Tag: inequality

Richer than the law permits?

On By phulsrojIn UncategorizedLeave a comment

Inspired by my upcoming book, The Optional Society, with Marco Aliberti (Ex Tuto):

 

‘You can never be too rich or too thin’ was the statement of the late Duchess of Windsor. Both assumptions are wrong. The latter is disproven by anorexia, the first by Amazon and brethren.

Let us stay on ‘too rich’. The value of Amazon has almost doubled over the 15 months of the corona crisis. It currently stands at 1.6 trillion dollars and will not shrink hereafter! The activities of Amazon not only deepen – they broaden. This is a natural consequence of economic theory. The abundance of capital must be allocated and there are only two choices: to give back to shareholders or to deploy to new activities. Giving back to the owners is pusillanimous and hence the quest for new fields of business activity is mostly preferred. Where banks use other people’s money for other people’s activities, mega-firms use their own money for their own activities. Their incredible wealth means that there is almost no entry threshold for these firms to enter new fields. Their acumen in managing a new type of activity must not pass the crucible of third party capital allocation like start-ups. Mega-firms become planned economy instruments, albeit not of the communist type. Managers need not consider the general good of society. This may be conducive for efficiency but is a far cry from Adam Smith and liberal economics.

The general good is in this model supposed to be taken care of by the political decision makers, and by and large they have so far had the tools, but not always the ability, to exercise the function. But imagine Amazon at three times its current size. It will have branched into currency, health care, security, education, and deeper into news and entertainment. It will have reached such compact power that no state will have the de facto ability to rein it in. But not only that. Companies like Amazon will increasingly replace the state by providing most of what the state currently offers or ensures: retirement benefits (as a financial institution and as large-scale employer), policing, health care and hospitals, funding of new medicines, going to the Moon, you name it! All the while, the human factor in economic activity will become more and more irrelevant because of automation and AI. Wealth will therefore inevitably amass with the owners of the means of production.

What we are experiencing, and will so even more in the future, is that authority  increasingly moves from the state to private actors like Amazon. The state will become ever more emasculated and will ultimately not be able to fulfil its role of ensuring fairness and solidarity in society.

In order to avoid such an outcome in the incredibly wealthy world we are moving towards, we have to ask ourselves the impossible question: should it become illegal to become too rich? Should a company with a market value of a trillion dollars or more be deprived of the option to further expand – and hence be forced to return excess capital to shareholders, who would then have to find other vehicles for investment?

There is an antitrust logic in this, although such a proposal goes far further than just regulating monopolistic activity. Capital itself becomes the regulated object.

If we do not start to entertain this question we will, knowingly, have sacrificed the state and its benefits on the altar of an Adam Smith who, being a moralist as well as an economist, would never have imagined that his liberal economics could be taken to advocate such an illiberal result.

But in the interest of full disclosure it should also be said that where this regulatory screw ends is with the question whether personal wealth should have a limit also. When Jeff Bezos becomes a trillionaire must he be forced to give back to the society that enabled him all the further wealth beyond that measly first trillion?

Tenderness on Life Support

On By phulsrojIn Uncategorized1 Comment

Our times are raw and rough. This is a commonplace, and implies that the period before was less so. This is also true, albeit not in the mushy sense it is often understood. Earlier times were kinder in subtler ways.

First of all there was a cultural recognition particularly in the hippie era that tenderness was a moral imperative, despite the many violent protests. Ronald Reagan chipped away at this perspective with his adoration of wealth and trickle-down economics, yet the personality of Reagan reduced the sharp edge of his philosophy. The Contract with America and neo-cons put kindness as a self-standing goal into question and opened the door for the wholesale introduction of the cold-heartedness of the Trump era. That is perplexing, though, given that the intervening Obama presidency very deliberately (and tragically in vain) championed positivity and embraced kindness even towards political enemies bent on frustrating its policy goals. Just contrast the considerate fashion in which health care reform was introduced by Obama and the immoral and brutal steps taken during the Trump presidency to seek to discontinue it.

