little people). I'm sure that sense of liberty must be quite exhilarating (romantics and hippies also aspire to it, though they actually have to make sacrifices to achieve it). But that freedom also means that they aren't really like the rest of us. There is some worrying social psychology research about what they are like (eg).  It suggests that society’s nobility are not actually very noble. The rich have a more positive attitude to greed than the rest of us, and this is expressed, for example, in feeling entitled to opt out of ethical standards; to lie and cheat when it suits them; and a lack of compassion toward others.

Though recent events should teach us not to build castles on the findings of social psychology, such research goes together with what all of us see and hear every day of the self-centredness and self-servingness of the rich, from Donald Trump’s political interventions to boost ratings for his TV show, to Warren Buffet’s exploitation of his political connections to lobby for public subsidies of his investments in Goldman Sachs and railroads. Thus, the 'ethical independence' of the rich from the rest of society has political implications, since, to put it mildly, it does not suggest that the rule of the rich is to the benefit of all.

For the rich the spirit of cooperation on which democracy depends is only an option, not a necessity. When the rich engage in politics they are not under the same constraints as the rest of us to find a mutually agreeable solution, since their fortunes are not fixed to the success of this society as ours are. They can always buy their way around the absence of public goods, or leave for somewhere nicer.

That means that the rich don't have the same political interests as the rest of us. They aren't worried about crime (their gated communities come with private security) or the quality of public education (their kids go to the fanciest schools money can buy) or affordable accessible health care, job security, public parks, gas prices, environmental quality, or most of the other issues that the rest of us have no choice but to care about, and to care about politically since they are outside of our individual powers to fix. The political concerns of the rich do not lie in the provision of public goods, but in furthering their private interests, whether their personal wealth and power or their political whimsies. That is why Adam Smith, the father of economics, warned us so vehemently to be suspicious of their self-serving rhetoric (e.g. WN I.11.264).

It is an unfortunately widespread fallacy that democracy is a means to achieve one's interests, rather than a space in which the public interest can be deliberated. Thus some people seem to believe that elections work in the same way as the rest of our modern consumer society: one orders what one wants at the election and then 2 weeks later it should arrive. Then if it doesn't arrive, they think democracy must be broken.

However, for the rich, politics actually does work somewhat like this, because they have the power to intervene non-democratically in our politics. They can and do use their wealth to command outsize political influence, whether by being powerful enough to bargain directly with our elected officials about government policies; by cultivating private relationships with political candidates who want their financial support; by becoming politicians themselves; or just by buying an enormous media megaphone to transmit their opinions to voters and drown out counter-speech.

The rich act this way because they believe that their opinion deserves more voice because it is theirs, and their wealth means that it does indeed receive more attention. This is the logic of the market, of course, and it converts politics from democracy into a market for influence.

First, it introduces a principle of political inequality. The rich achieve extraordinary influence over the character and direction of our society, and thus over how our individual lives will go, yet they have no qualification for that political role except their wealth. Like a feudal aristocracy, their special political status derives from a prior asymmetry of power (combined with a personal sense of entitlement), rather than democratic selection.

Second, it undermines the democratic legitimacy of our political institutions, the perception that even if we don't personally agree with their outcomes they genuinely reflect the will of the people and we should go along with them. Every ideological faction wants to get their own way. Democracy deals with the threat of factionalism not by suppression but through a transparently fair social choice process. Everyone still thinks their own views are right and true, but in a democracy everyone agrees that practical legitimacy derives from the consent of the people. Those ideas that win a democratic mandate have a prima facie legitimacy to govern, subject to the checks and balances that protect opposing (minority) views.

The rich  are a particularly dangerous faction because they have the power to upset this principled modus vivendi, to hollow out democratic institutions and establish the permanent dominance of their interests. When that happens, then, even though elections continue to be held, the link between political success and a democratic mandate to govern is broken. Political outcomes are no longer understood as a reflection of the will of the people, but rather of the machinations of the rich.  Everyone realises that the system is rigged. As a result the legitimacy of the political regime will no longer rest on democratic grounds, but on some other grounds, such as economic prosperity.  

Why the Rich are not 'Job Creators'


It is sometimes thought that the rich are necessary to the flourishing of a free market economy, that because they have more wealth than they need for their own consumption it is their investment of capital that makes the economy spin around and create jobs. Thus the claim that there is a trade-off between democracy and material prosperity. But that ‘job creator’ thesis is out of date and back to front. 

First, while in Adam Smith's time it might have been true that economic development required capitalists to reinvest their profits this was because everyone else was too poor. But these days the economies of democratic societies are characterized by a broad middle-class whose savings are quite sufficient for funding business development and expansion (such as through the share-ownership of our pension funds or the bank loans backed by our deposits). 

Second, the greater the wealth inequality, the worse we may expect the economy to perform. A flourishing economy requires customers as well as investors. If the gains of economic productivity are overwhelmingly transferred to some small group (as profits) that means that they don't go to ordinary people (as wages). (For example, since 1979 all the productivity gains of America's economy have gone to the richest 1%.) The implications are, first, that economic growth does not increase national prosperity because it does not increase the economic command of ordinary people to satisfy our wants (which is how Smith defined the wealth of nations). And, second, economic growth itself will eventually suffer since high inequality limits the extent of the market (fewer customers) and thus the scope for innovation.

But the biggest problem is the capitalists themselves, who use their dominance of politics to legitimate and entrench their momentary competitive advantages into de facto quasi-monopolies and effectively levy a redistributive tax on society as a whole. The interest of the plutocratic elite is to widen the market but limit the competition; to do what Bill Gates did to Netscape and Carlos Slim did to Mexico's telecoms industry. Consider the re-construction of America’s financial services industry over the last 30 years. As the number of firms went down, favourable laws went up, converting the industry into a rentier system in which the costs of financial services to the economy as a whole rose, profits rose, and risks were socialized.

This rentier capitalism doesn't have the same virtues as the free market kind proposed by Smith and endorsed by most contemporary economists. It undermines the policing required to maintain real – fair and rivalrous - competition. It misallocates the country's wealth and talent, by funnelling it away from productive enterprises and into rent-seeking enterprises that harvest the productivity of others.


What to do about the rich


I think it is clear that the rich are a burden and a danger to our democratic society as a whole. (If you're still not convinced, read the now classic essay Of the 1%, by the 1%, for the 1% by the economics Nobel prize winner, Joe Stiglitz.) But that doesn't tell us what to do about them. Some people would say that we should tax the rich into the middle-class, but this proposal has never really got off the ground because it seems punitive and unfair, and not only to libertarian moral philosophers. After all, the rich got rich by playing - and ‘winning’ - the economic game according to the rules we set. It's not their fault that their wealth is toxic to democracy. 

Fortunately I am not concerned here with fairness and social justice, but with the somewhat simpler but more urgent existential threat that the presence of the rich poses to a democratic society. I'm against the rich, but I don't care about their money. And that allows me to advance a different kind of proposal than one normally sees in this debate: the simple rule that no-one can be both a member of our democratic society and rich.

A good way of thinking about what a democratic society is and should be, and how its members relate to it, is through the device of the social contract. A social contract is a hypothetical agreement to form a political association for the mutual advantage, security, and justice of all its members. The significance of this idea is that it allows us to scrutinize whether our current social arrangements resemble what we would have deliberately chosen to create if we had had the chance. Or whether we would have chosen something better (John Rawls' project). In Rawls’ hands the social contract is a device for generating a unique agreement on the basic structure of a just society by making explicit our intuitions about what a just democratic society requires. 

