I’m reading The Affluent Society, an economics book originally published in the late 1950s, by John Kenneth Galbraith. I’m still in the first third of the book, but so far as I can tell the idea behind it is that up until this time, economics had been built around some pretty unpleasant assumptions, like scarcity, inequality, insecurity. That those assumptions persisted well beyond their expiration date, into a new world of affluence, largely due to technological progress. In this new era, everyone’s needs can be met pretty easily, except that our thinking is still controlled by the ideas of the past.
I’m not entirely sure where he’s going with all this, but I picked up the book because I heard it offered an early criticism of the role of induced overconsumption through advertising. This is also the era in which Buckminster Fuller was writing about the techno-utopian future in which humanity is liberated from toil by our technology.
One idea that’s really stood out so far came from the chapter on inequality. He makes it out to be a fundamental aspect of the classical capitalist economic worldview. That inequality isn’t just unavoidable, but that it is also necessary. One of the explanations for why it’s necessary is the need to facilitate “capital formation” — the accumulation of surplus wealth which can then be productively re-invested to generate yet more wealth and innovation, ultimately making everything better for everybody. Lamentably, more better for some people than others, but hey it’s the only way to keep this engine running…
Mandatory Wealth Concentration?
He’s not a fan of this justification. If you can only start forming productive capital after you’ve satisfied the extravagant wants of the wealthy, that’s not very efficient. Is there any basic reason why in an affluent society, wealth can’t pool in a distributed fashion? The accumulation of surplus value is as much a function of the bounds on consumption as it is the level of production. It’s the difference between these two that define the surplus.
In an Age of Affluence, many of us can choose to limit our consumption and still be totally fine. We can choose to form our own reservoir of capital and deploy it as we see fit. If you have the income, you just have to develop a personal concept of sufficiency. A flexibility in your consumptive expectations. It all just makes me think of Mr. Money Mustache, and my eventual realization that investing is just not something there’s much to know about.
The manufactured social norms that tell us to consume everything we earn and more, ensure that even pretty well-off people never have much income that’s derived from capital instead of labor. And as Thomas Piketty has pointed out (PDF) the return on capital has historically been higher than the rate of economic growth, which means wealth concentrates. Consumerism is a kind of opportunity hoarding. A sociologically inflicted indentured servitude.
Swimming in Other Capital Pools
I fell off this bandwagon a long time ago and wandered into the economic wilderness. I’m a member of a worker cooperative. We produce software and data that can be used by anybody for any purpose for free. I’ve chosen to live in a middle-income country and buy almost nothing. I can save and invest about 75% of what I earn.
Partly I do this so I won’t be forced to stop working if there’s a gap in funding. Or if it turns out The Economy doesn’t want me to do this work at all. At the same time, the cooperative is accumulating its own surplus income as an entity. Our collective capital account is a pool of economic autonomy that we get to wield together. We can invest in the co-op’s productive capacity, or projects that we think need to be done.
Most of the capital that has flowed to us has come (often indirectly) from the hoards of billionaires. Alfred P. Sloan (an early anti-political activist), Michael Bloomberg (a proprietary information trader), and William Hewlett. It’s a complicated network of stocks and flows. Economic freedom pooling in different reservoirs at different scales, spanning 5 orders of magnitude, each with its own set of risks and imperatives. The individual. The firm. The charitable foundation.
With an endowment of $10,000,000,000 yielding 10% per year, they have to give away half a million dollars every business hour of every weekday of the year just to keep the pile of money from growing exponentially. An hour’s worth of grants would be enough to keep three of us working full time for 2 years.
The idea that capital formation can — and maybe should — happen in different loci, governed by different decision making processes, representing different constituencies, seems alien to a lot of people in the US. I’ve done the accounting for food and housing co-ops. The impulse to cash out any reserves that accumulate is constantly there. When given the choice, people want their share, so they can spend it immediately. Even if that means the collective endeavor is impoverished, disempowered, and made vulnerable to unexpected change.
The same mentality poisons the US dialog about accumulating public wealth or investing in the public interest, even when the returns are good! Education. Controlling pollution. Public health. Transportation infrastructure. Climate mitigation. It’s like people think all wealth should either flow downstream to individuals who will spend it immediately, or pile up in Jeff Bezos’ portfolio.
I keep being surprised by how deeply and diversely toxic consumptive norms are. Not only is our obsession with material consumption directly responsible for ecological disaster, it’s also key to concentrating wealth, and preventing us from developing other nodes of economic power and autonomy.
Thankfully knowledge works differently. Once produced, knowledge can be used by everyone without running out. But that’s another thing entirely.