Labor vs. Capital: Continuing the Meritocracy Trap Debate

This post, an exchange between Andrew Hart, Marshall Steinbaum, and Daniel Markovits, continues their debate from our March 2020 series discussing The Meritocracy Trap by Daniel Markovits. Click here to read all posts in the series. 

Andrew Hart & Marshall Steinbaum: It seems to us that the issue is not whether one places income in buckets labeled “capital” or “labor,” but rather what those particular buckets signify when it comes to extremely wealthy people. We might all agree to call the $50 million that a healthcare CEO gets for working 80-hour weeks “labor” income, but the fact that the firm or the “economy” has seen fit to allocate $50 million as a proper compensation for a healthcare CEO does not, as far as we can tell, have much to do with the productive value of 4,200 hours of healthcare CEO work over the course of a year. To justify this income by reference to skill is a just-so story—part of the inequality regime of “hyper-capitalism,” as delineated in Thomas Piketty’s recent book Capital and Ideology.

But Markovits seems to accept at least some of the human capital justification for high salaries when he speaks of superordinate workers and their immense skills and training. Put another way, we think Markovits believes the operative question is whether a person needs to work 80-hour weeks to get the $50 million as a healthcare CEO, and if the answer is yes, then the money is labor income. By contrast, we believe that the question should be why a healthcare CEO is “worth” $50 million in the first place, and that the answer to that question may at least cast some doubt on the usefulness of the category “labor income” when a person’s yearly income is high enough.

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Are the Rich Rentiers or Superordinate Workers?

This is the third post in our series discussing The Meritocracy Trap by Daniel Markovits. Click here to read all posts in the series. 

Daniel Markovits –

I am grateful to the LPE Blog for hosting this exchange about The Meritocracy Trap. Today’s post will take up Hart’s and Steinbaum’s post and focus on facts, and tomorrow’s will turn to Gordon’s post and take up values.

Hart and Steinbaum claim that The Meritocracy Trap fails to recognize deep “differences between rich professionals and the ultra-wealthy capitalist class.” They also propose that the book exaggerates meritocratic inequality’s economic rationality, that “[i]t is not the meritocrats’ skills that bring in their high salaries.” In short, Hart and Steinbaum propose that the rich are not superordinate workers paid on account of their enormous productivity but rather are rentiers who exploit their capital to extract rents.

Hart and Steinbaum suggest that The Meritocracy Trap overemphasizes the rising labor incomes of the merely very rich and underemphasizes the exploding capital incomes of the super-rich. But in fact, although the past half-century has seen a shift of income against labor and in favor of capital, this shift is much too small to account for rising top income shares. Instead, rising economic inequality is principally caused by a shift of income within labor’s share, away from middle-class and towards superordinate workers.

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Guiding Innovation’s Hand: Industrial Policy Against Inequality

This is the second post in our series discussing The Meritocracy Trap by Daniel Markovits. Click here to read all posts in the series. 

Jeff Gordon – 

Most of the critical attention directed at Daniel Markovits’s The Meritocracy Trap has focused on its claim that well-off parents launder inequality through schooling. While Markovits brings masterfully comprehensive reams of data to bear on the concept of the “meritocratic inheritance,” the most original and provocative part of the book comes later, when Markovits offers his explanation of why educational sorting has come to matter so much: elite schooling leads to top jobs, and “[t]he top jobs pay so well because a raft of new technologies has fundamentally transformed work to make exceptional skills enormously more productive than they were at mid-century and ordinary skills relatively less productive.” This is provocative because it contradicts the pervasive myth that technological change is natural, self-directing, or inevitable. Few reviewers have remarked on this part of the book or reflected on what it suggests: that industrial policy will be vital to building a more equal economy.

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Liberate the Meritocrats—From Their Bosses

This week, we share two posts discussing The Meritocracy Trap by Professor Daniel Markovits. In his 2019 book, Professor Markovits argues that meritocracy is a straightforward mechanism of class reproduction and wealth concentration—and that it is making life worse for everyone, elites included. The Meritocracy Trap has generated productive conversations about the causes and implications of wealth inequality, and what this means about potential movements to upend the present hierarchy. Because the book centers the gap between elite and nonelite labor as today’s most salient class division, critics have been quick to push back. In particular, some have challenged the book’s downplaying of the role of capital in its class analysis, as well as its optimism about elite cooperation in any project aiming for economic justice. While these are crucial parts of the debate around the book, we want to avoid rehearsing those arguments here.

