The Question of Redistribution

Does one really need to be paid £50,000,000 a year? Is this a necessary sum of money to have?

This number was not plucked out of thin air, but is the rounded total of Sir Martin Sorrell’s annual salary — the highest paid CEO in the United Kingdom — who presides over WPP plc, an advertising and public relations company. I think most of our answers would be no. It is, to many of us, an incomprehensible amount of money to have year on year; the mind boggles even to consider what freedom and luxury such wealth could bring. And I’m sure each of us would be ecstatic and eternally grateful if we were to be in that position.

Yet it is our response to the initial question — does anyone need that much money — that is most interesting, as it reveals to us, implicitly, where we stand on the question of inequality. For there is another situation, occurring parallel to such extreme wealth, and which is, in many cases, intrinsically linked to it — one of widespread deprivation, chronic insecurity and perpetual disadvantage; where 40% of our population has less than £100 in savings and a fifth live in poverty. Where child poverty alone is projected to reach 37% in the next 5 years, and life expectancy for men living in some of Britain’s poorest areas is 9.2 years shorter than those in wealthy areas. We live in a nation in which your place of birth largely determines your lot in life, with ‘cold spots’ of opportunity holding far too many back from achieving their potential.

So it is in this context that the question becomes more complex: does one really need to be paid £50,000,000 a year, when so many live on so little, scraping by just to survive? How can we defend that level of opulence, when the very socioeconomic mechanisms that enabled this executive to receive more money in a year than most earn in a lifetime, are the same that consign many to a precarious existence? Is this fair?

Some may answer no, and it is this egalitarian intuition that tells us a lot about why inequality is viewed as such a pressing issue. Equality is not some immaterial goal; a universal principle bestowed with legitimacy by some superhuman arbiter of morality. It is instead a matter of fairness, itself a value which is a key aspect of our social psychology. This ingrained aversion to what is perceived as unfair is supported by anthropological studies of hunter-gatherer socieities, as explained by Yuval Harari in his book Homo Deus:

“If 30,000 years ago I helped you hunt a wild chicken and you then kept almost all the chicken to yourself…my evolutionary algorithms kicked in, adrenaline and testosterone flooded my system, my blood boiled, and I stamped my feet and shouted at the top of my voice. In the short term I may have gone hungry, and even risked a punch or two. But it paid off in the long term, because you thought twice about ripping me off again. We refuse unfair offers because people who meekly accepted unfair offers didn’t survive in the stone age.”

Egalitarianims is an emotion impulse; a palpable feeling that this isnt fair. And this emotional impulse guaranteed our survival. Yet classical economic theory has no room for this impulse. It perceives humans as perfectly rational beings, always pursuing our self-interest, and yet this is a fantasy. Studies in behavioural economics, most famously the Ultimatum Game, where one of two players is asked to divide $100 in whichever way they desire, and the other must either accept or reject this distribution, have not only undermined the homo economicus model of human behaviour, but has also corroborated the findings mentioned above. Once again, in the words of Harari, contrary to what classical economics dictates:

“Most people playing the Ultimatum Game reject very low offers because they are ‘unfair’. They prefer losing a dollar to looking like suckers…few people make very low offers in the first place. Most people divide the money equally, or give themselves only a moderate advantage…”

The homo-economicus would take the offer of one or a few dollars because it rationally seeks to maximise its wealth when making decisions, whereas we didnt. So reality finds itself in opposition to neoliberal ideology explains, to a certain extent, the conclusion of those who answered no to the question of necessity, what are we to make of this knowledge in respect to those who adopted the contrary position? Even if one doesn’t believe that £50,000,000 is necessary, they may argue that it is their right to have it, irrespective of whatever destitution may exist alongside it. It is a matter of morality; the question of redistribution is one of right. This contention bring us to the practical thrust of this opening enquiry, as it is made in reaction to the obvious reality of taxation. The right of the executive to keep this money is such that the state is in no position — has no right — to take it from them, redistributing as they see fit.

