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Justice and Income Inequality

WidePlace has responded to my criticism of her or his post suggesting that the Occupy Wall Street protestors were motivated by greed. I had suggested that if a teenager working a part-time, minimum wage job started throwing around the kind of cash you can’t earn at a minimum wage job that a parent (or anybody looking) would have some legitimate questions to ask about where the money came from. WidePlace writes:

First of all, if this is really meant to be an analogy to rich people, then you and I (and you and most people) are starting from completely different assumptions about work, wealth, and goods. In the scenario you describe, the high school kid - barring a bizarre turn of massively good fortune - has obtained something wildly disproportional to the merits of his work, almost certainly illegally. We’d look at him with his shiny new Mercedes and assume - correctly - that he’s likely done something grievously wrong to get it. If you think that a wealthy person who puts in 50, 60, 70 or more hours per week in an office engaged in transactions with clients who willingly hand their money over to him/her in exchange for the product he/she provides is analogous to a high school student working a minimum wage job selling bagels on the side but who ends up, somehow, with a new Mercedes, then you are simply operating with a very, very critical view of wealth. You are assuming a wealthy person is guilty until proven innocent, not the other way around. On your scenario, rich people, like the high school student, should be viewed with massive skepticism, because they’ve almost certainly committed a crime to get where they are. I think the onus is on you to prove that this is the case.

Let me clarify my position on a couple fronts. I fully support people recieving compensation proportional to their labor. If one person works a 40 hour week and another works an 80 hour week, I have no problem with the guy working the 80 hour week recieving twice as much pay. I don’t even mind if he recieves three times as much pay. Or even ten as much. That’s not what Occupy Wall Street is protesting. Their protest explicitly targets the top 1% who recieve, at a minimum, over twenty-five times the median household income. When you consider anybody the top .01% by income, that multiplier jumps over 600. We can break it down further if we would like. The bottom of the top 1% households, for example, recieve over eleven times as much income as the median household income for those with doctoral degrees.1 More curiously, the wealth disparity has increased over the last fifty years or so—suggesting that either the rich have gotten a lot smarter and harder working—or that income isn’t meaningfully correlated to the merit of somebody’s work.

To sum up, yes the bagel kid seems to be rewarded beyond the merit of his work. Unless we define “merit” in some circular way (like “the amount you’re paid”), the top 1% are also rewarded beyond the merit of their work.2 We need to inquire a bit deeper than, “Huh, I guess that money is deserved.”

The second point involves the word “crime.” I’m not suggesting that we should assume that those with the highest income predominately recieved their money through criminal means. What is legal does not always line up with what is fair or what is right. There are plenty of ways that I can dupe somebody while remaining, technically, within the bounds of the law. There are other ways to take advantage of somebody with less bargaining power to get a grossly inequitable bargain. Finally, there are ways to (legally) shift the cost of what you’re doing onto somebody else who does not have meaningful power to protect themselves. While our gross inequality may be the result of technically legal (or at least, non-criminal) activity, it is frequently the result of unjust or inequitable behavior that could or should be illegal.

Next, you ask “have the rich misappropriated wealth that, in a more just society, would have gone to somebody else?” Well, this is a very tricky question. Who gets to determine what anyone ought to do with his/her money?
You? Reasonable people will disagree - and do so passionately - on this question because it’s a very subjective question, and it all depends on how you define justice. Some think it’s unjust that some people have certain things that others don’t. In a sense, maybe it is. But it intuitively strikes many as unjust to take something someone has worked for, via coercion and threat of imprisonment, and give it to someone who has not worked for it. And whether you agree or not, don’t they at least have a point?

Let’s back up even further. Who got to determine what money belongs to who? And why? When I steal somebody’s wallet, they always make me give it back via coercion and threat of imprisonment. I try to explain that it’s my money—and that reasonable people can disagree with what I should do with it—but the cops never listen. Not even the libertarian cops. The same thing happens when I refuse to pay my mortgage. I say, “Screw you bank! It’s my money, I can do what I want.” But that’s a good way to end up in contempt of court. They even make me give back the money when I defraud somebody. (I sold a one pound chunk of gold and the stupid buyer thought that it weighed a pound. In reality, it was a speck of gold worth one British Pound. But caveat emptor, I say!) I had to give the money back after I coerced somebody into buying home insurance by threatening to light their house on fire too.3 The only times I get to keep the money are when I can keep my unethical behavior within the letter of the law. For example, if I terrify enough vulnerable people, I can make a killing selling them life insurance.

