Tuesday, June 9, 2015
Economic Equality (Part 1: A Worldly Rationale for a Heavenly Requirement)
In the past few posts, I’ve talked about how our corporate system is largely authoritarian in nature and how partisan politics has created a false dichotomy between economic freedom and economic equality. In the next several posts, I’m going to look at a more hopeful possibility: a system that increases economic freedom through increasing economic equality. I’ll start with a few scriptural reminders for why we should be seeking such an economy and give a worldly rationale for what is apparently a heavenly requirement. Much of the material in this post and the next two will come from my 2010 Sunstone article on economic equality.1
A Scriptural Basis for Economic Equality
Regardless of how you define economic freedom, if you try to defend this notion with an appeal to scripture, you’ve got your work cut out for you. I’ve seen a few attempts by those who try to demonstrate that the scriptural idea of freedom to choose is the same as a blanket freedom to accumulate as much wealth as possible, but this argument is tenuous at best. On the other hand, finding support in scripture for economic equality is extremely easy. In all four standard works of The Church of Jesus Christ of Latter-day Saints, this common theme appears whenever the Lord establishes his Church among his children.
After the Savior’s Ascension, his followers “were together, and had all things common; and sold their possessions and goods, and parted them to all men, as every man had need” (Acts 2:44–45).
In the Book of Mormon, when Alma first established the Church of God among the people of King Noah, he “commanded that the people of the church should impart of their substance, every one according to that which he had; if he have more abundantly he should impart more abundantly; and of him that had but little, but little should be required; and to him that had not should be given” (Mosiah 18:27).
Later, after the resurrected Lord’s appearance among the descendants of Lehi, “they had all things common among them; therefore there were not rich and poor, bond and free, but they were all made free and partakers of the heavenly gift” (4 Nephi 1:3).
In the Pearl of Great Price account of the city of Enoch, we read that “the Lord called his people Zion, because they were of one heart and one mind, and dwelt in righteousness; and there was no poor among them” (Moses 7:18).
The Doctrine and Covenants is unique among the standard works because it contains revelations given to Joseph Smith to direct the restoration of Christ’s church on earth. Among these revelations are specific instructions about how the Lord intended to establish economic equality among the Latter-day Saints. Indeed, these revelations repeatedly touch upon economic themes, including the following:
“But it is not given that one man should possess that which is above another, wherefore the world lieth in sin” (D&C 49:20). In other words, economic inequality is considered not just wrong but sinful.
“Nevertheless, in your temporal things you shall be equal, and this not grudgingly, otherwise the abundance of the manifestations of the Spirit shall be withheld” (D&C 70:14).
“I, the Lord, stretched out the heavens, and built the earth, my very handiwork; and all things therein are mine. And it is my purpose to provide for my saints, for all things are mine. But it must needs be done in mine own way; and behold this is the way that I, the Lord, have decreed to provide for my saints, that the poor shall be exalted, in that the rich are made low. For the earth is full, and there is enough and to spare; yea, I prepared all things, and have given unto the children of men to be agents unto themselves. Therefore, if any man shall take of the abundance which I have made, and impart not his portion, according to the law of my gospel, unto the poor and the needy, he shall, with the wicked, lift up his eyes in hell, being in torment” (D&C 104:14–16, emphasis added).
It could not be more clearly expressed in scripture that the Lord wants his children to live in economic equality. No rich, no poor. And this is not just a special test he gives to those who are trying to establish Zion. It is the way the Lord wants us to live on his earth. And why can he expect this? Because, as he reminds us twice, all things are his. They are not ours.
The question no one seems to ask is “Why does the Lord desire economic equality?” Elsewhere in scripture we read that opposites are essential for our existence: light and darkness, health and sickness, pleasure and pain, happiness and misery, corruption and incorruption (see 2 Nephi 2:11–13). But why is it not so with poverty and wealth?
Perhaps we receive a clue in section 104, quoted above, when the Lord says that “the earth is full, and there is enough and to spare.” It is apparent from the context of this statement that there is enough and to spare only if we practice economics the Lord’s way. And his way is to exalt the poor, “in that the rich are made low.” Apparently, if some of his children consume or hoard far more than they need, there is not “enough and to spare,” causing others of his children to go without.
