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Wednesday, April 1, 2020

The choice for capitalism - facing up to the reality of unearned windfalls!

I have posted several times about the smugness associated with the so-called meritocratic arguments. From the belief that the millennial deserves his or her high-flying career and the Chief Executive deserves the obscene salary differential from the workers. These are all seen as just desserts. 

As Covid 19 looms large on the world, Janan Ganesh in FT has a terrific article that posits the choice faced by capitalism in terms of the contrasting worldviews of Charles Dickens and George Orwell.

He sets the stage,
If only Murdstone were kinder to David Copperfield. If only all bosses were as nice as Fezziwig. That no one should have such awesome power over others in the first place goes unsaid by Dickens, and presumably unthought. And so his worldview, says Orwell, is “almost exclusively moral”. Dickens wants a “change of spirit rather than a change of structure”. He has no sense that a free market is “wrong as a system”. The French Revolution could have been averted had the Second Estate just “turned over a new leaf, like Scrooge”. And so we have “that recurrent Dickens figure, the Good Rich Man”, whose arbitrary might is used to help out the odd grateful urchin or debtor. What we do not have is the Good Trade Unionist pushing for structural change. What we do not have is the Good Finance Minister redistributing wealth. There is something feudal about Dickens. The rich man in his castle should be nicer to the poor man at his gate, but each is in his rightful station. You need not share Orwell’s ascetic socialism to see his point. And to see that it applies just as much to today’s economy. Some companies are open to any and all options to serve the general good — except higher taxes and regulation. “I feel like I’m at a firefighters’ conference,” said the writer Rutger Bregman, at a Davos event about inequality that did not mention tax. “And no one is allowed to speak about water.”
And then gets to the point, 
What Orwell would hate about Stakeholder Capitalism is not just that it might achieve patchier results than the universal state. It is not even that it accords the powerful yet more power — at times, as we are seeing, over life and death. Under-resourced governments counting on private whim for basic things: it is a spectacle that should both warm the heart and utterly chill it. No, what Orwell would resent, I think, is the unearned smugness. The halo of “conscience”, when more systemic answers are available via government. The halo that Dickens still wears. You can see it in the world of philanthropy summits and impact investment funds. The double-anniversary of England’s most famous writers since Shakespeare... serve as a neat contrast of worldviews. Dickens would look at the crisis and shame the corporates who fail to tap into their inner Fezziwig. Orwell would wonder how on earth it is left to their caprice in the first place. The difference matters because, when all this is over, there is likely to be a new social contract. The mystery is whether it will be more Dickensian (in the best sense) or Orwellian (also in the best sense). That is, will it pressure the rich to give more to the commons or will it absolutely oblige them?
In this context, I am struck by the story of Gifford Pinchot, who is widely credited with having established the US Forest Service at the turn of the twentieth century into one of the most successful US bureaucracies. This extract from Samuel Huntington's Political Order in Changing Societies (which I now happen to be re-reading),
He was, for all his privilege, incredibly motivated to make something more of his life... Religion played an important role in sharing his character... Pinchot in many ways embodied Max Weber's Protestant work ethic, observing that "my own money came from unearned increment on land in New York held by my grandfather, who willed the money, not to the land, but to me. Having got my wages in advance in that way, I am now trying to work them out".
How many people today who benefit from the Ovarian lottery think this way? Education, with its reductionist approach, does its best to gloss over the underlying contributors to one's success and highlight some faux meritocracy. 

Much of the just desserts are simply unearned windfall in a system whose rules are rigged to accentuate the Matthew Effect arising from initial endowments. The pendulum has swung so much to the other extreme that a correction is imminent. 

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