This is the second part of my two part series on Lynn Stuart Parramore’s recent article titled How Piketty’s Bombshell Book Blew Up Libertarian Fantasies. Let’s get started.
By 1987, Ayn Rand acolyte Alan Greenspan had taken over as head of the Federal Reserve, and free market fever was unleashed upon America.
Alan Greenspan was indeed one of the original acolytes of Ayn Rand, but he deviated from pure laissez faire by becoming head of the central bank called the Federal Reserve. The notion that a “free market fervor” emanated from a statist institution like the Federal Reserve is absurd. It may have been in the direction of relatively more freed market freedom, but a fervor implies a massive revolutionary shift. Something I highly doubt occurred, but I am open to evidence otherwise.
The next thing worthy of discussion she wrote was:
People in U.S. business schools started reading Ayn Rand’s kooky novels as if they were serious economic treatises and hailing the free market as the only path to progress
Ayn Rand’s novels do touch on economic themes like corporatism and government management or regulation of the economy. It may not be a full blown economic treatise, but it doesn’t deserve to be dismissed. This left-libertarian market anarchist doesn’t believe the free market or freed market is the only path to progress. A healthy dose of civil society is essential to my theory of political economy and positive change.
Since the ‘80s, the top salaries and pay packages awarded to executives of the largest companies and financial firms in the U.S. have reached spectacular heights. This, coupled with low growth and stagnation of wages for the vast majority of workers, has meant growing inequality. As income from labor gets more and more unequal, income from capital starts to play a bigger role. By the time you get to the .01 percent, virtually all your income comes from capital—stuff like dividends and capital gains. That’s when wealth (what you have) starts to matter more than income (what you earn).
Wealth and income are related. You can also be said to earn wealth too. It doesn’t simply refer to what you already have. I agree that more wealth being acquired through capital rather than labor is a problem, but I don’t see government or the state as the solution. Freed markets will ensure that the only way of getting an income or obtaining wealth is through labor. They will also ensure that the wage of labor is its full product.
Another thing she writes is:
Wealth gathering at the top creates all sorts of problems. Some of these elites will hoard their wealth and fail to do anything productive with it. Others channel it into harmful activities like speculation, which can throw the economy out of whack. Some increase their wealth by preying on the less well-off. As inequality grows, regular people lose their purchasing power. They go into debt. The economy gets destabilized. (Piketty, and many other economists, count the increase in inequality as one of the reasons the economy blew up in 2007-’08.
There are ways to address the above problems without using government or state power. In a left-wing market anarchist society, the productive would be able to keep the product of their own labor. The disconnect between labor and results would not exist, so it would be more difficult to make a ton of cash to hoard. One would have to be continually innovate or rely on the cooperation of newly empowered fellow workers to make staggeringly high levels of money to put away. Speculation can also refer to forecasting the future direction of things, but I see the author as talking about speculation in the context of finances.
Which brings us back to Friedman’s view that people naturally get what they deserve, that reward is based on talent. Well, clearly in the case of inherited property, reward is not based on talent, but membership in the Lucky Sperm Club (or marriage into it). That made Uncle Milty a little bit uncomfortable, but he just huffed that life is not fair, and we shouldn’t think it any more unjust that one person is born with mathematical genius as the other is born with a fortune. What’s the difference?
Actually, there is a very big difference. It is the particular rules governing society that determine who amasses a fortune and what part of that fortune is passed on to heirs. The wrong-headed policies promoted by libertarians and their ilk, who hate any form of tax on the rich, such as inheritance taxes, have ensured that big fortunes in America are getting bigger, and they will play a much more prominent role in the direction of our society and economy if we continue on the present path.
She is partially right that inherited property or wealth has nothing to do with talent. I’d only add that it might represent talent in the form of manipulating the person who gives the wealth away. The rules of society do indeed determine who gets a fortune, and those rules deserve to be changed in the direction of left-wing market anarchism.
What we are headed for, after several decades of free market mania, is superinequality, possibly such as the world has never seen. In this world, more and more wealth will be gained off the backs of the 99 percent, and less and less will be earned through hard work.
Which essentially means freedom for the rich, and no one else.
We don’t live in any society with free market mania. I otherwise agree with her assessment. Look to my next blog post for an explanation and justification of the economic perspective underlying this assessment of Lynn Stuart Parramore’s article.