Despite what we tell ourselves about earning, deserving, and meritocracy; our most natural instinct is to see not doing and making things of value as the mark of prestige and hierarchy. This deep, dark impulse is stunting the human race’s development and technological progress.
Blind Spots’ mission is to explore ideas that are demonstrably false yet so widely believed that our ability to detect them is overridden.
The central hero in our present-day mythology is the entrepreneur. At the time of writing, seven of the ten richest people in the world are entrepreneurs. Heros aside, mythologies need to have built-in morals, values, and virtues too. In a culture that holds up the successful entrepreneur as the hero, the virtues that fit these heros best are innovation, hard work, and becoming rich from producing something that is of value to others.
It would be an exaggeration to say that the miracles of free enterprise are completely mythological. Whether you want to look at the world since 1950 or China since its economic opening up in 1978; it really does seem that governing countries in such a way as to make it easier for people to start businesses, shops, and stalls seems to have an unrivalled ability to lift people out of poverty when you allow an organic patchwork of traders serve the demands of populations and as people are incentivised to produce and keep the fruits of their own labour. There’s also a clue in there.
In light of this, it’s easy to see why the dominant story we tell to explain our societies is of people making things and doing things that other people value and want to pay for, and being rewarded accordingly. While this story is far from a complete fantasy, I believe we fail to realise just how recent a story and aspirational a reality it is.
The concept of making or doing things is extremely important if you want to be able to trace back who’s creating the value and who is managing to extract it without bringing anything to the table themselves. I like how the Latin languages have one verb for ‘make’ and ‘do’:
- Faire (French)
- Fare (Italian)
- Hacer (Spanish)
- Fazer (Portuguese)
- Face (Romanian)
Whereas the Germanic languages except for Swedish seem to split them out:
- Make/Do (English)
- Machen/Tun (German)*
- Lave/Gøre (Danish)
- Lage/Gjøre (Norwegian)
- Göra/Göra (Swedish)
To summarise what I’m going to say before I say it:
- I believe I detect a deep-rooted pattern in our societies and down through history where power, influence, prestige, and wealth go in the greatest chunks to non-doers/makers. In most times and places, being something or owning something is what marks you out as further up the hierarchy, and doing or making things is what marks somebody out as being an underling, serf, peasant, or pleb, with slavery the most extreme result of this deep, dark, but seemingly natural instinct.
- In the corporate and organisational world, I believe I detect a pattern of non-doers being put in command of, and dictating to, doers. Oftentimes the non-doers will have little more than a project management or business qualification but may have the power to override either the reality on the ground, or the knowledge of highly technical scientific or engineering staff. I contend that this is because their non-doerness triggers a primitive and subliminal ass-kissing instinct that has us see them as ‘higher-than’.
- Because humans have invented so many different systems and narratives down through time to support our deep-seated hierarchical instinct to make some do the work, and others consume the benefit of that work; we see the differences between the various stories and systems used to justify this more clearly than we see the similarities between them. This causes us to miss the underlying dynamics that are present across them all.
- While this instinct runs much, much deeper than capitalism; capitalism (not commerce) — with its bizarre, convoluted financial instruments — is perhaps the most advanced system that’s ever existed for transfering the benefits and profits of doing and making to non-doers and non-makers. Most entrepreneurs are actually parasitised by this in much the same way as workers are.
- In social systems where we incentivise not doing to such extreme degrees, it’s easy to see why our development and progress is stunted, especially when we try to imagine it against our potential. We’ve forgone decades of technological and social development progress in many areas because our non-doing instinct has come to shape our ideas on public investment.
- China, despite it’s horrific political oppression, is a nation that has put development of capabilities and infrastructure at the top of its priorities. This has caused it to emphasise doing and building at a time when the West has slumped into a pattern of incentivising not doing and not building.
The Lord / Serf Dynamic That Just Keeps on Recurring
I believe we can follow the breadcrumbs of this issue back to the time when humans settled down from hunting and gathering to start farming and establishing civilisations.
Because this social change — twelve thousand years ago — is the biggest our species has ever undergone, it is littered with clues about why we do things the way we do now. One very significant effect that came from this change was the emergence of much steeper social hierarchies.
Hunter-gatherers had very little social hierarchy because everyone had the same job: finding enough food to keep themselves alive. This means that you have to imagine a world with hardly any specialisation, trades, or professions. No builders, no tool-makers, no administrators, no priests, no soldiers, and no kings or other kinds of political leaders (aside from chiefs of smaller families and clans). They chose to spend their time finding food and preferred to use their excess time resting and recreating.
