BY MATTHEW HERBERT
I do not dislike the rich.
I dislike the many layers of fraud by which they avoid hard questions about where their wealth comes from.
How might you come by enough money in America to buy a beautiful beach house? If you are in fact the owner of such a home, you likely believe it is because you competed and won a prize in our economic meritocracy. You hustled, took smart risks, and made more money than the next guy. The marketplace rewarded your performance with the means to buy a house that looks like this:
It’s lovely. I’d like one.
The usual story about how to get one of these is a free-market capitalist story. Work hard enough, and you can own one, too.
But that’s not the true story, or at least it leaves out all the crucial details. Like almost every other aspect of being rich in America, the system that advances and safeguards the privileges of the wealthy is not free-market capitalism. The accumulation of ostentatious wealth relies on massive, continuous government intervention in the free market–precisely the kind of thing that heroic capitalists are supposed to despise.
In his short 1945 review of Jack London’s The Iron Heel, George Orwell notes how remarkable it was that in 1907 London correctly prophesied this aspect of capitalist society: contrary to Marx, capitalism would not “collapse of its own contradictions.” Rather, as Orwell read London, “the possessing class would be able to form itself into a vast corporation and even evolve a perverted Socialism . . . to preserve its superior status.”
This is what we have in America, a perverted form of socialism that looks out for the rich. The rich and powerful routinely petition the government (using their “vast corporation” of lobbyists and other influence buyers) to intervene massively in free markets to create conditions favorable to them. And every time this happens (which is basically all the time), all of us, rich, poor and middle class, pick up the bill.
This is the main moral of the story of the 2017 federal tax cut, for example. If you are a billionaire in America, your corporation of influence buyers has succeeded in getting the working class to pay parts of your tax bill that you formerly paid. So praise be to God for that.
But back to that beach house. The thing about it is, it’s not just a pristine prize waiting out there in a free market wilderness for an adventurer to find and claim. It took massive government intervention to prepare the way to it, and it takes continuous government intervention to protect its value.
First, no developer in the world is going to undertake a beach community project based on a rational evaluation of the risks alone. It takes someone with a lot of money to volunteer up front to back such an enterprise. This is where the government comes in. By zoning beach areas for residential construction, governments are signalling they will do whatever it takes to turn houses built in hurricane zones into viable investments. (The Bible, if you’re into it, famously has this to say about such choices.)
Well, wait a minute. Don’t heroic capitalists just spend some of their own money on insurance rates that are calibrated for the risk? No. In 1968 the federal government established the National Flood Insurance Program, funded by loans from the U.S. Treasury. The reason the feds had to get involved is because there were no private capitalists heroic enough to stay in the flood insurance game after several devastating coastal floods in the 1950s and 60s. Insurers simply could not devise a profitable business model that charged homeowners a high enough premium.
The NFIP has never been solvent, and today it is in a tailspin of ever deepening debt. There is no plan to get the NFIP out of the red. So know this: If you buy that beach house, chances are high that your flood insurance will be financed mostly by working people, half of whom cannot afford houses anywhere, let alone on our country’s beautiful beaches. And at least for now, with the present tax scheme in effect, the poor are paying a higher proportion of their “wealth” to do this than you are. The icing on the cake?–They’re paying into a “business” that no capitalist would touch with a 10-foot pole.
I probably wouldn’t have bothered to look into this matter if I hadn’t heard an interview with Gilbert Gaul, the author of The Geography of Risk a couple weeks ago. Gaul basically tells the story of the vast system of government interventions that have evolved to make it possible for our owning class to buy the choicest residential real estate in the country despite the obvious downside that their homes are constantly at risk of being flooded or blown down. Someone’s gotta pay for all that risk.
Much of the government intervention that favors the rich has been devised behind the scenes, so that it appears to be part of an objective, impersonal landscape. This is the first layer of fraud that I believe enables the rich to think of themselves as deserving champions. They say, and possibly even believe, we’re all competing on a level playing field. But this is nowhere close to the truth.
The rich person gazing out over a construction lot on the beach is not coldly taking in objective reality, consisting of risks that must be delicately weighed. He’s basking in a Shangri-La of rules, budgets and institutions that have been trumped up to benefit him and to make his life even easier than his money should make it.
Not all beach-house-friendly government interventions are this insidious, though. They do not all induce moral blindness. Amazingly, some just come knocking at your door in broad daylight and announce their intentions to help.
One of the most scenic places to build beach houses is on what’s called a barrier island, a thin strip of land that is set off the main coast anywhere from a few hundred yards to several miles. The best known barrier islands in America are probably the Outer Banks, stretching 200 miles from the coast of Virginia to North Carolina. They are beautiful and gloriously remote, a national treasure.
Problem is, if you want to build on barrier islands, they’re disappearing. Eventually the Outer Banks (and other barrier islands) will be overtopped by rising sea levels. In the meantime, they’re facing a nearer-term threat, beach erosion. Every year, rain and wind eats away a little more beach. The more this happens, the closer your beach house or hotel comes to extinction.
So here’s an amazing thing. The federal government routinely comes swooping in, bursting with money, to protect you from this natural process. The U.S. Army Corps of Engineers regularly pops up in beach communities to do billions of dollars worth of beach reclamation. Often, they must coach the local mayors through the process of taking the federal money they are offering. I am not making this up. It’s in Gaul’s book, The Geography of Risk. Until I heard the interview with him and then read his book I had no idea voluntary beach reclamation was happening. But it’s actually happening all the time.
Because the Corps of Engineers has private contractors perform the reclamation work, an uninformed observer could be forgiven for not knowing the whole thing is a massive welfare program planned, initiated and funded by the federal government. Yes, of course, the home owners’ taxes help pay for the Corp’s good deeds, but so do the taxes paid by the rest of us, taxi drivers, family farmers, failed literary critics, what have you. Is this fair?
So what am I saying–should we eat the rich? Burn down their beach houses? Of course not. At the end of the day, my philosophy comes more from Ecclesiastes than Marx. I have no idea who actually deserves their wealth, and on what grounds. Anyway, I believe these question pale beside deeper ones about our ultimate extinction, a fate shared by rich and poor alike.
But, such weightier questions aside, I know in the here and now that I despise intellectual fraud. I think the owning class should be much more honest about the gaudily generous ways that the government constantly comes to their aid, and they should stop trying to distract us by pointing out the paltry handouts the poor get and calling them unsustainable. Paying the flood insurance policies for the rich out of an endless pile of Treasury debt is sustainable?
Imagine if the U.S. Corps of Engineers showed up in an inner city with a plan and funds in hand to revitalize its infrastructure–help out the poor for a change? Is that laughable? Yes it is. All I’m asking is that the rich recognize how ridiculous their myth is that they’re winning the game of life on their own merits. Their pretend game of capitalism is in reality what Orwell called a perverted form of socialism.
But the biggest outrage perpetrated by the rich is that they get us to amplify their frauds. They condition us to train our critical instincts on the very same categories of government expenditure they dislike, such as basic services, infrastructure, and welfare for the poor. So check out Gaul’s book. The rich also receive welfare, but they have trained us to call it something else.