“Inequality Starts In The Crib”: The United States Is Not A Meritocracy
The entire conservative ideological program on economics depends on cosmic justice: the idea that those who develop talent and work hard will succeed as they deserve, while those who are lazy and without skills will fail as they ought. That meritocratic concept is the justification for slashing all forms of assistance to the poor and the middle class from food stamps to healthcare. Further, if the rich got there by just deserts, then they should get even more money to keep being so productive for everyone else.
But if it turns out that there is no meritocracy–if the rich get there through privilege and luck rather than industry and talent–then the entire rest of the conservative agenda morally falls apart.
It just so happens that a new study shows that the United States does not, in fact, have a meritocracy:
America is the land of opportunity, just for some more than others. That’s because, in large part, inequality starts in the crib. Rich parents can afford to spend more time and money on their kids, and that gap has only grown the past few decades. Indeed, economists Greg Duncan and Richard Murnane calculate that, between 1972 and 2006, high-income parents increased their spending on “enrichment activities” for their children by 151 percent in inflation-adjusted terms, compared to 57 percent for low-income parents….
Even poor kids who do everything right don’t do much better than rich kids who do everything wrong. Advantages and disadvantages, in other words, tend to perpetuate themselves. You can see that in the above chart, based on a new paper from Richard Reeves and Isabel Sawhill, presented at the Federal Reserve Bank of Boston’s annual conference, which is underway.
Specifically, rich high school dropouts remain in the top about as much as poor college grads stay stuck in the bottom — 14 versus 16 percent, respectively. Not only that, but these low-income strivers are just as likely to end up in the bottom as these wealthy ne’er-do-wells. Some meritocracy.
What’s going on? Well, it’s all about glass floors and glass ceilings. Rich kids who can go work for the family business — and, in Canada at least, 70 percent of the sons of the top 1 percent do just that — or inherit the family estate don’t need a high school diploma to get ahead. It’s an extreme example of what economists call “opportunity hoarding.” That includes everything from legacy college admissions to unpaid internships that let affluent parents rig the game a little more in their children’s favor.
But even if they didn’t, low-income kids would still have a hard time getting ahead. That’s, in part, because they’re targets for diploma mills that load them up with debt, but not a lot of prospects. And even if they do get a good degree, at least when it comes to black families, they’re more likely to still live in impoverished neighborhoods that keep them disconnected from opportunities.
Everything about the conservative economic agenda is wrong not only on the merits (supply-side economics is a proven logistical failure, for instance), but from its very philosophical underpinnings.
There is no meritocracy. The rich do not get ahead by their industry and talent, but by luck and connections. It’s more about who you know, than what you know. Which means that anyone defending the right of the rich to take even more money is exalting a system as indefensible as the divine right of kings.
By: David Atkins, Political Animal, The Washington Monthly, October 20, 2014
“Elizabeth Warren Makes A Powerful Case”: Who Does The Government Work For?
Sen. Elizabeth Warren says she isn’t running for president. At this rate, however, she may have to.
The Massachusetts Democrat has become the brightest ideological and rhetorical light in a party whose prospects are dimmed by — to use a word Jimmy Carter never uttered — malaise. Her weekend swing through Colorado, Minnesota and Iowa to rally the faithful displayed something no other potential contender for the 2016 presidential nomination, including Hillary Clinton, seems able to present: a message.
“We can go through the list over and over, but at the end of every line is this: Republicans believe this country should work for those who are rich, those who are powerful, those who can hire armies of lobbyists and lawyers,” she said Friday in Englewood, Colo. “I will tell you we can whimper about it, we can whine about it or we can fight back. I’m here with [Sen.] Mark Udall so we can fight back.”
Warren was making her second visit to the state in two months because Udall’s reelection race against Republican Cory Gardner is what Dan Rather used to call “tight as a tick.” If Democrats are to keep their majority in the Senate, the party’s base must break with form and turn out in large numbers for a midterm election. Voters won’t do this unless somebody gives them a reason.
Warren may be that somebody. Her grand theme is economic inequality and her critique, both populist and progressive, includes a searing indictment of Wall Street. Liberals eat it up.
“The game is rigged, and the Republicans rigged it,” she said Saturday at Carleton College in Northfield, Minn. The line drew a huge ovation — as did mention of legislation she has sponsored to allow students to refinance their student loans.
Later, Sen. Al Franken (Minn.) — a rare Democratic incumbent who is expected to cruise to reelection next month — gave a heartfelt, if less-than-original, assessment of Warren’s performance: “She’s a rock star.”
In these appearances, Warren talks about comprehensive immigration reform, support for same-sex marriage, the need to raise the minimum wage, abortion rights and contraception — a list of red-button issues at which she jabs and pokes with enthusiasm.
