by Tim Di Muzio
So one of the fundamental contradictions the social justice movement will have to confront is the pathological drive to accumulate money and power held by the few versus the logic of livelihood, well-being and human security held by the many.
This brings us to what is at stake in this work. As I see it, there are at least three things. First, if current trends continue, the tiny percentage of humanity that owns the majority of the world’s wealth will continue to get wealthier at the expense of everyone else. The ethical dilemma here is that dominant owners do not, and indeed cannot, spend all of the income they accumulate. Instead, they continue to invest their money in more income-generating assets with the intention of making themselves even wealthier. So while the majority of the planet’s inhabitants are subject to precarious or insecure conditions of existence – many of them easily addressed if the finance were forthcoming – a small fraction of humanity is accumulating vast fortunes not for the sake of well-being and livelihood but, as we shall discuss in detail in Chapter 2, for the symbolic accumulation of power and social status. For example, consider that the Organisation for Economic Co-operation and Development estimates that to achieve the Millennium Development Goals (MDGs) by 2015 it would cost US$120 billion (Stijns et al. 2012: 12). For many of us that might sound like a lot of money – and it is. But as a percentage of the US$200.5 trillion held by 8.4% of the global population it represents only 0.06% of their total wealth. Put another way, if we asked the 393 million people who own 83.3% of global wealth to pay for the MDGs, we would be asking each person to pay a whopping US$305.34 (my calculations using Credit Suisse 2013: 22). So the problem of achieving these goals is not that there is no money out there to possibly meet the targets. The major problem seems to be that those who actually have the most money have it invested in income-generating assets to make more of it for the sake of making more of it, which in turn is for the purpose of making more of it, ad infinitum. Put in the words of Adam Smith: ‘the great affair, we always find, is to get [more] money’ (Smith 2005: 342). If this sounds a bit bizarre as an end goal for earthly existence, then you will enjoy this book. The second political problem, as we will find out, is that dominant owners also control the money supply through their ownership and/or control of commercial and central banks. This creates radically uneven access to money, with the majority of humanity experiencing a real scarcity of money. As I elaborate in Chapter 3, we will see that the reason for this scarcity of money is partially rooted in the power of commercial banks and their owners to create money by issuing interest-bearing loans. In other words, the power to create money is capitalised by investors. What this means is that, through their lending, banks help determine spending and investment priorities. Helping the world’s most vulnerable populations has not been one of those priorities. As we shall discover later, reforming the way in which money is created should be a key priority for progressive activists who want to move beyond capital as a mode of human control.
The second thing at stake in this analysis is that we are starting to gather evidence suggesting that a high level of economic inequality leads to bad or undesirable social outcomes. This may sound intuitive to most people who have not been steeped in Ayn Rand’s infantile fantasies of individual extremism. Indeed, the reverse hypothesis would be that high levels of economic inequality lead to desirable social outcomes – a proposition that, again intuitively, would sound absurd to most. Still, it is one thing to intuit that inequality causes social harm and another to demonstrate it in a scientific way that can be verified and replicated by other scholars. Wilkinson and Pickett’s The Spirit Level (2009) does just that. The authors consider 11 health and social problems, such as drug abuse, imprisonment, obesity, social mobility and teenage pregnancies, and find that the more unequal a country, the worse it is likely to perform. So, if a political goal is healthier, happier and greener societies, then confronting current relations of force and power should be at the top of our agendas.
The third thing at stake in this analysis is whether or not we can find a convincing argument that definitively proves that the private fortunes of the few are deserved. The ‘capital as power’ approach used in this study and detailed in Chapter 2 will already suggest that they are not. This argument is elaborated at greater length in Chapter 5, when I consider the mounting empirical evidence that the vast majority of wealth is social and that individuals play a far smaller role in generating wealth than has been appreciated in popular discourse or capitalist fanfare. Indeed, the business press tends to lionise and worship wealthy individuals as though they were superhumans capable of feats that no one else on earth could even conceive of accomplishing. So there are three things at stake in this book: 1) a future of increasing inequality rooted in an unfair and corrosive monetary system; 2) the social harms of extreme inequality; and 3) the sociality of wealth and its radically unequal distribution among a minority of individuals.
