Jedediah
Purdy
Essay for Nomos, Wealth issue
Draft: June 7, 2015
Wealth and
Democracy
It wasn’t supposed to be like
this. The present that we are living in
is not the future that we were promised.
Wealth was not supposed to be so unequal, and its inequality was not
supposed to be such a problem for democracy.
Thinking about wealth today means taking stock of a rude awakening.
Of course,
to put it this way simplifies the matter dramatically. But let us take it in steps. To recite a cultural history that readers
already know as cliché – but not less true for its familiarity – the 2014
appearance in English of Thomas Piketty’s Capital
in the 21st Century alerted Americans to a body of research that
had been developed over more than a decade, showing both income and wealth
growing sharply more unequal around the world.
The strongest data concerned the wealthy countries of the North
Atlantic, where inequality has been growing since roughly 1970 and, Piketty
warned, a new rentier class of
inherited wealth and social prestige is on the verge of emerging.
As his most
acute respondents have pointed out, Piketty’s work opens many more questions
than it answers.
My major concern here is what growing
inequality means for democracy and the rule of law, a topic where Piketty
himself is more suggestive than informative.
Others have focused on disaggregating Piketty’s findings: how much comes
from real-estate, from first-wave returns to technological innovation, and so
forth.
Both sets of questions are
necessary in moving from measuring inequality to assessing it.
Inequality, as a merely formal or
statistical feature of the economy, is not good or bad; it becomes good or bad
only as it affects those things that people value and have reason to value. Indeed, inasmuch as the word “inequality” in
common use implies something bad, a problem, it is a derivative concept, taking
its intelligibility from some (explicit or implicit) idea of what would count
as an appropriate kind of equality. And
because wealth is itself an instrumental good, valuable only because it enables
people to have and do things that they value, any idea of an appropriate level
of inequality will presuppose a series of things: what wealth enables one to do
in a given society, which things wealth cannot buy, which things are available
regardless of wealth, and, of course, what kinds of things are important to be
able to have and to do. Part of this web
of presuppositions is the conception of citizenship implied in any picture of
democracy: what it means to have standing in the political community and among
other private individuals, and how wealth structures these relations.
To diagnose unequal wealth, then, one
must disaggregate its effects and relate them to a scheme of values and the
institutions that embody those values – such as schemes of social provision,
market-making and market-limiting rules, and so forth. Another kind of disaggregation is also essential,
this kind concerned less with the effects of wealth than with its sources. To do
anything with respect to unequal wealth, one must know something about what
causes it and what kinds of interventions are possible around those
causes. How much inequality of wealth is
the result of simple rent-seeking, such as featherbedding by executives and
compensation committees? How much comes
from broader political choices, such as tax policy or laws governing labor
unions? How much is a structural result
of technological innovation, or of globalization, or of some persistent dynamic
in the spectrum of economic orders that we call “capitalism”? How much is specific to changes in a specific
area of the economy, such as real estate, and are such changes basically
contingent, or are they symptoms of some structural dynamic? For any of these sources, but particularly
the last two, how much political space is open to mitigate the effects of
inequality, and at what cost?
Moreover, both questions – what
does wealth mean and where does it come from? – are all the more important in how they interact. To put the question in a way that is somewhat
over-stylized, how do capitalism and democracy interact? Is there a tendency toward rising economic
inequality that erodes putative commitments to civic equality? Does civic equality presuppose and require
certain economic arrangements – whether laissez-faire, social-democratic, or
otherwise? This, of course, is not a
question that could be answered once and for all: because it concerns dynamic
interplay between two spheres of braided equality and inequality (broadly, the
economic and the political), it might get a different answer at any moment in
time, depending how events had played out to that point, what kinds of institutions
were in place, and so forth.
Although this last question, the
issue of interacting spheres, is sweeping and elusive, it is also the most
important, because it joins the work of explaining and assessing wealth
inequality with the work of acting on it.
Wealth and Democracy in the Age of
Kuznets and Keynes
The rediscovery of massive and
growing wealth inequality brings an inconvenient realization: much of the
thinking of recent decades has been subtly inflected by empirical premises that
seem to be turning out false. First
among these is the expectation that economic inequality in developed countries
should settle at stable and tolerable levels.
This expectation was crystallized in the famous “Kuznets curve,” named
for economist Simon Kuznets, which found (based on a limited sample of
mid-century tax records in the United States) income inequality growing for a
time, then leveling off. Soon matched by
doppelgangers such as the “environmental Kuznets curve” (which showed pollution
rising early in the development process, then falling as wealthy societies
adopted environmental regulations), the Kuznets curve came to be a kind of
macroeconomic emoji for optimism about the social meaning of economic growth.
If the first vulnerable promise belonged
to Kuznets, the second can be fairly identified with economist John Maynard
Keynes: the benign statist assumption that expert governance has more or less
wrestled economic vicissitudes to the ground and is now firmly in control of
economic life.
Although the core of
Keynes’s contribution to post-war economic governance was the management of
business cycles through demand stimulus (via public spending or relaxed
interest rates), it rested on a larger image of political and social life in
which, as Keynes famously put it, the “economic problem” (basically the problem
of scarcity) was on the way to being solved.
Taken together, these two premises describe
the common sense of the North Atlantic countries in the “thirty glorious years”
following World War II, when high rates of growth, effective national controls
on the international movement of capital, and a strong political role for
organized labor resulted in widely shared prosperity. (There were important exceptions to the trend
of economic inclusion, notably African-Americans in the United States, but it
was typical of the time that these, like certain other pockets of poverty or
social vulnerability, were regarded as
exceptions, and the assumed solution among elites was to incorporate them
into a system generally regarded as working for everyone.) This common sense implied that there was no
great reason to expect wealth inequality to be self-compounding, and that, if
inequality did grow, no reason that a democratic political order should not be
able to sort it out.
