Friday 7 June 2019
Thursday 6 June 2019
‘Socialism for the rich’: the evils of bad economics
The economic arguments adopted by Britain and the US in the 1980s led to vastly increased inequality – and gave the false impression that this outcome was not only inevitable, but good writes Jonathan Aldred in The Guardian
In most rich countries, inequality is rising, and has been rising for some time. Many people believe this is a problem, but, equally, many think there’s not much we can do about it. After all, the argument goes, globalisation and new technology have created an economy in which those with highly valued skills or talents can earn huge rewards. Inequality inevitably rises. Attempting to reduce inequality via redistributive taxation is likely to fail because the global elite can easily hide their money in tax havens. Insofar as increased taxation does hit the rich, it will deter wealth creation, so we all end up poorer.
One strange thing about these arguments, whatever their merits, is how they stand in stark contrast to the economic orthodoxy that existed from roughly 1945 until 1980, which held that rising inequality was not inevitable, and that various government policies could reduce it. What’s more, these policies appear to have been successful. Inequality fell in most countries from the 1940s to the 1970s. The inequality we see today is largely due to changes since 1980.
In both the US and the UK, from 1980 to 2016, the share of total income going to the top 1% has more than doubled. After allowing for inflation, the earnings of the bottom 90% in the US and UK have barely risen at all over the past 25 years. More generally, 50 years ago, a US CEO earned on average about 20 times as much as the typical worker. Today, the CEO earns 354 times as much.
Any argument that rising inequality is largely inevitable in our globalised economy faces a crucial objection. Since 1980 some countries have experienced a big increase in inequality (the US and the UK); some have seen a much smaller increase (Canada, Japan, Italy), while inequality has been stable or falling in others (France, Belgium and Hungary). So rising inequality cannot be inevitable. And the extent of inequality within a country cannot be solely determined by long-run global economic forces, because, although most richer countries have been subject to broadly similar forces, the experiences of inequality have differed.
The familiar political explanation for this rising inequality is the huge shift in mainstream economic and political thinking, in favour of free markets, triggered by the elections of Ronald Reagan and Margaret Thatcher. Its fit with the facts is undeniable. Across developed economies, the biggest rise in inequality since 1945 occurred in the US and UK from 1980 onwards.
The power of a grand political transformation seems persuasive. But it cannot be the whole explanation. It is too top-down: it is all about what politicians and other elites do to us. The idea that rising inequality is inevitable begins to look like a convenient myth, one that allows us to avoid thinking about another possibility: that through our electoral choices and decisions in daily life we have supported rising inequality, or at least acquiesced in it. Admittedly, that assumes we know about it. Surveys in the UK and US consistently suggest that we underestimate both the level of current inequality and how much it has recently increased. But ignorance cannot be a complete excuse, because surveys also reveal a change in attitudes: rising inequality has become more acceptable – or at least, less unacceptable – especially if you are not on the wrong end of it.
Inequality is unlikely to fall much in the future unless our attitudes turn unequivocally against it. Among other things, we will need to accept that how much people earn in the market is often not what they deserve, and that the tax they pay is not taking from what is rightfully theirs.
One crucial reason why we have done so little to reduce inequality in recent years is that we downplay the role of luck in achieving success. Parents teach their children that almost all goals are attainable if you try hard enough. This is a lie, but there is a good excuse for it: unless you try your best, many goals will definitely remain unreachable.
Ignoring the good luck behind my success helps me feel good about myself, and makes it much easier to feel I deserve the rewards associated with success. High earners may truly believe that they deserve their income because they are vividly aware of how hard they have worked and the obstacles they have had to overcome to be successful.
But this is not true everywhere. Support for the idea that you deserve what you get varies from country to country. And in fact, support for such beliefs is stronger in countries where there seems to be stronger evidence that contradicts them. What explains this?
Attitude surveys have consistently shown that, compared to US residents, Europeans are roughly twice as likely to believe that luck is the main determinant of income and that the poor are trapped in poverty. Similarly, people in the US are about twice as likely as Europeans to believe that the poor are lazy and that hard work leads to higher quality of life in the long run.
FacebookTwitterPinterest ‘There’s been class warfare going on for the last 20 years, and my class has won’ … US billionaire Warren Buffett. Photograph: Kevin Lamarque/Reuters
However, if the only function of the state is to support private ownership rights (maintaining a legal system, police, and so on), it seems that taxation could be very low – and any further taxation on top could still be seen as a form of theft. Implicit in this view is the idea of incomes earned, and so ownership rights created, in an entirely private market economy, with the state entering only later, to ensure these rights are maintained. Many economics textbooks picture the state in this way, as an add-on to the market. Yet this, too, is a fantasy.
In the modern world, all economic activity reflects the influence of government. Markets are inevitably defined and shaped by government. There is no such thing as income earned before government comes along. My earnings partly reflect my education. Earlier still, the circumstances of my birth and my subsequent health reflects the healthcare available. Even if that healthcare is entirely “private”, it depends on the education of doctors and nurses, and the drugs and other technologies available. Like all other goods and services, these in turn depend on the economic and social infrastructure, including transport networks, communications systems, energy supplies and extensive legal arrangements covering complex matters such as intellectual property, formal markets such as stock exchanges, and jurisdiction across national borders. Lord Lloyd-Webber’s wealth depends on government decisions about the length of copyright on the music he wrote. In sum, it is impossible to isolate what is “yours” from what is made possible, or influenced, by the role of government.
Talk of taxation as theft turns out to be a variation on the egotistical tendency to see one’s success in splendid isolation, ignoring the contribution of past generations, current colleagues and government. Undervaluing the role of government leads to the belief that if you are smart and hard-working, the high taxes you endure, paying for often wasteful government, are not a good deal. You would be better off in a minimal-state, low-tax society.
One reply to this challenge points to the evidence on the rich leaving their home country to move to a lower tax jurisdiction: in fact, very few of them do. But here is a more ambitious reply from Warren Buffett: “Imagine there are two identical twins in the womb … And the genie says to them: ‘One of you is going to be born in the United States, and one of you is going to be born in Bangladesh. And if you wind up in Bangladesh, you will pay no taxes. What percentage of your income would you bid to be born in the United States?’ … The people who say: ‘I did it all myself’ … believe me, they’d bid more to be in the United States than in Bangladesh.”
Much of the inequality we see today in richer countries is more down to decisions made by governments than to irreversible market forces. These decisions can be changed. However, we have to want to control inequality: we must make inequality reduction a central aim of government policy and wider society. The most entrenched, self-deluding and self-perpetuating justifications for inequality are about morality, not economy. The great economist John Kenneth Galbraith nicely summarised the problem: “One of man’s oldest exercises in moral philosophy … is the search for a superior moral justification for selfishness. It is an exercise which always involves a certain number of internal contradictions and even a few absurdities. The conspicuously wealthy turn up urging the character-building value of privation for the poor.”
In most rich countries, inequality is rising, and has been rising for some time. Many people believe this is a problem, but, equally, many think there’s not much we can do about it. After all, the argument goes, globalisation and new technology have created an economy in which those with highly valued skills or talents can earn huge rewards. Inequality inevitably rises. Attempting to reduce inequality via redistributive taxation is likely to fail because the global elite can easily hide their money in tax havens. Insofar as increased taxation does hit the rich, it will deter wealth creation, so we all end up poorer.
