Meritocracy is a myth invented by the rich

The college admissions scandal is a reminder that wealth, not talent, is what determines the opportunities you have in life writes Nathan Robinson in The Guardian 

 
‘There can be never be such thing as a meritocracy, because there’s never going to be fully equal opportunity.’ Photograph: Dan Kitwood/Getty Images


The US college admissions scandal is fascinating, if not surprising. Over 30 wealthy parents have been criminally charged over a scheme in which they allegedly paid a company large sums of money to get their children into top universities. The duplicity involved was extreme: everything from paying off university officials to inventing learning disabilities to facilitate cheating on standardized tests. One father even faked a photo of his son pole vaulting in order to convince admissions officers that the boy was a star athlete.

It’s no secret that wealthy people will do nearly anything to get their kids into good schools. But this scandal only begins to reveal the lies that sustain the American idea of meritocracy. William “Rick” Singer, who admitted to orchestrating the scam, explained that there are three ways in which a student can get into the college of their choice: “There is a front door which is you get in on your own. The back door is through institutional advancement, which is ten times as much money. And I’ve created this side door.” The “side door” he’s referring to is outright crime, literally paying bribes and faking test scores. It’s impossible to know how common that is, but there’s reason to suspect it’s comparatively rare. Why? Because for the most part, the wealthy don’t need to pay illegal bribes. They can already pay perfectly legal ones.

In his 2006 book, The Price of Admission: How America’s Ruling Class Buys Its Way into Elite Colleges, Daniel Golden exposes the way that the top schools favor donors and the children of alumni. A Duke admissions officer recalls being given being given a box of applications she had intended to reject, but which were returned to her for “special” reconsideration. In cases where parents are expected to give very large donations upon a student’s admission, the applicant may be described as an “institutional development” candidate—letting them in would help develop the institution. Everyone by now is familiar with the way the Kushner family bought little Jared a place at Harvard. It only took $2.5m to convince the school that Jared was Harvard material.

The inequality goes so much deeper than that, though. It’s not just donations that put the wealthy ahead. Children of the top 1% (and the top 5%, and the top 20%) have spent their entire lives accumulating advantages over their counterparts at the bottom. Even in first grade the differences can be stark: compare the learning environment at one of Detroit’s crumbling public elementary schools to that at a private elementary school that costs tens of thousands of dollars a year. There are high schools, such as Phillips Academyin Andover, Massachusetts, that have billion dollar endowments. Around the country, the level of education you receive depend on how much money your parents have.

Even if we equalized public school funding, and abolished private schools, some children would be far more equal than others. 2.5m children in the United States go through homelessness every year in this country. The chaotic living situation that comes with poverty makes it much, much harder to succeed. This means that even those who go through Singer’s “front door” have not “gotten in on their own.” They’ve gotten in partly because they’ve had the good fortune to have a home life conducive to their success.

People often speak about “equality of opportunity” as the American aspiration. But having anything close to equal opportunity would require a radical re-engineering of society from top to bottom. As long as there are large wealth inequalities, there will be colossal differences in the opportunities that children have. No matter what admissions criteria are set, wealthy children will have the advantage. If admissions officers focus on test scores, parents will pay for extra tutoring and test prep courses. If officers focus instead on “holistic” qualities, pare. It’s simple: wealth always confers greater capacity to give your children the edge over other people’s children. If we wanted anything resembling a “meritocracy,” we’d probably have to start by instituting full egalitarian communism.

In reality, there can be never be such thing as a meritocracy, because there’s never going to be fully equal opportunity. The main function of the concept is to assure elites that they deserve their position in life. It eases the “anxiety of affluence,” that nagging feeling that they might be the beneficiaries of the arbitrary “birth lottery” rather than the products of their own individual ingenuity and hard work.

There’s something perverse about the whole competitive college system. But we can imagine a different world. If everyone was guaranteed free, high-quality public university education, and a public school education matched the quality of a private school education, there wouldn’t be anything to compete for.
Instead of the farce of the admissions process, by which students have to jump through a series of needless hoops in order to prove themselves worthy of being given a good education, just admit everyone who meets a clearly-established threshold for what it takes to do the coursework. It’s not as if the current system is selecting for intelligence or merit. The school you went to mostly tells us what economic class your parents were in. But it doesn’t have to be that way.

