Carney is therefore totally correct to say that: "When the whole system is rigged, there’s often no good way to unrig just one part." This is precisely the point made by legal realists and made by Nagel and Murphy in their sweeping book The Myth of Ownership.
You can't just look at one single piece of the economic or tax system, whether that's the carried interest loophole, income tax rates, economic regulations, or anything else. The "whole system is rigged" together into one big edifice of production and distribution and it all fits together. From our system of property and contract law to our system of capital income taxation, we've constructed an entire economic system, and analyzing small pieces of it in isolation for their fairness makes no real sense.
What we have to do instead is analyze the whole system. When we set out to determine how to construct our economic institutions, we have to ask ourselves: what are we trying to do here in broad terms?
For me, the answer is to invent an economy that ensures everyone has access to the resources and capabilities necessary for them to flourish and pursue their personal projects. Instead, we've constructed a system that unnecessarilly generates widespread poverty, inequality, economic insecurity, and social immobility, all of which frustrate flourishing for huge swaths of those subject to our economic institutions."When the whole system is rigged, there’s often no good way to unrig just one part." Exactly.
Demos
What Tax Puzzles Tells Us About Economic Justice
Matt Bruenig
13 comments:
In any population there are a few "bad" corrupt people, and a few "good" selfless people. The majority lie somewhere in between selfish and selfless with a skew toward selfish.
We know that western inequality increased during the great expansion of labor markets but that world inequality decreased by the most it ever has in the history of humanity.
What if the pattern we are seeing in the western world is just a fluke of events in the bigger pattern. They happen all the time, you get 3 low income growth heads in a row during this coin toss because of global events. The person that gets the 3 heads feels incredibly lucky, like the rules have changed and something special happened.
What if we are talking about chucking out a system that really works well because we've had a run of bad luck and the system is designed to change slowly and not react to every whim of interested parties.
The system is protecting itself from us, because we are wrong in our thinking. Not saying we are necessarily but something to think about.
"What we have to do instead is analyze the whole system."
At least somebody is starting to get it...
Ryan I dont know about that it seems to me like we are still operating a system that was set up under the metals... tax system is set up for govt to obtain revenues out of necessity, etc...
I dont think we need to throw the whole thing out but a full body off restoration is probably in order...
rsp,
The system IS corruption, how can the system "work well"? Anyway, what does "work well" mean, when we add qualitatively adjectives like those we imply that the system has some teleological objective other than "keep running". We think that systems have to make the average human conditions improving. But systems are only reflections of living organisms at a bigger scale, and what any living organism does is just try to keep going (individually and as an specie). there is nothing written about if it should or should not improve it's living conditions, that's circumstantial. And the apparent success is based on what we call "the system" really? Are we including there things like demographic trends, technological progress, etc. and thinking straight about the cause -> effect? Maybe we are drinking too much kool aid and have reversed perception of causality? Food for thought there.
Coming back to the economics, some of the places were there has been more 'growth' are leading corruption machines AND that growth has been generated on the back of developed nations credit cards and mortgages with insane leverage all over the system (beggar-thy-neighbour). Maybe if we come with a way to reset the whole thing without huge disruption we can call it a day and declare victory "you see, the system works!". Good luck with that!
Corruption is wealth extraction by definition, you can't have a sustainable system based on exploitation (wealth extraction). It has never worked, but ofc, you can make it "work" for centuries as long as you can keep your violence-generation machine going (but then "the system" would look like different to what we experience today as a system). You need a tyranny for that, when the machine shows it's real face, when it's no longer sustainable. You had that, not long ago, the whole USA economy was based around slavery less than a century ago, finance and cheap fossil fuel substituted these forces as an engine for 'progress and growth'. All the ancient civilizations we worship were based on slavery and exploitation and/or great class divide and violence. The old order was based on hierarchy, class divide and power extraction from (pick one): monarchs, aristocrats, the church, etc. Capitalism has worked relatively fine, has reduced the level of 'constant violence to keep the system running' somehow to 'tolerable levels', but it still exists, capitalism also created reactionary trends to the internal contradictions and offspring systems like state socialism (USSR), fascism (traditional), and wars to resolve these contradictions, colonization and predatory tendencies of any growing system.
