Quite the latest idea is Limitarianism. Laid out in a book of the same name by the Dutch-Belgian philosopher Ingrid Robeyns, the underlying thesis is that, just as there’s a physical limit to how much stuff we can all have, there should be a limit to how much wealth any one person may have. The suggestion is that no one be allowed to have more than $10 million.
There are certain flaws to this even at inception. The most obvious being that economic growth is not about stuff: it’s about value. Therefore, while the physical world is a limit – note the ‘a’ there – on what can be produced, and how rich people can be, it’s not the limit. What really limits us is not the physical world but our ability to add value, which means there is no physical reason to limit what each person may have.
There’s a more cynical observation to be made: that everyone who does propose such limits always proposes something just above what they themselves might conceivably attain. A solid academic career, house, country cottage, decent pension, the money from a couple of bestselling non-fiction books, appointments to this and that grouping of the Great and Good – yes, $10 million is beyond that in a manner that $2 million isn’t and $5 million might not be. That is cynical, but then, it’s not clear what other justification there is – none seems to be offered – for the suspiciously round number laid down by Robeyns as the absolute limit on permissible wealth.
To retreat back from cynicism to analysis, there’s also a gross misunderstanding of who loses out when some people can’t get really rich. My current favourite example is Mark Zuckerberg, who has $200 billion or whatever it is, with which he’s bought a boat and a chunk of Hawaii. Well, OK, but that’s a trivial amount compared to the value he has created for the rest of us. Half the species – yes, fully 4bn people – now get free telecoms from WhatsApp and Facebook’s Messenger. Call that $20 a month in value each (-ish?) and that’s a trillion dollars each year near enough. And if you turn that $20 a month for billions of people into the kind of one-off figure investors use to value an asset, you’re talking about roughly $20 trillion. As I’ve been known to note, entrepreneurial capitalism is the greatest bargain in all of history, and we consumers out here are on the right end of it too – we get $20 trillion, he gets $200 billion and yet there are people who complain about this? Sheesh, tough crowd, eh?
This also runs into the problem of incentives. Would Zucks have carried on entrepreneuring if he could have no more once he’d hit his $10 million limit? It’s certainly possible that he wouldn’t, and therefore we’d all have missed our $20 trillion. Something of a pity that would have been. We even have evidence that rather more than $10 million wasn’t enough: Zucks was at one point offered $1 billion for Facebook and he turned it down.
It’s even possible to say that the basic economic background is misunderstood. From Robeyns in The Guardian this week:
‘But the specific neoliberal form of capitalism that has risen to dominance from the late 1970s onwards has additional features: the privatisation of companies previously in public ownership; a shift in power from workers to capital owners; and reduced taxes on entrepreneurs and the richest.’
Two of those aren’t really true. A shift in power would be seen by a change in the shares of national income, and yet the capital share of UK GDP bobbles around 20% just as it did in the 1950s. Oh, it’s true that the labour share – and the wage share within that – have fallen but there are four parts to national income, not two. The driver of that falling labour (or wage) share is that government is taking more, not that capital is. Neatly proven by the fact that capital is not, in fact, taking more of it all. As to the taxation of entrepreneurs, well, we only started taxing them in 1965. Before that there was no capital gains tax at all. So that Golden Age before neoliberalism was not, in fact, more punitive of entrepreneurs.
A further misunderstanding:
‘Yet at its core, economic inequality is about much more fundamental issues. It is about who gets what share of what we produce together. Neoliberal ideology, with its focus on individuals and the efficiency gains of competition, makes us inclined to think that we can attribute wealth-holding to individual efforts. But this is a myth.
.
The economy is a complicated ecosystem of interlinked processes, in which the areas where the largest profits are made are reliant on other fields that provide the conditions for this to be possible.’
First off, let’s note that there is a reasonable point here. The modern economy is complicated, and who does this depends upon other people doing that. Indeed, one of the great questions of economics itself is how we coordinate all those different actions and activities. But the record of those places that have, in the modern parlance, ‘rejected neoliberal ideology’ and used other means than markets and prices (and profits) to do their coordinating, is not good. So while the observation is not incorrect, the conclusion we’re invited to draw from it is.
But to me here is where the idea truly falls down. We get, from Robeyns, the by now ritual condemnation of inequality. About which we must do something, winds blow, cheeks be cracked in order to deal with this terror. Neoliberal capitalism must be constrained, abolished even, because of this inequality.
Hmm. From the recent Joe Stiglitz report for the G20:
‘Globally, income inequality between all individuals in the world has fallen since 2000, due largely to economic development in China. However, it remains very high, at a Gini coefficient of 0.61.’
That ‘largely’ there is carrying a lot of weight. Too much – so much weight as to not, in fact, be true. Under the yoke of global neoliberalism those poor countries that take part in it have been growing faster than the already rich countries. As the academic work of the expert on the subject, Branko Milanovic, shows.
In other words, even as global neoliberal capitalism has reduced – and continues to reduce – economic inequality, Robeyns and her acolytes insist we must adopt another economic system to reduce inequality. Ho hum. Limitarianism becomes just another excuse to dismantle capitalism and markets, rather than a useful attempt to understand the world as it is. That tells us rather less about capitalism’s failures than about how reliably some people decide that inequality becomes immoral at exactly the level of wealth they themselves will never reach.
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