the theory of the managerial elite explains the present transatlantic social and political crisis. Following World War II, the democracies of the United States and Europe, along with Japan—determined to avoid a return to depression and committed to undercutting communist anti-capitalist propaganda—adopted variants of cross-class settlements, brokered by national governments between national managerial elites and national labor. Following the Cold War, the global business revolution shattered these social compacts. Through the empowerment of multinational corporations and the creation of transnational supply chains, managerial elites disempowered national labor and national governments and transferred political power from national legislatures to executive agencies, transnational bureaucracies, and treaty organizations. Freed from older constraints, the managerial minorities of Western nations have predictably run amok, using their near-monopoly of power and influence in all sectors—private, public, and nonprofit—to enact policies that advantage their members to the detriment of their fellow citizens. Derided and disempowered, large elements of the native working classes in Western democracies have turned to charismatic tribunes of anti-system populism in electoral rebellions against the selfishness and arrogance of managerial elites.
This is a theme of a number of recent essays. In a review of Richard Baldwin’s book on globalization, Christopher Caldwell writes,
But only a tiny fraction of people in any society is equipped to do lucrative brainwork. In all Western societies, the new formula for prosperity is inconsistent with the old formula for democracy.
In the same publication, Angelo M. Codevilla writes,
The 2016 election and its aftermath reflect the distinction, difference, even enmity that has grown exponentially over the past quarter century between America’s ruling class and the rest of the country.
…The government apparatus identifies with the ruling class’s interests, proclivities, and tastes, and almost unanimously with the Democratic Party. As it uses government power to press those interests, proclivities, and tastes upon the ruled, it acts as a partisan state. This party state’s political objective is to delegitimize not so much the politicians who champion the ruled from time to time, but the ruled themselves.
A few remarks.
1. Keep in mind that if a few tens of thousands of votes in key states had come up differently, we would be less interested in essays of this sort.
2. As the authors are aware, the class differences have been simmering for a long time and have been noted by many writers. Lind starts with Galbraith and James Burnham. One could move on to Robert Reich’s “symbol analysts” and David Brooks’ Bobos.
3. I might use the distinction of abstract workers and concrete workers. Concrete workers work with stuff. They are in construction, mining, agriculture, manufacturing, and transportation. They might own small retail and service businesses (think of repair). Abstract workers work with words, numbers, and computer programs. Think of lawyers, accountants, software developers, teachers, and bureaucrats. This abstract-concrete distinction is not a perfect dichotomy (health care, for example, combines a lot of both), but it is useful if we do not get too carried away with it.
4. The status of workers in the concrete sector is threatened in many ways. Outsourcing, machine substitution, ease of firing a non-performer, inefficient firms going out of business, and industries with productivity rising faster than demand all could cause the loss of a concrete sector job.
5. The status of workers in the abstract sector is protected in many ways. A public school teacher or industry regulator need not worry about outsourcing, machine substitution, being fired as a non-performer, having an inefficient employer shut down, or facing a decline in demand. Many abstract workers have protection from having their wages pressured by competition from people who lack their credentials. Workers in the concrete sector believe that their wages can be pressured by competition from people who do not even have citizenship papers.
6. Government and management are mostly abstract functions. So the natural order of things is for the Abstract class to rule over the Concrete class.
7. You have to wonder whether (5) is to some extent a result of (6). That is, maybe the Abstract workers who make the rules have set things up to protect Abstract workers but not Concrete workers. As policy makers rescued the economy from the financial crisis, a lot of Concrete workers lost their homes, but financial executives did not lose their mansions.
8. Lind argues in favor of policies that add protection to workers in the Concrete sector. The libertarian alternative is to provide less protection and government indulgence to workers in the Abstract sector. I do not much care for Lind’s vision. But the libertarian vision is surely a non-starter in reality.
Put 1 and 2 together, and you come up with a hell of an indictment of the intellectual class, don’t you? For all the analysis of power structures, privilege, or pareto improvements, pretty much no one in the right thinking class could figure out that:
A) The power relationship between low-education rural workers and high-education urban workers is a big deal in 2016 United States.
B) Privilege isn’t about skin color or the shape of your reproductive organs. It’s about class. (of course, the Onion demonstrates that it is our most insightful journal of US culture http://www.theonion.com/article/white-male-privilege-squandered-on-job-at-best-buy-35835)
C) Pareto improvements are unicorns. An economic change may be *ON NET* a positive, but improving the lot of Peter at the expense of Paul makes for a lot of unhappy Pauls.
I’m glad to say that growing up in Appalachia made me understand A and B above, but I moved the hell out and forgot about C, so lump me in as missing the boat.
We are simply at the end game of what von Mises predicted in ‘Planned Chaos’, “there is the German pattern of Zwangswirtschaft, towards the complete adoption of which the Anglo-Saxon countries are manifestly tending.”
Or in more detail:
The Dictatorial, Anti-Democratic and Socialist Character of Interventionism
Many advocates of interventionism are bewildered when one tells them that in recommending interventionism they themselves are fostering anti-democratic and dictatorial tendencies and the establishment of totalitarian socialism. They protest that they are sincere believers and opposed to tyranny and socialism. What they aim at is only the improvement of the conditions of the poor. They say that they are driven by considerations of social justice, and favour a fairer distribution of income precisely because they are intent upon preserving capitalism and its political corollary or superstructure, viz., democratic government.
