Unjust Deserts is an important, timely book, and its publication should ignite a far-ranging discussion about just what it means to earn wealth.
By Ryan McGreal
Published January 08, 2009
Libertarian opponents of redistributive taxation often equate it to theft from people who create wealth and earn income to people who do not, while most of its proponents have tried to justify redistribution by saying that fairness or compassion trumps property.
In a controversial new book called Unjust Deserts: How the Rich are Taking Our Common Inheritance and Why We Should Take it Back, authors Gar Alperovitz and Lew Daly attack the libertarian position, challenging the assumption that the people receiving most of our society's wealth actually earned it and hence deserve it.
They argue by contrast that most of the wealth being created today is unearned, a "free lunch" that should, by rights, accrue to society as a whole. "A fundamental implication of modern research on economic growth is that past advances contribute far more to today's economy than current activities."
Consider, as a single example, the curious conceit of a small handful of people (myself included) who nominally believe that we created Raise the Hammer, the website you are now reading.
I call it a conceit because the site's creation (let alone its continued existence) would not have been possible without the efforts of untold and probably uncountable numbers of contributors; and curious because once made explicit, this fact is as obvious as it is unremarked.
We did not have to invent any of these technologies, developer languages or protocols but were free to use them. They have all benefited from countless thousands of person-hours of development - most of it free and voluntary - including language architecture design and abundant testing and bug-fixing.
In addition, tremendous and freely accessible resources exist to study, learn, and develop with each and all of these technologies, including active user communities in which people help each other to solve their problems.
Further, the site layout and design was informed by abundant existing research into user interface design, readability, and even 'findability' - the ability of search engines (another free service) to discover, index and rank our content.
I haven't even discussed the underlying historical reasons (including trillions of dollars in public research and development) allowing us to assume that most of the people we want to reach own or have access to personal computers that are connected to the internet.
I also haven't discussed the fact that all the contributors (and probably all the readers) have had the luxury of comprehensive public education and, in some cases, post-secondary school, plus access to libraries, books, magazines, TV programs, and, indeed, the massive and rapidly-growing internet itself - a sheer abundance of information that, by historical standards, is utterly without precedent.
If not for the pre-existence of this vast and irreplaceable infrastructure - physical, technological, intellectual and social - Raise the Hammer absolutely would not exist in its current form, and may well not exist in any form at all.
It's probably not possible to overstate the contributions made by this immense public foundation of knowledge and infrastructure. Economic historians calculate that as much as 80 percent of all the wealth being generated today is actually based on pre-existing knowledge, an "unearned gift of the past."
This is just as true of for-profit corporations as it is for a citizen-based volunteer group like RTH: most of the wealth of knowledge and resources they employ are actually pre-existing and freely available - a "free lunch".
Yet most of the profits generated by these businesses are concentrated among their owners - investors and shareholders who 'created' their value only nominally. As a result, wealth is incredibly concentrated: in the USA, the top 1 percent of households own more than half of all the country's total assets and enjoy more income than the bottom 40 percent combined.
The authors sketch the process through which growth in knowledge drives economic growth, observing the phenomenal growth in labour productivity and real per-capita GDP over the past two centuries (since just 1870, productivity has grown by a factor of 15) and exploring the so-called "Solow residual".
They argue, "technological progress appears in many ways to be exogenous to the economy - often arising broadly from society rather than narrowly from conventional economic behaviour." Noting that some economists have tried to endogenize technological progress by explaining it in terms of capital investment, they nevertheless point out that "private investment on its own cannot begin to account for the vast scientific advances of the modern era that contribute to economic growth".
They argue further, "even those who stress market actors and investments" as the principal agents of innovation and productivity growth "agree that increases in knowledge (whether endogenous or not) are of central importance."
They also point out that knowledge is ecological, with a value far greater than the sum of its parts. Before scientific research began to systematize our understanding of how the world works, trial-and-error discoveries in one domain simply could not be applied to other domains.
Knowledge is growing exponentially, fueling and being fueled by a large and growing infrastructure of scientists and other researchers, which is in turn fueled by widespread public education. "Across the twentieth century ... a significant fraction of the total national wealth was created not by firms and individuals (the basic units of entitlement or reward in our society), but by school systems - the collective institutional achievement of millions of taxpayers, teachers, students, school boards, parent associations, etc."
That does not even include the additional value generated by preparing those students for college and university or of public funding for colleges, universities, and scientific research, both basic and applied. Without a huge pool of aspirants and applicants, the social and institutional system of science research and education simply would not exist in anything like its current form and scale.
Later, the authors trace the history of unearned income and economic "deservingness" from its roots in John Locke's defence of liberty through Adam Smith and David Rickardo, J.S. Mill, Tom Paine, Henry George, J.A. Hobson, Leonard Hobhous, Sidney Webb, Patrick Edward Dove, Hippolyte de Colins, Thorstein Veblen, John Mokyr, Brian Barry, and several other economists and moral philosophers.
The book steadily and incrementally builds the inescapable conclusion that most of the wealth an individual creates is unearned by any reasonable definition of the term, and that this realization implies the need for a new way of reckoning how wealth is allocated.
They close the book with an exploration of how this might take place, what it might look like, and how its implementation may address the reasonable objection that people are less likely to innovate if they know they will receive less compensation for it. In particular, they note, "When the annual rate of productivity growth was at its peak in the United States ... so too were the top marginal tax rates at their peak" while "the last thirty years of tax cutting and deregulation ... have generated mixed productivity growth".
Unjust Deserts is an important, timely book, and its publication should ignite a far-ranging discussion about just what it means to earn wealth and how we can ensure that the overwhelming contribution of our society's broad public infrastructure receives just compensation for its indispensable role in generating wealth.