Although the Latter-day Saints made several attempts at implementing the economic principles outlined in the Doctrine and Covenants, the Church officially abandoned its United Orders in the latter years of the nineteenth century and began embracing the economic system that prevailed in the United States, seeking assimilation in place of the independence it had so jealously guarded during its first sixty years. Gradually, the Saints moved away from their communitarian roots, not just in practice but also in point of view, until today’s Mormons are among the nation’s most ardent supporters of conservative economics,2 which can only be construed as the economics of inequality.
In this context, it is significant that present-day Saints are not asked to live the law of tithing as it stands in section 119 of the Doctrine and Covenants. If we did, we would first place “all [our] surplus property . . . into the hands of the bishop. . . . And this,” the Lord reminds us, “shall be the beginning of the tithing of my people.” Then, “after that, those who have thus been tithed shall pay one-tenth of their interest annually” (D&C 119:1, 3–4, emphasis added). As the Lord revealed it, the law of tithing included an initial requirement that leveled the economic playing field, much as the law of consecration did. This requirement was abandoned at about the same time Lorenzo Snow began pushing for increased participation in the 10 percent portion of the law of tithing in an effort to relieve the Church’s debt burden. Consequently, the initial scriptural requirement has been largely forgotten. Our present interpretation of tithing, therefore, has a very opposite effect. It requires the poor to sacrifice more in relative terms than the wealthy. In this sense, tithing is consistent with conservative economic dogma and does not directly promote economic equality. Economic equality is, in fact, so far from LDS thought today that most Utah Mormons saw no red flags at all in the flat income tax that was legislated in 2008.
A Worldly Rationale
Why is it important for us to reconsider the Lord’s economic preferences in our modern capitalistic world? Why should we think there might not be “enough and to spare” if we allow unlimited accumulation of wealth for anyone who has the drive, ingenuity, and luck to succeed at materialistic endeavors? The scriptures offer very little by way of explanation. Perhaps, then, a worldly rationale for this heavenly requirement would be in order.
There is no need to explore here the many positive contributions of capitalism, but among them would certainly be the technological advances that have improved our standard of living, the market system that promotes innovation and competitive pricing, and the trade relationships that in some ways have reduced political tensions between countries. We don’t have to look far, however, to see that our current system, which I have termed corporate capitalism,3 has fundamental flaws. Indeed, the particular form of capitalism that has become entrenched in nearly the entire world in recent decades has serious internal conflicts.
A primary purpose of the corporate system is to generate as much profit as possible for those who own or control capital (generally defined as the means of production). To do this, business enterprises pursue two strategies. One is to constantly increase revenues; the other is to constantly decrease expenses. The resulting profits go almost exclusively to those who supply or manage capital. These individuals who compose the capitalist class are thus paid as much as possible. But on the other side of the ledger, a vital expense corporations seek to minimize is the cost of labor. They do this in two ways: first, by increasing productivity, which enables workers to produce more product per dollar spent on wages (and simultaneously reduces the number of workers needed); and second, by moving production to locations where wages are lower. Within legal and socially acceptable parameters, corporations seek to pay their productive workers as little as possible. At its foundation, then, corporate capitalism is a system explicitly designed to increase the gap between the owners or managers of capital and everyone else. Trickle-down economics, as this arrangement is sometimes called, is a fairly apt description. If those at the bottom are receiving a trickle, those at the top generally receive a flood.
And here is where the first serious internal conflict of corporate capitalism erupts. As inequality increases in a tax-averse and loosely regulated corporate economy, the wealthy class does not spend a proportionate share of its income on the products corporations need to sell in order to generate profit. Instead, directly or indirectly, these individuals invest a significant portion of their earnings in new production capacity, often in developing countries, expecting a bountiful return. The logical consequence is an excess of productive capacity feeding the U.S. economy, from both domestic and foreign sources—excess because the lower and middles classes don’t have enough disposable income to purchase this increased supply of goods and services. Compounding this shortfall of disposable income is the fact that a large portion of new productive capacity increases employment abroad at the expense of domestic wages, and workers in developing countries are simply not paid enough to purchase the consumer goods they are creating. (Neither are Americans, but as we shall see, we have found a way around this little speed bump on the road to artificial affluence.)
