by Christopher Horner
It’s only when the tide goes out that you learn who has been swimming naked —Warren Buffett
Buffett’s famous remark has usually been applied to the shock of the 2008 financial crisis: the over-leveraged, the under-financed, the chancers and the over-exposed in general were embarrassed when the tide went out and left them shivering on the seashore. But we can apply that image to our present troubles. The tide that has been COVID-19 has exposed those very highly paid professions that do not count as essential, by most people’s standards. How many hedge fund managers, for example, do we need out there, working for us right now? We seem to be getting on just fine without them. Contrast a ‘job’ like that with the much lower paid nurses, care home workers, security guards, service and delivery personnel of all kinds who face the real prospect of illness and even death, often in contexts in which there is insufficient personal protection equipment and where social distancing isn’t observed, either because it would be impracticable, or because their employer doesn’t care enough to ensure it it happens. And beyond what we are learning to stop calling ‘unskilled’ and are now calling ‘key’ workers are a larger group that either keep society going or who help make it something we would want to keep going. Crudely put, we need bricks and mortar but we also want art, entertainment and education.
Marx’s distinction between use value and exchange value is helpful here. The former, for my purposes, is the rough and ready criterion of adding personal and social value – the things we need and want. The latter is the production of commodities or services to be exchanged for money, with the aim of making a profit. In a capitalist system like ours, the two sides of value are always in an uneasy relationship, to say the least – commodities need to be of some use to the buyer and must produce profit. However, in our current crisis they have split asunder. Not completely, of course: this pandemic is almost perfect for online companies like Amazon, whose profits will surely rocket beyond the already stratospheric up into outer space. But there is now a stark distinction staring us in the face between the two kinds of value and the people who create it.
We are talking here about various forms of social value, and it seems obvious that social value and financial remuneration inhabit different universes. This shouldn’t be surprising for anyone who hasn’t embraced the touching faith that the market and the prices that it generates are the best signals of what society needs. The New Economics Foundation published a study of the relation between pay and social value and it makes for interesting reading. Unsurprisingly, people like nurses add many times more social value than, say, bankers.[1] Yet nurses are paid vastly less than bankers, hedge fund managers and the like. A time like this, when we can clearly see the importance of work that produces genuine social value rather than just inflated bank balances for the few, is a good time to ask some serious questions about the criteria we use for recognising and rewarding the contributions people make to society. The two key terms here are merit and desert and it is to those we turn next.
Merit
Merit and desert are terms that often come up when we think about this kind of thing. They are often used interchangeably, when referring to what it would be right for someone to receive, and about fairness in the distribution of goods or services. So we might say ‘she merited that reward’, and not worry much if ‘deserved’ is used instead of ‘merited’ -there is a lot of overlap between the two words . Yet there is a difference. This difference lies in the direction that the words face, as it were. Merit is a ‘forward’ looking word: it’s connected to meeting criteria or benchmarks. So the student who scores 10 out of 10 gets the prize, and the banker who pulls off a series of profitable deals, exceeding her performance targets, ‘merits’ a big bonus. Extending the idea, we might say that the hard working or talented merit greater financial rewards than their less productive, industrious or talented peers. The ideal of a meritocratic society is thus held up to us as an ideal of fairness: some people are more successful, and merit greater rewards. But it is possible to question what success means here. Who decides what these criteria are to be, and what counts as having met them?
A moment ago I invoked the idea of productiveness, industry or talent as criteria that might determine fair rewards. But these benchmarks are socially constructed, as are the ways in which they are assessed. Who is the most productive: the banker or the teacher? It’s hard to see how we can we meaningfully compare what they do. It is also clear that there are some lines of work in which however hard one grafts, one is not going to earn a great deal (think of the people who clean the bankers’ offices). In fact, only possessors of certain kinds of merit, such as those we find in financial services, say, rather than nursing, are going to be highly rewarded for what they do. We might call these ‘market merits’. And they may have little or nothing to do with what I have called ‘social value’.
