A Failing Point of Democracy

Sand

I'd be more in favour of the capitalist->democratic argument if alternate democratic systems weren't crushed so damn often, historically speaking

Capitalism is reliant on freedoms, and democracy isnt necessarily free. A majority of people will happily vote to burn books and oppress the minority. Democratic Athens put Socrates to death by popular vote afterall, because they didnt like his views. Its the law and curious anti-democratic measures like balances and checks, not democracy, that guarantee invididual freedom.

The first target of populist movements in a "revolution" is to destroy those checks and balances in the name of democracy. So you end up with a democracy where everyone is less free as their rights exist only so long as the mob chooses not to turn on them.

Kama

Just out of curiousity Sand, are you AynRandian?

Sand wrote:

If the state gets involved to the point where its championing particular market participants [ including itself] then its no longer a free market, nor is it a tolerable system of justice so it cant be capitalist practically by definition. The military-industrial complex of most major states wouldnt be described as free markets.

I agree. However I'm unconvinced of the concept of a 'natural' free market; markets exist by and through a degree of state regulation, even at the basic point of ensuring property rights. Creating 'free' markets requires a complex degree of regulation, rather than being naturally emergent.

Can a 'tolerable system of justice' be non-capitalist, out of interest? Or is a capitalist form of social organization a necessary prerequisite for justice, in your terms?

Sovereign wealth funds are dangerous - markets have been freed up, liberated, the stifling influence of political elites weakened, the era of "ism's" over - and then suddenly regimes and party elites simply dump the misgotten wealth of entire states/regimes into an investment fund and go on a shopping trip and end up owning the means of production anyhow.

Yeh, tend to agree. View the consequence of financial liberalization as Chinese slave labour capitalism buying up the world with the gains of a mercantilist strategy hugely and bitterly ironic.

The implications for personal freedoms when the economic assets are held by the state isnt hopeful.

Less in agreement. Depends what the actions of the state are; both states and standard market-actors can behave pathologically, I don't have 'faith' in either. In a smallholder capitalist scenario, with wide access to credit, and without large oligopolies, agree moreso. But the implications for freedom which can occur in an exploitative economic scenario, with narrow capital distribution in a small dominant class, personal freedom can also suffer, imo. Hence state redistribution and transfers can be justified, and aren't necessarily a theft and abuse, just pragmatic.

State involvement is hardly the answer as state involvement is the problem.

Necessarily the problem? Always the problem? I'm less convinced by this, I regard it more situationally and pragmatically, according to context. While states can be repressive, they can also be liberating; like a lot of things, can be both a tool and an obstacle.

The safest course of action therefore is to ensure the rights of the individual, especially their property and economic rights are defended against the power of the state

Again, this would seem to assume that property rights pre-exist the state ontologically, rather than are constructed and implemented through it. It also seems assumes that property and economic rights are necessarily emancipatory for all, rather than merely some, and that oppression essentially comes solely from state infringement. I'm yet to be convinced of this.

Is there a better system to deliver efficient outcomes [the state - or whatever entity might carry out the same function - obviously has a role in this, but as a neutral, not an involved party]? To reward and encourage innovation? To punish bigotry? To reward merit? To deliver fair outcomes?

If we differentiate markets as a distribution system from current capitalism as a social system, then I agree with you fully. I'm quite pro-market (loses me a lot of trendy leftist friends) because I view markets as the most fair and efficient distributional form in existence, while being highly critical of current capitalist forms. Markets predate capitalism anyhoo, so they aren't necessarily co-identical. The liberalization on 'free market' theory has some unintended consequences of cronyism, corruption and oligopoly that I'm not down with. I don't believe 'capitalism' is a unitary phenomena, but highly variable dependent on regulatory environment, history, regime type etc, see previous post.

Sure, slaves can have long, happy lives whilst toiling away for their masters gain.

And their masters can be state-bureaucratic or liberal-capitalist, I would contend. But so long as we're agreed that we want a reduction in human slavery, cool!

Sand

Just out of curiousity Sand, are you AynRandian?

No, I am a Sandian.

However I'm unconvinced of the concept of a 'natural' free market; markets exist by and through a degree of state regulation, even at the basic point of ensuring property rights. Creating 'free' markets requires a complex degree of regulation, rather than being naturally emergent.

The state has the monopoly on violence and uses that to enforce property rights [ essentially people obey laws for fear of the violence of the state ] - if the state did not have a monopoly on violence then property rights would continue to be enforced, but by a competitive free market in violence instead - possibly more efficiently too!

In so far as a natural free market is difficult to accept, what is natural about forbidding me with trading with another person on the basis that other person is from a different country, or of a different religion or of a different race? Restrictions on trade are based on artificial inventions like borders and so on.

Its one of the conceptual weaknesses with socialism as far as I am concenred - the moral imperative for redistribution of wealth seems to end at national borders on the basis of Irish redistribution for the Irish only. Seems to contradict the internationalist angle really.

Can a 'tolerable system of justice' be non-capitalist, out of interest? Or is a capitalist form of social organization a necessary prerequisite for justice, in your terms?

I wouldnt say capitalism is necessary for justice, as I would consider capitalism to be a naturally occurring result of a tolerable system of justice. So if a society is broadly capitalist, then it could be assumed it is also a society with strong protection of individual rights but it wouldnt cause such a system of justice as such.

If we look at the success of capitalism in the US, Europe, Australia, Canada and so on as opposed to the failure of capitalism in Africa, the Middle East and South America the difference that stands out is the "tolerable administration of justice". Many African and Middle Eastern states are essentially the fiefdoms of family clans, and the individual is practically powerless. South America, less so - but again tiny groups, political and otherwise have undue power over countries judicial and legislative process and cant be realistically challenged by any individual.

Meanwhile in the US/EU/Etc, individuals can challenge their governments in the courts, they can hold their government accountable in elections and so on. Its not that the governments are much better, but the system of laws that protect individuals from the state are much stronger.

