Friday, June 7, 2013

What is Meritocracy?

The US Fed Chairman, Ben Bernanke, recently gave a speech to the graduating class at Princeton.    He shared 10 lessons, and it was No.3 that caught my eye.   Here is an excerpt:

“3. The concept of success leads me to consider so-called meritocracies and their implications. We have been taught that meritocratic institutions and societies are fair. Putting aside the reality that no system, including our own, is really entirely meritocratic, meritocracies may be fairer and more efficient than some alternatives. But fair in an absolute sense? Think about it. A meritocracy is a system in which the people who are the luckiest in their health and genetic endowment; luckiest in terms of family support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate--these are the folks who reap the largest rewards. The only way for even a putative meritocracy to hope to pass ethical muster, to be considered fair, is if those who are the luckiest in all of those respects also have the greatest responsibility to work hard, to contribute to the betterment of the world, and to share their luck with others…”

When I was growing up, my family, like many others, was poor.   But like many others, we have seen our lot improve tremendously by reason of the education and opportunities we received.   So, I always believed strongly in the concept of "meritocracy".   Except, I never thought deeply about what it really meant.   To me, it was always about your rewards being determined by how hard you worked.   But, it is not that simple.

Recently, some have questioned whether meritocracy is truly fair.   As Bernanke questioned: “fair in an absolute sense?”.   Of course not.   But we need to compare something with something.    To compare meritocracy with a system of absolute fairness and then criticise its shortcomings does not advance the debate because no system is absolutely fair.   At the moment, meritocracy is the fairest and most efficient system we have. 

But to deal with its undesirable effects, we have to recognise its limitations.  One is what Bernanke pointed out – that the success of an individual may have as much to do with luck and happenstance.   Another, as pointed out by President Obama in an election speech (for which he was attacked), is that an individual’s success is not entirely the result of his own work, but the support he receives from those around him.    I would not be where I am today but for others - the great teachers I had, the Foundation which helped pay my university fees, my mentors who taught me the practice of law, etc.    The list is long.

Everyone who has succeeded has received help, and also has had some measure of luck.    Seen from this perspective, the call for those who have done well to contribute more is a powerful one.     Such debates are often reduced to discussions on taxes and redistribution.   In Singapore, there is a good amount of redistribution.   For example:

(a)  about 70% do not pay income tax.   In fact, 20% of households account for 80% of income tax paid;

(b)  about 85% of GST is paid by the top 40% earning Singaporeans and foreigners; and

(c)   middle income households will receive $1 in Lifetime Benefits for every $0.80 in Lifetime Taxes they pay.  

Nonetheless, income inequality is an issue and we must do a better job of helping those who get less.   We should have constructive debates about whether there should be greater redistribution and, just as importantly, how we should do it so that we continue to reward work, enterprise and risk taking. 

But the debate should not be dictated by numbers alone.    It should be about the kind of society we want.   We should recognize that we become a better, stronger community where there is incentive to succeed, and at the same time, the weaker amongst us continue to have the opportunities to forge a decent living.  

The problem with much debate in Singapore (and elsewhere) is that it often involves people criticising the current, but not dealing with, or being full and frank about, the risks and problems of the alternatives they are advocating.   They make nice-sounding statements, but avoid the difficult questions.    We are not dealing with academic matters, and there are no prizes for best speaker or the funniest put-down.     Decisions we make affect the lives and futures of real people, and we must never forget that.