Are extreme wealth and privilege good for you?

Photo: twintiger007, Creative Commons

Photo: twintiger007, Creative Commons

Does being born into a rich family benefit you? Clearly it does. You inherit not merely money but ‘social capital’ – lots of connections in high places that will benefit you relative to others who lack them. You also inherit ‘cultural capital’ – an easy familiarity with the cultural goods and ways of speaking that play well with the rich and powerful: art (Renoir or abstract, not Jack Veltriano), music (cello or oboe, not banjo or bass guitar), elite sports (polo, lacrosse or tennis, not skateboarding or football), literature (Austen, not Dan Brown). You will probably have lots of holidays abroad, and hang out with rich people in other countries, and think of yourself as ‘well-travelled’, ‘cosmopolitan’ and see the world as your oyster. People will say you are ‘well-spoken’, ‘from a good family’ – euphemisms for posh – and defer to you. None of this has anything to do with merit, but you’ll probably be able to convert your inherited (i.e. unmerited) economic and cultural capital into the merited form of educational capital – qualifications, degrees.[1] And it will be easier for you to get these because in posh schools and universities and other ‘high places’ you will be a fish-in-water, already speaking their language.

Does being born into a rich family benefit your character? Probably not. Those who inherit a position of dominance are likely to overlook the fact that inheritance has nothing to do with merit or what we need or deserve. As C. Wright Mills said, “People with advantages are loath to believe they just happen to be people with advantages.”[2] You are unlikely to have much idea of what life is like for people who are born into disadvantaged positions. You might imagine that if you’d been born into a poor family, you would have fought your way up and out, but that’s a delusion, because you would have been a different person from the one you know. We are all substantially shaped by the position and circumstances that the lottery of birth in an unequal society gives us. Even motivation and aspirations are affected. Yes, we have some power to make a difference, but we don’t get to choose our parents or our environment in our most formative years.

If your family are in a position of power, able to make decisions that affect many others, and to give orders, then expecting others to defer to you, and assuming that you know best are hard to avoid given such an upbringing.[3] But the coupling of such a sense of entitlement with ignorance of what life is like for other less fortunate people breeds arrogance. None of this is inevitable in every case: some rich parents may strive to combat such arrogance. But it is probable, and common.

Photo: Matt Price, Creative Commons

Photo: Matt Price, Creative Commons

You might say, what’s wrong with parents wanting the best for their children, and hence wanting to pass on any advantages they have? The answer is nothing. What is wrong is the arbitrary inequality in the distribution of advantages that can be passed on. The rich are in the strongest position to take advantage of the unequal opportunities that confront us.

Upper class child neglect

But that there’s one source of advantage which many of the rich pursue that both benefits and harms their children. If you get sent to boarding school – a strange practice of child neglect found in the British upper and upper middle classes – it will probably give you more power in terms of social and cultural capital, and offer the benefits of small class sizes in school and lavish resources, but the chances are it will damage your character, and in ways that damage others too.

Nick Duffell went to boarding school, and felt damaged by the experience. He went on to

Holding 3D Bookbecome a psycho-therapist, and specialized in treating others similarly damaged by the experience. He’s written an important book about it – Wounded Leaders – following his TV documentary on the same subject called The Making of Them. Those who are sent away to school, especially at an early age, are deprived of the safe space of acceptance and unconditional love that families, at least good enough ones, can provide – a space where vulnerability does not have to be hidden or defended. They quickly learn that if they are to avoid bullying and ridicule they must present an appearance of absolute invulnerability, and use attack as the best form of defence. They develop what Duffell calls a ‘strategic survival personality’. This may include “a seamlessly smooth duplicity, an apparent unshakeable faith in his own ego, a tendency to bully when he feels cornered and a barely concealed contempt for being told what is what by women and foreigners . . .”[4]

Photo: artofthestate, Creative Commons

Photo: artofthestate, Creative Commons

As an illustration, Duffell refers us to Prime Minister’s Questions, that awful weekly spectacle that appals viewers of British television news, in which the antagonists go for the withering put-down and the knock out punch. This is where Etonian David Cameron infamously told Anna Eagle, a member of the opposition, to ‘Calm down, dear, calm down. Calm down and listen to the doctor!’ Cameron was sent to boarding school at the age of 7.

The vulnerability and emotions that they fear in themselves are projected onto others. Many find that in later life that they struggle to form intimate relationships because they cannot accept, hold and love their partners’ vulnerability, neediness and emotions. Hence their need for therapy. But it also means they lack the emotional intelligence required for the jobs that they get, including in high political office. “Only 7% of members of the public attended a private school. But 71% of senior judges, 62% of senior officers in the armed forces, 55% of permanent secretaries in Whitehall, 53% of senior diplomats, 50% of members of the House of Lords and 45% of public body chairs did so.”