Yeh, tend to agree. View the consequence of financial liberalization as Chinese slave labour capitalism buying up the world with the gains of a mercantilist strategy hugely and bitterly ironic.

Indeed, its doubly a problematic given the Chinese situation [ where people are imprisoned, beaten and facing labour camps for defending their property rights against the state] is a contradiction of everything capitalism is built on [ free market, property rights, individualism, justice] and yet they can fully participate in capitalism so long as they comply with the rules and regulations. And seeing as they are a state its very hard to make rules they cant veto or evade as up until now, states have been the ones to create the rules and regulations for markets.

Less in agreement. Depends what the actions of the state are; both states and standard market-actors can behave pathologically, I don't have 'faith' in either. In a smallholder capitalist scenario, with wide access to credit, and without large oligopolies, agree moreso. But the implications for freedom which can occur in an exploitative economic scenario, with narrow capital distribution in a small dominant class, personal freedom can also suffer, imo. Hence state redistribution and transfers can be justified, and aren't necessarily a theft and abuse, just pragmatic.

I would agree there is a role for the state in markets - as a neutral regulator and enforcer of justice/contracts/property rights. And as an institution that can correct market failures such as pollution or social costs not being considered in simple supply and demand pricing. As I said before, if the state didnt exist some institution independant of the market would have to be created to fufill those requirement for a free market [ I dont hold with the anarcho-capitalist view of law enforcement for the same reason I dont hold with the anarch-socialist view of law enforcement....claiming people will regulate themselves is all well and good, but people are social animals - punishing unpopular law breakers throught ostracisation/non compliance is easy, punishing popular law breakers....not so easy]

But it has to be remembered that states are effectively a "small dominant class". Sure, they have a supposed moral mandate of being voted in by the majority of citizens but whatever the weakness of that mandate [ and if you look at the feudal loyalties of Pakistani "democracy" there are plenty of weaknesses] the power still ends up concentrated in the hands of the party leadership and a circle of cronies. It cant be assumed they will act on a more virtuous basis than any other circle of self interested powerful individuals.

Necessarily the problem? Always the problem? I'm less convinced by this, I regard it more situationally and pragmatically, according to context. While states can be repressive, they can also be liberating; like a lot of things, can be both a tool and an obstacle.

I would agree to some extent - it might be pointed out for example that the US Federal governments decision to deploy the 101st Airborne to ensure the integration of the Little Rock Nine was a liberating step by the state, but it was to combat a repressive measure by the Arkansas governor who deployed troops to stop the the Little Rock Nine attending school [ in support of "citizen councils"] - an oppressive action of the state.

But my usage in this context was a reference to the fact that the state is relied upon as a neutral regulator of the market, with SWF states are involved in the markets as players and thus cant be relied to regulate themselves anymore than anyone else can.

Again, this would seem to assume that property rights pre-exist the state ontologically, rather than are constructed and implemented through it. It also seems assumes that property and economic rights are necessarily emancipatory for all, rather than merely some, and that oppression essentially comes solely from state infringement. I'm yet to be convinced of this.

Property rights do pre-exist the state, though then they were based on might alone as opposed to legal rights.

Property rights and economic rights, where they favour the individual, mightnt be directly empancipatory for all - but they do alter the power dynamic between the state and the individuals that it is supposed to serve. The state must argue for and justify its use of your assets, as you own them. This benefits everyone as the state must alter its natural inclination to oppression of the individual.

Never believe for an instant that that because you do not own something, that no one does. In any human organisation, there is leadership - we are instinctively all leaders or followers. It how we are wired. No room for lone wolves in our evolutionary struggle. In cases of "group ownership" make no mistake about it, its the leadership that owns it. Everyone else is a follower, a slave, dependant on the leadership for the benefits of the assets the leadership holds.

You might argue that people are smarter than to be mindless drones following orders but I think of example of a young Bosnian-Serb during the Balkan conflict; early in the conflict he helped his Bosnian-muslim neighbours escape Serbian paramilitary death squads. Later in the war, he wound up with the Bosnian-Serb military and ended up a guard in a concentration camp where he was one of the most terrifying and murderous tormentors of the Bosnian muslims held there. The neighbours he helped escape testified on his behalf at his trial in the hague - they simply couldnt conceive of this boy committing the crimes he had been accused of. But he had. Because he, like most human beings, is a follower.

You cant hope to make people into something other than followers, but you can aim to ensure they are fanatical about following the law, checks on populism and democracy in decision making and protecting the rights of individuals as a conceptual loyalty. This should limit peoples natural tendency to follow leaders down the path of tyranny to some degree by limiting the ability of such leaders to become tyrants based on mob support. If we look at tyrants, laws, checks on populism and individual rights tend to be the first things attacked in a supposedly liberating revolution.

The liberalization on 'free market' theory has some unintended consequences of cronyism, corruption and oligopoly that I'm not down with.

At worst it simply changes the players involved in cronyism, corruption and oligopoly. Instead of being party favourites, they become poorly regulated abusers of their market success.

Kama

Thanks Sand, lots to respond to there...

Interestingly, the monopoly on violence has been increasingly liberalised and opened to competition, rather a statist force monopoly; the actions of Sandline, Blackwater, and other mercenary companies come to mind, never mind the rise of private security. I'm more comfortable with security in the hands of a state force than mercenary companies, generally. Its a bit of a return to the Middle Ages tbh. Jeff Vail has a nice essay on the legal regulation, or lack, in private mercenary companies, and another article on the 'dark' market of liberalization of violence in the Niger Delta.

In so far as a natural free market is difficult to accept

I can conceive of 'natural' or organic free markets easily; time-barter systems like LETS are pretty close, voluntary exchange of goods and services; as systems for distribution and exchange. I'm exceedingly pro-market, I just don't think its 'natural' or a prior-perfect state that is 'interfered' with, its always a partially constrained social situation.

But I find laissez-faire capitalism historically to be significantly unlike a 'free' market; even genealogically its growth in the British imperial system after a long period of protectionism, and especially once you get into monetary creation and policy, and more crucially have any element of power into the equation, it seems a different story, and in a global sense with large corporate and sovereign players less so again.

