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The CORONAtion of Equality, the Abdication of Inequality

The CORONAtion of Equality, the Abdication of Inequality Or viceversa?

We all are equal in front of death, but we are living lives in unequal ways, because of our deeply uneven endowments and unsimilar chances that Gods or odds reserve for us. We are (supposedly) alike in front of laws, while some (one-sidedly) legislate fake sameness. Among the many questions we may ask while getting bored in the tight safety of our lazaretto homes: is Corona an equalizer? 

Parenthesis #1: “I am one of the (top) 1%” 

Large numbers and statistics tend to sometimes have the peculiar trait of being so opaque, that the very same figures may either fail to convey anything or be used to support anything. Some while ago, I read about the results of a study carried out by Oxfam, the well-known charity organisation dedicated to the mitigation of poverty. According to their research, released in the eve of that year’s ritualic Davosian gathering of the World Economic Forum, about 1% of the world’s population was expected to collectively own more wealth than the remaining 99%. The prophecy seems to come true (according to the all-seeing and clairvoyant statisticians). Yet, this was but another addition to a series of similar calls highlighting a trend of widening economic disparities worldwide. The naming of their root causes remains rather ambiguous, while the cures to the phenomenon tend to further maintain the imprecision of this diagnosis. It’s more than just a statistical whodunit – this “imprecision” is a real drama of our civilization since it creates more that relative inequalities but absolute poverty.

Coming back to our previous statement that statistics fails to tell the whole story, I tested this very example with a statement I made to a group of friends. “My dear fellows”, I said, “I’d like to make a confession that will surely change your view of me, but I can no longer bear to live a lie. You see, I am part of the 1% which controls half of the world’s wealth!” Of course, my confession elicited a few chuckles, but, my verbal parsimony notwithstanding, I wasn’t really lying: if I were to switch places with the 78 000 000th person of the “top” 1%, that figure would not suffer any modifications, save for a negligible ripple in its decimals. I’d made a similar remark when I was the tenant of a dorm room in college, in the years when the “Four-House Năstase” (the “stage name” of Romania’s Prime Minister during my studentship) affair came into the public eye: I explained to my colleagues that “I feel wealthy since His Excellence and I owned, on average, two houses each”, a troublesome aspect “because I wasn’t quite sure which of them I’d end up living in after graduation”.

Poverty, however, is no laughing matter. The love for statistic-empirical inquiries into the symptoms of sociological deformities caught root with the downright Newtonian revelation of a renowned Italian economist, Vilfredo Pareto, who, aside from his well-famed (but poorly fathomed) “efficiency criterion”, would observe a particular pattern in nature, which the Romanian-American quality “guru” Joseph Moses Juran would coin as the “Pareto criterion”. This is also known as the “law of the vital few” or the “principle of factor sparsity”. According to this postulate, in nature, 20% of all known causes account for 80% of all known effects. Pareto had observed this recurrent relationship by contemplating the distribution of Italian real estate funds at the end of the nineteenth century. It is said that Pareto noticed this structure after previously discovering it in his garden as well: namely that 20% of all peapods contained 80% of all peas. For the love of God, how did he “document” this??? What a robust “primary data” collection!!! (Talking about living off the fat of the empirical land…)

The statistics of poverty has thus far produced a plethora of heartfelt accounts, epitomised as variations of the aforementioned principles. Later, they were further refined in analytical literature with the advent of the “Gini coefficient”, the most synthetic instrument available to measure wealth and income disparities with. Italian sociologist and… statistician Corrado Gini, a much younger contemporary of the well-reputed Pareto, was somehow dissatisfied with the analytical precision of the indices his compatriot had developed. So, he created the index that now bears his name. In its simplest form, this index can be approximated as the difference between the percentages of the observed effects and those of their causes: 0.6 (as applied to the relationship from Pareto’s criterion) or 0.49 (when applied to the example in the beginning of this column). The core principle is that the index goes from 0 (viz., perfect equality) to 1 (viz., absolute inequality). “Breaking news”: the world’s 26 richest people own as much as poorest 50% (apud the same Oxfam’s calculations, around a year ago).

Poverty is a perfidious disease afflicting all of society, not just the poverty-stricken, and its “ontology” will not fully reveal itself if we only examine it stati(sti)cally. For instance, cheap-money policies don’t make wealth more equitably accessible, as they are said to; what they do at most is to fuel the reckless passion for unbridled consumption, which brings ruin to both the debtor and the creditor and to all those connected to them. The linked chain of “subprime” weaknesses is a prime example in this regard, given the ravages it caused on a global scale to the financial economy and its outlets in the “real” economy (yes, with the obvious exception of those deemed “too big to fail” and awarded privileges). Then, there are (redistributive) taxes and the (hyper-social) rules and regulations which, while ostensibly intended to fight inequalities, do little more than cause crowding-out effects, leading to unemployment and poverty while “capital” is disconnected from the truly hardworking population via populist policies. Why the antipoverty revolution can’t begin with the revelation of liberty?

Yes, but what about Corona-inequality/poverty?

