Blog # 55c – The Blocked Questions on Inequality.

Blog # 55c – The Blocked Questions on Inequality.

[Blog #55a has tried, in outline form, to explain the existence of inequality in the U.S.A.]

[Blog #55b has asked mores specifically how that inequality came about and why it is tolerated in a democracy.]

This Blog #55c gives three examples, from different points of view, of how challenges to that inequality are blocked in the discourse about it.

The limits of Piketty.

 Thomas Piketty’s work has received deserved acclaim among economists in the mainstream, and even among some on the left. He clearly relates increased inequality to the growth of wealth and capital, Iin other words, inequality is increasing because the 1%’s share of growth is increasing. Historically, Piketty argues, as Steven Pressman, in a review in the “social justice and economic democracy committed” journal Dollars and Sense,[1] summarizes it, although inequality had been declining, “in the 1970’s or1980’s…the moneyed class revolted and began to influence policy. Top income-tax rates fell, income and wealth inequality rose rapidly.” The focus is clearly on the 1%. The conclusion is to tax it more heavily again, both its wealth and its income. But, Piketty concedes, an unlikely immediate development. Period.

What Piketty brings to the discussion is very much; what is surprisingly missing is as great. His analysis seems to cry out for answers to questions he does not ask: how does that wealth of the 1% come to them in the first place, what in the process of production that Miller refers to gives them their wealth, how come when the moneyed class revolted it was able to influence policy so strongly, why is it unlikely to be taxed down? “When the rate of return to capital (r) exceeds the growth rate of the economy (g)… more money flows to those at the top and inequality increases.” Obviously; that’s simply stating a tautology: when capital gets more of growth, non-capital gets less. Money seems to flow up-hill quite naturally, in such an economy. Wouldn’t the logical next question be, if the concern is for inequality, how could one reverse the flow? But the existence, and propriety, of the reverse gravity is simply taken for granted.

And the progressive economist reviewing Piketty has no better conclusion than to wish for “even more fire in [Piketty’s] soul for a global wealth tax.” His consolation for Piketty’s pessimism is that Malthus was pessimistic too, and look, he was wrong; maybe Piketty will be wrong too.[2] The problem is not so much that Piketty’s recommendations, or the reviewer’s wishes are wrong. Indeed a global wealth tax is well worth fighting for. The problem is that neither is pushing their questions to the next logical level of inquiry: how the difference in wealth between the 1% and the 99%, capital and non-capital, comes about in the first place.

Leveling down or leveling up.

 We read in a brief summary of how to deal with inequality dealing with “the underlying causes of our continuing high degree of poverty and inequality,” by a well and properly respected liberal sociologist and veteran of the anti-poverty wars, that the choice is between two approaches: Leveling Down the 1% or Leveling up the 99%.[3] Leveling Down, in the form of “increasing tax rates on the 1% would… ineffectively combat the continuing production of wide-ranging poverties and inequalities.. .”[4] The simple idea that levelling down the 1% might in fact be the best way to leveling up the 99%, because the profits of the 1% are built on the lower wages of the 99%, simply does not appear in the discussion. Miller might well agree that it is so; he points out that financial industries captured 40% of all business profits…and they certainly did not provide 40% of all jobs, while making a substantial contribution to income and wealth disparities.”[5] But the logical conclusion that limiting the profits of the business sector might help level up the incomes and wealth of the 99% is not pursued.

But what are underlying causes of our continuing high degree of poverty? “The American Economy is shaping up as a low-wage economy producing …” poverty. “…the production of these low-wage jobs is a great obstacle to… contraction of poverties and inequalities.” These jobs are in the “low-wage service sector.” “Yes, we should definitely seek to improve wages in that sector,” but the better route is to reduce the role of those jobs and rather foster jobs in construction, for instance, where the pay is better.

The point here is not that Miller is wrong in his recommendations; they should be supported as part of a broad effort to reduce inequality. The point is that what is missing in his discussion is any confrontation with the simple fact that the wealth and income of the 1% are related to the lack of wealth and incomes of so many of the 99%.

