Sunday, August 3, 2014

What is the purpose of wealth?

Earlier last week I heard a sermon from a visiting speaker at church. It was about wealth and prosperity and how God wants to financially bless those who are His people. 
He used many verses to talk about how God provides wealth for His people, or more accurately, provides us with the ability to produce wealth. He seemed to think that Christians had a poverty mindset, where it is more holy to be poor and that the rich tended to be looked down upon.
He said some things that I agreed with, especially on the latter point. Like him, I don't believe we were called to be poor, but more to be without need or to have sufficient income to live on (depending on our context). However I felt that the sermon was heavily one sided. Maybe because he was swimming upstream against some Christians who tend to reject prosperity teaching - to be rich is bad and to be poor good? I take it that he was well meaning, but simply was too one-sided.

In this write up I would like to share a few verses that I find pertinent to how we should be handling the issue of money. Later on, I will raise some questions about the validity of leverage, passive income and 'blind' giving for the purpose of assisting the needy. I will also share a question that I have found helpful to ask myself when giving to others.


The visiting preacher's leaning tendency was pretty much that Christians should be seeking to make money to be wealthy. To give him credit he at least 'mentioned' that if we have more, then we are able to give more. However, here are a few verses that I think challenge his tendency to focus on the value of wealth:

Matthew 6: 19-21 “Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal; 20 but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. 21 For where your treasure is, there your heart will be also.”

The preacher made it clear that he did not think Christians should make wealth their primary goal, but that it should still be a goal in life. However, here in Matthew, Jesus is making it very clear that we should not be seeking wealth here on earth but that we should be focusing on the rewards heaven has to offer. 2 Corinthians talks about the purpose of having plenty:

2 Corinthians 8:8-15 I speak not by commandment, but I am testing the sincerity of your love by the diligence of others. 9 For you know the grace of our Lord Jesus Christ, that though He was rich, yet for your sakes He became poor, that you through His poverty might become rich.
10 And in this I give advice: It is to your advantage not only to be doing what you began and were desiring to do a year ago; 11 but now you also must complete the doing of it; that as there was a readiness to desire it, so there also may be a completion out of what you have. 12 For if there is first a willing mind, it is accepted according to what one has, and not according to what he does not have.
13 For I do not mean that others should be eased and you burdened; 14 but by an equality, that now at this time your abundance may supply their lack, that their abundance also may supply your lack—that there may be equality. 15 As it is written,“He who gathered much had nothing left over, and he who gathered little had no lack.”

In the beginning of the sermon, the speaker made reference to people having 'dreams' of material goods, but that as we moved through life we realised that those dreams were too large. He claimed that we tend to drop those dreams, not because they are necessarily misguided but because they are out of our reach. He also emphasised verse 9 where Jesus came to make us rich. However, verses 13-15 qualify the purpose for gaining riches. It is not so that we can spend the riches on ourselves but to create fairness and equality between us and those around us. Don't get me wrong, I believe in enjoying the work of our hands, but it needs to be done in balance and not at the expense of others. There is no rule per se when it comes to how much money we can have or spend, because for each person it would be different in our infinitely diverse contexts. 

The biggest struggle that I had with some of what he said, was that he promoted concepts of leverage and passive gain for personal gain. They are both intelligent ways of making money, but at whose cost?
I am no economist, but it doesn't take much imagination to wonder where the extra money earned has actually come from. If I am not working for a "day's" money or earning more than a "day's" labour, then where is the money coming from?
Ultimately using leverage and passive income means that we are actually using or exploiting someone else's labour for our own pocket. Being a little bit controversial here, but what is 'profit' really? Money gained after our expenses seems to me, to be the very definition of exploiting someone else somewhere down the line. It is the people with power who eventually win and those who do not that lose. Money gained up the top of the stratification ladder would come from down below, would it not?
This is part of the reason why the majority of the money in western cultures is in the hands of a few.

Should we as Christians be promoting this behaviour for our own gain? If we do it for the good of others, then that's awesome. However, maybe this could be done by leveraging the rich somehow to assist the poor, instead of oppressing them? What needs to be taken into consideration is that the people we are trying to help, may be the very people we are exploiting.

I felt that possibly the sermon actually discouraged and alienated people rather than encouraged them. How many people have chased money before and only failed? This sermon may have indirectly caused these people to feel like they had failed God or had sinned somewhere in their lives. Not all of us want to make more money than what is sufficient for us.

There was an article I read recently that was talking about empowerment - how we could be seeking to assist the powerless to become powerful themselves. It raised the concept of charity and how it actually encouraged the power imbalances within the stratification in society. Even though charity can be done with good intentions, we must ask ourselves whether it is actually benefiting the people we are trying to help. What I mean by that, is that each time we who have abundance give to those who have need, it potentially creates a situation where they feel like they owe the rich one and the rich feel like they are owed one. It doesn't necessarily close the gap between the rich and poor, but actually confirms it. Instead of giving blindly to the poor, maybe the rich could give a little more strategically, if they really are wanting to assist the poor to empower themselves and get back up on their feet.

I heard someone raise an important issue regarding giving that I found extremely helpful to check my motives about giving. Do I give because I want to feel like I am helping people, or, do I give because I want to actually help people?