This is not to say that there was
perfect complacency, but that the conceptualization of issues at the
intersection of private wealth and public power assumed that they were soluble:
of a manageable scale and subject to powerful tools of governance.
For instance, John Rawls’s
Theory of Justice, published in 1971, devoted
a bit more than two pages to “the fair value of political liberty,” that is,
the problem of ensuring that formally equal rights to political participation
should not be undermined by unequal economic power.
Rawls recognized that unequal political
power might arise from unequal economic power, then entrench itself in the
legal rules of the game (both political and economic).
He responded with what was in effect a strong
expression of the Keynesian assumption: in its distributive capacity,
government should maintain an ongoing re-sorting of wealth to avoid excessive
concentrations of economic power, while also using public financing of
elections to sustain boundaries between the political process and private
wealth.
All of this appeared in Rawls’s
thought as, in effect, an important administrative problem for a post-war state
assumed to have the power, expertise, and legitimacy to carry it out.
Rawls offered no sustained reflection on the
ways that unequal wealth might arise from within, or break free of, a basically
social-democratic state and impose its own logic of power throughout both
economic and political life.
Rawls wrote that if such questions
arose, they would “belong to political sociology,” rather than to his theory of
justice.
But the thought that a theory of justice
could set aside problems of “political sociology” got the point exactly
backward, at least in one key respect.
Rawls’s theory of justice had the appeal that it did because it could
presuppose a political sociology
characterized by the assumptions of Kuznets and Keynes.
It could stand as an idealizing and
rationalizing account of a certain kind of post-war state, one poised to manage
economic life so thoroughly as to make economic processes thoroughly
objects of political choice and control,
rather than allowing them to become
agents
of political power and change.
To write
of the economy as Rawls did, as the site of distributive shares, to be
organized by rules that allow only those inequalities that benefit the least
advantaged, while also treating the choice between socialism and private
ownership as an open one, assumes that economic life is basically a plastic
object of regulation, not a source of barriers to, and disruption of, the
political project of justice.
Because it rests on these (in
hindsight) heroic assumptions, Rawls’s project is in some sense the apogee of a
body of thought that preceded the post-war period by many decades but came to
its fullest flowering then. This line of
thinking expected to see the importance of the distinctively economic domain of
life diminish as scarcity receded and humanity emancipated itself from material
insecurity. Whatever organizing
principles scarcity and self-interest imposed on economic life would turn to
be, in effect, transient features of a passing era.
In its liberal version, this
tradition owed a key debt to John Stuart Mill.
In his Principles of Political
Economy, Mill argued that the era of money-making and business-driven
busyness that he was living through would prove an anomaly, an historical
peculiarity. In good time, Mill
predicted, people would recognize that their material needs had been met by
growing social wealth, and would turn to other priorities, the “higher
pleasures” of refinement, self-unfolding, and non-instrumental personal
relationships. The forecast was consistent
with Mill’s tendency toward an optimistic, humanist libertarianism woven into
the fabric of a perfectionist utilitarianism.
In Mill’s account, social life, the realm of sociability that is defined
neither by the instrumental rationality of the marketplace nor by the formality
and sovereign authority of politics, would spontaneously and fluidly implement
post-economic, humanistic priorities – for no great, or lesser, reason than
that women and men would grow bored of money-making and appreciate that they
had better things to do with their lives.
A culture devoted to making money had something wrong with it, Mill
reckoned, and the perspicacity of free individuals would recognize this and set
it right.
Keynes’s forecast in “Economic
Possibilities for Our Grandchildren,” that the problem of scarcity might be
overcome after another century, was little more than an extension of Mill’s
argument, augmented by intervening decades of compound growth. Keynes proposed that the defining question of
collective life would no longer be how to create wealth, but rather how to use
leisure. The most socially prized people
would be those who showed others gracious, edifying, and pleasurable ways to
spend their time and powers toward non-accumulative ends. Keynes even suggested, following Mill and
perhaps waxing a bit mischievous, that the pursuit of wealth as an end in
itself, having exhausted its social usefulness, could be handed off with a
shudder to experts in mental disorders.
Like Mill, Keynes seemed to imagine that tastes for leisure and
refinement would assert themselves organically once material needs ceased to be
pressing. The engine of capitalist wealth-production
would slow and cease, having used up its fuel of human cupidity.
By the end of the 1950s, the engine
had not even slowed. This was the puzzle
that Keynesian economist John Kenneth Galbraith set himself in one of the
twentieth century’s major American social-theoretic treatments of wealth, The Affluent Society. Galbraith argued that Keynes’s utopia of
leisure had not arrived for two reasons.
First was the perverse persistence of economic insecurity in a wealthy
society: although the United States was rich enough to provide a decent and
secure living for all, economic life continued to be shadowed by the prospect
of vulnerability and deprivation for those who fared badly. Galbraith argued that whatever rationale
these fearsome incentives might have had in an earlier, poorer era that needed
to make a priority of economic growth could no longer apply in the age of
affluence. The feeling of scarcity and
vulnerability was a kind of collective neurosis in economic life – albeit one
given a very real material basis by lawmakers’ failure to provide security for
Americans in the form of social provision and protection in their employment.
Second, Galbraith sought to explain
the unsettling fact that the appetite for consumption of material goods had not
abated, even as the economy provided nearly everyone with levels of material
prosperity that, a century or even fifty years earlier, would have seemed to
solve the problem of material want. Here
he introduced a kind of deus ex machina:
he advertising industry produced new wants in pace with economic production,
artificially keeping consumer demand high enough to stoke the engines of
industry. Galbraith distinguished
between those wants that preceded the production process and those that, as he
described it, were created as part of the production process itself. He argued that human happiness could be
fostered just as much by avoiding the creation of new wants as by satisfying
those wants once they existed: after all, the sum of satisfied wants is a joint
product of the level of wants and the degree of their satisfaction, and one may
produce full satisfaction as easily by subtracting inessential desires as by
multiplying means of satisfying them.
