He [Thomas Piketty] saw five striking facts: First, ownership of private wealth–with its power to command resources, dictate where and how people would work, and shape politics–was always highly concentrated.
This is the second sentence of Brad DeLong’s “The Melting Away of North Atlantic Social Democracy.”
You might argue that Brad is simply reporting Piketty’s thoughts, and he is. But it seems from context that the idea that ownership of private wealth dictates “where and how people would work” is one that Brad shares. If so, then the title of this post is appropriate; if not, not.
In any case, I want to address whether the claim about wealth dictating “where and how people work” is correct.
It isn’t.
Take the richest man of his time, John D. Rockefeller, whose wealth in today’s dollars would exceed the sum of the wealths of both Bill Gates and Warren Buffett. (For why this is a kind of ludicrous comparison–in any reasonable sense, John D. Rockefeller was poorer not only than Gates or Buffett separately, but also than me–see Donald Boudreaux’s excellent post on Rockefeller.)
Could Rockefeller, whose wealth was a larger percent of U.S. wealth than Gates and Buffett’s wealths combined, “dictate where and how people would work.” No. He could certainly affect where and how a small percent of the U.S. population would work. And he certainly, by bringing down the price of petroleum by 61%, made work easier for many people. But that’s hardly dictation.
Was there anyone back in, say, 1917 or 1918, when Rockefeller was still alive, who dictated where and how people would work? Well, yes there was. And his name was Woodrow Wilson. By implementing military conscription, he dictated where a few million American men worked and how they worked. He even, indirectly, caused over one hundred thousand of them to die while working.
But it’s hard to find an example of a private wealth owner who had the power that Brad DeLong claims.
READER COMMENTS
Dan Hill
Feb 22 2016 at 6:19pm
I would argue it’s also a distorted view of power. Influential politicians have far more power to “command resources, dictate where and how people would work” than Gates or Buffett. The difference is not only one of degree but of kind. Actually the terms “command” and “dictate” seem inappropriate to apply to businessmen and women who must conduct their relationships with customers, employees, and investors on a purely voluntary, mutually beneficial basis. No such constraint applies in politics.
Bill
Feb 22 2016 at 6:55pm
“…with its power to command resources, dictate where and how people would work…”
At first glance, one might almost think he was referring to allocation of resources by the spontaneous order of voluntary exchange. But then you understand he’s suggesting that accumulation of wealth is analogous to sinister power over market participants to their detriment.
But as David ably and concisely explains, the accumulation of wealth is generated by exchange among many less wealthy market participants that results in increasing their benefit by increasing consumable goods and lowering the cost of production.
When will intellectuals cease insisting on writing massive tomes that balance precariously on a grievous misunderstanding: that wealth is the same as coercive power? It is possible to attain wealth through improper manipulation of political power, but that doesn’t mean that’s how all, or even most, wealth is generated.
ThomasH
Feb 22 2016 at 9:49pm
Dave,
Is this a quibble about “dictate?” No reader thinks that DeLong thinks that Rockefeller had the kind of power that Stalin or Pol Pot had. At the same time do you dispute that any entrepreneur decides where people will work and live if he decided to make one city rather than another his headquarters?
Daniel Klein
Feb 22 2016 at 11:31pm
Nice post. Semantics is where the important struggles lie.
Robert Evans
Feb 22 2016 at 11:56pm
I believe the appropriate terms are de facto and de jure (or de somethingorother)?
Owing money to the company store or rent to the company town – your job wouldn’t start out as dictatorial, but thanks to debt laws it might end up that way (especially if you became somewhat injured).
So keep working as they say, or go to prison – exactly the same option the conscripts had.
Let’s not forget slavery a few decades before, or indentured servitude a few centuries before that.
Does it count as “dictating” if individuals had a nominal or real choice, but knowing that some portion of them definitely would make the choice? Because if we are going to be semantic about it, the word used is “people”, not “persons”.
@Dan Hill
“who must conduct their relationships with customers, employees, and investors on a purely voluntary, mutually beneficial basis.”