We’ll get to that… 

Parenthesis #2: Rich man, poor man(kind) 

In the exhibitionistic world of mass-media-variety capitalism, it is now a fad, if not an obsession, to measure and compare private fortunes. Most people would care to know their neighbours’ wealth and how they’ve come to make it (…or lose it). There is no shortage of tops which the vain and vainglorious try to overtake while the more dissimulative try to discreetly keep away from them. The fact that we are witnessing a never-ending dawn of a market economy makes many of us regard the rich not so much as creative drivers of general wealth who serve their fellow men (as opposed to ensnaring them into serfdom), but rather as sinister deviants who – all – defy the law of natural equality. The distorted idea of “wealth” is subject to an implicit presumption of guiltiness, while for the vast majority, poverty becomes the call sign of those who possess the highest moral virtues. Even philanthropists are blamed for not donating more, even though charity comes as a by-product of markets and profits. Noteworthy: charities are a capitalist (by-)product.

Eventually, I came to understand that, despite any and all social(ist) experiments, “individual freedom” is the only sound premise for “collective welfare” (to the extent that the latter is desired, because there are free yet austere/ascetic communities as well). Poverty is, on the other hand, a virtue only when it is pursued with dignity. The idle and unskilled don’t qualify for that virtue all the more they long in fact to amass riches effortlessly. Those who were impoverished because of theft and robbery also don’t gain automatic virtue through their misfortune alone, for virtue is not merely a spiritual patch to fill in material gaps. Finally, the poor in spirit have the promise of an ever-lasting inheritance transcending worldly confines, but only if their poorness is assorted with humbleness, not with envy. That said, material wealth can actually be morally constructive, alongside hard work and unabridged honesty, patience and persistence against uncertainty – defining traits of the providential, community-builder, more than mere firm-maker, entrepreneur.

Although still bearing the deep print of the Protestant revolution, Christian dogma continues to view wealth with a modicum of moral opprobrium. If wealth was accumulated via deceit, theft, robbery, the sin is obvious. Case closed. But when we hear the call “Help thy neighbour!”, this does not necessarily equate kindness simple to dole, nor does it compel us to blindly aid the others to the extent of our nigh-complete patrimonial sacrifice and ruin. In fact, we cannot truly help the poor by impoverishing ourselves, al least not “sustainably” (a notion in fashion this epoch). If we trust in God, and in the coherence of His work, we should be convinced that the basic logical tenets are fully in line with moral commandments. You can help other only of you are not helpless. Morally and/or materially. The road to salvation is not destined exclusively to the monks, for if it were so, our bloodline would have long since died out, yet this does not seem to be the Grand Plan. Conscience passes through the stomach, some say. The catch is that it should not stay there.

We flick through glossy magazines about business trends, we measure wealth in our community, we share this information with the general public and thus we elicit reactions. There are two main poles that define the emotions we experience as a result: respect and envy. By reading the true stories behind figures and probing the manner in which those individuals have built their fortunes (and their lives), we can distinguish among those whom we can deem to be creators of welfare in the community as a whole, and those who’ve amassed their riches by parasitically confiscating wealth from the community. Deifying and demonising successful capitalists without fair judgment will eventually poison the social fabric. We thereby risk instating ever increasing taxes for the wealthy, and in blissful democratic ignorance, punishing hard work, patience, perseverance in the face of uncertainty, and honesty just as well as we punish idleness, greed, unfair privileges and theft. As an aside, what happens to the money taken from the rich (and the rest of us, as well)? They go to a breed of rich “political animals”: the State-raptors.

Yes, but what about Corona-inequality/poverty?

We’ll get to that… 

Parenthesis #3: Picketing M’sieur Piketty 

The plight of inequality has been stalking mankind well before the ghost of communism began haunting Europe. The best-seller by French professor Thomas Piketty, Capital in the Twenty-First Century, enjoys quite select company, alongside Das Kapital by eschatological economist Karl Marx, Progress and Poverty by the all-too-telluric journalist Henry George, or The Theory… by the short-term-embracing John Maynard Keynes. Piketty’s work brings a fresh contribution to the endless struggle against human nature itself, to put it plainly. “The central contradiction of capitalism” (in a vein reminiscent of old Marxist dialectics) is that the fortune amassed from the past onwards increases at a faster rate than the production output and wages: the entrepreneur tends to turn into a tired (and tiresome) annuitant whose yields continue to roll forth and grow ever larger, suffocating those who own nothing but their own labour. The asymmetry of these trends causes the past to devour the future.

The rich get richer and the poor get poorer” is a timeless, time-tested slogan, and scholars, moved either by good faith or unrepentant cynicism, have never tired of looking for cures to this ailment, starting with a statistically sound identification of symptoms, but using a severely flawed diagnostic system. Whereas Marx proclaimed the socialisation of property as the “final solution” which would allow an allegedly holistic and indivisible proletariat to enjoy the full product of labour, George believed that (the value of) land was the cornerstone to the design of a fiscal apparatus that would remove any inequities: given that land can be neither created nor destroyed, rendering it taxable would cause no negative impact on social wealth or productive incentives. Au contraire, by taxing land alone to finance the expenses of the state we can free up both labour and capital to be invested in value-adding activities, put a damper on undue riches, redeem our capital and safeguard our democracy.