With farming came the rat-race. Once we transitioned from finding food to making food, human societies started to look much more like primitive versions of what we would be used to today. The fact that a certain chunk of the population could produce enough food for everyone else meant that people were freed up to do things that weren’t producing food. Different professions started to emerge which resulted in the sorting of our societies into social hierarchies according to how much prestige, respect, and status different cultures attached to the various roles. A warrior upper-class seems to have been the most common almost everywhere, with aristocrats and royalty usually being drawn from this class. The next most respected tended to be the educated class of administrators, priests, and other learned people, with merchants next, and then skilled tradespeople. At the very bottom of most social hierarchies were: the impoverished free or enslaved food producers that allowed all of this bullshit to go on in the first place!
What a paradox it is that the very people holding society up on their overworked backs are the ones that hold the least power and prestige. Are there any echos of this dynamic in our societies today?
What makes a lord?
In Ancient Greece, the concept of ‘aristocracy’ (artistos = excellent, kratos = rule) meant rule by the most excellent or competent citizens, and actually didn’t at the time mean a hereditary privilege passed on by blood, which was to them in fact oligarchy (olígos = few, archos = command), or command by the few.
But by the time of the Roman Republic; we start to see the emergence of something very similar to more recent concepts of lordship or aristocracy. The upper patrician classes were roughly subdivided between the top layer of senators and the slightly lower rank of equites, literally meaning ‘horsemen’, who served with the cavalry when they performed their military service. Admission into this rank of knights was determined by a minimum threshold of property ownership. If you owned over a certain value of assets, you qualified for the cavalry and didn’t have to be a foot soldier.
I’m not normally one for hot takes, but I feel there is an obvious one that needs to be made here.
Today, the word ‘equity’ means two quite different things: one is equality or fairness, and the other is ownership of assets, such as how owning equity in a company means ownership of its shares. The official etymology for equity strikes me as very naive:
If one of the two definitions of equity is ‘ownership of assets’, and the name of the Roman aristocracy was equites, and entrance into that class was based on property ownership, it seems pretty innocent not to think that this is one of the origins of the word ‘equity’.
Fast-forwarding from Rome to medieval and early-modern Europe, Thomas Piketty has recently explored the question : What marked someone out as a member of the nobility?
While France, Spain, Germany, and Central Europe had differing amounts of formal codification of what legally constituted a noble person, the British system was more casual and ad hoc. It seems that the strongest indicator of what marked one out as a member of the gentry was whether or not they were invited to dine and socialise with them. And in turn, the strongest factor deciding whether this happened or not was where their income flowed from.
Nobility meant: not earning your income through work or commerce but through land rents. A prospective dinner guest who made twice as much income from their linen mill as a local landed gentleperson made from their land rents would still be seen as less suitable dinner company because they did things to earn their money, and toil of any kind was seen as beneath a person of noble standing.
Gentlemen get paid for owning things, not for doing things. Regardless of your wealth, if you toiled at work or commerce for your income, you could not be a gentleman.
Doing or Making Vs. Being or Owning
There are very telling patterns — both throughout history and in the present day— where human social structures tend to allocate rewards — in the form of decision-making power, influence, prestige, privilege, wealth, and income — according to what a person is or what a person owns, or both.
It gets interesting when we try to compare the amount of value those roles actually contribute (or extract!) with the amount of societal importance we assign to them, and I will attempt to do some of this during this piece.
What seems to be shrouding this reality is the fact that we aspire to the idea of meritocratic societies. We can imagine a setup where people are rewarded and punished according to what positive or negative impact they have on the world around them. The concept of rule of law is an aspiration with many parallels. The law of the jungle is cruel, so we try to imagine as fair and as rational a society as we can, and we’re right to. But that doesn’t mean we are there yet. Like is so often the case in the social sciences, our aspirations regarding meritocracy have evolved into doctrines and beliefs that get taught in schools and universities, and get printed in textbooks. This has the effect of brainwashing people — particularly the most influential managers, bureaucrats, and politicians — that we are already there and that the job is already done. This effect is no doubt compounded by the fact that this belief provides validation to people that hold this prestige. The idea that everyone is rewarded according to deservedness is music to the ears of any rich or powerful person.
The widespread and (surely very familiar by now) belief that anyone who is wealthy and successful deserves to be, and that anyone who is struggling through poverty also deserves to be, can be very neatly summed up with this claim:
“The men who get rich may be the most honest men you find in the community…there is not a single poor person in the United States who was not made poor by his own shortcomings” – Russell Conwell, Acres of Diamonds.
