99% Should Give to the 1%? Why Harry Binswanger and Objectivism are Wrong

Someone I recently started to follow on Twitter is Wasp, (@shokufeyesib) Interesting, opinionated, and often goes on Twitter Rages.  She went on one because of a Forbes Op/Ed piece entitled “Give Back? Yes, It’s Time For The 99% To Give Back To The 1%” by Harry Binswanger.  I clicked on Wasp’s link and didn’t even have to read the article to know the viewpoint; Ayn Rand’s version on Laissez-faire Capitalism.  This stuff long ago stopped angering me and had taken to mostly ignoring this idealism for it’s obvious faults. 
Harry Binswanger pic. from Forbes Bio

I may come back some day and talk about Ayn Rand’s Objectivism but this is going to be a step by step breakdown of Harry’s op/ed.  I will be heavily quoting most of the article here but you can check out the original here.
It opens with this a poorly worded paragraph saying he is taking on the “Sacred Cow” of high-earners exploit people to become rich, not create value.

“-as if Henry Ford was not necessary for Fords to roll off the (non-existent) assembly lines and Steve Jobs was not necessary for iPhones and iPads to spring into existence.”

He goes on in the next paragraph.
     “Let’s begin by stripping away the collectivism. ‘The community’ never gave anyone anything. The ‘community,’ the ‘society,’ the ‘nation’ is just a number of interacting individuals, not a mystical entity floating in a cloud above them.”

Ayn Rand’s idealism, which she called “Objectivism,” must hold this value first.  That only the individual exists.  Any sense of community or group wellness must be illuminated in order for Objectivism to work.
“And when some individual person–a parent, a teacher, a customer–‘gives’ something to someone else, it is not an act of charity, but a trade for value received in return.”

Since there is no community, individuals never give anything, things are only traded for other things. 
“It was from love–not charity–that your mother fed you, bought clothes for you, paid for your education, gave you presents on your birthday.”

Harry, at this point, says that love has a value or a price.  If we trade our time and resources for anything it is because we are receiving something of value back.  A couple that is married is nothing more than a mutually beneficial agreement.  I can see this argument as valid.  When my marriage stopped being mutually beneficial agreement is when we got a divorce.
“All proper human interactions are win-win; that’s why the parties decide to engage in them. It’s not the Henry Fords and Steve Jobs who exploit people. It’s the Al Capones and Bernie Madoffs. Voluntary trade, without force or fraud, is the exchange of value for value, to mutual benefit. In trade, both parties gain.”

This is where the Ideal of Objectivism runs into reality.  If Harry could leave out the word “proper” and say that every interaction was win-win then Objectivism would work.  He provides two good examples of people who exploited, conned, and hurt people to get ahead.  Trade without force or fraud, who decides what is ”Force or fraud?”  How is that enforced? I believe that is why societies, or should I say interaction of individuals, create laws and enforcement mechanisms.
Wait didn’t you just tell me there is no such thing as community?  Go on.
“Each particular individual in the community who contributed to a man’s rise to wealth was paid at the time–either materially or, as in the case of parents and friends, spiritually. There is no debt to discharge. There is nothing to give back, because there was nothing taken away.”
In a closed system you might be able to make this work but we live in a *ahem* community that has generations.  Harry Binswanger uses Ford and Jobs as examples of good capitalists.  If Henry Ford had not invented the previously mentioned assembly line Steve Jobs never would have been able to produce the iPhone.  There is no way for there to be a trade between two people who were never alive at the same time. 
The Pyramids are a 5000 year legacy that still produces value. It is no way the tour guide or the travel agent can trade the value that the pyramids produce with the people who made it.  We as individuals or  a “Society” create things that last beyond our lifetime. 
“Well, maybe there is–in the other direction. The shoe is on the other foot. It is “the community” that should give back to the wealth-creators. It turns out that the 99% get far more benefit from the 1% than vice-versa.”
When I read this I knew why Wasp went crazy over this.  I am all about letting people attempt to convince me of their point of view and also letting people hang themselves with their own words. If everyone is already paid for their contribution how can one person be owed anything by the others.  You can’t claim there is no debt to discharge then say people owe other people.  You are defeating yourself here sir.

 But then Harry inserts a lengthy quote from Atlas Shrugged by Ayn Rand.  In the article the quote is  2 parts of John Galt’s speech. The first half establishes labors work is paid not only for their labor but you are paid for the work the engineers and investors and inventors that made the labor possible. This part I will ignore because it has little relevance to the author’s point.

The second quote is the WTF part.

