Creating a Worker-Led Economy When Business and Human Interests Diverge

June 11, 2019 6:09 AM

Law as the Code of Inequality and Wealth - "Katharina Pistor's new book, The Code of Capital: How the Law Creates Wealth and Inequality, deserves to be the essential text of any movement today that concerns itself with law and political economy. It establishes, as its central topic, how fundamental law is to political economy, in the tradition of classical social theory but with a considerable update in light of contemporary affairs. And, more fully than anything else I know, it vindicates the LPE intuition that legal intellectuals have something essential to bring to the current and ongoing debate about markets and injustice."[1]

This is not because Pistor has detailed prescriptions for an emerging movement for reform of this or that area of law, but rather because she offers such a breakthrough set of theoretically-inflected descriptions of how law serves “capital,” and so often fulfills the interests of the rich rather than the rest. It has always done so, of course, but the current moment of extreme inequality requires a considerable effort to collect and synthesize the workings of law that prior generations already detailed. It also demands careful descriptions of the new forms of legal protection on a global scale that recent generations have failed to offer in one place and as part of a general account. Pistor even claims to offer a novel definition of “capitalism” that makes law central, insofar as law not only has a role to play in the creation of property, but also ensures its durability and convertibility.

To exist at all, and to be insulated and multiplied and transformed, wealth requires law and therefore state power to create it and protect it. Even land, the ur-form of wealth, is valueless except to the extent that law “coded” it, Pistor says, and the same is even more true of successor forms of mobile property down to the fancy inventions of contemporary finance that have successful allocated so much of what there is to own at the top of many societies. But creation is not the end of it. For Pistor, the additional key to understanding how law performs a constant and definitional function in the life of capital lays in tracing the ways that law secures capital’s endurance and allows for its transformation into new asset forms.

• Watch Chief Justice John Roberts's commencement speech at his son's New Hampshire school - "I hope you will be treated unfairly, so that you will come to know the value of justice."[2]
• I haven't gotten it yet - "I want more wealthy Harvard Law graduates turned corporate lawyers, turned Supreme Court Justice to tell me about the merits of suffering and bad luck."

Shame Versus the Free Market - "One of the ways I want to understand the power and dynamics of shame as a social mechanism is by comparing and contrasting how shame works with the other forces that play similar roles but that we are much more aware of. Today I'll start thinking about that with respect to market forces, and more generally the viewpoint of the individual as an economic free agent."

Indeed, shame often works really well to get individuals to act against their self interest in relatively small ways so that the group as a whole works more smoothly and is better off, at least ideally. The idea is, if the norms are reasonable and achievable, then people are shamed into following them for the sake of society.

When norms are unreasonable or unachievable, things can go wrong, and the free market ideology we have been indoctrinated with can make things worse...

Speaking of being a perfect 10, I think the easiest way to access how shame works vis-à-vis free markets is to think about how easily scores and scoring systems evoke in people a deep sense of shame.

Whether it’s an SAT score, a GPA, the ranking of the college you went to or your kid got into, your weight, your BMI, your IQ, or your Twitter followers, people have gotten used to – and to a large extent embraced – the concept of being measured by externally defined, maintained, and verified scoring systems. They have profound effects on society, at least to the extent they people care about them...

Stepping back, I think I’m ready to say that there’s been a massive and largely undescribed conflict between the two systems of powers represented by the informal social mechanism of shame and more formal market mechanisms. They are not consistent with each other, and as individuals and groups, we’re being pushed one way by shame and another way altogether by market incentives.

• Machine learning sucks - "Training a single AI model can emit as much carbon as five cars in their lifetimes."
• How Adam Smith became a (surprising) hero to conservative economists - "Adam Smith questioned the values of modern market-oriented society. How did he become a hero to conservative economists?"

Plans for a worker-led economy straddle America's political divides - "Most notable among them is Elizabeth Warren, who last week announced her 'plan for economic patriotism'[3]... Marco Rubio — the senator from Florida who wants to be president someday — has come up with what is in some ways a very similar take on Making America Great. In May, he issued a report, in his capacity as chair of the Senate small business committee, on the challenges to capital investment in America, which crossed a number of red lines for Republicans. The report admitted that the US capital markets had become too self-serving and were no longer helping non-financial business, that prioritising shareholders above all should stop, and that public policy could play a role in directing capital to more productive places — away from Wall Street, and towards Main Street."

Republicans are beginning to question the trickle-down orthodoxy. Made in China 2025, Beijing’s manufacturing strategy, has made it clear to politicians on both sides that the US can no longer successfully compete with state-run capitalism unless it figures out how to funnel capital to the most productive places, connecting the dots between job creators and education.

That’s industrial policy, of course — it’s been a dirty word in the US for decades now. But it wasn’t always. As Cornell professor and legal scholar Robert Hockett, who has advised several presidential hopefuls, puts it: “All this represents a return to our own Hamiltonian development model, in which the public sector played a crucial coordinating role, empowering the private sector, and enabling its efforts not to be scattered, haphazard or wasted.”

Alexander Hamilton supported the creation of a national bank, and started a public-private partnership to provide cheap water-power and financial capital to investors in the early Republic. Subsequent administrations, from Lincoln to Roosevelt, Eisenhower and Kennedy, took pages out of his book.

• Building a Good Jobs Economy[4]
• We need approaches for hourly workers that enable them to buy or earn assets that can appreciate

Rethinking Wealth, From Birthright Capital to Big Spender Taxes - "Americans have about $100 trillion of wealth. If that was divided evenly across the population, each individual would have a net worth of $300,000. At a 5% rate of return, this money would deliver to every person $15,000 annually in investment income. Poverty would be eliminated, inequality would be slashed, and the power of concentrated wealth would be neutralized."

If this sounds like a socialist fantasy, it is: Some 20th-century Marxist economists argued that it should be possible to bring a country’s assets into collective ownership and pay everyone a universal dividend. But part of that socialist idea—that millions of people could own a country’s capital together—has, in a way, already happened. Look at the rise of index funds, such as those run by BlackRock Inc. and Vanguard Group Inc. These companies now manage trillions of dollars for tens of millions of clients and are major investors in many public companies.

The bulk of these assets are held by the wealthy, but it’s not hard to see how a socialist society could build on this design. A huge, government-operated mutual fund—in which each citizen owned an equal, nontransferable share—could work just as well as index funds do today. The government could create an investment fund, use wealth taxes to gradually fill it up with return-generating assets, and then pay out an annual dividend to every American based on the fund’s return. Alaska’s Permanent Fund, which pays a dividend to state residents, and Norway’s Government Pension Fund Global have proved that such portfolios can work not just in theory, but also in practice.[5]

• How Marc Benioff and Other Tech Titans Are Disrupting Philanthropy - "Bay Area tech entrepreneurs have changed how we communicate and do business. Now the community is trying to disrupt philanthropy by reinventing capitalism."
• The Real Reason Stock Buybacks Are a Problem - "This argument is a corollary of the fact that the preferential taxation of capital does not seem to deliver on the policy goals with which it is rationalized... that preferential taxation of capital no longer leads to the intended policy effects of job creation and increasing capital investment in plant, property and equipment but rather is a bought-and-paid-for scam perpetrated by the financier class."

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