When skill and ability is normally distributed, half of all people are below average. Always. By definition. It is one thing to say we must become "artisans," that we all become become more skilled in absolute terms, but it is quite another thing to say that only those with above average skills can expect anything more than below average wages. And in a capitalist economy, "below average" is newspeak for subsistence wages, only enough to support the bare minimum of survival, never mind "luxuries" such as decent dental care or the education necessary to participate in a democracy.
We read this article in my Economics class yesterday. My instructor maintains that Friedman is speaking metaphorically in his conclusion, but I think he's speaking literally. There really is a disproportionate weighting relative to the distribution of ability and skill towards the high end of the scale: the average wage is substantially higher than the median wage. We see this way of thinking all over the place, from the tendency of upper-middle class people comparing themselves to the ultra-rich and feeling poor, to Joel Spolsky's business model of hiring only the best of the best.
This way of thinking — the idea that those who are only average "deserve" below average wages — matches reality to a certain extent. Productivity is not directly proportional to skill, it's proportional to some power of the skill. A worker who is twice as skilled as another will produce not just twice as much but four times as much as the other. This relationship underlies the 80-20 rule of thumb: 20% of the workers produce 80% of the output. So the idea that the most skilled workers in any field are disproportionally rewarded is in a certain sense "fair".
Without commenting on the "macro-ethics" of capitalism, under economic conditions where there's value in going balls to the wall to increase our economic productivity, to increase productivity an order of magnitude faster than the population is increasing, this particular "micro-ethical" sense of fairness is almost guaranteed to be selected for*. Any economic ecology that identifies the most skilled people and encourages them to work as hard as possible will have an enormous selective advantage versus those that do not do so.
*More precisely, any other behavior will be selected against.
But economic conditions have changed. We no longer need to improve our productivity as fast as possible. We no longer want want to improve our productivity as fast as possible. And we physically cannot improve our productivity — especially our productivity of physical things — as fast as possible.
We have enough "stuff" — enough food, enough clothing, enough housing, enough electricity, enough medical and dental care, even enough televisions, DVD players and computers — for everyone in the world. Or, more precisely, we have the capacity to produce and physically distribute enough stuff for everyone. We have the capacity right now for everyone on the planet to live in a degree of physical comfort. I'm not saying that we shouldn't ever produce more stuff, or better stuff, but we are no longer facing the pressure of desperate poverty to improve our productivity as much as possible.
I don't want more stuff; indeed I want a lot less stuff than I used to want. I don't think I'm alone in this opinion. Everywhere I look, even those who want more stuff seem to be growing more desperately absurd and contrived. I've reduced my spending (and income) almost an order of magnitude, from the low six figures to the low five figures. I don't want a 3,000 square foot house in the suburbs. I don't want a new car every two years to drive more than an hour a day in increasingly congested traffic to get to work. I don't want the latest smart phone, iPad, or electric back-scratcher. I don't want more processed food, processed entertainment or processed opinions. I don't want more stuff; I'm tired of stuff; I'm tired of chasing after stuff. My life is better now with less stuff than it was two years ago when I had tons of stuff.
I don't want more stuff. I want better medical care and especially better dental care, but most of all I want to learn and I want to participate. The greatest technological development of the 21st century, the development that has given me the most reward and satisfaction, is Wikipedia, that has put all the knowledge of the (English-speaking) world at my fingertips. For free*. I don't want a dozen $500,000/year Harvard professors to tell me what job I should do and how much I should get paid, I want to learn about economics myself. I don't want to pay $20 to see professional actors in a $200,000,000 movie, I want a community theater where I can act. I don't want to watch two dozen steroid-crazed gorillas mauling each other on TV, I want to actually play soccer with a bunch of other out-of-shape middle aged folks. I don't want to watch, I want to do.
