Thursday, October 26, 2006

Intra-High-Class Warfare

Via Kash and Greg Mankiw, I read a fascinating piece in Fortune about the source of some of the anti-ultra-rich sentiment, the merely rich. The key excerpt:

Here's my outlandish theory: that economic resentment at the bottom of the top 1 percent of America's income distribution is the new wild card in public life. Ordinary workers won't rise up against ultras because they take it as given that "the rich get richer."

But the hopes and dreams of today's educated class are based on the idea that market capitalism is a meritocracy. The unreachable success of the superrich shreds those dreams.

As Kash, says, he may be onto something, but it's a different thing than the author suggests. Here is a rewrite of the last part of the excerpt that I think is more accurate: "... the hopes and dreams of today's educated class are based on the idea that society is not the meritocracy of market capitalism but the meritocracy of a social democracy."

I don't disagree with the article's diagnosis: the educated trade classes of doctors, lawyers, authors, accountants, engineers, and professors (among others) have lost ground in the last decade or so compared to the entrepreneurs and financiers. Market capitalism rewards these innovators and risk takers above all others.

I think the educated trade classes resent that the contributions they make through their intellect and efforts are not valued by the market as highly as the returns to innovation and risk taking in product markets. The amenities that would accrue to them under (their idealized notion) of a more socialist system are becoming more expensive. They want their dachas by the lake, but the ultra-rich have already bought them up. And it didn't used to be that way.

And, of course (and as suggested in the article), every nurse, public school teacher, fireman, and other worker with lower education-based credentials, who works just as hard or harder and receives even less compensation for it, could rightfully tell them to get over themselves.

Kash closed his post with the question, "Who knows what such resentment could cause?"

My suggested answer: Senator Ned Lamont.

For some earlier ideas in this topic, see these two posts.


Anonymous said...

This has been an issue in society for thousands of years. Why do you think we have this:

You shall not covet your neighbor’s house; you shall not covet your neighbor’s wife, or male or female slave, or ox, or donkey, or anything that belongs to your neighbor.

Charles Ponzi said...

"Market capitalism rewards these innovators and risk takers above all others." This is another way of saying that capitalism is a meritocracy. I see it as simply the sum total of millions of voluntary transactions -- no merit or systemic reward involved. If the Fed lowered interest rates tomorrow to 1% and kept that rate for a year -- that would move more money up the food chain than any innovation taking place in the same period. Profiting from credit and asset value growth is merit?

Anonymous said...

I would add journalists to your list of professionals who feel that they have been left in the financial dust by entrepreneurs and workers in the financial services sector. Journalists do help set to terms and tone of the debate

Lord said...

A rising tide lifts all boats but a large wave can swamp all but the largest. If all were moving up no one would object but when only a few do, it is widely seen as at the expense of the rest. That capitalism can be cruel as well as kind is often overlooked.

monkyboy said...

Did everyone who joined Microsoft in the early 90s contribute more to society than everybody who joined Enron at the same time?

I don't think so...remember Bob?