Categories
Book Reviews

Review – Tyranny of Merit by Prof Michael Sandal

What kind of world would you want if you didn’t know whether you will be born to a rich or poor family?

This is a question few of us ask today, especially if you are a wealthy or a high earner, from the right side of the tracks.

The latest book by Harvard Professor of Philosophy Michael Sandal is a timely warning that a well-meant focus on meritocracy has gone wrong. Inequality has deepened, opening wide rifts in society. People in despair, failed by traditional politicians from both right and left, have flown to the extremes. Dark clouds of dictators and demagogues are threatening democracy.

People in despair, failed by traditional politicians from both right and left, have flown to the extremes.

Adverse impacts of meritocracy have been exacerbated by other trends over the past 40 years. Globalisation and automation have reduced the number of higher-paying manufacturing jobs traditionally filled by blue-collar workers. The power of multinationals and high-earners has increased due to well-funded lobby groups and laws allowing unlimited spending on political contributions in the USA. The financialisation of the economy has seen obscene income and wealth flowing to a few traders in financial products that add little or no value to the economy. Reducing levels of taxation for high earners, investment incomes and capital gains have increased income and wealth gaps.  Lower tax revenues and demonising the poor have reduced social benefits and services like health and education. The reduced power of unions has slowed growth or decreased the real wages of workers.

Meritocracy, Globalisation, Automation, Financialisation, Tax changes, Reduction of welfare benefits, Lobby Groups have widened rifts in our society.

The current wave of meritocracy started with Reagan and Thatcher. They believed that markets will deliver both economic growth and the fruits of the economy to all willing to work. Those who failed did so due to lack of effort and deserved to be poor. The problem deepened with Clinton and Blair, who tried to soften the impact on low-income earners rather than challenge the premise of a market-driven meritocracy. Both Liberal and conservative politicians have focused on meritocracy and education as the primary vehicle for advancement to achieve a good life in society

The economic and social policies adopted by Anglo-American democracies veered sharply away from those of Scandinavia and mainland Europe to an economy and country of winners and losers.

Achieving pure meritocracy, equality of opportunity is a fallacy. A wealthy family has many advantages; their children start miles ahead in the race of life. Better schools, private tutors, more parent support and access to resources far greater than a child from a low-income family. However, those reaching the top in our economy strongly believe that they did so due to hard work and merit, thus deserve outsize rewards. While those espousing meritocracy envisioned a society with higher social mobility and lower inequality, the actual results have been directly the opposite. More students come from families in the top 1% at Princeton and Yale than the bottom 60%. Two-thirds of admissions for Ivy league universities have come from families with earnings in the top 20%.

Pure meritocracy is a fallacy, children born in a wealthy family start the race of life miles ahead of the rest.

Parents of both rich and poor tell their kids that they will reach their goals if they work hard. The reality is different with sluggish economies, struggling families, poorly funded schools and the high college cost. Income mobility is low, leaving many stuck in these jobs, which are poorly paid and insecure. Profit maximisation rarely takes into account the social cost of laid-off labour.

The relentless focus on merit has impacted those on high incomes as well. Anxiety, depression and alcoholism have taken a toll.

While politicians from both right and left wings have repeatedly spoken about education as the primary vehicle for advancement, opportunities for a better education have decreased for those on lower incomes. Lower tax revenues reduced funding, lowered the quality of education, and made it more expensive by levying higher fees.

Whilst retraining has been promoted as the way forward for those displaced due to globalisation and offshoring, funding provided for this has been minimal. Economies of rural areas and small towns have been decimated. Deaths of despair have soared, along with social ills like drugs and alcoholism.

The rapid escalation of rewards flowing to winners of our society has sharply increased inequality between the elites and those on the bottom rungs, diminished the middle class. Manufacturing jobs that paid a reasonable wage have been replaced with low paid service and retail work. Earnings of blue-collar workers have declined or stayed stagnant while those for top ranks have surged ahead.

Low-income earners are looked down upon as losers by the elites and, at times, by themselves. The dignity of work and respect for them diminished. The value placed on middle-class jobs like teachers, nurses and police have reduced along with their salaries. College degrees are increasingly tied to income and prestige.

Higher wages and tax advantages are hardening into wealth passed onto the next generation. Establishing a hereditary aristocracy.

We need to reverse the trends of the past four decades, raise taxes, provide better essential services and pay better wages for those at the bottom. The lessons of history are clear; we ignore them at our peril.

