by Tim Di Muzio
By virtue of this legal right of sabotage which inheres as a natural right in the ownership of industrially useful things, the owners are able to dictate satisfactory terms; so that they come in for the usufruct of the community’s industrial knowledge and practice, with such deductions as are necessary to enforce their terms and such concessions as will induce the underlying population to go on with the work. Without the power of discretionary idleness, without the right to keep the work out of the hands of the workmen and the product out of the market, investment and business enterprise would cease. This is the larger meaning of the Security of Property (Veblen 1923: 67).
Sabotage is a requisite of business and the chief way in which dominant owners accumulate money. Indeed, it can be shown that many business actions have actively harmed society in their drive to accumulate more money: the slave trade, the arms industry, pollution and global climate change are all evidence. One of the reasons why this is so is that capitalist societies – whatever their cultural differences – do not produce for livelihood but for profit, and profit is limited by the ability of people to purchase the goods and services produced: by their income and their access to credit. So while we may have the capacity and potential as a species to provide clean water to everyone, enjoy nutritious food, increase leisure time, improve public transport networks, and ensure healthcare and life insurance for all, as well as transition away from fossil fuels, corporations and much of our political leadership are all directed towards enriching the few. With our examination of Veblen’s ideas complete, we can now turn to how modern heterodox economists have conceptualised the growing disparity between the rich and the rest of us.
Unjust deserts
One book that will surely be greeted as kryptonite by the 1% is Unjust Deserts by Alperovitz and Daly (2008).10 Alperovitz and Daly canvass the growing body of literature that purports to demonstrate precisely what Veblen discussed at the turn of the century: that an isolated individual is not a productive unit and that the creation of wealth and its current magnitude are largely due to a past store of accumulated social knowledge that has grown at an increasing rate. What they miss is that this explosion in social knowledge, or what Joel Mokyr calls the ‘industrial enlightenment’, would have likely been impossible without the surplus energy provided by abundant and affordable fossil fuels. The authors marshal considerable evidence to advance their conservative argument that the top wealth-holders do not truly deserve their wealth. Conservatives or politicians on the right wing of the political spectrum are typically the first to cry out that those at the bottom of the social hierarchy do not really ‘deserve’ public hand-outs, and in many cases they do their best to frustrate or stymie programmes aimed at helping the less fortunate. So if it can be demonstrated that the rich do not really deserve their fortunes and indeed have taken a disproportionate share of society’s wealth, then it follows that something must be done to right this wrong. What that something is is up for debate, but let us reflect on the evidence.
In order to consider the unequal distribution of wealth and income, Alperovitz and Daly survey a great deal of literature on the sources of wealth creation. I summarise only some of their key points here since their study should be read in its entirety. The question they begin with is this: could it really be that individuals – by themselves – are the primary source of wealth? Their answer is an emphatic no and they support this claim in a number of ways. First, while our societies have a tendency to reward those who come up with inventions first – typically by being first to file a patent – history demonstrates that any scientific community tends to be working with the same knowledge base. What this means is that certain discoveries would be arrived at regardless of an individual ‘genius’. The historical record is replete with examples of people who arrived at the same discovery or scientific conclusion at roughly the same time. Hence, when asked who ‘invented’ the telephone, most would answer Alexander Graham Bell, but he just happened to be first to file for a patent (and for a non-workable phone). He also had very good lawyers to fend off other potential claimants. Five years before he became the legal ‘inventor’ of the telephone, Antonio Meucci had designed such a device, but, due to lack of money, he could not file the full patent. There is also evidence to suggest that Meucci’s designs were later stolen (ibid.: 59–60).
Second, those who come up with discoveries are completely dependent on the accumulated knowledge of the past. Alperovitz and Daly use Newton to make their point:
If Newton, in his lifetime, had to learn everything humanity had learned from the time of the caveman to the late seventeenth century – if he had no knowledge inheritance whatsoever to work with – he could not have contributed much more than an insightful caveman could in his lifetime (ibid.: 144).
And we have become better and better at storing ever more knowledge outside our brain (in computers, for example). Third, those in a position to discover or invent new goods or services have a positionality in a social system that supports their endeavours. If inventors were worried about obtaining food, clothes and shelter, there would be considerably less time to focus on scientific discoveries. But because there is a social structure where other people work producing food, clothes and shelter, among other things, the division of labour can be further extended by people not engaged in these activities. Moreover, Alperovitz and Daly point to the vital role public spending has had on successive discoveries. The internet is perhaps the most prominent example but there are countless others, such as public education, pharmaceuticals and computers. This public or social spending has fed into the private fortunes of the 1%. Last, the authors use the work of Nobel laureate Robert Solow, who focused on productivity growth in the United States. After crunching the numbers, what he found was that 88% of the increase in productivity growth from 1909 to 1949 was not due to added inputs of capital or labour but to what is broadly understood as ‘technical change’ (ibid.: 25–6). In sum, there is mounting evidence to suggest that wealth is socially created but its distribution has been privately appropriated by the few.