That tenderness is on life support today is to a large extent the fault of populism. Populism sees only black-and-white, where tenderness presupposes recognition of nuance, diversity and individuality. The binary truth perception of populism also makes it antithetical to democracy, as we have experienced all too clearly lately.

But inequality, the close relative of populism, also carries significant guilt for the retreat of tenderness. Inequality is premised on a perception that all rewards are accrued by own effort – that they are inherently just deserts. The flipside of this argument is that misfortune is equally just deserts. The self-righteousness involved largely precludes empathy, let alone tenderness. It represents the rough world of Hobbes. And the idea that all is ‘deserved’ is obviously fundamentally flawed. It is impossible to seriously dispute the effect of one’s environment and the lottery of genetics.

The corona crisis has given us object lessons in how tenderness does and does not function. The deliberate culling of segments of the population by governments refusing safety in putative favour of the economy is showing not just a lack of tenderness, but a complete absence of humanity, particularly in societies that can well afford proper lockdowns. What is happening is making social Darwinism look good!

On the personal level, the lockdowns have taught many of us the virtues of tenderness. Living claustrophobically closely in a successful manner requires acknowledgement of The Other and a subtlety of approach that we often sought to avoid when we had the possibility of fleeing to the office, travelling incessantly, and leading a butterfly’s social life. It is hard not to get the impression that President Trump is so emotionally averse to lockdown measures partly because they mean that he cannot entirely escape a closeness he is constitutionally unable to cope with and has spent a lifetime trying to avoid.

All is not lost, though. Corona has highlighted human fragility, and understanding fragility is a first step on the road back to tenderness. Joe Biden, for all his flaws, understands the preciousness and precariousness of human life – and thus is a poster person for tenderness, as was his boss, Barack Obama.

Yet, it is for each of us individually to use this time of multiple crises to pursue new beginnings in our lives and in society. Any meaningful endeavour in this respect must first and foremost get tenderness off life support!

Corona and the Optional Society

On By phulsrojIn UncategorizedLeave a comment

                                                                         

Lockdown is a not a new invention. We share history with those who lived through the repeated tragedies of the plague and with the societies that suffered in the invisible hands of the Spanish flu a hundred years ago. What is different today are prosperity, the predictive tools and the much-improved ability to communicate governmental messages and have their restraints respected. As Finland has demonstrated, most of the world had the option to prepare much better for this sort of calamity, but almost all other countries decided against comprehensive prepping despite the stark warnings of SARS, MERS and Ebola. The current tragedy could probably not have been completely avoided, but it would have been contained significantly had we deployed our wealth wisely and exercised our options with more foresight.

 Our upcoming book, ‘Essays on the Optional Society’, takes a close look at how society and individuals will be affected by the plethora of options we have and will gain in the future – options that are put in our lap because of the digital revolution, globalisation, and the rapid growth of wealth we experienced until the corona virus brought it to a halt, but hopefully not to an end.

 A society full of options may appear an unambiguous good, but will, in fact, present dangers as well as opportunity. How we act in the current crisis is an illustration of both qualities.  

 Resilience is what we are looking for now and options are a key element. When one way of living and operating becomes impossible, others will open up. Yet options can be abused, can also lead to new appalling inequality, for instance, and that influences resilience.

 This brings us back to the specifics of corona. The wriggle room that options give makes sure that we do not go hungry during lockdown, because we can quickly modify supply chains (look at the explosion of delivery services). But options are very unequally distributed, and it was heart wrenching to read about the American single mothers on hourly pay that had to go to work even when sick with corona. For them the options picture was: work or let the children starve! All the ‘great leveller’ talk proved empty. As always, the underprivileged become even less privileged when disaster strikes.

 If we decide to build the optional society in a conscious fashion in order to make sure that its benefits will touch everybody, one important task will be to create resilience in such a fashion that a shift in tectonic plates will not automatically sacrifice society’s weakest. Future resilience dictates that everybody’s daily life be moved well away from the breadline – that a safety buffer be there for all.

