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Spreading the Wealth: A Review of Unjust Deserts

The foremost ethical question is, given that we owe most of our productivity to a common social inheritance, to what extent can we say that we have "earned" our personal wealth? There is a growing consensus in favor of a new robust public compact to regulate our shared conditions.
Dear readers,

The following is a review of a new book called Unjust Deserts: How the

Rich Are Taking Our Common Inheritance And Why We Should Take It Back.

A version of the article is running in the current issue of The

Nation, now on news stands or on-line at:  http://www.thenation.com/doc/20081215/engler


(If you have trouble with the text being restricted, you might try

going through this Google link, which leads to the full article:  link to www.google.com)

My own book, How to Rule the World: The Coming Battle Over the Global

Economy, is available at:  http://www.amazon.com/How-Rule-World-Mark-Engler/dp/1568583656

. If you haven't yet checked it out, there's a lot in there that is

useful for making sense of Obama's economics as well as the current

financial crisis. I hope you will take a look.

If anyone is interested to give the book as a gift for the holidays (I

couldn't think of a better possible present myself!) and would like to

order a signed copy directly from me, just send me an e-mail. I will

be happy to work out the details with you.

I hope you are well, and I welcome your comments!



Spreading the Wealth

A review of Unjust Deserts: How the Rich Are Taking Our Common

Inheritance And Why We Should Take It Back.

By Mark Engler

Adam Smith was not an economist. In the 1750s, when he was a professor

at the University of Glasgow in his native Scotland, Smith served as

the Chair of Moral Philosophy. The designation is telling. The rise of

modern economics departments in universities was a late-nineteenth and

twentieth century phenomenon. Economics in its infancy, characterized

by the pursuits of Smith, Ricardo, John Stuart Mill, and Marx, was not

a matter of graphs and econometric models. It was a broader

investigation into social life, a look at how society structured

labor, production, and exchange. And it concerned itself greatly with

the ethical implications of this structure.

Warren Buffett, ranked by Forbes in 2008 as the world's wealthiest

man, is no moral philosopher. Yet he is capable of raising a tricky

philosophical quandary. Reflecting on his tremendous riches, he has

attributed his fortune largely to chance: "It just so happens that I

was in the right place at the right time," Buffett has said. "I really

wouldn't have made a difference if I were born in Bangladesh. Or if I

was born here in 1700... . I just got lucky as hell... . Stick me [someplace

else] and I could say I know how to allocate capital and value

business. But they'd say, so what?"

In crediting luck, Buffett not only points to the birth lottery, in

which some people are born into more privileged circumstances than

others. He also recognizes that to a great extent he owes the

accomplishments of his professional life to the manifold contributions

of other people, known and unknown, past and present. They have

collectively done Buffett enormous favors, affording him security and

education, providing modern infrastructure, science, and

communications systems, and creating a sophisticated market in which

he could do business. Because of this, Buffett claims, "society is

responsible for a very significant percentage of what I've earned."

The issue raised by the billionaire forms the core of Gar Alperovitz

and Lew Daly's Unjust Deserts: How the Rich Are Taking Our Common

Inheritance And Why We Should Take It Back. The authors start their

book with the latter quote from Buffett, noting society's tremendous

contributions. Then they ask, "But if this is true, doesn't society

deserve a very significant share of what [Buffett] has received?"

The question indicates how thoroughly Alperovitz and Daly want their

new book to upend commonplace notions about the relationships between

economic growth, productivity, and wealth. Their premise, simply put,

is this: Most of us with regular work lives get up in the morning,

expend our energy and intelligence to meet a day's challenges, and

retire, depleted, in the evening. In this respect, we toil away our

workdays just as subsistence farmers did for thousands of years. What

makes us more "productive" than these forbearers—in the sense that

they often struggled to ward off starvation, while we, relatively

speaking, are surrounded by abundance—is not our individual strength,

initiative, or daring. Rather, it is our inheritance of thousands of

years of cultural knowledge, innovation, and discovery. Owing to this

legacy, a person in the United States working the same number of hours

as a past American from as recently as 1870 will produce, on average,

some fifteen times more economic output.

