"Undermining my electoral viability since 2001."

What Is To Be Done?



Let's Talk About Inequality

Inequality lies at the heart of questions of right and wrong, and it's not just as simple as inequality == bad. To be un-equal is to be different or diverse, the natural state of people in a free system. Liberty invites a range of results and thus some inequality is inevitable

There are also different kinds of inequality. Economically speaking, there are three main types to consider:

  1. Consumption: the amount you spend
  2. Income: wages, earnings, and growth from investments
  3. Wealth: money in the bank, assets like real-estate, stocks, or other investments.

There are a number of valid points to be made about inequality consumption. For instance, inequality of consumption is an immediate driver of dissatisfaction — the proverbial, "keeping up with the Joneses". While I don't think coveting your neighbor's SUV causes the same level of pain as being priced out of your neighborhood, it's been strongly suggested that the relationship between happiness and income is all about perception above a certain minimum threshold.

Also, not to put to fine a point on it, in Estados Unidos we've had an economic bubble and crash fueled by debt-based personal consumption. As Dries pointed out in his comment, and a few other people noted on Facebook or directly to me, part of the responsibility for volatility in our consumer based economy falls on people living beyond their means. That's a thing in our culture that's not healthy, and if we were a bit more modest we might all lead better lives. It might also be good not to allow banks to issue NINJA loans they have no intention of holding onto, but I digress.

When it comes to income, the inequality picture clarifies. Inequality of income in the US has grown sharply over the past thirty or so years. Even as the economy has grown overall, average wages and salaries have been flat. The national wage index in 1980 was $12,513. It's a lot more now in absolute terms, but adjusted for inflation it's actually slightly down.

However, higher wage and salary earners have it quite a bit better, and those who derive income from investments have made huge gains. Hence "the 1%".

Conservative commentators who dispute the rise in inequality, or suggest that it doesn't matter all that much, often point to consumption rates, which are closer than income rates. But that ignores the whole problem of debt. The human experience of inequality has been smoothed over the '90s and aughts by a huge amount of consumer and household debt (credit cards and mortgages), but that has come to an end as of our latest financial crisis. Which is probably why this conversation is suddenly so popular. People are feeling it as never before.

Which leads us to the heart of the matter: inequality in wealth. Incomes and consumption can vary over years, but over time they accrue into wealth, and wide disparities of wealth can have serious and lasting effects. They unbalance a society. As wealth easily translates into power, feedback loops develop. Existing wealth seeks (and finds) preferential treatment from the government and manipulates the market to protect itself from competition and artificially inflate earnings. This is how the rich get richer, as they say. And that's wrong.

When we start to see inequality being embedded and reinforced structurally, there's a problem. Different individuals will lead different lives, sure; their outcomes will be unequal. But when you see really wide gaps emerging, growing over time, persisting over generations, then you’ve got something to worry about.

We've Seen This Thing Before, Right In These United States

This is something we have a history with here in Estados Unidos, dating back to the glory days of the nation’s founding. At the time, the prevailing norm worldwide was to have a hereditary aristocracy, if not an outright royalty, which passed down wealth and power over the generations. The breakaway colonies wanted no part of that. In order to buttress their fledgling democracy, the early revolutionaries who founded the United States set about explicitly to make it difficult for economic aristocracy to take hold.

Their main policy in doing so was to tax the crap out of the wealth of people when they died, insuring they couldn’t pass it all on to the next generation. This had the effect of whittling down ineffectual hoards of wealth over generations — money that just sat there would eventually dissolve — while simultaneously establishing a stream of revenue for public goods like roads, education, and eventually such wonders as rural electrification and the internet.

The idea began in the US, and gained popularity in other nations as more democratic styles took hold. If you’ve been watching this season of Downton Abbey, the early preoccupation with “death duties” reflects the rise of estate taxation in early 20th-century England.

Of course, effective aristocracies still emerged here in Estados Unidos. The last great historical peak of wealth concentration occurred early in the 20th century. Economically it was a time when industrial fortunes — the Rockafellers, Carneges, etc — peaked, and financial speculation ran rampant. Culturally, this was the Great Gatsby era. Probably a pretty wild time, and a lot of fun if you were rich. Maybe less so if you weren't.

