Obligations of the Wealthy

What obligations do capitalists have to their society? Any? Or is it only the money?

Consider somebody who works for a living. Family. Wife and children. Hard worker. Maybe overtime. He has time and resources to look after his own affairs. But does he have time to look at the bigger picture? And even if he had the time, would he have the opportunity. Would he have the education?

Probably not. Indeed, in most cases, a person cannot look after larger interests than his own. Yet, each person is as dependent on this bigger picture as he is of his job. Indeed, one of the people he is most dependent on is his boss. His boss can make his job miserable or pleasant. He can fire him, in some places without any cause at all. Just so, his boss is dependent on his own boss, and his boss on his boss. And so on, up to the very wealthy and very powerful. And even the self employed, even the small business owner is dependent on those richer and more powerful than he is in society. After all, they are able to spend vast sums of money, and alter the government and the allocation of resources. Any one of these powerful could destroy him, the worker, the self employed, the small business man, purely incidentally, without thought, or regard. One has only to look at the hundreds, perhaps thousands, of down towns destroyed by Walmart, or the thousands of desolate factories, to know this is true.

We are all dependent on what goes on beyond our horizons. And we look to other people, those above us, those around us, to keep track of what those things are. We have to.

This dependency is a socially necessary thing. Society could not exist without it. A worker who was more concerned with the affairs across the planet simply could not give enough attention to be able to manage his own life. The same for the small business man. He must attend to his business, his community, the people he buys from and sells to. He doesn’t really have the time to spend a lot of it worrying about the larger issues.

And of course there are other dependencies. We are dependent on the behavior of our neighbors, on the politicians who are expected to serve us, on the people who provide the public services in our community. Society is a web of dependencies. So the question is: Do these dependencies carry any obligation beyond the purely economic? Do they carry a moral obligation?

And what do we mean by moral obligation? From “The Free Dictionary:”http://legal-dictionary.thefreedictionary.com/moral+obligation we have: MORAL OBLIGATION. A duty which one owes, and which he ought to perform, but which he is not legally bound to fulfill.

Now some of these dependencies are equal exchanges. I depend on my neighbors, and my neighbors depend on me. The sense of ‘duty which one owes,’ seems clear in these cases. It is not so clear in cases of hierarchy. Does a boss owe his employee anything besides his salary? Is not the entire value for both parties of the relationship summed up in the exchange of labor for money? Is not the employee compensated in his wages for all the factors of his employment including, say, the fact that he can be fired at will? If we believe this, then be believe that not only is the labor market efficient, but that it is just. But if we believe a particular market is just, how can we believe that the same market, tilted by external forces, is also just? Is the market produced by a monopoly just? And employment, we have a market defined not only by an asymmetry of needs, as are all markets, but by an asymmetry of information. Can the employee negotiate a premium on not only on what he doesn’t know, but what he doesn’t know he doesn’t know? Not only can he not negotiate such a premium, but it is unreasonable to expect him to. And even were he to, he would be in competition with those who would not demand such a premium.

The point here there is that there is a gap, which cannot be remedied by formal debt and application of law.

And what about the relationship between the wealthy and the rest of us. Let us first admit the obvious. They pretty much control the economy. That is, our welfare, the welfare of the society is dependent on their actions. Even if this were not completely the case, it is very much so. By their actions, should they choose, they can do enormous damage to society.

I am not claiming conspiracy. I merely claim a similar response to similar motivations. There was no conspiracy to outsourcing, nor is there to robotization, but damage was done, though some would say the benefits to society more than compensated for it.

But who got compensated? Did the workers who lost their jobs to outsourcing gain any share of the increased profits enjoyed by those companies who sent their jobs overseas? Were they owed any? Did the companies who fired these workers for greater profit elsewhere have any obligation to these workers, or society in general? Or just to enjoy their increased profits, to divide among the wealthy shareholders?

So do the wealthy owe the rest of us anything? It need not be a matter of owing. A parent has obligation to his offspring. But it is not a matter of debt. And in a very real sense we count on the wealthy to take care of us, to manage the economy for the benefit of us all. Why should society allow them to have and retain wealth, if it were not to the benefit of the rest of society? If the wealthy have no obligation, then they have no obligation to act to society’s benefit. They have no obligation not to inflict damage on the rest of society. So if inflicting damage on society profits them, then we should expect them to do so.

Unless they indeed have a moral obligation to the society which supports them.