Why I want to see private schools abolished

Tim Lott in The Guardian

I am inclined towards equality of opportunity for all children. I am also aware that such a phrase is open to multiple definitions – and with most of them, such equality verges on the impossible. For instance, we can all hold up our hands in pious disapproval at the unfairness of, say, familial nepotism – such as that seen among Donald Trump’s brood – yet most of us are not much better. Anyone who is educated, or from a middle-class background is also operating on a manifestly unequal playing field.
This is largely because of the workings of social capital – of which nepotism is simply an extreme example. At a mundane level, it means having parents who are educated, interested in education, connected within the professions and happy to use those connections – what you might call cultural nepotism. I am not innocent of this. Conscience takes a fall when one’s children are involved.
This kind of inequality is difficult to legislate against. The divide between rich and poor families is growing, and largely inescapable. A new report from the Institute for Public Policy Research thinktank shows that the number of internships has risen 50% since 2010 – another leg-up for those who can afford to take low-paid or unpaid positions.

Add in decent housing, good nutrition and the imparting of confidence and the middle classes have a huge advantage, even before you talk about schooling. There are other ineradicable forms of inequality – genetic capital for instance, since intelligence, is, according to most scientific sources, at least 50% hereditary. But social capital is the most visible.


Middle-class kids will, on aggregate, still come out on top because of their pre-existing advantages

This entrenched and inevitable advantage is, perversely, why I oppose private schools far more firmly than grammar schools (which, at least in theory, could be meritocratic). It is not that I hope to take away from privileged children any unfair head start. I just want to take away the only advantage that is purely down to money and entirely subject to legislation.
Private schools add insult to injury. If you get rid of them and shift all the pupils into the state system, nothing will guarantee the latter’s improvement with more certainty. And the middle-class kids will, on aggregate, still come out on top because of their pre-existing advantages – so it is especially egregious that so many people so staunchly oppose their abolition.

Grammar schools, as envisaged in the 1944 Education Act (with selection based not solely on tests but also on aptitude and past performance) might be the answer to those who suggest the abolition of private schools would result in “dumbing down” – as long as they were a resource for the clever and motivated rather than the privileged and tutored. There would still be inequality, but it would be minimised. Absolutely level playing fields are, and always will be, a myth. However, we can make the fields less ridiculously skewed than they are at the moment.

It is doable, practically. Shame that it just appears impossible to do politically. The fact that Jeremy Corbyn is suggesting charging private schools VAT is a step in the right direction. A few more steps in that direction and he might establish a policy that would make me vote for him.

But I’ll take a (state-educated) guess that it won’t happen. There are too many people with too many fingers in the private-schooling pie – among them a fair number of Corbyn’s shadow cabinet. Because when those who stand against inequality simultaneously take advantage of it, their motivation is sorely undermined – whether or not it would be a vote winner.

Such is the insidiousness of educational inequality – so long as it works for the policy-makers themselves, it has little or no chance of real reform. Those responsible can always tell themselves that it’s just for their children’s sake. It is understandable. It may even be forgivable. But it is a total cop-out.

What To Do After You Graduate College

Gary Vaynerchuk

I’m scared. I’m scared because I know exactly what happens around this month every year. There are so many of you who have graduated (or will be graduating) and still have no idea what you want to do with your life. And you know what? That’s ok! Most people don’t. You shouldn’t be stressed about that. What I’m scared about is that you don’t realize that you are entering the greatest 5-year window of your life.

If you are 22 years old, regardless if you’re graduating from college or not, there are two things you should keep in mind. The first is to acknowledge that you are entering some of the greatest years of your life. The second is that this is the moment when you don’t go practical—don’t take the “safe” route. This is NOT the time to get the job Mom always wanted you to get. This is NOT the time to try to maximize as much money as you can make so you can save up to buy a sick ride. This IS the time, however, to realize that you have a five-year window (three for some, eight for others) for you to attack the life that you want to win.

Something else that scares me is the naïveté of what the world is like after graduation. I am by no means saying that “winning” is going to be easy. It’s not. What you’ve been doing for the last 16 years is easy. Classes and school are easy because they’re structured. The world? It’s hard. It changes every day.

The fact is that the world is going to be exactly the way it is going to be without regard to the way you thought it would be, think it should be, or whatever big plans you’ve already made for yourself. Your parents might have already told you it’ll be one way, but they don’t really know. They just want you to do what they think is best, which usually means avoiding big risks. But, what you need to recognize is that now is the time when you can afford to take those risks.

