The standard economic model of how economies work is that people produce and exchange goods–activities are essentially productive. While this view has made for a thriving profession of economics, it is not a correct view of reality. Through control of a society and its key elements (economy, government, social system), some people/groups in the society obtain income from others. This income is not based on production, but some form of taking away from/harming others. The definition of harm used here: one group uses resources to structure the alternatives of the second group in such a way that the first group benefits. “Your money or your life” structures peoples’ decision making so that they will give up their money. Monopolists obtain monopoly profits by restricting production. The institution of slavery has various mechanisms, including force and restricting the ability to flee, to keep people in bondage. Harm is essentially unproductive activity, so it is a reallocation from productive activity and those that undertake it. (The actual producers of cotton in slavery are not receiving the value of what they produced. Monopolists do sell goods, but their monopoly profits make a claim on production even though the monopoly action was restricting production.)
This harm is typically resisted by those being harmed. And there is competition from other groups-internally and externally–for control of the society. So, there are two basic aspects in a social system where harm is important: obtaining income and maintaining control. This is expressed in the principal categories used in the website which can be seen in the right column of each page. Nonetheless, the productive part of the society is the larger, and should not be forgotten.
Income through harm can be obtained through the economy, government, or the broader social system. Typically all of these are involved, but one sector is more apparent. Categories principally related to the economy include Harm through the market, Control of land and natural resources, Crime, , and Slavery/Forced labor. Rent seeking and corruption are two descriptions for obtaining income through harm through the government. Discrimination: race – gender – ethnic – religious – class, and Discrimination against women typically are thought of as relating to the broader social system. These are not a complete list of types of harm that might be included.
Staying in power – Struggle for control is a central part of the operation of a productive + harmful political and economic system. For control we have important sub-categories including Conflict, Harming people – Keeping people oppressed and Opposing oppression and injustice .
These are the categories that help us understand the basic organization of a productive + harmful political and economic system.
This is the point of the harmful part of a productive + harmful system: obtaining income not through productive means, but by unproductive means–taking it away from others. The central idea of this website is that one group uses resources to restructure the alternatives of the second group in such a way that the first group benefits. The harmful part of the economy allocates a significant part of the output of a productive economy to itself.
Oligopolies and monopolies are very important ways of obtaining income without providing a productive service. They produce goods, a productive service. However, they receive additional income by raising prices, and their oligopoly/monopoly profits are distinguished by economists from normal profits and other expenses, which are the returns to productive activity. There are other harmful aspects to concentration and large firms as well, including restriction of innovation, using patents to defend market position, labor market power, including non-compete requirements for their employees, and substantial political power. It is important to bring out that this harm involves the productive sector. Goods are being produced, but part of the income is from harmful activity. This is very often true–harmful activity is intertwined with productive. Also see Obtaining income from the government as both are often involved. Tax havens are another way in which taxes can be minimized and income from corruption can be laundered.
Various terms have been used to describe obtaining income through the government that does not provide a good or service. One of them is corruption. This typically refers to acts that people consider corrupt, such as government officials taking government money that is not theirs. People or firms not in the government can also obtain favorable treatment from the government. Taxes can be avoided, for example. This is sometimes called corruption and sometimes not. Rent-seeking is a more neutral term used to some degree in orthodox economics.
Transparency International defines corruption as the abuse of entrusted power for private gain. Though this definition encompasses corrupt practices in both the public and private sectors, the Corruption Perceptions Index (CPI) ranks 180 countries according to the perception of corruption in the public sector only (2020). With a scale of zero (highly corrupt) to 100 (very clean), more than two-thirds of countries score below 50, with an average score of only 43. It is fair to say that corruption is significant in most countries of the world.
The government is more than just a means of obtaining income through harm. Since the spread of greater democracy, governments engage to some degree in democratic decision-making, including action to reduce harm, such as the establishment and enforcement of anti-trust laws, and devoting a higher percentage of government income to valuable services such as education. Productive and harmful activities are present in varying ways and degrees in the governments of countries in the world. Unfortunately, in orthodox government economics texts, governments are treated as democratic, without raising at all the possibility of, or the extent to which, there is oligarchic control of government (or other social institutions) . This completely obscures the centuries-old struggle for democracy, which is far from over. Freedom in the World (2020), Freedom House’s annual global report on political rights and civil liberties covering 195 countries, addresses the question. Separate scores are awarded for political rights and for civil rights which, weighted equally, are used to determine the status of Free, Partly Free, and Not Free. Forty-three percent of the countries of the world are evaluated as free, while 57 percent are classified as either Not Free (25 percent) or Partly Free (32 percent).
