The Left has complained of inequality. What rankles the Republican insurgent, however, is immobility, and in particular the idea that it might result from a set of unjust rules that advantage a new class of aristocrats. We might be prepared to accept the fact of deep income inequality if we thought that everyone stood the same chance of getting ahead, and that people were sorted out by their abilities. Ragged Dick is a desperately poor, orphaned bootblack, but he’s accepted as an equal by his wealthy friend, Frank Whitney, and we’re led to believe that they’ll end up in the same place. Henry Fosdick, honest and intelligent but lacking Dick’s ambition, will find himself a rung down on the scale. The Hibernian Johnny Nolan, honest but lacking in both intelligence and ambition, will end up yet another rung down. Those at the very bottom are not even honest, and an unpleasant end is prophesized for them. But what if we’re not like that anymore? What if today’s Ragged Dick lags behind, his place at the top taken by those who have gamed the system, whose wealth is founded upon illicit advantages? If that’s the case, if America offers no better opportunities for advancement than other countries, then the core understanding of American Exceptionalism will have been lost.
This would be a tragedy, for income inequality and immobility are serious problems, and we’d all want to return to the levels of income equality and mobility of 50 years ago, if we could leave everything else the same, if we could do so without cost. That might seem impossible, for most of the things which have been proffered—free trade barriers, massive tax hikes and the like—would be enormously costly. But then there are other solutions which would give us an economy both wealthier and more just, an entrepreneurial society in which people would have a better chance of getting ahead. We’d all want to go there—unless we were one of America’s aristocrats.
As an ideal, income mobility wasn’t there at the country’s formation, but emerged later when Lincoln and the Civil War gave America a new birth of freedom, in which the opportunity to rise above one’s station came to define the country’s promise. If one had to pick the crucial moment it would be a little-known speech by Abraham Lincoln at an agricultural fair in 1859, when he worked out the implications of the Declaration of Independence in a country that was still half slave. From this everything else followed, the Civil War, the land grant colleges, the open door policy for immigrants, Ragged Dick’s America.
Today, however, the United States is a highly unequal society and, what is far worse, a highly immobile society as well. Jobs have expanded at the very top and bottom of the economy, while middle class jobs have cratered. That’s regrettable, for countries with greater economic equality have higher levels of civic participation and personal trust. People feel better about each other when the game doesn’t seem to be rigged against them. They’re also happier and less likely to support demagogues who promise greater equality but would restrict political freedom and threaten the rule of law to attain it. Finally, inequality and immobility are unjust when they result from special favors the government grants to its political friends and cronies.
So we’d want more income equality and mobility. Easier said than done, however. People on the Left have argued that inequality might go away if we could only raise taxes on the rich. However, the top U.S. marginal rates for individuals and corporations are amongst the steepest in the world, and capital gains taxes here are much higher than the First World average. Attacks on greed aren’t going to do very much either. The acquisitive instinct (to give it a less emotionally charged name) is coded in the DNA of the species, and I haven’t heard of plans to rewire our brains to eliminate it. In any event, as greed is ubiquitous, it can’t explain why there’s more immobility in America than elsewhere.
Nor are there any magic fixes in our welfare system, which is one of the most generous in the world. Not only is this a pretty good country to be poor in, but people at the bottom rung in America are amongst the richest people in the world. Moreover, the kinds of welfare improvements that get proposed are often self-defeating. For example, increasing the minimum wage would benefit some workers at the margin, but would also hasten the trend to automation, with store clerks replaced by check-out kiosks. Between 2007 and 2009 a Democratic Congress raised the minimum wage from $5.15 to $7.25 an hour, this as the economy plummeted and unemployment skyrocketed. There’s no persuasive evidence that the higher minimum wage did workers any good.
Then there’s the move to an information economy, free trade, and globalization. In the recent past, good jobs awaited high school grads on the assembly lines and in the factories of America, jobs that gave people a solid and secure footing in the middle class. Those jobs, however, are increasingly a casualty of an economy that requires higher levels of skill. High-tech jobs have increased in number, while low-skilled jobs are disappearing. In addition, free trade has moved low-tech jobs to countries with lower labor costs, while at the same time increasing the number of high-skilled jobs in America. Globalization brings Third World people into the middle class, but shrinks the First World’s middle class.
We might not like what this has done to income equality and mobility, but there’s not a lot we’d want to do about it. Or could do. We can’t smash our computers, the way that 19th century Luddites smashed cotton looms, and expect we’d be doing anything other than shipping more jobs offshore. The same goes for free trade. Lower trade barriers have greatly strengthened the economy and increased the number of jobs overall, as American companies became better able to meet the challenge of foreign competition. A retreat from free trade would also encourage firms to incur the deadweight losses of lobbying for sweetheart trade barriers from politicians, in order to protect the firms from foreign competition.
There are also several reasons why we’d never expect to see perfect income mobility between generations. First, it always helps to have the head start that wealthy parents give one: better schools, better networks, better first jobs. That’s why countries with high levels of income inequality are also countries with low levels of income mobility. From rich parents, rich kids. Second, and relatedly, the environment in which children are raised matters. Children raised by wealthy parents are less likely to come from broken homes, and will learn by example to value education. Compared to poor children, they’re exposed to a much higher social and cultural environment. In addition, there’s a developing empirical literature suggesting that the personal qualities (“phenotypes,” for the geneticist) that are correlated with economic success are heritable. That is, we’d expect to see some correlation between the personal (phenotypic) attributes of parents and children.1 A lot of things we thought to be random or a product of our environment seem now to be inherited, and this might also be true of the things which make people wealthy. If Lady Gaga was born that way, why not the rich?
A degree of aristocracy is thus to be expected in any society, and not merely expected but also natural. We are apt to think that economic inequalities are self-correcting, self-arighting, but it’s not so; and the natural rights lawyer who said that all men are equal lied to us. Instead, equality cuts against the grain, and what is natural are differences, the differences between rich and poor, high and low. What is natural is aristocracy, the natural default position of any society, and not just aristocracy but a hereditary aristocracy. What is unnatural, unexpected, anomalous, the briefest of interludes in the world’s long history of class distinctions, is Ragged Dick’s America.
For a hereditary aristocracy to arise, only two things are needed, common to all of us: a bequest motive and relative preferences. The bequest motive is