There is a huge amount being implied in this statement. Implication shrouds a lot. Let me attempt to translate and lay out its true meaning explicitly:
“If someone is poor, then the fact that they are poor is proof that they deserve to be poor. On the other hand, if someone has done unethical things to bring them into a position of wealth, then the fact that it has brought them wealth means that those things couldn’t have been unethical.”
When made explicit, it’s clear how circular the reasoning is. It’s known as closed loop thinking. A very common feature in closed-loop thinking is the substitution of one judgement criteria for another. In this case the criterion of ‘deservedness’ (usually defined by whether there’s been some kind of value exchanged for the reward) is being substituted by the criteria of ‘wealth’ because the very foundation of the belief is that the market would not reward someone unless they deserved it, and that the market always rewards people for the value they produce. Therefore, poverty and wealth are in themselves proof that those things are deserved.
This idea that the market wouldn’t reward our punish you unless you deserved it is a very transparent and flimsy repackaging of the Protestant God (Russell Conwell was in fact a baptist minister) that always rewards and punishes according to deservedness. It’s staggeringly naive to think that we’ve totally broken free of the brutal and predatory laws of the jungle and that wealth and power could not still be the results of exploitation of those weaker than us.
Now that I’ve set a bit of historical context on how being and owning has always been the marker of hierarchy, and how making and doing actually marks you out as an underling, I want to make the case for how this is still mostly the case today. The common counter-argument, of course, is that we are more meritocratic than at any other time in our history. I would broadly agree with this (with the slight adjustment that we’ve slipped backwards somewhat since the 1980s), but the point I am actually trying to make is that there is still a massive gap between where we believe we are and where we actually are with this issue.
At the Corporate & Organisational Level
I first noticed something funny with the story of meritocracy in the world of work when I realised that, lots of the hardest, most value adding jobs I’ve done were not only paid far worse than more prestigious yet easier jobs I went on to get later, but that a decade of grindingly difficult work weighed less in a prospective recruiter’s mind than two years of easier, more prestigious work. I started to understand how we reward people more for ‘la di da’ value than we do for the difficulty of the tasks they complete.
I’ve also sensed that there are a number of extremely influential roles and professions that are seen as more important than, dictate terms to, and are disproportionately more highly recompensed than some other roles or functions. And it’s interesting to wonder what the rationale is for this.
There is one lens through which this can be analysed. Many organisations delineate core functions from support functions. Core functions are concerned with producing and delivering whatever products or services the organisation exists to provide in the first place. Support services administrate and facilitate this core work. I’m not suggesting that support services aren’t absolutely necessary, but I do think it is very common for the importance assigned to each to be ‘flipped’ or inverted when we forget which one is the tail and which one is the dog. I think it’s a healthy thing to remember which one comes first and which one exists to support the other after the fact. What would there be to manage or administrate without the core work?
Two industries into which I have a bit of insight are tech and pharma. In both, it’s relatively common for technical, scientific, or engineering-qualified staff to report to and be commanded by project managers that often have little or no technical knowledge of the science underpinning the core work. This can have problematic and frankly hilarious results such as the recent Cyberpunk fiasco case where the deadline the project managers set was seen as more real than whether or not the product was actually engineered into existence yet! There are so many case studies in this vein that this format of problem should have it’s own genre and label.
Let me stress how I’m not suggesting for a second that project managers aren’t essential, my point is that there are certain professions to which we have decided to assign a lot of prestige and influence, often far in excess of what is warranted if you consider the value they add or the competence they bring- especially relative to other professions that do more practical work.
In my industry, I constantly see large firms make people with managerial or project-management experience and qualifications, but with a complete lack of competence in computer science, responsible for massive IT or cybersecurity projects and departments. The logic appears to be that if you can manage a HR or marketing department, you can manage the technology department. In the best cases they know what they don’t know and defer to their senior engineers. But this is far from always the case since again, our society has promoted the managerial/project management role to a place of such high prestige and so, humility is often lacking. Is it really safe to put this power in these hands and simply rely on the individual to know what they don’t know?