What I wrote above is going to contradict what I’m about to tell you now. Even though the real world is hard, the next five years of your life will be the opposite. These will be the best and easiest years of your life because it’s your chance to attack what you love and try out what you want to do. Why? Because you don’t have all the baggage.

Look, I understand you might have college loans. I respect that financial debt is a real hardship. You may have to live up to the expectations of your parents. That’s mentally hard—fake hard. You may have many other obligations, but this time is exactly when you can live with 4 roommates in a basement and eat fast food.

Most of you don’t have children yet. Most of you are not married and have not yet promised your life to someone else. So, this is the time before the world has sucked out all your hopes and dreams. You still have this window—the next five years to help you achieve your goals.

Time is the number one asset and now is when you have the most flexibility to use it.

I’m sure some people will leave comments about their loans or whatever other financial obligations they might have. Again, I respect that. But one way or the other, that loan is going to be there whether you build something for yourself or not in these five years. I truly believe that you can wake up on your 26th or 27th birthday, start being practical, and still pay off your loans and any other debts. While I’m sure those obligations might have compounded interest, leaving the opportunity of “going for it” in those five years (especially if you have entrepreneurial DNA) is a mistake and actually lacks practicality.

Yet, so many of you are so hungry for short term gains right after college. For example, you would rather take the job that maximizes your pay at $3,000 more a year, despite the fact that you would have enjoyed a lower paying job more suited for you. For what? For a new iPhone? A slightly nicer apartment? You get to live life one time.

(By the way, you can work at night! This is when you put in your 18 hours a day to make the life that you want happen. That’s practicality.)

Promise me, all you youngsters who are reading this, that you understand that the land grab for happiness starts right now. You don’t have to worry about getting “that job.” What you should do is go and travel and learn. Go and start that business you always wanted. Travel with those three friends and start that band. This is the time to be massively risk oriented. There will be plenty of time to be risk averse later. Now is the time to understand what’s actually happening and map your behavior to something that will impact you for the next 80 years of your life.

When you are in your early 20s, this is when you can grind at your highest level because you don’t have the baggage that comes later in life. It’s harder for the 42 years olds to listen to this advice. At that point, you can’t just wake up tomorrow and say “let’s go” because little Sally has soccer practice and you have a million other things that are holding you down.

If you are lucky enough to be graduating today without any clue what about what you want to do with your future, no one’s ever been luckier than you. Please recognize that.

The trouble with philanthropy is that money can't buy equality

Courtney Martin in The Guardian

I spent Saturday morning at the public library with my 2.5-year-old daughter. She sat in the centre of a multi-racial, multi-lingual group of toddlers, spread her arms out as wide as they would go, and screamed: “He turned into a beautiful butterfly!” at the end of the consummate classic, The Very Hungry Caterpillar. The parents and grandparents giggled at the collective exuberance of little ones. The kids’ insanely spongy brains soaked up the sea of words surrounding them.

This may sound like a mundane scene, but it’s a surprising triumph for philanthropic equity – one of the few that exists at a meaningful, functional scale in our increasingly unequal country. At a time when early childhood has exploded as a lucrative market opportunity, no money is exchanged at the nation’s public libraries.

Why? Because in the 1850s, a wealthy guy invited a poor, 13-year-old immigrant boy to spend Saturday afternoons at his private library in Pittsburgh.

That boy grew up to be steel magnate Andrew Carnegie. Carnegie rememberedthat, as a child, “I resolved, if wealth ever came to me, that it should be used to establish free libraries.” True to his word, Carnegie’s funding built about half of the 3,500 public libraries that existed by 1920.

Philanthropy has come a long way since the “Patron Saint of Libraries” took a childhood experience and turned it into a national legacy. Too often, it feels like we’ve lost our core wisdom about how change actually happens.

As they say, money can’t buy love. It can’t, ultimately, buy equity either. Both start with the seed of relationship.

There would be no three-year-old black kid in Oakland screaming hungry caterpillar exuberance without Andrew Carnegie. And there would no Andrew Carnegie without that Pittsburgh bibliophile.

So what does this mean for philanthropy? It means that the only philanthropy worth engaging in – both ethically and strategically speaking – is the kind that honours the wisdom of relationships and the power of money.

In what organiser and human rights activist Ella Baker deemed the “foundation complex” in 1963, those with money usually call the shots. Typically, a foundation positions itself as the expert and judges the merits of a nonprofit to solve a particular problem, whether it’s childhood hunger, or deforestation, or homelessness.

