By William K. Black
I have written two prior columns about Tyler Cowen’s praise of the faux “hyper-meritocracy.” Cowen assumes that productivity determines personal wealth and is measured by wealth. He celebrates financial managers as the exemplars of this hyper-meritocracy. In my first column I explained that it should have given Cowen pause that his meritocratic vanguard caused the greatest loss of wealth to society and that so many financial CEOs not only destroyed societal wealth, but also became wealthy through accounting control fraud. I explained how the bank CEOs that led the accounting control frauds also created the Gresham’s dynamics that suborned other professions (e.g., appraisers, loan brokers, and auditors) that cause bad ethics to drive good ethics out of the professions. Cowen could not have picked a less meritocratic group as his heroes than the financial CEOs running the systemically dangerous institutions (SDIs).
My second column explained that the perverse result that Cowen cheered was no anomaly. The policies that Cowen and other theoclassical economists have championed have created such a criminogenic environment that control fraud is frequently the optimal strategy for maximizing the CEOs’ self-interest. I described the policy changes essential to end this criminogenic environment.
This column makes a more fundamental challenge to Cowen’s vision assumption that unrestrained self-interested actions produce a hyper-meritocracy that improves life. Unrestrained self-interested actions are the primary threat to humanity. Cowen lauds the fact that the ultra-wealthy will secure dominant political power even in Nations that were once reasonably functional democracies.
Research that threatens the interests of the ultra-wealthy is grossly inadequate. It is exceptionally difficult to get the National Institute of Justice to fund research into elite white-collar crime and research on the attitudes of the ultra-wealthy is very limited. What we do know about CEOs, students of economics or finance, and the ultra-wealthy indicates that the wealthy and financial elites have many harmful characteristics that set them apart from the general public.
The triumphal book Moral Markets (which had the misfortune to be published in 2008) concedes that “homo economicus is a sociopath.” Economics and finance students are less altruistic than their peers before they begin university classes and are even less altruistic after their studies. There is a cottage industry among business professors praising CEOs for their narcissism because extreme narcissism is so common among CEOs. The last thing a narcissist needs is “scholars” urging him to unleash his narcissistic nature. One of the rare studies done on CEOs’ and sociopathy found that they scored far higher in many measures of sociopathy than the general population.
The recent New York Times profile of the rampant sexism and depravity of the Harvard Business School emphasized that the worst elements among the students were the ultra-wealthy and those who came from working in finance.
What both NYT articles missed is that far too many business school faculty have helped turn their institutions into fraud factories that teach students how to “manage” earnings in an environment in which “ethics” is an inside joke. The two problem groups of Harvard B School students and their ethos are exceptionally criminogenic.
Rampant, praised narcissism by wealthy CEOs is consistent with the results of the recent study of the attitudes of the highly wealthy. Narcissists care about themselves. Other people are simply instruments that may be useful to that overriding goal. The wealthy show far less empathy for the poor while the poor tend to have far broader empathy. “The more powerful were less compassionate toward the hardships described by the less powerful.”
A recent study found that wealthy Americans had policy views that differed greatly from most Americans. The authors summarized their key finding:
“[T]he biggest concern of this top 1% of wealth-holders was curbing budget deficits and government spending. When surveyed, they ranked those things as priorities three times as often as they did unemployment — and far more often than any other issue.”
The wealthy favor policies that would increase their disposable income and reduce the income of poorer Americans.
“They were also much less likely to favor raising taxes on high-income people, instead advocating that entitlement programs like Social Security and healthcare be cut to balance the budget. Large majorities of ordinary Americans oppose any substantial cuts to those programs.”
The wealthy opposed a broad range of programs designed to help the working class and the working poor and their children to have a better standard of living and to develop skills to increase upward class mobility. The wealthy even opposed jobs programs despite the fact that the study was conducted during the Great Recession. Only 8% of the wealthy supported a federal jobs program (v. 53% of the general public). In response to the statement: “The government in Washington ought to see to it that everyone who wants to work can find a job” only 19% of the wealthy agreed (v. 68% of the general public). These were the two of the largest gaps between the wealthy and the general public on any policy studied.
The other two massive policy gaps are in education and they are worth emphasizing because they share a common characteristic with the jobs policies. The policy statements and percentage agreement (the general public response is in parentheses) were:
“The federal government should spend whatever is necessary to ensure that all children have really good public schools they can go to: 35% (87%)
The federal government should make sure that everyone who wants to go to college can do so: 28% (78%)”
The job and education policies that produced such enormous gaps demonstrate the extreme hostility of this sample of the wealthy to any governmental program that has a significant likelihood of causing a major change in class, particularly for younger Americans. The wealthy did not want to increase substantially the number of rivals for their children in what they see as a zero-sum competition for wealth, status, and power. Their responses evidence that they would prefer a substantially less productive and far more unequal Nation with substantially reduced class mobility – because their children are more likely to be the “winners” under such a rigged system.
The support of the wealthy for austerity in response to the Great Recession demonstrates that the wealthy remained the problem even after their frauds drove the crisis. They sought a policy that would have compounded the Great Recession (as it did in the Eurozone) and they succeeded in blocking any adequate stimulus program and in producing increasing austerity from 2011 to the present. The wealthy’s pro-austerity position was incoherent because a strong majority of them stated that the government should run a deficit in response to a recession. In sum, the wealthy are far worse than the general public about the policy aspect (finance) where they would purportedly have the greatest advantage over the general public.
The study also found that the wealthy are less likely than the general public, even with the advantage of seeing the disaster caused by financial deregulation, to support increased regulation. The wealthy diverge the most from the general public in the extent of their opposition to increased regulation of the finance and oil industries. The wealthier the subject, the more likely they were to favor further, even more criminogenic, economic deregulation.
Climate Change and the Malign Neglect of the Wealthy
Table 3 of the article reporting the study of the wealthy’s attitudes asked them to evaluate the importance of 11 “problems.” The wealthy ranked “climate change” dead last, with only 18% rating it a “very important.” The next lowest-ranked problem, “inflation,” was rated “very important” by 26% of the wealthy. Inflation was trivial at the time of the study and the markets were pricing the risk of future inflation as trivial. Inflation has remained trivial. The wealthy rated the budget deficit as their top problem with 86% of them rating it as “very significant.” The deficit was, if anything, too low and a substantial majority of the wealthy stated that the government should run a budget deficit in response to the Great Recession.
The wealthy are the least likely group with substantial political power to act promptly and decisively to reduce global climate change given their denial of the problem. If Cowen is correct that the power of the ultra-wealthy will grow substantially then the ultra-wealthy will become, if the climate scientists prove correct, an even graver threat to humanity and the ecosystem. It is a strange use of the term “meritocracy” to apply it to plutocrats whose relentless dedication to their short-term accumulation of even greater wealth causes them to ignore science and endanger the world.