Thursday, May 01, 2008

Capital

Like most people, I was more revolutionary when I was young. Today, I have centred my indignation on a simple proposition: some people make way too much money compared to others.

I do think a system of incentives is necessary. People who do their jobs well should be rewarded with a few luxuries. What one must object to, however, is a society that rewards even dubious hacks for choosing particular professions while letting recognized masters of other arts scrape by.

"Should the richest man in a town amass ten times more, even fifty times more, [than the poorest man,] it is not hard to conceive of a decent society," said Norman Mailer. "When you get to the point where you're speaking of thousands to one, something outrageous is taking place." What that something outrageous is might be gleaned from the title of the book that this idea appears in: Why Are We at War? The answer, of course, is: in order to keep it well over a thousand to one.

Something outrageous is taking place. But there is something a bit quaint about Mailer's suggestion that America (this fictional little town) "got to the point" where it was a thousand to one. It's been a thousand to one for 10,000 years. It was a thousand to one in ancient Egypt and in Imperial Rome and in the British Empire.

'The world would be a better place...' pretty straighforwardly if it were impossible to be rewarded 50 times more than anybody else for one's efforts. It would be more than enough to ensure that people made an effort. In fact, it might ensure that only one's real efforts were rewarded. So say I on this first of May.

9 comments:

Kirby Olson said...

All three of our top candidates for president are millionaires many times over. It's repulsive.

Even Ralph Nader is worth about 200 million.

It's repulsive.

The progressive tax system in Denmark and other Lutheran countries narrows this gap, I imagine, at least somewhat.

Here you can get all kinds of tax loopholes. The Kerry family is worth about 800 million and maintains some 30 residences.

Repulsive.

In one Boston mansion, there is a two-story kitchen.

What rats.

G. M. Palmer said...

What about other forms of possession? What if I am 1000 times better than the next poet? Or if I have 1000 times the recognition? Silliman's blog currently has about 1000 times the total number of hits mine has (though his is about 30 times older, so maybe it's only 33 or so and not 1000). Rachel Barenblat (the Velveteen Rabbi) has 1000 times more recognition than my blog (because of her inclusion in Time). Is that not also unfair? Are they not also rats?

The problem with the "people can have too much theory" is twofold.

One -- things are always unfair. This condition will not be changed. Ever.

Two -- it is both ahistorical and (important to Kirby) unbiblical. Show me in the Bible where it says "this man was too rich" (not "too rich to get into heaven" -- that's an entirely different thing). You can't. Instead you find examples like Job and Solomon. There's no need to point out the mountains of historically rich people.

The real question is not "is this unfair?" but "how does their wealth affect me?" Does it matter to me that Bill Gates and Warren Buffet have more that 100 billion dollars between them (making them about 100,000 times richer than me)? Hardly. I still have a house and a decent job and a great family. Which makes me 1000 times richer than say, the average Sudanese refugee. Is that terrible? Hardly. Is Kirby damaged because of someone's two story kitchen? Not unless he's their cook -- and even then, wouldn't you want to cook in a huge kitchen?

The only way to achieve economic, intellectual, or social egalitarianism is to play like Pol Pot and kill everything that is good.

read the blog,
Michael

Thomas Basbøll said...

My argument goes entirely to purchasing power (which is not exactly capital, I suppose, but somewhat similar). Recently, the scramble of very wealthy people to remain very wealthy has caused many people to lose their homes.

Third world poverty is actually a good example. The ordinary middle class Western tourist, simply by spending a disproportionate amount of money in a given country, raises the price of everything.

So you are right, Michael. It is not the ostentatious wealth itself that is outrageous. It is the way the existence of such wealth affects the lives of ordinary people. That said, I share your pessimism.

c.t.parks3 said...

But even when a relatively large amount of money is spent, the money goes back into the economy. The store owners who made the sales have an increased income (which would increase their relative income even with the decreased PP), and they would then distribute it back into the economy. This would negate the decreased purchasing power of the overall population--by increasing the overall income level of those whose goods were demanded by the tourists.

The few ways this would not happen is if one exclusive store owner made almost every sale to tourists and became rich to the point of not needing to spend the money. But then if someone was selling unequivocally the best of every product does it not make sense that he would be the best off by no small margin?

The other way to negate the countering of the decrease in PP would be for another institution, say the government, to come in and take all the money made by the store owners without subsequently redistributing it back to the populace. The problem here is third world governments are really good at doing this.

So where does the problem lie? In America's wealth or in the third world's governments?

And anyways, an increased flow of the dollar into any country would have the opposite effect on American products. Those living in the 3rd world country could now buy American products at a relatively cheaper price.

Regardless of this, the decrease in Purchasing Power could not possibly be that large. The only recorded instance, to my knowledge, of the temporary destruction of an economy because of a tourist would be when certain Nigerian Kings made pilgrimages to Mecca and wasted enormous amounts of Gold en route. Indeed, just as you have postulated, the purchasing power plummeted and precious gold proceeded to prove powerless.

In the situation being referred to, the influx of foreign investment is not a sudden shock followed by nothing (as in the case of the pilgrimages.) It is many tourists spending smaller amounts of money over a far greater period of time. I fail to see how this could significantly change an economy to the point of anything beyond a slight initial discomfort. Unless the consideration is that American tourism is a suddenly new thing, I think the overall argument holds very little weight.

Thomas Basbøll said...

Yes, third world corruption is definitely a problem. But that doesn't shift the blame or change my point.

The problem with the current system of foreign aid is that it is both a way of helping the most impoverished people in the world and a way that a handful of people can make a disproportionate amount of money.

The basic problem is that some people can position themselves near the source of any influx of liquidity. (The store owner in the right location who sells to a tourist is a very, very small example of the same thing.)

