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Homo Economicus [4]: Enlightened Self-Interest

homo economicus

The concept of “homo economicus” captures the belief that the rigorous pursuit of self-interest in a free market improves things for everyone. This belief powered Milton Friedman’s famous dictum that “the social responsibility of business is to increase profits,” and finds a philosophical ally in Ayn Rand’s “objectivism”:

“The core of Rand’s philosophy… is that unfettered self-interest is good and altruism is destructive. [The pursuit of self-interest], she believed, is the ultimate expression of human nature, the guiding principle by which one ought to live one’s life. In “Capitalism: The Unknown Ideal,” Rand put it this way:

‘Collectivism is the tribal premise of primordial savages who, unable to conceive of individual rights, believed that the tribe is a supreme, omnipotent ruler, that it owns the lives of its members and may sacrifice them whenever it pleases.’

“By this logic, religious and political controls that hinder individuals from pursuing self-interest should be removed.”

What Happens When You Believe in Ayn Rand and Modern Economic Theory, Evonomics (Feb. 17, 2016)

Thus Ayn Rand became the patron saint of American capitalism in its current iteration. This is from a 2017 Atlantic article:

“’I grew up reading Ayn Rand,’ … Paul Ryan has said, ‘and it taught me quite a bit about who I am and what my value systems are, and what my beliefs are.’ It was that fiction that allowed him and so many other higher-IQ Americans to see modern America as a dystopia in which selfishness is righteous and they are the last heroes. ‘I think a lot of people,’ Ryan said in 2009, ‘would observe that we are right now living in an Ayn Rand novel.’”

Critics point out that there is no such thing as a free market or objectively rational self-interest, arguing instead that the market is inescapably skewed toward policy-makers’  beliefs and values — i.e., their particular interpretations of what “self-interested” behavior looks like.[1] As a result, economic policy always comes laden with ethical and moral beliefs about “good” vs. “bad” outcomes, which the not-so-free market then dutifully delivers:

“Milton Friedman argued that competition between big businesses suffices to safeguard the public interest, but in practice it is almost always insufficient, especially where there is collusion among the players to safeguard their market dominance – and their political influence.

“Free-market economists have an unwarranted faith in the capacity of price adjustments to produce technological changes in production and patterns of consumer demand. Their theories imply that the price system has infinite capacity to shape sustainable outcomes.

“But if the self-interested market behaviours continue to seek an unchanged goal – more personal incomes with which to purchase more material goods – ultimately they cannot be fulfilled.

 “Ultimately, the short-term self-interested economic arrangements are not sustainable anyway. As the US economist Kenneth Boulding once said: “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist”.

“Economic inequalities also predictably widen where self-interested market behaviours dominate. Capital makes capital, while those without capital often remain consigned to poverty. Certainly, the very rich have become notably much wealthier during the last three decades while neoliberal ideologies and policies have been dominant. In the absence of strong unions and governments committed to some degree of egalitarian redistribution, the unequalising tendency is inexorable. The result is predictably unhappier societies that experience a higher incidence of social problems, as empirical research complied by Richard Wilkinson and Kate Pickett clearly demonstrates.

“Something has to give. An economic system that rewards amoral self-interest creates economic instability, fractures economic insecurity, fosters concentrations of economic power, exacerbates economic inequality and violates ecological sustainability. So much for the self-regulating market economy!

“There is currently much talk of ‘social responsibility’ in business and of ‘triple bottom line accounting’ that emphasises the use of social and environmental criteria, as well as a financial criterion, in assessing business performance… Indeed, businesses developing reputations for responsible behaviours may reap benefits in the form of worker and customer loyalty. But unless and until ethical behaviours become integral to how markets function – by directly affecting ‘shareholder value’, for example – it is hard to see the overall effect as much more than window dressing for ‘business as usual’.”

Oh, The Morality: Why Ethics Matters In Economics, The Conversation (in partnership with the University of Sydney) (March 22, 2012)

More on ethics and economics next time.

[1] For more on whether the market is truly “free,” see this article and this one. Or if you prefer, here’s a short video and here’s a TEDX talk.

