The Road to Freedom (8 page)

This faith in the effectiveness of hard work is distinctly American. In the World Values Survey conducted between 2005 and 2007, researchers asked people in fifty-four countries whether
hard work brings success or whether success is more a matter of luck and connections. Americans were more likely than people in other developed countries to say success comes from hard work; for example, they were more than twice as likely as the French to give this response.
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This may be why many believe America is—for now—an aspirational society, while Europe is more animated by envy. The singer Bono summed it up evocatively: “In Ireland people have an interesting attitude to success; they look down on it. In America, you look up at . . . the mansion on the hill and say, ‘One day . . . that could be me.' In Ireland, they look up at the mansion on the hill and go, ‘One day I'm gonna get that bastard.'”
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Most Americans believe the U.S. is an opportunity society—but not all do. The biggest difference on this score is political ideology. According to the Syracuse University data, the people least likely to say they believe in the opportunity society today are political progressives. Liberals, including successful liberals, believe less than conservatives—even poorer conservatives—that economic mobility is actually possible in America. Forty-eight percent of lower-income conservatives believe there's a lot of upward income mobility in America, versus 26 percent of upper-income liberals. And 90 percent of the poorer—but optimistic—conservatives said that hard work and perseverance could overcome disadvantage, versus just 65 percent of richer liberals.
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For now, the optimistic view is the mainstream view, though, given that seven in ten Americans still believe in abundant opportunity. This is not very surprising, I suppose; it may even be in our genes. Had our ancestors not believed in the correlation between hard work and success, most of us wouldn't even be here. If you're descended from immigrants (and most of us are), ask yourself
why your ancestors came here. I am confident they didn't come to America in search of a stronger system of government income redistribution. Letters from my own great-grandparents who emigrated from Denmark suggest they came to America to earn their success. They wanted to start a farm, and to be rewarded if they worked hard. A system without opportunity, where merit was not rewarded, was what they were escaping
from
in Europe.

Generation after generation of immigrants came to America for the same reasons that my family did.
²⁶
Abraham Lincoln promised, “When one starts poor, as most do in the race of life, free society is such that he knows he can better his condition; he knows that there is no fixed condition of labor for his whole life.”
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Perhaps the popular American belief in meritocracy explains why our sense of economic class has remained practically unchanged across the decades. In 1972, 48 percent of Americans called themselves “working class,” while another 44 percent called themselves “middle class.”
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By 2002, despite a 15 percent increase in income inequality,
²⁹
these percentages were still 46 percent and 46 percent, with just 8 percent considering themselves either “lower class” or “upper class.”
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If you are a French intellectual you might say that this is evidence of some sort of “false consciousness” among the proletariat. But most people believe that America offers a decent chance to prosper, however they choose to define prosperity.

Politicians have denied this core American truth at their peril, occasionally leading to comical moments in American politics. Back in 1972, Democratic presidential candidate George McGovern delivered a campaign speech to blue-collar workers at a rubber factory near Akron, Ohio. He announced his plan, if elected, to raise estate taxes and reduce inheritances dramatically—and
redistribute the money to people like those assembled. He felt sure his message of redistributive fairness would strike a chord with his working-class audience. To McGovern's shock, he was booed.

We might make the (correct) observation that an inheritance is inconsistent with an heir's earned success, and there is no evidence that inherited wealth brings any happiness to people who inherit. But people aspire to rise enough to leave something to their kids or to charity. That is why polls find Americans believe the estate tax is the most unfair tax in the entire system.
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It offends their sense of meritocratic fairness, not due to any merit on the part of heirs, but because people who honestly earn their money should not have it confiscated and redistributed, even after death.

MAYBE YOU'RE THINKING
at this point that, of course, opportunity is real in America. But it's not the
only
thing. Some people are lucky, some people are born rich, and some people have access to better schools and colleges than other people. Other people are born poor, suffer from discrimination or handicaps, or live in areas where good schools are few. I was born into a family without much money but was lucky to have excellent parents who valued honesty, thrift, and education. I learned from an early age that hard work and self-discipline led to things I wanted. Other people aren't so lucky in their upbringing.

Good parents are only one kind of good luck. Studies show that good-looking people find it easier to get ahead in life. Throughout their careers, taller men have higher earnings than shorter men, and thin women with more attractive faces have the highest socioeconomic status all through life.
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(I'm not sure you need a study to figure this out, but there you are.)

If equality of opportunity is not universal, should we throw out the whole idea of meritocratic fairness? Of course not. First, you're living in a dream world (or you have tenure) if you really believe merit doesn't matter. Everyone can think of times when things went well as a direct, observable result of hard work. Thinking a little harder, people can also come up with cases in which they were punished at work or in life for laziness, incompetence, free riding, or plain stupidity. I can think of lots of such cases in my own life.

Second, we have to build our system based on our values and aspirations. Even if success sometimes comes down to connections and good luck, it would be a mistake to build our system on the idea that this is all that matters. Even if only half of the outcomes in life were due to merit—a dubious assertion—we need to gear our system to the part under our control. Otherwise, we have no incentive to be industrious, honest, innovative, and optimistic. Do we really want to teach our kids that if they're not pretty and thin, they probably won't get very far in life? Do we want to teach them that it's alright to take things from others?

