Surely wealth is not the problem!

So we have come, rather quickly, to the more intractable kinds of inequality.

Wealth is an especially challenging problem to a democracy, not least because so many of a democracy’s citizens desire wealth for themselves and commit tremendous energy to acquiring it.  They may deplore the consequences of privileged access to resources, but at the same time demand that nothing stand in the way of their own acquisition of such resources.  They’re the ones who vote for politicians and policies.  Wealth is a democratic problem because it concerns the relative control of resources within a society, that is, between the various members who make it up.  Wealth by its nature requires inequality—the word has no meaning without disparate control of resources.  Aspiring to wealth in a modern civilized society is not about feeding one’s family or providing basic shelter and necessities.  Almost everyone already has such basics.  Nor does it mean wanting one’s children to have decent education and health care, as it might in a developing country.  We’ve largely achieved those goals too.  To aspire to wealth in a modern, developed nation means that you wish to have more of a society’s goods than those around you—more than your neighbors, your fellow citizens, even your friends and family—which means that you necessarily wish them to be poorer, relative to yourself.  There is no other way to be wealthy.  The pursuit of wealth is entirely a positional aspiration, and positional goods are inherently unequal ones.  This means that a citizen’s pursuit of wealth will sit uncomfortably with the requirements of a healthy democracy.

It does not follow, however, that a healthy democratic society requires a rigidly precise and equal parceling out of resources.  Moderate degrees of resource-inequality may turn out to be advantageous to such a society as a whole.  There may be demonstrable public benefits in the private and unequal control of resources.  And if we are able to identify and convincingly demonstrate such benefits, then we will have a reasonable foundation for justifying some forms of resource (or wealth) inequality.  But we must be careful not to get ahead of ourselves—we have not yet identified such benefits, nor have we demonstrated that these benefits outweigh the public harms caused by wealth inequality.  And even if we do discover reasons to conclude that some forms and degrees of resource inequality have public utility, it does not follow that all forms or degrees of inequality will have similar benefits or be equally defensible.

It helps to get our terms straight.  Wealth and income are not the same things at all, though they affect one another.  Picture a bathtub.  Wealth is the quantity of water already contained in one’s personal bathtub.  The tubs of some people are full, while others are mostly empty.  Many tubs are bone dry.  Some individuals need Olympic-size bathtubs to hold their fortune.  Some will never see more than a sink-full in all their lives.  If wealth is the quantity of water already in your tub, then income is the amount flowing from the tap.  Some people have a trickle of water entering their tubs, some a roaring gush.  Some are comfortably supplied with little or no additional flow from their taps.  These folk have likely inherited their wealth of water, or perhaps have recently retired.  Some have a considerable flow of tap-water, but lose most of it down the drain in expenses and debts.  These are young professionals with large mortgages and little time to have accumulated wealth.  Most people have a moderate flow of tap water, perhaps roughly balanced against the water flowing down the drain.  They will be all right as long as their tap-flow continues and they avoid tub-containment disasters.  Once upon a time, those with large incomes and those with wealth were quite distinct—professionals versus heiresses.  But in the past generation or so, the two have become more integrated, such that those with the highest incomes are likely to have the greatest accumulations of wealth.  (And heiresses need good financial advisors these days to improve their revenue flows.)  This mutual reinforcement of wealth and income has not traditionally been the norm and helps explain the significant growth of wealth inequality since about 1980.  Those with lower incomes have fallen further behind—not necessarily into poverty but certainly in comparison to the top income growers—and those with modest middle incomes have not been able to accumulate cushions of wealth in the same way as those in the higher middle-income range.

