“The
tenacity of the Yankees... is a result of their theoretical
backwardness and their Anglo-Saxon contempt for all theory. They are
punished for this by a superstitious belief in every philosophical
and economic absurdity, by religious sectarianism, and by idiotic
economic experiments, out of which, however, certain bourgeois
cliques profit.” Frederich Engels, letter to Sorge,
London, January 6, 1892. Translation by Leonard E. Mins (1938)
One
hundred and twenty-two years later, the Yankees remain bereft of
theory while clinging to every outlandish scheme promising to curtail
the appetite of an insatiable capitalist system. Churning on without
interruption, capitalism generates greater and greater wealth for its
masters while devouring everyone else in its wake. From regulatory
reform to alternative life styles, from tax policies to cooperative
endeavors, self-proclaimed opponents of this rapacious economic
behemoth have announced newly contrived exits from its destructive
path. While “...people [in the US] must become conscious of their
own social interests by making blunder upon blunder...” as Engels
put it in another letter to his US friend Frederich Sorge, the
contented capitalists merrily continue profiting.
Engels'
brutal indictment of the North American allergy to theory and the
affinity for unfocussed activism was tempered by an optimism based
more upon hope than reality: “The movement itself will go through
many and disagreeable phases, disagreeable particularly for those who
live in the country and have to suffer them. But I am firmly
convinced that things are now going ahead over there...
notwithstanding the fact that the Americans will learn almost
exclusively in practice for the time being, and not so much from
theory.”
That
conviction may well seem misplaced today as many of those who claim
opposition to capitalism continue to decry theory and invest instead
in utopian schemes and isolate burning issues from a general critique
of capitalism and its social policies.
Nothing
illustrates the Engels' diagnosis more than the current public
discussion of inequality and poverty. It is tempting to call the
new-found interest a fad or fashion, since it seems to spring from
nothing more than a sitting President's alarm. But the present-day
rage to address economic inequality is far more cynical. With interim
national elections on the horizon and a competitive Presidential race
on its heels, Democratic Party leaders served notice on the lame-duck
President that it is time again to rouse the Party base, the labor
unions, the progressive single-issue organizations, internet lefties,
and the deep-pockets social liberals. Hence, despite the fact that
inequality and poverty are neither newly discovered nor newly
arrived, the alarm goes up: inequality is with us! Poverty is on the
rise!
It
is true, of course. Only a few outliers would deny that income and
wealth growth for most people in the US have been stagnant or
declining since some time in the 1970s (Even right-wing ideologue,
Representative Paul Ryan, concedes that there are 47 million US
citizens living in poverty). Health care has been in crisis, with
millions left without any significant health options and untold
numbers dying prematurely. The education system, like the physical
infrastructure, is underfunded and crumbling. Employment continues to
decline as discouraged workers exit the labor market. In short,
poverty, disease, declining living standards, crime-- all the
attendant problems of social and political neglect-- continue
unabated, increasing dramatically over the last forty years.
At
the same time, a privileged minority has enjoyed increasing income
and wealth, a sharp rise in that group's share of the economic pie.
As the economy marched forward, the “fortunate few” marched
forward as well, but at an ever accelerating pace.
Without
Theory
“Data,
not stultifying political or ideological rhetoric, must drive our
agenda.” So says rising Democratic Party superstar, Senator Cory
Booker, in a newsprint debate with Republican policy icon,
Representative Paul Ryan. Sponsored by The Wall Street Journal
(A Half Century of the War on Poverty, 1-25/26-14) to
commemorate the fiftieth anniversary of the Lyndon Johnson-era “War
on Poverty,” the two contestants demonstrate the futility of
addressing poverty without a broad and deep understanding of its
sources and its history-- the “how” and “why” of social
theory. Representing the “respectable” Left in the US two-party
political pantomime, Booker rehearses a host of liberal think tank
palliatives based on education, job training, apprenticeships,
de-criminalized drug use, and a bare-bones safety-net designed to
shrink the number of those unlucky enough to fall below official
government floors.
Solutions,
for Booker, come through the tools of business and commerce:
investments, cost-benefit analysis, returns on investment, cost
savings etc. Rather than improving peoples' lives, the task of
reducing poverty resembles an MBA project of this new generation of
Democratic Party politician. He draws on suspect, often out-of-date
correlations once found between education levels and future economic
outcomes to sell education as a magic elixir. These long unexamined
verities are now shaken by the absence of good paying jobs, the
declining worth of higher degrees, and the enormous growth of student
debt. Booker's feeble defense of the leaky safety-net that remains as
a tarnished legacy of the New Deal and Johnson's anti-poverty
legislation centers on food stamps and Medicaid, a formula to barely
sustain life, but to not escape poverty. Add a dash of Moynihan-like
sermon against single-motherhood and you have the anti-poverty
program of the new generation of Democratic Party leaders-- truly a
patchwork of “economic absurdity” worthy of Engels' contempt.