One strange thing about these arguments, whatever their merits, is how they stand in stark contrast to the economic orthodoxy that existed from roughly 1945 until 1980, which held that rising inequality was not inevitable, and that various government policies could reduce it. What’s more, these policies appear to have been successful. Inequality fell in most countries from the 1940s to the 1970s. The inequality we see today is largely due to changes since 1980.
In both the US and the UK, from 1980 to 2016, the share of total income going to the top 1% has more than doubled. After allowing for inflation, the earnings of the bottom 90% in the US and UK have barely risen at all over the past 25 years. More generally, 50 years ago, a US CEO earned on average about 20 times as much as the typical worker. Today, the CEO earns 354 times as much.
Any argument that rising inequality is largely inevitable in our globalised economy faces a crucial objection. Since 1980 some countries have experienced a big increase in inequality (the US and the UK); some have seen a much smaller increase (Canada, Japan, Italy), while inequality has been stable or falling in others (France, Belgium and Hungary). So rising inequality cannot be inevitable. And the extent of inequality within a country cannot be solely determined by long-run global economic forces, because, although most richer countries have been subject to broadly similar forces, the experiences of inequality have differed.
The familiar political explanation for this rising inequality is the huge shift in mainstream economic and political thinking, in favour of free markets, triggered by the elections of Ronald Reagan and Margaret Thatcher. Its fit with the facts is undeniable. Across developed economies, the biggest rise in inequality since 1945 occurred in the US and UK from 1980 onwards.
The power of a grand political transformation seems persuasive. But it cannot be the whole explanation. It is too top-down: it is all about what politicians and other elites do to us. The idea that rising inequality is inevitable begins to look like a convenient myth, one that allows us to avoid thinking about another possibility: that through our electoral choices and decisions in daily life we have supported rising inequality, or at least acquiesced in it. Admittedly, that assumes we know about it. Surveys in the UK and US consistently suggest that we underestimate both the level of current inequality and how much it has recently increased. But ignorance cannot be a complete excuse, because surveys also reveal a change in attitudes: rising inequality has become more acceptable – or at least, less unacceptable – especially if you are not on the wrong end of it.
Inequality is unlikely to fall much in the future unless our attitudes turn unequivocally against it. Among other things, we will need to accept that how much people earn in the market is often not what they deserve, and that the tax they pay is not taking from what is rightfully theirs.
One crucial reason why we have done so little to reduce inequality in recent years is that we downplay the role of luck in achieving success. Parents teach their children that almost all goals are attainable if you try hard enough. This is a lie, but there is a good excuse for it: unless you try your best, many goals will definitely remain unreachable.
Ignoring the good luck behind my success helps me feel good about myself, and makes it much easier to feel I deserve the rewards associated with success. High earners may truly believe that they deserve their income because they are vividly aware of how hard they have worked and the obstacles they have had to overcome to be successful.
But this is not true everywhere. Support for the idea that you deserve what you get varies from country to country. And in fact, support for such beliefs is stronger in countries where there seems to be stronger evidence that contradicts them. What explains this?
Attitude surveys have consistently shown that, compared to US residents, Europeans are roughly twice as likely to believe that luck is the main determinant of income and that the poor are trapped in poverty. Similarly, people in the US are about twice as likely as Europeans to believe that the poor are lazy and that hard work leads to higher quality of life in the long run.
Ronald Reagan and Margaret Thatcher in 1988. Photograph: Reuters
Yet in fact, the poor (the bottom 20%) work roughly the same total annual hours in the US and Europe. And economic opportunity and intergenerational mobility is more limited in the US than in Europe. The US intergenerational mobility statistics bear a striking resemblance to those for height: US children born to poor parents are as likely to be poor as those born to tall parents are likely to be tall. And research has repeatedly shown that many people in the US don’t know this: perceptions of social mobility are consistently over-optimistic.
European countries have, on average, more redistributive tax systems and more welfare benefits for the poor than the US, and therefore less inequality, after taxes and benefits. Many people see this outcome as a reflection of the different values that shape US and European societies. But cause-and-effect may run the other way: you-deserve-what-you-get beliefs are strengthened by inequality.
Psychologists have shown that people have motivated beliefs: beliefs that they have chosen to hold because those beliefs meet a psychological need. Now, being poor in the US is extremely tough, given the meagre welfare benefits and high levels of post-tax inequality. So Americans have a greater need than Europeans to believe that you deserve what you get and you get what you deserve. These beliefs play a powerful role in motivating yourself and your children to work as hard as possible to avoid poverty. And these beliefs can help alleviate the guilt involved in ignoring a homeless person begging on your street.
This is not just a US issue. Britain is an outlier within Europe, with relatively high inequality and low economic and social mobility. Its recent history fits the cause-and-effect relationship here. Following the election of Margaret Thatcher in 1979, inequality rose significantly. After inequality rose, British attitudes changed. More people became convinced that generous welfare benefits make poor people lazy and that high salaries are essential to motivate talented people. However, intergenerational mobility fell: your income in Britain today is closely correlated with your parents’ income.
If the American Dream and other narratives about everyone having a chance to be rich were true, we would expect the opposite relationship: high inequality (is fair because of) high intergenerational mobility. Instead, we see a very different narrative: people cope with high inequality by convincing themselves it is fair after all. We adopt narratives to justify inequality because society is highly unequal, not the other way round. So inequality may be self-perpetuating in a surprising way. Rather than resist and revolt, we just cope with it. Less Communist Manifesto, more self-help manual.
Inequality begets further inequality. As the top 1% grow richer, they have more incentive and more ability to enrich themselves further. They exert more and more influence on politics, from election-campaign funding to lobbying over particular rules and regulations. The result is a stream of policies that help them but are inefficient and wasteful. Leftwing critics have called it “socialism for the rich”. Even the billionaire investor Warren Buffett seems to agree: “There’s been class warfare going on for the last 20 years and my class has won,” he once said.
This process has been most devastating when it comes to tax. High earners have most to gain from income tax cuts, and more spare cash to lobby politicians for these cuts. Once tax cuts are secured, high earners have an even stronger incentive to seek pay rises, because they keep a greater proportion of after-tax pay. And so on.
Although there have been cuts in the top rate of income tax across almost all developed economies since 1979, it was the UK and the US that were first, and that went furthest. In 1979, Thatcher cut the UK’s top rate from 83% to 60%, with a further reduction to 40% in 1988. Reagan cut the top US rate from 70% in 1981 to 28% in 1986. Although top rates today are slightly higher – 37% in the US and 45% in the UK – the numbers are worth mentioning because they are strikingly lower than in the post-second-world-war period, when top tax rates averaged 75% in the US and were even higher in the UK.
Some elements of the Reagan-Thatcher revolution in economic policy, such as Milton Friedman’s monetarist macroeconomics, have subsequently been abandoned. But the key policy idea to come out of microeconomics has become so widely accepted today that it has acquired the status of common sense: that tax discourages economic activity and, in particular, income tax discourages work.
This doctrine seemingly transformed public debate about taxation from an endless argument over who gets what, to the promise of a bright and prosperous future for all. The “for all” bit was crucial: no more winners and losers. Just winners. And the basic ideas were simple enough to fit on the back of a napkin.