So, in conclusion regarding these thoughts:
  1. Seeking wealth primarily should be for the good of others. Though, in balance, I still believe in enjoying the work of our hands.
  2. Is leverage and passive income really helpful to those in need?
  3. Sermons inspiring people to become rich could potentially be alienating or discouraging to those who have not done so well in the business arena.
  4. Is 'blind' charity the most helpful form of assistance for those in need?


     



31 comments:

  1. Hello Daniel,
    Two things spoke to me early on in my walk with the Lord. One was 2 Chronicles ch.1 v.10 where Solomon asks for wisdom and knowledge. I thought 'what better to ask for?', and I asked for it.

    The other thing that spoke to me was Matthew ch.6 vs. 31 - 33:-.

    "Do not worry then, saying, 'What will we eat?' or 'What will we drink?' or 'What will we wear for clothing?' "For the Gentiles eagerly seek all these things; for your heavenly Father knows that you need all these things."But seek first His kingdom and His righteousness, and all these things will be added to you.…'
    That word has proved true in my life.

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  2. Wow brother, I love that image on Capitalism. Spot on Daniel!
    I always say that a picture saves a thousand words.
    And a famous boxer once said, "One in the eye is better than two in the ear".

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  3. Hey Brenda,
    Thanks for sharing Mat 6:31-33. It is great verse that has also encouraged me to have faith in Him.

    Paul,
    Yeah, pictures do say a lot! I was quite happy I managed to find that one on Flikr. I thought it reflected the theme of the post rather well :)

    Cheers

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  4. Daniel,

    One verse that always answers the prosperity question for me is Matthew 25:29. To those whom God can trust He will give more, etc...

    I look back and see how we use money, at least here in the US. We buy the best of cars, the best houses, the latest cell phones, 50" LED flat screen TV, and everything in between and then give less than 10% of their wealth BACK to God and/or not help those who are less fortunate and starving or with no shelter. And we wonder why we can't succeed. The message is if you are not trustworthy with the income you earn then why would God allow you to get more. Now of course that does not mean that is the rule for everyone or there would be no tycoons. But it does show a path to wealth or comfortness. So having money is not the problem; it is what is in your desires and actions of that money that is.

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  5. Daniel: what you say. Laissez-faire capitalism destroys society: the society it depends upon to exist. Wealthy people who do not share their wealth, be it by way of taxes or donations- are greedily denying the needy, and their own children in the end.

    And you don't need God to see that there are more important things in life than wealth. I have friends who are rather wealthy, and they are very generous with their wealth and their work. Some of their wealthy relatives are not generous, and they are nasty, backbiting, miserable people. The people I know who are happiest are those who have the classical things: loving family and friends, fulfilling work and play- and a roof over their heads and enough to eat.

    Rich people can be great doers of good: look at Bill Gates' philanthropic work, for instance- but the increasing gap between haves and havenots does not bode well for a workable society.

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  6. Oh, and yes- Jesus being coopted as a Founding Father of neoconservatism and "prosperity preaching" could only be done by people who have never really read the Bible. If anything, Jesus was a socialist: share with those in need, pay Caesar what is due, deal honestly.

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  7. Yeah, quite agree Laissez-faire is disastrous without morals attached and adhered to. It is sad that society has to be policed to stop exploitation and greed. It would be cool if everyone adopted an empathetic mindset towards those in need and an awareness about the impact of our actions on the world around us. And yes, Jesus was more of a socialist :)

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  8. Hi Daniel,
    I'm convinced that *how* we do business/work speaks volumes - in what sphere we operate, whether its ethical, sustainable etc. We are either doing good and building up our world, ministering to the poor, building community, preserving God's creation or we are exploiting people/the earth for short-term gain, which to me is totally against a Kingdom of God perspective. Unfortunately most "prosperity" teaching I have heard doesn't take this into account at all - seeming to assume that we as Christians have some form of entitlement to live materially "blessed" lives while those around us suffer - often by our exploitation! This has, I think, given Western conservative "Christianity" a very bad reputation among those concerned with social justice and caring for the earth.

    My personal angle on what Jesus teaches is neither capitalism or socialism - both these things are "big-picture", top-down impositions which run against both personal responsibility and true community. If capitalism is "sin" then socialism/communism is "law" (using Paul's categories fairly loosely!). To me the middle way of "grace" is where communities take responsibility, as far as possible, for their own local wellbeing, not dependant on either the global market or Big Brother State to fix things.

    This is a subject I am pretty passionate about by the way... :)
    Clive

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  9. I agree Clive, well put :)

    However, capitalism being 'sin' and socialism being 'law' is like comparing apples and oranges, because they only fit these descriptions if you approach them from opposite perspectives. For capitalism to be 'sin' you must interpret it from an individual level. If you interpret capitalism from a societal level, many see it as the 'lesser of two evils' (though I disagree, I can understand this sentiment).

    For socialism to be 'law' you must interpret it from a societal level. But if you interpret socialism from an individual level, it is, essentially, the way of grace you are describing (because this will outwork itself in the community).

