CHAPTER 5

Economic Justice

Economic justice includes a great many things, but here we’ll focus on equal opportunity in employment, ownership, the right to profits, the right to interest, and wealth distribution. This is one place where we see the views of many philosophers at variance with public opinion. There was a time when we had arguments and debates about the fundamental issues behind markets and property rights, but we rarely do today. Instead, we tend to just assume that the property rights we’re used to must be good and must be justifiable somehow or other, because they’ve been around for a while. This is not to say that our current structures of late capitalism are unjustifiable, but rather that we just haven’t spent much time justifying them. Decisions are often made by established interests in order to further their interests, and lawmakers have been at least as likely to help out big business and the wealthy (i.e., campaign donors) as they are to follow an issue of principle.

To give one example that my students seem to find more and more outrageous with each passing year, consider the “justice” of recent changes in intellectual property rights. Why did we need to extend copyright past the author’s death? Is that going to encourage writers and musicians to work more? Why did lawmakers give corporate-owned intellectual property more protection than works owned by actual people? In this example, as with many others, when we look for justifications for our current systems, we find them flimsy, missing, or decrepit. And when we ask about what would be just, we sometimes find ourselves going off in some unfamiliar directions.

Privilege

Talk to a friend who is of a different race. Ask her what her race has meant to her, and how she believes it has influenced how she has been perceived and treated. Share your own experiences as well.

What about your friend’s experience is most surprising to you? Have you ever experienced something similar?

How has your experience of the social meaning of your race been different? What has been easier for you, and what has been more difficult?

The Philosophy

In a 2004 study, University of Chicago professor Marianne Bertrand and Harvard professor Sendhil Mullainathan found that identical résumés sent to job ads in Boston and Chicago got 50 percent more calls for interviews if the names at the top were Emily and Greg than if they were Lakisha and Jamal. This is but one bit of evidence among a multitude of empirical demonstrations that our society continues to be racist and sexist, even though, today, almost nobody thinks that racism and sexism are acceptable.

One of the most significant reasons why people who aren’t racist do racist things is confirmation bias. We internalize cultural images and associations: Latinos on TV are often drug dealers in crime dramas; the woman of the house is already there when the sitcom kids get home from school; Asian people play stringed instruments. These internalized images condition how we interpret others, even if we don’t believe that they represent anything real or meaningful. The mind, like everything else, tends to follow the path of least resistance, and stereotypes pave the way for confirmation bias. You can feel this at work for yourself by taking an Implicit Assumptions Test—Harvard’s Project Implicit has some very good ones online (www.implicit.harvard.edu).

This is one important aspect of white privilege and male privilege. Women and minorities are attached to all sorts of associations, often negative ones, whereas whites and men have the privilege of being much more likely to be judged on their own merits. There’s much more to privilege than this, though. Behavior that might be called efficient and “no-nonsense” among white men might get a woman labeled “bitch,” or a minority “angry.” Being a white male means that wherever you go, the people in charge are likely to be like you, and if you do something wrong it’s taken to be your own mistake rather than the inevitable consequence of your race or gender. Even claiming that there is no privilege is a form of privilege—it’s easy not to notice privilege when it’s in your favor, but trying to be “race blind” is a poor solution when others are making your race an issue.

Preferential Hiring

Does the best-qualified person always deserve to get the job? Why? What exceptions to this general principle can you think of, if any?

Using your insights on experiences of race, from the last question, consider what it would be like to be a white applicant passed over in order to hire a less-qualified minority, and what it would be like to be a minority applicant passed over in order to hire a less-qualified white. How would these similar acts take on different meanings, based on what it’s like to be a minority in our society and what it’s like to be white?

The Philosophy

Affirmative action is very controversial among Americans, but not nearly as much so among philosophers. Author and Professor Emeritus at the University of California, Santa Cruz, Richard Wasserstrom’s defense of programs of preferential treatment has been influential and illustrates clearly the kinds of considerations that make this seem like an easy issue to many of us.

First, there’s the charge of “reverse racism.” The problem with this, according to Wasserstrom, is that what’s wrong with racism is not that it uses an irrelevant characteristic to judge others, but that it’s a systematic program to create and maintain inequality. Programs of preferential treatment also use an irrelevant characteristic to make decisions, but they are systematic programs to reduce inequality—and this seems like an important difference! Even if there’s always something troubling about considering race, this alone shows us that calling preferential treatment “reverse racism” only makes sense if you consider individual justice but ignore social justice, and the wrong of racism is surely an issue of social justice.

