Tales of a New America

by Robert B. Reich

  There is, in any event, a middle course between jettisoning all forms of social benevolence and imposing strict government surveillance. This is to merge the principle of collective obligation with the advantages of smaller groups as agents for inculcating responsibility among their members. By insuring the smaller group as a whole rather than the individuals who comprise it, the group becomes an intermediary in the system of social benevolence. The costs of any specific hardship are still pooled; society continues to be insurer of last resort. But because the other members of the group share a significant portion of the cost, they have a strong incentive to look out for one another and take preventive action.

  By the 1980s the American corporation fulfilled this role for a portion of the population. Its willingness to take on this responsibility was not due to any outbreak of benevolence on the parts of top management or shareholders. As we have observed, the advantages of tax-free employee benefits had pushed many corporations into the business of insuring their workers and workers’ families against all sorts of adversity. But while American taxpayers funded a portion of these benefits, the corporations financed the rest. The bill could be high. In 1982, for example, over $600 of the cost of a new Chrysler was attributable to payments on employee health insurance.14 Companies that did a better job than their rivals of controlling these costs could gain a competitive advantage; those whose employees led more dissipated lives would end up paying the bill. Corporations were thus motivated to encourage employees to avoid the risk of costly afflictions.

  Accordingly, American corporations invested ever larger sums on preventing risks. One company, Johnson & Johnson, encouraged its employees to quit smoking and to eat and exercise properly; after five years the program slashed hospitalization costs by 35 percent and recaptured three times the cost of the effort.15 Other companies were providing their employees with counseling for alcoholism and drug abuse, advice on how to deal with financial and legal problems, therapy for coping with family crises and emotional problems, and lessons for improving personal safety and hygiene. The American corporation was fast becoming the community service agency of the 1980s. But unlike the older version, it was an agency with a direct financial stake in helping people to become more responsible for themselves.

  Prepaid group health plans, prepaid group legal plans, and other forms of collective insurance generated similar incentives. Because the costs of insurance to the entire group depended upon the responsibility that each member assumed for avoiding large expenses later on, all such plans emphasized prevention as well as compensation. Health maintenance organizations educated their members in good health habits, legal plans offered guidance in avoiding costly litigation, hospitals counseled their doctors in how to reduce carelessness and thereby stem future malpractice claims.

  6

  In its own way, the welfare system was groping toward the principle of group liability as well. By the 1980s welfare agencies were imposing financial responsibility on people other than those directly in need—on those who could help prevent hardship from occurring in the first place.

  One example was the man (or boy) who might father a child and then abandon it. His cooperation was induced by a simple strategy: Welfare agencies agreed to provide aid to the mother and child on condition that the agency be authorized to seek out the absent father and, if he had a job, dock his pay for child support. This innovation had rather the opposite effect of another rule, still in effect in several states, which denied mothers and children aid if an employable male were found on the premises. Instead of encouraging fathers to leave, the new rule encouraged them to take more responsibility from the start.16

  Alternatively, welfare agencies held the parents of the unmarried teenagers financially liable for their childrens’ plight. The boy’s parents would bear an equal share of the responsibility with the girl’s. (A sponsor of such legislation in one state offered a modest hope that the provision would induce parents to “at least talk about the subject [with their children] before there’s an unwanted pregnancy.”)17 A third, related approach involved assigning partial responsibility to family members when calculating the aid due to the claimants. Childrens’ assets would be considered, for example, in deciding whether their elderly parents needed welfare.18 The intent and effect here was to induce the family to help its wayward members take greater personal responsibility in advance of any difficulties, and simultaneously to render their insistence on such responsibility highly persuasive.

  In all these instances, public welfare remained a last resort. The idea was not simply to cut costs to the public budget—although that was an aspect as well—but rather to tap the potential of the recipient’s family to encourage responsible behavior, and at the same time to affirm these relationships by sharing responsibility. There remained one central problem, however: Those who were asked to share the responsibility for the needy were often in the same desperate straits as recipients. Runaway fathers, the parents of wayward teenagers, and the children of the elderly poor were apt to be as needy as those whom they were to influence. A group comprised primarily of needy people may not have the resources to both ameliorate hardship and inculcate responsibility. It is differences in condition—the coexistence of prosperity and want within the same community—that makes social insurance workable. Thus the principle of group responsibility is of limited utility so long as it is confined to the welfare system.

  Many of the poor in America have remained outside the groups in society with resources to help them gain responsibility. Being unemployed, or at least unsalaried, they have had no access to corporate-sponsored prevention programs. Living together in poor communities, they have been too readily shunned by health maintenance organizations or other group insurance plans, which regard them as too risky. So long as “the poor” exist as a separately identifiable population, therefore, they continue to be locked out of the very organizations that might otherwise best help them avoid perpetual dependence.

