How meritocratic is the United States

Editorial: More meritocracy

The topic was looked for in vain on the agenda of the World Economic Forum in Davos, which ended yesterday. But there was hardly a political or economic discussion group in which the terms "equality" or "justice" were not used at some point. Regardless of whether it was about crisis prevention or terror: the conversation almost always turned to the growing inequality in many countries, which endangers free-market democracies and triggers crises.

The old Davos paradigm no longer applies. In the past, people were certain that the economy only had to grow, and then everything would be fine. A flood lifts all boats. But that no longer applies. The income gaps between rich and poor in most economies are too great for societies to tolerate this level of inequality. In all major economies from the United States to China to Germany, the Gini coefficient, which measures the extent of inequality, has increased since the mid-1980s. One of the few exceptions is Brazil, which was one of the most unequal societies in the world.

What sounds abstract is visible to everyone in many places. 40 percent youth unemployment in Spain, 26 percent in the United States, these are catastrophic developments that make the German integration problem seem almost small. But even in this country there are millions of people who do not seem to be able to integrate into the labor market, while companies are looking for skilled workers and salaries for board members and managing directors have been rising sharply for years. An untenable state of affairs: a modern society cannot afford to have its members working en masse not at all or working below their potential, while the elite threatens to decouple.

But what to do The basic problem is that in German society in particular there is a strange understanding of what is equal and fair. The two terms are mostly used as synonyms. Accordingly, what makes the same is fair. We are very close to the French, who have internalized the term "egalité" since the 1789 revolution. But this understanding leads a society on the wrong track. The importance of performance incentives is underestimated, as are the many positive effects that high performers have on the rest of society. If you don't want to see that, you should ask yourself how the German auto industry would be if there weren't more and more rich people around the world. And how can you get people to invest a lot of time and money in education if they are not appropriately rewarded for it?

More state-organized redistribution from the wealthy to the poor cannot be the solution in most developed economies - especially not in Germany. Experience since the end of the war has made it clear that an excessive social system creates false incentives and encourages abuse. Whoever takes more from the service providers in order to distribute the money without consideration, reduces the incentive for advancement. No national economy can afford that anymore. The global competition for bright minds and innovations is too tough. How absurd the incentives are is now becoming particularly clear in the euro zone, where redistribution is supposed to be institutionalized even between states.

The alternative to the conventional social system is a meritocratic understanding of state benefits. Accordingly, they should not ensure more equality, but rather more justice. The goal must always be to make society more permeable, i.e. to facilitate advancement. The lowest common denominator of such a policy, which applies to all national economies, is a modern education system that begins early in kindergarten. Here, too, the principle of equality should not apply. Rather, it is important to encourage people to do what they are particularly good at and what they are enthusiastic about. This is exactly where the German school system fails blatantly - especially when compared to British elite schools.

However, the same recipes are far from being correct for all societies. It depends very much on the level of development on the one hand and the current orientation of the economy on the other. Sometimes a targeted infrastructure policy should be a priority to enable local people to develop their potential. A good example of this is China: Migration to the coastal regions there is progressing at a pace that the state would do well to encourage people to stay in their homeland by building roads, schools, telecommunications and hospitals. The same was once true for East Germany. On the other hand, it can also make sense to promote mobility so that people go where there is work.

In countries with a strong financial sector but a weak industrial base, economic policies should aim to stimulate new industries in order to reduce reliance on banks. In many metropolises there is hardly any middle ground between high-paid managers and poorly paid employees in the service sector. Germany, on the other hand, would do well to make it easier for social assistance recipients to enter the labor market. The problem has long been recognized, only the concepts are not creative. Why do we always see our health system as a cost and not primarily a growth factor? And that also for unskilled workers in the care sector. However, this presupposes that not every sensible measure is directly rejected because it is not egalitarian enough. As long as the tax and contribution system, especially in the lower and middle range, is designed so that hardly more than 50 cents are left of every additional euro earned, care services will become unaffordable or jobs will remain unattractive for potential workers. A meritocratic social policy may not go well with the equality thinking of many. But it is fair, gives more people the chance to develop and makes the economy more efficient. Those who still fall through the grate can be caught. But there will be far fewer people than in a society that constantly confuses justice with equality.