Even if it’s necessary for social justice, there’s still clearly something unfair to the rejected individual in preferential hiring. But what kind of fairness are you entitled to? Fundamentally, businesses own their money and can do what they want with it. Your qualifications do not entitle you to a job—so long as they aren’t perpetuating social injustices, businesses are free to make choices that they think will be most profitable, and that often means preferential hiring. Having a diverse workforce is a benefit in a diverse society, and the distinctive experiences of women and minorities can be a benefit as well. Further, a less-qualified candidate may be the better candidate—it may be more impressive to have achieved slightly less in the face of greater difficulties than to have achieved slightly more while enjoying white and male privilege.

The Invisible Hand

We typically recognize that we can achieve more by cooperating with others, and working together. What sense does it make that production in our society is based instead on competition?

The way we live today makes us dependent on others for food, water, housing, and energy. Why do we allow those providing goods necessary for life to “skim off the top”? Why not provide these goods on a nonprofit basis?

We say “it takes money to make money,” and surely having a greater initial investment makes success and market dominance more likely. Doesn’t that mean that the rich, on the whole, get richer, and the poor generally stay poor? If so, is that a good way to run a society?

The Philosophy

Maybe you said that the way we’re doing things is wrong, but if you tried to justify our capitalist mode of production, it’s likely that what you said was some version of the idea of the Invisible Hand.

This concept is that through free competition in a transparent and open market, based on profit motive, we see a maximally efficient use of resources and an improved standard of living that benefits everyone. A business that charges too much will be undercut by a competitor. If a production process is inefficient, a competitor will figure out a better way so it can sell the product for less and take over the market. By acting in our self-interest in this competitive environment, it is argued, we end up with better results for everyone than we would have if we planned things out and tried to help people.

The Scottish moral and economic philosopher Adam Smith (1723–1790) first formulated the idea, but important parts of his view get lost today. For one thing, this action of the market was meant to be a protection against selfishness, whereas today it is given as a justification of selfishness! Also, today we tend to talk about profits as something capitalists have a right to take, but for Smith, profits were justified only as a useful means to create a prosperous and just society.

Smith’s vision of what that society would look like is also different from what we’d expect. In his Theory of Moral Sentiments, he argued that the rich would be “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.”

If Adam Smith saw the inequality of our society, our rampant selfishness, and the massive profits of corporations, he would regard capitalism as a failed moral experiment—in this regard, at least.

Property Rights

If profit-driven competition doesn’t always result in the greatest good for society, is there another justification for a company taking profits? Don’t we have a right to profit from our efforts? If so, why? Even if it seems obvious, try to explain it.

What are the limits of our property rights? Is it acceptable, as in eminent domain laws, to force people to sell their homes at fair prices if the land is needed for social utility, like building a new airport? What about for economic prosperity, like building a new factory or sports stadium?

If we have a right to our property, then taxes require moral justification. If you thought it was okay to force the sale of property for an airport, does that also justify taxes for social utilities? What about taxes that are meant to support businesses—like shifting the tax burden away from corporations and investors through incentives and lowered tax rates, and relying more on revenue sources like income and sales taxes?

The Philosophy

The moral justification of capitalism is sometimes also traced back to English philosopher John Locke (1632–1704). Unlike Adam Smith, who argued for free-market competition based on the greater good for all of society, Locke argued that we have a God-given individual right to our property. On this kind of basis, whether it’s best for society is irrelevant—it’s our right, and that’s the bottom line.

Locke argued that although the world was given to humanity in common, we were given our own bodies individually. This is why we can control our bodies with our minds, and, try as we might, we can’t control anything else that way. Based on this, he argued that whatever we mix our bodies with—as we do by expending the hours we have to walk the earth improving something through our labor—becomes rightly our sole property, so long as we leave enough of nature for others to do the same. So if you make some clothes from fabric, or even just pick some berries out in the forest, you’ve mixed your labor with it and it becomes your right to keep or sell it, and to profit from your work.

There’s been some question of what a Lockean view implies about eminent domain. At the time that Locke was writing, if you didn’t own anything, you could just go to the uncharted wilds of America and till the soil. Today, it’s not clear that there’s “enough and as good” of raw nature for us to go out and improve through our labor. The fact that almost the entire planet is already owned by someone makes an absolute right to property more questionable, and the idea of eminent domain seems more necessary.

