The Rich Stay Rich
Part three of our series on ‘philanthrocapitalism’
If ‘self-made billionaires’ tend to be ‘more willing to give their money away than those who inherit their fortunes’ as Bishop and Green contend then, seemingly, the prospect of philanthrocapitalism making a larger impact on society depends to some extent on a relative increase in the proportion of wealthy individuals who allegedly made their wealth in this way. In other words, on the degree to which individuals are able to become upwardly ‘socially mobile’. On current trends, however, this seems unlikely. If anything, what seems more likely is that the significance of inherited wealth is going to grow in relative terms.
What helps to sustain the myth of ‘self-made men’ is precisely the belief that we live in a socially mobile society in which inheritance plays only a negligible role. This discounting of the importance of inheritance is a characteristic feature of conservative sociological analysis and its barely concealed aim of wanting to justify the existence of gross inequalities. Such inequalities will tend to be more tolerated insofar as it is assumed they reflect the workings of a meritocratic principle. The rich are rich because of hard work, runs the argument. That’s quite true, of course, except that it omits to mention that it is other people’s hard work that made them rich.
In a sense, then, the argument about the role of inheritance in perpetuating gross inequalities is a distraction. Whether the capitalists inherited their wealth or ‘made’ it, that wealth overwhelmingly derives from that portion of the labour performed by working people that is effectively unpaid or unreciprocated. The only virtue in drawing attention to the significance of inheritance in modern capitalism is that it helps to clarify this point and make it all the more obvious.
How significant a role does inherited wealth play in modern capitalism, then? This is a difficult question to answer. Partly this is because what is called ‘inheritance’ is not simply what it is often imagined to be asLisa Keister and Stephanie Moller explain in their article, ‘Wealth Inequality in the United States’:
‘We know very little about how wealth is actually inherited because data on inheritance is virtually nonexistent. Indeed, Menchik & Jianakoplos (1998) estimated that between the 1970s and 1990s, as little as 20% and as much as 80% of total wealth may have been inherited. Those who study inheritance typically refer to three forms of inheritance: inheritance at the death of a parent or other benefactor, inter-vivos transfers of money and other assets, and transfers of cultural capital (Miller & McNamee 1998:3) While we typically think of inheritance as occurring at the death of the benefactor, Kurz (1984) estimated that inter-vivos transfers account for nearly 90% of intergenerational wealth transfers’ (Annual Review of Sociology,August 2000, Vol 26: 63-81).
Study after study has confirmed that, far from ‘social mobility’ in America (and elsewhere) increasing, it is on the wane (and, along with it, faith in the ‘American dream’). This seems to have gone hand in hand with the steadily widening gap between rich and poor. If you are born poor today you are more likely to remain poor than was the case with your parents or grandparents but the corollary of that is that, if you are born rich, your offspring are more likely to remain rich, too. Meaning that the role of inheritance is likely to loom ever larger as an explanation for the extremely skewed distribution of income and wealth. Consequently, if it is true that the ‘self-made’ super-rich give more to charity than those who inherit their wealth, this would seem to imply that a relative long-term decline in charitable donations from the super-rich is in prospect.
According to Thomas Picketty, author of the best seller, Capital in the Twenty-First Century (2013), the recent growth in inequality augurs a return to the ‘patrimonial capitalism’ of the Gilded Age and the dynastic wealth of a rentier economy.In America, for example, the share of total wealth owned by the top 0.1 percent increased from 7 percent in late 1970 to 22 percent in 2012. This is approaching levels of inequality to be found in the era of the Robber Barons.
What is driving this process, argues Picketty, is the simple fact that the rate of return on capital has been consistently exceeding the rate of economic growth over the past few decades, meaning the super-rich have been appropriating a steadily growing slice of the economic pie. A kind of positive feedback loop is at work which ensures that, to those who have, shall more be given, simply by virtue of the fact that they have the capital to invest which the rest of us don’t. If you are securing a rate of return that exceeds the rate at which the economy is growing, then, logically, that can only mean you are accumulating wealth at the expense of others who lack capital. Inequalities in the distribution of wealth and income will thus grow. That, in turn, acts to slow down or impede social mobility and thus boost the significance of inheritance. The recipients of this inherited wealth not only benefit directly but indirectly too by capitalising on all advantages that great wealth bestows upon them in terms of social capital, having connections with the right people and so on.
