Scialabba on American Inequality

The intolerable inequalities we take for granted.
Elon Musk, in 2015 (CNS photo/Patrick T. Fallon, Reuters)

 

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Unless we have reached the end point of humankind’s moral development, it is pretty certain that the average educated human of the twenty-third century will look back at the average educated human of the twenty-first century and ask incredulously about a considerable number of our most cherished moral and political axioms, “How could they have believed that?” We do it every time a movie like Twelve Years a Slave or a novel like The Handmaid’s Tale or a play like Angels in America or a work of history like Bury My Heart at Wounded Knee or of journalism like Michael Harrington’s The Other America prompts us to ask, “How could decent, intelligent people have believed they were entitled to treat other human beings like that?”

So let’s interrogate some of our beliefs about political morality with the eyes of our descendants. Two four-letter words lie at the heart of contemporary America’s public morality: “free” and “fair.” “It’s a free country” is every American’s boast; “I only want a fair shake” is every American’s plea. I doubt I need to remind many Commonweal readers of the more flagrant forms of unfairness in our national life—that one American child in five lives below or near the poverty line; that somewhere between 80 and 90 percent of our economy’s productivity gains since 1980 have gone to the top 10 percent of the income distribution; that the top twenty-five hedge-fund managers earn more than all the nation’s kindergarten teachers combined; that 100,000 Americans will die for lack of health care over the next ten years in order to give a large tax cut to Americans with incomes above a half-million dollars; and so on and so on, down the long and shameful catalog. You all read the newspapers. Our twenty-third-century descendants may ask—they will ask—how we could have tolerated such unfairness; but they won’t ask how we could have believed such inequalities to be fair, because we don’t, most of us, believe them to be fair. Let’s instead consider a different question: whether our present-day ideals of fairness and freedom, even if we lived up to them, would satisfy our descendants.

The average CEO now earns around three hundred times as much as his or her average employee. Many people are dismayed at the contrast with the good old days of the Eisenhower administration, when CEOs earned only thirty times as much as their average employees and paid a far higher tax rate, and yet the country didn’t exactly seem to be going to the dogs. But let’s put aside our reaction to this striking change and ask more generally whether and why some people ought to earn more than others.

The usual answer, I suppose, is that people deserve whatever they get through the operation of supply and demand. The competitive marketplace quantifies the value that one’s efforts have for others. Some people (like doctors) employ vital skills; some people (like baseball players) give exceptional enjoyment; some people (like corporate executives) assume extra responsibilities; some people (like investors) forego luxury consumption. All such people are rewarded in proportion to the satisfaction they furnish others, as measured by others’ willingness to pay, directly or indirectly, for those satisfactions. No payment, no service. As Adam Smith wrote: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

 

Of course, it’s not that simple. Consider those doctors, baseball players, and executives I used as examples of economic agents who exchange services for money. In fact, they—like you, like me—live with only one foot in a market economy and the other in a gift economy. Any doctor or scientist or athlete or nurse or teacher or carpenter worth her salt feels at least occasionally that she is making a gift of her best efforts; and as with all such gifts, the chief reward is internal: the pleasures of giving and of exercising one’s faculties at their highest pitch.

In the private economy, you can do whatever you like—create beauty, pursue truth, help others—as long as what you like to do makes someone a profit.

Nowadays, the gift economy leads a precarious existence, appearing mostly in commencement-day addresses in which graduates are exhorted to follow their dreams, while most of the poor things are worrying frantically about how to pay their debts. The family is a gift economy, and so is culture, including both the arts and the sciences, as well as the shrinking public and nonprofit spheres. Ever since that most fateful of innovations, industrial mass production, has become virtually universal, the market economy has progressively squeezed out the gift economy. In a mature capitalist society, competition grows in both extent and intensity—that is, both between and within economic units. Creativity and generosity are not forbidden but they are no longer self-justifying; they are, on the contrary, subordinated, like all activity in the non-public sphere, to the goal of increasing shareholder value. In the private economy, you can do whatever you like—create beauty, pursue truth, help others—as long as what you like to do makes someone a profit.

I said earlier that people in a market economy are rewarded in proportion to others’ willingness to pay. That willingness to pay is the measure of value in a market economy; and so, to say that a person deserves what she earns is to say that there is at least a rough correspondence between the value of what she produces and the value of what she receives. As Milton Friedman, the high priest of American capitalism, put it: “The ethical principle [underlying] the distribution of income in a free-market society is, ‘To each according to what he and the instruments he owns produces.’”

