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The Nation's Pulse
Compression at the Mean
It’s become the American way.
From the founding of this nation to the present there has been an understandable tension between equality and individualism. Clearly we, as Americans, want both, assuming they are reasonably defined.
Equality presumes equal before the law, equal or roughly equal opportunity and even equal in the eyes of God. But it does not mean or should not mean equal in the race for success and equal economic results.
Yet curiously the nation is moving from the safety net designed
to assist those in peril to redistribution or the attempt to
equalize economic results, i.e. “spread the wealth around.”
This condition I would describe as a belief in compression at the
mean, a belief that has penetrated almost every aspect of
American life. It is the egalitarian project launched by John
Dewey in the 1920s and embraced by President-elect Barack Obama.
Take education as an example. Almost all recent funding in this arena is designed to assist those in the bottom quartile of performance. Schools that are not performing well receive more funding than schools that meet state guidelines, based on the assumption that additional funding can influence performance. And in some cases, this has proven to be the case. The bottom moves closer to the middle of the pack. Yet totally ignored in this distribution scheme are those in the highest quartile, those who might be described as excellent. The consequence, of course, is decline at the top of the achievement pyramid, some upward movement at the bottom and a bulge in the middle.
Assume a similar set of conditions in the tax structure where those who earn over $250,000 (or is it $150,000?) are taxed at a higher rate than those who earn less. Since rebates will be given to those in the bottom quartile of the income structure paid for by those in the top quartile, it would appear that progressivity in the tax system is designed to promote compression at the mean. No one too rich and no one too poor.
The problem with this arrangement is that if you eviscerate the incentive for wealth, those who have the capacity to attain it will be disincentivized. Why earn more if the government intends to take it away and give it to others?
The same situation is emerging in the financial and industrial areas. By offering to jump start a faltering economy, Secretary of the Treasury Hank Paulson has advocated assisting some financial houses, but not others. The government assisted J.P. Morgan with the purchase of Bear Stearns, but let Lehman Brothers fail. Consideration is being given to a loan for the Big Three automakers, but not to computer manufacturers. Aside from the fact that government officials can play God and determine who stays in business and who doesn’t, these bailouts are predicated on the simple proposition that those companies capable of generating profits and paying taxes will be obliged to assist companies that are failing and need a handout.
The danger is that at some point every company will be asking for assistance. In fact, the egalitarian project will inevitably fail because it destroys the incentive to succeed. By homogenizing economic rewards, government is instituting mediocrity. The society is suggesting that meritorious results should not be sought or valued.
Imagine a situation in which baseball players earning the highest salaries based on performance have to subsidize those who are “.200 hitters.” What would baseball become? Who would bother attending games or even watching on TV?
Yet the movement for compression at the mean continues unabated.
Where it will lead is clear. Unfortunately, its devotees don’t
seem to mind.
About the Author
Herbert London is president emeritus of the Hudson Institute and the author of America’s Secular Challenge: The Rise of a New National Religion (Encounter Books).
Alan Brooks| 12.3.08 @ 9:09AM
Another good piece.
Pretty hopeless though, if you de-incentivize the top and middle, then productivity goes south. Don't push upwards the bottom quartiles then many, very many, become resentful.
If this isn't bad enough, push the bottom up and they become more status conscious.
I say hush this cry of progress 'til a thousand years have past!
Thomas| 12.3.08 @ 11:15AM
The first half of your article accurately describes the historical progression of a communist state. The one point that you missed though was that, not only do the top and bottom move toward the mean, but that the mean, itself, drops to a lower level.
As to government bailouts of private enterprise, if the bailouts become extensive enough, the government will have essential control of the private enterprise. Beginning to sound like Russia and China in the 1980's?
As for "rich" and "poor" in a society, both are relative. The lowest quartile of people living the United States have a far higher standard of living than all but the upper 1% in most third world countries and generally higher than the lower half of the citizens of most second world countries. Unfortunately, as socialist societies throughout history have shown, there are always some pigs who are more equal than others.
mark| 12.3.08 @ 1:25PM
And now some of my money, in the from of a bailout to AIG, is going to a competitor whose own greed and mismanagement got it in trouble.
Frank Natoli| 12.3.08 @ 1:33PM
Can anyone provide a definition of "envy", you know, that which was once known as a cardinal sin, something that "moral leaders" used to preach against, that would not include our present "progressive" income tax structure? I can't. And I observe that almost all our "moral leaders" preach in favor of legislation that more than anything else gratifies the envy in all of us.
As Mr. London notes, the legislation, the tax policies, are likely to fail to accomplish the economic magic they are intended to perform.
But in so noting, Mr. London accepts that the public justification for the tax policies is in fact the fundamental intent. It is not. Its intent is to satisfy envy, buying votes in the process, and in that respect, it is very successful.
Mary| 12.3.08 @ 5:39PM
You're absolutely right about the courting of envy.