    I feel that Christ's focus (from an individual and societal perspective) was so OPPOSITE to being concerned about your personal wealth. 'Don't worry', 'its impossible for the rich to enter', 'take up your cross' etc. And then you have the apostles: 'weep, you rich', 'they have pierced themselves with many sorrows', 'I can be content with nothing through Christ who strengthens me', and of course the very socialist verses Daniel points out in 2 Corinthians.

    To me the very concept of 'prosperity Gospel' is not only opposed to Christ, but the very discussion makes no sense. Its not a question of 'how much wealth does Christ allow us to pursue, and how does he want me to pursue it?' That doesn't even make sense in Christ's framework. He would be asking completely different questions, like 'how can I best alleviate the suffering of these people?' and 'how can I best reveal God more fully to these people?'.

    It gets tricky when you ask how the Christian's individual 'socialism' should interface with business and politics. Is it Christ's intent that we look to societal factors in our attempts to aim for the 'socialistic' heavenly realities? Much more difficult to answer...

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  10. Joshua: bravo, I agree wholeheartedly (leaving God out, of course). Whatever economic policies we pursue, we should first concentrate on the health of our people, and that means alleviating poverty, etc. As my mother once told me, if we were all angels, it wouldn't matter what form the government took.

    But we are not angels- I think atheist and theist agree here. Thus, we need to make laws that govern the distribution of wealth: how much is private, how much is public. As you say, there are no easy answers here.

    I have some experience with communism: I spent a fair amount of time in Hungary before the fall of the Iron Curtain. The plus side of this form of communism: there were no homeless people, everyone (as far as I could tell) got enough to eat. Public transportation, food, rent, the Zoo, even the Opera, were all ridiculously cheap: everyone could afford to live. The minus side: because there was no way to better your financial position, no one cared about their work. People in stores were unfriendly and unknowledgeable. Buildings fell apart. Information from the West was censored. Lots of people (for instance, my friend's grandmother who I stayed with in Budapest) didn't even have a refrigerator, not to mention a radio or a television.

    We need a balance to build viable societies, a balance that respects the needs of individuals and the needs of the group. In the USA the individual is worshiped, and the group is called "communistic". Small wonder that society is crumbling in many places there.

    cheers from hot Vienna, Scott

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  11. Josh I was being a bit cheeky with the sin and law parallels but making the point that as these were theologically essentially the only two options and Jesus comes in with another way that bursts the paradigm and somehow brings an answer. In the same way the left/right dichotomy is often seen as the only two options and we are all on a scale between these. I think as Christians we can challenge this.

    I think the metaphor can go further though, equating sin to "licentiousness" without controls is pretty similar to "laissez-faire". Capitalism that assumes the "invisible hand" is enough to bring a prosperous sustainable society doesn't take into account the sin in human hearts. Bernard Mandeville's "Parable of the Bees" was really the forerunner of this kind of thinking. ironically the so-called "free-market" has thrust us into intense over-regulation of everything - to the advantage of no-one but those with enough power and wealth to make the rules.

    Against this the "law" of socialism/communism recognises that this is evil and that it creates great inequality in society but instead of recognising the real issue (the nature of the human heart) it seeks to bring equality and justice through top-down central control, which requires an increasingly heavy hand to maintain - just as the Law was found to do - actually increasing sin as Paul observes in Romans.

    It is an interesting metaphor, and I know it has limitations as you point out, but it helps me to think through what might be the way of grace from an economic/political perspective. As God's people living in the midst of "Babylon" I think like Daniel we may have something to say that can do good and bring a level of sanity. My perspective is that these oppressive systems, whether global/capitalist or centralised/communist or like the China communist/capitalist hybrid will be judged by God at the end (Revelation 18) but as the people of God we are called to explore and pursue Kingdom of God economic values here in the midst of them. I think it's good to step back and as Scott has pointed out, see the good and evil in both Communism and Capitalism and learn from history.

    I'm fascinated to hear from people who have grown up under communism Scott - one of my favourite authors is Tomas Sedlecek (Economics of Good and Evil) who grew up in Czech Republic. He has some amazing insights having experienced that and then able to see the West with fresh eyes.

    Clive

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  12. Clive: I think I agree with you pretty much as well. I would just add that it's not only Christians who should be able to see past classical left/right political dichotomies, but also humanists, and anyone else who looks at history.

    I think the key here is that government alone is not sufficient to produce a just, workable society: you need a moral structure too. Capitalists and Communists alike can oppress, if people are not goodwilled. But where does goodwill come from?

    Imho, it can come from religion, or humanistic values, or simply individual inspiration. All are subject to corruption, unfortunately: we are not angels.

    cheers from summery Vienna, Scott

    P.S. If you're ever in Vienna, or the SF Bay Area most summers (not this year, alas) drop me a line, and lunch is on me.

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  13. Hey Clive, totally hear you brother. Primarily change needs to happen from the bottom up, that is, the change needs to happen within the hearts of the people in the communities. Laws don't change hearts, and laws aren't even a true reflection of people's hearts, even in democracy. If we all look out for each other and become more aware of how our actions affected those around us, then I think we would be bringing Christ's kingdom here.

    In saying that, even though a focus of ours should be on transforming communities from the bottom up, we can still assist the oppressed through laws. Rather than letting systems of thought like capitalism be in control of society, we can still look out for the oppressed by countering the actions of the oppressors. This may not be changing people's hearts per se which is the ideal, but is still practically lessening the affect of evil committed by others. Practically looking out for the underdog, as Jesus did.