The point is simple: the money that counts as “your money” depends on a whole slew of laws and societal assumptions. When we’re discussing what the law should be, we can’t assume that people have some kind of intrinsic moral right to do what they will with the money they currently possess. If, afterall, we were considering adding or tightening a law against fraud, we shouldn’t assume that people who had made a living defrauding others deserve that money. Similarly, if we were considering changing an inheritance law from a rule that says the eldest son gets everything to one that divides parental property equally, we shouldn’t feel like we are robbing all of those eldest sons. We’re simply removing a mechanism through which they had recieved money their siblings would have recieved under a more equitable rule. In other words, people can do what they want with their money—but social structures determine what money counts as “theirs” and what money counts as somebody else’s. I’d like to change some of those structures.

Furthermore, what do you do with the fact that the wealthiest already give exorbitantly more to charitable organizations than anyone else, pay more than everyone else in taxes as it is, and that half of “taxpayers” in this country don’t actually contribute a dime to the national fisc?

The first thing I do is check my facts to ensure I don’t inadvertently slur the poorer taxpayers in the country. It’s true that a remarkably high percentage of people have had no net federal income tax liability last year. Despite that, even the bottom quintile are still net federal tax payers when you consider payroll taxes. This doesn’t even consider state and local taxes.

It really doesn’t bother me that the wealthiest pay more in taxes already. They have more money. More importantly, they have so much more disposable income that the marginal utility of a few extra dollars has decreased dramatically. But, frankly, I’m not that concerned about that either. Our government does a lot of important things. That costs money. Let’s figure out who can most afford to pay it.

I think you’re on very shaky ground judging people who have more for their “misappropriation” of their own goods that, presumably even you would agree, they are at least somewhat entitled to as the fruit of their labor.

Tell you what. I’ll let everybody keep the money they are entitled to as the fruit of their labor if you let me 1) take the money people get that isn’t the fruit of their labor, and 2) ensure that people are paid what they should be entitled to as the fruit of their labor. I’m pretty sure I come out way ahead in that deal.

Next, you write, “Wait. What goods and services have the richest produced again?” OK, think of the richest people. Steve Jobs, who was a billionaire, immediately comes to mind. What goods and services did he produce? He produced millions of computers, ipods, iphones, and the operating systems they run on. He didn’t sit in the factory hand-assembling them, I grant you (because that would have been a waste of his time), but without him they never would have been made. Hence, they can be attributed to him. Do you deny that he produced these goods and services? Do you think the factory workers who assembled these devices are just as worthy of compensation as the man who invented them, risked his capital to produce them, oversaw their production, marketing, and sales, etc.? Why does being removed from the actual, hands-on manufacturing of a product make one less worthy of being rewarded for that product’s success? Wouldn’t overseeing the production of a million units be inherently more valuable than simply making a few dozen of them?

Jobs did the designing? The marketing? The sales? Personally? Huh. When I walked into an Apple Store, it must have been his day off. Somebody else was doing all the work. Of course Apple wouldn’t have been Apple without Steve Jobs. But Steve Jobs wouldn’t have been Steve Jobs without however many million people worked for Apple.

But why jump down the list to St. Jobs? Is it just because he’s the guy on the list who made some clear and obvious contributions? He didn’t make the hundred richest people. Above him on the list are a lot of people who inherited their wealth, a lot of people who were in the right place at the right time to ride a bubble to the top, a lot of savvy investors, and a lot of oil money. I’m sure all of these people are contributing a lot of useful labor to society—but I’m not sure they are thousands of times more significant than the average person.

You continue, “the most vehemently protested sector is the financial sector—which isn’t making its money by selling goods and services to willing and informed purchasers.” How, then, is the financial industry making money? Which part of your description do you dispute? Are its clients not, in fact, informed?

Generally, no. The people paying billions of dollars in overdraft fees every year were not “informed.”

If not, do they not bear some of the responsibility for participating in transactions the details of which they are ignorant of, especially given that the financial services sector is already subject to probably the most intense information disclosure and heavy regulation of any industry? Or are its clients not willing? When was the last time a bank - or any private company for that matter - forcibly took your money from you or coerced you on threat of force or imprisonment to surrender your private capital to it? Incidentally, the government does this to me every April 15.

While I’m still confused about why you think money legally owed in taxes is “your private capital” when it doesn’t legally belong to you, we’ll set that aside for now. I also understand that when people get tricked by a highly sophisiticated industry, they bear some level of responsibility for being duped. Of course, they don’t bear as much responsibility as the people who are being protested—namely the people who knowingly duped them. Maybe the victim could have avoided it if they were more alert or more clever—but dwelling on that won’t explain why we tolerate such massive and unjust wealth transfers from the most vulnerable to the least vulnerable.