One evening in December 1974, a group of ambitious young conservatives met for dinner at the Two Continents restaurant in Washington DC. The group included the Chicago University economist Arthur Laffer, Donald Rumsfeld (then chief of staff to President Gerald Ford), and Dick Cheney (then Rumsfeld’s deputy, and a former Yale classmate of Laffer’s).
While discussing Ford’s recent tax increases, Laffer pointed out that, like a 0% income tax rate, a 100% rate would raise no revenue because no one would bother working. Logically, there must be some tax rate between these two extremes that would maximise tax revenue. Although Laffer does not remember doing so, he apparently grabbed a napkin and drew a curve on it, representing the relationship between tax rates and revenues. The Laffer curve was born and, with it, the idea of trickle-down economics.
The key implication that impressed Rumsfeld and Cheney was that, just as tax rates lower than 100% must raise more revenue, cuts in income tax rates more generally could raise revenue. In other words, there could be winners, and no losers, from tax cuts. But could does not mean will. No empirical evidence was produced in support of the mere logical possibility that tax cuts could raise revenue, and even the economists employed by the incoming Reagan administration six years later struggled to find any evidence in support of the idea.
Yet in fact, the poor (the bottom 20%) work roughly the same total annual hours in the US and Europe. And economic opportunity and intergenerational mobility is more limited in the US than in Europe. The US intergenerational mobility statistics bear a striking resemblance to those for height: US children born to poor parents are as likely to be poor as those born to tall parents are likely to be tall. And research has repeatedly shown that many people in the US don’t know this: perceptions of social mobility are consistently over-optimistic.
European countries have, on average, more redistributive tax systems and more welfare benefits for the poor than the US, and therefore less inequality, after taxes and benefits. Many people see this outcome as a reflection of the different values that shape US and European societies. But cause-and-effect may run the other way: you-deserve-what-you-get beliefs are strengthened by inequality.
Psychologists have shown that people have motivated beliefs: beliefs that they have chosen to hold because those beliefs meet a psychological need. Now, being poor in the US is extremely tough, given the meagre welfare benefits and high levels of post-tax inequality. So Americans have a greater need than Europeans to believe that you deserve what you get and you get what you deserve. These beliefs play a powerful role in motivating yourself and your children to work as hard as possible to avoid poverty. And these beliefs can help alleviate the guilt involved in ignoring a homeless person begging on your street.
This is not just a US issue. Britain is an outlier within Europe, with relatively high inequality and low economic and social mobility. Its recent history fits the cause-and-effect relationship here. Following the election of Margaret Thatcher in 1979, inequality rose significantly. After inequality rose, British attitudes changed. More people became convinced that generous welfare benefits make poor people lazy and that high salaries are essential to motivate talented people. However, intergenerational mobility fell: your income in Britain today is closely correlated with your parents’ income.
If the American Dream and other narratives about everyone having a chance to be rich were true, we would expect the opposite relationship: high inequality (is fair because of) high intergenerational mobility. Instead, we see a very different narrative: people cope with high inequality by convincing themselves it is fair after all. We adopt narratives to justify inequality because society is highly unequal, not the other way round. So inequality may be self-perpetuating in a surprising way. Rather than resist and revolt, we just cope with it. Less Communist Manifesto, more self-help manual.
Inequality begets further inequality. As the top 1% grow richer, they have more incentive and more ability to enrich themselves further. They exert more and more influence on politics, from election-campaign funding to lobbying over particular rules and regulations. The result is a stream of policies that help them but are inefficient and wasteful. Leftwing critics have called it “socialism for the rich”. Even the billionaire investor Warren Buffett seems to agree: “There’s been class warfare going on for the last 20 years and my class has won,” he once said.
This process has been most devastating when it comes to tax. High earners have most to gain from income tax cuts, and more spare cash to lobby politicians for these cuts. Once tax cuts are secured, high earners have an even stronger incentive to seek pay rises, because they keep a greater proportion of after-tax pay. And so on.
Although there have been cuts in the top rate of income tax across almost all developed economies since 1979, it was the UK and the US that were first, and that went furthest. In 1979, Thatcher cut the UK’s top rate from 83% to 60%, with a further reduction to 40% in 1988. Reagan cut the top US rate from 70% in 1981 to 28% in 1986. Although top rates today are slightly higher – 37% in the US and 45% in the UK – the numbers are worth mentioning because they are strikingly lower than in the post-second-world-war period, when top tax rates averaged 75% in the US and were even higher in the UK.
Some elements of the Reagan-Thatcher revolution in economic policy, such as Milton Friedman’s monetarist macroeconomics, have subsequently been abandoned. But the key policy idea to come out of microeconomics has become so widely accepted today that it has acquired the status of common sense: that tax discourages economic activity and, in particular, income tax discourages work.
This doctrine seemingly transformed public debate about taxation from an endless argument over who gets what, to the promise of a bright and prosperous future for all. The “for all” bit was crucial: no more winners and losers. Just winners. And the basic ideas were simple enough to fit on the back of a napkin.
One evening in December 1974, a group of ambitious young conservatives met for dinner at the Two Continents restaurant in Washington DC. The group included the Chicago University economist Arthur Laffer, Donald Rumsfeld (then chief of staff to President Gerald Ford), and Dick Cheney (then Rumsfeld’s deputy, and a former Yale classmate of Laffer’s).
While discussing Ford’s recent tax increases, Laffer pointed out that, like a 0% income tax rate, a 100% rate would raise no revenue because no one would bother working. Logically, there must be some tax rate between these two extremes that would maximise tax revenue. Although Laffer does not remember doing so, he apparently grabbed a napkin and drew a curve on it, representing the relationship between tax rates and revenues. The Laffer curve was born and, with it, the idea of trickle-down economics.
The key implication that impressed Rumsfeld and Cheney was that, just as tax rates lower than 100% must raise more revenue, cuts in income tax rates more generally could raise revenue. In other words, there could be winners, and no losers, from tax cuts. But could does not mean will. No empirical evidence was produced in support of the mere logical possibility that tax cuts could raise revenue, and even the economists employed by the incoming Reagan administration six years later struggled to find any evidence in support of the idea.
George Osborne, who lowered the UK’s top rate of tax from 50% to 45% in 2013. Photograph: Matt Cardy/PA
Yet it proved irresistible to Reagan, the perennial optimist, who essentially overruled his expert advisers, convinced that the “entrepreneurial spirit unleashed by the new tax cuts would surely bring in more revenue than his experts imagined”, as the historian Daniel T Rodgers put it. (If this potent brew of populist optimism and impatience with economic experts seems familiar today, that might be explained in part by the fact that Laffer was also a campaign adviser to Donald Trump.)
For income tax cuts to raise tax revenue, the prospect of higher after-tax pay must motivate people to work more. The resulting increase in GDP and income may be enough to generate higher tax revenues, even though the tax rate itself has fallen. Although the effects of the big Reagan tax cuts are still disputed (mainly because of disagreement over how the US economy would have performed without the cuts), even those sympathetic to trickle-down economics conceded that the cuts had negligible impact on GDP – and certainly not enough to outweigh the negative effect of the cuts on tax revenues.
