Plague of Inequality CHAPTER FOUR Jean-Jacques Rousseau “THE EVER-WIDENING INEQUALITY OF FORTUNES”

Extreme inequality is like the plague, not good for economy or society. Yet, “Rousseau is aristocratic and comfortable with significant inequality, so long as the wealthy do not parade their fortunes (p. 136).”  So, Rousseau is not egalitarian, but more like wanting something akin to the Optimal Inequality  framed by DIT.  “… different citizens are characterized by different talents and efforts, a republic’s distributional scheme must reflect this in a community marked by broad economic inequality (p. 136).” Incentive must be preserved, but going to extremes runs counter to it.

Amour-Propre is the Problem

The problem is the extremes brought by “… amour-propre … ‘a relative sentiment, factitious, and born in society, which inclines every individual to set greater store by himself than by anyone else, inspires men with all the evils they do to one another’ (p. 137).”   Adam Smith, too, warned of the role of self-love, the arrogance of self-interest on path 0G leading to the extreme concentration of wealth, and destruction of both economy & society. It led the rich to ‘abandon themselves to arrogance’ … (p. 138).” Extreme wealth does not make for good and ethical people.

Mandeville Would Have Been All In on Amour-Propre a Good Frame

Belief was becoming ever more widespread in the “… doctrine of doux commerce—the belief that commerce improves societies … (the book, which was popular at the time, by)  Mandeville argued that human society did not require virtue. Rather, people can be directed to sociable behavior via their reliably selfish dispositions (p. 140).”  As DIT makes clear, the claim is quite flawed --- in that a reliably selfish Econ has to be tempered by the ethic, the shared other-interest of the Human.  Mandeville wrongly believed that selfishness would temper itself… (the Econ) would “… restrain their desires insofar as they are rewarded with public esteem in the form of honor, flattery, and praise.”  Modern Single Interest Theory (SIT) in mainstream Microeconomics sees it the same way: Extreme inequality will just somehow as though by magic self-correct. Not likely.

The flawed thinking which continues to the current time goes as follows:  “Mandeville … argues that promoting the public good requires giving free rein to the human tendency to sin, including avarice, luxury, pride, envy, vanity, and opulence. This is because, for him, the more citizens exercise their vices, the more the economy grows. And with economic growth comes greater employment. And greater employment promotes the common good. Such are the foundations of doux commerce (p. 140) … For this magic to work, Mandeville assumes significant inequality … portrait of a flourishing society requires that most workers hover just above subsistence. People must be induced to work—and poverty is the most effective catalyst of industry (p. 141).”    Sounds like Conservative balderdash, the claim that poverty is essential to nudge harder work. 

Consistent with DIT and empirical support for it, “Rousseau … doubtful that doux commerce will deliver the common good (p. 142). Rousseau was a MetaEcon.

Amour De Soi-Meme Works Far Better to Temper the Excesses

The notion of amour de soi-même, “a natural sentiment which inclines every animal to attend to its self-preservation and which, guided in man by reason and modified by pity, produces humanity and virtue”  would put the system on some better path 0Z.  It would tend to bring some compassion as represented on path 0M into play. Rousseau emphasizes that compassion is hardwired (p. 143). DIT in action.  Unfortunately, amour-propre without empathy-based compassion drives “… (extreme) economic inequality (and) effectively disables or obscures natural goodness. Great fortunes inflame self-interest (p. 145).”

Wealthy Individuals Could be Virtuous

Can wealthy individuals be truly virtuous? Rousseau questions it, in that “... the acquisition of wealth itself will profoundly change one’s priorities … Becoming wealthy requires ‘years of hardening’ oneself to the dignity of others in the name of profits… The rich cultivate the “canker of corrupted hearts” losing all natural pity, and adopting values that rationalize their own opulence and the suffering of the poor … (the) wealthy … must “multiply the iron doors, the locks, the chains, the guards and watchmen” to protect … property against the encroachments of the poor (p. 146) … life of the rich … consumed by anxiety and misery (p. 147).”

More Optimal Inequality is an Advantage

Intriguingly, a more optimal inequality “… is advantageous for nations insofar as it fosters civic virtue (p. 147… (some) poverty  (is essential, but it is)  relative societal poverty  … (pp. 147-148). The problem is the extreme inequality, in that “… the costs of poverty in unequal societies extend well beyond hunger and housing … (said costs) not incidental to unequal societies—they are structural (p. 148)…. The rich invented the laws to protect themselves and punish the poor. The hardships of the poor were no accident of the social contract—they were one of its central purposes….” The longer they suffer, the more likely they are to lose their noble qualities—their freedom and virtue. Moral freedom—the ability to resist inclinations and heed the conscience—is one of humanity’s defining features (p. 149).”

