Skip to main content

Sign up for our newsletter.

Quality journalism. Progressive values. Direct to your inbox.

Please Support Common Dreams This #GivingTuesday

Our staff has grown and our coverage of the climate emergency, COVID-19, and rising authoritarianism has intensified over the last two years. But, our expenses during the pandemic have gone up as well. This has been one of the toughest years we’ve ever faced. Donations are down. Traffic to the website from Google and Facebook have inexplicably fallen off a cliff. If we have any chance of meeting our fundraising targets for the year, we need this to be the best #GivingTuesday ever. Though our content is free to all, less than 1% of our readers ever make a donation. We're counting on you. Can you make that gift today to help Common Dreams end the year strong?

Please Help This #GivingTuesday -- Though our content is free to all, less than 1% of our readers give. We’re counting on you. Please help Common Dreams end the year strong.

Photo: mSeattle/cc/flickr

The Meritocracy Myth: How the Super-Rich Really Make Their Money

Paul Buchheit

Warren Buffett once claimed that the "genius of the American economy, our emphasis on a meritocracy and a market system and a rule of law has enabled generation after generation to live better than their parents did." The Economist suggested that "people succeed through brains and hard work." Economist Tyler Cowen believes in a "hyper-meritocracy" in which wealth is created by the most intelligent and motivated people.

That all sounds very inspirational. But the super-rich tend to make their money in less meritorious ways.

1. Betting on Food Prices to Rise

Chris Hedges noted that Goldman Sachs’ commodities index "is the most heavily traded in the world. The company hoards rice, wheat, corn, sugar and livestock and jacks up commodity prices around the globe so that poor families can no longer afford basic staples and literally starve." Numerous sources agree that speculation drives up commodity prices. Wheat, for example, rose in price from $105 to $481 in just eight years.

2. Betting on Mortgages to Fail

In 2007 hedge fund manager John Paulson conspired with Goldman Sachs to create packages of risky subprime mortgages, so that in anticipation of a housing crash he could use other people's money to bet against his personally designed sure-to-fail financial instruments. His successful bet against American households paid him $3.7 billion.

Adding to the insult is that much of a hedge fund manager's income is considered carried interest, which is taxed at the lower capital gains rate. How do they merit this? They don't. As Dean Baker explains, "Carried interest...has no economic rationale. With most other tax breaks there is at least an argument as to how it serves some socially useful purpose."

3. Renting Houses Back to People Who Lost Them

Private equity firms like Blackstone are buying up foreclosures and renting them back at higher rates while waiting for home prices to rise. As absentee landlords they have little interest in long-term community issues.

They go for even bigger money by packaging the rental agreements into rental-backed securities, which are disturbingly similar to the mortgage-backed securities that brought down the economy in 2008.

4. Being a Banker

Almost all of the big names have participated. HSBC Bank laundered money for Mexican drug cartels. Countrywide and Wells Fargo targeted Blacks and Hispanics for unaffordable subprime loans. GE Capital skimmed billions of dollars from its customers. Bank of America and JP Morgan Chase hid billions of dollars of bonuses and losses and loans from investors. Banks fixed interest rates in the LIBOR scandal, and illegally foreclosed on millions of homeowners in the robo-signing scandal.

5. Making "Can't Lose" Bets on Wall Street

With high-speed computer trading, programs can identify 'buy' orders, purchase the stock in a few nanoseconds, and then sell it to the identified buyer for a few pennies more. By doing this millions of times per hour, billions of dollars can be extracted from the stocks that make up our retirement accounts.

Some evidence of the strategy's effectiveness comes from the astonishing performance of Virtu Financial, which made money in the stock market on 1,277 out of 1,278 days over a five year period. That is, only one bad day in five years.

6. Checking the Stock Portfolio Every Morning

In one year the Forbes 400 'earned' more than the total combined budget for SNAP, WIC (Women, Infants, children), Child Nutrition, Earned Income Tax Credit, Supplemental Security Income, Temporary Assistance for Needy Families, and Housing. These lucky 400 were the main beneficiaries of a stock market that grew by $4.7 trillion in just one year.

7. Having the Right Friends and Relatives

Like having Fred Koch or Sam Walton as your daddy. The authors of The Meritocracy Myth say it well: "In the race to get ahead, the effects of inheritance come first and merit second, not the other way around." Much of the individual wealth in our country was taken by individuals who had the right connections. The CEOs of Silicon Valley, the alleged mecca of self-made tech visionaries, are no different. A Reuters analysis concluded that a prestigious degree and personal connections to power-brokers are "at least as important as a great idea" for Silicon Valley entrepreneurs.

None of these money-making methods are productive, or praiseworthy, or suggestive of a meritocracy. Perhaps demeritocracy is more apt.


Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.
Paul Buchheit

Paul Buchheit

Paul Buchheit is an advocate for social and economic justice, and the author of numerous papers on economic inequality and cognitive science. He was recently named one of 300 Living Peace and Justice Leaders and Models. He is the author of "American Wars: Illusions and Realities" (2008) and "Disposable Americans: Extreme Capitalism and the Case for a Guaranteed Income" (2017). Contact email: paul (at) youdeservefacts.org.

... We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.

WHO, South Africa Urge Nations to Lift 'Naive' Omicron Travel Bans

"The only thing the prohibition on travel will do is to further damage the economies of the affected countries and undermine their ability to respond to, and recover from, the pandemic."

Brett Wilkins ·


EU Joins Rights Group in Condemning Israel's 'Day of Destruction' of Palestinian Homes

"Demolitions are illegal under international law and significantly undermine the prospects for peace."

Brett Wilkins ·


GOP 'Silence Speaks Volumes,' Says Ilhan Omar as Boebert's Bigotry Goes Unpunished

"Normalizing this bigotry not only endangers my life but the lives of all Muslims. Anti-Muslim bigotry has no place in Congress."

Brett Wilkins ·


Africans Should Be 'Applauded, Not Punished,' Say Advocates Amid Omicron Travel Ban

"What is going on right now is inevitable," said African Union Vaccine Delivery Alliance co-chair Dr. Ayoade Alakija. "It's a result of the world's failure to vaccinate in an equitable, urgent, and speedy manner."

Brett Wilkins ·


Biden Drilling Report Blasted as 'Shocking Capitulation to the Needs of Corporate Polluters'

"Greenlighting more fossil fuel extraction, then pretending it's OK by nudging up royalty rates, is like rearranging deck chairs on the Titanic," said one campaigner.

Jessica Corbett ·

Support our work.

We are independent, non-profit, advertising-free and 100% reader supported.

Subscribe to our newsletter.

Quality journalism. Progressive values.
Direct to your inbox.

Subscribe to our Newsletter.


Common Dreams, Inc. Founded 1997. Registered 501(c3) Non-Profit | Privacy Policy
Common Dreams Logo