Progressive Capitalism

torn dollar bill

Torn dollar bill image source and license.

We’ve been looking at economic winners and losers in the zero-sum economy — particularly in the context of higher education, where cultural belief in the importance of college and post-graduate degrees on upward mobility and success in the job market is driving behavior that harms both parents (the college admissions scandal) and the economic and mental health of their children (student loan debt, general anxiety disorder, depression, suicide).

This series of blog posts is now in its third year — throughout, we’ve seen how hyper-competitive capitalism and its staunch faith in the implicit justice of the “free” market is causing other economic loses. For example:

  • the stagnation of middle class real incomes;
  • the rise of the numbers of statistically poor people in the U.S.;
  • the dismantling of compassionate social safety nets in favor of expensive, counterproductive, and humiliating replacements;
  • the rise of the “rentier” economy in which formerly public benefits have been privatized, making them accessible only to those who can afford them through the payment of economic “rents”;
  • the end of the American ideal of upward social and economic mobility;
  • the high cost of housing and the death of the American dream of home ownership;
  • the elimination of “normal” jobs through off-shoring, outsourcing, and the delegation of productivity to intelligent machines;
  • the advent of the short-term, contract-based “gig economy” with its lack of fringe benefits and its precarious prospects for sustainable income;
  • economic inequality that favors the wealthiest of capitalists at the expense of the bottom 90% (or 99%, or 99.9%, depending on your data and point of view);
  • the creation instead of an insular top-level “meritocrat” socio-economic class;
  • the new state of “total work” and the “monetization” of goods and services;
  • rising rates of career burnout, mental illness, and suicide resulting from social isolation and the vain struggle to find meaning and purpose at work;
  • the rise of corporate nation-states with economic and policy-making power that dwarfs that of many governmental nation-states;
  • the private (non-democratic) social policy-making initiatives of the wealthiest elites;
  • and much, much more.

Nobody meant economic policy to do this, but it has, for roughly the past 30-40 years. Good intentions; unplanned results.

We’ve seen that both plutocrats and progressives advocate for systemic change, while status quo inertia weighs in on the side of those who don’t see what all the fuss is about, since capitalism is undeniably the best economic option and always has been, and besides it’s still working just fine, thank you very much. Instead of meaningful discourse, we have a predominant nostalgic, populist doubling down on the neoliberal socio-economic cultural ideology that jet-propelled post-WWII recovery but finished running its course in the 1970s, while the retrenchers and the media slap those who beg to differ with the kiss-of-death label “progressive.” As a result, we’re left with incessant lobbing from one end of the polarized spectrum to the other of ideological bombs that originate in data and analysis skewed by cognitive biases, intentional blindness, and fake news . Economic policy-making resembles WWI trench warfare — a tactical grinding down of the opposition and the numbing and dumbing of everyone else. It was a bad idea then, and it’s still a bad idea now.

I had no idea this is what I was getting into when I decided three years ago to research and write about the new economy and the future of work.

It’s in the context of this toxic environment that Economics Nobel Laureate Joseph E. Stiglitz, offered his “progressive capitalism” alternative, based on “the power of the market to serve society.” Progressive Capitalism Is Not an Oxymoron: We can save our broken economic system from itself, New York Times (April 19, 2019). His article, like virtually all of the economics books and articles I read these days, begins with a long parade of evils and ends with a handful of policy ideas. His version of the former is by now quite familiar:

“Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years.

“This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.

“There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying. America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens.

“We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking).

“Just as forces of globalization and technological change were contributing to growing inequality, we adopted policies that worsened societal inequities.

“Even as economic theories like information economics (dealing with the ever-present situation where information is imperfect), behavioral economics and game theory arose to explain why markets on their own are often not efficient, fair, stable or seemingly rational, we relied more on markets and scaled back social protections.

“Politics has played a big role in the increase in corporate rent-seeking and the accompanying inequality.

“Markets don’t exist in a vacuum; they have to be structured by rules and regulations, and those rules and regulations must be enforced.

“We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.

“If we don’t change course matters will likely grow worse, as machines (artificial intelligence and robots) replace an increasing fraction of routine labor, including many of the jobs of the several million Americans.

“The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society.

“Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.

“Part of this new social contract is an expanded public option for many programs now provided by private entities or not at all

“This new social contract will enable most Americans to once again have a middle-class life.