If you desire to gain for yourself more wealth—which is nothing but a superior capacity to command the resources available within a society as a whole—then you will have to take control of these resources from others.  There is no other way for you to accumulate wealth but to skew the control of available resources to your benefit, at the expense of others.  (Defenders of capitalism reject the notion of a fixed pie, arguing that innovators are able to create wealth that would not otherwise have existed—by way of new technologies or more efficient methods of production.  There is certainly a case to be made that our modern resource-pie is much, much larger than ever it was for previous generations.  But most practicing capitalists do nothing much like innovation—they improve profits by controlling expenses, specifically by trimming wage-costs, or by running competitors out of business.  Either way, others lose control of resources.)  The same is true of any species of power or influence or status—if you want more for yourself, you will necessarily wish others to have less.  There is no other way.  Wealth is not about having a specific quantity of resources, or of maintaining a certain standard of living or having enough to get by.  Even disadvantaged Americans today have more calories available, better medical care and more comfortable housing—not to mention longer healthspans—than most medieval elites.  If you want the best chance of a long and healthy life, better to be among the poorest in a modern industrialized nation than the wealthiest in any ancient society.  Private wealth today adds only a small bonus to the length or quality of one’s life—though status does produce measurably different outcomes among the various segments of a modern society.  But moderns are really after something quite different when they pursue wealth.  The same is true if we compare wealth between nations.  A society or country may become wealthier in the sense that it has more resources at its command than it once did, or more resources compared to others.  But wealth itself remains fundamentally a relative measurement.  It’s really a social attainment.

In social terms, we understand the problems associated with wealth disparities (a redundant pairing of words, to be sure)—stress, anxiety, resentment, gloating, disappointment, projections of superiority and notions of inferiority.  But wait!  Surely we should allow the wealthy their success!  Again, a purely relative concept.  No success without the relative failing of others.  Should we say that wealth reflects an individual’s accomplishment or is it the accomplishment itself?  These are just the social costs of wealth disparities between yourself and others you know.  Inequality of wealth (or income) becomes a problem for a democratic society inasmuch as it amplifies and perpetuates the many other varieties of inequality.  Wealth grants some children higher social status (entirely unearned) from the start—an advantaged neighborhood, better health care and educational opportunities during their critical developmental years.  (Health and education spending in a developed economy tends to rise faster than overall inflation—because these sectors are inherently more resistant to efficiency gains—which means that middle income families and governments must devote more and more of their budgets to such spending categories.)  But privileged children not only gain incalculable head-starts, they are more likely to realize their individual potential than non-privileged children.  If they have modest talent (or very little), they will still get into university and respectable employment, not to mention an inheritance.  A poor child’s talent is much more likely to go entirely unnoticed and unencouraged.  Higher income provides myriad ways to stack the deck in favor of one’s own offspring.  Money buys all manner of opportunity—from summer camps to private tutors to volunteer opportunities (won’t that look nice on your CV!) to professional contacts.  The poor quite simply do not have the same opportunities (there never was much equality of that), and without opportunities they have little chance, no matter how hard they work, of achieving the outcomes that are relatively easy for the offspring of the wealthy.

But it’s my money, growls the wealth-holder, not pleased with the direction of the conversation or the absence of flattery.  I earned it fair and square and it’s my right to do with it as I please.  I can spend it on whatever I like or leave it to my children—and it’s nobody’s business if I do.  This argument seems to stump most people (perhaps because they would say the same in the wealth-holder’s place) but it’s not as unanswerable as it seems.  Let’s think about those small-business owners, the darlings of the self-made-success school of apologists.  Is it true that success in business is entirely an individually-earned accomplishment?  If you could show us a business-founder, an entrepreneur, who did not receive any form of public education, who did not have access to public roads, who was not guarded by publicly-funded police and armed forces, whose access to safe water and other resources were not facilitated by public utilities, who did not register their properties and business holdings with government bureaucracies, whose patents were not processed by public clerks, whose limited liability companies were not underwritten and protected by public laws, then we might be better persuaded that it was entirely their doing.  Businesses only thrive in highly regulated environments.  America’s generous bankruptcy laws allow individual businesses to take large risks and make catastrophic mistakes, with the promise of an opportunity to try again tomorrow.  The damages caused by those mistakes are carried by others.  And even beyond that pampered legal environment, their business success would be nothing without consumers.  Those consumers are, in a democratic society, the same as your fellow citizens.  You give them a product they want, and they give you the wealth and status you crave.  No business success without context.

