20 March 2015

Why we despise the rich


Remember the earworm “Que sera, sera”, interpreted by Doris Day, so typical for the Fifties? “When I was just a little girl / I asked my mother, what will I be / Will I be pretty, will I be rich …” Children know that there is no free lunch. Money promises access to the many material marvels of the world. Not all boys and girls will be rich once they’ve grown up, however, for a variety of reasons, be it lack of education, talent, motivation or sheer luck. And those who will be rich may end up disappointed, since money can buy a lot, but not everything that is essential to a happy life.

In his Theory of Moral Sentiments, the Scottish Enlightenment philosopher Adam Smith (1723-1790) describes the fate of a rich man who comes to recognize the vanity of wealth: “It is then, in the last dregs of life, […] that he begins at last to find that wealth and greatness are mere trinkets of frivolous utility, no more adapted for procuring ease of body or tranquillity of mind than the tweezer-cases of the lover of toys; and like them too, more troublesome to the person who carries them about with him than all the advantages they can afford him are commodious.” (TMS, IV.I.8) Money can leave you lonely and unhappy. As the common expression implies, the “happy few” are only a few, and even inside this small group, there tends to be more rivalry than chivalry. What ties the rich together nevertheless is the vast ocean of resentment, envy and prejudice that engulfs them all.

The sight of other people’s wealth doesn’t seem to function as a good incentive. Many have-nots just pity themselves and indulge in a zero-sum mode of thinking. They feel exploited and abandoned. In an analogy to Pierre-Joseph Proudhon’s saying about property, they hold and spread the belief that all prosperity is essentially theft. This sense of deprivation, irrational as it may be, contains the germs of rebellion, as Adam Smith lucidly foresees in his “Wealth of Nations” (1776), his famous economic masterpiece: “Civil government […] is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.” (WN, V.i.b.12) In our days, material inequality is once more the – not so fertile – soil on which the wide anti-capitalist, anti-free trade, anti-globalization, anti-western, anti-American stances have been growing.

From a rigorously economic point of view, however, there is really nothing that supports such a hostile attitude toward the rich. Wealthy people consume more than others, and they consume more expensive goods. Without their demand for luxury, there would be fewer jobs and smaller, stagnant incomes for the not-so-rich who cater to them. Their consumption spurs growth. The rich also accumulate capital. Since they cannot consume as much as they have, they save and invest – which is good for the whole of society.

None of this is news. In the last days of the feudal age, Adam Smith wrote, perhaps a little too optimistically: “Though [the rich] mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.” (TMS, IV.I. 10) There it is, the famous invisible hand.

The same Adam Smith, however, noted the “natural selfishness and rapacity” of the rich. Given that he drew much inspiration from ancient Greek texts, it doesn’t come as a surprise that this unfriendly characterisation is very much in line with the common attitude toward the rich ever since antiquity. Even Aristotle was disgusted by unfettered “chrematistics”, the pursuit of wealth for its own sake. Mankind had to wait until the 13th century for the scholastics to first toy with the idea that limited profits and even interest, which can make a person rich, might be tolerable under certain conditions. Five centuries later, Adam Smith finally performed a crucial paradigmatic shift by explaining how the common – economic – good can result in the market even when noble personal motives are missing.

Smith demonstrated that the wealth of a country is the result of “human action, not human design”, to quote another Scottish Enlightenment thinker, Adam Ferguson (1723-1816). Supported by good institutions, the prosperity of all no longer depends vitally on individual good character and morality. “Natural selfishness and rapacity”, where they do exist, will not cause an economic breakdown. The “obvious and simple system of natural liberty” can deal with it. Intellectually, this insight was a major breakthrough, and it set free an enormous amount of progressive economic energy, to the benefit of all. A deep-rooted emotional aversion against wealthy people, profits, business and money, however, nevertheless persists until this day. “Rich aversion” has survived the whole of modern economics.

This wide-spread resentment has many sources. One source is of course the provocative observable behaviour of some very wealthy people, ranging from all too conspicuous consumption and mindless luxury, as displayed by “It-girls”, to the conceited “master of the universe” attitude of some “top” bankers and managers. It is admittedly not easy to tolerate such ostentatious obscenities. Another source is the not so infrequent disconnect between what some people earn and what they seem to deserve by any measure of common sense; one unforgettable example is Klaus Esser, formerly the boss of the German company Mannesmann, who lost out in the merger race between Mannesmann and Vodafone 15 years ago – and was rewarded with a 30 million euros compensation.

“Desert”, problematic as its definition may be, seems indeed to be the crucial prerequisite for social acceptance of wealth; its absence leads to hostility. That’s why we don’t mind so much that “world soccer player” Cristiano Ronaldo earns some 18 million euros per year; in a reverse manner, that’s why inheritance taxation is widely popular. “CR7” has to run more than 10 kilometres at every match, while rich heirs don’t even need to get out of bed. Closely connected with the call for just-deserts is envy, another abundant source of “rich aversion”. Envy is one of the seven deadly sins, but despite this heavenly verdict, it seems ineradicable. In fact, religion may even contribute to keeping the prejudice against the rich alive.

Religions pass on moral norms from one generation to the next, mostly without our conscious knowing. Via their impact on society, their influence also reaches outsiders. According to Friedrich Hayek (1899-1992), these normative systems become part of our genetic heritage and thus adapt only very slowly. Biological evolution takes place at a much slower pace than its cultural counterpart. The moral codes coming along with most religions however refer to pre-modern times. Their tenets are dramatically out of tune with modern life. It is therefore crucial to understand the historical context of the Scripture and to adapt its teachings to the present, i.e. to revise the outdated ethics. At the same time, it is important to keep in mind that Scripture is not first and foremost a collection of rules of just conduct, but deals with the relationship between man and God.

A well-known parable in the New Testament is the one where Jesus says “It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God” (Matthew 19:13-26). A multitude of scholars have tried to soften or to define away the troubling message of this quote: Maybe there was just a Greek misprint, with kamêlos (camel) replacing kamilos (rope); maybe the “eye of the needle” referred to a narrow gate in Jerusalem which camels couldn’t pass loaded. The metaphor of the camel and the eye of the needle was common currency in the old days. It simply illustrated impossibility. It serves exactly this purpose in the Quran as well, where, some centuries later, Mohammed tells his people that arrogant non-believers cannot hope for Allah’s mercy: “The gates of heaven shall not be opened for those who have belied and grew proud against our verses; nor shall they enter Paradise until a camel shall pass through the eye of a needle” (7:40).

It would be outright nonsense to conclude that Jesus was an early anti-capitalist, many centuries before the very emergence of more or less free markets. His words, written down by the Evangelists many years after his death, aim at the individual soul. In a plausible interpretation, the ban concerns those men and women whose souls are so caught up with pecuniary matters that they forget about God. The message is therefore the following: If you’re rich, fine, but don’t let the mammon obsess you, don’t let it turn you into a sinner. From this follows, for all of us, the duty to end the prejudice and appreciate each other for our characters, not for our money – whether we have little or lots of it.

Karen Horn is an independent author and teaches the History of Economic Thought at various universities. She also serves as the President of the Friedrich A. von Hayek Gesellschaft (Berlin). She is the author of “Roads to Wisdom – Conversations with Ten Nobel Laureates”.