Saturday, July 13, 2019

Meritocracy Trap

I listen to some of the podcasts released by the London School of Economics. They have guest lectures from many leading economists, so it is a good way to catch up on what economists are up to.

The best lecture I have heard in the last few years was a talk by Daniel Markovitz called the Meritocracy Trap. Anyone who wants to understand what is happening in the modern economy and society should listen to it. He is not an economist, so he is easy to understand.

During the nineteenth century, a clash occurred between the traditional aristocracy, who lived on inherited wealth, the capitalists, who became rich with new businesses that emerged during Industrial Revolution, and the working classes who moved to the cities for low-paid hard work. This struggle between land, capital and labour dominated the next century.

Markovitz explains that a dramatic change has occurred in the last half century making the old struggles irrelevant. He explains that super-elite incomes now come from work and not from capital. The richest people in society now work for their incomes. They get and increasing share of their income from work and effort.

Most of the income in the elite groups share has not come from a shift of income from labour to capital but from a shift of income from one kind of labour to another. From the middle-class labour to elite labour.
The poor always worked long hours. In the past, elites did not work hard. Now it is elite labour that works long hours.
The top quintile works four to five hours more a day longer than it did mid-century. This represents a shift in work towards the elite.
This change brings a huge change in the way inheritance works. He explains.
The way that elites transfer their privileged status to the next generation has changed from bequests to adult children on the death of parents to through investment in human capital of young children while parents are living.
Markovitz explains that although the super-elite think they deserve their status, the system is stacked in their favour. For example, the education of their children at elite universities is almost fully subsidised. They also exercise considerable political power.
The top percentile has political influence, the bottom quintile has none. A massive complex of income and wealth defence has emerged. The super-rich has substantial influence over the laws that regular them and how they comply with the law. In the past, people got rich by working for the state. Today professionals get rich by working for people who are fighting the state to protect the wealth.
This change is a problem because the super-elites have distorted the direction of national economies for their benefit, to the detriment of other groups in society.

Markovitz is effective at diagnosing the problem, but his solutions are not really useful, because they rely on government interventions. That only solution is Jesus teaching on Unrighteous Wealth and the implementation of his solutions.

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