The rules of the game

French president François Hollande is going a bit against the rules of the game with his proposal to raise taxes on the rich.  The Financial Times cries “foul” today in an article entitled “France: Ready to Jump Ship”.  We’re told that wealthy executives are ready to “jump ship” and take their businesses elsewhere.  According to Guillaume Poitrinal, the chief executive of the largest commercial real estate company in Europe, “France is not isolated from the rest of the world and Paris needs to be competitive….I am sure that the government realizes that if [businesses] are weakened vis a vis their competitors abroad, this would be a negative for employment, tax resources and economic growth”.

Mr. Poitrinal is correct as far as it goes.  Increasing taxes on the wealthy and raising wages and benefits of workers in a game where the wealthy can easily “jump ship” is a shaky move.  It probably won’t succeed.  But what he seems to forget is that this game isn’t like chess – it doesn’t have fixed rules; the rules are subject to change at any moment by the players themselves.  Mr. Poitrinal is an expert at the game of global capitalism but that’s just a micro game imbedded into a much wider politically determined macro contest.  Since the ultimate rule maker and referee in the macro game is society itself, the leaders in the micro contest are always on very dangerous ground.  They push their advantage at their peril.

This is especially true given the increasing public awareness at how preposterous the micro rules actually are.  A tiny minority is granted the right to remove entire businesses from a country if they aren’t satisfied with the size of their incomes, the level of worker wages, monetary policy, or anything else.  This despite the fact that the businesses are the sole source of living for millions of people.  Businesses are treated as mobile fiefdoms and the workers who create the products as little more than serfs.  The only “legal” response for the serfs is to beg for the businesses to return by offering lower wages and higher incomes for the owners.

Capitalism must be seen as an extension of feudalism.  Workers need the corporation today just like peasants and farmers of the past needed the land.  Yet we grant business owners a level of power we’d never give the landowners.  What if landowners, say of the great vineyards of Bordeaux, could simply dig up their land and “jump ship” to some other nation offering lower taxes and worker wages?  Would the French permit it?  Impossible.  The land is seen as French, in a deep sense public, and the rules would never give such power to the “owners”.

We must come to see corporate business in the same light.  Individuals should be able to “jump ship”, but businesses employing large numbers of people become an integral part of the ship itself.  The “jump ship” analogy is therefore false – the owners are asserting a right not to change ship but to destroy it.

We desperately need to change both the rules of the game and its ultimate goal.  The goal of widely shared prosperity needs to replace the obscene chase for ever expanding hoards of money and the rules must ensure that outcome.  We need to remember, despite what the economists wish for us to believe, that the rules of society aren’t at all like those of physics; they are fully under democratic control.