Thursday, August 14, 2014

A Bone to Pick with Professor McCloskey re Inequality


Professor McCloskey discussing some of her ideas

Professor Deirdre McCloskey gets a lot right. Her “Bourgeois trilogy” (the third volume will soon be published) is an important contribution to current thinking about economics. Indeed, her academic career, including a stint at the high temple of market economics at the University of Chicago, now centers on re-thinking economic discourse and perspective.* Her project of developing “humanomics” (as she has dubbed it) adds another voice to those attempting to bring a new reality to the subject of economics. In this, she joins the likes of Diane Coyle, Eric Beinhocker, and Nick Hanauer and Eric Liu among those whom I’ve read recently that want to change our understanding of the fundamentals of economics. McCloskey’s project in this area merits the highest praise and encouragement.

But I have a bone to pick. In a recent Financial Times article, McCloskey dismisses current concerns over inequality. Diane Coyle (Enlightenment Economics blog) and Evan Davis in The Spectator describe her as taking an anti-Picketty position. McCloskey argues that “the Great Enrichment”, the tide of economic development that has lifted all boats, counts more than any resulting inequality. This Great Enrichment, which comes as a result of changing ideas and practices and not so much as a result of the accumulation of capital, has created the greatest era of human dignity and liberty that the world has ever known. I don’t disagree. I have enough of a sense of history to know that as a Baby-Boomer American I have lived in a unique, golden era of general prosperity and even relative peace. (I was just young enough—and lucky enough—not to have to go to Vietnam or even get drafted.) McCloskey provides a compelling explanation and defense of the engine of material and human well-being that we call “capitalism”. (She and I both have reservations about the usefulness of the loaded word.) People around the world have benefited immensely since thinking about economics and the bourgeois life began to change in the 1600s. (As I write this now living in China, it boggles the mind to consider the speed of change this country has undergone since I first visited in 2004, not to mention since 1979.) She argues that reducing the wealth of “the rich” (however you define them) doesn’t increase the wealth of the poor. It’s not a zero-sum game. Innovation in ideas and institutions create wealth, not exploitation. Thousands of years of exploitation increased the wealth between warrior classes in a zero-sum game involving lands and peoples with per capita incomes that hovered at about $3 a day for about as long humans have lived in civilizations. Nor does economic growth come from mere investment, so we have no incentive—in fact a disincentive—to choke off investment by the rich.

McCloskey argues that the current concern with inequality stems from envy, and to the extent her perception is correct (as it is in some measure), she has a valid concern. Envy is a mental poison. It’s ugly. It’s despicable. Perhaps Rene Girard is correct in identifying it (under his designation of “mimetic desire”) as the root of evil. But perhaps most obvious to me, entertaining envy of the rich is stupid. Why should we envy the rich, the 1%? All the money in the world doesn’t buy you love, respect, admiration, or other things that we value (although it can buy expensive imitations). Do I admire Jay Gatsby or The Wolf of Wall Street? Who admired the lead character in Wolf? I found the movie—centered on this narcissistic, money-intoxicated jerk—too boring to finish. Having a great deal of money and earning respect (for something other than having a great deal of money) are unrelated. Perhaps there’s even a negative correlation. Don’t get me wrong: all things being equal, I’d rather have more money than less. But all things are never equal, are they? For me to have big money—I wasn’t born rich—I would have needed to have been very lucky and willing to trade more of my time, my energy, and my values (family, friends, leisure, community service) to get more dollars. At some point, the marginal cost exceeds the marginal benefit. We all draw that line at different points, as individuals and as cultures, but a healthy individual does draw it. I’m somewhere between Henry David Thoreau and Donald Trump, but I sure as hell hope that I’m closer to Thoreau!^

So what’s my beef with inequality if I don’t think envy worth the coin and the rich don’t create poverty? It’s political. First, in our American political system with its legalized corruption, money buys influence. And lots of money buys lots of influence. Money isn’t speech. The U.S. Supreme Court made a monumental and disastrous blunder in equating speech with money. Money can coerce and seduce, but it does not reason. And with a lot of money, such as Koch brothers-size money or Sheldon Adelson-size money, you can buy a whole lot of scare time (sometimes referred to by the euphemism “air time”). The same is, of course, true of more liberal millionaires, say a George Soros. But either way, allowing any one person or group of individuals to dominate our political discourse (if we can give such low talk a hifalutin name) is anathema to reasoned, democratic discourse.