But one can also use the social contract device more crudely, to draw our attention to the preconditions for and legitimate authority of a democratic society. Though we may not follow Rawls’ controversial argument for what an ideally just democratic society would look like, we may all readily agree that some features are incompatible with the persistence of any democratic society in which such questions of justice might be debated. Plutocracy seems such a feature, since it is incompatible with freedom from domination between citizens or political equality in social choice.

The idea of the social contract also directs us to think of our democratic society as a kind of private club for the mutual benefit of its members. (Indeed, this is explicitly how we often analyse it when thinking about immigration [previously].) Such a club has the legitimate authority to enforce its constitutional commitment to democracy and take action against members who undermine it.

Hence my modest proposal. We should first identify with some precision the category of what it seems reasonable to call the rich i.e. those people whose capabilities for independence from and command over the rest of us crosses the threshold between enviable affluence and aristocratic privilege. Then, when anyone in our society lands in the category of the problematic rich we should say, as at the end of a cheesy TV game show, "Congratulations, you won the economy game! Well done." And then we should offer them a choice: give it away (hold a potlatch, give it to Oxfam, their favourite art museum foundation, or whatever) or cash out their winnings and depart our society forever, leaving their citizenship at the door on their way out. Since the rich are, um, rich, they have all the means they need to make a new life for themselves elsewhere, and perhaps even inveigle their way into citizenship in a country that is less picky than we are. So I'm sure they'll do just fine. Still, we can let them back in to visit family and friends a few days a year - there's no need to be vindictive.

How much wealth makes someone problematically rich? That seems a political question for society to deliberate about, informed by empirical research from social scientists about the character and effects of large wealth inequalities. It is certainly not something for philosophers to decide! But, for the sake of this discussion let me outline one approach, to show how such deliberation could move from broad and abstract principles to concrete proposals. 

The general principle is adapted from Rousseau: “In respect of riches, no citizen shall ever be wealthy enough to buy another, and none poor enough to be forced to sell himself.” That suggests that the form of the definition of the rich should be 'absolutely relative' rather than merely relative (e.g. we can't just use the richest 1%, because there will always be a richest 1% , and this proposal is not about envy). One way to go would be to use some multiple of the wealth of the median citizen (the person who is poorer than 50% of the population and richer than 50%) as a proxy for the distance from and power over ordinary citizens that defines problematic wealth. Let me suggest a very generous multiple of 500 to be going on with (surely everyone can agree that anyone with more than 500 times the wealth of the middling citizen is in a different class than the merely enviably affluent). What would that mean for a country like America?

According to the 2012 Global Wealth Report (published by Credit Suisse) the median adult American’s personal wealth is presently around $39,000, which suggests a cut off of around $20 million. For context, America’s mean average wealth is $262,000, reflecting the fact that wealth inequality is even more pronounced than income inequality. For further context, median wealth in the UK, another very economically unequal rich country, is nearly 3 times higher than America, producing a cut-off of $57.5 million. The UK-US comparison shows that this simple definition has a powerful inbuilt ratchet. The greater the concentration of wealth in a society, the greater, I have argued, the threat to democracy, and the lower the boundary line for the problematic rich that this definition will produce. 

There are obviously many technical difficulties remaining in this definition (from which accounting standards to use to how to allow for market volatility in asset values). But if it could be made to work, what would happen? Obviously there would be a mass outpouring of wealth, especially when it is first instituted. But this need not make our society poorer. An economy's wealth - as opposed to an individual's - relates to its efficiency in converting resources into valuable goods and services. In the long term our economy's productivity would be higher without the distorting influence of the rich (and the gains from that productivity would likely be more equally shared than they are now).

But I don't think everyone would leave. After all, while tax avoidance is extremely popular among the rich, true tax exiles are somewhat rare. Democratic societies really are great places to live, and plutocracies really aren't. (Even Russia’s oligarchs want to live in New York and London, and send their kids to school there.) I think that many rich people understand that, and would in fact appreciate the benefits of democratic society even more if they were forced to make an explicit choice between continuing to live there and their money.

Another possible consequence is a decline in innovation and entrepreneurship - vital to the future growth of the economy. If the rewards for winning 'the economic game' became truncated at a few million dollars, would people stop trying so hard? Will there be no future economic revolutionaries like Bill Gates or Peter Thiel?

This argument seems to rest on the assumption that innovators are only motivated by the possibility of very high rewards. On the one hand, this seems false because innovation is just what free people do in the face of interesting or important problems, whether that be in literature, computer science, or logistics. On the other hand, it is true that the people, like Bill Gates, who package up the technological breakthroughs of others into economically significant contributions are certainly motivated by the hope of economic windfalls. And yet, how big does the reward have to be to motivate entrepreneurial innovation? Does it really have to be in the billions? Would JK Rowling have stopped writing books after she reached her $57.5 million limit? Perhaps. Though I am sympathetic to Adam Smith’s argument that what people are really seeking is the “respect and admiration of mankind” and that a swimming pool full of money is merely one way – a vulgar, inferior way – of achieving that (TMS).

What about the poor?


It may seem curious that I haven't yet mentioned the poor. If democracy requires a society that is bourgeois through and through, then the poor may seem as problematic to its success as the rich. It is not true, however, that the poor threaten democracy in the same way as the rich. Although their circumstances are as different from the bourgeoisie as those of the rich - characterized by the precariousness of their lives and dependence on others - they do not present an existential threat to democratic society that should be excluded. After all, their defining feature is a lack of power. Rather they present an ethical challenge of full inclusion. That is, a society that wants not only to survive but to flourish as a democracy should commit to the elimination of the poor by raising them into the bourgeoisie. Yet it seems to me that the rich are an obstacle to this justice project and only limited progress may be made while they remain.

Our political-economy has been designed to suit the rich (cf David Grusky). Yes, the system 'redistributes' some money from the economic winners to the losers (only a tiny part of taxes paid). But this is considered a kind of charity that the poor should be grateful for. The resulting debates about how much charity they deserve are a distraction from the real issue of the fairness of the pre-tax distribution. The form of our social and economic institutions - from capital markets to labour markets to higher education - determines who gets what share of the economy's productivity, and thus who gets to enjoy a life of aristocratic opulence, middle-class dignity, or precarious penury. Yet these institutions are not the pure reflection of perfect competition we have in recent decades been persuaded to take them for, in which wages exactly reflect economic contribution. If you want to know why CEOs get so much money and cleaners so little, it's rather ridiculous to appeal to 'the market' in general (though The Economist likes to try), especially when pay levels can be seen to vary so greatly between successful economies. CEOs get paid so much because CEOs want to get paid so much, and they have substantial power to make it so.

There is a further sense in which the presence of a rich elite harms the poor: by skewing our bourgeois sense of justice from a concern for equal dignity to a concern for 'meritocracy'. The rights and interests of the poor are considered, to the extent that they are, only in terms of whether they have a 'fair chance' to pass through the filtering process that selects who is worthy to be in the tiny elite (the narrow academic path up through the elite universities and thence to places like Goldman Sachs or the White House). Not whether they have real access to a decent middle-class life for themselves and their families.

What about Corporations?


It may seem that the greatest threat that wealth poses to democracy comes from rich corporations, not rich individuals. Like rich individuals, corporate agents such as Exxon Mobil and Goldman Sachs can use their concentrated economic power to intervene non-democratically in our politics. Like rich individuals, their interests in politics are narrower and more self-interested than the ordinary citizen's. Once again the nexus between wealth and power undermines political equality and the legitimacy of the political system as a whole. Indeed, corporate bribery of politicians to work for them rather than their constituents appears much more extensive and systematic than similar efforts by rich individuals.

