An exchange in Boston Review between Richard White and Gavin Jones on wealth during and since the Gilded Age reminded me of a question that arose during the Occupy Wall Street protests: To what extent has the decline of social stigmas contributed to the rise in economic inequality?
Few would disagree that there is now less of a stigma against divorce, unwed motherhood, homosexuality, and other once-controversial practices than there was in the early and mid-twentieth century. (The real argument is over whether stigmas can serve a useful purpose, but we’ll leave that aside for now.) One factor underlying the explosive growth of top executives’ compensation in recent decades could be a similar decline in the stigma against accumulating and enjoying great wealth.
Paul Krugman described the transformation this way in the New York Times magazine a decade ago:
For a generation after World War II, fear of outrage kept executive salaries in check. Now the outrage is gone. That is, the explosion of executive pay represents a social change rather than the purely economic forces of supply and demand. We should think of it not as a market trend like the rising value of waterfront property, but as something more like the sexual revolution of the 1960’s—a relaxation of old strictures, a new permissiveness, but in this case the permissiveness is financial rather than sexual.
Brink Lindsey, writing (PDF) more recently for the libertarian Cato Institute, admits that Krugman “is on to something” but argues that the older attitude toward wealth was closely tied to “the combination of in-group solidarity and out-group hostility” that also contributed to racism and sexism. Racial, sexual, and financial tolerance may be a package deal; one cannot have both individualism and a high degree of social solidarity.
Lindsey’s argument seems plausible, but social stigma has not evaporated entirely: Even as many forms of stigma have declined, new ones have emerged. The former stigma attached to interracial marriage, for example, has been replaced by a stigma against racism. The Occupy Wall Street protests could be read in part as an effort to re-stigmatize wealth by publicly criticizing, ridiculing, and harassing the extremely wealthy.
Whatever the merits of such demonstrations—no one wants reckless CEOs to receive golden parachutes and government bailouts—I don’t think the broader re-stigmatization campaign has much chance of success. It’s hard to attach public disgrace to a desirable state of life, and perhaps harder still to inflict it on society’s most powerful members.
February 20th, 2013 | 1:03 pm
Thanks, Anna. Good, thought-provoking stuff.
February 20th, 2013 | 2:25 pm
I would humbly disagree with Krugman’s assessment. When I was a kid you couldn’t tell where the doctors, lawyers or executives lived by looking at their houses. Generally speaking, they pretty much lived the same lifestyle as everyone else even though their incomes could afford much more. Today there seems to be an overall lack of thrift and an ever increasing largesse that has infected everyone across the socio-economic scale. Just look at the explosion of bankruptcies in recent years from people living beyond their means. It is not a phenomenom that is just affecting the “wealthy”, it is affecting us all.
February 20th, 2013 | 2:26 pm
Very important post.
I can’t tell you how many times I have seen the exploding compensation for CEOs (and income inequality in general) tied directly to the Reagan and/or Bush tax cuts – as if one caused the other. The corollary of this argument is that if we just raised taxes on the “1%” (or if they just “paid their fair share”) then inequality would magically disappear.
What an exercise in missing the point. The reason there has been an explosion in executive compensation relative to what the rank and file are paid is simply this – “because they can and get away with it”. Marginal tax rates (or capital gains tax rates depending upon the argument) have comparatively little to do with it. In the post WWII generation there was a sense that coming out of the Great Depression and World War – some sense of solidarity and recognition of common experience was to be acknowledged and respected. There were ostentatious displays of wealth to be sure – but they weren’t as ubiquitous and in the executive suite there was more of a sense of what was high pay and what was simply ridiculous.
But, given the realities of human nature – that sense of solidarity was more of the exception – not the inequality and brazen greed that we see today. That can’t be fixed with marginal tax rates – but only with changes of heart and different sets of social expectations (which at the end of the day, only reflect attitudes of society).
February 20th, 2013 | 3:56 pm
I share this view.
Contrasted with the 1960s, people are tempted to regard the 50s as the model of normalcy. In fact, the 50s were perhaps the apex of ABnormalcy – an era with weirdly high social cohesion and low social stratification (among white people). Arguably the disparities of the Gilded Age and the 1920s were more typical of the kind of social stratification you see in other societies, and more typical of the stratification we’ve returned to – for better and worse.
And this view – the 50s was “normal” — helps fuel libertarianism. It’s easy to rebel against the constricting bonds of social cohesion when we can treat that cohesion like air – endlessly available, costless provided. But when people live amid social decay – crack-ravished urban centers, meth-ravished rural landscapes – the burden of social cohesion no longer rank at the top of people’s concerns.