Third, and most importantly, if we reject the ideals of opportunity and meritocratic fairness, we will get a system in which outcomes really are just based on luck or political power. In a 2005 study of twenty-nine countries, researchers at Harvard and the Massachusetts Institute of Technology found that where taxes are higher and money is redistributed through social programs, citizens are much more likely to believe that luck, not merit, is the driving force behind success.
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So, in countries like Italy, Spain, and Uruguay, at least half the population believes luck determines incomes and about twice as much of GDP is redistributed in social spending as in the United States.

The link between redistribution and citizens' cynicism isn't just a coincidence. The same study showed that economic outcomes in
countries like Italy and Spain are disconnected from merit and hard work precisely
because
citizens demand government social programs and wealth redistribution. If people believe that economic outcomes are a product of luck, birth, connections, or corruption, they demand more and more forced wealth redistribution. This rewards political power and connections, as citizens, corporations, and interest groups lobby for favors, not excellence in the marketplace.

Simply put, if people believe they are rewarded for their merit, they'll get a system in which that's true. If they think it's all rigged or based on luck, then the system will end up that way.

Some politicians say that, for the sake of fairness, the U.S. needs to raise taxes on the entrepreneurial class—to make the “millionaires and billionaires,” pay their “fair share.” Unknowingly, these leaders are weakening America. They are damaging the possibility of achieving the kind of opportunity society they believe does not exist and moving the nation further and further away from the vision of the Founders.

If the opportunity society is becoming a myth, it is not because of income inequality. It is because of the leaders who insist that opportunity is not real and encourage policies that redistribute more and more income. They are moving America from a culture of aspiration to a culture of envy.

SOME OF MY
progressive friends argue that my characterization of redistributive fairness is, well, not fair. Sure, progressives want more equality, they say, but all that really means is that they want to bring the bottom
up
, not bring the top
down
or equalize everybody. I don't buy this argument because I don't think it stands up to scrutiny. You simply can't get much more income equality without bringing the top down.

To many, it is an article of faith that income inequality in America is exploding, and the rich are getting richer while everyone else is stagnating or getting poorer. This seems certain to be one of the central arguments of the political left in the coming years. Yet a great deal of economic analysis today questions these “facts.”

First, income inequality measures almost always neglect to consider things like changes in household size, the prices of goods and services people consume, and the value of services from the government. As a result, Northwestern University economist Robert Gordon states that the rise of inequality in America has been “exaggerated in both magnitude and timing.”
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Second, the increases in inequality are not because the poor and middle class are worse off than in the past, according to Cornell University economist Richard Burkhauser. Inequality increases are mostly due to the fact that the top 1 percent of earners have gotten a lot more prosperous over the years.
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Using data from the government's Current Population Survey, Burkhauser looks at the bottom 99 percent of earners to measure inequality growth in this group and finds almost none. Furthermore, the bottom 99 percent have not stagnated. According to the Congressional Budget Office, every income quintile has seen a real increase in purchasing power of at least 18 percent over the past thirty years.
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So, there have been substantial income increases at the very top of the pyramid—the “1 percent” in the rhetoric of the Occupy Wall Street movement. But that growth hasn't occurred at the
expense
of the 99 percent. Increasing income equality as a social goal means either you don't understand the evidence, or you think it is desirable per se to punish people at the top
because they are rich
. There's no way around this fact.

This logic relies on a kind of zero-sum reasoning: that the rich are rich only because the rest of us are not and that the wealthy
can only get better off if the rest of us get worse off. Such a world-view has been debunked by two hundred years of economic data. Virtually every economist since Adam Smith has demonstrated that productive activity grows the size of the pie. Entrepreneurs create new economic activity, which creates jobs, opportunity, and economic growth. A farm or a factory can create value and wealth for both owners and workers via products that come into existence through their combined effort. Obviously management can abuse labor (and vice versa). But were it not for capitalists, workers would have no jobs at all.

THE REDISTRIBUTIONIST GOAL
is not really one of bringing up the bottom, then. Effectively, it is to achieve economic
sameness
. The famous economist Arthur Okun, chairman of President Lyndon Johnson's Council of Economic Advisers and one of the most influential economists in the past one hundred years, put it this way:

. . . incomes that match productivity have no ethical appeal. Equality in the distribution of incomes . . . as well as in the distribution of rights would be my
ethical
preference. Abstracting from the costs and the consequences, I would prefer more equality of income to less and would like complete equality best of all. . . . To extend the domain of rights and give every citizen an equal share of the national income would give added recognition to the moral worth of every citizen.
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This brings us to the most unfair aspect of this kind of anti-meritocratic thinking: To get to the ideal of sameness, somebody
has to decide what and how much to take from whom and how to redistribute it. Who does that? You know the answer: The government does. The government decides how much of people's money to take and in what form—income, investments, savings, transactions, or whatever. It decides whether to give it to others in a welfare check or farm subsidy, or whether to give them services like medical care.

Everyone knows that America needs a functioning government and critical public services. I am happy to help pay for the fire department that puts out the fire in your house (and mine). The problem arises when the government takes from you and gives something to me,
not
to provide critical services, but just to make us more equal for reasons of redistributive “fairness.”