    Really interesting Scot, hearing about your time spent in a communist society. Sounds really strange compared to anything I have ever experienced. Definitely food for thought. Sad that people can't value the work of their own hands even though the excess is given to others.

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  14. Daniel: my picture of communist society is of course very oversimplified. Probably there were people who valued the work of their own hands there too. But capitalism does make things more exciting. Another example is Rumania: my brother-in-law has a house there, and we've visited a couple of times. The oppressive regime of Ceaușescu managed to destroy a lot of things, including basic knowledge of woodworking. It's next to impossible to find a handworker in modern Rumania who can, say, install a door competently. This is in contrast to old farmhouses we saw, all made of wood perhaps a hundred or two ago, where the joints are perfect.

    Of course, we all give our "excess" to others in many ways: taxes, donations, and gifts. Without such donations, society cannot exist.

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  15. Thanks Scott - I'll keep that in mind :). And I agree, often humanists, etc see the problems very clearly and take action. Christians too often accept the status quo unfortunately. I think all humans have some inner God-given orientation toward what truly being "human" (made in the image of God) should look and feel like, it just can get a bit cluttered and confused for all of us.

    Daniel, agree totally that change comes from bottom up, but like Daniel, some are also called into arenas of great influence. I read a story in a book by Alan Roxburgh about how in Czech Republic under communism people just gradually stopped believing in the narrative of communism, and when enough people did that it simply couldn't continue to hold its power .Similarly I think when we begin to stop believing in the myth of globalised capitalism and centralisation as the utopian ideal it will simply lose it's power. At a local level we will find ways to hopefully avoid the need to be hooked onto the train-wreck that is the globalised economy.

    Just as Scott says under communism in Rumania basic skills were lost so we see a similar thing with globalism - the shoe-maker in Whangarei for instance has just closed down - one of only two left in NZ apparently! Just because we can import cheaper. We should be keeping these skills alive as there will come a time when these kinds of skills will be far more important that what we now consider to be high-end jobs.

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  16. Thanks for the post. I have a question about this passage:

    "Ultimately using leverage and passive income means that we are actually using or exploiting someone else's labour for our own pocket. Being a little bit controversial here, but what is 'profit' really? Money gained after our expenses seems to me, to be the very definition of exploiting someone else somewhere down the line."

    It seems that having an employee to do some of your work for you, and produce income for you, is a form of passive income, and therefore immoral.
    Am I understanding you correctly?

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  17. Hi Will,

    Welcome!

    I try not to look at things as black and white because there seems to be positives and negatives of certain actions.
    However, we must ask ourselves some questions and think beyond our own pocket. If a business is selling its product for more money than what the workers who produce that product are getting paid, then that to me seems like a self defeating society. The workers are the consumers, and if they aren't getting paid for what they produce, then society (the consumers) will not be able to afford the products. Therefore this brings into existence the poor and exploited. The workers are getting sold over priced products worth less than what they are paying for them, all to make the share holders and guys at the top rich.
    We must ask ourselves, is this moral?

    On the other hand, there may be circumstances in our not so perfect world where smaller businesses (with the right motivation) could look to exploit the rich to give back to the community. This could be done through selling expensive art or other elite luxuries that the rich like to spend "their" money on.

    I realise economics is much more complicated than what I have shared, but this principle of profit meaning exploitation makes sense to me.

    Two cents

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    1. Thanks for your response.

      I disagree that "the workers are the consumers." If I worked as an accountant for a firm that consults for big businesses, then I am personally ineligible to consume the product I produce. I, as a consumer, could only ever purchase a tiny fraction of the goods and services our economy offers. Therefore, it's quite possible for workers like me to produce goods that they don't consume.

      Companies must charge more for the goods than they pay for the labor to produce; otherwise, how could they pay to maintain the means of production, e.g. service the machinery, or even keep the lights on? Or pay the workers' supervisors, or the company's legal team, or provide any return at all to the investors that helped get the business off the ground, etc.

      Bottom line is, if you can't make any sort of profit by employing people, then companies across the whole economy grind to a halt (which is a truly "self-defeating society"). There's nothing necessarily greedy about employing people, especially if the employer acts with Christian principles (i.e., non-exploitatively).

      Indeed, if poor people didn't have the opportunity to be someone's employee, then where would their income originate, especially if they don't have the capitol to start a business of their own? Is this a better situation for them?

      Hope I've left some food for thought.

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    2. Hi Will, nice to have you along! Great stimulating comments.

      Here's my take on it. There's nothing wrong with people being payed for work they do. But I don't think simply holding a position of power and money counts as 'work'. Hence I don't think these people should be able to take money from the profit pool. The profit should go to paying those actively working, and to maintaining the business. Obviously this will include paying managers, etc, but only as long as they actually work. And their salary should not take into account their position of power, merely their current active work. Sure, these people may have worked hard and taken risk to get to their current position. Good for them. While they were working hard and taking risk, they should have a higher salary. But sitting back and earning 'passive income' at some point in the future should never be an option.