Homo Economicus [3]: Capitalism For Capitalists

homo economicus

Homo Economicus is alive and well where capitalism and capitalists are prospering  most:  in the USA. We know that because U.S. GDP is going up, and has been since the 2007-2008 financial crash, That’s the perspective of this Bloomberg piece:  Capitalism Is Working in the U.S.: From Warren Buffett to Jeff Bezos, today’s American capitalists are proving Adam Smith’s claim that free markets produce investment and growth (Nov., 2018)

“So where is capitalism succeeding in a world roiled by kleptocrats, simmering trade wars, and the xenophobia that inspired Brexit? That would be the U.S.

“American free enterprise is achieving the greatest growth in the developed world, posting annual gross domestic product gains since 2009. Within just eight years of the global financial crisis, the U.S. was the only non-emerging-market economy with record GDP. The nation’s growth has exceeded the Group of Eight leading industrial countries’ average every year since 2012, a trend that economists surveyed by Bloomberg forecast to continue through 2020.”

Bloomberg is bullish on American capitalism, but the Nobel prizewinning economist who created the concept of GDP had his reservations about its proper use:

“GDP’s inventor Simon Kuznets was adamant that his measure had nothing to do with wellbeing. But too often we confuse the two… If something has to be sacrificed to get GDP growth moving, whether it be clean air, public services, or equality of opportunity, then so be it.”

“GDP is how we rank countries and judge their performance. It is the denominator of choice. It determines how much a country can borrow and at what rate. But GDP is well past its sell-by date, as people are starting to realise. However brilliant the concept, a measure that was invented in the manufacturing age as a means of fighting the Depression is becoming less and less capable of imparting sensible signals about complex modern economies.

5 Ways GDP Gets It Totally Wrong As A Measure Of Our Success, World Economic Forum (Jan. 17, 2018)

The ideological clash between the two articles cited above couldn’t be more striking.

The Bloomberg’s article extols capitalism as a “moral force” to match the American Revolution:

“The founder of modern capitalism, Adam Smith, published The Wealth of Nations in 1776, the same year 13 colonies declared their independence from Great Britain. It remains the most referenced guide to prosperity because of its moral force: Smith said the freest markets are led by an invisible hand benefiting everyone, not just the individuals and companies motivated by their own profit.”

The article then lauds the big capitalist growth winners — Jeff Bezos, Elon Musk, Warren Buffet, Facebook, Amazon, Paypal, Apple, etc. — singling out Musk for special praise, saying “[Adam] Smith would relish the example of Musk,” who “might be the archetype of Smith’s capitalist,” despite his having to “give up his position as Tesla chairman and pay a $20 million fine to settle fraud charges.”

Finally, after a few paragraphs acknowledging there’s still work to be done, the article soars to a grand finale that quotes Abe Lincoln on upward mobility:

“Quoting Lincoln in her summer 2010 Marquette Law Review essay, Heather Cox Richardson wrote: “A healthy American society worked so that ‘[t]he prudent, penniless beginner in the world, labors for wages awhile, saves a surplus with which to buy tools or land, for himself; then labors on his own account another while, and at length hires another new beginner to help him.’ This was the idea behind free labor, ‘the just and generous, and prosperous system, which opens the way for all—gives hope to all, and energy, and progress, and improvement of condition to all.’ ”

By contrast, the World Economic Forum article is having none of Bloomberg’s enthusiasm:

“GDP is a gross number. It is the sum total of everything we produce over a given period. It includes cars built, Beethoven symphonies played and broadband connections made. But it also counts plastic waste bobbing in the ocean, burglar alarms and petrol consumed while stuck in traffic.

“Kuznets was uneasy about a measure that treated all production equally. He wanted to subtract, rather than add, things he considered detrimental to human wellbeing, such as arms, financial speculation and advertising. You may disagree with his priorities. The point is that GDP makes no distinction. From the perspective of global GDP, Kim Jong-un’s nuclear warheads do just as well as hospital beds or apple pie.