My proposal does nothing directly to address the threat of corporatocracy. Nonetheless, this idea of politicising wealth in terms of its incompatibility with democracy suggests how it should be approached. The idea of 'corporate citizenship' implies that corporations can possess political rights, such as to freedom of expression of political views, that are inextricable from real citizenship. But this is a nonsensical chimera. Corporate agents are not citizens to begin with, and never can be since they are not morally sophisticated enough to appreciate the obligations as well as rights of citizenship. Rather, they are artificial persons created for purely instrumental reasons - increasing our general prosperity - and their 'rights' can be assessed and revised by reference to the public interest rather than 'their' interests. This means that we can exile corporations from politics if we conclude that they are a threat to democracy without having to do any moral philosophical heavy lifting. The means for doing so are also obvious and long-established in many democracies. We can pass (and enforce) laws that restrict corporations' electioneering communications and lobbying. We can even dismember them if they get too big for their boots and start creating oligopolistic market positions that undermine the efficiency of the market economy.

Conclusion


My proposal will not be enacted any time soon. But like the idea of the social contract, it is primarily intended to do its work hypothetically. The point is to politicize the issue of excessive wealth in terms of democratic citizenship, rather than merely moralise it in terms of justice. It challenges the rich to justify their place amongst us, to overcome our suspicions by proving their loyalty to the democratic values of our society (as immigrants have to).

In this perspective the advantages of the rich are turned against them. The rich have been used to think of themselves as more equal than others in our society. Yet that power of command over others is exactly what puts the legitimacy of their place in our politics in question. They have been used to enjoy their independence from the rest of us, hardly mixing with ordinary people and hardly noticing the national borders they cross. Yet this very feature would legitimate and justify our ostracising them in turn. The rich have made it perfectly clear that they believe all their accomplishments came through their own efforts and that they don't need us for anything except property rights. By their own reasoning, we wouldn't be doing them any harm by exiling them from our politics, or even literally exiling them to another country. By achieving such independence, the rich have brought upon themselves the burden of justifying why they should be allowed to remain amongst us. If you don't need us, we can ask, why do we need you?


Update
Heavily revised  Feb 2013

81 comments:

  1. You make a good argument.
    If you'd like, here are a few comments.
    1) is it possible for capitalism to exist let alone thrive without inequality?
    2) are there cases of countries like ours either transitioning to a more moderate form of capitalism and/or starting there.
    3) would there be a sacrifice of civil liberties or entrepreneurship?
    4) while economic inequality may be unhealthy, social relationships are to a certain degree autonomous to the economy; so would the baseline mode of our society and here I speak of America in particular, be a viable community?
    5) You speak of a social contract; the main social contract in America is the constitution- to my knowledge, it condones wealth and its pursuit. Jefferson's first draft of the Declaration spoke of the right of property. Is there a tacit social contract that is tacit yet not too nebulous and vague? The closest to your view is Locke who valorized the general welfare, economic, of the people; but Hobbes was so adamant about maintaining order that it justified an absolute rule of KIngs not better than the oligarchy you condemn?
    Thanks and in part I am playing the devil's advocate. I share some of your alarm, but think less drastic measures are called for.
    Finally, take Bill Gates, if all the money he earned was given back to the buyers by computing power, don't you think he earned his wealth? If all his fortune were redistributed, it would then be stolen and would boost the general wealth only by 10 or 12 thousand, though of course that's not your gripe, he earned that money, though I'd admit that say the Oil Companies or Walmart act contrary to the common weal, as factions as potential oligarchs- but their power can be fought by means other than ostracizing them.
    That said, you make logical arguments others would flinch at and you may even be right or if not have some compelling points.
    Thank You

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  2. Thanks for the comment, HB.

    1. Successful capitalism is compatible with some degree of economic inequality, but not substantial power imbalances.

    2. Yes - all across N. Europe, Japan, etc.

    3. I've added something more about entrepreneurship.

    4. Not sure what you mean by 'community'. The rich seem to be increasingly retreating to closed (even gated) communities and mixing almost entirely with each other. I'm not sure we would miss them.

    5. The social contract is only hypothetical - a device for reflecting on whether the way our society is set up meets our foundational concerns/requirements.

    6. I'm not denying that Gates more or less got his fortune by fair means (though Microsoft was investigated and fined for anti-competitive practises a number of times). The Economist magazine likes to say that he did more good for the world by building up Microsoft than he will ever do as a philanthropist. Perhaps. But what I fundamentally disagree with is the idea that Gates and other rich folks should have some special influence over democratic governments and politics and have special rights or power to determine our destiny. Nothing about their wealth qualifies them for that.

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  3. What I meant above by referring to social issues is that there are other social problems besides inequality, that though perhaps you think inequality most dire and glaring, solving income inequality might create new problems rather than restoring a healthier equilibrium.
    Thinking about how this situation got underway is interesting; you might say that the 60s destroyed social bonds resulting in the 80s unabashed pursuit for cash; you might say that traditionally society rewards those who create things and produce, but that these natural incentives have been taken to unchecked extremes. Though you're more concerned with fixing I'd like to hear your diagnosis of how this came about

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    1. As a matter of fact, many social problems are linked to income inequality [previously]. But my concern in the essay is saving democracy, not making a perfect society. Absent the rich, there would still be lots of inequality, but at least we would be free of the domination of the rich.

      How this came about? Try 'Winner-Take-All Politics' by Jacob Hacker and Paul Pierson. (Reviewed here)

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  4. Great article, I like it a lot. I've included a link to an article about Warren Buffet. A real example of the power that the ultra-wealthy wield.

    http://reason.com/archives/2012/02/09/warren-buffett-baptist-and-bootlegger/singlepage

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    1. Thanks - it's a great article (I had already included a link to it in the section on democracy!)

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  5. Excellent proposal. After we've dealt with the rich, I think we need to move on to the next group of people who are dangerously independent of the goodwill of others and who wield an outsized influence on public discourse: tenured academics!

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    1. I agree that tenure is unjust and should go. But I don't see how it threatens to undermine democracy .....

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  6. Shouldn't such a plan also offer the non working poor who collect social benefits the choices to stop receiving benefits or to do some job on behalf of society, or else to leave the democracy as well (since otherwise they would also be acting outside the 'contract' in which the others participate)?

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    1. The rich, by definition, have the resources to make their life elsewhere. The poor do not. So your proposal seems mean. Further, I don't see why we would want to do that. After all, the poor are hardly in a position to threaten our democracy, are they?

      But I do like your idea of a positive right to work.

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    2. The rich are defined by their wealth, however it doesn't make them independent.

      They need us to build their homes and make their cars and other consumer goods.

      We need them to give us pay checks so we can feed their families (or we go into the public sector in generally less well paid jobs, or go on welfare checks)

      But the point is they are not independent from us, and I would actually make the case that they need us more then we need them.

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    3. *feed our families, not their families, lol

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    4. The emphasis here should be on "good-will". The rich do not need our good-will. They can simply pay for things, and the need or desire for wealth will invariably turn up someone who will do the job. On the other hand, my neighbors depend upon my good-will, and I theirs, to keep our lawns trimmed, and thereby keep our neighborhood looking neat (as an example). The rich can be much choosier about their neighbors, or not have neighbors at all. They are significantly less encumbered by the need for good-will. They are dependent only on the existence of financial interest.

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  7. Democracy is not about consensus, the goal of democracy isn't so that everyone agrees, its so that everyone gets an equal say and that the majority rule. If everyone had the same views, same problems facing them and wanted the same solutions, democracy would be worthless because a dictator would react the same way as a president. Because of that the rich don't destroy democracy, but the represent a minority group with a different opinion of the rest of us. There is nothing wrong with that, thats what makes democracy great.

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    1. Ah, The Citizens United argument. The rich are a minority in the same sense that aristocrats in feudal society were: numerically small, but rather more than politically equal.