But the Laffer curve did remind economists that a revenue-maximising top tax rate somewhere between 0% and 100% must exist. Finding the magic number is another matter: the search continues today. It is worth a brief dig into this research, not least because it is regularly used to veto attempts to reduce inequality by raising tax on the rich. In 2013, for example, the UK chancellor of the exchequer George Osborne reduced the top rate of income tax from 50% to 45%, arguing Laffer-style that the tax cut would lead to little, if any, loss of revenue. Osborne’s argument relied on economic analysis suggesting that the revenue-maximising top tax rate for the UK is about 40%.
Yet the assumptions behind this number are shaky, as most economists involved in producing such figures acknowledge. Let’s begin with the underlying idea: if lower tax rates raise your after-tax pay, you are motivated to work more. It seems plausible enough but, in practice, the effects are likely to be minimal. If income tax falls, many of us cannot work more, even if we wanted to. There is little opportunity to get paid overtime, or otherwise increase our paid working hours, and working harder during current working hours does not lead to higher pay. Even for those who have these opportunities, it is far from clear that they will work more or harder. They may even decide to work less: since after-tax pay has risen, they can choose to work fewer hours and still maintain their previous income level. So the popular presumption that income tax cuts must lead to more work and productive economic activity turns out to have little basis in either common sense or economic theory.
There are deeper difficulties with Osborne’s argument, difficulties not widely known even among economists. It is often assumed that if the top 1% is incentivised by income tax cuts to earn more, those higher earnings reflect an increase in productive economic activity. In other words, the pie gets bigger. But some economists, including the influential Thomas Piketty, have shown this was not true for CEOs and other top corporate managers following the tax cuts in the 1980s. Instead, they essentially funded their own pay rises by paying shareholders less, which led in turn to lower dividend tax revenue for the government. In fact, Piketty and colleagues have argued that the revenue-maximising top income tax rate may be as high as 83%.
The income tax cuts for the rich of the past 40 years were originally justified by economic arguments: Laffer’s rhetoric was seized upon by politicians. But to economists, his ideas were both familiar and trivial. Modern economics provides neither theory nor evidence proving the merit of these tax cuts. Both are ambiguous. Although politicians can ignore this truth for a while, it suggests that widespread opposition to higher taxes on the rich is ultimately based on reasons beyond economics.
When the top UK income tax rate was raised to 50% in 2009 (until Osborne cut it to 45% four years later) the composer Andrew Lloyd Webber, one of Britain’s wealthiest people, responded bluntly: “The last thing we need is a Somali pirate-style raid on the few wealth creators who still dare to navigate Britain’s gale-force waters.” In the US, Stephen Schwarzman, CEO of private equity firm Blackstone, likened proposals to remove a specialised tax exemption to the German invasion of Poland.
While we may scoff at these moans from the super-rich, most people unthinkingly accept the fundamental idea behind them: that income tax is a kind of theft, taking income which is rightfully owned by the person who earned it. It follows that tax is, at best, a necessary evil, and so should be minimised as far as possible. On these grounds, the 83% top tax rate discussed by Piketty is seen as unacceptable.
There is an entire cultural ecosystem that has evolved around the idea of tax-as-theft, recognisable today in politicians’ talk about “spending taxpayers’ money”, or campaigners celebrating “tax freedom day”. This language exists outside the world of politics, too. Tax economists, accountants and lawyers refer to the so-called “tax burden”.
But the idea that you somehow own your pre-tax income, while obvious, is false. To begin with, you could never have ownership rights prior to, or independent from, taxation. Ownership is a legal right. Laws require various institutions, including police and a legal system, to function. These institutions are financed through taxation. The tax and the ownership rights are effectively created simultaneously. We cannot have one without the other.
Yet it proved irresistible to Reagan, the perennial optimist, who essentially overruled his expert advisers, convinced that the “entrepreneurial spirit unleashed by the new tax cuts would surely bring in more revenue than his experts imagined”, as the historian Daniel T Rodgers put it. (If this potent brew of populist optimism and impatience with economic experts seems familiar today, that might be explained in part by the fact that Laffer was also a campaign adviser to Donald Trump.)
For income tax cuts to raise tax revenue, the prospect of higher after-tax pay must motivate people to work more. The resulting increase in GDP and income may be enough to generate higher tax revenues, even though the tax rate itself has fallen. Although the effects of the big Reagan tax cuts are still disputed (mainly because of disagreement over how the US economy would have performed without the cuts), even those sympathetic to trickle-down economics conceded that the cuts had negligible impact on GDP – and certainly not enough to outweigh the negative effect of the cuts on tax revenues.
But the Laffer curve did remind economists that a revenue-maximising top tax rate somewhere between 0% and 100% must exist. Finding the magic number is another matter: the search continues today. It is worth a brief dig into this research, not least because it is regularly used to veto attempts to reduce inequality by raising tax on the rich. In 2013, for example, the UK chancellor of the exchequer George Osborne reduced the top rate of income tax from 50% to 45%, arguing Laffer-style that the tax cut would lead to little, if any, loss of revenue. Osborne’s argument relied on economic analysis suggesting that the revenue-maximising top tax rate for the UK is about 40%.
Yet the assumptions behind this number are shaky, as most economists involved in producing such figures acknowledge. Let’s begin with the underlying idea: if lower tax rates raise your after-tax pay, you are motivated to work more. It seems plausible enough but, in practice, the effects are likely to be minimal. If income tax falls, many of us cannot work more, even if we wanted to. There is little opportunity to get paid overtime, or otherwise increase our paid working hours, and working harder during current working hours does not lead to higher pay. Even for those who have these opportunities, it is far from clear that they will work more or harder. They may even decide to work less: since after-tax pay has risen, they can choose to work fewer hours and still maintain their previous income level. So the popular presumption that income tax cuts must lead to more work and productive economic activity turns out to have little basis in either common sense or economic theory.
There are deeper difficulties with Osborne’s argument, difficulties not widely known even among economists. It is often assumed that if the top 1% is incentivised by income tax cuts to earn more, those higher earnings reflect an increase in productive economic activity. In other words, the pie gets bigger. But some economists, including the influential Thomas Piketty, have shown this was not true for CEOs and other top corporate managers following the tax cuts in the 1980s. Instead, they essentially funded their own pay rises by paying shareholders less, which led in turn to lower dividend tax revenue for the government. In fact, Piketty and colleagues have argued that the revenue-maximising top income tax rate may be as high as 83%.
The income tax cuts for the rich of the past 40 years were originally justified by economic arguments: Laffer’s rhetoric was seized upon by politicians. But to economists, his ideas were both familiar and trivial. Modern economics provides neither theory nor evidence proving the merit of these tax cuts. Both are ambiguous. Although politicians can ignore this truth for a while, it suggests that widespread opposition to higher taxes on the rich is ultimately based on reasons beyond economics.
When the top UK income tax rate was raised to 50% in 2009 (until Osborne cut it to 45% four years later) the composer Andrew Lloyd Webber, one of Britain’s wealthiest people, responded bluntly: “The last thing we need is a Somali pirate-style raid on the few wealth creators who still dare to navigate Britain’s gale-force waters.” In the US, Stephen Schwarzman, CEO of private equity firm Blackstone, likened proposals to remove a specialised tax exemption to the German invasion of Poland.
While we may scoff at these moans from the super-rich, most people unthinkingly accept the fundamental idea behind them: that income tax is a kind of theft, taking income which is rightfully owned by the person who earned it. It follows that tax is, at best, a necessary evil, and so should be minimised as far as possible. On these grounds, the 83% top tax rate discussed by Piketty is seen as unacceptable.