In a frictionless, powerless world, of utterly atomised market actors a la free trade theory, I'd be more inclined to agreement. Thats not the world we have, or will ever have. Reforming it to be one seems a massive, and failing, utopian project.

Its one of the conceptual weaknesses with socialism as far as I am concenred - the moral imperative for redistribution of wealth seems to end at national borders on the basis of Irish redistribution for the Irish only. Seems to contradict the internationalist angle really.

Yep, it does. But pragmatically, given that states existed, and were the means of delivering policy, this was essentially obligate. Contradiction in theory, less so in reality.

I wouldnt say capitalism is necessary for justice, as I would consider capitalism to be a naturally occurring result of a tolerable system of justice.

So justice is the egg, capitalism the chicken? The argument usually moves in the other direction. Certain periods in early capitalist development appear manifestly unjust; I'm curious if you could expand on 'tolerable system of justice'; do you mean a procedural legal system for property rights? More of a justice system, prisons, police, than social justice I presume.

Would you accept that property rights can increase injustice, especially given power differentials? Much of the socialist counter-argument to capitalism consisted of precisely this, that property relations 'become', or always-already are, sufficiently unjust and exploitative that restitution is required. Justice requires a change in property relations and ownership, or at a minumum the regulation of a 'free market', such as in the robber baron period in the States. If a quote unquote free market delivers an income and capital distribution that is unacceptable (and possibly inefficient), state intervention can be a efficient, liberating and healthy one.

The growth of capitalism in Europe also had fiefdoms, familial cronyism, and a lack of voice by citizenry. It was also accomplished with significant levels of repression, both domestically and in the international world-system. Core European states had the advantage of a free trade economic system built atop a colonial state-military one, as both the British and American periods of capitalist hegemony would appear to demonstrate. 'Free' trade between unequal partners, I hope you'll agree, can be a profoundly negative experience, which I regard as a conceptual weakness in the free trade position generally, its elision of power dynamics from analysis. If you are blind to power, you are easily its slave.

I would agree there is a role for the state in markets - as a neutral regulator and enforcer of justice/contracts/property rights. And as an institution that can correct market failures such as pollution or social costs not being considered in simple supply and demand pricing.

I agree. The question then is how to correctly, or consensually, ascertain what constitues a social cost; how narrow or broad that definition is covers a wide range of ideological ground.

But it has to be remembered that states are effectively a "small dominant class".

The executive committee of the bourgeoisie, someone once called it...:D

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Sure, they have a supposed moral mandate of being voted in by the majority of citizens but whatever the weakness of that mandate..the power still ends up concentrated in the hands of the party leadership and a circle of cronies. It cant be assumed they will act on a more virtuous basis than any other circle of self interested powerful individuals.
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Yes, but in contradistinction to a small dominant capitalist class, a state, or its political elite class, is at least theoretically under partial democratic control. The same cannot be said of concentrated power and ownership in the hands of a capitalist cabal or their circle of cronies. Their self-interest is less inhibited by the requirements of democratic responsivity and citizens voice, especially if their ownership is essentially an absentee one. This seems pertinent in current context of a global capitalist class system that is without effective democratic jurisdiction and control.

Property rights do pre-exist the state, though then they were based on might alone as opposed to legal rights.

Partial agreement. I wouldn't regard these as 'rights' to the same extent. But perhaps we agree on the origin of property in coercive appropriation?
You can view this as then taking the guise of law, and emergent property systems being thus 'sanctified'. I part ways with the conventional origins of the bourgeoisie narrative replacing feudal elites, thinking that the feudal (force-based) elites leveraged their position in the initial period of capital accumulation, roughly analagous to the post-Soviet Russian experience.
But with the transition from property held in fief or might, to one based on law, a necessary component to legitimacy would be a degree of justice as fairness, without which they would merely be a transparent tool of (economic) tyranny.

Property rights and economic rights, where they favour the individual, mightnt be directly empancipatory for all - but they do alter the power dynamic between the state and the individuals that it is supposed to serve.

I agree. However they also alter the power dynamic between individuals, or aggregates of individuals such as 'classes'. Regarding the principal antagonistic relation in the social world as between Individuals and the State yields a possibly emancipatory result for Individuals, yet cutting the social cake of the world in a different direction, some Individuals gain disproportionately. This is often then 'justified' by Iron Laws of Oligarchy, Power Law distribution, and so forth. Whether one regards the principal antagonism in society as between individuals and the State, or between groups within society with the State as a contested tool, will yield a different understanding.

The state must argue for and justify its use of your assets, as you own them.

And if I possess no assets, then the state has no duty to convince me? Its this asymmetry derived from property which is the rub for the Other Side, and a historical bone of contention for working classes. Historically proletarianization in capitalist development took place by the breaking up of communally 'owned' usufructuary relations, essentially expropriating shared assets that provided use-value, enforcing wage-labour. A current variant would be the Zapatista movement, which responded to imposed neoliberal individualised property rights (when their group rights were previously constitutionally enshrined) with insurrection. Equally, the State could have to justify the use of group assets; this doesn't seem unique to individual ownership.

This benefits everyone as the state must alter its natural inclination to oppression of the individual.

I regard states more neutrally. I no more think they naturally oppress than that they naturally liberate, neither are innate qualities, though both are possible expressions. Similarly markets, capital, money, corporations, and so forth. Its what is done with them, not an identity that they 'have' on any kind of ontological basis.

In any human organisation, there is leadership - we are instinctively all leaders or followers. It how we are wired.