Now this immediately contradicts our supposed egalitarian nature. One could argue that this is a political position made on the ground of another innate human value, and that they have merely supplanted equality with the notion of freedom, prioritising negative liberty above anything else. And whilst this no doubt forms a crucial aspect of such libertarian reasoning, it ignores a wider social phenomena, one that has enabled the suppression of both freedom and equality throughout human history.

Returning to Harari’s grand analysis of civilisation, Homo Deus, he points to the unique ability of homo sapiens to operate on large scales, well beyond the 150 intimate relationships we are limited to. “All large-scale human cooperation is ultimately based on our belief in imagined orders. These are set rules that, despite existing only in our imagination, we believe to be as real and inviolable as gravity.” Ancient Egypt, with slavery and obscene inequality, prospered and remained stable because “as long as people believe that [the social structures] reflect the inevitable laws of nature or the divine commands of God, rather than just human whims” they will not rebel. Idolisation and religion prevent people from questioning the established order, with the stories that make up this inter-subjective realm — shared narratives that enable us to cooperate — shaping our behaviour and interactions toward our social environment.

In modern times, it is not archaic religion but ideology which serves this purpose, convincing people that the current distribution of income, wealth, power and therefore opportunity is just. It has many of its own myths and plenty idolatry, portraying the state as a dangerously inefficient institution which must be curbed, lest it constrain the freedom of innovators, entrepreneurs and benevolent corporations, upon whose rising tide all our boats will be lifted.

Of course, the former answer to the central question that sees it as unfair can itself be made in accordance to ideological assertions, albeit ones that appear to actually align with our innate nature: that inequality is corrosive, producing conflict, and wealth is co-produced, so the state — or other democratic organs of decision making — must serve as the defender of public interest by reigning in the power of capitalist elites, and sharing prosperity equally.

So which is correct? Is the latter response, that the titular CEO has every right to keep his money and the state has none, a more accurate answer than the one implied by those who see this state of inequality as distinctly unjust, that re-distributive measures should be taken to heal this divide?

Only by scrutinising the assertions upon which this narrative is structured can we hope to expose its falsity, so lets begin with the first sacred cow: the Self-Made man.

We are all aware of this first assertion, that ones wealth is earned solely through hard-work, perseverance, intelligence and skill. Capitalists no doubt point to Lord Sugar or J.K. Rowling as success stories — inspirational people who lifted themselves out of disadvantage with a mix of ability and ambition. The spirited individualist; the brilliant entrepreneur who, despite all the factors working against them, pulled themselves up by the bootstraps to reach the top— this story is so tightly woven into the character of modern capitalism that you’d be forgiven for believing it.

For every one Lord Sugar (no doubt a man possessing immense determination and vision) there are countless others who failed to escape the social milieu to which they were born. As, in order to swim against the tide and still make it to shore, you must be both a very adept swimmer, and possibly very lucky. Because the very nature of poverty is hereditary, the inheritance of handicaps makes it highly difficult to overcome them, thereby impacting your life chances:

‘A 2014 paper from the National Scientific Council on the Developing Child at Harvard University found that stresses related to poverty — “overcrowding, noise, substandard housing, separation from parent(s), exposure to violence” — can generate neurotoxins that damage a child’s developing brain.’

Much research in child psychology explains how children from low-income families begin on the back foot, with the difficulties of deprivation — not enough time to read to your child, poor nutrition, hostile living areas — providing huge barriers to success, leading to a language gap between rich and poor kids being already entrenched before age 2, and a smaller cerebral cortex. Not to mention the obvious lack of accessible opportunities in working class areas, this confluence of disadvantage puts paid to the mythic story of class ascension. Studies on the origins of innovation in the US have found that children with high-test scores from low-income backgrounds, women and minorities are significantly less likely to become innovators than children of similar ability from high-income families, and that growing up in an area that exposes you to innovation — usually affluent hubs of economic activity — increases the likelihood of entrepreneurial success. Aptitude is evidently not enough.