“The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest.

“America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people.”

His point seems to be that merely reciting litanies of economic woes won’t bring about systemic relief — for that, we need to embrace an essential factor:

Paradigms only shift when culture  shifts:
new ideas require new culture to receive them,
and new culture requires new belief systems.

Systemic change requires cultural change — remodeled institutions and revised social contracts that tether ideas to real life. Trying to patch policy ideas into the existing socio-economic system is like what would happen if a firm were to abruptly change its products, services, and strategic and marketing plans without bothering to change its mission statement, values and beliefs, and firm culture.

Like that’s going to work.

Coming up, we’ll look beyond policy bombs to the higher ground of revised cultural beliefs, starting with next week’s search for the “public” that’s gone missing from the Republic.

The Zero-Sum Economy [2]  Meet the Winners

The House Always Wins

We met the zero-sum economy losers last time. Let’s meet the winners this week.

The winners are the best of the best and have the best of the best in cultural, logistical, financial, and other kinds of support. They were tapped for economic competition before preschool. They’ve been groomed for it all their lives. But they pay a ridiculous price — the stress of training and competing is unreal. And when it’s time for college and beyond, only a handful stand on the podium. No wonder their ascent has been tainted with scandal

They’re the children of the new Meritocrats — the economic top 1%. They complete in the X Games of economic competition, and it’s killing them. That description is from Yale law professor Daniel Markovits — a Meritocrat himself, and the author of The Meritocracy Trap: How America’s Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite (just out, on Sept. 10, 2019).  Prof. Markovits previewed his book in a recent article that begins as follows:

“Two decades ago, when I started writing about economic inequality, meritocracy seemed more likely a cure than a cause. Meritocracy’s early advocates championed social mobility. In the 1960s, for instance, Yale President Kingman Brewster brought meritocratic admissions to the university with the express aim of breaking a hereditary elite. Alumni had long believed that their sons had a birthright to follow them to Yale; now prospective students would gain admission based on achievement rather than breeding. Meritocracy—for a time—replaced complacent insiders with talented and hardworking outsiders.

“Today’s meritocrats still claim to get ahead through talent and effort, using means open to anyone. In practice, however, meritocracy now excludes everyone outside of a narrow elite. Harvard, Princeton, Stanford, and Yale collectively enroll more students from households in the top 1 percent of the income distribution than from households in the bottom 60 percent. Legacy preferences, nepotism, and outright fraud continue to give rich applicants corrupt advantages. But the dominant causes of this skew toward wealth can be traced to meritocracy. On average, children whose parents make more than $200,000 a year score about 250 points higher on the SAT than children whose parents make $40,000 to $60,000. Only about one in 200 children from the poorest third of households achieves SAT scores at Yale’s median. Meanwhile, the top banks and law firms, along with other high-paying employers, recruit almost exclusively from a few elite colleges.

“Hardworking outsiders no longer enjoy genuine opportunity. According to one study, only one out of every 100 children born into the poorest fifth of households, and fewer than one out of every 50 children born into the middle fifth, will join the top 5 percent. Absolute economic mobility is also declining—the odds that a middle-class child will outearn his parents have fallen by more than half since mid-century—and the drop is greater among the middle class than among the poor. Meritocracy frames this exclusion as a failure to measure up, adding a moral insult to economic injury.

“Public anger over economic inequality frequently targets meritocratic institutions. Nearly three-fifths of Republicans believe that colleges and universities are bad for America, according to the Pew Research Center. The intense and widespread fury generated by the college-admissions scandal early this year tapped into a deep and broad well of resentment. This anger is warranted but also distorting. Outrage at nepotism and other disgraceful forms of elite advantage-taking implicitly valorizes meritocratic ideals. Yet meritocracy itself is the bigger problem, and it is crippling the American dream. Meritocracy has created a competition that, even when everyone plays by the rules, only the rich can win.

“But what, exactly, have the rich won? Even meritocracy’s beneficiaries now suffer on account of its demands. It ensnares the rich just as surely as it excludes the rest, as those who manage to claw their way to the top must work with crushing intensity, ruthlessly exploiting their expensive education in order to extract a return.

“No one should weep for the wealthy. But the harms that meritocracy imposes on them are both real and important. Diagnosing how meritocracy hurts elites kindles hope for a cure. We are accustomed to thinking that reducing inequality requires burdening the rich. But because meritocratic inequality does not in fact serve anyone well, escaping meritocracy’s trap would benefit virtually everyone.”