Instinctively? I'd like some evidence on that call. I regard leadership qualities as far more nurture than nature; give me a child before the age of [whatever age the Jesuits said] and you can encourage leadership skills and qualities, or repress them, much like any other skill or quality. Rather than how we are wired, could it not be how we were wired, or better, in Buckminster Fuller terms, how we wire? (I seem to be a verb)

I'm also skeptical of the binary-dualist distinction between the two. I regard context and habit as more likely causal factors than a supposed innate 'leaderness' quality; some people lead in certain situations well, and not so in others. I can lead a discussion group with reasonable skill; I fail badly at leading a sports team. And so forth. So am I a leader or a follower? I presume both, without logical contradiction, both A and Not-A. People, I believe, are more multifaceted than your reduction gives them credit.

No room for lone wolves in our evolutionary struggle.

Seems somewhat contradictory to your privilege of the individual

In cases of "group ownership" make no mistake about it, its the leadership that owns it. Everyone else is a follower, a slave, dependant on the leadership for the benefits of the assets the leadership holds.

This can happen, its true; but I'm unconvinced that its a necessary outcome. It also assumes the hierarchical constant from your leaders/followers dichotomy in all possible group-types; I accept it occurs, I've lived long enough to see it, yet I've also seen the healthier form of sharing in a non-egoist manner that I would regard as true community.
(There are also significant economic efficiencies to be gained by sharing, btw. More on that if we want to get into property rights. Possibly on the Econ forum)
Similarly, in a couple or marriage, is one 'the leader', or can there be fluid and equal co-operation? Between Master and Slave, no third? This is not the world I perceive, to be frank. Perhaps thats just a pleasant delusion on my part; or perhaps the view of only Masters and Slaves is also a partial one.

You might argue that people are smarter than to be mindless drones following orders

Not naturally smarter, no. Put in a hierarchical system of authority and control, results like that which you mentioned are all too common. The Milgram and Stanford Prison experiments demonstrate this all too clearly; human callous savagery is a banal and normal possible state that any of us can exhibit, given the wrong circumstance. But raised and entrained in contexts which support peoples autonomous impulses and habits, submission to mindless authority becomes less automatic; I have a Gramscian (pessimism of the intellect, optimism of the will) approach on human capacity to be more than drones. But raised in conditions of ceaseless orders and commands, entrainment is to blank stupid fanatical obedience, or bitter submission, to any authority, whether it be facist-racist, market-fundamentalist, communist or authoritarian-socialist. Also a recipe for tyranny.

At worst it simply changes the players involved in cronyism, corruption and oligopoly. Instead of being party favourites, they become poorly regulated abusers of their market success.

Hehe I tend to agree, again. A complaint I have generally is the tendency of free market proponents to be simultaneously closet corporatists; the definition of a subsidy seems to be when someone else is receiving state support.

More seriously: sometimes the players change, sometimes the same people move laterally (Russia prime example again), and sometimes the numbers of 'players' shrinks to a less equitable, more oligopolistic scenario. In a might-based possession, this lacks in legitimacy what it has by force. In a politically-governed variant anywhere along the collectivist spectrum (including social democracy) this possession must be justified to an electorate, who has a justified interest and indirect control. In a liberalized market scenario, property rights grant legality without social controls. Its this excession of control that I see as a possible tyranny, 'taxation without representation', similarly to your view of state encroachment on liberty.

In the days of Adam Smith, or the Austrian School critiques, the size of the State relative to the economy made the identification of the State as repressive justified; while in our era, the growth of the market-capitalist system above and beyond State or democratic control seems a qualitatively different world-historical scenario. As the dominant form or social constitution, the repressive possibilities of our currently-constituted market system seem a greater threat to liberty than the remains of the subalterned State from whence it has escaped.

g5fd6ow0hseima

Ill just throw in one arguement slightly off the point - I read above where one person spoke of capitalism failing in the third world due to the fact that many of the areas there are homes to fiefdoms and the like, where the right is not instilled in the individual, well I just want to ask, would you not think that capitalism has failed in these areas simply because it is based on expolitation, and that capitalism needs exploitation to truly prosper - when you think of it, if the third world wasnt raped by the higher powers, we wouldnt be sitting on as much wealth as we do!

Can one truly say that capitalism can exist on an equal basis?

Sand

Quick post and run:

Leif

Ill just throw in one arguement slightly off the point - I read above where one person spoke of capitalism failing in the third world due to the fact that many of the areas there are homes to fiefdoms and the like, where the right is not instilled in the individual, well I just want to ask, would you not think that capitalism has failed in these areas simply because it is based on expolitation, and that capitalism needs exploitation to truly prosper - when you think of it, if the third world wasnt raped by the higher powers, we wouldnt be sitting on as much wealth as we do!

Can one truly say that capitalism can exist on an equal basis?

The third world is rife with exploitation. I read a story today where an Indian government minister was advising the poorest Indians, members of a despised social caste, to eat rats if they were hungry.

And India isnt even considered a third world country as such.

If capitalism was based on exploitaton it should be a run away success in the home of the blood diamond trade.

o Diablo o

Kevster wrote: »

Hi,

I have the feeling that one of Democracy's failing points is the fact that the rich appear to get richer, while the poor get poorer (Essentially, the 'wealth-divide' just keeps on growing). Has anyone else noticed this at all? I began thinking about this today after I read that sales of sports / luxury cars have actually increased here from last year's sales, whilst sales of other 'regular' cars has decreased.

Kevin

To get back to the posters original question, I would argue that social inequality is the result of limited democracy. In a free market, corporations, who are unaccountable to the people, essentially run the economy. Our democratic power only extends so far as the states power to intervene. The huge gaps in wealth occur when private individuals own the means of production.

Kama

Bit of a pedantic point here, but a degree of social inequality doesn't seem to be the issue, its rapidly diverging levels of social inequality.
Large wealth gaps can't be completely blamed on current capitalism, they predate it by a long shot, and occurred whenever social hierarchies emerged; you can blame agrarian social shifts, or all sorts of sequential villains. We can see this in the archaeological record of ancient civilizations, with clear differences in property, and nutrition.

