Opportunity Means Nothing

Matt YglesiasMatt Yglesias made a keen observation about the State of the Union address, Sorry, Equal Opportunity Isn’t Good Enough. It’s about how both Obama and Cathy McMorris Rodgers (in her “response” to him) focused on “equality of opportunity.” It’s true: people just love the idea of opportunity. It’s like motherhood: no one is against it. And as such, it is meaningless to talk about.

Yglesias focuses on the general idea that just because someone is born slow and stupid doesn’t mean they should be relegated to a short and painful life. There is something fundamentally wrong with that idea. Just the same, you don’t want to give everyone the same amount or a random amount of wealth. This would suck the vitality out of the society. Incentives really do matter.

The randomly distributed wealth example is a good one. I think it is more or less the system we now have. I know that conservatives want to think that money stays in certain families because of great genes. But that isn’t my experience. I find that people’s abilities are mostly due to their environments. Look at Bush the Younger. There is no doubt that born to poor or middle class parents, he would not be rich. Yglesias discusses the random distribution case and notes that it would provide bad incentives for people. That’s true. And I think we are seeing much the same thing in our economy. People don’t generally think, “I’m going to work hard at this entry level job because I want to be Bill Gates!” They think that the entry level job may lead to a reasonable life. But that expectation is looking more and more like wishing to become Bill Gates.

It does seem to me that Yglesias poses the question right. There are two things that we are trying to maximize: fairness and incentives. An economy where everyone gets the same would not provide anything in incentives. An economy that allowed a small group to get the vast majority of wealth would not provide fairness. We should look for something in the middle that provides both fairness and incentives. I don’t have the ultimate solution as to what that might be. I’m not even sure there is a single system. But one thing is certain: our society is tilted entirely toward the incentives.

What’s especially bad is that if Bill Gates were worth only $30 billion instead of $60 billion, I don’t see that he or anyone else would feel more incentivized to work. There is a point of inequality past which we don’t get any extra incentives. And we are well past that point in the United States and in the world. So our society could provide a whole lot more fairness without losing any incentives for the young up-and-comers. Truly, I think a 99% tax on wealth above a billion dollars would have no negative effects on the society. But clearly, less extreme measures wouldn’t.

I like Yglesias’ framing of the issue. But there is a deeper issue: there cannot be anything close to equality of opportunity when absolute equality is so far out of whack. This sets up a situation where the children of the rich get every conceivable advantage, even apart for actual cash payments. This is not a meritocracy. This is, as I’ve discussed before, inviting the poor in to play your Monopoly game after all the properties have been purchased. I wish we could cut the crap, but that seems unlikely. Conservatives argue about these issues the same way they argue about global warming. First they argue that there is no inequality problem. Then they argue that there is inequality, but the real issue is mobility and that is fine. Then they argue that equality just means laws that specifically stop people from doing something. Then they argue that mobility doesn’t matter. If they were honest, they would just admit that they like the way things are and they have no reason.

The bottom line to all of this is that talk of opportunity is a distraction. We all believe in it. Hooray! We don’t ever have to talk about it again. But if we really care about it—if we want to provide it to everyone—we need to do something about inequality. This isn’t class warfare. In fact, it is just the opposite. It is an effort to lessen class distinctions. Regardless, discussing opportunity without income and wealth inequality is just lip service. It means nothing.

Franz Schubert and Norman Mailer

Franz SchubertIn 1923, the great novelist Norman Mailer was born. It is kind of sad that he is remembered today more for being an egotistical jerk than a great artist. And indeed, he did have that whole Ernest Hemingway thing going on. But my take on him is that it was just his way of dealing with deep feelings of inadequacy. I heard him talk shortly before he died, and I still got that from him, even though he had calmed down a lot. Anyway, in addition to his novels, he was a wonderful nonfiction writer—arguably better than a novelist. Above all, Mailer was an interesting man who could express himself really well. In a world filled with fairly boring people who can’t string a sentence together, that’s saying something.