As
for the Republicans, they argue for nothing, only against Democratic
Party plans. Theirs is a simple contention: Forty-seven million US
citizens remain in poverty. While the “War on Poverty” may have
shifted the victims of poverty demographically, the poor are still
with us and in great, stubborn numbers. For Representative Ryan,
charity and moral suasion-- the remedies of two centuries ago-- are
the only alternative to liberal interventionism and its failure.
Now
liberals will recoil from these harsh conclusions. They can and will
point to significant pockets of improvement, temporary declines in
the poverty rate, or promising social experiments. But what they
can neither explain nor address is the persistent reproduction of
poverty by our economic system. For nearly forty years, measures
of income and wealth inequality have grown, signally an inevitable
increase in poverty. Even those ill-disposed to theory can surely see
a relationship between growing inequality and increasing poverty.
Glaringly
absent from Booker's program is any significant plan to redistribute
income and wealth. We can attribute that absence to the near complete
ownership of elected officials of both parties by the corporations
and the wealthy. But on the periphery of mainstream politics, voices
can be heard advocating measures both to grow the economy beyond mass
impoverishment and/or to redistribute wealth through taxation.
The
Krugmans, Reichs, and Stiglitzs and the like enjoy a measure of
independence afforded by their academic tenure and widely celebrated
intellectual stature, allowing them to somewhat sidestep fealty to
corporate masters. As esteemed economists, they understand that the
continued growth of inequality will ultimately bring harsh economic
or social consequences. But their nostrums, like those of the
political establishment, only treat the symptoms of a persistent
malady that continually generates inequality, unemployment, and
crises. A study of economic history demonstrates that bursts of
economic growth and progressive taxation have indeed tempered, even
slightly reversed inequality and the growth of poverty, but over time
both return to their former trajectory.
A
Dose of Theory
A
new study by a French economist, Thomas Piketty, brings forward the
view that the long-term tendency of capitalism is to produce and
reproduce inequality. Though his book, Capital in the Twenty-first
Century, is not scheduled for release in the English language
until March, it has already generated serious discussion across the
spectrum of the US commentariat. New York Times columnist,
Thomas B. Edsell, asserts that the book “suggests that
traditional liberal government policies on spending, taxation and
regulation will fail to diminish inequality.” (Capitalism
vs. Democracy, 1-28-2014)
How
can that be? The liberal and social democratic consensus cries out
for government spending, progressive taxation, and corporate
regulation as the answer to growing inequality. A gaggle of Nobel
laureates embrace these tools, attesting that they are effective
means to combat inequality. What does Piketty see that they do not?
History.
Piketty
is not afraid to study the history of inequality, a necessary
condition for any proper socioeconomic theory. What he finds,
according to Edsell, is that:
...the
six-decade period of growing equality in western nations – starting
roughly with the onset of World War I and extending into the early
1970s – was unique and highly unlikely to be repeated. That period,
Piketty suggests, represented an exception to the more deeply rooted
pattern of growing inequality.
According
to Piketty, those halcyon six decades were the result of two world
wars and the Great Depression.
In
other words, growing inequality is the normal for capitalism and its
shrinkage the aberration. Apologists would have us believe otherwise,
that capitalism does not carry a gene for inequality. Unlike his
Yankee counterparts, Piketty is willing to study the economy as a
system-- capitalism-- and explore its historical
trajectory. Both methodological dispositions give rise to a theory of
inequality, an incomplete theory, but a theory no less.
Now
Piketty and his frequent collaborator Emmanuel Saez are widely
acknowledged to be among the leading experts documenting inequality
world wide as well as in the US. Undoubtedly this gives a high
plausibility to his core claim to identify a strong correlation
between capitalism's typical course and the growth of inequality.
Of
course students of Marxist theory or followers of this blog should
not be surprised by Piketty's findings. For over a hundred and fifty
years Marxists have maintained that inequality and impoverishment are
necessary products of the capitalist system. That is, the logic of
capitalism necessitates growing inequality. By locating profit at the
heart of the capitalist organism, Marxists understand that wealth
will invariably flow to the tiny minority of the owners of capital
and away from the producers. It is this process of profit generation
that overwhelms all barriers, all “reforms,” to channel society's
resources to the capitalist class.
Piketty's
argument is a welcome antidote to the paucity of explanatory theory
presented by the liberal and social democratic punditry. The
controversy stirred by Piketty's argument well before its
English-language availability is a sure sign that he offers something
beyond the conventional.
However,
his interpretation of the long-term trajectory of capitalism,
especially its departure from the norm, may be incomplete. He
reportedly sees the time between 1914 and 1973-- a time when he
claims that the growth of inequality was uncharacteristically
retarded-- as a period when the after-tax rate of return on capital
lagged behind economic growth. One could quibble that this is perhaps
too simple and mechanical, the era was certainly one in which many
factors worked to change the “normal” course of capitalism and
often buffered the growth of inequality, together constituting a
tendency.