Fortunately, the progress made socially regarding tolerance for violence in many developed nations will make it much harder for similar things to keep popping. That can be reversed in a single generation though. Again we are not in hands of 'systems' but in hands of 'knowledge' and progress, which in the end will have to save the day. Systems will adapt to circumstanced shaped by other forces and, will have an impact on how those other forces develop, in a big feedback loop, but by itself alone is not going to guarantee nothing (if past experience is of any use).
Ignacio,
"class divide": wouldnt from a Darwinian perspective in a bee hive the 'drones' are one 'class' while the 'workers' are another class?
So should we complain when this type of thing happens within mankind? Seems 'natural'? From a Darwinian perspective...
btw doesnt mean 'drones' are better than 'workers' or vice versa .... just divided or parted within the bee species to perform separate functions within the community...
Like 'specialization' no?
rsp,
Well, not every specie adapts through specialization of roles, neither is the social organisation similar in every specie and more importantly in every ecosystem (inter-species).
It's appropriate to compare human societies with social insects? It can't be denied that insects have been an huge success biologically, been around for hundreds of millions of years, but at what expense? Insects in their current iteration will never be able to escape the earth or work around any cosmic challenge (like a gamma ray burst from a supernova or when the Sun inflates in it's last phase absorbing the earth), we neither do right now, but we may some day be able to do it (and other benefits, like self-awareness, "high" intelligent functions and creativity). OFC coming to a more 'mundane' issues, ants will never to self-improve their living conditions materially! So they can't shape and direct "the systems" through tools and interactions within the different systems (ecosystem) like we do.
Most insects which organise around colonies are 'anarcho-communists'. Yes, they have specialization but 'property ownership' is common and they have (usually) no hierarchy, they are organised around roles (the 'queen' does not rule, is just an other asset to the colony, an organic producing machine of eggs, an other specialized member), everyone 'knows' it's function and does it, but they don't have added benefits over other individuals because of that.
We humans have roles, but roles are not classes, classes are defined in the context of hierarchy. Classes are defined by relationship amongst classes (ie. in relation to) in an order or hierarchy. In a social context this means someone in a 'top class' has a benefit over someone in a 'lower class' (you can see this clearly in some of the societies I listed in the previous post), meanign that benefit could be power over the lower class to shape it's context. Classes are abstractions we use to group 'stuff' (people, statements) and define relationships, not necessarily productive or social roles. If human history has a 'liberal bias' then by that self-improvement thought 'shaping systems' we certainly are not trying to achieve a class-divided/defined society.
We can have bankers, politicians, technicians and specialization of different productive sectors; that's roles. But we are not aspiring to have a class system divided by strata of property claims as far as I know, if we did books like Piketty would have never had so much impact (or even would have been published). But it doesn't necessarily have to be that way, classic Roman society wasn't like that and all and the social order was widely accepted anyway (in that regard it was conservative), even if it was 'unfair'.
There is enough anthropological evidence that we humans have very adaptive social systems, we are not natured one way or an other, but nurtured. This same evidence is a show about the distinction of roles and classes. Certainly every human society has roles and specialization, but classes (economically), and more importantly, the divide and relationships amongst them, are not fixed in terms and depend much more on context.
Nice analysis, Ignacio. I would say that class gets differentiated from roles though institutional arrangements imposed by hierarchy. Hierarchical organization on the temple-military model replaced consensus at the time of the transition from hunting-gathering to agriculture and the emergence of of surplus societies capable of supporting different specialization that lent themselves to organization by class — warrior rulers, temple intelligentsia, acquisitive people of commerce, and workers-slaves. That fundamental organization has persisted for millennia and is still with us to one degree or another. While the caste system still remains as a cultural artifact in India, and the Western class system in Britain, it is more implicit in the US but still prominent. Its persistence can be traced to cultural hysteresis on one hand and institutional arrangements, particularly law, on the other.
