Federal MP Andrew Leigh has a vivid metaphor for describing inequality in Australia. He asks us to imagine a ladder in which each rung represents $1 million of household wealth. Then:
- The typical Australian household is halfway to the first rung
- A household in the top 1% is at least 5 rungs from the ground
- Gina Reinhardt is 8 kilometres off the ground (that puts her around 26,000 rungs up)
Inequality is getting worse and worse in Australia and many developed countries. Dr Leigh points to a range of possible causes, but gives most attention to taxation. He says taxation – especially low marginal tax rates – can explain a third to a half of the rise in top income shares in English-speaking countries between 1970 and 2000.
As I’ve discussed before, improving equality of opportunity is a key way to create a more equitable society. However in a remarkable new book released last month, Twilight of the Elites: America after Meritocracy, Christopher Hayes argues it’s not enough. We must also concern ourselves with equality of outcomes.
He contends equality of opportunity does not inexorably produce equality of outcomes – the ideology of meritocratic achievement stands in the way of social progress.
The first commandment of the post-1970s meritocracy can be summed up as follows: “Thou shall provide equality of opportunity to all, regardless of race, gender, or sexual orientation, but worry not about equality of outcomes.”
In an interview with Rolling Stone reporter Julian Brookes, he says meritocracy is insidious because it “countenances and tells a story that justifies the extreme inequality. Which is why you see those extreme payouts at the top. And those extreme payouts create a tremendous corrupting influence.”
He explains how the mechanisms of mobility and of equal opportunity are inevitably subverted by unequal power and wealth.
We want to make a neat division between equality of opportunity and equality of outcome, but in practice, we can’t. I use my high school, Hunter College in New York City, as an example. It’s a public school, free, open to students from all five boroughs, but it’s highly selective. When I went there, in the 1990s, you took one test to get in, in sixth grade. If you scored high enough you got in, if not, not. And if you were the mayor’s kid and you didn’t score high enough, you didn’t get in. That’s the kind of democratizing promise of the meritocracy.
What’s happened over time is you’ve seen a decline in black and Latino students in the school — who were always underrepresented, but are even more so now — at the same time as there’s been this growth of a test prep industry. Parents are paying thousands of dollars for cram schools to prepare their kids for the test, and now the majority of kids getting in are products of the test-prep regime. So the test prep industry has been this perfect parable: You have this scarce resource — a spot at an elite school — and people with money in a very unequal city have a clear advantage over those who don’t.
Here’s a brief extract from his book which I think gathers up some of Haye’s key ideas. He starts off with the arresting proposition that the US has made “remarkable, improbable, even transcendent progress toward equality” over the last seven decades. Best to let him speak for himself:
Since World War II, we’ve seen two distinct eras of equality in which a whole host of deeply embedded, overwhelmingly powerful systems of inequality were dramatically weakened, and in some cases all but destroyed.
The first era of equality, from the end of the Second World War to the early 1970s, represented a period of historically unprecedented growth, mass affluence, and middle-class expansion that has not been duplicated since. Income inequality markedly declined, even as the economy posted a nearly unmatched level of annual GDP growth. Union density rose as high as 34 percent (the highest it’s ever been), while the ratio between average CEO compensation and average production worker compensation hovered around 25 (by 2009 it was 185), and people up and down the income scale saw remarkable material gains.
Between 1947 and 1979 real family income grew for everyone but it grew the most for the poorest 20 percent of the population. Compare that to the period from 1979 to 2009, when real family income declined for those in the lowest income quintile, while increasing annually by 1.2 percent for those in the top quintile. During the Great Compression income gains were relatively evenly distributed, while in the three decades after 1979, the top 10 percent captured all of the income gains, while incomes for the bottom 90 percent declined
The fact that the first era of equality—with its strong middle class, manufacturing base, union density, but also “traditional families,” higher levels of church attendance, and far less tolerance for sexual identities outside rigidly prescribed norms—has something to recommend to both the left and the right means that we are gripped by a tangled kind of nostalgia politics. “Here, in the first decade of the twenty-first century,” writer Brink Lindsey observed in a 2006 essay, “the rival ideologies of left and right are both pining for the ’50s. The only difference is that liberals want to work there, while conservatives want to go home there.”
Lindsey, a libertarian, prefers the values of the second era of equality, the period from the mid to late 1970s until now that follows the contours of our meritocratic model: more equality along lines of race, gender, and sexual orientation, with far greater inequality and segregation in skills, wages, and wealth: More women law students, more black doctors, more openly gay millionaires.
I don’t share Lindsey’s politics, but I do think there’s much to celebrate now. It’s senseless to pine for a bygone era of Jim Crow, Mad Men–style casual sexual harassment and gender apartheid, police raids of underground gay bars and sodomy prosecutions, and laws against interracial marriage. The second era of equality has dismantled many (though certainly by no means all) of the legal and cultural structures that regulated and enforced these brutal inequalities of race, gender, and sexual orientation. Women entered the workforce in unprecedented numbers, and trends suggest that in the very near future, women will surpass men in all levels of educational attainment. While women still make on average 23 percent less than men, that gap has shrunk markedly since 1980, when women made on average 40 percent less.
As for racial equity, the gains are decidedly more mixed, but one unambiguous achievement of the second era of equality is that the elite has undoubtedly become more diverse. In 1975, only 1.4 percent of black households made more than $100,000. By 2006, it was more than six times that, a considerably faster rate of growth than that of white households. The number of black officeholders doubled between 1975 and 1993. And of course, there is what many view as the crowning achievement of the Civil Rights era: the first black president of the United States.
Equality for LGBT people hardly existed as a political issue during the first era of equality, while during the second the strides have been historic and remarkable: in 2003, the Supreme Court in Lawrence v. Texas struck down sodomy laws as unconstitutional. Eight states plus the District of Columbia have legalized gay marriage, while 58 percent of Fortune 500 companies offer benefits to same-sex partnerships. As of 2011, gays and lesbians can serve openly for the first time in the history of the United States military.
So the first era of equality produced an unprecedented reduction in economic inequality, a reduction that did not last, but that was, in some senses, replaced by a dramatic, if patchy and incomplete, reduction in inequality along the lines of gender, race, and sexual orientation
Given this history, the path forward is clear, if not exactly easy: we need to bring about a social order that combines the best things about each era of equality, one that shrinks the yawning social distance that now makes elite failure inevitable
The first step is persuading the public—including the elites themselves—that the ideology of meritocratic achievement stands in the way of social progress. The first commandment of the post-1970s meritocracy can be summed up as follows: “Thou shall provide equality of opportunity to all, regardless of race, gender, or sexual orientation, but worry not about equality of outcomes.”
But what we’ve seen time and time again is that the two aren’t so neatly separated. If you don’t concern yourself at all with equality of outcomes, you will, over time, produce a system with horrendous inequality of opportunity. This is the paradox of meritocracy: It can only truly come to flower in a society that starts out with a relatively high degree of equality. So if you want meritocracy, work for equality. Because it is only in a society which values equality of actual outcomes, one that promotes the commonweal and social solidarity, that equal opportunity and earned mobility can flourish.
I thought it was a fabulous read. And thanks to the wonder of e-readers and the internet, we can read it now (I couldn’t see it in hardcopy in any local bookstores). Here are some reviews: Aaron Swartz at Crooked Timber, Hua Hsu at Slate, and Nick Krafft at Open Economics.