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Saturday, September 17, 2016

The Downside of Upward Mobility

Branko Milanovic:

The downside of upward mobility: ...If we ... really wanted to support upward mobility or give equal chances to all there are many political measures we could enact. ...Ganesh shows how totally politically unfeasible they are: confiscatory inheritance taxes, smaller class sizes in poorer neighborhood funded from the taxes from the rich, end of tax-exempt status for the richest universities, moral suasion that rich universities annually transfer 1% of their wealth to poorer state schools, criminalization of nepotism etc. None of these proposals will have the remotest chance of being accepted by those who currently wield political and economic power. ...

If upward mobility is about the relative positions in a society, then upward mobility for some implies downward mobility for the others. But if those currently at the top have a stronghold on the top places in society, there will no upward mobility however much we clamor for it. This positional (or relative) approach to mobility is a fairly accurate description of reality in societies that are growing slowly. In societies that develop quickly even if a lot of mobility is about positional advantages (and they are by definition fixed) it can be compensated by creating enough new social layers, new jobs and by making people richer. Thus the upwardly mobile have some room to move up which does not require an equal number of people to move down.

In more stagnant societies, mobility becomes a zero-sum game. To effect real social mobility in such societies, you need revolutions that, while equalizing chances or rather improving dramatically the chances of those on the bottom, do so at the cost of those on the top. In addition, they destroy many other things including lives, not only of those on the top but also of those on the bottom. ...

It is then not surprising that, short of such massive upheavals that shake the societies to their very core, countries tend to display relatively little positional mobility. ...

I think that we are led to a very somber conclusion here. In societies with slow growth, upward mobility is limited by the lack of opportunities and the solid grip that those who are on the top keep over the chances of their children to remain on the top. It is either self-delusion or hypocrisy to believe that societies with such unevenness of chances will come close to resembling “meritocracies”. But it is also the case that true upward mobility comes with an enormous price tag of lives lost and wealth destroyed.

    Posted by on Saturday, September 17, 2016 at 10:59 AM in Economics, Income Distribution | Permalink  Comments (26)


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