The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [69]
Although the pattern characterizes most of the developed world, the United States displays the extreme. It is worth emphasizing for American readers that although many European cities have poor neighbourhoods that could certainly be described as ghettos, nowhere in the rest of the developed world is there the kind of poverty and deprivation we glimpse when we travel to the United States. The shocking realization in my case came on a Metroliner train ride from Washington, DC, to New York, seeing communities next to the tracks that rivaled the visible poverty I had previously only seen in developing countries. Even to someone coming from the relatively unequal United Kingdom, the chasms in American society are shocking.
One consequence of this growing social chasm is that there is also a divergence in the kind of behavior that is socially acceptable as well. This too marks a return to the early twentieth century. It used to be a staple of British comedy to make fun of the fact that poor people used different words for meals or items of furniture, or ate at different times—that they had different norms of behavior. Class distinctions in behavior have returned—many well-off people on both sides of the Atlantic make fun of the dress and speech of poor people. There has been a return to a social division between the language based on received grammar and pronunciation of polite society and street language for everyday.
The last chapter described the evidence that people have an innate fairness instinct and take decisions on the basis of “moral sentiments.” The next chapter makes the case that social capital, or trust, plays a vital role in the long-term sustainability of any society. Too great a degree of inequality not only adversely affects the well-being of society’s losers, it also corrodes the social scaffolding on which a prosperous economy must be built. This is a long-term result, not an overnight disaster. It is a question of sustainability exactly because it brings into question our ability to bequeath a healthy society to later generations.
This point is made clearly, I think, in microcosm in many businesses. It is clearest in banking, with astounding bonuses paid to individuals for short-term results measured without any attribution made for the efforts of colleagues. Any business’s profitability depends on the efforts of many people, even though some individuals will be better or work harder than others. Indeed, there’s recent evidence from the financial world that the supposed stars are paid more than their due: it finds that when top-rated analysts move to a new job, their performance deteriorates sharply. Their performance, it turns out, depends on their firm and not their unique individual talents. People who work for better teams deliver a better performance. Author Boris Groysberg concludes: “Outstanding performance owes a good deal to the quality and culture of the firm.”59 Of course the most talented or those with the most onerous responsibilities need to be paid more than most of their colleagues. But to pay them tens or even hundreds of times more is to destroy any sense of responsibility for results among those at the bottom of the pile. Let the people with multimillion salaries worry about how things turn out, the underlings will think.
The habit of excessive salaries and bonuses has been a contagion. It spread from investment banks throughout the corporate sector in the United States and (in paler imitation, the United Kingdom, Australia, even formerly egalitarian Sweden). It spread to the public sector