A girl stamping her own book at the old Aberystwyth Carnegie-funded public library, Wales. Photograph: Keith Morris/Alamy

I’ve been on the phone myself, scrambling to feel worthy of a foundation officer’s attention and money; nothing has inflicted me with a more toxic form of impostor syndrome. The questions foundation representatives ask, like those little bubbles on a standardised test, seem to pop up one after the other. With each one, I feel my breath get shallow. I’m feverishly tap-dancing when what I want to be doing is have good faith, meaningful conversation.

With individual donors, the hierarchy is often softened with social graces – a cup of coffee, a chat about shared passions, the scent of camaraderie – but ultimately the power dynamic is no different. One of us has the means and therefore is in the position of judging the other’s “good works”. In some ways, these interactions can be even more demoralising because they are deeply confusing; sometimes it can feel like you are performing friendship.

In the midst of particularly demoralising experiences with wealthy philanthropists, I have often reminded myself of my own privilege – a white woman from an upper-middle-class background with an Ivy League degree. If these interactions make me feel this way, imagine how confusing and alienating they likely are for people even further afield of the social class of most philanthropists.

A note about philanthropists’ demographics: three-fourths of foundations’ full-time staff are white and nearly 90% are over 30. Women flourish at smaller foundations – about three of four fundraisers are female – but at those with assets of more than $750m, women comprise only 28.9% of CEOs and CGOs (chief growth officers).

Board leadership is even more demographically starved. “Fully 85% of foundation board members are white, while just 7% are African American and only 4% are Hispanic,” said Gara LaMarche, president of the Democracy Alliance. “Nearly three-quarters of foundations have no written policy on board diversity, and fewer than 10% of board members are under 40.”

This means a lot of people who are not white, male and older are hustling their asses off to understand the sensibility of those who are. They are spending energy being tactical about how they talk about their work and build relationships, however transactional or tokenising. I admire their commitment and acuity, but even if some get good at translating and tap-dancing for dollars, that should not comfort the philanthropic world about its own inclusivity or transparency.

It only means that some people are willing to put in the work to get good at the game, not that the game isn’t profoundly rigged or that it doesn’t distract from getting real work done.

And the truth is, I imagine it’s a disconcerting experience for most philanthropists, too. On some level, they must know that they’re not the wisest authorities on the issues they’re seeking to effect. Money doesn’t make you an expert on poverty alleviation; in fact, it can make you dumber with distance. And yet, traditional philanthropy is set up to put you – the one with financial wealth – in the position of playing god with something you deeply care about. Even if it strokes your ego to be the decider, it’s got to erode your sense of integrity.

How can we reinvent philanthropy with an eye toward true equity? How can we create new cultures and structures that allow resources – financial, experiential, energetic – to flow in ways that feel dignifying? How do we create paradigm-shifting shit together, not just send LinkedIn requests and push money and paper around?

One obvious thing we can do is work to change the demographics of those giving away money and sitting on boards. But even that isn’t a fix; it’s a good bet to slowly shift culture, but not a promise of radical restructuring. There has been a slight uptick in black executives at foundations, for example, but as soon as they arrive, many are looking for an out, according to the Association of Black Foundation Executives. They overwhelmingly cite as their reason for fleeing that they want to be “more directly engaged in creating community change.” Duh.

If we really want to reinvent philanthropy then we are going to have to look at the underlying historic and structural causes of poverty and work to dismantle them and put new systems in their place. It’s also about culture – intentionally creating boundary-bashing friendships, learning to ask better, more generous questions, taking up less space.

It’s about what we are willing to acknowledge about the origins of our own wealth and privilege. It’s about reclaiming values that privilege often robs us of: first and foremost, humility. But also trust in the ingenuity and goodness of other people, particularly those without financial wealth. And a more accurate sense of proportion – where and how are philanthropists really most crucial in the fight for a more just society?

Several groups are working to show us what this kind of giving might look like. An example: a group of trust fund kids, calling themselves the Gulf South Allied Funders, took their own inheritances, raised even more money from their own networks and then donated the sum to the Twenty-First Century Foundation, which has a long-standing presence in New Orleans. In the wake of Hurricane Katrina, they acknowledged their unfamiliarity with the community, and decided to funnel their resources to someone who could make a bigger difference.

