Friday, July 16, 2010

The Egalitarian Myth of Capitalism - A Neoeudaemonistic Viewpoint

It is considered by many that capitalism provides for a form of egalitarianism, in that anyone in a free, modern, democratic society has the same opportunities and therefore what one has is related to their own efforts, and any one in turn by their own efforts can improve their circumstances.

Whilst I don't fully dispute this, and I do think that any one can improve their circumstances through their own efforts; it is not such a simple equation as effort = reward.

Their are elements of social prejudice and social privilege that play a major role in the creation and retention of wealth in society....and let's face it, we are talking about wealth as a predicator of security in our currency driven society.

A neoeudaemonsitic view of taxation
I was, for a long time, in favour of a flat tax rate. I considered that a flat tax was the most fair because everyone paid, proportionate to their income, the same amount as a contribution to society.

I no longer believe this...

The major change came as a result of several studies I read that showed that there appeared to be a critical tipping point where happiness increased up to a point of income and then didn't further increase with increase in income. Once peoples needs are met and there is a minimal level of 'creature comfort' and security happiness indicators do not improve.
Let's say that people earning under $30,000 a year are more unhappy than those earning over and further, that as people approach $30K p/a they become more and more happy but do not continue to become happier as they earn 35, 40, 50, 100 or 200K per year.
This to me shows that if we want to live in a society that is at it's absolute best, a society that truly cares for it's citizens and a society that takes it's citizens happiness as something of primary importance then the bench mark of happiness should be an important indicator for policy.

In this hypothetical scenario I would propose that there should be NO tax up to $30,000 per year and that tax should then be graduated (as it currently is) in proportion to someones income.
This way more people (at least those working) would have the greatest opportunity to live happily. This argument could be taken further to encourage minimum wage levels more conducive to happiness and not just survival in the most meager sense of the word....

I often hear the argument "Why should I pay more because I worked harder and improved my position?" and while this argument is in some ways valid, it is also flawed for the following reasons:

- The highest earners in society do not necessarily work harder than others. Can you honestly say that an executive earning $200,000 per year works harder than a single mother working 2 jobs at $12 per hour to support her kids? I would say not.

- High earners are not necessarily more productive than others. In fact I would say that in many cases the productivity per dollar is considerably lower. We see a glaring example of this in law firms where 1st and 2nd year associates provide the greatest return on output (salary) as their productivity is proportionately higher than their salary amount.

- Often high salaries are given in the presence of losses and/or poor investor and shareholder return. Meaning that it has become a culture of largesse - not one of reward for value, which of course is truly anti-capitalistic! This has also served to strip small investors of their wealth which has been siphoned away to executive pay and perks.

- Executive salaries have grown disproportionately to all other workers. Take for example CEO pay which was approximately 42 times higher than non-management workers in 1982, rising to 107 times higher in 1990 to the 2000s where it fluctuated between 300 and 500 times what an average worker makes. (

I have also heard it said that it is about 'responsibility'. That high earners are being paid for the burden of the economic machinery that they manage that is responsible for society. And I do agree with this. I don't necessarily think that the burden is that much greater than the average worker, however I certainly don't begrudge high salaries to executives. In fact I applaud it...but I don't agree with the exorbitant salaries now paid out to many execs...especially where this has drastically outstripped the earnings of middle management and workers.

Is being a high salaried exec more stressful than being one step from the breadline?
We could all have different opinions on this...but I can tell you that in my experience it's not. However the self imposed stress of being caught up in the materialist money game is a very real problem.

There also seems to be a real sense of entitlement of "I worked hard for why don't other people?" Hey - here's a freakin' wake up call....people are working hard and some of them, but not all, are becoming wealthy. Some of them don't have the same connections or the right skin colour or background to maximally encourage their rising up the ladder which many claim is so easy to climb.

If you are white, male and middle or upper class you cannot claim that your wealth is built purely on the sweat off your own back, because there may well have been women, the poor, and ethnic minorities who were working as hard  or harder than you who were overlooked for your benefit.

There has always been an upper class and lower class. In some countries (like the new world economies of the US, Canada, Australia and New Zealand) society has been seen as more egalitarian. But that is changing.
Since the Second World War there has been an increasing consolidation of wealth in the hands of fewer and fewer people in these countries.
Increasing wealth in fewer hands increases relative poverty. It is that simple.
Think of it this way - if there is a finite amount of money in an economy and more of it is controlled by fewer people, there is simply less to go around for the rest.

Again taking a eudaemonistic view point: IF this means that more people live below the level of income required for happiness then this society is not working for the greatest good of it's people, and by extension is not working in it's own highest good (as we are all part of the greater whole and our health/happiness affects that of the whole and everyone else within it.)

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