Control of land and natural resources is an important part of Harm through the market, and Obtaining income through the government. Most control of land and natural resources has been established in the past and in vast areas of the world this control went to elites, with present land-holding patterns still reflecting this. Gaining and maintaining control is still important today. First, large land deals and violence and intimidation can wrest control from local people. Secondly, land use for human products such as cattle and palm oil can threaten native species such as the orangutan. Governments play a large role in the control of land and natural resources as they assign and maintain land ownership.
Discrimination against women occurs throughout the world in politics and law, the economy, and in social customs and attitudes. In politics and law, women have only 25 percent of parliamentary seats worldwide and laws in many countries continue to institutionalize second class status for women and girls with regard to nationality and citizenship, health, education, marital rights, employment rights, parental rights, inheritance and property rights. In the economy, there is a gender pay gap in almost all countries and top jobs are typically held by men. Social customs still harm women, as manifest in the prevalence of violence against women, with 18 percent of women with partners reporting sexual and/or physical violence in the most recent 12 months (UN Women). See the UN’s Gender Inequality Index for a measure of gender inequality in the countries of the world. Also see Discrimination: race – gender – ethnic – religious – class on this website, which covers the general category of discrimination.
These various forms of discrimination are barriers to entry into the higher income levels of a productive + harmful society, which benefit from unproductive sources of income. Discrimination can arise when people are of a different race, gender, ethnicity, nationality or religion. An important manifestation is racism, sexism, or other strong prejudice against a given group.
The way such discriminatory barriers to entry work is to limit access to worthwhile employment, as well as other social advantages such as education, the ability to marry outside of one’s class or group and the transmission of wealth. Discrimination is a type of unproductive activity that obtains income by restricting the productive opportunities and income of others, and also limits access to the elite group that receives such income. Barriers to entry have also been discussed in heterodox economics and sociology using the terms stratification economics, social closure, opportunity hoarding, categorical inequality, and ascriptive inequality. For further reading, see Edward G. Grabb, Theories of Social Inequality.
Two major costs of crime are the cost to the victim and the cost of preventing crime. There does not appear to be a worldwide estimate for the cost of crime. Estimates for the cost of crime in the United States have ranged from $690 billion to $3.41 trillion according to a 2017 GAO look at the issue.
The International Labor Organization estimates that 40 million people are victims of modern slavery. This includes 25 million people in forced labor and 15 million people in forced marriage. This means that there are 5.4 victims of modern slavery for every thousand people in the world, about 0.5 percent (one half of one percent).
Those in forced labor are being forced to work under threat or coercion as domestic workers, on construction sites, in clandestine factories, on farms and fishing boats, in other sectors, and in the sex industry. They are forced to work by private individuals and groups or by state authorities. In many cases, the products they made and the services they provided end up in seemingly legitimate commercial channels.
Most victims of forced labor suffered multiple forms of coercion from employers or recruiters as a way of preventing them from being able to leave the situation. Nearly one-quarter of victims (24 per cent) had their wages withheld or were prevented from leaving by threats of non-payment of due wages. This was followed by threats of violence (17 per cent), acts of physical violence (16 per cent), and threats against family (12 per cent). For women, 7 per cent of victims reported acts of sexual violence.
Those in forced marriage were living in a forced marriage to which they had not consented. That is, they were enduring a situation that involved having lost their sexual autonomy and often involved providing labor under the guise of “marriage”.
Women and girls are disproportionately affected by modern slavery, accounting for 28.7 million, or 71 per cent of the overall total. One in four victims of modern slavery were children. (This section taken from ILO 2017)
Tax havens facilitate important types of harmful activity: money obtained from crime, from corruption, money sent abroad to avoid taxes, and for corporate tax avoidance schemes which falsely but often legally enable corporations to transfer profits earned in higher tax destinations to these low tax destinations, thus reducing or avoiding taxes. It is a vital part of these types of harm.
According the estimates of Gabriel Zucman, money in offshore destinations, with ownership obscured from the public, amounts to about 8 per cent of the global financial assets of households, equivalent to at least $7.6 trillion. The figure is much worse for developing countries. For Africa, Zuckman estimates that tax havens hold about 30 percent of Africa’s financial wealth, and in Russia, 50 percent or more.
“A tax haven provides facilities that enable people, corporations and other entities escape (and frequently undermine) the laws, rules and regulations of other jurisdictions, using secrecy as a prime tool. Those rules include taxes, but also criminal laws, disclosure rules (transparency), financial regulation, inheritance rules, and more” (Tax Justice Network). “A global industry has developed involving the world’s biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for their tax- and law-dodging clients” (Tax Justice Network). This secret money can then be used to invest and consume, especially in developed countries. Financial assets and often high-priced consumption goods such as real estate can be purchased without the source being known or challenged. Thus the United States and other developed countries benefit greatly from tax havens.