What followed of course was the Great Depression, after which additional steps were taken to stabilize and protect the country from this kind of inequality developing. The New Deal for the first time attempted to set a minimum level of poverty which we would tolerate as a society. It was also a time when progressive taxation of income really took hold — in order to subsidize the New Deal (and a number of extensive national infrastructure projects, and a major war), top earners were taxed at ever higher rates, which had the effect of diminishing income inequality significantly.

It's somewhat ironic that the prime mover for those early 20th-Century policies, Franklin Roosevelt, was himself an aristocrat. But early in his tenure he was trying to stay one step ahead of actual real-live Communists who were gaining popularity. Bold action required in the face of the Depression, and agitation by significantly more radical elements both pushed FDR and created political space for him. By the time his fourth term as president rolled around he was probably so deep in the mindset of national economic manager that old-money royalty sounded like the enemy. That's when he proposed a 100% top tax rate.

In any event, all that plus being the only industrialized nation not heavily bombed in World War Two led to a long economic boom and the birth of what we still think of as the modern Middle Class. The trend of general growth lasted up until the late 1970s, when the countercycle took hold and inequality started to ramp up again under Reagan, accelerating under Clinton and into more recent history. Here's a graph from a conservative article in Foreign Affairs I've annotated a bit:

Inequality in recent history

The point is that while all of this is not new, it is a relatively recent thing for people to worry about, let alone consciously mitigate. For a long time in history the massive accrual of wealth by a select few was assumed to just be how we rolled. But then it turned out that it was remarkably inefficient and unproductive to over-concentrate wealth, and civilizations that devised means to share prosperity more broadly advanced more quickly.

Moral vs Pragmatic Judgements, and Ideology

There’s a moral dimension to all of this of course: the excess of the haves, the privation of the have-nots, the startling failures of empathy that spring up around any such divide. A lot gets said. There’s no shortage of drama. The moral dimensions of inequality are real, but are also frequently expressed via aesthetic considerations. As my old ETW colleague Randall mock-paraphrased my gentrification post on Facebook:

So battles over gentrification are of only spectral importance, because they do little more than reinforce the ahistorical narcissism of well-intended young people whose objection is more aesthetic than political?

A fair skewering, and his point was that gentrification is driven by underlying material conditions. Which is true, and closer to my interest when I move beyond simply relating my personal history and experience.

While moral outrage is good fuel, I’m continually drawn back to the practical failure of inequality — it’s really not in anyone’s interest to have modern-day royalty ala the Rich Kids of Instagram concurrent wtih have billions of people who can't read and lack access to clean water.

Of course that's now how other people see it. While few would say "it's in everyone's interest" to have people living in terrible conditions — though overly technical economic types will actually say that kind of thing — there are a large number of people who enjoy the status quo, and are threatened by attempts to change up. Such a person might say, "Of course I don't want billions of illiterate people with low life expectancy, but don't you see that's just how things are. Also, coincidentally they're also quite good for me, so let's try and keep it that way."

Likewise, moralistic ideologies develop to inure people in positions of privilege from feeling guilt or regret at the plight of fellow human beings who aren't faring quite as well. Here in SF we've seen this recently as there's been a rash of douchy startup founders feeling the need to post long ugly screeds about the terribleness of homeless people. Also, the octogenarian scion of a top-tier(ish) VC firm comparing Occupy protests to Nazi pogroms and asserting as a good thing that we live in a "$1 = 1-vote" society.

That sentiments like these emerge in the public square with gusto is the result of decades of self-reenforcing ideological development that reassures the wealthy that they deserve everything that's come to them. They are the "job creators" without whom society would be bereft of vigor or innovation.

This is, of course, untrue. Inequality at the levels we see now is actually anathema to broad prosperity. I recently found a great take on this via computer security guru Bruce Schneider. From a Guardian piece looking at the future of the global economies:


This dark future is not a pleasant one: an increasingly paranoid and detached elite buffering themselves further and further from the rest of humanity — both physically as well as intellectually and emotionally — in an effort to retain a sense of security and self-worth. It's where you get scenarios like Elysium and whatnot in science fiction, but structurally it looks a lot like the various Dark Ages that have held sway over different civilizations at different points in history. Set that against a backdrop of resource contention and climate change, and it definitely takes on an unpleasant air of unsustainability, if not outright evil. Certainly not the future I'd want for my kids.