Change that “must” to “legally are supposed to”. On some occasions the laws are not followed. Mostly in other countries, and in previous decades, but sometimes here and now. As an extreme example: slavery, though illegal and rare, still exists in the US.
James Hanley
Feb 23 2016 at 8:12am
Political Scientist David Easton defined politics as “the authoritative allocation of values for a society.” I’ve never liked that definition, but it’s worth noting that it emphasizes that such authority lies in the political realm, rather than in the market realm.
MG
Feb 23 2016 at 8:34am
Like Mr. DeLong, I consider that maximizing the utility of choice in where to live and work is very important. I wonder how would he respond to policies that would increase the value of choice — more, not less federalism, which would give people more choice. And policies that would maximize the likelihood of being able to exercise that choice — e.g., minimize barriers to residential/commercial development to accommodate migration, facilitate portability of health insurance arrangements across state lines, reduce barriers to work associated with idiosyncratic licensing requirements, facilitate making long-term renting a cost effective option for both investors and renters, encourage school choice…
JK Brown
Feb 23 2016 at 2:32pm
Robert Evans,
You are mistaken, slavery is not illegal and does not exist in the US. Force labor, rape, kidnapping, false imprisonment are illegal, but do occur sometimes in the US. But if the crimes become known to society, to the government, the perpetrators are called to account. The victims are not returned to their “owners”.
Slavery is a societal condition. That is why slavery is unconstitutional, not illegal. Slavery requires government, or at least the entity that monopolizes coercion and compulsion in the society. So, the only “slavery” permitted in the US is the Draft.
JK Brown
Feb 23 2016 at 2:44pm
For private wealth, this is in a manner true, but only after those people have voluntarily joined in common cause with the wealth holder. Not to mention, those people can break with the common cause at anytime they wish, including over dictations of where and how they work. The latter is subject to contract terms and practical considerations. For instance, it is generally accepted that a seaman may not quit work while at sea, sometimes while on the voyage, defined in the shipping documents.
In any case, it is not the private wealth that dictates, but rather the enterprise with which the people have joined in common cause.
Mr. Econotarian
Feb 23 2016 at 3:23pm
“The company store’s monopoly power in nonunion districts was limited because store prices were part of an employment package offered to geographically mobile miners in a labor market with hundreds of mines.”
https://www.questia.com/read/65250311/soft-coal-hard-choices-the-economic-welfare-of-bituminous
Andrew_FL
Feb 23 2016 at 3:41pm
@ThomasH-“No reader thinks” How would you know?
ThomasH
Feb 23 2016 at 8:24pm
MG
Those are all stock in trade of Liberal economists so I guess DeLong would agree with at least most of them.
Pajser
Feb 24 2016 at 3:44am
Dictator and private owner are more similar than it looks on the first sight. Both can command to people who are “inside” (on “in contact to”) “their” territory or property and not to others.
It is usual that people find themselves inside private property of other people voluntarily, and inside dictator’s territory by birth. I think it is the reason that David Henderson believe there is strong difference. But it is only usual, not universal.
Jon Murphy
Feb 24 2016 at 7:29am
Pajser-
How can private wealth control someone by birth?
Pajser
Feb 24 2016 at 10:29am
Jon Murphy – for instance, one who is born on the ranch has to obey decisions of the ranch owner, equally as one who voluntarily moved on the ranch. Isn’t it essentially the same relation as with country’s sovereign?
Jon Murphy
Feb 24 2016 at 12:17pm
Jon Murphy – for instance, one who is born on the ranch has to obey decisions of the ranch owner, equally as one who voluntarily moved on the ranch.
No he doesn’t.
I was born in a hospital, as I imagine most (if not all) readers were too. I didn’t then and don’t now have to obey the decisions of the hospital owner.
liberty
Feb 24 2016 at 12:40pm
John Murphy,
I was born at home, but I assume that the comment was about the time of Rockefeller.
