One thing that anarchists get told a lot by people who seem to think it’s the first time anyone’s thought to say it to them is: “Democracy is the worst form of government, except for all the others.”
Churchill’s full quote is actually, “Democracy is the worst form of government, except for all the others that have been tried.” This is a bit more reasonable, I think, and it’s worth remembering that the same thing could have been said of monarchy before democracy was tried.
But either way, the sentiment is roughly the same: “No one’s saying things are perfect, but this is the best arrangement possible.” They say it about capitalism and about liberal democracy, and it’s a handy rhetorical device for dismissing genuine complaints about capitalism and liberal democracy.
That “this is the best arrangement possible” is not dissimilar to the argument of some religious folk, that this is the “best of all possible worlds”. It’s even used as an argument for the existence of God – “How else could things be so perfect, like the distance of the Earth from the Sun, just right for life to exist, except if it was planned?”
Schopenhauer (yes, him again) once suggested that the same arguments could be used to describe this as the worst of all possible worlds. Yes, we’re just close enough and not too far from the sun that life can exist, and all of the suffering that comes with it. Any closer to or farther from the sun and suffering wouldn’t exist. Conditions are set up so that we are able to experience just enough happiness to know what we’re missing out on when our bodies inevitably degrade and we suffer and die – but not before having had children who can keep the suffering going on into the future.
I’m not as pessimistic about the world in this regard as Old Grumpy Face was, but I like the form of his argument. When I’m told that liberal democracy and capitalism are the best possible arrangement, I wonder if the opposite is not true. Perhaps the situation in liberal democracies and global capitalism is kept by its own internal pressures precisely as bad as it can possibly be without completely collapsing.
So, last week I gave a kind of sketch of capitalism and one problem I have with it – that it rewards some people for doing nothing, to varying degrees, and in so doing it robs people who are contributing through their work. Obviously a lot has been left out – things like the question of the value of risk-taking and how most capital is basically a kind of stored-up labour, etc.
There are two main ways that political and economic systems are criticised or justified – the fairness of the interactions and the fairness of the outcome. Someone who focuses on the interactions tends to justify the outcome by pointing to the interaction that led to it. Someone who focuses on the outcome tends to justify the interactions by pointing to the resulting outcome.
I’ve mainly focused so far on my views of the fairness of the interactions – complaining that it’s not right that some people benefit more than they contribute and others benefit less than they contribute – without really talking about the consequences of that system. I suppose I mentioned briefly that there’s a Rawlsian case to be made for capitalism in terms of outcome – that what I call unfair interactions actually result in better outcomes for the least advantaged in society, and so those interactions are actually preferable to what I would call fair ones.
I want to approach the same situation from a different angle today, and hopefully make my position and concerns clearer.
So I’m going to talk a bit about what’s technically possible and practically impossible in our world today, and why I think this is the case for each.
After World War II, Bertrand Russell observed in his essay In Praise of Idleness that the war had done some interesting things to the economy. The working population of Britain (working-age men) had gone off to war for six years, and the women at home had taken over the jobs necessary not only to keeping the country running at home, but also providing the economic and productive requirements of the war effort. When the war ended and the men came home (their numbers sadly diminished, but still a sizeable population), there were almost twice as many workers in the country and the same amount of work to do.
He asked a fairly simple question: If the workforce has doubled and the requirements are the same, why wasn’t the standard working day halved to four hours?
I’ll try to explain my view of this.
Firstly, you’ve got the workforce, the people who are of working age and capable of work. Collectively, they are able to create wealth through doing work. It is well worth briefly noting that this includes those people who are, in our current situation, unpaid workers, such as men and women running households.
Next, you’ve got technology. Technology is an amplifier of human labour. A simple example would be tilling a field. How much ground one person can till in a day gets larger the better the tools she’s using. With a hand tool, maybe it takes a week. With an animal-drawn till, one day. With a tractor-drawn till, an hour. It’s the same person, expending less effort and/or in less time, to achieve the same result. Or, put another way, the same person, expending the same effort, in the same time, can create much greater value.
