The Weird Meritocracy of Liberal Capitalism

It is all too easy for anyone interested in social sciences or ethics to adopt an over-simplilfied and univocal idea of justice, and its concomitant rights, duties, merits, and deserts. As Aristotle notes in the Nicomachean Ethics, ideas of merit are largely dependent upon the types of social structures that people inhabit, or roles which they occupy: “Democrats say it is freedom; oligarchs, wealth; others, good birth; aristocrats, virtue.” (5.3) Aristotle does not appear to be ruling out any one of these conceptions of merit; rather, he is cautioning against reducing justice to any one of them — or exalting any one of them to fill the whole notion of justice.

A healthy society incorporates into its structures and institutions an ideal of justice which accommodates all possible senses of merit, or as many as possible. An unhealthy society, naturally, builds its social structures around a limited and univocal sense of justice. Were Aristotle alive today, he would undoubtedly identify in the social structures of liberal capitalism the spirit, not of democracy, but of oligarchy, where wealth is the principal measure of merit. The virtuous in liberal America, those whom American society sets up as models to be emulated, are none other than the successful, the wealthy, those who make a profit for themselves by a lifetime of making clever investments. In fact, wealth itself, or profit, is the proper reward only of the investors, those who master the art of managing money. Those who have not mastered this art are entitled to little more than the scraps that fall from the rich man’s table in the form of wages.

Without denying that some form of reward may indeed to go to investors and the managers of money, we ought to consider the possibility that a society that is built solely upon this idea of merit has constricted itself to an arbitrarily narrow conception of justice. Though at first sight they appear to be soldiers of pristine rationality, when they defend the thesis that the capitalist investor deserves the sole reward for his investments, market fundamentalists are in fact defending a narrow and arbitrary concept of justice, which is no more than a contingent product of a very specific set of social conditions. It is by no means a universal or absolute rule.

This can be gleaned by simple observation of the fact that innovation and production, for which the capitalist tends to claim sole responsibility, are in reality the outcome of highly collective and collaborative input from a variety of agencies, both personal and institutional. Not only the most obvious instance of workers, but also institutions such as the state, local communities, and civil society at large, contribute a highly significant input to the productive and innovative process that occurs within individual firms. The ideology which seeks to justify the capitalist mode of production wrongly insists that capital investment is the primary contribution to the process. Such a conviction is only the outcome of a social structure which rewards only capital, and not the other agents who collaborate in production and innovation, in the first place. As Aristotle said, only in an oligarchy would anybody think that wealth is the principle of merit. In reality, it is but one among many sources of merit. Just reward is — or ought to be — accorded to all of the actors who contribute, both individually and collectively, to a given activity; and not all of those actors act on the basis of wealth, as the capitalist does.

The meritocracy of capitalism is a strange one, since its only conception of merit is based on who invests the greatest financial capital in a risky enterprise. Capitalist meritocracy assumes that the capitalist is the only significant stakeholder in a productive enterprise, and that his investment is the only type of investment worthy of the rewards generated by that enterprise. Not only is this view morally abhorrent, it is also simply untrue to the facts of every example of productive enterprise. No capitalist can rely solely on himself to make his enterprise successful, but his success depends enormously upon the collective effort invested by a host of diversified agents. Empirically, it is demonstrable that precisely in the degree that production and innovation are embarked upon as such a collective effort, productive enterprise is correspondingly successful. And in the degree that an enterprise is embarked upon with little social cohesion and organization among the various agents involved, the enterprise actually suffers. This has been shown empirically in many studies by both sociologists and economists. The economist William Lazonick has several times referred to the example of Japanese integrative industry in the latter part of the 20th century, particularly in technology and automobile manufacturing, which even out-competed the U.S. in global markets due to greater integration of the workforce and the government into the productive process. Even when labor unions in the U.S. were strong, workers in Japan were significantly more integrated into the productive process of their manufacturing firms than U.S. workers have ever been. In other words, productive or innovative enterprise occurs best when investments are made, not merely in capital, but also in labor, the education of labor, research, and all of the sources that contribute to the process. Only a meritocracy that is not exclusively capitalist actually works to make innovative enterprise really flourish.

From a philosophical-sociological point of view, this point is reinforced yet further. Alasdair MacIntyre, an Aristotelian moral thinker, has referred to the same example of Japanese industry in one of his books on moral theory (Ethics in the Conflicts of Modernity), to illustrate what kinds of social organization contribute to an invigorated consciousness of social cohesion and participation in shared goals, in contrast to the individualistic lack of cohesion that characterizes capitalist society. From every angle — political, economic, sociological, empirical, ethical — it appears that the capitalistic sense of a wealth-meritocracy is simply unsustainable.

The ideology of capitalism is so pervasive that capitalists have even begun to reward themselves, through instruments such as stock buybacks, without even making any further investments in productive activity itself. Several studies have come out in the last few decades, many of them produced by Lazonick (and repeated by politicians such as Marco Rubio), which show that production in the U.S. has not only stagnated but actually declined somewhat, while capitalists continue to reward themselves with greater and greater profit. The absurdity of the capitalist meritocratic system becomes painfully evident when one realizes that capitalists are rewarding themselves no longer for anything actually productive or innovative, but precisely for their skill and ability to reward themselves. Their business is no longer the production of adequate use-values for society, but simply money. The Marxist scholar David Harvey has remarked that even technically “productive” firms (such as airlines, notably) now make more profit by dabbling in finance and financial manipulations than they do by actually flying people anywhere. There is no meritocracy, no system of reward, no conception of justice, that is more absurd than this.

Genuine social and economic reform cannot proceed without reconsidering, and re-educating the public upon, the multi-faceted nature of the virtue of justice, and the corresponding conception of merit. Merit is not univocal; there is not only one kind of activity that deserves reward from society. Such a univocalist conception of merit would inevitably reward only a part of society with a monopoly on the means and power necessary to participate in the benefits offered by society (i.e. by way of the market). But if it is recognized that not only the capitalist, but everybody — workers, workers’ families, educators, the state — involved in the productive process has a genuine and meritorious contribution and therefore deserves a proportionate reward, this will not only contribute to greater social and political cohesion and solidarity, but will also have the added benefit of increasing innovative production itself, creating adequate use-values for society. Every individual involved in the economy invests not only in what is in his own interest, but in the good of society at large, to which many others also contribute: the common good. Justice will acknowledge the contributions of them all.

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