Wednesday, June 3, 2015

A False Dichotomy: Freedom vs. Equality

Although there are significant differences between America’s two major political parties in terms of economic philosophy, it seems to me that you can boil most of these differences down to a contest between freedom and equality. If these two ideas lie at either end of a continuum, then Republicans would cluster toward the freedom pole, while Democrats would gravitate toward equality. As you might expect if you’ve been following this blog for long, even though I am unaffiliated I favor equality above freedom, at least as economic freedom is defined by conservatives in America today. That, however, is a major qualifier because I also believe that the conservative definition of freedom is incomplete, which effectively makes this whole freedom vs. equality debate a false dichotomy. In this case, it is quite possible that these two concepts are not mutually exclusive.
If you follow the online comments to the opinion pages of both Salt Lake daily newspapers, as I do, then you are aware that some LDS conservatives believe rather strongly that the rich have every right to get as rich as possible without government interference, and that the poor should stop taking government handouts, pick themselves up by their bootstraps, get a better education, cast of their obvious laziness, and thereby join the ranks of the wildly successful. Some of these comment composers are offended at the idea that government might redistribute a little wealth to help level the playing field, and the whole idea of taxation is simply theft from the “productive” members of society—this despite all the things they as conservatives still want government to provide for them. They just don’t want to pay for all this stuff with taxes. Of course this is a bit of a caricature, but not all that much really. (Read the online comments.) Much of this attitude represents a mind-set that has been carefully cultivated by Fox News and certain talk-radio personalities. Unfortunately, too much of it filters up even to the highest levels of party politics, but that is another story.
My primary concern today is with the mistaken notion that economic freedom is so paramount that economic equality (one of the two major goals of the American Dream) should not even be mentioned. Equality is evil because in some minds it implies redistribution. Basically, those who have invested in a business should be free to pay any wage they can get away with and accumulate as much wealth as possible, the more the better. The very real trajectory of where this line of thinking will take us is irrelevant, because it is ideologically kosher. Facts be damned.
Of course I have some serious macroeconomic concerns with this simplistic view of economic freedom. In a nutshell, if wealth keeps accumulating at the top at the rate it is today, soon the consumer classes will not have enough disposable income to purchase all the products that our beloved corporations need to sell in order to stay in business. The result would be falling demand, which would translate into fewer jobs, which would require more people to seek government assistance and would cause less money to circulate in the economy. This is the recipe for recession, and we know where that leads. The economics experts today are somewhat baffled by the current situation in America. They think the economy should be doing better, but it isn’t. Growth is weak. Employment is okay, but wages are stagnant. One significant factor in all this is the massive inequality we’ve created with over thirty years of supply-side economics, but I’ll save that topic too for another day.
Today I want to focus on the conservative definition of economic freedom. Whenever Republicans talk about economic freedom, they refer only to the “job creators,” whoever these people might be. What they really mean are the wealthy, many of whom are not actually job creators, but “job creators” is a fine euphemism, so I’ll go along with it. The problem with the Republican view of economic freedom is that it excludes the vast majority of Americans, those who actually hold the jobs the “job creators” purportedly create. Wage laborers, as I have pointed out in an earlier post, are not really free. Oh, certainly they are free to leave one place of employment and search for another. Or, as defenders of the current arrangement remind us, they can always start their own business. Yes, if they have either sufficient funds or enough credit to start a business, but that again eludes the vast majority of job holders. Let’s face the music. We have become a nation of hirelings, which means most Americans do not enjoy either economic freedom or economic equality. So the conservative utopia Republicans keep trying to promote is really a land in which a few are free and the rest are, well, not so free. The aristocratic precapitalist society we thought we had banished through the great American experiment is not so different, in practice, from the society corporate capitalism is giving us. In significant ways, we are back where we started.
Let me put this bluntly. If you are an employee in almost any business, small or large, you are, in a very real sense, property. You are owned by either the stockholders or the proprietor of the business you work for. You don’t believe me? Let me illustrate with a common example. Let’s assume a company is being sold by its founder, and the business’s primary asset is its workforce of 100 technicians and researchers. The company would be quite worthless without these employees, so what is really being sold is a group of people, along with a few peripheral physical assets—an office building, computers, desks, and whatever else the employees need to create their product. This happens all the time. Businesses are bought and sold, and the workers are simply part of the package, part of the property being exchanged for money. When corporate executives say, “Our employees are our greatest asset,” they are not speaking figuratively.
So, now that we have established that unpleasant little fact, what are we going to do about it? Nothing? That’s not much of an answer. But how can we change a system that is so entrenched that most people don’t even realize they are property of the businesses that employ (use) them? Well, we can start by educating ourselves and others so that we can see through the charade. We can also stop supporting politicians who defend their efforts to increase economic inequality by trotting out the silly argument that they are devoted to economic freedom when what they are really dedicated to is economic liberty for a just small, favored minority of Americans.
What are we to think of a political party that stacks the deck so that those who are already wealthy can accumulate an even greater percentage of the wealth that is created by all Americans, in thousands of businesses, leaving most workers with a shrinking share of the prosperity they help create? What are we to think if this party then develops a rationale to support this strategy that includes the demonizing of the poor? Remember the 47 percent? An unfortunately revealing remark by a man who certainly knew better. But it plays well with those who have been living in the conservative sound bubble. A 2014 Pew Research Center survey showed that over three quarters of conservatives believe that the poor “have it easy” because of government benefits.1 This thinking is the result of a concerted program of propaganda against the unfortunate. And this propaganda is very effective. It also enables the GOP to pursue policies that stack the deck even further against those who are being excluded by a skewed economic system. Two related exhibits: (1) In April of this year, the Republican House passed legislation that would repeal what has been called the death tax, a change in the estate-tax law that would benefit only about 5,400 of the wealthiest families in America. Only two-tenths of 1 percent of Americans who die are wealthy enough to pay any money under the existing law.2 Fortunately, this legislation will likely die in the Senate, but it would be vetoed by President Obama anyway. Still, it sends a message. (2) At the same time, the Republicans unveiled yet another proposed budget that would cut benefits to the needy. As they say, actions speak louder than words, but in this case the words and the actions are in perfect harmony. In essence, the Republicans, in pure ideological devotion to their limited definition of economic freedom, are working overtime to accelerate the rampant inequality that is threatening our nation’s future. I see this not just as an economic issue, but also as a moral issue.
The problem with the inequality bubble we are seeing today, which is worse now than in 1929 or even 1789,3 is that it is not sustainable. It may end in collapse, or it may end in revolution, but end it will. In either of these two scenarios, we would be in a much more difficult spot from which to effect change. But there are things we can do now, before it is too late, to reverse the trends we are seeing. If we don’t, then we will surely arrive at the destination for which we are heading, and it is not a very pleasant place. In the coming weeks, I’ll tackle some of these possibilities. And I hope, in the process, to show that true economic liberty for all is not really incompatible with economic equality.
1. Christopher Ingraham, “More Than Three Quarters of Conservatives Say the Poor ‘Have It Easy,’” Washington Post, June 26, 2014,
2. Editorial Board, “Real Estate Tax Would Reward 0.2%: Our View,” USA Today, April 16, 2015,
3. Paul B. Farrell, “Opinion: The Inequality Bubble Is Accelerating, Worse than ’29, even 1789,” MarketWatch, April 20, 2015,