What Is To Be Done?

If you've stuck with me this far, thanks. I've done my best to lay out the big picture of inequality as I see it: how it arises, its historical context, the harm it causes, and why it's so difficult to address. And now to venture some guesses at Jacob's question: So What?

The title of this post (and this section) are a wink at any real-live communists out there, but everybody knows that "communism didn't work". However, we're discovering now that absent any meaningful critical opponent, unfettered "capitalism" doesn't appear to work very well either. We need an effective counterweight to the Neoliberal economic thinking that prevailed at the end of the cold war. Not just a critique, but a different argument altogether.

Something new is needed in the global dialectic which can speak to the values of our commonwealth in both moral and practical terms. This is what I was reaching for in my previous post with the notion of a "global middle-class consciousness". In many places around the world, in spite of everything, development is working. As the US becomes more "like Brazil", Brazil is steadily growing a middle class. Same goes for China, and to a lesser extent India. It's reasonable to hope for these trends to continue, but not without the emergence of an ideology which presents a positive alternative to the current "winner take all" attitude of globalized Neoliberal capitalism.

While most successful people work very hard and do pretty good, meritocracy is very much a work in progress. Also, the degree of reward is way out of whack. The argument that the highly-compensated create commensurate value is bogus. There are too many obvious counter-examples, and the lack of any form of serious accountability for glaring and obvious failures makes such arguments little more than a sham.

We need to invest much more in the physical and economic infrastructure that creates and enables opportunity. That runs the gamut from ensuring access to clean water and adequate food, to making education more widely available (and inexpensive), to having good roads and utilities, to unlinking healthcare and employment so that entrepreneurs can take risks without having to worry about what happens if they get sick.

Across the board, we have to back our thinking out of one in which winners "pull themselves up by their bootstraps" and "losers, moochers and takers" sit around sucking on the rest of productive society. That kind of cartoon ideology doesn't help anyone.

What's necessary is a kind of thinking that can drive these investments in Public goods, that can allow us to realize the nonzero-sum tradeoffs that are possible if we work together, and that can guide us towards greater and more democratic global integration of resource management. Our future is going to hinge on how the whole planet works, so the sooner we can get about the business of coherently approaching that problem the better. From a pure materials perspective there's already more than enough to go around. The fact that we have people in such states of deprivation is an indictment of our systems of management and distribution. It's a moral and pragmatic outrage, but one we won't overcome until we think about these things differently.

The Real Challenge

Ultimately we have a couple of converging existential challenges. There's the fact that we need to develop skills at geoengineering (managing our ecosystem on a planetary scale, global warming, etc), and the fact that our existing system of wages-for-labor is likely to break down as more and more people are available to do more and more kinds of work, and simultaneously less and less actual work is necessary to run society. The latter has been happening in the US for a while.

Manufacturing vs labor

I pulled that chart from the same place as the previous one I annotated, a rather conservative take on Inequality in Foreign Affairs that demonstrates there aren't any real ideas on the Right about what to do here. They argue that Social Security exacerbates inequality, and the answer is "an opportunity society" — so basically we should just keep on truckin' and try to cut that safety net if possible.

But the broader challenge remains: we're living through an economic transformation that's comparable to urbanization and industrialization, but occurring on a global scale. There are national policies we can and should pursue, e.g. raising the minimum wage, but they're not going to do much to address the macro or existential questions.

I don't have any specific answers there, but taking the questions seriously leads you to some pretty far-out conclusions:

  1. World government
  2. Widespread wealth redistribution

Part of me wants to say "yeah, good luck with that," but then I think again. Do we not already have an effective kind of world government through trade agreements and international alliances? It's just not very democratic or transparent.

Likewise, is this whole inequality rap not about a redistribution of wealth already occurring; concentrating said wealth in the hands of a few?

I'd argue that these things are already happening, just not in the ways we'd all like. Once you look at it that way, turning things around doesn't sound so far-fetched. Certainly not easy, but a lot more possible. If we look at what's worked in the past, we should be looking at taxing idle wealth and egregious incomes, and investing in base-building programs. On a global scale, that could be pretty exciting stuff.