“Pointing out the defects of GDP and even tentatively suggesting alternatives is no longer controversial. Former French President Nicolas Sarkozy commissioned a panel led by Joseph Stiglitz, a Nobel economist, to examine the issue. It was creating a dangerous ‘gulf of incomprehension,’ Sarkozy said, between experts sure of their knowledge and citizens ‘whose experience of life is completely out of sync with the story told by the data.’”

The two articles are talking past each other, which allows both to be correct:  (a) capitalism is in fact good for capitalists, and (b) obsessing over GDP ignores general societal wellbeing. Squeezed between the two is the philanthrocapitalist vision of better world. We looked at that previously; we’ll look again next time.

Homo Economicus [2]

homo economicus

Despite its detractors, the concept of homo economicus is a mainstay of economic theory and policy-making because it has become a cultural myth, and cultural myths hold tight even if they perpetuate societal ill health. That’s is the perspective offered by London economist and Guardian columnist Peter Fleming in his book The Death of Homo Economicus: Work, Debt and the Myth of Endless Accumulation (2017). This is from the book blurb:

“In today’s workplaces we work harder and longer, labouring under the illusion that this will bring us more wealth. As this myth becomes increasingly preposterous, it’s time to understand why we believe in it, and where it came from.

“The Death of Homo Economicus explores the origin of this oppressive myth, in order to destroy it. The story begins with the creation of a fake persona labelled the ‘dollar-hunting man’, invented by economists Adam Smith and Friedrich Hayek. Today, this persona, driven by competition and ego, is used by politicians and managers to draw a veil over the terrible reality of work under capitalism.

“Creeping into all aspects of life, the desire to constantly compete and accumulate must be resisted if we are to create a better way of life for all.”

In this short book promo video, Prof. Fleming challenges the notion that humans are “a money-chasing animal” and that society as a whole prospers when dominated by “self-interested individualism.”  “The [homo economicus] ideal never really gained traction from the beginning.” he says, “because we don’t act as individual self-seeking beings, we live in a society and we live in communities.”

Author and entrepreneur Jeremy Lent agrees:

“Capitalism is based on the premise that the most desirable state of affairs is economic growth, which can be attained most effectively through free markets in which assets are privately owned. Based on this credo, the primary responsibility of government is to provide the infrastructure necessary for the free market to conduct its business with minimal constraints.

“Some important assumptions about human nature underlie these beliefs. Individuals are understood to be motivated primarily by financial self-interest. They are assumed to be rational in pursuit of this goal, and their “rationality” is believed to lead them to act competitively rather than cooperatively in the marketplace.

“Another crucial assumption holds that the aggregation of all these individuals competitively their own financial gain leads to the most beneficial outcome for society.

“These assumptions about human nature are not self-evident truths; however, the money-based system constructed by capitalism encourages and rewards these traits over other traditional, community-oriented values, creating a self-fulfilling prophecy about the nature of human behavior.”

The Patterning Instinct:  A Cultural History of Humanity’s Search for Meaning, Jeremy Lent (2017)

As The Guardian said in its review of The Death of Homo Economicus:

“‘Homo economicus’ is the totally made-up creature who is the proletarian hero of mid-20th-century economics: going about his daily life with unimpeachable rationality, efficiently calculating ways to maximise his self-interest.

“But people don’t actually live like that, as the behavioural economists Amos Tversky and Daniel Kahneman pointed out. It is a refuted model, yet its malign influence persists.”

“Malign” or not, competitive capitalism has become a cultural norm. Again from The Guardian’s book review:

“Our entire lives, [Fleming] argues, have been economified. The ruling narratives of work and commerce hypnotise us into thinking of our very selves as micro-businesses, so that it becomes ever harder to imagine life outside the paradigm of capital investment, productivity and profit.”

Free market champion Mises Institute agrees that economics would be better off if homo economicus went extinct.

“The problem … is that homo economicus is not actually necessary to understanding human behavior or how markets work. In fact, understanding of markets would be improved by not resorting to the homo economicus model at all… because it fails to provide a useful or accurate metric or model for human behavior.