Rich Tend to Become  Corrupted

 Rousseau pointed out that “… ‘everywhere it is the rich who are always the first to be touched by corruption, the poor follow’… the effects of inequality on the poor and rich alike …. eviscerates humanity’s capacity to exercise its most noble attributes of freedom and virtue  … the social disorder resulting from inequality … turns out to be central to Rousseau’s critique of economic inequality precisely because it undermines his conceptions of justice and the general will (p. 150) … the general will is Rousseau’s highest political value—the standard of right and wrong, of legitimacy, and of political morality (p. 151).”  The general will is expressed and realized on path 0Z.

State Must Maintain Order

Primary responsibility of the state is to maintain order while avoiding despotism, which “…requires that citizens actively love one another in the Christian sense—that they approach one another socially as if everyone’s interests matter as much as their own (p. 152).” The contention is made easy sense with DIT, as that that kind  shared other-interest arises on that empathy-with --- a major Christian tenet --- path 0Z.

Problem is, the wealthy become “ravenous wolves,”  driven by the tendency of the wealthy to an insatiable amour-propre, i.e., an insatiable greed. The wealthy pit the poor against one another in order to keep a kind of active rebellion among same, and, thus, insulating the wealthy.  The frame has an amazing resemblance to “the Don” and Trump-America.  The extreme inequality fosters distrust and division, which keeps the wealthy in power. It undermines the general will, which requires freedom and liberty, and the rule of law applied equally to all. The extreme inequality, in turn, runs counter to the rule of law, as it brings the tyranny of the rich over the poor.  Again, Trump-America comes to mind.

Optimal Inequality Works

Rousseau rather wants a form of optimal inequality wherein the state would ensure that “no citizen be so very rich that he can buy another, and none so poor that he is compelled to sell himself.” The state must tolerate neither the extremely rich nor the beggar. It is not about equality of wealth but is about the shared common good in a reasoned inequality, what everyone can go along with. In DIT terms, the Ethic of Optimal Inequality must play.

So, the state must operate to ensure the social contract does not give “the weak new fetters and the rich new forces (p. 155).” The general will requires a more optimal inequality in both wealth and the power it buys to avoid the fetters on the poor driven by the forces --- as in changing the laws --- by the rich. The rule of law must be about the general will, which as DIT makes clear is in effect about the ethic of optimal inequality. Freedom for all depends upon it. When an extremely poor person depends on the rich to even survive, freedom is lost.

“In (extremely) unequal societies, ‘the apparent power is in the hands of the magistrate and the real power is in those of the rich.’ In such abusive societies, those who seek public office do so only to “sell its use to the rich and to enrich themselves by this means (p. 156).” Wealth buys political power, so extreme wealth must be tempered. In DIT terms, without such tempering of self-interest --- wealth coming from it, and the wealth used to buy the politician --- a few  people control the entire economy & society.  The general will is lost.

Unfounded Meritocracy is the Problem

And, what drove it? Well, the rising meritocracy, the wealthy claiming to be more deserving than the poor. The wealthy presume the fortune came only because of merit.  It was earned, and, thus, could be kept and concentrated for generations. Now, meritocracy can have an upside, if indeed poor and lower income people could move up the income and wealth ladder  with merit, i.e., hard work and the opportunity to make a go at becoming wealthy.  Rousseau believed the poor must not be pitied, else said poor will not work to find a way up the income ladder.

Unfortunately, it gets carried to an extreme, and works against the poor, as the rich come to claim that poverty “… according to meritocratic principles, reflects … lack of talent, effort, and general worthiness. For the poor, such reflections are harsh realizations of their daily lives. This analysis of the underlying moral psychology of inequality of meritocratic societies is one of Rousseau’s most novel and greatest insights (p. 157).”  The acknowledgement of meritocracy worsens the extreme inequality. The poor are expected to feel less worthy, even though the opportunity to move up the income and wealth ladder is made difficult by the rich. Being poor is deemed by the rich as a personal failure.

The rich come to believe, whether founded in fact or fiction, that the extreme wealth so accumulated was always earned and deserved. It is about an often unfounded belief in superiority and merit, amplified by amour-propre, the latter about ego-based self-interest on path 0G in Figure 1.  A better path 0Z would arise from amour de soi, a path where the self-interest was tempered, brought within reason by the empathy-based shared other-interest of path 0M.

The issue, too, is just what is the content of the shared other-interest held by the rich as compared to what is held by the poor: Is the shared other-interest really different?  Also, is the talent, and capability for determined hard work really that much different among various classes of people? Is the talent and shared other-interest as different as the meritorious rich claim? Is the claim for deserved meritocracy unfounded, or, is it really fact-based?

Solutions to the Problem of Extreme Inequality

As Rousseau would have it, “one of the most important tasks of government (is) to prevent extreme inequality of fortunes  … (to ensure) all have something, and none has too much of anything (p. 159).”  As DIT clarifies, the state must work to help achieve optimal inequality. It was about avoiding the extremes of misery and opulence.  Taxes were to be a major tool to accomplish optimal inequality.