Boarding schools seek to build a particular version of masculinity. According to Duffell this applies to girls’ boarding schools too – forms of masculinity can be learned by women: they are not tied to biological sex. It was this upper class model of masculinity that dominated much of British literature and culture in the 20th Century, and it trickled down

Photo: Creative Commons

Photo: Creative Commons

to the middle classes, saturating much of what I read and learned about as a state school kid in the 1950s and 60s, from comics to war stories to ‘great man’ narratives in history. Rudyard Kipling’s awful poem ‘If’ represents it well; to become a man, a boy has to repress his emotions and assert his superiority over others who are to be regarded as fools at the mercy of dangerous irrational passions. This training would ‘armour’ him when he went out to the colonies, and enable him to subordinate his class and ethnic inferiors.

Some of the 1% see the character defects encouraged by public (i.e. private) boarding schools as virtues. Anthony Seldon, Headmaster of Wellington (public) School and co-founder of the neoliberal Institute of Economic Affairs, recommends the practice known at Eton as “’oiling’, which is learning how to win friends and influence others, and how to clamber over them to get what you want. It’s a mixture of ambition, self-confidence and bloody-mindedness . . . ” Seldon acknowledges that this will “nauseate many on the left” [and many others, surely?] and that for many the obsession with character is a “rightwing obsession, redolent of empire and all that is wrong with the class system.”[5] (I couldn’t have put it better myself.) But he is not discouraged in his desire to make a virtue out of a vice, arguing that oiling and the like are necessary for survival in a war of all against all, so the 93% who go to state schools better get over their moral scruples and get used to it, and also acquire the arch confidence that he admires in the public schooled. Though it sounds like self-parody of upper class overconfidence and the arrogance of ignorance, this was not an April 1st article. He was serious.

Combating and undermining the rule of the rich is not only a matter of challenging their domination of politics and economics. It’s also about challenging their idea of ‘character’, their behaviour, and their model of masculinity.

 

 

 

[1] P. Bourdieu, P. and J-P. Passeron, . (1990) Reproduction in Education, Society and Culture, Sage

[2] C. Wright Mills, 1956 [2000] The Power Elite, Oxford University Press, p.14.

[3] See A. Sayer (2005) The Moral Significance of Class, Cambridge University Press, and A. Lareau (2003) Unequal Childhoods, University of California Press

[4] Duffell, Wounded Leaders, pp.46-7

[5] http://www.theguardian.com/commentisfree/2011/sep/02/public-schools-toby-young

Thatcher’s Legacy: The Something-for-Nothing Culture

Photo: Byzantine_K, Creative Commons

Photo: Byzantine_K, Creative Commons

‘The something-for-nothing culture’ is a phrase used by the Right to bash those who live in areas with job shortages, or whose pay does not lift them out of poverty, or who have disabilities and who claim benefits to which they’re legally entitled. It’s a favourite of Iain Duncan-Smith’s – he of the Universal Credit shambles and the bedroom tax. Slandering the poor goes down well not only at Tory Party conferences, but also in newspapers owned by super-rich press barons – i.e. most papers – and, judging by continuing support for the Conservatives, by many of their readers.

It’s a bit rich, not simply because the phrase generally comes out of the mouths of a privileged minority who ooze entitlement from every pore, but because, starting with Margaret Thatcher, neoliberal governments (Tory, New Labour and Condem) have created a something-for-nothing culture of their own for the better off and especially for the rich.

While she preached against inflation, Thatcher’s deregulation of The City fuelled inflation in share and property values, benefitting the better off. Freeing up credit for buying houses inflated their price, as did restricting the creation of new social housing. An increase in the price of assets like houses may make their owners better off on paper in terms of financial wealth – potential claims on goods and services others have produced for sale, but it does not reflect any additional wealth creation, so ultimately the increase must come at the expense of others, including those unable to afford to buy such assets. Sometimes house-owners who benefit from such gains feel a bit guilty about it – quite rightly – though many seem to think it’s a reward for some kind of contribution they’ve made, or a mark of respectability, and hence OK. But it’s something-for-nothing.

As Shelter, the UK charity for the homeless, put it: “If food prices had risen at the same rate as house prices over the last 40 years, a chicken would cost £51.18. Four pints of milk would be £10.45, and a loaf of bread would set you back £4.36. We wouldn’t accept this with food. So why accept it with housing? Unless something changes, a generation will struggle to afford a home of their own.”

And that’s exactly what’s happening. London’s housing market is the most extreme example of the neoliberal something-for-nothing culture. The rich and super-rich are buying up properties merely as financial investments – not to live in and use, but to rent out to others and to enjoy the windfalls in capital gains. Hence it’s improperty.

