The Politics of Resentment and Envy

In discussions of income disparity and skewed wealth distribution one can be certain that the old trope of class envy and resentment will surface.  Conservatives have dismissed concerns about income disparity for decades based on their belief that a) there will always be income disparity because the more talented and ambitious will work harder and smarter and earn more, and b) the resentment and envy of those earning less is irrelevant as long as ‘all boats are rising’ in the economy.

There is, of course, some truth to the first part of that argument.  There is a wide range of talent and ambition among human beings.  Some people are driven to seek wealth and others are not.  Some people are indolent, some are energetic.  But it is also certainly true that good fortune, both in terms of one’s birthright and place in the world, as well as the vicissitudes of fate as one goes through life, will have a large impact on whether one succeeds and how much income or wealth can be acquired.  The old joke that a conservative is a person who was born on third base and thinks they hit a triple has a very significant kernel of truth.

It is also a simple fact that on balance, the poor get poorer and the rich get richer.  A single small obstacle can derail the fortunes of the poor, while the rich may weather many a trial with no great discomfort.  The fortunes of the wealthy naturally multiply through capital gains and a multitude of other benefits.  The fortunes of the poor are assaulted daily by health costs, transportation costs, shelter costs, childcare costs and a litany of other basic needs that loom as relatively huge obstacles to any accumulation of savings or wealth.  A single unexpected expense can launch a poor person on a nightmare voyage of high interest loans and long term debt.

But let us, for argument’s sake, say that indeed all boats are rising.  Is a growing income disparity justified in such a case?  Well the first question is whether the boats would be rising even faster if the incomes were more evenly distributed.  This question has been at the core of the battle between conservative and progressive economists for many decades, and I am unlikely to answer it here in any new or acceptable way.  My simple economic logic is that money in the hands of the poor and middle class is more likely to be spent directly on goods and services and is therefore more likely to contribute to growth in demand and growth in the economy.

However, leaving aside the question of economic effectiveness, what is the impact of high income and wealth disparity on the social fabric?  One may argue that wealth does not equate to happiness, and this is certainly true.  Indeed, it may be that massive wealth actually leads to a less satisfied life in the long run for many people – one sees this phenomenon often in the lives of celebrities or tycoons.  A modest wealth and lifestyle is probably the best path to happiness.

But the world celebrates wealth and we are constantly forced to compare ourselves with our neighbors and fellow citizens in this regard.  Every place we turn reinforces this fact.  Every advertisement, every mode of entertainment, every party we attend, every post on social media – they all either blatantly or subtly probe this aspect of our lives.  The world tells us not only that money will make us happier, but that it is a measure of our worth, our standing.  We are encouraged to feel inferior to those who have higher incomes.  Intellectually, rationally, we may understand that this is propaganda and a fallacious mode of thought.  But on a gut, reactive level we cannot help but be affected by this incessant indoctrination.  Those who are struggling at the margins, and even those who are reasonably successful but forced to pay homage to the rarified world of the increasingly rich and powerful, will become envious and resentful.  It is simple human nature.

The solution to this very real and very dangerous problem is to return to the extremely high marginal taxes on upper income ranges that were in place during the 1950’s.   The 50’s were, after all, the years when America was great, right?  The tax revenues produced by these higher marginal rates can be used to provide medical care to everyone and to revitalize our infrastructure.

A growing income disparity unravels the social fabric.  The resentment and envy that it creates may not be justified in terms of a true measure of our happiness and worth, but they are there nonetheless and are a cancer that will metastasize and invade every part of society.  No good thing will come of gross income disparity and many a bad thing may be on the horizon. 

Spreading the Wealth

A recent article in the Atlantic warns of the ‘Birth of a New American Aristocracy’.  The author defines a new 9.9 percent group, just below the formerly villainized 1 or 0.1 %ers, as the more dangerous, soon-to-be-entrenched aristocracy.  Riding just under the radar, this group has privileges that they glibly pass on to their progeny without realizing the implicit unfairness.  The so-called meritocracy of our society is a sham when examined closely, as merit can to a great extent be bought or ensured by the relative advantages of birth, neighborhood, school system, marriage, race and other factors outside the reach of human striving.

The article is well written and thought provoking.  However, it offers little in the way of antidotes to the poison of an entrenched aristocracy.  It seems to suggest that the best way to avoid a long-term disaster of radical income inequality and associated class resentment is to appeal to the individual consciences of the 9.9 percenters and hope that they will in some as-yet-to-be-defined fashion relinquish some of their many advantages. 

This is seriously naïve.  Who gives up their good fortune willingly?  What father will not ask a friend to give an interview to his daughter?  What mother will not seek out the best possible education for her son?  What aspiring professional will not seek out other aspiring professionals as life partners?  These are not criminal acts or even ethical lapses.  They are as natural as breathing and they will only be surrendered by a tiny minority of the most idealistic who have the strength of their convictions.

I advocate another means to achieve some measure of egalitarianism – spreading the wealth.  The number of capable, well-educated young people continues to grow ever higher.  In 1940 only 3.5% of the population had college degrees. Today over 35% do.  Any elite college can tell you that they receive almost identically impressive applications from many times the number of students they can enroll.  The jobs of the 9.9%ers – management consulting, physicians, law firm partners, accounting firm partners, financial firm partners, high tech executives, etc. – are a form of lottery that bestow high degrees of wealth on only a small portion of the population that could effectively occupy those positions.