Next, you write “Do you know how much we pay the public servants in DC relative to what they could make in the private sector? Hint: If they’ve rigged the game for their own benefit, they’re terrible at rigging games.” Really? How about lawmakers’ convenient exemption from insider trading laws?

Is that one gone yet? It will be within a few weeks. Months at the most.

How about lifetime pensions for serving just one term? Do you know of any equivalent in the private sector?

I’ll trade that pension for the $11.4 million in average total compensation recieved by the CEOs of the largest companies last year..

Sounds like rigging the game to me.

$11.4 million in a year? I’ll say.

But regardless, the largest financial problem with public sector compensation isn’t the benefits we’re giving a few hundred lawmakers in DC, obviously. It’s the millions of public sector workers all across America, many of whom make more than their counterparts in the private sector (especially once all perks are accounted for). It is well-known, for instance, that public school teachers make more than private school teachers, on average. Add in early retirements, fantastically expensive lifetime pensions - something virtually unknown in the private sector, especially in education, one of the least lucrative industries - not to mention other perks, and you realize that many public sector workers are doing very well compared to equivalent private sector jobs. Don’t believe me? Ask yourself whether you’d rather teach in an average public school vs. private. How about deliver mail for the USPS or for UPS? Would you rather be a police officer, who works 20 years and can retire in your 40’s with a lifetime pension and still start a second career with a second income, or a private security guard with no such benefits? Then, when you realize that all of this compensation is negotiated in back-room deals between powerful union bosses and complicit politicians, and the taxpayer - who foots the bill for all of this - has no direct say in the matter, you get a pretty disheartening picture of public sector compensation.

I just can’t get on board with the whole “those teachers are overpaid” schtick. As you point out, education is not a lucrative industry—particularly considering how important it is and how much crap teachers are getting lately from people who aren’t willing to pay what it takes to ensure that children have reasonable opportunities for the future. Instead of paying public school teachers less, why not ensure that their private sector counter-parts are paid a decent wage in comparison to the work they do? (And when did we stop talking about how people “earned” their money? Does the labor of teachers not count? Do you know any teachers? That’s one of the harder, more demanding jobs out there.)

The back-room deal part is also silly. The union has a lawyer. The administration has a lawyer. They fight. A deal is worked out. If you don’t think anybody in politics is watching out for the taxpayers, you haven’t been following politics. That’s all we talk about these days.

Finally, you write, “I thought we weren’t in favor of envy-based, class warfare rhetoric? If we’re upset that the lawmakers have too much power, we can also be upset that the rich have too much money.” Well, no. For two reasons. First, I don’t object to the government having so much power because I want it for myself, as envy-based OWS people want the money others make for themselves. Rather, I want the excesses of the government’s monopolistic, coercion-based power structure to disappear forever! I don’t want them, and I don’t want anyone to have them! Hence, it’s not envy because envy is wanting for yourself what someone else has.

I’m pretty sure nobody at any of the OWS protests has demanded the kind of lifestyle it takes $1.5 million a year to support. There’s no envy of the 1%. There’s just a sense that everybody else is getting screwed—and that policies concentrating wealth at the top are to blame.

Second, there’s a document on which this country was founded that prescribes the proper boundaries within which the government may operate. It puts specific limits on the power that government can have and the things it can do. There’s no document binding all Americans that puts limits on how much money anyone can earn. When you make analyses about governmental excesses, you do it with a metric, and agreed-upon standard in mind; and it is clear to most in this country that our federal government no longer abides by that written standard. When you argue that the rich have too much money, you’re just making an emotional argument, with nothing concrete, objective, or standardized to support you.

Before we start talking about constitutional law, I’ll give you an opportunity to explain why anybody should care more about a fringe interpretation of the literal language of a deliberately ambiguous document than they should about basic principles of justice. It’s a tough sell.

  1. If anybody wants to follow the links to confirm my math, you’ll figure out pretty quickly that I’m using pre-recession numbers. This is solely because those are the numbers available. While the recession has doubtlessly shaken up a fair amount of the details, the trends have not changed. 

  2. As I noted in the previous post, I have some serious differences with the Occupy Wall Street people. I view the “1%” as an arbitrary and politically convenient cut off. 

  3. Before anybody thinks I live a more exciting life than I actually do: Nothing in this paragraph is true. 

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