There is an entire cultural ecosystem that has evolved around the idea of tax-as-theft, recognisable today in politicians’ talk about “spending taxpayers’ money”, or campaigners celebrating “tax freedom day”. This language exists outside the world of politics, too. Tax economists, accountants and lawyers refer to the so-called “tax burden”.
But the idea that you somehow own your pre-tax income, while obvious, is false. To begin with, you could never have ownership rights prior to, or independent from, taxation. Ownership is a legal right. Laws require various institutions, including police and a legal system, to function. These institutions are financed through taxation. The tax and the ownership rights are effectively created simultaneously. We cannot have one without the other.
FacebookTwitterPinterest ‘There’s been class warfare going on for the last 20 years, and my class has won’ … US billionaire Warren Buffett. Photograph: Kevin Lamarque/Reuters
However, if the only function of the state is to support private ownership rights (maintaining a legal system, police, and so on), it seems that taxation could be very low – and any further taxation on top could still be seen as a form of theft. Implicit in this view is the idea of incomes earned, and so ownership rights created, in an entirely private market economy, with the state entering only later, to ensure these rights are maintained. Many economics textbooks picture the state in this way, as an add-on to the market. Yet this, too, is a fantasy.
In the modern world, all economic activity reflects the influence of government. Markets are inevitably defined and shaped by government. There is no such thing as income earned before government comes along. My earnings partly reflect my education. Earlier still, the circumstances of my birth and my subsequent health reflects the healthcare available. Even if that healthcare is entirely “private”, it depends on the education of doctors and nurses, and the drugs and other technologies available. Like all other goods and services, these in turn depend on the economic and social infrastructure, including transport networks, communications systems, energy supplies and extensive legal arrangements covering complex matters such as intellectual property, formal markets such as stock exchanges, and jurisdiction across national borders. Lord Lloyd-Webber’s wealth depends on government decisions about the length of copyright on the music he wrote. In sum, it is impossible to isolate what is “yours” from what is made possible, or influenced, by the role of government.
Talk of taxation as theft turns out to be a variation on the egotistical tendency to see one’s success in splendid isolation, ignoring the contribution of past generations, current colleagues and government. Undervaluing the role of government leads to the belief that if you are smart and hard-working, the high taxes you endure, paying for often wasteful government, are not a good deal. You would be better off in a minimal-state, low-tax society.
One reply to this challenge points to the evidence on the rich leaving their home country to move to a lower tax jurisdiction: in fact, very few of them do. But here is a more ambitious reply from Warren Buffett: “Imagine there are two identical twins in the womb … And the genie says to them: ‘One of you is going to be born in the United States, and one of you is going to be born in Bangladesh. And if you wind up in Bangladesh, you will pay no taxes. What percentage of your income would you bid to be born in the United States?’ … The people who say: ‘I did it all myself’ … believe me, they’d bid more to be in the United States than in Bangladesh.”
Much of the inequality we see today in richer countries is more down to decisions made by governments than to irreversible market forces. These decisions can be changed. However, we have to want to control inequality: we must make inequality reduction a central aim of government policy and wider society. The most entrenched, self-deluding and self-perpetuating justifications for inequality are about morality, not economy. The great economist John Kenneth Galbraith nicely summarised the problem: “One of man’s oldest exercises in moral philosophy … is the search for a superior moral justification for selfishness. It is an exercise which always involves a certain number of internal contradictions and even a few absurdities. The conspicuously wealthy turn up urging the character-building value of privation for the poor.”
Tuesday 4 June 2019
Want to tackle inequality? Then first change our land ownership laws
George Monbiot in The Guardian
What is the most neglected issue in British politics? I would say land. Literally and metaphorically, land underlies our lives, but its ownership and control have been captured by a tiny number of people. The results include soaring inequality and exclusion; the massive cost of renting or buying a decent home; the collapse of wildlife and ecosystems; repeated financial crises; and the loss of public space. Yet for 70 years this crucial issue has scarcely featured in political discussions.
Today, I hope, this changes, with the publication of the report to the Labour party – Land for the Many – that I’ve written with six experts in the field. Our aim is to put this neglected issue where it belongs: at the heart of political debate and discussion.
Since 1995, land values in this country have risen by 412%. Land now accounts for an astonishing 51% of the UK’s net worth. Why? In large part because successive governments have used tax exemptions and other advantages to turn the ground beneath our feet into a speculative money machine. A report published this week by Tax Justice UK reveals that, through owning agricultural land, 261 rich families escaped £208m in inheritance tax in 2015-16. Because farmland is used as a tax shelter, farmers are being priced out. In 2011, farmers bought 60% of the land that was on the market; within six years this had fallen to 40%.
Homes are so expensive not because of the price of bricks and mortar, but because land now accounts for 70% of the price
Worse still, when planning permission is granted on agricultural land, its value can rise 250-fold. Though this jackpot was created by society, the owner gets to keep most of it. We pay for this vast inflation in land values through outrageous rents and mortgages. Capital gains tax is lower than income tax, and council tax is proportionately more expensive for the poor than for the rich. As a result of such giveaways, and the amazing opacity of the system, land in the UK has become a magnet for international criminals seeking to launder their money.
We pay for these distortions every day. Homes have become so expensive not because the price of bricks and mortar has risen, but because the land that underlies them now accounts for 70% of their price. Twenty years ago, the average working family needed to save for three years to afford a deposit. Today, it must save for 19 years. Life is even worse for renters. While housing costs swallow 12% of average household incomes for those with mortgages, renters pay 36%.
Because we hear so little about the underlying issues, we blame the wrong causes for the cost and scarcity of housing: immigration, population growth, the green belt, red tape. In reality, the power of landowners and building companies, their tax and financial advantages and the vast shift in bank lending towards the housing sector have inflated prices so much that even a massive housebuilding programme could not counteract them.
The same forces are responsible for the loss of public space in cities, a right to roam that covers only 10% of the land, the lack of provision for allotments and of opportunities for new farmers, and the wholesale destruction of the living world. Our report aims to confront these structural forces and take back control of the fabric of the nation.
A Labour government should replace council tax with a progressive property tax, payable by owners, not tenants. Empty homes should automatically be taxed at a higher rate. Inheritance tax should be replaced with a lifetime gifts tax levied on the recipient. Capital gains tax on second homes and investment properties should match or exceed the rates of income tax. Business rates should be replaced with a land value tax, based on rental value. A 15% offshore tax should be levied on properties owned through tax havens.
To democratise development and planning, we want to create new public development corporations. Alongside local authorities, they would assemble the land needed for affordable homes and new communities. Builders would have to compete on quality, rather than by amassing land banks. These public corporations would use compulsory purchase to buy land at agricultural prices, rather than having to pay through the nose for the uplift created by planning permission. This could reduce the price of affordable homes in the south-east by nearly 50%.
We propose a community participation agency, to help people, rather than big companies, become the driving force in creating local plans and influencing major infrastructure. To ensure a wide range of voices is heard, we suggest a form of jury service for plan-making. To represent children and the unborn, we would like every local authority to appoint a future generations champion.
Councils should have new duties to create parks, urban green spaces, wildlife refuges and public amenities. We propose a new definition of public space, granting citizens a legal right to use it and overturning the power of private landowners in cities to stifle leisure, cultural events and protest.