In his 1997 book One World, Ready or Not, William Greider demonstrated at length how and why nearly every major industry in the global economy—from automobiles and steel to pharmaceuticals and textiles—had achieved 20 to 50 percent overcapacity. This trend did not reverse itself in the next eleven years. After the 2008 financial crisis, production declined temporarily as consumers and businesses suddenly slowed their buying, but overcapacity did not vanish. It was merely lying fallow for the moment. But why such an excess in production capacity in the first place? Why didn’t the laws of supply and demand kick in and bring things into balance? In the “normal,” pre-2008 economic circumstances, instead of cutting back capacity, which economic theory suggests they should have done, corporations kept adding, investing heavily in the Third World, building new, lower-cost plants in a self-centered effort to ensure that overcapacity became their competitors’ problem.4
This is not an exclusively U.S. predicament. It affects all interconnected national economies. In Greider’s assessment, “The imperatives of industrial revolution create more supply faster than new demand, and the expanding productive capacity overruns the available market of consumers. Together and separately, no one in the global system—not governments or enterprises—is willing to face the gathering crisis of inadequate demand and to reverse the flows of incomes between capital and labor.”5
The net effect of this unequal wealth distribution and its resulting overcapacity is that the lower and middle classes have relatively less disposable income with which they can be expected to purchase the products corporations need to sell to stay in business. Having been thoroughly indoctrinated by corporate advertisers, however, the consumer classes know it is their responsibility to consume, and so they do—on credit. Indeed, according to Richard K. Green, director of the USC Lusk Center for Real Estate, consumer purchases accounted for 70 percent of U.S. gross domestic product (GDP) in 2009, up from 63 percent in the 1950s and 1960s, in spite of the increasingly unequal distribution of wealth over the same time frame. Not surprisingly, “the driver of [this increase in] consumption,” says Green “was consumer debt: the ratio of consumer debt to GDP rose from about 60 percent in 1995 to over 100 percent in 2007.”6 Ivan Lee, former head of Citigroup, cites the same statistics but adds that growth in consumer debt has far outpaced the growth of business debt in recent years: “U.S. households were accumulating debt at a pace equal to about one half of China’s national output every year, between 2001 and 2007. And China is the world’s third largest economy!”7 Most economic commentators admit that such debt levels are unsustainable, but the common solution is simply to say that up to 30 percent of this debt must be either paid off or written off. Unfortunately, this solution ignores the source of our exponentially expanding debt—the imbalance between capital and labor we have just discussed—as well as the inevitable result of not correcting this imbalance: namely, decreased demand, which causes the downward-spiraling domino effect of faltering industries, soaring unemployment, and even lower demand.
An economy that grows by financing consumption with increasing debt endures only until the consumer class extends itself too far, as it finally did in the United States with the 2008 subprime mortgage debacle. And then the house of (credit) cards starts to collapse. Alas, the remedy for this sickness prescribed by economic doctors on both sides of the political divide was a second dose of the very microbe that caused the malady in the first place: huge infusions of debt-generated cash to bail out faltering financial institutions and other industries. I say “alas” not because the bailout wasn’t necessary (as right-wing history rearrangers now claim) but because we put ourselves in this situation in the first place by feeding a rapidly expanding inequality.
In summary, a major malfunction of global corporate capitalism is the lopsided distribution of capital. This is the source of what has already become a dangerous predicament, and it will worsen unless we can fundamentally alter the way our businesses do business. Indeed, the recent “jobless recovery” (that has hopefully now ended), in which corporations became profitable again without hiring new employees, was another indication of how out of balance things have become.
If we were looking for a convenient scapegoat, we could blame Reaganomics8 for these dire circumstances, but this would be a simplistic overreaction to the depth and breadth of our current dilemma. The very fabric of capitalism practiced by the multinationals that dominate the global marketplace is woven from the illogical thread of supply-side economics. Reagan or no Reagan, corporate capitalism is a supply-oriented, growth-driven system. His shortsighted philosophy simply hastened the global economy on its inevitable course.