Emergency response team volunteers clean up debris from a home destroyed by Hurricane Katrina. Photograph: Mark Humphrey/AP

Another: poor families in Boston and Detroit and Fresno track data about their own strengths and goals and then come together on a regular basis to talk about what they’re learning and the kinds of support they need. The families provide the moral support, while Family Independence Initiative provides the financial support in the form of scholarships, small business grants and other capital, on an as-needed basis.

And another: Self-Help, a family of nonprofit credit unions in North Carolina, California, and Florida, counter predatory lenders and high-fee check cashers in underserved communities by providing low-interest banking and loan services, financing community development projects and rehabilitating historic buildings with local partners. They celebrate the ways in which their current banking structure is significantly imprinted with the historic intelligence of African-American credit unions so critical during the Jim Crow era.

What makes these different than the average “foundation complex” experience? They have authentic, trusting relationships at the centre. They acknowledge history and local context. They walk their talk – moving beyond radical theory to radical practice.

To their credit, many of the world’s most powerful donors have begun to question the ethical underpinnings and best practicesof status quo philanthropy. In 2013,Peter Buffett, chairman of the NoVo Foundation, wrote a manifesto that, at its essence, was a call for more structural consciousness and less cognitive dissonance among wealthy altruists: “Because of who my father is, I’ve been able to occupy some seats I never expected to sit in. Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders. All are searching for answers with their right hand to problems that others in the room have created with their left.”

More recently, Darren Walker, the President of the Ford Foundation, has called fora “new ‘gospel of wealth’ for the 21st century” – one that addresses “the underlying causes that perpetuate human suffering. In other words, philanthropy can no longer grapple simply with what is happening in the world, but also withhow and why.”

The shift in zeitgeist is promising. A critical mass of people working within philanthropy is hungry to do work with more ethical rigor; more systemic, cultural, and emotional intelligence; less bureaucracy and hubris. There is a growing conversation about these shifts. On paper, the will is there.

But philanthropists need more than “big ideas” about how their profession could and should change. They need radically new habits or these ideas just become bold in theory.

As Vu Le, the Executive Director of Rainier Valley Corps, points out: “True Equity takes time, energy, and thoughtfulness. It requires us to reexamine everything we know and change systems and practices that we have been using for hundreds of years. This is often painful and uncomfortable.”

In part, this is about scale. Philanthropists must push themselves to give more, and in particular, give more to address American poverty. Only 12% of total giving in 2015 went to “human services,” according to Giving USA. Wealthy donors are more likely to support the arts and higher education and less likely to give to social service charities, according to the Chronicle of Philanthropy. And they’re not as generous as those with less income: “The wealthiest Americans – those who earned $200,000 or more – reduced the share of income they gave to charity by 4.6% from 2006 to 2012. Meanwhile, Americans who earned less than $100,000 chipped in 4.5% more of their income during the same time period.”

In 2014, the poverty rate in the US reached 15%. Photograph: Spencer Platt/Getty Images



How and where do you meet potential grantees?

If you don’t have genuine relationships with those outside of your racial or class category, you’re going to have a hell of a time finding out about the most interesting, powerful work going on to tackle poverty.

How do you approach general operating funds or capital campaigns?

Have you ever noticed that foundations feel justified in spending millions on beautifully designed headquarters, but frown on nonprofits using money to spend a fraction of that on dignifying spaces of their own? Poor people, and those that partner with them, deserve fair salaries and beauty, too.

How can grant reporting be redesigned so it doesn’t create such huge frustration and a misuse of time and energy on the part of grantee organisations?

Human-centered design is so often heralded by foundations these days, but too often their own bureaucracies are filled with soul-deadening detail that is anything but humanising.

Do you build relationships for the long, systemic haul?


Funding also shapes and dictates our work by forcing us to conceptualise our communities as victimsAdjoa Florência Jones de Almeida, The Revolution Will Not Be Funded

Gara LaMarche takes his peers to task for talking big game about sustainability, but then essentially treating grantees like “the right wing would treat single mothers on welfare, imposing strict time limits and cutoffs – the fact is that most sustainability strategies are aimed at helping grantees move from dependency on one foundation to another.”

This may all seem “in the weeds”, but it has a huge impact of the daily lives of those tackling poverty on the ground. How we treat one another every day, as cliched as it may sound, becomes the nature of our relationships, and the nature of our relationships, becomes the nature of our institutions and, ultimately, systems.

Perhaps the most profound question that philanthropists can ask themselves at this ripe time for reinvention is this: what stories do you want or expect grantees to tell you? What stories do you tell about yourself?