Low wage jobs are simply accepted as low-wage jobs; the wages should be higher, but low wage is simply what those jobs are. The financial industry makes 40% of the profits of business. That’s too much, but it’s not an “underlying cause of inequality.” And the jobs that need creating are not simply jobs that pay well, but jobs that do useful work, not speculate better or privatize more.

No larger pie. The New York Times’ Eduardo Porter, in his Economic Scene column in that mainstream paper, believes he has the answer, gotten by “Taking a Hard-Eyed Look At U.S. Income Inequality and the Problems Behind it.”[6] At various points he quotes, apparently approvingly, Gregory Mankiw, an economic advisor to President George W. Bush and Mitt Romney, advocates focusing on “increasing educational attainment,” and holds, in as forthright a conservative statement as one would want, that “Inequality itself is the wrong thing to look at… The question is, how do we help people at the bottom, rather than thwart people at the top? … “Policies that address the symptom rather than the cause include higher taxes and a more generous social safety net,” says Mankiw. So helping people at the bottom doesn’t work, perhaps because it might thwart those at the top? “The best way to address inequality is to focus on increasing educational attainment [because] technological progress has benefitted well educated workers.” But then there are a series of comments pointing out that “education isn’t doing it” either. Nor does “technological progress” seem to be the answer either, for “the real problem is slow growth.” according to Mankiw‘s presumably hard-eyed look.

But, Porter says at the end of his discussion, apparently sympathetically, getting to “the nub of the issue,” that, “as the richest Americans capture a larger and larger share of the fruits of growth, for many people the essential question becomes: What is the point of creating a larger pie?” Well! So it is the division of the pie that counts, after all, and maybe those at the top do need to be thwarted, if the nub is to be dealt with?

Although Porter has thus gone much further than the avowedly liberal Miller in linking the growing wealth of the 1% to the poverty of the poor, charging that the rich are capturing – presumably from the poor – a large part of the pie, he seems to go back to an earlier comment in the middle of his piece, said more or less in passing: “even avowedly liberal social scientists have had a tough time figure out the negative consequences of the rise of the 1 percent.” Without noticing that he has himself just figured it out, he concludes with a classic cop-out: “That’s the post-Great Recession reality.”

 

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[1] “Piketting Wealth Inequality,” July/August 2014, p. 26.

[2] P. 37

[3] S.M. Miller, “Breaking the Low-Wage Syndrome, Poverty & Race, vol. 23, No. 4, July/August 2014, p. 9.

[4] Miller also properly points out that the effort to tax the 1% has been largely unsuccessful but does not address the question of why that is, the main point raised here.

[5] Ibid.

[6] July 30, 2014, p. B1, B8.

Blog #55b – Why Does Inequality Have Popular Support?

Blog #55b – Why Does Inequality Have Popular Support?

The Agents of Inequality The Agents of InequalityThe Processes of Inequality: Exploitation, Dispossession, Incorporation

I have argue here and elsewhere[1] that

Social inequality is caused, not by any technical developments or by agreement that it is just or because the people wanted it, but because it directly serves the interest of the 1%, who have the power to impose it through the processes of exploitation, dispossession, and incorporation. Inequality is inevitably a matter of conflict, roughly between the 1% and the 99%. Any serious effort to reduce inequality must deal with this simple and obvious fact.

(It should be clear that we are talking about social inequality, inequalities in social relations reflecting hierarchies of power and wealth, not individual differences or inequalities in strength, wisdom, inherent abilities, virtues. It is of course what Jefferson meant in the Declaration of Independence’s ringing declaration: “all men are created equal.” They obviously differ in size, weight, talent, strength, desires, etc.; it’s the social relations among them that is in question.)

But what are the concrete processes that create social inequality, that permit the 1% to impose social inequality in society, to their benefit?