      Capitalism is MEANT to be all about 'market value', where the market determines how much things are actually worth to society. If the person's current active work really is beneficial to greater humanity, the market will determine its value. I would venture that most high-level rich earners wouldn't dare expose themselves to true 'market value'. Instead they shield themselves with layers of corporate bureaucracy - the people that determine their income are only those closest to them in terms of income and goals, etc. If there really is any way to justify this as fair 'market value' income for their 'active job', I'd be keen to hear it. But currently it seems to me that the active work / service is being done by others, but most of the 'market value' for this active work is going to the pockets of someone manipulating their position of passive power, and not actually engaged in active work.

      Obviously those leaders / employers / managers that actively work and perform a service to humanity, are entitled to the true market value of their service - so not all profit is immoral by any means.

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  18. Thanks for the thoughts, Joshua. So let me hit you with a scenario:

    A landlord who maintains his rental houses himself has fallen ill and unable to work, but for whatever reason the governmental aid he receives isn't enough to cover his family responsibilities, so he needs money. Is it immoral for him to retain ownership of the properties, but outsource the maintenance to a management company (for a fair wage)?

    In this case, he will not be working, yet will still be profiting from the business he owns. Is he cheating/exploiting his employees? What if the management company can't afford to purchase property of their own. Is the landlord exploiting their lack of capitol, or providing an opportunity for them to use their skills in exchange for fair compensation? Should he be stripped of his personal property on account of his outsourcing its maintenance?

    Another case to consider is angel investors: people who provide capitol for a new business in exchange for a share of ownership and a proportional claim to the profits. These people have performed a significant service, and in return expect significant compensation; but the compensation will be "passive" because they are not contributing to the business' productivity aside from the initial investment. Is it immoral for angel investors to expect a return on the money they've contributed? If so, does this mean that angel investing is an immoral profession?

    And if angel investing is immoral, how about lending with interest? Lenders, such as banks, give you a lump sum of money with the expectation of repayment, i.e. interest. The bank does no ongoing work to produce that return for themselves; is lending therefore evil? If so, is patronizing lenders (by taking out loans) supporting an evil profession, and therefore evil itself?

    Perhaps you'll say that investing isn't immoral, because they did the initial work of vetting the business and contributing the money. But then, I'd ask, what could be a clearer example of passive income than ownership of investments? If merely the act of owning an appreciating asset, aka investing, is morally justified, then what sort of passive income isn't justified? I guess you can own an appreciating asset without actively choosing to own it, e.g. receiving an inheritance, but do we really want to call the receipt of a gift immoral? If we do, then giving gifts would be forcing another person into doing evil, and therefore evil; but this is false by nearly every ethical system, Jesus' included.

    Each one of these examples are passive income earners, and I'd encourage you to answer each question.

    I find it interesting that you've characterized "most high-level rich earners" as incompetent, exploitative, and lazy. Perhaps you've implicitly assumed that "most high-level rich earners" earn passive income, but you've not shown that. Even CEOs, the archetypal high earners, are active in their organization, and typically contribute to the creation of huge amounts of value.

    I also think your understanding of "market value" is flawed, but unfortunately I'm not knowledgeable enough to provide a substantive response.

    Joshua, I'd also be interested in your response to Daniel's claim that all profit is exploitation, since you indicated your disagreement.

    Thanks for a lively discussion.

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  19. Thanks Scott :) Great comments. Its made me think more thoroughly about things. I'm still sorting out exactly where I stand, but here are some more thoughts for now:

    Firstly, I'm not opposed to all forms of profit, merely those that are not 'fair active incomes'. I think Daniel was referring to profit as something extra to a 'fair active income', in which case I mostly agree with him. But even the concepts of 'active' and 'passive' are fairly loose. There are many ways to actively provide a service to humanity, and 'earn' payment. In particular, actively working to provide employment, deserves compensation. But I would argue that the active work most CEOs perform is comparable to that of their lower managers, yet their salaries can differ by vast orders of magnitude. The difference (i.e. most of their salary!) is a form of passive income, provided because of their position of power and existing wealth, rather than because of active work. Lenders should be compensated with full repayment plus the analysed risk of loss(which increases as time goes on i.e. interest). Investors should get money (when they sell) to compensate for their active service - this obviously considers both the original amount invested (proportional to the contribution of others over time, but also including non-monetary contributions e.g. by employees), and the market value of the full service the whole company provides to society. You can see that, in our current system, the price of shares does NOT necessarily accurately reflect the value of the company's service to society, and the whole shares-based system provides an exclusive advantage to those who have resources to invest with money as opposed to time actively working (i.e. most employees).

    Secondly, I'm not opposed to passive income when you are unwell! Society's gratitude for their past / future contribution to society make us willing to continue to support them. This is similar to the income I was talking about earlier - it should be based on market value of their service to society (in this case, their past and future contribution, rather than current situation). In unlikely situation that your landlord really is completely lazy and exploitative, and has not contributed to society (even in a managerial role), and has no intention of doing it in the future - I would say it IS exploitation for him to continue to earn money (unless, of course, it was merely based on compassion i.e. a willing gift, which is quite different to unwilling and undemocratic exploitation).