The question then arises why this system arose as an evolutionary trait. Was it simply the result of power relationships or does it play an evolutionary role? I would say both. The proximate cause is asymmetrical distribution of power in a society, whereas the underlying cause is the efficiency and effectiveness of hierarchical organization as social groups grow larger than the clans and tribes of the hunter-gather stage of historical development.
The advent of surpluses made hierarchical organization based on power possible by providing the economic space for some to play roles that were not directly involved in subsistence. With this came the opportunity to commandeer the surplus.
That's where we still are as a species to a greater or lesser degree in different societies, some of which are more "liberal" than others in emphasizing socially necessary roles over class privilege.
Corruption arises from illiberality resulting from the authoritarianism of class privilege which makes it possible for some to dictate institutional arrangements that support their privilege.
The basis of a liberal society is equality as absence of privilege. This is the basis of the rule of law and equality of persons before the law. That is a necessary condition for a liberal society but not a sufficient one. Other cultural conventions and institutional arrangements are also required, although they can be somewhat different in different societies provided they meet the standard of liberality socially, politically and economically, and this can only be comprehensive in societies that are liberal "spiritually" in the sense of possessing the requisite level of collective consciousness. Liberalism is only reflected in culture and institutions and that reflection is a manifestation of the level of collective consciousness.
"We humans have roles, but roles are not classes, classes are defined in the context of hierarchy. "
ok we have "roles" (who assigns the roles? nobody? ie these "roles" are "natural"? having "evolved"?) while "classes" are "defined" (who is doing the defining? humans?) maybe we should accept our "roles" and not then try to change them by defining "classes" on top of them? or by lobbying thru politics that the one "role" is making a big mistake by not wanting to take the other "role"?
this is like the capitalists telling the communists they are making a big mistake and should be capitalists while the communists are telling the capitalists that they are making a big mistake and they should be communists...
To me this is like a worker bee telling a drone that they have it all wrong and everybody should be a worker and/or vice versa... LOL!
Make sure each "role" is being adequately provisioned and respected and move forward as "one" mankind? But "we can't afford it!" as "we're out of money!" ???
rsp,
The idea underlying liberal education is that roles are based on disposition and aptitude, which are natural to great extent rather than chiefly the outcome of nurture. A proper educational system would be oriented to role discovery from the outset. This is the way to unleash maximum creativity and transform work into play.
Matt, as far as I understand it, we are talking about abstract constructs, like most things we talk in a daily based. Those are not 'grounded' on matter, it's 'ontological foundation' is based on social relationships. Probably you have heard it sometime, a right-wing libertarian saying: "there is no such thing as society!". But then I could say: "but there is no such thing as property, or the market, or freedom".
So in the end, we are getting carried by world views and ideologies, and trying to impose those on others. But that's how we roll in everything, the difference for example in science, is that we don't appeal to 'magical thinking' because we have to ground it, prove it (or wrong it) through material relations (through direct/indirect observation). I wish we had a more 'scientific' (aka sceptic) way of conducting our society. Unfortunately "technocracy" has been captured by glorified bankers and accountants in different institutions, and we think that we are conducting our economies through science when in reality we are not (every reader of this blog knows that much at least).
Roles are nurtured & natured, most probably, an interaction of both things: we develop certain skills depending on many things, no one can say (scientifically) how this happens. the closest thing to the real deal we can say is that they are shaped by context (environment), this includes from parent and family, early development to social trends and influences; probably with a bit of innate traits. In one phrase, roles are evolved epigenetically.
Classes is something we 'randomly' define, and we define them depending on our world views. A lot of people will say too that "there are no such thing as classes!". Again, we come back to the same issue: we can selectively decide what linguistic constructs are grounded on reality or not, to support our world view or deny others world view. So in a sense, is what you say: X telling Y they should not be that way because they are not like X.
Classes are cognitive short-cuts to describe reality. But that does not mean there isn't something real behind them, in terms of relationships. You can describe the internal 'operations' of an human family in terms of classes, maybe if I do so, it would seem to you that I'm being conflictive, but that does not mean that those relationships do in fact exist.
"Make sure each "role" is being adequately provisioned and respected and move forward as "one" mankind? But "we can't afford it!" as "we're out of money!" ???"