And you’ve got how many hours a week on average people are working. For example, in theory, in most Western countries, we’ve got a 40-hour work week.
So you’ve got people using technology for a certain amount of time each week to create wealth. That’s the supply side of the equation.
On the demand side, you’ve got the whole population – not just the workforce. And they want necessities first – food, shelter, education, healthcare, etc. – and they also want other things too, which I’ll call luxuries. “Luxuries” here include anything that isn’t a necessity, so some of them aren’t particularly luxuriant: anything from a cold beer in a green glass bottle all the way up to… Well, basically anything. All the way up to tourist trips to Mars, whatever’s possible at the time.
And you’ve also got another thing on the demand side, which is investment in the kinds of things that will be used by workers to make more wealth in the future – things like equipment and innovation. Those are things which are not immediately consumed or enjoyed, but amplify and enable work in the future.
Very basically, it looks like this:
[Total population x percentage that work] x technology x hours in a working week = total population x [necessities:luxuries] + technological improvement.
Over time, some of these things change, some can’t change and some can change but don’t.
One thing that’s always changing is population. It’s always growing. But that grows things on both sides of the equation. It grows the number of people who can work and it grows the (larger) number of people who consume necessities and luxuries. So it kind of evens out, unless there’s a change in the proportion of people who can work, such as when people live longer but can’t work longer.
One thing that changed a lot in the past, but hasn’t changed (in theory) much recently in the developed world is how many hours a week people work on average.
Technology is always changing, always growing in its power as an amplifier of the productive power of human labour. The simple example of improvements in farming technology given above is echoed throughout all forms of work. Some create larger leaps in power than others – the steam engine, assembly line, automation, etc.
So that leaves the demand for necessities and the demand for luxuries.
What constitutes necessities for a human being stays fairly static. Not completely, though. For example, there was certainly a time when education would not have been considered a human necessity, and I’ve listed it as something I consider a basic necessity today. I’m actually going to define “necessities” as “the basic requirements of living a human life”. This is intentionally vague. I actually consider internet access to be a basic requirement of living a human life these days.
The only important thing for our purposes here is that while our definition of necessities may grow over time, and have grown over time, they grow arithmetically. Which is to say that they increase at a fairly constant rate when they increase at all. Similarly with the proportion of non-working to working population – when it changes, it changes arithmetically.
This is important because the only other element which is changing here is technology, which grows exponentially. All that matters for my argument is that technology grows its labour-amplifying power at a greater rate than our definition of necessities grows, but it’s all the more powerful a point because of just how much more greater a rate it is.
So, what does all of this mean?
It means that there was a point in history where everyone who could work, working 40 hours a week with the technology available at the time, could not have provided the necessities of the whole population.
It means that as technology grew, slowly at first, in its capacity as an amplifier of human labour, there was (or will be) reached a point in history where everyone working 40 hours a week could have provided the necessities of the whole population.
Similarly, when the power of technology doubled after that, a point would be reached where everyone working 20 hours a week could provide the necessities of the whole population.
And if it doubled again, everyone working 10 hours a week could provide the necessities. And so on.
Let’s ignore for a moment the question of whether or not we already have reached any of these hypothetical (but inevitable) points.
Let’s leave that whole thought at that for now.
Let’s look at a more specific instance of technological improvement’s effect on people working to create value. Think about the effects of ATM machines on people who work as bank tellers. ATMs come along and do 90% of the work performed by bank tellers. (Much fewer people are required to do the work of maintaining the robots.) What are the bank tellers told?
What they’re not told is this: “Robots can do your job now. Go home and pursue whatever creative, religious, social, recreational and artistic endeavours you want to pursue.”
What they’re told is this: “Robots can do your job now. Find a new job.”
And so they do. They find a new job, perhaps reapplying their existing skills to a different job or retraining and applying new skills to a different job, or perhaps finding no job at all.