*Or more precisely for the trivial cost of a half-day's minimum wage work per month for my internet connection
We physically cannot produce more stuff We are running into physical limitations on the production of stuff: pollution, global warming, garbage, the energy required to move stuff around. If we keep producing stuff, and especially if we keep producing more and more stuff, we're going to drown in our own shit. Not in a thousand years, either, but tomorrow.
There's a kind of perversity in the present-day capitalist system. I believe that human beings are fundamentally morally good. I think that underlying capitalism — explaining and even to a certain extent excusing its immorality and exploitation — has been a feeling that it's fundamentally good to do everything in our power to respond to the desperate poverty and unimaginable suffering of the hundreds of thousands of years of humanity's mere economic subsistence. There is a belief — righteous, I think — that the three-century-long project to improve our material well-being has been worth all the sacrifices and excesses of the capitalist system. Worth it or not, here we are, with such a monumental productive capacity that we can today produce more in a year than the the the entire pre-capitalist world produced for all of recorded history. But because this response to desperate poverty is so ingrained, when we are on the verge of actually eliminating poverty, we are reluctant to do so, for fear of eliminating our primary motivation.
We do not rationally construct our ethical beliefs; our ethical beliefs evolve. The idea of concentrating reward for the most productive people evolved because it worked to increase our productive capacity as fast as possible. But we don't really think about why an ethical belief evolved; we tend to think about our ethical beliefs as intrinsically valid, not instrumentally valid. Under specific environmental circumstances we evolved an ethical predisposition to increase our productivity as fast as possible in order to alleviate poverty. But because the ethical belief evolved — because we did not consciously construct it — we have come to believe that increasing productivity, especially for the production of physical goods, is intrinsically good. And therefore we see any retreat from that impulse to increase productivity, or any belief that would even permit a retreat, as intrinsically bad, lazy, useless, wasteful, without regard to the underlying why.
The last three recessions have hinted at the increasing disconnect between our foundational "capitalist" ethical beliefs and the actual material conditions of global society. We recovered from earlier recessions by eliminating production of stuff we didn't want and then using the available labor to increase the production of more and better stuff, stuff we actually needed and wanted. But except for the construction of the internet and cell-phone infrastructure (which are only a small fraction of GDP) the last three recoveries have not been driven by reallocation of production, but by finding new and creative ways to create financial bubbles. We recovered from the 1991 recession by creating a stock-market bubble; we recovered from the 2001 recession by creating a housing bubble; and — lacking a suitable vehicle to create a financial bubble — we have not yet truly recovered from the 2008 recession. In each of the last three recessions, the fall in unemployment has lagged further behind recovery in GDP growth, indicating that the recovery is not being driven by effective reallocation of employment. Indeed, we have seen an increasing fraction of GDP transferred to financial services, services arguably without any actual social utility. We aren't even trying to efficiently allocate our labor anymore; we seem instead to be flailing around to more effectively allocate demand... and failing to do so.
The observation that the exceptional receive a disproportionate reward is obvious, and has been around since the beginning of recorded history. It is only recently that we have been able to push the unexceptional out of sight, in ghettos and mostly in other countries, that we have been able to pretend that "everyone" (at least everyone we can see) deserves a basic level of comfort and dignity that has for most of recorded history truly been available only to a privileged few. With globalization, the pointy end of this inequality has returned to our own shores.
And fundamentally, I object to Friedman's conclusion not because it's wrong, but because it's too limited. Friedman is "right" within his own tiny little box of the capitalist ethos, but the box itself has become too small, too ill-fitting to today's world. It is the ethos of the 19th century, when the vast majority of the population was called upon to sacrifice their lives and labor for the benefit of their great-grandchildren. Perhaps this sacrifice was unjust, perhaps we could have achieved the same result without so much misery, exploitation and suffering, but they did in fact make that sacrifice. We ourselves, however, are those great-grandchildren they made that sacrifice for. It is time now to enjoy that sacrifice, to let everyone live in the comfort and dignity we can because of that sacrifice now enjoy, and to work on making the world better instead of more productive.