  1. Badly stated, I think.

    I think claim of employees as property are badly made, almost dishonestly. You first beg us to assume that the company's primary asset is it's workers... which is the point you are trying to prove!

    You then justify this by calling on the casual use of the word "asset" as in "our employees are our biggest asset".

    For demonstration you use a fictitious company that you tell us has little other assets in order to prove that the people were sold as property!

    Even for such a company it is the goodwill and employment contracts that are valuable, and these can't be kept against the will of the employees, therefore it is not property at all! In fact the value of the company is that it is so structured as to be able to attract and retain such staff.

    The lack of economic freedom isn't a factor of corporations, it exists for the man on the desert island who also must work or starve. It is the natural condition.

    That the so-called job creator has offered an alternative to grubbing in the self-ploughed field is a raising of the condition above it's natural state, not a lowering of it!

    You assumes but does not make the case that the poor are demonized; and particularly not in any way that supports your case.

    You claim that freedom is ill defined, but equality is equally ill defined.

    One word labels are so open to interpretation.

    It's hard to tell equality what type of equality is being sought... equality of existence? Equality of assets? Equality of opportunity? Equality of capacity? Equality of luxury? Equality of free time?

  2. Inequity is rising everywhere, so I don't think you can blame it on trickle down economics. Rather globalization is the key factor (although not the only one).

