Inequality & power

The Times today provides one answer to Sam Bowman's question: does inequality matter? It reports how Glencore's profits arise, in part from "exposing thousands of Zambians to dangerous levels of sulphur dioxide emissions." The firms is also accused of profiting from inside information obtained from an EU bureaucrat and using stolen land in Colombia. 
These are all examples of how income and wealth inequality - Glemcore CEO Ivan Glasenberg is a multi-billionaire* - arises in part from inequalities of power: Zambian and Bolivian villagers have no power to insist that the costs of pollution are internalized; Colombian peasants had no power to protect their property rights, and so on.
These, of course, are not isolated examples. As Rick says, "All pay is, ultimately, a function of power."
Some of this power is innocuous: Wayne Rooney earns a fortune because his rare skills give him the power to demand a high wage. But other forms of power are more questionable. For example:
- top bankers are rich because they hav the power to privatize gains but socialize losses.
- technical change has weakened the power of unskilled workers whilst raising that of bosses.
- profits and profit-related incomes have risen at the expense of wages because capitalists have power conferred on them by mass unemployment and declining militancy.
- workers have low pay because they lack bargaining power whilst capitalists can extract favours from government because they do have such power, as they can threaten to relocate.
And herein lies one of the blindspots of the free market right. It seems unable to see that in actually-existing markets, there is power and unfreedom; some of the more tedious passages of Hayek's Constitution of Liberty are where he tries to redefine coercion as something that hardly happens in a market economy.
If the Left is sometimes guilty of caricaturing the rich as evil exploiters, the right has its own caricature of them as heroic Howard Roark types. They are not.
However, it's not just the right that is at fault here. So is the non-Marxist left.
It sometimes gives the impression that more progressive taxes are a sufficient response to inequality. They are not. Such taxes fall as heavily upon the minority of the rich who are genuine public benefactors - entrepreneurs and talented sportsmen and artists - as it does upon exploiters and rent-seekers.They do not address inequalities of power.
Worse still, it's not clear that the soft left even has much idea here. It's not obvious whether the state is part of the solution or part of the problem. Those allegations against Glencore, for example, could all be seen as examples not (just) of corporate malfeasance but of state failure.
* It's a minor point, but it peeves me when the media reports that Glencore's flotation will make Glasenberg a billionaire.This is not true. It's owning a big part of a valuable business that makes him a billionaire, whether the firm is publicly or privately owned.

Comments

[Charles Wheeler]

"However, it's not just the right that is at fault here. So is the non-Marxist left.
It sometimes gives the impression that more progressive taxes are a sufficient response to inequality. They are not. Such taxes fall as heavily upon the minority of the rich who are genuine public benefactors - entrepreneurs and talented sportsmen and artists - as it does upon exploiters and rent-seekers.They do not address inequalities of power.
Worse still, it's not clear that the soft left even has much idea here. It's not obvious whether the state is part of the solution or part of the problem."

These points would carry more weight if you suggested some alternative to the state.

[gastro george]

Just to summarise - the problem with the soft left is that their critique is that of economics. But what is actually required is a critique of power.

[tomslee]

I haven't been reading S&M much lately, but I should come here more often. This is very good and needs to be said more often. The idea that people will have wealth and not use it to accrue other forms of power is a silly one.

That said, like Charles Wheeler I'd like to here your non-soft, non-non-Marxist suggestions.

[BT]

Time to tax 'socially useless' activities:

- financial trading
- asset price speculation
- gambling
- environmental damage

[twitter.com/gappy3000]

The post puts in the same class stealing land, unchecked negative externalities, monopoly power, regulatory capture, different bargaing power in that all arise in part from inequality of power. This seems deeply misguided and confused. Stealing land is unethical and inefficient; externalities and monopoly power are not always unethical; bargaining power is often neither unethical nor inefficient. As much as Seattle workers may dislike it, there is nothing wrong with Boeing relocating a factory to South Carolina. Even a perfect procedural egalitarian system of laws (one that does not tolerate stealing and will price externalities) will eventually have to deal with parties with vastly different bargaining power. Not accepting such inequality means to opt for an outcome-equalizing system. Good luck with that.

[CharlieMcMenamin]

But where does power originate? Traditionally, Marxists have claimed it comes from ownership and control of the means of production. Yet an awful lot of ink has been spilt on the problems of ensuring the interests of *owners* and *controllers* remain compatible. Mainstream thinking approaches this through tropes like the 'principal-agent' problem. Much longer ago James Burnham tackled the issue in 'The Managerial Revolution'.

If power is the problem, knowing where it comes from is the key to the answer.

[Prateek Buch]

It is a little unfair to say that non-Marxist lefties don't look beyond redistributive taxation - some of us do! I am currently grappling with issues of inequality (not just of income but of wealth and power) as I contribute to what I hope will be a major piece of work on the issue to be published in the summer.

As a part of this, I am looking into inequality of voice at work - the inability of low-skilled workers to hold management/capital to account, amongst other things.

The answer (or at least part of it) is hinted at by @CharlieMcMenamin - aligning to a greater extent the goals of labour and capital - or giving both management and labour a stake and a say in how a firm's direction.

This is where Chris is spot on of course - it's the failure of the State to set corporate governance along these lines which is as much to blame as the operation of the ensuing market - rest assured that some people (not enough...) are working on spreading these ideas within government :-)

[Luis Enrique]

I suppose the answer has to be democracy and other forms of participation in decision making.

otherwise you face the problem that you need power in order to do anything to fix the problem, whihc can be self-defeating unless you have some equitaable means of conferring power.

although I suppose you could think about the technology of production, so to speak, on the basis that certain 'technologies' lend themselves to concentrations of power more than others.

[tong abercrombie]

Très beaux vêtements, je voudrais l'avoir, mais je n'ai pas assez d'argent, alors je dois essayer de