The current obsession with inequality masks the fact that wealthy but unequal societies are highly resilient. A new rhetoric is required
A narrow emphasis on the short-run, personal and hedonistic benefits of economically liberal policies has impeded their uptake and is encouraging growing resistance worldwide. Corbynism is not an isolated phenomenon, but part of a global trend. Addressing this threat does not require new liberal economic theory, the underlying principles of which, though poorly applied, are well understood and known to be robust. What is needed is a change in the psychological framing and language of liberal economic policies.
Specifically, it is futile to deny that the wealth differentials produced by liberal markets are as a matter of fact disadvantageous to worse-off individuals, even in the presence of the rising incomes for all. The worse-off know this to be true, and are contemptuous of arguments to the contrary by liberal economists. The evolved human organism gathers resources to secure reproduction, and in that process it is genetically functional to resent and attempt to prevent competitors acquiring differential levels of available resources.
Bluntly, rich people secure the future of their families more effectively, and this is obvious to all of us. Given that reality, political effort should be concentrated on the equally valid but less manifest truth that individual lifetime wealth differentials and their very real disadvantages are more than offset by the long-run, extra-personal, benefits returned to an individual’s direct and collateral descendants through societies that are resilient to natural disaster and shock due to high aggregate, societal wealth.
Advocates could show that this argument is sincere by recommending policies that facilitate the transfer of wealth between generations and within families, with a particular emphasis on those currently of lower net worth. In order to reconcile ourselves to short-run individual wealth differentials we must be allowed to build families with long term interests.
Resilience in the face of shock, the ability to recover promptly from natural disaster or to resist hostile forces, internal or external, is one of the defining hallmarks of successful societies. In its absence even generally high levels of personal income would be seen as having little value. However, this contrary case, of rich but weak societies, is purely theoretical, since systemic resilience is exhibited only by wealthy societies, that is to say by societies where the mean wealth per capita is high, the total aggregate wealth of all individuals is very substantial, and the wealth is not only maintained but steadily augmented even in the face of swiftly changing circumstances. All the resilient societies of which we know are rich and increasingly rich: all rich and increasingly rich societies are resilient.
However, we know empirically that this wealth need neither be evenly distributed across the population nor held in common, provided that the aggregate is available for use in the face of any threat to the system.
How, then, to obtain greater aggregate wealth? Since these riches are to be used for a common purpose, it is intuitively plausible to suppose that it should be the business of government to oversee this creation in the general interest. However, and naive intuition finds this supremely puzzling, the historical record suggests that collective strength is frequently and most successfully attained by economic systems that permit substantial differences of individual personal wealth to emerge as the result of the free creation and exchange of goods and services. Indeed, the best of these systems are not only permissive in this regard, but actively encourage and even provide legal protection for such differences.
The resulting societies are far from politically harmonious, with the uneven distribution of wealth being much resented and criticised; but the historical evidence again shows that these societies succeed exceptionally well when faced with natural disasters or when in conflict with societies organised on other lines. Civil life in such societies may resemble one interminable domestic quarrel, but they are shock-resistant to a remarkable degree. The United States brushes off on a regular basis natural disasters of a scale that would flatten other economies for a generation, and has successfully defended itself and its allies against courageous and dedicated enemies on at least three occasions in the last century. One of those opponents, Japan, now amongst the world’s most prosperous liberal societies, suffers periodic and tremendous earthquakes, but is superbly prepared and promptly addresses these disasters and recovers the damage with hardly a bead of economic sweat.
But if unequal societies are so successful in delivering this common good, why is there any resentment of the inequalities? The answer lies deep in the development of our species. The human organism, body and mind, has evolved predominantly through the individual’s reproductive competition with its conspecifics. Slight differences in individual reproductive success, even if only partly determined by genetic variations, will have remarkable consequences in only a few dozen generations, and in fact there have been approximately 200,000 generations since the human line diverged from that of the australopithecines about 3.5 million years ago. As a result of this evolutionary history, every one of us is acutely sensitive to even small differences of individual personal wealth. Statistically speaking, what our ancestors did, and what we continue to do, is to gather resources to secure reproduction. Of course, humans do not crudely maximise that reproduction. Given available resources they balance the number of offspring against the investment needed to prepare them for life in the natural circumstances and social systems in which those offspring will themselves reproduce. Thus, even in the presence of high levels of absolute personal riches, differential levels of resources lead to different numbers of offspring and varying levels of investment in those offspring, and so in the security of reproduction at that social level.
