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Money and Income Inequality
Part of the challenge of addressing political economy is the different realms that economic and philosophical discourse exist in. Western (capitalist) economics can be informed by history but it can’t accommodate it. This can be seen in response to French economist Thomas Piketty’s new book ‘Capital in the Twenty First Century.’ The effort, nay contrived ‘necessity,’ of quantifying income distribution across history, as Piketty has done, places it at the center of what could in different terms leave it as bit player, as artifact rather than base discursive fact. This isn’t to argue that income distribution isn’t ‘important.’ It is to argue that there are other, possibly more illuminating, ways of getting to issues of economic cum political asymmetries and their role in social outcomes. By staying within the anti-historical historiography of ‘income’ and its quantification across time a limited history is presented as the addition of ‘facts’ when it could alternatively be understood to be a detraction that leaves the base premises of capitalist theory largely untouched by design. This probably won’t make much sense to those raised in the Western economic tradition so I will spend some time below trying to relate the thesis across different modes of discourse. This effort bears some relation to the Cambridge Capital Controversy in the sense that the terms exist in what appear to be irreconcilable realms.
For instance, the Western storyline of the IMF’s (International Monetary Fund’s) role in Ukraine is of providing financial ‘assistance’ to a nation in need. The point has been made that IMF loans will simply replace Ukraine’s debt to Russia with debt to it, ‘the West.’ That is, ‘Western’ funds will be used to pay for energy sold to Ukraine by Russia at a subsidized price in exchange for Ukraine implementing ‘austerity’ policies at the behest of the IMF. When considered in conjunction with CIA and EU machinations to assert political control over Ukraine the intersection of geopolitics and economics is exposed. Debt is being used as a weapon to exert economic control over Ukraine under the guise of providing financial assistance. ‘Privatization’ of nominally public assets is a central goal of IMF imposed austerity. Lest the point be taken too narrowly, since the 1980s U.S. investment banks have used debt to wrest control of Western corporations from ‘stakeholders’ in order to loot worker’s resources like pension funds and wage agreements leaving behind de facto ‘private’ austerity. And in the 1970s and 1980s ‘money center’ banks in New York made loans to ‘nations’ across South America at the behest of the US government with the ultimate result being neo-liberal ‘reforms’ forced onto ‘debtor countries’ and citizenries who saw little to no benefit from this debt being forced to repay it. In the terms associated with ‘income inequality,’ is asymmetrical income distribution cause or effect? And in what way is it dissociable from three centuries of Western imperial history? Where precisely does the ‘state of nature’ exist that renders reduction to quantum of interest—‘income,’ addition?
When it comes to ‘discussing’ income distribution, particularly in the US, a tightly circumscribed storyline is near instantaneously brought forward where variants on anomaly, institutional particularity and ‘nature’ are intermingled to assert a patina of gentility to facts of history better described as barbarous. Current Western geopolitical machinations in / on Iran date to the decision by US and British ‘intelligence’ agencies in 1953 to overthrow the democratically elected President of Iran in order to secure Iranian oil for what is today British Petroleum. British Petroleum is presently the major supplier of oil and oil products to the US military. Mid-twentieth century US incursions into South and Central America and Cuba at the behest of the United Fruit Company, today re-branded ‘Chiquita,’ were similarly undertaken in Honduras, Nicaragua and El Salvador by US President Ronald Reagan in the 1980s to protect Coca Cola bottlers from nationalization (Nicaragua) and to ‘free’ regional labor to sew underwear for Wal-Mart and Target for pennies an hour. Regular US incursions into Haiti since the 1940s left Democrat President Bill Clinton with the brilliant-lite, but instinctually neo-imperialist, insight that Haitians could likewise sew underwear for rich Americans for pennies an hour. (See Haitian debt to France for additional insight). The Mexican migration northward to the US in the 1990s and early 2000s coincided with NAFTA (North American Free Trade Agreement) destroying indigenous agriculture in Mexico by flooding it with subsidized industrial corn from the US. Of relevance: economic relations with basis in history are only claimed ‘natural’ by emptying the term of meaning. A history of income inequality that poses concentrated income and wealth as potential cause of economic dysfunction, ‘patrimonial capitalism,’ reifies the Western economic conceit that an anti-historical ‘state of nature’ from whence ‘inequality’ arises is either plausible or even vaguely theoretically coherent.