The centerpiece, though, is her progressive analysis of how bad decisions in Washington have allowed powerful interests to re-engineer the financial system so that it serves the wealthy and well-connected, not the middle class.
On Sunday, Warren was in Des Moines campaigning for Democrat Bruce Braley, who faces Republican Joni Ernst in another of those tick-tight Senate races. It may be sheer coincidence that Warren chose the first-in-the-nation nominating caucus state to deliver what the Des Moines Register called a “passion-filled liberal stemwinder.”
There once was consensus on the need for government investment in areas such as education and infrastructure that produced long-term dividends, she said. “Here’s the amazing thing: It worked. It absolutely, positively worked.”
But starting in the 1980s, she said, Republicans took the country in a different direction, beginning with the decision to “fire the cops on Wall Street.”
“They called it deregulation,” Warren said, “but what it really meant was: Have at ’em, boys. They were saying, in effect, to the biggest financial institutions, any way you can trick or trap or fool anybody into signing anything, man, you can just rake in the profits.”
She went on to say that “Republicans, man, they ought to be wearing a T-shirt. . . . The T-shirt should say, ‘I got mine. The rest of you are on your own.’ ”
The core issue in all the Senate races, she said, is this: “Who does the government work for? Does it work just for millionaires, just for the billionaires, just for those who have armies of lobbyists and lawyers, or does it work for the people?”
So far this year, Warren has published a memoir, “A Fighting Chance,” that tells of her working-class roots, her family’s economic struggles, her rise to become a Harvard Law School professor and a U.S. senator, and, yes, her distant Native American ancestry. She has emerged as her party’s go-to speaker for connecting with young voters. She has honed a stump speech with a clear and focused message, a host of applause lines and a stirring call to action.
She’s not running for president apparently because everyone assumes the nomination is Clinton’s. But everyone was making that same assumption eight years ago, and we know what happened. If the choice is between inspiration and inevitability, Warren may be forced to change her plans.
By: Eugene Robinson, Opinion Writer, The Washington Post, October 20, 2014
“Our Invisible Rich”: Most Americans Have No Idea Just How Unequal Our Society Has Become
Half a century ago, a classic essay in The New Yorker titled “Our Invisible Poor” took on the then-prevalent myth that America was an affluent society with only a few “pockets of poverty.” For many, the facts about poverty came as a revelation, and Dwight Macdonald’s article arguably did more than any other piece of advocacy to prepare the ground for Lyndon Johnson’s War on Poverty.
I don’t think the poor are invisible today, even though you sometimes hear assertions that they aren’t really living in poverty — hey, some of them have Xboxes! Instead, these days it’s the rich who are invisible.
But wait — isn’t half our TV programming devoted to breathless portrayal of the real or imagined lifestyles of the rich and fatuous? Yes, but that’s celebrity culture, and it doesn’t mean that the public has a good sense either of who the rich are or of how much money they make. In fact, most Americans have no idea just how unequal our society has become.
The latest piece of evidence to that effect is a survey asking people in various countries how much they thought top executives of major companies make relative to unskilled workers. In the United States the median respondent believed that chief executives make about 30 times as much as their employees, which was roughly true in the 1960s — but since then the gap has soared, so that today chief executives earn something like 300 times as much as ordinary workers.
So Americans have no idea how much the Masters of the Universe are paid, a finding very much in line with evidence that Americans vastly underestimate the concentration of wealth at the top.
Is this just a reflection of the innumeracy of hoi polloi? No — the supposedly well informed often seem comparably out of touch. Until the Occupy movement turned the “1 percent” into a catchphrase, it was all too common to hear prominent pundits and politicians speak about inequality as if it were mainly about college graduates versus the less educated, or the top fifth of the population versus the bottom 80 percent.
And even the 1 percent is too broad a category; the really big gains have gone to an even tinier elite. For example, recent estimates indicate not only that the wealth of the top percent has surged relative to everyone else — rising from 25 percent of total wealth in 1973 to 40 percent now — but that the great bulk of that rise has taken place among the top 0.1 percent, the richest one-thousandth of Americans.
So how can people be unaware of this development, or at least unaware of its scale? The main answer, I’d suggest, is that the truly rich are so removed from ordinary people’s lives that we never see what they have. We may notice, and feel aggrieved about, college kids driving luxury cars; but we don’t see private equity managers commuting by helicopter to their immense mansions in the Hamptons. The commanding heights of our economy are invisible because they’re lost in the clouds.
