Wednesday, November 2, 2011

Thoughts on Meritocracy

This article considers a paradox: as the elites become more diverse, stratification is becoming even more extreme. As the paragraph below notes, this had led to extreme wealth inequality as somehow justified. Because “anyone can be rich” black, white Asian, male female- massive fortunes are justified, i.e. anyone at the top has “earned it”.
One of the groups to become mobilized in response to the protest movements of the 1960s and early 1970s was the rich. Think tanks dedicated to defending the free-enterprise system — such as the Cato Institute and the Heritage Foundation — were born in this period. And it is not an accident that the right-wing advocate Glenn Beck held a national rally on the anniversary of King’s “I Have a Dream” speech in front of the Lincoln Memorial. Republicans now defend tax cuts for the richest 2 percent using arguments and language from the civil rights movements: insisting that excluding the richest earners is unfair.

Removing the most blatant forms of discrimination, ironically, made it easier to justify keeping whatever rewards you could obtain through the new, supposedly more meritocratic system. “Greater inclusiveness was a precondition for greater economic stratification,” said Professor Karabel. “It strengthened the system, reinvigorated its ideology — it is much easier to defend gains that appear to be earned through merit. In a meritocracy, inequality becomes much more acceptable.”
Interestingly, meritocracy was initially not seen as a plus:

THE term “meritocracy” — now almost universally used as a term of praise — was actually coined as a pejorative term, appearing for the first time in 1958, in the title of a satirical dystopian novel, “The Rise of the Meritocracy,” by the British Labour Party leader Michael Young. He warned against the creation of a new technocratic elite in which the selection of the few would lead to the abandonment of the many, a new elite whose privileges were even more crushing and fiercely defended because they appeared to be entirely merited.
The second is a long article, but well worth the read, called "Who Killed Horatio Alger". Here’s a snippet, giving one of the first instances of a modern meritocracy – post-revolutionary France.

A meritocracy can’t survive on a supportive culture alone, however; it must also confer benefits large enough for people to recognize them. It’s no accident that meritocratic systems emerge when their potential benefits are the most sharply felt. At the national level, that tends to occur in wartime, especially when the survival of a country is at stake. In 1793, when the French Revolution was threatened by the invading armies of other European powers, the Jacobin government started to promote talented soldiers, rather than well-bred ones. This simple innovation allowed the Revolution to beat back Europe’s better-armed and better-trained forces. A similar effect was demonstrated by a friend of mine who felt sick one day. His wife offered to call their doctor friend. “No, I’m really sick,” he said. “I need a real doctor.” When life is in danger, there’s an enormous benefit to choosing according to merit, not loyalty.

So a meritocratic system, to engender a broad consensus, must confer relatively sizable benefits, even if they aren’t necessarily so enormous as saving a country from defeat. That isn’t an easy task. In politics, for example—a field in which value is mostly redistributed rather than created—the benefits conferred by meritocracy are relatively small compared with the benefits conferred by cronyism. If I appoint my friends to office, even when they aren’t terribly competent, I lose relatively little efficiency and gain quite a lot of power. Hence meritocracy is difficult to sustain in government.

The same is true when a firm enjoys a monopoly. Since the firm’s market position isn’t at risk, it doesn’t benefit much from hiring the best people. Instead, its executives focus on bureaucratic infighting, trying to grab an ever-larger share of the profits from one another, and once again, hiring loyal workers pays more than hiring competent ones. Contrast that with what happens in a competitive market, in which firms find themselves constantly threatened by competitors. It doesn’t pay to struggle for a larger slice of the pie if the pie is at risk of disappearing: a larger share of zero is always zero. Better to fight to preserve the pie, even at the cost of getting a smaller piece. This is another way in which meritocracy is intrinsically related to free markets. Without the threat that arises from economic competition, organizations have no reason to be efficient and thus no reason to be meritocratic.

Two powerful forces are threatening to drive America from a meritocratic equilibrium to a nonmeritocratic one. Recall that to survive in a democratic country, a meritocracy must enjoy a welcoming culture and offer large, widespread benefits to citizens. In the United States, both of these factors are being challenged: the first by a spreading belief that markets are a bad method of rewarding the meritorious; the second by a reduction of the benefits that most people derive from those markets.

The housing bubble and the 2008 financial crisis played a major role in the moral delegitimization of markets. When new developments in Florida and Arizona, built under the pressure of astronomically high real-estate prices, sit empty, people start questioning the efficiency of market prices. When the difference between a comfortable retirement and an indigent one is determined not by hard work or by a frugal lifestyle but by lucky timing in buying or selling your house, people start questioning the fairness of the market system. The fact that the real-estate bubble was the second large bubble to pop in less than a decade further undermined trust in markets as a good indicator of where to invest resources.

But nothing upsets people like the perception that the rules don’t apply equally to everybody. When my children were small, they sometimes tried to play Monopoly. These attempts inevitably degenerated into arguments. My daughter, who is two years younger than my son, would claim that my son was cheating. My son, with the official instructions in hand, would protest his innocence. And he was right: he never invented any rule. Nevertheless, my daughter was right, too: my son was engaging in selective recollection of the rules, counting on my daughter’s ignorance and bringing up only the rules that were in his favor. Despite her youth, my daughter understood that something wasn’t fair, so she employed the only response she had available: giving up.