“Thus, Ludwig von Mises noted that the homo economicus model described behavior for only one small type of human action, and failed to account for the behavior of consumers:

‘The much talked about homo economicus of the classical theory is the personification of the principles of the businessman. The businessman wants to conduct every business with the highest possible profit: he wants to buy as cheaply as possible and sell as dearly as possible. By means of diligence and attention to business he strives to eliminate all sources of error so that the results of his action are not prejudiced by ignorance, neglectfulness, mistakes, and the like…

‘The classical scheme is not at all applicable to consumption or the consumer. It could in no way comprehend the act of consumption or the consumer’s expenditure of money. The principle of buying on the cheapest market comes into question here only in so far as the choice is between several possibilities, otherwise equal, of purchasing goods; but it cannot be understood, from this point of view, why someone buys the better suit even though the cheaper one has the same “objective” usefulness, or why more is generally spent than is necessary for the minimum — taken in the strictest sense of the term — necessary for bare physical subsistence.’

“If an economics model tells us very little about consumer behavior, then its value is limited, to say the least.”

The Homo Economicus Straw Man, Mises Institute (Oct. 26, 2016).[i]

Curiously, von Mises’ argument suggests why homo economicus persists in capitalism theory:  it may not describe consumer behavior but it does describe his prototypical “businessman,” who is also his prototypical capitalist.

Continued next time.

[i]  The image above is from this article.

Homo Economicus

homo economicus

John Stuart Mill coined the term homo economicus to explain economic behavior. This is from . Investopedia:

Homo economicus, or ‘economic man,’ is the characterization of man in some economic theories as a rational person who pursues wealth for his own self-interest. The economic man is described as one who avoids unnecessary work by using rational judgment. The assumption that all humans behave in this manner has been a fundamental premise for many economic theories.

“The history of the term dates back to the 19th century when John Stuart Mill first proposed the definition of homo economicus. He defined the economic actor as one “who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labor and physical self-denial with which they can be obtained.”

“The idea that man acts in his own self-interest often is attributed to other economists and philosophers, like economists Adam Smith and David Ricardo, who considered man to be a rational, self-interested economic agent, and Aristotle, who discussed man’s self-interested tendencies in his work Politics. But Mill is considered the first to have defined the economic man completely.”

Homo economicus says the rational approach to commerce is to seek the most for the least. The idea has its detractors:

“The theory of the economic man dominated classical economic thought for many years until the rise of formal criticism in the 20th century.

“One of the most notable criticisms can be attributed to famed economist John Maynard Keynes. He, along with several other economists, argued that humans do not behave like the economic man. Instead, Keynes asserted that humans behave irrationally. He and his fellows proposed that the economic man is not a realistic model of human behavior because economic actors do not always act in their own self-interest and are not always fully informed when making economic decisions.”[1]

Austrian economist Ludwig von Mises sided with Keynes:

“It was a fundamental mistake … to interpret economics as the characterization of the behavior of an ideal type, the homo economicus. According to this doctrine, traditional or orthodox economics does not deal with the behavior of man as he really is and acts, but with a fictitious or hypothetical image. It pictures a being driven exclusively by ‘economic’ motives, i.e., solely by the intention of making the greatest possible material or monetary profit. Such a being does not have and never did have a counterpart in reality; it is a phantom of a spurious armchair philosophy. No man is exclusively motivated by the desire to become as rich as possible; many are not at all influenced by this mean craving. It is vain to refer to such an illusory homunculus in dealing with life and history.”

The Homo Economicus Straw Man, Mises Institute (Oct. 26, 2016).[2]

More recent criticism questions the role of rationality in human behavior not only in economics but more generally:

“Humanity’s achievements and its self-perception are today at curious odds. We can put autonomous robots on Mars and genetically engineer malarial mosquitoes to be sterile, yet the news from popular psychology, neuroscience, economics and other fields is that we are not as rational as we like to assume. We are prey to a dismaying variety of hard-wired errors. We prefer winning to being right. At best, so the story goes, our faculty of reason is at constant war with an irrational darkness within. At worst, we should abandon the attempt to be rational altogether.