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    2. That's a poor analogy. Was everyone able to vote in a feudal society?

      Anonymous Poster above: 1
      Philosopher's Beard: 0

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    3. Voting in elections is only one aspect of the working of democracy. What matters is how good the system is altogether in considering ordinary people's values, rights and interests.

      Consider who gets to decide what options are on the menu from which you select. Or whose voices get heard in the deliberations of your representatives. Is it the ordinary voter, or those whose money gives them a greater entitlement to power? Seems aristocratic to me.

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    4. (original anon poster here)

      Yes it was the citizens united arguement (I actually wasn't thinking of the Citizens United vs FEC when I posted that, I was just typing as someone who disagrees with your argument), regardless, I think your forgetting something. Citizens united WON that case, the judges ruled it to be constitutional.

      In anycase, I think the best way to explain is to firstly show some videos from one of my fav youtube channel:
      http://www.youtube.com/playlist?list=PL308A7330966EA55D&feature=plcp

      and talk about Ron Paul, who is the polar opposite of everyone else running, I don't like Paul (I am not a libertarian), but he proves that we do have choices that we can vote on.

      The problem with our democracy is not the rich, its the way the vote is set up. A WTA electoral college will always in the long become a two party system.
      http://www.youtube.com/watch?v=s7tWHJfhiyo

      The rich have nothing to do with Democracy, and so this is a terrible terrible analogy between aristocracy and todays vote.

      Lastly, the rich still only have 1 vote. The problem with many intellectual democrats is they assume people want to vote democrat, but are tricked to vote republican.

      I know people in the lower middle class who vote republican not because they are rich, but because they are social conservatives whose fathers were registered republicans and now they are registered republicans. I don't agree with them, but to many people like you assume they are doing it because the rich have tricked them.

      I have seen no adds from the republicans talking about who being gay is a sin, but I have friends who think that, and vote accordingly.

      The rich aren't the problem with democracy, its the electoral college that is.

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    5. "The rich have nothing to do with Democracy"

      I quite agree - that's how it should be.

      I also agree that elections are about values not interests [previously]

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    6. I meant that being rich has nothing to do with the outcome of democracy.

      Besides, 62% of those earning 200,000 or a more a year voted for Obama in 2008. So the rich supported a democrat, which seems to contradict your assumption that they are all republicans.

      They're not, they have political views just like us and many of them are left wing, hell Micheal More is a member of the 1%. (for somereason the commment got posted below, not here)

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  8. You should be more concerned about many Americans voting for the politician who promises them the most benefits and goodies from the treasury and will thus bankrupt the country.

    A rising tide lifts all boats so while inequality may be issue #37 to deal with, issue #1 is our anemic economic growth leading to massive unemployment and issue #2 is our unsustainable debt levels.

    In other words, while worrying about the plants in the front garden, the house continues to burn to the ground. Focus on saving the house first or else you won't even care about the plants.

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    Replies
    1. Does a rising tide lift all boats? Not unless you deal with inequality of political influence about who gets what. And so, not in America over the last 30 years

      Delete
    2. Yes it does but, of course, not proportionally. Living standards are materially higher than 40 years ago (when inflation-adjusted wage growth for American males began to stagnate) because of women entering the work-force and technological advances.

      Regardless, increasing inequality is an effect from globalization and changing trade patterns. Rising inequality stems from a shift to knowledge based economies in the developed world and low and medium skilled manufacturing jobs moving to developing countries over the last 4 decades.

      If you want to address income inequality, the key is not to take down the top 1%, 5%, and/or 10% a few pegs but to see that medium skilled manufacturing can be competitive in the USA again. Fortunately, inflationary pressures in China and a drastic reduction in excess labor is making it more costly to produce goods there and a rising yuan doesn't help them either. Further, extremely low natural gas prices and rising oil prices make it cheaper to make things in the USA rather than producing them in China, shipping them across the Pacific (using oil), and then unloading them on West Coast ports.

      Going back to my analogy of a burning house yet fretting about the plants in the front yard, the burning house is the dearth of low/medium skilled manufacturing jobs in the USA (at least compared to 40 years ago) and the plants are the top earners in the country. In sum, it's much more important to determine how the country can supply/create good paying jobs again and outside of the knowledge economy rather than spending hours trying to take money from people who have rightfully earned it.

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    3. Additionally, do you honestly think the unemployed worker or the under-employed guy who was making $23 an hour in a factory but is now making $11 an hour part-time care as much about inequality nearly as much as making a better living and being solidly middle class?

      There's only so much energy and time people have so it's best to focus on how to help those who want to make a better living rather than going after top earners who have managed to effectively respond to the shifting global trends since the early 70's.

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    4. I'm not arguing here against economic inequality in general, only a particular kind that generates political inequality and democratic failure. You say that inequality follows from globalisation, but such market forces only explain a part of it, and not the degree of inequality right at the top. The people at the very top are a rentier class who have used their political influence to get things arranged their way. Productivity gains in the wider economy go increasingly to them alone.

      I say such a class is a clear and present danger to any democracy. Whether that motivates people is another thing. Perhaps Americans don't really care about saving their republic.

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  9. Will you at least let us visit? I think I would miss some of my less affluent friends and neighbors.

    Why are you allowed to have such a loud voice? You have a disproportionate talent for writing and a power of persuasion that is at a level much higher than the median. It might be disruptive to democracy for you and others like you to stay in this country.

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    1. You've completely missed the point. The rich have adapted so well because they are the ones in control. If only the GM line worker had perfect foresight and means since the 1970's.

      When you control the terms of unemployment, and control the level of investment, and further control the political process, society does what you whim it to do.

      Sure, we might like to solve the problems of the poor and middle class, but if the group in power doesn't care about those problems (as the rich don't)-we are all screwed. Logic tells us that we have to remove the blockage before we can turn to the other problems.

      Using your metaphor-the house might be burning, but the rich are not the plants-no- they are the firemen who refuse to put out the fire.

      Or better yet, they are the house three counties away that is indifferent to your house burning down!

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    2. "When you control the terms of unemployment, and control the level of investment, and further control the political process, society does what you whim it to do."

      Since when hasn't the top 1, 5, 10, or 25% not had a disproportionate level of control over investment and the political process? I am astounded that some people like this is a phenomenon from the last 5, 10, or 20 years and not something that has held true throughout man's history.

      Again, I go back to the exceptional period of WWII to the early 70's when the USA was the only industrial power around. This actually created an artificial employment environment where American males were in high demand while other countries were either rebuilding their industrial bases (England, France, Russia, Germany, Japan) or building their own out of nearly scratch (China, South Korea, India). By the early 70's, many countries had rebuilt and could effectively compete with American manufacturing (see Germany and Japan, especially related to cars and electronics) and the supply of labor increased dramatically through globalization. Thus, wages stagnated for American males, women had to join the workforce, and China put more downward wage pressure on unskilled labor as it reformed its economy in the 1980's. In sum, quite a few people are barking up the wrong tree. Globalization has been the bane of the American worker as the Japanese, Chinese, Germans, Indians, etc. wanted in on the action too.

      So how to move forward? Again, make it as attractive as possible for companies to produce things in the USA again. Low energy costs, corporate tax reform, and the appropriate regulatory burden are good places to start so that companies would rather "in-shore" production again rather than producing in China.

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    3. Anon. A few days a year visiting privileges - sure. There's no need for this to become vindictive.

      I am pretty sure that I do not live in your country, so you needn't be so afraid of my loud voice.

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    4. Ok, that's a relief. I was kind of surprised because I don’t feel like the people I know resent what I have much at all. My customers seem to be happy with what I provide for the price I charge and, I think, would miss the service.
      It’s obvious to me now that we are talking about different countries because in my country there is a great deal of class mobility. We are a democratic republic with an excellent constitution that encourages a nice mix of democracy and individual liberty. Before you do anything drastic, you might want to try modeling your system on our constitution.