There are debates about what Lockean theory means for taxation as well. If we’re going to have public goods and works (e.g., roads), it seems only fair that everyone should help pay for them. But if our right to property is God given, then how can it be just to force anyone to give up any of his property?

On Interest and Investment

If we agree with Locke that property rights are based on labor, how are we justified in charging interest on a loan? Does labor justify taking profits on someone’s borrowing from us—if not, does anything justify charging interest?

On the assumption that there is some justification for charging interest, are we justified in charging more to the poor and desperate? If our property rights are absolute, can we justify laws against predatory lending—payday loans at very high rates, for example?

Based on your answers to the previous questions, consider making an investment. Are you entitled to profits from someone else’s work because you supplied startup funding? Given that these profits come from someone else’s labor, isn’t she entitled to keep them? If not, how much of the profits are you entitled to, and why?

The Philosophy

These are some serious problems with justifying capitalist profit taking based on Locke’s labor-desert theory. We might say that the labor bound up in having accumulated wealth in the first place justifies taking further profits by charging interest—but then we’re left explaining why the person doing the work doesn’t at least equally deserve those profits. A further problem is that many of the members of our “investment class” have inherited their wealth; it seems difficult to say that the labor of one’s ancestors justifies taking a profit on lending out that wealth. Those born wealthy start to seem like mere parasites who contribute nothing while reaping profits from others. A better answer might be to appeal to the greater good, and say that we need these economic tools to keep our system going—but then we have to ask whether the greater good is served by structures that tend to help the rich get richer while keeping the poor poor.

While there has been a recent upsurge in resentment against bankers and financiers, we are still more accepting of these financial arrangements than we have been in the past, when charging interest was known as the sin of usury. St. Thomas Aquinas wrote that “to take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice.” The money has its own value, printed on its face. To charge more than that amount for it is to charge both for the object and its use, as if we sold someone a bottle of wine, but demanded an additional payment if the buyer decided to drink it.

John Calvin (1509–1564), the Protestant reformer, thought that there were fair ways of charging interest, but that for the most part “the practice of usury and the killing of men” are justly placed “in the same rank of criminality, for the object of this class of people is to suck the blood of other men,” and “men should not cruelly oppress the poor, who ought rather to receive sympathy and compassion.”

Corporate Social Responsibility

Ford Motor Company produced the Pinto, which had a design flaw that made the car prone to catch on fire, especially when in rear-end collisions. Ford determined that the cost of a recall, plus the $11 per car it would take to repair the issue, was greater than the likely cost of lawsuits brought by those injured and the families of those killed in these preventable accidents, and determined not to do the recall. Did they make the right call? Why or why not?

If it’s profitable to do so, should a public company pollute as much and as often as is legally allowed? Why or why not?

Given that public companies have an obligation to give investors a return on their investments, what kinds of public interests are sufficient reasons to sacrifice profits for?

The Philosophy

Nobel Prize–winning economist Milton Friedman (1912–2006) argued that public companies are the legal property of shareholders and therefore should be run based on shareholders’ interests alone—and Friedman says it’s fair to assume that the shareholders’ only interest is profits. On this “shareholder theory” of corporate social responsibility, the corporation has an obligation to (legally) maximize profits no matter what. Any compromise of profitability for whatever purpose—helping the environment, paying employees well, donating to social causes—he compared to a form of taxation without representation; the CEO is basically taking someone else’s money and spending it on whatever he thinks is important, which is almost a kind of theft.

Friedman’s view has been hugely influential and has taken hold among a great many people in business and among a great many legislators as well. This is despite the fact that a large part of the public finds it immoral, and the arguments in its favor have been widely and seriously questioned. Different kinds of property come with different kinds of rights. The bank may “own” your house as a financial interest—the bank can repackage your mortgage as a collateralized debt obligation—but bank officials can’t drop by to use your bathroom or improve your landscaping. Just because investors own the business in some sense doesn’t mean they own it in every sense. In fact, under the LLC structure, Ford investors were not liable for Ford’s actions even though they “owned” the company. Why should the company be solely responsible to investors when they are not held responsible for what it does on their behalf?

A larger point is that we can have a society without business, but there can be no business without a society. If business is dependent on its natural and social environment, then it makes sense that business would have an obligation to help maintain a prosperous society, a healthy educated workforce, and a business environment where the public generally trusts corporations.