These differences stimulate resentment, and indeed spite, which is the attempt to suppress the wealth and success of others so that it does not exceed our own. This is in many circumstances an adaptive reaction for individuals in an evolved social species where each organism’s security of reproduction is defined in relative terms. It is good to be rich, but this counts for little if others are richer. An individual is alive today because their ancestors were concerned about the relative wealth of those around them, and did their best to exceed or to restrain the success of others.
This recognition adds great vistas of time and additional foci to the standard economic understanding of individual self-interest, and it explains the power and resonance of Edmund Burke’s framing of the social contact as trans-generational. That is to say, the interests of the individual are only in part vested in the present and in the life of its own body, but also extend into the far distant future in the persons of their actual or probable offspring, and in their collateral family, and in the descendants of all of these. It is principally though not exclusively to these latter interests that the benefits of a resilient society are returned, and it is on this ground that liberal, competitive societies delivering great aggregate wealth can be convincingly justified.
However, that is not the argument presented by most economists, who have in general tried to make the case for liberal, contractual systems, and, indeed, for wealth differentials and private property, in terms of the return to the individual within their own lifetime. Such economists say, for example, that “a rising tide lifts all boats”. This a terrible error, for as we have seen, such an argument can convince no one, not even those proposing it. It is obvious to all that wealth differentials do as a matter of fact and in truth damage the short-term interests of less wealthy individuals. Of course, it is true that these short-term harms may be to some degree offset by an increase in absolute wealth and by rising incomes, but if the differentials remain or increase they will continue to stimulate resentment and spite.
However, greater societal resilience yields enormous dividends for the long–term interests of the individual, through its offspring and its relatives. But economists have shown little interest in these temporally extended and extra-personal aspects of self-interest, and so have missed the only argument in favour of inequality that is likely to have any deep purchase on the minds of all men and women.
While the short-run cost of this benefit is not trivial, and the suppression of resentful and malicious feelings towards successful individuals adjacent to us is painful, difficult and hardly ever attained in perfect form by anyone, the argument asks, in an overwhelmingly reasonable way, for self-sacrifice in one department in order to exercise familial love in another. The human mind grasps this point easily, and it is easy to demonstrate — because it is true — that while the striving for pre-eminence, the competitive investigation of the world’s possibilities produces winners and wealth differentials, it also delivers rising incomes for all, and, crucially, greater aggregate wealth. If an individual wishes for his or her direct and indirect descendants to live in progressively richer societies so that they are as safe as may be from natural disasters, from earthquakes, hard winters, crop failures, tidal surges, pandemics, as well as secure from attack, then they must suppress their short-sightedly selfish desire for equality.
But anyone making the argument must understand that this genuinely is a sacrifice, for our instincts are correct, and it is fruitless for economists to pretend otherwise. The suppression of resentment is a classic moral act, though not in the simple sense an altruistic one, for we may ourselves benefit tomorrow, and will very probably benefit via our extended family.
However, it certainly harms our interests in the short run. The rich secure the future of their own immediate families to a greater degree than do others, and consciousness of this fact is painful for those less able to do so.
How tempting it is, therefore, to desire laws that restrain an individual’s adventures and make incomes level. John McDonnell is only the latest evangelist for this beguiling view. How tempting it is, furthermore, to misrepresent this levelling as a common good and in the interest of all. In fact, and on the contrary, the truth is that egalitarianism, collectivist Corbynism for example, serves the short-run self first and foremost and is actually positively harmful to the long-term interest of our intermingling descendants in the future, which is where we find the most profound common good known to man.
And no one should be in any doubt as to the severity of the harm to those long-term interests. By levelling we destroy human motivation, including our own. We make it impossible for anyone to attempt the increase of their wealth. Curiosity about the world dies; risk and experiment become pointless. Without the motivating possibility of advantage for self and family, the population relaxes into tense inactivity, and the aggregate wealth of the society stagnates and may even fall away for lack of repair.
