By Nov 7 2011, 6:24 PM ET 728 I don't care about income inequality. I care about the absolute condition of the poor--whether they are hungry, cold, and sick. But I do not care about the gap between their incomes, and those of Warren Buffett and Bill Gates. Nor the ratio of Gates and Buffett's incomes to mine. And I'm not sure why anyone should. Other than pure envy, it's hard to see how I could somehow be made worse off if Bill Gates' income suddenly doubled, but everything else remained the same.
But
while I do not care about gaps and ratios, I do care about opportunity.
It is fine that CEOs earn many times what their workers do--but it is
not fine if some are born to be workers, and others to be CEOs. And
unfortunately, that increasingly seems to be the story in America, as
Scott Winship outlines in a fine new piece for National Review:
If you're reading this essay, chances are pretty good that your household income puts you in one of the top two fifths, or that you can expect to be there at age 40. (We're talking about roughly $90,000 for an entire household.) How would you feel about your child's having only a 17 percent chance of achieving the equivalent status as an adult? That's how many kids with parents in the bottom fifth around 1970 made it to the top two-fifths by the early 2000s. In fact, if the last generation is any guide, your child growing up in the top two-fifths today will have a 60 percent chance of being in the top two fifths as an adult. That's the impact of picking the right parents -- increasing the chances of ending up middle- to upper-middle class by a factor of three or four.That paragraph captures the essence of the problem--and also, why we may well despair of solving it. How would upper-middle-class parents feel about children who had only a 17% chance of achieving a household income above $90,000? They would be horrified. And then they would busily start using the full scope of their talents--their financial resources, their educational skills, and their social capital--to "fix it".
Arguably, this
is just what they've done. Rocked by the shattering forces of the
Depression and World War II (and flush with the prosperity of the
postwar years), the old moneyed elites of the Northeast and Midwest did
something really remarkable: they voluntarily abdicated their position.
Ivy League colleges threw open their doors to the bourgeois masses, and cut back on the Saint Grottlesex
crowd. The old WASP bastions democratized or were swept away by
nimbler competitors who didn't scruple to sacrifice profits because it
might look bad to the boys in the club. First Jews, Irish, and
Italians, and then later blacks, Hispanics, and Asians, burst through
doors that had once been reserved for the sort of people who got married
and buried at St. Thomas Church. They were joined by the children of
undistinguished WASP families from America's small towns, suburbs, and
tenements.
The architects of the transition
envisioned a shift to a new meritocratic society in which the
circumstances of one's birth didn't matter--only hard work and talent.
But that hasn't happened. Instead, we have a system that has less
mobility than the old, forthrightly aristocratic version.
Research suggests that by the time they were in their 40s, American children born in the 1950s should have experienced the same earnings mobility as their Swedish counterparts if the economic payoff for additional schooling were not so much higher in the United States -- and, more important, if that payoff had not grown so much between generations. And educational mobility in the two countries -- the connection between parent and child schooling -- was actually very similar for this generation. Opportunity for top slots may therefore have been as widespread in the United States as in Sweden.
However, evidence indicates that American children born since the 1950s have had lower educational mobility than children in Sweden and other Western nations. And recent research indicates that the link between parental income and educational advantages on one hand and child academic outcomes on the other is stronger in the United States than in other Western countries.
You can argue about why this
is--are the upper middle class transmitting real skills, or pull? But
does it matter? As an editor at The Economist once noted to me, it's
actually rather more worrying if what they're giving their children is a
strong education and an absolutely ferocious work ethic. An
aristocracy that simply bequeaths money and social position to its
children will eventually fall. And aristocracy that bequeaths the
actual skills required to earn more money than everyone else is self
perpetuating.
And self-legitimating. The old
aristocracy was, I think, at least dimly aware that it wasn't quite
fair for them to have what they had by mere virtue of being born to the
right parents. But in the new aristocracy, it is rarely enough to just
get born to the right parents; you also have to work very hard. (Higher
earning men are now more likely
to work more than 50 hours a week than are men in lower earnings
quintiles.) Whatever the systemic injustices, it's also quite clear to
everyone . . . even parasitic leeches of investment bankers . . . that
their salaries only come as the result of frantic effort.
The
ability of one's parents to confer such enduring advantages is
obviously unfair. And while I don't want to say that a society cannot
last that way--obviously, many have, for hundreds of years--I don't
think it's healthy for society. It is hard to get civic engagement, or
respect for the law, when the bottom 40% or so feels that the game is
rigged.
It's also worrying because, as Ross Douthat points out in the Times, recently, the meritocracy hasn't done such a great job.
Oh, it's easy to cavil--the old moneyed elite didn't do such a great
job in the 1920s, now did it? But I think that rather misses the point:
shouldn't the educational meritocracy, which really is very different
from the combination of WASP elites and up-from-nowhere untutored
operators, have done better?
Oh, I
know--you want to break out your favorite whipping boy. Barney Frank,
Milton Friedman, the CEOs of Fannie and Freddie, Ronald Reagan, Alan
Greenspan . . . we've rehearsed the list a hundred times over the last
few years, and I know you'd be happy to give one more dramatic reading.
But
as I think Ross is saying, this overlooks a more important question,
which is why the system went wrong. Don't tell me it got hostage to the
wrong ideology--tell me why all those professors we paid millions of
dollars to study economics couldn't provide a convincing rebuttal to
that ideology in advance of the crash. Don't tell me that regulators
were stupid or bankers got greedy until you first explain to me why tens
of thousands of very well educated people, most of them graduates of
colleges and professional schools that had aggressively winnowed them
based on intelligence, barely outperformed a bunch of upstart micks,
third-generation coupon-clipping WASP dimwits, and central bankers who
still worshipped the barbarous relic of the gold standard?
The
new meritocracy doesn't seem to be much better, on any dimension, than
the old aristocracy. It's just more persistent, in every sense of the
word.