“The present climate of distrust in our reasoning capacity draws much of its impetus from the field of behavioural economics, and particularly from work by Daniel Kahneman and Amos Tversky in the 1980s, summarised in Kahneman’s bestselling Thinking, Fast and Slow (2011). There, Kahneman divides the mind into two allegorical systems, the intuitive ‘System 1’, which often gives wrong answers, and the reflective reasoning of ‘System 2’. ‘The attentive System 2 is who we think we are,’ he writes; but it is the intuitive, biased, ‘irrational’ System 1 that is in charge most of the time.

“Other versions of the message are expressed in more strongly negative terms. You Are Not So Smart (2011) is a bestselling book by David McRaney on cognitive bias. According to the study ‘Why Do Humans Reason?’ (2011) by the cognitive scientists Hugo Mercier and Dan Sperber, our supposedly rational faculties evolved not to find ‘truth’ but merely to win arguments. And in The Righteous Mind (2012), the psychologist Jonathan Haidt calls the idea that reason is ‘our most noble attribute’ a mere ‘delusion’. The worship of reason, he adds, ‘is an example of faith in something that does not exist’. Your brain, runs the now-prevailing wisdom, is mainly a tangled, damp and contingently cobbled-together knot of cognitive biases and fear.

Not so foolish:  We are told that we are an irrational tangle of biases, to be nudged any which way. Does this claim stand to reason? Aeon Magazine (Sept. 22, 2014)

Even so,

“Although there have been many critics of the theory of homo economicus, the idea that economic actors behave in their own self-interest remains a fundamental basis of economic thought.”[3]

If the shoe doesn’t fit, why do we keep wearing it? And to what end? More next time.

[1] Investopedia, op cit.

[2]  The image above is from this article.

[3] Investopedia, op cit.

A Tale of Two Countries

pie cut in half

It’s official:  the U.S. is split in half — not just on everything, as we already know, but also in economic terms:  half of us are poor, half of us aren’t.

Well, not quite. Joe Biden apparently got his math wrong when he said half of Americans are poor. More accurately, according to a 2017 Federal Consumer Financial Protection Bureau report,

“Measured by the By the Official Poverty Measure (OPM), more than 95 million Americans (nearly 30 percent of the total population) are either in poverty or considered ‘low-income’ (living below twice the poverty line) … That number rises to 140 million people (43.5 percent) when using the (SPM) [Supplemental Poverty Measure].”

Fact Checker:  Joe Biden’s Claim That ‘Almost Half’ Of Americans Live In Poverty, The Washington Post (June 20, 2019)

Right-leaning Ballotpedia also corrected Biden’s math, concluding that only 32% of Americans are technically poor. On the other hand, progressive Common Dreams is sticking with one-half.

Glad we got that cleared up.

Besides, what’s “poor” anyway? Are we talking poverty, poor, low income, or what? Again from The Washington Post’s Fact Checker:

“The OPM was adopted in the mid-1960s and has garnered widespread criticism because it measures pretax income and food-purchasing power, updated yearly to account for inflation. That methodology, experts say, fails to capture many people struggling financially in modern society.

“The Census Bureau responded with the SPM, which since 2011 has measured after-tax income, food costs and other necessities such as clothing, housing and utilities. The SPM accounts for geographic variations in the cost of living, includes welfare benefits such as food stamps and housing subsidies, and subtracts child-care expenses.”

Therefore, apparently “poor” is about food, housing, utilities, and child-care  — subject to how much you make on the dole. But what about childcare for people not on public assistance — are you poor if you can’t afford that? Or how about healthcare, education, transportation? Internet access? Cell phone? Or what if you can’t come up with $500 to cover an unexpected expense? (Something 63% of American’s couldn’t do, according to this Forbes article.) Or what about a car, washer and dryer, TV, air conditioning…maybe even home ownership, a shot at upward mobility, or relief from the insecurities of the gig economy?

