Free Market Fairness (FMF) presents a fusionist theory of liberal justice, one affirming both private economic liberty and social justice. I call this market democracy.
In a symposium on FMF hosted by Critical Review, a new objection has been arisen against market democracy, the objection that market democracy sanctions class domination. This objection is raised explicitly by Annie Stilz, but I think it underlies several other critiques as well (most notably those of Joseph Carens, Samuel Arnold, and Alex Gourevitch).
I shall present the objection about class domination by way of an example. The example my own, but I think it makes vivid the worry raised by Stilz. One path of response, which I sketch below, would involve a significant revision to market democracy. I would be interested to hear what BHL readers think of this problem, and how they think market democracy could best answer it.
Imagine a person named George living in a market democracy that I will call Alpha Land. George, let’s imagine, rose from nothing to become a hedge fund titan. Central to George’s life plan is the ambition to establish his family as a dynasty. Using his great wealth, George makes large gifts to the most elite university in the land, Alpha University, in order to help his children gain admittance. George also makes large bequests to his children and grandchildren, enabling them, in turn, to help their children and grandchildren to gain admittance to Alpha University when the time comes. And let’s imagine that George is not the only person in this market democracy with dynastic ambitions. Let’s say that most, or all, of the students who gain admission to Alpha University come from families with great wealth. With the superior education they receive there, and through the contacts they make, the graduates of Alpha University come to constitute an elite class in the society. The very most desirable positions in industry, science, art and political life are most always held by Alpha alums.
Further, let’s imagine that all the requirements of my market democratic conception of social justice, free market fairness, are satisfied in Alpha Land. Along with liberty of association and expression, for example, the constitution Alpha Land protects thick private economic liberties of labor and ownership. What’s more, Alpha grads are well-trained, and so achieve great success as leaders of the great industries and institutes of their country. Alpha Land thus enjoys an exceptionally high rate of growth so that, over time (say, over the course of a generation or two) the least advantaged members of Alpha Land enjoy better opportunities and have more private wealth than would have been available in any other regime type (as required by the social justice component of market democracy, recall).
However, and here is the objection, this success comes at a price. While opportunities and benefits are maximized to the least well-off, the top positions in society are effectively closed to members of that class. Further, the members of this lower class are aware of this. The basic institutions have been arranged so that they can do very well, but they know that a certain strata of social positions is effectively closed to them. The horizons of their dreams for themselves and their children are thus curtailed. We can point out to them that the social arrangements of Alpha Land maximize their position compared to that available to them in rival regimes. Still they have doubts about themselves and, specifically, about their standing as fully free and equal members of their society. They live in a system of class domination (or at least, note, of class division). Being aware of this, their self-respect, which includes their confidence in the worth of their own life-plans, is eroded.
Would universities such as Alpha collude with wealthy people such as George in giving coveted admission slots to children from wealthy families? Maybe not. But in a market democracy such as Alpha Land, I imagine that universities would mainly be private. They would not receive the tax exemptions that have allowed private universities in the United States to amass their huge endowments. But, let’s say, within market democracy these private schools would have wide freedom to admit students according to their own criteria. Competing against Beta University and other strong schools, it seems plausible to imagine the trustees of Alpha directing the admissions office to consider wealth when selecting each year’s incoming class.
What are we to make of this? One response is to deny that class domination such as this could arise or long endure within a (fully just) market democratic institutional scheme. Free markets unleash creative destruction and new elites rise meteorically to overtake the elites of a generation before. Still, given Alpha University’s king-maker role in this society, I think it is plausible to imagine class domination to persist in Alpha Land, even granted that the elite class will occasionally be joined by some parvenues (such as our friend George).
Alternatively, we might respond by pressing the distinction between class division and class domination. As formulated in FMF, market democracy accepts the Rawlsian idea that the political liberties have special status and so must be guaranteed at their “fair value.” In FMF, I explain how market democracy satisfies this stringent test (247-254). So if the worry is that Alpha alums politically dominate their fellow citizens, market democracy already has resources to explain why domination of that sort is objectionable. I could say much more here but I will just say that I find this unsatisfying. Even if the objection is only based on class division (and not political domination), the worries about self-respect raised by the example seem serious. I believe those worries are not adequately answered within market democracy as formulated in FMF.