Apply that same scenario every time technology increases the productive power of human labour. The same or more value can be generated by much fewer people’s work. Those whose labour is rendered redundant find new jobs. Over and over. Meanwhile, as the economy grows, new jobs are being created that make use of the available labour – the proportion of workers to unemployed varies, but not exponentially.
Now, the work that a person does either produces necessities or produces luxuries. But the demand for necessities doesn’t really grow, and if it does (by an expanding definition of necessity), it does so arithmetically. Meanwhile, the productive power of the population increases exponentially through technological advance.
So what grows, instead, is the production and consumption of luxuries. Those whose work created necessities, once they are made redundant by technological advances, are more and more likely to find new jobs creating luxuries than creating necessities. And they have to work, because they have to purchase necessities in exchange for the luxury value they are now creating.
Again, on the scale of the individual instance, it doesn’t seem like a big deal – go find a new job. Writ large, if the trend is taken to its logical conclusion, we will reach a point where a very small portion of the population is working 40 hours a week to create necessities, while the rest of the working population is working 40 hours a week creating luxuries. And, of course, because the reward for almost every person’s work is being split between the worker and the owner, the capital-owning class grows in its purchasing power, and the proportion of that power is spent on luxuries increases.
My problem with this scenario is not that I begrudge people the enjoyment of luxuries. I enjoy them myself. My problem is that I contrast it against what is technically possible.
What is technically possible, as I suggested earlier, is that as technology increases in its role as an amplifier of the productive output of human labour, the same output can be achieved with less work. That “less work” could be expressed as fewer people working the same number of hours or the same number of people working fewer hours.
I’m saying that there is enough to go around, at a certain inevitable point, where everyone in the world could be working 10-hour weeks and produce enough necessity-meeting wealth for everyone to enjoy the basic requirements of living a human life. And that seems a very much more desirable scenario than the one produced by the trend of our status quo described above.
And that same desirable outcome which is made technically possible by technological advancement is rendered practically impossible by the system of wealth production in which we currently live.
I believe we’ve already reached that point. But even if we hadn’t, reaching it would still be inevitable, and the (vastly more) desirable scenario it makes possible would still be rendered impossible under the current system. There is no future where humans are freed from labour by technology, where automation replaces rather than displaces workers, that does not have in its past the replacement of our current economic system by another.
I’ll say one more thing here before wrapping up this bit.
The desirable scenario I’m describing is not one where the happiness of the few is reduced in favour of the happiness of the many. There’s a jokey line I like: “Money doesn’t buy happiness – someone with $50 million is no happier than someone with $20 million.” Labour-created wealth, in its form as supplying the necessities of life and in its form as supplying luxuries in life, is subject to the law of diminishing returns when it comes to happiness. Beyond a certain point, somewhere just above however we define necessity, its power to increase happiness drops off exponentially.
This is also what I mean by there is enough to go around.
I first explained my reasons for not voting in 2005, in an article about anarchism for Auckland University’s student magazine Craccum. Three years later, after the election of John Key’s National government, a few friends took me aside and told me that they had met a number of young people on the campaign trail who had declared themselves actively non-voters. They referenced my article as having been a contributing factor to their point of view.
I suspect that my friends were telling me this in the context of kindly explaining to me the damage that I had done.
I am more wary than most (I’d like to think) about the dangers of confirmation bias – that, in the words of Robert Anton Wilson, “What the Thinker things, the Prover proves.” As an anarchist, I unavoidably see the world through an anarchist lens, and a number of other lenses besides. But sight is impossible with no lens at all, so I just try to keep it mind.
That said, while my views have been challenged and tested through argument, dialogue, reflection and observation, the essentials of my views (on this, at least) have not changed radically in the past nine years. I was young and foolish then; I feel old and foolish now.
I’ve known I was going to write something like this for a while. Three things have put me off. 1) Voting is sacrosanct and non-voting is heresy in our society, and being a heretic looks tiresome. 2) I am a hypocrite and quite lazy. And 3) I know that I could never fit all of my relevant views into a single blog post.
So what I’m going to do is, I’m going to write several posts instead, and I’m going to work on being a lazy hypocrite, and I’m going to suck it up if heresy is tiresome.
