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6 Balancing Justice and Economics

An inherent problem in any democracy based on open markets is avoiding the accumulations of extreme wealth that unleash monopolistic and corrupting influences. Monopolistic capitalism undermines meritocracy by stifling creativity and entrepreneurship and fostering corruption in government and the market place. Over the last 50 years trends toward increasing economic disparities have accelerated in many economies. In the developed world the US leads with income differentials at large corporations (between entry and top-level management) rising from less than 100 in the 1980's to over 400 more recently. And the trend appears ongoing due to a number of factors that accompany the implementation of developing technology in a modern society.

The range of stratification in the US is not only unique in the developed world, it is far in excess of what is believed to be reasonably necessary to motivate people. The many studies that have been done in varied societies generally concur that economic differentials are important, but they also agree that differentials in the range of five to ten appear to be quite sufficient for rewarding and encouraging good performance. Levels in excess of this are not only economically unnecessary, but they feed the forces of corruption and monopoly, impede the sharing of prosperity, and eventually undermine the general welfare of the many.

Driving this is the convergence of several irreversible systemic trends: 1) greater use of automation or machine intelligence in the production of goods and services. This displaces many from relatively high paying skilled and managerial jobs, 2) expanding technology also facilitates greater manufacturing economies of scale allowing more stuff to be produced by fewer people. This leads to localized accumulations of wealth at the top of organizational pyramids, and, 3) spreading international agreements and lax immigration policies open our labor markets to competition from outside pools of less expensive labor. Immigration from low wage countries depresses wages at the lower end of the scale while at the same time higher paying jobs in manufacturing and technology are out-sourced.

Huge accumulations of wealth almost inevitably lead to lavish displays of excessive consumerism and the wasting of resources. And big money in the hands of self-serving special interests facilitates the buying of politicians and their lackeys. Economic success thrives in a harmonious social environment built on transparent and open enterprises that honor contracts. We joke that we have the best government money can buy, but there is a time when it should no longer be a joke. If we lose trust we lose the lubricant that facilitates the synergism that enables group productivity. And as we offshore our production systems, while we become more dependent on foreign sources of energy and other resources, we are obviously more vulnerable to foreign interests that may not align with our own. And our irresponsible fiscal policies have led to an increasing reliance on foreign markets to float our ballooning budget and trade deficits. Just considering the risks and costs associated with securing oil supplies in areas riddled with unstable and hostile governments should sober even the most Pollyanna among us.

So is there a reasonable solution? Our current approach seems to be one of default -- hoping the problem will eventually self-resolve. But this conflicts with our knowledge of the driving forces which indicates the opposite. And if disparities become too great, the ballooning power of vested interests will make change even more painful and difficult, and corruption even more intractable. We have seen this happen to many countries in the throes of development. We are left with the only apparently reasonable solution -- raising taxes with the focus on income levels well above those considered necessary for motivating people towards success in the markets and workplaces.

Politicians generally shy from any mention of tax increases (particularly on extreme wealth) due to fears of alienating major sources of campaign contributions. And the conventional political "wisdom" puts it next to political death. But we should consider the vitally necessary conditions that make wealth accumulation even possible. Internally, one's economic success is the result of creative energy coupled with cognitive acumen and the good fortune to be in the right spot at the right time... or, for the most, "good luck".

But externally an even bigger part of the wealth equation stems from the efforts of a whole society to create the type of a business environment conducive to the creation of wealth. Economic success does not occur in a vacuum. It requires the efforts and sacrifices of the many to create the conditions that facilitate it... s.a. defense and security, the enforcement of contracts, and protection of property. These services cost money and it would seem those who profit most from a good business environment would be the most willing to contribute a greater amount of the resources necessary to keep it in place. So one reason to tax more progressively is to allow those who benefit most to pay to maintain the benefits.

Another reason for increased taxation would be to reduce the potential for political corruption and avoid displays of wealth that appear to many as not only grossly inequitable and ugly, but egregiously unfair. This could feed the fires of social disruption and the weakening of the pillars supporting a good busines environment. It the larger perspective it is to the benefit of all that economic disparities do not exceed those necessary to optimally produce a reasonable amount of economic success for all.

Also increased taxation is the only sensible and effective way to address a number of other problem areas that are intensifying -- such as the need to develop alternative energy sources, correct the solvency problems relating to Social Security and Medicare, repair and improve infrastructure, meet national emergency and security demands, balance our budgets, and re-engineer our educational and health care systems in order to provide cost effective and high quality services for all. And doing these types of projects will create the jobs (in place of unemployment benefits and welfare checks) necessary to replace those continually being lost to technical innovation and automation. It is a win/ win... society wins with the improvements in infrastucture and services, and those with creative potential have a continuing secure environment to optimally express their skill while still receiving adequate compensation for their creativity.

The possession of gross amounts of wealth (and the ostentatious displays of excessive consumerism that often accompany it) have never been shown to produce, or contribute to, individual happiness or satisfaction. And the pursuit of it to buy power or to pass it along to undeserving heirs has never been reasoned to be good for the general social or economic welfare measured in terms of human creativity and the greatest good for the greatest number... or in any other way. Or is it good for the heirs. Inordinate amounts of wealth are inherently inordinately corrupting for all.

History has repeatedly shown us that extreme inequities are destabilizing and have the potential to fractionalize a society to poverty. Many examples of this are scattered around the globe. Let us hope we have the courage and foresight to use our intelligence to address obvious imbalances before increasing levels of monopoly and corruption make it much more painful and difficult.



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