Fallacies of Capitalism 1: Inevitability of Inequality

How does the 'inevitability of inequality' fallacy ignore the role of social and institutional factors in perpetuating the unequal distribution of wealth and opportunities in a capitalist system?

The "inevitability of inequality" fallacy suggests that inequality is a natural and unavoidable outcome of a capitalist system, implying that it is inherently fair and just. However, this fallacy ignores the significant role of social and institutional factors that contribute to the unequal distribution of wealth and opportunities. Let me break it down with some simple examples:

1. Unequal starting points: In a capitalist system, individuals have different starting points due to factors like family wealth, education, and social connections. These disparities make it harder for those with fewer resources to compete on an equal footing. For instance, imagine two children who want to become doctors. One child comes from a wealthy family with access to the best schools and tutors, while the other child comes from a low-income family and attends underfunded schools. The unequal starting points put the second child at a significant disadvantage, limiting their opportunities for success.

2. Discrimination and bias: Social factors such as discrimination based on race, gender, or socioeconomic status can perpetuate inequality. Discrimination may lead to unequal treatment in hiring practices, education, or access to resources. For example, imagine a qualified job applicant who is denied a position because of their gender or ethnicity, while a less qualified candidate from a privileged background is chosen. Discrimination hinders individuals' ability to succeed and reinforces inequality in society.

3. Power imbalances: Capitalist systems often concentrate power and wealth in the hands of a few individuals or corporations. These powerful entities can influence policies, regulations, and institutions to their advantage, further perpetuating inequality. For instance, consider a large corporation that has significant political influence. They may lobby for policies that favour their interests, such as tax breaks or deregulation, while undermining measures that could reduce inequality, such as progressive taxation or workers' rights.

4. Lack of social mobility: Inequality can persist if social and institutional factors make it difficult for individuals to move up the social ladder. For example, imagine a society where access to quality education is primarily determined by wealth. If children from low-income families are unable to receive a good education, it becomes challenging for them to break the cycle of poverty and improve their economic prospects. This lack of social mobility reinforces existing inequalities over generations.

These examples demonstrate that the "inevitability of inequality" fallacy overlooks the social and institutional factors that contribute to the unequal distribution of wealth and opportunities in a capitalist system. By recognising these factors and working towards creating a more equitable society, we can address and reduce the systemic barriers that perpetuate inequality.

Why some companies will survive this crisis and others will die

Andrew Hill in The Financial Times 

The first written document about a Stora operation, a Swedish copper mine, dates back to 1288. Since then, the company — now Finland-based paper, pulp and biomaterials group Stora Enso — has endured through attempts to end its independence, the turmoil of the Reformation and industrial revolution, wars, regional and global, and now a pandemic. 

“It would have been catastrophic for [Stora] to concentrate on its business in an introverted fashion, oblivious to politics. Instead the company reshaped its goals and methods to match the demands of the world outside,” writes Arie de Geus, describing one particularly turbulent era in the 15th century in his 1997 book The Living Company, shaped round a study of the world’s oldest companies he conducted for Royal Dutch Shell. 

This is wisdom that companies today, wondering how to survive, let alone thrive, could use. Alas, de Geus himself is not around to help them: he died in November last year. 

Part of his work lives on through the scenario-planning exercises that I identified last week as one way of advancing through the uncertainty ahead. The multilingual thinker was Shell’s director of scenario planning, where he developed the distinction between potential futures (in French, “les futurs”) and what was inevitably to come (“l’avenir”). 

He also lived through the aftermath of the second world war, which destroyed Rotterdam, the city of his birth, and encouraged him and his friends to seek jobs within the safe havens of great corporate institutions, such as Shell, Unilever and Philips. 

It is not a given that all the oldest or largest companies will outlive this crisis. Those that do, however, should take a leaf out of de Geus’s book. 

Longtime collaborator and friend Göran Carstedt, a former Volvo and Ikea executive, says he discussed with de Geus last year how near-death experiences enhance the appreciation of being alive. “Things come to the fore that we took for granted. You start to see the world through the lens of the living,” he told me. “Arie liked to say, ‘people change and when they do, they change the society in which they live’.” That went for companies as much as for societies. Long-lived groups such as Stora owed their survival to their adaptability as human communities and their tolerance for ideas, as much as to their financial prudence. 

These are big ideas for business leaders to ponder at a time when most are desperately trying to keep their heads above the flood or, at best, concentrating on the practicalities of how to restart after lockdown. In her latest update last month, Stora Enso’s chief executive sounded as preoccupied by pressing questions of temporary lay-offs, travel bans and capital expenditure reductions as her peers at companies with a shorter pedigree. 

Some groups that meet de Geus’s common attributes for longevity are still likely to go under, simply because they find themselves exposed to the wrong sector at the wrong time. 

Others, though, will find they are ill-equipped for the aftermath. What he called “intolerant” companies, which “go for maximum results with minimum resources”, can live for a long time in stable conditions. “Profound disruptions like this will simply reveal the underlying schisms that were already there,” the veteran management thinker Peter Senge, who worked with de Geus, told me via email. “Those who were on a path toward deep change will find ways to use the forces now at play to carry on, and even expand. Those who weren’t, won't.” For him the core question is whether those who interpret the pandemic as a signal that humans need to change how they live will grow to form a critical mass. 