Adjoa Florência Jones de Almeida of the Sista II Sista Collective in Brooklyn, NY,wrote in the groundbreaking anthology, The Revolution will not be Funded:

In theory, foundation funding provides us with the ability to do the work – it is supposed to facilitate what we do. But funding also shapes and dictates our work by forcing us to conceptualise our communities as victims. We are forced to talk about our members as being “disadvantaged” and “at risk”, and to highlight what we are doing to prevent them from getting pregnant or taking drugs – even when this is not, in essence, how we see them or the priority for our work.

Six years later, organiser and activist Mia Birdsong, took the TED stage and furthered the paradigm-shifting narrative: “The quarter-truths and limited plot lines have us convinced that poor people are a problem that needs fixing. What if we recognised that what’s working is the people and what’s broken is our approach?”

The story we’ve told about the poor in America, the story that we continue to ask them to tell in order to get funding, is that they’re broken. In fact, we are.

The ultimate irony of the way the philanthropic sector is structured is that it is actually the recipients – people of colour, the working class, women – that may be the most masterful at creating and maintaining long-lasting, catalytic relationships. They are disproportionately poor in terms of dollars and cents, but rich with experience of making a way out of no way and persevering in the face of huge, intractable, sometimes downright exploitative systems. This usually involves relying on friends and extended family, nurturing people’s gifts for the betterment of whole communities and having grace through challenge.

We have an ethical imperative to acknowledge and build new systems around that intelligence. Carnegie’s one ask of the public libraries that he funded, to be built in communities across the country, was that they each be engraved with an image of a rising sun and the words: “Let there be light.”

That light, for him, was present in books, but in truth, it was sparked by an unlikely relationship. Long-lasting change so often is.

How much inequality is too much?

BBC Business

Image copyrightiStock

The richest 10% of Americans earn half of all of income. In Britain, the top 10% hold 40% of all the income.

Inequality isn't just an issue for rich countries: a billion people have been lifted out of poverty since 1990, but inequality has also been rising in many countries too.

Four experts talk to the BBC World Service Inquiry programme about the effect inequality has on growth and prosperity.

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Deirdre McCloskey: Capitalism is not the enemy

Deirdre McCloskey is Distinguished Professor of Economics, History, English, and Communication at the University of Illinois at Chicago. The daughter of a Harvard Professor, her brother became a university cleaner.

"You can't force people to take advantages that are placed in front of their nose, and that's my brother's case. No amount of income redistribution or socialist schemes to give my brother more opportunities would have made any difference at all to his life.

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Image captionOccupy protesters have highlighted the gap between the wealthiest 1% and the other 99%

"If people strive, some of them succeed and get rich, at least momentarily until other people strive and compete with them. This striving turns out to be good for all of us.

"The percentage of people in the world living on $2 (£1.30) a day - an appalling level of income - has halved in the last 30 years. That's not by foreign aid or redistribution. It's by letting the economy function in a more innovative way.

"The wrong way to cure inequality is to attack the people who are taller, or have better parents, or live in richer countries. The way to do it is to uplift the poor. I approve of being taxed to help the very poor. But I don't want to kill the goose that laid the golden eggs. Capitalism is not the problem, it's the solution.

"The growth in the last couple of centuries has been astounding. It's a factor of 30 - about 3,000% per head for the average English or American person. Explosive, unprecedented growth. Meanwhile, inequality has gone up and down a little bit.

"If you were to make a rule that the chief executive could only earn 50 times the shop floor employee, that would not reduce inequality substantially.

"I'm very relaxed about [inequality] as long as it's not force or fraud that caused it."

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Jared Bernstein: Inequality impedes growth

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington DC, and a former economic advisor to President Obama.

"I was a member of the President's economics team during the worst recession we've had since the Great Depression. The responsibility to try to turn that around was huge.

"This wedge of inequality between growth and the income of working families undermines the basic incentive that hard work will be rewarded.

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"I call it the shampoo cycle - bubble, bust, repeat. And because middle and low income families lack the income growth they used to see, they borrow to make the difference. That creates large leverage bubbles which explode and hurt growth.

"Once wage inequality gets too high, and you have lots of low income people stuck in tough neighbourhoods that are segregated by income and race, and they have fewer libraries and a more difficult learning environment, you begin to see this connection between high levels of inequality and barriers to opportunity.

"You don't necessarily see that in today's economy because that's a cumulative process, but it's very possible that we'll see that in economies 20 years from now when these children come into the job market.

