The Real Redistribution Is Going On Behind The Curtain

By its own recent report’s framing and that of the Washington Post’s Howard Schneider (“Communists Have Seized the IMF,” February 26), the International Monetary Fund has apparently gone soft on “redistribution.” But that framing is wrong.

Both the IMF report (“Redistribution, Inequality, and Growth,” IMF Discussion Note SDN/14/02, February 2014) and Schneider’s write-up of it conflate “redistribution” with “equality”: They operate from the unstated assumption that inequality is the spontaneous outcome of “the market,” while achieving greater equality requires government intervention in the market to redistribute income counter to this natural market tendency.

These unstated assumptions are of course unremarkable, constituting as they do the core of the official ideology of the big-business, big-government nexus defining the existing capitalist system. The corporate economy’s dominant players have a vested interest in promoting the erroneous assumption that their concentrated wealth and economic power are legitimate because they result from superior performance in “our free market economy” or “our free enterprise system.” And advocates for the regulatory state have a similar vested interest in promoting the equally erroneous assumption that state intervention is necessary to prevent rising concentrations of economic power and disparities of wealth.

But these assumptions are not true. State action to redistribute wealth downward isn’t a corrective to a normal market tendency of inequality — rather, inequality is the result of continual state intervention in the market to distribute wealth upward. The primary function of the state is to enforce the artificial scarcities, artificial property rights, monopolies, entry barriers and cartels by which the economic ruling class extracts its rents — and not only that, but to directly subsidize the operating costs of big business at taxpayer expense. The overwhelming bulk of land rent and corporate profit, and of the plutocracy’s income, are rents on such monopolies enforced by the state.

What’s normally called “redistribution” is entirely secondary. Because these rents tend to shift income from the classes that must spend money to live to the classes that invest it or save it, corporate capitalism is plagued with a chronic and growing tendency towards overinvestment, excess production capacity and underconsumption. As a result the system is threatened by steadily worsening economic crises and by political radicalization of the lower orders resulting from economic insecurity or outright homelessness and starvation.

Progressive taxation and the welfare state — to the modest extent that they actually exist — involve taking a small fraction of the income that’s redistributed upward, and shifting it back downward to prevent politically destabilizing levels of poverty among the poorest of the underclass and increase popular purchasing power enough to reduce idle industrial capacity. Income “redistributed” through food stamps, welfare and the like is an order of magnitude (at least) less than that originally redistributed upward by the state to landlords, capitalists, usurers, holders of “intellectual property” and other monopolies, and senior corporate management and the administrative classes. It’s the equivalent of a mugger hand his victim  cab fare so she can get home safely, keep working and make more money for future muggings.

So so-called downward “redistribution” is just a secondary corrective to the state’s previous upward redistribution of income. The only truly just solution is to eliminate the upward redistribution in the first place, letting market competition and voluntary cooperation destroy the rentier incomes of our corporate ruling class.