Introduction
A 2013 Oxfam report estimates that the richest 85 people in the world own as much wealth as the entire bottom half of the worldâs population (Oxfam 2014).1 Another recent report indicates that 23.1 % of children in the USA live in poverty, the highest percentage among 35 developed countriesâsurpassed only by Romania,2 even as the country hosts, at 5.9 % of households, the highest share of millionaire households, with over a million dollars in private financial wealth, of any large country in the world.3 A widely disseminated âpolitical economy book of the centuryâ4 documents in devastating empirical and historical detail the increasing âpatrimonialâ nature of twenty-first-century capitalism showing that it is well on its way to resurrecting a nineteenth-century class system based on inherited wealth that violates even the most basic notions of meritocracy (Piketty 2014).
The direct causes of these extreme concentrations of poverty and wealth are obvious for any who cares to look. A marquee example is Walmart, the largest private employer in the world.
Walmart has what is euphemistically called âa low-wage business model.â5 In 2012, a leaked document detailing Walmartâs official compensation policy revealed that its âsales associatesâ typically start at or near minimum wage ($7.25 an hour for states without higher state minimums) and received raises of only 20â40 cents an hour in incremental promotions. A worker with consistently âflawless performance evaluationsâ who started at $8.00 an hour could, after 6 years, expect a maximum hourly wage of $10.60.6 Walmart workers are paid so poorly that they are eligible for numerous US means tested public subsidies such as food stamps, Medicaid payments, and earned-income tax credits.7A 2013 report for the Democratic staff of a US Congressional Committee estimated that the average Walmart store costs US taxpayers $904,000 a year or roughly $5000 per employee.8 Walmart is also notoriously antiunion and a pioneer and leader in low-wage outsourcing from China (Workplace Fairness 2014)9 (Scott 2007).10
At the same time, Walmart made $17 billion in profits in 2013, paid its CEO in excess of $20 million, and provided an estimated $3.16 billion in dividends to entities controlled by three Walmart heirs.11 In 2014, the six Walmart heirs were estimated to be worth at least $ 150 billion.12 In 2010, they were estimated to own more wealth than the bottom 42 % of US families combined.13 With this enormous concentrated economic power, the Walmart heirs are actively supporting numerous conservative political causes (Rich 2014).14 These six passive investors, by virtue of their inheritance, are sitting on and controlling a $150 billion pile of claims to resources, resources that allow them to extract billions in further claims from the work of a veritable army of low-paid workers who can barely survive, even as they toil to generate more wealth for their passive billionaire owner-employers.15
In the advanced capitalist countries, Walmart has increasingly become the rule rather than the exception. As noted above, using the most detailed and exhaustive data on individual income ever assembled, Piketty (2014) has shown that inherited privilege has become a dominant âlaw of motionâ of modern capitalism. Does this make any sense to anyone? Are these enormous levels of wealth inequality functional or justifiable?
Even if the initial accumulation was âearnedâ through a combination of talent, education, luck, and ruthless monopolistic business strategies, as for example, in the case of Bill Gates, does it make sense for one person to be, in the words of American Federation of Teachers President Randy Weingarten, âricher than Godâ with an estimated $80 billion in wealth? (Sorkin 2014).16
When a single individual has this much personal economic power, anything they do is almost sure to swamp the political and democratic process. For example, Gates and his philanthropic Foundation are (arguably, unlike the Waltons) trying to do good things for drug and vaccine development and public education, but his brute economic power renders even the most well-intentioned initiatives controversial. For example, Gatesâ Foundation staff reportedly âdonât talk about drug patents,â a critical barrier to drug and vaccine dissemination, because it is a source of Gatesâ wealth,17 and as prominent education scholar Diane Ravitch points out, in reference to a Gatesâ âBig History Projectâ education initiative: âI wonder how Bill Gates would treat the robber barons. I wonder how Bill Gates would deal with issues of extremes of wealth and poverty.â18
Does anybody think that these conditions are the mark of a successful economic system? Neoclassical (NC) economics19 legitimizes these, intolerable by every major religious and philosophical moral standard, absolute and relative disparities of income and wealth by claiming to be value neutral 20 with regard to socially preferred wealth and income distribution.21 Is there an economics school of thought that robustly condemns this outcome as the moral, political, and economic failure that it is and that bases its theoretical and policy analysis on this understanding? This book argues that so-called radical economics in the USA, and progressive âheterodox economicsâ or âpolitical economyâ in other countries, is based on this understandingâan understanding that should be shared by all economic schools of thought.
This is not just a matter of a destructive economic model.22 It is a moral outrage. Economists should not eschew their moral responsibility to condemn these grossly unjust and undemocratic arrangements by pretending to be value-free and amoral, and they should surely not be in the business of justifying these economic systems out of some misguided conception of impartiality. Silence on these and the many other profoundly immoral outcomes of modern capitalism is complicity. If it is to be relevant to people and to society, economics must be based on moral values. There is no excuse for not condemning economic arrangements that violate the most universally shared moral imperatives to help and support the poor and destitute and to condemn wealthy exploiters of the poor. Economic theory needs to be based on these broadly accepted moral values and should not hide behind an indecisive, misplaced, and effectively apologetic amorality, or moral relativism.
We have accepted a status quo in which billions of human beings are reduced to mass deprivation, exploitation, and abuse. A good part of this is due to economic arrangements that place property rights above human needs by, for example, sanctioning the rights of rentiers, or passive investors, to accumulate unfathomable wealth even as the billions of humans who produce this wealth are reduced to hopelessness and misery. This includes both abysmally low-paid workers and the millions who are languishing without employment,23 all without a public response to create well-paid employment and minimal guaranteed income (Baiman et al. 2011). The hegemonic economic school of thought, NC economics, bases its core theoretical analysis on hypothetically fully employed labor markets and the optimal welfare efficiency of capitalist market economies (Weeks 2014, Introduction; Taylor 2004). Economics should not be at the forefront of justifying this illegitimate system as an unavoidable outcome of markets and sacrosanct property rights but, rather, should be leading efforts to expose the immorality of this kind of economic arrangement and proposing and advocating policy solutions for it.
This does not mean that economists need to be wild-eyed utopians. Realistic and politically popular policy options, such as the âRobin Hoodâ tax on financial speculation, to fund large-scale living-wage job programs in green energy, social services, and infrastructure are perfectly plausible (Baiman et al. 2012).24 Piketty (2014, Chap. 14) has suggested a global tax on capital. Many other perfectly realistic proposals have been offered (Hartmann 2014). Hill (2010), Huber and Stephens (2001), and Baiman (2014) and many countries, particularly in northern Europe, have made tremendous progress toward building more just, sustainable, and democratic economies by removing a large proportion of economic activity completely or partially out of the private for-profit production sector.
Why can we not âeuthanize the rentierâ as Keynes famously advocated (in their economic function, not as people) (Keynes 1936, Chap. 24)? The answer, of course, is political; but a major source of political legitimation for this manifestly inequitable and increasingly dysfunctional global economic system is NC economicsâa theory based on the presumption that the natural and normal way for national and world economies to function is as capitalist market economies with minimal constraints on capital. And this argument continues to be made even as rentierism, a fundamental and increasingly dominant characteristic of these economies, undermines their ability to generate real production and living-wage employment and avoid a planetary crisis (Klein 2014).
Karl Polanyi (1944) pointed out at the end of the previous round of debate over what were then liberal, and now neoliberal, free-market policies, that markets are fundamentally creatures of society. There is no such thing as markets act...