Doctor Science Knows

Thursday, July 29, 2010

The inequality boom

Henry at Crooked Timber posted about the most recent issue of Politics and Society and its discussion of What Produced the Inequality Boom?. I commented:

I have to agree with Straightwood on the importance of propaganda and on a pervasive mental model of how the world should work. Ideology, maybe?

What I've noticed, especially in the last couple of decades, is that many Americans and almost all Republicans or libertarians have great difficulty assigning blame to rich people. In discussing any problematic situation or institution -- illegal immigration, for instance -- their first reaction is to see the source of the problem in the least powerful and wealthy people involved. In the example of immigration, if you bring up the complicity of major employers who want to hire illegal immigrants because they're cheap and exploitable, they'll nod and then ... it's as though their brains skid away and they start talking about anchor babies again. The idea that wealthy people have more power and thus may be more culpable doesn't seem to have an traction in their brains, it's a notion that doesn't seem to compute on some basic level. Wealth is the elephant in the room that *people can't actually see*.

From Henry's description of the articles, what stands out to me as an unconsidered aspect is something about the behavior of inherited wealth. It's not just that some people were able to get lots of money, it's that at least some people who started out with money -- Old Money -- didn't lose it in the time-honored fashion, but saw it grow in the way only New Money used to grow. See, for instance, a Wall Street Journal article about Charles Koch, which said he 'applied the "science of liberty" to become one of the world's richest men' -- apparently the "science of liberty" allowed him to make a very wise choice of parents.


It can't be just Calvinism, we've had Calvinism all along.

Currently, there's a discussion at Balloon Juice about Megan McArdle's piece in the Atlantic blaming the housing bubble on the 30-year fixed mortgage, because it
gives the consumer the power to shaft banks whenever it is to their advantage.
See Irvine Housing Blog for more evisceration.

McArdle is a useful idiot test case, because she so perfectly exhibits the attitudes I'm talking about. She's not a Calvinist; she calls herself a "libertarian". She's The Atlantic's business and economics editor, though it's thunderously obvious that she knows nothing about what Henry would call "economics".

What she *is*, is an MBA. As I recall, MBA programs became very popular and important in the late 70s, as the inequality boom was taking off. I wonder, now, if what these programs teach -- the mindset, the basic attitudes, what things are important and what aren't -- isn't where the Dives-blindness (or whatever it should be called) comes from. MBA programs, generally speaking, teach the wealthy to regard workers as tools, consumers as lawful prey. This is where our aristocracy is trained, and this is what they learn.

Now that I think about it, what has changed in how inherited wealth functions is that the scions of wealth are often expected to get MBAs. Dr. Hilarius @15 talks about how Old Money is tied up in trusts, etc., so the heirs can't spend it on hookers & blow, in traditional fashion. But since the 60s-70s the MBA has become a way to train heirs to a different kind of aristocratic tradition. You don't have to insulate your heirs from the money if you train them not to blow it, and that's why e.g. Charles Koch (who has an MBA) can be so obscenely wealthy. Gilded Age robber barons started small and made their businesses large; modern ones are Robber Dukes: they start with a large business and make it gigantic.

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