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    5. Re: "Why are you allowed to have such a loud voice? You have a disproportionate talent for writing and a power of persuasion that is at a level much higher than the median. It might be disruptive to democracy for you and others like you to stay in this country"

      If you are in the USA, you "are allowed" to have a loud voice, write Ed/Ops to newspapers, etc. -- the listeners digest the commentary and come to their own conclusions. No one has to approve of another person's philosophy! If so I want to move to another country... We need more loud voices so we won't become so complacent.

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    6. "If you are in the USA, you "are allowed" to have a loud voice, write Ed/Ops to newspapers"
      However if you're in the USA you're also allowed to be rich, so saying what is currently present in America defeats the purpose of the philosopher rather contradictory argument.

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    7. Moreover, a voice or opinion represents (in a sort of Bayesian sense) a measure of problem solving, and as such, especially when carefully reasoned, represents a contribution to society. The rich, on the other hand, are a bit like an immortal whale that sits at the mouth of a river, sucking out a great fraction of what flows downstream, but never dying and becoming part of the ecosystem again.

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    8. The rich typically do die and pass on their assets to their children. Who typically aren't interested in keeping that business alive and see their inheritance dwindle away. It's all a cycle. The rich typically worked their butt off to get where they are. It's diversity which makes any ecosystem thrive. Who would want to live in a place where the work output doesn't translate into quality of life? No one wants a parasite taking what was earned. We need smaller government to allow less inefficiency and more control by the people.

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    9. So people who take money they didn't earn are parasites? And you're against a large government administration?

      I guess your solution must be to have a 100% inheritance tax (the children didn't build that) and redistribute that wealth directly to the whole population (i.e. don't use it to run government services) That sounds like a radical (left-libertarian?) plan to give everyone the freedom and ability to make their own choices about their lives free from Big Government.

      It seems quite attractive, though I would need to hear more about it before endorsing it.

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  10. Again. The point has been missed. Keep living the low tax free market fantasy. I'd offer an empirical suggestion. Compare the daily wage of a Chinese worker to that of an American worker. I think you'll see that we would need to "liberalize" production quite a bit to "compete".

    Moreover, corporate tax policy has been extremely generous. At what point do you stop begging corporations to employ Americans? And wages stagnated not from greater "competition" but through conscious decisions by executives and threats of offshoring. The real job killer might more accurately be the computer, but being a Luddite is silly.

    And talking about mans history: just because it happened does it mean it is right or desirable? Truisms aren't arguments.

    Ps. What does artificial employment mean? What a nonsensical thing to say. Here's a website you should go to: neweconomicperspectives.org

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    1. The point hasn't been missed, I simply disagree with the disproportionate fixation on the wealthy especially relative to the pressing need to create solid paying middle class jobs. Besides, 49.5% of the country doesn't pay any federal income tax and the top 10% pays an astounding 70% of all federal income taxes. Anyway, you are right, the conscious decisions of executives have lead to greater production and employment in other countries over the last 40 years; some of those executives weren't American and some where. The greater point is that if production is siginificantly cheaper elsewhere, production will shift there and that is what has happened the last 4 decades. A Chinese or Indian executive has no obligation to set-up production in the USA.

      Artificial employment meant that, with the devastated industrial bases of other countries, the USA was responsibile for 50% of the entire world's production after WWII and thus had levels of manufacturing employement that were abnormal since we were the only ones left standing. How was Germany's economy in 1946? How about Japan's? Russia's? It makes perfect sense if you think more deeply, give it a try.

      Again, high levels of wealth inequality isn't desirable but it's hardly the most pressing issue facing our country. The three decades from WWII to the mid 70's were an exceptional period that will never be repeated again (unless Germany, England, Japan, and Russia agree to blow up their industrial bases and China, India, Brazil, and South Korea agree to go back to a largely agrarian society). With real unemployment in the double digits and stagnating incomes for most people (including me), we should concern ourselves with how to grow wages and opportunities for the middle class in the knowledge economy.

      If you are rightfully upset with Wall Street, you should watch this video:

      http://brain-terminal.com/posts/2011/11/07/my-heavily-edited-video-of-a-good-natured-stroll-amongst-the-occupiers-of-zuccotti-park-which-is-a-few-blocks-north-and-slightly-to-the-west-of-wall-street-in-new-york-city

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    2. "49.5% of the country doesn't pay any federal income tax and the top 10% pays an astounding 70% of all federal income taxes."

      America's middle-classes are drastically undertaxed, but that's a separate issue from the problem the super-rich pose. (Though there's no reason not to deal with both!)

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    3. Yes, first get rid of all the silly and distorting deductions in the tax code. Romney said if he is elected, he would immediately end the 2nd home (vacation home) mortgage deduction; if someone can afford a vacation home, they certainly don't need the deduction!

      With comprehensive personal tax reform and the phasing out of other deductions, we could likely lower the top rate to 28 or 30% and still have it be revenue neutral off the bat. That would make it easier to raise taxes on carried interest (think private equity and hedge fund types) up to that level as well.

      Delete
    4. It should come as no surprise that the top 10% of income earners pay 70% of taxes. The top 10% earn roughly 36% of all income. Meanwhile, they earn a much larger fraction of "disposable income". Consider, for example, that to eat nothing but your caloric requirement of rice requires about $2000 per year. When you make $7000 per year, your disposable income looks pretty small.

      Moreover, income inequality pales in comparison to wealth inequality. This is why the author's point about simply kicking out the rich or having them give up their wealth is a good one; income disparity is almost meaningless in the face of enormous wealth disparity. (You could make 250,000/year -- well in the top 1% -- for 40 years and not have the wealth Donald Rumsfeld, Diane Feinstein, or Colin Powell, to say nothing of the Clinton's, Romney's or those with even greater assets. In the face of such wealth inequality, even the top 1% of earners is politically handicapped.)

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  11. Interesting to read this from the perspective of Australia.
    Our economy has been very successful over the last 20 years and we essentially avoided the GFC, in part because of a booming mining industry exporting to China and India. As a result we have a number of incredibly wealthy people who caught the rising tide of mining and who are now using their power/wealth to influence the political debate. They successfully derailed a proposed mining 'super-profit' tax in 2010; indeed they were so successful it led to the deposing of our Prime Minister. Our Treasurer recently spoke about the undue and malign influence these super wealthy individuals have on our democracy and now, lo and behold, one of these very individuals is planning to stand against the Treasurer in the next election. They are very outspoken about issues like climate change and a carbon tax/ETS and openly admit to seeking the defeat of the present slightly leftist government. Oh and they also have lots of friends in the Murdoch dominated media.
    Sadly, at least in Australia, we seem to have no idea of 'what to do about the rich' - but they have lots of plans about what to with the rest of us.

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  12. Since the eighties the social contract has changed. This new social contract has everybody on their own financially with most people thinking the American Dream of becoming rich is at the very least their right and something natural in the order of things.
    This changed sentiment is why the rich have been able to have their way.
    Perhaps a new order or new social contract needs to be implimented

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    1. Perhaps you should move to France then? Tax levels are nearly 50% there and the government is responsible for 56% of their GDP.

      Delete
  13. Wow!

    Am I getting this right? You admit that the wealthy are contributing a disproportionate share of the prosperity (this is implicit in positive sum nature of economics) and you want to ask them to leave or stop baking the economic pie? And you think this is a good idea?

    You do realize that your argument reduces down to, in order to get more equal outcomes, it would be good to reduce capital investment and profit driven innovation and investment?