We propose much tighter rent and eviction controls, and an ambitious social housebuilding programme. We also want to create new opportunities for people to design and build their own homes, supported by a community right to buy of the kind that Scotland enjoys. Compulsory sale orders should be used to bring vacant and derelict land on to the market, and community groups should have first rights to buy it.
To help stabilise land prices and make homes more affordable, we propose a new body, called the Common Ground Trust. When people can’t afford to buy a home, they can ask the trust to purchase the land that underlies it, while they pay only for the bricks and mortar (about 30% of the cost). They then pay the trust a land rent. Their overall housing costs are reduced, while the trust gradually accumulates a pool of land that acts as a buffer against speculation, and creates common ownership on a large scale.
We call for a right to roam across all uncultivated land and waterways (except gardens and similar limitations). We want to change the Allotments Act, to ensure that no one needs wait for a plot for more than a year. We would like to use part of the Land Registry’s vast surplus to help community land trusts buy rural land for farming, forestry, conservation and rewilding. We would like a new English land commission to decide whether to make major farming and forestry decisions subject to planning permission, to help arrest the environmental crisis. And we want to transform the public’s right to know, by ensuring that all information about land ownership, subsidies and planning is published freely as open data.
These proposals, we hope, will make the UK a more equal, inclusive and generous-spirited nation, characterised not by private enclosure and public squalor, but by private sufficiency and public luxury. Our land should work for the many, not just the few.
What is the most neglected issue in British politics? I would say land. Literally and metaphorically, land underlies our lives, but its ownership and control have been captured by a tiny number of people. The results include soaring inequality and exclusion; the massive cost of renting or buying a decent home; the collapse of wildlife and ecosystems; repeated financial crises; and the loss of public space. Yet for 70 years this crucial issue has scarcely featured in political discussions.
Today, I hope, this changes, with the publication of the report to the Labour party – Land for the Many – that I’ve written with six experts in the field. Our aim is to put this neglected issue where it belongs: at the heart of political debate and discussion.
Since 1995, land values in this country have risen by 412%. Land now accounts for an astonishing 51% of the UK’s net worth. Why? In large part because successive governments have used tax exemptions and other advantages to turn the ground beneath our feet into a speculative money machine. A report published this week by Tax Justice UK reveals that, through owning agricultural land, 261 rich families escaped £208m in inheritance tax in 2015-16. Because farmland is used as a tax shelter, farmers are being priced out. In 2011, farmers bought 60% of the land that was on the market; within six years this had fallen to 40%.
Homes are so expensive not because of the price of bricks and mortar, but because land now accounts for 70% of the price
Worse still, when planning permission is granted on agricultural land, its value can rise 250-fold. Though this jackpot was created by society, the owner gets to keep most of it. We pay for this vast inflation in land values through outrageous rents and mortgages. Capital gains tax is lower than income tax, and council tax is proportionately more expensive for the poor than for the rich. As a result of such giveaways, and the amazing opacity of the system, land in the UK has become a magnet for international criminals seeking to launder their money.
We pay for these distortions every day. Homes have become so expensive not because the price of bricks and mortar has risen, but because the land that underlies them now accounts for 70% of their price. Twenty years ago, the average working family needed to save for three years to afford a deposit. Today, it must save for 19 years. Life is even worse for renters. While housing costs swallow 12% of average household incomes for those with mortgages, renters pay 36%.
Because we hear so little about the underlying issues, we blame the wrong causes for the cost and scarcity of housing: immigration, population growth, the green belt, red tape. In reality, the power of landowners and building companies, their tax and financial advantages and the vast shift in bank lending towards the housing sector have inflated prices so much that even a massive housebuilding programme could not counteract them.
The same forces are responsible for the loss of public space in cities, a right to roam that covers only 10% of the land, the lack of provision for allotments and of opportunities for new farmers, and the wholesale destruction of the living world. Our report aims to confront these structural forces and take back control of the fabric of the nation.
A Labour government should replace council tax with a progressive property tax, payable by owners, not tenants. Empty homes should automatically be taxed at a higher rate. Inheritance tax should be replaced with a lifetime gifts tax levied on the recipient. Capital gains tax on second homes and investment properties should match or exceed the rates of income tax. Business rates should be replaced with a land value tax, based on rental value. A 15% offshore tax should be levied on properties owned through tax havens.
To democratise development and planning, we want to create new public development corporations. Alongside local authorities, they would assemble the land needed for affordable homes and new communities. Builders would have to compete on quality, rather than by amassing land banks. These public corporations would use compulsory purchase to buy land at agricultural prices, rather than having to pay through the nose for the uplift created by planning permission. This could reduce the price of affordable homes in the south-east by nearly 50%.
We propose a community participation agency, to help people, rather than big companies, become the driving force in creating local plans and influencing major infrastructure. To ensure a wide range of voices is heard, we suggest a form of jury service for plan-making. To represent children and the unborn, we would like every local authority to appoint a future generations champion.
Councils should have new duties to create parks, urban green spaces, wildlife refuges and public amenities. We propose a new definition of public space, granting citizens a legal right to use it and overturning the power of private landowners in cities to stifle leisure, cultural events and protest.
We propose much tighter rent and eviction controls, and an ambitious social housebuilding programme. We also want to create new opportunities for people to design and build their own homes, supported by a community right to buy of the kind that Scotland enjoys. Compulsory sale orders should be used to bring vacant and derelict land on to the market, and community groups should have first rights to buy it.
To help stabilise land prices and make homes more affordable, we propose a new body, called the Common Ground Trust. When people can’t afford to buy a home, they can ask the trust to purchase the land that underlies it, while they pay only for the bricks and mortar (about 30% of the cost). They then pay the trust a land rent. Their overall housing costs are reduced, while the trust gradually accumulates a pool of land that acts as a buffer against speculation, and creates common ownership on a large scale.
We call for a right to roam across all uncultivated land and waterways (except gardens and similar limitations). We want to change the Allotments Act, to ensure that no one needs wait for a plot for more than a year. We would like to use part of the Land Registry’s vast surplus to help community land trusts buy rural land for farming, forestry, conservation and rewilding. We would like a new English land commission to decide whether to make major farming and forestry decisions subject to planning permission, to help arrest the environmental crisis. And we want to transform the public’s right to know, by ensuring that all information about land ownership, subsidies and planning is published freely as open data.
These proposals, we hope, will make the UK a more equal, inclusive and generous-spirited nation, characterised not by private enclosure and public squalor, but by private sufficiency and public luxury. Our land should work for the many, not just the few.
Monday 3 June 2019
In economics the majority is always wrong
It is time for US business and government to embrace Galbraith’s pragmatic approach writes Rana Foroohar in The FT
---Also watch
---
Economists’ reputations, like skirt lengths, go in and out of fashion. In the past 10 years, John Maynard Keynes has received fresh appreciation, and Hyman Minsky has been having a moment.
I think it’s time for John Kenneth Galbraith to have his. The late liberal economist’s “concept of countervailing power”, put forth in his 1952 book American Capitalism, is a critique of the “market knows best” view that has dominated the US political economy since the era of Ronald Reagan. There could not be a better time to re-read it.