I’ve written elsewhere about finance’s dominant influence over business even beyond where it may have competence. Most people who work in selling things business-to-business and generating revenue for their companies have some experience of a layer of management and accountancy that asks us to push clients to purchase before they’re ready to for the sake of the supplier’s quarterly results reporting. If a company has decided to buy a large, multi-year project from a supplier, they don’t want to be begged to buy on June 29th instead of July 10th for the sake of the supplier’s quarterly results. This approach can and does, in fact, jeopardise revenue and strain the client/supplier relationship. In these cases I believe that the roles doing this are often actually extracting value from the process.
There is a chronic habit in my industry of firms trying to dictate demand to clients, usually because the accountants love to see sales of high-margin products or products that produce predictable subscription revenue. A client cannot be expected to demand according to their supplier’s financials. This work muddies the water and works against a company’s ability to service its clients’ demands well. Yet the people doing this work are very high up the influence and compensation food chain.
The Irish health service is consistently in the news for its badly managed finances and overruns. A recent report shows it’s staff population is split 42% medical staff to 58% admin and management. It seems to be struggling under the weight of its own bureaucracy which is so bloated that there aren’t enough funds left over for doctors and nurses after this administrative layer is catered for.
Why do we have so much of this stuff?
My suggestion is that our culture has bought into the idea that certain roles and skill sets are transcendent. These roles are seen as ‘above’ all of the actual doing and making, they sit on top of all of the practical work and so are given more prestige. These skills and roles are, of course, a necessary part of the overall mix but I think it’s useful to wonder why roles that exist to facilitate the core work have come to be elevated above the core work.
MBA types trained in strategy and management, project managers, HR professionals, finance and accountancy, and legal are all professions to which quite high levels of influence and prestige are assigned. But do they produce anything in and of themselves? Like Copernicus’s discovery that the Earth orbits the sun and not the inverse, are we a little confused about whether the core work or the support work is more important? There’s certainly a very strong argument for emancipating the practical side of life at work and being far more careful about making the practical subservient to the non-practical.
While I understand the importance and validity of leadership up to a point, these ‘transcendent’ skill sets can at times appear to be a way to launder hierarchy through professions. We are so accustomed and attached to having hierarchies that we use these ‘transcendent’ professions as a way to justify it in lieu of being able to justify based on value addition.
Where this all echoes with the old lord/peasant farmer dynamic is where it seems to be a mark of prestige to not do the core work! This is why there is both often a clamour in most companies to ‘climb’ out of doing core work and into management and why companies pay more for people to manage than to do core work. Think about how this clamour can suck all the most competent people away from the core practical work that often matters most.
Yes, responsibility and the ability to inspire teams to be more productive and innovative partly explains this difference in pay, but does it explain all of it? The ‘too many chiefs, too few indians’ situation is rife across the corporate and public-sector world; surely this top-heavy bloating of the managerial class is mostly rooted in our primitive clamour to get further up the hierarchical ladder?
Chicago economist Kevin Murphy completed an excellent paper that compares countries that have more engineers than lawyers with countries that have vice versa. He found that countries that have a higher proportion of engineers have significantly more robust economies. It stands to reason that if we place more importance on — and offer higher rewards for — administration work over and above the actual things that that administration work is supposed to administrate, you won’t have as strong an economy as one that rewards the more productive work more highly!
The important point to stress again is that while managers, administrators, financiers, and lawyers are very necessary, they are abstract, derivative, and can only exist to service the actual productive work. To illustrate this with a thought experiment: imagine how any of these support professions and services could exist if there was no agriculture, healthcare, manufacturing, engineering, construction, service, or hospitality work going on?
One last point on how this dynamic works at the organisational scale. Most of our command structures are derived from the dual ladder that exists in the military where there is an officer ladder and an enlisted ladder. These ladders are best understood as the manager class and the worker class ladders.
A senior enlisted soldier such as a first sergeant (army), or senior enlisted sailor like a chief petty officer (navy) may have 20 years experience but have to salute and address as ‘sir/ma’am’ a 23 year-old junior officer fresh out of the academy. Put simply: the most senior doer is still more junior than the most junior non-doer. The argument goes that they “salute the rank, not the person” and that the separation of decision-making and work-doing duties exists for operational purposes. There are probably ways in which this argument has some validity. But it is important to note that this system is really just a legacy left over from a time when the officer corps was open only to the aristocracy (a remnant of the Roman equites mentioned above) and the enlisted ranks were populated with peasants. The often used justification that the peasantry wouldn’t have been educated enough for managerial positions in the military is circular since peasants were largely excluded from education in the first place.
If most corporate command structures are derived from this, and if this is just a hangover from feudalism’s separation of lords and commoners, perhaps it is time for a rethink?