The exceptions are celebrities, who live their lives in public. And defenses of extreme inequality almost always invoke the examples of movie and sports stars. But celebrities make up only a tiny fraction of the wealthy, and even the biggest stars earn far less than the financial barons who really dominate the upper strata. For example, according to Forbes, Robert Downey Jr. is the highest-paid actor in America, making $75 million last year. According to the same publication, in 2013 the top 25 hedge fund managers took home, on average, almost a billion dollars each.
Does the invisibility of the very rich matter? Politically, it matters a lot. Pundits sometimes wonder why American voters don’t care more about inequality; part of the answer is that they don’t realize how extreme it is. And defenders of the superrich take advantage of that ignorance. When the Heritage Foundation tells us that the top 10 percent of filers are cruelly burdened, because they pay 68 percent of income taxes, it’s hoping that you won’t notice that word “income” — other taxes, such as the payroll tax, are far less progressive. But it’s also hoping you don’t know that the top 10 percent receive almost half of all income and own 75 percent of the nation’s wealth, which makes their burden seem a lot less disproportionate.
Most Americans say, if asked, that inequality is too high and something should be done about it — there is overwhelming support for higher minimum wages, and a majority favors higher taxes at the top. But at least so far confronting extreme inequality hasn’t been an election-winning issue. Maybe that would be true even if Americans knew the facts about our new Gilded Age. But we don’t know that. Today’s political balance rests on a foundation of ignorance, in which the public has no idea what our society is really like.
By: Paul Krugman, Op-Ed Columnist, The New York Times, September 28, 2014
“The Show-Off Society”: In A Highly Unequal Society, The Wealthy Feel Obliged To Engage In ‘Conspicuous Consumption’
Liberals talk about circumstances; conservatives talk about character.
This intellectual divide is most obvious when the subject is the persistence of poverty in a wealthy nation. Liberals focus on the stagnation of real wages and the disappearance of jobs offering middle-class incomes, as well as the constant insecurity that comes with not having reliable jobs or assets. For conservatives, however, it’s all about not trying hard enough. The House speaker, John Boehner, says that people have gotten the idea that they “really don’t have to work.” Mitt Romney chides lower-income Americans as being unwilling to “take personal responsibility.” Even as he declares that he really does care about the poor, Representative Paul Ryan attributes persistent poverty to lack of “productive habits.”
Let us, however, be fair: some conservatives are willing to censure the rich, too. Running through much recent conservative writing is the theme that America’s elite has also fallen down on the job, that it has lost the seriousness and restraint of an earlier era. Peggy Noonan writes about our “decadent elites,” who make jokes about how they are profiting at the expense of the little people. Charles Murray, whose book “Coming Apart” is mainly about the alleged decay of values among the white working class, also denounces the “unseemliness” of the very rich, with their lavish lifestyles and gigantic houses.
But has there really been an explosion of elite ostentation? And, if there has, does it reflect moral decline, or a change in circumstances?
I’ve just reread a remarkable article titled “How top executives live,” originally published in Fortune in 1955 and reprinted a couple of years ago. It’s a portrait of America’s business elite two generations ago, and it turns out that the lives of an earlier generation’s elite were, indeed, far more restrained, more seemly if you like, than those of today’s Masters of the Universe.
“The executive’s home today,” the article tells us, “is likely to be unpretentious and relatively small — perhaps seven rooms and two and a half baths.” The top executive owns two cars and “gets along with one or two servants.” Life is restrained in other ways, too: “Extramarital relations in the top American business world are not important enough to discuss.” Actually, I’m sure there was plenty of hanky-panky, but people didn’t flaunt it. The elite of 1955 at least pretended to set a good example of responsible behavior.
But before you lament the decline in standards, there’s something you should know: In celebrating America’s sober, modest business elite, Fortune described this sobriety and modesty as something new. It contrasted the modest houses and motorboats of 1955 with the mansions and yachts of an earlier generation. And why had the elite moved away from the ostentation of the past? Because it could no longer afford to live that way. The large yacht, Fortune tells us, “has foundered in the sea of progressive taxation.”
But that sea has since receded. Giant yachts and enormous houses have made a comeback. In fact, in places like Greenwich, Conn., some of the “outsize mansions” Fortune described as relics of the past have been replaced with even bigger mansions.
And there’s no mystery about what happened to the good-old days of elite restraint. Just follow the money. Extreme income inequality and low taxes at the top are back. For example, in 1955 the 400 highest-earning Americans paid more than half their incomes in federal taxes, but these days that figure is less than a fifth. And the return of lightly taxed great wealth has, inevitably, brought a return to Gilded Age ostentation.
Is there any chance that moral exhortations, appeals to set a better example, might induce the wealthy to stop showing off so much? No.