    I suggest we instead encourage the wealthy to add more value (keep on baking pies) and build institutional safeguards against them using their wealth I zero sum ways against us.

    By the way, the wealthy are not the only special interest group we should worry about. There are also politicians, special interest groups of any size or influence, the media, etc. all these groups need to be checked, but not in silly ways that undermine their value or contribution to society.

    In other words, if special interests are a threat-- and they always are -- the key is not to eliminate the group or their value to society, it is to build institutional safeguards against them using their power in zero sum ways that harm others.

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    1. "You admit that the wealthy are contributing a disproportionate share of the prosperity"

      No, the rich are extracting a disproportionate share of the prosperity. Read my argument again

      Delete
    2. How are they "extracting a disproportionate share of the prosperity"? Extracting implies ill begotten prosperity yet that is hardly fair to accuse the wealthy of that, outside of some Wall Street bankers.

      Just because someone makes more money than me and has more wealth doesn't mean that they have obtained it unfairly.

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    3. I am with Anonimous here.

      The nature of free enterprise is that voluntary interactions lead to expected utility gains for all participating agents. Billionaires acquiring their gains legitimately (which is the point here) did so by creating billions of value for others. We need more Jobs, Waltons and Gates, not fewer. Indeed, if we care about prosperity, we should encourage trillionaires.

      Your argument is that those with money use their power and wealth to extract wealth outside of the free market system. Or within the system by prostituting the rules and extracting privileged "rents". I agree that all powerful special interest groups will try to seek privilege and exploit others. History makes a convincing case. But I would not recommend chopping off our noses to spite our faces. You cut too deep.

      Yours is a recipe not for equality or prosperity, but impoverishment and misery.

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    4. The mere existence of voluntary transactions is an impoverished basis for comparing different economic arrangements.

      I do not claim that the rich obtained their wealth 'unfairly' in the sense of coercing people. Carlos Slim makes his billions from a hundred million Mexican voluntarily buying his telecoms services avery year. What I mean by extraction is what economists analyse as 'rent' i.e. income deriving from institutional position not productivity. If we arranged our institutions differently - as our telecoms service industry is arranged differently from Mexico's - prices for consumers would be lower and rentier profits much lower. That seems not only a better situation from the utilitarian perspective, but also more in the spirit of capitalism that you profess.

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    5. Yes, I oppose rent seeking activities and see these as detrimental to prosperity and justice.

      Yes, wealthy people attempt to seek rents and privilege. So far we are in agreement.

      Two counterpoints though...

      First, the wealthy do not ONLY seek rents. They also invest and pursue entrepreneurial activities that are essential to the health of the economy. Your recommendation basically entails slicing the foundation out of modern standards of living. The results would be catastrophic.

      Second, they are not the only group that seeks rent. I am not even sure they are among the worst offenders. There are bureaucrats, politicians, public service workers, unions, media, organized special interest groups such as the elderly, producers, market incumbents, etc.

      History supports that people always attempt to seek privilege and rents. But if you oversimplify this problem as the wealthy seek rents then you are defining the problem wrong from the onset.

      The key is not to prevent wealth, which in a positive sum economy also creates prosperity, it is to prevent rents.

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    6. I think you misunderstood. I'm arguing against the rich because they are toxic to democracy. Identifying them as successful rent-seekers is a counter argument to the mistaken belief that we somehow need the rich anyway. Almost by definition - Econ 101 - if you get rich in a competitive market economy, it's because the markets isn't really competitive.

      Why do we need super-rich people to have a successful economy? It's a commonplace of our political debates but I don't see how it is supposed to work. You don't buy my economic analysis. But look at history - Europe, Japan and the US had their greatest and longest economic growth in history in the post-war period when ineqality was lowest.

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    7. My argument is that all special interest groups seek to undermine democracy. You are concentrating on eliminating the presence of one such special interest group, by eliminating the group. Yet you ignore the positive sum benefits that this particular group offers to society. Your article reveals that you are well aware that these people own a huge portion of the creative capital that drives the prosperity of America. If you eliminate the incentive to create this capital, or the ability to reinvest this into the capitalist engine you will push us into catastrophic impoverishment. We're talking economic Armageddon here. When these evil rich people leave they are going to take their investments which fund all the factories, research, new startups, infrastructure bonds and tax dollars with them.

      As for economics 101, dynamic, competitive markets can and do lead to wealth. Furthermore they actively undermine monopolies.

      Your best economic growth argument is just a correlation is causation fallacy. Furthermore you are falling for a zero sum fallacy and a good intentions means good results fallacy.

      I loved your Adam Smith opinion peace. This one is a logical and factual disaster.

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    8. I'm glad you liked something I've written!

      But I see a lot on continuity in my post on Smith and this one (except, of course, that Smith was not a democrat). I spent some time elaborating on his own concerns about the rich gaining privileged access to socio-economic insitutions to the detriment of the country's prosperity in general and the poor in particular. His whole argument for laissez-faire was to get those people away from political power. I also mentioned his prioritising systemic regulation over individual liberty when necessary; and his scepticism that the market always knows best (for which he was taken to task for by Bentham, but didn't back down.

      I think you took a different Econ 101 than me. A great many economists - including Nobel Prize winners like Joseph Stiglitz - are on my side in this.

      The one point you raise that I would worry about is economic armageddon - i.e. the short run effects. Transitioning from a semi-plutocracy might well be traumatic given how entrenched they are throughout the system. Of course, the same arguments were made against the abolition of slavery (i.e. that slaves represented an enormous porportion of the wealth of the South/Caribbean colonies, and emancipation would cause economic armageddon). Of course, that kind of argument can stop one ever doing the right thing.

      Anyway, of course nothing like this will ever happen. As I note in my conclusion, my aim is to put the political status of the rich in question. I'm as tired of their special status and political privileges as Smith was. I want the rich to reflect on their position and consider whether, if they have indeed 'transcended' the democratic society in which they live, they really still belong amongst us; or if they decide they do want to stay amongst us, what that implies of them in terms of fulfilling their responsibilities as equal citizens of a democracy. And I want the good old bourgeoisie to lose our quasi-feudal respect and awe for these people and regain our rightful self-respect as the true owners of the great democratic societies we have built.

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    9. I didn't just like your Adam Smith piece, I loved it.

      I share your concern that powerful special interest groups can threaten democracy and free enterprise. I just see the problem as being broader. All powerful special interest groups will seek privilege, and will seek to eliminate other special interest groups.

      Anarchist libertarians make a similar error. They see government as a source of exploitation so they preach eliminating government. They throw out the good to prevent the bad.

      Overall, the last 200 years has seen lifespans double and real incomes increase 16 fold in the world and 58 fold in the US. Free enterprise has contributed to this. Special interest groups of all sorts seek to monopolize these gains. Despite all this, worldwide, we are coming off our best decade ever in terms of escaping from poverty.

      Progress and prosperity are possible if we proceed carefully.

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    10. Howard Berman6 May 2012 at 22:43

      There is a distinction between factionalism and plutocracy. The founders like the Federalists were well aware of the threat from factions. I'd say that Aristotle sums up the peculiar danger when one faction becomes supreme- he wrote that the proper place for men is a city state, except for those who are like beasts who are below it or people who are Godlike who are above it. Substitute modern America for Aristotle's polis, and take the rich as the people who are above the polis or American democracy. The danger is particularly acute because a modern state harnesses such super human powers- so the ruling faction, who control the economy and state, become as if Gods. There are provisions in place to abate the powers of the President; what the Philosopher Beard is saying is similar mechanisms must be in place for the ultra rich. If you think you're above our democracy, our city state, then leave it and we'll do fine without you. So, I'd put Aristotle in addition to Adam Smith on his side

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    11. Ok, I have to ask, does philosophers beard believe in zero-sum economics?