We have now landed squarely in the center of the necessity vs. luxury debate, which will endure until the seas all melt, and to which the most reliable answer seems to be, it depends on what socio-economic level you’re talking about. For the middle class and up, things like a reliable car, smart phone, high-speed wireless, home ownership, savings… plus the occasional night out… are givens. As for the poor,

 “There is a moralistic presumption that poor people, especially those receiving benefits, should not be spending money on anything but the bare essentials, denying themselves even the smallest ‘luxury’ that might make their lives less miserable.”

Basic Income:  A Guide For the Open-Minded, Guy Standing (2017) [1].

If “only” 32%, or maybe 43.5%, or even half of Americans are below, at, or just above the official poverty line, the USA has truly become what one writer calls “the world’s first poor rich country.” That means look left, look right, and one of you:

  1. Does not plan for the future in the press of making ends meet right now;
  2. Makes money and purchases stretch as far as possible;
  3. Is shadowed by the what if? of emergencies and other unplanned costs;
  4. Regularly opts out of social engagements for lack of funds;
  5. Relies on unreliable transportation to get around;
  6. Constantly sacrifices this I order to do and havc that;
  7. Does not ask for help because it’s too embarrassing and shameful.

Everyday Things Poor People Worry About That Rich People Never Do, Everyday Feminism (May 7, 2015),

If none of those apply, then either you’re a member of the top 10% economic upper class or you’re part of the middle class that hasn’t vanished yet. Otherwise, “poor” can happen even right here in our house. If I’d thought about it back in the day (but of course I didn’t), I’m sure there were three things I would have thought I’d never be:  old, poor, and infirm. Now, by federal standards, I’m all three. I’m also certain I never would have thought that the best financial day I’d ever have was the day I qualified for disability income. Amazing what a social safety net can do for your outlook.

Old, poor, and infirm are three reasons why I’ve been writing about economics and jobs for the past couple years. One of the many things I’ve learned is that law and economics are inseparable — which is obvious if we ever think about it, but usually we don’t. Click here for an article about how law creates economic reality.

Next up:  we’ll meet a human species you’ve probably never heard of.

[1] The results of my Google searches on necessities vs. luxuries were fascinating. I highly recommend your own. See, e.g., this article that cites a 2009 Pew Research Center poll re: what Americans considered necessities at that time. I didn’t find an exact Pew follow up, but for something close, see this 2016 research study that identified job security and the ability to save money as prerequisites for being considered middle class.

Masters of the Universe

masters of the universe 2

If the rich can’t save the world, how about the CEOs? They know how to get things done – how about we let them take a crack at it?

That kind of thinking has become “powerful in the public consciousness,”  say the authors of CEO Society:  The Corporate Takeover of Everyday Life, Peter Bloom and Carl Rhodes (2018):

“CEOs epitomize this fantastical figure of the empowered sovereign. Their vaunted decisiveness, guiding vision and ability to proverbially ‘get things done’ speak to this deeper aspiration for being the master of capitalism rather than its mere slave or apparatchik.[1]

“It is no surprise that many people seeking to become more powerful themselves would look to CEOs as heroes and role models.

“Perhaps the most evocative, if not foretelling, in this regard, was Tom Wolfe’s portrayal of stockbrokers and financiers as the new ‘masters of the universe’. [2]

“In the decades since Wolfe’s era-defining novel, the business executive has become the stuff of dreams on a much broader scale than the novel could have imagined.

“The CEO is the ultimate contemporary figure of power. CEOs, in their ideal form, have the ability to thrive in the market, save companies, and spread their influence across the world.”

Nothing wrong with solving the world’s intransigent problems, but watch out:  CEO power degrades into elitism in the marketplace and authoritarianism in politics:

“The marketization of global charity and empowerment has dangerous implications that transcend economics. It also has a troubling emerging political legacy, one in which democracy is sacrificed on that altar of executive-style empowerment. Politically, the free market is posited as a fundamental requirement for liberal democracy. However, recent analysis reveals instead the deeper connection between processes of marketization and authoritarianism…

“The image of the powerful autocrat is, to this effect, transformed into a potentially positive figure as a forward-thinking political leader who can guide their country on the correct market path in the face of ‘irrational’ opposition.