Links: Bank of America: Too Crooked to Fail

This should make you angry.  You're paying for it, and will pay perhaps thousands of dollars for it.
You.  Personally. And that may be if you're just lucky, since this sort of things screws up civilizations.

http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314


Higher taxes. Higher prices.  Fewer services. Degraded quality of life.

The bank(s) is(are) half the problem.  The essential complicity of our government is the other half.

And more of the same with the so called JOBS bill  (Jump-start Our Business Startups) now going through Congress.   Investors will have another reason to beware, since it essentially reduces or does away with a lot of pesky disclosure formerly required of companies raising money from the public. Not that that will be a real problem, except to the suckers, er, investors, any company unwilling to disclose is looking for. 

Further, there is no reason to invest in an economy that is essentially frozen by excessive rent seeking, and as Matt Taibbi documents, is increasingly run as a Kleptocracy.

And this is the real reason for the decline in IPOs. (IPO is initial public offerings, the stock companies offer when they go public.) After all, disclosure wasn't a problem before  Certainly not in the 1990's, when there were hundreds each year, despite the disclosure laws they are now getting rid of.
 
As far as I can tell, the only difference between Democrats and Republicans is that the Democrats seem to use a little more grease. 

Morality and Debt

We have presented the producer-consumer problem as the basic problem in economics. (See: http://anamecon.blogspot.com/2010/05/greek-debt-and-producer-consumer.html )

However much money the consumer starts with, the consumer must spend his money until the producer has it all, and then the system collapses, (or the consumer runs into debt, and then it collapses.) When the market for the producer’s surplus collapses, the system then implodes. How then to maintain demand in the consuming sector, so it never runs out of money (demand) and will always provide a market for the producing sector?

We have used producing and consuming sectors in the original analysis, and as a kind of shorthand. We could generalize the problem and instead say the powerful and the weak sectors, where the real value of goods exchanged between sectors is equal, or even slanted so that the weak sector produces more than the powerful sector, and thus it is the powerful sector that is the ‘consuming’ sector. But the powerful sector is able to secure a greater proportionate revenue than the weak sector. (It uses its power to do this. We can define the powerful sector as that which is able to secure a higher proportionate revenue than the weak sector, defined as that sector unable to do so.) The powerful sector has a higher profit margin. And so it accumulates the money of the weak sector, and eventually acquires it all. Then it runs the weak sector increasingly into debt.

The moral implications of the terms producer and consumer, are, here, absent. In the reality, where the weak sector produces more than the powerful sector, they are inverted to appearances: The powerful creditor sector has not earned its wealth, but gained it through manipulation and force and fraud, that is, what ever instruments it has at its disposal that make it the more powerful, and the weak debtor sector has not become debtor through sloth. The weak sector is the producing sector, but its wealth is taken through the greater power of the creditor sector.

Does the creditor sector produce or consume? Well, the whole point of extending credit in the present is to, in the future, consume more than one produces. It is a matter of ordering. First, one produces more than one consumes, extending credit. Then one consumes more than one produces, collecting on the debt. However, this initial production by the creditor sector of surplus, to ‘hook’ the weak sector, is not necessary, but only the least unjust.

Whoever controls the flow of money controls the economy. The creditor sector need only start with a portion of the money. Then by collecting more in interest from the producing sector than the creditor pays the producing sector for what it consumes, the creditor sector will accumulate the money of the weak sector. This is the money of the producing/debtor sector. See:

http://anamecon.blogspot.com/2010/11/banks-are-forcing-debt-on-rest-of-us.html

And the video http://www.youtube.com/watch?v=rCu3fpg83TY&feature=related

Especially from about 32 minutes on, but watch the whole thing.

The consuming/creditor sector need not ever have produced anything.

Now the creditor sector seeks to loan to producers, because only producers can pay them back. Only those who produce more than they consume, who are net producers, can pay back loans, in any real sense. So either the creditor sector starts as a consuming sector, or it becomes one. The creditor sector must be a consuming sector, since in order to be paid back, it must allow the producing/debtor sector to produce a real surplus, and make the producing/debtor sector hand that surplus over. It consumes an ever greater portion of that surplus, as the producing /debtor sector becomes more in debt. The producing/debtor sector must become ever more in debt because there is never enough money in circulation to pay back the principal and the interest on the loans the creditor sector extends. This proceeds until the producing/debtor sector owes more in interest than it can produce, and must consume its capital to maintain payments. The creditor/consumer takes some of the production the weak producing/debtor sector needs to maintain itself and its production.