The main arguments and structure of the book
The arguments made in this book are presented over six chapters. Although each chapter introduces distinct arguments, my hope is that the reader will be able to appreciate the logic of their presentation and the value of the work as a whole. In the first chapter I argue that, while there is considerable scholarship on elite networks and the formation of a transnational capitalist class, there is a dearth of scholarly analysis focusing on the 1%, or what this study calls dominant owners or high-net-worth individuals. This group can be defined as individuals who have a minimum of US$1 million in investable assets – that is, assets intended to produce more money for their owners. This excludes their ‘primary residence, collectibles, consumables and consumer durables’ (Capgemini and RBC 2013: 4, note 3). According to the 2013 World Wealth Report there are about 12 million humans who belong to this category out of a global population of about 7 billion. So, while labelling the global wealthy ‘the 1%’ was politically expedient for the Occupy movement, when considered empirically from the point of view of wealth experts and leading financial institutions, the number of dominant owners is far smaller. In fact, high-net-worth individuals represent only 0.2% of the global population. The first chapter takes an analytical look at this minority and discusses the two major sources of income generation: labour and investments in income-generating assets such as stocks, bonds and real estate. The chapter also provides some examples of the geographical distribution of the 1% and details some of the key sources of their wealth. As this chapter is largely analytical, it is perhaps the driest chapter in the book. For this reason, I have tried to make the quantitative data as succinct as possible. What I hope emerges is a clear image of the disparity of wealth, and we have to ask what could explain such overwhelming inequality. Part of the answer lies in recognising that we did not arrive at this point in human history because of some conspiracy – although people often do conspire to pursue their private interests. Even the liberal Adam Smith argued that ‘people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public’ (Smith 2005: 111). In this book, I argue that the current disparity in wealth can be explained by a logic of power that has been ruthlessly followed by high-net-worth individuals, the corporations they largely own, and their investment managers: the logic of differential accumulation (Nitzan and Bichler 2009). This logic is the subject of Chapter 2.
In Chapter 2 I outline the ‘capital as power’ approach used in this study. I explain why the neoclassical and Marxist understanding of ‘capital’ cannot explain prices and accumulation and therefore the distribution of wealth. I then argue that the ‘capital as power’ framework is more convincing in this regard since it understands capital in the same way as modern-day investors and their wealth management firms view it: as the capitalisation of expected future earnings adjusted for some factor of risk. I then offer an understanding of capitalisation as the dominant ritual of global investors and provide some examples to illustrate the theory of capital as power fo
r the reader. In the final section, I sketch what could be called the architecture of capitalisation by exploring some of the key institutions and income-generating assets in the capitalist mode of power. Many readers will be familiar with these instruments and institutions, but many students new to political economy may not be. For this reason, I found it necessary to include them in this work since they are integral to understanding the capitalist mode of power. Overall, what I hope emerges from Chapter 2 is a keen awareness that the very logic of differential accumulation at the heart of modern capitalism is designed to intensify inequality, not overcome it.
The topic of Chapter 3 is wealth, money and power. I begin by contextualising modern wealth and its generation by looking at wealth historically. I then explore some of the main attempts to account for the generation of wealth that emerged from the eighteenth century onwards. Here, we consider mercantile thought, William Petty, the French physiocrats, Adam Smith and the irascible Karl Marx. I argue that Marx’s focus on social labour to explain wealth generation is convincing but only partially correct. What Marx largely missed is that the transformation in social property relations that created capitalist owners on the one hand and wage-labourers on the other also corresponded to a revolution in energy production and consumption in England and later elsewhere. The radical difference between the meagre wealth of the past and the abundance many experience today (and the 1% have a disproportionate share of this abundance) can be explained by humanity’s uneven exploitation of fossil fuels: coal, oil and natural gas. In fact, the world’s first billionaire – John D. Rockefeller – grew rich by monopolising the petroleum industry in the United States. But while real wealth has a material reality, it is also represented in money. What this means is that any explanation of wealth and the 1% must take into account not only energy but also the creation of money. So in the last section of this chapter I introduce a new general theory of money, energy and power. I explain how money is created and consider its role in the transition to capitalism as a new social relation of power. This is absolutely essential, since most people do not have any understanding of how money is actually created and most economists have generated an incredible amount of confusion on the matter (Häring 2013). If we fail to understand the generation of money, we fail to understand one of the central institutions of the capitalist mode of power and a primary reason for global disparity. As we will discover, our very money supply is capitalised by the few.
In Chapter 4 I explore the concept of differential consumption and the rise of what Citigroup refers to as a plutonomy – an economy driven by the consumptive practices of the 1%. I begin with the Gilded Age in the United States and by recognising that fossil fuels were a necessary, though not sufficient, cause of the new wealth – a fact that has been considerably overlooked by mainstream studies of wealth generation. I then move on to discuss differential consumption in what has been called the New Gilded Age. In the final section I consider Kempf’s (2008) thesis that dominant owners and their quest for consumption, status and power are destroying the planet for future generations. What emerges from this discussion is that the global 1% have created not only a separate economy for themselves and their families but also a separate world view that prioritises the accumulation of symbolic power as represented in money above mere livelihood or any other ethical concern for the fate of humanity or the natural environment. Where ethical concerns can be discerned among this tiny minority, this is contradicted by their drive to accumulate ever more money, thus requiring more growth, the destruction of nature and the commodification and commercialisation of nature and human relationships. This drive to accumulate symbolically is in fundamental contradiction with the 99% who are largely concerned with a decent livelihood, security, and the well-being of future generations.