On a different path American economist-historian Robert Heilbroner argued in 1966 in ‘The Limits of American Capitalism’ that a residual plutocracy (my term) and corporate executives earning ten times the average wage of ‘their’ workers ran the American economy and US foreign policy. Today the ratio of executive to average worker compensation is 341:1. This isn’t to infer / require either that Heilbroner was ‘right’ or that greater concentration of income is without effect. But there was no ‘clean’ dissociation of economic outcomes from expression of political power either then or now. As uncomfortable and cluttered as this may be to discussion of income distribution, the very premise of ‘income inequality’ is that income equality would in some way resolve the barbarous genesis of Western ‘wealth.’ The point in raising Heilbroner isn’t of relative versus absolute wealth distribution but of the historically indissociable role of capitalist ‘wealth’ to its broader social facts and in the acts that place it at the center of interest. To the extent Heilbroner was ‘right’ the quantity of income, either relative or absolute, is artifact of capitalist (anti) social relations. Capitalism is an approach to ‘the world,’ not simply to its economic ‘aspect.’ By framing income inequality as cause and leaving ‘its’ genesis in imperial history as ‘unrelated,’ or even marginally related through coincidence, the problem raised— the creation, persistence and self-perpetuating character of social asymmetries and their related facts, is left unarticulated and therefore necessarily unresolved.
The conspicuous concentration of ‘wealth’ in recent decades has led to the term ‘income inequality’ being thrown around as if it has meaning outside of a much broader set of premises about the social relations that Western economics purports to address. The very idea of ‘equality’ behind the phrase is a restatement of the social role of money— ‘income,’ the quantum that is the theorized basis for the possibility of equivalence behind ‘inequality.’ Phrased differently, of what coherence is ‘equality’ without a place for it to reside beyond the particular (the concept is wholly metaphysical). Money is the social creation that reifies this metaphysical space, which poses thought as ‘fact’ and puts it back as personal possession. ‘Income’ as money receipts is the metric, the thing that answers its own question: by what measure does this inequality have meaning?—by its own. You and I form the ‘we’ of theorized in / equivalence but I am not you and you are not me. This ‘we’ is social ‘object’ as are money and income, the difference being that money is reified social relation, the ‘object’ of social division into ‘yours’ and ‘mine.’ To invert the high-capitalist metaphor, or rather Marx’s critique of it, the billionaire left alone on a desert island with her money has but piles of paper or digital entries— the fishes and the palm trees exist outside the ‘we’ that give money the only meaning / ‘value’ it has, social meaning.
Framed differently, under what set of premises should the social allocation of money— ‘income,’ be ‘equal?’ The answer implied in use of the phrase ‘income inequality’ is that there is basis. Capitalism is in theory premised on social allocation according to economic contribution— unless contribution is under some measure ‘equal’ then unequal distribution is the ‘correct’ outcome of capitalism. Ironically, ‘homogenous’ labor is in neo-classical (capitalist revival) economics the ‘equivalent’ labor used to legitimate outsourcing, unequal pay for ‘equivalent’ work, through relocating economic production to areas with lower wages. Assuming similar capacities a worker in a factory in China or a McDonalds in Paris (sorry France) will produce the same physical quantity of product as workers in Des Moines or Pittsburgh, but the difference in pay that they receive is used to claim that the ‘value’ that each produces is a function of the wages paid. And the wages paid are used to argue that workers are paid according to the ‘value’ that each produces. The argument is wholly circular, but so is the whole of capitalist economics. To be clear, this isn’t a gratuitous slam; it is a function of the basis of capitalist economics in Cartesian metaphysics. The starting point for this economics is ‘first principles’ that are dogma— they can’t be refuted without discarding Western economics in its entirety. The narrower point is the nexus of income and labor, or income and ‘capital,’ as both determinant of and measure of ‘their’ ‘product.’ Income is the explanation of ‘value,’ which in turn is the alleged basis of income (disparities) in capitalist economics.