Similarly with shares: over the last 30 years share prices have risen, not because of economic growth but simply because demand for shares grew with the rise of big institutional ‘investors’, driven by increasing numbers of people taking out private pensions and financial ‘investments’, while the supply of shares was fairly static. Rising share prices in turn drew in more buyers, seeking to enjoy these gains, which only pushed the prices still higher. Buying existing shares in a company just transfers money to those who previously held them; it need not result in any real investment by the company, so shareholders’ dividends and speculative gains were something-for-nothing. Likewise with the privatization of public utilities. Those people who bought the new shares and sold them off to big companies got windfalls. In the process they put public utilities beyond effective public control and handed them over to private companies who took advantage of the monopoly power they afforded and soaked customers.

Photo: Byzantine_K, Creative Commons

Photo: Byzantine_K, Creative Commons

Then there was the great hand-out to the rich in the form of tax cuts and letting tax dodging rip. Thatcher cut the top rate of income tax wfrom 83% to 60%, and increased VAT, which relatively has a bigger impact on low incomes, from 8% to 15%. But that’s not all. Corporation tax has been cut from 52% in 1980 to 21% now. ‘Business-friendly’ means ‘business-compliant’: willing to give business whatever free-ride it wants – or is prepared to pay for in party funding. Remember, at the last election, the Conservative Party got 50% of its funding from the financial sector. Among the important policy changes won by finance lobbyists in Whitehall and Westminster in 2012 were:

  • The slashing of UK corporation tax and taxes on banks’ overseas branches, after a lobbying barrage by the City of London Corporation, the British Bankers’ Association (BBA) and the Association of British Insurers. The reform will save the finance industry billions.
  • The neutering of a national not-for-profit pension scheme launching in October that was supposed to benefit millions of low paid and temporary workers.
  • The killing of government plans for a new corporate super-watchdog to police quoted companies.

UK tax expert Richard Murphy estimates tax avoidance (not illegal[1]) at £25billion and tax evasion (illegal) at £70 billion, or combined £260 million per day; that’s 260 times estimated benefit fraud. Many major multinationals each employ hundreds of lawyers and accountants to work out ever more ingenious ways of avoiding tax. Yet in 2009, the UK’s tax authority, Her Majesty’s Revenue and Customs (HMRC), employed only 600 workers to check the affairs of 700 companies, and only about 100 of those dealt with tax avoidance. In 2011, its budget was cut by £3 billion. But then, back in 2005, Gordon Brown, the Chancellor of the Exchequer had obsequiously reassured the Confederation of British Industry that the government would apply ‘not just a light touch, but a limited touch’ to financial regulation, and to tax too. He went to reassure his audience that he rejected the old assumption that business, unregulated, will invariably act irresponsibly. [Was he just remarkably gullible or bought off?] HMRC were then making job cuts of 25,000. This was completely false economy, for in 2008 its so-called ‘large business service recovered 92 times its costs’, while ‘the “special investigations section” fighting the most complex avoidance cases had yielded 450 times its costs.’

Photo: Mariscat, Creative Commons

Photo: Mariscat, Creative Commons

We’ve seen this kind of thing before:

“Where the labourers and artisans are accustomed to work for low wages, and to retain but a small part of the fruits of their labour, it is difficult for them, even in a free government, to better their condition, or conspire among themselves to heighten their wages. But even where they are accustomed to a more plentiful way of life, it is easy for the rich, in an arbitrary government, to conspire against them, and throw the whole burthen of the taxes on their shoulders.”

(David Hume, 1752)

It’s time to throw the ‘something-for-nothing’ tag back at the Tories and their funders and supporters.

[1] To say it’s not illegal, doesn’t necessarily mean it’s legal: it includes avoidance schemes that haven’t yet been assessed in a court of law. (See my book, chapter 16).2014-09-24 15.41.59

The economy: smart or dumb?

Photo: Christian Guthier, net_efekt, Creative Commons

Photo: Christian Guthier, net_efekt, Creative Commons

Turn to the back of most newspapers, at least the broadsheets, and you’ll come across the money pages – ‘your money and you’, etc.: how to get the best deal on energy suppliers, what to do with that inheritance, how to get on the property ladder, tips on buy-to-let, where ‘the smart money’ is going.

Here the economy appears as a game, full of risks and opportunities, that can be played safely, if only you are smart enough, or get the right advice. Some may see the money pages as a source of advice on how to be prudent and provide some security; others as how to make money and get rich.

But while the advice may seem sensible and what any smart person would heed, the implicit model of the economy is not ‘smart’ but actually a stupid and short-sighted one.

