Tuesday, September 14, 2010

Anna Karenina, Morality, and the American Economy

In reading Russian Literature and studying Russian History I have often noted the problems, issues, and patterns of late Imperial Russia bear an uncanny resemblance to those of contemporary America. I intend to elaborate generally on this in a future post (surely you wait on bated breath); today I will focus on a few salient passages within Lev Tolstoy's Anna Karenina pertaining to socioeconomic and ethical/moral subject matter.

Published in segments from 1873-77, Anna Karenina occupies a most ideal temporal location for sociopolitical discussion: mere years removed from the emancipation of the serfs (and American Civil War), mere years from the publication of Darwin's On the Origin of Species, but a few years from the publication of Marx's Capital, and amidst a growing/continuing storm of discontent among the Russian people.

We, the reader, are recipients of the most wonderful gift literature can bestow upon us: we are allowed to eavesdrop on lives literally frozen in time upon the page. The issues of the age, the personalities, the characters, the society, and so forth are preserved (perfectly, thanks to Tolstoy) for us to observe and admire. We are so fortunate for it.

What I find interesting is how the topics of debate back then are not terribly dissimilar to now. What is different, however, is the cognitive framework in which these discussions take place.

Social issues, for instance, are rooted in individual morality, an inversion of how today's social sciences tend to construct what is essentially the same thing. (Chernyshevsky's "What is To Be Done?" follows this same pattern of inverted self/society).

Thus when the characters of Anna Karenina examine socioeconomic issues, we see a greater connection between the larger, general problem and the moral/ethical basis of the individual actions comprising that general problem.

Take, for instance, this fascinating discussion between Stepan Arkadyevitch Oblonsky (a very likable, but sort of morally lax fellow), Konstantin Dmitrievitch Levin (more rigid), and Vassenka Veslovsky (more or less a fool). In this scene Oblonsky is describing his visit to the very lavish estate of a nobleman who had "made his money by speculation in railway shares." The debate that follows is this:

"I don't understand you," said Levin, sitting up in the hay; "how is it such people don't disgust you? I can understand a lunch with Lafitte is all very pleasant but don't you dislike just that very sumptuousness? All these people, just like our spirit monopolists* in old days, get their money in a way that gains them the contempt of every one. They don't care for their contempt, and then they use their dishonest gains to buy off the contempt they have deserved."

Oblonsky smiled. "I simply don't consider him more dishonest than any other wealthy merchant or nobleman. They've all made their money alike: by their work and their intelligence."

"Oh, by what work? Do you call it work to get hold of concessions and speculate with them?"

"Of course its work. Work in this sense, that if it were not for him and others like him, there would have been no railways."

"But that's not work, like the work of a peasant or a learned profession."

"Granted, but its work in the sense that his activity produces a result - the railways. But of course you think the railways useless."

"No, that's another question; I am prepared to admit that they're useful. But all profit that is out of proportion to the labor expended is dishonest."

"But who is to define what is proportionate?"

"Making profit by dishonest means, by trickery," said Levin, conscious that he could not draw a distinct line between honesty and dishonesty. "Such as banking, for instance," he went on. "It is an evil - the amassing of huge fortunes without labor, just the same thing as with the spirit monopolies, it's only the form that's changed. Le roi est mort, vive le roi. No sooner were the spirit monopolies abolished then the railways came up, and banking companies; that, too, is profit without work."

What is most striking about this is the degree of moralizing taking place: Levin (and apparently others) find profit gained via "speculation on the railways" to be dishonest! Today such gains would be considered either shrewd or lucky; inherently dishonest does not enter the equation.

That is because we find the idea of "profit out of portion to the labor expended" an entirely foreign one. Consider Levin's next culprit: banking. He does not condemn a corrupt bank or an irresponsible lender - no - he condemns banking in general as an evil: an example of the 'amassing of huge fortunes without labor'.

This, it seems to me, does indeed resonate with some of the earlier arguments I have made pertaining to contemporary America. Doesn't that sound like 'fictional wealth'? My own position does not go remotely so far; I am concerned with artificial and/or predatory means of pumping up a market, their necessity to economic obesity, and the inevitable consequences that follow: inequity, social stratification, widening disparity between rich and poor, etc.