The weak point in Galbraith’s
account is the would-be distinction between natural and artificial
desires. There is, to be sure, something
important here; but it is not enough to say that desires without an old
pedigree have less weight than those known to Homer and the Victorians. The reasons are familiar from Marx and from
market-oriented technological optimists alike: in a deep way, human life is a
joint product of the organic and the inorganic, our individual bodies and personalities
and our collective technologies of production.
We create ourselves and discover our potential – our powers, desires,
and discontents – through an historical process of innovation. This innovation sets in motion a constant
series of revolutions – technological, political, cultural, and at the level of
consciousness itself. People had, at one
time, not heard of racial equality, same-sex marriage, or safe and effective
control over reproduction; but there is nothing deficient in our demands for
these things today.
In Galbraith’s view, then, wealth
was both an achievement and a problem; but the problem lay essentially in the
fact that the society had not yet matured enough to take full advantage of
wealth’s revolutionary humanitarian potential.
The way to do this would be by legislating, rather than simply waiting
for, the culture of leisure and refinement that Keynes had forecasted.
The legislation would take the form of social
provision, in personal security (job protection and pensions, for example) and
public goods, the latter cultural as well as infrastructural.
This was, in effect, the theoretical version
of President Lyndon B. Johnson’s Great Society: a program for a humanistic,
post-material utopia of lifelong education, leisure, reflection, and
self-development.
Galbraith identified a vanguard for this
change: what he called the New Class, a social stratum whose members valued
work as a source of intrinsic satisfaction and self-expression, rather than a
hard bargain of instrumental labor in exchange for unrelated wants.
This population was already moving into the
post-material world of satisfaction in activity rather than things, in doing
rather than consuming.
The goal of any
affluent society, Galbraith argued, should be to usher as many of its people as
possible into this class, and so to realize the emancipating potential that
wealth represented.
In Galbraith’s account, as in
Rawls’s, there is a clear assumption that the Keynesian state stands ready and
able to realize the potential of affluence to solve the problem of scarcity and
release people into a post-scarcity society.
Both of these assumptions – the availability of a post-scarcity
situation and the capacity of the state to usher it in – came under pressure
from both left and right in the decades following Galbraith’s 1958 book.
Doubts from the Left: Positional
Goods and the Persistence of Scarcity
Fred Hirsh’s Social Limits to Growth made both cases in [1974]. Hirsch, an economist and former International
Monetary Fund official, argued that Keynesian optimism had rested on a pair of
assumptions that turned out to be historically contingent – and, increasingly,
no longer held. First was that the
lion’s share of economic demand would be for goods that served classically
material needs, such as food and shelter.
Economic growth straightforwardly serves more of these needs as it
progresses: more food, bigger houses with more bathrooms, more consumer
electronics, and so forth. But, Hirsch
argued, economic development brought growing emphasis on positional goods, goods whose capacity to satisfy their owners or
consumers is relative to what others have.
Affluence created a paradox: the value of positional goods was eroded
precisely by increasing material wealth, so that the satisfaction produced by
economic growth was often a matter of two steps forward, (at least) one step
back.
Positional goods were mainly of two
kinds. First were material goods subject
to congestion, such as cars and suburban houses – goods that appeared luxurious
when few people had them, but turned out to be much less enjoyable when widely
distributed, precisely because wide distribution meant crowded roads and
clogged, increasingly remote suburbs. Inasmuch
as economic growth produces positional goods, it constantly undermines its own
promise: what one sets out to achieve is less satisfying once one finally gets
it.
Hirsch’s second type of positional
good is the pure positional good, the thing that is scarce by its nature, such
as leadership positions or other bases of prestige. Hirsch’s lead example was higher
education. As material wealth increases,
ever more spending flows into competition for positional goods, which do not
increase in number (at least not in proportion to the increase in overall
wealth). With increased competition for
positional goods, pressure increases on universities to serve as sorting
institutions, allocating leadership positions, prestige, satisfying work, and
so forth. Results include longer
certifying processes, increasing rates of matriculation, (one might add today)
rising tuition, and, at the heart of the matter, years spent in education that
is purely instrumental to achieving a positional good, or, even worse, purely
defensive – like a home-security system, a way of avoiding a loss, the loss in
this case being a decline in social standing.
All these uses of wealth to pursue positional goods are, Hirsch argued,
mainly social waste. Such waste is
unavoidable in a materially wealthy society with a highly uneven topography of
positional goods. Because of positional
goods, economic growth does not overcome scarcity, but displaces it from the
straightforwardly material sphere to the positional sphere.
Hirsch’s second paradox takes us to
the crucial issue: the interaction between capitalism and democracy. Hirsch argued that the traditional agenda of
economic development, associated with a broadly utilitarian state (whose
policies were to be laissez-faire under the Benthamite dispensation, managerial
in the Keynesian incarnation), was coherent only because of invisible but
indispensable boundary on the domain of economic self-interest. Individual economic actors were expected to
pursue their self-interest to the full, but always within the rules of the
game, while principled and public-spirited officials were charged with
enforcing those rules in an even-handed fashion. But these boundaries would prove
unstable. Absent some independent social
morality, there was no reason for people, professions, and industries not to
try to game and change the rules in their favor. Reciprocally, there was no guarantee that
officials would not put the rules up for sale, if not crudely and nakedly, then
in the familiar, revolving-door style of capture that has become familiar in the
capitalist regulatory state. There was
reason to expect these trends to quicken as the status of economic
self-interest as a sole and sufficient account of rationality eroded the
quasi-religious social ethics of businesspeople and professionals and the
mandarin noblesse oblige of public
officials. Such extra-market social
ethics, Hirsch argued, was the implicit sociological linchpin of the regulated
market that the Keynesian state supported; but the market’s logic tended to
undercut this sine qua non of its own
regulation.