By examining the social and political valences of a seemingly neutral quantitative system, The Meritocracy Trap touches on several questions at the core of law and political economy. Today on the blog, Marshall Steinbaum and Andrew Hart argue that Professor Markovits omits capitalists from the story in part by relying too heavily on the flawed theory of human capital. Tomorrow, Jeff Gordon turns our attention to the book’s argument that industrial policy contributed to the technological innovations that over-reward elite workers at the expense of the poor and working class, and that industrial policy will be essential to build a fairer economy.

This is the first post in our series discussing The Meritocracy Trap by Daniel Markovits. Click here to read all posts in the series. 

Andrew Hart and Marshall Steinbaum

There’s a big difference between the first Gilded Age and the second. Historically, rich people earned income from their capital and everyone else earned income from their labor, under the direction and control of the capitalists. This time around, the rich don’t just own capital; they also work. Daniel Markovits’s book The Meritocracy Trap is about just how hard they work, and what it says about them.

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Reclaiming the Right to Future Tense

Scott Skinner-Thompson –

By now, many of the societal, political, and distributive harms caused by large technology companies and so-called “social” media companies (Amazon, Facebook, Google, etc.) have been surfaced.  They invade our privacy, decrease market competition, erode our sense of self and, despite their euphemistic label, our sense of community.  Shoshana Zuboff’s new book—The Age of Surveillance Capitalism—intervenes to weave together the seemingly balkanized practices of large, monopolistic data-harvesting companies, painting a more comprehensive picture of their decidedly anti-social strategies.  At the same time, she situates their tactics in comparative, historical context as a distinctively new market logic.  Zuboff labels the emerging economic regime created by these tech companies “surveillance capitalism” in order to capture the transformative shift they represent in how our society is being organized—organized by surveillance capitalist corporations, not by the people.  Put simply, surveillance capitalism is an economic ideology that deploys divergent technologies as a means of cultivating and monetizing our identities. 

As Zuboff underscores, surveillance capitalists treat the information generated by our online activity and our situated, physical activity (collected through the Internet of Things) as raw material available for extraction—a pool of resources that Julie Cohen has theorized and critiqued as the “biopolitical public domain.”  But even more troubling, once scythed and privatized by the surveillance capitalists, our information is sifted to predict and shape our future behavior.  The shaping of our behavior by surveillance capitalists threatens individual autonomy, yes, but also popular sovereignty and democracy itself.  This may sound hyperbolic, but Zuboff methodically explains how surveillance capitalism is undermining core democratic values and why the stakes are so high. 

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Law as the Code of Inequality and Wealth

Samuel Moyn –

pistor coverKatharina Pistor’s new book, The Code of Capital: How the Law Creates Wealth and Inequality, deserves to be the essential text of any movement today that concerns itself with law and political economy. It establishes, as its central topic, how fundamental law is to political economy, in the tradition of classical social theory but with a considerable update in light of contemporary affairs. And, more fully than anything else I know, it vindicates the LPE intuition that legal intellectuals have something essential to bring to the current and ongoing debate about markets and injustice.

This is not because Pistor has detailed prescriptions for an emerging movement for reform of this or that area of law, but rather because she offers such a breakthrough set of theoretically-inflected descriptions of how law serves “capital,” and so often fulfills the interests of the rich rather than the rest. It has always done so, of course, but the current moment of extreme inequality requires a considerable effort to collect and synthesize the workings of law that prior generations already detailed. It also demands careful descriptions of the new forms of legal protection on a global scale that recent generations have failed to offer in one place and as part of a general account. Pistor even claims to offer a novel definition of “capitalism” that makes law central, insofar as law not only has a role to play in the creation of property, but also ensures its durability and convertibility.

To exist at all, and to be insulated and multiplied and transformed, wealth requires law and therefore state power to create it and protect it. Even land, the ur-form of wealth, is valueless except to the extent that law “coded” it, Pistor says, and the same is even more true of successor forms of mobile property down to the fancy inventions of contemporary finance that have successful allocated so much of what there is to own at the top of many societies. But creation is not the end of it. For Pistor, the additional key to understanding how law performs a constant and definitional function in the life of capital lays in tracing the ways that law secures capital’s endurance and allows for its transformation into new asset forms.

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