    I do think some redistribution is necessary, although we already do have a lot of redistribution going on. The problem is that most people wanting massive increases in redistribution are a little vague in the details of getting it. The richest simply aren't rich enough to pay for the desired redistribution. Further the rich tend to have the capabilities to figure out how to find loopholes and avoid taxes.

    The biggest problem in inequity it seems are people owning property. This is usually exacerbated by stick housing limits in large urban areas which in turns jacks up housing value making inequity worse. An easy way to solve this would be to liberalize zoning and allow high density housing in these places many people want to live.

    A second problem is that large corporations aren't reinvesting their profits (thus the huge stock market run). If we want more jobs we need to figure out how to get corporations reinvesting and growing. There obviously is a large difference of opinion on how to do this. Some favor lowering corporate taxes to be more in line with the EU. Others such as Krugman think this illustrates a lack of competition in the markets these businesses are in. But that requires making it easier for new businesses to be created and thus careful deregulation. Unfortunately typically the people focused on inequity are also those most opposed to easing regulation burdens.

    I think the problem of the death tax, perhaps overstated though, was family run businesses and what happens to them when the founder dies. As I said I personally find that very overstated, but that's the main concern.

    The reason companies can treat people like property is because the costs of people moving is so high. So in areas with high unemployment no one wants to leave. The difficulty of moving health insurance and, for the poor, just the intrinsic problems of moving mean people take the work in the area they can find. If we want to give more power back to the workers we should make labor fluidity easier so people can move to where the jobs are.

    Underneath it all though is the issue of increased productivity - often through automation. We have a large group of people, primarily males, who simply don't have the skills to deal with the modern labor force. That problem is the primary one that needs to be addressed that neither party has.

  3. The problem is that there is no way for anyone to support themselves without paid employment.

    One can't borrow an axe to build a shack in the woods, or turn over an acre or two with a spade and plant potatoes and turnips to trade for shoes.

    The federal government owns roughly 635-640 million acres, 28% of the 2.27 billion acres of land in the United States, so that state of affairs is not to be blamed on corporations, but federal and local government who both own the land and also set minimum standards of subsistence.

    If you can't build a shack that meets local building codes, then you can be homeless instead.

    If you can't generate enough value so as to justify the minimum wage then you are forbidden from paid employment entirely.

    It is the government that subjects the poor to the dependency of the corporation pay packet or destitution by denying the natural alternative; which is to be able to provide for ones self instead of being a beggar.

    Outlawing everything except the corporate labour force is good for business and keeps wages low; but it's in the power of the government to change.

    The costs of starting a business are high because the government made it that way! Don't forget to post your bond, or you can't go into business - but it's all to protect the poor consumer, yet it is a barrier to new businesses.

  4. To your larger point, I think you're completely right. Once you accept taxes that are used for things that aren't as clear (say increased military spending or even R&D) then you can't say it's unjust to fund redistribution from taxes. I think it's sloppy of conservatives and especially libertarians to make the appeal to the ethics of private property here.

    What's in question isn't whether redistribution is just, but what level and form redistribution should take. The problem is that large redistribution has effects on the economy that make it harder to get good jobs. This is why even the Scandinavian countries moved to a much more neoliberal position after the huge redistribution push of the 60's and 70's. Figuring out the balance is hard.

    It's even worse for the United States due to the amount we spend on defense (largely as a world police force - enabling other countries to spend little) but also on other things such as drug R&D.

  5. Figuring out the balance is indeed hard. But my larger point, which isn't really explored here, is that the current system is fracturing and may be impossible to fix. It may need to be replaced. We have an economic system that is authoritarian at its foundation, and we are trying to make it work within the parameters of a democratic republic. This mismatch creates extraordinary internal pressures. The problem, however, is that instead of our political system exerting pressure so that the economic system becomes more just, where liberty and equality can coexist, the exact reverse is happening. The authoritarian economy, in which wealth and power concentrate in the hands of a few, is exerting immense pressure on the political system, and government is being taken over by monied interests, exactly what Jefferson and other Founders feared.

    Both political parties are pretty well owned by corporate interests and are dedicated to implementing a corporate agenda. But whereas the Democrats still have some sort of instinctive tendency to look out for the disadvantaged, the Republicans are myopically devoted to a strict ideology that places incomplete or twisted principles above the very real needs of people. In order to justify to themselves and others the callousness this entails, they have to create a narrative in which government is evil, taxes are theft, the poor are lazy, and inequality doesn't have any macroeconomic effects.