How Life Became an Endless, Terrible Competition:  Meritocracy prizes achievement above all else, making everyone—even the rich—miserable. Maybe there’s a way out (The Atlantic, Sept. 2019).

The rest of the article details the lives of the winners, and is well worth reading. (For a long and thoughtful critique of the book, see this NewYorker article.)

Next time, we’ll look further into “escaping the meritocracy trap.”

Economic Storytelling

story telling

Last time, we heard Nobel Prize winner Robert Shiller promote the use of narratives in economic policy-making, on the theory that it would produce more humane outcomes than mathematical modeling — for example, reversing trends such as soaring economic inequality, loss of upward mobility, stagnant purchasing power,  and declining cultural wellbeing.

Narratives are up to the challenge, proponents say, because:

  1. Humans are natural storytellers.

 “Our storytelling ability, a uniquely human trait, has been with us nearly as long as we’ve been able to speak. Whether it evolved for a particular purpose or was simply an outgrowth of our explosion in cognitive development, story is an inextricable part of our DNA.”

The Power Of Story, Aeon Magazine (Jan. 12, 2015)

  1. There’s nothing like a good story to make you rethink your life.

“The careers of many great novelists and filmmakers are built on the assumption, conscious or not, that stories can motivate us to re-evaluate the world and our place in it.

 “New research is lending texture and credence to what generations of storytellers have known in their bones – that books, poems, movies, and real-life stories can affect the way we think and even, by extension, the way we act.

“Across time and across cultures, stories have proved their worth not just as works of art or entertaining asides, but as agents of personal transformation.”

The Power Of Story

  1. Narratives supply a welcome sense of meaning:

“Each of us has a story we tell about our own life, a way of structuring the past and fitting events into a coherent narrative. Real life is chaotic; life narratives give it meaning and structure.”

Silicon Phoenix:  A Gifted Child, An Adventure, A Dark Time, And Then … A Pivot? How Silicon Valley Rewrote America’s Redemption Narrative, Aeon Magazine (May 2, 2016)

  1. Stories are catchy: brain scans show that listeners’ and readers’ brains mirror the storyteller’s — another reason why they make good change agents.

“fMRI data [shows] that emotion-driven responses to stories… [starts] in the brain stem, which governs basic physical functions, such as digestion and heartbeat. So when we read about a character facing a heart-wrenching situation, it’s perfectly natural for our own hearts to pound.

“Just when the speaker’s brain lit up in the area of the insula – a region that governs empathy and moral sensibilities – the listeners’ insulae lit up, too. Listeners and speakers also showed parallel activation of the temporoparietal junction, which helps us imagine other people’s thoughts and emotions. In certain essential ways, then, stories help our brains map that of the storyteller.”

Silicon Phoenix

  1. American capitalism already has an established story genre — the “redemption narrative” — that it can rely upon to good effect.

“For Americans, the redemption narrative is one of the most common and compelling life stories. In the arc of this life story, adversity is not meaningless suffering to be avoided or endured; it is transformative, a necessary step along the road to personal growth and fulfilment.

“For the past 15 years, Daniel McAdams, professor of psychology at Northwestern University in Illinois, has explored this story and its five life stages: (1) an early life sense of being somehow different or special, along with (2) a strong feeling of moral steadfastness and determination, ultimately (3) tested by terrible ordeals that are (4) redeemed by a transformation into positive experiences and (5) zeal to improve society.

“This sequence doesn’t necessarily reflect the actual events of the storyteller’s life, of course. It’s about how people interpret what happened – their spin, what they emphasise in the telling and what they discard.”

Silicon Phoenix

  1. Redemption narratives make good citizens, and never mind if there’s some ego involved:

“In his most recent study, the outcome of years of intensive interviews with 157 adults, McAdams has found that those who adopt [redemption narratives] tend to be generative – that is, to be a certain kind of big-hearted, responsible, constructive adult.

“Generative people are deeply concerned about the future; they’re serious mentors, teachers and parents; they might be involved in public service. They think about their legacy, and want to fix the world’s problems.

“But generative people aren’t necessarily mild-mannered do-gooders. Believing that you have a mandate to fix social problems – and that you have the moral authority and the ability to do so – also requires a sense of self-importance, even a touch of arrogance.”