If I view myself as a member of a class, then that will become a reality. Why do I view myself as a member of a class does not matter, the fact is I do and I behave one way or an other because I do. Is the power of ideologies and social constructs, they become real if we believe they are real. If those relationships didn't exist I wouldn't even be using that terminology (I have no bested interest).
You cannot have a code of governance based on technocracy (which is basically what you wrote in the last paragraph) when people is arguing about if governments should have the ability to print money at all, if we should have laws or not, on what forms of property should we accept, etc. Think about how PRIMITIVE the whole thing is, we do not have consensus on how we should build the core foundations of our civilization, it's impossible we can agree on 'economic -monetary- policy', impossible.
My opinion is that, socially, we are still amoebas in evolutionary terms. We never got a good way to conduct large civilizations past the hunter-gatherer level, because most feedback loops that work at the level don't work at bigger societies. Is not a trivial problem to solve, maybe is so hard that's why we don't see any sign of advanced civilizations in the galaxy, maybe every civilization fails at this level. Time will tell.
Sure, if everybody woke up this morning and 'forgot' who the Queen of England was, she wouldn't have a role or a class. Especially if she 'forgot' too. Then she would just be a human being, wondering who she was. Without distractions. Sounds familiar ....
But JR, have you seen the people in England fawning all over the Royals?
They get all excited when there are weddings in the Royal families, etc...
So these people seem content to be in "classes" below the Queen no? they seem to enjoy it no?
I dont think anyone is twisting their arms...
rsp,
I've read Ryan Harris' thoughtful comment and Ignacio's equally thoughtful reply. And I largely agree with Ignacio.
There's something, however, in Ryan Harris's intervention which Ignacio left out and I would like to broach here. Harris started out with these two sentences:
"In any population there are a few 'bad' corrupt people, and a few 'good' selfless people. The majority lie somewhere in between selfish and selfless with a skew toward selfish."
My first observation is that Harris seems to be focusing, in these two sentences, on individual morality issues. Don't get me wrong, individual morality is an important thing. But morality is hardly an absolute. What is moral today, may not be moral tomorrow (or vice versa). Slavery was considered a normal fact of life three hundred years ago; today it's considered not only immoral, but illegal. Homosexuality was immoral (and illegal!) fifty years ago; nowadays there is much greater acceptance.
The point is that morality is not the best basis to judge whether capitalism should be preserved or replaced. In my opinion, a much better criterion is whether capitalism induces anti-social behaviours in otherwise rational and moral people. And this, it does (Ignacio apparently referred to this by his phrase: capitalism is corruption).
I'll expand on this: let's use big investment bank managers as an example, giving them the benefit of the doubt, too. They are normal human beings, with the normal virtues and vices of other human beings; no more or less rational than others. You'll agree that this is in accord to your own second claim: "The majority lie somewhere in between selfish and selfless with a skew toward selfish".
Well, a bank manager acts rationally and according with the best interests of his employers (the shareholders) by being reckless; he knows he can get his bank considered too big too fail, so there's no risk of loss. The bank can get away with it and if history taught us something from the recent GFC, is that it will get away with this.
The bank manager is doing his duty; that's what they pay him to do: maximize shareholder value. To do otherwise is a dereliction of duty and is immoral. You don't need to take my word for that: every big shot mainstream economist says the same.
Exactly the same class of examples can be given for other problems: pollution (ask Larry Summers), people burning to death in garment factories in Bangladesh, black miners being murdered by a racially-mixed South African police force, governments applying self-defeating austerian policies.
That's the thing with capitalism: the interest of the individual clashes with the interest of society. This cannot be solved within capitalism and is not a fluke.
That's not to deny that capitalism has added enormously to human civilization. But human society has become way too complex to rely on capitalism. Either we adapt and replace it (and I am optimist and believe this can be achieved) or we perish.
That's the choice we have.
" ... seem content to be in 'classes' below the Queen ...." [MattF]
Is the enjoyment of the sunrise in you or in the sunrise? If it is in you, then the sunrise is just a catalyst. Swap Queen for sunrise and does that make sense? Swap Queen and sunrise for what is inside and roles and classes on the outside become natural (not substitutions and contrived).
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