---Also watch
Markets don't supply according to demand
---
Despite the much discussed rise of millennial “socialists” (to my mind they are not, really), Americans still fundamentally accept the idea that the private sector always allocates resources more efficiently than the public sector. It is a truism that dies hard, even amid what feels like a drumbeat of boardroom scandal, an explosion in unproductive corporate debt, and an inverted yield curve for Treasuries that suggests investors fear a recession is coming.
Policymakers across the political spectrum agree on what we need to create real and lasting growth — decent infrastructure, a 21st-century education system, healthcare reform.
Yet these are things that the private market has little incentive to address. Building roads and running schools and hospitals (at least the non-profit kind) simply isn’t as lucrative as throwing up luxury condos or engaging in financial speculation.
As Galbraith would have agreed, private markets also are not well set up to address the broad economic and social externalities of climate change or the effects of income inequality.
One obvious example is that burgeoning student debt has become a headwind to overall economic growth. Market prices cannot capture the full costs of these problems.
Galbraith also would have argued that corporations can be just as bureaucratic and dysfunctional — if not more so — than government. His 1967 book The New Industrial State explored how large companies are driven more by their need to survive as organisational entities than by supply and demand signals.
He predicted that innovation and entrepreneurial zeal would decline as such organisations rose. That is exactly what happened as our economy became dominated by superstar companies.
Look at any number of troubled behemoths — from GE to Kraft Heinz to Boeing — and it is hard not see exactly what Galbraith predicted. In an endless search for profits, many companies simply move money around on their balance sheets, creating a short-term financial sugar high without real innovation.
We live in a world in which markets cannot handle even a tiny rise in interest rates without plunging, and when the savings from tax cuts went not into new capital investment but share buybacks, which were also fuelled by debt issued at those very same low rates. Can anyone really argue that the private markets are allocating resources efficiently?
I am not saying that we need centralised planning. Galbraith once put it well: “I react pragmatically. Where the market works, I’m for that. Where the government is necessary, I’m for that. I’m deeply suspicious of somebody who says, ‘I’m in favour of privatisation,’ or ‘I’m deeply in favour of public ownership’. I’m in favour of whatever works in the particular case.”
Politicians and policymakers on both sides of the aisle should sear these words on their brains. Americans don’t really do nuance. We like strong, simple statements, such as Reagan’s observation that: “The government is not the solution to our problem; government is the problem.”
But the “private good, public bad” argument simply isn’t true. How else can we explain the rise of China? It has not only shown that government planning and economic competitiveness cannot only go hand in hand, but that in the current era of tech-based disruption and inequality, public sector support may be necessary for the private sector to thrive.
It is time for political conservatives, economic neoliberals, and chief executives to embrace this. I find it endlessly frustrating to hear so many American corporate leaders complain that government cannot get anything done, even as they pay expensive accountants to keep as much wealth as possible out of state tax coffers.
It is time to admit that endless tax cuts have not put more money into the real economy, despite frequent, incorrect claims from businesses that they would create lasting above-trend growth. Rather, they have led to pitted highways and hazardous bridges that rival those one might find in any number of far poorer countries. The US ranks 31st out of 70 countries on the OECD’s Pisa test for mathematics, science and reading.
Let us try something new. Let us stop assuming that markets always know best. Let us pay our taxes, modernise our social safety nets, regulate markets properly, enforce antitrust to protect the overall economic ecosystem and not just the largest businesses, and reinvent our social compact.
This is not socialism. It is smarter capitalism. The majority may not yet believe that. But as Galbraith is often quoted as saying: “In economics, the majority is always wrong.”
Saturday 1 June 2019
The winner’s wisdom of Silicon Valley Stoics
Letting go of comfort and control makes sense — if you already have those things writes Janan Ganesh in The FT.
The late George Michael used to hail marijuana as the optimal drug — for those who have already achieved their ambitions. For the rest of us, he warned, its mellowing properties would sap our drive. “You’ve got to be in the right position in life,” said a man who kept houses in both Hampstead and Highgate, which, if you know Manhattan better, is like keeping homes on East 75th Street and West 75th Street.
An idea that works for an established winner can be utterly ruinous for a mere aspirant.
For some reason, this insight comes to mind whenever I encounter the modern fad for Stoicism. Which, given that I have access to the internet, and to the state of California, is rather a lot.
In common parlance, Stoicism used to mean nothing more specific than a kind of grin-and-bear-it fortitude. But in recent years, the actual philosophy of Seneca and Marcus Aurelius has rallied too, if in glib and half-understood form.
The new Stoicism calls for — and here I paraphrase — a virtuous rather than joy-centred life. It often takes the guise of self-denial: the modern Stoic volunteers for ice baths and sparse diets. It also manifests as a certain detachment from the vicissitudes of life. The modern Stoic does not rail against external variables. Enemies, disasters and random surprises are all part of the natural order.
You can recognise the parallels with the Zen vogue of yesteryear. And you can guess who has fallen hardest for this creed. It has made deep inroads into the educated rich, and into the tech cognoscenti in particular. Through their cultural reach — the podcasts, the Ted talks — it is fanning out from Silicon Valley to other pockets of well-fed ennui.
There is a something to be said for this elevated version of self-help. Certain habits I keep, such as a minimal intake of media, are unconsciously neo-Stoic. And while some of its followers would fall for any passing -ism or -ology (Tim Ferriss, Arianna Huffington), others have brains like industrial lasers.
All the more reason, then, for the smarter among them to insert a qualifier: letting go of comfort and control makes perfect sense (and I really must resort to italics here) once you already have these things. The new Stoicism is a kind of victor’s wisdom. It simplifies the lives of people who are beset with extreme surplus. This is not a universal problem. Modern Stoics should not pretend to universal (or even broad) relevance. “Very little is needed to make a happy life”, wrote Marcus Aurelius, the ultimate owner of everything in the known world at the time. At least he did not try this line on the masses. His Meditations were never meant for publication. Would that his 21st-century heirs were so coy.
As a way of de-stressing powerful millionaires, neo-Stoic thought is hard to fault. For those striving for some power and millions to be stressed about, it rather speaks over their heads. Most of us aspire to material comforts or (another Stoic no-no) popularity. It is fine to achieve these things and then decide to keep them in check, lest they drive one mad. But to warn others off them, or pretend they can get them by not craving them, is life advice at its most de haut en bas.
You will notice that the smarmy de-emphasis on earthly pleasures stops well short of total renunciation. Like some credulous Sloane on an equatorial gap year, the modern Stoic idealises hardship precisely because they can pick and choose their exposure to it. “Practising poverty,” they call it, with Marie Antoinette’s self-awareness.
Perhaps the worst of it is the deception of those who are just starting out in life. Unless “22 Stoic Truth-Bombs From Marcus Aurelius That Will Make You Unf***withable” is pitched at retirees, the internet crawls with bad Stoic advice for the young. The premise is that what answers to the needs of those in the 99th percentile of wealth and power is at all relevant to those trying to break out of, say, the 50th. The new Stoicism is not useless. It promises a measure of serenity in a world that militates against it. You’ve just got to be in the right position in life.
The late George Michael used to hail marijuana as the optimal drug — for those who have already achieved their ambitions. For the rest of us, he warned, its mellowing properties would sap our drive. “You’ve got to be in the right position in life,” said a man who kept houses in both Hampstead and Highgate, which, if you know Manhattan better, is like keeping homes on East 75th Street and West 75th Street.
An idea that works for an established winner can be utterly ruinous for a mere aspirant.