Silicon Phoenix

  1. Stories are good for the American capitalist ideal.

“From a more sociological perspective, the American self-creation myth is, inherently, a capitalist one…. The sociologist Paul du Gay [believed that most people] craft outward-looking ‘enterprising selves’ by which they set out to acquire cultural capital in order to move upwards in the world, gain access to certain social circles, certain jobs, and so on. We decorate ourselves and cultivate interests that reflect our social aspirations. In this way, the self becomes the ultimate capitalist machine.”

Silicon Phoenix:

But of course, not everyone shares these rosy opinions of narrative economics, or of the current practice of American capitalism. We’ll hear from the naysayers next time.

Homo Economicus [4]: Enlightened Self-Interest

homo economicus

The concept of “homo economicus” captures the belief that the rigorous pursuit of self-interest in a free market improves things for everyone. This belief powered Milton Friedman’s famous dictum that “the social responsibility of business is to increase profits,” and finds a philosophical ally in Ayn Rand’s “objectivism”:

“The core of Rand’s philosophy… is that unfettered self-interest is good and altruism is destructive. [The pursuit of self-interest], she believed, is the ultimate expression of human nature, the guiding principle by which one ought to live one’s life. In “Capitalism: The Unknown Ideal,” Rand put it this way:

‘Collectivism is the tribal premise of primordial savages who, unable to conceive of individual rights, believed that the tribe is a supreme, omnipotent ruler, that it owns the lives of its members and may sacrifice them whenever it pleases.’

“By this logic, religious and political controls that hinder individuals from pursuing self-interest should be removed.”

What Happens When You Believe in Ayn Rand and Modern Economic Theory, Evonomics (Feb. 17, 2016)

Thus Ayn Rand became the patron saint of American capitalism in its current iteration. This is from a 2017 Atlantic article:

“’I grew up reading Ayn Rand,’ … Paul Ryan has said, ‘and it taught me quite a bit about who I am and what my value systems are, and what my beliefs are.’ It was that fiction that allowed him and so many other higher-IQ Americans to see modern America as a dystopia in which selfishness is righteous and they are the last heroes. ‘I think a lot of people,’ Ryan said in 2009, ‘would observe that we are right now living in an Ayn Rand novel.’”

Critics point out that there is no such thing as a free market or objectively rational self-interest, arguing instead that the market is inescapably skewed toward policy-makers’  beliefs and values — i.e., their particular interpretations of what “self-interested” behavior looks like.[1] As a result, economic policy always comes laden with ethical and moral beliefs about “good” vs. “bad” outcomes, which the not-so-free market then dutifully delivers:

“Milton Friedman argued that competition between big businesses suffices to safeguard the public interest, but in practice it is almost always insufficient, especially where there is collusion among the players to safeguard their market dominance – and their political influence.

“Free-market economists have an unwarranted faith in the capacity of price adjustments to produce technological changes in production and patterns of consumer demand. Their theories imply that the price system has infinite capacity to shape sustainable outcomes.

“But if the self-interested market behaviours continue to seek an unchanged goal – more personal incomes with which to purchase more material goods – ultimately they cannot be fulfilled.

 “Ultimately, the short-term self-interested economic arrangements are not sustainable anyway. As the US economist Kenneth Boulding once said: “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist”.

“Economic inequalities also predictably widen where self-interested market behaviours dominate. Capital makes capital, while those without capital often remain consigned to poverty. Certainly, the very rich have become notably much wealthier during the last three decades while neoliberal ideologies and policies have been dominant. In the absence of strong unions and governments committed to some degree of egalitarian redistribution, the unequalising tendency is inexorable. The result is predictably unhappier societies that experience a higher incidence of social problems, as empirical research complied by Richard Wilkinson and Kate Pickett clearly demonstrates.

“Something has to give. An economic system that rewards amoral self-interest creates economic instability, fractures economic insecurity, fosters concentrations of economic power, exacerbates economic inequality and violates ecological sustainability. So much for the self-regulating market economy!

“There is currently much talk of ‘social responsibility’ in business and of ‘triple bottom line accounting’ that emphasises the use of social and environmental criteria, as well as a financial criterion, in assessing business performance… Indeed, businesses developing reputations for responsible behaviours may reap benefits in the form of worker and customer loyalty. But unless and until ethical behaviours become integral to how markets function – by directly affecting ‘shareholder value’, for example – it is hard to see the overall effect as much more than window dressing for ‘business as usual’.”