Nearly all individuals will secretly resist this situation, for in demanding equality they sought limits to the success of others, not to their own freedom. In order to avoid confiscation they will be driven to conceal what wealth they possess and can create. Worst of all, the most sincerely tender of any human acts, those by which people care for their children and aim to give them some advantage, however slight, will be turned into crimes, and so in the absence of that delight, demoralisation of the parent is inevitable.
Evasion will be frequent, of course, but detection will be common, since with frozen and even declining income every individual will be strongly motivated to observe and inform on the behaviour of others in order to prevent them gaining advantage. As a result, such systems of enforced equality are remarkably stable and can persist until the aggregate wealth falls to very low levels, rendering the society feeble in the face of external competition and natural shocks, which alone can destroy them. Recent history provides many examples amongst the populations governed under the aegis of the Union of Soviet Socialist Republics and its satellites such as the German Democratic Republic. The Democratic People’s Republic of Korea and the Bolivarian Republic of Venezuela are grim warnings that the dream which is actually a nightmare lives on. Milder, less extreme and less dispiritingly tragic cases are not unknown even in Europe. France is one, and, let us be honest with ourselves, the United Kingdom is another.
So the paradox is now evident. In order to serve the common good, and emphatically there is such a thing, tomorrow or in the more distant future, it is necessary to have at hand for immediate use or redeployment a high, stable and rising level of aggregate societal wealth. But the best, indeed the only means known to us for delivering, maintaining, and increasing that aggregate wealth, especially in difficult and rapidly changing circumstances, is to permit individuals to put all their inventiveness, meticulous observation, sensitivity to error and willingness to admit and correct mistakes, all their physical energy and intellectual passion into serving their own immediate short-term requirements, and to become, if they are successful, richer than their neighbours.
It was this to which Bernard Mandeville, the author of the scandalous early 18th-century economic satire, The Fable of the Bees, wittily referred when he observed that “private vices” lead to “public benefits”. Mandeville’s joke has from the first confused readers; it is rather more than the trickle-down theory that Keynes admired in him, and it must be granted that Mandeville could have been clearer in the meaning he attached to the term “vice”. But in a religiously doctrinaire age his caution was understandable, for, to a degree astonishing even by the very advanced standards of his native Netherlands, Mandeville was a moral sceptic, and held that there is no absolute definition of moral or immoral behaviour. We invent right and wrong, as J.L. Mackie put it in his much later book of that title.
There are, of course, passing identifications on which many can agree, but there is no fundamental, universal, abstract definition on which all would and must converge. What we call “vice” is simply some act probably harmful to our own interests. These acts are all but invariably committed by other people, who see them, naturally enough, in a rather different light, as we might see them if we wished to commit them ourselves.
To deliver the distant, probable common good we must tolerate the present and certainly irritating success of others, their viciousness as we feel tempted to call it; we must exercise forbearance at the spectacle of a person becoming richer than ourselves, and often for no reason that we can see other than chance, that this person gambled and won. In pursuit of this tolerance we must insist that all individuals should have the freedom to create goods and services and trade these with any other person, without interference from another party. We know that this freedom will not in practice be quite unlimited, since interests inevitably come into conflict, but the principle is an ideal to which we can aspire, compromising that purity as needs must. And when, as a result of these conditions, some people succeed and we do not, we must suppress feelings of resentment.
This is a testing act, and psychologically demanding. Relatively successful people and their immediate descendants who enjoy the fruit of their insight and luck are all around us and little different from ourselves. Worse, they do not always wear their wealth with tact and respect for our sensitivities. They may even revel in their advantage, attributing it all to personal superiority and none to good fortune. Unsurprisingly, we bridle. But in return for a little more absolute wealth now, and a much ampler reward to the interests of our own descendants in the longer term, we must reason away our spiteful instincts.