The problem with today’s job and income marketplace is not that a small number of candidates achieve the ‘merit’ necessary to be successful by entrenched privileges, but rather that the highly compensated labor marketplace is too small and getting smaller!  Can anyone argue with a straight face that a law school graduate from Yale is worth the $250k/yr they are paid as an associate?  Or more importantly, that they deserve the ten-fold ratio of pay over the law school applicant who missed out on the Yale law school lottery and had to settle for a lesser school? 

There are complex and intricate reasons why our marketplace has evolved into a rich-get-richer and poor-get-poorer scenario.  But with the rapidly approaching end-of-life of so many job functions and the ever-increasing expectations of a burgeoning educated class, we must begin to analyze this trend and work to unravel the Gordian knot of wage disparity and job cartels before chaos and revolution descend upon us. 

Perhaps the first step is to encourage a much smaller work week – say 20 or 30 hours – for highly paid professionals.  This would have the effect of expanding the job market in those areas.  Of course the free market would not bend in that direction without some significant encouragement.  That must come in the form of very high marginal taxes on the upper incomes.  Would this be such a hardship?  The law firm partner who formerly made $500k and now makes $250k/yr and works 20 hours a week might just grow to appreciate this new quality of life over the rat race of his formerly lucrative but drone-like professional career.

It may seem the height of naivete to suggest such a radical change in our job market, but what other meaningful choice is there?  If, as many predict, and we are already observing, the number of well—paying jobs is decreasing, then the only real solution is to share these jobs and the associated wealth.  And the only way to do that is by some fairly potent social engineering in the form of taxation and other incentives.

Elite Schools - A Contrarian View

A recent court case concerning Harvard’s apparent attempt to limit the percentage of Asian Americans in their admission process has once again brought up the topic of how incredibly competitive elite colleges have become and how desperate parents and students are to gain admission into their exalted realm.  I think everyone is focusing on the wrong question here.

I am a product of the so-called elite colleges with degrees from Stanford, MIT and Georgia Tech.  I am well acquainted with the benefits of a degree from these institutions.  I make this disclaimer at the outset because I am going to take a contrarian view to the prevailing wisdom on this issue and I believe I am qualified to do so.

The usual argument from the media, educators and businesses when hearing anguish from students rejected from elite schools is that there are many excellent institutions of learning and that anyway, one’s career is not dictated by the school that one attends, but rather by the work that is done throughout one’s career.

There is of course some truth in these common sense platitudes.  A poor performer from Harvard will eventually be ejected from the fast track and a superstar from a good public university (or even a poor one) will over time rise to the top of his or her profession given a modicum of good timing and fortune.

But in my experience and in many years of observation, elite schools do offer an amazing advantage to their fortunate graduates.  The reasons are threefold – Brand, Cronyism and Connections.

As a Stanford graduate I have found that my resume is almost always given a second look because of the brand of the school.  People who meet me are visibly impressed when they learn that I went to Stanford or MIT.  Elite universities have spent much of their endowed billions (which, by the way, are donated in a rather incestuous cycle by their successful graduates for exactly this purpose) creating and polishing their brand so that the general public, and many potential employers, are simply in awe of them.  This is not to say that these institutions do not deserve some cachet, but I am quite certain that their brand is much more powerful than it really should be, for reasons I will point out later.

When graduates of elite universities head into the marketplace, they are able to take advantage of a uniquely American cronyism that is quite astonishing.  Consulting firms, financial firms, high tech firms, law schools, business schools and a plethora of other top opportunities are doled out by executives who are graduates of these elite schools and are typically inclined, like shadowy potentates in some secret society, to seek out their elite brethren and offer them the choicest entry points into the business world.  They justify this in the name of meritocracy, because who can argue against offering elite opportunities to elite graduates?

This cronyism is one type of networking, but the benefits of an elite pedigree do not stop there.  The multiplying effect of having both friends who have graduated with you and are now on the yellow brick road of good fortune, as well as a network of former and future graduates who have also been anointed in similar fashion, is quite stunning.  It creates an outsized impact on one’s career and perpetuates itself by giving one’s children and other loved ones similar advantages.  Who can blame you for hiring your college buddy’s daughter for that fast track position?

But it’s all ok, isn’t it?  These graduates of elite universities are the best and brightest, right?  They deserve to get the best jobs and careers.  They’ve earned it.

 

Ah, there’s the rub that makes this a calamity of such long life (if I may be forgiven a slight paraphrase)!  There are, give or take, 325 million people in the U.S.   The Ivy League schools and their equivalents throughout the country (Stanford, MIT, CalTech and a few others) can admit perhaps 20,000 students each year.  It has been noted on numerous occasions that the actual admission process for these schools is the equivalent of a lottery.  There are so many qualified applicants with amazing test scores, grades and activities that they could fill up ten times the number of so-called ‘elite’ schools and still not have enough spaces.  By perpetuating a myth of these elite schools having uniquely gifted students and offering a uniquely brilliant education we have created a system that is simply another form of hereditary privilege.

Of course this will never change.  It is our uniquely American form of oligarchy - an oligarchy that takes its form in both business and government.  Is it horribly evil?  No, not really.  But it is unfair.  However, we can all take comfort in the fact that life and happiness are not closely related to power, wealth or business success.  The Stanford grad who is hired by another Stanford grad at McKinsey and then fast-tracked to an all-expenses paid MBA at Harvard three years later and then becomes a partner with a whopping million dollar a year income may in the long run be just as miserable as any other person on this planet who focuses their life and energy on making money and cultivating power.

I have experienced much of this myself and have observed it at very close quarters all my life.  Did I unduly benefit in my career from my Stanford and MIT pedigree?  Well, I am actually the exception – I deserve everything I got!  😉