Oh, The Morality: Why Ethics Matters In Economics, The Conversation (in partnership with the University of Sydney) (March 22, 2012)

More on ethics and economics next time.

[1] For more on whether the market is truly “free,” see this article and this one. Or if you prefer, here’s a short video and here’s a TEDX talk.

Archeconomics

archangelI made up the term “archeconomics.” I’m using “arch” in the sense of “first principles” — e.g., as in “archetype.” An “arch” is the larger version of the smaller expressions of itself — e.g., not just a villain but an arch-villain, not just an angel but an archangel. Life goes big when an arch-something is at work:  experience expands beyond circumstance, meaning magnifies, significance is exaggerated.

Archeconomics is therefore the larger story behind economics.

I ended last week’s post by referring to the larger story behind the rentier economy. As usually happens when I’m on a research trail, several commentaries have appeared in my various feeds lately that look beyond the usual opinionated mash of current events and instead address over-arching ideas and issues. All of them deal in one way or another with the current status and possible future of the liberal worldview — an arch-topic if there ever was one.

The term “liberal” in this context doesn’t refer to political liberal vs. conservative, but rather to historical liberalism, which among other things gave us post-WWII neo-liberal economics. Mega-bestselling author Yuval Noah Harari describes this kind of liberalism in his latest book 21 Lessons for the 21st Century:

“In Western political discourse the term “liberal” is sometimes used today in a much narrower sense, to denote those who support specific causes such as gay marriage, gun control, and abortion rights. Yet most so-called conservatives also embrace the broad liberal worldview.

“The liberal story cherishes human liberty as its number one value. It argues that all authority ultimately stems from the free will of individual humans, as expressed in their feelings, desires, and choices. In politics, liberalism believes that the voter knows best. It therefore upholds democratic elections. In economics, liberalism maintains that the customer is always right. It therefore hails free-market principles. In personal matters, liberalism encourages people to listen to themselves, be true to themselves, and allow their hearts — as long as they do not infringe on the liberties of others. This personal freedom is enshrined in human rights.”

If you read Harari’s books Sapiens and Homo Deus. you have a sense of what you’ll find in 21 Lessons, but I found it worth reading on its own terms. Two recent special magazine editions also take on the fate of liberalism:  Is Democracy Dying? from The Atlantic andA Manifesto for Renewing Liberalism” from The Economist. The titles speak for themselves, and both are offered by publications with nearly two centuries of liberal editorial perspectives.

Another historical liberal offering from a conservative political point of view is “How Trumpism Will Outlast Trump,” from Time Magazine. Here’s the article’s précis:

“These intellectuals are committed to a new economic nationalism … They’re looking past Trump … to assert a fundamental truth: whatever you think of him, Donald Trump has shown a major failing in the way America’s political parties have been serving their constituents. The future of Trump’s revolution may depend on whether this young group can help fix the economy.”

Finally, here’s a trio of offerings that invoke environmental economics — the impact  of the global ecology on global economics being another archeconomics topic. The first is a scientific study published last week that predicted significant environmental degradation within a surprisingly short time. Second is an article about the study that wants to know “Why We Keep Ignoring Even the Most Dire Climate Change Warnings.” Third is last week’s announcement that the winner of this year’s Nobel Prize in Economics is an environmental economist.

Some or all of those titles should satisfy if you’re in the mood for some arch- reading.

Next time, we’ll return to plain old economics, with a look at how the low income social strata is faring in all the dust-up over rentiers and economic inequality, robotcs and machine learning, and the sagging paycheck going to human labor.

The Great Gatsby Lawyer

How okay are we, really, with the right of everyone (a) to make as much money as they want, and (b) to spend it any way they like? If we would limit (a) or (b) or both, then how and why?

Consider for a moment what your (a) and (b) responses have been to the upward mobility stories we’ve looked at so far:  Richard Reeves, Matthew Stewart, Steven Brill. Travie McCoy. David Boies, Eric and I. Now consider this story from an article in Above the Law:

“[P]ersonal injury attorney Thomas J. Henry threw a lavish bash to celebrate his son, Thomas Henry Jr.’s, 18th birthday. And the price tag for the Gatsby-mixed-with-burlesque-themed fête? A cool $4 million.