The way the bailout was conducted damaged Americans’ faith in their financial system, in their government, and in the market economy. A BBB/Gallup poll conducted in April 2008, a few months before TARP was passed, indicated that 42 percent of Americans trusted financial institutions and that 53 percent trusted U.S. companies. In a similar survey performed in December 2008 by the Chicago Booth/Kellogg School Financial Trust Index, which I direct, these figures dropped to 34 percent and 12 percent, respectively. Moreover, 80 percent of respondents felt less confident about investing in financial markets because of the bailout. Their altered feelings weren’t the consequence of any ideological bias against government involvement; on the contrary, a majority of respondents believed that the government should regulate financial markets. They objected, rather, to the specifics of what the government was doing. One reason they objected was their perception that lobbying interests had influenced the intervention: 50 percent of respondents, for instance, thought that Paulson had acted in the interest of Goldman Sachs, not the United States.

But a stronger reason, presumably, was that the bailout made the system suddenly look fundamentally unfair. Why should outsourced workers, whose only fault was to have entered the wrong sector, bear the burden of market discipline, while rich bankers were offered a government safety net? In the December 2008 survey, 60 percent of Americans declared themselves “angry” or “very angry” about the economic situation. Their anger affected political decision making. In September 2008, when Congress voted against the first version of the Paulson plan, it did so in response to the anger pervading the country; in March 2009, Congress approved a 90 percent tax on AIG bonuses for the same reason; and when President Obama contradicted his advisors and condemned the bonuses paid to Merrill Lynch executives, he, too, was responding to widespread anger.
Wikiepdia on meritocracy:

I wonder if people who believe American society is in any way a meritocracy live on the same planet as I do. Can their experiences really be so divergent from mine? Has their life been so different? Are they in just denial? Because ALL of my personal experience over the course have my life has reinforced the notion that what one earns has absolutely nothing to do with your intelligence, ability, or contribution to society. In my experience, it is mostly just luck of the draw, and then justified retroactively.

I’ve met plenty of people who could not even write a simple paragraph or spell even simple words but live in mansions and drive shiny new SUV’s. I’ve met plenty of people who have bookshelves filled with eighteenth century philosophy but survive on beans and rice and live with roommates. I’ve met plenty of uncurious, unintellectual people who have Masters Degrees for one reason only – they could afford it. I’ve met plenty of people who are dumb as rocks yet have cushy jobs with outsized incomes, and people who work hard but are underpaid and fear for their jobs. I’ve meet plenty of people who owe their jobs to their parents and little else. All of these instances are not exceptions – they are the rule. Very few people end up in jobs that they intended to be in, and most end up falling into their position by any variety of factors, including dumb luck. I’ve even met a few people who were honest enough to admit it. Unless people have had drastically different life experiences than mine, and I don’t know what would account for that, I cannot believe that other people have not experienced this. Are we really living in the same country? I do think a lot of people stay in their narrow race/class/wealth divisions, but still you would have to be very willfully blind and ignorant not to see what is going on around you.

One of the supreme ironies of our time is that modern-day America is now much more of an aristocracy than almost anywhere else on earth. In that sense, America resembles nineteenth century Europe far more than it does nineteenth century America. Americans seem to lack the common sense to know what Europeans, and pretty much the rest of the world knows – the surest way to success is to pick your parents wisely. Having been born on the bottom, I know that in America you have to work twice as hard to get half as much as someone born with the standard middle class advantages.

I think there is a definite generational factor at work, too. If you were a baby boomer, you did not need to have much ability or talent to have a very high standard of living. I’ve met many Baby Boomers (and older) who have nothing more than a high school education and are barely literate yet have high incomes, pensions, suburban houses, and plenty of disposable income. Most of them played the game well – they stuck at a single job their entire life, because that was what one did in their day. Today, of course, that is not even an option. And, of course, many of them were either union members or government workers. And it is also telling that most of them are now right-wing Republicans, fixated on keeping their taxes low to the exclusion of all other factors that affect society. Needless to say, people of my generation and younger have a much different story – advanced degrees with low pay, high debts, and nonexistent job security, particularly if you started from a lower middle class background.

The meritocracy fiction is highly convenient to those in the upper class. No matter how much the elites change the rules to benefit themselves, you are berated for being responsible for everything that happens to you. As one of the articles points out, belief in meritocracy is more akin to a religious belief than having any sort of objective truth. People believe the concepts in their heads while refuting actual experience all the time. I read much of my news from European sources, and it’s interesting that European authors actually have to explain the American world view to their reading public. Europeans cannot believe the levels of inequality that are tolerated here, and they cannot believe anyone would buy the silly fictions like people get paid what they’re worth. I think holding into these beliefs in meritocracy is increasingly causing a lot of cognitive dissonance when myth meets reality. Me, I tend to base my beliefs on experience, not myth.

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