Money only has value if there are things on sale that it can buy. Those goods and services have to be produced. The money pages take the standpoint of the reader as a holder of money, and recommends actions that are likely to benefit them – either saving them money or making them additional money – regardless of whether they provide anything useful in return or do something that benefits others and the economy. On this view, economies are just the sum of individual choices. They promote a wholly self-interested view of economic life. Things are bought and sold, but without any consideration of who produces it, and what they get in return, or of any bad consequences for others.

Photo: Alan Cleaver, Creative Commons

Photo: Alan Cleaver, Creative Commons

The financial columns and websties appear to be for everyone, but what you can do with your money depends on how much you have, and many of the opportunities are simply beyond the pockets of many readers. What’s more, many offer ways of making money at the expense of other people.

Most people get money by working, but what’s distinctive about the money pages is that they deal with how to get more money without doing extra work, through so-called ‘investments’. These are assets that provide the holder with unearned income – that is, an income that doesn’t depend on providing a service of some sort in return. ‘Invest’ in buy-to-let housing and you’ll get money from rent and probably capital gains on the property too: any payment you receive that covers more than construction and maintenance costs is something for nothing.  (This is the something-for-nothing culture that we need to counteract!) Buy an ISA (Individual Savings Account) and the money will be ‘invested’ in stocks and bonds and other securities, and will yield you an income. Unless the shares or bonds are newly issued, then your money goes not to the firm but to the previous owners. (Even in the former case, the money need not be used for any productive investment: for example, it may just be used to raise funds to takeover another company – a mere change of ownership.) Only if your investment funds  improvements in the production of goods and services or of public wellbeing is it doing anything productive, and only then is the return something-for-something, as your action enabled that development. Otherwise it’s just a matter of buying a stream of unearned income or betting on the future value of things.

At this stage in the discussion someone usually pipes up with Adam Smith’s famous argument that in markets, it’s in the self-interest of sellers to give buyers what they want, because they’ll lose custom to competitors if they don’t. So, it’s best for everyone if each person follows their self-interest! Here’s the key sentence, the only one from Smith that some economists seem to know, or think they need to know.

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” (Wealth of Nations, Bk I, ch.II)

Adam SmithIt’s clear from the passage preceding this quote that he did not rule out benevolence altogether as a motive in economic matters, and it’s clear from his life work that he valued public spiritedness: “The wise and virtuous man is at all times willing that his own private interest should be sacrificed to the public interest of his own particular or society.”(1) True, there are circumstances where the pursuit of self-interest in competititive markets does indeed encourage behaviour which benefits consumers. But it’s a huge jump from Smith’s tiny 18th century businesses to today’s Walmarts, Goldman Sachs and Microsofts. And Smith’s examples were businesses that produced goods, rather than operated in financial markets (e.g. for loans). And he was not talking about renting out property; let’s remember it was Smith who said of landlords that they love to reap where they have not sown (2); he was under no illusion that the pursuit of self-interest by landlords benefitted anyone else, least of all the tenants.

In markets, people generally do pursue their self-interest, partly because even if they wanted to know the social and environmental costs of their actions for others it would be difficult to get the information. But just because people follow their self-interest it doesn’t follow they have equal power to get what they want. The asset rich (bankers, landlords,  capitalists) can get what they want at the expense of the asset poor (borrowers, tenants,  employees). Nevertheless the butcher-baker-brewer quote has been used to whitewash anything and everything involving markets.

Particularly in the face of global warming, we cannot afford to perpetuate this myopic pursuit of self-interest, with no regard for the consequences for others and the planet. True, we need some markets, because there are lots of things whose production and distribution cannot be centrally planned; but you can have markets without minority private ownership of land and control of banks, and workers can have co-ownership of their market enterprises. But in addition economies need to be regulated to stop high carbon production and energy use, if we are not to give the next generation a frighteningly inhospitable planet. Only then would our economy be ‘smart’.

(1) Smith, A. (1759) The Theory of Moral Sentiments, Indianapolis: Liberty Press, pt VI, sec ii, ch 3.1, p 235 (6th and final edition published in 1790, a year after the 5th and final

2014-09-24 15.41.59 edition of The Wealth of Nations).

(2) (1776) The Wealth of Nations, Bk I ch.V

The Super-Rich and Us – getting there

I have to admit that as I settled down to watch this 2-part BBC2 documentary, I was prepared for the worst: a programme on the 0.001% made by some people lower down in the 1%, lingering on their luxury lifestyles, narcissistic personalities and fawning minions, with scarcely a hint of criticism beyond the odd ineffectual mention of greed, and ending up with a politically safe ‘balanced agnosticism’ or untroubled bewilderment. But I was wrong.