Add to that the progression of society from a body trying to gather knowledge, to one trying to manage it, and you have a looming disaster.
Ralph Peters said in one of his pieces that I can't find or I would link, that based upon this evolving info paradigm, the middle class is going to really get thin, and there's not much that can be done about that.
He wrote that those who play by the rules and work hard will survive, if leaner, but that we're headed for return to a state of world-wide instability, marked by more tribal interests and flare-ups.
The United States is certainly balkanized enough to likely be part of this devolution, should Peters prove prescient.
ODR| 12.3.08 @ 7:37PM
Ralph Peters said in one of his pieces that I can't find or I would link, that based upon this evolving info paradigm, the middle class is going to really get thin, and there's not much that can be done about that.
He wrote that those who play by the rules and work hard will survive, if leaner, but that we're headed for return to a state of world-wide instability, marked by more tribal interests and flare-ups.
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The Ralph Peters article you're referring to is "Return of the Tribes."
ODR| 12.3.08 @ 7:38PM
http://www.weeklystandard.com/Content/Public/Articles/000/000/012/616fcajg.asp
ODR| 12.3.08 @ 7:41PM
"The Tribes are Back"
http://www.commongroundcommonsense.org/forums/lofiversion/index.php/t55282.html
Mary| 12.3.08 @ 8:54PM
I can see why you thought the piece I was referencing was his Tribes piece, but your link was what provided the opportunity for me to read it for the first time.
Here's an excerpt from the piece I had in mind, which was titled Constant Conflict:
***For the world masses, devastated by information they cannot manage or effectively interpret, life is "nasty, brutish . . . and short-circuited." The general pace of change is overwhelming, and information is both the motor and signifier of change. Those humans, in every country and region, who cannot understand the new world, or who cannot profit from its uncertainties, or who cannot reconcile themselves to its dynamics, will become the violent enemies of their inadequate governments, of their more fortunate neighbors, and ultimately of the United States. We are entering a new American century, in which we will become still wealthier, culturally more lethal, and increasingly powerful. We will excite hatreds without precedent.
We live in an age of multiple truths. He who warns of the "clash of civilizations" is incontestably right; simultaneously, we shall see higher levels of constructive trafficking between civilizations than ever before. The future is bright--and it is also very dark. More men and women will enjoy health and prosperity than ever before, yet more will live in poverty or tumult, if only because of the ferocity of demographics. There will be more democracy--that deft liberal form of imperialism--and greater popular refusal of democracy. One of the defining bifurcations of the future will be the conflict between information masters and information victims.
In the past, information empowerment was largely a matter of insider and outsider, as elementary as the division of society into the literate and illiterate. While superior information--often embodied in military technology--killed throughout history, its effects tended to be politically decisive but not personally intrusive (once the raping and pillaging were done). Technology was more apt to batter down the city gates than to change the nature of the city. The rise of the modern West broke the pattern. Whether speaking of the dispossessions and dislocations caused in Europe through the introduction of machine-driven production or elsewhere by the great age of European imperialism, an explosion of disorienting information intruded ever further into Braudel's "structures of everyday life." Historically, ignorance was bliss. Today, ignorance is no longer possible, only error.
The contemporary expansion of available information is immeasurable, uncontainable, and destructive to individuals and entire cultures unable to master it. The radical fundamentalists--the bomber in Jerusalem or Oklahoma City, the moral terrorist on the right or the dictatorial multiculturalist on the left--are all brothers and sisters, all threatened by change, terrified of the future, and alienated by information they cannot reconcile with their lives or ambitions. They ache to return to a golden age that never existed, or to create a paradise of their own restrictive design. They no longer understand the world, and their fear is volatile.
Information destroys traditional jobs and traditional cultures; it seduces, betrays, yet remains invulnerable. How can you counterattack the information others have turned upon you? There is no effective option other than competitive performance. For those individuals and cultures that cannot join or compete with our information empire, there is only inevitable failure (of note, the internet is to the techno-capable disaffected what the United Nations is to marginal states: it offers the illusion of empowerment and community). The attempt of the Iranian mullahs to secede from modernity has failed, although a turbaned corpse still stumbles about the neighborhood. Information, from the internet to rock videos, will not be contained, and fundamentalism cannot control its children. Our victims volunteer.***
The rest can be found here:
http://tinyurl.com/5m9g3x
From my observation, what he writes in this piece is true.
Marc Jeric| 12.3.08 @ 10:10PM
Unions have been very successful in destroying a number of industries - steel, automobile, textile, electronics, shoes, and many others. Teacher union has destroyed education; unfortunately education cannot be outsourced; the two generations of illiterate nincompoops have given us the Clintons and now Abu Hussein from Kenya. The third generation of self-esteemed cretins is already on the way.
ruth| 12.3.08 @ 11:00PM
Scary and depressing. Great combo.