I realize that my referring to “reasoned, democratic discourse” I have referenced (what can most kindly be labeled) a Platonic ideal. But some conversations are more reasoned than others. It’s an ideal to which we can aspire. I understand what most strongly motivates humans: fear, greed, power, prestige, and sex. These are our base motives. But we want to hide our motives in attempting to convince others. Perhaps we have an innate shame of such animal instincts. So instead, we use reason; that is, public arguments based on shared criteria relevant to the subject. In other words, what should convince a disinterested audience of decision-makers? I realize this is an ideal and not a reality. After over 30 years of practicing law, I know the motivations that lead people into litigation: greed and an aggrieved sense of dignity—although most persons don’t appreciate the prominence of the later. I understand the challenge of trying to convince (what you hope is) a disinterested judge or jury. Of course, they too have their built-in biases and motives, but like democracy as a political system, it’s the worst way of deciding things except when compared with all the others. (Thanks, Churchill).

When we concede the bulk of public discourse to the super-rich, they set the agenda in their favor. They dominate the conversation (to the extent we can call still call our democracy a conversation), and they win the support of the populace by repeating their message over and over again with no practical way to limit or challenge their assertions. (A lie told often enough and sincerely enough becomes true.) Make no mistake: Republicans and Democrats are both beholden to money. Individuals and organizations with big dollars to contribute to campaigns for or against a candidate control the agenda. Fear and resentment (and to a lesser extent seduction) are the current hallmarks of mass-media political advertising. To allow this type of communication to go unchecked, subject only to the checkbooks (and whims) of the wealthiest, is an error of judgment that will long haunt us. Politics is about the future, and a poisoned polity creates a poisoned future.

My other concern with inequality stems from living almost two years in India. Corruption in India isn’t legalized and winked at as it is in the U.S. In fact, I believe it’s comparable to the corruption experienced in the U.S. during the Gilded Age and the era of Tammany Hall. But an even greater problem in India stems from the pervasive and crippling social inequality that has such deep roots there. The caste system is legally abolished, but the social, economic, and political inequality remains. Upon exiting the Rambaugh Palace in Jaipur, once a home to the local maja raja and now a five-star hotel adjoining Jaipur Polo Club grounds, you can walk across the road and find a shantytown slum of the deepest poverty. Between venues in India, one finds an impoverished public space with poor infrastructure and little concern for the shared environment. The rich, as they tend to do around the world, think that they can retreat into their gated homes, their luxury cars, and their guarded, air-conditioned buildings. But each day they have to experience “the real India” of poor infrastructure, poor politics, and poor public spaces. I come from a small town in Iowa where even the kid reputed to have been born a millionaire had to attend the same schools and hang out at the same places as the rest of us, the kids of the encompassing middle class. Based on that experience growing up, I found the staggering inequality of India one of the most shocking aspects of that culture. To the extent that the U.S. moves to increasing levels of inequality—as I believe we are—we move in a way that will denigrate the well-being of all, even the richest among us. If we in the U.S. mimic the inequality found in India, we invite not only an impoverished public space, but also social upheaval. While the poor can suffer from a relative lack of money, no one willingly or happily suffers from denigration of their dignity. This is the repeated lesson of civil rights and human rights movements. Do we want to create a class of second-class citizens? Or rather, perpetuate and enlarge it? I hope not.

Professor McCloskey, who has gotten so much right in her analysis and defense of the innovation economy, the importance of ideas, and the relative usefulness of markets (i.e., capitalism), understates the importance of the growing inequality in America. This growing inequality, as seen in stagnated wages and the decline of much of the white middle class, had given rise an increasing politics of resentment and desperation. The Tea Party and kindred groups, in the weird world of American politics, ally with the plutocrats and free-market ideologues who denigrate government and any intervention that limits business profits and prerogatives. It’s not rational, but it’s real. We don’t have to soak the rich—let them keep their money. I’m not happy when I pay taxes, but I’ve seen what happens without an effective tax and public finance system. I don’t believe that I can buy a private world that will insulate me from the poor, nor would I want that even if I could afford it. I only argue that we not allow the super-rich to skew our system in a way that warps out polity. We need to ponder the inequality that affects liberal, capitalist democracies and not just celebrate the wealth that this system has created.

*McCloskey also held appointments in economics and history at the University of Iowa from 1980 to 1999. I don't believe that we ever met.

^Having said this, I must report that I’m not retired or independently wealthy and that anyone knowing of remunerative work in Suzhou, China that doesn’t involve me teaching English should contact me immediately! Ditto if you know a lawyer who could benefit from my freelance lawyering service (www.GreenleafAdvocacy.com).