I believe that there is a complex relation in the way that we use technology, the way we see ourselves in relation to the world, and the general complaint that we have about the present economy. In brief: Our attraction to rational structures, the pleasantness of technology, and our call for government to intervene are all related, and perhaps constitute a descending spiral. Let me see if I can make my case.
A View of Economics
The complaints both among the Occupy Wall St. (OWS) and the Tea Party (TP) crowds have some significant overlap. And in fact there are many that share these ideas. Each group has been or soon will be largely commandeered by one of the two parties and used as a means of beating up the other one. But even though the TP leans conservative and OWS leans liberal, many of their complaints are similar. Their solutions may be different. I want to make a couple simple (simplistic?) economic distinctions and then note some wider cultural issues that may be feeding a particular point of view in the debate.
There are at least two forms of wealth creation, though the second may not technically be wealth creation. The first is what I’ll call broad wealth creation (BWC). BWC is the production of goods and services that have the following properties: 1) They increase the value of one’s time and 2) they are such that they can be widely distributed without conflict. Let me explain these briefly.
(1) simply means that one increases productivity without increasing the time spent. For example, you are roofing a house. You are being paid 500 dollars for labor. If you use a hammer, it will take you 15 hours. If you use a nail gun, it will take you 12 hours. The use of the nail gun gave you a per hour wage increase of $8.00. It is clear that in just 2 or 3 days of work, the nail gun will have paid itself off and will of course continue to work after those 2 or 3 days. Thus, the nail gun is a product that increases the value of your time.
And, in turn, it can bring the cost of roofing down, lowering the cost of repairing a house and also lowering the cost of homeownership, as well as for all shingled buildings like apartments and so forth. Thus, it can have the effect of reducing the cost of all housing, thus making so that we need not spend so much of our work on housing.
This brings us to (2), which stipulates that BWC cannot be the production of a good or service that results in conflict. What I mean by this is not that the product/service causes competition to increase. A roofing company that buys nail guns can reduce their prices slightly versus a company that just uses hammers. Thus, the invention of the nail gun could be considered something that “increased” competition. But all that is required is that the other company purchase nail guns, and all is made equal again.
But consider the nail gun versus a clever accountant. A clever accountant may be able to discover ways to avoid paying certain taxes and fees that most businesses must pay. Though perhaps not immediately obvious, such clever tricks create a kind of conflict. Insofar as one company avoids taxes and fees, a larger portion of the burden is placed on other companies. And insofar as the other companies also use clever accountants, the government must double-down on enforcement, seek to stop up loopholes, or simply raise the fees or taxes. This shifting of burden or forcing of the hand of government is what I mean by causing conflict.
You see, in turn, that there is really no broad benefit to society if (2) fails to be the case. Whereas the simple creation of a nail gun has the possibility of increasing pay and reducing costs for most people in a society, a clever accountant benefits only a small group, and in such a way that may increase costs on the rest of society.
This conflict-causing kind of “wealth creation,” I will call narrow wealth creation (NWC), because it “creates” wealth for only a limited group. It still contains property (1), in that it increases the value of the time of those in that limited group, but it transgresses (2) in that it is not capable of increasing the wealth of society as a whole. The result is that NWC is actually just wealth redistribution, not really wealth creation at all.
It is in the interest of the whole that NWC be kept to a minimum, while BWC be encouraged as much as possible. Why would any group consider NWC rather than BWC? Both can make a company wealthy, while the former is only good for the company. And of course, the wealthier a society is, the wealthier the company/individual doing wealth creation can be.
NWC comes from a simple cost-benefit analysis. Let us say that a company makes $10,000,000/year profit. Taxes and compliance with regulations costs the company 30% of these profits. That is $3,000,000. Let’s say that they can expand and rework their factory in order to increase the value of their product. This will cost $5,000,000 over 5 years and will result in an estimated increased profit of $7,500,000 over 10 years. That is, for 5 years they will be running at a loss or breaking even, but it will pay off in the long run. (My guess is that almost all business expansions and improvements work like this.)
But let’s say they discover that spending $500,000 for a collection of clever accountants and lawyers and lobbyists, they can avoid paying $1,500,000 every year in taxes and regulation compliance. These expenditures will delay the expansion and reworking of the factory for a number of years.
Which will the company decide? Perhaps they should be compassionate and moral and decide to expand and rework the factory – giving people a better product and giving more people jobs. But what is the profit difference? In the first, they are risking a lot (what if the economy tanks? What if new taxes and regulations pop up that make the company insolvent?), though doing something great. And it promises to increase profits over 10 years by $2,500,000, and in the long run perhaps by a lot more. In the latter case, they get some peace of mind, have little to no risk, and increase their profits by $1,000,000 per year, which is an increase of $10,000,000 over ten years.
All of these are made up numbers, but it shows how high taxes and expensive regulations encourage a push toward NWC. To venture into BWC is always risky, and even more so when things are complex. NWC takes away much of that risk.
