I thought this was going to be another mindless partisan hatchet job on free market economics, but I was wrong. It's a thoughtful piece on the problems of inequality, surprisingly balanced. I think I winced only once, which is amazing for an essay at Foreign Affairs.
See Jerry Muller's lead article from the March/April issue, "
Capitalism and Inequality: What the Right and the Left Get Wrong." This part is especially good:
THE FAMILY AND HUMAN CAPITAL
In today's globalized, financialized, postindustrial environment, human capital is more important than ever in determining life chances. This makes families more important, too, because as each generation of social science researchers discovers anew (and much to their chagrin), the resources transmitted by the family tend to be highly determinative of success in school and in the workplace. As the economist Friedrich Hayek pointed out half a century ago in The Constitution of Liberty, the main impediment to true equality of opportunity is that there is no substitute for intelligent parents or for an emotionally and culturally nurturing family. In the words of a recent study by the economists Pedro Carneiro and James Heckman, "Differences in levels of cognitive and noncognitive skills by family income and family background emerge early and persist. If anything, schooling widens these early differences."
Hereditary endowments come in a variety of forms: genetics, prenatal and postnatal nurture, and the cultural orientations conveyed within the family. Money matters, too, of course, but is often less significant than these largely nonmonetary factors. (The prevalence of books in a household is a better predictor of higher test scores than family income.) Over time, to the extent that societies are organized along meritocratic lines, family endowments and market rewards will tend to converge.
Educated parents tend to invest more time and energy in child care, even when both parents are engaged in the work force. And families strong in human capital are more likely to make fruitful use of the improved means of cultivation that contemporary capitalism offers (such as the potential for online enrichment) while resisting their potential snares (such as unrestricted viewing of television and playing of computer games).
This affects the ability of children to make use of formal education, which is increasingly, at least potentially, available to all regardless of economic or ethnic status. At the turn of the twentieth century, only 6.4 percent of American teenagers graduated from high school, and only one in 400 went on to college. There was thus a huge portion of the population with the capacity, but not the opportunity, for greater educational achievement. Today, the U.S. high school graduation rate is about 75 percent (down from a peak of about 80 percent in 1960), and roughly 40 percent of young adults are enrolled in college.
The Economist recently repeated a shibboleth: "In a society with broad equality of opportunity, the parents' position on the income ladder should have little impact on that of their children." The fact is, however, that the greater equality of institutional opportunity there is, the more families' human capital endowments matter. As the political scientist Edward Banfield noted a generation ago in The Unheavenly City Revisited, "All education favors the middle- and upper-class child, because to be middle- or upper-class is to have qualities that make one particularly educable." Improvements in the quality of schools may improve overall educational outcomes, but they tend to increase, rather than diminish, the gap in achievement between children from families with different levels of human capital. Recent investigations that purport to demonstrate less intergenerational mobility in the United States today than in the past (or than in some European nations) fail to note that this may in fact be a perverse product of generations of increasing equality of opportunity. And in this respect, it is possible that the United States may simply be on the leading edge of trends found in other advanced capitalist societies as well.
And this section's politically incorrect:
WHY EDUCATION IS NOT A PANACEA
A growing recognition of the increasing economic inequality and social stratification in postindustrial societies has naturally led to discussions of what can be done about it, and in the American context, the answer from almost all quarters is simple: education.
One strand of this logic focuses on college. There is a growing gap in life chances between those who complete college and those who don't, the argument runs, and so as many people as possible should go to college. Unfortunately, even though a higher percentage of Americans are attending college, they are not necessarily learning more. An increasing number are unqualified for college-level work, many leave without completing their degrees, and others receive degrees reflecting standards much lower than what a college degree has usually been understood to mean.
The most significant divergence in educational achievement occurs before the level of college, meanwhile, in rates of completion of high school, and major differences in performance (by class and ethnicity) appear still earlier, in elementary school. So a second strand of the education argument focuses on primary and secondary schooling. The remedies suggested here include providing schools with more money, offering parents more choice, testing students more often, and improving teacher performance. Even if some or all of these measures might be desirable for other reasons, none has been shown to significantly diminish the gaps between students and between social groups -- because formal schooling itself plays a relatively minor role in creating or perpetuating achievement gaps.
The gaps turn out to have their origins in the different levels of human capital children possess when they enter school -- which has led to a third strand of the education argument, focusing on earlier and more intensive childhood intervention. Suggestions here often amount to taking children out of their family environments and putting them into institutional settings for as much time as possible (Head Start, Early Head Start) or even trying to resocialize whole neighborhoods (as in the Harlem Children's Zone project). There are examples of isolated successes with such programs, but it is far from clear that these are reproducible on a larger scale. Many programs show short-term gains in cognitive ability, but most of these gains tend to fade out over time, and those that remain tend to be marginal. It is more plausible that such programs improve the noncognitive skills and character traits conducive to economic success -- but at a significant cost and investment, employing resources extracted from the more successful parts of the population (thus lowering the resources available to them) or diverted from other potential uses.
For all these reasons, inequality in advanced capitalist societies seems to be both growing and ineluctable, at least for the time being. Indeed, one of the most robust findings of contemporary social scientific inquiry is that as the gap between high-income and low-income families has increased, the educational and employment achievement gaps between the children of these families has increased even more.
And from the conclusion:
For capitalism to continue to be made legitimate and palatable to populations at large, therefore -- including those on the lower and middle rungs of the socioeconomic ladder, as well as those near the top, losers as well as winners -- government safety nets that help diminish insecurity, alleviate the sting of failure in the marketplace, and help maintain equality of opportunity will have to be maintained and revitalized. Such programs already exist in most of the advanced capitalist world, including the United States, and the right needs to accept that they serve an indispensable purpose and must be preserved rather than gutted -- that major government social welfare spending is a proper response to some inherently problematic features of capitalism, not a "beast" that should be "starved."
In the United States, for example, measures such as Social Security, unemployment insurance, food stamps, the Earned Income Tax Credit, Medicare, Medicaid, and the additional coverage provided by the Affordable Care Act offer aid and comfort above all to those less successful in and more buffeted by today's economy. It is unrealistic to imagine that the popular demand for such programs will diminish. It is uncaring to cut back the scope of such programs when inequality and insecurity have risen. And if nothing else, the enlightened self-interest of those who profit most from living in a society of capitalist dynamism should lead them to recognize that it is imprudent to resist parting with some of their market gains in order to achieve continued social and economic stability. Government entitlement programs need structural reform, but the right should accept that a reasonably generous welfare state is here to stay, and for eminently sensible reasons.
The left, in turn, needs to come to grips with the fact that aggressive attempts to eliminate inequality may be both too expensive and futile. The very success of past attempts to increase equality of opportunity -- such as by expanding access to education and outlawing various forms of discrimination -- means that in advanced capitalist societies today, large, discrete pools of untapped human potential are increasingly rare. Additional measures to promote equality are therefore likely to produce fewer gains than their predecessors, at greater cost. And insofar as such measures involve diverting resources from those with more human capital to those with less, or bypassing criteria of achievement and merit, they may impede the economic dynamism and growth on which the existing welfare state depends.
Folks can quibble with Muller's concluding thoughts. I don't think the right doubts the "indispensable purpose" of the social welfare state. It's the left's never-ending program of expanding it that's the problem (which includes the promulgation of really terrible policies that in fact hurt social welfare rather than improve it). And of course the left will never "come to grips" with the futility of ending inequality. And leftists couldn't care less about harming "economic dynamism and growth."
In any case, read the whole thing. A thought-provoking essay.