This is the first post. Let’s see how it goes.
The reason I don’t vote is because I believe that to vote is to implicitly condone an unjust system to which I fundamentally and morally object.
Which system? What objection? Condone how? And so on.
The systems are capitalism and authority, which are actually so integrated and mutually dependent that they can be treated as a single system to which I object.
That didn’t take long, did it?
You see my predicament. How am I to continue? How can I explain my objection to capitalism without explaining what I understand capitalism to mean? But how can I explain what I understand capitalism to mean while I’m being asked what I mean by authority? How can I be opposed to capitalism, but not in favour of taxation? How can I be concerned with justice and not vote in favour of it? How can I claim that capitalism and authority are a single system when the authority of the state constantly interferes with capitalism? And so on.
I’m going to compare myself to Schopenhauer. Indulge me. Actually, “indulge me” is kind of paraphrasing the thing about Schopenhauer that I want to reference. He was a bitter, arrogant man, and prefaced his greatest work by basically saying, “There are things at the start that will only make sense once you’ve read things at the end.” He actually went on to say that anyone who wants to understand where he’s coming from should read his book cover to cover twice, and only after reading his doctoral thesis, all of Plato, and some Indian mystical literature to boot.
I’ll just leave it that, though – indulge me. I can’t explain any of my thoughts on these things without explaining all of my thoughts on these things. Please save your questions for the end of the talk. And even then, my thoughts are a constant work in progress and God help me if that ever ceases to be the case.
I’ll start with a sketch of what I mean by capitalism. Let’s try that.
I believe that people should be paid for the work that they do. That’s fairly uncontentious. Not many people would disagree with that.
The statement comes with a few consequences. For example, I therefore don’t believe that someone who does no work has earned any pay. Also fairly uncontentious.
I’m also quite happy with the idea that the value of someone’s work should be determined by how much people will pay for its product. Somebody who works very hard to create a good or service that no one wants has, for all intents and purposes, created no value and earned no reward for their work. Someone who works very little to create a product or service that someone will pay a lot of money for has created a lot of value and earned a large reward for their work.
So I like markets determining the value of goods and services. I like that for three reasons. Firstly, I like that it incentivises people to use their efforts, talents and education to create things that people want. Secondly, I like that it does this organically, without any third party interfering and determining the value of the good or service. (I’m going to call goods and services “products” from now on.) And finally, it seems fair to me.
Let’s bracket that for a moment.
The thing is, the goods and services – the products – that people pay for are almost never the result of just one person’s contribution. So let’s imagine a fairly simple scenario, an idealised hypothetical, where two people work to create something of value.
If both people contribute equally, both contribute 50% of the value to the product, they have both earned 50% of the value of that product.
You may be thinking, “Now, I’ll stop you right there. How on earth do the we measure the contribution of these two people? How do we know that it’s 50%?” Fair enough. But for now, all that’s necessary is to agree to the principle of the thing. How we determine the proportion of contribution may be difficult, but before we worry about that, let’s agree to the principle.
If two people do half the work each, they’ve earned half the reward each. In principle. And I think most of us agree to that principle, even if we may disagree on what constitutes contribution. Because you’re right: in practice, it is not that simple. Is it about how many hours were contributed each? Is it about the skill of the contribution of one as compared to another? Was some of the work extremely unpleasant and the other part pleasant?
But if we can agree to the principle, then we can agree that the question of how we measure that contribution is a question of how to apply that principle. Objections to any suggested method of determining contribution will come in the form of: “But that’s not fair – that method does not accurately measure contribution.” Objections to the method reaffirm the principle.
The reason that this is important is that while we may disagree on how contribution is measured, we can agree that someone who has contributed nothing deserves nothing. We can agree that the least fair distribution of reward is one where someone who contributed nothing enjoys all of the reward while those who contributed something enjoy none of it. Slavery might be imagined as an example of this, or work done under the orders of a dictator.