For these reasons, Hirsch argued,
political intervention would be necessary to create a social state in which
prosperity would not undercut its own promise.
As he put it, the market provides a range of choices to the individual,
but only politics provides the power to choose among multiple ranges of choices, that is, to shape the playing
field and the rules themselves in a deliberate way. And individual choice alone would prove
insufficient to deliver the promised escape from scarcity and insecurity. It is interesting, in hindsight, that Hirsch
felt it urgent to make this case: in his view, a benign and effective
regulatory state could no longer be assumed, and this at the very moment when
growing evidence suggested that market-led economic growth could not fulfill
its promise without political intervention.
From the (center-) Right: Doubts
about Democracy and Neoliberalism’s Rise
Part of the difficulty was
this. Throughout the twentieth century,
as the regulatory state took on ever-greater importance as the assumed linchpin
of political economy, it was losing plausibility as a vehicle of democratic
feedback. A line of argument widely
broadcast in the United States by Walter Lippmann and Joseph Schumpeter held that
actually existing mass democracy could not instantiate any idealistic
conceptual account of collective self-rule.
Voters were ill-informed, emotional, and often in sway of fantastical
confusion. Majorities were contingent
and transitory. Even at its most lucid,
the will of the majority was simply visited on the minority with the arbitrary
decisiveness of authoritarian dictates.
The idea that democracy involved a collective body deliberately choosing
its direction was insupportable outside certain exceptional and archaic
circumstances, such as the Greek polis
or Swiss canton. The most optimistic
account one could give of democracy was to describe majoritarian elections as a
rule of decision to resolve contests among rotating bands of elites – the
position Schumpeter adopted. Lippmann
took a gentler tone but was not much more optimistic, describing popular
majorities as weighing in occasionally on questions of great moment – not all
that rationally, but more or less decisively – but otherwise little connected
with the activity of governance, which was the work of institutions, not
populations. These arguments appeared
between the 1920s and the 1940s: by the 1970s, a sophisticated body of
public-choice literature portrayed government as, in effect, a subset of
economic life: a congeries of rent-seeking by industries and constituencies,
power-accumulation by bureaucrats, and, at worst, utopian flights of reformist
fancy free of the discipline that cost-internalization imposes on private
decisions. Hirsch thus wrote in a world
in which Galbraith’s rather easy assumption of a legitimate, effective, and
benign state was under considerable intellectual pressure. Recognizing the need for regulation was
already a matter of reclaiming contested ground, not simply bathing in
near-consensus.
The most polemical, sustained, and
– in hindsight – emblematic attack from the right on Great Society optimism
came from Friedrich Hayek. Hayek argued
that, contrary to promises of post-material security, an economy could do its work
only if it maintained a measure of insecurity and arbitrariness, and that
social provision did not complete the promise of economic development, but
instead undercut it. Hayek argued that
the economy should be understood as an information-processing system, conveying
data about the relative scarcity of goods, time, and talent, and the extent and
intensity of desire for them. Effective
communication of this data laid the groundwork for rational decisions about the
trade-offs between possible uses of resources that are the ligature of economic
life.
The key to this informational
function was the price mechanism, which expressed the kaleidoscopic facts of
economic life in uniquely succinct and usable form. Prices could do this work only if they were
in fact allowed to coordinate decisions about distribution and use of resources:
every redistributive or regulatory mandate clogged and diverted the flow of
information, turning a healthy vascular system of data into a swampy delta of
drifting decisions. The consummation of
secure prosperity that Galbraith sketched would be, in effect, the end of
economic life as Hayek described it, and its eclipse by the bureaucratic life
of an administered state. One could
expect such a state to be inefficient, arbitrary, and actuated by envious and
irrational passions, quite unlike the relatively lucid instrumental rationality
that the price system enforced on market choices. Faced with a choice between liberalism –
which for him meant the classical economic liberalism of laissez-faire – and
democracy, Hayek argued, one should prefer liberalism. The more democracy developed in the
directions that Galbraith and Hirsch urged, the more it might force the choice.
On the strength of these arguments,
Hayek has become the exemplar of the approach to political economy often called
neoliberalism.
The heart of this revival
of classical economic liberalism is the claim that there is no viable
alternative to a market system, and therefore any attempt to use state power to
do what Galbraith presupposed and Hirsch urged – to choose collectively among
sets of choices – is an error.
Less a
program or system of thought than a constellation of programs united by an
intellectual mood, neo-liberalism is sometimes bolstered by the claims that
markets secure liberty and equality (which Hayek argued), fairness (which he
did not), or welfare (which he did, but in qualified form), but the heart the
neo-liberal position is a negative one: there is nothing much for the state to
do but make and maintain markets.
Ambitious political projects will undermine liberty, equality, fairness,
and welfare together.
A market regime is
the least-worst for all of these values.
This is, increasingly, the intellectual mood in which revelations of
growing inequality have appeared.
One of the major divisions in
today’s political economy must come over why the forecasts of Keynes and
Galbraith did not come true.
Was it
because Hayek’s recuperation of market theory, combined with a long-running
theoretical demotion of democracy, was intellectually right, and sensible
policy-makers saved the world from incipient statism?
Or was it because, as Wolfgang Streeck has
argued, capital revolted against the broadly social-democratic mid-century
accommodation that thinkers like Galbraith assumed and sought to perfect?
Put differently, is the surging inequality of
recent decades a feature of the best of possible worlds, or of a world where a
relatively egalitarian regime was recently dethroned and false necessity
reigns, enforcing an undue impression of inevitability in the very market arrangements
that produce and sustain inequality?
Obviously, the stakes of this question are not small.