The answer, again, can be given in a few words: Exploitation, Historical Dispossession, Capitalist Dispossession (Expropriation), and Incorporation

Historic dispossession actually came first, in primitive societies and pre-feudal monarchies and empires and autocracies. The 1%, the established rulers, chieftains, monarchs, simply were entitled to take possession of what they wanted from anyone in their power. They did this through the exercise of brute force: slavery, where the masters took possession of anything of the slaves that they wished, war, where the spoils of the war were simply taken by the victors from the losers as their spoils.. The practice persisted well into feudalism, with the divine right of kinds (even Mozart built on its recognition in Figaro’s objection to the exercise of the Rights of the Seigneur in 1786!). And the dispossession of villagers’ use of the traditional commons for grazing, what we would now call privatization, was a significant part of the transition from feudalism to capitalism.[2]

Exploitation is a widely understood concept, and understood as a constitutive component of capitalism in the form of the wage relationship in production. , and focuses on the processes by which one person or group obtains the benefits of someone else’s labor through the payment of wages that do not equal the value of that labor. The profits accruing to the employer in that relationship accrue to capital, are a “return to capital” in Piketty’s sesnse, a conspicuously non-judgmental phrase for a relationship that could raise some questions of justice but which clearly benefit the 1% and the expense of a major part of the 99%, and contribute to a mounting inequality as capitalist forms of production expand and go global.

Capitalist dispossession, however, accompanies the drive to ever-increasing profit (what Marx calls primitive accumulation and David Harvey calls accumulation by dispossession[3]). Colonialism is its manifestation at the international level, but is paralleled by national practices. Rosa Luxemburg spoke of “The right to take possession, oppression, looting, are openly displayed without any attempt at concealment, and implemented by force if necessary.”[4] But in its mature capitalist form it is put forward as a right, and a right available to anyone, not merely of a chieftain or king exerting a hereditary or divine right to its exercise.

Foreclosing on a mortgage effectively dispossesses the “owner” of the house of his occupancy of it, and expropriates the house to the bank or financial institution that holds the mortgage. And the force behind it is state sanctioned and applied, if not under specific legislation then by execution of judgments in courts of law. The Sheriff will enforce the order of eviction a court grants, and forcefully puts the owner’s property on the street.

Contemporary dispossession (expropriation) differs from both its preceding forms, historic and capitalist, in two major ways;

• Contemporary dispossession is much less focused on physical dispossession, and involves a whole range of broader goods and assets, including property rights in all sorts of values which are included when one speaks of inequality. Contemporary dispossession might more properly be called expropriation, the taking of some key rights in that bundle of rights called ownership, key rights that go into the composition of wealth and power that Piketty, unlike Marx, lumps together in the term capital. The most obvious, of course, is the right to income or a share in the profits from an investment. Expropriation here is not the taking of the physical stock certificate, but the justification for not honoring a supposed “right” to a proper return on the investment. The right to an education, the right to health care, the right not to be discriminated against, the right to security of the person, the right to the sanctity of the home free of trespass, the right to vote, are all rights the 1% take for granted, but that large parts of the 99% find in practice not or barely available to them. The effective elimination of those rights in practice leads directly to the relative reduced wealth and income of the 99% and the expansion of the wealth and income of the 1%, increasing inequality by the most conventional of measures, and in a quite fundamental way. As an (critical) example, every reduction in the progressivity of taxes used to make such rights meaningful goes directly in the pockets of the 1% and the expense of those in need of those rights.
• Contemporary dispossession in fact largely creates those very rights and values it then expropriates. Ironically, when the “owner” of a home among the 99% loses it in foreclosure, his or her very ability to purchase it was enabled through high credit by the institutions of the 1%, who end up unharmed by the foreclosure. The bank owner, surely among the 1%, itself enabled the creation of the owned homes of many of the 99% which it helped finance, and then through foreclosure dispossesses the homeowner of that home to its own benefit, widening the gap between the two. The whole process of financialization, and the credit bubble it engendered has caused harm to the 99% from which the 1% have benefited, so that their share of the society’s wealth has increased while that of the 99% has decreased. It is a case of private dispossession/expropriation.

How could the 1% get away with this, in an advanced democracy? It couldn’t happen without support, including much active support, from a large part of the population, at least in the so-called “advanced democracies.”