Two Arrested Development actors have birthdays today. Jessica Walter, who plays the matriarch of the family, is 73. Portia de Rossi, who plays the narcissistic sister, is 41. I’ve known for some time that de Rossi is married to Ellen Lee DeGeneres, who is 15 years older than she is! Who would have thought DeGeneres would be a cradle robber? But in her defense, she doesn’t seem any older. (Of course, I’ve never seen her up close…) Regardless, I love the show and these two actors are a big part of it.

Other birthdays: chemists Theodore William Richards (1868) and Irving Langmuir (1881); ethnomusicologist Alan Lomax (1915); architect E Fay Jones (1921); composer Philip Glass (77); the great comedy writer Connie Booth (70); actor Glynn Turman (68); actor Kelly Lynch (55); actor Minnie Driver (44); and singer Justin Timberlake (33).

The day, however, belongs to the great early Romantic composer Franz Schubert who was born in 1797. He was only 31 when he died—four less than Mozart. This is remarkable given the enormous amount of music he produced. He was one of the best melody creators ever, but it is a mistake to think that this is all he was. He was extremely innovative in his approach to harmonic structure, for example. But more to the point, his mature work is as good as anything that has ever been composed. Here is the Belenus Quartett doing his String Quartet in G major, which is a technical marvel as well as an incredibly beautiful piece of music:

Happy birthday Franz Schubert!

Rich Are Above the Law… Of Economics

Jamie DimonAre you ready for some more outrageous Wall Street banking behavior? You may have heard last week that JPMorgan Chase CEO Jamie Dimon got a 74% raise. This is after the London Whale trade lost the company $6 billion in 2012. Then, last year, the company was fined $20 billion for financial misbehavior—also known as fraud or “stuff that would get regular people thrown in jail.” But Dimon got a huge raise. Hooray for capitalism!

Matt Taibbi wrote a great article yesterday, Jamie Dimon’s Raise Proves US Regulatory Strategy is a Joke. He noted that the “record” fine against the company didn’t make its board and top management repentant, but it did cause them to layoff 7,500 non-CEO class of line employees. And they froze the pay of the people who remained.

Taibbi goes into some depth about the problem. If we didn’t already know before, we should have known after the 2008 financial crisis: the CEO class does not run its companies in the long-term interests of those companies. Instead, they run them in the short-term interests of themselves. All the top people who caused the 2008 crisis went away with tens of millions of dollars. What does it matter to them what ruin they leave in their wake?

It would be one thing if these people were socially ostracized. That might make them less inclined toward their dirty dealings. But all of them do it. What’s more, no level of fine is ever going to make Jamie Dimon unwelcome on CNBC. These people are our royalty, so anything they do is acceptable, with a minor exception for a Bernard Madoff sort of scam. (Although even there, I think if Madoff had controlled the kind of money that JPMorgan Chase does, it might have been different.)

But I’m focused on that 74% raise. In my work life, I’ve had employers who were hugely impressed with my work. I’ve been given ostentation raises. But I’ve never gotten any raise even close to 74%. I’ve talked to people, and no one I know has ever gotten a raise like that. Supposedly, raises are given to stop an employee from leaving. But that clearly isn’t the case with Dimon. He certainly wasn’t going anywhere. It is just that people in our society assume that the rich are better and thus deserving of ridiculous compensation packages. And this is with Dimon already making gobs of money.

Of course, as Taibbi notes, JPMorgan Chase was “sending a message” to the justice department. Not only are they not cowed, but they are also willing to inflict a bunch of harm on innocent employees if the government messes with them. After six years of watching the bankers flip off the rest of society, it isn’t surprising. But it seems that the Obama administration is determined to be naive in these matters. A proper government would have thrown people in jail. Or at least tried!

The last five years have told the people of the United States everything they need to know about justice in America. If you reveal our torture program to the press, you must go to jail. But if you rip off people for billions of dollars, cause a financial crisis, and generally screw up the economy for a decade or more, you’re in the clear. In fact, you are probably rich and well respected!

American justice in action!

And the la-hand of the Freeeeee!
And the hoooome, of thhhhhe, braaaave!