The Super-Rich and Us broke the mould. It linked the rise of the super-rich to growing inequality and to austerity, and to the financial boom and crash. It took the trickle-down theory to pieces, went back to the 1970s and the subsequent rise of indebtedness as a source of profit or lenders, and for those who managed risk, who saw inequality as a way to make money. It even referred to debt as a means of wealth extraction. It exposed how tax inspectors were promoted for fostering a ‘relationship’ with companies rather than making them pay their taxes. It recognized the UK as a tax haven and the error of imagining that attracting the super-rich would benefit the British economy. It showed that greater inequality did not result in more growth. It acknowledged the huge rise in housing costs and the booming market for luxury property and goods bought not for use but as ‘investments’. There were a couple of apologists for the rich telling us that they didn’t believe you could make the poor rich by making the rich poor, as if anyone wanted to do that (a bit of polarisation to the point of absurdity is always a good way of avoiding an awkward issue).

And it got some of the right people on: Thomas Piketty, David Graeber (author of the brilliant Debt: the First 5000 Years), Nick Hanauer (the US billionaire who rejects many of the myths about the rich wants more equality), Ha-Joon Chang (the alternative economist), Danny Dorling (prolific author on inequality), Matt Whittaker from the Resolution Foundation, and Deborah Hargreaves from the High Pay Centre. Jacques Peretti did a good job as the interviewer/investigator, avoiding the egoism and gush of the usual suspects fronting these sorts of programmes.

No doubt BBC2 will be charged with ‘bias’. If anyone wants to put on 2 episodes arguing against it, I hope BBC will let them. That would be better than the ridiculous expectation that every programme should achieve ‘balance’.

Anyway, you’re waiting for the ‘but’:

Well first, although it did mention wealth extraction, it failed to make explicit the dependence of the super-rich on unearned income – the crux of the matter when it comes to evaluating the legitimacy of extreme wealth. So while it did say austerity and stagnating pay for the majority were products of the rise of the super-rich, it didn’t get to the heart of the matter, to the mechanisms by which the rich extract wealth from others, though some were at least implicit in its coverage of debt and interest payments.

Second, it used those dangerous, ideological words ‘investment’ and ‘investor’, without showing how they cover both real investment in new activities (wealth creation) and financial investment that just provides the investor with a yield at the expense of others (wealth extraction), and regardless of whether any real investments result from them.

Third, there was also little on the return of plutocracy – the infiltration and capture of the state by the super-rich and their political supporters, servants and sycophants, though some of the super-rich did recognize that one day the 99% may realize what has been done to them, and rise up.

Lastly while it did mention Citibank (bailed out by the American people in 2008 after

Photo: Maxine Simpson yachtfan. Creative Commons

Photo: Maxine Simpson yachtfan. Creative Commons

sustaining huge losses in the crash), and its services to the super-rich, it missed an opportunity to reveal the shocking contents of its ‘Plutonomy’ reports, produced for its ultra-rich clients but leaked to the press in 2006. The last of these reports, sensitively titled Plutonomy Rising Tides Lifting Yachts, reassured its readers that “the rich are likely to keep getting even richer, and enjoy an even greater share of the wealth pie over the coming years.” However, they needed to be vigilant:

“RISKS — WHAT COULD GO WRONG? 
Our whole plutonomy thesis is based on the idea that the rich will keep getting richer. This thesis is not without its risks. For example, a policy error leading to asset deflation, would likely damage plutonomy. Furthermore, the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfranchisement remains as wasone person, one vote (in the plutonomies). At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. This could be felt through higher taxation on the rich (or indirectly though higher corporate taxes/regulation) or through trying to protect indigenous [home-grown] laborers, in a push-back on globalization — either anti-immigration, or protectionism. We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.” (emphases in the original)

Democracy is a dangerous thing if you’re a member of the plutocracy. As the BBC2 documentary noted, the 99% could stop the 1% at any time – and the Ministry of Defence, represented by Rear Admiral Chris Parry*, has already warned of a backlash if inequalities deepen – but you can be sure that the plutocracy will fight hard and dirty to resist this.2014-09-24 15.41.59

* The report is summarised here. For Parry’s class interests see this on his view of state school pupils and their families.

Why we shouldn’t envy – or admire – the rich

Photo heyjoewhereyougoinwiththatguninyourhand, Creative commons

Photo: Broderick, heyjoewhereyougoinwiththatguninyourhand, Creative Commons

The knee-jerk reaction of the Right to criticism of inequality is to call it ‘the politics of envy’. No need to engage with arguments, just slap down the critics with a smart-arse phrase that saves the need to think. My critique of the rich is about the politics of injustice, not envy; indeed, like most critics of inequality I think envy is a mistake and part of the problem.

