The Market’s Eduardo Saverin Problem
Eduardo Saverin, co-founder of Facebook and one of world’s newest billionaires, has renounced his US citizenship to save an estimated $67 million on taxes. The US is the only country in the world to levy personal income tax on all its citizens world wide, irrespective of residence.
By renouncing one’s US citizenship, it thus becomes possible to block the IRS. Between 2008 and 2011, the number of “renunciants” increased 8 fold. The renunciation of US citizenship for the purpose of lessening one’s tax liability, therefore, is not uncommon. And yet Saverin’s renunciation (he was born in Brazil and had enjoyed dual citizenship with the US) has generated howls of protest. “He owes America,” implored Huffington Post blogger Farhad Manjoo. US Senator Jack Reed, D-RI) in his criticism of Saverin also invokes the ideal of citizenship. He urged Homeland Security Janet Napolitano to bar Saverin from ever re-entering the US.
Libertarians, on the other hand, defend Saverin. “Saverin got rich by creating immeasurable value for Americans,” notes Aaron Ross Powell. Thanks to Saverin, “many other enormously successful companies” were created, companies that “employ thousands of Americans, who not only are more prosperous…but [who] also pay taxes on all their earnings. The libertarian defense, while celebrating free choice, also, ironically, invokes the “common good.”
Both these positions, however, obscure the problem. Whether Saverin owes or is owed turns on a calculation: did we Americans do more for him or did he do more for us. But the problem is not about accounting. It’s institutional. The problem is the market itself.
Charles Schultze, chairman of the Council of Economic Advisors under Carter and an analyst with the Brookings Institution for the past 40 years, articulated a view of the market that is about as canonical as anything gets in American politics:
Market-like arrangements not only minimize the need for coercion as a means of organizing society; they also reduce the need for compassion, patriotism, brotherly love, and cultural solidarity as motivating forces behind social improvements. Harnessing the ‘base’ motives of material self-interest to promote the common good is perhaps the most important social incentive mankind has yet achieved.
There it is! Saverin is simply doing what every proponent (and I assume this includes Manjoo, Reed, and Powell) of free markets celebrates. He is harnessing his own base motives of material self-interest. Moreover, if he were motivated by some broader sense of citizenship and solidarity (Manjoo and Reed) or if measures of the common good (value and job creation) were used to assess his activity (Powell), market principles would have to be abandoned. Manjoo, Reed, and Powell invoke standards of some larger social purposes. Each slips on that slope that leads to democratic planning.
They can’t have it both ways. The embrace of individual market freedom as freedom is inconsistent with either the embrace of citizenship or measures of the common good. Appeals to citizenship end with the restriction of individual choice (or in the case of Saverin, punishment). Appeals to the common good end with the government regulation of market activity generally.
The problem of equating market freedom with freedom, however, cuts even deeper. Evidence of compassion, patriotism, brotherly love, and cultural solidarity as motivating forces is what defines a just society. Market societies that understand such motivations as constraints on individual freedom have no recourse but to coerce individuals to contribute to whatever the power believe to be the common good (hence, the singular effort to tax personal income worldwide). Or to put it another way, market societies cannot support a common-good ethic easily. The aggregate of individual private interests simply ends up as a war of all against all.
Saverin is an easy target. But the off-shoring of jobs and profits is far less so. Staving off environmental catastrophe or grotesque inequality or wars of aggression and theft, while keeping market sensibilities intact, becomes virtually impossible.