"If you go back to the period where productivity and incomes for middle class families were growing together - in the US that would be back to the mid 1970s - you'll see that the top 1% held about 10% of all income.

"Now it's 20 times that. That's too much. I'm not saying we necessarily have to get back to the late 1970s level, but I do think that a good metric here would be that the income of middle income families would grow closer to the rate of productivity growth, and that's something that we haven't seen for a while."

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Jonathan Ostry: Opportunity more important than inequality

Jonathan Ostry is deputy director of the Research Department of the International Monetary Fund.

"We don't have a threshold level for how much inequality is too much. We don't have a magic number. Sometimes a rise in inequality is perfectly compatible with healthy growth and prosperity, and in other cases the rise has gone way too far.

"When China opened up, it not only took off in terms of economic growth, but there was a marked and quite significant increase in income inequality. I'd be prepared to venture that was a good increase in inequality. Sometimes you need to have a little bit more inequality in order to get growth going as part of deregulating of your economy.

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Image captionThe Bolsa Familia programme to tackle poverty was a centrepiece of former Brazilian President Lula's social policy

"Think of the very high levels of inequality that prevailed in Brazil when President Lula came to office, and the steps he took with the Bolsa Familia conditional cash transfer programmes. His policies were successful without jeopardising economic growth.

"I would want to be sure that in a country with a lot of inequality those at the bottom still had opportunities to be well-educated, to have adequate nutrition, and were not shut out from credit and banks. Likewise if there was a fair degree of equality, but nevertheless those at the bottom didn't have adequate opportunities, I'd be concerned.

"So for me it would be more a question of whether there were adequate opportunities for the less well-off in society. Provided that was the case I wouldn't be overly concerned that a given level of inequality was causing great harm.

"[However] it turns out that income equality is an important factor in separating countries that have been successful at sustaining growth for long periods, versus those that have enjoyed spurts of growth which have fizzled out rather quickly. Too much inequality can undercut the ability to sustain growth.

"In more equal societies, those that are more socially cohesive, governments are able to take measures that have buy-in from the population at large. Therefore they can right their economies more quickly.

"In more unequal, less socially cohesive societies, people don't buy the notion that if the economic ship is righted, everyone will benefit. They're more likely to oppose the painful short-term measures that governments need to take to right the economic ship. And so righting that ship becomes much more difficult in less equal societies."

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Branko Milanovic: Beware rising inequality within countries

Professor Branko Milanovic has spent his career studying inequality, and is now a visiting professor at the City University of New York.

"We need inequality. Perfect equality, everybody having the same income, doesn't exist anywhere, nor has it. Obviously some countries - maybe China during the cultural revolution - came relatively close, but some inequality has always existed.

"Without inequality you lack incentives to do practically anything - to work, to invent new things or to invest. Nobody is going to do things for nothing and we know that monetary rewards are really crucial, so this is the good part of inequality. We should not forget that inequality is indispensible for the development of a society.

"Globalisation has been very good for the middle classes in the emerging markets - China in particular, parts of India, Thailand, Indonesia. They are still not level in terms of income with the middle class in the rich world, but it's improving, On the other hand, we have essentially a stagnation of middle class incomes in rich countries, a very interesting and a potentially politically destabilising development.

Image copyrightGetty Images

Image captionThe economic disparity between the wealthiest and poorest in China is stark

"If the gaps keep on increasing as they've increased in the last 20 years, you would end up with two types of societies within a single country. If there is no sufficient middle class and if the poor really are very far from the rich, then you really cannot speak of a single society.

"We could end up with a kind of a global plutocracy, this global one per cent or even half a per cent that are very similar among themselves, but really belong to different nations.

"We might have a situation that most of global inequality is due to inequalities within nations which was more or less the situation 200 years ago. So we may be really going back to the situation that existed before the industrial revolution."

Want to be happy? Be grateful

David Steindl-Rast





The person you really need to marry:

Tracy Mcmillan


How to know the purpose of your life in five minutes

Adam Leipzig

How to improve your luck and win the lottery twice (possibly)

Richard Wiseman in The Guardian

A British couple have just won £1m in the EuroMillions lottery for a remarkable second time. In doing so, they have beaten odds of more than 283 billion-to-one. So are they exceptionally lucky, and is there anything we can all do to increase the chances of experiencing such good fortune?

