Recently, Harry Binswanger, contributor to Forbes, published an Op-ed in which he argued the 99% should “give back” to the 1% because: (1) communities don’t give anything to individuals that isn’t already paid in full at the time it is given; (2) all transactions are freely and reciprocally agreed upon and therefore, mutually beneficial and uninhibited by further obligation; and (3) the 99% actually reaps the benefits of the 1% by profiting from their mental capacities to innovate and create jobs to produce products and services. His article illustrates everything that is wrong with our society.
The notion that the wealthy ought to “give back” to the community is infinitely more complex than Binswanger gives credit. Of course, he is attempting to captivate readers by cloaking his arguments in distorted interpretations of libertarian theory so they will emotionally accept what is actually an extremist and quite ludicrous point of view: that the working people of the world owe more money and gratitude to the extremely wealthy, that is the 1%. In doing so, he simply ignores the nuances of what the rest of us call “reality.”
Binswanger is wrong because: (1) the extremely wealthy not only make profits by exploiting others, but also by not paying adequate value for what they use to make profits. Furthermore, in accumulating wealth they negatively impact many people who are not involved in the “mutual exchanges,” and those people are not compensated. (2) Consumers don’t purchase products and services simply because they value and want them. Money is an inadequate measure of real value; global access to markets allows capital holders to manipulate local and national markets; consumers are lied to, coerced, and often lack real choice; and, again, many people are forced to pay costs (even non-monetary costs) for exchanges they had no say in. And (3), Binswanger’s assertion that the 1% are innovators and job creators – well, it’s not true. That claim is a fallacy created to attempt to align the 1% with small business owners and entrepreneurs. However, small business owners operate very differently from large corporations and the 1%.
It is terribly sad to see someone unable to understand the value one receives from their community or the country to which they belong. Perhaps, Binswanger is a victim of the epidemic of hyper-focused individualism and undervaluing of community in the neoliberal western world. However, let’s not harp on his opening statement and the overall tone of his article, which suggest he doesn’t believe in or value what communities give to individuals. Instead, let’s focus first on what appears to be his main point regarding community: the value one receives from the community is paid at the time it is received so those that accumulate extreme wealth do not owe anyone anything more.
Let’s take that statement as true and therefore we can assume people should be allowed to accumulate unlimited wealth without ever giving back to their community or country. Some would agree with this point. However, if in pursuing wealth you are taking resources without paying a real value for them, damaging the environment, cheating the financial system, bribing politicians, circumventing laws, preventing competition, coercing consumers, inhibiting accurate information, or exploiting employees by paying them as little as possible, then the bare minimum compensation is a fair tax rate, because even that amount would not sufficiently pay for the value you take from others.
Expecting the extreme wealthy to give back to the community is not the same as condemning the successful. Most people loved Steve Jobs for bringing us the iPhone, but when Chinese teenagers began jumping off the roof of his subcontractor Foxconn to escape their effective enslavement, we lost the love. There is no “envy-ridden moral code that damns success, profit, and earning money in voluntary exchange.” Most Americans still admire success. What we don’t like is the extremely wealthy controlling our government, forcing the rules of the playing field to their advantage, and preventing real Americans from doing the entrepreneurial work that needs to be done.
Furthermore, paying taxes isn’t the same as charity. Most Americans are not arguing for the wealthy to give anything extra other than their fair share—they want the rich and corporations to pay at least the same tax rate as everyone else and close the loopholes. You may not like the idea of taxes, but in our current structure, taxes are how we maintain a society and mitigate the effects of our oligarchical corporatist system. We all benefit from things like an educated citizenry and a healthy population, but essentially, taxes are needed to make up for the damage Binswanger’s friends inflict on the rest of us. Whether it’s environmental degradation, worker exploitation, consumer coercion, or messing up our financial systems, big corporations and the swindlers that run them owe the rest of us some compensation. Until we change the structure to one where taxes are no longer needed to mitigate the effects of our corrupt, political, and business elites, the argument for taxing the rich remains: “hey, while our messed up system allows you to accumulate unreasonable amounts of wealth through corrupt and counterproductive practices, you need to pay for at least some of the damage you’re causing and some of the benefits you’re reaping from our complacency.” Taxes are the bare minimum for these elites.