I suggest we quickly begin to reconsider this question in a contemporary light, only perhaps we frame it so:

"profit out of proportion to real/true value"

And where do find profit out of proportion to real value?


But let us first return to Anna Karenina and another conversation, this time between our good friend Stepan Arkadyevitch Oblonsky and Alexey Alexandrovitch Karenina:

"I consider, and I have embodied my views in a note on the subject, that in our day these immense salaries are evidence of the unsound economic
assiette [basis] of our finances."

"But what's to be done?" said Stepan Arkadyevitch. "Suppose a bank director gets ten thousand - well he's worth it; or an engineer gets twenty thousand - after all, it's a growing thing, you know!"

"I assume that a salary is the price paid for a commodity, and it ought to conform with the law of supply and demand. If the salary is fixed without any regard for that law, as, for instance, when I see two engineers leaving college together, both equally well trained and efficient, and one getting forty thousand while the other is satisfied with two; or when I see lawyers and hussars, having no special qualifications, appointed directors of banking companies with immense salaries, I conclude that the salary is not fixed in accordance with the law of supply and demand, but simply through personal interest. And this is an abuse of great gravity in itself, and one that reacts injuriously on the government service."
The notion that a salary ought to conform to supply and demand, is, from a contemporary point of view, nearly incomprehensible. 'Immense salaries' in disproportion to the actual value of a position are so commonplace today that we really don't even consider the moral/ethical abuse inherent in them, as does Alexey Alexandrovitch in the example above. The best some of us can do is feebly protest the very highest, most ludicrously astronomical salaries (ever-decreasingly assigned via merit). Indeed, this sort of consideration falls entirely outside our lexicon.

The point is that in matters of economics today when it comes to ethics and morality we are able to offer only the most rudimentary considerations. Our country is young; thus we are suffering from a sort of Old World (and its global influences) amnesia. We have chosen to ignore the moral/ethical consequence of the 'immense salary' (i.e.; corporate management, wall street bonuses, etc.) and the 'huge amassed profit out of proportion to real value' (i.e.; 'housing debacle', predatory lending, etc.).

Due to this amnesia we are rediscovering and reinventing the very same world we once streamed out of in droves, and unless we are able to first acknowledge and then expel (forcefully) these immoral and repugnant practices, the promise and possibility that America represents will wane.

Thus senior corporate management earning obscene amounts so wildly out of line with what they actually do has a literal socioeconomic consequence and, in light of this, a moral one as well. In today's world we see virtually none of our actors taking moral responsibility - or even consideration - for their actions; instead they seem too busy defending and rationalizing indefensible positions. They want to have their cake and eat it too.

Anywhere we can identify a set value wildly disproportionate to a product or service's real value, we know that trouble will eventually and necessarily ensue. We are slicing from a finite pie of social value: where one place receives some absurd amount disproportionate to its value, the other loses it. And where and who is this 'other' place? The poor, of course, hence the growing discrepancy.

The medical and insurance industries are perfect examples. Insurance companies, when they are in fact accountable for a bill, only agree to pay a portion of it (meaning the bill in full is a fiction). In response to this the hospital hikes its fees, and a game of cat and mouse ensues in which the consumer (or rather, the patient) becomes the ultimate victim, because in the event they must pay their own outrageous bill, they (for some reason) lack the leverage/rights afforded to the insurance companies to pay a reduced amount. They are stuck with the fictional value, so absurd most just throw up their hands and declare bankruptcy.

The fee hike is fictional because it is arbitrary. It does not reflect the real value of the product or service. Evidence of this is simply the obscene profits of insurance, medical, drug companies, etc... Something is out of whack, and it will necessarily catch up to us in terms of our overall economy, just as did the fictional wealth created by the banks and the housing market.

It is money unjustly made.

When we think of our economic health in an ethical sense - is profit derived from hard work? Ingenuity? Creativity? Persistence? Innovation? That is health. Is profit derived from trickery? Deception? Irresponsibility? Neglect? Predation? These are signs of sickness.

In short, call a doctor.

