Sunday, January 04, 2009

Mark Engler: Spreading the Wealth

Spreading the Wealth: A review of Unjust Deserts: How the Rich Are Taking Our Common Inheritance And Why We Should Take It Back
By Mark Engler
The Nation; Reprinted on Democracy Uprising

Adam Smith was not an economist. In the 1750s, when he was a professor at the University of Glasgow in his native Scotland, Smith served as the Chair of Moral Philosophy. The designation is telling. The rise of modern economics departments in universities was a late-nineteenth and twentieth century phenomenon. Economics in its infancy, characterized by the pursuits of Smith, Ricardo, John Stuart Mill, and Marx, was not a matter of graphs and econometric models. It was a broader investigation into social life, a look at how society structured labor, production, and exchange. And it concerned itself greatly with the ethical implications of this structure.

Warren Buffett, ranked by Forbes in 2008 as the world's wealthiest man, is no moral philosopher. Yet he is capable of raising a tricky philosophical quandary. Reflecting on his tremendous riches, he has attributed his fortune largely to chance: "It just so happens that I was in the right place at the right time," Buffett has said. "I really wouldn't have made a difference if I were born in Bangladesh. Or if I was born here in 1700.... I just got lucky as hell.... Stick me [someplace else] and I could say I know how to allocate capital and value business. But they'd say, so what?"

In crediting luck, Buffett not only points to the birth lottery, in which some people are born into more privileged circumstances than others. He also recognizes that to a great extent he owes the accomplishments of his professional life to the manifold contributions of other people, known and unknown, past and present. They have collectively done Buffett enormous favors, affording him security and education, providing modern infrastructure, science, and communications systems, and creating a sophisticated market in which he could do business. Because of this, Buffett claims, "society is responsible for a very significant percentage of what I've earned."

The issue raised by the billionaire forms the core of Gar Alperovitz and Lew Daly's Unjust Deserts: How the Rich Are Taking Our Common Inheritance And Why We Should Take It Back. The authors start their book with the latter quote from Buffett, noting society's tremendous contributions. Then they ask, "But if this is true, doesn't society deserve a very significant share of what [Buffett] has received?"

The question indicates how thoroughly Alperovitz and Daly want their new book to upend commonplace notions about the relationships between economic growth, productivity, and wealth. Their premise, simply put, is this: Most of us with regular work lives get up in the morning, expend our energy and intelligence to meet a day's challenges, and retire, depleted, in the evening. In this respect, we toil away our workdays just as subsistence farmers did for thousands of years. What makes us more "productive" than these forbearers--in the sense that they often struggled to ward off starvation, while we, relatively speaking, are surrounded by abundance--is not our individual strength, initiative, or daring. Rather, it is our inheritance of thousands of years of cultural knowledge, innovation, and discovery. Owing to this legacy, a person in the United States working the same number of hours as a past American from as recently as 1870 will produce, on average, some fifteen times more economic output.

As early as the 1950s, economists began establishing a greater role for socially accumulated knowledge in mainstream understandings of growth. During that decade, Nobel-Prize winning economist Robert Solow argued that advances in knowledge are, in fact, the primary driver of today's growth. Alperovitz and Daly write, "Solow calculated that nearly 90 percent of productivity growth in the first half of the twentieth century (from 1909 to 1949) could only be attributed to 'technological change in the broadest sense.'" This suggestion was a radical shift away from accounts that stressed the more specific agency of capitalists and entrepreneurs--or of laborers, for that matter--in expanding our economy.

Hearing such a theory, one might object that all this progress in the realm of science and technology would never happen without the grit and determination of our hard-working innovators. Because Alexander Graham Bell invented the telephone, a creation of tremendous social value, he deserves to be exalted as a genius and richly rewarded for his patent. Right?

Not necessarily. The telephone, as it turns out, was simultaneously invented by another innovator, Elisha Gray, who visited the patent office the same day as Bell with a superior design for transmitting vocal sounds, but who was behind him in the completing patent process. Five years earlier, an Italian immigrant named Antonio Meucci had declared the invention of a "voice telegraphy device"; he merely lacked the $10 required to legally register his work. With or without Bell, the telephone had arrived.

To Read the Rest of the Review

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