 The inequality in options exists not only within countries, but very much between countries and regions, as well. Ebola showed that, with proper leadership, rich countries could insulate themselves from a highly contagious virus. There was virtually no spill over. In West Africa however, Ebola was a terrible killer and one reason was that the region did not have the range of options available to rich countries. They did not have an army of doctors and nurses that could be re-deployed, they could not communicate health messages efficiently and effectively, there was no physical and human infrastructure that allowed proper quarantining, let alone a meaningful lockdown, supply chains were not easy to re-arrange. Options were there, but far too few.

 The corona virus is making its way to Africa now and there is a horribly big risk that a continent starved of options will see disaster of an unimaginable scale. The rich world that is monopolising all debate is not addressing this issue at all although the delay function in the spread of the virus is giving time to protect these vulnerable populations. Just as we cannot let the single mother be too close to the abyss, it is a moral imperative not to leave Africa to sink or swim. Our options, and the wealth that options have created, must be deployed now to assist Africans. There is no time to waste!

 The upshot of all this is that the optional society can become a libertarian wet dream with all the attendant inhumanity, or it can become a society of solidarity where options work for all. What we will do for Africa today is the harbinger of the way we will go tomorrow. To choose solidarity or barbarism is the ultimate option facing us!

Capital in any century

On By phulsrojIn UncategorizedLeave a comment

 

At a recent lunch I discussed with a friend the perennial issue of populism and how difficult it is for the liberal elite to colport truer statements without oversimplifying. I mentioned as an example of such oversimplification an incident in the seventies at my high school when an in-crowd hippie told a large meeting how unjust it was that a normal worker would earn less than hundred thousand kroners when Denmark’s richest man would earn hundreds of millions.

My friend immediately said: don’t give me the trickle-down story now. And he was right, of course. Trickle-down is another oversimplification, partly because it does not distinguish between unequal consumption and unequal capital ownership.

Inequality is a moral and economic outrage. The moral aspect requires no explanation, but it is important to understand the economics in this respect. And it is important not to oversimplify.

What disturbs us the most is not necessarily that capital ownership is so unequally distributed. Our concern is mostly about the inequality in living conditions, the inequality in consumption. This inequality in consumption makes little sense from an economics perspective, since a healthy economy requires prosperous consumers. The current expanding global economy is largely driven by exporting to underserved markets, which is fine since this helps inter-regional equality. However, in the long run export markets will start to saturate, and start to be more self-sufficient, and the lessons of the Industrial Revolution is that that is when the purchasing power of the domestic consumer will start to become critical. Marx and Engels explained very clearly that the bourgeoisie ultimately requires a better paid proletariat in order to hang on to its wealth. Social democracy was the handmaiden to a blinkered capitalist class.

Capital that does not go into consumption must be invested. When we question unequal capital ownership we are implicitly also questioning whether the capital owners that be are the best to allocate capital. And this is an exceedingly pertinent question, and one that should be explicit, not just implicit. With a very high percentage of capital ownership concentrated in very few hands we are approximating the planned economy paradigm. The difference to Marxism is only that those who in our society are allocating capital are not politically chosen, but, in the best case, chosen by entrepreneurship, in the worst case by inheritance, and in many cases by the ability to climb a corporate ladder not dissimilar to that of a government bureaucracy. John Kenneth Galbraith explained fifty years ago how large corporations in the Industrial State exercise a planned economy function. That fundamental truth has only been exacerbated nowadays by capital ownership residing in so few hands.

Capitalists are genetically aligned with Adam Smith. Yet, the vision of Adam Smith was not an economy planned by the few and the quasi-monopolists. Adam Smith imagined a vibrant society of mainly middle class entrepreneurs. Ironically, if we want to pursue the Adam Smith ideas we must thus break the stranglehold on capital by the few. Adam Smith would have voted for a much higher degree of capital equality! But also, in a democracy we must believe that capital allocation should harness the wisdom of the population at large. Yet for that to happen capital ownership must be far more broadly distributed!