We worry about rule-breaking by the underclass, not the upper class

Summary: The daily press gives us lurid tales of the underclass breaking social norms, but seldom does so about the more serious lost professionalism that helps the upper class. Before we tinker with American society to reverse our rising inequality, we should understand the processes that created this problem. I believe we not only don’t understand the causes, we don’t even clearly see the deep changes in American society during the past few decades — during the Boomers’ years. This is another post about our poor vision of America.  {1st of 2 posts today.}

Content

1. Breaking social norms.
2. Loss of professionalism.
3. Rise of self-interest in other occupations.
4. Conclusions.
5. For More Information.

(1)  Breaking social norms

We talk a lot about underclass break society’s behavioral norms. In his 1986 book Beyond Entitlement Lawrence Mead (Prof Pol Sci, NY U) taught us to fear their increasingly “dysfunctional” behavior: criminality, drug use, promiscuity, out-of-wedlock births, excessive rates of divorce, etc. Sadly we seldom notice the breaking of norms occurring just as strongly in the upper classes — with greater effect on our social cohesion and level of inequality.

(2)  Loss of professionalism. Broken professions.

Like the word “gentleman”, the meaning of “professional” has eroded away to a bland sense of well-behaved. Managing conflicts of interests was a major factor distinguishing professionals from other trained people. For example, doctors, accountants, and attorneys balanced their clients’ interests vs. theirs as business people vs. those of society. Attorneys were expected to act as “officers of the court”. In an epidemic doctors were expected to place the public’s health above that of the patient’s and their own. Accountants were to maintain the integrity of the financial reporting system that guides the money flows of our society.

These standards were often honored in the breach — America was never Heaven — but during my lifetime they have collapsed. What’s happened in medicine and law clearly shows the problem and the result.

In the early 1980’s doctors realized they the controlled America’s health care checkbook, and could leap from affluent to wealth by “optimizing” their practice: bringing in-house diagnostic and out-patient services and then over-utilizing them, taking de facto bribes from drug and medical device companies, and in a hundred other ways. Conferences and articles gave step-by-step instructions, and their incomes rose — varying widely by specialty, skyrocketing for the most aggressive doctors (see this paper, and a later one).

Only slowly did the pushback arrive, the current push to disenfranchise them — turning decision-making over to the HMO’s, enmeshing doctors in paperwork, authorizing less-trained technicians to do aspects of their work, and eventually automating much of their work.

The story of law is too well-known to need telling. Their incomes zoomed as they “optimized” their practices, with the richest law firms becoming money machines. In 1983 the Federal Reserve of San Francisco moved out of their palatial offices (built in 1924) to larger and more modest quarters — replaced by the venerable law firm of Orrick, Herrington, & Sutcliffe (who else could afford it?). But attorney’s greed forced their clients to adapt in ways that undercut the profession’s independence and prosperity. Retrenchments and bankruptcies followed; now even law schools (long-time cash cows for universities) are experiencing hard times.

(3)  Rise of self-interest in other occupations

This collapse of social norms affected more than the professions. Far more serious was the discovery by CEO’s that they could take control of their own compensation and divert a large fraction of their companies’ incomes into their pockets. A pioneer of this was Ross Johnson of RJ Nabisco, whose story was told in the gripping Barbarians at the Gate: The Fall of RJR Nabisco.

Increasing pay of senior executives’ at large firms is the largest single driver of inequality, but other — more visible — forms of inequality can have large effects although lost in the aggregate national numbers. For example, senior leaders in the military made a similar discovery to that of CEOs, with similar results. Four-star generals now have the lifestyle of kings and plutocrats, as described in this Washington Post article — often doing even better after retirement.The effect on the operations of the military have been horrific, and probably even worse on its morale.

These behaviors have spread though our upper classes, increasing inequality, fueling cynicism and mistrust, and damaging the social cohesion that was for so long one of our greatest strengths.

(4)  Conclusions

America has changed — and continues to do so — due to deep social processes that we don’t yet understand. Reforming America is problematic until we do so. We cannot fix what we don’t understand.

Unfortunately, we remain stuck in the first phase: problem recognition. Until two years ago conservatives refused to admit that America had low social mobility (in fact, they boasted about our mobility) and rising income inequality. The causes of these trends remain controversial, with the Right blaming the victim — often with crude class and racial explanations (in effect, “we’re better, and more deserving”).

I do not believe a consensus can form on the needed large-scale reforms until much changes. Analysis of what has happened to us is, in my opinion, the best place to start. Perhaps then we’ll gain insights about how to fix America, or even make it better.

For More Information

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1. Students, cheerleaders, & lawyers all exploited as they scramble for the few opportunities in New America.
2. More symptoms of decay: professional associations abandoning their standards and obligation to protect us.