Of
Course the Rich Are Getting Richer (Part 2)
The
Irrelevance of Right and Left
Neither major political
orientation offers a viable solution to the growing economic inequality that
prevails in modern America. The conservatives insist that the best course is
just to leave the beast alone, and everyone will prosper. This strategy is
arguable at best. If we leave the beast alone, the gap between rich and poor
will widen at an accelerating pace, companies will continue to replace workers
with technology in their drive to increase productivity, our ability to consume
all that we produce will continue to shrink, disposable income will drop while
consumer debt rises, and we shall not prosper. The standard of living for most
Americans will slip as the middle class continues to lose weight.
The liberal response, on the
other hand, attempts to alter only the effects, and not the functioning,
of capitalism, by redistributing income—in essence, to paint stripes on a
baboon and then expect it to behave like a zebra. For many reasons, the welfare
state has proved itself a major disappointment.
No true liberal, of course, would
suggest that everyone be made absolutely equal in economic matters. The true,
rational liberal suggests only that we narrow the wide disparity between rich
and poor by redistributing money, the fruit of capital ownership, to bring the
very poor up to a certain minimum level of consumptive (though not productive)
capacity.
Both conservatives and liberals
tend to look at economics as a game. Conservatives insist that there must be
both winners and losers. If we were to make it so nobody lost, they argue, we
would also make it so nobody could win. And then the game would become
pointless, like playing tennis without an opponent. The liberals, of course,
don’t want to do away with the game—they just want to spot the weaker opponent
a few points, possibly a whole set, so that the inevitable losers don’t get
trounced so badly. No shutouts allowed in the game of liberal economics.
The principal flaw of income
redistribution programs is that they create dependency among the poor and
sabotage the motivation and creativity of entrepreneurs and executives. Free
handouts never motivated anyone to become a contributing member of society, and
taking away the apples from a hard-working fruit farmer’s tree may make him
scratch his head and honestly wonder why he’s in the business in the first
place.
Is there an alternative, then, to
the flawed liberal and conservative economic strategies? Of course there is,
and both sides would probably wax indignant over it, because it strikes at the
root of the increasing inequality that both sides, in their own way, yearn to
preserve. This alternative, however, is both logical and consistent with our
American ideals: Instead of fixing the score by redistributing income, the
fruit of capitalism, we should instead consider leveling the playing field by
redistributing capital, the source of income and the only factor that inspires
motivation and creates genuine opportunity.
Finding
a Balance
Adam Smith theorized that the
inherent self-interest of people would promote the interest of society and
create an equalizing effect by benefitting both sides in any economic
transaction. This would transpire as if an “invisible hand” were guiding their
actions, causing them to “promote an end which was no part of [their] intention.”1
The problem we discover when we try to apply this theory to transactions in our
modern economic system is that Smith was talking about a far different society
than the one we live in. In Smith’s day, capital ownership was far more limited
and widespread. Today, the gargantuan businesses and bureaucracies of modern
capitalism have dramatically shifted the balance of power in society,
effectively paralyzing Smith’s invisible hand and negating any widespread
societal benefit that might accrue through the economic interaction of two
self-interested parties.
There is no mutual benefit, for
instance, and society as a whole is worse off, when an impersonal organization
has so much power that it can use, abuse, fire, or require a dehumanizing
conformity from individual employees, whose only real recourse is to quit. In
theory, Smith’s invisible hand operated between two parties, neither of which
was significantly more powerful than the other. In this circumstance, a balance
would arise in terms of benefit, not just power. Equality of opportunity and
of outcome would be served. We can realize such equality, of course, only when
ownership is both widespread and limited. Democracy and equality are all about
ownership. You can’t really have either without it.
Achieving true democracy and
functional equality is virtually impossible where opportunities are divided, as
Peter Block points out, between a class of executives who are paid as much as
possible and a lower class of laborers who are paid as little as possible. This
double-standard pay system creates a situation in which workers are, by
definition, part of the problem, and not a group that stands to benefit from
any of top management’s solutions. Workers are seen as a cost, something that
eats away at profit and must be minimized as much as possible.