Ayn Rand pic. from Cool FB Covers

In proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of him. And the same is true of all men between, on all levels of ambition and ability. The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains. Such is the nature of the ‘competition’ between the strong and the weak of the intellect. Such is the pattern of ‘exploitation’ for which you have damned the strong. – Ayn Rand Atlas Shrugged

It is the smart people who are the richest, contribute the most to “the people below him,” and it is the janitor who is paid proportionally more for his ‘mental contribution.’  Basically Brains = profit = superior.  So all the richest men in the world are the smartest and most driven because no one who isn’t smart can succeed and those who are always succeed.  Again, taking it on face value, it does not cover generational inheritance.  Your father could be one of the richest man in the world and you inherit his fortune.  You did not create that wealth by your brain or drive but by someone else.  A smart person can have very dumb kids and that kid will be rich.
But my favorite part is this “The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains.”  I picture Bill Gates and the janitor at my high school dropped in the woods.  My money is not on Bill Gates being the survivor.  And that Janitor contributes nothing?!  What about the win-win trade of value?
Then Ayn Rand concludes with “Such is the nature of the ‘competition’ between the strong and the weak of the intellect. Such is the pattern of ‘exploitation’ for which you have damned the strong.”  What she is trying to say is that there should be intellectual natural selection.  There is no value in physical strength or work. This concept can be argued for.  Should we keep alive the severely mentally handicapped if we want the species to grow stronger?  That’s an argument for another day.
After this extended quote, Harry comes at us with this.

“For their enormous contributions to our standard of living, the high-earners should be thanked and publicly honored. We are in their debt.”
No.  According to your own words previously, “there is no debt to discharge.”

“Here’s a modest proposal. Anyone who earns a million dollars or more should be exempt from all income taxes. Yes, it’s too little. And the real issue is not financial, but moral. So to augment the tax-exemption, in an annual public ceremony, the year’s top earner should be awarded the Congressional Medal of Honor.”

The rich should be valued above all else.  Even if they didn’t earn it themselves. Just a modest proposal.
“Or if the moral praise showered on Mother Teresa went to someone like Lloyd Blankfein, who, in guiding Goldman Sachs toward billions in profits, has done infinitely more for mankind.”
If you didn’t know, Ayn Rand and Objectivism is anti-religion because of the community and mutual well being it represents.  It is also against social norms and morality.  Objectivism is amoral and Laissez-faire Capitalism values profit like Mother Teresa valued life.
“Instead, we live in a culture where Goldman Sachs is smeared as ‘a great vampire squid wrapped around the face of humanity.’”
Who said that? I searched and found it form a Rolling Stones Article by Matt Taibbi from 2009.  If you for value for value trade you should be all for sighting sources.
“There is indeed a vampire squid wrapped around the face of humanity: the Internal Revenue Service. And, at a deeper level, it is the monstrous perversion of justice that makes the IRS possible: an envy-ridden moral code that damns success, profit, and earning money in voluntary exchange.”
Blame taxes. No better yet blame the non-existent society for having morals. 
“An end must be put to the inhuman practice of draining the productive to subsidize the unproductive. An end must be put to the primordial notion that one’s life belongs to the tribe, to ‘the community,’ and that the superlative wealth-creators must do penance for the sin of creating value.”
Again survival of the fittest, that those who cannot contribute to society without the help of the society as a whole should be left to die.  Government contributes nothing to society.  If we remove the shackles of religion, social welfare, and government the power of profit will lift humanity to new heights.  Objectivism in all its glory.
Objectivism as an intellectual exercise is interesting and useful but in is not an ideal to strive for yet it is fundamental economic philosophy behind most of the conservative and Libertarian movement.  The “intellect” behind this article is flawed.  Even Harry Binswanger’s last sentence is flawed.
“And Ayn Rand is just the lady who can do it.”
She’s dead.  She can’t lead us.  You can trade with her for the knowledge she left behind. Even she would not want to be worshiped in this way.  
Wasp and I come at things in different ways.  When I see socially destructive pieces like this my tendency is to ignore it.

Wasp does this.

I think both responses are justified.

2 thoughts on “99% Should Give to the 1%? Why Harry Binswanger and Objectivism are Wrong

  1. How much shall we give the CEOs and innovators so that they will become creative again and revive the US economy?

    According to a 2010 UCSC study, the top 1% in the US own 35.4% of the total net worth, and 50.4% of the total investment assets.

    Let's agree that CEOs and innovators deserve more wealth. Is it possible to be in agreement as to how much that will be rather than aribitrarily designate tax freedom for them? Let's not waste time trying to figure out which of the top 1% are creative and simply give all of them a boost in hopes that added wealth will revive their creativity and jump start the economy.

    Is a 10% increase in total net worth sufficient? Probably not, because that can be achieved by a very good year in the stock market. Perhaps doubling their net worth is enough? That's only 70.8 % of the total net worth in the US. If CEOs and innovators owned 90% of the total investment assets, certainly they would be interested in maintaining that wealth by hiring more people once their creative ideas start flowing again.

    Can anyone suggest how we may begin this transfer of wealth as soon as possible?


  2. The rich do have the wealth. The quickest way to improve the economy is to get people to spend money, to consume. This helps business, employees, everyone. You give a rich man $20 to a thousand people and they'll buy a thousand pair of pants. you give 1 rich guy $2,000 and he'll buy maybe 3 pairs of pants. What does more for the economy? Dollar for dollar, the poor consume more of their net worth than the rich. You improve a consumer based economy by people consuming.

    Ingenuity is built on need. The uber rich “need” less therefore have less ingenuity. Innovators aren't born rich, they become rich.


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