Everybody has a story.
In general, but especially when it comes to explaining their own financial success and economic well being. For our purposes here, I’ll be speaking in the context of developed markets, by the way.
In democratic nations fortunate enough to boast of advanced economies operating on some version of capitalism, the prosperous demonstrate an almost unshakable belief in the meritocratic origins of their success. That penchant for ascribing good fortune to merit is understandable. Ascribing it to anything else is to admit that luck, happenstance, coercion, cheating or something else not readily amenable to the stories we tell about ourselves played a role. That’s an uncomfortable admission.
Uncomfortable though it may be, it’s obvious that meritocratic narratives are almost wholly false. At a very basic level, being born a human in a developed economy in a period during which people enjoy access to unprecedented creature comforts and medical technology is akin to having won the lottery many times over. I mention this occasionally as I think it’s good for folks to keep perspective. Rerun history a million times and the chances of you being born a human into a rich nation in the 20th or 21st centuries are infinitesimal. Indeed, rerun history a million times from the beginning and the chances of you being born at all are infinitesimal.
In that sense, it’s all luck. If you’re reading this from an internet-connected device in a rich country, you are, in many respects, one of the luckiest creatures to ever inhabit the planet, although crucially, that doesn’t mean you’re one of the happiest.
Most educated, prosperous people won’t dispute any of that, but oddly enough, they’ll dispute the notion that they don’t “deserve” what they have (in terms of wealth and material possessions) compared to someone else born lately into a rich nation. People invariably feel sorry for refugees in Syria, for example, and most rational people understand that it was a matter of pure chance that their child ended up born a member of America’s upper-middle class versus one of the voiceless children currently caught in the crossfire of Yemen’s civil war.
Somewhere along the way, though, the logic breaks down when it comes to empathizing with one’s own countrymen and women in developed economies. America’s prosperous are far more likely to think “My God, that could have been my child” when they happen on a TV commercial for a charity committed to saving child refugees, than they are to hear about another day of gun violence in Chicago and think “You know, in a parallel universe, I’m that single mother whose teenager was killed in a gang-related shooting.”
In America, the tendency to tell ourselves and others meritocratic stories is especially acute and it’s a natural byproduct of capitalism. It also serves as a catch-all justification for an aversion to higher taxes on the wealthy. “I deserve what I have because I worked for it” may be an entirely accurate way to describe where you ended up (and by extension, where your children get to start out), but you almost surely wouldn’t have ended up there had your initial circumstances been materially more challenging.
There are, of course, exceptions. If you spend a few hours on Google, you can find what seem like countless success stories documenting, for instance, refugees from war-torn nations or immigrants hailing from abject poverty who, through sheer force of will, cleared unimaginably high hurdles to become prosperous members of society in advanced economies.
But while those stories may appear countless if you’re searching for them on the internet, they pale in comparison to the number of untold stories where being born into poverty, war and generalized despair led to precisely the life outcomes you’d expect: More violence, lifelong economic precarity and perpetual suffering.
In my view, it’s absolutely crucial that prosperous people in developed economies come to terms with the reality described above so that you can cut through the propaganda around proposals like Joe Biden’s tax plan which, honestly, isn’t even very onerous.
Have a look at the figure (below). As Goldman wrote a few days ago, “top individual tax rates on ordinary income are relatively low in the US, at least for households in low-tax states, and even full implementation of the Biden program would only close the gap partly.”
“The 43.7% average combined federal, state, and local US top marginal income tax rate is toward the lower end of the international range, and would remain somewhat below the median even if the federal rate increases from 37% to 39.6%,” the bank went on to say.
The visual also shows that under the Biden proposal, the capital gains rate would be near the top-end of the international range, but the bank expects a more modest increase once everyone in Congress (where “everyone” basically just means Joe Manchin in today’s silly Beltway conjuncture) has had their say.
The narrow takeaway is just that there’s nothing particularly “radical” about Biden’s agenda, even as some argue it’s shifted further left since he was elected.
But the far more important takeaway is that, at a very basic level, it’s all luck. The meritocratic stories we tell ourselves are fictions, unless you want to couch them in Darwinian terms (e.g., “I deserve what I have because evolution worked hard to make me strong and smart”). I wouldn’t recommend evolutionary humanism as an excuse when it comes to explaining why you “deserve” your wealth. You might unwittingly find yourself the subject of some rather unflattering ideological comparisons.
Paradoxically, accepting that it’s all (or mostly) luck leaves you far freer to enjoy it than if you’re constantly struggling to spin a spurious meritocratic narrative to yourself in the mirror. If there is such a thing as a “sin,” surely it’s being handed a winning biological/demographic lottery ticket and taking it for granted.