Written:13 January 2007. Links: Home | Afghanistan | Urban Studies | Essays | Linux
Conservative Americans (i.e. my parents) only hear Leftists criticizing corporate welfare, excessive CEO salaries, and rip-offs of the poor by the rich, such as through predatory lending practices and most forms of insurance. Since conservatives only hear this criticism, they acquire the impression that Leftists are opposed to all forms of making money, and even opposed to building wealth in general. Amongst ourselves, Leftists are too busy criticizing the neo-Liberal movement to articulate our position on wealth-generation. However, I am deeply committed to major, broad-based wealth-generation given my work with the urban poor in the United States and Afghanistan. This essay is intended to clarify a Leftist position advocating the generation of wealth.
To begin with, many Leftists are committed to development in one form or another. from a Left point of view, successful development means successful human development, often expressed in terms of the power to choose to live your life as you see fit, in a dignified way. This does include the wealth necessary to have real options, and this is not just the position of moderates such as Amartya Sen and Muhammad Yunus; but also of much more radical Leftists as well. Even for those primarily dedicated to psychological and epistemological emancipation of women, the poor, and the oppressed, some form of wealth is necessary to realize new freedoms. At the very least, this means sufficient wealth to prevent starvation, which means moving the two billion people who live on less that $1 per day to living on $3 a day. A simple arithmetic calculation suggests that this would cost $6 billion per day of shift in wealth from the richer to the poor, but that assumes a zero-sum game in which a fixed amount of money must be taken from one group to give to another group. But as we know, the amount of wealth available in the world is not fixed. It varies with institutional effectiveness, productivity, and collective faith in economies. Thus, effective development worldwide is likely to increase the overall wealth available, in many ways beyond available cash.
So when Leftists talk about development economics, human investment, increasing government transparency and accountability, they are in fact arguing for increases in real wealth for whole populations. The emphasis is on broadly-distributed wealth, but it is not a simplistic argument for equalizing all wealth nor for taking from the rich to give to the poor. Leftists also argue that broad-based wealth-generation improves the quality of life for the elite as well: better to be rich (and heavily taxed) in Sweden than to be rich and risk kidnappings and assassinations in Brazil or Nigeria. Better to live in a country where 90% or more of the people can read, where life-expectancies are about 70, than to live in a country where 35% of the people can read and the overall life-expectancy is 45. Even if you are wealthy, no amount of money can buy total insulation from surrounding conditions, such as the rise of drug-resistant contagious diseases.
The obvious difference between Leftists and conservatives, then is about the distribution of wealth. Conservatives often use passive metaphors such as 'the invisible hand' or 'rising tides' to suggest that economies function like natural phenomena. In fact economies are entirely artificial; and since they are constructed by humans, their successes and failures are the result of human actions, whether deliberate or unintentional. Economies seem too complex to understand, if we assume that we would have to track every transaction in order to understand the process. In fact, what many economists and conservatives ignore is that economies function by limited sets of rules, and those rules are neither universal nor inevitable. Two examples should illustrate this point. The first is private contracts. Private contracts are a social institution that grew out of informal acts of gift-giving, obligation, and indebtedness. In non-contract societies, the form and degree of debt or obligation often involved extensive negotiation (Franz Boas studied this among the Kwakiutl; it is beyond the scope of this discussion). In the late Middle Ages the Knights Templar began to enforce promissory notes in order to facilitate the movement of Crusaders through insecure territory without carrying all their gold and silver; these promissory notes are the basis of both bank-notes and personal checks--both of which are contracts of debt. However, Jews and Muslims developed much more sophisticated personal contracts for long-distance trade and the rendering of services, which was portrayed so negatively by Shakespeare in the Merchant of Venice. By Medieval Christian standards, all participants in modern society are Shylocks. We all make money off of usury (lending at interest), and the 'pound of flesh' which we demand translates into crushing indebtedness for poorer Americans; "Structural Adjustment" reforms which have destroyed dozens of African economies; human trafficking; and forced labor that differs little from chattel slavery.
Does every economic system lead to such gross abuses of human rights? Or is it the particular way that we have written the current rules?
