Podcast Summary
The Illusion of Meritocracy: The meritocracy system perpetuates wealth inequality and the disappearance of the middle class, with higher education being a primary driver. The idea of being self-made and merit-based is an illusion, and a one-time wealth tax could be a response to economic crises.
Key takeaway from this episode of the Making Sense podcast is that the notion of meritocracy, while once seen as a positive force, is now contributing to wealth inequality and the disappearance of the middle class. Daniel Markovitz, a professor of law at Yale, argues in his book "The Meritocracy Trap" that our system of higher education has become a perpetual motion machine of inequality, and that the idea of being self-made and merit-based is an illusion. Markovitz proposes a one-time wealth tax as a response to economic calamities like the COVID-19 pandemic. The conversation between Sam Harris and Markovitz covers the nature of inequality in the US, the difference between labor and capital as sources of inequality, and the shrinking middle class. Markovitz also discusses the flawed notion of being self-made and the social norms among the elites and the working class. The conversation challenges the assumption that meritocracy is a fair and just system, and raises questions about the consequences of a society that places too much emphasis on individual merit.
Meritocracy's Unintended Consequences: Meritocracy's emphasis on individual achievement has led to an advantage for the meritocratic elite, creating a cycle of privilege in education and perpetuating inequality.
Meritocracy, which was initially intended to promote equality of opportunity, has become an obstacle to opportunity for many in the United States. This is due to the fact that the children of the meritocratic elite have an immense advantage in education, creating a cycle of privilege. At the same time, the US faces a complex inequality landscape, with falling poverty rates but rising concentrated wealth and income inequality within the top 5%. The sources of top incomes have also shifted, with a larger percentage coming from labor rather than capital. These trends have significant implications for the ideology of inequality and the ways in which we address economic disparities.
Wealth vs. Labor: Who Really Works Harder?: New research challenges the notion that the wealthy don't work hard, suggesting that the top 10% work the most, while hours for the bottom 60% have decreased since 2000.
The wealth gap between those who have capital and those who have to work for a living has been a topic of much debate, with Thomas Piketty's thesis focusing on the distinction between these two groups. However, a new perspective suggests that the truly wealthy work harder than the rest, leading to the most extreme inequality in the top 10%. This discussion also highlighted the shift in hours worked, with the bottom 60% losing hours while the top 1% gained, amounting to two regulation workdays a week. The disagreement between Piketty and the new perspective lies in the source of income for the top earners in management and finance, with Piketty categorizing some of it as capital income and the new perspective viewing it as labor income. Despite these differences, both agree that until 2000, top incomes in the US were driven by rising labor income. The disagreement arises in the post-2000 period, with different interpretations of how to categorize the income of the highest earners.
Classifying Income of Top 1% Earners: Economists debate whether top 1% income is labor or capital, with the speaker arguing for labor based on individual contributions and long hours worked.
There is a significant difference in how economists classify the income of the top 1% earners. Thomas Piketty, in his analysis, treats much of this income as capital income, while the speaker argues that a large portion of it should be considered labor income. The speaker emphasizes that these individuals contribute valuable skills, ideas, and labor to their ventures, and their income is often a result of their ownership or creation of businesses. For instance, someone like Mark Zuckerberg, despite his wealth coming from his ownership of Facebook, likely works long hours and views his success as a result of his own labor. While there is some overlap between the groups discussed, the speaker argues that there is a distinction to be made between those who reap outsized rewards from their innovative ideas and those who grind away in traditional industries as part of a larger system of credentialing and social signaling.
Theories on Income Inequality: Piketty vs. the Speaker: Piketty's theory focuses on inherited wealth, absolving the elite of responsibility, while the speaker's theory implicates institutions and the elite, making it uncomfortable for them.
The debate around income inequality often focuses on different groups and the causes of inequality. Thomas Piketty's theory, which emphasizes the role of inherited wealth, absolves the elite left, who are often the book's natural audience, of responsibility for inequality. In contrast, the speaker's theory, which implicates institutions and the elite, is uncomfortable for the elite left. Additionally, defining the middle class is a complex issue, as it varies by location and lifestyle. The speaker primarily focuses on the top 1% and the 4% surrounding them due to the significant income growth in this group over the past 30 years. However, it's essential to recognize the differences between the merely rich and the super rich, as the wealth stratification between these groups is enormous and not comparable.
Middle class economic mobility and cultural relevance have declined: The middle class has seen a decrease in economic mobility and cultural significance, with the largest drop occurring between the 30th and 90th percentiles of income. This trend has negative impacts on individual well-being and political stability.
