Yves here. Please welcome guest blogger #SlayTheSmaugs. For those of you who have neither read The Hobbit nor seen the movies, “Smaug” is probably a meaningless word. In The Hobbit, Smaug is a massive and vicious dragon. He sits on a pile of gold and jewels that would bury a football stadium’s grass several feet deep, and he knows how much he has down to the last golden cup. He does nothing with his wealth except sit on it, and glory in it; that is his hoard’s only purpose. Smaug is greed incarnate.
Also note that #SlayTheSmaugs implicitly reinforces the “taxes fund spending” narrative by using government spending as a scale to understand how big the hoards are. While the scale is helpful and rhetorically, may seem to make for a stronger case for redistribute taxes (we need the money and they have it), it is important to remember that the real constraint on Federal spending is inflation. The low labor participation rate, stagnant real wages, the rise of McJobs and part-time work, and the inability of the Fed to hit its inflation targets all point in the same direction: the US needs to spend a lot more than it is now.
In keeping with the moral imperative #SlayTheSmaugs articulates there are plenty of reasons to tax the top wealthy much more aggressively. Lambert’s top three:
To keep them from buying government with their loose cash
To prevent the development of an aristocracy via inheritance
For the health and welfare of their children
By #SlayTheSmaugs, an elected Bernie delegate in Philly. #STS believes that the billionaire class are Smaugs (the greed incarnate dragon of The Hobbit), immorally hoarding wealth for no reason beyond ego gratification. To “Slay” the Smaugs, we need a confiscatory wealth tax, stronger democratic institutions to impose it, and a shared moral agreement that #GreedIsEvil to justify it.
When Gordon Gekko proclaimed that ‘Greed is Good’ in 1987, it was an obvious rejection of several millennia of teachings by traditional prophets and priests. Yet when Gekko preached greed, he was merely reinforcing the current cultural norm; greed had already been rebranded a virtue. (Still, the speech was to remind us Gekko was a bad guy). Consider that Madonna had proclaimed herself a Material Girl three years earlier, and “Living Large” was cool. Conspicuous consumption is walking the talk that greed is good.
Why had greed become good? I blame the creation of a credit-fueled culture of constant consumption that necessarily praises coveting stuff, plus the dismantling of the regulatory state that had kept Wall Street and wannabe oligarchs in check.
Our healthy cultural adoration of the self-made man, of respect for success, warped into worship of the rich. They are not the same. Wealth can be inherited, stolen through fraud and other illegal activities, or harvested from bubbles; none of these or myriad other paths to riches is due respect, much less worship. Paired with another 80’s definition—government is the problem—worshiping wealth facilitates all the dysfunction in our government.
Remembering Greed is Evil
Thirty years later, the old social norm—the one that protected the many from the few, the one that demonized greed as a deadly sin—is resurgent. We have a Pope who preaches against greed, and who walks his talk. We had a Presidential candidate of a major party—Bernie Sanders—who railed against those living embodiments of greed, the Billionaire Class, and walked his talk by rejecting their money. At the convention, he has invited delegates to four workshops, one of which is “One Nation Now: Winning the Fight Against Racism and Greed”. We have a late night comedian—John Oliver—ridiculing the prosperity gospel and taking on the debt industry. We have mass consciousness rising, reflected in Occupy, the label “the 99%”, BLM and more.
But we need more voices insisting #GreedIsEvil. We need to teach that basic message at home, in school, and in houses of worship. We need to send the right signals in our social interactions. We need to stop coveting stuff, and start buying with a purpose: Shopping locally, buying American, buying green and clean, and buying less. We need to waste less, share more and build community. We need to re-norm-alize greed as evil, make it shameful again. Then we will have redefined ourselves as citizens, not consumers.
But make no mistake: America cannot become a just nation simply by the 99% becoming more virtuous. The cultural shift is necessary but not sufficient, for norms alone do not deliver social and economic justice. Shame will not slay the Smaugs; we need structural change in the political economy.