Assetification & Finance: How Prestigious Parasitism (Prestigesism) Rolls Today
“It’s transformed democracies into oligarchies throughout the world” – Michael Hudson.
The most important thing to understand in how prestigesism works in today’s societies is the finance, insurance, and real estate (FIRE) sector. These industries use a mechanism I have christened ‘assetification’ to turn resources that most or all people need access to into assets so that they can be charged a toll for accessing them.
To understand assetification: humour me for a second and imagine the government decided to privatise the air by designating it an asset and creating a deed document for it. Now imagine it sold that deed to a corporation who now had the right to charge the citizens of the country a toll for breathing it. What is the conceptual difference between this and parceling off land as an asset?
In the black comedy horror How to Get Ahead in Advertising, Richard E. Grant develops a talking boil on his shoulder that grows and grows, while his head shrinks and shrinks to the point where the boil becomes the real ‘him’. This is a perfect metaphor for how the financial economy — that is based entirely on the concept of ownership (or claimed ownership) of assets — is cannibalising the real economy, which is based on people making and doing real things that are of tangible value to others.
OK, so the financial sector has not yet grown bigger than the real economy but figures recently published show that it has grown to the point where every fourth or fifth dollar/pound/euro/yen earned on earth is being earned by the financial sector. Can we really say with a straight face that every fourth or fifth buck’s worth of value is being produced by the financial sector? Some very rough sums show that the sector employs just one in a hundred people in the UK, Germany, and Japan, with three in a hundred working in the sector in the US.
It is my claim that the financial sector has not only evolved into the largest and most effective parasite that has ever existed, but that under normal circumstances, no one would ever be allowed to occupy such a unjustified privileged position where, because they carry out the administration of the flow of money, they are entitled to a share of the money whose flow around the world they manage. This privilege can only be explained by the deference afforded to the sector because of its perceived prestige.
Michael Hudson is a leading voice in analysing how these industries literally suck real wealth out of our economies and into the pockets of investors, financial institutions, and other hierarchical beneficiaries in the FIRE sector. This interview with him is the best episode of an economics podcast I know of as it pulls into one place all of the most important elements of economics today and explains it with minimal jargon.
Cecchetti and Kharroubi have found in this paper that the faster the financial sector grows, the slower the total productive economy grows. When you consider that the financial sector could not exist without tangible industries to piggyback on and perform financial services for, this is hardly surprising. We would probably say “no shit, Sherlock” to a biologist who found that a fast-growing tapeworm slowed the growth of a horse whose intestines it inhabited. One interesting aside in the paper did contain a similar message to Murphy’s mentioned above, though. It found that: where more skilled workers are attracted into the financial sector, the overall economy is more sluggish as those societies give out bigger prizes for the less productive work than they do for the more productive work!
I’d now like to explore three examples of how profits are ‘earned’ in the financial sector and examine them through the lens of a concept from common law: ‘Quo warranto’ or ‘by what right?’.
The first example is insurance. By the standards of our meritocracy and value-exchange myths, insurance is one of the most privatisation-inappropriate things imaginable. The central idea in insurance is shared risk. Everyone pays into a pool of funds in return for the security of knowing that the fund will pay out to them should a misfortune befall them. The vast majority of the time, the vast majority of subscribers are not having car accidents or falling ill, so the key is to have large numbers of payers. Insurance is a great idea, but by what right exactly should profits, shareholder returns on share price, and dividends be earned for private interests on this? In cases especially where the state deems insurance mandatory, why wouldn’t it also provide state-run insurance packages provided at the cost price of administrating the pot and making sure it doesn’t go bust from payouts? Why should private interests be able to charge profit margins over and above the cost of covering the risk?
The second example is high-frequency trading. A method of stocks or commodities trading that uses analysis of the buying and selling orders being placed, it can react to the orders that are essentially already ‘in the wires’ and beat the market to the punch by milliseconds. It’s a similar principle to the early Mortal Kombat videogames where, on high difficulty playing against the computer, the instructions from your joystick to your character were channeled via the computer opponent so that they were reacting to your moves before your character even made them! By what right exactly are the proceeds of this activity ‘earned’? It is simply a privileged position to extract a toll because you can. And I’d suggest that the prestige we attach to a financial education and profession has something to do with our tolerance for it.
The third example is the collaboration between the mortgage and real estate industries. Thinking is emerging on how banking and real estate are combining to parasitise our societies. Being dubbed the financial/real estate complex, it examines how the mortgage and real estate industries are colluding to both keep property purchase and rent prices as high as possible, and on the flip-side, capturing as many people as possible in as much debt as possible (made easier by the artificially high property prices).