British couple celebrate winning second £1m EuroMillions prize

 

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A few years ago I conducted a large-scale investigation into luck. I studied the lives of more than 400 people who considered themselves exceptionally lucky or unlucky. There was remarkable similarity among the volunteers, with the lucky people always being in the right place at the right time, while the unlucky volunteers experienced one disaster after another.

I asked everyone to keep diaries, complete personality tests and take part in experiments. The results revealed that luck is not a magical ability or the result of random chance. Nor are people born lucky or unlucky.

Instead, lucky and unlucky people create much of their good and bad luck by the way they think and behave. For example, in one study we asked our volunteers to look through a newspaper and count the number of photographs in it. However, we didn’t tell them that we had placed two lucky opportunities in the newspaper. The first opportunity was a half-page advert clearly stating: “STOP COUNTING. THERE ARE 43 PHOTOGRAPHS IN THIS NEWSPAPER.” While a second advert later on said: “TELL THE EXPERIMENTER YOU’VE SEEN THIS AND WIN £150.”

The lucky people tended to be very relaxed, more likely to see the bigger picture, and so quickly spotted these opportunities. In contrast, the unlucky people tended to be very anxious, more focused on detail, and so missed the advertisments. Without realising it, both groups had created their own good and bad fortune.

Eventually we uncovered four key psychological principles at work in lucky people:

1. They create and notice opportunities by building a strong social network, developing a relaxed attitude to life, and being open to change.

2. They tend to often listen to their intuition and act quickly. In contrast, unlucky people tend to overanalyse situations and are afraid to act.

3. They are confident that the future will be bright, and these expectations become self-fulfilling prophecies because they help motivate lucky people to try even when the odds are against them. Unlucky people are sure that they will fail and so often give up before they have begun.

4. They are highly resilient, and keep going in the face of failure and learn from past mistakes. Unlucky people get dragged down by the smallest of problems and take responsibility for events outside of their control.

Lucky people tend to be very relaxed, more likely to see the bigger picture

In a second phase of the project, I wanted to discover whether it was possible to change people’s luck. I asked a group of 200 volunteers to incorporate the four key principles into their lives by thinking and behaving like a lucky person. The results were remarkable. Within a few months around two-thirds of the group became happier, healthier and more successful in their careers.

But is it possible to use these techniques to win the lottery? Unfortunately not. Lotteries are purely chance events, and no amount of wishful thinking will influence your chances of success. However, the good news is that being lucky in your personal life and career is far more important than winning the lottery.

Oh, and one last tip. If you are feeling bad about never hitting the jackpot, spare a thought for Maureen Wilcox who, in 1980, bought tickets for both the Massachusetts lottery and the Rhode Island lottery. Incredibly Maureen managed to choose the winning numbers for both lotteries. Unfortunately her Massachusetts numbers won the Rhode Island lottery and her Rhode Island numbers won the Massachusetts lottery. She didn’t win a penny.

What is a fair start

Michael Sandel - Harvard University -

PART ONE: WHATS A FAIR START?
Is it just to tax the rich to help the poor? John Rawls says we should answer this question by asking what principles you would choose to govern the distribution of income and wealth if you did not know who you were, whether you grew up in privilege or in poverty. Wouldnt you want an equal distribution of wealth, or one that maximally benefits whomever happens to be the least advantaged? After all, that might be you. Rawls argues that even meritocracy—a distributive system that rewards effort—doesnt go far enough in leveling the playing field because those who are naturally gifted will always get ahead. Furthermore, says Rawls, the naturally gifted cant claim much credit because their success often depends on factors as arbitrary as birth order. Sandel makes Rawlss point when he asks the students who were first born in their family to raise their hands.

PART TWO: WHAT DO WE DESERVE?

Professor Sandel recaps how income, wealth, and opportunities in life should be distributed, according to the three different theories raised so far in class. He summarizes libertarianism, the meritocratic system, and John Rawlss egalitarian theory. Sandel then launches a discussion of the fairness of pay differentials in modern society. He compares the salary of former Supreme Court Justice Sandra Day OConnor ($200,000) with the salary of televisions Judge Judy ($25 million). Sandel asks, is this fair? According to John Rawls, it is not. Rawls argues that an individuals personal success is often a function of morally arbitrary facts—luck, genes, and family circumstances—for which he or she can claim no credit. Those at the bottom are no less worthy simply because they werent born with the talents a particular society rewards, Rawls argues, and the only just way to deal with societys inequalities is for the naturally advantaged to share their wealth with those less fortunate.