Envy, as a vice, involves resenting those who have something that we’d like to have ourselves, such as a special ability or an advantage, where there is nothing unfair in the way they have got those desirable things; for example if it is a matter of natural luck, like having beautiful eyes, or a product of hard work, imagination and intelligence, or some mixture of all these.

Adam SmithAdam Smith, that much misunderstood – because rarely read – founder of economics, described envy as an “odious and detestable passion”, defining it as “that passion that views with malignant dislike the superiority of those who are really entitled to all the superiority they possess.”[i] But the rich do not owe their wealth to superiority, unless we mean their superiority at exploiting unfair systems.

Envy of the rich means resenting the rich and yet wanting to be rich oneself. This implies despising those who have inherited money and other advantages and who can live off unearned income based on control of assets, because it’s them, not you, that’s doing it! Those who are envious in this way make the mistake of missing the unfairness of the situation, and instead resent the fact that someone else – not them – is the beneficiary. It’s unethical.

And it’s a mistake to envy the rich for their disproportionate power over others; again the envier just wants to be in that position instead. Never mind that it’s arbitrary, that it can’t be generalised to everyone, and that it’s undemocratic.

Envy of the rich and their lifestyles is also misplaced because vast private material wealth is wasteful: it distorts economies so that they overproduce luxuries for the rich and underproduce goods for the poor. It wastes the earth’s resources; and the carbon footprints of the rich are far more excessive than other peoples’ – far beyond what the earth can sustain. And many of the rich are banking on unsustainable growth, or get unearned income from the fossil fuel energy system and so have a vested interest in continuing to trash the climate. This is hardly something to envy! 2014-09-24 15.41.59

Finally, it’s a mistake to envy those for whom getting money and material wealth is an end in itself and who put this before everything else. They show a complete lack of wisdom in terms of understanding human well-being. Those who can come to terms with the fact that we are social beings, dependent on others, needing them, and who appreciate the importance of giving and of love and friendship are wiser and more likely to be happy.

But actually if you think about it, while the desire to be like those richer than us is common, this is not usually driven by bad feeling towards the rich, but by something more akin to admiration. The problem here is not envy but misplaced admiration, because as my book shows, the wealth of the rich has more to do the fact that property rights are defined in such a way that those who control certain kinds of property can use it to extract wealth from others without creating wealth for them in return. Free-riding on the wealth produced by those in a weaker position than you is hardly ‘admirable’, or something deserved to which the recipients can justifiably claim to be ‘entitled’, and it has no particular connection to superiority. Rich landlords don’t need to be superior. They just need to own houses or land when other people lack these so they can get something – rent – for nothing. There’s nothing admirable in this.

Talented people who give others a lot of pleasure, such as sports stars, musicians or actors are of course generally viewed with gratitude and admiration by those who love their work, and they often wish they could be as good as them. Sometimes we say we ‘envy’ stars their talents, but we don’t mean envy in the sense of ‘malignant dislike’ of them – quite the opposite. Some of them may make a lot of money in the process, particularly where they gain access to global communication and advertising systems that reach huge audiences, as economist Sherwin Rosen explained.[ii] Consequently, fans sometimes feel conflicted about their heroes. It’s not unusual to love a pop star’s music but be angry at their use of tax havens to avoid paying tax, and lots of football fans think top footballers are overpaid. In such circumstances a conflicted response is absolutely understandable. We admire their talents, but don’t approve of their excessive wealth or the attitudes that often go with it.

So neither envy as a vice, nor envy in the softer form of wishing one had something others have while admiring them rather than resenting them for it, is appropriate for the rich.

But the bizarre thing about the politics of envy jibe is that some on the Right seem to believe envy is actually a good thing. Here’s London’s Mayor, Alexander Boris de Pfeffel Johnson:

Photo: bixentro, Creative Commons

Photo: bixentro, Creative Commons

“I stress – I don’t believe that economic equality is possible; indeed some measure of inequality is essential for the spirit of envy and keeping up with the Joneses that is, like greed, a valuable spur to human activity.”[iii]

Johnson was born into a rich family and sent to public schools, including Eton, so he hardly needed a ‘spur’; like many public school boys he oozes a sense of entitlement from every pore, and is seemingly incapable of self-doubt. Like Tony Blair he assumes wealth is a reflection of contribution, of special ability, including high IQ. This is what we should say to them: ‘What do you have that you did not receive? And if you received it, why do you boast as if it were not a gift?’ (1 Corinthians 4:7).[iv]

[i] Adam Smith (1759) The Theory of Moral Sentiments, Liberty Press, VI.iii.16, p.243-4

[ii] Sherwin Rosen (1981) ‘The economics of superstars’, The American Economic Review, Vol. 71, No. 5., pp. 845-85

[iii] Boris Johnson 2013 ‘What would Maggie do today?’ Margaret Thatcher Lecture, 27th November

[iv] I came across this in a great book by Gar Alperovitz and Lew Daly – Unjust Deserts, published by New Press, New York in 2008. I’m an atheist by the way, but a good quote is a good quote.

