Abstract
Since the crisis started in 2008, a ‘mantra’ is constantly repeated in public discourse: can we afford the cost of our welfare? Can we afford the cost of new immigrants or unemployed people? Are they a burden that becomes an obstacle to everyone’s happiness?
Andrew Sayer tries a simple ‘twist,’ and proposes a reverse question: can we afford the rich? Can we bear the costs of unequal wealth in which the top 1% takes an increasing share of the national wealth? How can this situation be sustained for future generations?
The thesis of the book reinforces the debate on the failure of capitalism and the effect of neoliberal policies in the last 40 years, in the wake of other recent best-selling books such as Piketty’s (2014). However, Sayer’s arguments are innovative. He tries to disclose the biggest ‘lie’ perpetuated over the years: the indissoluble connections among capitalism, meritocracy, and happiness. The social narratives on the goodness of capitalism, supported by the mainstreaming ‘ministers of the market,’ are even more embedded than we ever thought, and explain the stubborn resistance and legitimacy of the model, even in the face of its obvious inadequacy. Sayer’s book is a wake-up call, destroying the myths that legitimate the power of contemporary capitalism and the cultural – not only economic – hegemony of 1% of the population.
The first myth described by Sayer is that the rich create benefits that ‘trickle down’ to the rest of the population. Data deny that in an impressive way: the richest 85 people in the world own as much as the poorest half of the global population; the wealth of the richest 1% is over $110 trillion, which is 65 times the total wealth of the bottom half of the world’s population; 7 out of 10 people live in countries where economic inequality has increased over the last 30 years. If the crisis brought a collapse of wealth for many and a slowdown in national growth, the wealth of the wealthiest has continued to grow. Moreover, the majority of accumulated wealth goes to tax havens, instead of participating in the redistribution process, whereas wages are stagnant and employment is less protected. Such inequality is often underestimated, and these facts don’t produce anger but envy. It is more acceptable to take a ‘blame the victim’ attitude towards the poor, immigrants, ‘unproductive’ elderly people, or the young unemployed, who are described as ‘scroungers’ or ‘skivers,’ even if the ‘working poor’ have outnumbered the unemployed poor since 2008. The idea that wealth creates jobs is a typical neoliberal slogan, but in fact many more jobs could be created through a wealth less concentrated in the hands of a few. Aggregate demand for goods, which the number of jobs depends on, is less dependent on the wealth of the rich because of their lower marginal propensity to consume. Moreover, restricting job creation is seen as a way to contain inflation, which is a creeping poison in the era of ‘liquidity supremacy.’ In this sense, a certain amount of inequality appears to be an acceptable evil in the theory that only unlimited growth can expand the number of wealth’s beneficiaries. But it is a fallacy, which does not take into account finite natural resources and the senselessness of an unlimited growth, as argued by the theorists of de-growth (Latouche, 2009).
The other myth is that the richest people deserve their success because they have earned their wealth. They are described as special and creative, using examples like Steve Jobs or James Dyson. But Sayer argues that the richest people aren’t well known. They are bankers, CEOs, and financial intermediaries. The ‘fairy tale’ of the self-made man is a myth: the majority of wealth is inherited. The richest aren’t people who create jobs for others, and they don’t earn a lot of money due to a huge amount of effort. Most of the wealthiest people’s wealth is ‘extracted unearned income,’ which is based on the exploitation of key assets (e.g., technology, real estate, debts). The rich aren’t innovative or risk-taking. They do not act like entrepreneurs but as rentiers or usurers. The pressure to privatize public utilities over the last 30 years is based on this lust for rent. The financialization of capitalism no longer needs to be enterprising, shareholders don’t need to invest in a company because of its efficiency and quality service, but are only moved by the maximum value that can be extracted. At the same time, they are interested in becoming creditors, not as a way to support initiatives or gain interest for the money borrowed, but as a way to dictate to the debtor and exercise power. The profit of the capitalist involved in production is also parasitic, because of the ‘divorce’ between ownership and corporate responsibility. Shareholders are more interested in short-term profitability. Moreover, it not always true that shareholders enable the means of production, because 97% of shares are bought and sold in the secondary market, so the money people invest doesn’t go directly to a company. The richest act more like gamblers who often bet on the failure of the company, because this could end up being more lucrative than success.
The final myth concerns the role of the state. The ability of the state to create wealth and jobs is taboo in neoliberal rhetoric. Governments are described as bad investors and public regulation is seen as a burden. So, according to the richest, the state should be ‘invisible’ in economic issues even if capitalists continue to be interested, and seek influence, in what a government does. Thus, the richest seek to control public policies by financing election campaigns or proposing advisors and spin doctors in order to subordinate politicians to their interests, laying the foundations of a ‘plutocracy’ based on ‘criminnovation.’ This delegitimization of the public sector is also supported by the thesis of wealth as a self-produced factor, originating only through individual effort. In this sense, the richest always blackmail the state on taxation by threatening to invest in another, ‘more competitive’ country. But Sayer highlights how every kind of wealth is dependent on the commons and public investment, and major innovations are funded with public financing (see Mazzucato, 2013). The privatization of the commons is a way of expropriating the public value of these assets that should be left for future generations, and is compromising the entrepreneurial ‘biodiversity’ of our economy (Ostrom, 2002).
The author concludes that capitalism is not the evil, but a mixture of ‘shades of grey’ that have become even darker over the last 40 years, a kind of Second Great Transformation that has undermined its ethical roots from production to financialization, from waged free labor to interest, from profit to rent, from welfare to charity, from accumulation to greed. We are facing a regressive capitalism and a revival of a medieval redistribution that tries to individualize profits and socialize the costs. The crisis we are living is not only economic or financial, it’s also social and environmental.
Sayer concludes his book with some ‘shades of light,’ summarizing some interesting reforms intended to reverse this tendency: first, get back to basics, rethinking the idea of development and restoring the ‘human side’ of economy, stopping financialization; second, nationalize land and natural assets, restoring public monopolies of key fundamental services (Bowman et al., 2014); third, reform the credit system by imposing a stricter regulation of interest, making sure that the risks are shared by lenders and borrowers, breaking up big banks, separating high street banking from speculative investment banking; fourth, increase workers’ involvement in the management of firms through stronger representation on corporate boards; fifth, introduce a ‘global capital tax’ and, at the same time, guarantee a minimum wage; sixth, focus on renewable resources and reduce consumption; and, finally, reinforce democracy with stronger restrictions on private donations to political parties and political action committees while reducing possible conflicts of interests, and increasing transparency. The proposed program seems ambitious even though the proposals are not new. Sayer assembles proposals that have already been presented and discussed in the global arena but with little success. However, a question remains that Sayer seems to forget to answer: if these solutions are well-known, why haven’t they been implemented? Perhaps, these solutions require different proposals or more books on the theme, stimulating awareness and cultural changes that are hard to take root. Of course, it is a question of power and the richest continue to hold it.