As early as the 1950s, economists began establishing a greater role

for socially accumulated knowledge in mainstream understandings of

growth. During that decade, Nobel-Prize winning economist Robert Solow

argued that advances in knowledge are, in fact, the primary driver of

today's growth. Alperovitz and Daly write, "Solow calculated that

nearly 90 percent of productivity growth in the first half of the

twentieth century (from 1909 to 1949) could only be attributed to

'technological change in the broadest sense.'" This suggestion was a

radical shift away from accounts that stressed the more specific

agency of capitalists and entrepreneurs—or of laborers, for that matter

—in expanding our economy.

Hearing such a theory, one might object that all this progress in the

realm of science and technology would never happen without the grit

and determination of our hard-working innovators. Because Alexander

Graham Bell invented the telephone, a creation of tremendous social

value, he deserves to be exalted as a genius and richly rewarded for

his patent. Right?

Not necessarily. The telephone, as it turns out, was simultaneously

invented by another innovator, Elisha Gray, who visited the patent

office the same day as Bell with a superior design for transmitting

vocal sounds, but who was behind him in the completing patent process.

Five years earlier, an Italian immigrant named Antonio Meucci had

declared the invention of a "voice telegraphy device"; he merely

lacked the $10 required to legally register his work. With or without

Bell, the telephone had arrived.

This example is not an isolated incident. As Alperovitz and Daly

write, the pattern of simultaneous invention "is so obvious to modern

scholars that it is no longer considered controversial." New

innovations rely upon thousands of previous advances in understanding

and technical capability: "What is called an 'invention,' is always a

combination of diverse constituent elements, mostly drawn from

existing technology."

The authors allow that people who are pushing at the edges of our

knowledge should be given economic incentive to press forward. But it

takes a lot of hubris for a modern inventor, far less an entrepreneur,

to claim that his or her contributions are on par with those of past

greats. As political scientist Robert Dahl pointedly asks, "Who has

made a larger contribution to the operation of General Electric—its

chief executives or Albert Einstein or Michael Faraday or Isaac Newton?"

Yet even as mainstream economists cite the increasing role of this

socially accumulated legacy in driving our "knowledge economy,"

inequality grows ever more severe. In 2004, the top 1 percent of

American households holds almost half of all "non-retirement account

stocks, mutual funds, and trusts," and Bill Gates's net worth alone

"was more than twice the direct stock holdings of the entire bottom

half of the U.S. population."

Alperovitz and Daly cloak their argument in the language of the "new."

They cite "extraordinary developments" in the study of knowledge and

economic growth as the foundation of their contentions. But they are

actually returning the economic discussion to where it started, to

moral philosophy's debate about the values that should inform our

public policy.

The foremost ethical question they raise is, given that we owe most of

our productivity to a common social inheritance, to what extent can we

say that we have "earned" our personal wealth? If we see far it is

because we stand on the shoulders of giants, the argument goes.

Therefore, a large portion what we claim as payment for our

productivity should actually go to the Goliaths who are doing the

heavy work of holding us up. Even if your eyesight is much better than

average, your individual claim is limited.

While avoiding the Marxist tradition, Alperovitz and Daly find a long

philosophical stream, running through John Locke, David Ricardo, and

John Stuart Mill, that distinguishes between "earned" and "unearned"

gains. "Nothing is more deeply held among ordinary people than the

idea that a person is entitled to what he creates or his efforts

produce," the authors note. But if a person reaps gains through no

effort of their own, society has a quite different view of their

deservingness, or what philosophers know as "desert."

One complication with the "standing on the shoulders" metaphor is that

the "giants" in question are not discrete, living beings. Einstein and

Faraday and Newton are not around to claim their cut of your paycheck.

What's left, then, is the state. Ultimately, what Alperovitz and Daly

dub the "knowledge inheritance theory of distributive justice" offers

a much deeper justification for government-imposed taxation than what

Americans are normally challenged to consider.

The closest we have come to hearing these arguments in contemporary

political debate was in the recent fight over the estate tax, a levy

dubbed by conservatives as the "death tax" and by some defenders as

the "Paris Hilton tax." "Responsible wealth" advocate Chuck Collins,

who wrote a book with Bill Gates, Sr. in defense of the estate tax has

argued that the justice of such a tax is rooted in an appreciation of

social contributions to prosperity, an idea that has been previously

recognized in American political life.