“To rack up such a hefty bill, the event had lots of performers which included showgirls, aerial performers, art installations, and contortionists (oh my!). Plus, there were musical performances and celebrity guests.

“And don’t think the over-the-top party was the only gift the birthday boy received:

“The star of the party, who sat on a throne-like chair when he wasn’t dancing, was given a fully loaded blue Ferrari, an IWC Portugieser Tourbillion watch and a custom-made painting from Alec Monopoly.

“Henry’s work as a trial attorney is obviously pretty lucrative. The big payouts he’s been able to secure for his clients have made him a member of the Multi-Million Dollar Advocates Forum.[1]

“Henry is known for throwing giant parties. Just last year, he spent $6 million for his daughter’s quinceañera. I guess we know which one is really daddy’s favorite.”

The writer telegraphs her attitude about the story with the article’s tone and with the understated lead line, “this seems extreme.” Apparently she would cast a vote for limitations on (b). When I’ve shared the story with friends, the response is usually stronger than “this seems extreme.”

I wonder why. Maybe it’s because this looks like a case of conspicuous consumption, which never goes down well. Economist/ sociologist Thorstein Veblen coined the term in his 1889 book, The Theory of the Leisure Class, to describe how the newly prosperous middle class were buying things to communicate their move up the social ladder. The neighbors were rarely impressed — that is, until they made their own purchases, and then the game turned into keeping up with Joneses.

The conspicuous consumption shoe might fit here:  Mr. Henry’s website tells a bit of his upward mobility story — German immigrant, raised on a farm in Kansas, etc. Or maybe there’s something going on here that transcends his personal story. In that regard, the term “affluenza” comes to mind.

“The term “affluenza” was popularized in the late 1990s by Jessie O’Neill, the granddaughter of a past president of General Motors, when she wrote the book “The Golden Ghetto: The Psychology of Affluence.” It’s since been used to describe a condition in which children — generally from richer families — have a sense of entitlement, are irresponsible, make excuses for poor behavior, and sometimes dabble in drugs and alcohol.”

From an article by Fox News. See also these descriptions from CNN and New York Magazine.

Definitions of the term come loaded with their own biases, judgments, and assumptions. This is from Merriam-Webster:

Affluenza: the unhealthy and unwelcome psychological and social effects of affluence regarded especially as a widespread societal problem: such as

feelings of guilt, lack of motivation, and social isolation experienced by wealthy people

extreme materialism and consumerism associated with the pursuit of wealth and success and resulting in a life of chronic dissatisfaction, debt, overwork, stress, and impaired relationships

And this is from the popular PBS series that came out shortly after The Golden Ghetto:

Af-flu-en-za n. 1. The bloated, sluggish and unfulfilled feeling that results from efforts to keep up with the Joneses. 2. An epidemic of stress, overwork, waste and indebtedness caused by dogged pursuit of the American Dream. 3. An unsustainable addiction to economic growth.

Affluenza teenAffluenza made quite a splash in the estate planning world where I practiced, spawning a slew of books, CLE presentations, and new approaches to legal counseling and document design. Affluenza went mainstream in 2014 with the highly-publicized trial of Ethan Couch, the “Affluenza Teen,” when a judge reduced his sentence on four counts of intoxicated manslaughter and two counts of intoxicated assault after an expert witness testified that his wealthy upbringing had left him so psychologically impaired that he didn’t know right from wrong.

For a great number of my clients, that their kids might catch affluenza was their worst nightmare.[2] Their fear suggests this consensus to Thomas Henry’s partying habits:

(a) it’s okay to make all the money you want,

(b) but it’s not okay if you use your money to make your kids a danger to themselves and to others.

I wonder — would it temper our rush to categorize and judge Mr. Henry if we knew his philanthropic history and philosophy? This is from his website:

“Mr. Henry’s overall philosophy is that helping others when you have the good fortune of being successful is not an elective decision but a mandatory decision. People who achieve success have a duty to help others.”

That statement closely mirrors the beliefs of Robber Baron Andrew Carnegie. We’ll look at that next time, along with the perceptions of other 0.01 percenters about the social responsibilities of wealth.