    Thirdly, its not a simple matter of labelling one 'evil perpetrator' and one 'innocent victim'. In the lazy sick landlord's situation, it is not so easy to pinpoint exactly who is exploiting who. The money he receives for the 'service' of the maintained rental property, is not being distrubuted proportionally based on active contribution toward this service (even though this is where the market would determine it should go) - but its too complex to point out a single group of people that have 'earned' this money. But the fact remains that the landlord is ultimately siphoning off money from somewhere, which he hasn't actively earned. Things can get even more complex and layered , to the point where its difficult to isolate the specific passive earners as well. But the point is that the system as a whole is geared to take an awful lot of the money 'earned' by those actively providing a service to humanity, and place it in the hands of those NOT actively involved. It is geared to undermine democratic efforts to determine where worth truly lies, and to protect those already in power and with existing revenue. Its not necessarily that all passive earners are 'evil' - they may merely be existing in a system which is fundamentally flawed. But most do so gladly. Its similar to the concept of white privilege - its certainly not evil to be White, but it is evil to avoid working toward making the system a little more fair.

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  20. I think land ownership demonstrates this relatively well, actually. Is it fair that those with money are automatically given the privilege of taking more money off this who have less, just because we are in a position to purchase land? Now, if we are actively providing a service (i.e. building and maintaining houses, improving the land / local society, etc) of course we should be paid for that. But does rent really cover JUST the service we provide? Of course this is perpetuated by the fact that many of us have debts we need to pay, which are also intertwined with property rights (i.e. mortgages) - so why not utilise the same system to help? This makes it understandable, but I would argue its still exploitative on multiple levels.

    The definition of 'market value' I agree with, is the one which capitalists typically use to justify the system morally - it is the 'market value' which results in values that are based on their service to society as a whole. In practice, 'market value' is actually only determined by those utilising the service - so if a service is tailored only toward the rich, it is the rich that determine its value. This results in services being valued in a way that does NOT reflect their service to society as a whole. To me, this kind of limited 'market value' removes the moral incentive for capitalism, and is not worth supporting.

    I acknowledge that other systems probably can't work very well - if we really gave money in proportion to active service rather than simply money invested, this would decreasing shareholders income at time of selling their shares, and so would reduce the incentive to invest in companies which are 'valuable' (as defined by service to society, which probably increases as productive employees increase, and thus as divided incomes from shares decrease). Also, its near impossible to determine the 'true market value' of a particular service. Pragmatically, the prices determined by our current system are the best guess we've got. So we're probably stuck with the system, as the only one with enough motivation to work - it is based on the greed of those in power, after all.

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  21. I disagree that being paid a higher salary than someone else for similar work fits into the definition of "passive income." If they don't work, they don't get paid; thus it isn't passive, but active.

    I disagree that the high salaries of CEOs is caused by their existing wealth, unless they literally bought their way into the position. The salaries of CEOs are higher than other managers because CEOs have more responsibility, and have the biggest potential to create and destroy value for the company. If Bob the middle manager screws up, maybe a regional branch will close; but if the CEO screws up royally, the company could easily go under. Higher responsibility generally means more pay, which is reasonable in my opinion. Obviously not all cases of CEO pay are justified, however.

    You say that investors should be compensated for their "active service." In many cases, there has been no active service since the initial investment.

    Also, selling assets is not necessary for an investor to profit from them, if the companies release dividends.

    You've said "...the whole shares-based system provides an exclusive advantage to those who have resources to invest with money as opposed to time actively working." In what way are the employees at a disadvantage? With regard to compensation, they are compensated fairly (ideally) for their work; what else is owed them? With regard to ownership, it seems as if you're suggesting that the employees deserve the opportunity to take ownership in the business, but it's not clear why that is the case. Is that what you're asserting? If I own a lawn-mowing business and hire Frank to help me out, why should Frank be able to make business decisions when the company belongs to me?

    I sure wish I could be compensated according to my past and future contributions, especially my future. If I'm projected to earn 1.5 million in my lifetime, why shouldn't have it now? ... Easy: because I haven't earned it, and no one will pay me for work I may never do.

    You said about unwell passive earners: "Society's gratitude for their past / future contribution to society make us willing to continue to support them." This is confusing, because the people providing income for the business are customers purchasing a good or service, not charitable philanthropists who continue to patronize out of mere gratitude! I don't "support" Walmart because I'm so grateful for the existence of their company; I do it to obtain goods, in a purely self-interested way.

    "In unlikely situation that your landlord really is completely lazy and exploitative, and has not contributed to society...I would say it IS exploitation for him to continue to earn money" What are your reasons for believing this moral claim? By the way, lazy and exploitative landlords are common enough to have a name, and a Wikipedia article: slum lords. And, I have no idea what you mean by "undemocratic exploitation," because democracy is a form of government, not a form of company, and you'd be hard-pressed to find any company that behaved as a democracy.

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  22. Pt 2

    You say that rental income should be "distributed proportionally based on active contribution toward this service (even though this is where the market would determine it should go)," but you've given no reason why it should be distributed proportionally. In the case of property, the owner has the legal right to profit off of it, whether he does the work himself or outsources. My question remains: If the employees are compensated fairly, then why should they have a claim to any additional profits? By owning property, you have the right to receive benefit from that property, by the very definition of ownership! I do not see the justification for prohibiting an individual from profiting off his property, just because he hired out the work.