It’s not just that people who can afford to live large tend to do just that. As Thorstein Veblen told us long ago, in a highly unequal society the wealthy feel obliged to engage in “conspicuous consumption,” spending in highly visible ways to demonstrate their wealth. And modern social science confirms his insight. For example, researchers at the Federal Reserve have shown that people living in highly unequal neighborhoods are more likely to buy luxury cars than those living in more homogeneous settings. Pretty clearly, high inequality brings a perceived need to spend money in ways that signal status.
The point is that while chiding the rich for their vulgarity may not be as offensive as lecturing the poor on their moral failings, it’s just as futile. Human nature being what it is, it’s silly to expect humility from a highly privileged elite. So if you think our society needs more humility, you should support policies that would reduce the elite’s privileges.
By: Paul Krugman, Op-Ed Columnist, The New York Times, September 25, 2014
“Paralysis Isn’t Inevitable”: Income Inequality And N.R.A. Dominance May Not Last Forever
One of the hardest things for us to do is to envision a future that is different from the present. For instance, we live in an age of paralyzed politics, so it is hard, in the here and now, to imagine what could change that. A second example: It is difficult to think of a scenario where federal gun legislation could be passed over the objections of the National Rifle Association. And a third: Income inequality has been the trend for some three decades; doesn’t it look as if it will always be that way?
What prompts these thoughts are two papers that landed on my desk recently. Although they tackle very different issues, they have one thing in common: They imagine a future that breaks from the present path.
The first is a draft of a speech given earlier this month at TEDMED by Daniel Webster, the director of the Johns Hopkins Center for Gun Policy and Research. (TEDMED is associated with TED Talks.) The second is an article in the latest edition of the Harvard Business Review by Roger Martin, the former dean of the Rotman School of Management at the University of Toronto.
Webster’s speech lays out an agenda that he predicts will reduce the murder rate by 30 to 50 percent within 20 years. “I don’t think that our current level of gun violence is here to stay,” he declares in the draft of the speech. Martin’s article is about how the rise of the “talent economy,” as he calls it, has helped further income inequality. But he doesn’t believe a high level of income inequality is an inevitable part of our future.
Let’s tackle Webster first. Politically, he told me, “It’s a loser to call for a gun ban.” Instead, his reforms would make it more difficult for criminals to get their hands on guns. Using background checks, he would keep guns away from people who have a history of violence. He would raise the age of gun ownership to 21. (Webster notes that homicides peak between the ages of 18 and 20.) He would pass laws that make gun dealers more accountable, including “requiring business practices that prevent guns being diverted to criminals.” And he would mandate something called microstamping, “which would make it possible to trace a gun used in a crime to its first purchaser.”
When I asked him why he thought these changes would eventually take place, given the inability of the Senate to pass a background check bill after Newtown, he pointed to polls that show the vast majority of gun owners favor such changes.
“The N.R.A. has been very successful in controlling the conversation and making it about a cultural war,” he told me. “But I believe that narrative won’t persist.” The key, he says, is to change the conversation so that it is about pro- and anti-crime instead of pro- and anti-gun. Once that happens, “gun owners will start to demand changes.” He added, “I think that ultimately that idea will prevail, and it will be a pretty mainstream idea.”
Now to Roger Martin. His essay traces the way “talent” came to replace labor and capital as the most important factor in the economy, so much so that those who were part of the talent economy could become billionaires even as the median income stalled and then slipped back. Chief executives, who have gorged on stock options, are part of the talent economy, and so are hedge fund managers, who charge the infamous “2 and 20” (meaning a 2 percent management fee and 20 percent of the profits), which ensures their wealth no matter how poorly their investors do. The interests of such talent, in his view, simply don’t align with the interests of the rest of us.
Like Webster, Martin also proposed a series of changes to “correct the imbalance,” as he puts it. He suggests that pension funds should see that they are best served when they do not hand capital to hedge funds, for instance. And he wants talent to show “self-restraint.”
When I told him that seemed unlikely, he told me he thought we were approaching a moment like 1935, when, after years of letting labor fend for itself, the government passed laws that protected labor and helped bring about the rise of the labor movement.
If talent doesn’t start taking the rest of the country into account, he said, he feared that the government would once again take significant action to level the playing field.
Given the current political paralysis, I asked, what might bring that about? “Another boom and crash,” he said.
Martin clearly sees his article as a warning to corporate executives and others who are part of the 1 percent. And maybe, just maybe, it will take hold. After all, not long after his article was published, Calpers, the huge California pension fund, announced that it was going to eliminate hedge funds from its portfolio. There’s hope yet.
By: Joe Nocera, Op-Ed Columnist, The New York Times, September 26, 2014
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