Twilight of the Elites (part 2)

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In my last post, I described Chris Hayes’s “Iron Law of Meritocracy,” the idea that meritocracies eventually produce so much inequality that they undermine equal opportunity and degenerate into self-serving oligarchies. Here I’ll describe some of the ways that he elaborates on his basic argument.

Meritocracies need social norms defining the meritorious behaviors to be rewarded. But “it’s rather difficult to design a competitive system that heavily rewards performance and doesn’t also reward cheating.” The greater the inequality of outcomes between winners and losers, the higher the stakes and the greater the “moral hazard.” Once a few people start cheating, those who don’t join in are placed at a competitive disadvantage, further weakening the social norms. Bad behavior starts to drive out good behavior, just as bad money drives out good money according to Gresham’s Law. During the housing bubble, financial firms that were willing to make shaky loans based on bogus appraisals and sell them off to unsuspecting investors expanded their businesses at the expense of more traditional, cautious bankers. Once a culture of cheating develops, its participants develop some pride in their own slickness and some contempt for the suckers who don’t understand how the game is really played. Those who are supposed to enforce the rules may be overwhelmed by the volume of cheating or corrupted by its benefits. One reason why Major League Baseball tolerated steroids for so long was that all the power-hitting brought in fans and revenue. Economists who endorsed the newfangled financial instruments that turned out to be toxic were rewarded will lucrative consulting deals.

Meritocracies depend on a relationship between knowledge and trust. Ordinary people place their trust in authorities, since they can’t know everything themselves; but they must know enough to have some basis for that trust. Our enriched information environment gives us more information, but also more opportunities for some to have information that they keep secret from others. The Bush administration used carefully controlled leaks to make the case that Iraq had weapons of mass destruction, while not revealing that CIA analysts had serious doubts about that case. The professional journalists we expect to tell us what’s going on can fall victim to the same deceptions, either because they too are misled or because they learn to see the world through the eyes of the elites they cover (“cognitive capture”). “Without some central institutions that have the inclination, resources, and reputational capital to patrol the boundaries of truth, we really do risk a kind of Hobbesian chaos, in which truth is overtaken by sheer will-to-power.” The term “post-truth” politics was already being applied to this situation before the 2012 presidential campaign, in which the absence of trusted authorities who could set the record straight made lying a more viable strategy.

Critics of social inequality usually focus on how steep hierarchies hurt the people at the lower end of the social pyramid. Hayes prefers to focus on the destructive effects closer to the top: “As American society grows more elitist, it produces a worse caliber of elites.” The winners of the meritocratic competition are, not surprisingly, the truest believers in the meritocracy. The system allows them to claim that they succeeded because they were smarter and harder working than their competition, an idea that inspires egomania and disregard for the worth of others. The “fractal” reward structure (many levels of smaller hierarchies within larger ones) encourages a great deal of insecurity, since there’s usually an even higher echelon of success with an even smaller inner circle beyond the level one has already achieved. So the status-seeker looks upward, toward the next rung on the ladder, the next group of higher-ups to please, the next expectation that must be met to get ahead, whether it’s good for society or not. Hayes cites psychological research showing that status-conscious, self-preoccupied, insecure people usually lack empathy for others, especially others lower than themseleves in the social hierarchy. Since the book’s publication, former private equity CEO Mitt Romney provided a perfect example, dismissing the 47% of the population not subject to income taxes as freeloaders unwilling to take responsibility. (In actuality, most either have legitimate reasons for not working, such as age or disability, or they work in low-wage jobs subject to payroll taxes but not income taxes.)

If a meritocracy is to work for the benefit of all, the authorities must be able to receive and act upon honest feedback from people at all levels of society. But extreme inequality creates excessive social distance between the top and the bottom. Elites can call for war without worrying that their sons and daughters will need to enlist in order to get a job or an education. Political authorities can call for an evacuation of a city like New Orleans without thinking very much about the people without cars or money to travel. Catholic Bishops can be “the very archetype of a cosseted elite, remote and diffident and hermetically sealed,” so that their loyalty is “first to their institution, followed by compassion for their brother priests, with very little left over for their actual flock,”even those victimized by sexual molestation. During the housing boom, many people in the neighborhoods most affected by predatory lending knew that something was amiss, but the Wall Street high-rollers who were making the most profits were too insulated to know or care. Hayes uses the metaphor of a sinking ship:

The ship sprung a leak down in the lower decks, flooding the servants’ quarters, and no one up top realized that it would bring down the whole thing. The cocktails continued to flow, the band continued to play, and the party rollicked on Wall Street throughout the housing bubble, even as subprime borrowers drowned, as their lives and wealth and homes were destroyed.

My final post about Twilight of the Elites will deal with Hayes’s discussion of the prospects for reform.

(Continued)

One Response to Twilight of the Elites (part 2)

  1. bob says:

    As to “those who are supposed to enforce the rules”, they certainly are overwhelmed, but there are also other factors that taint the effectiveness and hinder the oversight required to perform satisfactorily…regulatory officials are often recruited from the very industry being regulated and are hired back into that industry if their performance favors that industry; the overseers and the overseen enjoy a very cozy relationship with lavish entertainment and under-the-table rewards; and finally, the rules often fail to foresee new developments in industry practices, allowing them to slip through the cracks along with those that simply weren’t addressed.

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