    Just for fun, let me quote one of the frequent conservative commenters on the Deseret News website to illustrate the sort of thinking that is becoming common among conservatives. This is from yesterday:

    "The current left-wing administration is determined to turn this Country into just another European-style post-Christian socialist state. The consequences will be catastrophic unless someone is able to stop this effort. . . . The left-wing wants to impose a cradle to grave entitlement system. Everyone will look to the government to provide for their every want and need. This is the goal: to have the citizens dependant on the government, with no loyalty towards religion or any other group.

    "When will the slumbering masses awaken to realize what is going on? When will they realize that the government cannot give to one without taking from another? If left unchecked, this process will completely destroy the collective work ethic. America will become little more than a collection of people who sit around in their sweatpants and crocs watching hot dog eating contests, only taking a break to engage in drunkenness and promiscuity.

    "From the beginning, it was declared that man must earn his bread by the sweat of his own brow. If he will not work, he will not eat. We must return to that principle."

    Frankly, I don't know any liberals who desire the things this writer accuses them of. But all the elements of the narrative I mentioned above are present here. Of particular concern is the last paragraph, which, if taken at face value, is saying that those who, for whatever reason, cannot earn their bread by working must simply starve. Another commenter responded to this paragraph by pointing out that this idea appears in article 12 of the Soviet Constitution: "In the USSR work is a duty and a matter of honor for every able-bodied citizen, in accordance with the principle: 'He who does not work, neither shall he eat.'"

  6. I'm far from convinced our economics is largely authoritarian. I think that's hyperbole at best. There are authoritarian angles, but those are usually due to government regulation and the force necessary to support those regulations. It seems odd to decry authoritarianism in one place and then effectively cry for more of it in an other.

    What's really in question are the types of regulations and not authority. If anything those pushing for more emphasis on regulation and equality almost always have to do so by increasing authoritarianism and monitoring of day to day practices not just of corporations but of regulation people. Further usually choices even for regular people are limited in preference for views that will (it is hoped) achieve greater equality.

    Thus those pushing equality almost always want considerable regulation of all practices rather than a simple system of redistribution via cash payments. Instead payments are tied to practices people must do, and limits are placed upon what choices are offered. (Admittedly the right does that at times too such as the hugely counter effective typing of benefits to various tests ranging from drugs to work requirements)

  7. To add, it's not difficult to find current examples of egregious conservative hyperbole. But to be fair it's also not difficult to find examples of egregious liberal hyperbole. Both sides do this especially at the most populist angle. A lot goes on now with cries of socialism and the like because it's a Democratic President. When there's a Republican President you hear cries of trying to starve the poor or war on women or the like when the actually issues in hand are almost always far more minor, marginal and even subtle.

  8. When I use the term authoritarian, I am using it in a fairly theoretical sense, which is how the dictionary actually has it: "of, or relating to, or favoring a concentration of power in a leader or an elite not constitutionally responsible to the people." This quite accurately describes most businesses in America, be they small proprietorships or mammoth corporations. As I mentioned earlier, we have many businesses that resemble monarchies, oligarchies, plutocracies, dictatorships, and so on. We have very few, however, that we could honestly call democratic republics. This has everything to do with ownership rules and nothing to do with how the businesses are actually managed. What I am preparing to do (in the next few posts) is contrast our very much authoritarian business structures with an alternative or two that are indeed democratic or republican in nature, to illustrate how we might structure our businesses so that they are more in harmony with our political system and social ideals. Certainly some businesses are run in a humane way. But there have also been benevolent monarchies in the world. This doesn't make them democracies. What I hope to point out is that it is possible to have freedom, democracy, and more equality in our economic arrangements. You'll of course recognize that this was, more or less, what Joseph Smith was up to. But we've come to accept the status quo as Mormons, and tend to see the world as two-dimensional (communism vs. capitalism). This prevents us from seeing third or fourth or fifth alternatives. Of course this will not happen without government intervention, but that is what government is for—to intervene in our selfish endeavors so that we can have some semblance of civilization. It doesn't just happen because people go out and seek their own self-interest. As I pointed out in a very early post, the invisible hand was always a feature of what Adam Smith viewed as a suboptimal society. But we have fallen even below that in today's economy. We're sub-suboptimal at best.