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Mark DeFusco

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Meritocracy and the Death Tax

I don’t want to be ignorant. I want to grow up ‘spectable.

Ragged Dick (Horatio Alger, 1866)

The notion that America is a place where one can “strive and succeed” is quickly becoming a myth rather than a dream. Horatio Alger Jr. was a media star in the late 19th century that would rival J. K Rowling’s popularity today. Selling more than 200 million copies, his books were mostly formulaic and discussed how through “luck and puck,” disadvantaged children were able to climb social ladders to find a better life. In doing so, Alger’s name became synonymous with the notion of “rags to riches.”

It is an important American myth, one that has drawn waves of immigrants from around the world to our shores, ready to make a name and life for themselves. It has been good for America as well, for we draw our genius from places least expected. Schools have been the engine of this genius, finding seeds of talent from all kinds of places and people, preparing a small but fertile plot to grow. If 1% of the world population is genius, most of these seeds are left fallow in despair not ever being recognized and without the resources that only the most fortunate in most cultures have access to. We need only to look at the autobiography of Justice Sonia Sotomayor to give evidence of how a small investment in the education of talented minds brings enormous dividends both individually and collectively for our country.

We have a quaint notion that schools have been an avenue to meritocracy. Schools identify the best and brightest in every one of our 15,000 school districts nationwide-rich and poor. Master plans have been designed to allow the top 10% of every graduating class access to superior public higher education, but daily we see that the torque of budgetary issues makes this goal far less attainable.

A recent New York Times article lends even more doubt to the notion that we might ever reach a true meritocracy and continue to find genius. The issue is less one of race than it is of stratification. Poor students, even the highest scoring students, face almost insurmountable odds trying to complete their education. Affluent students have a huge gap in graduation rates and that gap is widening. Even the lowest scoring students among the affluent have a better chance of graduating from higher education than the highest scoring (top 10%) poor students. Are we willing to waste this talent?

More and more, we see schools as an agent of social stratification rather than an engine of building meritocracy. I recently delivered my 6th grade daughter to take the SSAT test that allegedly identifies talented students for admission to the many private schools in St Louis. Here I was shocked to see hundreds of 12-year-olds all nervous at what might be a defining moment in their young lives. St. Louis, for a relatively small city, has an inordinate amount of private schools (224). At cocktail parties, I am continually surprised when people ask me what school I went to. In that question, one finds powerful diagnostics regarding the social stratification of the area. I am surprised too, when schools boast of the scions of noteworthy citizens, somehow, attempting to convince me that my child will be noteworthy too, simply for the association. One should not be surprised, then, to learn that the St Louis city schools are a mess, still under the imposed care of the state because the city schools have difficulty getting accredited. Would those schools be better if the scions of noteworthy St. Louisans attended them?

I can’t help but think at such a gathering of affluent test takers, that these fortunate children would do well no matter where they attended school.

In our last two presidents, we see a classic example of meritocracy versus stratification. President Bush attended the finest schools America had to offer (Andover, Yale, Harvard). A self-described “C” student, President Bush took advantage of the stratification that comes by making friends with good people who go to such schools. He needn’t worry much about academic achievement. His place in American political royalty allowed that he would do well by connection. Achievement was only secondary. President Obama, by contrast, came from humble roots. Raised by a single mother, who valued the power of education, he distinguished himself at Occidental College and later finished at Columbia and was president of the Harvard Law Review. Still, President Obama’s educational roots started at the Punahou School which claims to be the largest independent school in the US.

Should schools cement current social and economic stratification, or should schools be a powerful tool in identifying genius and building a society on merit? What is lost when only the privileged have access to academic success?

I end this piece with an answer to the title. I am among the only workers on Wall Street that favored the “death tax” (previously, it was titled the inheritance tax—politicians coined the new euphuism because everyone dies, not everyone has an inheritance). I favored the death tax because I dreaded if the capital markets in the US were controlled by the scions of wealthy individuals. In many cases, there was no reason for achievement in these descendants, and they often had little to prove and so spent their high school and college days telling stories at fraternity parties and practicing their socialization skills over drinks. It made them ill-prepared to consider reasoned arguments (they simply didn’t have much experience with that). And lessons that often come from hard knocks were often avoided with well-heeled attorneys. I had a saying as an investment banker—“If it wasn’t for dumb children, I wouldn’t have anything to sell.”

The last century was a wonderful moment in human history where smart, talented individuals from modest means found a way to not only survive but to excel. In doing so, they brought a world of idea and invention that would have been lost had we not invested in their education. I hope that we continue to find a way to nurture genius wherever we find it, and to judge people by what they know and what they can do, not where they came from.

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