Intriguingly, Rousseau saw too much focus on the use of currency exacerbated the problem as the rich could accumulate it. “The pecuniary interest is the worst of all [interests], the vilest, the most liable to corruption (p. 160).”  It seems Rousseau would be all in on regulation of financial transactions, making it more difficult to accumulate huge amounts of wealth in the form of currency. In DIT terms, virtue beyond the prudence of having huge stocks of wealth represented in currency holdings was to be encouraged. Civic virtue and attention to the shared public good was to be encouraged: It was not about only private good.  As DIT clarifies, and Rousseau would agree, it was about striking balance in the joint private & public good.

So, “… the state must … employ various tools (including taxes) to bind the citizens together so that they love one another more than themselves (p. 162).”  As DIT would frame it, the state must be involved in nudging empathy-with the other, on the way to finding the common and public good.

Taxes as a Major Tool to Solve the Problem of Extreme Inequality

Rousseau favored using taxes to help the problem, with taxes used in “…counterbalancing the undue tax burdens placed on the peasant and laboring classes (p. 163).”  In modern terms, it would seem a progressive income tax would be favored. The overall goal was to move toward a more optimal inequality, which usually also meant some redistribution from the rich to the poor. Any tax that disproportionately affected the poor (i.e., a regressive tax, like a tariff) was a tax against the general will that best served economy and society. Rousseau also favored substantive luxury taxes, which would temper the incentive to accumulate wealth. It would seem Rousseau would also have favored substantive estate taxes, to avoid concentration of wealth in dynastic proportions.

Rousseau also favored more equality for women and racial minorities. Slavery was also rejected. Native peoples were also to be acknowledged and admired for the tendency to be more like amour de soi and having a lessor tendency to amour-propre. 

Conclusions

Williams claims “Rousseau’s approach to understanding inequality is an important landmark in the Western tradition … spoke of the problems of poverty and wealth concentration …  gives the simultaneous presence of these conditions a name: inequality  … (and) not only how inequality comes about, but also how it is legitimated through the social contract and its subsequent institutions (p. 168).”  

Social Contract Gets Taken Over by the Wealthy and Powerful

Comparing Rousseau to Hobbes, “… what distinguishes Rousseau from Hobbes and his other predecessors is his acknowledgment of how the principle of legitimacy can be abused to secure inequalities and govern on the elite’s behalf… lesson … is that most of the social contract tradition has rationalized such inequalities  … wealthy have been able to establish a system that guarantees their advantages by tricking the poor and dispossessed into consenting to a social contract that legitimizes their oppression (p.169).”  The shared other-interest of the wealthy and powerful gets entrenched in the social contract, and, the poor have a difficult time escaping it.

The social contract is a key idea, what is agreed to in the shared other-interest.  “Rousseau’s understanding of the faux social contract that has secured illegitimate inequalities animates his successors (p. 169)… For Adam Smith, ‘laws and government may [thus] be considered … in every case as a combination of the rich to oppress the poor, and preserve to themselves the inequality of the goods which would otherwise be soon destroyed by the attacks of the poor, who if not hindered by the government would soon reduce the others to an equality with themselves by open violence’ … John Stuart Mill laments that the poor have been persuaded by the rich that their poverty is a ‘necessary evil,’ and consent to their condition has been ‘partly extorted from their fears’ …  For Friedrich Engels, the ‘legal system has been devised to protect those who own property from those who do not’ … (said) subsequent thinkers have drawn from Rousseau’s logic of the faux contract, sometimes with express acknowledgment. His approach to understanding inequality, thus, significantly raises the stakes. Inequality is more dangerous because it is more deeply entrenched, not only in the laws and institutions of Western societies but in the notion that popular consent legitimates it (p. 170).”

Rousseau is Still Seeing a Zero-Sum Economy

Rousseau saw a zero-sum economy, so the rich were rich by taking from the poor.  “Adam Smith changed that view … reasoning, that someone can grow rich without it coming at others’ expense. In colloquial terms … sometimes known as ‘growing the pie—if the pie is larger, then everyone gets a larger slice, and it explains why it is that although Smith will affirm Rousseau’s criticisms of inequality, he does less to mitigate it … (yet even though) the market has produced enough material wealth for everyone to live a good life, the priority then becomes to ensure that wealth benefits everyone (p. 170).”  DIT helps make sense of it all: Focus on path 0Z --- the path of synergy, making the possibility for the economy to not be a zero sum process --- the best path as a tempering of the amour-propre of path 0G with the ethic of path 0M essential to everyone becoming better off. Optimal inequality assures it.

Adam Smith was one of the first to see the possibility of wealth creation on some better path 0Z, where the Ethic tempered the Incentive.  It was possible, Smith argued, that wealth could be created without it from the poor, and having an always poor group of people on which the rich preyed.  Extreme inequality is still a problem, but a growing economic pie perhaps --- at least it holds the potential --- raises all boats.