Whatever else the “Occupy” movement accomplishes, it has already popularized the fact–known for a decade to those who pay attention to such things–that the rich in the U.S. are getting richer, while the chasm between them and nearly everyone else is becoming wider, really wider.
The Concise Encyclopedia of Economics notes that “the most careful studies suggest that the top 10 percent of households, with average income of about $200,000, received 42 percent of allpretax money income in the late 1990s. The top 1 percent of households, averaging $800,000 of income, received 15 percent of all pretax money income.”
Meanwhile, economic mobility–the ‘American dream’–has diminished compared to the promise of increased wealth awaiting our peers in Canada and many Western European countries. Most jobs now being offered in the U.S. feature lower salaries and wages, fewer if any health benefits, and rarely pensions.
Every pundit has someone or something to blame, as if what this country is experiencing is contrary to nature, an alien blight on our divinely pre-ordained “city on a hill.” Let the business cycle do its thing, those who have not yet lost their incomes hopefully urge us; let the free market do its thing, aspiring politicians from the right implore us; let research and innovation restore us to prosperity for all, many on the left advise. But, alas, we are in this pickle precisely because the business cycle, the free market, and technological innovation have been doing their thing. Whether their destructive consequences are ‘creative’ for the long term, or in a fashion we can accept, remains to be seen.
From the get-go the purpose of technological innovation has been to reduce the cost of production, of which labor is among the largest and least tractable, with or without factories and unions. Yearly cornucopias of new products to incite consumer spending are at bottom a promise of less work and more play. Technological innovation today is splendid for innovators, and for entrepreneurs, and for patent attorneys, and for those who package IPO’s. But it does not create jobs for the multitudes because the technology-driven industrial revolution is behind us. Adam Smith, who wrote the script for American economic expansion (The Wealth of Nations, 1776), could not have foreseen our post-industrial economy.
Possibly the most powerful natural force leading to a growing chasm between the few rich and a shrinking middle class was recognized two millennia ago by the apostle Matthew, whose ‘day job’ was collecting taxes. Matthew describes the disparate fortunes of those servants of the Lord who multiply their talents and those who do not: “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.”[Matthew 28:29]
Two millennia later the sociologist Robert Merton would attribute professional recognition among Nobel laureates to the “Matthew Effect,” a psycho-sociological process having less to do with scientific merit, and more to do with a natural human attraction to success and abhorrence of failure. The world of sports, where the playing field should be the final arbiter of merit at any given moment, has evolved “winner take all” victories, as if that makes the contest more rewarding to spectators. And it probably does.
Like the miracle of compound interest, cumulative achievement multiplies the possibilities for greater success. The rewards for winning early can be enormous over a lifetime, while the human and social costs of early failures may never be overcome. ‘Winner take all’ triumphs in business (e.g. Microsoft, Google), the advantage of incumbency in our politics and the workings of the US electoral college system, and the cumulative gains from an educational ‘head start’–life is rich with examples of the “Matthew effect” at work.
Whether or not it is a good thing indefinitely for the few to reap rewards vastly out of proportion to their merit and due, while increasing numbers struggle to survive, depends on who is defining the ‘good.’ Sooner or later, however, we will arrive at a tipping point when–as in 1789, 1848 and 1917–defining the ‘good’ will have become an academic exercise.
* (This article first appeared in the Portland Press Herald for January 18, 2012)