“That Makes Me Smart”

“Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required.”-Statement by the Trump campaign.

I have not been posting here as much as usual because I have been hard at work completing a book about a circle of friends who lived in the Victorian and Edwardian era. Their culture was still much more focused on “honor” than “success.” (This sent them to the libel courts in foolish attempts to preserve their reputations on a regular basis.)

Aristocrats were, of course, entitled and out of touch with the needs of the working class. Yet they did have an ideal of “noblesse oblige,” that is to say, if God favored you by allowing you to be born Lord Wibblebottom of Wembley then this fortune came with a responsibility to society and to those who were less fortunate. The sense of duty and honor was positively fatal to the aristocracy during World War I when so many sons were killed in battle. There was no question that a man had a duty to defend his country. Nobles did not always live up to this ideal, nor were they always aware of their class assumptions, but at least the ideal existed.

In the rarefied air of today’s super rich this ideal is not even present. People like Donald Trump use the language of duty and honor, as in the Trump campaign’s “fiduciary duty,” but “duty” includes no obligation to the larger society whatsoever.

A couple of points, there is no “fiduciary duty” to avoid paying taxes. A 2013 article in The Guardian notes:

Farrer & Co was commissioned to look at the issue by tax justice commissioners who fear executives are trying to justify tax avoidance on the grounds that their priority is to enhance shareholder returns.

The legal assessment from Farrer & Co, which numbers the Queen among its clients, states: “It is not possible to construe a director’s duty to promote the success of the company as constituting a positive duty to avoid tax.”

Farrer says company directors have a wide discretion when calculating the social impact of their decisions. If they choose to pay tax responsibly, they would in fact be protected by the applicable law rather than at risk of liability, it explains.

It seems amazing that this should even be a question. What is fascinating about the 2013 article is that it quotes a representative who says executives “are being told by their tax advisers that they have a duty to adopt anti-social tax measures.”

Think about this for a moment. A duty– a moral obligation– not to contribute to your country.

The idea that it is a moral obligation to avoid taxes is related to another myth that has taken hold of our discourse, the idea that the CEO of a company is morally bound to focus on nothing but maximizing shareholder value.  Yves Smith wrote in Naked Capitalism:

…that board and managements are somehow obligated to “maximize shareholder value” is patently false. Legally, shareholders’ equity is a residual claim, inferior to all other obligations. Boards and management are required to satisfy all of the company’s commitments, which include payments to vendors (including employees), satisfying product warranties, paying various creditors, paying taxes, and meeting various regulatory requirements (including workplace and product safety rules and environmental regulations)…

this idea did not come out of legal analysis, changes in regulation, or court decisions. It was simply an academic theory that went mainstream. And to add insult to injury, the version of the Jensen formula that became popular was its worst possible embodiment.

And as John Kay has stressed, when companies try to “maximize shareholder value,” they don’t succeed

the most profitable companies are not the most profit-oriented…In their 2002 book, Built to Last: Successful Habits of Visionary Companies, Jim Collins and Jerry Porras compared outstanding companies with adequate but less remarkable companies with similar operations…in each case: the company that put more emphasis on profit in its declaration of objectives was the less profitable in its financial statements….When a corporation becomes financialized in this way, the top executives no longer concern themselves with investing in the productive capabilities of employees, the foundation for rising living standards. Instead they become focused on generating financial profits that can justify ever higher stock prices – in large part because, through their stock-based compensation, high stock prices translate into megabucks for these corporate executives themselves.

The Trump campaign has gone even a step further with this, making the case that Trump has a duty to avoid paying personal taxes. This is framed as a responsibility to his family. Imagine if you were to try to make the case that you were not going to pay your income tax because you have a duty to your family to provide them with more money?

My interest in this is in how language is used. We use a different standard for middle class and upper class individuals when we talk about income. Trump has profits. Profits are good because they fuel the economy and create jobs. You have savings. Savings are bad because they show a lack of consumer confidence. In both cases the words refer to money that is being hoarded for future personal use.

Then there is the word “responsibility.” I would like to go back to something I said on this subject in 2013 (you can read the full article via the link above):

…Asked what “Thatcherism” was he said, and I’m paraphrasing, Thatcherism was not a political philosophy, it was a way of thinking.  Thatcher, he said, stood for “responsibility.”

I was thinking about this and it occurred to me that this is not a completed concept.  You can’t stand for “responsibility” you have to finish the sentence.  Responsibility to what?

I got to thinking about classical literature and all of those tales about duty and honor.  I thought of something David Denby wrote about the Iliad in Great Books, “Accepting death in battle as inevitable, the Greek and Trojan aristocrats of the Iliad experience the world not as pleasant or unpleasant, not as good and evil, but as glorious or shameful.”

sing the world “responsibility” without saying “to what” calls these types of commitments to mind.  It calls to mind the responsibility of a parent to child.

Yet when I think of Thatcher and Reagan it is a different kind of “responsibility” that comes to mind.  This is often phrased as “personal responsibility.”  It means that each person should take control of his own life, pull himself up by his bootstraps and make his own way. As the name suggests “personal responsibility” is actually a limiting of responsibility from society as a whole to one person.  I am responsible for myself, you are responsible for yourself…

Pulling yourself up by your bootstraps is empowering when it means you have the opportunity to break out of rigid social hierarchies.  It is less empowering when it is used to explain why your boss does not have any responsibility to you.  “It is my responsibility to reduce costs and make the largest profits possible so that I can do my duty and create jobs.  It is not my responsibility to ensure that those jobs have living wages.”

Many of the super-wealthy got that way and remain that way by shielding themselves from personal responsibility while at the same time using the language of personal responsibility to justify not participating in the social contact that binds the rest of us.

The article linked above talks about and Wake Forest Law Review by Brent T. White of the University of Arizona that discusses how middle class borrowers were disadvantaged in the crash of 2008 because we held on to old concepts of honor and duty, which included paying mortgages even when underwater. “Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility.”

White called this, in his academic parlance, “norm asymmetry.” What it means in layman’s terms is that most of us feel honor bound to pay our bills, and to avoid taking advantage of the system. (For example millions of people who are eligible for food stamps do not take them as a point of pride and a belief in the virtue of self-reliance.)

If using every advantage the system can provide is, as Trump suggests, “smart,” then those proud people are, it seems, “stupid.”

We, every day Americans, are proud of these virtues. We are proud that we respect the system, work hard and “play by the rules.” Words like “duty” and “responsibility” are meaningful to us.

But if “responsibility” when I use it means I have a responsibility to be contributing citizen, and “responsibility” when you use it means “every man for himself,” then we are not having the same conversation.

In an era when most members of congress are millionaires, and most of us are not, I think it is worth stopping and asking, when a politician uses a word like “responsibility” if he is really speaking the same language.

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