There are two important pieces in understanding how the tactics of this parasitism operate.
First; property prices are kept high by restricting the supply of housing to cause artificial shortage. This is done via lobbying governments to carry out no serious public investment in property. It is accepted wisdom that the state should stay out of large-scale property construction since the 1980s. This is why we see so much less social housing constructed since then compared to the period from the 1940s through 1970s.
Second; banks are licensed by states’ central banks to lend the exchequer’s own currency back to it (the money is created as it’s lent – retail banks don’t ‘have’ this money to lend in the first place) at the rate of this artificially highly priced property PLUS interest over and above what the banks borrow this money from their central banks. In most countries central banks charge retail banks between 2-5% interest on the money they create, but then the effective interest rates charged on to consumers by retail banks on that money almost always falls in the region of 10-20%.
To tie this back together with one sentence of simple english:
The FIRE sector is making property cost much more than its really worth and is then lending the public’s own money back to it against these inflated prices PLUS interest.
When we become acclimated to certain customs and narratives we inevitably accept them as ‘normal’. But this can often mark or obscure the underlying dynamics at work in them.
Now, to attempt to see through the mist of familiar custom and narrative: the entire general concept of needing to borrow money from a bank to access something (housing, health, or education) we need in life is highly questionable. We should be asking: “why do banks get to profit off us accessing things we need?”.
Especially if we could provide these things out of public service at far more affordable prices? Why do we give banks the power to decide who gets to access things we need?
If you configure an economy so that people need to take on debt to access something they need to access to flourish in life, such as education in the USA, or housing in any other Western country, you essentially hand these things to the banks to then dole out to the population at interest. Given that it is the public that grants them the license to create the money they lend to us: by what right do banks act as the custodians of housing or education?
This has been the most difficult section of this piece to write because the justifications for the financial sector’s parasitism are so much more complex, and this is what makes it such an effective shroud.
At the centre of the story is what is formally known as ‘economic rent’. I prefer the term ‘tolls’ since everyone can easily understand the concept of having to pay the owner of a road for the use of the road. The important point about it is that it is relatively ‘unearned’ and certainly unproductive relative to the income derived from doing and making things. But it is Capitalism’s favourite kind of income as it is ‘pure profit’ and demands little or no effort from its recipient. It is what people mean when they talk of ‘making your money earn for you’. It’s a certainty that if your money or assets are ‘earning for you’, then there is someone else doing the value creation that you are getting paid for.
As a very dear accountant friend of mine said when he decided to sum up the financial sector: “Clause 1a: give me all of your bills”.
Yes, it can be argued that people will have worked hard to earn the money to purchase the asset that is now earning for them. But from that point on they are being paid the money working people earned for the use of something we all need, so what we’re really saying is:
“They’ve earned the right to earn other people’s money”
They’re prestigious enough to not be seen as parasitic.
Classical economists in Adam Smith’s tradition — that ironically most conservative capitalists cite when they seek to defend all of these practices — divided national income flows into productive and unproductive to try to distinguish between rent-seeking and payment for doing and making things. They also advocated for the former being either taxed or competed out of existence.
Even the socialist school of economics descending from Karl Marx thought that the capitalists would abuse their ownership of the assets that are needed to be productive such as land and machinery. Never in their wildest dreams did they think we would devise a system based on pieces of paper stating the holder owns this imaginary asset and so must be paid by all of the doers and workers for owning it.
Both the capitalist Smith and the socialist Marx would turn in their graves if they could see the grotesque pharaonic systems of assetification, financialisation, and rent-seeking that suck reward out of the pockets of doers and makers and into the hands of owners and be-ers.
Seeing the Deeper Pattern Across Time
Jordan Peterson repeatedly says the problem of inequality is much deeper and older than Capitalism, and he’s dead right. He sites the 80/20 Pareto principle where 20% of the people will hold 80% of the wealth. He also quotes the bible verse Matthew 25:29 when discussing this:
“For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.”
To help us see just how deep and old this dynamic is, I’d encourage you to think in terms of the handy little accountant’s word: ‘net’. It means over and above.