Moreover, the global 1% and their well-remunerated financial and political servants not only have created a separate economy and world view, but are increasingly insulating themselves from the rest of humanity. One major example is the growing number of fortified built environments (such as bullet-proof armoured vehicles, missile defence systems mounted on private yachts, gated communities and Armageddon survival bunkers).5 What this suggests is that the more closed off dominant owners become, the less likely it is that they will be able to identify (let alone sympathise) with the everyday life struggles of the 99% and their politico-economic interests. This is a very worrying trend, as many earlier complex civilisations collapsed due to an insulated elite leadership blindly following a destructive path (Diamond 2005). The elites did not turn away from the destructive path, because they were the last to suffer the negative consequences of their own logic. What is troublesome today is that there is considerable evidence to suggest that our current leadership is almost completely unreliable and disconnected from the concerns of the 99% (Gill 2011).
Chapter 5 considers the major justifications for unequal wealth and seeks to challenge them based on new research on the origins of social wealth. We begin with Locke’s natural rights defence of unequal property and the right to accumulate money without limit. I then show how Rousseau – also starting from the point of natural rights – overturned this argument based on the very logic Locke used to advance it. I go on to demonstrate how Bentham’s disavowal of natural rights introduced a new justification for unequal property based on utility and the law. His explanation would go a long way in influencing the fantasy land of neoclassical economics. We then explore how mainstream economics justifies the rampant inequality of wealth. The final sections discuss Veblen’s distinction between business and industry and explore serious research on the origins of social wealth and how this challenges the mainstream view of wealth being ‘earned’ on an individual and productive basis.
What I argue in Chapter 5 is that there is currently no convincing theory that can justify the level of income and wealth held by dominant owners. Indeed, I make the argument that the overwhelming surplus enjoyed by such a small section of humanity is not the result of individual ‘effort’ or ‘productivity’ alone but of a combination of factors: the uneven use of fossil fuel energy, a common heritage of compound human knowledge, the institution of ownership, access to resources, luck and socio-geographical positioning. As such, this study puts forward the critical argument that we need to start having a global conversation about social wealth and how we might conceive of fair and appropriate incomes within the context of the limits to growth and the need to develop a different societal logic premised upon well-being, livelihood and creativity. From the point of view of the ‘capital as power’ framework, a further challenge is to imagine what de-capitalised communities might look like. This is addressed more fully in the final chapter.
The sixth chapter of this volume is perhaps its most radical. It contextualises the Occupy movement that swept the planet after the global financial crisis and bank bailouts. I argue that while the movement did have some positive outcomes – such as drawing attention to the widening wealth gap – it was ultimately ineffectual in bringing about the serious change we need if we want to stop the gross inequality in income, wealth and life chances as well as to address our looming energy and environmental crises (Di Muzio 2012). As we will see, these crises are actually beneficial to certain portions of the 1% that stand to gain enormous amounts of money in the short term. I suggest that the only way to effect the change we need is not to create some movement of movements with a plurality of befuddled messages and horizontal leadership, but rather to establish a focused national political party of the 99% (linked transnationally) that has clear policy goals based on evidence, not conjecture. Leaderless leadership, as some radical democrats argue for, is a chimera and amounts to no leadership at all. The 1% can rule largely because the 99% are fragmented and following the logic of livelihood.6 The 1% and their managers are playing a totally different game: capitalising the expected future income streams of society. They are following the logic of differential accumulation premised on the control of human creativit
y for profitable ends. I offer ten goals that a party of the 99% might discuss and organise around in order to challenge this reality. The chapter concludes with a brief discussion on creativity, power and the meaning of life.
What I think emerges from this discussion is that, if we do not overhaul the logic of differential accumulation and challenge the capitalist mode of power, we are likely to witness worsening political, economic, social and environmental conditions for the 99% and a severe crisis of legitimacy – already apparent in a number of places, such as Spain, Greece and Egypt. Such conditions could eventually lead to a politics of apathy and desperation, but they could also lead to more organised and intensified forms of resistance – including violent action. In this sense, the fate of the 1% is unmistakably tied to the fate of the 99%. The Canadian writer Margaret Atwood went so far as to suggest that events could spiral out of control:
When distrust in a system becomes widespread among small players, it throws up something like Occupy Wall Street, or like the Tea Party. Or like, for instance, the French revolution. Before that game-changing event, a privileged class that made the rules – rules favoring itself – overspent on a foreign war and then tried to stabilize the nation by overtaxing the already ruinously taxed populace. Confronted with protest, the aristocrats responded with inflexibility and prevarication, and dedicated themselves to preserving their own advantages at the expense of everyone else. If this sounds in any way familiar, it may be bracing to recall that before long, heads were being sliced from necks, blood was running in the streets, and France, riddled with internal dissension, lost its position as the most powerful country in Europe (Atwood 2012).
Let me be clear: I am in no way advocating violence as the solution to social justice issues. But as a political economist and social scientist it would be foolish, given past tumults and struggles, to deny the potential of violent outbreak unless we embark upon a radically different path to the one we are currently headed down. In the final chapter of this book, I try to carve out such a path in a suggestive manner. For now, we turn to an analytical account of the 1%, their geographical locations, and how they hold their wealth.