Earned Success and Learned Helplessness

[hernan]

In today's Wall Street Journal article "America and the Value of 'Earned Success'", Arthur Brooks contrasts the American ideal of defining your own future and achieving success on the basis of your own merit and hard work with the Spanish (and, generally, European) democratic socialist ideal of unearned benefits. Earned success, he argues, leads to life satisfaction while unearned benefits leads to learned helplessness because people learn that rewards and punishments are not tied to merit and effort. In such a situation, "people simply give up and stop trying to succeed." But there are alternatives.

One alternative is to nominally comply with the law while avoiding the worst consequences of it. In the New York Times article, "How Apple Sidesteps Billions in Taxes", Apple is accused of tax avoidance, as for example moving income from high-tax California to no-tax Nevada. While the mobs are grabbing their pitchforks and blaming Apple (and companies like it) for California's chronic budget problems, there is nothing illegal in it's tax avoidance strategy. Nor is it immoral, the state is not a charity. But nominal compliance can only go so far.

Another alternative is revolution. To be sure, this is the alternative that many instinctively reach to when times are hard. But the problem is that revolutions often replace one dictatorship with another or devolve into civil wars largely because there is almost always a large segment of the population, if not a majority, dependent upon the status quo, no matter how bad it may seem to those pursuing success. Worse, revolutions seldom benefit those fighting for change. And the democratic version of this, throwing the bums out of office, rarely has any discernible effect on systemic dysfunction.

Which leaves us with, perhaps, the single best alternative: going underground. The underground economy (the "shadow economy", or "black market") is a market in goods and services that operates outside of formal social and political structures. It's what results when people ignore the law.

According to the IMF report "Hiding in the Shadows: The Growth of the Underground Economy", "shadow economic activities have long been a fact of life—and are now increasing around the world." Of course, measuring the underground economy is difficult but, as of the date of the 2002 report, the underground economy constituted 35–44% of economic activity in the developing world and 14–16% in the developed countries, Greece and Italy lead with 30% and 27%, respectively. Other economists have estimated as much as half the Greek and Italian economy was already underground before the sovereign debt crisis erupted. And these numbers have probably only increased in southern Europe since.

Operating in an underground economy brings many risks. Not only are those who deal outside the law at risk of prosecution but they are also, as a practical matter, deprived of the protection of the law and, thus, can become targets of crime.

However, in practice, because thriving underground economies sap resources from the state and provide alternative opportunities, there is often little or no effective enforcement and legal protection of legitimate activity (absent political connections) is, in any case, scant.

In any case, the risks associated with operating in the underground economy can easily outweigh the costs.

So next time someone suggests doing business under the table, remember, they are not just defying the law, they are escaping the trap of learned helplessness. So support your local underground economy.

http://www.conquistador.org/newsletterissue?newsletterIssueEntityId=102076651290

[hernan]

Someone reminded me of Ayn Rand's alternative: going Galt. But while that makes for great drama, especially when you burn your assets, it's not really a practical alternative for most individuals. In a way, though, I think the underground economy is the everyman's Galt's Gulch.

What do you think?

[softwareNerd]

Someone reminded me of Ayn Rand's alternative: going Galt. But while that makes for great drama, especially when you burn your assets, it's not really a practical alternative for most individuals. In a way, though, I think the underground economy is the everyman's Galt's Gulch.

The underground economy can make sense in some professions within some countries. For instance, in the U.S. it would not be practical for the majority of skilled professions.

[hernan]

The underground economy can make sense in some professions within some countries. For instance, in the U.S. it would not be practical for the majority of skilled professions.

My impression is that, in general, it is most appropriate to the lowest sphere of the economy. Obviously it won't work for big fat obvious targets like big companies. But it is very easy for the unskilled or semiskilled self employed. And, similarly, it is most appropriate for the worst economies. The more overbearing the state, the more attractive the option of going underground. While things are far from perfect in the U.S., they are nowhere near as bad as some countries.

[Spiral Architect]

My impression is that, in general, it is most appropriate to the lowest sphere of the economy. Obviously it won't work for big fat obvious targets like big companies. But it is very easy for the unskilled or semiskilled self employed. And, similarly, it is most appropriate for the worst economies. The more overbearing the state, the more attractive the option of going underground. While things are far from perfect in the U.S., they are nowhere near as bad as some countries.

If you mean a hair dresser or mechanic working for cash out of their home, outside if having a permit or some such in addition to being untaxable, then yes is can be very practical and neccessary. It is also alredy happeneing. "Going on strike" was of course a drama to essentialize the principles involved but it could also be pratical or moral. It depends on how far society has gone to the dark side. It is also worth noting that AS did make small references to that to in demonstrating that men of virtue would be forced to become criminals to live in such a State. When is using the "underground" moral? When is the point one should "opt out"? Interesting subjects indeed.

[softwareNerd]

When is using the "underground" moral?

Whenever it is practical. Trading with someone else is moral if it the right trade for you. If the trade is illegal, it adds certain aspects that one must consider. There is the risk and cost of being caught. Then, there's the risk and cost of a deal which a court will no enforce if it goes bad. When the stakes are big -- as in prohibition and drug-running -- participants must often pay for their own private "law" enforcers.

[hernan]

One way to think about the question: what would you recommend a Greek Objectivist do? (Besides emmigrate?)

[hernan]

A few relevant articles:

http://www.cnbc.com/id/47813158

http://www.newcriterion.com/articles.cfm/Future-tense--X--The-fourth-revolution-7395

http://spectator.org/archives/2012/06/14/its-about-reality-not-austerit

The problem that confronts Greeks, and the PIIGS, generally, is fascinating in its own right but I think it's worth thinking about since there is every possibility that it won't end there.

[FrolicsomeQuipster]

This thread made me wonder, will the Bioshock after Infinite feature an underground city?