New Era and beyond

Congratulations and Happy Christmas to the New Era residents!

The best news this Christmas?: the New Era tenants have won their high profile battle against Westbrook Partners, the New York property firm that bought up their estate in London in order to put up the rent and get in richer tenants. If they’d succeeded many of the tenants would have ended up homeless. Faced with bad publicity in the season of good will, Westbrook decided to retreat in order to free-ride again elsewhere; so they sold the estate on to the Dolphin Square Foundation, a charity providing low cost housing.

Screenshot 2014-11-16 10.19.28

But a few days later, a survey by the National Housing Federation found that more than a quarter of the people in private rental accommodation are having to cut back on food to meet their housing costs, and just under a quarter had cut back on heating. (Guardian 23rd December 2014).

So the problem of using housing as a source of unearned income by renting it out remains, and in cities all over the world, landlords big and small, seek to buy up properties precisely for this purpose, often removing existing tenants in order to raise the rents. Housing simply as property is for living in. Housing as an ‘investment’, a source of unearned income is ‘improperty’, as J.A.Hobson called it.

The usual argument of mainstream economists is that ‘market rents’ should be charged, this being seen a matter of facing up to inevitability (‘you can’t buck the market’, as Margaret Thatcher famously said) – of acknowledging a natural law. And they don’t mean rents that will cover maintenance costs (i.e. fair rents), but rents as high as they can go. Intervening to hold down rents to an affordable level for low and middle income tenants is seen as some kind of inadmissible ‘distortion’ of the market, which by making markets less efficient will damage the economy. For mainstream economics it’s ‘efficient’ to set rents at the going market rate, because then that will balance supply and demand. It may do, but that may mean that those whose incomes are too low to be able to afford them, will end up homeless. ‘Demand’ only counts in free market economics if it’s backed up by money. Allowing land and property to go to the highest bidder is sometimes described as allocating it to ‘the highest and best use’. This is usually justified as allowing the property to be rented (or sold) to whoever is ‘willing’ to pay the most, as when a chainstore outbids some residents for land. But of course, potential tenants differ massively in how much they can afford to pay. What people offer to pay for anything reflects not just how much they want or need it, but their income. Interestingly, economists don’t call these inequalities in purchasing power a ‘distortion’ of the market.

Photo: Charleston's TheDigitel, Creative Commons

Photo: Charleston’s TheDigitel, Creative Commons

 

What’s more the market for houses is not like that for cakes. Their supply does not readily adjust to demand, and there are no substitutes for housing as there are for cakes. Housing is a basic need, so its production and distribution should be regulated so that everyone can meet their needs. And that should include state-housing.

Rent is unearned income for the landlord, a private tax on others, and a deadweight cost on the economy. Mainstream economists don’t like to be reminded that landlords “love to reap where they have not sowed”, as Adam Smith said, or that David Ricardo, John Stuart Mill, Karl Marx, Henry George, R.H.Tawney, Michael Hudson and a host of others agree that rental income has no justification, other than power. Recently, a more critical US economist, Joseph Stiglitz, has argued that increasing urban land rents have been a major component in the economic crisis.

So yes, it’s wonderful that the New Era residents have won, but two things still need fixing. At present we have thousands of people on incomes too low to afford adequate housing, and housing costs that include a large element of deadweight costs imposed by private landlords to provide them with unearned income. Until these are resolved, the wider problem underlying the New Era case will remain.2014-09-24 15.41.59

Education for enterprise?

students

Photo: bensonk42, Creative Commons

In the brave new world of neoliberalism, everyone is encouraged – ‘empowered’ – to choose freely what to buy, do, eat, what health care to have, what schools to attend, what to invest in, so their opportunities are maximized. If they’re smart, savvy and ‘hard-working people’, they’ll be able to navigate successfully through this world of opportunities. Society, which as Margaret Thatcher told us does not exist, apparently has no structures, no deep, enduring inequalities, no extraordinary imbalances of power, no privileges or discrimination, no inheritance of huge advantages and disadvantages, no free-riding by the rich. There’s just a mass of individuals-from-nowhere encountering each other on a level-playing field of competition and markets. Winners and losers emerge, of course, but their success or failure is deserved so it’s a meritocracy.[1] We need risk-takers, special enterprising people who have the ability to make things happen, apparently.