This brings us to Piketty’s r>g, the rate of return on capital (wealth) is greater than the rate of economic growth. The basic argument is that in recent history, as well as in select earlier periods, wealth has accumulated faster than its ‘material’ base in goods and services produced. If left unchecked the logical (mathematical) consequence is that concentrated wealth will continue to concentrate until a few people own all economic production. To relate the issue to the Cambridge Capital Controversy, one problem with this formulation is that both ‘r’ and ‘g’ are placed in the dimension of ‘r’ through the use of money as the metric of commensurability. A ‘twenty-thousand dollar car’ is a car regardless of the monetary value assigned to it— it is ‘its’ own fact related to all of the ‘facts’ that went into its production regardless of their monetary value. The reason why this might matter is that there are the facts of economic production— the making of things and the things used to make things, ‘technology,’ and there are social claims on this economic production. These are two separate things. The contemporary capitalist claim that ‘technology’, or more broadly ‘capital’ in its neo-classical understanding, is the cause of income inequality is circular in the sense that the assignment of ‘value’ produced by it is both input and output, it is a base assertion that is put forward as fact of ‘nature.’ Without the imposition of money as metric of commensurability (metaphysical ‘equivalence’) Marx’s labor theory of value is more coherent than the capitalist explanation leaving technology in the realm of embedded labor rather than as ‘capital’ posed in (confused) opposition to it. The Cambridge Controversy was in part over the issue of logical circularity but the larger issue was / is of the imposition of capitalist metaphysics through rate of profit that simply assumes that its imposition ‘settles’ issues that in fact result from the premises being irreconcilable. With r>g Piketty asserts that a ‘twenty-thousand dollar car’ is a ‘twenty-thousand dollar car’ as if the claim had basis in nature rather than in social relations. (Marx’s labor theory of value is more coherent than capitalist theories because of its basis in / tie to the act of production. Capitalist theories are circular because they are metaphysical— they derive from logical first principles that not even capitalist economists care to defend as plausible. The two theories are wholly irreconcilable because they proceed from different dimensions).
The concentration of social claims on social production, ‘wealth,’ poses particular arrangement of circumstance as indubitable fact. Mountain top removal to mine for coal assumes commensurability between the price paid for the land, the cost of removing the mountaintop and mining the coal and the price paid for the coal in ‘exchange.’ Left unaccounted for are the social and environmental costs of mining for and burning coal. There is no commensurability, no crossing of dimensions, that makes money and monetary ‘value’ equivalent to what was destroyed. There may be some residual accounted for in capitalist theory, some ‘externality,’ but there is no ‘equivalence’ that leaves mountaintops undestroyed and air unpolluted. Likewise, the ‘income’ of ‘income inequality’ is abstracted from its social facts, from its broader genesis in historical relations and pre-existing social asymmetries, and put back as object of wholly implausible equivalence. It is this base idea of equivalence, of the very possibility of equivalence, that renders the idea of ‘income in / equality’ fundamentally incoherent. Through this idea of equivalence the dodge is to keep the facts of Western capitalism: imperial history, the persistence, in fact the creation, of asymmetrical social relations and social and environmental dysfunction increasingly in evidence, at the level of a counting game. To be clear, this isn’t to argue against income redistribution. It is to broaden the fight, and a fight it is, to argue that capitalist theories of economic production are fundamentally incoherent and that theoretical incoherence is closely related to the accumulating social and environmental dysfunction that are its facts. Phrased differently, arguing over income restates / legitimates its role as claim on social resources when it is the facts of capitalist economic production that are of greater consequence.
The ‘pragmatic’ rationale for addressing income inequality appears to be to ‘improve’ capitalism. This is the apparent point behind the distinction of productive and unproductive wealth / capital. But either there exists a benevolent ‘nature’ that distributes income justly or there isn’t. This phrasing may seem quaint, but what then is the reason for wanting to improve capitalism if this isn’t the case? And wanting to improve capitalism bears no necessary relation to alleviating the social and environmental pathologies it creates. An argument is even being put forward that ‘solving’ global warming can leave the capitalist ‘growth’ imperative intact. ‘Externalities,’ e.g. global warming, are costs of capitalist production that others are forced to bear. If capitalists benefit from forcing others to bear their costs of production (income inequality anyone? Anyone?) why would they forego this ‘benefit’ without being forced to? The central hindrance to addressing global warming has been Western governments held captive by particular economic interests who benefit from not solving environmental issues. Wall Street wants to not solve the problem by trading pollution rights. Big oil wants to not solve the problem to maintain its role in the fossil fuel economy. If it is possible to resolve the social and environmental consequences of capitalism while leaving it intact, where is the evidence? Efforts made in the 1970s to regulate industrial pollution were abandoned under the argument that ‘we all’ benefit from capitalist production. The redistribution schemes of the New Deal were abandoned under the quaint theoretical premise of ‘disincentives’ at the heart of capitalist theory. In other words, the problems were known and understood before they were mis-re-forgotten. Claims that these issues are solvable within the existing order are clearly contradicted by history.
Rob Urie is an artist and political economist. His book Zen Economics will be published by CounterPunch / AK Press shortly.