The State

If there are
any number of inequalities (though only a few will really yield to levelling), the state can at least propose or pretend to level a number of them. If so, it is impossible to predict the most efficient redistributive offer from the initial distributions alone. Even the presumption that transfers from the haves to the have-nots (rather than the other way round) are politically superior, may not stand up if clout matters much more than votes and it is the haves who have the clout.
*6

In order to make a determinate solution possible, it would help to have a political culture where most inequalities were accepted as untouchable, so that neither the state nor its competitors would include them in a redistributive offer. In such a culture, for example, children would be allowed to be raised by their own (unequal) parents; non-income producing personal property would not have to be shared; people could wear distinctive dress; unpleasant work would be done by those who could not get any other, etc. Obviously, not all societies have this sort of culture, though those we call consent-based by and large do. Culture, then, would severely narrow down the possible variety of political offers. However, to rule out any freak programme and cultural revolution, it will be best to consider first a society where only one inequality is “politically” perceived at all: the amount of money people have.

Money looks the natural object for redistribution because, unlike most other interpersonal differences, it is
par excellence measurable, divisible and transferable.
*7 But it has a subtler advantage, too. At least conceptually, there are political processes which run their course, achieve their objective and comes to an end. The class struggle between capital and the proletariat is conceived in Marxist thought to be such a process. Once this terminal conflict is resolved and there is no exploited class left for state power to oppress, politics comes to a full stop and the state withers away. Likewise, if politics were about latifundia and landless peasants, or the privileges of the nobility and clergy, or other similar inequalities which, once levelled,
stayed level, the state’s purchase of consent by redistribution would be an episode, a once-for-all event. At best it could be history made up of a succession of such episodes. However, with money as the object, democratic politics can make sense as a self-perpetuating static equilibrium.

Why this is so is best appreciated by recalling the facile distinction that people so readily draw between equality of opportunity and of end-states. Moderate egalitarians sometimes suggest that it is opportunity that ought to be equal while end-states arising out of
equalized opportunities ought to be left alone (which could only be done with mirrors, but that is now beside the point). Peter and Paul should have the same chances of attaining any given level of income or wealth, but if in the end he were to make more, Peter should not be robbed to pay Paul. Inequality of income or wealth is in turn, however, the resultant of a large universe of prior inequalities, some of which can be equalized (but then at least some end-states must be permanently interfered with; compulsory free education must be paid for by somebody), while others cannot. If Peter has in fact made more money, some prior inequalities in his favour
must have subsisted.

A little reflection shows that there is no other test of the equality of people’s respective opportunities to make money, than the money they do make. For once inheritance of capital is abolished, everybody is made to go to the same school and every girl is given cosmetic surgery at eighteen, there are still ninety-nine well-known reasons why one person may be materially more successful than another. If these known reasons (notably one’s parents) were all abolished and it were impossible to inherit more ability than the next fellow, we should be left with the unknown residuals habitually subsumed under “luck.”

This need not stop anyone from choosing some stipulative definition of equal opportunity, making it an arbitrary subset (to include, say, equal attendance at school, “careers open to talents” and provision of fixed-sum unsecured loans for starting a business, and to exclude everything else such as happening to be in the right place at the right time) of the set of reasons which make end-states unequal. One might stipulate that all who have danced with the most coveted girl at the ball are deemed to have had an equal opportunity to win her. If she gave her affections to one, rather than equally to all, that was luck.

The point is not only that equality of
opportunity is conceptually dubious, nor that as a practical matter serious egalitarians must deal with
end-states—for that is how you go about equalizing opportunities—though both points are valid enough. It is, rather, that each time end-states are equalized, sufficient underlying “inequality of opportunity” will subsist
rapidly to reproduce unequal end-states. They will not be identically the same ones. Redistribution must, intentionally or otherwise, have some influence on the
causes of a distribution, if only through its much-invoked effects on incentives—the idea being that if you keep taking away the golden eggs, the goose will stop laying them. Nevertheless, some new unequal distribution will almost instantaneously come about. It will require redistribution to be recurrent (an annual assessment?) or fully continuous (pay as you earn). In any case, there is no danger that the state, by vanquishing the inequality of money, would unwittingly depreciate its own role and “work itself out of a job.”