While Master Keynes preferred to foster social equity by nurturing perpetual, fiscally-crafted and cyclically-adjusted inflation in order to increase employment rates (though not necessarily with an equivalent growth in productivity), Piketty takes a leaf from the book of “Georgist” teachings, “modernising” them and aiming the fiscal “harpoon” towards the “rents” which have spun out of control, so that taxing will only be necessary for the maintenance of land. The French intellectual uses the wider sense of the notion of rent, understood as an income that is decoupled from productivity, and his solution consists in a global, progressive tax on wealth, “punishing” obscene riches inherited and multiplied almost entirely through inertia, which would ultimately lead to a more egalitarian and productive society, free of parasites that idly gorge themselves on annuities and trender obsolete any need for protectionist resorts between nations. Allons enfants de la Patrie!

In other words, we preserve (economic) freedom and openness in exchange for a modest price, small for the poor and insignificant for the rich since their wealth is, historically speaking, on “autopilot”. If we start our journey with graphs which show gross disparities in the growth rates between the accumulation of capital and new labour-generated income, as well as the primal instinct of resenting wealth (other than our own), then Piketty’s analysis may be tempting, and it is indeed so in left-wing circles. If, however, we understand that the taxation of non-productive wealth cannot be so cleanly distinguished from that of productive wealth, meaning we’re at risk of throwing the baby out with the bathwater, and if we understand that the asymmetrical growth rates of wealth are not altogether separated from the historical spikes in inflation owing to the expansion of monetary credit – which is not related to natural capital accumulation, but to its statist distortion – then our enthusiasm fades, and the scene is enshrouded into the egalitarian-dystopian “brave new world”.

Yes, but what about Corona-inequality/poverty?

Well… 

Inconclusive remarks 

There is no poverty of academia and media signals regarding the effects of the Corona-crisis on (in)equality. They are swinging between allegations that the virus is, in a sense, a leveller (by virtue of death and the general depression, with which they are assorted, which somehow indiscriminately hit people and peoples) or, contrary, that it acts as a horrendous unbalancer (by virtue of deepening the already suffocating burden of today’s polarized economies and, especially, labour markets usual losers). Moreover, inequality itself is some sort of a cruel “multiplier” of COVID-19-driven havoc. A “disease-driven poverty trap” sets in motion. The sentiment already induced by the apostles of contemporary inequality vertigo receives in this crisis extra fuel. Without adding to lucidity, with respect to noticing the perverse effects of anti-inequality/anti-poverty mainstream mindsets.

On a rule of thumb, the already existing wealth and welfare gaps definitely become sensibly more acute, for the general lockdown translates into even-more-uneven social access to: money (i.e., in terms of a blatant decreasing purchasing power, despite formal price freezing), work (i.e., in terms of keeping the jobs slightly-above or just-below wage-productivity parity), education (i.e., in terms of keeping up with IT&C replacing traditional teaching/learning), health (i.e., in terms of shortage of or disease-risk within baffled public medical institutions) or… empathy (i.e., with precisely the society’s underdogs – that is, the minorities, the migrants, the meagre – facing discriminative attitudes from fear of them being agents of contagion or simply the wrong persons at the wrong time in communities). It’s hard to contest such praxeological or psychological assumptions.

Almost all fancy media outlets entered the frenzy of interrogating global masterminds about “How the World/Economy Will Look After the Coronavirus Pandemic?” [take 1, take 2]. Joseph E. Stiglitz states that “the coronavirus crisis has been a powerful reminder that the basic political and economic unit is still the nation-state.”; Robert J. Shiller warns us that “the pandemic has created a wartime atmosphere in which fundamental changes suddenly seem possible”; Carmen M. Reinhart speaks of “another nail in the coffin of globalization”; Adam Posen foresees that “economic nationalism will increasingly lead governments to shut off their own economies from the rest of the world”; Eswar Prasad notices that “the world looks to central bankers for deliverance”; while Adam Tooze gives a bleak verdict: “the normal economy is never coming back”… “Real politik”.

As for “ideal politics” – i.e., of fighting the social injustice of the economic inequalities – there is hardly something like this at hand right now, if ever was. It seems the whole fight against this inequality scourge is misled. This “ethics-and-economics-of-envy”, upon which the anti-inequality crusades build up is inferior in meaningfulness to the more decent and coherent fight against unwanted poverty. True enough, the social game is based on relative perceptions and positions (e.g., market rivalry and competition, the system of relative prices that helps us rationally master scarcities). Though, installing the fight against inequality as a universal (bad!) habit diverts our individual energies from improving “own” state, to levelling playing field even by mining “their” yard. That looks like a more perverse virus, for as we’ve learnt, junk ideologies outlive grim pandemics.

 
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OEconomica No. 1, 2016