Thus we come to an inversion of the original problem. The consuming/creditor sector has the surplus of money, and the producing/debtor sector is starved of the money needed to support itself. It contracts. But it is leveraged against itself. That is, its nominal net income is negative, because the burden of what it owes, the interest burden, nominal interest times money owed, is greater than its profit margin times how much it produces. (The situation is even worse where a portion of the principal must be repaid.) So it is perpetually in the state of losing money That is, rolling over ever more debt.

Now the question arises: Why are corporations flush with cash? First, they are not. See: http://anamecon.blogspot.com/2011/10/today-were-just-going-on-little-about_09.html

Second, labor also constitutes part of the producing sector, and labor is losing money.

Why are the banks in debt? The banks are just a front. They owe also. Who do they owe? They owe themselves. That is, they are front corporations which, when they fail, will have no assets, but the assets will have been transferred to another corporation with the same owners. The one percent.

As the producing/debtor sector contracts, it is ever less able to repay its debts to the consumer/creditor sector, which debts increase even as the producer/debtor sector’s ability to repay decreases. Austerity cripples the producer/debtor sector, effectively making its debts larger and more difficult to pay back. More and more of its assets are transferred to the consuming/creditor sector, until the producing/debtor sector is stripped of its assets.

The details of this process are interesting in themselves. The consumer/creditor sector controls the quantity of money available to the producer/debtor sector. (But there is only money to pay the principal, never enough to pay the principal and the interest.) When it extends more credit, there is more money, and the price of things goes up. The members of the producer/debtor sector must borrow to keep up. (It is a failure of the commons. If no one borrows, no one has to borrow. If some borrow, the others have to, to keep up. Note also, the creditor/consumer sector can drive up prices by increasing its own demand, thus forcing increased levels of debt on the producer/debtor sector.) Then when the consumer/creditor withholds credit, there is less money, and the price of things, particularly assets, goes down. Not only that, when there is less money, there is greater unemployment, businesses contract, and, because money is needed to repay debts, more debts that cannot be repaid. Consider housing. By withholding credit, the price of houses is driven down. And there are more foreclosures.

Now it is argued that assuming a debt is purely voluntary, and that therefore the resulting indenture is essentially freely entered into. Assuming this excuses a process and result that is to many people intrinsically repellant, the assuming of debt may, under some circumstances, itself be compelled. Indeed, purely voluntary situations are rare. There is almost always some degree of force of circumstance, and often circumstance where one’s choices may be limited to a choice of evils. When the cost of living exceeds income, one is left with the choice of starving, or dieing of exposure, or assuming debt, and at least postponing the day of reckoning. Or, in the absence of universal health insurance, many are vulnerable to the choice of assuming debt or dieing of their malady. Similarly, where education is necessary to advancement in society, yet its results uncertain, one is left with the unhappy choice of almost certain poverty or a chance at either prosperity, if as a result of the education one secures adequate employment, or debt peonage if one does not. In either case, the debt must still be repaid, but in one case one is able to pay it off, and in the other one may not be.

Another instance where one assumes debt without choice is through agency, eg the government. Then there is the businessman seeking to preserve his business, or the farmer seeking to pay for planting his crop.

Then there is fraud.

And as ownership is concentrated, monopoly can be expected to be more and more of a feature of economic processes. It is the nature of monopoly to provide to less than the market needs, and people need to borrow to pay the rents collected by- those who extend credit.

In an environment where others assume debt, the resulting increase in the money supply drives up the cost of living, making it more difficult to sustain one’s life style without borrowing. Further, this life style may be deserved, that is a reasonable proportion of a person’s contribution to society. It is essentially unfair that someone who makes a considerable contribution to society be yet forced to live a life of penury. Yet those who blame him for the assumption of debt effectively condone this.

We have shown that being in debt need not imply a moral obligation to repay: The debtor, far from being lazy, may produce for society more than his fair share. Indeed, the lazy and indolent are not extended credit. Only the producers are sought out by creditors, who effectively seek to indenture them.

The debt may have been forced on the debtor, often by circumstance induced by the creditor. Even if not, the perpetual obligation often resulting from overbearing interest amounts to a form of slavery, and this is reprehensible.

The creditor has no implicit claim to moral superiority. Neither should the debtor berate himself as morally inferior, and as deserving of indenturship.

The true immoral behavior may thus be on the part of the creditor.