It is, therefore, simply not the case that the wealthy and powerful in our society have come from disadvantage. If it were, social mobility figures wouldn’t be continually low. Such a story serves to conceal the very real advantage of those born into privilege, whether from geography, class or inherited wealth – which alone accounts for between 50% and 70% of US household wealth – and acts as a means through which the right can obtain popular support for lower taxes on the rich. By articulating a vision of meritocracy, conservatives appeal to our intrinsically aspirational character, encouraging us to vote against more progressive taxation in the chance we will, someday, be in the position to bare that burden.

Now, this is not to dispute the fact that it is indeed possible to become a millionaire, an executive or a senior editor if you originated from poverty, it is merely to point out that it is considerably more difficult to achieve than if, by accident of birth, you were gifted social prestige and material advantage. In this case, certain peoples affluence is not wholly a product of their wit and will, but instead has been largely enabled by factors independent of their control. And the same applies for those on the opposite end of the scale — poverty is not a consequence of individual laziness or stupidity. Environmental determinants shape how we behave in the world, who we mix with, even our personalities and intelligence. The reality of psychology is that very little can be put down to rational, independent choices, or indeed genetics, with certain genes only lending themselves to predisposition — to be activated or not, dependent on context. This process — epigenesis — can explain why “poorer people [are] more prone to heart disease, diabetes, cancer and other diseases” as well as psychosis, schizophrenia and bipolar disorder. Our nature is not fixed and static like conservatives assume, but malleable and dynamic; ever-evolving through the interactions we experience.

I shall not descend into overt victimization here — we must of course make the most of the hand we are dealt. Yet when some players are continually dealt aces, and others begin with the deck stacked against them, we must begin to question if the game is rigged.

Thus, the rich owe much of their success to society itself; by mere luck they begin with head starts to which others must attempt to catch up. The right of the very wealthy to retain their cornucopia is predicated on the notion that it is, in fact, all theirs, earned through hard-work. As we have seen, this is incorrect, and indeed the arguments of extreme libertarians — that taxation is equivalent to theft, and akin to a form of slavery — can also be safely discarded in the knowledge that the state apparatus — sustained by tax revenue — has created and facilitated the legal structures, institutions and infrastructure that allow wealth to be generated in the first place. Without property rights to defend ownership, courts to uphold the law, police to enforce it, roads and railways to transport goods, and education and healthcare to provide workers and consumers, there would be no prosperity. Taxes are the subscription fee you pay to live in a civilized society. Most, save for the likes of libertarian philosopher Robert Nozick, with their conception of the tyrannical state, accept this. The question then becomes how much should we pay, and who should pay it?

My contention is that, in a period of worsening inequality, taxes should become more progressive, targeting both higher income brackets and wealth, in order to provide those on the lowest incomes with the necessary opportunities, wages and living standards to fulfill their potential. And the states legitimacy to perform this redistribution arises from its duty to provide each with equal opportunity, and from the realisation that wealth is not exclusively the result of individual actions. In many cases, wealth is literally co-produced, with state investment in research and development giving rise to most of the technologies in our smartphone, the algorithms powering Google, and the solar batteries fuelling Tesla’s electric vehicles. Taxpayer money takes the initial risks, with private investors coming on board later and privatising the profits generated by public-sector ingenuity. The CEO who earns £50,000,000 does not need that money, but there are many who do need proper education, efficient healthcare — both mental and physical — and well-paying jobs, and these can only be provided by re distributive mechanisms of state intervention. To create equality of opportunity, we must too seek relative equality of outcome.

Therefore, the notion of the Self-Made man is more misconception than reality. Indeed, it seems John Donne was right: no man is an island, and modern science has provided socialists with the empirical support needed to confirm that observation of human nature. What is fascinating about the longevity of this myth, however, is that it is intrinsically upheld by another: that if one works hard, they will succeed. It is the American Dream, now tied to the Thatcherite spirit of entrepreneurship; put in the effort, have aspirations, and you will receive the rewards equivalent to that hard graft. This is the enduring promise of capitalism, and defends the superiority of those in the top 1%: if you’re not rich, you didn’t work hard enough.