The deal was that feudal warrior lords provided safety to their serfs in return for a lifetime of free labour working the lord’s farm estate – is that lifetime of free labour priced in proportion to the protection afforded to the serf? Surely the lord is getting more net value out of this than the serf. Most knights that ever lived did not die in battle, many of them never saw battle, but all of the ones that owned estates owned people that owed them a lifetime of servitude. Individual cases of warrior-lords that lost their lives protecting their serfs hardly outweighs this massive systemic parasitism. And this is before we price in some other feudal customs such as prima nocta, whereby lords were sexually entitled to the female serfs on their lands on their wedding nights (the serf’s wedding nights, that is), or their right to deny their serfs’ wishes to leave the estate or marry. By what right did they exercise this power?
Taking the process of wage labour: in return for ‘secure employment’, an employer lets an employee keep a cut of the value they themselves have produced as if the employer is doing the employee a favour by letting them keep some of the fruits of their own labour. By what right?
The Finance and Real Estate industry in pretty much every Western country has rigged the real estate market to make property function as financial instruments that earn for the investor class. The effect is becoming so pronounced that people who want to buy property to dwell in it are being more and more priced out every year. Why do we allow this to happen?
Slavery is the most nakedly brazen yet honest version of prestigisism (prestige-justified parasitisim) and is now mostly unacceptable to us. But instead of deepening our moral progress in this area, we’ve just found ways to launder and justify more (and often more gentle) incarnations of the same thing. And that thing is this:
It is clear that we instinctively try to create and occupy prestigious positions of privilege where we can both convince or coerce others to do the work, yet collect the benefits of that work that we have others do.
The principal tools we use to do this are ideologies and narratives, be they feudalism, capitalism, communism, landlordism, slavery, or financialisation. Importantly; because our discourse focuses mainly on this ideology layer, we are distracted from the next layer down which is a plain old primitive drive to make others do the work while we collect the pay.
The answer, of course, to all these queries wondering“by what right?” is: “by right of my power and ability to do it”.
The three things shrouding this reality are, firstly, the apparent differences between the various ideologies and social systems down through the centuries and millennia when in fact they are all just justifications and fronts for the same parasitism and, second, the aspiration for a fair and meritocratic society fooling us into believing we are already there. Thirdly, and perhaps most importantly is: Prestige.
The illusion that wealth or power is self-evident proof of deservedness is what generates in us that ass-kissing belief that only the poor and weak can be lazy or parasitic, blinding us to what we know right well deep down. That more blood has always been sucked upwards rather than downwards.
We’ve Sacrificed The Jetsons For The Monopoly Man
Now to turn to how all of this is holding back the human race’s development.
Imagine the crew of the starship Enterprise needing to refuel or do maintenance but being hampered and stranded because “the economy is in recession”, because “consumer sentiment back on Earth is low”, or because “the deficit is too high”.
It’s not a very futuristic thought is it?
There are too many variables at play to allow us to guess what route we might take to a future where we’ve broken free of the constraints of this planet. But we can very safely bet that Rich Uncle Pennybags (The Monopoly Man) is not the route to that future.
First drawn in 1936 in the depths of the Great Depression, Pennybags was a symbol for the greedy rentier, or someone who’s income flows from owning things rather than doing or making things.
With his 19th Century top hat and monocle, does Uncle Pennybags look like the way to the future to you?
Triggered by a stock market crash in 1929, the Depression saw (depending on the country) between a quarter and a half of all business being done around the world disappear and put every third person out of work. Of course, most of the unemployed workers and out-of-business entrepreneurs had nothing to do with the stock market whatsoever, but I’ve written about the financial video game’s ability to damage the non-imaginary economy elsewhere.
Measures were put in place to stop the imaginary financial economy from being able to pull down the real-life economy ever again, the most important of which stopped banks from gambling their customers’ deposits away on investments.
For decades after the suffering of the Great Depression, it was understood that the interests of people chasing rewards simply for owning risky things needed to be balanced against the realities of what we all need – a prosperous, productive, and developing world where quality of life and technological progress is continuously improving.
But gradually, over the course of the 1970s, 80s, 90s, and noughties, Rich Uncle Pennybags made a comeback. Banks were allowed to start gambling their customer cash away again and, lo and behold, in 2008 a financial crash pulled the non-imaginary economy down with it when it collapsed. Again.
Quite apart from all of this though, the dominant Western belief system based on private enterprise being the only — rather than one of — the games in town, has stalled our scientific and technological development. The belief that something isn’t worth doing unless it can earn returns for private investors has placed us on a development plateau for the past 40 years (yes yes, computing, communications, and pharma aside).