Extreme greed, the greed of Smaugs, is categorically different than the petit greed underlying the irrational, constant consumption and the worship of wealth. Extreme greed manifests as a hoard of wealth so great that “purchasing power” is an irrelevant concept; a hoard so great it lacks any utility other than to be sat upon as a throne, gratifying the Smaug’s ego and symbolizing his power. That greed must be understood as an intolerable evil, something so base and malevolent that the full power of the state must be used against it.
This essay is my contribution to the cause of returning extreme greed to its rightful place in the pantheon of ultimate evils. Here is the thesis: extreme greed must be ‘slain’ by the state because extreme greed is brutally violent.
The Stealth Violence of False Scarcity and “Cutting Corners”
Greed’s violence is quiet and deadly: The violence of false scarcity and of “corner cutting”. Scarcity is not having enough because there just isn’t enough to go round, like the nearly 50 million people who don’t reliably have food during the year, including 15 million kids. False scarcity is when actually, there’s plenty to go around, but people generally don’t have enough because of hoarders.
It’s a concentrated version of what happened to pennies in 1999. People keeping pennies in piggy banks created a shortage felt throughout New York City. If only people had broken open their piggy banks, and used their pennies, there would have been plenty of pennies in circulation, and shopkeepers wouldn’t lose money by rounding purchases down. In this piece, I’m focusing on false scarcity of dollars, not pennies, and the maiming and premature death that results from false dollar scarcity. But the idea is essentially the same; there’s just far fewer relevant piggy banks.
By the quiet violence of ‘corner cutting’, I’m referring to unsafe, even deadly, workplaces that could be safe if the employers invested in safety.
Sporadically, greed also drives overt, and sometimes profoundly bloody violence to protect the hoard. Think of employer violence against unions and union organizers, a la Henry Ford, or John D. Rockefeller. Nonetheless in this country now, the violence of greed tends to be more covert. It is that quiet violence, in both forms, I want you to hear now.
As Sanders often reminds us, in this, the richest nation in the world, nearly 50 million people are living in poverty; roughly one in seven Americans. And as Sanders explained, in a speech in West Virginia, 130,000 people die each and every year as a result of poverty. I have not read the study Sanders referred to, so I don’t know how much it overlaps with the rise of suicide that accelerated after 2006 and which appears to be correlated with financial stress. Nor do I know how it overlaps with the documented increase in white mortality that also appears to correlate with financial stress. Regardless of overlap, however, each of these studies reflects the quiet violence of false scarcity. Naked Capitalism has featured many posts documenting the damage of greed; this is a recent one.
Chronic and acute financial stress from false scarcity maims, and kills. And Smaugs create false scarcity to feed money to their egos and maintain their oligarchic power.
As Lambert often says, they don’t call it class warfare for nothing.
But wait, you might insist, how false is the scarcity, really? How much do a few billionaires matter? Ranting that greed is evil is all well and good, but really, can a relative handful of people be manufacturing scarcity where there is none, shortening and taking millions of lives in the process? Aren’t you making your target too narrow in going after the Smaugs?
In order: Very false, a lot, yes and no.
The Falsity of Dollar Scarcity
In 2015 the Institute for Policy Studies determined that the richest 20 American billionaires had hoarded as much wealth as 152 million people had managed to scrape together combined. Think on that.
Twenty people had hoarded $732,000,000,000. America is a nation of about 300,000,000 people. That means 20 people could give a combined $2,370 to every American, and still hoard $1 billion each. I’m not suggesting that’s how the redistribution should be done, but it’s notable that in an era when some 200 million Americans haven’t been able to save $1000 for an emergency, twenty people could give everyone over two grand while remaining fabulously wealthy.
Now, these 20 monstrous people, these full grown Smaugs, are not alone in their extreme greed. Adding in the assets of the next 380 richest Americans brings the total wealth hoarded to $2.34 trillion. That number is so large it’s hard to process, so let’s think this through.
First, imagine that we took all of that money with a confiscatory tax, except we again left each of the 400 people with $1 billion. They would still be obscenely rich, so don’t pity them.* Our tax thus netted $1.94 trillion. Since that’s still an unimaginable number, let’s compare it to some recent government spending.