Then people put effort into building cohesion. Is it a coincidence that areas with high church attendance are also areas that suffer high rates of social maladies – divorce, unemployment, school drop-outs, violent crime, stress-related illness, obesity, etc? People value the straight-and-narrow when they see, all around them, the consequences of falling off the path.
February 20th, 2013 | 5:34 pm
Not at all certain that I had the correct terms in mind, after reading this, the terms “luxuria” and “superbia” came to mind.
A google search brought up a definition for luxuria – “inordinate love of money, possessions – and for “superbia” -”inordinate, unreasonable self-esteem”. I had mistakenly thought the terms were used to describe flaunting of riches, of inciting envy.
Jewish teaching/tradition condemned these qualities, did it not?
February 20th, 2013 | 7:15 pm
I think Krugman is on to something. Perhaps not so much “fear of outrage” in the 50s, but a memory of the Depression & a realization that “easy come” can turn to “easy go.” There’s a boom and bust cycle – Gilded Age corruption/conspicious consumption busted by WW I, Roaring Twenties by Depression/WW II, 80s-90s excesses busted by market drops, etc.
Interesting, however, that 80s excesses coincided with the Reagan Gospel of low taxes & trickle-down. Coincidence? Or the same mindset giving rise to both?
I do not buy Lindsey’s argument. There were rich philanthropic non-racists in the 60s, there were liberal black Republicans in the 60s. To say that a society either tolerates everything individualistic or nothing individualistic is a bit silly – of course we pick and choose, according to our values at the moment.
“But, given the realities of human nature – that
sense of solidarity was more of the exception – not the inequality and brazen greed that we see today. That can’t be fixed with marginal tax rates – but only with changes of heart and different sets of social expectations (which at the end of the day, only reflect attitudes of society).”
True…but a bit of a cop-out. There were higher tax rates in the 50s and the rich did not complain and business did not suffer. Imposing higher tax rates at least would address the issue of equality and inch us toward solvency, even if the wealthy paid grudgingly. There was enough of a “change of heart” to abolish segregation…all we need is enough of a change of heart to change the tax structure. National solvency might turn out to even make up for a bit of individually-suffered “pain…” It would be nice if there were less brazen greed, but I would settle for brazenly greedy rich people who were afraid enough of the law to pay their fair share…
February 20th, 2013 | 7:36 pm
You can’t stimatize wealth, it is too desirable. And it is simply too easy to ignore anyone who would want to. I mean, seriously, does anyone take those occupy losers seriously?
February 21st, 2013 | 4:14 am
A suspicion of commerce has very deep roots in Western culture. Echoing Aristotle, St Thomas says that commerce has a certain baseness (turpitudo) about it, because it is not, of itself, directed to any honest or necessary end (although it can be).[ST II-II q 77]
The end of medicine is healing, the end of agriculture is food production and so on. But the end of commerce is gain, which may be used well or ill.
The bourgeois, by the nature of his calling, tends to view everything as a commodity, something to be bought and sold, rather than for its contribution to human well-being. This becomes a problem when the bourgeoisie ceases to be a class and its spirit imbues a whole culture.
February 21st, 2013 | 6:25 am
Comment of a business leader, from an article circa 2000:
When a policy was under consideration, I once heard the question, “But is this right?”. I now hear only, “… will it work”.
February 21st, 2013 | 8:11 am
A suspicion, not so much of wealth, as of commerce, has very deep roots in Western culture. Echoing Aristotle, St Thomas says that commerce has a certain baseness (turpitudo) about it, because it is not, of itself, directed to any honest or necessary end (although it can be).[ST II-II q 77]
In other words, the end of medicine is healing, the end of agriculture is food production and so on. But the end of commerce is gain, which may be used well or ill.
The bourgeois, by the nature of his calling, tends to view everything as a commodity, something to be bought and sold, rather than for its contribution to human well-being. This becomes a problem when the bourgeoisie ceases to be a class and its spirit imbues a whole culture.
February 21st, 2013 | 11:52 am
“A suspicion, not so much of wealth, as of commerce, has very deep roots in Western culture. ”
Bah, humbug. Most of those who were “suspicious of commerce” were spoiled landholders whose main excuse was their(often dubious), skill at arms which is a profession that by nature has the same objection as commerce as it too can be said to create no useful material. They had all the vices they projected onto merchants, except merchants when they were loan-sharking went for bigger game. It is hard to take seriously the complaints of this class which are mainly from getting what they were dishing out to others.
Merchants risked their lives in travel and lived by their wits, and did NOT just sit around in luxury waiting for wealth to flow into their pockets. And despite what Aristotle said, they do create; by bringing goods and services to where they are most wanted they add value to it.
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