Sunday, August 4, 2013

Breaching the Social Contract

Part 1 | Part 2 | Part 3

When discussing the really obscene amounts of money some rich folks have amassed in the world, the justification I always hear is: “It's their due. They are the ones taking the risk, so they should get the spoils.” I understand why they say that, but I still don't buy it. It's at best an oversimplification, and at worst just a clever lie designed to put a nice face on institutionalized inequity.

Of course, lie or not, I don't doubt that the rich believe the excuse. They need to believe this wealth is rightly earned through the risks they took. It soothes their conscience to believe that. So they repeat the excuse a lot, and they find after a while that they do believe it.

“They risked everything to get there,” say others, trying to vary the wording just a little. In this form, the parallel between “risk everything” and “get everything” makes it seem ever so fair, like a carefully balanced scale, with the same quantity on both sides: “risk everything, win everything.” What could be more obvious justice? Except the “everything” risked was only one's private fortune, if one even had one at the time—they may have had little to lose—and the “everything” to be won is a lot more.

The net worth of the Walton family, who inherited the Wal-Mart retail chain, was pegged earlier this year at $115.7 billion. I somehow doubt that they risked that much to get that much. Even the late brothers Bud and Sam Walton, who founded the company and I'm sure worked quite hard, still had human limits on what they could contribute. In present day, I'll bet the combined Walton family wealth exceeds the combined wealth of every one of their employees, probably every employee past and present. Did the family work harder than all of the other employess put together? That seems an unlikely truth.

If the rich really did have a way to take unbounded risk in exchange for unbounded reward, that might be a different matter. But bankruptcy laws generally place a bound on risk, preventing folks from having to pay back more than a certain amount in really extreme cases. This allows them to start over, sometimes even more than once. We coddle our rich in ways we don't our poor.

By “rich” here, of course I mean the class of folks that feel entitled to be rich, because even when they are without money, they are rarely without a whole social network who sees them as differently poor than those who were always poor, and who understand that these particular poor need to be made rich again before all is right.

Likewise, when I speak of the “poor” in this context, I mean those who are not similarly entitled to riches by virtue of birth or connection. Odd that these should be called the “entitlement class.” The reverse would seem more apt.

Poor folks often don't actually go bankrupt. They may just get stuck in a cycle of poverty that restricts their lives, but they may not have the luxury of time, money or knowledge to do a proper bankruptcy, or even know it's possible, so they never clear their debt.

In fact, we've done to this class of people something the rich would never tolerate: We've taken the primary longshot investment they could make that might raise them out of their poverty, education, and have written it into law that if this longshot fails, they may not clear their education debt. We would never do that to a rich person's longshot. And why? Because we want to encourage entrepreneurs, I'm told. But we don't want to encourage people to invest in education?

Closer to the truth, I fear, is that those people buying the lobbyists that write our policies are comfortable that their own kids are going to end up educated, and they really just can't find it within themselves to care about anyone else being educated. In fact, they'd probably rather we have a broad underclass of exploitable poor ready to work at junk jobs, since that offers a direct profit advantage to them. Right now they have to get their ultra-cheap labor from abroad, which means managing at a distance, dealing with foreign governments, and lots of transportation costs.

Just think of the Utopia the US would be for them if only they could achieve real poverty here at home. Once minimum wage is eliminated and overtime regulations are repealed, pay could drop to a level where the rich could afford to offer tons of jobs and get everyone to shut up about unemployment. A job for everyone—maybe two or three, actually, since the pay for any one of them would never be enough. Isn't that what the liberals have wanted? Jobs? Imagine the joy the conservatives would feel in being able to satisfy that request if allowed to do it on their own terms.

And when the rich do need a few educated folks to work for them, they can always import them from other countries. There are plenty who would love to come here, and they'll take lower wages than those in the US because they grew up in a part of the world where the cost of living and of getting an education was lower. In effect, we're now outsourcing education because many of the heirs apparent to our educated jobs have gotten their degrees elsewhere. The fact that the people who are thus educated may not be American citizens is a mere detail, irrelevant to the business. And anyway, a less-talked-about aspect of modern immigration reform is the desire to ease the path to citizenship for these people, so they'll be citizens soon enough.