A society that is dominated by NWC is one in which people become rich primarily by wealth redistribution. When I see the complaints of the OWS folks, it seems that this assumption is lurking underneath – that the rich and powerful have become richer and more powerful by redistributing wealth from the poor and middle class to themselves.
What about the solution? There are several options for solutions, but most of them have undesirable aspects. Get rid of or severely roll back government regulation? Yes, most people would argue that there are regulations that are ridiculous, but that is a long and difficult discussion.
What about taking the more OWS approach? Which is something like: Limit the ability of companies to buy politicians. We all would agree on this, I think. How do we do this? It would seem we would need some more regulation and some focused policing. But I’m not sure how well this would work. If the benefits of playing the system, and the costs of not playing the system, are large enough, then the rich and powerful will find a way. And, besides, there is always the option to move the company elsewhere.
A View of Our Culture
Why the general unwillingness to roll back government regulations? The government is capable of doing things that we are not. Direct and maintain an army, create infrastructure that crosses different domains within the society, and so forth. Further, the government can look out for broad interests that many of us as individuals or groups may ignore. Say: the environment, equality, and so forth.
Further, most of us lack the willingness to think through the issues related to regulation. This lack of awareness is a favorite insult of conservatives about OWS. For many, it may be too many steps to move from NWC to that which encourages it. We simply say “NWC is bad!” (whatever form it happens to be) and point at those who participate in it, without considering that which creates the cost/benefit equation that encourages companies to do NWC.
There is another aspect of society that is complex and, I think, plays into this discussion. It involves the interplay between our attachment to technology and the “natural” virtue of the underdog.
We are addicted to technology. From the video games to computers to smartphones, we are always connected. And this connection offers us a “world” that is rational and controlled. Of course, by “rational” I don’t mean that everyone acts rationally, but that one is the master of one’s domain. Even the move to texting as opposed to talking on a phone is a shift toward control – if we are not talking live, then I need not respond, you can’t hear my voice and make judgments about it, and so forth. All is controlled.
This kind of control is tricky. Consider a role-playing game (my favorite kind). My activities result in a rational and clear progression. They are exciting, beautiful, and glorious. But my interactions with, say, my friends can be boring, unpleasant, and inglorious. Things don’t work the way I want them to, they are not interesting, and I am just another person full of faults and failures.
Whereas prior to all this “interconnectedness,” we were forced to function in relation to people and so learned to deal with these things. (Perhaps manners were the previous generations’ form of control in interactions? Has technology made manners unnecessary for us?)
When I get off my video game and go to work, I experience a sense of helplessness and mistreatment and lack of belonging. This may be better or worse depending on how “introverted” one is. But living a personal life of control, then entering the public realm causes a feeling of helplessness.
Enter the house of someone in poverty. I can almost guarantee that the possessions of that person/family are primarily made up of entertainment products. In entertainment, we relax and gain control. In life, we are a mess.
Entertainment and interconnectedness relate to our failure to be informed, though information is easier and cheaper to access than ever in human history. Further, if knowledge is power, more people have access to this “power” than ever before. But we have acquired a general feeling of helplessness.
I think the ease of enforcing my own order through technology is part of this problem. There are other things – the amount of information available can make us shut down, because we can’t get it all and don’t have a clear way to filter it. (Consider where those filters might be grown, and you begin to see the danger of a “don’t judge” culture. I’m not saying here that a “don’t judge” culture is all bad, but that there are dangers involved.)
In such a society, we follow the rules – we are fairly good people, we “follow our dreams” like we’re told, and we go to college. We get out, and there are no jobs. This is not fair. It is “out of order.” We feel helpless – partly rightly so, and partly because we’re too accustomed to an ordered world. (Part of this may relate to how our childhood is purposely and inadvertently being further and further extended, and how adolescence is considered the goal of human life in our society. But I’ll leave that alone here.)
With helplessness comes blame. With too much entertainment comes limited critical thinking. And, in fact, when we feel overwhelmed, we tend to shut down and become despondent and/or angry.
If I am right, the suggestion is that as we become more connected with technology, we will become less able to handle interactions with real life.
The Enlightenment Ain’t Done with Us Yet
There is one further factor that will bring things into place. The Enlightenment several centuries ago raised human reason to ultimate authority. And though there have been many struggles back and forth, we have not really lost our faith in reason. The incarnation of our reason is most evident in technology. Trash metanarratives, bring your linguistic and interpretive weapons, and cry out about power relations all you want – they will never stand against my smartphone (I don’t actually have one), Facebook, or a good video game/movie.
Of course, there is a disconnect here. Those attacks on reason belong to real human interactions, and even those interactions that take place through technology. But they do not belong to my ability to control and form my experience through technology. Kant “proved” God through the need in our reason for a summum bonum which makes those that are good be rewarded for that good. After all, to be good simply means to be worthy of happiness. There must be a God who can make them happy, and so can order things in such a way as to lead to this summum bonum.
Perhaps we don’t need God. What we needed were a few centuries of technological development. Human reason has led us into a world in which we are made happy. It is different from everyday life. It is a new world of order, in which I can acquire happiness by my reason alone.