This schizophrenic wage system
illustrates perfectly the gulf in our society between capitalists and
noncapitalists. Capitalists, we might well say, are those who are made independent
because the system conspires to pay them as much as possible. They can
accumulate capital, lend or invest money, and earn interest. Noncapitalists,
then, are those who are made dependent by a system that is designed to
pay them as little as possible. They accumulate debt, pay interest, and never
really own their time, productive energy, or technical skills. For them, the
invisible hand is not only invisible, it is nonexistent. No true mutual benefit
ensues, because they cannot exchange anything meaningful from a position of
equal strength.
The
Organizational Society
Widespread and limited ownership
of capital is a foreign idea in our modern-day capitalist society. We live in
an organizational world, one in which capital is controlled by a few hands and
large, impersonal organizations dictate not only the work-lives of millions of
Americans, but also our lives away from work: everything from our entertainment
to the consumer-based identities we buy off the shelf come from large
organizations.
Immense organizations and the
rules that govern their ownership and management prevent any true democracy or
equality from existing in modern America. These gargantuan businesses and
bureaucracies have dramatically shifted the balance of power in our nation,
creating a divisive society of haves and have-nots. We have come a long way
from the original blueprint.
The historian Paul Johnson points
out that the Declaration of Independence “laid down what no other political
document in the whole of history had yet claimed, that men were ‘endowed by
their Creator’ with the right not only to ‘Life’ and ‘Liberty’ but the
pursuit of Happiness. By this last, what the Founding Fathers had in mind
was the acquisition of property, which they saw as the precondition of human
felicity. Without widely dispersed property, true individual independence, and
so a sound Republic, was impossible.”2
This perception that small but
universal ownership is necessary in a truly free society soon withered,
however, before the rising sun of capitalist conquest, and the focus of those
interested in improving the total human picture shifted from equal ownership,
which was given up as a practical impossibility, to a vain (and still ongoing) attempt
to create a viable substitute for true equality—in short, a counterfeit.
Huge corporations, says
Christopher Lasch, as well as the wage system and a more and more intricate
subdivision of labor, made it pointless to restore the independence of individual
proprietorship. Instead of giving the wage earner a piece of the action (a
piece of the capital), “enlightened social policy” would make his job secure,
his working conditions tolerable, and his wages equitable. “Hardly anyone asked
any more whether freedom was consistent with hired labor. People groped
instead, in effect, for a moral and social equivalent of the widespread
property ownership once considered indispensable to the success of democracy.”
But redistributing income, guaranteeing job security, and turning the working
classes into consumers are nothing more than pale substitutes for property
ownership; for none of these strategies produce “the kind of active,
enterprising citizenry envisioned by nineteenth-century democrats.”3
An “active, enterprising
citizenry” is only possible when the citizens own substantial quantities of
capital—so that they can be producers. By contrast, a society weighted down by
an immense host of practical noncapitalists must be, by definition, a society
of subordinate role-players and consumers.
If we do not fully own our time,
energy, skills, and, most of all, our production, how can we possibly achieve
the American Dream? The ideals that make up that Dream—equality, liberty,
democracy, unity, human dignity, justice, even material prosperity—are not
fully available to us if we do not own the fundamental building blocks of our
lives. The American Dream, as discussed earlier, is not simply an economic
wish. It is a much grander ideal that encompasses every aspect of life. And if
we are not completely free during a third of our waking hours, then even our
lives away from work lose some of their meaning.
What we have not learned in all
these years is that you can’t disconnect a person’s political, social, and
economic circumstances without damaging all three. A society filled with
authoritarian businesses restricts in a very real way a person’s political
influence and social development. Hired laborers, regardless of how well
compensated they are, will never achieve the levels of independence, community
spirit, and equality necessary to make democracy work—either in the nation as a
whole or in the organizations where they labor.
___________________
1.
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations,
ed. Edwin Cannan (New York: Modern Library, [1776] 1937), 423.
2.
Paul Johnson, “An
Awakened Conscience,” Forbes, September 14, 1992, 183.
3. Christopher Lasch, The True and Only Heaven (New
York: Norton, 1991), 207–8, 224–25.
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