Let’s talk about the in­equal­ity of op­por­tu­nity

The Washington Post Sunday - - DIVERSIONS - STEVEN PEARL­STEIN pearl­stein@wash­post.com

In­equal­ity may well be the is­sue of our time. But is it in­equal­ity of in­come we care about or in­equal­ity of op­por­tu­nity? And what is op­por­tu­nity — the op­por­tu­nity to do bet­ter than our par­ents, or bet­ter than our­selves at an ear­lier age, or does it mean do­ing bet­ter rel­a­tive to ev­ery­one else? Can some of us get wealth­ier with­out mak­ing oth­ers poorer? Would in­equal­ity re­cede if we just had more eco­nomic growth?

Th­ese ques­tions an­i­mate two new books. One is “Dream Hoard­ers: How the Amer­i­can Up­per Mid­dle Class is Leav­ing Ev­ery­one Else in the Dust, Why That is a Prob­lem and What To do About It,” by Richard Reeves, a Bri­tish-born philoso­pher by train­ing, politi­cian by in­stinct and a Brook­ings In­sti­tu­tion so­cial sci­en­tist by trade. (Richard is also a friend). The other, “The Bro­ken Lad­der: How In­equal­ity Af­fects the Way We Think, Live and Die,” is by Keith Payne, a pro­fes­sor of psy­chol­ogy at the Univer­sity of North Carolina. Both books are au­thor­i­ta­tive, thought pro­vok­ing, ac­ces­si­ble and well worth a spot on your sum­mer read­ing list.

Reeves starts from a sim­ple fac­tual ob­ser­va­tion — namely, that the rise of in­equal­ity in the United States isn’t just a story about the su­per-rich, the top 1 per­cent, but even more about a class of mar­ried, highly ed­u­cated, in­flu­en­tial and in­creas­ingly iso­lated pro­fes­sion­als in the top 20 per­cent who have been pulling away, both lit­er­ally and fig­u­ra­tively, from the rest of the coun­try.

Or, as Reeves is quick to ac­knowl­edge, peo­ple like him­self and his friends. While to the world, and to them­selves, it ap­pears that the mem­bers of the up­per mid­dle class have come out on top be­cause of their tal­ent and hard work, Reeves re­minds us that it has just as much to do with the luck of be­ing born to par­ents able to de­vote time, money and in­flu­ence to de­velop and nur­ture their tal­ents and en­sure their suc­cess.

Now, in the new age of in­equal­ity, that mer­i­to­cratic elite is us­ing its in­creased wealth to per­pet­u­ate that ad­van­tage for their chil­dren by seg­re­gat­ing them in the best com­mu­ni­ties, send­ing them to the best schools and securing for them the best in­tern­ships. As a re­sult, Reeves writes that what started as an in­come gap in one gen­er­a­tion is turn­ing into an op­por­tu­nity gap in the next, cre­at­ing an Amer­i­can class sys­tem that “is func­tion­ing more ruth­lessly than the Bri­tish one I es­caped.”

As Reeves sees it, his own class has be­come “kind of self­ish,” and he wishes they (we) would stop hoard­ing all the op­por­tu­nity and shar­ing a bit of it with the mid­dle class and the poor. By his

cal­cu­la­tion, the in­creas­ingly un­equal dis­tri­bu­tion of in­come has given the up­per mid­dle class an ex­tra $1.2 tril­lion in in­come each year — more than enough to be able to pro­vide other chil­dren some of the same ad­van­tages that they now pro­vide to their own.

While Reeves mar­shals the lat­est think­ing and data to sup­port his the­sis of a new mer­i­to­cratic aris­toc­racy, there are blind spots in his anal­y­sis and holes in his logic.

He ac­cepts too eas­ily the econ­o­mist’s as­sump­tion that com­pet­i­tive mar­kets dis­trib­ute re­wards in rough pro­por­tion to tal­ent and work ef­fort. He fo­cuses his crit­i­cism on how rich kids have a bet­ter op­por­tu­nity to de­velop the nec­es­sary tal­ents and dis­ci­pline be­fore the mar­ket com­pe­ti­tion be­gins. “Amer­ica has a mer­i­to­cratic mar­ket but an un­fair so­ci­ety,” he writes.