The problem is, as Picketty suggests, that while some of the super-rich might claim to have earned their wealth by the sweat of their brows, plainly the same could not really be said of their offspring inheriting this wealth. The corollary of reduced upward mobility is obviously reduced downward mobility – meaning an increased capacity for the super-rich to hang on to their huge fortunes and thus to pass them on to their heirs.
Inheritance is thus the cuckoo in the nest of capitalist ideological legitimation. With the rich getting increasingly richer at the expense of the rest, more and more discrediting the myth of upward social and intergenerational mobility, it is going to be increasingly difficult to justify their huge fortunes in the face of these stubborn realities. The disconnect between ‘merit’ and ‘reward’, which were never closely linked to begin with, will become ever more apparent.
This is where the ideological significance of philanthrocapitalism comes into the picture. It represents an attempt to shore up a failing mechanism of ideological legitimation by projecting an image of the philanthrocapitalist as a generous benefactor and of capitalism itself, as a system that can be philanthropic, working for the good of mankind (http://philanthrocapitalism.net/about/faq/). It is the application of a fresh lick of paint on a crumbling façade that barely conceals the stark structural reality of capitalist exploitation.
Exploitation and charity
While philanthrocapitalism focuses on what the rich give to the poor it would be far more to the point to focus on what the poor give to the rich. According to BarbaraEhrenreich the appropriate response to such giving ought to be one of ‘shame’:
‘shame at our own dependency, in this case, on the underpaid labor of others. When someone works for less pay than she can live on — when, for example, she goes hungry so that you can eat more cheaply and conveniently — then she has made a great sacrifice for you, she has made you a gift of some part of her abilities, her health, and her life. The “working poor,” as they are approvingly termed, are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect’ (Nickel and Dimed: On (Not) Getting by in America, 2001).
However, the problem with Ehrenreich’s way of framing the whole question is that it is seriously misleading. She is focussing only on the lowest paid members of the working class, those who are ‘underpaid’. The presumption seems to be that were they not ‘underpaid’ but paid at the going rate they would have no cause for grievance. Her perspective is the suppressed view of a ruling class which she faithfully echoes in talking of ‘our’ dependency on the ‘underpaid labour’ of others. She ignores completely the unpaid labour that workers in general contribute towards the accumulation of capital even when they are not ‘underpaid’. Her sympathy for the ‘working poor’ is the sentiment of a guilt-ridden liberal trying to eradicate the more unpalatable aspects of contemporary capitalism and to soften some of its rough edges.
What makes the working class – not just Ehrenreich’s ‘working poor’ – ‘the major philanthropists of our society’ is the brute fact of surplus value, the value which our class creates over and above what it receives by way of a wage. As Friedrich Engels put it: ‘It is infamous, this charity of a Christian capitalist! As though they rendered the workers a service in first sucking out their very life-blood and then placing themselves before the world as mighty benefactors of humanity when they give back to the plundered victims the hundredth part of what belongs to them!’ (The Condition of the Working Class in England, 1845).
But even if we look at philanthropy in its more conventional sense as the voluntary donation of money and effort to others, it is quite misleading to portray this as the prerogative of the rich alone. Workers likewise give handsomely in this sense.
Indeed, according to one survey,individuals with incomes below $25,000 gave away around 4.2 percent of their income while those on an income of $150,000 or more gave away around 2.7 percent. Research carried out by Dacher Keltner revealed that ‘lower class people just show more empathy, more prosocial behavior, more compassion, no matter how you look at it’ (www.alternet.org/economy/5-studies-show-how-wealth-warps-your-soul).
(Next month, concluding article: No Such Thing As A Free Gift)