Staying in power/struggle for control
This section considers the second of two fundamental ways in which a social system where harm is important differs from a productive one: maintaining control. It is a much more substantial problem for societies where harm is important. Threats come from two sources, those who would replace them, while maintaining harm, and those who would reduce harm. This control takes place in the political, economic and social spheres; in the consideration here, the emphasis is on the political.
Two groups of economic historians writing from an orthodox economic perspective have discussed such societies, Daron Acemoglu and James A. Robinson (2012), and Douglass North, John Joseph Wallis, and Barry R. Weingast (2009).
North, Wallace and Weingast use limited access order or natural state.
A natural state… form[s] a dominant coalition that limits access to valuable resources—land, labor, capital—or access to and control of valuable activities—such as trade, worship, and education—to elite groups. The creation of rents through limiting access provides the glue that holds the coalition together, enabling elite groups to make credible commitments to one another to support the regime, perform their functions, and refrain from violence (2009, 30).
They estimate that limited access orders have about 85 percent of the world’s population.
Acemoglu and Robinson refer to extractive economic institutions that extract wealth from one subset of society to benefit a different subset and extractive political institutions which
concentrate power in the hands of a narrow elite and place few constraints on the exercise of this power. Economic institutions are then often structured by this elite to extract resources from the rest of society. Extractive economic institutions thus naturally accompany extractive political institutions. In fact, they must inherently depend on extractive political institutions for their survival (2012, 81).
Both sets of authors distinguish a second group of countries that has emerged—an open access order for North, Wallace and Weingast and inclusive for Acemoglu and Robinson, with about 15 percent of the world’s population—those that live in developed countries.
Freedom in the World (2020), Freedom House’s annual global report on political rights and civil liberties covering 195 countries, addresses the same topic. Separate scores are awarded for political rights and for civil rights which, weighted equally, are used to determine the status of Free, Partly Free, and Not Free. Forty-three percent of the countries of the world are evaluated as free, while 57 percent are classified as either Not Free (25 percent) or Partly Free (32 percent).
Three subcategories bring out important aspects of maintaining control.
Conflict is an important part of harm which as harm has not received the attention that it deserves. It is thought of as “national defense” (a productive good) in the pursuit of “strategic self-interest” with some “collateral damage” which minimizes its role as harm.
Harming people – Keeping people oppressed brings out the often brutal oppression of people by those who control productive + harmful economic systems.
Opposing oppression and injustice illustrates how people have fought against oppression and injustice. (This section is perhaps an inadequate appreciation for the struggle that people have waged, but it is something. ) This section also includes some mention of the struggle between democratic and oligarchic elements in a given nation which result in victories won by democratic forces. Governments and other parts of society can act to reduce harm. As an assumption of orthodox economics is that governments almost always do act in this way, we have tried to bring out the evidence for the opposing view in this website.
Conflict Conflict has been an essential element, probably the most important one, in creating societies where harm is important. In terms of our two basic categories, it is both a “means of obtaining income through harm” and an important way of “staying in power/struggling for control.” It is easy to see in the past: one group or nation conquered another and put those conquered in a subsidiary status, taking their land, controlling their labor, taxing them and placing them in an inferior position through various means. (See the sections on harm in Understanding harm, especially conflict theory, some economic historians, and primitive accumulation in the exploitation in Marxism section.) These patterns frequently continue into the present, in (usually) weakened, but still present, form.
Conflict can also arise when people who are oppressed fight for their freedom.
Conflict, even narrowly defined, is an important activity. In 2019, there were 54 state-based armed and 67 non-state armed conflicts (Petterson and Öberg 2020). The Stockholm International Peace Research Institute estimates world military expenditure at $1.8 trillion in 2019, or 2.2 percent of global gross domestic product (SIPRI 2020). It does use resources that can be devoted to productive activity. The drastic worsening of peoples’ lives is a second major source of harm from conflict. For example, at the end of 2019, 79.5 million people were forcibly displaced worldwide as a result of persecution, conflict, violence, or human rights violations (UNHCR 2020). Approximately one of every 100 people worldwide have moved from normal lives to the bleakness and desperation of a refugee situation.
This section gives examples of how people are oppressed / harmed by exploitation. Should be read in conjunction with Opposing oppression and injustice. This is part of staying in power/struggle for control. It is a separate section because of its importance.
People oppose injustice and oppression in a social system. These are some examples of the opposition.