What these people fail to realize is that the various measures they suggest are not capable of bringing about the beneficial results aimed at. On the contrary they produce a state of affairs which from the point of view of their advocates is worse than the previous state which they were designed to alter. If the government, faced with this failure of its first intervention, is not prepared to undo its interference with the market and to return to a free economy, it must add to its first measure more and more regulations and restrictions. Proceeding step by step on this way it finally reaches a point in which all economic freedom of individuals has disappeared. Then socialism of the German pattern, the Zwangswirtschaft of the Nazis, emerges.
von Mises, Ludwig (1947). Planned Chaos
I don’t believe this Cold War on the economy:
1) How much was the Post War Boom (1948 – 1973) a function of low labor supply from WW2 deaths and early Depression Baby Bust? Look at the job growth during the Eisenhower administration was (well) below every single President until Bush Jr. and decimal points higher than Obama. (like Eisenhower is 1.2% to Obama is 1.1% annual increase) The weakening of US and Europe working class wages all start in 1974 and generally drop until 1994. (I believe Japan is the outlier here.) So this Cold War stuff does not fit the historical data IMO. It politically kept us together but wage data does not support this narrative.
2) By 1974, we had:
2a) Slow downs caused by higher commodity prices.
2b) Significant job growth with females and Baby Boomers entering the job market. The 1970s had the highest job growth of any decade (over 200% which is not true for any other time ater WW2.)
2c) At least in the US, class warfare was controlled by Segregation of races. (I won’t elaborate but I believe this to be true.)
2d) Japan Inc. was beating both European (Germany exception) and US manufacturing.
3) The Trump reality is interesting because the Clinton Neoliberals sound more pro-market than the Trumpian worker rallies. Trump rallied WWC voters with promises of factories of old with different trade deals and getting rid of Alien Immigrants will vastly improve their lives.
4) The big question for libertarian economist, is why have the wages for most Developed nations stagnated the last 15 years and will it continue? In a lot ways, we are seeing some real wage increases since 2014 but I believe it has been concentrated on urban workers. (Oddly enough it is the Southwestern Hispanic-Americans improving the most here where as more rural WWC have not seen this reality.)
4a) I think Conor Sen is on the right track that the primary reason for current labor shortage is lower birth rates in the 1990s. (I suspect the baby bust from the mid 1970s changed the 1990s labor market. FYI.)
Do you think that this abstract vs. concrete paradigm is a stronger explanation for the effect of the financial crisis than just rich vs. poor? With regards to #7, did the well-paid end of the concrete worker group (e.g. owners of small retail and service businesses) suffer more or less than the low end of the abstract worker group (e.g. teachers, call-center operators, etc.)?
The US does not have a bimodal income distribution, and it does not look like we are moving that way. What implications does this have on this conversation?
At the very least the world is not as discrete as some think.
Isn’t the implication that not having a bimodal distribution is part of American exceptionalism, and if we revert to the mean, so to speak it will be disruptive?
One side-point is “identity politics” delicately dances past the whole issue of class. You can be an intersectional feminist and critical race advocate with a side order of queer theory while still quietly being a managerial capitalist. You’d never describe yourself that way, but you’ll still accept the “academic meritocracy” and the verdicts of the marketplace.
And you’ll happily consult for megacorps interested in burnishing their “socially responsible” credentials through ad campaigns and support of the “right causes”.
Frankly, I can’t help but wonder if this is why “identity politics” is so popular with certain rather wealthy sectors these days. It allows you to appear “progressive” and “woke” while still keeping your mansions and private jet.
Do we know it is envy, vs stagnation?
Anything other than what we are actually going to have is “a non-starter in reality.”
Picking up on the Caldwell point about brainwork, my take away from Goldin and Katz’s Race between Education and Technology is not that we need to educate the population more but that we cannot educate the population more. Aren’t we so far up the skill chain in advanced economies that we have largely educated our population to the extent possible, and that further advances in our collective human capital will come from intelligent immigrants?
Which is more beneficial? Total human capital or per-capita human capital?
(At the scale of 10s or 100s of millions of people)
Correct.
The number of truly talented immigrants, the kind that start the next Google, is pretty small. And they are almost all Asian. The rest of immigrants are net drains.
If genetic IQ is the limiting factor, and the West has a very high genetic IQ compared to the global average, then overwhelmingly keeping out the rest of the world is the best way to maintain our human capital.
I don’t draw that conclusion asdf. When the US educated its population in the 20th Century it went from a situation of having an under-educated population to a fully educated population, with great gain. Much of the third world has not had that chance yet, and there will be millions of very talented people just waiting to be educated. This will also increase the collective IQ of immigrant groups.
The evidence on IQ seems to disagree. But if you don’t want to accept it, I can’t force you to.
Could you refer me to some of that evidence? I know that IQs are lower in poorer countries, but also that over a number of decades particular groups can improve their IQs in advanced countries. Thomas Sowell has written about this.
