Going Galt

March 16, 2009 at 12:43 pm | Posted in Arts, Economics | Leave a comment

I stumbled across this interesting post in the comment section of a conservative commentary

Imagine this story line.
The top 1% wealthiest people in this country go on vacation for six months. I mean everybody just stop working and producing income.
Take some of your wealth, go have fun and live on that for awhile. You’ve already been labeled as heartless and greedy by the liberals..
If RUSH is right and 40,000 people pay 1/2 the taxes of New York w/ a population of 8 million..
just imagine if they simply walked away.
What do you think that would do to tax reveneus?
I wonder what the tax & spend crowd would do then? Anyway, it’s a great story idea.
Keep the faith..

Hmmm….  Sound familiar?  Let’s see….

Oh, that’s it!  Atlas Shrugged, by Ayn Rand.  This is one of those fascinating novels which I have never read but had to find the online Cliff’s Notes so I can follow the zeitgeist.  The author herself is in interesting character.  Born a Russian Jew in the heyday of Bolshevism, she managed to emigrate to America and worked in Hollywood.  Later, she founded an institute dedicated to her own brand of philosophy, which interestingly enough, was never connected to any major academic entity.  Her big claim to fame, however, is the 1100 page Atlas Shrugged, which is routinely cited as one of the most influential books of the Twentieth Century.

In brief, the novel is about a wealthy engineer and capitalist, John Galt, who gets fed up with the pettiness of the world around him and retreats to start his own enclave of wealthy innovative capitalists.  Without all these movers and shakers, the rest of the world goes to hell in a handbasket.  I think our poster above is merely making a tongue-in-cheek modern application of Rand’s storyline.

I have been seeing similar sentiments lately in the comments of a lot of Internet websites.  It seems that the new meme for protest by withdrawing one’s wealth and talent from society is called “Going Galt“, mostly in response to the new tax policies of the Democratically controlled government.  Economic considerations of tax policies aside, the question here is: Does “Going Galt” really make sense?

First off, does 1% of the American population really have that level of indispensable contribution to society?  Well, according to the Federal Reserve, in 2004 the top 1% of Americans owned 62.3% of all business assets.  That’s quite a lot of capital.  Should it be shuttered or liquidated while these folks collectively went off into the woods to find themselves, that would put quite a hurt on the economy.

The truth is, regardless of the social engineers’ efforts, wealth has always collected in the hands of the unique individuals who were able to use it best.  Even in tribal gift economies, wealth quickly becomes concentrated in the hands of a few more fortunate and talented individuals, hence the development of potlatch ceremonies to balance the status quo.  Thus, a social contract is reached — to maximize their return, the less-gifted individuals allow their wealth to be concentrated in the hands of a few, who in return retain a portion of the proceeds.  This principle works everywhere, from the local Mafia Don to your local bank account.

Once the social contract is broken, however, the consequences can become rather grim.  If a peasant holds out on his local ruler, he can expect a visit from the Sheriff of Nottingham.  But if the local lord hoards too much wealth, then the local populace start sharpening their pitchforks.  Of course, we are civilized now, so instead we just follow Charles Stewart Parnell‘s advice and “boycott” individually, and then collectively sharpen our ballots. 

But what is the civilized response of the moneyed class to proletariat economic aggression?  One cannot legally hire thugs as in the Days of Yore, though lobbyists and lawyers are an acceptible substitute.  Ballot initiatives, though feasible in a republic,  are doomed to fail in a fully enfranchised popular democracy.  So, is there a form of “inverse boycott”?  Maybe “Going Galt” is the solution the wealth holders are looking for?

But, would it really work?  Well, the first point is that almost complete collusion among wealth holders is required.  This would require some formal resolution of the Nash Equilibrium that keeps them in business, otherwise some entrepreneur will swoop in and scoop up the vacated marketshare.  Either the market capital must be very concentrated in the hands of a few and the barrier to entry very high, or the wealth holders as a group must be very ticked off.  I really can’t imagine a national response of this caliber (nor can I think of any historical precidents), but I could imagine such an action on a local level, even in response to a nationwide tax policy.  Not good news for your beleaguered state and local governments….

But I think that more telling is the fact that capitalistic wealth is inherently competitive.  That is, the more wealth one has, the more it is a target to be acquired and utilized by another capitalist.  If that capitalist can make more productive use of it than the current owner, the rules of the game are biased to take ownership of a larger share of it.  So, “Going Galt” is inherently anti-capitalist.  One must actively protect and develop one’s wealth in a capitalistic economy or watch it vanish altgether.  Thus, it’s kinda like cutting off one’s nose to spite one’s face.  I can imagine that some would take this drastic step, but it would not be a widespread phenomenon.

What I predict will happen, (since we are seeing this already) is that the “gift economy” will gradually collapse.  The White House already intends to slash deductions on charitible giving, so expect a huge drop in contributions to social institutions, especially liberal bastions such as arts organizations, environmental movements, and academic institutions.  What is this sort of big ticket giving but a form of potlatch, dressed up in a tux for the benefit gala?  The days of public philanthropy may fade with the return of the private club.

Atlas may not shrug, but he might twitch a little bit.


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