This notion of desert rests on the assumption that two distinctions can be made rigorously: first, that one person’s input—to any output or outcome at all—can be sharply distinguished from all other inputs; second, that merit can be distinguished from luck—that is, that diligence, good judgment, talent, and other productive qualities and character traits are not fully attributable to biological endowment, early environment, education, and other contingent and therefore morally arbitrary sources. I don’t believe those distinctions hold up.

Let’s take that CEO, and let’s assume we know somehow that she produces thirty or three hundred times as much as her average employee. Causation is a transitive relation, and production is a kind of causation. If A is a cause of B, and B is a cause of C, then A is a cause of C. If A contributes to the production of B, and B contributes to the production of C, then A has contributed to the production of C. Now, who has contributed to the production of our CEO and, therefore, to the production of whatever she produces? Clearly, her parents, spouse, teachers, fellow students, predecessors, colleagues, rivals, and friends, along with all their parents, spouses, teachers, fellow students, predecessors, colleagues, rivals, and friends, along with all those who created the physical, organizational, and cultural resources employed in the production of whatever our CEO produces, along with all their parents, spouses, teachers, fellow students, predecessors, colleagues, rivals, and friends, and, it goes without saying, all their parents, spouses, teachers, and so on through what is, if one wants to insist on the point, an infinite chain of causes.

I do want to insist on the point. Einstein famously wrote: “I have all along been standing on the shoulders of giants.” So has our CEO. Exceptional contributions, whether to art, science, or the Gross National Product, are prepared for by the whole previous development of the field. People who make brilliant, courageous, and illuminating mistakes, which may be indispensable to the ultimate success of a rich and famous artist, scientist, or entrepreneur, are not, in a competitive market system, retrospectively and proportionately rewarded for their contributions, even though Friedman’s definition of justice would seem to require it.

My point is that all production is social production. The productive assets of every age are the joint product of all preceding ages, and all those born into the present are legitimately joint heirs of those assets. And the same arguments for joint rather than individual inheritance of wealth created in the past apply to the distribution of income in the present. If this seems counterintuitive, it is perhaps because there persists a deep and ancient distinction between luck and merit, according to which we deserve praise and reward for our good actions, though not for our good fortune. But what if our good actions are the results of our good fortune?

From a strictly moral point of view, no one deserves a reward for being born luckier than someone else.

Philosophy assimilates scientific discoveries slowly. As a result, it is always riddled with archaic concepts and images, survivals from an earlier scientific epoch. One such survival, it seems to me, is the concept of merit. It has always been partly recognized (it is, indeed, implicit in the word “gifted”) that talents and aptitudes come under the heading of luck rather than merit. But the inescapable implication of modern genetics, neurobiology, and psychiatry is that character, no less than talent, is inherited or else formed by very early experiences. Diligence, decisiveness, initiative, coolness under pressure—all these entrepreneurial virtues—are, no less than intellectual or manual abilities, part of one’s natural endowment. And from a strictly moral point of view, no one deserves a reward for being born luckier than someone else. I imagine the twenty-third century will ask: “Why did you make talent and character the measure of an individual’s desert rather than of her obligations? How could you have overlooked what is to us the obvious and elementary principle of fairness: from each according to her abilities, to each according to her need?”

I suggested earlier that causation is potentially an infinite regress. If that’s true, does anyone deserve anything? Actually, potentially infinite regressions are perfectly commonplace and don’t normally defeat us. We call a halt to them wherever it seems appropriate. Every parent has to decide when a child is genuinely curious and when it keeps asking “Why?” just to put off going to sleep. Every conscientious judge has to decide when to stop applying the maxim “To understand all is to forgive all,” even though it’s undoubtedly true. The point about these decisions is that they are arbitrary and fallible—in making them we rely on prudence rather than principle. So that when we decide to ignore the infinite chain of causes that produced the output of the CEO and pay her the whole market value of it, our decision is not a matter of justice, as Milton Friedman claimed it was.

 

I said “our decision,” but of course you and I don’t have anything to say about the just distribution of income and wealth. Indeed, the purpose of definitions like Milton Friedman’s is precisely to prevent such distributions from becoming a matter of public decision. In the 1940s, an influential senator, trying to stifle criticism of Harry Truman’s Cold War policies, demanded that “politics should stop at the water’s edge.” It worked then, and the proponents of the economic class war have had a similar success in preaching that democracy should stop at the economy’s edge. In principle, the state is governed according to the rule of one person, one vote. Economic enterprises such as corporations are not even democratic in principle: there, the rule is, one dollar of shareholder value, one vote. In both areas, it hardly needs pointing out, principles count for very little. None but the largest investors have any influence on corporate management; while in politics, rich donors, in effect, have many votes, and the rest of us have none.

