[Update: I rewrote the piece so that it would actually be readable by financial people, and have replaced the earlier version of this post with the even more overly-simplistic (and not even necessarily historically accurate) version that appears below.]
Today my boss came in to work with a smile on his face, telling me he had a project for me. This is the result of that project. It draws a lot on this previous post, and admittedly oversimplifies some of the issues at hand. I didn't mean it to be a thorough examination of the issue, but I figure it might be somewhat interesting to some of you folks. So here it is:
[My boss] asks, “Is it consistent to think that wealth should be redistributed from rich individuals to poor individuals, but not from rich organizations to poor organizations?” To answer this question, I will explore the reasons that one might advocate redistribution from wealthy individuals to poor individuals, and then ask whether those reasons apply to organizations as well. In doing so, I will not address important objections to wealth redistribution policies, and so this discussion should not be seen as a defense of implementing them. The goal here will only be to establish whether someone who accepts the legitimacy of redistributions from wealthy individuals to poor individuals would be committed to being in favor of those arrangements between organizations as well.
Why Do We Care About the Distribution of Wealth?
Typically, redistribution of wealth is justified on the basis of empowering the poor. This seems simple enough. But if we are to try to apply this thinking to other areas, it will be important to understand how the argument for redistribution is supposed to work, and what moral problem the redistributive policy is supposed to fix. I will therefore offer a brief overview of where the argument for redistribution comes from, and how it responds to some of the ideas that have underpinned our society from its birth.
Our society is built on the foundations of classical liberal philosophy, which is itself built on the idea that we should treat freedom as a value in itself. It is second nature to think of the ideal America as a “free country” dedicated to “life, liberty, and the pursuit of happiness.” These are values that are taken directly from the classical liberal movement, and which still form the backbone of our worldview today. But why should we (and why did the classical liberals) care about freedom? Today’s political discourse has turned liberty into a buzzword, and has masked the connection between exaltation of liberty and the ideas that motivate redistributive policies. So in order to understand why redistribution is not just a matter of expedience or charity to its intellectual defenders, but is rather a matter of principle in their eyes, I will start out by setting the record straight on this issue.
Adam Smith, David Hume, Adam Ferguson and the other liberal thinkers of their time observed that human societies are elaborate and dynamic systems, and that no individual (or group of individuals) could effectively design and operate a complex society according to a rational plan. The problem of society was, according to these thinkers, too complex for any mind to solve. Accordingly, the liberals postulated that successful societies would need to rely on mechanisms like the market system to produce “spontaneous” order – that is, to allow individuals to live together peacefully and productively without a comprehensive plan of action. A spontaneous system of producing social order would allow societies to function without all-knowing, benevolent rulers who would produce order and prosperity in accordance with their divine insights. And this was particularly important to the liberal thinkers, as it was painfully apparent to them that such rulers were generally not forthcoming, and attempts to produce a rational order in their absence were universal failures. The market system, then, could substitute for the benevolent and all-knowing ruler, producing prosperity and order as if by an invisible hand.
But the classical liberal defense of freedom extended beyond the simple idea that freedom tends to produce desirable social systems. The liberals argued not only that freedom promotes prosperity, but also that freedom is an essential component of human well-being. People, according to the liberals, can only realize themselves as individuals in an environment in which they are free to design their own lives, make their own choices, and live according to their own plans. And we still generally believe this today, which is why we care to live not only in a wealthy country or an advanced country, but also in a free country.
It was through the desire for mechanisms for spontaneous ordering and the belief in the importance of self-determination that the classical liberals came to be advocates for institutions of private property. By securing our possessions, property rights enable us to plan our separate lives without having to fear the arbitrary authority and incursions of other citizens or government agents. The classical liberals recognized that our lives are built in the outside world, and not just within ourselves, and that we therefore need security in our property in order to live full, meaningful lives. Property rights also set rules that allow us to interact in peaceful and productive ways without the need for social planning and all-knowing, benevolent rulers.
But a number of different groups of thinkers saw a flaw in the classical liberal argument defending individuals’ rights to their property. If property rights are a core element of liberty, and individuals need liberty in order to live good lives, then what about the people who do not have any property? Critics of the classical liberal position pointed out that the property-less, talent-less individual may have liberty in the sense of being free from the incursions of others, but she sure didn’t have much leeway to live her life according to her own desires or to be the master of her own fate. The impoverished man faces a choice between submitting to labor for someone else on one hand, or death by starvation or exposure on the other. Only in a technical, abstract sense could someone in such a situation be called “free.” And this, the critics held, was unfair.