But could it be that the mar­ket it­self has be­come more un­fair? One could ob­serve that changes in laws, reg­u­la­tion and busi­ness norms since the 1980s have given busi­nesses more lever­age over em­ploy­ees, al­lowed some com­pa­nies but not oth­ers to earn above-mar­ket prof­its and pay above-mar­ket wages, and show­ered in­or­di­nate com­pen­sa­tion on a small num­ber of fi­nanciers, chief ex­ec­u­tives and en­ter­tain­ment su­per­stars. Surely such struc­tural changes have had more of an ef­fect on the un­even dis­tri­bu­tion of in­come and op­por­tu­nity than per­sis­tent fa­voritism in the award­ing of in­tern­ships.

Reeves also is too ready to think of eco­nomic ad­vance­ment is a zero-sum game. While it is true that, at any mo­ment, there are a lim­ited num­ber of homes in the posh­est com­mu­ni­ties and a lim­ited num­ber of fresh­men ad­mit­ted to the Ivy League, that doesn’t mean so­ci­ety can’t cre­ate more posh com­mu­ni­ties or cre­ate more high-qual­ity uni­ver­si­ties. And while it is a math­e­mat­i­cal cer­tainty that for ev­ery per­son who rises into the ranks of the top 20 per­cent of house­holds by in­come there must be an­other who falls back, it does not fol­low that there is a limit on the num­ber of Amer­i­cans who can en­joy an up­per mid­dle class ex­is­tence.

Like many ne­olib­er­als, Reeves is con­flicted. He can’t de­cide if the prob­lem is that our mer­i­to­cratic econ­omy isn’t mer­i­to­cratic enough, or if, be­cause of the re­al­i­ties of both na­ture and nur­ture, mer­i­toc­racy by its na­ture is doomed to evolve into self-per­pet­u­at­ing aris­toc­racy. He is also re­luc­tant to take sides on whether it is in­equal­ity of in­come that is the root prob­lem, or in­equal­ity of op­por­tu­nity, which sits bet­ter with de­fend­ers of free mar­kets. Reeves sees the two as hav­ing be­come so mu­tu­ally re­in­forc­ing that the only an­swer is all of the above.

In “Bro­ken Lad­der,” by con­trast, psy­chol­o­gist Payne em­braces the egal­i­tar­ian view that in­equal­ity of in­come is a prob­lem in and of it­self — eco­nom­i­cally, morally, po­lit­i­cally. He be­gins with the ob­ser­va­tion that hu­mans are hard-wired by evo­lu­tion to care not just about their ab­so­lute level of ma­te­rial com­fort but also their rel­a­tive stand­ing in the eco­nomic and so­cial hi­er­ar­chy.

Our ten­dency, he ex­plains, is to be­lieve that each of us is above av­er­age in terms of char­ac­ter, tal­ent and per­for­mance, and when an un­equal re­ward struc­ture fails to re­flect that be­lief, we be­come anx­ious, re­sent­ful and pes­simistic about the fu­ture. Those neg­a­tive feel­ings, in turn, lead peo­ple to make bad de­ci­sions — tak­ing on too much risk, un­der­in­vest­ing in the fu­ture, in­dulging in too much food, drink, sex — which only fur­ther un­der­mines their eco­nomic prospects.

So­cial psy­chol­o­gists have long iden­ti­fied this vi­cious cy­cle to ex­plain the poverty trap — the per­sis­tence of poverty in cer­tain fam­i­lies and com­mu­ni­ties. But Payne’s point is that be­cause of the dra­matic rise in in­come in­equal­ity, the same sta­tus anx­i­ety has now come to af­flict the mid­dle class, cre­at­ing a sim­i­lar self-de­feat­ing dy­namic.

“Our in­trin­sic ap­petite for high sta­tus crashes against the tow­er­ing in­equal­ity we see around us, with enor­mous con­se­quences for . . . not just the poor, but the mid­dle class as well,” he writes. “In­equal­ity is not sim­ply a mat­ter of how much money we have; it’s about where we stand com­pared to other peo­ple.” In other words, it’s not just be­ing poor that mat­ters; feel­ing poor has a sim­i­lar ef­fect.

Peo­ple who feel left out and pow­er­less are also prone to be­come dis­trust­ful and grav­i­tate to con­spir­acy the­o­ries to ex­plain their fate. And as we now ob­serve in the Trump era, if enough peo­ple feel that way, it can un­der­mine public faith in in­sti­tu­tions and po­lar­ize our pol­i­tics.