They concern whether the
inequality-generating logic of economic life limits and conditions the possible
forms of democracy or, on the contrary, the real possibility of democratic
decisions about the shape of the economy has been suppressed by a
counter-democratic revolt of capital.
A Step Back: The Long History of
Markets, Democracy, and Social Life
The
recognition that markets have their own logic, which imposes an order on social
activity and allocates resources and capabilities among social groups, and
which may conflict with other principles of social organization and
distribution, is basically a nineteenth-century one, although it appears in
germ in works as diverse as Adam Smith’s Wealth
of Nations and Jean-Jacques Rousseau’s Discourse
on Inequality (aka, the Second
Discourse). As David Grewal argues
in his forthcoming Invention of the
Economy, modern social and political thought, going back to roots in the
seventeenth century but flowering in the latter part of the eighteenth, is
marked by a pair of contrasting utopias, two pictures of how a society of
equally free people might coordinate its common life. The economic utopia, associated especially
with Adam Smith and David Hume, envisions a non-coercive structure of
cooperation emerging organically, in the form of proto-legal rules of property
and contract akin to the structures of grammar.
Such rules require no central authority to create or specify them;
rather, they are, so to speak, pre-programmed into human nature (again, in the
manner of grammar) and manifest themselves under the pressure of increasing
interdependence and social complexity. This
is the origin-point of a laissez-faire conception of social order in which
mutuality of interest, coordinated by commonly recognized rules, enables people
to structure their lives around obligations freely and rationally assumed,
without arbitrary imposition.
Grewal’s
other utopia is political. The political
utopia is founded on citizenship and sovereignty. The emphasis on sovereignty reflected the
view that the organizing principles of social life arise from the binding
decision of what Thomas Hobbes identified as the sovereign. A sovereign, for Hobbes, was not necessarily
a monarch or any other specific institution.
Rather, it was an analytically necessary feature of any legal and
political order. In such an order, there
must be some entity with the power to make, interpret, and enforce its rules, a
holder of the last word. This was the
sovereign, whatever form it took in any polity (court, council, assembly,
monarch, etc.). The political utopia is
a utopia of equal citizenship: each person has an equal share in the production
and legitimation of the sovereignty, and thus of the rules that shape their
common life.
At a deep
level, the clash between the two utopias was rooted in conflicting accounts of
the relationship between law and human nature.
Smith and Hume’s naturalistic jurisprudence tied a uniquely functional
and beneficial set of laws to an account of human beings as organically
intertwined through sociability, a disposition to join in bonds of mutual
interest and intelligibility. Law was a
product of human cooperation, not its precondition, and the range of laws that
would emerge from organic cooperation at any stage of economic development was
narrow enough that one could speak of it as a domain of natural law. By contrast, Hobbes’s positivism denied the
possibility of an organic, emergent law: the epistemic situation of uncertainty
and mutual endangerment that Hobbes famously diagnosed as the “state of nature”
(that is, a social world imagined without law) was as far as horizontal,
spontaneous encounters would take people.
The conditions of mutual intelligibility and assurance that cooperation
required could arise only through legislation and enforcement of law by a third
party outside the would-be cooperators, that is, the role of sovereign. (Of course, the sovereign, as an artificial
juristic entity, might just be the will of a majority of members of the
political community. This was precisely
the idea of the political utopia of equal citizenship.) Law, and social order, were therefore
constructed in quite a radical sense: nothing about them was natural except the
need for them.
In later
developments, the two utopias have, of course, not existed as pure types, but
rather as regulative principles, asymptotic ideals that have motivated
competing schools of thought. Nonetheless, when one asks into the
relationship between markets and citizenship, one is speaking within this
tradition of conflict, asking how far the contemporary extensions of one
version of a society of equally free persons constrain and distort the ambitions
of the other version.
The two utopias
coexist in social and legal thought with a third ideal-type of social life,
which is organic and horizontal, in the manner of Hume and Smith, but does not
find its consummation in the market.
This vision has its exemplary twentieth-century expression in Karl
Polanyi’s Great Transformation, which
portrays laissez-faire doctrine as artificial dogma, achieved only through
aggressive, state-led reform. The
organic form of social cooperation is not that of the market, but arises from
loose reciprocity and deeper ties of solidarity. These motives produced a “moral economy” that
included ideas of just prices and wages, various forms of security, and, above
all, forms of obligation that were ethical, religious, and emotional as well
as, and often rather than, self-interested.
From this point of view, the state
is neither the source of ordering principles, as for Hobbes, nor the
superintendent of market order, as for Smith and Hume. Instead the state would
be
either the guardian of organic
patterns of reciprocity or the battering ram of disruptive, market-making
reforms.
Polanyi is famously associated
with the formula “Laissez-faire was planned,” but it is just as illuminating to
see him as arguing that planning was spontaneous: society mobilizes in its own
defense.
Less abstractly, people mobilize to defend
security and established patterns of social relations, and, quite naturally,
call on the state to help them in doing so.
The point
of this taxonomy is that there is no pre-theoretical formulation of the
question of democracy’s relation to unequal wealth. The question depends on one’s conception of
democracy, and also on one’s conception of economic order. The
stronger one’s commitment to a idea of robustly equal citizenship, and the more strongly one supposes that
a political community might choose among a range of economic orders, the more
unequal wealth seems to foreclose the work of a sovereign polity, predisposing
political judgment in favor of the present economic regime. Conversely, the more one sees politics and
law as handmaidens to a naturalized set of market relations, the less is at
stake in unequal wealth among citizens.
While the eighteenth-century naturalization of markets was affirmative,
claiming to root rights of property and contract in human nature and
providential design, and the twenty-first century version is more likely to be
negative – asserting that “there is no alternative” to markets on account of
incentives, information costs, or some other constraint on institutional design
– the basic logic remains: the demotion of political sovereignty by the
naturalization of market economics, which in turn demotes citizenship to a
symbolic status rather than a substantive part in collective governance.