Categories
unemployment

Jobs Guarantee Scheme

Call for a post-pandemic jobs guarantee scheme

New Zealand’s unemployment was less than 1% for 30 years from 1946 to 1976. Now the government, the Reserve Bank and traditional economists settle for 4% unemployment, as ‘full employment’.

This version of ‘full employment’ means 8% youth unemployment and 16% Maori / Pacific youth unemployment. Problems such as family poverty (including children missing meals), mental health, suicide, poor health and reduced self-esteem which accompany the lack of a job are barely acknowledged or debated there as to whether they are too high a price to pay.

Martin Taylor of progressive economic thinktank Digital Strategies who has been working on a jobs guarantee argues this could cost as little as NZ $1.6Bn, approximately 0.5% of GDP. And, this is more than outweighed by the benefits such as dignity of work, improved mental and physical health, improved social and environmental outcomes, boost infrastructure and care work.

Full article by Catriona MacLennan published on Radio New Zealand website, 29th April 2020.

https://www.rnz.co.nz/news/on-the-inside/415421/cat-maclennan-post-covid-19-job-guarantee-scheme-a-bold-solution

Categories
unemployment

Modern Monetary Theory (MMT) – Eliminating Unemployment

A plain-English guide to what it is and why it’s interesting

“There’s nothing to prevent the federal government creating as much money as it wants” -Alan Greenspan, former Chairman of Fed Reserve, USA

Stephanie Kelton, Professor of Public Policy and Economics at Stonybrook University argues that there is no harm in printing money, there will be no inflation as long as there is unused economic capacity or unemployed labour. Government spending can be used to boost the economy and eliminate unemployment. Inflation can be controlled either by reducing government spending or withdrawing money by increasing taxes.

Explains that highly publicized instances of hyper inflation in pre war Germany and Zimbabwe were due to lack of resources to boost economies, rather than printing money.

While traditional economists still haven’t accepted MMT, what many governments are doing since GFC is printing money.

Government spending can be used to boost the economy and eliminate unemployment.

Full article by Jim Edwards and Theron Mohamed in Business Insider , https://www.businessinsider.com.au/modern-monetary-theory-mmt-explained-aoc-2019-3?r=US&IR=T

Categories
Book Reviews Uncategorized

Viking Economics

“The cruelty of high inequality countries is to induce starstruck dreams upon their young people, but refuse to fund pathways to get there”

George Lakey, ex Professor for Issues in Social Change, Swarthmore College

The social-democratic economic model.

High taxes, high wage costs, short hours of work, long vacations, even longer maternity leave, free childcare, free college education, extensive social welfare programs that pay an unemployment benefit of up to 80% of your wage,

 And highly productive economies sound like an oxymoron, a fantasy too good to be true.

How would you encourage entrepreneurs and compete in a globalised economy when your costs are so high? In a world where low labour cost and low taxes are deemed essential for success.

This book dispels the myths that prevail, putting Scandinavian success down to culture, a homogenous population, size of the countries etc. An anomaly.

The arduous journey these nations undertook to transform their economies, from the Viking spirit of war and adventurism to capitalism with a human touch, a caring society. The struggles of the Nordic people to achieve a more equal country over more than a hundred years. The battles to overcome missteps that arose, trying to follow the neo-liberal models that changed the Anglo-American economies in the 1980s. The recovery from virtual bankruptcy that engulfed Iceland following the Global Financial Crisis of 2008. A clue -they didn’t bail out the reckless bankers. And they resisted pressure from the IMF to implement harsh austerity measures.

Scandinavian countries have a higher rate of startups than the USA, free higher education builds human capital, an excellent social welfare net encourages risktaking.

Businesses are encouraged to be competitive, except by cutting wages and benefits. Strong unions provide a balance between employers and employees. Successful cooperative ventures dispel the myth that private ownership or listed companies are the only viable economic models.

Scandinavians support high taxation, as they know they get a high level of services in return– “To get a lot, we pay a lot”. The economic system was built for everyone. It is not a system that encourages the notion in high inequality countries that the winners are supporting losers.

Social welfare programs, while comprehensive, encourages a strong work ethic. The focus is on getting people back to work. Sole parents are encouraged to work by providing free childcare. Teenagers are supported into employment or apprenticeships, providing a smoother transition from school.

This book by George, an American who lived in Norway for many years tells the story of the Nordic economic model. The successes, the challenges, warts and most importantly, lessons for the rest of the world. How we can achieve a highly productive economy where people are treated with dignity and the balance between business and society is highly equitable.

Full review by Chuck Collins who directs the Program on Inequality and the Common Good. https://ips-dc.org/take-lesson-nordic-countries-inequality/