Saturday, August 16, 2008

Social Democracy and the Achievement Motive

There may be a deepening rift between American culture and its political structure. The cause is the shift from what Louis Hartz calls the Horatio Alger psychology of late nineteenth century America to the credentialism and "rationalization" that Progressivism initiated in the early twentieth century. I put rationalization in quotes because although the Progressives and their predecessors, the Mugwumps, along with early management theorists like Frederick Winslow Taylor and Fayol believed that bureaucracy, tight structure, merit-based systems and the like fostered efficiency, this was only a partial truth. Merit and structure foster efficiency where change is limited but may not be so important where change is rapid. Also, the measurement of ability is riddled with error, even when it is done properly, which it rarely is. The best measures of ability explain 25-30 percent of the variance in performance for a specific job. There has never been any serious effort to predict long-term, say life-long achievement. There are measures that may predict future success, but the book "Millionaire Next Door" suggests that the key variables, ethics, time preference, thrift, interpersonal skills, type B personality, and a stable family are not generally discussed in the personnel psychology literature or tangentially so. But most firms do not utilize valid criteria in hiring. So even the modicum of rationality that the Progressives advocate have not been implemented in most firms.

More importantly, American society has chosen to replace achievement and market success with college and graduate school diplomas in making selection decisions. This removes achievement from the equation, and stratifies society. Part of selection into college is family background, and part is IQ as tested by the various scholastic aptitude tests. Neither of these is identical with achievement. The correlation between IQ and job performance is about .55, which means that about 30 percent of the variance in job performance is due to IQ, 70% is not. The correlation becomes much weaker when one looks at life success over the long term. Success and short-term job performance are two different things. Ethics and the Aristotelian virtues (courage, prudence justice and sophrosunae, self-control, balance or moderation) play a significant role over the long term. The point isn't to diminish the importance of IQ or raise the importance of ethics. Rather, the point is that structure rather than market have increasingly predetermined outcomes, and rough measures of potential rather than human excellence have been rewarded. In the nineteenth century Whig philosophers could argue that wealth reflected religious or moral virtue. In the twentieth century, one can argue that wealth reflects gaming some corporate HR department's slapdash interview process or the Scholastic Aptitude Test, which is only a hair better.

Thus, rather than achievement creating economic success, Progressivism decreed that success would be administered. The attack on achievement that began with the Progressive movement's emphasis on rationalized human resource management criteria and the related emphasis on professional degrees was carried forward by the social democracy of the New Deal, which reflected the ultimate fulfillment of the Progressives' agenda. The New Deal established the paradigm that experts can rationally determine the equitable distribution of wealth; that the very wealthy can retain their wealth intergenerationally through family trusts but that up-and-coming entrepreneurs would be heavily taxed upon death; that the use of coercion in the redistribution of wealth is acceptable; that the monetary system can and should be used to redistribute wealth as well as various compulsory welfare systems, such as social security and unemployment insurance.

The "conservative" attack on the New Deal focused on the unemployment insurance. In effect, the Democrats forced the Republicans into the same corner that Jefferson forced Hamilton, and the Republicans took the bait. The Republicans did not frame their complaints about the New Deal in terms of its bias toward the wealthy, in part because the Democrats were able to sufficiently cloak the bias by throwing up red flags that likely they anticipated the Republicans would charge. Social insurance is a small matter, and it could have been done voluntarily as many firms such as General Electric had been demonstrating by the 1920s through welfare capitalism. The public works of the Hoover and Roosevelt administration were nothing new. They had characterized American government since the pre-revolutionary days, and if anything were more voluntaristic than the approach that was often used in colonial America: forced labor.

What changed during the Progressive era was increasing subsidization of big business (which had always been subsidized) through the establishment of the Federal Reserve Bank, which increasingly became a conduit for subsidization of big business at the expense of small and at the expense of taxpayers. This can be coupled with regulation such as securities regulation, pension regulation, and health and safety regulation which purported to help small investors and employees but served the purpose of excluding entrepreneurial initiative and further consolidating power in the hands of large corporations and banks, which have through the twentieth century proved decreasingly efficient.

Thus, Progressivism attacked the achievement motive in two ways. First, by rationalizing selection for elite jobs, first through civil service and then through inept but rigid personnel requirements involving college diplomas that reflect IQ and class but not achievement. Second, Progressivism instituted a progressive process of regulation whereby elites could secure their position in the name of helping underprivileged groups whose lot became increasingly worse the more the social democrats helped them.

As a result, and because the debate between the advocates of achievement and social democracy devolved into a debate between two parties that advocate social democracy, the Democrats and the Republicans, the political and economic elite, through Progressivism, slowly wrenched America's heart out of its casing, and ate it, blood dripping from its Progressive chin. In effect, in the twentieth century Progressivism reversed the democratic and laissez-faire achievements of the nineteenth.

Louis Hartz wrote the following about those nineteenth century achievements:

"Freedom from state control went hand in hand with the religion of opportunity, which in the broadest sense democratized economic power and made it acceptable to the egalitarian ethos of a liberal society. Technically, of course, this correlation was not essential. One could have the Horatio Alger dream functioning in the context of the old Whig paternalism: Ragged Dick could dream of making his million in a business fostered by the government itself, and we cannot excuse Hamilton from his failure to grasp the Alger secret by referring to the state of the American economy. There was sheer blindness, sheer failure to understand America in the Hamiltonian attitude. At the same time the capacity of Whiggery to dispense with the state, or at least a portion of the state, did make certain things possible. One was a full appropriation, or perhaps one should continue to say "confusion" of the Jeffersonian and Jacksonian symbolism. That symbolism had assailed the state for granting the corporate charter and thus interfering with individual enterprise. Now, with the reliance on the state diminished, the capture of this symbolism was facilitated. The granting of the corporate charter could be confused with corporate regulation, the corporation could be confused with the individual, and Jackson could be turned inside out. The antagonism of state and individual, originally created to disadvantage the corporation, could be twisted to its defense. Down to the present day it is the genius of this achievement to convert the ideological Jefferson into his own worst enemy."*

Hartz's point is brilliant although his history is inaccurate in several ways. The point is that the corporation became a vehicle for individual achievement. But through a process of increasing government support as well as economies of scale and foreign trade advantages, the corporation became ever-increasing in size. Rather than demand that corporations prove themselves in the market, the Progressive era established exponentially greater supports for big business. This enhanced support had a range of economic and social effects. One of these was an attack on the achievement motive through credentialism, regulatory obstacles to new enterprise ideas, and the inheritance tax, which excludes the economic elite through the institute of family trusts, restricting the inter-generational evolution of family firms.

*Louis Hartz, "Government-Business Relations" in Economic Change in the Civil War Era: Proceedings of a Conference on American Institutional Change, 1850-1873, and the Impact of the Civil War Held March 12-14 1964. David T. Gilchrist and W. David Lewis, editors. Greenville, Delaware: Eleutherian Mills-Hagley Foundation.


intlprof said...

Enjoyable, thoughtful piece.. it can be strengthened by perusing the Achivement Motive lit, in psych.

International Professors Project

Mitchell Langbert said...

Thanks, Ron. I'm hoping to develop this concept into part of a book.