A Culture of Injustice by Matias Bulnes, NYC

The prevalent principle in politics nowadays is that letting the financial sector fail is, all things considered, the worst scenario for everybody, including the worst off. This was the principle president Obama availed himself of in his speech to congress when announcing he was going to bailout Wall Street in spite of his own fury. If in the sinking of a ship you want to save children and women first because they are the most vulnerable, in the sinking of the country the principle prescribes the exact opposite: let the strongest (same ones who caused the ship to sink) take the emergency boats; the rest of us can swim and hope they’ll manage to come back to rescue us.

The case of AIG executive bonuses is a particular application of the principle. While most of the country is drowning, we find ourselves having to stretch our air supply even more so AIG executives (same ones who caused us to be drowning) can have enough peace and piña coladas in Cancun to figure out how to get us afloat. It turns out, according to the principle, that unless we collect our last pennies and give them away to the same gang that drove us bankrupt, they might decide to move to other industries leaving us helpless.

It is almost impossible not to find the principle funny. If only because it implies incentives that go beyond perverse: “twisted” seems a better word for them. In the hypothetical case that saving Wall Street first will in turn get the country afloat, it will be in the best interest of Wall Street executives to be as ruthless as they have been in making money next time round. The principle guarantees their capacity to extort the country if things don’t go well again. “We take the risk, they take the losses” could well be their motto.

Still, the principle might turn out to be true. Pundits seem to be pretty sure it’s true, including pundit in chief, Ben Bernanke, who is said to be an authority on the subject. For him or president Obama to even contemplate presenting a principle like this to the public he needs to pair it up with a promise of reform guaranteeing that the conditions that allowed the financial sector to drive us down will not repeat. Only this can placate the perversity of the incentives thus engendered.

On pain of exposing my ignorance I shall not challenge the pundits. Instead I want to ask a question that grants their backward principle: Is it possible that our social organization is set up to safeguard the interest of an elite? If the principle is true, could it be true in virtue of a type of social organization whose ultimate goal is to protect a few?

The hypothesis suggested is admittedly speculative but, if true, it would depict our society in a guise bleaker than commonly assumed. It would entail not that social injustice is an unfortunate byproduct of Capitalism but that the collective well-being is a fortunate byproduct of the American brand of Capitalism. In simpler words, if correct, this would imply that the system allows for the collective well-being to increase only insofar as it does not interfere with the well-being of the elite. This would reverse the order of priorities usually thought to represent our social organization.

In fact, this order of priorities is invariably assumed in political rhetoric as well as academic debate. Our standard, if somewhat chauvinistic, historical account says that the modern democratic society is the result of centuries of social struggle leading to the vindication of the powerless masses. We all tacitly take pride in living in the age of reason when finally humanity has arrived at a social organization whose ultimate goal is the collective well-being and where the enrichment of a few is only accepted when conducive to this goal. We are heirs of the French Revolution—we like to believe.

By questioning this historical account, however, I do not intend to suggest that the economic elites somehow conspired to cheat us all into believing that the system works for us while it really works for them. On the contrary, I take the hypothesis to be compatible with this system being more or less inevitable: the spontaneous result of the flaws of alternative systems. In sum, it is possible, if perhaps implausible, that the system has been tweaked to protect the elite in a corruption-free manner.

Evidence for the hypothesis that our social organization is set up to safeguard the economic elite can be found in diverse considerations. If indeed the principle that the future well-being of the country depends on the well-being of the financial sector is true, as most experts believe, it will seem to entail the impossibility of pursuing the interest of the country without at the same time pursuing the interest of the “big banks.” This would appear to be prima facie evidence for the hypothesis.

Moreover, the fact that it is only the “big banks” that need to be protected at any cost adds support to the hypothesis. If it were Wall Street as a whole that needed to be protected to salvage the economy one could argue that there is enough flow of people to and from Wall Street to represent a stable elite. But while this line of argument seems empirically dubious when predicated of Wall Street as a whole, it would seem plainly false when predicated of the “big banks.” The admission barriers for this elite seem insurmountable by the regular citizen regardless of her talents: e.g. having family connections, having attended Harvard Business School, having a certain golf handicap, etc.

Another obstacle my hypothesis needs to hurdle is the steep taxation rates of modern democracies. The redistribution of wealth resulting from such taxation rates seems to support the view that it is the collective well-being that has priority over the well-being of the economic elite in the inner workings of our social organization. While this argument may well carry some weight applied to countries with moderate inequalities (e.g. Sweden, Finland, Denmark, etc.) it seems entirely insufficient applied to the US. Not only does the US exhibit record inequalities but also its social mobility (i.e. the likelihood of moving up or down in the social structure) is remarkably low. In fact, the social mobility within the higher classes of American society is even lower than within middle and lower classes. This, on the contrary, further supports the hypothesis.

I realize that the evidence presented in this article may not suffice to prove the hypothesis under consideration. Still, I believe it is important to countenance such a bleak possibility in the light of the allegedly necessary injustices the country has reluctantly funded. What does seem clear from the discussion, however, is the demise of the American Dream: the US resembles less a land of opportunities than a land of well-paid servants. Perhaps we fail to see this in times of economic prosperity because we are absorbed in a culture of injustice.