‘Market merits,’ the ability to do the kinds of things the market rewards, have nothing to do with morally admirable characteristics, like caring, loyalty or a social conscience. Arguably, the type most likely to be rewarded by the market are the aggressive and the egotistical, as they tend to fare better in an environment that stimulates the emotions of fear and greed on a regular basis. This might be why some of us find top CEOs morally unimpressive types. If we cast our minds back just a little, we may remember the names of some of the geniuses of the financial world who were left embarrassed when the tide went out in 2008. Here I am thinking of people like Fred Goodwin, Bob Diamond, and Dick Fuld, late of RBS, Barclays and Lehmann Brothers respectively. All three were remunerated at levels almost, but not quite, beyond the dreams of avarice. Against this, the advocates of an unfettered free market might argue that morality has nothing to do with it, and nor does being a nice person. Results count, and nothing else. The most successful merit the highest rewards, and overall, we all do better in a society that lets the logic of the market determine rewards. So Goodwin, who had a basic salary of £1.29 million plus a pension worth in all £8.23 million, Diamond, who got £1.3 million, a bonus of £3 million and share options worth 500% of his salary and Fuld, who received at least $484 million since 2000 merited their rewards. [2]
Unfortunately, what happened to these financial institutions does little to support this line of reasoning: the first two nearly drove their banks into the ground, while Fuld hit the jackpot by succeeding in doing just that. Research shows that there is little or no relationship between CEO pay and company performance, which leaves some wondering how they could ‘merit’ the kinds of remuneration cited above. The figures are quite striking: top CEO pay in the UK in 2020 is 117 times median earnings (the USA has a similarly wide gap). That’s a lot of exchange value. In the face of this, believing that the market operates as a meritocracy and is actually rewarding the right people, to the right extent, is actually to make a huge leap of faith. And even if these characters had been as successful as they claimed they were when they drew down their huge rewards, would they actually be worth that kind of money? is anyone? I doubt it. Beyond that, the social consequences of such vast disparities in pay are quite toxic. Indeed, even the ideal of a ‘meritocracy’ as a goal we should aim at is a problematic one. Let’s now turn to the other of our key words: desert.
Desert
Desert is a ‘backward’ facing term. It tends to be used when one is considering reward for past effort, or for a state of affairs that already exists. So we might say of a not particularly productive colleague ‘well, he deserves some recognition for all the work he put in’ or for a student who put in hours of study yet only scored 4 out of 10 that she deserves something too (but what? praise? a bag of sweets?). The term is embedded in our everyday conceptions of morality: we think the guilty deserve punishment; the injured deserve sympathy or compensation and so on. The problem, though, is working out who really deserves what.
The question of desert often gets mixed up with questions of moral worth, and of deserving character. So we get ideas of the deserving and undeserving poor, the feckless versus the hardworking and so on. I’d suggest that such language, while it serves us quite well in interpersonal relations (e.g. ‘Bob is a lazy so-and-so and doesn’t deserve X’) can lead us quite seriously astray when we try to think about larger social issues. This is partly because we use it quite inconsistently. For one thing, it’s noticeable that the moralistic language of desert more often gets used to describe benefits claimants rather than the better off. And when we use it in relation to ourselves we are tempted to apply it in ways that justify what we have, (‘I deserve it: I worked hard for this’) and why others can’t have as much as us. We also tend to factor out luck, for instance, or the larger, hard to picture forces that impel or impede people’s path through life. It’s not that we can dispense with the language of morality (I’ve been using it myself in relation to Goodwin et al) but that we should keep our wits about us when we do. And a little humility might not be a bad thing, either.
Crucially, we can go on to claim that people deserve things, just in virtue of their being fellow citizens, human beings, sentient creatures etc, and not because of anything they might have done, or failed to do. (It’s here that we often find the language of needs, rights and entitlement cropping up: complex words I do not have the space to discuss here). If we do start arguing that people deserve things, not because of actions performed or talents possessed, but just because they are our fellows, that might lead to some pretty radical conclusions. We might want to go beyond what Marx called ‘the narrow horizon of bourgeois right’ in assessing desert, to consider what people need, and here need can include not just bare survival but what it takes to live a flourishing and fulfilled life beyond the production of exchange value – bread and roses. And invoking Marx ought to remind us that we have been mainly considering how value is distributed; the conditions under which it is produced, which we began with, matter too.
Last Thoughts
When people start talking about society as it is, or how it might be, they usually find themselves drawing on a vocabulary of key terms: words like ‘justice’, ‘desert’, ‘merit’, ‘needs’ and so on. Here I’ve focused on two: merit and desert. The meaning of these apparently simple terms can prove elusive when we think about them carefully. Perhaps this is because, as Nietzsche put it ‘only that which has no history can be defined’ – by which he meant that, unlike a word like ‘triangle’, which means the same to us as it did to our ancestors, a word like ‘justice’ doesn’t have a stable essence that can be captured in a neat definition. Its meaning has changed through time. To that I’d add the thought that the meanings of terms are also subject to the needs and interests of the people that use them and that the terms themselves, with their histories, shape the way we think. Nonetheless, what these words mean and have meant can be tracked as they change. In the light of the current seizure that a large part of the economy is experiencing, we may be about to shift the way we think about what we need, what social value is, and which well remunerated activities we can do without, or might pay a lot less for. Let’s do all we can to make that shift happen.
[1] NEF report on remuneration and social value:
https://neweconomics.org/2009/12/a-bit-rich They make the point, too, that some of the most highly paid tend to destroy social value.
[2] Things haven’t changed much: the current (2020) head of RBS, Alison Rose, has a remuneration package includes a base salary of £1.1 a year (so not including any bonuses) and a fixed share allowance set at 100% of salary. And other CEOs are still doing very well for themselves.
All photographs were taken by the author