The Veil of Ignorance

Gina Rinehart (1954–), who has been named the world’s wealthiest woman, is estimated to earn $1 million every half-hour from her investments and from the mining company she took over after her father’s death. She has also recently stated that she’s worried about how Australia can remain competitive when Africans are willing to work for less than $2 per day and has suggested that Australia cut its minimum wage. Should we allow the free market to determine how wealthy the wealthiest in a society can be, and how poor the poorest should be?

If we institute a minimum wage, governmental job training programs, or higher tax rates for top wage earners, we are limiting inequality and, in effect, redistributing wealth. How can we justify what arguably amounts to taking from the rich to help the poor?

If we accept that this is justifiable, why not raise the minimum wage to $30 per hour and raise the marginal tax rate for income above $1 million to 95 percent? Is that going too far? Where is the line?

The Philosophy

American philosopher John Rawls (1921–2002) gave answers to these questions in 1971, using an argument that was so obviously powerful that it changed the debate about distributive justice. Rawls’s argument is impossible to ignore today, whether you think it’s right or wrong.

When we talk about economic distribution, there’s a basic problem: consent. It seems unjust to take property in the name of justice without consent—even more so when we are taxing people at different rates. Now, what would you consent to if you didn’t know who you were? Imagine you were under a “veil of ignorance” and didn’t know your social class, race, gender, sexual orientation, or anything else. What kind of distribution of wealth and opportunity would you want in society, based purely on your own self-interest?

You don’t want a slave society, even if the nonslaves are really well off, because you might be a slave. You’re betting with your life, and you want to maximize your minimum outcome here, and play it safe. Okay, so what about total equality of wealth? That’s a safer bet, but in a society without some inequality, people don’t see hard work and innovation pay off, and that means that there’s likely to be less prosperity overall. So you want some inequality, but how much? Remember, you’re betting with your life here, so you’ll want more and more inequality, but only so long as it continues to help the least among us. As soon as more inequality would come at the expense of the poor, it’s not maximizing our minimum outcome anymore, so it’s no longer your best, safest bet.

There’s more to the argument than this, of course, but this is enough to give us an answer to our questions: We are justified in redistributing wealth to have the kind of inequality that benefits everybody—much less than we have today!—because it’s what any rational person would want if she didn’t know who she was. So if the rich don’t consent, we can tell that that’s only because they know that they got a lucky draw in our very unequal society.

Giving and Keeping

What have you spent money on during the past week that was more important than what that same amount of money would have meant to a hungry family, a homeless veteran, or a child in need of vaccines? Justify your choices.

Assume that you have an absolute right to your property and that you owe no consideration either to society or to any individuals. Just because you have the right not to help others by donating to humanitarian causes, does that make it moral for you to choose not to? Why?

If you give 10 percent of your income, why don’t you give 15 percent; if 15 percent, why not 20 percent? Is the 101st suffering child less important than the first one—or the 1,001st?

The Philosophy

Of course, the clearest form of consent is actual, literal consent, not the merely conceptual-rational consent we get with Rawls. But the practical value of donation and other forms of voluntary giving has clear limitations. There are many who just don’t care, or don’t think they have any responsibility to do anything for people they don’t know and aren’t connected with, but even those of us who do donate and volunteer don’t go as far as it seems we ought to.

Peter Singer, a contemporary Australian ethicist, has pursued this issue very effectively in journal articles, book chapters, and an excellent article published in the New York Times Magazine called “The Singer Solution to World Poverty.” Remember the trolley examples from the chapter on Morals? Singer asks you to imagine that you’ve parked your car on some tracks and gone for a walk. You see a train coming and a child tied to the tracks. If you do nothing, the child dies, but there’s a switch you can throw to divert the train so that it will destroy your car instead. What kind of monster wouldn’t throw the switch? And yet, if we imagine the child is in Bangladesh instead of the train tracks, and the threat to her life is disease or famine instead of a train, then we seem to have no problem keeping the car and letting her die. In fact, we have no problem buying an overpriced corporate latte when five days of lattes would be enough, through Heifer International, to provide a family in Tanzania with a flock of chickens to raise, breed, and collect and sell eggs from, alleviating hunger, dependence, and poverty.

It’s an ingenious thought experiment. You’re not responsible for the child on the tracks. You don’t owe her anything, and she has no right to your help. Can you justify standing by as the child dies? Can you justify spending money that could have been spent to save a life? According to Singer, although making the change may be tough, the right answer is simple: “Whatever money you’re spending on luxuries, not necessities, should be given away.”