Ray Dalio's recent essay insightfully investigates the maladies of capitalism in the U.S, but what's actually underneath is a not a story about the dying of capitalism, but rather, a story about a failing government.

The reality is that the institutions that so badly need reform to truly change inequality in the U.S., like early education and childcare, continue to remain unaddressed, while society instead focuses on policies that address not the root of inequality, but the ends, such as taxes and free college. And until the nation can hone in on the root of what drives inequality--and stop trying to address it with policies that pose to remedy inequality once it already exists--nothing will change. It's like treating a gunshot wound with a Band-Aid. And perhaps what's worse is that real policy solutions are not a mystery nor are very complicated in terms of economic impact.

As Dalio discusses, so many of the institutions that are failing Americans, like the education system, have vestigial structures because they were created at the inception of the United States--at a time when big government was worth fighting against and society overall was still agrarian. And so our current education funding system was created then, using local property taxes, for example, which perennially keeps poor education areas poor, and subjugates working parents to additional childcare costs to compensate for the differences in the hours of the workday and the school day. 

And instead of working on addressing the failures of these long-standing institutions directly, politicians focus on the wrong things. One of these is the redistribution of wealth in the form of taxes. It's easy to see why they do this. It's faster to implement and claim the success of policies that don't require investment and have easy to measure outcomes like spending. But by focusing so much on redistribution--and not fundamentally changing the system of who is able to create wealth--there will be no end to a system that's ever more reliant on those who already have wealth to produce more. And ignoring reform of the policies that create these divides disproportionally hurts those at the bottom. To really address inequality, policies must be focused on lifting the bottom, instead of just redistributing the top.

The other oft-cited policy idea is to make college free. While not free, the U.S. is full of amazing community, city, and state colleges with tuition in the single-digit thousands per year and high acceptance rates. Part time is even cheaper. Each Ivy League university and many other elite universities offer free tuition--and sometimes room and board--to students from households below the median income. 

The problem is not the current cost of college and access to a college education for those who are qualified; the problem is that far before high school, students from underserved backgrounds fall off the track to ever being qualified. Division in the quality of education begin at kindergarten; starting to try and equalize this disparity at the college level, therefore, will never effectively address the disparity. 

Another indicator of how the U.S. is failing its most vulnerable residents is that clear tactical remedies that would truly get to the root of inequality are not difficult to see and yet continue to be ignored. Perhaps the most shocking indicator that the government's policies are failing those at the bottom is that 22 million women live below the poverty line and by some accounts just as many live near the edge. Many of these women work minimum-wage jobs with no paid sick days, and they're single moms. The magnitude of this is just staggering.

If a woman making minimum wage without childcare can easily slip into a desperate situation just by her kids getting the flu, it is easy to understand that it is impossible for her to lift herself out of poverty by the only way possible--that is, investing time in her education. The policy solution that would target the root of this problem is a nationwide system of childcare that is open 24 hours, 7 days a week, 365 days a year from when a child is born. Target the neighborhoods with the highest concentration of single mothers living in poverty. These are not difficult to find. Without childcare that allows women to be gone for longer than the workday, women living in poverty have no chance to pull themselves out. This is a policy solution that can actually move the needle on inequality. 

As the 2020 presidential election comes into view, much will come from politicians who will claim to be able to fix everything, without giving any specifics as to how. We don't have the luxury to allow this anymore. And like Ray Dalio mentions, if the government can't get this done, a public-private partnership with philanthropists should pursue this investment. Just as many wealthy philanthropists and entrepreneurs have jumped in as of late to help the survivors of natural disasters, maybe it's time for the private sector to organize and mobilize to help address these issues. Funding from the private sector and implementation by people who understand how to scale fast to successfully leapfrog the bottlenecks of slow-moving policy reform could be just what this nation needs to really level the playing field.

As it is the case that governments should come in when markets fail, perhaps the private sector should come in where the government is failing, which it clearly is now.

Published on: Apr 9, 2019
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