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.”

Can The Rich Save The World?

adam Smith

Adam Smith didn’t think so.

“For while Smith might be publicly lauded by those who put their faith in private capitalist enterprise, and who decry the state as the chief threat to liberty and prosperity, the real Adam Smith painted a rather different picture. According to Smith, the most pressing dangers came not from the state acting alone, but the state when captured by merchant elites.

“Political actors, Smith claimed, were liable to be swept up by a ‘spirit of system’, which made them fall in love with abstract plans, which they hoped would introduce sweeping beneficial reform. Usually the motivations behind these plans were perfectly noble: a genuine desire to improve society. The problem, however, was that the ‘spirit of system’ blinded individuals to the harsh complexities of real-world change.

“What Smith is saying is that … the ‘spirit of system’ infects politicians with a messianic moral certainty that their reforms are so necessary and justified that almost any price is worth paying to achieve them.”

The Real Adam Smith, Aeon Magazine (January 16, 2018).

Smith had little faith in the free market’s altruism:

“Smith was, however, deeply pessimistic about the stranglehold that the merchants had managed to exert over European politics, and despaired of it ever being loosened. Accordingly, he labelled his preferred alternative – of liberal markets generating wealth to be passed on to all members of society – a ‘Utopia’ that would never come to pass.”[1]

The Real Adam Smith

Today’s “philanthrocapitalists” would beg to differ. Their social and economic charter originated in the 1990’s, under President Clinton’s leadership. Post-WWII neoliberalism had begun to fatigue in the 70’s, and the tide had turned against the 80’s social conservatism. Clinton and his U.K. counterpart Tony Blair offered a mix of conservative economics with social liberalism:

“As much as possible, they preferred a progressive politics that channelled private initiative, and the logic of philanthrocapitalism was pleasingly straightforward. Since the rich were getting richer, they had more money to throw around. The lure of yet more lucre could now be used to steer them into sinking some of this new wealth into the poorest communities, something touted by Clinton late in his presidency when he went on a four-day ‘new markets’ tour of deprived American neighbourhoods. Urging the super-rich to do some good with a portion of their rapidly growing prosperity, Clinton told them that a better world would make them richer yet. ‘Every time we hire a young person off the street in Watts and give him or her a better future,’ he said, ‘we are helping people who live in the ritziest suburb in America to continue to enjoy a rising stock market.’”

Economics As A Moral Tale, Aeon Magazine (Jan. 9, 2019) [2]

The rich and famous jumped on board, and the rest of the 90’s into the 2000’s, private foundations were a growth industry. The Economist’s Matthew Bishop and development pro Michael Green  wrote the book on the topic, with a foreword from Bill Clinton:  Philanthrocapitalism: How Giving Can Save the World (2009). The book blurb captured the spirit of the approach and the times:

“For philanthropists of the past, charity was often a matter of simply giving money away. For the philanthrocapitalists – the new generation of billionaires who are reshaping the way they give – it’s like business. Largely trained in the corporate world, these “social investors” are using big-business-style strategies and expecting results and accountability to match. Bill Gates, the world’s richest man, is leading the way: he has promised his entire fortune to finding a cure for the diseases that kill millions of children in the poorest countries in the world.

“In Philanthrocapitalism, Matthew Bishop and Michael Green examine this new movement and its implications. Proceeding from interviews with some of the most powerful people on the planet―including Gates, Bill Clinton, George Soros, Angelina Jolie, and Bono, among others―they show how a web of wealthy, motivated donors has set out to change the world. Their results will have huge implications: In a climate resistant to government spending on social causes, their focused donations may be the greatest force for societal change in our world, and a source of political controversy.”

Maybe philanthrocapitalism’s greatest appeal was that it offered a fresh, inspiring story:

“At heart, philanthrocapitalism offered not a new science of development, but an old-fashioned moral tale – one in which a hero, who would reveal himself by some magnificent achievement, would come along to save us from some peril.”[3]

Everybody loves a great story, but does this one have a happy ending?

We’ll look at that next time.

[1] Id. For more, journalist and social commentator Chris Hedges thoroughly and adamantly deconstructs and debunks secular and religious utopian thinking in his book I Don’t Believe in Atheists, which he wrote after debating Sam Harris and Christopher Hitchens — two of the “four horsemen” of the “new atheism.” His analysis explains why utopias invariably crash into dystopias. If that topic interests you, I’ve been writing about it in my Iconoclas.blog, and you might like to check it out.

[2] The author is John Rapley, academician, world development expert, journalist, and government advisor. His latest book is  Twilight of the Money Gods: Economics as a Religion and How it all Went Wrong (2017).

[3] Id.