Payne draws on nu­mer­ous ex­per­i­ments he and other psy­chol­o­gists have con­ducted to demon­strate the im­por­tance we at­tach to rel­a­tive po­si­tion. He also reprises some­times con­tro­ver­sial stud­ies show­ing a high cor­re­la­tion be­tween in­come in­equal­ity and crime, chronic dis­ease, shorter life spans, less hap­pi­ness, po­lit­i­cal po­lar­iza­tion and slower eco­nomic growth. I say con­tro­ver­sial be­cause it is not al­ways clear from this data whether in­come in­equal­ity is cause or ef­fect, or whether a high rate of in­equal­ity is merely a sta­tis­ti­cal proxy for the real prob­lem, which is the higher poverty rate in most un­equal so­ci­eties. But none of that de­tracts from Payne’s main point that it is the un­even­ness in the dis­tri­bu­tion of in­come, not the over­all level of in­come, that is the more rel­e­vant fac­tor.

Payne, how­ever, pushes his the­ory of rel­a­tiv­ity a step too far when he as­serts that faster eco­nomic growth is no so­lu­tion to the prob­lem of in­equal­ity, as many economists have long ar­gued. Even if we were to dou­ble the in­come of ev­ery Amer­i­can, he writes, we’d feel worse, not bet­ter, be­cause the gap be­tween rich and poor would ac­tu­ally in­crease.

I se­ri­ously doubt that is true. While rel­a­tive stand­ing mat­ters, it is not the only thing that mat­ters. In the past, when in­comes and in­come in­equal­ity have both been grow­ing fast, as dur­ing the 1920s, peo­ple have felt those to be good times, not bad. Our cur­rent age of in­equal­ity has come at a time when the in­come growth for the av­er­age house­hold has slowed to a crawl. Amer­i­cans wouldn’t be so re­sent­ful about bil­lion­aire hedge-fund man­agers and mil­lion­aire chief ex­ec­u­tives if they them­selves were get­ting a raise ev­ery year.

A sim­i­lar ten­sion is at work in dis­cus­sions about mo­bil­ity, and whether it is ab­so­lute or rel­a­tive mo­bil­ity that we should care about. We think of the pe­riod from 1880 to 1980 as a golden era be­cause the vast ma­jor­ity of Amer­i­cans were able to earn higher in­comes than their par­ents (that’s ab­so­lute mo­bil­ity), even though their rel­a­tive place in the eco­nomic peck­ing or­der re­mained largely un­changed.

Con­trast that with the pe­riod 1980 to 2010, when mil­lions of poor im­mi­grants flooded across the border, rais­ing the rel­a­tive stand­ing of Amer­ica’s blue-col­lar work­ers. Have those blue-col­lar work­ers cel­e­brated their higher rel­a­tive sta­tus, or are they grumpy that im­mi­gra­tion has put down­ward pres­sure on their (ab­so­lute) wages?

The point here is that con­text mat­ters. It’s too sim­plis­tic to say that we should care only about in­equal­ity of op­por­tu­nity and that con­cerns about in­equal­ity of in­come are merely class envy, just as it is too sim­plis­tic to say that all that mat­ters is rel­a­tive mo­bil­ity rather than ab­so­lute or that eco­nomic growth ei­ther is ir­rel­e­vant or is the sil­ver bul­let.

What­ever their short­com­ings, books like “Dream Hoard­ers” and “The Bro­ken Lad­der” demon­strate how much more in­ter­est­ing and en­light­en­ing the in­equal­ity de­bate has be­come since those early days when it was mostly la­bor economists de­bat­ing how much in­equal­ity had in­creased and whether we should blame tech­nol­ogy or trade. The ad­di­tion of philoso­phers, psy­chol­o­gists, evo­lu­tion­ary bi­ol­o­gists, po­lit­i­cal sci­en­tists and so­ci­ol­o­gists has made for a much richer and more sat­is­fy­ing con­ver­sa­tion about the na­ture and con­se­quences of in­equal­ity.

And while we have come to un­der­stand that a so­ci­ety can suf­fer from hav­ing ei­ther too much in­equal­ity or too lit­tle, the chal­lenge now is iden­ti­fy­ing and get­ting to that sweet spot in be­tween.

Steven Pearl­stein

SPENCER PLATT/GETTY IMAGES

Peo­ple wait at dawn in Mil­ton, Fla., to see a doc­tor at a clinic that pro­vides free health-care ser­vices in un­der­served, iso­lated or im­pov­er­ished com­mu­ni­ties. “Amer­ica has a mer­i­to­cratic mar­ket but an un­fair so­ci­ety,” writes Richard Reeves, a Brook­ings In­sti­tu­tion so­cial sci­en­tist.

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