Incorporation is the best term I can think of for the answer. Not in the sense of forming a corporation, of course, but in the sense of absorbing any potential resistance within it, making the resistance itself part of the system it attempts to criticize. Co-optation might be an easier term, but it is co-optation at a fundamental level, deliberately provoked and nurtured out of self-interest. But then internalized as natural, inevitable, and indeed desirable by the majority whose interests are in fact badly served by it. If the key cause of inequality is what was theorized at the opening here:

Social inequality is caused, not by any technical developments or by agreement that it is just or because the people wanted it, but because it directly serves the interest of the 1%; who have the power to impose it.

The question becomes how have the 1% amassed that power, and why are the 99% not able to resist it?

But that question is simply missing from mainstream discussions of inequality, and rarely raised even in critical discussions in economics even from the left, where it might be expected but where it seems to encounter a blockage that requires understanding. Instead what critical analysis exists is incorporated in a mainstream analysis that neglects fundamental conflicts and instead pokes at the edges of the problem sometimes with sensible but limited suggestions for reform that are incorporated into the mainstream of reform discussions, but shy away from even acknowledging the deeper issues of conflicts of interest that a more iconoclastic discussion would engender. And as the discussion veers away from these conflicts at the ideological level, the political attitude towards inequality likewise veers away from unsettling proposals and ends up incorporated within the mainstream in at best mild reforms at its edges and at worst celebrating its existence.

Such incorporation into the mainstream is produced by the combination of two factors:

1) at the discourse level, suppression of the acknowledgement of conflict: the domination of public discussion of the issues by ideological analysis incorporated into an acceptable mainstream blind to the conflict-laden causes and alternatives, and spread through media practices and institutional support into the popular consciousness; and

2) at the political level, consumerism leads to acquiescence: the strong lure of artificially induced consumerism, as reality and as hope, smothers criticism and incorporates the potential critic into the mainstream of acquiescence.

At the discourse level the public discussion of inequality is strangely limited. It not only circles around partial or simply wrong answers, discussed schematically in Blog 55, Inequality is indeed spoken of in public, and even makes the best seller lists, viz. Piketty, but the public discussion almost always simply fails to address the right questions, fails to push superficial if plausible answers to their roots, to consciously recognize its roots and consequences, to acknowledge the conflicts of interests and motivations.[6]. At both the discourse and the political levels, both effectively suppress or sidetrack.

Blog #55c – The unasked questions about inequality   gives three concrete examples of this blockage of the discourse.

CONCLUSION

How is the foregoing discussion relevant to a concern about inequality? If the analysis is right, a very practical political conclusion. If inequality refers to how the pie is divided, and if inequality is to be reduced, the 1% must give up some of it to the 99%. But the acknowledgement of conflict is suppressed, not because the facts aren’t clear, but because of a simple acquiescence in things as they are, a hard wall that stops both the avowedly liberal and the hard-eyed conservative from extending the implications of their own analysis to the recognition that it will take a serious thwarting of the rich to effectively reduce the inequality of the poor.

The first conclusion: remedying inequality involves a fight, before a search for broad consensus can begin. The causes of inequality are not technical failures, or found by focusing singly on action aimed at improving the lot of the poor, or by changing the poor by education, moral suasion, example, or similar measures. Inequality is the result of real conflicts of interest. In the long run it may be to everyone’s interest, in common, to reduce inequality, but certainly in the short and intermediate run, reducing inequality will involve significant conflicts. It may not be entirely a zero sum game: the advantages of reducing inequality may include greater productivity, less social tension, more effective policy making; but it will also result in some winners and some losers. So the first conclusion: be prepared to fight, challenge the means by which the !% get their greater share of the pie to begin with, seek consensus as far as possible but only around a just answer and realize consensus is not likely to happen except at a very superficial level.

The second conclusion: The forces supporting inequality not homogeneous; the majority can be converted. In the unavoidable fight, figuring out who is on what side is key. As of this writing, it seems clear that a large number of folk, not simply defined by their economic position, support measures that buttress or even promote inequality. Taking the Tea Party, and the conservative wing of the Republican Party as examples, they support lowering taxes, reducing public services, undermining unionization, avoiding minimum wage legislation, increasing security by policing and incarceration, privatizing public services from education to garbage collection to health care, indeed to anything out of which the private sector might make a profit. And in these positions they are supported by a large part of the leaders of public discourse, not only in the media but also among pundits, academics, many religious leaders, grounded in some deeply embedded racial prejudices and social mores.