Leftists argue that the core problem is the way we have written the rules of property-relations, including the rules for debt. There is a difference between a Liberal-capitalist system, in which the elite make appalling amounts of money off the efforts of their subordinates, and a socialist system in which we all get a reasonable return on our efforts and the state invests in our general welfare through our investments in the state. 'Fair pay for fair work' is a socialist principle which does not conform with the economic rules we have written for ourselves. In an effort to maximize individual incentives to take risks and commit effort to personal wealth-generation, we still believe that the aggregate myriad acts of self-interest, unchecked my any moral or collective principle of society, is the best design for our political economy. In the United States, we even extend First Amendment rights to corporations (virtual people) so that firms can lobby for their own interests, such as deregulation of labor and pollution practices. In practice this means that board-members of corporations have far greater political voice through campaign finance and lobbying, whereas the internal practices of private firms are notoriously heirarchical and autocratic. Three hundred years ago, a very different way of conceiving of corporations was that they serve the public in beneficial functions, at the pleasure of the state. If they did not, their charters should be revoked and the individual board members should be directly accountable for malicious practices. On paper, those rules still apply, but we do not enforce them. The institutional organization of our society is the rules and principles that are actually enforced; and we could revoke First Amendment rights for corporations. That would leave very wealthy people free to use their personal wealth for disproportionate interest, but not the resources of whole companies. The question which wealthy capitalists do not want us to ask is: what rules do we want to live by? There is no One Correct Way, nothing inevitable in the design of this political economy. And we could modify the rules of the American economy to protect and extend human rights and dignity.
A second example is the organization of property-relations. Venetians began issuing patents-of-monopoly in the fifteenth century, and the British adopted the practice in the sixteenth century. Example: Thomas Tallis and William Byrd were given monopoly rights to publish music in Britain by Elizabeth I. In the 1700s, this practice was expanded substantially into intellectual property as we know it: the temporary monopoly right to produce an invention, or to license out the right for others to produce that invention. The system of design-patents partially replaced the older system of trade-guild secrets, and the most dramatic example of its early application was James Watt's patenting of steam-engine inventions from 1760 to 1789. Royalties from each patent funded subsequent research and experimentation which led to the next improvement. The result, by 1789, was a reasonably safe, reliable, powerful steam-engine design which drove the entire Industrial Revolution from textile mills to locomotives to steamships. One of the first acts of the American Republic was to establish the Trademark and Patent Office, and I argue that the USTPO has generated more wealth than any other single institution in human history.
In the 1990s, Disney Corporation used its vast resources to successfully lobby for an extension of copyright protection for its characters. Microsoft is pushing for patent-protection of software code which thus far has only been protected by copyright. In other words, these two corporations are using their disproportionate influence to rewrite the rules of intellectual property in their favor. Economies do not have to work this way! For Disney, images of Mickey should be under trademark protection, since they are a unique part of the corporate image of Disney. But Disney should not have the right to change all of copyright law to suit their purposes! For Microsoft, the ethical problem is that their operating system and applications rest on work that was done for the public and done for free in the 1970s. If we are to press the point, Microsoft should be forced to rewrite and redesign all of their software from scratch in order to claim that it is entirely their own product. That means not using a windowing desktop, which Xerox invented in the 1970s, etc. So, without getting too geeky about the details, my point is that protecting intellectual property is a brilliant human invention, and it should be applied equitably. Who did the best genetic modification of plants that benefit humans today? Ancient Mesoamericans who bred maize from native grasses, and ancient Andeans who bred potatoes from native tubers. Does the world pay royalties to Mexico and Peru for these crops? If that is an invalid question, then how valid is it to assume that a wheat-farmer downwind from a field of Roundup-Ready wheat must be forced to pay royalties to Monsanto since his wheat had acquired resistance through inbreeding with wind-borne seeds?
We write these rules. And they can either benefit the elite in a capitalist form of market-organization, or they can benefit the people as a whole through a more socially-minded form of market-organized political economy. And I include 'political' in this term because no economy is apolitical, ever. The implications of divorcing economies from politics is that private capitalists should never be held accountable to the people from whom they make such enormous profits. Leftists disagree. Political economies are the products of human design, and elites will always have a disproportionate degree of influence over that design (one might argue that this is in fact the definition of elite status). Leftists do not agree on how to mitigate this inequality, nor the degree to which the playing can and must be leveled. But right now, thousands of people die each winter in the degraded, humiliated condition of homelessness in American cities, because of the choices we have made; tens of millions of children die across the world because of contaminated drinking water. The degree of inequality which we choose, both close to home and in the terms of trade which we negotiate across the world, are a disgrace to us; these policies and rules show us as lesser human beings.
But it is insufficient to say that neo-Liberal capitalism as we now practice it is unethical. More importantly, we believe that human investments in healthcare, education, and debt-reduction across the world will increase the wealth of humanity as a whole. Wealth, in this case, is both wealth as economists understand it and wealth meaning living better lives on each of our own terms. Leftists believe that public and private transparency should replace public and private secrecy. We believe that people will individually and collectively invest more resources into a society if they can trust that society at multiple levels. That does not mean that some people will not earn more and gain more influence; but it does mean that a CEO might be embarrassed into not paying himself 500 times more than the janitors whom he employs. And those janitors, knowing that they are doing valuable work, may get some of their dignity back. Dignity is an essential component of living well, and Leftists argue against capitalists for the promotion and restoration of dignity. It, too, is a form of wealth.