And from there, we have a kind of principle for determining the fairness of a distribution of reward – it is fair in so far as everyone is rewarded proportionately to their contribution and it is unfair in so far as anyone is rewarded more than their contribution, because one person being rewarded more means others being rewarded less.
And in fact, in any situation where someone is being rewarded for contributing nothing, any reduction in their share of the reward will be a step towards a fair distribution of reward to the people who did the work.
The history of the world is full of people being rewarded for less than their contribution by work, by labour. Despotism, monarchy, feudalism, slavery – these are all instances where it’s clear that a few individuals are benefiting from the work of others either without contributing themselves or contributing proportionately much less than they benefit.
Of course, in the real world, things are much more complex than our imaginary two people doing half the work each. Two people creating something that sells don’t exist in a vacuum. Probably they take materials from elsewhere and work on them to make them more valuable. If we’re making a hammer, we need metal for the head and wood for the handle. The ore had to be mined, then smelted, then delivered. The mining equipment had to be built (from more metal), and the smelter had to be powered, and the truck had to be built, delivered, fuelled and driven. And so on.
As we expand the picture out more and more to encompass all of the different elements, we find more and more contributions, each a new person who’s contributing through their work and therefore deserves some of the reward. The complexity makes the question of how to justly distribute the reward more difficult, but that question is itself still a reaffirmation of the basic principle – what’s fair is what’s proportionate to their contribution, and anyone who has contributed nothing through their work deserves nothing as a reward.
To many people, this is Socialism 101. I just find that there’s a lot of disagreement on what particular words like “socialism” mean, so I want to explain my thinking in my own words.
When most people think of capitalism, they think of markets – usually the market that determines the value of a product, the sales market. And so when I say I have a problem with capitalism, they think I have a problem with this means of determining the value of a product. And the only alternative they can imagine of determining the value of a product (and therefore the incentive for people to create one product rather than another) is some kind of central planning authority, which they often associate with the word “socialism”.
Obviously, I don’t have a problem with the sales market as a means of determining the value of a product (good or service), and I consider it to be an elegant mechanism for incentivising work.
When I talk about objecting to capitalism, what I’m objecting to is not markets, but rather the private ownership of the means of production. That’s a particular kind of ownership that we have. On its most basic level, it’s a licence to demand payment in exchange for the use of those things which are the other part of the equation of creating value, the part of the equation that sits alongside labour.
It’s things like the land on which people live or work, the equipment they use in doing their work, and in some cases the techniques being used in doing their work. It encompasses all of the rest of what is necessary to create value through labour. That’s capital. Labour + capital = value.
The reason I call capital ownership a licence is because what it represents is the ability for someone to call in the force of the State to prevent someone from using those capital goods to create value. It means that if I own a building or a piece of equipment or the patent to a technique and you try to use any of those things to create value through your work, even if you bring your own raw materials, I can call the police to stop you and punish you.
That’s what it is in a practical sense. That’s what it would look like to an alien who observed someone sneaking into a factory at night and doing some work and getting accosted by the police and locked up. “Why did that happen?” asks the alien. “Well,” replies the owner. “That factory is mine.”
It’s also what would happen if the person working in the factory during the day took what they had made and sold it themselves. That would be theft, because the owner of the capital goods owns whatever is made with them, and the worker has negotiated pay in exchange for their labour.
On the face of it, this appears to many people like just another example of the kind of fair exchange I talked about earlier. After all, the labourer has found someone to pay for the product of their labour – their service – for as much as they can get. It’s another market, and I’ve already said I like markets. Another way of looking at it is that the capital owner has found in the worker a buyer for something they’re offering – the use of their means of production. The price of the use is the difference between what the worker is paid and what the product of their labour will sell for on the sales market.
The difference between the worker’s pay and the cost of raw materials on the one hand, and the value of the product of the work on the other hand, is profit.