So, for example, if the World Bank funds the building of a dam, this creates a number of jobs at, say, a dollar a day (I don't know how realistic that is, probably not too far off the mark). But the same investment also has to pay the project managers, who make thousands of dollars a day.

That's outrageous. And there are alternatives. One of the most important is monetary reform. I'm not at all optimistic about it ever happening, but monetary sovereignty in a country that (like most countries, most of the time) has the capacity for self-sufficiency would allow the state to put purchasing power directly into the hands of workers.

One can then let entrepreneurs try to fleece them. But because they have to go after each "sucker" individually, there are limits to what they can make.

That's my utopian vision. (Not fully worked out ... of course.)

Thomas Basbøll said...

Free market ideologues sometimes assume that opposition to wage disparity implies support for state intervantion (i.e., income redistribution). But that's not what I'm saying.

It is not that a "natural" (i.e., market driven) concentration of wealth needs to be "artificially" redistributed (i.e., taxation and welfare). Rather, an "artificial" (bank driven) concentration of wealth needs to be "naturally" redistributed through the sovereign creation of credit (see Cook's essay.) That is, if the natural connection between credit and productivity were maintained (rather than being broken by a private cartel) then the 1000:1 income disparity and infinity:1 wealth disparity would begin to erode naturally.

The disparity should be taken as a symptom of a deeper ailment, not as something to be "directly" done away with (by means of the revolutionary appropriation of the means of production or something.)

Once again, I emphasize that these ideas are explorative. I am trying to understand what Pound was trying to get at ... ultimately what it might have to do with poetry. I'm still working through this.

G. M. Palmer said...

Thomas B:

The full text and importance of Canto 45, then, is what we ought to be talking about:

"With usura hath no man a house of good stone
each block cut smooth and well fitting
that design might cover their face,

with usura

hath no man a painted paradise on his church wall
harpes et luthes
or where virgin receiveth message
and halo projects from incision,

with usura

seeth no man Gonzaga his heirs and his concubines
no picture is made to endure nor to live with
but it is made to sell and sell quickly

with usura, sin against nature,
is thy bread ever more of stale rags
is thy bread dry as paper,
with no mountain wheat, no strong flour

with usura the line grows thick

with usura is no clear demarcation
and no man can find site for his dwelling
Stone cutter is kept from his stone
weaver is kept from his loom

WITH USURA

wool comes not to market
sheep bringeth no grain with usura
Usura is a murrain, usura
blunteth the needle in the the maid's hand
and stoppeth the spinner's cunning. Pietro Lombardo
came not by usura
Duccio came not by usura
nor Pier della Francesca; Zuan Bellin' not by usura
nor was "La Callunia" painted.
Came not by usura Angelico; came not Ambrogio Praedis,
Came no church of cut stone signed: Adamo me fecit.

Not by usura St. Trophime

Not by usura St. Hilaire,

Usura rusteth the chisel
It rusteth the craft and the craftsman
It gnaweth the thread in the loom
None learneth to weave gold in her pattern;
Azure hath a canker by usura; cramoisi is unbroidered
Emerald findeth no Memling

Usura slayeth the child in the womb
It stayeth the young man's courting
It hath brought palsey to bed, lyeth
between the young bride and her bridegroom

CONTRA NATURAM

They have brought whores for Eleusis
Corpses are set to banquet

at behest of usura."

Now, you will find no greater opponent of modern usury than I -- but I understand it the way Pound did (which is not the way the Church or Dante did/does). That is, it is not the lending of money at interest that is evil but the lending of money to create debt slaves that is evil -- i.e. if someone has a worthwhile project and will be able to reasonably/easily pay back the loan and the project and money will better the world then lend the money and charge interest on it. But when a person wants to simply consume or has no chance of success but will simply have an albatross/millstone of debt around their necks, do not lend or tempt them with your money. Things don't tend to work well (vid credit crisis and home lending crisis) for more than a short-term gain.

But you aren't talking about proper use of money when you say "'The world would be a better place...' pretty straighforwardly if it were impossible to be rewarded 50 times more than anybody else for one's efforts." You're talking about PolPotting. Also it is important to note that the truly rich people in America (Gates, Buffet, the Waltons, etc.) are not rich because of salaries but because of investments.

I think, perhaps, that your beef is not with them but with corporations (and, possibly, with corporate personhood) who are much more wealthy than individuals. The problem is, when you start quoting Mailer or talking about capping the money someone can make, you turn off half of your audience.

GMP

Thomas Basbøll said...

The idea of "half my audience" intrigues me. Maybe I should install a site meter again. I haven't had a very clear image of readers for awhile now. I'll think about it. But I'm not going to stop quoting Mailer just to please a readership.

But I think it's unfortunate if the post has been read (even by half my readers) as support for Pol Pot's methods or for the imposition of a "cap" on income. I think it's important to keep in mind that the Poundian view (at least in its contemporary manifestation) includes opposition to income tax. The idea is that a properly functioning monetary system imposes an a tax simply by printing money without increasing a national debt. There is no need to actually take earnings away from people.

It's about making it almost physically impossible for an hour's labour to yield enormously different amounts of purchasing power (or even investment capital). The continuous circulation of a healthy currency would continuously erode accumulations of capital ... money would tend to stay liquid ...

... like I say, I'm still just learning about these things ...

most importantly, "capital gains" won solely by asset-price increases should not be possible. In order to become 50 times richer than your neighbour you should actually be responsible for the proper functioning of 50 times the social machinery.

Hedge fund managers have no such responsibility. They are responsible for the maintainance of the wealth of handfuls of people and yet they are thousands of times richer than others.

Thomas Basbøll said...

We agree about usury.

May favourite lines are:

Usura rusteth the chisel
It rusteth the craft and the craftsman