In looking at the conduct of the state in competitive politics, we will for some of the above reasons make the large simplifying assumption that it rules over a society which is an amorphous collection of people lacking any pattern. It does not coagulate into groups, occupations, strata or classes on the basis of material and moral inequalities. It is the ideal democratic society in Rousseau’s sense in that it does not break down into sub-societies, each with a general will of its own, in conflict with the general will proper. There are no intermediaries, historical or functional, personal or institutional, between the individual and the state. Though people are thus homogenous, I will nevertheless take it that they have significantly different amounts of money due to “unequal opportunity” or, less controversially, to luck.

Quite unrealistically but expediently, I will also suppose that everybody’s political choices are entirely determined by their material interest, and in a narrow sense at that: there is no altruism, no false consciousness, no envy and no idiosyncrasy. When given the chance, people go for the policy which gives them the most money or takes away the least, and that is all.

The other simplifying assumptions we need are less demanding. The basic democratic rules apply. Tenure of state power is awarded to a contender on the basis of a comparison of open competitive tenders describing redistributive policies. The actual tenant
is the state. If another competitor were awarded tenure,
he would become
it. Tenure is for a specific period. There is some provision for premature termination—”recall”—in case the conduct of the state is in gross breach of the terms of its tender offer. If there were no recall, and the period of assured tenure of power were long enough, the state might promise one thing and do another, inculcating in society the corresponding new tastes, habits and addictions and developing support for what it was doing rather than for what it had said it would do. Though this is obviously happening in real politics, for government would become quite impossible otherwise, our analysis would grow immensely complicated if we did not exclude it by postulating easy recall. Award of state power is to be decided by simple electoral majority, one-man-one-vote and secret ballot. Entry to politics is free, i.e. anyone may tender.

Under these assumptions, towards the expiration of each period of tenure there will be competitive bidding for votes by the state and its opposition. The highest tender will, at the appointed time, earn the award of fresh tenure. Which, however, is the highest tender? Neither the state nor its competitors have any money to offer which does not already belong to somebody in civil society. Neither can, therefore, offer to civil society a total net sum greater than zero. Yet each can offer to give some people some money by taking away at least that much from others. (It makes for ease of exposition if collecting taxes is, at this stage, taken to be a costless operation.) The redistributive policy such an offer represents can be regarded as a tender with discriminatory pricing, some votes being bid positive, and others negative, prices—with the crucial proviso that if the tender in question wins, the people whose votes have been bid negative prices will have to pay them no matter how they voted. (As is perhaps obvious, people offered a negative price for their votes may rationally vote either for or against the tender in question, depending on how much a competing tender, if it prevailed, would make them pay.)

Our argument will lose nothing if we simulate the two-party system and consider only two rival tenders, one submitted by the incumbent state and the other by the opposition (which may of course be a coalition), while assuming sufficient ease of entry of potential competitors to prevent the state and its opposition from reaching collusive agreements to share spoils and underpay votes. (The American political system, for one, has in recent years been showing symptoms of incipient
collusion, in the form of the bipartisan commission taking over from the adversary-type legislature, where
competition had led to stalemate over such questions as the budget deficit or the lack of control over social security expenditures. Despite the attractions of collusion, ease of entry and many other built-in elements of competitiveness make it in my view unlikely that government by bipartisan commission should get very far in superseding the basic rivalry of “ins” and “outs.”)

If society is differentiated by riches only, state and opposition have only two roles to divide between them, that of champion of the rich and champion of the poor. Who takes which role may be decided by historical accident; for our purposes, it may as well be decided by spinning a coin. The winning tender must attract 50.1 per cent of the votes. There are thus always 49.9 per cent of the people whose money can be used to buy the votes of the 50.1. Any greater percentage bought would be wasted. No rational tenderer should under these assumptions bid positive prices for more than 50.1 per cent. If he did that, he would by implication be taking money away from less than 49.9 per cent. He would be proposing to redistribute a lesser total sum among more people. In trying to get too many votes, he would be reduced to offering a lower price for each. He would be outbid by his competitor who (as future generals are taught to do) concentrated his fire to get the necessary and sufficient bare majority. In this streamlined political contest, any election result other than virtual dead heat would be proof that at least one competitor had not got his sums right and had handed victory to the other.