It has often been claimed by redistributionists that in the interests of the common good the rich must make sacrifices, usually through progressive taxation. However, the evidence suggests that the sacrifice necessary is very general. In order to create rich societies that can withstand disaster and attack, we must accept the dissatisfaction of living with wealth gradients. For the sake of robust societies, for the common good, we have to suppress our malicious, selfish feelings towards the more successful, knowing that this tolerance of success is essential if the minds of the entire population, including our own, are to be engaged and brought to bear on the problems at hand, and great wealth generated for the unknown problems of the future. And conversely we must all exercise restraint in whatever advantage we can attain. Spite is certainly a short-sighted malice; but sneering victors should not be surprised if the patience of their neighbours quickly wears thin. Greed is not good, not good for the rest of us in the short term; and it is puerile as well as inaccurate to suggest that it is so.
Modern economics has not helped here. Indeed, it has done us all an immense disservice by arguing that sustained growth and high levels of wealth are dependent only on the self-seeking of superior wealth creators, and that the proper reaction of the surrounding and inferior population is to be bought off in the short run with a share of the victor’s spoils. It should be no wonder that people do not and will not accept such disgusting and humiliating terms.
Indeed, arguments emphasising the single lifetime interest of the entrepreneur, and urging venal submission on the part of the remaining population, are counterproductive since they stimulate exactly those spiteful reactions that even the most far-sighted amongst us struggle to suppress. By making such arguments, economists have not only signally failed to persuade people of the virtues of competition, they have contributed to the creation of a resistance demanding punitive, illiberal economic and other behavioural measures. Notwithstanding decades of well-publicised and cleverly engineered neo-classical short-run economic arguments, electorates all over the world, and even those populations only able to make their wishes felt through undemocratic systems, tend to press for a large element of social organisation determined by governmentally-assigned status, rather than permitting order to emerge spontaneously from the rough and tumble of experiment, observation, learning, and free contract between individuals. This reaction is largely spiteful, and so serves their short-term interests while harming the long-term future of their offspring by inhibiting growth and leaving these societies less robust than they would otherwise be. However, given the prevailing and mistaken rhetoric of economic liberalism, this otherwise incomprehensible preference for the common evil is not surprising. Free-market think-tankers have actually made things worse rather than better.
A different tack is needed, one grounded in immediate and extended family, in our reproductive futures rather than the personal, lifetime, hedonic interest which is at best a distant proxy for reproductive success. Medieval bestiarists supposed the pelican to tear its own breast to feed its young in time of hardship. We now know this to be more poetic license than good natural history, but it depicts an essential truth, for indeed all parents do this and not only in extremis. The restraint of self-interested spite, the sacrifice of the short-run interest to yield for their offspring a resilient society, would be just one more instance.
The points made here could be grounded, with revisions, in many, perhaps any of the world’s religious and ethical traditions. In making this case I have invoked only pragmatic concerns, and for me they are sufficient; but I would not be offended if others prefer them in a different structure, and find them stronger there. One widespread religion, for example, exhorts us to love our neighbours as ourselves. That is asking a lot of an offspring-rearing creature. Victors may be an intrinsic and unavoidable consequence of competition, but we will never become so habituated to their presence as to treat them with familial affection, nor should those victors expect or demand it. However, what we can realistically deliver is tolerance of our neighbour’s success, so that our heirs and successors may profit from the riches and security that a motivated, competing population of individuals produces.
This recognition can also be embodied in a naturalistic politics, one grounded, to invoke Mandeville once more, not in what we suppose people should be, but in what they actually are and what they already do. For human individuals are not the narrow hedonists egged on by one side of the political debate and scolded by the other. They are self-sacrificing mothers and fathers, grandparents, great-grandparents, uncles and aunts. People are, and the evidence is on every hand, self-sacrificing family builders. It is true that our caritas diminishes in intensity as it reaches out over the extended web of relationship, reaching very fine grades indeed in the far distance, but it is actual even at those extreme distances and utterly authentic in its sincerity. This cannot be claimed for the absolutist and undiscounted versions sometimes urged upon us by politicians and welfare economists alike.
The Conservative Party is said to be searching its soul for a set of fresh principles fit for the new age. No exotic novelty, no sacrifice of principle, is required. Any and all policies that facilitate rather than as at present relentlessly inhibiting the transfer of wealth, the expression of love, within families and between generations, with a particular emphasis on those families currently poor, will also enhance the common good and so secure general public consent.