Even before Occupy Wall Street made "We are the 99 percent" the slogan for post-financial meltdown America, Nobel Prize-winning economist Joseph Stiglitz grabbed the attention (of elites, anyway) with his provocatively headlined "Of the top 1 percent, by the top 1 percent, for the top 1 percent" Vanity Fair piece last March. It laid out not only the details of how the uber-rich had consolidated American wealth at the very top of society, but something more important and disturbing – how they had consolidated political power, which in turn continuously protected and even expanded their share of the pie. They managed to upend government "of, by and for the people."
Thanks to OWS and the work of writers like Stiglitz, 2012 was supposed to be the year America rediscovered and tackled economic inequality. Time magazine closed 2011 by naming OWS its top story of the year, a pretty big honor for a movement that only revved up in the year's final quarter. But that's how much its "We are the 99 percent" framing seemed to change the political debate. Suddenly cable news shows and myriad publications that had been obsessing over the deficit and President Obama's latest poll numbers began publishing data about the way that 1 percent had at least doubled its share of the nation's income and wealth over the last 30 years, to proportions not seen since the eve of the Great Depression. As the GOP primaries ramped up, it seemed beyond good luck that Obama would get to run head to head against Mitt Romney, whose vast wealth, Bain Capital "vulture capitalism" career (as derided by Republican Rick Perry) and 13.9 percent tax rate made him the poster boy for the top 1 percent.
Yet Mr. 1 Percent is barely trailing Obama nationally, and he leads in a few recent swing state polls. On the question of who would better handle the struggling economy, voters give Romney marginally higher marks. What happened? In his new book "The Price of Inequality: How Today's Divided Society Endangers Our Future," Stiglitz provides a partial answer. The Nation and MSNBC's Chris Hayes comes at it from a different direction in "Twilight of the Elites: America After Meritocracy." The two books don't explain everything, but they make you think in new ways about why we tolerate such vast and growing income inequality.
Paradoxically, Hayes blames the American ideal of meritocracy for our accelerating inequality. Meritocracy, of course, is supposed to be the opposite of and the antidote to aristocracy, and is often heralded as making America the land of opportunity that most people still believe it is. Yet Hayes lays out the ways it leads to a sclerotic stifling of economic mobility and equality nonetheless. For one thing, our ideal of meritocracy leads us to almost fetishize wealth and achievement, since we're invested in believing it was earned, not inherited, and that we too may someday share it if we work hard (and get smart) enough. It's also led us to be too trusting of elites, who've failed us on almost every level. Hayes takes an eclectic tour of America's 21st century Elite Hall of Shame, from the Bush administration's handling of Hurricane Katrina to the Catholic Church sex abuse scandal, the banking crash to Major League Baseball's steroid debacle, showing how our faith in meritocracy and the leaders it produces let elites run unchecked and nearly run our society into the ground. (One nagging quibble: The Catholic Church is anything but meritocratic, and as despicable as its handling of predator priests was, I wasn't always sure it fit the narrative.)
But Hayes identifies three problems with meritocracy that are convincing. First, it isn't genuine meritocracy; it's easily and almost inevitably subverted. Second, it provides an intellectual and moral justification for skewing rewards to the very top. And finally, even as it provides a pathway to the top for a comparative handful of standouts from the working and middle classes as well as racial minorities, it winds up channeling those folks into supporting the inequitable status quo when their efforts might otherwise go toward subverting it. It's no accident that Barack Obama may be our meritocracy's "crowning glory," in Hayes' words. An early progressive Obama supporter, Hayes isn't tackling the question of Obama's achievements and disappointments directly, but the book can be read as an extended meditation on why the great hope and change revolution of 2008 has so far left the inequitable status quo a little bit too intact.
Maybe Mr. Meritocracy vs. Mr. 1 Percent isn't as stark a contest as we liberals like to think it is.
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Hayes isn't some naive leveler; he doesn't think we should choose heart surgeons, airline pilots or presidents by lottery, or completely detach reward from effort and talent. He's asking us to question the superstructure of belief and prejudice that lets too many Americans believe that the supposedly meritocratic status quo is the best of all possible worlds, the fairest (albeit flawed) way to distribute rewards.
"Twilight of the Elites" zeroes in on the elite New York public school Hayes attended, Hunter College High School, to show the way our trust in meritocracy lets us tolerate increasing inequity. Once a genuine stepping-stone for a broad range of smart kids from the city's working class to better opportunities, providing equal access to all depending on how they scored on a single test, Hunter is now almost exclusively white and Asian. Yet its lack of racial diversity is dismissed by many as the lamentable but immutable byproduct of social forces beyond Hunter's reach, mainly poverty and systemic historic discrimination. While Hunter still provides immigrant and non-affluent kids with a boost, Hayes also shows the way the semi-privileged and truly privileged game the system, with expensive test prep classes and other supports that are typical of the way in "meritocratic" America the rich always get richer.