The class of “managerial elites” certainly seems to be doing well, and is poised to do better.
#7 *** strongly demonstrates the elites protecting themselves from the costs of their own mistakes, while allowing the plebe workers to suffer for mistakes and even bad fortune. The Bush-Obama bailouts for the rich were terrible (and I flatly do NOT believe they were necessary to avoid a Great Depression: 0% interest from the Fed plus the same amount of bailout money instead going to married people with children would have resulted in greater economic growth.)
#8 make the elite pay more would be a good start:
a) higher capital requirements for banks (I say 50%; there is trouble even raising it to 10%) — yet this is something politicians can do if there is will to do it.
b) progressive property tax: only starting on properties whose value is 10* prior year’s median wage (~$50k; so houses > $500k), and starting quite small, like 0.1% on the amount over. With this increasing as values increase: 0.2% over $1 mln; 0.3% over $10 mln; 0.4% over 20mln; 0.5% over 30mln; 0.6% over 40 mln; 0.7% over 50 mln; 0.8% over 60 mln; 0.9% over 70mln going up to 1% on the sold value of housing at $80mln or more.
c) progressive wealth tax, similar to RE above.
Unfortunately, if the rich want gov’t bailout & security protection, the fair thing to do is give the workers more gov’t protection … the rich do want gov’t security protection.
Fair might well NOT be optimal, economically — but most folks are really unhappy about injustice.
There are several assertions about the abstract-concrete dichotomy that seem to be red herrings:
1) Ease of firing for non-performance, vulnerability to inefficient firms going out of business and facing a decline in demand.
Public school teachers don’t need to worry about being fired for non-performance because they are unionized and *similarly* for unionized concrete workers. Plenty of non-unionized abstract professionals can be fired for underperformance (or even firm politics unrelated to own performance), including financial professionals and even CEOs. Also, teachers and regulators are protected from inefficient employers being shut down or facing a decline in demand because they work for *government*. Plenty of software developers lose jobs when their startups shut down. The dichotomy here is between unionized and public sector workers vs. non-unionized, private sector workers.
2) “Many abstract workers have protection from having their wages pressured by competition from people who lack their credentials.”
That’s true only to the extent that the credential is viewed by employers as differentiating. It just so happens that many concrete workers are viewed as interchangeable (and concrete workers’ unions actually encourage that view, by the way). Professional athletes are concrete workers whose differentiation does give them protection. A more obtainable example might be some owners of neighborhood retail businesses, like family restaurants. Abstract workers with non-differentiating credentials, say MBAs or law degrees from second and third tier schools, are not that protected. I’m sorry, *individuals* having differentiated skills is not a “class” protection. By definition, those differentiated skills differentiate those individuals even from other members of their so-called class. On that note, abstract workers, aside from unionized teachers, actually compete against each other much more fiercely than do concrete workers. Of course, the winners of such competition will ex-post look like they are doing very well, but that is because the losers will be ex-post defined out of the class. An alleged class advantage is meaningful only if it is an a priori advantage.
Meritocracy and privilege are tautologically opposite — meritocracy means advancement “based on ability and talent rather than on class privilege” — so that anti-meritocracy arguments inherently promote privilege. Nowadays, it’s mostly those on the left that fail to understand this concept, but some on the populist right also make the same mistake.
I’m a pretty successful “meritocratic knowledge worker”. I’ve mostly worked in private sector and a couple different industries. I’ve never been in a union. I’ve met plenty of people that lacked merit but were still employed by companies. If we are going to defend the companies, its probably hard to measure merit in any industry I’ve been in systematically, so any push from the top would be pretty arbitrary. However, most people in any department know who is and isn’t useful.
Mostly though I think of knowledge worker meritocrats the way I think of the Mongols. The Mongols were certainly the best at what they do. They had lots of talents and skills. However, their talent and skill was used entirely for exploiting others.
We all know that FIRE, healthcare, and post-secondary education make up a majority of the upper class knowledge worker economy. Tech is also often in service of those industries, when it isn’t giving us 140 characters. All of them have notoriously hard to measure productivity, don’t appear to be producing much marginal utility, are famously considered corrupt and useless by many of the professionals in those industries, and have a long documented cosy relationship with government. Why shouldn’t most people question this, most people in these industries themselves question it.
Let’s put it another way.
Knowledge industries tend towards crony industries because its nature makes it hard to measure value for both public and private actors.
Within crony industries, its a meritocratic rat race, subject to some of the noise that comes with not being able to judge value that well.
The meritocrats within these industries aren’t troubled by the crony nature of their industry, and usually encourage it for self gain.
The nature of knowledge work means that IQ acts as a kind of natural barrier to entry. Not everyone can get into these crony industries just because they want to.
So IQ is a kind of “unearned privilege”, and the high IQ gravitate towards industries of dubious value that have an cozy relationship with government (that they encourage). I guess within these high IQ bubbles there is a loose relationship between merit and personal success, though second place is usually not so bad, at least compared to whats happening to the working class. It’s unclear what they are doing in these industries that is of such value to society that they are so proud of themselves.