      Not even Karl Marx was that left wing...

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  14. I think there is enough money in the collective pot today to fix this. Just look at your income tax receipt. 25% to national defense, 10% to interest on the debt. 0.06% for college assistance.

    I see two main shackles the system, driven by big capital, that has been put on the citizens. 1) lack of national healthcare. I can't count how many times I've heard someone say they had a dream they wanted to pursue, but did the prudent calculation of risk, and came to conclusion for their family's sake, they better stay with the job because of the healthcare. 2) student loan debt. So many students graduating college go out to the work force and take a job for big capital in order to pay for their mountain of student loan debt. It pretty much amounts to modern day indentured servitude.

    But what are these things in the system designed to do? I think it is to tie citizens to the labor pool. Capital needs its labor pool flush with hungry workers. It needs to be able to cherry pick from a pool of applicants. Globablization, yes, has been a great way to do reduce the production needed out of the domestic labor pool. And it is a great threat to existing employees, threatening to move their jobs overseas.

    Now, obviously I wouldn't be writing this if it was easy to change national policy from 25% of the budget national defense to 10% national defense, 7% healthcare for all, and 7% cheap college education. It is pretty obvious big capital has fixed that game.

    So what is to do? What can everyone do today to change this, or at least impact it? Here's what I do. I have a stable job. It's O...K... I'm comfortable. But, I don't sit around going, "sucks to be those other out of work schmucks, good thing I got my healthcare and can make my student loan payment."

    I apply for jobs, I send out my resume to jobs all the time. I take interviews. I have even got a few job offers. What do I say? You don't pay enough. Not nearly enough. I tell them to double it and then we talk.

    Why? Because although the system has been rigged to create an excess of labor and keep those employed impeded to move from job to job. The system has a flaw in it. It is susceptible to noise in the hiring process.

    We hear these stories about 1000 people waiting in line for a job. Or an opening at a firm getting 10,000 applicants for one position. The faulty assumption these companies are making is that there are 10,000 applicants who desperately need employment. Imagine if it was 50,000 applicants and everyone they interviewed said, "pssh not enough money".

    Instead of today, where big capital is sitting on a pile of money doling out work to an excess labor pool, big capital would start to be sitting on a pile of work. Once the work starts to pile up, the wages go up.

    TLDR? What can be done today? Help inflate the labor market by applying for jobs yourself, even if you already have a job. This will slow big businesses ability to treat the labor pool as their bottomless well. It will cause work to start piling up redirecting capital to the wages.

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    1. I think health-care at the state level would be much better and state governments would be more accountable to their citizens than if it was centralized in DC.

      Plus, best practices would emerge from the states and it would be a race to the top to craft the best system.

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    2. That does sound better. I said nationalized, what I probably meant was an alternative that essentially stops people from factoring it into decision making.

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  15. A really fine article that brings several disparate concepts together and links them.

    The problem is defined. What is the solution?

    We have made little headway since 2008/09. Using banks as an example, they are still too big to fail and the Glass Steagall Act is a memory.

    While the suggested solution has merit, it is utopian. These are complex and historical issues, few people grasp. So few people understand that there is inadequate, informed pressure to bring about the needed changes.The Occupy Movement did not understand.

    The article is correct in saying it represents a challenge to competitive capitalism and effectively functioning democracy.

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  16. Terryt, the lessons of history hold the answer to your question, which is to say that, short of the super rich opting for one of the two choices on offer, it can only end badly for a lot of people. The only real question is one of timing, as in how long can the wealth disparity continue to grow, and how long can the planet's finite resources continue to sustain that growth, and how long can the environment continue to absorb the pollution from that unsustainable growth before the whole enchilada implodes. Wall Street is probably shorting their position on that scenario as we speak.

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  17. Those that can't do teach, those that can't teach become philosophers - the academic eqivalent of a backseat driver. Move to Mother Russia she will embrace your views if not your beard.

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    1. "Mother Russia"? What are you, still living in the Reagan era?

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  18. Great article, it's a perspective on the problem I haven't heard before.
    How do rich and powerful corporations fit into your view? They are sort of like super-rich citizens even if they are composed of many non-rich workers, and slightly rich lobbyists and lawyers. We would certainly miss our corporations if they were forced to leave.

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    1. Much of my critique of the rich would apply even more strongly to corporations, which unlike the rich lack a soul. In particular, the small number of enormous oligopolistic multi-nationals who claim to be American, British, or whatever, but systematically funnel their profits offshore and whose only interest in their home country is lobbying politicians shamelessly for special rights and privileges.

      We created corporations for the purpose of increasing our general prosperity and their 'rights' should be assessed against this standard. We gave corporations legal rights for purely utilitarian purposes, while we gave legal rights to people to recognise and support their ethical claims as human beings and/or democratic citizens. So we can be much more brusque in our treatment of corporations than the rich. We can even dismember them if they get too big for their boots.

      So I would basically argue for doing more of the kinds of things we already do, or used to do: anti-trust actions against companies with oligopolistic market positions; tightening up tax rules and tax compliance enforcement; international agreements against tax competition; increasing shareholder control rights over management; bans on political contributions or "electioneering communications"; etc.

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  19. All your observations about infirmities of real competitive markets and the severe distorting role played by the rich appear compelling. I do have doubts about the solution proposed instead. In a globalized world, the rich would exit one country and invest in another. The inequalities in sharing fruits of productivity would continue, only this time it would happen across borders and not within one country.

    Let us take an example. Under the new rules a rich manufacturer of cars leaves the US and settles in China. He would immediately set up facilities in China to innovate, design and manufacture cars in China and export them to the US. The rents he was earlier accruing from his lop sided control over non competitive markets in the US would continues flowing to him working out of China.

    It could be argued that once the mal-influence leaves the US, the auto industry would get more competitive and make it difficult for China to profitably export as before.

    Over a long period of time, may be it would work that way. But the international system of inequalities is also due in some part due to the distorting effects of the rich that you so vividly explain. Only this time it is not rich citizens that are to blame, but rich nations as a unit of discourse.

    So the rich auto manufacturer leaving the US only helps in correcting the international inequality and leaves little time for the benefits of greater internal competition within the US to play itself out as your hypothesis seems to suggest. This is because the magnitudes of competitive inequalities are vastly different.

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  20. It seems to me two Supreme Court rulings have tipped the balance to the wealthy: money is speech and corporations are persons. Can we not create a social contract that tips power away from the wealthy rather then exiling them? Can we decrease the power of the wealthy as their wealth increases? For example,ending corporate and wealthy funded campaigns, squashing lobbyists and special interest groups funded by the wealthy?

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  21. This is a great essay and a delight to read and think about, so, naturally some things in it give me pause, such as “…to confiscate the fairly earned money of the rich…would be unjust…” and “whether the poor have some sort of claim on rich peoples’ money…” The terms here need definition before I can agree or disagree.

    There are many ways of becoming rich. A person may rise from the middle class to wealth by working hard and long, living abstemiously, saving assiduously, and investing wisely. His or her income may never reach beyond low six figures but I think if accumulated assets reach two, three, or four million, that’s wealth honestly earned and the person is rich, indeed. You can find folks like that among retired professionals, small business owners, technical experts, and others. At the other end of the spectrum is the person who has enough assets already to influence the necessary power points, gain a monopoly or other great advantage by tax avoidance or other purchased trick, and award himself with multi-million dollar income for his “cleverness” year after year. I suggest that there is a difference between these two assets and incomes.