Among
nineteenth-century figures who identified a basic conflict between market order
on the one hand and social or political community on the other – those, that
is, who rejected the naturalization of markets – there were two predominant
responses. One, associated with Karl
Marx and various strands of revolutionary socialism, sought to absorb economic
life fully into the community of equal citizens, that is, to overcome the
distinction between the political and economic domains and dissolve all forms
of unequal economic power into the sovereign power of democratic politics. The other, associated with Progressive
reformers in the United States and in Europe with certain strands of social
democracy and, later, Christian democracy, took the opposite approach, using
the political power of the state of strengthen the boundary between economic
relations and non-economic social life, notably in the domains of the family,
education, culture, and professional activity.
While the first approach updated and radicalized the utopia of equal
citizenship, the second represented a compromise between the two utopias and,
in the style of Polanyi, a political defense of non-market orders in the
reproduction of biological, social, and cultural life. The latter was the basic strategy of the
accommodation that structured post-War life in the twentieth century.
Trans-Atlantic social democracy,
then, was more social than democratic.
It took seriously the quest for security in a relatively familiar,
stable, and manageable social world, whether that of the factory, the union,
the neighborhood, the university or profession, or the family. Through pluralistic representative
institutions, it sought to maintain a reasonable balance among interests
conceived of through these collective categories, even as, through the period,
rights-based claims to greater individual liberty and the end of various caste
systems also proliferated. Its basic
strategy of reform – not premeditated, but consistent in application – was to
open up existing institutions of representation and advancement to previously
excluded groups while also redefining the state’s relation to individuals
through an increasingly homogenous and libertarian scheme of negative rights. It all seemed to be working well enough – until
a reassertion of market principles and market power began to break down the
barriers protecting various secure domains of social life and revealed the lack
of power, or will, in the democratic state to reassert their protection.
The Poverty
of Our Philosophy
All of this
is to emphasize the peculiar situation in which wealth is now emerging as a political
issue. Unequal wealth is widely (though
by no means universally) recognized as an urgent question even as the terms of
the problem remain ill-defined, to the point that it is difficult to say just
what is at stake in it. Much of the
thought that we have about wealth and its relationship to democracy comes from
the anomalous period of the mid-twentieth century, when that relationship
seemed to have been resolved in practice, even as resources – intellectual and
institutional – for dealing with conflicts between the two were being eroded.
Yes even in
this theoretically impoverished situation, theories of wealth and democracy are
doing a lot of work.
Consider the Supreme
Court’s implicit theories of markets and democracy in its First Amendment cases
concerning money in politics.
The
Court’s ready assimilation of money to speech assumes that there is, in
principle, no conflict between political argument and economic accumulation,
that these are compatible, even mutually supportive, dynamics.
The Court’s embrace of for-profit
corporations as essential participants in the process of American democracy
also highlights its confidence that there is no contradiction between the
accumulation of great wealth and the survival of effective self-rule.
And why would the justices think
that? The key may lie in an implicit
theory of what self-rule is. The Court’s
rulings holding that campaign-finance regulation cannot be justified by the
goal of equalizing influence among citizens or (the observe of the same
principle) avoiding “distortion” of political debate by moneyed interests
indicate that its conception of democracy excludes the robust idea of equal
citizenship at the heart of what I have called the utopia of sovereignty. Instead, the Court’s concerns appear
basically Schumpeterian: to avoid the entrenchment of a political class through
self-serving campaign laws, even at the cost of ensuring the entrenchment of a
class of wealth donor-citizens who effectively set policy – that is, in
Schumpeter’s terms, facilitating elite rotation while declining the romantic
idea that ordinary citizens should, or can, participate in self-government in
any meaningful way. The patronage
relationships that Buckley v. Valeo
and Citizens United (rather more the
first, despite the notoriety of the second) produce between massive donors and
their preferred candidates and movements are exemplary Schumpeterian politics,
intra-elite disruptors that change the menu of choices for the mainly passive
voters.
This is just one example of the
work that implicit theories of wealth and democracy are already doing sub silentio – and, hence, one piece of evidence
for the need for explicit engagement with these questions. And what might that engagement look like? Here I suggest four strategies for starting
out with deficient resources for thinking through these problems – up from
poverty, as it were.
1/ Life-Cycle Analysis: This term
is usually applied to assessment of industrial processes, but I mean it in a
different, mischievous but also entirely serious sense.
One of the most provocative, if
underdeveloped, features of Piketty’s
Capital
is his account of the life-prospects and likely priorities of young people in
societies with various levels of wealth.
Drawing on nineteenth-century fiction, he shows that, past a certain
level of inequality, “careers open to talent” gives way to “marriage open to
ambition,” that is, that the key to a good life is winding up in the right,
highly capitalized family, whose advantages ability and hard work cannot
match.
In such a society, ambition,
effort, and esteem all flow toward established concentrations of wealth, with
predictable consequences for the quality of the professions, the hierarchy of
prestige, and, to name elusive but real qualities, the texture of social
sentiment and imagination.
Now carry the same kind of question
from personal life to the political activity of democracy. What kinds of leaders does a highly unequal
democracy produce when wealth flows freely into campaigns? As Zephyr Teachout has emphasized in her
important book, Corruption in America,
the flip side of “free” spending by the wealthy is dependence on the part of
candidates, who need money for political survival. The result is not usually the outright
bribery that the Supreme Court classifies as “corruption” – the only evil it
permits campaign spending laws to address – but a subtler reorientation of
attention and concern. One might think
of it by analogy to the ways one sees and hears in a crowded room: where does
the eye go, which voices does the ear pick up?
Who, a day later, does one remember was there? In a democracy that depends on private wealth
for its basic activities of communication and mobilization, candidates see and
hear the wealthy, because they need them.