More important – although most of what Don B. and D. Henderson say is true, there are other issues about Rockefeller and others from that time of “Robber Barons” that I have only recently become aware of…
From something I am finishing (publishing with Palgrave):
“Although Folsom and Austrians take from this the benefit of private business and the waste and dangers of rent-seeking, the two are not always clear-cut. It may not be possible to eliminate rent-seeking entirely, even in a system based on libertarian principles. It was not only the public sector railroad managers who sought government aid, and Folsom’s heroes in fact used government in much more vicious ways according to journalist Ken Silverstein, in his book Turkmeniscam. The ethical effect of a society based around self-interest and rent-seeking can be seen in the way it can be abused by the elite wealthy business owners like Rockefeller. The same lobbyists that shaped public opinion about foreign tyrants like Hitler were also hired by domestic business elites to shape opinion about themselves. “Lobbyists have been aiding and abetting pariah regimes since at least as far back as the 1930s, when the Nazi government through a firm called the German Dye Trust, retained Ivy Lee, the father of modern public relations, to favorably influence American public opinion of the Third Reich” (Silverstein, 2008: 4). As long as this kind of lobbying exists, it seems that the private business icons so loved by Austrians and libertarians will make use of them and make use of the government and its forces of coercion:
‘Lee’s most famous domestic client was John D. Rockefeller, the industrialist and founder of Standard Oil who became the world’s richest man. Under Lee’s guidance, Time magazine reported in 1934 (in an article about Lee’s work for the Nazis), Rockefeller “was metamorphosed from a corporate monster into a benevolent old philanthropist.” Lee’s PR work for Rockefeller included sanitizing the Ludlow Massacre of 1914, when the Colorado National Guard killed dozens of people, among them women and children, during attacks on striking coal miners and their families at Ludlow Colorado. The strikers worked for the Rockefeller-family-owned Colorado Fuel & Iron company and two other mining companies; Lee falsely claimed that some of the victims of the Guard, which effectively worked at the behest of the Rockefellers, had died of smoke inhalation from an over-turned stove. He also spread word that the famous labor leader Mother Jones, who supported the strikers, ran a whorehouse. Lee’s work at Ludlow earned him the moniker “Poison Ivy” from the writer Upton Sinclair.’ (Silverstein, 2008: 4-5; my emphasis)
Note that Rockefeller made use of the National Guard to violently put down strikers and used a famous and despicable lobbyist to smear the labor union leaders and to falsely claim that it was not his coal mines or the National Guard forces that had caused deaths, but accidents in the workers’ homes. I would argue that even if true, one would hope miners’ workers’ compensation might cover all respiratory ailments, given the conditions and prevalence of work-related health factors. ”
Pajser
Feb 24 2016 at 6:45pm
Jon Murphy – you had to obey decisions of the hospital owner while you was in hospital. If hospital owner said “move to other room” or “go to sleep at 22:00” you had to do that – or leave the hospital. Once you left the hospital it was over; you did not need to obey hospital owner’s decisions any more. Few people stay in hospital in which they are born long enough that “obey decisions” have meaning – but it still holds.
And it is the same about country. If you are born in USA, you have to obey sovereign’s decisions – although you never voluntarily accepted his sovereignty. Once you leave US territory – you don’t have to obey his decisions any more.
liberty
Feb 25 2016 at 2:05pm
If it was not clear, my point is not merely that Rockefeller was a bad guy, which it appears from this evidence that he was, but also that he wielded an inordinate amount of power — and that this power was not granted to him solely by the state. His economic power gave him power over others.
As I write in the work for Palgrave:
“Austrians and libertarians might attempt to blame the public sector entirely for the despicable practices of Rockefeller described, but the private profit motive and the falsifying of reputations (hiding his crimes and “smearing” others) lie at the core of Rockefeller’s actions. In a purely libertarian system Ivy Lee might still exist, available to influence media on behalf of the wealthy elite like Rockefeller, and private militias could have taken the place of the National Guard (which anyway was serving Rockefeller in what looks like a private capacity).”
Robert Evans
Feb 25 2016 at 10:24pm
@JK Brown
I consider the constitution to be law, and thus actions contrary to it to be illegal. But fair enough on the rest.
Comments are closed.