This simplistic view of success of course operates on many of the same fallacies exposed above, yet it is its implications — the way in which it ties monetary plenitudes directly to how much ‘hard-work’ one puts in — that are most relevant. If this was true, nurses, firemen, careworkers, paramedics, and police would all be paid considerably more than they receive today, providing the invaluable, exhausting work that keeps society ticking. In the UK presently, in-work poverty has reached a record high, with 60% living in working families. In 21st Century Britain, there are people working three part time jobs just to survive, balancing the ever increasing cost of living against precarious finances and finding themselves squeezed to the point of destitution. Employment is no longer a route out of hardship, contradicting the entire foundation of the capitalist worldview.

And this lack of correlation between reward and effort is not limited to the sphere of the precariat, extending also to that of the business elite. We’re told the very richest among us — the executives, financiers, the landlords and investors —have reached that position through interminable grind. It is perfectly just and acceptable that the average FTSE 100 executive earns 312 times that of a careworker, because they deserve it. When a managing director of a banking firm receives over half a million in bonus pay, it is because he has earned it. Unfortunately for the fat cats, this isn’t at all true. Once again, findings in behavioural economics have totally refuted the assertions of free-marketers. As put by the writer and activist George Monbiot, Daniel Kahneman, who won the Nobel Prize in economics:

‘discovered that their apparent success is a cognitive illusion. For example, he studied the results achieved by 25 wealth advisers, across eight years. He found that the consistency of their performance was zero. “The results resembled what you would expect from a dice-rolling contest, not a game of skill.” Those who received the biggest bonuses had simply got lucky. Such results have been widely replicated. They show that traders and fund managers across Wall Street receive their massive remuneration for doing no better than would a chimpanzee flipping a coin. When Kahneman tried to point this out they blanked him. “The illusion of skill … is deeply ingrained in their culture.”’

So if they are not in possession of uniquely superior intelligence or vision, how do they reach the top? Putting structural advantages to one side for the moment, if it’s not hard work that gets them there, then what is it? As Monbiot writes:

In a study published by the journal Psychology, Crime and Law, Belinda Board and Katarina Fritzon tested 39 senior managers and chief executives from leading British businesses. They compared the results to the same tests on patients at Broadmoor special hospital, where people who have been convicted of serious crimes are incarcerated. On certain indicators of psychopathy, the bosses’s scores either matched or exceeded those of the patients. In fact on these criteria they beat even the subset of patients who had been diagnosed with psychopathic personality disorders.

If you possess “egocentricity, a strong sense of entitlement, a readiness to exploit others and a lack of empathy and conscience”, then a job in a corporate boardroom may be for you. I do not wish to generalise, I am sure there are many who are as compassionate as you or me, but it would be foolish to ignore the significance of such research. It is, in my mind, extremely disconcerting that the personality traits and values (or lack thereof) rewarded by our dominant structures of social organisation are so obviously misanthropic. Yet the question of how to rearrange such institutions to promote pro-social values is a whole other issue.

More saliently, this serves to highlight the other factors — independent of tough labour — that determines who reaches the stratospheric heights of the economic elite. Furthermore, once they inevitably get there, it is even easier to continue the process of accumulation. Through unproductive activities such as stock buybacks, short term trading, and rent extraction, capital acquisition is increasingly divorced from any form of work at all. Writing in Evonomics, Ralph Nader points to the over “$7 trillion of dictated stock buybacks since 2003 by the self-enriching CEOs of large corporations”, wherein executives funnel corporate wealth away from productive investments into their own pockets, driving huge inequality and hindering growth. Private rentiers, developers and landowners are benefitting enormously from the UK housing crisis, with exorbitant rents of just under half of ones annual salary flowing upwards as a consequence of the skyrocketing price of land, keeping many off the housing ladder. And much of modern capitalism has erred from the truly competitive free-markets envisioned by Adam Smith, with too many industries instead being dominated by a few companies, free to spike prices and extract more wealth from consumers.