Hunter, of course, isn't the worst example of the way the wealthy concentrate their wealth and privilege by any stretch, but its meritocratic ideals help us see those ideals' shortcomings. In a genuine meritocracy, a scrappy poor kid might move from Hunter to Harvard Business School and attain enviable wealth and power. But that wouldn't be guaranteed to his children: One might reach Harvard, another a decent state school; the ne'er-do-well who slacked off and sold drugs might wind up in jail. In America today all three of that Harvard grad's kids have a better than average shot at the Ivy League, and the ne'er-do-well might turn out to be a fantastic investment banker – or at worst, move from one cushy rehab facility to another. The wealthy have safety nets the poor can only dream of. Even the beneficiaries of meritocracy, once they get to the top, work to protect their status.
"Twilight of the Elites" and "The Price of Inequality" are fascinating counterpoints to Charles Murray's "Coming Apart: The State of White America 1960-2010," which likewise details the concentration of educational privilege among American elites. But while Murray believes that sorting is a genetic imperative, and blames the immiseration of the white "lower class" on its moral failings – they just don't get married and work hard like their forebears did! – Hayes blames meritocracy itself for providing the justification for that inequality. And where Murray insists the rich are rightly rewarded for their harder work, impeccable morality and superior IQ, Stiglitz shows how they've rigged the game to create greater incentives for their own achievements as well as fewer for the rest of us.
"The Price of Inequality" is a primer on how the political power of the super-rich makes them richer. Stiglitz goes into great detail about "rent-seeking," the government-enabled extraction of money by the rich from the lower classes or the larger society, which has allowed the financial sector to gobble up a bigger share of American wealth without expanding the pie. He details the privileging of that sector, by both political parties, with lower tax rates on investment income and greater protection for bankers than consumers. Like Hayes, he forces us to question things many people take for granted -- Why can't mortgages or student loans be reduced in bankruptcy proceedings? – and shows how bankruptcy "reform" encouraged predatory lending by protecting lenders from the consequences of extending credit to people who clearly couldn’t afford it. Hayes and Stiglitz show how 21st century America protects those at the top while meting out ever more punishing, permanent consequences to those at the bottom.
Both authors note with alarm the share of wealth going to the financial sector -- before the crash, it took in 40 percent of all American corporate profits – as well as the share of graduates from the best American universities. The obscene rewards at the top are drawing America's top intellectual achievers into the financial sector rather than into pursuits that might revive rather than further deplete the American economy. As Hayes surveys corporate ethnography, he finds the word "meritocratic" and "meritocracy" used to describe kleptocracies from Enron to Wall Street, often in contrast to the "paternalistic" corporate leadership and ethos that ruled American business a generation ago.
Both books also highlight the way the social distance between the rich and the rest of us is vast and growing, and in turn prevents the kinds of political change that might reverse these trends; in fact, it encourages the opposite. Despite its concentrated pockets of (mainly African American) poverty, Washington, D.C. happens to be one of our wealthiest cities, with among the highest per capita income and the lowest unemployment rate. That has to help explain the lack of urgency to solve these problems, even among some Democrats and think-tank liberals. Meanwhile, with rewards so skewed to those at the top, they work ever harder – and especially since they can work from their iPad at their weekend home, or on their yearly jaunt to Davos, they don't understand why everyone else doesn't labor 24/7 too. (Of course you can't rebuild a sewer line, security-screen an airline passenger or teach kindergarten from the comfort of your home and iPad, and the strain of the jobs held by the non-elites helps explain why they may look forward to retiring at 65, rather than the youthful 70 their betters believe would be better for them.)
Still, neither Hayes nor Stiglitz entirely explain the psychological and political forces that have caused either meritocracy or American democracy generally to result in such a brutal redistribution of riches to folks at the very top, while consigning a growing number of Americans either to poverty or the brink of it. Hayes finds that polls show Americans believe we're a much more equal society than we are – the concentration of wealth data popularized in the last year hasn't reached mass consciousness yet – which he takes to mean that we value equality and would support efforts to achieve it. Polls likewise show that Americans support much higher tax rates than we have currently, and greater restrictions on Wall Street. Yet those tax rates and tough, equitable Wall Street regulations continue to elude us. As I write, JP Morgan Chase's Jamie Dimon is instructing a Congressional subcommittee on the way the Dodd-Frank act should have been written, even though he was called there to testify about Chase's latest $2 billion loss due to a bet – excuse me, a hedge – gone bad. Why is it so hard to bring about the political change that would reverse these troubling and corrosive trends?
Hayes touches on, but doesn't quite dive into, the trickiest question of all: The way the principle and practice of meritocracy divides liberals and the left, too.
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The cult of meritocracy that emerged in the mid-20th century was an antidote not merely to aristocracy or inherited wealth, but to government patronage and widespread public and private corruption. The rise of the civil service, conditioning public sector jobs on either test results or performance, was a well-intended effort to wrest control of those jobs from politicians.
