or: Alternatives to the Pyramid Scheme
The idea of Libertarianism in our time — in North America anyway — seems to be pretty much owned by the far Right.
If you google for “Libertarianism” the hits will tilt perceptibly rightward. If you start collecting websites claiming to be Libertarian, to be advocates for Libertarianism, Liberty, etc., you will eventually find yourself out on the fringes among people who want to abolish government as fiercely as the Black Bloc does.
Nevertheless, I call myself a libertarian. I also call myself a socialist. Sometimes, just for a conversation-tickler, I call myself a Menshevik or an anarcho-syndicalist. But mostly, if asked to pick a label, I say I’m a libertarian socialist, or a socialist libertarian. Most people in North America today think that’s some kind of a joke, an oxymoron. They think I’m kidding.
But I’m quite serious. I think it makes perfect sense.
The core value of libertarianism is individual freedom. The core sins in a libertarian canon are Force and Fraud, otherwise known as violence and lies. I can definitely get behind all of that. And that’s what makes me a socialist.
Here’s my reasoning. Say you have a human community — or, since many right-wing libertarians don’t believe in the concept of community, let’s just say you have a group of humans. And among that group of humans, some have managed to get control of an essential resource needed for survival and comfort. To keep it simple, let’s say food. So some people have got control of the food, and have easy access to food, and other people don’t have access to food.
That’s called inequity. And it destroys liberty, because the people who have access to the food are in a good position to dictate terms to the people who don’t. They are in a good position to say, “If you don’t obey me and kiss my ass, you won’t eat.” The people who don’t have access to the food don’t have liberty. They are quite likely to be enslaved by the food-controllers.
In the fantasy world of right-wing libertarians, there’s an infinite supply of food. All the have-nots need to do is roll up their sleeves and go forage, farm, or hunt more efficiently, instead of being so darned lazy. Alternatively, if competition is tough locally, they could wander off to some new territory where food is more plentiful. So if they are at the mercy of the food-controllers… it’s their own darned fault.
In the real world of human beings, however, the game of life is not quite so simple. Trekking off into unknown territory (not necessarily uninhabited, and not necessarily inhabited by friendly people) may be just exchanging foreign slavery for domestic. And resources are never infinite. Soil has a finite productive capacity. Bioregions have limits. There’s only so much potable water. So as humans get more successful and more numerous, the finitude of resources makes itself more and more felt. If the Haves enclose resources, the Have-Nots feel the pinch.
In fact, it’s now fairly respectable for historians to speculate that the development of grain agriculture may be the starting point for the evolution of intensely unequal, hierarchical societies… for this very reason. As human numbers increase, we are forced to grow food deliberately rather than foraging, and to rely on a more limited diet of a few staples, especially hard (storable) grains like wheat, barley and rice. As the urgent necessity for storing and managing grain reserves makes itself felt, we evolve specialized castes to keep records and protect the stores.
As these castes get more and more control over the food supply, they become an elite… and before you know it you’ve got Pharaonic Egypt, or the Aztec Empire, or Ur of the Chaldees: highly organized, rigidly hierarchical civilizations based on the pyramid model not only architecturally but socially. An enormous majority of slaves and serfs and foot soldiers serves a moderate-sized artisanal and service minority, which in turn obeys a much smaller, elite bureaucratic and warrior caste, which finally answers to some kind of priest/king at the top.
A subset of the people got control of an essential resource. They parlayed that control into absolute power over everyone else. Inequity led inexorably to unfreedom. My thought experiment seems to play out in real history.
Now let’s consider capitalism, or more generally commerce (since commerce and currency predate what we call “capitalism” by at least a couple of millennia). I like to think of commerce, banking, all that baroque efflorescence of the basic concept of fungible money, as a game. Like poker, or chess, or backgammon, but more complicated, involving huge numbers of players: possibly the most elaborate, clever, and viciously competitive game humans have ever invented.
Like all games, it only works so long as everyone agrees to believe in its rules and conventions. You and I, when I buy a loaf of your bread at the farmer’s market, have to agree that these odd greasy slips of thin, coloured plastic in my wallet are money, and the magic of money is that if I give you one of these purely symbolic objects in exchange for your loaf of bread, you will be able tomorrow to exchange it for something else of similar worth. That same consensus has been invented and honoured all over the planet, whether the agreement be on the worth of gold or silver, copper or brass, cowrie shells or clay markers. It must be a nifty idea, because we keep on discovering it.
And it is a nifty idea. It’s a great game. It allows us a flexibility and portability in trading that was never possible with in-kind barter. That’s why we’re so attached to it. But like many games, it contains the seeds of its own sabotage.
The tendency in any game in which accumulation equals winning, is for lucky or skillful players to parlay their initial success into leverage that then assures yet more success. If you are the early Chaldean bigwig who controls the granary, that control enables you to coerce others into working your fields. The bigger your granary (your ante, as it were) the more labour you can coerce, the more productivity you can command, the more grain you can stockpile, and so on. That accumulated wealth may then enable you to buy some more acres… and that’s called a “success story,” as you and your family leverage your assets to enclose yet more assets.