There's a definite weakness to my mind in a lot of leftist thought to attribute all misfortune and calamity to capitalist processes, much as in the Ayn Randian/libertarian right its all the fault of an intrusive State. In both cases, it weakens rather than supports the overall argument, and leads to cheap rhetoric and rigid thinking (in my highly biased and unrepresentative epeenion)

Eliminating social inequality altogether seems of dubious value, due to eliminating incentives and severely restricting basic freedoms, while determining at what levels social inequality becomes inefficient on a economic basis due to the significant externalities it creates seems to me a *very* interesting question, and a much more fertile one than attempting to completely flatten in an enforced equity. Do market-societies perform better with relative egality, or with extremes of inequality? What are the economic costs to a highly unequal society?

In right-libertarian thought, many of these 'social costs' are picked up by the reliable 'night watchman' state...it makes me wonder what happens for a 'small government' thesis if the cost of this becomes larger than the equivalent 'bill' paid through a welfarist regime?

nesf

Sand wrote: »

I wouldnt say capitalism is necessary for justice, as I would consider capitalism to be a naturally occurring result of a tolerable system of justice. So if a society is broadly capitalist, then it could be assumed it is also a society with strong protection of individual rights but it wouldnt cause such a system of justice as such.

Spot on. Any market system just will not work if property rights, and other legal necessities, are not in place. These laws were in place in Western European countries prior to the move to democracy and a market economy in the modern sense. A market system without legal protection for market participants are very undesirable, present day Russia being a modern example of what happens when you force a market system on a country without building the necessary legal framework first.

The legal framework is necessary to prevent the exploitation of people. Without legal rights to property that are enforced and protected for all the people, you don't get capitalism when you introduce a "free market" you just get another brand of dictatorship/oligarchy.

nesf

Kama wrote: »

Bit of a pedantic point here, but a degree of social inequality doesn't seem to be the issue, its rapidly diverging levels of social inequality.
Large wealth gaps can't be completely blamed on current capitalism, they predate it by a long shot, and occurred whenever social hierarchies emerged; you can blame agrarian social shifts, or all sorts of sequential villains. We can see this in the archaeological record of ancient civilizations, with clear differences in property, and nutrition.

There's a definite weakness to my mind in a lot of leftist thought to attribute all misfortune and calamity to capitalist processes, much as in the Ayn Randian/libertarian right its all the fault of an intrusive State. In both cases, it weakens rather than supports the overall argument, and leads to cheap rhetoric and rigid thinking (in my highly biased and unrepresentative epeenion)

Eliminating social inequality altogether seems of dubious value, due to eliminating incentives and severely restricting basic freedoms, while determining at what levels social inequality becomes inefficient on a economic basis due to the significant externalities it creates seems to me a *very* interesting question, and a much more fertile one than attempting to completely flatten in an enforced equity. Do market-societies perform better with relative egality, or with extremes of inequality? What are the economic costs to a highly unequal society?

In right-libertarian thought, many of these 'social costs' are picked up by the reliable 'night watchman' state...it makes me wonder what happens for a 'small government' thesis if the cost of this becomes larger than the equivalent 'bill' paid through a welfarist regime?

Market economies almost necessitate some degree of inequality in the distribution of wealth. Otherwise there is no impetus for change, economic activity etc. The thing is,

a) Market economies don't necessitate inequality in law, representation and so on. In fact, they generally perform less efficiently when these inequalities are present. The "ideal" market economy is one where all market participants are equal yet wealth is distributed unevenly. In realistic terms market participants can never be truly equal, different parental income, genetics etc will always put some people at a relative advantage/disadvantage, what is realistic is ensuring that everyone "starts the race at the same place" and striving to make access to education, training etc open to any who wish to partake in it.

b) Inequality in wealth, is not automatically a bad thing. A more important variable is what the average standard of living is like at the bottom of that distribution. If inequality persists, yet standards of living across the board increase, then that's more important than the top and bottom 10% earning similar amounts per year. In fairness to most Western market democracies, it isn't anything like subsistence living for the bottom third of society versus the conditions in other parts of the world. This is a rather major improvement on the situation that these market economies grew out of a few hundred years ago.

Kama

Market economies almost necessitate some degree of inequality in the distribution of wealth. Otherwise there is no impetus for change, economic activity etc.

Agree. What I was musing on is what degree of inequality is efficient as an incentive, and what are the social externality costs for a highly diverged distribution. Am making an efficiency rather than a equity argument, funnily enough...While having the capacity to get twice as much as the next man is surely an incentive, I'm less sure that having 100 times is 50 times more of one.

a) Market economies don't necessitate inequality in law, representation and so on.

Don't necessitate, but definitely expedite. If uptake and use of those rights possess transaction costs, or produce differential benefit according to ability to pay, then inequality in law etc, while not necessary, seems heavily determined. Which would be the intrinsic tension between liberal-democratic egality and market-capitalist inegality. I'd agree that markets perform worse, both in theory and practice, with increasing inequality of power, voice, and access; imo there's a quite strong pro-market rationale for socialisms on this basis.

The meritocratic-egality argument seems also weakened by the social effects of inequality; ensuring that everyone 'starts at the same place' becomes proportionally harder to achieve the further apart the starting points 'naturally' are, which has implications for the relative poverty question further in.

Without getting into anything thorny and genetic, taking just fetal and childhood nutrition and early education, and their effects on early development, systemic inequalities will tend to transmit and reproduce, before even the more class-based barriers downstream. Talk of allowing each the opportunity is laudable; implementing that more resource-intensive to play 'catch-up', or more restrictive as in inheritance taxation.
With highly divergent inherited income distribution, I'd have thought a certain amount of financial 'gravity' kicks in as positive feedback, leading to a rentier versus disenfranchised-excluded dynamic manifests, which has definite implications for both a functioning market economy and a functioning democracy.

b) Inequality in wealth, is not automatically a bad thing. A more important variable is what the average standard of living is like at the bottom of that distribution. If inequality persists, yet standards of living across the board increase, then that's more important than the top and bottom 10% earning similar amounts per year.

Agree, up to a point; was never advocating 'flat' income distribution btw.