This system has a lot going for it. For one, it answers the question of how to decide who is going to use capital goods when they’re scarce – there’s not enough of them to go around. Not only that, it provides a mechanic for incentivising the most productive labour being applied to the creation of value in our society (better workers). It still incentivises workers to get good at the kinds of labour that is most valuable to society. It continues to service the changing needs and desires of the sales market, by incentivising (via profit) the direction of both labour and the use of capital goods to create those products which are most in demand. And it provides an incentive for innovation – it promises a reward for taking the risk inherent in directing labour and capital into creating new kinds of goods and services.
But let’s go back to our first principle. We have now a situation where the reward for the work is distributed between the workers on one hand (most immediately their pay, and indirectly the pay of those who contributed at the preceding steps of creating the materials used by the workers) – and the owners of the capital goods (profit). If we are to ask if this distribution of reward is just, we are still asking if the distribution of reward is proportionate to the contribution through labour.
What is the capital owner contributing? Actually, to varying degrees, several things. The entrepreneur who starts a business, grows it, manages it – she or he is contributing a lot of value, often vastly more in terms of time, effort, skill and talent than any of her or his employees. Still bracketing the question of measuring contribution, we can agree that this person deserves a reward for their efforts, possibly a large reward, a large portion of the value created by the work.
That’s the most extreme example of capital ownership, however. And I use it partly because I have a huge amount of respect for entrepreneurs and partly because they are a very obvious example of contributing greatly through work.
I also use it because whenever I question the rewards our society provides to capital owners, the mighty small businessperson is immediately brought up. The hours they work, the stress of not knowing if their business will succeed, the jobs they create, etc. I am always reassured when this example is brought up to justify the rewards of capital ownership, because they almost exclusively focus on the contribution of the owner through labour. I believe that this is because the people I speak to share my basic principle of a just distribution of reward, and so they think of the hardest-working capital owner they can. They believe, quite rightly, that I will be convinced that such a person has earned their reward.
But ultimately, our society is not rewarding the hard-working entrepreneur because she or he is hard-working. Our society is rewarding the hard-working entrepreneur for owning capital which increases in value through their work, and also through the work of their employees.
The two (reward for work and reward for ownership) coincide for a long time. Actually, for a long time our society often rewards them proportionately much less than the value they are creating through their work – many small businesspeople barely draw a salary while they pay their workers as much as possible. Society is in debt to them for a long time before they start to be rewarded proportionately to their contribution – if at all, as the creator of a failed venture is not rewarded well at all.
But the difference is that, because they are actually being rewarded through ownership rather than for their work, and because ownership is a licence to own the product of other people’s labour, and because ownership exists outside of contribution through labour, in the case of a successful business, the entrepreneur will end up continuing to reap rewards proportionately greater than their contribution through labour. Because value will continue to be created by the people doing the work, and the owner will continue to profit by virtue of his or her ownership.
And at the point where the owner has received proportionately more reward than his or her proportion through labour, as compared to the other people doing work, the owner’s wealth has become unjust in terms of the principle to which we have agreed. (In principle. Being unable to accurately measure where that point sits does not prevent us from agreeing that in principle it must sit somewhere.)
As I said, I have chosen for that first example the most difficult. It is difficult firstly because they are the hardest-working, most value-contributing capital owners, and so are the most deserving of reward by my standards. And it is difficult secondly because they are the most obvious examples of the element of risk in the investment of capital into the creation of value.
But while I have to ask that we bracket the question of risk for now, I have chosen that most sympathetic example to demonstrate how even in this case, capital ownership results in the long term in an unjust allocation of reward in our society, by the principle to which I believe most people subscribe, however difficult it is to practically measure.
Because every other example of capital ownership in our society is not nearly so sympathetic as the hard-working entrepreneurial small businessperson.
Capital ownership is a licence to be rewarded for the work of others. Let’s look at the next step down. How else can someone reach a point where they are rewarded for ownership rather than work?
The next fuzziest example is the worker who saves and invests. That’s someone who does not spend all of what they are paid, and invests it in various forms, from bank savings accounts to mutual funds to shares to purchasing rental properties. In some ways, this is an even more difficult example than the entrepreneur, because while we may admire the entrepreneur from afar, most people reading this (including myself) can actually see themselves in this category or are already there to some degree.