The careers of Bill and Hillary Clinton since the end of his presidency
may serve as emblems of this economy of attention: although they remain
standard-bearers of the more egalitarian of the two major American parties,
they have spent fifteen years relentlessly cultivating the company, attention,
and largesse of the world’s wealthiest people.
That, after all, is how things get done.
2/ Disaggregating Wealth: In
principle, the same disparities in purchasing power might have many different
meanings, depending on certain distinctions.
Of the basic goods of life, which (A) must be purchased, (B) are
guaranteed without purchase, and (C) are protected from monetization and may
not be purchased at all? The more robust
a set of social guarantees (category (B)), such as guarantees of education,
basic security in one’s person, health care, and retirement, the less wealth
matters, even if it grows more unequal.
Conversely, the more basic goods must be purchased on the market, the
more differences in wealth put lives on divergent courses, quite apart from
talent, effort, need, or whatever else one regards as an appropriate
distributive criterion.
Of course these categories are
dynamic, and wealth produces potential demand for differentiation in such
goods. This is why category (C), the
non-monetizable category, is so important.
Particularly important is whether political influence, the basic feedback
mechanism that determines revisions in these categories, is itself monetizable. Where it is, wealth will tend, other things
equal, to become more salient across all categories of goods.
3/ Recognizing the Primacy of
Politics: The Legal Realists were right, as was Hobbesian positivism long
before they wrote: economic life takes its shape, and property rights –
including claims to wealth – arise only with the legal framework that political
action creates. Rough-and-ready
conventions for certain resources may arise in small and tight-knit groups,
particularly against a backdrop of state definition and enforcement of other
claims; but where there is conflict or uncertainty beyond such a community –
that is, where there is anything resembling complex economic activity – someone
must decide, and that someone is sovereign.
This is a decisive argument against any radical naturalization of
economic claims.
Of course this argument remains
very far from implying that anything goes in the political creation of the
economy. From Hayekian arguments
concerning the informational complexity of economies to liberal claims about
autonomy to conventional neo-classical economists’ worries that no system gets
far without appealing to self-interest, there may be decisive reasons to
organize any given area of economic life along market lines. The point is that this is a choice – a
political choice. The utopia of
property-and-contract, of market sociability and reciprocity, runs through the
utopia of equal citizenship, of political sovereignty, and any case for it must
be made there.
4/ The Democratic Pivot: This point
returns the discussion to what remains its crux. What does it mean to submit basic economic
questions to political judgment, and what is the most one might hope to
accomplish there? The answers depend on how
one understands political processes, and how robust a set of goals one believes
democratic sovereignty, the utopia of politics, can support.
These goals come in two
dimensions. First is the conception of
citizenship as a form of social membership: what kinds of security,
empowerment, opportunity, access to institutions, and so forth should be
guaranteed to every member in good standing of the social order? This political economy of citizenship, as
Joseph Fishkin and William Forbath show in this volume, goes all the way back
in the United States, and has a distinctive social-democratic version in the
twentieth century (identified in the US with the New Deal) whose future is now
in considerable doubt.
The second dimension of citizenship
concerns active self-rule: how far, after the doubts that marked
twentieth-century thought and demoted political judgment to an undisciplined
mix of self-interest and fantasy, can a polity actively shape its own economic
life, making the rules of material interdependence a matter for choice rather
than happenstance?
Unless one is a thoroughgoing
fatalist, it seems fair to infer from the last seven decades that there is a range
of possibilities along both dimensions.
The social-democratic accommodation of the mid-twentieth century represents
a genuine alternative to a marketized social and political order. This is true despite whatever social
democracy’s internal failures were (notably failures of inclusion), and despite
the doubts that its decline raises about its sustainability in the face of
marketizing pressure. As noted earlier,
however, social democracy, always had more to do with securing a strong form of
social membership for citizens than with the active political supervision of
economic life: it was, to repeat, more social than democratic. This may have been its Achilles heel.
There may, however, be something
essential to learn from social democracy about self-governance. This is the importance of organized people,
as opposed to abstractly empowered individual citizens. Proposals to increase the influence of
citizens – for instance, by allocating campaign-contribution credits to each
adult as a way of matching the influence of the wealthy – are admirable and
likely to be helpful; but they also share the neoliberal emphasis on the
choosing individual as the pivot of collective life – a de-collectivized view
of collective life, in which aggregating individual choice is the whole work. By contrast to this neoliberal vision, the
pluralist politics of the social-democratic states rested heavily on
intermediary institutions, notably labor unions, to provide virtual
representation and, perhaps as important, to create bonds of identification
around common interests and agendas.
Such institutions may be key features of a “political sociology” that
could make active self-rule a more plausible ideal for a roughly majoritarian
system.
Here, however, one encounters the
next challenge.
As discussions of
Piketty’s proposed global annual wealth tax highlighted, the scale of wealth
accumulation and transfer is now worldwide in its basic dynamics.
Sovereignty remains almost exclusively a
phenomenon on the national scale.
Indeed,
social democracy was marked, as much as anything, by being the mode of social
life that arose when strong working-class movements in relatively rich
societies could sustain their victories because capital was mostly contained
within national borders.
Today,
inequality resembles climate change in its formal dimensions: a global problem
at which national political order often flails ineffectually.
As David Grewal has pointed out, because we
work in circumstances more closely resembling those of the last Gilded Age than
of the mid-twentieth century, we might recall that many of those who confronted
the contradictions of wealth and democracy in that earlier time identified
their problems and goals as international, and their movements and strategies,
therefore, as internationalist.
It would be an overreaction,
though, to surrender the field of domestic politics. Here, as in other respects, we are
unavoidably in a posture of experimentation.
The long-neglected question is what kind of democratic relation to
economic life is possible. Precisely
because of the neglect, the novelty (or at least renewed sense of urgency) of
the issue is the greater, and all responses are partly on unfamiliar ground.