Two other thought experiments can demonstrate the point. First, if individuals were the crucial factor in wealth generation, then one might assume that the death of the wealthy would significantly wound the capitalisation of the firms they own, run or control. Take, for example, the revered Steve Jobs. When he died, Apple shares were worth US$422 in October of 2011. Rather than plummet in value, shares actually appreciated to a high of US$691.28 in September 2012. We can also consider Sam Walton, the founder of Walmart and Sam’s Club. Walton passed away in April 1992, when Walmart’s share price was US$12.93. Rather than nose-diving upon his death, Walmart’s capitalisation has exploded. In November 2013, shares traded at their highest – US$81.37 – a 529% increase in monetary value in just over 20 years. If the individual superhuman theory of wealth is correct, then it would appear that the deaths of Sam Walton and Steve Jobs were actually beneficial to the bottom line of their companies. Clearly, wealth generation has little to do with one particular individual.
A second example is to imagine which billionaires would still be billionaires if they were stripped of their ownership of income-generating assets. As Mills suggested:
If we took the one hundred most powerful men in America, the one hundred wealthiest, and the one hundred most celebrated away from the institutional positions they now occupy, away from their resources of men and women and money, away from the media of mass communication that are now focused upon them – then they would be powerless and poor and uncelebrated (Mills 2000: 10).
Many of the very rich are loath to admit it, but there are some who recognise that living in a society of immense wealth and talent along with the past practices of their ancestors, such as colonialism and slavery, have contributed significantly to their pool of wealth. For example, Katrina Browne traced her family’s wealth back to the transatlantic slave trade. Her ancestors constituted one of the largest slave-trading families in history and she argues tha
t she currently benefits from that original accumulation of wealth.11 Anyone who still wants to believe in the superhuman theory of wealth should also consider the testimonials compiled to the contrary by United for a Fair Economy (Collins et al. 2004).
The distribution of wealth and capital as power
Alperovitz and Daly have provided a great service to the growing community of people concerned with mounting inequality by synthesising the economic literature on the sources of wealth. Their chief shortcomings, other than the failure to see the connection between growth and surplus carbon energy, are twofold: 1) ownership and power are largely in the background of their presentation; and 2) economic growth and the ways in which it has taken place are assumed to be unproblematic. Our view, following Nitzan and Bichler, but also recognising an ecological dimension, is different.
First, from the perspective of capital as power, the distribution of income and wealth is wholly and fully a matter of institutionalised power rooted in ownership. Dominant owners are not rich because of special talents or superhuman traits but because they own income-generating assets that do not come from their labour. They capitalise expected future profits and the magnitude of their earnings relates not to productivity, as we saw in Chapter 2, but to a corporation’s power, alongside that of various government bodies, to shape and reshape the terrain of social reproduction writ large. Briefly, by social reproduction we mean the concrete ways in which any society produces, consumes and reproduces its life and lifestyles.
Second, production for profit rather than for livelihood (and for the livelihood of future generations) is far more worrying and contradictory than Alperovitz and Daly countenance. At a time of immense wealth for some, rapid technological change and promises of a better future for those excluded from the present benefits, a refusal to accept that the path we are on is unsustainable is somewhat understandable. Some, indeed, are doing very well, even if they are not dominant owners. But the evidence is mounting that the capitalist mode of power is ruining the very biosphere we all depend upon for a dignified and fulfilled life – not to mention the lives of future generations. McMurtry (1999) calls this the ‘cancer stage of capitalism’.
Perhaps the most worrisome thing about this is that it is not that the science isn’t forthcoming or available. We know about global climate change. We know about the acidification of our oceans. We know about pollution in our waterways and air. We know that our agriculture and food regimes are dangerously reliant on fossil fuels for energy inputs. We know that fossil fuels are non-renewable. We know that we are overworked and do not have enough time to spend with our loved ones. We know that species are becoming extinct at a terribly rapid rate. We know all of this and more and yet virtually nothing is done to halt this ‘progress’.
The fact that we are not changing course is not due to a lack of knowledge or even a lack of ideas. It is the logic of differential accumulation held by the ruling class of owners, combined with the capture of our political and cultural systems, that represents the greatest risk to our lives and the lives of our children. The aim of capitalists is for their logic to be all-encompassing, all-embracing. There have been attempts to curtail and even thwart this power, but in a world where money represents the power to command and where the 1% have appropriated most of it, the needs, desires and even the demands of the 99% have been actively suppressed – often with considerable violence. Again, this is not to suggest that these individuals and their families are evil. However, we have to recognise that they are slaves to the logic of differential capitalisation just as much as the pharaohs were slaves to their own logic of pleasing the gods in the hopes of gaining their favour. Differential capitalisation is the ritual that gives them the illegitimate power to control humans and natural resources in an effort to accumulate ever more money and power. It is illegitimate because it is undemocratic and in no way earned on the basis of individual skill or talent. It is the appropriation of social wealth pure and simple. And here Marx was right on the money:
[the purpose of accumulation is] not to satisfy the personal needs of its owner, but to give him money, abstract social riches and capital, more power over the labor of others, i.e., to increase this power (Marx 1978: 464–5).