Wealth is not exclusively accumulated by exploiting people and the environment. Wealth, as Binswanger proclaims, is also created by using human brainpower and labor to turn resources into a product or service that is sold for a price. What isn’t factored into the economic calculation (or price) is the value lost by removing resources from nature or the impact a transaction has on others.
In a perfect world, wealth would be created by making products while factoring in the real costs of environmental degradation and human input: but that doesn’t happen. Furthermore, in today’s finance economy, innovators aren’t creating awesome new products that everyone needs and selling them in a free market at a reasonable cost. Most innovation is not the creation of new products at all. There are many different ways businesses innovate to increase profits that have nothing to do with making new stuff. Tony Davila, Marc J. Epstein, and Robert Shelton surveyed a large number of manufacturing and service organizations. In Making Innovation Work, they present their findings that things like product quality improvement, expanding a product’s range, creating new markets, cutting labor costs, improving production processes, and other efficiency improvements, account for most innovation.
The way we create and measure wealth in our society is so illusionary and inaccurate that wealth no longer reflects productivity once you surpass a high enough threshold. So, yes, there are those that innovate, create, and work hard to provide quality products and services, but unfortunately most of the major wealth accumulators today are in fact exploiting the people—through suppression of wages, price manipulating, cheating the financial systems, circumventing laws, and many other practices—and the environment and they are doing it with the help of our government. And no hardworking, honest American, whether anarchist, liberal, or libertarian, thinks that is okay.
Binswanger further presents his case by reciting the standard economic discourse that, “in commercial transactions, customers buy a product…because they want the product or service…for their own personal benefit and enjoyment.”
An unfortunate limit of money is its inadequacy in measuring real value. Money spent does not determine value of things; it determines value relative to supply of money and is distorted by misinformation. Also, it is limited by our capacity to accurately put a price on something. For example, a plot of untouched land has inherent value to a community even if the community cannot afford to purchase it. It is aesthetically pleasing, absorbs some pollution, and maintains local ecosystems. If someone buys the plot of land from the owner (an out-of-state property management company), they are paying only for the value of the land to an owner who doesn’t interact with the land or the community that surrounds it.
Binswanger argues further, “all proper human interactions are win-win; that’s why the parties decide to engage in them. Voluntary trade, without force or fraud, is the exchange of value for value, to mutual benefit.”
Commercial transactions are infinitely more complex than the moment of exchange of a product or service between parties. On a small scale they may be a bit closer to Binswanger’s analysis, but in the modern world the “community” for big business is the United States and the economic playing field is global. This scale allows business leaders to exploit and manipulate people all over the world for their own interest while reaping the benefits and securities that a company in the United States enjoys.
For example, in America, our labor often competes directly with workers in Thailand because owners of capital have the resources to use labor to produce anywhere on the globe; so available jobs and wages in the US are driven down. However, as an American, you can’t shop for products in Thailand at Thailand prices. Instead, the owners of businesses bring them back to America and price items low enough to undercut the products made in America, but high enough to take as much of your money as possible.
The assumed truth that all economic transactions are a “win-win” is such a gross oversimplification of reality with several flaws. First, it assumes people have all the information they need, can quickly and adequately process it, and make the best economical choice possible. Meanwhile, the multibillion-dollar advertising and public relations industries are fully committed to brainwashing and misinforming people so they will buy something against their own interests. Binswanger ignores the fact that people are lied to and misled. He ignores that they aren’t informed and don’t consciously and actively participate in many of their transactions. Any student of economics knows that capitalism requires accurate information.