Is it any wonder that an economic system focused primarily on increasing supply should produce immense government debt? Someone has to buy the excess production, and consumers don’t have the wherewithal to do it, so the federal government, the “consumer of last resort,” has to pick up the tab, either through tax breaks and welfare spending to prop up individuals and corporations, bailouts of faltering industries, or direct spending. China and other foreign countries that do not share our national interests are now financing the U.S. devotion to inequality, but sooner or later these countries will decide that U.S. government bonds are not a wise investment, and then we will be forced to look at other options.
The primary problem with the supply-side doctrine is that the consumer half of the equation can never catch up. Why? Because too little of the profit the system generates is used to purchase all the products pouring into the marketplace; instead it is reinvested to create even more productive capacity. This produces an imbalance we can never “grow out of.” The growth is too lopsided: too much going to the owners and managers of capital, too little to the consumers. In fact, growth exacerbates the imbalance.
The Census Bureau uses a statistic called the Gini index to measure income inequality. Applying this measurement to the nations of the world reveals a fairly consistent pattern: those countries with the greatest economic equality (Central Europe, Scandinavia, Canada) generally have the strongest economies, while nations with less equality (South and Central America, Asia, Africa) tend to have weaker economies.9 The glaring exception is the United States, which despite its traditionally strong economy exhibits income inequality similar to that of a Third World country. And U.S. inequality has increased markedly in recent decades.
My point here is that over the long haul, inequality creates an inherently unsustainable economy. The preceding evaluation of our economic troubles is admittedly brief, but it may nevertheless have some relevance to the Lord’s insistence that we seek to establish economic equality.
1. Roger Terry, “Economic Equality: A Worldly Rationale for a Heavenly Requirement,” Sunstone 159 (June 2010): 36–50.
2. Scott Taylor, “Mormon Faithful Most Conservative Religious Group in U.S., Poll Finds,” Deseret News, January 11, 2010, A1.
3. Although a corporation can be structured in a variety of ways, including some very positive ones that I will mention in a later post, I use the term corporate capitalism to describe the form of ownership that almost exclusively prevails in the global economy today: large commercial entities that are owned not by the workers but by either a small group of owners or a host of absentee owners. This separation of ownership and productive labor lies at the heart of the inequality that defines modern capitalism.
4. William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism (New York: Simon & Schuster, 1997), 195.
5. Greider, One World, Ready or Not, 195.
6. Richard K. Green, “Don’t Count on the Consumer to Revive Real Estate Soon,” USC Lusk Center for Real Estate, http://blogs.usc.edu/lusk/2009/09/dont-count-on-the-consumer-to-revive-retail-real-estate-soon.html.
7. Ivan Lee, “How Deep a Hole Has the U.S. Dug for Itself?” http://english.caijing.com.cn/2009-04-20/110149909.html.
8. Reaganomics restored to prominence three incompatible conservative economic doctrines that had been discredited in the collapse of 1929. They were: monetarism (managing the economy by controlling the money supply), supply-side economics (reducing taxes on the wealthy so that they would invest in new production), and balancing the budget. William Greider sums up the theoretical incompatibilities as follows: “How could the supply-side tax cuts pump up economic growth if the monetarists’ money policy was simultaneously retarding it? How could the Reagan program lead to a balanced budget if the tax cuts were at the same time increasing the deficits?” William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country (New York: Touchstone, 1987), 366. Reagan’s economic advisers were drawn from all three conservative schools of economic thought and argued intensely among themselves, prompting Fed vice chairman Fred Schultz to refer to the whole affair as “a zoo.” Unfortunately, these conflicting theories, along with Reagan’s inability to reduce government spending, transformed America from the world’s largest creditor to the world’s largest debtor, a legacy that still burdens us.
9. See comparative United Nations and CIA statistics at “List of Countries by Income Equality,” http://en.wikipedia.org/wiki/List_of_countries_by_income_equality.