The Tyranny of Meritocracy

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.