Second, it assumes people make decisions because it is a win for them, while many transactions are coerced either through advertising and manipulation, pricing control, or the lack of real choice (i.e. cell phones, gasoline, and meat industries are dominated by a handful of companies with almost no difference in products, services, and price). It assumes when people take a low paying job, it is a mutual exchange based on a win-win. In reality, most of us take a job because we have no other choice. You may think, “Well just go get an education.” Many of us did that. There are still so few jobs available and the pay is so little that we are forced to take jobs to survive – we don’t choose them. This view also assumes that the wage of a job simply found is its proper value based on equilibrium reached from supply and demand. Binswanger most likely believes that because that’s what he read in an economics textbook in his freshman year of college. Again, I remind you that the reality is a bit more complex. Labor is not paid value for one’s work; we are paid the least amount possible an owner can pay in a climate where technology and outsourcing are diminishing jobs.
Third, it assumes that no one else is impacted by the transaction. Economists trivialize the impact an economic transaction has on third parties—called an externality. Often, the total value lost to third parties is greater than the gain of the parties engaging in the transaction, but this loss is not calculated. For example, if you want to turn your suburban yard into a landfill because you secured an account with a nearby city to dispose of their trash, you would decrease the value of all the houses around you, who had no say in in the agreement and would not be compensated. The total loss of value among the community would be much greater than the net gain of the two parties involved in the transaction. Now, you’re probably thinking, “But that could never happen because it’s against the law.” Exactly.
In a response to the article, Matt Taibbi of Rolling Stone recently addressed the practices of the 1% and counters Binswanger’s determination that the CEO of Goldman Sachs, Lloyd Blankfein, should be held in higher regard than Mother Teresa. He highlights some of the common practices of companies like Goldman Sachs that are either illegal or should be because they violate the freedom and self-determination of others just like turning your yard into a landfill would (only worse).
Binswanger perverts libertarian notions of voluntary exchange by pretending that this is somehow the reality of the America we live in. By using divisive language like, “an end must be put to the inhuman practice of draining the productive to subsidize the unproductive” he excites a following because some people love to hate — but here is a platform where all Americans should be able to stand united. Even the libertarian right knows that in a free market with access to accurate information, supported by a small government, the Goldman Sachs types would never exist. They exist because our government helps them survive because they artificially inflate GDP and American power.
People don’t oppose big businesses because they’re successful; we oppose them because they are corrupt institutions that rose to power by cheating the system and our government simply helped them do it. We could have a society where real work and innovation was rewarded and small businesses would be able to compete—but we don’t. Goldman Sachs and other overblown banks and corporations would not be able to survive in that climate. In the meantime, while our corrupt political and economic system allows them to exist, we’ll go ahead and settle for that payback.
Ultimately, Binswanger hangs his hat on the most unoriginal of all neoliberal pundits’ arguments: the wealthy are the innovators and the job creators. But what do they innovate? Well, they innovated a pretty cool finance trick where they sold bundles of bad debt as a package with a good rating and then bought insurance on the debt so when loans went into default (which they knew would happen) insurance companies paid them a lot of money. They created a pretty awesome process to target and trick lower income families into buying mortgages because of a low affordable payment, knowing it would rise and their houses would be foreclosed. They created millions of part-time, low paying jobs while simultaneously contributing to the downfall of full-time, good paying jobs. But we should say thank you because “the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of him.”
I feel bad that Binswanger does not feel like he belongs to a community and cannot comprehend the value of community because it doesn’t translate into a monetary denomination. However, the rest of us understand it. Not for charity, but for the value society will receive by preventing future distortions of reality from being projected into our collective discourse, someone ought to buy Binswanger a book that was written after 1975.
Instead of paying back the 1% with what Binswanger says we owe them, I suggest the 99% build strong human bonds within their communities to promote both mutual aid networks and environments in which small businesses are free to exchange. Let’s be honest, if we only advanced far enough to create the type of real competitive capitalism that someone like Ayn Rand believed in, one where corporations had to play on level fields and information was accessible, businesses like Goldman Sachs and Walmart would crumple to the ground under their own inadequacies.
To find out more about why Harry Binswanger is a complete tool and how you can avoid being anything like him, check out my book, “Another World IS Possible: Freedom, Economic Truth, and Creating a Society of Humanness.”