For decades after the war, big companies did not change the way they operated. They took advantage of young people who believed material security was “worth the price of submitting to strong central leadership vested in relatively few people”, de Geus wrote. Faced with this crisis, though, de Geus would have placed his confidence in those companies that had evolved a commitment to organisational learning and shared decision-making, according to another close collaborator, Irène Dupoux-Couturier. 

The pressure of this crisis is already flattening decision-making hierarchies. Progress out of the pandemic will be founded on technology that reinforces the human community by encouraging rapid cross-company collaboration. 

De Geus was adamant that a true “living company” would divest assets and change its activity before sacrificing its people, if its survival was at stake. That optimism is bound to be tested in the coming months but it is worth clinging to. 

“Who knows if the characteristics of Arie’s long-lived companies . . . boost resilience in such situations as this?” Mr Senge told me. “But it is hard to see them lessening it.”

There is no longer any justification for private schools in Britain

Labour is right to debate the future of these unjust institutions, which at last are no longer seen as untouchable writes Frances Ryan in The Guardian

 

Pupils at Harrow school, London: ‘Removing charitable status is rightly no longer seen as radical.’ Photograph: Alamy Stock Photo


A few years back, I finished a PhD on how to tackle Britain’s unequal life chances – which, among other measures, included abolishing private schools. Dusty academia seemed the home for this sort of proposal, one that has long filled endless papers but never quite makes it off the page and into reality.

That is no longer the case. In a few days, the Labour party will debate the future of private schools. The grassroots group Labour Against Private Schools (Laps) will bring a motion to the annual party conference in Brighton calling for the full integration of state and private schools, including nationalising the endowments of the hugely wealthy public schools. It has support from six constituency parties so far and the backing of senior party figures, with the shadow chancellor, John McDonnell, putting his weight behind the motion this week. A leaked memo to the Telegraph last week noted that the party is already considering making a manifesto pledge to remove tax breaks from the sector – while leaving the door open to getting rid of the schools altogether.

Removing charitable status is rightly no longer seen as radical. In 2017, that well-known lefty Michael Gove declared that private schools were “welfare junkies”, calling the VAT exemption “egregious state support to the already wealthy so that they might buy advantage for their own children”. The classic argument that private schools deserve tax breaks because they provide bursaries to poorer children is as thin as paper: in 2017, only 1% of private school pupils were schooled for free, while figures show “financial assistance” is considerably more likely to go to affluent middle-class families than children in need. 

It’s exciting, then, that the conversation is no longer restricted to this. For decades, private schools have held an untouchable air in this country. We know very well the damage they cause – both to the children whose education is harmed by losing advantaged peers and their influential parents, and to a society that is stifled by positions of power handed out on the basis of wealth rather than talent. We know how bizarre this set-up is – that 7% of schoolchildren will go on to control much of the media, the judiciary and parliament. And yet it is greeted with borderline rabid resistance by many commentators, while even those on the left have been reluctant to argue for comprehensive solutions. It typifies the worst of class privilege, where a small section of society is permitted to buy power and influence despite all the evidence of the damage that causes, and the rest of us must shrug our shoulders and accept this as an inevitability.

What feels different now is that these ideas are becoming mainstream at a tipping point in this country. Years of austerity have highlighted the resources gap between the highly funded private sector and the starved state sector. When many working-class children don’t have basic equipment in class, the dominance of elite schools feels even more obscene. The calamity of Eton alumni taking their turn at Downing Street, meanwhile, is now a real-time display of how dysfunctional a nation becomes when structured to be forever run by a tiny pocket of the wealthy.

The abolition of private schools is not an outlandish idea but rather an extension of what we already do. Societies constantly set limits on how far a parent can go in giving their child an advantage in life – that’s why it’s illegal for a mother to bribe a university admissions officer to give her son a place, and unethical for a father to do his daughter’s GCSE coursework. This is because it is widely understood that no matter how natural a parent’s desire to do the best for their child, it does not trump the good of society. Other countries, such as Finland, have already acted on this by slowly merging private and state schools.

When many working-class children don’t have basic equipment in class, the dominance of elite schools feels even more obscene

That the recent Telegraph front page had to rely on the retro “politics of envy” accusation to describe Labour’s ideas – akin to a playground cry of “You’re just jealous!” – shows how weak critics’ arguments are. In an era in which the damage of inequality is ever clearer and the movements to tackle it are growing stronger, those who cannot comprehend a desire to make life fairer for other people’s children sound increasingly out of touch.

It’s clear that tackling private schools alone is not enough to level the playing field, but that there are multiple causes of inequality doesn’t seem a good argument to ignore one of them.

The protection of a two-tier school system comes down to a fundamental question about what we think education should be. If we want the education system to be about giving every child a fair shot, then merging state and private schools is the logical move. The question is: what is really stopping our children being educated together?