    I'm not sure what you mean by "this is where the market would determine it should go." In the landlord's case, the market demanded a service, he used his assets to supply it, he demanded help with maintenance, and a manager supplied that service for a fair price. This is the market in action! The market is not imbalanced or inhibited here.

    I understand your characterization of the system as unfair. In a sense, the system is very fair - supply and demand, for everything. Rich people got rich because of how they navigated the waters of supply and demand, as are poor people. It's unfair in the sense that not everyone has equal opportunity to succeed in the economic game. We can try to provide more opportunities to make the system more welcoming to an extent, but please realize that to disparage top earners is to disparage the people who built the businesses that offer opportunity to the poor. If you don't let the rich landlord outsource his maintenance, then you've stolen a potential job opportunity from a poorer person.

    You discussed "democratic efforts to determine where worth truly lies," and I am ignorant of what you mean by that and why it's true.

    Regarding determining the ultimate value of goods and services - who can make such a decision? No one knows enough to do so; as you said, it's impossible. One of the main pillars of capitalism is that the market can allocate resources more efficiently than a top-down authority can. So, a service targeting rich people costs a lot of money, because they are willing to spend it. I don't see any problem with that. What other system could possibly be more democratic than supply and demand?

    I fail to see how the system is in control of the greedy people at the top who are supposedly passive earners. You've made those assertions without defending them, which is making this into a less productive conversation.

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  23. Great discussion guys. Obviously this is an extremely complicated topic, and disappointingly, no matter the route taken to bring about equality, nothing will ever be "equal" in society.

    Will, I think you misunderstood me. From my understanding profit is money made after the costs of running a business, including the worker's wages. What I do not appreciate is the MOTIVATION to sell a product for more than it is actually (Consciously) worth i.e. more than what the consumers of society in general can afford.

    We need to remember that if I am successful as a businessman, it is not because I necessarily freely chose to be successful and therefore I should automatically deserve to be rewarded. I would merely be successful because of circumstances that I had “no control” over. For example if I succeed in making lots of money, I may have been blessed with realities such as - good health, intelligent genes, a supportive family, social capital (its all about who you know), cultural capital, ethnic bias, and the list goes on. I need to realise this and use my advantages to assist the disadvantaged and not abuse them.


    If I find a more efficient way of doing my job to the point that I would be raking in the completed jobs for the same amount of hours, it would be my duty to bring down the prices of the service to offer a fair price for how hard I worked. Ideally, I would then share my new found efficiency with those in the same field or else I would be taking all their customers lol. It wouldn’t be helpful to the livelihood of those businesses if I kept my secrets to myself.

    Regarding the sick landlord. In my ideal world :D, he would only be charging enough that is fair to upkeep the property and support him. If he could no longer manage the properties and therefore not be in active work, then I would hope that society would be of the type where they could get around him and share a little of what they have to help him on his feet. Without the capitalists exploiting society, I think more people would actually have money to share with those in need.

    I am surprised you speak so highly of banks, Will. Banks in my opinion are responsible for much of the debt we have in society. The bank lends out money to society only to ensure that it reaps more from society (through interest) than what they lent out in the first place. Banks keep lending more and more thus creating inflation, and through all this holding everyone captive to debt, and therefore captive to them. Of course, they milk it.

    On principle, I don’t like one of the key purposes of business in the first place. Many people start a business to make a profit, which in other words means to sell a product for more than what it is worth which = exploitation. What I would like to see in an ideal world is to see everyone looking to earn a fair wage and genuinely look to support society rather than pondering ways of exploiting through passive income or significantly bloated incomes.

    I realise what I am saying is simplistic but I hope you understand my intentions.

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  24. Will you said regarding employees under share holders "In what way are the employees at a disadvantage? With regard to compensation, they are compensated fairly (ideally) for their work; what else is owed them?".

    As long as you have people sitting back on their backsides with capital to throw at investments that yield return, you will be having active employees exploited. Employees will be working for a wage relatively far smaller than the returns the share holders rake in from the employee's efforts.

    You also said:
    "I fail to see how the system is in control of the greedy people at the top who are supposedly passive earners. You've made those assertions without defending them, which is making this into a less productive conversation."

    This is straight from wiki but is well known:
    "Just prior to President Obama's 2014 State of the Union Address, media[3] reported that the top wealthiest 1% possess 40% of the nation’s wealth; the bottom 80% own 7%; similarly, but later, the media reported, the "richest 1 percent in the United States now own more wealth than the bottom 90 percent".

    I cannot even imagine how much work that top 1% would be doing in order to deserve that margin. The margin must be caused by passive income or the equivalent.

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  25. Hi again Will,

    I watched this documentary last year and found it rather insightful. You may enjoy having a look into it. It is about the economic inequality in New Zealand brought about by capitalism.

    Cheers

    http://www.tv3.co.nz/INSIDE-NEW-ZEALAND-Mind-The-Gap/tabid/3692/articleID/94816/Default.aspx

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  26. Hi again Will! I'm enjoying our discussion - don't think I've had to think through the specific applications of my ideas quite so thoroughly before!

    I think we both have foundational assumptions (much of which we consider to be 'common sense') that we don't feel the need to defend - and maybe defending these falls well outside the scope of economics, and into the realm of morals and ethics. This is why we both feel the other is not providing adequate reasons for their position! I'll make a stab and describing my position a little more clearly at least.