We need to return to a true sense of individual, moral/ethical accountability if our system is to have any future.

I heard on the radio today a woman talking about how their bank was 'unhappy' when she and her husband decided to purchase a house below their approved amount. As she put it, "We wanted to decide what we could afford, not the bank." The truth is they were very wise. The bank has some (MBA derived) equation that maximizes the very limits of affordability. They care absolutely nothing for their customer; it is all a means to derive the largest profit possible on the very margins of risk. That is wrong (as is the artificial cost of a home relative to earnings, but that is for another post).

Our economy and nation would be a far better place if we could only realize that genuine (not fabricated) consumer/citizen care and consideration results in a healthier life for all.

The current consumer/citizen is woefully exploited, especially the lesser among us. It is high time we realized the moral depravity of our current system.

Instead we seem hellbent on irrationally defending it. On the subject of 'immense salary', for instance, why is it a whole slew of Americans are engaged in a bizarre hero-worship of these very same characters who control a grossly disproportionate percentage of our nation's wealth (23.5%)? We seem no better than adoring sycophants. The best we can muster is jealousy, the worst a sort of delusional imitation. Sorry, but a fake Louis Vuitton purse, or for that matter a real one, does not make you a wealthy aristocrat!

To conclude, not too long ago these sorts of issues were discussed and considered quite freely among Americans. But since then, somehow, this notion of unrestrained capital - devoid of ethics, of morals, indeed of honor (to coin an oft-used word of late) - has sought and found refuge behind a protective shield of jingoism/patriotism. That, it strikes me, is a shame.

And not a terribly wise place to hide.

* Spirit Monopoly: The taxes on vodka became a key element of government finances in Tsarist Russia, providing at times up to 40% of state revenue. In 1863, the government monopoly on vodka production was repealed, causing prices to plummet and making vodka available even to low-income citizens


  1. I admire the complexity and moral depth of your analysis, even as I don't agree with all of it. But how many of the people I know can take a piece of historical literature and use it as a prism through which we can peel apart the layers of the philosophy of the underlying characters, which is to say, the society in which they lived? Not many, I say.

    Still, I think there are two distinct phenomena here, and they ought to be treated separately. Illegal, or legal but "predatory" behavior, relies on the incomplete knowledge of the consumer for its success. The consumer may have been actively misled, or is simply participating in a market of such complexity that he can be assumed to be ill-informed. You know what they say: if you're sitting at a poker table, and you don't know who the sucker is--it's you.

    On the other hand, there is the matter of absurdly inflated salaries. In and of themselves, I believe salaries today generally are a result of supply and demand, though the market for talent is necessarily inefficient. Ayn Rand said, "Money demands that you sell, not your weakness to men's stupidity, but your talent to their reason," and we can see in these examples that she is both right and wrong. Surely the negative amortization loan was a product aimed directly at man's stupidity; on the other hand, if my employer thought he could get when I'm providing him for less, he would probably do so. As he has not, I conclude that supply and demand are in at least partial control of my salary.

    OK, I've bored myself with my own comments now.

    Bottom line: great blog, Jeff!

  2. Thanks Scott! Great comment.

    Yes, I very much agree supply and demand are in proportion to your salary - that what you do is relatively proximate to what you receive in return.

    But I think there is, in general, a point where this 'supply and demand' model for salaries begins to break down, because the very top salaries in this country are, in my mind, very absurd - far more than any individual or family would ever need.

    The balance of wealth has been creeping out of proportion for the last 30-40 years (top 1%: 9% of wealth in 70s, 23.5% in 2007!). This simply has to change if our society is to prevail.

    I'm open to ideas as to how.

    Anyhow, thanks again for the comment!
    - Jeff

  3. Have to love any post tagged with Lev Tolstoy, Fictional Wealth and Louis Vuitton!
    Very interesting stuff. I wanted to offer more of a response, but I've already sat on my hands for almost two weeks, so for now I'll just go on record as saying I love that you're working to weave these threads together. (And I love the way you've laid-out the article!)

  4. Given the depth of his religious feelings, interesting that to my knowledge L. Tolstoy didn't ever go POV on a priest--did he?