The relative rate of increase would be an important nuance here from an equity point of view; but its initially hard to argue against an increasing standard of living. However, the Western lifestyle of even the low or unwaged has standards of living in excess of nobility a few hundred years ago: dentistry, health care, and so on, yet somehow this isn't perceived as a privileged utopia. In 'objective' living standards any Western citizen is rich, a veritable global 'landed gentry'. Perception and the quality of experience factor largely, and the perception that results in conditions of palpable inequality, whatever one's consumption, appears a negative one.

In fairness to most Western market democracies, it isn't anything like subsistence living for the bottom third of society versus the conditions in other parts of the world.

With notable exceptions: African-American lifespan and infant mortality in Washington DC spring to mind, as an example of a liberal economic regime with entrenched inequality.

nesf

Kama wrote: »

Agree. What I was musing on is what degree of inequality is efficient as an incentive, and what are the social externality costs for a highly diverged distribution. Am making an efficiency rather than a equity argument, funnily enough...While having the capacity to get twice as much as the next man is surely an incentive, I'm less sure that having 100 times is 50 times more of one.

There is some kind of trade off between efficiency and fairness in market systems and this is where the State and redistribution of wealth comes in. Too constrictive measures reduce efficiency dramatically by making things "too even" by means of high taxes, too generous a welfare state or whatever, equally too loose measures decrease fairness to the point where you've people barely surviving on a subsistence lifestyle while the top 1% live like kings. Both are undesirable. The question is where the optimum balance is and there are many different opinions on this as shown by the variety of approaches in Western countries from the relatively more constrictive market in France to the far freer markets in the United States. In the former chronic unemployment is a problem, in the latter inequality is more of an issue as is the potential for a more uncomfortable fate for those forced out of the workplace due to injury etc .

Kama wrote: »

Don't necessitate, but definitely expedite.

Arguably the expediency comes from the State side of things rather than the market.

Kama wrote: »

The relative rate of increase would be an important nuance here from an equity point of view; but its initially hard to argue against an increasing standard of living. However, the Western lifestyle of even the low or unwaged has standards of living in excess of nobility a few hundred years ago: dentistry, health care, and so on, yet somehow this isn't perceived as a privileged utopia. In 'objective' living standards any Western citizen is rich, a veritable global 'landed gentry'. Perception and the quality of experience factor largely, and the perception that results in conditions of palpable inequality, whatever one's consumption, appears a negative one.

The reality subjectively is that people tend to measure their current standard of living in terms of their peers around them. Rationally we should be happy with any increase in living standards, psychologically we tend towards unhappiness when our standard of living is lower than that of the people around us.

The question is whether we should be looking at the psychological or rational effect here. If given two systems, one where people's standards of living increase a lot yet people tend to be less happy because of peer differences and a second where people's standards of living increase much less yet people are happier because there's less difference in incomes in the society which is better option?

Kama

Cheers nesf, nice food for thought there...

My query wasn't on the trade-off between market-efficiency and social-equity, but whether there are diminishing returns on efficiency from increased inequality past a certain point. The zero-sum equity-efficiency argument is to me less interesting than whether extreme income distributions are economically inefficient; not the meritocrat-egality normative position, but the hazard of essentially a rentier class with lower incentives to efficiency resulting from inequality. If this is a daft question call me on it, and maybe point in the direction of an answer.

But, if we were looking at the low US unemployment rate, masked unemployment through the 'night-watchman' prison system seems significant factor; black and Latino incarceration rates are approx 2% of the male labour force. Significant incarceration rates may be a necessary supplement to a highly unequal social system; when expenditure on 'minimal state' coercive systems exceed the total budget for higher education there's somewhat of a quandary for a 'small state' approach...

Arguably the expediency comes from the State side of things rather than the market.

Could you flesh out the argument on this side? I'm sure it is arguable, but I don't know the logic, while market-skewed distribution of public goods like law seems clearer to me.

If given two systems, one where people's standards of living increase a lot yet people tend to be less happy because of peer differences and a second where people's standards of living increase much less yet people are happier because there's less difference in incomes in the society which is better option?

Exactly...this is a *very* interesting question; 'twould almost send me back to college to do something more economics-based. Was looking at something quite similar a while back, Scitovskys critiques of utilitarianism in terms of adjustment to a higher threshold becoming a new base, so even if one is better off in rational gains terms than before, it is experienced as deprivation.

If one approaches as a pure hedonic utility maximiser, this would seem to suggest quite counter-intuitive conclusions to the accepted doxa of homo oeconomicus[i/] Would seem to have some odd implications for presuppositions in economics generally. Bhutans Gross National Happiness 'measure' also springs to mind.

If, crudely, we are talking about what one rationally should perceive, rather than what psychologically and behaviourally we do experience, I'd tend to favour lived experience over the theoretical result. Is 'objective quality of life' an oxymoron? Hmm...

nesf

Kama wrote: »

My query wasn't on the trade-off between market-efficiency and social-equity, but whether there are diminishing returns on efficiency from increased inequality past a certain point. The zero-sum equity-efficiency argument is to me less interesting than whether extreme income distributions are economically inefficient; not the meritocrat-egality normative position, but the hazard of essentially a rentier class with lower incentives to efficiency resulting from inequality. If this is a daft question call me on it, and maybe point in the direction of an answer.

Well, it depends on what exactly you mean by economic efficiency. In welfare economic terms you're talking about Pareto efficiency (i.e. No one can be made better off without making someone else worse off) where inequality is an implicit factor. Pareto efficiency would require that the rich got richer but the poor got no poorer, as long as this condition is held the increase in inequality could be considered to be efficient in this sense. Pareto efficiency is considered superior to the utilitarianism is that with utilitarianism so long as the majority of people got richer, it would be efficient (i.e. the bottom 10% could be severely adversely affected and it would be ok so long as the other 90% did well out of it. Think of turning the city of Kilkenny into the national dump and building loads of landfill sites around it, better for everyone else in the country but pretty bad for Kilkenny people).