The argument for redistribution, then, is that by redistributing wealth to those without access to it, we ensure liberty for all members of society, and not just those who can empower themselves through luck, talent, or the generosity of their benefactors. Such a policy, it is held, takes full consideration of everyone’s interests and needs in order to foster the conditions under which all individuals can pursue their own happiness, free (to some extent) from the concerns which might lead us to object to the circumstances faced by the property-less proletarian.
Empowerment and Organizations
When [my boss] asks about the potential for extending this line of thinking to organizations, it should be more or less clear at this point what he has in mind. Like individuals, organizations can have or lack the resources necessary to pursue their own goals. As is the case with individuals, a wealthy organization has more than enough resources available to it to meet its basic needs, and accordingly has more of a say in its fate than an organization which struggles simply to remain in operation. As we have seen, it is out of a desire to provide for the effective freedom of all individuals that the advocates of redistribution seek to transfer resources to those who lack property of their own. But does arguing this way commit them to the position that “needy” organizations should also be empowered in order to promote their abilities to plan their own “lives”?
In order to answer this question, it will help to ask why it is that liberty is morally important in the first place. The classical liberals thought that freedom was valuable because it could produce spontaneous social order and because it was a component of human wellbeing. But why should we attribute moral significance to order and wellbeing?
According to one very simplistic view, moral concern is built on the idea of promoting the interests of entities that have “goods of their own.” Each of us clearly has a good of his own, and our interests are promoted by living in orderly, peaceful, and prosperous societies in which we can pursue our own happiness. And similarly, our interests are promoted by having access to resources that enable us to make freer choices. But organizations can have “goods of their own” too. A University does well when it is able to sustain a thriving academic community, play an important role in its community, and operate with a strong budget. A corporation does well when it is able to generate income for its stakeholders, or when it successfully expands its operations into a new market. And in order for organizations to pursue their interests, they need access to resources just like individuals do. So if it is for the good of individuals that we enact empowering redistributive policies, then it seems like a similar line of thinking could lead us to advocate empowering organizations.
But one might object that moral concern should not attach simply to anything with a good of its own. We might notice that where we actually experience our own goods, organizations (that is, conceived of separately from the people who make up the organizations) do not. Whether or not a person’s interests are promoted actually makes a difference to that person. But except in a metaphorical sense, an organization is not the sort of thing to which something can make a difference. And this seems like a very important distinction.
To be sure, the individuals who compose the organization and who are impacted by its success have an active interest in its wellbeing. However, it is critical to notice that the interests of the individuals who make up an organization are not the same as the interests of the organization itself. If we are going to empower an organization because of the organization’s interests, then we need to separate the organization’s interests from the interests of the individuals from the organization. And if we deny that an organization’s separate interests can be morally significant because organizations cannot experience their own goods, then it appears that we would want to reject the analogy between the moral significance of an individual’s need for empowerment and an organization’s need for the same.
One might still want to argue that empowerment of poor organizations should be justified not on the basis of the organization’s own need for liberty, but rather on some need possessed by the individuals constituting the organization or by those with a stake in the organization’s performance. That is, by empowering organizations, we can indirectly empower individuals. And because we care about individual empowerment, we might be able to achieve our goals through the empowerment of organizations. But notice that this would not be an extension of the ethical argument in favor of empowering individuals to cover organizations. Rather, it would simply be an alternative way to carry out the redistribution called for by the original argument.
Ultimately, I am not convinced that we can coherently extend the moral concern which motivates redistribution to empower individuals to cover needy organizations. This can perhaps be supported best by comparing the way that we think about the death of an organization for lack of resources to the way that we would think of an individual’s death due to the same causes. When organizations fail or struggle, it seems like our proper concern should be focused on the individuals whose lives are worsened or constrained by those processes, and not on the organizations themselves which fail to live up to some constructed conception of their good. Accordingly, where redistribution is to be justified in order to empower those in need, I think it should be individuals to whom resources are allocated, and not organizations.