The idea of saving and investment is that when you work for your money, and spend less than you are paid, you can have your money work for you. Usually in an indirect way, through intermediaries, we place our money into situations where it is invested on our behalf and we indirectly own capital which is generating returns.
That investment generates returns because we are indirectly owning the capital which other people are using to create value, through their contribution of work. The big difference between us and the entrepreneur is that we’ve already done our work and have been rewarded for it. We’re taking that reward and purchasing licences to own a portion of other people’s work.
What we have done is, through work and saving, shifted ourselves slightly across that line between people who are rewarded for contributing through labour and people who are rewarded for owning – which is to say, rewarded without contributing. Of course, we have contributed – we have worked. But through investment, we are able to be rewarded for more than our contribution. For most of us, this is a very small reward, in contrast with how much we are rewarded for our work.
So let’s apply that principle again here. Are we being rewarded proportionately more than our contribution through work? If we say no, it’s because we’re recognising that our original contribution was not justly rewarded – and true enough, because almost everyone’s reward has already been divvied up between them and the owners of the businesses in which they worked. All we’re doing now is getting our just reward after not getting it previously. And if we say yes, it’s because we’re recognising that we are unjustly benefiting from the work of others.
That’s probably most obvious in the case of a rental property. You work, scrimp and save, and purchase a property (almost certainly with a mortgage – others indirectly owning alongside you, via the intermediary of a bank) and you rent out that property to someone who pays you for the use of it. They take a portion of the reward of their labour and give it to you, to prevent you from calling the police to remove them. Obviously rental ownership is not without its own costs and effort (and risk!), but the net rewards are greater. Even most of the efforts can be outsourced to a property manager.
Two difficult examples, because they are the ones that most of us admire or to which most of us aspire.
That category is quite broad, because it spans everyone from sensible people saving for their retirement to people purchasing a number of rental properties to people who work high-paying jobs and are able from a relatively early age to put aside large sums of their own work’s reward into investment and reap the exponential rewards of compound interest.
Let’s move to the least sympathetic example, the opposite of the spectrum from the hard-working entrepreneur: the heir.
Because capital ownership is a licence to benefit from the work of others, and because capital ownership is inheritable, anyone who dies owning capital can pass a licence to benefit from the work of others on to their children. Let’s take the most extreme example and talk about someone who inherits enough capital ownership that they can comfortably live on the returns of their ownership.
In addition to being rewarded with absolutely no requirement to contribute through labour, this is a person who can spend less than is afforded by the returns on their investment and re-invest the difference, increasing the power of their licence to be rewarded for other people’s labour. Outside of monarchy and aristocracy, there is no more obvious example of someone who is being rewarded greatly without contributing.
(Note that I have no problem with inheritance in general. There’s nothing wrong with gifting wealth to people, before or after you die. The problem here is that “wealth” in our system includes the kind of wealth that is an ongoing licence to benefit without contributing.)
With perhaps the exception of the final example, none of these seem particularly offensive on an individual level. We tend to admire anyone who spends less than they earn and manages to save. (Ignoring for a moment just how rare a privilege, on both a national and even more so a global scale, this is.)
My problem is not with any particular person – and a good thing, too, as I sit comfortably in one of the more privileged categories on this scale.
My problem is what happens when this system is writ large. If each instance is one of someone benefiting to a greater or lesser degree from the work of others without contributing through work themselves, en masse it translates to a class of people who benefit from the work of others without contributing through work themselves.
Writ large, it is a national – well, really global – system of institutionalised theft. I believe that. What is a little bit unfair on a small scale is, when considered on a larger scale, immensely unfair.
Now, there are some defences of this system. One is that there is mobility between the owners and the workers, which I’ve touched on above while talking about that fuzzy area where people are both working and owning. Nor does inheriting great wealth preclude the possibility of someone using it foolishly and ending up destitute.