[1] The Forum’s website says that “fewer than 1% of U.S. lawyers are members,” which appropriately signals Thomas Henry’s position in the economic strata.

[2] I used to tell my clients that if I had a dime for every time a client said, “I don’t want my money to ruin my kids,” I would have been a rich man. That was hyperbole, of course:  a dime each time wouldn’t have made me rich. On the other hand, a million dollars each time might have made me a billionaire. A billion is a BIG number.

Rebel Without A Cause

Continuing with David Graeber’s analysis of Eric’s job experience from last time:

“What drove Eric crazy was the fact that there was simply no way he could construe his job as serving any sort of purpose.

“To get a sense of what was really happening here, let us imagine a second history major–we can refer to him as anti-Eric — a young man of a professional background but placed in exactly the same situation. How might anti-Eric have behaved differently?

“Well, likely as not, he would have played along with the charade. Instead of using phony business trips to practice forms of self-annihilation, anti-Eric would have used them to accumulate social capital, connections that would eventually allow him to move on to better things. He would have treated the job as a stepping-stone, and this very project of professional advancement would have given him a sense of purpose.

“But such attitudes and dispositions don’t come naturally. Children from professional backgrounds are taught to think like that from an early age. Eric, who had not been trained to act and think this way, couldn’t bring himself to do it.”

James-Dean-Rebel-Without-A-Cause-Movie-PosterLike Eric, I couldn’t bring myself to do it either — although it was not so much that I couldn’t, it was more a case of not knowing how. I was bright enough, had a knack for the all-important “likeability factor” with clients and colleagues, and worked with lots of clients and other professionals who were members of the Red Velvet Rope Club. But like Eric, I remained on the outside looking in, and I spent a lot of time feeling envious of others who fit in so easily. Those dynamics dogged the early years of my law career. In time, a general sense of inadequacy became depression, which I compensated for by nursing a rebel-without-a-cause attitude.

My experience didn’t have to be that way. Consider, for example, the story of super-lawyer David Boies. Like Eric and me, Boies was also born to working class parents and grew up in a farming community, but that’s where the resemblance ends. Chrystia Freeland introduces him this way in her book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (2012):

“As the world economy grows, and as the super-elite, in particular, get richer, the superstars who work for the super-rich can charge super fees.

“Consider the 2009 legal showdown between Hank Greenberg and AIG, the insurance giant he had built. It was a high-stakes battle, as AIG accused Greenberg, through his privately-held company, Starr International, of misappropriating $4.3 billion worth of assets. For his defense, Greenberg hired David Boies. With his trademark slightly ratty Lands’ End suits (ordered a dozen at a time by his office online), his Midwestern background, his proud affection for Middle American pastimes like craps, and his severe dyslexia (he didn’t learn how to read until he was in the third grade), Boies comes across as neither a superstar or a member of the super-elite. He is both.

“Boies and his eponymous firm earned a reputed $100 million for the nine-month job of defending Greenberg. That was one of the richest fees earned in a single litigation. Yet, for Greenberg, it was a terrific deal. When you have $4.3 billion at risk, $100 million — only 2.3 percent of the total — just isn’t that much money. Further sweetening the transaction was the judge’s eventual ruling that AIG, then nearly 80 percent owned by the U.S. government, was liable for up to $150 million of Greenberg’s legal fees, but he didn’t know that when he retained Boies.”

What did Boies have that Eric and I didn’t?

Well, um, would you like the short list or the long?

Boies is no doubt one of those exceptionally gifted and ambitious people who works hard enough to get lucky. I suspect his plutocrat switch was first activated when his family moved to California while he was in high school, and from there was exponentially supercharged by a series of textbook upwardly mobile experiences:  a liberal arts education at Northwestern, a law degree from Yale, an LLM from NYU, joining the Cravath firm and eventually becoming a partner before leaving to found his own firm.

That’s impressive enough, but there’s more to his story:  somehow along the way he was transformed into the kind of person who belongs — in his case, not just to the 9.9% club, but to the 0.1 %. Yes, his human capital was substantial, but it was his personal transformation that enabled him to capitalize (I use that term advisedly) on the opportunities granted only by social capital.

And now, if the 9.9 percenters we heard from a couple weeks back are correct, the pathway he followed is even more statistically rare (if that’s even possible) than when he travelled it — in part because of an economic principle that’s at least as old as the Bible.

We’ll talk about that next time.