Dumb luck aside, individuals who are good at playing the game — especially in the earlier rounds — tend to compound their success and capture more and more resources. As Marx noted in his critique of C19 industrial society, ownership of the means of production guarantees the lion’s share of the profits. As we still say today, it takes money to make money.
So money-wealth tends to compound. Inherited wealth tends to compound over generations. When we invented usury (lending money at interest), this problem itself was compounded! Now it was possible for wealth to make more wealth without even commanding labour or hiring overseers — all it had to do was be lent out for someone else to use (at their own risk), and they would be obliged by the rules of the game to pay back more than they borrowed. They could be coerced into agreeing to these rules, because they needed the money and other people had it.
Now the person who has already amassed some money can really make it multiply, not by the simple growth rate of productivity on arable land or the multiplication of livestock, but by the non-linear curves of compound interest. The money has gone on autopilot and is growing without the owner having to do anything but keep the books. This is what we now call “Capitalism” with a big C, aka the debt-based infinite growth economy. The metaphorical crowbar with which we “leverage” our assets just got a whole lot bigger and longer.
OK, so game theory plus historical observation plus the nature of money itself all suggest that the natural tendency of organized, monetized economies (especially those involving usurious lending) is for successful accumulation to amplify its own success in a feedback loop — until a fairly small number of people or families control most of the wealth. It’s rather like a poker game in which one player, by a combination of skill and luck, ends up with the entire pot. And as in poker, when all the other players are broke the game is over. You can’t play the game any more if the other players have nothing to bet with. (At that point the top-heavy economy, in modern times, may enter a financial crisis or crash, which is a messy and brutal form of “game over, reset.”)
Hoarding has always been a vice of elites, from Ur of the Chaldees forward. But abstract money (debt) economies, unlike barter economies, permit a theoretically infinite amount of hoarding. Wealth — when counted and stored as “obligation to pay” rather than as physical stores of wheat, jewels or bullion — can be hoarded securely with very low risk, in fabulous quantities. A Chaldean grain hoarder would have a hard time housing or managing a store of more than a certain number of tons; he would run into some problems of scale. But a modern money hoarder can accumulate virtually unlimited wealth. In 2017, the three wealthiest Americans owned more assets than the poorer half of the entire US population. The thirty wealthiest individuals on the planet control, in sum, assets that exceed the GDP of entire nations (not superpower nations, but midlevel players like Spain, Turkey, Mexico).
So we have good reason in practise, not just theory, to believe that our fun game of money, played for long enough, tends to result not in an even distribution but in points of locally dense accumulation surrounded by sparsity (read: concentrations of wealth surrounded by poverty). And we know that in an organized monetized economy, money is the essential that everyone requires for survival and comfort. Without money it is difficult to get adequate food, shelter, or clothing. We are back to the original thought experiment in which a few people control access to food, although at one remove (mediated by the mechanism of currency).
When money is sufficiently concentrated into dense islands of wealth surrounded by large areas of poverty, the people in the areas of poverty automatically become vulnerable to coercion and exploitation by those who control the flow of money. Translation: they lose various freedoms. They experience injustice. Those who find powerful asses to kiss and jobs to do, who manage to earn some crumbs from the big table, live in constant fear of losing that connection with the islands of wealth and being plunged into the surrounding ocean of poverty.
The net result is… a stagnant society, one where employees turn into yes-men and yes-women because they are so frightened of losing their jobs, where many people with fresh new ideas never get to realize them because they have no capital and will never accumulate any, where more and more of the nation’s resources are siphoned off into private pockets… an inflexible society, as more and more creativity and energy are directed into the production of absurdly excessive luxury goods for the ruling class rather than into reacting to changing conditions, solving common problems. And, not coincidentally, an increasingly authoritarian society where the focus of government shifts from service to the people, to containing and policing the people — as the people or the majority starts to mean the Have-Nots.
In summary: the stereotypical “Third World Dictatorship” in which a small comprador elite lord it over immiserated, precarious masses. Or any other “pyramid scheme” in human history.
So, what can be done to prevent the decline of our dynamic, enjoyable poker game into a static, boring table where one over-successful player sits smugly hoarding the pot (gun in hand) and no one else gets to play? What alternative is there to the Pyramid Scheme? The solution is pretty simple. We can redistribute the pot, so that everyone can start playing again. Game over, reset.
The notion of a deliberate reset in our economic game is anything but new-fangled. We can find it in the traditional potlatch of the Northwest’s First Nations. We can find it in the decrees of Babylonian kings who periodically ordered the cancellation of all debts and/or the restitution of lands that had been sold for debt payment. We can find it placed on a less whimsical and autocratic, regularly scheduled basis in the Torah, in the concept of the Jubilee Year and in the limits placed on the period of slavery: the limit of servitude was seven years, and every seven times seven years all debts were to be forgiven. This “clean slate” event effectively restarted the game once per generation, preventing perpetual indebtedness, putting the brakes on the natural tendency of commerce and fungible currency to spawn dynastic elites.