The other main way you'd think of economic efficiency is a system where the maximum output is produced for a given amount of input is efficient. This is a horribly simplified measure to deal with formally since as soon as you have more than one output competing for a given input but conceptually at least it's useful enough. Here inequality is meaningless so long as output (of whatever) is maximised. Different efficient states exist for a system depending on what outputs you consider and how you rank them. Imagine average public health in a country as one of the outputs or average education and consider the difference in including and excluding them from consideration.

Efficient can essentially mean anything you want it to mean in some ways depending on how you set up your initial question. Those are the two main economic definitions I've come across that are relevant to this.

Kama wrote: »

But, if we were looking at the low US unemployment rate, masked unemployment through the 'night-watchman' prison system seems significant factor; black and Latino incarceration rates are approx 2% of the male labour force. Significant incarceration rates may be a necessary supplement to a highly unequal social system; when expenditure on 'minimal state' coercive systems exceed the total budget for higher education there's somewhat of a quandary for a 'small state' approach...

This hits on a key point. Large amounts of inequality brings externalities like crime into the equation. A state that redistributes sufficient wealth to minimise such externalities does much to oil the wheels of commerce. The problem is that you can't redistribute too much without adversely skewing the labour market and if you redistribute too little you will incur higher costs in law enforcement, prisons etc in both economic and social terms (I'm not arguing that we should only redistribute to keep the people from rioting here, there are other reasons).

Kama wrote: »

Could you flesh out the argument on this side? I'm sure it is arguable, but I don't know the logic, while market-skewed distribution of public goods like law seems clearer to me.

I think we might be referring to two different things actually. My point was that any inequality in basic rights is a product of the State since it is the State that has a monopoly on awarding them essentially (universal suffrage being an interesting point). You're talking about access to services with regard to those rights, like legal services etc (I think), which is a different matter. The State's job with a market economy is (in my view) to step in for those who cannot afford to pay their way and provide free legal aid, healthcare/health insurance etc, but the quality of service is open to competition with regard to pay. There's an open question on what services this applies to and what services it doesn't. Some view healthcare as sacrosanct, personally I'd view basic healthcare (GP, hospital care etc) as an entitlement but I'd view any "add ons" like nicer food, faster service for elective treatments etc as being outside of this, for example.

Kama wrote: »

If, crudely, we are talking about what one rationally should perceive, rather than what psychologically and behaviourally we do experience, I'd tend to favour lived experience over the theoretical result. Is 'objective quality of life' an oxymoron? Hmm...

Well, lets put it this way. How do you measure happiness? Or can individuals really truly grasp how good they have it? Should we not just aim for increasing rational quantifiable things like the general health level and education and let people worry about their own happiness? It's an open question without a black and white answer I think.

Kama

Found a guest post on pretty much this topic on Freakonomics of all places...annoyingly, the interesting bits are unreferenced, grr...

More ominously, several data sets now connect high national income inequality with low growth. Correlation is not causation, and clearly, much more research is called for. But these data should give pause to those who are complacent about increasing income and wealth disparities Source

nesf

Kama wrote: »

Found a guest post on pretty much this topic on Freakonomics of all places...annoyingly, the interesting buts are unreferenced, grr...

Those inequalities could be symptoms of much broader political and social problems that interfere in the market which is a separate question. What you want is a stable country with a solid and enforced legal system that has a market economy and that has a large degree of inequality and then have a near identical country in all respects except for a low/moderate degree of inequality. Such ideal economic experiments don't happen so we're left trying to guess from problematic sample issues like some I listed above.

Kama

Well, it depends on what exactly you mean by economic efficiency.

I think (but I'm a lay or armchair economist, so am probably wrong) that I meant allocative efficiency, and consider there to be a hazard of market failure from concentrated ownership/extreme income inequality, with information and other asymmetries as factors. But yeh, agree that saying efficiency without specified criteria is vacuous, apologies. The annoyingly unreferenced article which linked higher inequality with lower overall growth rates seems close to what I was after; like said, grr no references to the data.

My issue with both Pareto and Kaldor-Hicks efficiencies in this area is they justify increases in inequality; if you regard better and worse off as having any relational component rather than being statics, a Pareto-efficient move that gives Bill Gates twice what he has while all his workers stay at the same stagnant wage is efficient, as 'no one is worse off', or a Kaldor-Hicks one where he cuts their salary, while makes more than enough to compensate them (but doesn't). Both scenarios appear 'efficient', but something seems screwy to me.

I think we might be referring to two different things actually. My point was that any inequality in basic rights is a product of the State since it is the State that has a monopoly on awarding them essentially (universal suffrage being an interesting point). You're talking about access to services with regard to those rights

Think we are talking about the same thing, still, but from different angles.

On a formalist level, rights can be equal, but due to distribution of quality and access, highly unequal. Suffrage is an interesting example, being in practice distributed asymmetrically. Ireland has been called a 'property-owning democracy' due to the differential uptake rates of voting rights being heavily skewed on this basis; I'm also reminded of a attempt in America to have voting days made national holidays to increase participation, which was heavily thrown out with bipartisan support; in this case its significantly easier to avail of one's voting rights if you have a middle-class to upper job, far more difficult at a low wage-earning position, with results stemming from this discrepancy in voice being self-reinforcing.

Those inequalities could be symptoms of much broader political and social problems that interfere in the market which is a separate question

Abstracting markets from the social settings in which they are embedded doesn't seem possible, and meeting scientific requirements of repeatabilty etc in economics seems essentially impossible. The closest that seems doable (to me) is historical comparison of regime types, like Anglo-liberal, Nordic, Corporatist and so forth, with regard to what outcomes or results one is aiming for, and determining what that 'utility function' is seems to be the essential democratic question. The link between reduced inequality and higher levels of democratic participation seems to have fairly good correlation, if that was what we were aiming at.

A Primal Nut

brianthebard wrote: »

In cuba greed is not rewarded.