The middle class has experienced a significant drop in economic mobility and cultural relevance in recent decades. Economically, the odds of children becoming wealthier than their parents have decreased for the broad middle class, with the largest drop occurring between the 30th and 90th percentiles of the income distribution. This economic trend is reflected in the increasing stratification of various aspects of life around the income divide, with the rich part of life receiving more attention from the culture and media. Despite some relative improvements, such as access to technology, the overall decline in the economic and cultural standing of the middle class is damaging to individual flourishing and political stability. While some argue that growing inequality is acceptable as long as the floor is rising for everyone, the evidence suggests that this is not the case for the middle class.
Life expectancy gap between rich and middle class: In a capitalist meritocracy, the life expectancy gap between the wealthy and middle class is greater than what would be expected if we cured cancer, and success requires immense support which is expensive in terms of time, money, and expertise.
While consumer goods have improved significantly over the decades, other aspects of human well-being, particularly for the middle class, have not kept pace. The meritocratic system, which promises equal opportunity, instead creates a rigged system that excludes many, leading to self-harm behaviors and reduced life expectancy. For instance, the life expectancy gap between the wealthy and the middle class is greater than what would be expected if we cured cancer. Additionally, social issues like divorce and having children out of wedlock, which are closely linked to economic hardship, further widen the gap between the elites and everyone else. Life in a capitalist meritocracy is a constant struggle, and success requires immense support, which is expensive in terms of time, money, and expertise.
Economic Inequality's Impact on Society: Economic inequality affects various societal aspects, leads to family structure breakdown, and causes political implications. Elite families prioritize orderly homes for success, while middle and working-class roles are most affected by economic transformations.
Economic inequality not only affects income and wealth, but it also influences various aspects of society, including family structures, religious practices, consumption habits, and even health. In a meritocratic society where child training is crucial for success, elite families prioritize orderly and work-driven domestic spaces to secure their children's future. However, the jobs that have been most affected by economic transformations are traditionally middle and working-class roles, leading to a breakdown of the traditional family structure outside of the elite. This economic inequality, combined with gender hierarchies, results in extreme conservatism among the elite and the erosion of social solidarity. The growing problem of social cohesion has significant political implications, and the perception of the elite as self-made individuals complicates efforts to address this issue.
Wealthy resist redistribution during crises: During crises, the wealthy resist redistribution despite its potential benefits for society, making a one-time wealth tax a challenging proposition
During times of crisis, those who have accumulated significant wealth are less likely to support redistribution, even if it's for the greater good of society. This was argued in a New York Times op-ed proposing a one-time wealth tax to help alleviate the economic burden caused by the COVID-19 pandemic. The wealth tax was proposed as a means of social solidarity, with the richest 5% of households contributing to the relief efforts. This contrasts with ongoing wealth taxes proposed by campaigns like those of Warren and Sanders, which aimed to rebalance society and increase the social safety net. The one-time wealth tax was easier to implement, raised more revenue, and was less avoidable due to its one-time nature. However, advocating for this tax meant addressing the resistance from those who have benefited the most from rising inequality and have the means to protect their wealth.
Addressing wealth disparities during a crisis: During a national crisis, a wealth tax could help ensure that those with more contribute towards the common good, promoting fairness and collective recovery efforts.
The current economic crisis has highlighted the significant disparities among the wealthy population, with some benefiting while others are suffering. The proposal for a one-time wealth tax aims to address this issue by requiring those who were wealthy before the crisis to contribute a percentage of their wealth towards the bailout efforts. However, the discussion also acknowledges that some wealthy individuals have been negatively impacted by the pandemic, and their circumstances may not be as stable as those who have seen their wealth increase. Ultimately, the idea is that during a national calamity, society should focus on the collective good rather than individual wealth, and a wealth tax could be a fair way to ensure that those with more contribute towards the recovery efforts. Despite the complexities and potential unfairnesses within the wealthy population, the broader goal is to ensure that everyone contributes their fair share towards the common good, much like in a fair draft during wartime.
Promoting societal contribution through a new tax approach: The proposed tax aims to encourage wealthier individuals to contribute to society, distinguishing it from other progressive tax proposals, sparking debates on fairness and value creation.
The proposed tax under discussion aims to promote solidarity and societal contribution from the privileged, rather than focusing on fairness throughout the entire income scale. The speaker argues that this approach is different from other proposed taxes, such as those from Sanders and Warren. While some may find this perspective persuasive, others may worry about the notion of how much wealth is fair for an individual to have, regardless of how they acquired it. The speaker acknowledges that there are instances of wealth accumulation that don't seem to create much value for anyone, but also emphasizes that those who create significant value for others deserve to be wealthy. The podcast, Making Sense, relies on listener support and can be subscribed to at samharris.org for access to full episodes and other exclusive content.