“[For example,] Rwanda is led by the autocratic President Paul Kagame, a close personal associate of former President Bill Clinton whom the New York Times has described as the “Global elite’s favourite strongman.” In the face of mounting criticism of this relationship, “Clinton has privately praised Kagame as someone who can “GSD” (get stuff done). One supporter, Gerald Mpyisi, the managing director of the Institute of Management and Leadership, defended Kagame’s methods in explicitly corporate terms:

‘The president is running the country like a CEO of a company who ensures that every director is accountable for their department. That is why, despite the lack of resources, you still find things happening. I believe for a country in the third world to develop there has to be a certain a certain element of organizing the population. The west tries to use its standards in the developing world and it isn’t fair.’”

Apparently the prospect of being in a position to get things done is irresistible. U.K. politician Boris Johnson once said, “I have as much chance of becoming Prime Minister as of being decapitated by a frisbee or of finding Elvis.” Now he’s the odds-on favorite to become just that. Either he actually did find the King or he’s taking to heart something else he said — back in 2008, just after the Great Recession:  “No matter how much you may dislike the Masters of the Universe, my friends, there are plenty of other parts of the universe that would welcome them.”

Meanwhile, on this side of the Pond, we have CEOs running for the ultimate corner (oval) office.

“Here’s an argument for billionaires in politics, at least as long as they made their fortunes themselves: It takes an incredible work ethic, good management skills, dedication, and a gift for setting priorities to turn a small company into a prosperous multinational one. Those all seem like skills that’d be useful in politics too, right?

“This is the case Perot made for himself, starting in 1992. ‘See, there’s a lot I don’t understand,” he said in a debate with George H.W. Bush and Bill Clinton. “I do understand business. I do understand creating jobs. I do understand how to make things work. And I got a long history of doing that.’

“Billionaires since have echoed him. Bloomberg cited the “pragmatic approach” of business leaders. Schultz’s website prominently features his successes at Starbucks. Trump leaned on his business background, telling voters in early campaign ads, ‘My opponents have no experience in creating jobs or making deals.’”

Dear Billionaires: Stop Running For President:  If you’re a billionaire who wants to transform politics and our world, there are better ways. Also, you’ll lose. (Vox, Jan. 19, 2019)

But are those skills really transferable? Again from Dear Billionaires:

“The problem is that it’s not really clear the skills transfer. In the course of their meteoric professional careers, billionaires mostly interact with people who work for or with them, and lots of political concerns that rank highly for everyday Americans aren’t areas they know anything about.”

Besides, is somebody who rakes in thousands of times more than the average person on their company’s payroll really going to understand what’s good for the rest of us? For an opinion about that, see No One Should Earn 1000 Times More Than a Regular Employee (The Guardian, Mar. 20, 2018).

Today, we’ll let Tom Wolfe have the last word on whether the CEOs can save the world:

“The Masters of the Universe were a set of lurid, rapacious plastic dolls that his otherwise perfect daughter liked to play with… On Wall Street he and a few others — how many? — three hundred, four hundred, five hundred? — had become precisely that… Masters of the Universe. There was no limit whatsoever!”[3]

[1] Merriam-Webster:  “Apparatchik:  1. a member of a Communist apparat,  2. a blindly devoted official, follower, or member of an organization (such as a corporation or political party. In the context of the definition of ‘apparatchik’ (a term English speakers borrowed from Russian), ‘apparat’ essentially means ‘party machine.’ An ‘apparatchik,’ therefore, is a cog in the system of the Communist Party. The term is not an especially flattering one, and its negative connotations reflect the perception that some Communists were obedient drones in the great Party machine. In current use, however, a person doesn’t have to be a member of the Communist Party to be called an ‘apparatchik’; he or she just has to be someone who mindlessly follows orders in an organization or bureaucracy.”

[2] Wolfe’s epic satire, Bonfire of the Vanities. You may know that the original bonfire of the vanities occurred in Florence on February 7, 1497, when Dominican friar Girolamo Savonarola sponsored a bonfire of objects condemned by authorities as occasions of sin — cosmetics, art, books… you know, the usual.

