Our faithful critic, “Someone in USA”, has raised one of the fundamental tenets of libertarian belief and I think it deserves more than just a comment.
This is the idea of personal responsibility, especially for how far one goes in life. This is the Horatio Alger myth which was very popular during the high growth period of US history. Basically it is: poor boy works hard, succeeds in life. When this literary theme was popular it happened regularly. The US was a rapidly expanding economy, with an open frontier and many undeveloped natural resources.
Things have changed in the past few decades and this type of social mobility is much less common than before.
Here’s a sample of reporting on the change:
Bhashkar Mazumder, a Federal Reserve Bank of Chicago economist, recently combined the government survey with Social Security records for thousands of men born between 1963 and 1968 to see what they were earning when they reached their late 20s or 30s. Only 14% of the men born to fathers on the bottom 10% of the wage ladder made it to the top 30%. Only 17% of the men born to fathers on the top 10% fell to the bottom 30%.
There is a nice graphic in the article which illustrates the data.
Now if there is a widespread social phenomena laying it to failures of personal virtue seems a poor explanation. If the deck is stacked against you it is hard to get ahead. That a few individuals do it does not change the fundamental problem.
Those who point out the large social problems behind these trends are accused of coddling the slackers. It is the same mindset that disfavors welfare programs and says “I work hard, let them go out and get a job”.
The biggest predictor of how well a student will do in school is the economic status of his parents. Are all these under performing children lazy or stupid? Or is there some other factor at work? Blaming the victim may make one feel morally superior, but does nothing towards solving the problem. If you really think that millions of people are morally inferior then you must have a rather poor opinion of the human race.
Let’s assume that there are some underlying reasons why we have so little upward class mobility in this country, both compared to prior periods and also compared to other advanced societies. What are they?
The paper quoted cites the rise in wealth inequality, and this is something that I frequently point to as well. But wealth inequality is a result of other policies, not the cause. The cause is the institutionalization of wealth. Those who have it have gained political power as well and have used this power to restructure the legal framework of the nation.
There are several aspects of this.
1. Changes in tax laws to enable the wealthy to keep more of their wealth and to pass it on to future generations. This include the changes estate taxes as well as the preferential treatment given to capital gains and dividend income. These are now taxed at a lower rate that the average income tax rate for middle class workers. These same workers have little or no income from capital gains and dividends so the rich are benefiting at the expense of the poor.
2. Changes in campaign tactics to allow big money to have much more influence on elections. The creation of PAC’s, the cost of buying TV ads and the ability of big donors to influence politicians have all biased elections against regular folks. Even when a person comes from a modest background they have to ally themselves with big money interests if they are going to be able to afford to run.
3. Changes in the legislative process. The rise in lobbying and the revolving door between business and government has made legislators more in tune with these interests and less concerned with the issues of importance to the average person.
4. The rise of multi-national firms which are now, in many cases, bigger than whole countries. Changes to international trade and tax rules (“globalization”) have allowed these firms unprecedented power to play off one country against another and weakened the control that countries have over their own affairs.
5. Lack of opportunity in the developed world. While there are still the occasional examples of entrepreneurs who have a big success (Google or Facebook) they are much less common in the West than in the developing world. For every Google there are hundreds of new enterprises creating millionaires in China and India. Why this is so could be a topic for an entire article, but a growing middle class and government support for entrepreneurship are important. So is the lack of an existing super wealthy class that is interested in preserving their privilege and keeping newcomers from competing.
What I find most surprising is the lack of outrage in this country over the poor hand that many people get dealt. Perhaps the recent highlighting of the excessive compensation in financial firms will awaken people to the underlying issues. The last time people understood the effects of class was 100 years ago.