So far, so good; this simplified schema duly reproduces the complicated real world’s tendency to make close-run things out of democratic elections in two-party systems where competent professionals on both sides strive to be all things to all men and fine-tune their electoral promises. What, however, seems left unpredicted is the winner. We know that the highest tender wins. But we do not know the terms of the competing tenders.

Let us arbitrarily suppose (the argument will gain no unfair advantage if we do) that you can get, say, ten times as much tax from the rich half of society as from its poor half, and that either competitor for state power can propose to tax the rich, or the poor, but not both at the same time. The latter condition makes redistribution conveniently transparent, though it is of course quite possible to redistribute without respecting it. Let us also suppose that both competitors have the same idea of taxable capacity, more than which they will not attempt to extract from either half of society. “Taxable capacity” is an embarrassingly nebulous concept, to which I shall have to return later in dealing with the causes of “churning.” It is usually employed in the sense of some economic capacity, having to do with the effects of varying degrees of taxation on taxable income, output, effort and enterprise,
*8 the implicit assumption being that everybody’s willing performance of their tasks depends,
inter alia, on how hard they are taxed. I am employing the concept in both this sense and also in a parallel one, as a relation between taxation and the subjects’ willingness to abide by the rules of a political system under which a given share of their income or wealth is taken away from them, the implicit assumption being that the greater this share, the less the subject feels bound to respect rules under which he is made to surrender so much. “Capacity” suggests that there is some limit beyond which the economic or political tolerance of taxation declines, perhaps quite abruptly. Both the economic and the political senses of the concept are shrouded in fog. No one has yet convincingly depicted the shape of the relation, nor did anyone measure its limits. Discussion of it is apt to degenerate into rhetoric. However, unless we are prepared to take it that for a society at any point in its historical career, there are such limits, and that it takes history, i.e. the long period or large events in the short period, to shift them by a lot, much in social affairs must fail to make sense. In the context of the problems we are pursuing there would, for instance, be no intelligible reason why, spurred on by democratic competition, the state should not subject large sections of society, possibly fully one-half of it, to marginal tax rates of 100 per cent.

(If there is no such thing as a “taxable capacity” which taxation cannot exceed without bringing about a high likelihood of political or economic anomie, turbulence, disobedience and breakdown of some possibly obscure kind, unpredictable as to its specifics but unacceptable in any case, it must be feasible as of tomorrow to tax everybody at 100 per cent—”from each according to his ability”—and to subsidize everybody at the state’s discretion—”to each according to his needs”—without first having to put society through the phase of the dictatorship of the proletariat. Despite its apparent convenience, this programme cannot really appeal to socialists who, if they had to choose, would probably rather agree that taxable capacity is limited than give up the requirement of fundamentally changing the “relations of production,” i.e. abolishing private capitalist ownership.)

Since the winning tender is one which is “accepted” by not less than 50.1 per cent of the voters, the two competitors will seek to hit upon the winning combination of positive and negative “prices” for the richest 49.9 per cent, the poorest 49.9 percent and the middle 0.2 per cent of the electorate.

(1) The rich party might propose to tax the poor, redistributing the money so collected to its own constituency and (in order to form a majority coalition) to the middle. The poor party might symmetrically propose to tax the rich and transfer the proceeds to its own poor constituency and the middle. Table 1 shows us what we would then have.

Table 1
		Rich party offers		Poor party offers
To the rich		+1		-10
To the middle				+10
To the poor		-1
		0		0

(2) The rich party, however, would immediately realize that its offer under (1) is bound to be rejected, for there is always more money available for buying the votes of the middle out of the taxes of the richer half than out of those of the poorer half. It must, therefore, steal the poor party’s clothes and turn upon its own constituency. (This is, of course, what rich parties do in real-life democracies.) Table 2 shows how the two tenders will then compare.

Table 2
		Rich party offers		Poor party offers
To the rich		-9		-10
To the middle		+9		+10
To the poor		0
		0		0

(3) Under (2) the rich party would win. It would get the acceptance of the rich who would prefer to be taxed 9 instead of 10, and of the middle who would prefer to get all the pay-off rather than having to share it with the poor. However, “going for the middle ground” is a game two can play; to stay in the race, both must. So the outcome is as in table 3.

Table 3
		Rich party offers		Poor party offers
To the rich		-9		-10
To the middle		+9		+9
To the poor		0		+1
		0		0