But
it would be a simplification to locate these factors entirely in
economic or political events while overlooking policy. For example,
throughout most of the twentieth century capitalism paid an
anti-Soviet levy or rent to the working class as an inoculation
against the threat of socialist or Communist ideology. That factor
played no small part in moderating inequality, creating the mirage of
working class equality, and ensuring labor peace.
Closer
examination of Piketty's interesting thesis must await publication of
the book.
For
a Robust Theory of Inequality
We
needn't wait for Piketty, however, to find an adequate theory of
inequality. Elements of Karl Marx's theory of socioeconomic
development offer the key to understanding the production and
reproduction of inequality in our time as well as earlier times.
There
are, of course, many possible causes for the concentration of wealth.
Theft, good fortune, guile, dishonesty are only a few of the ways
that humans have redistributed wealth since antiquity. Such causes
occur often in history, but only haphazardly. The only systemic
cause of inequality is the expropriation of the labor of one by
another under the protection of social norms. Marx called this
process exploitation. He was the first to identify its forms
and its trajectory. He was the first to explain adequately the
mechanisms of expropriation. Armed with Marx's theory of
exploitation, the inequalities of slavery, feudalism, and, of course,
capitalism are revealed with all their specific features. Thus, the
concentration of wealth produced by expropriation of the labor of
slaves, serfs, and employed workers is connected to unique socially
protected forms of exploitation.
Exploitation
explains how inequality arises and continues. Without recognition of
this mechanism embedded in capitalist economic activity, liberals and
social democrats cannot explain the persistence of inequality. They
will apply inadequate reformist measures to stem the tide of wealth
and income concentration springing from capitalist exploitation, but
the tide will not be forestalled by reforms.
It
cannot be overemphasized that inequality springs from a process,
a process definitive of capitalist economic relations. Outside of the
Marxist orbit, commentators view inequality as a state-of-affairs,
a state-of-affairs existing between various social groupings. While
they authentically decry the misery generated by inequality, they are
at a loss to find the proper quantitative relationship between
different groups constitutive of society. Sure, some have more than
others, but what is the socially just distribution of society's
goods? Granted that inequalities exist, what is the optimal way to
assign shares of wealth? How much and for whom? Should everyone get
an equal share? Should those on the bottom get a 10% larger share?
20%? These are the questions that perplex the non-Marxists.
The
best answer from the best minds of Anglo-American social philosophy
is a pretty nasty and unsatisfactory principle called Pareto
efficiency. Rather than solving the inequality puzzle, Pareto
efficiency justifies an unequal state-of-affairs provided that it
does not diminish the well-being of others, including the least
advantaged. Because of the theoretical intractability of settling on
exactly what constitutes a just distribution of goods and services,
modern bourgeois academic philosophers attempt to establish what
would be the least objectionable, but unequal state-of-affairs.
Nothing demonstrates the theoretical barrenness of Anglo-American
social thought than this misguided, impossible task of determining
distributive justice once and for all and for all times and places.
There is no idealized state-of-affairs that could answer this
question. The question itself is misguided.
Rather,
in our time, the task of reducing inequality, of advancing
distributive justice, is to eliminate exploitation. There can be no
ideal, perfect solution to the inequality issue, but there is a way
of eliminating the primary cause of indefensible inequality in a
capitalist society: end labor exploitation.
Liberals
and social democrats have no answer to the rightist challenge that
workers today are immeasurably better off under capitalism than they
were two hundred years ago. It is certainly true that most workers
now live longer, are healthier, and have more free time than did
their counterparts two centuries earlier. Marxist theory does not
challenge that point. Instead, it asserts that the logic of the
capitalist system tends to impoverish working
people at all times. Whether capitalism succeeds in suppressing
living standards is entirely a different matter. Other factors--
labor fight back, labor shortages, the cheapening of the means of
subsistence, etc.-- may buffer, even overwhelm this tendency for a
time, but the tendency never disappears.
The
tendency towards impoverishment flows logically from the Marxist
understanding that labor under capitalism is a commodity like any
other commodity. Capitalists buy and sell the labor power of
workers just as they do any other factor of production or
distribution. And as with any other cost, they seek to pay the lowest
possible price for it. Accordingly, the capitalist system, through
the cost-cutting actions of individual capitalists (or corporations),
is constantly pressuring the compensation of workers downward to
levels of mere maintenance-- that is, poverty. The only systemic
constraint upon that pressure is the necessity of securing labor in
the future.
Therefore,
we find in Marxism a basis for understanding (and addressing)
inequality and poverty. Thanks to a theory that identifies the two
closely related afflictions with specific historically evolved
mechanisms and that connects their production and reproduction to
economic systems, we can avoid the muddiness and ineffectiveness of
the liberal and social democratic approaches. Both mystify the
causes, offer a balm instead of a cure, and fail to halt the
continuing reproduction of inequality and poverty. Like quacks and
faith healers, liberals and social democrats may make the patient
more comfortable, but only excising the cancer of capitalism will
finally end the suffering.
Zoltan
Zigedy