Imagine two individuals, both launching new business-ventures.  Each has a brilliant invention, a marketable commodity, perhaps an innovative business model (or a brilliant management book!) that may prove to be the next big thing.  Each innovator learns as much as she can about the intended market, puts in countless hours developing and testing the product, creates a brilliant marketing scheme.  Each finds a few enthusiastic backers and scrapes together sufficient capital.  Each collects endorsements and testimonials promising that the new product will revolutionize the market.  Each hires brilliant staff, creates a clever advertising campaign.  Then each puts her product out there—into the same business environment, the same economic climate.  Each is given similar buzz and the same chance of success by the business press.  Now fast-forward one year.  One of these entrepreneurs can’t fill orders quickly enough.  She is already expanding into new locations, gaining valuable word-of-mouth support, and generating a solid revenue flow, more than enough to pay back the initial borrowing costs, nearly ready to offer dividends.  The other is drowning in debt, can’t seem to find or keep customers, and will run out of cash before next rent is due.  Which one has earned the outcome actually received?  Which one has gained the appropriate reward for the work and brilliance she put into her venture?  Is it not possible that contingency has a bit to do with it, that luck plays a considerable part in any success or fortune?  Neither the best product nor the best idea always wins.

We seldom get what we deserve.  Some with talent work hard and persist, only to fail, though their effort deserved as much success as any other striver.  By the same token, some who have succeeded do not deserve all that fortune has granted them.  So life is not fair.  Agreed.  Should we conclude that we poor mortals are powerless to remedy the injustices of fate?  We need not.  Those who have succeeded will of course tell themselves it was all their doing, that they fully deserve every bit of their good fortune (and the control of resources they have subsequently acquired), and that they need not share it with anyone else.  They will offer matchless nuggets of wisdom to the less fortunate—get a job, work hard, find a gap in the market, keep at it.  Bestselling business books tell us about the great successes (with a few hard lessons along the way!), but not nearly so often the noble failures (more likely the ignoble ones).  But the failures and mediocrities far outnumber the successes.  It’s as if we were to judge the public value of lotteries by interviewing the winners—which is exactly what lottery advertisements do.  But we don’t have to content ourselves with such unequal outcomes.  We are not bound by nature’s (or fortune’s) injustices.  We need not let the hardworking unfortunates perish while the few fortunates ringfence their recently-acquired resources against the remainder. 

What do the wealthy do with all their wealth?  What do their additional resources buy?  Not more essential nutrients, not warmer shelter, not worthier friends.  The wealthy use their wealth to buy advantage.  This is to say, they use their present advantage (disproportionate control of resources) to purchase even more advantage for the future.  They are buying better medical care which may well prolong their healthspan compared to others’.  They are buying the attention and expertise of specialists—accountants, investment experts, tax advisors, assistants and chauffeurs—so that they have more time to focus on improving their already-superior position.  They are buying second homes and diverse properties with which to ride out uncomfortable contingencies such as climate change, or political leverage through campaign donations to ensure that future laws and bureaucratic priorities favor their interests at the expense of those of the non-resourced masses.  They are buying educational advantages for their children (tutors, learning specialists, highly-trained teachers to concentrate critical effort on fewer children, elite schools providing better opportunities and elite connections whatever the quality of the teaching) so that they can compete more effectively in the next generation and gain even more relative status and wealth.  The best way to get ahead in our contemporary world is to be ahead from the start.  Elites know this very well, and will use all their existing advantages—whatever they have—to leverage future advantages.

As a civil society that values human rights and claims to uphold human equality, we cannot be indifferent to the self-amplifying nature of inequality.  Yet we cannot allow ourselves to think that the solution will be easy.  Tax the rich sounds like a simple solution.  It is not.