Fed Chairman Ben Bernanke's recent speech to new Princeton University graduates has attracted a lot of attention, thanks to a fairly good sense of humour – for a central banker – and not least because of his questioning of meritocracy. In front of these elite students, many of whom convinced that they fully deserved their seat that day and the best positions in society the day after, he stated that “meritocracy is a system in which the people who are the luckiest […] reap the largest rewards”. For this reason, he continued, “the only way for even a putative meritocracy […] to be considered fair is if those [...] also have the greatest responsibility to work hard, to contribute to the betterment of the world, and to share their luck with others”.
In a country where social inequality, being higher than in other states with a similar level of development, has usually been justified by meritocracy, it is easy to understand that such comments can throw a stone in the garden of the American Dream. Ben Bernanke's argument could indeed be interpreted e.g. as a case for more progressive taxation, a reform that even some billionaires, like Warren Buffet, have been supporting for the sake of “fairness” and “shared sacrifice”.
The peculiarities of the American context may explain why the notion of meritocracy has immediately been associated with “rewards”, but this is a misuse of language. Meritocracy, as the second part of the word suggests – it is the same “kratos” as in “democracy” or “aristocracy” –, is about power, not income distribution. In such a system, the legitimacy of political rulers derives from their merit and competences, not from birth or wealth, and these criteria are to ensure that power is used in the most efficient way for the common good. Therefore, because the selection process is mainly outcome-driven, it is not abnormal that some of “the luckiest” secure positions after a harsh competition. Only if they occupied them all would the system raise doubts about its “fairness”.
This has however very little to do with “rewards” since power, in contrast to earned money for instance, is not freely disposed of by its holder but rather an instrument given for a certain period of time by a community to achieve certain goals. When it comes to money, we actually already live in a society where “the luckiest reap the largest rewards”, even if there is no valid justification behind it – and definitively not meritocracy.
From this perspective, Ben Bernanke's address is not an attack on meritocracy nor a defence of fairness, but an attempt to make continuously rising social inequality in the United States more acceptable for the population with a somehow classical argument that those who own more should adequately “contribute to the betterment of the world”. In other words, the rich are expected to be philanthropic in order to provide ex post moral grounds for their favoured situation. The same philosophy inspired the famous “robber barons” like Andrew Carnegie or John Rockefeller... one century ago.
Its corollary is that the government has no role to play in trying to challenge the fact that “the luckiest reap the largest rewards”, for example through salary caps or increased taxation and income redistribution. During the last thirty years when such a policy has been followed, state abstentionism has not only failed, despite considerable economic growth, to be replaced by private philanthropy to pull people out of poverty – it has been the exact opposite – but in the end, it has even drawn the American economy and the rest of the world into the most severe crisis since 1929.
Later in his speech, Ben Bernanke added that politicians' and policymakers' “bad or indifferent results” more often came from their lack of “effectiveness” than from “base motives and bad intentions”. It is true that were they to be judged, as they should in a well functioning meritocracy, on their ability to solve people's basic problems like the economic slowdown, many of them would already have been dismissed. If economics really is, as Mr. Bernanke says, “a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong”, he might have done well to inquire about the status of his leave from the university.