Conclusion:
Inequality, as Jeffrey Winters
reminds us, is very old – indeed, so far, perennial. Democracy is rather arrestingly new, mass
democracy especially so. Manhood
suffrage is 100-150 years old even in the “mature” democracies. Women’s suffrage is a product of the
twentieth century. In the United States,
effective enfranchisement of African-American and Latino citizens dates to the
passage of the Voting Rights Act of 1965, and policies such as denying former
felons the vote continue to qualify the right.
Allowing for the economic catastrophe and political turmoil of the Great
Depression and the ideological bloodshed of World War Two, it may be that close
to half of the human experience of widespread and stable mass democracy
occurred in the halcyon years when economic inequality seemed to be in abeyance,
and even economic scarcity seemed on the path to being overcome. Thinking about wealth and democracy has been
informed by the optimistic premises of that time, in what it has not said as
well as in what it has.
I have noted that the twentieth
century’s experience of “actually existing democracy” coincided with sharp
theoretical skepticism toward the idea that a majoritarian representative
system could credibly be claimed to embody collective self-government. This might have been more troubling had it
not been for optimism that inequality and scarcity, those recurrent sources of
conflict, were now subject to rational and humane administration. The social-democratic accommodation between
democracy and capitalism seemed a good-enough arrangement as long as it was
stable. To the extent that inequality
and scarcity could be mastered, a pluralist, administered democracy promised to
be self-rule enough.
The question to ask today at the
intersection of wealth and democracy is not simply whether wealth might be
mastered again, so that it would let democracy proceed in peace.
The more basic question is whether growing
social wealth could become a means to an enriched democratic future.
Taking that question seriously would mean
reclaiming the mid-century goal of a world after scarcity, with widely-shared prosperity
spurring proliferating self-development and experiments in living.
The thought contained in that older goal was
that twentieth-century democracy was becoming a post-materialist form of life:
individuality was more central than collective self-rule to this conception of
democracy, but, in a world that seemed to have stabilized in a tolerable form,
that was good enough.
[Today the
dominant expressions of individuality have come apart from democracy and
lodged, instead, in neoliberal, non-democratic celebrations of economic power:
either the world-making creativity of the entrepreneur or the self-development
and humanitarianism of the
rentier.
The first is the denuded economic Nietzscheanism
of Schumpeter, dressed up in the style of Silicon Valley.
The second is mid-century Great Society
humanism without the society, a life of leisure, reflection, and intrinsically
valuable activity for those who happen to have the resources (often enough
inherited) to pursue them.]
Fred Hirsch’s analysis of
positional goods gives powerful reason to believe that the end of scarcity will
not come through the raw accumulation of total social wealth. Positional goods will continue to make rich people
(objectively rich on the spectrum of historical human experience) feel not-nearly-rich-enough. This dynamic only becomes more intense with
the marketization of essential resources for social reproduction, especially
education, health care, and child care: as pressure from growing overall
material wealth increases the relative cost of these labor-intensive goods, the
prospect of being unable to afford them (at least in decent quantity or quality,
which are of course socially relative standards) will haunt economic life,
making the threat of relative scarcity acute.
Hirsch’s analysis suggests, then,
that making wealth more socially beneficial will require revitalized
governance. There would have to be a
meaningful commitment to social provision of the goods that are necessary to
social reproduction and also vulnerable to intensified relative scarcity, such
as health care, education, and child care.
There would also have to be significant social limitation of inequality. This would mean limits on the accumulation of
great fortunes, such as those of George Soros, Bill Gates, and Sheldon Adelson,
who can effect their own foreign policies; but it would also mean constraints
on the difference in resources and social capacity that divide roughly the
“fifteen percent” of well-educated professionals and mid-level executives from
the “eighty percent” that includes more or less everyone else except the
actually rich. Under the present
dispensation, the attack on privilege too often means breaking down the
residual structures of security that defined the mid-century social vision, and
throwing, for instance, the tenured and professionally certified onto an
unregulated market. This leveling-down
of traditional social protections and stabilizing institutions is a signature
neoliberal move. It only intensifies
susceptibility to the dynamics that Hirsch diagnoses. A more apt response would be to level up
social provision and other forms of security, reducing the effect of relative
scarcity, while limiting raw economic inequality to ease the pressure for differentiation
in the availability and quality of these goods.
At the time of writing, it is an
increasingly common perception that economic inequality must be brought under
control for democracy to realize, or recover, its potential. As we have seen, this claim depends on one’s
conception of democracy; but it is highly plausible for any conception of
democracy that aims at meaningful version of collective self-rule, rather than
simple elite rotation. The argument
developed here suggests something further: that robust democracy is necessary
if wealth is to realize its potential for social benefit. Indeed, democracy must be able to intervene
in the definition, creation, distribution, and use of wealth precisely to make
the benefits of wealth real. A political
scheme of social provision, and political limitations on the scope of
inequality, are the most plausible means to prevent growing wealth from undercutting
its own benefits. This idea is not
extremist: it simply states the logic of the mid-century social-democratic
accommodation that established a measure of security and a pattern of widely
shared economic growth. It does,
however, insist on the priority of that political logic. The free play of the market will not deliver
the goods that market-led growth in wealth is conventionally celebrated for
producing. Only democracy can do
that. In this sense, wealth needs
democracy if it is to fulfill its humanitarian promise. The irony is that, ill-handled, wealth can
also overwhelm democracy and undercut its own humane potential.
Of course, these abstractions are
only ways of naming human powers. We – a
we that does not really exist yet, as a political matter – are the only ones
who can make a better world from the braided elements of economic and political
life. Both domains are, at the moment,
potent, unequal, and opaque. For
decades, respectable thought has regarded them with an understandable but also
unsustainable blend of cynicism and complacency. Now they need to become more equal and more
lucid, before their power is exhausted or fatally misused.