6 | THE PARTY OF THE 99%: RESISTANCE AND FUTURE PROSPECTS
There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning. (Warren Buffet of Berkshire Hathaway quoted in Stein 2006)
Power concedes nothing without a demand. It never did and it never will. Find out just what any people will submit to, and you have found out the exact amount of injustice and wrong which will be imposed upon them; and these will continue till they are resisted with either words or blows, or with both. The limits of tyrants are prescribed by the endurance of those whom they oppress. (Frederick Douglass 1857)
The passivity of the majority is what allows the powerful to rule.1 (Raj Patel 2009: 118)
The emergence of the 1%, and the imposition of its ruling logic, has always confronted resistance of some kind. Originally this resistance was isolated and localised as the price system of the market crept into rural or tribal life. With the price system now dominant virtually everywhere, resistance is far more global in scope, facilitated by the telecommunications revolution and often coordinated across borders. The Occupy movement was just the latest example in the long history of resistance movements in both the Global North and the Global South. Using the theme of the 99% and resistance, this chapter concludes our study of the 1%.
Occupy in context
The Occupy movement’s pedigree can be traced back to the first struggles against the imposition of capitalist markets and the formation of a small class of dominant owners. The eminent political economist Karl Polanyi (1957) called this the double movement. What Polanyi meant by this term was that the idea of free market industrialisation was not broadly accepted and had to be imposed – often with considerable violence – on an unwilling population by business and state agents. This was one side of the movement. The other side of the movement consisted of social forces struggling against the imposition of capitalist markets because they destabilised their traditional ways of living and treated them as commodities to be bought, sold and discarded when profits suffered. These were the forces of social self-protection struggling for a decent livelihood against dominant owners and their functionaries. Polanyi believed that the double movement was the primary cause of the World Wars and the Great Depression in the capitalist heartland. He thought, as did many at the time, that cooler heads would eventually prevail and ‘in a truly democratic society, the problem of industry would resolve itself through the planned intervention of the producers and consumers themselves’ rather than of the ‘elites and aristocracies’ and their corporations (Polanyi quoted in Dahms 2000: 150). And while business was to some degree tempered by democratic governments after World War II, the logic of differential accumulation was never questioned or touched, merely frustrated by national regulation. Indeed, there is a prevailing myth that class war somehow ended in the West with the rise of the welfare state. Yet, in a society divided by class, where the 1% effectively own all of society’s productive assets and control the money supply, class war never sleeps. If the prevailing rationality of the system is perpetual differential accumulation in the attempt to accumulate ever more money and power relative to others, class war is also perpetual. This war cannot be stopped without pursuing a different logic with a different social purpose. As long as the current rationale remains intact, any policy changes will be marginal and largely ineffective.
Still, many think of the post-war period as a time of economic growth and prosperity when benefits were widely shared with workers in industrialised countries. An unwritten compromise between workers, capitalists and the government seemed to be at hand. Workers received higher pay commensurate with productivity and better benefits in return for not striking. Capitalists avoided potentially costly strikes and the government achie
ved civil peace for overseeing the relationship. This, of course, is a highly stylised image of the period, but, at any rate, many scholars believe that this compromise started to unwind in the 1970s and 1980s as more right-leaning governments came to power and unions were targeted for elimination. These governments started to reconfigure the welfare state in favour of what Gill (1995) has called disciplinary neoliberalism. Disciplinary neoliberalism is a set of policies, such as privatisation, the liberalisation of trade and investment and deregulation. The policies are essentially designed to increase the power of dominant owners and their corporations. Although many have called these initiatives ‘free market reforms’, they have had nothing to do with creating a ‘free’ market anywhere or at any time (Nitzan 2001). In fact, these policies augmented corporate power, enriched the owners of dominant capital and lessened the power of workers globally. Apart from declining unionisation and stagnant wages, one of the major indications is the rash wave of transnational mergers and acquisitions that started in the late 1980s and really took off in the 1990s and 2000s. Between 1981 and 2012, the number of global mergers and acquisition deals increased by 2,000%. Hundreds of thousands of deals were made to concentrate ownership. The value of these transactions also increased, by 4,700% from 1981 to 2007, when US$4.8 trillion in deals were made. Mainstream economists justify these mergers and acquisitions by arguing that they must create more efficiency by encouraging ‘synergy’ and reducing transaction costs (Harding et al. 2014). As Nitzan (2001) points out, the evidence for this argument is flimsy and this is probably not the main point of corporate amalgamation.
In the ‘capital as power’ approach, the purpose of mergers and acquisitions is greater power. First, by merging instead of creating new capacity (called greenfield investment), corporations do not inject any additional productive capacity into the economy. Second, combining with other corporations increases the power of a particular firm to collect additional income streams. For example, Facebook has acquired over 40 companies since 2005; the more it acquires, the more it collects real or potential income streams and increases its power over other corporations by virtue of expanding what it can control through ownership. It can do this because a corporation is a legal fiction capable of owning a series of income-generating assets. Put differently, corporations merge and acquire in order to decrease competition and increase their differential earnings in relation to the average rate of return for their industry.