Similarly, public sector unions, now despised as the corrupt protectors of slackers and moochers, were to some extent a product of meritocracy, an attempt to protect public workers from reprisals based on politics not job performance. In New York, civil service tests and union backing helped Jewish teachers break the monopoly the Irish once had on the public schools. As police and fire departments also succumbed to civil service reform, they found ways to use testing to shield those brotherhoods from outsiders, proving that the impulse to protect what we have isn't merely the vice of the rapacious rich.
And yet Tammany pols and urban machine leaders understood something meritocrats missed: Most people want to work to live, but they don't want to live to work, and subjecting everyone to continuous vetting and evaluation seemed the obsession of good-government blue-bloods. Also: desperately poor people can be dangerous, and thus fear of the immigrant rabble led urban machines to find ways to employ them. Somehow the political consensus that emerged from the Great Depression found ways to balance the ideals of merit, opportunity and inclusion. The New Deal labor protections that helped build the middle class sheltered workers from the ruthless prerogatives of capitalism and its bottom line. Labor unions, generally, protected not the labor force superstar but the average Joe (and later Jane), in the name of providing the broadest possible economic security to the greatest number.
After the war, a wave of public spending built the middle class in two ways simultaneously: providing subsidies (or tax credits) for education, housing and health care, while also employing people – teachers and social workers, construction workers and police officers – to help provide those opportunities. The post-war military-industrial complex as well as the welfare state also served as a vast employment program, overseen by private sector and later public sector unions, in which we tolerated some inefficiency in the name of shared prosperity.
Paradoxically, meritocracy helped women, African Americans, immigrants and other excluded folks rise, and yet our drive for greater fairness and inclusion contributed to eroding support for that post-war superstructure of economic security and upward mobility. Continuing to open up more opportunities to those who were excluded, particularly African Americans, turned out to be divisive, even on the left. To take one example: In Hayes's New York City in the late 60s, both affirmative action and the notion of "community control" of public schools exploded in a wave of teachers' strikes that heralded our ongoing battles over education reform. Teachers' unions, which once were a symbol of meritocracy, came to stand for its opposite: cronyism and protecting the incompetent. They're even seen by some as a barrier to meritocracy, preventing generations of poor and particularly African American kids from rising the way earlier generations of low-income folks did.
I digress there neither to defend or attack teachers' unions, but to say: in the 60s, the forces of social justice divided on the best way to attack inequality and exclusion, and in the end settled on the one principle everyone seemed to be able to agree about: equal opportunity. Yet our battle to fairly apportion jobs and services quickly became a zero sum game. "Meritocracy" came to mean including a growing but still small number of the formerly excluded – African Americans, women, some of the multiracial working class – in the upper echelons of American society, where they became advocates for the status quo. Barack Obama is meritocracy's "crowning glory," Hayes writes, and he in turn demonstrates its possibilities – and its limits. How can he – and we – move us to a new phase of true opportunity and greater equality?
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Neither Hayes nor Stiglitz quite provides an answer. We're in a moment when books conceived years ago but finished as Occupy Wall Street emerged are beginning to enter bookstores. (I'm uniquely sensitive to this timing as I go over my own galleys.) Both Hayes and Stiglitz nod appreciatively to OWS as one way Americans might finally fight back against growing inequality. Hayes is more optimistic about it, making a good-faith effort to link OWS to Tea Party insurgents to show that discontent with our rigged and unequal system is not necessarily a question of left vs. right. I admire his open-mindedness, but given the way Tea Party energy has been harnessed by the Republican Party on the right, I'm not as sanguine about the possibility of left-right collaborative insurgence.
On the left, meanwhile, OWS has emerged as increasingly hostile to the Democratic Party, a hostility Hayes neither justifies nor criticizes but accepts as reality. He identifies a divide on the left between "institutionalists" and "insurrectionists" that made me realize I'm a hidebound "institutionalist," committed to pulling the Democratic Party back to its foundation in fairness and social justice, rather than tearing it down. But I recognize, as Hayes does, that the party's increasing subservience to Wall Street and the wealthy over the last 25 years makes it an increasingly unlikely vehicle for transformative social and economic change.
I see a profound difference between the values and priorities of Barack Obama and Mitt Romney, but if some struggling Americans can't, I'm not always sure I can blame them. Our Democratic president hasn't done enough to chart the way out of the economic hole into which our supposedly meritocratic elites and both parties have plunged us. I like Obama, but I've always gotten why working class folks may not (and it's not always their racism): he does exude the confidence of a man convinced that meritocracy indeed prevails and the system mainly works: it elevated him and his top deputies to the Ivy League and then the highest reaches of government, didn't it?
I interviewed Stiglitz at the Commonwealth Club of Silicon Valley Tuesday night (the podcast is here), and after we'd detailed the many problems caused by inequality, he pronounced himself optimistic that we can find our way to a new era of leveling it. We did it before, he noted, after the Gilded Age, and then again after the Great Depression; we can do it again. Likewise, Hayes thinks Americans need to remember they have the power to upend the towering status quo: "We've been looking at the tower for so long we forget it's made of blocks; we forget it can be put back together in a different way." We still don't know when that rebuilding will begin, but questioning whether our cherished ideals about creating a fair society in fact thwart it is an important first step.