I don’t have to talk about all of the other supporting privileges and disadvantages that coincide with wealth and poverty to say this: the same system that makes it possible for the few to lift themselves out of (or down from) their circumstances makes it inevitable that most will not. If you want to talk about free will, just wait – we’ll get to that.
Another defence is basically Rawlsian. If you’re not familiar with Rawls, I’ll summarise – people at the bottom of the heap are better off under this kind of inequality than they would be under an alternative, therefore they would select this system if they could, therefore it is a just system. Simply put, I do not accept that. I do not believe that other alternatives have been considered seriously enough for this statement to be made. I’m willing to be proven wrong, but that would require a level of serious discussion that I do not see occurring among those sectors of society who are inclined to make this argument.
To put these defences in perspective, imagine the slave owner claiming that slaves are better off being looked after by their owners than they would be in a situation without slavery. Imagine the slave owner arguing that slaves are free to choose their masters, and so slavery is okay – if they don’t like their master, they can pick another one. Imagine the slave owner arguing that some slaves can work hard to become masters, and occasionally some masters become slaves.
Many proponents of the status quo would take issue with me comparing capitalism to slavery, but as I see it, our society is on that spectrum, between a just distribution of wealth proportionate to contribution by work at one end, and a scenario where a class of people are given the minimum necessary to survive (or not) while working to create value enjoyed by an idle class of owners.
I suspect I’m going to have to leave it here for tonight. I recognise that I have left many questions unanswered. I recognised that before I began. But that’s a very rough sketch of my problems with capitalism, based in an intuition about what’s fair that I think is shared by others.
As I said: indulge me. Bear with me.
Also, I could well be wrong.
Please save your questions for the end of the talk.
Focussing on inequality – and looking to redistributive policies to solve it – risks throwing the baby out with the bath water. We would not restrain our more talented child just to make her less successful, younger brother feel better, so why should we levy our most talented, productive citizens?
This is a facile analogy for two reasons.
The first is that levying the wealthiest (who are not necessarily our most talented or productive citizens) is not in any relevant way like “restraining a talented child”. Progressive taxation does not restrain the pursuit and exercise of the talents of the wealthy, except when their talents are limited to spending or investing their wealth – which are precisely the activities least comparable to those of a “talented child”.
The second is the strawman characterisation of those at the bottom of the heap in our unequal society as analogous to a “less successful, younger brother” who wants to “feel better” about the success of the more talented older sibling. In other words, “Poor people are just envious and taxation is their revenge.” I’ll come back to that later. Partridge goes on to say…
What is needed is a focus on the real problem: that not everyone in our society has the skills needed to take advantage of the opportunities that should be available to all.
He does get close to the real problem here. There are two things going on in that statement – the availability of opportunities and the ability to take advantage of them. Proponents of equality of opportunity tend to focus on the former and ignore the latter. When the question of inequality is raised, they point to instances of formal equality of opportunity in New Zealand – for example, that anyone over a certain age could get a student loan and study at university. Therefore, if someone doesn’t have a university education, that’s their fault.
This emphasis on formal equality of opportunity is important, because it allows people to describe the circumstances at the bottom of the heap as a result of poor choices, and therefore guilt/responsibility – which logically implies that those at the top of the heap are there as a result of virtuous choices (and sometimes talent) and so rightfully deserve their wealth.
The problem is that, in our society, even with formal equality of opportunity, you can predict with some accuracy someone’s outcome by knowing morally arbitrary facts about them. For example, at birth you can predict that a Pākehā New Zealander will go on to earn a higher income than a Māori New Zealander. Individually they may not, but writ large they will, and it’s that predictability that demands an answer from advocates of merely formal equality of opportunity.
Because if there were equality of opportunity in New Zealand, outcomes may not be equal, but they would also not be predictable. Unpredictability of outcome is the measure of equality of opportunity. And anyone defending inequality in New Zealand by referring to equality of opportunity should, to be consistent, be advocating redistributive measures that address predictability of outcome.
That call to consistency makes a good test to determine who actually supports equality of opportunity, and who pays it lip service as a convenient means of indirectly justifying their own relative position in our society.