On Friday morning, I had what could have turned into a very ‘heated’ argument with the head of my unit. Not that my boss is shy of engaging into debates with me. In fact, before I started working from home, he would often come round to my desk to discuss various topics with me (this tended to be more frequent on Friday afternoons or in summer). Unless I had to complete something urgently, I would normally enjoy having a chat with him primarily because he is sharp-witted, because he is of an affable and generally open-minded nature, because we share a few points in common (my mum comes from the same area where he grew up and we are both interested in endurance sports) and because there is generally not much to discuss with my other colleagues for various reasons. In the context of a press release issued by our parent company that mentioned the contribution we (the Swiss subsidiary) had made to the group’s turnover for the year 2013, I ventured a remark on the steep decline the figure for 2013 seemed to represent over previous years. This sparked the following exchange via chat messenger:
07:36 [My boss] This is not an industry for anyone that wants to get rich. I have firmly told my two [sons] that they should certainly stay away from [the name of our industry] after they graduate.
07:39 [Me] Anyhow not anybody can become rich: so that some can be rich, others have to be poor. As long as they do not go into the trading of commodities, nuclear energy or weapons, their souls should be OK, I suppose.
07:40 [My boss] Economies are not zero-sum games. Not sure that Apple’s success made many people poor.
07:42 [Me] Yes, those former Nokia and Motorola employees who are still unemployed, the ones who are too old.
07:46 [My boss] You would have us all still tilling fields and hunter-gathering.
Coming from somebody who graduated from Cambridge University with a degree in physics, I was a little startled at the logic because to me it is simply not possible to have rich people without poor people (of course, not metaphorically speaking, but in monetary terms). Like the two sides of a coin, they are inseparable as I see it: an individual can only be wealthy in relation to others, who are not by definition. I suppose that what my boss meant was that the creation of wealth does not necessarily entail the impoverishment of some.
As I tried to explain in my second chat message by alluding to the names of Nokia and Motorola, in some cases this is precisely what happens, so that one firm’s loss is literally a gain for another firm – to paraphrase the famous saying one man’s loss is another man’s gain. This happens when a company comes up with a new technology which proves disruptive or when it gains market share through stepped-up marketing or promotional efforts, lower prices, better products and so forth, so that competitors are driven out of business and jobs are lost. For those workers who are unable to find a new job, this might not lead to extreme poverty depending on the social safety net in place in the country where they live, but it will invariably lead them to being poorer than they were when they had a job. In some cases (namely, when an unemployed is no longer entitled to any dole money), the forces at play in Schumpeter’s so-called creative destruction process can lead to total destitution for the unfortunate workers who were put out of work by this process.
My first point (‘Anyhow not anybody can become rich: so that some can be rich, others have to be poor’) was that even if the creation of wealth does not cause people to fall into poverty per se, the redistribution of wealth that is called for by the very division between rich and poor means that those who become rich can only do so because the others remain non-rich or, in some cases, poor. In other words, one state (being rich) excludes the other (being non-rich or even poor). This in turn means that, yes, the rich are rich only because the poor are poor (or at least non-rich).
What I find disturbing about the claim that the division between the poor and the rich is not a zero-sum game is that it partakes of the same ideology (capitalism, free market laissez faire, etc) that has become so prevalent that it is shared by capitalists (e.g. Bill Gates: There will be no poor countries by 2035, CNBC, 21 January 2014 ) as well as by so-called leftish politicians (e.g. Boris Johnson, We should be humbly thanking the super-rich, not bashing them, The Telegraph, 17 Nov 2013) this at a time when social inequality has reached truly obscene levels: according to the British charity Oxfam (Working for the Few, Political capture and economic inequality, 20 Jan 2014, which based it claims on a study by WEF), the 85 richest individuals on this planet have a net worth equal to that of half the world’s population!
PS Interestingly, the salary package of Apple’s CEO was so astronomical in 2011 that there was even an article in Bloomberg magazine on this topic, entitled ‘Too much cash in the corner office’, Roger Lowenstein, 15 February 2012
- The Equality Trust: latest research
- Swiss say ‘no’ to salary cap for executives (article on this blog)