Contrary to what we are led to believe, capitalism is, in these contexts, a zero-sum game, whereby the ballooning wealth of a privileged few comes at the expense of the rest of us — whether directly through household or monopoly rents, or indirectly through the rerouting of productive wealth into unproductive areas, sacrificing jobs and investment that could stimulate economic growth. This is not the product of hard work, but a modern approximation of the feudal lord, living off the rents generated from their assets, themselves obtained largely (but not wholly) through inheritance, ruthlessness or luck of birth. Indeed, as the share of wealth going to workers has dropped dramatically in the U.K. and US in recent years, that going to the top 1% has risen substantially.

Within this context, then – where hard work is decoupled from earnings, and luck of birth determines outcomes; where executive pay has arbitrarily risen; and in which modern capitalism more and more resembles an extractive, parasitic arrangement, distributing wealth upwards – it is entirely legitimate for the state to act as a levelling mechanism, effectively distributing that which the market plainly cannot.

No wonder such insolence has emerged against the establishment in recent years when so many are living on so little; when hard-work fails to expand their lot in life and living standards continue to fall — all whilst levels of inequality in the developed world are returning to levels not seen since the ‘Gilded Age’ of the 1920’s, with just 8 men now owning as much wealth as half the worlds population.

Inequality is a vicious cycle, setting in motion forces that attempt to guarantee its own survival. Political donations, access to lobbying and the revolving door all provide the ultra-rich and the most powerful corporations with unmatched influence over our policy makers, crafting laws that ultimately protect and nurture their wealth. Research carried out by Berkeley psychologists Paul Piff and Dacher Keltner and published in the Scientific American concludes that wealth reduces our empathy for others, encouraging less compassion, a finding corroborated by the fact that the wealthiest Americans donate 1.3% of their income, whilst the poorest donate 3.2%. Not only is it inherently divisive, creating a rift between the haves and the have-nots, it is concretely corrosive, with higher inequality being linked to greater poverty, increased crime, and worse health outcomes, among other terrible ills.

And it is this which provides redistributive policies with their moral imperative; we cannot allow such forces to rip our nations and communities apart, condemning too many to a life of cyclical poverty and entrenched disadvantage. Only by striving for relative social equality through progressive taxation, and other ‘predistributive’ measures such as alternative forms of ownership, community land trusts, and stakeholder shares, can the goal of social equality be reached. In order to provide the education, job-retraining, homes and child-care required to reduce the gap between the privileged and underprivileged, that wealth has to be obtained from somewhere.

By transforming our societies toward the natural harmony of egalitarianism, we could unleash the potential of millions. In removing barriers to success, everyone would have the opportunity to capitalise upon their abilities, ideas and skills; what great collective advancements could we make if the number of innovators quadrupled, as predicted by the innovation researchers mentioned above? For this isn’t just a matter of fairness, it is a matter of pragmatism. The pie would not only be shared more equitably, but there would also be more of it.

To return then, to the question of what is right. In order to justify the wealth of Sir Martin Sorell, and others in the top 1%, their argument hangs upon two contentions. Firstly, that they deserve it because they work hard, so we have no moral authority in taking that money from them. And the second, and interlinked, is that if one works hard, they get to the top — the Self -Made man and the American Dream; complimentary myths to justify an absurd, damaging status-quo. They conceal the true nature of capitalism — there are systemic, economic inequalities which lift some up whilst holding down others, inhibiting progress and guaranteeing greater suffering.

The choice is simple: do we want public luxury that benefits all, allowing each to achieve their potential? Or do we want private grandeur that benefits the few — at the inevitable expense of the majority?