In December 2015, Congress funded five years’ worth of infrastructure construction. Congress and President Obama were very self-congratulatory because our infrastructure is a mess, and building things involves good paying jobs. So, how much did five years of infrastructure building and job creation cost? $305 billion. That’s less than the $400 billion we let the 400 Smaugs keep at the start of this thought experiment. With the $1.94 trillion we imagine confiscating, we could keep building at the 2015 pace for 32 years. Or we could spend it much faster, and create an economic boom the like of which this nation hasn’t seen in generations.
Even Bernie Sanders, he of the supposedly overly ambitious, unable-to-be-paid for initiatives, only proposed spending $1 trillion on infrastructure over five years—a bit more than half what our tax would net. (Nor did this supposed radical call for a confiscatory wealth tax to fund his plan.) Sanders estimated his proposal would create 13 million good paying jobs. With nearly double the money, surely we get nearly double the jobs? Let’s be conservative and say 22 million.
In sum, we could confiscate most of the wealth of 400 people—still leaving them obscenely rich with $1 billion each—and create 22 million good paying jobs over five years. But we don’t; we let the Smaugs keep their hoards intact. Now consider this is only taxing 400 people; what if we taxed the richest 2,000 people more justly? What if we taxed corporations effectively? What if we stopped giving corporate welfare? A confiscatory wealth tax, however, simply isn’t discussed in polite company, any more than a truly progressive income tax is, or even serious proposals to end corporate welfare. The best we can do is agree that really, someday soon, we should end the obscenity that is the carried interest loophole.
False scarcity isn’t simply a failure of charity, a hoarding of wealth that should be alms for the poor. False scarcity is created through the billionaires’ control of the state, of public policy. But the quiet violence of greed isn’t visited on the 99% only through the failure to pay adequate taxes. Not even through the Smaugs’ failure to have their corporations pay adequate wages, or benefits. Predatory lending, predatory servicing, fraudulent foreclosure, municipal bond rigging, and pension fund fleecing are just some of the many other ways immoral greed creates false scarcity.
While false scarcity has the broadest impact, it is not the only form of stealth violence used by the billionaires in their class war against the rest of us. The Ford and Rockefeller style violence of fists and guns may be rare in the U.S. these days, but a variant of it remains much too common: Unsafe workplaces, the quiet violence of “cutting corners”. Whether it’s the coal industry, the poultry industry, or the fracking and oil industries, or myriad other industries, unsafe workplaces kill, maim and sicken workers. Part of the political economy restructuring we must do includes transforming the workplace.
Feel the Greed
Let us remember why this stealth violence exists—why false scarcity and unsafe workplaces exist.
People who have more money than they hope to spend for the rest of their lives, no matter how many of their remaining days are “rainy”; people who have more money to pass on than their children need for a lifetime of financial security, college and retirement included; people who have more money to pass on than their grandchildren need for a similarly secure life–these people insist on extracting still more wealth from their workers, their clients, and taxpayers for no purpose beyond vaingloriously hoarding it.
Sure, some give away billions. But even so they retain billions. For what? More; charitable foundations are not the same thing, in many cases, as true charity. Instead foundations often function as hoard preservers as well, and enrich their leadership too.
Greed is evil, but it comes in different intensities. Petit greed is a corrosive illness that decays societies, but can be effectively ameliorated through norms and social capital. Smaug greed is so toxic, so potent, that the state is the only entity powerful enough to put it in check. Greed, particularly Smaug greed, must be put in check because the false scarcity it manufactures, and the unsafe workplaces it creates, maim and kill people. The stealth violence of Smaug greed justifies a tax to confiscate the hoards.
#GreedIsEvil. It’s time to #SlayTheSmaugs
*One of the arguments against redistribution is that is against the sacrosanct efficient market, which forbids making one person better off if the price is making someone else worse off. But money has diminishing returns as money after a certain point; the purchasing power between someone with one billion and ten billion dollars is negligible, though the difference between someone with ten thousand and a hundred thousand, or a hundred thousand and a million is huge. After a certain level of accumulation money is simply ego gratifying points, it’s not money any more. Thus taking it and using it as money isn’t making someone ‘worse off’ in an economic sense. Also, when considering whether someone is ‘worse off’, it’s worth considering where their money comes from; how many people did they leave ‘worse off’ as they extracted the money?