Another response is to idealize up and away from the objection. The great good of social justice need not be achievable in all social contexts and at all times. If social justice is not achievable in some set of social conditions, that in itself is no mark against social justice. If the social conditions of Alpha Land really are such that they allow simultaneously for the satisfaction of all the requirements of free market fairness and for the creation of an elite class, then we might simply say, with regret, that the great good of social justice is not achievable under that set of social conditions. I believe that a technical defense of free market fairness could be mounted on these grounds, leaving intact all the main specifications of market democracy as I laid them out in FMF. However, frankly, that approach seems to me a dodge. Market democracy would be stronger, and more attractive, if we can adjust its criteria so as to provide a direct response to the worry about class domination that Stilz and others have raised.
How might we do this? One option is to adjust free market fairness so as to allow rules that limit the freedom of people like George to make gifts to elite universities (and other elite-forming organizations or clubs), or rules that prevent places like Alpha from amassing their great endowments. Since, as I am imagining in my example, market democracy does not grant private universities tax exemptions, it already contains features that at least do not encourage the building up of such endowments. But there are many types of organization and club that can aid in the formation of an elite class such as we see in Alpha Land. So this path would lead to imposing pervasive restrictions on people’s economic liberty. We cannot take this route without making great changes to the base of market democracy.
The other option, of course, is to adjust market democracy so as to limit the freedom of people such as George to make bequests to their children. On balance, I believe that this option coheres better with the core commitment of market democracy to respect all citizens as free and equal authors of their own lives. So I am open to adjusting my account of thick economic liberty so as to allow rules that would limit people’s liberties to make bequests. Specifically, I now believe that market democracy should be formulated so as to allow the state to impose substantially progressive tax rates on transfers of wealth between generations.
Market democracy is born from a sincere commitment to make room for the reasonable life plans of liberal citizens. The market democratic paradigm stresses the importance to people of making economic choices that are basic to their own life plans, an aspect of freedom that is systematically neglected under social democratic accounts of justice. However, this does not mean that market democracy must make room for every life plan simply because it includes an economic element. Dynastic ambitions such as those of people like George run against the market democratic commitment to treat all citizens as free and equal moral beings. Market democracy is not committed to social structures that make full room for people to fulfill such ambitions.
Let’s return to my claim in FMF that people have a basic liberty regarding the private ownership of property (personal and productive). We can think of this liberty as a bundle of elements protecting the freedom of people to own, use and control property as they think best. That liberty, like all the other basic liberties, has a central range of application. That range is defined in terms of its significance, that is, the strength of its connection to the development and exercise of the moral powers. Under market democracy, the moral powers are the capacity of citizens for self-authorship, and their capacity to respect all of their fellow citizens as self-authors too. To protect the most significant aspects of the right to property, and to craft that basic liberty so that it works as a component part of the other basic liberties considered as a set, it may be necessary to scale back on some dimensions of the right to property that we protect. So I am open to adjusting my account of the right to property so as to remove the liberty of citizens to pass on great wealth free of any substantial tax. If I take this route, this would be a significant revision to market democracy.
How significant is this revision? Well, a central feature of property-owning democracy, one of the two institutional ideals affirmed by social democracy recall, is steeply progressive taxes on intergenerational transfers of wealth. If we adjust market democracy so as to allow progressively rated taxes on bequests (and perhaps inheritances), does this mean that market democratic institutional forms go rushing toward the ideal of property-owning democracy?
The answer to this question, perhaps surprising to people sympathetic to the market democratic program, is: Yes. But the adjustment that I mention would point us towards distinctive, economic liberty-friendly interpretations of property-owning democracy. This is the tradition of property-owning democracy affirmed by political leaders such as Margaret Thatcher. I am open to market democracy’s being developed in this direction. Indeed, this suggests a new set of contributions that might be made by people working within the market democratic framework: the revival, and development, of the market friendly and economic liberty-affirming tradition of property-owning democracy. Call this property-owning democracy, free market style.