Socialism merely takes that ancient Jubilee concept a step further, as pre-emptive rather than corrective policy. Rather than letting accumulation continue unchecked for decades and then carrying out a single redistributive event, it limits accumulation in real time — by taxing wealth at ever higher rates as that wealth grows, so that the very richest pay the very highest taxes (and hence “lose” a large chunk of their wealth, which gets redistributed into goods and services which benefit the entire population).
The Torah recognises such a thing as too long a term of slavery and too lengthy a burden of debt, and limits those ills. In an ideal social democracy, we similarly recognise such a thing as surplus wealth (wealth that exceeds what anyone really needs), such a thing as excessive consumption; and our public policy limits the excess of the few so as to guarantee a sufficiency for all. By every objective measure, those nations which have practised social democracy have benefitted: statistics measuring public health, literacy, longevity, crime rates, drug addiction, self-reported happiness, and so on, consistently rank the “Scandinavian model” social democracies as the “best countries to live in.” Those nations which have rejected social democracy in favour of trendy Thatcherism, Reaganomics, and so on have seen their ratings slip in all indices (except, of course, the “number of millionaires” scoreboard).
Above all, people living in a functional social democracy enjoy a degree of freedom that even soi-disant libertarians in nations loyal to Chicago School ideology don’t enjoy. They are free to work or not work, without having to dread abject and grinding poverty if they fail to find employment. They are free to pursue their education without taking on crippling lifelong debts for college tuition. Those who do work, work fewer days out of each year and enjoy more paid vacations — more free time — yet still make a living wage. They are free from “job lock;” they can walk away from unhappy employment without fearing that their entire family will lose its health insurance or its housing or both. (Here I recommend Ed Nolan’s excellent article which introduced me to that useful phrase “job lock”.)
Workers who enjoy these freedoms can more easily… disagree with a boss, reject sexual harassment, stand up for their political beliefs, without thinking “OMG how will I survive if I lose this job?”
Employers hiring from among a population enjoying these freedoms have to woo rather than coerce, offer benefits rather than threaten consequences. Women are less pressured to tolerate an abusive but wage-earning partner when they know that they can leave without facing hunger and homelessness. In a country where shelter, nutrition, and basic health care are rights rather than commercial commodities, everyone has more liberty: that’s my idea of a truly libertarian country.
In a country where shelter, nutrition, and basic health care are commercial commodities available only to those who have money, the wealthy do enjoy something like freedom; but I wouldn’t call it that — it’s not really freedom at all, but privilege. Even the most privileged are never truly free; they have to live with the nagging fear that the dispossessed, the landless, the foodless, the hopeless, will one day get angry and desperate enough to attempt some immediate redistribution by violent means. It was only this fear of violent revolution (with the Russian example very fresh in their minds) that persuaded the ultra-rich of Roosevelt’s time to accept, grudgingly, the New Deal that moderated the grotesque inequity of the Gilded Age. Today we have “achieved” (if that is quite the right word) that same level of inequity, restored the ancien régime. As the man said, it’s déjà vu all over again.
Freedom for some might indeed be just another word for nothing left to lose — but for me a far better translation would be nothing much to fear. If you live in a society where you — as an average person on the street, not a member of the affluentsia — have nothing much to fear, you are free in a way that most North Americans cannot imagine. If you have nothing much to fear only because you have accumulated wealth, while those around you have everything to fear because of their lack of it, then what you enjoy is not freedom — it’s privilege, which always implies someone else’s unfreedom.
FDR expressed pretty much the same idea when he said that all people in the world should be entitled to four fundamental freedoms: freedom of speech, freedom of worship, freedom from want and freedom from fear. Freedom of speech and religion made it into the US Constitution; freedom from want is still considered a dangerous Communist idea… especially, ironically, by that subculture of right-leaning people who call themselves libertarians and say they love freedom.
I remain convinced that socialism is the most practical and genuine form of libertarianism, and that more freedom for all is inherently a better thing than more privilege for a few. None of us is free, if one of us is chained, none of us is free.
For a quick and amusing tour of some nifty features of European social democracies, I recommend Mike Moore’s film Where to Invade Next. Deep it isn’t. But it’s engaging, and eye opening if you’ve never lived in a country with humane social policies, decent labour relations, sane drug laws, a prison system that actually reforms criminals, or generous vacations and maternity/paternity leave.
For some much deeper thoughts on the nature and history of money I always recommend Alf Hornborg’s The Power of the Machine. There’s a lot more to be said about fungible money and the role of currency in enabling the flattening of human values. I give currency (as a concept) a break here because I’m arguing for humanizing the money economy via taxation rather than abolishing it entirely; but one could make a good case for abolishing it entirely — or at least dividing it strictly into a socialised necessity economy and a speculative luxury economy.
The subject of debt is another deep one. The economies of capitalism are “debt-based” economies rather than credit-based economies, and it’s worth reading some contemporary contrarian economic thinking about the merits of a credit-based system. In a nutshell, a debt-based economy forces hectic growth, because steep growth is necessary to repay usurious compound interest on debts. And growth, as any cancer patient can tell you, is not necessarily a good thing. “Post-autistic economics” or PAE is worth googling for. Steve Keen’s critique of neoclassical economics is unusually accessible for an economist (and acerbic too), a worthwhile read.