Separate and increasingly unequal

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Reihan Salam is guest-blogging for Andrew Sullivan, and he's just put up a typically thoughtful post on inequality:

It often seems as though right-wingers are trying to make light of inequality by pointing to consumption inequality, and that left-winger take inequality seriously by zeroing in on income and wealth inequality as meaningful metrics. I think, emphasis on think, that this is the wrong way of looking at things.

In The End of Equality, Mickey Kaus drew an insightful contrast between "Money Liberals," focused on income and wealth, and "Civic Liberals," focused on our shared institutions. His basic take was that while money inequality was a lost cause, we could create excellent schools and an excellent public healthcare system that all would be proud to use. These institutions, in turn, would serve as engines of mobility and opportunity. It's an attractive vision, though I can't say that it's my own. I suppose I'm more skeptical about the ability of even the best-run bureaucracies to adapt to fast-changing circumstances. But Kaus's framework is worth keeping in mind.

What exactly are the consumptionists telling us? My sense is that they are telling us that material deprivation isn't a pressing problem in the United States. This point, very narrowly understood, isn't very controversial. But it also doesn't establish that inequality is not a problem. Far from it. Consider the ever-present danger that a wealthy elite will use its disproportionate political power to entrench its privilege. Though I'm pretty optimistic about American life, and though I cheer lustily for the market economy, it seems clear to me that something like this state of affairs already exists. Of course, my view is a little idiosyncratic, e.g., I tend to see things like, say, the tobacco settlement or a cap-and-trade system or Wal-Mart agitating for ostensibly "progressive" labor market regulations as examples of this kind of oligarchic self-dealing, etc. Other views can just as easily fit this framework. Inequality isn't a problem because the hell of Anglo-Saxon capitalism is leading to people dying on their feet: it could be a problem "merely" because it corrupts our democratic institutions, a corruption that has corrosive effects on our life chances. That is, Money Liberalism could be an essential instrument for achieving Civic Liberalism.

Again, I don't actually think this view is right, but it's at least somewhat persuasive, which is more than can be said of the view that the economic immiseration of half or a third of Americans is the central fact of our time.

I also disagree with the notion that the concentration of wealth is a large political problem. Europe is, if anything, even more elite-dominated than America, despite radically less income inequality. And while the wealthy certainly have the ear of politicians, and also give a lot of money to those politicians, it's not clear to me how tightly these things are linked on matters of broad national policy. It's clear and obvious that people who give campaign contributions get favors that are large to them, but small from the perspective of the nation: a $14 million tax break for Florida loggers, or what have you. But the president of GM makes no campaign contributions; I bet he still gets his phone calls returned by politicians, especially if they happen to be from Michigan. I think that if there is a problem, it is that high concentrations of economic power may make the current distribution of wealth intergenerationally self-sustaining. I don't mean because they lobby for the repeal of the estate tax; the tax falls hardest on the lower tier of wealthy people, which is not where inequality is increasing the fastest. Also, the increase in inequality seems more linked to job earnings than to assets. But in America, money buys access to things, particularly education, but also opportunities like unpaid internships, that make it easier to get a high-paying job. This may be more worrisome than big wealth concentrations. Wealth is eroded over time, either by lazy heirs or the sheer multiplication of descendants; hence the phrase "shirtsleeves to shirtsleeves in three generations". But if the rich start passing on, not money, but the habits, skills, and social capital to make your own money, the result could be an aristocracy more deeply entrenched than any ever seen in America. Conservatives might rejoinder that this elite might be more entrenched, but less effective, since much of what it is handing its descendants are positive endowments such as virtue and education; endowments that can't be realized without a substantial amount of work by those descendants. I don't think that's right--our education system daily gives lie to the notion that America nurtures any sort of equality of opportunity--but even if it were, we'd need to think hard about the character of a nation with a hereditary educational aristocracy.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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