How Our Inequality Corrupts Success

Defenders of our deeply unequal economic order have a standard rejoinder whenever someone suggests that maybe we ought to consider taxing the rich at a somewhat higher level.

“Taking from the successful people to provide for those that aren’t isn’t the solution,” as White House hopeful Jeb Bush pronounced this past spring. “The solution is, How do you build capacity so people can achieve earned success?”

The core assumption behind this Bush pronouncement: Wealth equals success. Those who hold great wealth have achieved great success.

A claim this sweeping raises, of course, all sorts of philosophical questions. Economists and sociologists can’t really help us much with the answers. So Inequality.org went to someone who could: Elizabeth Anderson, the chair of the philosophy department at the University of Michigan.

The Harvard-trained Anderson may be perfectly positioned for helping us understand how wealth and inequality intersect with notions of success. She’s currently writing a history of egalitarianism from the 17th century days of the Levellers right down to the present day.

Anderson last month shared her take on wealth and success with Inequality.org co-editor Sam Pizzigati.

Inequality.org: Every society defines success. What types of societies come up with the best definitions?

Elizabeth Anderson: I’m wary of any society that reduces success to a single definition. If a society is free, people will pursue different conceptions of the good and define success in different ways. They won’t be unified around a single common definition of success any more than they would be unified around a single common religion.

Now if we have a society that respects basic freedoms — the rights to pursue different conceptions of the good — and this society still appears to share a common definition of success, we most likely have a very unequal society. We have a society where dominant groups are defining success according to their own narcissistic self-image, and that usually involves defining despised groups as unsuccessful and depriving them of the means to attain success as the dominant groups define it.

The societies that arrive at the best, plural definitions of success will be free societies of equals.

Inequality.org: In our current political environment, candidates like Jeb Bush and Donald Trump seem to equate success with the accumulation of wealth. Is wealth a legitimate yardstick for success?

Anderson: It’s hard to find a more absurd and corrupt, yet tempting mistake than to equate success with the accumulation of wealth.

Wealth has only instrumental value. It’s ridiculous to pursue wealth as an end in itself.

That doesn’t mean that accumulating wealth is wrong. There may be legitimate reasons to accumulate: for basic needs, security, comfort and convenience, and for the pursuit of things that do have intrinsic value — for example, among many others, education and the arts, improving the environment, and helping others.

Inequality.org: If we don’t define success by wealth, what other options do we have?

Anderson: Most of the projects that make life meaningful involve promoting the flourishing of other people and other living things. If someone wants to be successful, they should ask how they have improved the lives of other people or of the world. How have they made the world a better place? There are many ways to do this. Simply piling up lots of wealth for oneself is not one of them.

Inequality.org: At what point do material rewards for success, however defined, become problematic?

Anderson: Anyone who accumulates great wealth needs to ask two questions.

First, did they acquire that wealth in ways that made people better off and the world a better place to live in? Or did they acquire their wealth at others’ expense, in ways that made others suffer, that corrupted public institutions, or that undermined environmental sustainability? Did their accumulation of wealth result from activities that added net value to others’ lives, or did they merely extract value from the earth and others in order to enrich themselves?

Second, what did they do with that wealth to make people other than themselves better off and the world a better place to live in?

From the standpoint of just public policy, we need to consider how our society designs the rules of property, finance, and markets. Right now, many of our rules foster monopoly, rent-seeking, predatory and unsustainable financial practices, fraudulent dealings, labor exploitation, environmental destruction, and thousands of business models predicated on value extraction rather than value-added.

Markets and private property are indispensable to a free and flourishing society. But the rules need to be designed to ensure that everyone has effective access to the rewards of the system and that unequal rewards redound to the advantage of everyone in society, including future generations.

Inequality.org: What impact does equating success with wealth have on people of modest means?

Anderson: Equating success with wealth encourages the conspicuous display of wealth and ties esteem to a perverse positional competition where some can gain only if others lose. Those of modest means come to be despised because they cannot display fancy clothing, cars, jewelry, and other markers of “success.”

This dynamic is corrupting our society because merely having wealth in no way signifies that you have done anything valuable in your life. Countless ways of acquiring wealth involve no merit whatsoever. You may have inherited your wealth, for instance, or you may merely receive passive income from your ownership of an asset.

Or you may have engaged in unjust activity to have acquired your wealth. You may have manipulated markets, deceived people, exploited their vulnerabilities, created monopolies, or lobbied the state for special treatment.

Esteem should be based on what people do, not on what they have.

Lots of extremely important, valuable activity, we need to remember, does not generate great wealth. Taking care of dependents — children, the disabled, the infirm elderly — can be extremely valuable, but usually pays little or nothing. Serving the poor rather than the rich pays little or nothing. Promoting justice and the environment pays little or nothing.

Many people have modest means because they devote their lives to estimable causes like these. Equating success with wealth demeans many projects that hold vastly more value than projects that exploit the rules of a rigged economy to yield grand fortunes.

Inequality.org: Does taxing wealth “penalize” success?

Anderson: Taxing wealth does not penalize success because we shouldn’t be defining success in terms of wealth. But even if success were defined in terms of wealth, considering taxation a “penalty” on success would still be ridiculous.

The accumulation of wealth depends very heavily on public goods paid for by taxation. Everyone gains from a society with a robust infrastructure. Businesses need their workers to be well-educated and their roads to be paved. They need healthy customers.

What goes around comes around. Given that everyone gains from public goods, everyone should pay their fair share in providing them. Taxes are how we pay for these goods.

One other point here: We have two great sources of income and wealth. People can acquire income by working, or they can acquire it by passively owning income-generating property. Whether we regard taxation as a “penalty” or, more properly, as everyone’s duty to contribute their fair share to the provision of public goods, it’s more fair to tax passive ownership than productive labor.

Mere ownership, mere wealth, brings no merit on the owner and has only a distant relationship to any prior meritorious activity on the owner’s part. Considerations of desert or merit, far from leading us to oppose wealth taxes, argue in their favor. Inheritance taxes, in particular, are by far the most just taxes in the world.

Inequality.org: Can we have a deeply unequal “successful” society?

Anderson: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.”

That’s Adam Smith in The Wealth of Nations, book one, chapter eight. His judgment remains as just today as in 1776.

But let’s imagine that we had a society without any “poor and miserable,” a society where most all the fruits of economic growth were going to the top 1 percent but everyone below that top 1 percent had at least a decent standard of living and some financial security.

In real life, a society of such inequality could not emerge without economically unproductive rewards to mere passive ownership, financial manipulation, monopoly, and rent-seeking. But let’s ignore all that for a moment and simply ask: What would be the consequences of living in a society deeply split between a middle class and a 1 percent growing ever richer?

First, whatever the formal structures of democracy might be, we’d be living under a practical plutocracy.

Second, within a couple of generations, the riches to be gained from inheritance, or marrying great wealth, would become vastly greater than the rewards from engaging in productive labor, as economist Thomas Piketty has demonstrated. People would increasingly devote their talents to marrying well, rather than doing anything worthwhile, and labor would become despised and devalued.

No society governed that way, with such corrupt values, could ever call itself successful.

Sam Pizzigati co-edits Inequality.org, the Institute for Policy Studies online weekly on excess and inequality. Among his books: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970 (Seven Stories Press).