 But those who objectively end up supporting inequality can be separated analytically. and some can be significantly aroused to recognize their own interests politically. They might be separated, based on the analysis here, into at least two quite different parts: those whose interest these position serve, and those who are in reality adversely affected by them but have been incorporated, willy-nilly, into a pattern contrary to those own interests. In the first group, of which the Koch brothers are perhaps the most conspicuous example, their very material interests are served by inequality: they benefit from the inequality of the others. The 1% benefit directly from the inferior position of the 99%. But they are seduced into supporting the 1%, not only by the media and the doyens of public opinion, but also by their own benefits – their fear of losing those benefits which they already have, even with their limits, in favor of an alternative that is hardly visible on the horizon. They have been incorporated into a system harmful to their own interests by the various processes discussed in this piece. The challenge therefore is to break through those processes and convert even the bulk of the Tea Party supporters into supporters, rather than opponents, of greater equality.

Blog #55a gives an outline answer to why is there inequality.

This #Blog 55b explains why Inequality has so much Popular Support

Blog #55c gives examples of the blockage of key questions.

 

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[1] Blog #55

[2] Marx spoke of dispossession of the commons in the transitional phase from feudalism to capitalism as “primitive accumulation,” essentially the same thing.

[3]What Marx included under the concept, n Harvey’s summary, is included in Appendix A. Harvey’s trenchant discussion of its new form is in Harvey, D. 2004. “The ‘new’ imperialism: accumulation by dispossession.” Socialist Register 40: p. 73..

[4] The Accumulation of Capital, Rosa Luxemburg, quoted by Harvey, D. 2004. p. 73..

[6] Freud can be helpful here, but going beyond the general concept of mass psychology. See Herbert Marcuse, Eros and Civilization

Blog #55a – Why is there Inequality? It’s no Mystery

Blog #55a – Why is there Inequality in the U.S.A.?

An Answer in 22 and 7 words.

Piketty showed, in 648 pages, that inequality is increasing long-term. It continued in the short term:

In 2009, figures were: average net worth, top 1%;   $16,439,400   bottom 20% minus $14,000

Total Net Worth[1]      Top 1 percent              Bottom 80 percent

1983       33.8%                   18.7%

2010       35.4%                   11.1

Why is this so?

The wrong answers:

1.     Because the need for higher education and more skills is growing. Wrong because:

1. Access to higher education and skill training is controlled by the 1%. They support education that helps them produce profit, do not support that which could lead to criticism and organization for higher pay.
2. And higher pay and greater net worth are more related to parents’ incomes, s4ector of the economy, e.g. financial, education, social work, art, than to training and skills.

Because it is just, and criteria for justice in the distribution of income is that a person works harder, contribute more to society, is smarter, needs more, is justly entitled to have more. Wrong because:

2. Sitting in an office is not harder work than working on an assembly line or collecting garbage, but is paid more because hedge fund managers have more power than factory workers or garbage collectors.
3. And hedge fund managers do not contribute more to society than social workers or teachers, in fact do major damage.
4. And there is no evidence the 1% have higher innate IQ’s than the 99%.
5. And the 1% have more than they need, most of the 99% less.
6. And the 1% have vastly more than the 99% to begin with.

 

 

The right answer, in 22 words.

 

The 1% are rich because they profit by keeping the 99% poorer. There is only one pie to divide, whatever its size; if the 1% take more, the rest will take proportionately less..

Why is this so, in a democracy, and so little understood?

The wrong answer:

1.     Because the people wanted it that way. The wrong answer because:

2. Wealth provides political power also. And apparent prosperity co-opts opposition.

3. And the 1% control the means of mass communication, and bury the alternatives.And presumed experts of the 1% pontificate that trickle-down will work to the benefit of all.

4. And the 1% control the use of physical force, the use of incarceration, etc.

 

The right answer, in 7 words:

 

Political and economic democracy are too limited.

Blog #55b expands on this answer. Blog # 55c gives concrete examples.

[1] G. William Domhoff, at http://www2.ucsc.edu/whorulesamerica/power/wealth.html