Margaret Thatcher’s claim that “there is no such thing as society” has led us to believe that the muscle of public investment has no place when it was the very thing that enabled us to get to space and develop nuclear power. The same Margaret Thatcher, ironically, threatened Argentina with that very nuclear technology that never would have been invented if there was no such thing as society.
Plenty has been written about the immorality and ruthless cruelty of extremist capitalism. I write here with a different message: it’s stalling our development as a species.
Isn’t the notion that the best way forward as a species is to run everything like a shop or a bank a bit unscientific? Are we likely to branch out into the stars still wearing top hats and monocles?
Far from bringing us into the future, hasn’t a return to the Uncle Pennybags mentality caused an economic and developmental regression?
Would we have gotten where we are had we allowed everything to be run for Uncle Pennybags’ interests all along?
The key to this is in getting back to investment by the state in science, technology, infrastructure, and housing. The left of this chart shows how state investment of all kinds fell off a cliff throughout the 1970s and stayed low as Reagan and Thatcher’s dominant neolberal ideologies beat into our heads the mindless droning prayer that state investment would ‘crowd out’ private investment.
The problem with this ‘crowding out’ theory is that massive projects with time horizons too long to be of benefit to private investors, or with payoffs that diffuse over the entire population or environment are treated as bad investments. According to this reasoning baby formula, radar, passenger flight, the flu vaccine, MRIs, microchips, LEDs, satellites, and tyres would all have been ‘bad investments’.
Here we see non-doing constricting our building and progress at its grandest scale. Convincing governments not to invest in developing technologies and capabilities because, if a project or invention doesn’t make money for private asset-owners, it isn’t worth doing.
Tragically, we can only guess how much further along our progress in fusion power, sustainable energy, space exploration, and pharmaceuticals would be had we not mass-bought into the religion that research and development should be yoked to the cart of investor returns since the 1980s.
How will we ever escape the confines of this planet with such an attitude? To mature into a species anything akin to the humans depicted in Star Trek, we’re going to need to bring doing, making, and building back into fashion.
Incidentally, much of China’s strides in closing its technological gaps with the West can be explained by their lack of ideological constraints around state investment. They’ve decided they want to develop their country’s infrastructure and capabilities, and they’re happy to use the state or the market to do this according to what will work, case by case. As former chairman Deng Xiaoping stated: “Black Cat, White Cat, what does it matter as long as it catches mice?”.
It has taken me eleven months to write this piece. At times it has felt like trying to take a bite out of a car-sized apple. The dynamics I’m trying to describe are so prevalent and accepted that it feels like trying to smell the inside of your own nostril.
I hope I’ve managed to deliver an extremely broad message with some shape and validity. No doubt some of the points I’ve made have been flawed to different degrees.
Here I’d like to wrap up a few limitations to my proposition.
I realise that is impossible to trace back with any precision who is doing the work or producing the value, but I don’t believe that flaw is enough to invalidate the central thrust that, further up the hierarchy, less production and more talk occurs, yet most of the rewards flow to here.
I realise that I have somewhat glossed over the element of the learned ‘sagely’ class of highly educated experts who are supposed to be paid for knowing things. I believe these people are distributed in different proportions, depending on the situation and usually according to their place in their hierarchies, among both doer/makers and owner/be-ers.
A complete lack of hierarchy would indeed be chaos but I believe this point to be over-milked and used to justify hierarchy to a pathological degree and besides, my purpose is simply to point out how hierarchies are still mostly prestige and esteem-based, in contrast to our myths that our societies reward competence above all.
One of the most interesting and important learnings to come out of this piece for me has been how the two academic papers cited, one by Murphy, the other by Cecchetti and Kharroubi point to the importance of what we systemically incentivise and reward. If we put bigger prizes up for grabs for working in law than in engineering, we’re bound to have less development. If we pay people more to work in finance than in industry, we’re going to see less production. There’s a curious layer of collective storytelling and value allocation that humans do in large, nation-sized groups. Can we deliberately alter and steer these narratives and values? Or are we just puppets on the ends of our nature’s string in this regard?
The other important conclusion is pointed to by how we only feel the poor and weak are parasitic. It is a wonder we never wonder why, if they’re that successfully parasitic, how they’re still so poor or so weak?
It’s amusing how we think wealth or success or power are self evidences of virtue and deservedness and not self evidences of an ability to siphon resources from others.
The desolate answer to this contradiction can only be that we’re revolted by the weak or poor because we fear being like them. And in our scramble to imagine them as the ‘other’, we find more comfort instead in identifying with the very hierarchical leeches that are, in truth, sucking us dry.