We’re supposed to be ‘entrepreneurial selves’[2], constantly doing improving things in order to sell ourselves to others in the market of life, enlarging and ‘leveraging’ our ‘skillsets’ (sounds more impressive than skills, eh?), updating our cv’s, networking, using social media to promote ourselves, in competition with everyone else, so we can get ahead. Don’t think of the losers this inevitably creates, you wouldn’t want to be seen with them anyway; stay focused and positive. This is the route to success – and of course, to wealth and well-being.

I don’t remember becoming aware of the concept of the curriculum vitae – or resumé as Americans call it – until I was in my early 20s. Now I’ve heard that even primary school kids are introduced to it. Neoliberalism has colonised schools and universities, and continues to extend its influence into the minutiae of life within them.

You might expect that it would encourage pupils and students to become independent thinkers and actors, inquisitive and adventurous, well on the way to becoming skilled and self-reliant – entrepreneurs of their own lives. But ask anyone involved in education and you’ll find out that it hasn’t turned out that way. Instead of encouraging independent thought, the neoliberal education system is increasingly ‘teaching-to-the-test’, producing students who don’t want to take the risk of thinking independently and who just want to know the answers that will get them the grades.

It would be short-sighted and unfair to blame the students, though. Why? 2 reasons:

  1. With the burial of the post-war ideal of full employment – which was largely achieved for 30 years – young people face a very real threat of failure and unemployment – and of course, huge debts too. Now, taking risks in your assessments by learning and thinking independently is hardly an attractive option when grades matter so much for getting into university and for getting a job. ‘What should I have written to get a top mark?’ ask some students when they get their work back. If tutors say go and read, question, explore and think, it sounds like they’re cheating them, moving the goalposts.
  2. League-tables and audits: UK education is under the cosh of competition through league tables. Grades become the holy grail. In the stunningly unimaginative and mechanistic model of education in which all learning has to have pre-set, unambiguous objectives and ‘measurable outcomes’, grades are the primary measure of both students, tutors, schools, colleges and universities, while the content and the pleasure of exploring and learning are secondary. No wonder there is grade inflation. No wonder some teachers are tempted to drop heavy hints to their students about the ‘correct’ answers.

Worry about the future plus the reduction of education to a qualifications factory adds up to anxious, cautious students who understandably want their upper second class degree to ensure that they’re at least not disadvantaged in the labour market. And given chronic job shortages, employers faced with narrowing down hundreds of applicants per vacancy to a few find grades and league table rankings an easy way of doing this.

Photo: DonkeyHotey, Creative Commons

Photo: DonkeyHotey, Creative Commons

So where’s the space for creativity, adventure, experimentation, risk taking? And you do need time and space – so you can get absorbed, experiment and indeed play. A bit of daydreaming, wondering and walking can also help, especially if they follow some focused work – it’s surprising how often it’s then that you get the answers you were looking for. It’s all to do with allowing the right hemisphere brain to take over for a bit. And you need security too, so you’re not afraid of making mistakes, for the road to originality is paved with them. Comedian John Cleese and educationalist-cum-comedian Ken Robinson have made entertaining videos about these very things.

Our neoliberal culture is inimical to all of these, with its constant pressure to multi-task, scattering our minds with stimuli that turn out to be unsatisfying, and achieve (maximize your ‘deliverables’!), and with its chronic impatience – the shareholders want their money and they want it now. A few iconic firms like Apple may promote an image of creativity and even the pursuit of beauty, but don’t be fooled, the bottom line is the bottom line, and Apple pursues it ruthlessly.

The main thing neoliberal education provides for the economy is not independent, entrepreneurial students, but indebted individuals – a source of unearned income for whoever owns the debt –2014-09-24 15.41.59 trained to comply with whatever is demanded of them.

[1] Actually, some of the founders of neoliberalism knew this was nonsense. Frederik von Hayek, Thatcher’s guru, said outcomes in markets owe a great deal to luck, though he wondered if children should be told this, in case it discouraged them from making an effort. Hayek, F.A. (1976) ‘‘Social’ or distributive justice’ in his Law, Legislation and Liberty, Vol. 2, p.74. Similarly: ‘the value which a person’s capacities or services have for us and for which he is recompensed has little relation to anything we call moral merit or deserts.’ Hayek, F.A. (1960) The Constitution of Liberty, p. 94. Neoliberal politicians prefer not to know this because they realise it wouldn’t play well with the electorate, or indeed with the rich who fund their parties.

[2] This is a term inspired by the work of Michel Foucault on neoliberalism and care of the self. See his Birth of Biopolitics lectures.