How difficult it is to come down from your “heaven” to everyday life, to find that even your “heaven” may be threatened by the misfortunes of everyday life. Just as human reason has been made “flesh” and makes its dwelling among us, we find it crucified on the tree of everyday economics. (Did I go too far there?)
And so we lose our faith in our own capabilities in everyday life but retain our faith that life should be rational. After all, reason gave us our “heaven.” The obvious conclusion: We need overseers who will make life rational.
The Point
Take a sense of helplessness, add to it an unwavering faith that the ordered and rational is the good (especially that which makes me happy – is there any other kind?), and you get a group of people who believe that the way to happiness is through a very powerful government of really intelligent, rational people who make all things rational and ordered. All that is keeping the government from being structured this way is the interference of rich and powerful corporations. We (meaning the 99%) all want a rational and fair government. They (the 1%) have, on the other hand, a sense of power over society and so work to keep that at the expense of the 99%. And that sense of order is accomplished primarily through NWC.
This perspective involves several fairly serious over-simplifications. The first is the sense of our own helplessness. This is an over-simplification in that it tries to reduce our situations to the fault of others. Further, it suggests that simple greed is the source of corporations doing NWC instead of BWC. Maher said in a discussion, partly joking perhaps, that the rich (and Republicans) don’t want the poor to become rich because, well, who would then do the work that the rich hire the poor to do? That is, simple selfishness is the source.
But that seems ridiculous. It is rather a mix of beliefs. First, the primary concern of the company is to make a profit, not to carry out philanthropy. Second, cost-benefit analysis in relation to taxes, regulation, the market, and so forth. Sure, we might say that profit as a concern is the definition of greed. That may be so, but the pursuit of profit is the source of BWC and jobs, just as much as it is a source of NWC.
Given that we can do the two options mentioned above – draw back government regulations or try to cut off business influence – we are left with two undesirable solutions. The former can significantly reduce safety (the pursuit of safety is in almost all cases NWC), while the latter can significantly increase governmental NWC and may barely reduce business NWC.
There is one positive step that could be taken easily: making the tax code simple and difficult to modify. Insofar as complexity invites playing the system, and the perpetual changing invites crony capitalism, one that is simple and difficult to modify would immediately cut off a lot of NWC. Perhaps Herman Cain is the only one of the present candidates, the present POTUS included, that gets the importance of a simplification of the tax system.
Will it change? Probably not. The tax code is a source of much power and money. A simple tax code would result in a loss of resources devoted to the NWC that is accomplished through accountants and lawyers. In turn, it would significantly reduce the power of politicians to choose winners and losers, and thus significantly reduce the amount of campaign money and other benefits flowing from businesses to the politicians.
More needs to be changed than the tax code. But this little change would likely be enormous for our society. But it won’t change. Those powers that seek to incorporate the complaints of OWS and the TP do not, I think, want it to change. And, as the OWS gets taken over by the Democrat establishment and the Unions, it will cease to offer real solutions. And as the TP gets taken over by the Republican establishment and the Neo-Cons, it too will offer nothing of substance. Cain’s 9-9-9 plan, though perhaps not perfect, is thinking in the right direction.
The irony: The cries of OWS are largely related to the sense of having money and property forcefully taken from them and redistributed to the rich. The solution? To increase government regulation over businesses, while reducing business influence on the government. But increased regulation is likely to increase NWC, which is presently the primary complaint about businesses. We may try to make laws and a police force to make sure this doesn’t happen, but this is another form of NWC. After all, most of what government does costs a lot and creates no wealth,* even if it offers some benefits to us. In turn, if we cannot work out the complex laws and intense oversight required to keep the rich and powerful businesses and their rich and clever lawyers and accountants to buy politicians, NWC will simply increase. And as NWC increases, the amount of wealth in a society begins to grow stagnant. And if an economy becomes stagnant, the rich can only become richer through redistribution of wealth. That is, we are brought full circle. When you are not making more pie, you can only get a bigger piece by taking from others.
But, again, whereas our parents worked hard their entire lives just to give us a chance at a better life, we are appalled by a thought like that. We may work hard for a short time for a better life, but we have learned from technology that rational order will not demand such sacrifices from us. So, make changes, and let them be immediate and “fair.”
* The government has the ability to create wealth through R&D funding, infrastructure production, and simply maintaining safety from criminals and external enemies. All of these bring about a broad increase of value to us all. But the government lacks efficiency (it doesn’t really have a bottom-line that keeps its feet to the fire), and a good portion of what the government does involves things that are benefits to only a small portion at the cost of everyone else. Further, a lot of safety and other regulations, though offering benefits, simply consume wealth. One example is car seat regulations, which would make the development of simple adjustable seat belts in cars (which could save all parents a decent amount of money) not worthy of development – because it would take time before people could use them, due to slow-to-change laws. And with the lobbying of those companies that make child car seats fighting, this might be long and expensive. That is, BWC would be more costly than NWC.