Thats because nothing is rewarded in Cuba - there are no rewards for anything.

nesf

Kama wrote: »

I think (but I'm a lay or armchair economist, so am probably wrong) that I meant allocative efficiency, and consider there to be a hazard of market failure from concentrated ownership/extreme income inequality, with information and other asymmetries as factors. But yeh, agree that saying efficiency without specified criteria is vacuous, apologies. The annoyingly unreferenced article which linked higher inequality with lower overall growth rates seems close to what I was after; like said, grr no references to the data.

Well, market power is regulated in some fashion in all Western market economies through anti-monopoly/anti-trust law to prevent the market being uncompetitive which acts as a counter against extreme concentrations of ownership/income inequality.

Kama wrote: »

My issue with both Pareto and Kaldor-Hicks efficiencies in this area is they justify increases in inequality; if you regard better and worse off as having any relational component rather than being statics, a Pareto-efficient move that gives Bill Gates twice what he has while all his workers stay at the same stagnant wage is efficient, as 'no one is worse off', or a Kaldor-Hicks one where he cuts their salary, while makes more than enough to compensate them (but doesn't). Both scenarios appear 'efficient', but something seems screwy to me.

Pareto doesn't justify increases in inequality, it's closer to the truth to say Pareto just ignores inequality and focuses solely on income/wealth decreases instead, the idea being that an increase in relative inequality is a lesser sin than making the worst off worse off, so that when trying to come up with a simple rule, it is better to focus on avoiding the latter.



Think we are talking about the same thing, still, but from different angles.

Kama wrote: »

On a formalist level, rights can be equal, but due to distribution of quality and access, highly unequal. Suffrage is an interesting example, being in practice distributed asymmetrically. Ireland has been called a 'property-owning democracy' due to the differential uptake rates of voting rights being heavily skewed on this basis; I'm also reminded of a attempt in America to have voting days made national holidays to increase participation, which was heavily thrown out with bipartisan support; in this case its significantly easier to avail of one's voting rights if you have a middle-class to upper job, far more difficult at a low wage-earning position, with results stemming from this discrepancy in voice being self-reinforcing.

Be careful to not confuse correlation with causation here. Could it not be that people in the middle class are simply more involved in society/civics in general as an attribute of the average person who gets into one of these jobs, bearing in mind that it most certainly isn't the case that 100% of the middle class votes and 0% of the working class votes? Discrepancies in voting behaviour between groups could be symptomatic of a deeper self selection than merely the person's income or simply that the kind of person who is more likely to vote is also the kind of person who will climb the social/career ladder more. I'm not saying that this is the case but that you need to be careful about inferring things from these kinds of stats.

Kama wrote: »

Abstracting markets from the social settings in which they are embedded doesn't seem possible, and meeting scientific requirements of repeatabilty etc in economics seems essentially impossible. The closest that seems doable (to me) is historical comparison of regime types, like Anglo-liberal, Nordic, Corporatist and so forth, with regard to what outcomes or results one is aiming for, and determining what that 'utility function' is seems to be the essential democratic question. The link between reduced inequality and higher levels of democratic participation seems to have fairly good correlation, if that was what we were aiming at.

Yeah, but it means that we can't draw as clean a conclusion as a laboratory scientist can about causation. It's like the central bank, inflation link. Countries with independent central banks have lower levels of inflation and lower volatility in that inflation than countries with central banks that aren't independent. Now, does this mean that making a central bank independent will reduce inflation or that a population that is willing to make a central bank independent also has "a constitution for low inflation volatility" and that the two are both actually effects stemming from the same cause rather than one of them causing the other. From a glance at the data it's impossible to tell which way the causality goes with certainty, something that many economists and other social scientists are guilty of doing.

Kama

Pareto doesn't justify increases in inequality, it's closer to the truth to say Pareto just ignores inequality and focuses solely on income/wealth decreases instead.

Its exactly this ignoring which I was arguing rationalises or justifies inequality. I get that in an overall sense there is 'more' in a pretty utitlitarian sense, but it would seem (to me) that this dynamic would select for an increase by virtue of 'ignoring', which as a trend of wealth-centralization, despite the existence of anti-trust etc, accelerates inequality. Maybe this takes us back to the happiness-measuring problem, or just the utility of an additional euro to someone without being more than to someone with.

More pertinently, rather than a focus on a disenfranchised lower, a Pareto-efficient accumulation at the top might have similar social effects to a screwed-out lower-focused inequality. Tawney pointed out that the problem of poverty can be rephrased positionally as a problem of riches...

Be careful to not confuse correlation with causation here.

My bad. We agreed its pretty damn hard to establish causation though; the character-personal logics you gave could indeed account for the discrepancy. I doubt either the more 'leftist' structural causation or the more 'right' personal-character one tells the whole story; can't unpick em, assume both factor. Curious about what third-party causal could be going on though, food for thought...

Possibly results such as participation are 'constitutional' rather than 'structural', or both arise from a further factor; no doubt to an extent they are. Take health and mortality, for instance; its ideologically convenient for a lefty to point to the corelation between income and health outcomes, equally so for a righty to point to personal choice in living practices as an etiology; everyone can be happily confirmed in their presuppositions. 'Win!'

Similarly, pointing to voting rates and saying the more aspiring, better-off are more democratically active as part of their general 'citizen-ness' constitution, while the worse-off are less 'citizen-ny'; versus looking at effective participation rates as skewed by class position, or social alienation, or whatever. Both doubtless factor, it shouldn't be a hurrah-boo issue...

I freely admit bias on this count, think personal culture heavily influenced by peer/class culture, social situation rather than intrinsic-essential, and a lot of direct and indirect access issues come into play at a structural level. Also personal culture seems less amenable to policy than social arrangements are. (Which tbh is a 'i have a hammer it must be a nail' logic, never good, bad kama )

Agree can't get 'clean' conclusions; found this what bugged me most about economics, the attempt to get a clean model by abstracting as much reality as possible until got a nice quant-ish model you could 'prove' things with. Proof in any social science seems more physics-envy than hard science; the social world fails as a laboratory in many ways