[3] Said about bond trader Sherman McCoy.

Can The Rich Save The World? (2)

Clinton and Branson

Not only can’t the rich save the world, but philanthrocapitalism is a ruse to keep the rest of us in our place says former New York Times columnist Anand Giridharadas in Winners Take All: The Elite Charade of Changing the World (2019). The Amazon book blurb calls it “the New York Times bestselling, groundbreaking investigation of how the global elite’s efforts to ‘change the world’ preserve the status quo and obscure their role in causing the problems they later seek to solve.”

This edited extract from the book begins with a recitation of the same economic trends we’ve been following for the past two years in this blog — essentially how the equitable, “floats all boats” neoliberal years melted down in the past four decades of runaway economic inequality. After that, the book’s argument sorts itself into two main points:  however praiseworthy “doing well by doing good” may be, (1) it perpetuates inequality, and (2) it’s taking place off the government ledger, and that’s not how democracy is supposed to work:

“In recent years a great many fortunate Americans have also tried … something both laudable and self-serving: they have tried to help by taking ownership of the problem. All around us, the winners in our highly inequitable status quo declare themselves partisans of change. They know the problem, and they want to be part of the solution. Actually, they want to lead the search for solutions. They believe their solutions deserve to be at the forefront of social change. They may join or support movements initiated by ordinary people looking to fix aspects of their society. More often, though, these elites start initiatives of their own, taking on social change as though it were just another stock in their portfolio or corporation to restructure.

“For the most part, these initiatives are not democratic, nor do they reflect collective problem-solving or universal solutions. Rather, they favour the use of the private sector and its charitable spoils, the market way of looking at things, and the bypassing of government. They reflect a highly influential view that the winners of an unjust status quo – and the tools and mentalities and values that helped them win – are the secret to redressing the injustices. Those at greatest risk of being resented in an age of inequality are thereby recast as our saviours….

“This genre of elites believes and promotes the idea that social change should be pursued principally through the free market and voluntary action, not public life and the law and the reform of the systems that people share in common; that it should be supervised by the winners of capitalism and their allies, and not be antagonistic to their needs; and that the biggest beneficiaries of the status quo should play a leading role in the status quo’s reform.

“This is what I call MarketWorld – an ascendant power elite defined by the concurrent drives to do well and do good, to change the world while also profiting from the status quo.

“The elites of MarketWorld often speak in a language of ‘changing the world’ and ‘making the world a better place’ – language more typically associated with protest barricades than ski resorts. Yet we are left with the inescapable fact that even as these elites have done much to help, they have continued to hoard the overwhelming share of progress, the average American’s life has scarcely improved.”

The New Elites’ Phoney Crusade to Save the World Without Changing Anything, The Guardian (Jan. 22, 2019).

MarketWorld is about putting the fox in charge of the chicken coop; or, as Giridharadas says it, “ the people who broke the progress machine are trying to sell us their services as repairmen.” That’s exactly the point is the rejoinder of the philanthrocapitalist movement, and thus we have yet one more case of polarized assumptions and opinions talking past each other. There’s plenty more where that came from — for example:

The Prosperity Movie’s website declares “It’s not just a movie. It’s a movement.”

“The businesses we showcased in the film are only a handful of the thousands of new and existing companies who are actively trying to make changes in the world around us.

“The challenge we face is simple. We can’t predict the future, but we can help make choices that turn us in the right direction.

“We could feature something cool a company is doing today and, tomorrow they can go off the rails and do something bad.

“Our goal is not to endorse specific companies, but rather reward ANY company making an effort and showing good behavior. Let’s come together and encourage them to continue doing good things… and reward them for that.”

There’s a lot of “good” and “right” and “bad” in that blurb. Says who? On the other side, the title of this op-ed piece tells you all you need to know about its bias:  Tech Capitalists Won’t Fix The World’s Problems — Their Unionised Workforce Might.

So, one more time with feeling:  Can the rich save the world?

It depends who you ask.

Photo:  Bill Clinton and Richard Branson at a Clinton Global Initiative event in New York in 2006. Photograph: Tina Fineberg/AP