And, hey, I'm not xenophobic. I don't mind people coming from the outside, especially if they're going to become citizens, commit to living here and invest in our society. But I do mind a great deal using that trend as an excuse not to educate those who are already citizens. Our first responsibility is to them. If education is too expensive or ineffective here, our priority should be to make it cheaper and more effective. We can't treat our existing citizens as expendable just because it's cheaper or easier to fill STEM jobs from the outside.

Now let me come back to risk, because we were talking about education as the big risk. An education is needed for a good job, but it's not a guarantee of a good job. There are lots of people with college degrees working at retail outlets and fast food places. So getting an education is actually a huge risk, and we've allowed Congress to eliminate bankruptcy protection for those whose investment utterly fails. When the money coming in from those low-paid jobs doesn't pay back the loans, there is no escape for them as there would be for the rich when their investments fail.

Nor is that the only risk. There's the day-to-day risk of not having enough food, health care, housing, heat or air conditioning, and so on. The sad truth is that the minimum wage, which many of these people make, is not a living wage. That's also true, by the way, for some making over the minimum wage—say, minimum wage plus a buck. They're still not breaking even either, but they just don't have a catchy title like “minimum wage worker” to describe their plight. They may even be made to feel guilty for not speaking appreciatively about being above the minimum. But really, they're all in the same boat until they're at the level of a living wage.

After all, the minimum wage doesn't measure anything related to anyone's ability to survive, so being above it doesn't really mean one is somehow surviving. It just measures, through its distance from a living wage, how much we as a public are willing to stand by and watch people sink before we finally decide to care. And whether a person works at minimum wage or barely above, if they're not making a living wage, they're still running a daily deficit. Yes, deficit. The “D” word. And although the Republican Congress worries a lot about deficits, they really only worry about public deficits, and only because they themselves might have to pay. They imagine these private deficits are the result of private choices, and they're well-practiced at chiding people about the need to take responsibility for their own actions.

Never mind that these others have taken responsibility. Many got an education. Most work every day. By and large, most folks do their part of what should be our social contract: Be a good citizen, improve yourself, contribute the skills and strength you have to the general good. That should be enough that society should treat you as one of its own without insulting you by suggesting in the end that you're asking for a handout or not taking responsibility. If anyone is not taking responsibility, it's Society. We asked these people to do these things. They did what they were asked and are now beaten up for it and told they must suffer.

Implicit in our request that people work full-time should be that they be given work that will support them. Implicit in our request that people educate themselves should be that we'll find something to do with that education. And if some jobs don't require education, let's not treat the people who go that path as if they've disappointed us. Society asks different things of different people, and we need to treat everyone who does their fair share with a certain baseline respect. We've got a ways to go on that.

Meanwhile, back in the real world, the poor are stuck in situations they didn't freely choose. As Adlai Stevenson once aptly summed it up, “A hungry man is not a free man.” In bargaining for a way to survive, there is huge inequality of bargaining power. That, in turn, makes a mockery of any notion that the poor really elect their fate, and calls into question whether it's their responsibility to fix a problems they didn't create.

As Adam Smith put it in his book The Wealth of Nations:

“It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, a merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.”

It therefore falls to those of us who are not economically disempowered to speak in support of those who are, to acknowledge the legitimacy of their plight, and to stop insulting them by saying they should take responsibility for their actions. Of necessity, they take responsibility each and every day. They're not failing us. We're failing them. And it's time we took some responsibility.

Author's Note: If you got value from this post, please “Share” it.

This first part of a 3-part series was originally published August 4, 2013 at Open Salon, where I wrote under my own name, Kent Pitman.

The other articles in this series were:
Lien Times for Startups (part 2)
The Overtime Loophole (part 3)

The Adam Smith quote was borrowed from the Wikipedia entry, “Inequality of Bargaining Power.” It's quite a fascinating entry full of very instructive and powerfully-expressed quotations. If you have the time, I recommend that article as important reading.

Tags (from Open Salon): politics, social contract, bankruptcy, risk, reward, responsibility, entitlement, minimum wage, living wage, education, investment, inequity, walton, wal-mart, rich, poor, wealthy, class, entrepreneur, entrepreneurship, failure, success, reward, punishment, penalty, poverty, cycle of poverty, immigration, xenophobe, xenophobia, xenophobic, jobs, employment, unemployment, stem, college, degree, tuition, cost of education, deficit, congress, bargaining, inequality of bargaining, duress, adam smith, adlai stevenson

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