The case of politics is particularly egregious. Two political scientists, Martin Gilens of Princeton and Benjamin Page of Northwestern, recently summarized years of detailed statistical research into the relation between what voters want and what we get:

In the United States, our findings indicate, the majority does not rule—at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagree with economic elites and/or with organized interests, they generally lose. Moreover…even when fairly large majorities of Americans favor policy change, they generally do not get it.… For Americans below the top of the income distribution, any association between preferences and policy outcomes is likely to reflect the extent to which their preferences [happen to] coincide with those of the affluent. Although responsiveness to the preferences of the affluent is [not] perfect, responsiveness to less-well-off Americans is virtually nonexistent.

If democracy means one-person-one-vote, in what situations is it morally requisite? Here is an answer from Robert Dahl, perhaps the most eminent American political scientist of the twentieth century. According to Dahl, members of any association are entitled to insist that it be governed democratically when the following conditions hold: the group must reach some decisions that are binding on all members; discussion and collective decision-making are feasible; membership is stable, i.e. those who make the decisions will be subject to the consequences; there is a rough equality of competence, i.e. members are capable of judging their own interests and also of judging which decisions they must delegate to experts.

Now, why don’t these conditions hold for corporations as well as for political communities? One possible objection might be that, unlike laws, management decisions are not binding—employees can quit. The answer to this objection is that in the real world, unlike the world of smoothly clearing labor markets and other fantasies of neoclassical economics, the costs of renouncing employment are frequently as great as the costs of renouncing citizenship. Another possible objection is that management requires special skills that workers may not possess. But surely workers are no less capable of hiring and supervising managers than shareholders are, and probably more so. Still another objection is based on the notorious “iron law of oligarchy,” according to which any sizable association tends to be dominated by those with the most aptitude and ambition. But the same holds true for political democracy, which no one proposes abandoning on that account. Finally, there is the moral objection: Aren’t shareholders entitled to control the firms they invest in? For the same reasons that entitlement theories fail to justify large inequalities in income—namely, that wealth is a social product and that differences in ability and character are morally arbitrary—they fail to justify large differences in the power to control our common economic destiny. And more: since one requirement of fair political competition is that all group members have equal access to relevant information about group decisions and equal opportunity to place items on the agenda for decision, it follows that in a society like ours, where economic resources translate into political resources, economic inequality must result in political inequality, a conclusion that is obvious to everyone except the conservative majority on the U.S. Supreme Court. Political democracy requires economic democracy; indeed, the distinction between the political and the economic is altogether artificial. How, our twenty-third-century descendants will ask us politely, but perhaps with a tinge of exasperation, did you manage to overlook that?

 

Every day the House Freedom Caucus warns sternly that it will not rest until the tens of millions of Americans who cannot afford proper health care without assistance from the rest of us are finally free to go without it.

If you have the misfortune of being a left-wing social critic, the most galling part of each day is encountering the ubiquitous self-designation of apologists for capitalism as champions of freedom. One day a Tea Party Congressman introduces the Economic Freedom Act, which would free the four thousand or so people who pay it from the estate tax and liberate the rest of us from Social Security and the minimum wage. The next day some foundation with “freedom” in its name gives an award to Charles Koch for his stalwart defense of Koch Industries’ freedom to render sizable areas of West Virginia, Arkansas, and Louisiana uninhabitable. And every day the House Freedom Caucus warns sternly that it will not rest until the tens of millions of Americans who cannot afford proper health care without assistance from the rest of us are finally free to go without it.

Where there is ideological smoke there is sometimes philosophical fire. The primitive intuitions about freedom to which defenders of laissez-faire capitalism appeal are widespread and at least superficially plausible. No one makes you shop at Walmart, after all, or work there either. If you don’t like it where you live, you’re free to move. If you don’t like what you’re hearing, change the channel. If you don’t like Fords, buy a Chevy. This model of life as a series of discrete purchases and of citizens as sovereign consumers seems to lie in the background of many Americans’ conviction that, whatever its other virtues or defects, capitalism relies exclusively or primarily on free choice and that regulations or taxes or public provision, even if sometimes justified, diminish freedom.

This everyday, rough-and-ready understanding of freedom was more or less adequate once, back when America was, uniquely in its time, neither a feudal nor a capitalist society. For a couple of centuries, because the land was rich and empty of any inhabitants whose rights a white man was obliged to respect, economic autonomy—the ability to make a living without selling one’s labor—was widely, almost universally possible. Those two centuries formed the American imagination, which has not yet adjusted to the traumatic fact that the possibility of individual self-reliance, and therefore of economic autonomy in the sense presupposed by laissez-faire ideology, is gone forever. When the means of making a living were largely unowned and available to all, economic agents could confront one another as equals, capable of entering into genuinely voluntary agreements and morally binding contracts. Today, by contrast, employment contracts typically involve members of two groups that are radically unequal, since one group has control over something the other must have access to in order to survive, but not vice versa. That is just another way of saying that we live in a class society. Our individualistic political rhetoric, appropriate to the frontier period but now a century and a half out of date, serves only to conceal the one-sided class warfare that its victims stubbornly refuse to acknowledge.