    The former has earned wealth fairly and it certainly belongs entirely to the earner. The latter,…well, rights to it are debatable. Lets imagine a thief steals the battery out of your automobile. Whose battery is it? He earned it by a bit of work and some technical knowledge. Did he earn it fairly or unfairly? You surely have a claim on it. If you got it back would you be “confiscating” it from the party who earned it? There may be a lesson here. “Legal” is whatever the Law says, and money makes laws.

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  22. I was more persuaded by this essay than I thought I would be. However, I think the prescriptions are too harsh. Any government that would exile its wealthy citizens would inevitably become a 'monstrous totalitarian' regime.

    While it's clear that the interests of the rich are radically different from everyone else, the mechanisms of democracy should take care of this since there are so much more of the rest of us. The problem is their outsize influence on political process, not their existence within our borders per se.

    A solution that is gentler and in my opinion more effective would be something like the Oregon Tax Credit, where a $50 campaign contribution is refunded to you in your state tax return. An author (unable to find at the moment) suggested a similar policy at a national level. The first $50 of federal taxes paid could be put towards the campaign of your choice, creating an even lower barrier to participation (you don't even need the $50 on hand, as long as you've paid at least $50 in taxes).

    This policy alone could dramatically shift national policy as politicians become less dependent on the very rich for contributions.

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  23. I think you'd have problems with venture capital and other forms of startup funding in your proposal. Innovation requires creativity, but it also requires a lot of money. The funding for startups could dry up if their returns were limited to such an extent.

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    1. My proposal isn't anti-capitalist in the sense of being anti-profit. Even if individual private investors become less interested in making big bets (because they won't be able to keep big payouts), innovative firms can still be funded by banks and venture capital mutual funds, as they mostly are now.

      There is in fact substantial scope for the 'democratisation' of venture capital using the same kind of techniques employed in sub-prime mortgage packaging and selling (though with better ethics, risk management, and legal accountability). Equity in risky projects can be bundled together and shares in the whole sold to individual investors and financial institutions like pension funds in a way that smooths risks and returns and thus makes VC more accessible to ordinary people to invest in.

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  24. Nice article, but here are some criticism according to my opinion.The writer said that rich people are not good for economy but economy of America control by 10% rich people even every country wealth mostly in hand of rich people which clearly depicts our world in control of Capitalism.I want to add another thing If you want to see socialism you see China which is flourishing economies of today world.In Holy Quran it is written clearly "we have raised some of you from others so that you will give them what you have extra".So Islam tells also more about concentration of wealth,Don't concentrate wealth in few hands,it should be spread all of people.That is what China is doing.One solution how to eradicate poor in this world is to give charity(Zakkah)a tremendous system of circulation of wealth in economy.In final remarks dual economy is poison of any economy.But i am also agree with writer that people which have poor or middle-class family background was known to be as famous leaders like John Abrahim linkon,Winston Churchill and Mahateer Mohammad etc

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  25. Two relatively late comments:
    1) perhaps what troubles capitalism is something more structural than just being about a given class of individuals.
    2) I thought the problem with America was TV .

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  26. Wow!
    As someone rich and hard working who wants Democracy to perish I heartily endorse this plan. It's like proposing that the government play John Galt's part in Atlas Shrugged (albeit, with the use of force behind it).

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  27. Another solution to the problem posed to democracy by the superrich, in my opinion, is to give them a stake in democracy comparable to the Ancient Athenian practice of having the upper classes sponsor festivals and the like.
    I am working through the argument still- but it would go something like this.
    the rich view themselves as individuals just trying to make their way in the world, just cogs in the machine albeit bigger cogs than most (at least those I know in that class do). just like nations in international affairs grow bigger or perish, that is how individuals in capitalist society do- but the problem isn't that their selfish the problem is that in their social context they don't think about their fellow citizens- now I anticipate that you might argue that this atomism is precisely what assures our personal liberties; but in the middle of the last century, the rich were better integrated with the rest of society and our freedoms were just as well protected.
    Anyway, I await your counter arguments, unless you can think of a way to improve my argument.
    Again thanks for your humoring my humble contributions to the larger debate
    I just think it is more practical and pragmatic to balance a cohesive society with liberties than it is to banish the rich- full Marxism is just as practical.
    I think you are doing the equivalent of fighting the laws of gravity- just the outlook people have no matter how logical your arguments, the right to get rich is built into the capitalist ideology at least in America

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    1. Sure, that's how an aristocracy should function. But it's not compatible with democracy. i.e. you can't have both, as Justice Louis Brandeis pointed out.

      NB In the middle of the 20th century, wealth inequality was much lower (USA/UK are now back at 1920's Great Gatsby levels).

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    2. Thanks. I enjoyed your reply.
      I hardly realized I was advocating
      for an aristocracy. Thanks for giving me a fair warning.
      In your view is there any structural
      intervention that can alleviate
      the problem, and reduce income inequality
      rather than kicking the rich out/
      Has any less radical solution been proposed?
      Can the US follow the example of more equal
      and healthy countries out there?

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  28. I have a few more issues:
    1) the right to private property may be violated by your policy. That goes back (I think) to Locke, and if it is enshrined in the constitution, may require an amendment.
    2) the issue of entrepreneurship again. entrepreneurs are motivated by the pursuit of wealth, take that away and will their result stagnation?
    3)will corporations be allowed to be wealthy or will corporations be downsized to small businesses?
    4)might this provoke civil war or revolution and would that be worth the trouble? That is, Hobbesean civil order may trump economic inequality
    5)and this is impossible to foresee, but what about unintended consequences?
    That's it, for now. I look forward to your replies

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    1. Quick reply:

      1) Locke isn't very keen on waste - one can take a quite leftist interpretation of his foundational proviso about leaving as much or as good for everyone else if you want to claim something as yours.

      Anyway, the whole point of my proposal is that property rights remain sacred, but citizenship is put into question. I think that is broadly consistent with the social contract approach taken by e.g. Locke.

      2) I tried to address entrepreneurship already in the main text. I think entrepreneurs are generally motivated to succeed, but not necessarily by the dream of a swimming pool full of money. Academics for example count success in terms of the spread of their ideas.

      3) I already addressed corporations in the comment discussion. In any case, we don't need super rich individuals to have big corporations. In Smith's time, economic growth required capitalists who would reinvest their profits. But our modern economies can fund growth through the savings of the middle class (while it survives!) e.g. shares owned by pension funds and bank loans backed by ordinary people's savings.

      4) I don't really see how. The rich have a lot more to lose from social rupture than the rest of us, since their distinguishing feature - their wealth - depends on the general recognition of their property rights.

      5) Many unintended consequences can still be forseen, and they should be taken into account. I mentioned a few, but that is really a matter for professionals in economics, politics, sociology to work out.

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    2. Thanks. I get the points

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  29. A lot of the problem with the social contract, is its theoretical nature. I know I never signed the contract. Rich people didn't sign it either.

    Maybe it would be better if the social contract was a real legally binding contract that people had to sign on reaching adulthood, if they want to participate in the running of, and benefit from our society.

    If you choose not to sign, there is no cap on your wealth, but you are forbidden to vote or to contribute any money whatsoever to any political organization or politician under penalty of deportation.

    One of the great problems with the Constitution, and similar documents in other countries, is the lack of penalty clauses. A real social contract can fix that.

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    1. Sorry for missing your comment before.

      Interesting idea with many merits. Making our political commitment explicit is something that may change how we think of our birthright citizenship, rather as going through the ceremony of marriage can push us to reflect on the relationship and strengthen our commitment to it.

      However, note that unlike the Rawlsian device of the hypothetical social contract, it does not consider its signatories as active participants in determining - negotiating - its contents, but rather presents them with an ultimatum. Its role is in strengthening individuals' commitment to the status quo rather than stimulating society to consider whether that status quo is good enough, and to imagine together different - better - possibilities.

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