In a recent volume entitled 10 Excellent Reasons Not to Hate Taxes,

Collins quotes Andrew Carnegie, one of the key figures of our

country's first gilded age, who approved of taxing accumulated wealth:

"Of all forms of taxation this seems the wisest," Carnegie held. "Men

who continue hoarding great sums all of their lives, the proper use of

which for public ends would work good to the community from which it

chiefly came, should be made to feel that the community, in the form

of the State, cannot thus be deprived of its proper share."

Suffice it to say, if Barack Obama's innocuous suggestion that society

might "spread the wealth around" earned him rabid denunciations from

the right, Alperovitz and Daly's arguments, if subjected to cable news

scrutiny, would plant them firmly in the socialist motherland. In

articles and in a book published in 2005, America Beyond Capitalism,

Alperovitz has rejected the Statism he saw exemplified in the former

Communist bloc, and he has expressed a desire to craft a progressive

vision that "takes us beyond both traditional systems" of socialism

and capitalism. Yet this type of "neither right nor left, but forward"

rhetoric represents a fairly weak dodge.

The actual political tradition Alperovitz and Daly seek to revive has

deep roots in classical economic writing and represents a long-

established strand of non-Marxist socialism. The authors show sympathy

for nineteenth-century American reformer Henry George, who drew an

international following with his belief that land should be the common

property of humanity. George promoted free trade and productive

business, but he wanted state control of monopolies and argued in his

best-selling Progress and Poverty for a steep tax on parasitic rent-

seeking landlords. Alperovitz and Daly also align themselves with many

of the leading lights of the Fabian Society, a group of British

intellectuals who were influential in shaping the early Labour Party

around the year 1900.

Just as unionists who believed in the productive power of labor were

critical of Henry George's sole focus on land, the leftward ranks of

today's political economists may be skeptical of the overwhelming

weight of "knowledge" in Alperovitz and Daly's formulations. But most

would probably agree that the authors strike upon a vital topic when

they highlight the need for the benefits from productivity gains to be

shared throughout society.

As recently as the 1970s, there were discussions on college campuses

of how people would while away all their spare hours after modern

timesaving technology improved efficiency and inevitably shortened

their working days. Since then, productivity has indeed increased

dramatically, but working people have experienced a bitter twist:

owing largely to the waning power of organized labor, real wages have

been stagnant and hours at the office have only lengthened.

The Marxists of old criticized the gradualist tactics of Fabianism,

accusing the British reformers of being naïve utopians who wanted

socialist ends without the class struggle. Whatever the moral validity

of Alperovitz and Daly's argument about wealth, following through on

its public policy implications will require long and hard fight. And

it's not clear from their book that the authors are up for a rumble.

When it comes to how we might "take back our common inheritance,"

their concluding call to arms tepidly invokes a "renewed moral and

political understanding of [our] responsibilities."

The best Alperovitz has suggested in his recent writings is that

policy-makers concern themselves more with taxing wealth than income,

and that they focus on going after the top 2 percent of households,

leaving those few elites vastly outnumbered by the remaining 98

percent of the population. This is a sound position, but it is hardly

a silver bullet. Current Democratic assurances that they will only

hike rates for those in the very top tax brackets have done little to

quell political resistance.

At the same time, the nation now seems uniquely prepared for a new

debate about value and desert. Few moments could be riper for

revisiting the connection between our economy and our social ethics.

As housing values--the bedrock asset of the American middle class--

fall, stocks plunge, and retirement investment accounts are wiped out,

there is an acute awareness that things do not find their worth just

in the market's valuation on a given day. And even without unusually

candid voices like Warren Buffett's fanning their doubts, Americans

have begun to conclude that CEOs are not so worthy as their bloated

compensation packages suggest.

There is a growing consensus, too, in favor of a more robust public

compact to regulate the conditions under which we are together able to

live, save, and retire. Recent scholarly notions about "the developing

trajectory of the knowledge economy" likely have less power than

Alperovitz and Daly imagine to bring about a shift toward the social.

But late in this new gilded age, a devalued and depressed American

public may nevertheless be ready to demand more.

-- Mark Engler, a writer based in New York City, is a senior analyst

with Foreign Policy In Focus and author of How to Rule the World: The

Coming Battle Over the Global Economy (Nation Books, 2008). He can be

reached via the Web site  http://www.DemocracyUprising.com. Research

assistance for this article provided by Sean Nortz.

homepage: homepage: http://www.mbtranslations.com
address: address: http://www.thenation.com