Those victims have some excuse; they are daily bombarded by laissez-faire ideology. Intellectuals, on the other hand, really ought to know better. The structural un-freedom inherent in class relations was authoritatively described by an early critic of capitalism and champion of labor unions. I’m referring to Adam Smith, who wrote in the first volume of The Wealth of Nations:

[In disputes between masters and workmen,] it is not difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes or at least does not prohibit their combinations, while it prohibits those of the workmen.…

We rarely hear, it has been said, of the combinations of masters though frequently of those of workmen. But whoever imagines, on this account, that employers rarely combine is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination not to raise the wages of labor above their actual rate.

Smith, a true friend of the working man, added this:

[T]he masters can hold out much longer. A landlord, a farmer, a master manufacturer, a merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.         

The human intellect is already more than adequate to dispose of apologetics for greed. It is the human heart that needs instruction.

If we could speak with our nineteenth-century counterparts, we might ask questions like: “Why did you believe it legitimate for one person to own another? Why did women seem to you incapable of self-determination? Why did you consider that political authority could be inherited, for example by monarchs or aristocrats?” If they defended their morality against ours, we might learn a good deal by trying to rebut them and vindicate our own moral intuitions.

Similarly, we should try to imagine which of our current beliefs might seem benighted to our twenty-third century descendants. I suspect they will want to ask us questions like: “Why did you base desert on performance, which can’t be measured and is in any case a function of one’s endowments? After all, no one deserves her endowments. Why did you make that strangely artificial distinction between the political and the economic? It looks as though your only purpose was to prevent economic democracy. Why did you define freedom so narrowly, as the absence of constraints on one person’s right to employ her capital but not on another person’s right to realize her capacities? Why did you assume that contracts between parties with radically unequal resources could be free?”

 

Freud wrote, in a rare hopeful vein:

The voice of the intellect is a soft one, but it does not rest until it has gained a hearing. Ultimately, after endlessly repeated rebuffs, it succeeds. This is one of the few points in which one may be optimistic about the future of humanity, but in itself it signifies not a little.

The human intellect is already more than adequate to dispose of apologetics for greed. It is the human heart that needs instruction. In Edward Bellamy’s Looking Backward (the second-best-selling book in the nineteenth century), Julian West, the nineteenth-century Bostonian who wakes up in the twenty-first century, is told by his guide, Dr. Leete, that in the new world the helpless and disabled receive exactly the same income as everyone else.

“The idea of charity on such a scale,” said Julian, “would have made our most enthusiastic philanthropists gasp.”

“If you had a sick brother at home,” replied Dr. Leete, “unable to work, would you feed him on less dainty food, and lodge and clothe him more poorly, than yourself? More likely you would give him the best of everything; nor would you think of calling it charity. Would not the word, in that connection, fill you with indignation?”

“Of course,” I answered, “but the cases are not parallel. There is a sense, no doubt, in which all men are brothers; but this general sort of brotherhood is not to be compared, except for rhetorical purposes, to the brotherhood of blood.”

“There speaks the nineteenth century,” exclaimed Dr. Leete. “Ah, Mr. West…if I were to give you, in one sentence, a key to what may seem the mysteries of our civilization as compared with that of your age, I should say that it is the fact that the solidarity of the race and the brotherhood of man, which to you were but fine phrases, are, to our thinking and feeling, ties as real and as vital as physical fraternity.”

This passage is a bridge to a surely very remote utopian future. But it also echoes an even more distant and yet very familiar past—the Sermon on the Mount, with its promise that “blessed are those that hunger and thirst for justice, for they will be satisfied.” And later in the same Gospel, in the parable of the sheep and the goats, Jesus almost seems to have been admonishing Julian West and his hard-hearted contemporaries: “Whatever you do to the least of my brothers and sisters”—to the poorest of the poor—“you do to me.” Those who hunger and thirst for justice won’t be satisfied for a great while yet, except in imagination. But even that, as Freud said, signifies not a little.

Published in the January 2023 issue: 

George Scialabba is a frequent contributor to Commonweal. His selected essays, Only a Voice, will be published in 2023 by Verso.
 

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