For some reason, this insight comes to mind whenever I encounter the modern fad for Stoicism. Which, given that I have access to the internet, and to the state of California, is rather a lot.
In common parlance, Stoicism used to mean nothing more specific than a kind of grin-and-bear-it fortitude. But in recent years, the actual philosophy of Seneca and Marcus Aurelius has rallied too, if in glib and half-understood form.
The new Stoicism calls for — and here I paraphrase — a virtuous rather than joy-centred life. It often takes the guise of self-denial: the modern Stoic volunteers for ice baths and sparse diets. It also manifests as a certain detachment from the vicissitudes of life. The modern Stoic does not rail against external variables. Enemies, disasters and random surprises are all part of the natural order.
You can recognise the parallels with the Zen vogue of yesteryear. And you can guess who has fallen hardest for this creed. It has made deep inroads into the educated rich, and into the tech cognoscenti in particular. Through their cultural reach — the podcasts, the Ted talks — it is fanning out from Silicon Valley to other pockets of well-fed ennui.
There is a something to be said for this elevated version of self-help. Certain habits I keep, such as a minimal intake of media, are unconsciously neo-Stoic. And while some of its followers would fall for any passing -ism or -ology (Tim Ferriss, Arianna Huffington), others have brains like industrial lasers.
All the more reason, then, for the smarter among them to insert a qualifier: letting go of comfort and control makes perfect sense (and I really must resort to italics here) once you already have these things. The new Stoicism is a kind of victor’s wisdom. It simplifies the lives of people who are beset with extreme surplus. This is not a universal problem. Modern Stoics should not pretend to universal (or even broad) relevance. “Very little is needed to make a happy life”, wrote Marcus Aurelius, the ultimate owner of everything in the known world at the time. At least he did not try this line on the masses. His Meditations were never meant for publication. Would that his 21st-century heirs were so coy.
As a way of de-stressing powerful millionaires, neo-Stoic thought is hard to fault. For those striving for some power and millions to be stressed about, it rather speaks over their heads. Most of us aspire to material comforts or (another Stoic no-no) popularity. It is fine to achieve these things and then decide to keep them in check, lest they drive one mad. But to warn others off them, or pretend they can get them by not craving them, is life advice at its most de haut en bas.
You will notice that the smarmy de-emphasis on earthly pleasures stops well short of total renunciation. Like some credulous Sloane on an equatorial gap year, the modern Stoic idealises hardship precisely because they can pick and choose their exposure to it. “Practising poverty,” they call it, with Marie Antoinette’s self-awareness.
Perhaps the worst of it is the deception of those who are just starting out in life. Unless “22 Stoic Truth-Bombs From Marcus Aurelius That Will Make You Unf***withable” is pitched at retirees, the internet crawls with bad Stoic advice for the young. The premise is that what answers to the needs of those in the 99th percentile of wealth and power is at all relevant to those trying to break out of, say, the 50th. The new Stoicism is not useless. It promises a measure of serenity in a world that militates against it. You’ve just got to be in the right position in life.
Friday 31 May 2019
Pakistan, Waziristan.- the descent continues
Hope Vs Reason
Najam Sethi in The Friday Times
The economy is in tatters, inflation and joblessness are stalking the landscape. Both western and eastern borders are insecure – a civil war is threatening to spill over one border while an invigorated predator is sizing up its prey on the other. Terrorism/insurgency in Balochistan is barely manageable even as another threatens to shatter the newfound peace of FATA. Hounded to the wall, the mainstream opposition is inching towards mass agitation. Yet the PTI government of the day – hanging by an arrogant and unaccountable puppeteer’s thread — is bent upon imprisoning popularly elected leaders of Sindh, Punjab and FATA, blackmailing the NAB Chairman to do its bidding, prosecuting an honourable judge who dares question the writ of the puppeteer, extinguishing a rising star from lighting the path of the opposition and gagging the media from speaking the truth. Under the circumstances, can we shut our minds to reason and hope that all will be well? Or will defiance trump logic and set things right?
The Afghan Taliban are not likely to concede core American demands. In time, the Americans will blame Pakistan for not doing more to bail them out. President Trump has already teamed up with PM Modi to contain, if not confront, Pakistan’s lifeline ally China. Before long, both will turn the screws on Pakistan, the former via the US Treasury’s manipulation of the IMF and FATF and the latter by priming its “offensive-defense” proxy war doctrine. This will transpire when the ruling Puppeteer–PTI clique stands totally alienated and isolated from most sections of state and society.
The confrontation in FATA between the “patriotic” army and “treasonous” populace may get worse. Both sides have wantonly crossed red lines. In the heat of the moment, the protestors tried to overrun a security check post. The army shot and killed several of them. Next time, the protesting crowds will be bigger. If a new insurgency is born, it will doubtless be aided and abetted on a bigger scale by hostile neighbours.
The NAB chairman was spoiling to be hoist on his own petard. But the PTI exploited his weakness to advance its anti-opposition agenda. Now, if he throws in the towel and the government is successful in empowering its hand-picked Deputy Chairman, then there will be more confrontation, more repression, more political instability, more economic chaos. It is remarkable, isn’t it, that the media managers of the government, in cahoots with a civilian intel agency, should have successfully staged such a coup? No wonder, the government is adamant in denying a proper investigation into L’Affaire Chairman!
The decision to target a Supreme Court judge and teach a suitable lesson to other wayward judges was expected. The good judge had dared to tick off the Intel Agencies and seemed inclined to read out the “democracy” sections of the constitution to them. Horror of horrors, he was also lined up in due course to rule as the chief justice of Pakistan for many years. Confronted by leaked reports of a Presidential Reference to the Supreme Judicial Council to defame him, he has demanded to know the veracity of the reports. The Additional Attorney General in Karachi has resigned in protest. If other judges don’t resist such machinations, the peoples’ struggle for an independent judiciary will be lost. Certainly, there is at least one other judge who may be on the hit-list for ruffling the untouchable feathers of certain VIP housing societies across the country.
Next in line is the Election Commission of Pakistan. Having advisedly taken a soft look at the shenanigans of the Prime Minister, it is now being pressured to take a hard stance against Mariam Nawaz Sharif. If it does the government’s bidding, it will join the queue of discredited state institutions that are paving the way for societal anarchy and states of siege.
The worrying future is already upon Pakistan. The US is gearing up India and others to confront and contain China in the Asia-Pacific and Asia-West region. China’s Road and Belt project, in general, and CPEC, in particular, will be targeted. It is also engaged, along with Saudi Arabia, UAE and others in trying to force regime change in Iran as a prelude to redrawing the map of the Middle-East. This makes Pakistan’s third southern border vulnerable. It also threatens to open deep sectarian divisions within the country.
Wiser counsel would surely advise a contrary path. A national all-parties government headed by a stolid prime minister who can disarm domestic critics, build trust with prickly neighbours, manage the economy dispassionately and herald certainty and stability would do Pakistan much good. Such a dispensation would heal the wounds between provinces, between state institutions, between political parties, between classes and ethnicities, between Pakistan and its neighbours while pulling the economy out of its current trough. A nation united and at peace with itself is bound to be a nation united and at peace with the rest of the world. More than anything else that is the need of the hour.
Will hope be rekindled at the altar of realism? Or will despair be our lot when reason is sacrificed?
Subscribe to:
Posts (Atom)