Why Elites Fail

(Christopher Hayes, The Nation, June 6, 2012)
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But the Iron Law of Meritocracy makes a different prediction: that societies ordered around the meritocratic ideal will produce inequality without the attendant mobility. Indeed, over time, a society will become more unequal and less mobile as those who ascend its heights create means of preserving and defending their privilege and find ways to pass it on across generations. And this, as it turns out, is a pretty spot-on description of the trajectory of the American economy since the mid-1970s. . . . The sharp, continuous rise in inequality is one of the most studied and acknowledged features of the American political economy in the post-Carter age. Paul Krugman calls it “The Great Divergence,” and the economist Emmanuel Saez, who has done the most pioneering work on measuring the phenomenon, has written: “The top 1% income share has increased dramatically in recent decades and reached levels which had not been seen…since before the Great Depression.” . . . One of the most distinctive aspects of the rise in American inequality over the past three decades is just how concentrated the gains are at the very top. The farther up the income scale you go, the better people are doing: the top 10 percent have done well, but they’ve been outpaced by the top 1 percent, who in turn have seen slower gains than the top 0.1 percent, all of whom have been beaten by the top 0.01 percent. Adjusted for inflation, the top 0.1 percent saw their average annual income rise from just over $1 million in 1974 to $7.1 million in 2007. And things were even better for the top 0.01 percent, who saw their average annual income explode from less than $4 million to $35 million, nearly a ninefold increase. . . . It is not simply that the rich are getting richer, though that’s certainly true. It is that a smaller and smaller group of über-rich are able to capture a larger and larger share of the fruits of the economy. America now features more inequality than any other industrialized democracy. In its peer group are countries like Argentina and other Latin American nations that once stood as iconic examples of the ways in which the absence of a large middle class presented a roadblock to development and good governance. . . . This is evidence that the Iron Law of Meritocracy is, in fact, exerting itself on our social order. And we might ask what a society that has been corrupted entirely by the Iron Law of Meritocracy would look like. It would be a society with extremely high and rising inequality yet little circulation of elites. A society in which the pillar institutions were populated and presided over by a group of hyper-educated, ambitious overachievers who enjoyed tremendous monetary rewards as well as unparalleled political power and prestige, and yet who managed to insulate themselves from sanction, competition and accountability; a group of people who could more or less rest assured that now that they have achieved their status, now that they have scaled to the top of the pyramid, they, their peers and their progeny will stay there. . . . Such a ruling class would have all the competitive ferocity inculcated by the ceaseless jockeying within the institutions that produce meritocratic elites, but face no actual sanctions for failing at their duties or succumbing to the temptations of corruption. It would reflexively protect its worst members; it would operate with a wide gulf between performance and reward; and it would be shot through with corruption, rule-breaking and self-dealing, as those on top pursued the outsized rewards promised for superstars. In the same way the bailouts combined the worst aspects of capitalism and socialism, such a social order would fuse the worst aspects of meritocracy and bureaucracy. . . . It would, in other words, look a lot like the American elite in the first years of the twenty-first century.