    A fundamental assumption of mine is that 'fair pay' is mainly concerned with your contribution toward society as a whole. The ideal way to determine this, is to allow a flat 'democratic' (an adjective describing far more than just forms of government) unrestricted market to function, whereby the whole of society can freely set the value of a service.

    Obviously this does not occur in reality, nor can it given our concepts of rights, ownership, land, wealth, etc (which, in my opinion, are archaic). Instead we have what I call a segregated market system, whereby only a subset of society actually sets the value of things. This can seem to make sense on a certain level - why should those without poodles, set the value of a poodle-cleaning service? I would propose that all of society - those with AND those without poodles - should determine the value of a poodle-cleaning. But there are WAY bigger things at stake here than the cost of cleaning a poodle - namely the vast majority of the world's wealth. Essentially the rich and powerful have segregated themselves from the rest of society, so that they don't have to have their worth determined by the rest of us, and so that we rarely deal directly with them to be reminded that there is a lot of wealth on the world, most of out in the hands of people who do little for us. They the ones that set the value of the services provided by themselves - they are the ones that can buy and sell shares, and they are the ones with greater opportunities to enter CEO positions (so yes, there is a degree of inadvertently 'buying' yourself into a position). The rest of us have barely any say in the matter - EXCEPT by our purchase (or not) of the service their company provides as a whole.

    What we are really supporting with our money, though, is the whole company and its service - not just the CEO or investors. So the money should (in my version of 'free market') go to the whole company proportional to the components contributions to the whole service. If the market functioned freely as I suggest, I think its fairly self-evident that the value society placed on the contribution of CEOs and investors, and that of active workers within the company, would be vastly different than suggested by their usual incomes. There may still be a differential - to reflect responsibility, and the fact that management is still an active role, and that investment is hugely important and is still one way of (breifly) providing an active service. But the differential would decrease drastically. Our current segregated 'free market' retains enough semblance to the real thing that we can be kept in the delusion that payment of workers is 'fair' just because this is what they are willing to work for, even though most hard workers still struggle to make ends meet. In reality, this can only be considered 'fair' if we assume a set of restraints (i.e. limited wealth available to spread around). If we instead assume that there is MORE wealth available (which would be true if it were no longer being siphoned off by the top 1%), the concept of 'fair pay' changes drastically. Fair pay is, after all, proportional distribution of available money, based on your service to society as a whole (and determined by an unrestricted 'flat' free market).

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  27. Regarding compensation for past/future contributions to society, when you are temporarily indisposed - we actually have a robust ACC system in place, which does essential what I've described. It is very nice (as you point out), and I think entirely appropriate. We all contribute from our taxes to this scheme, and most of us don't complain because we recognise its value. This is one form of 'willingly supporting' each other out of 'gratitude' for our contribution toward society. Although you've rightly pointed out that 'gratitude' is a poor word to use - I agree with the more self-interested aspect you described, which keeps us supporting a company based on its service to society.

    I'm not necessarily suggesting any pragmatic solutions. I simply don't have the expertise, and as discussed I don't think much else would work anyway! Just because I value wealth re-distribution, doesn't mean I necessarily advocate extreme forms of government-run socialism (we all know the problems they can cause), and they doesn't fit well with my idea of a free unrestricted market anyway. But I think these MAY often be much better than the current system. Also, I'm not sure of the impact my 'flat free market' would have - would those who provide fringe non-essential services (like poodle-cleaning) cease to exist, because the value determined by society could never result in a living wage? Can society be 'trusted' to properly value things (i.e. if poodle cleaning ceases to exist, maybe pets would become less popular, and who knows what the ripple effects of this would be - maybe poodle cleaning is more valuable than we think?). Not sure. These are all almost identical to criticisms aimed at Democracy as a form of government, and they make a few good points. Anyway, its all food for thought, hopefully inspiring us to be more generous and 'fair' business owners and employers.

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  28. Josh, enjoying many of your points but I am not really sold on the idea of distributing wealth based on measuring how much we have impacted society.

    Looking at things like that doesn't really take into account people who are disadvantaged, people who are unable to impact society. Do these people deserve less simply because they do not have the faculties to rank high enough on the social impact meter?

    I agree that ACC is great :D

    ...Definitely bring in a maximum wage bracket. I don't know why on earth this has not been done already?!

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  29. Yes Dan, I guess I've only really discussed 'profit' and 'earning fair wages' etc, well before taxes and any government / societal assistance come into play (other than those which are, in a sense, also earned - like ACC).

    Obviously what you're talking about doesn't fit into either of these. And I'm guessing you have in mind disandantages that don't necessarily get recognised today (like struggling to cope with stressful jobs, because you only had poor coping strategies demonstrated to you in your formative years). This is obviously a much more difficult problem to tackle, since we know so little about HOW to fix these issues. As you allude to - is the answer really just to redistribute wealth to them (i.e. the welfare state)?

    The bottom line, I guess, is that we should care about these people and their issues. Those with wealth have a responsibility to use it in a caring way - not just to give their workers 'fair pay', but to aid those who are disadvantaged in their ability to earn fair pay.

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