  CHAPTER 16

  THE FABLE OF THE FISHERMAN (REVISED)

  1

  The reigning version of the basic American myth of the Benevolent Community tends to neglect the responsibilities that must accompany social membership. This invites inefficiency and, often, unfairness. It also tends to lose sight of the function of community itself, and the benefits that come to all with a broadening of the concept of membership. In the transformed world that America inhabits, the second oversight is particularly dangerous.

  As has been observed, the elderly poor have been entitled to social insurance; poor children, to welfare. The two spheres have been separated by more than different legal and bureaucratic trappings. They have rested on different rationales. Aid to the elderly is perceived as a means of spreading the risks of ill health and poverty in old age. Aid to children is seen as a redistribution of income, justified by social benevolence. The former appears to benefit all of us. The latter, it is assumed, benefits the recipients at the expense of everybody else who transfers his income to them (although some of us might take considerable satisfaction in the thought of our culture’s benevolence).

  Yet the perceptions of these two sets of programs—the one a matter of charity, the other motivated by self-interest—has come to be quite precisely the reverse of reality. Aid to the elderly has become, as we have seen, a massive redistribution from current workers to their predecessors. Contributors are not “investing” in their own retirement, except in the sense that they are perpetuating a system of redistribution from which they hope to gain in the future. But the political will to retain a system whereby workers pay a bonanza to retirees is one thing; the economic capacity to retain it is quite another. The prosperity in retirement of each generation of workers depends on the productivity of the next generation. So it had been for the early waves of Social Security recipients. So it would be for current workers. Yet by mid-1980s it was clear that the number of new workers destined to pay Social Security taxes in the future was destined to fall and the
productivity of each was stagnating. The ability of the next generation of workers to support the current generation—in the way the current generation was supporting its predecessors—was imperiled. Social Security for current retirees was more like charity than like insurance. Conversely, aid to the young was less a matter of redistribution than an investment in our future. Only by cultivating the future economic capacity of today’s children—and, equally importantly, by enlisting them into a culture of mutual obligation—could today’s workers provide for their own retirement.

  2

  This warped allocation of aid, between the young poor and elderly poor, could be explained in part by the simple logic of politics. Elderly Americans vote; children do not. There is more to it than that, however. Liberalism’s standard rationale for aiding the disadvantaged turns on charity. To the extent liberalism appeals to collective self-interest, it argues that to accept continued poverty among the young is to threaten domestic tranquility—to invite robbery, random violence, and vandalism. Conservative disciplinarians have never found this line of argument terribly convincing. In their view the best method of achieving domestic tranquility is to punish miscreants. (That America imprisons a larger fraction of its citizens than any other industrialized nation but South Africa and the Soviet Union, and still suffers the highest crime rate, has not dissuaded disciplinarians from this line of reasoning.1)

  But this debate has steadfastly overlooked the central self-interested argument for public attention to the problems of troubled and impoverished children. In addition to their potential for wreaking havoc, poor young people also have a capacity for generating future wealth. Like all of us they have brains and energies that can be tapped and put to use, or perverted and left to wither. The standard debate has focused on the peril of young minds gone wrong, and how to defend ourselves against them. It has neglected the ghastly waste of young minds left idle.

  Part of this oversight is due to the way we are accustomed to think about people in the productive system. Economists have long regarded the economy as a bundle of resources—land, labor, and capital—which are turned into goods and services. If some able-bodied workers are jobless and factories and machines stand idle, the economy is not living up to its potential, and some corrective measures are needed. But it is assumed that so long as all people who want to work are in fact punching a time clock somewhere five days a week, the potential of the labor force is being fully tapped. People too discouraged to look for work, or who lack the rudimentary skills necessary to hold down even a simple job, are not included in the definition of under-utilized resources. Nor are people who work in menial jobs, whose capacities for creativity and insight lie fallow or never have been developed.

  The idea that people’s capacities are as rigid and immutable as a factory or piece of equipment is incorrect, however. The human brain is the most capacious and flexible of instruments, capable of far more learning and synthesizing than its users typically demand of it. Indeed, if one is to believe neurobiologists, every brain is under-utilized, relative to its capacity when exercised and challenged. A two-year-old child—too young to be bored with life or disengaged from learning—absorbs at a breathless pace. To waste this asset is not only a tragedy for the individual who possesses it, but a loss to us all. Thus we tend to dwell on only the most invisible features of the wastage—the welfare dependency and crime—and not the wasted opportunity.

  There is a fable whose origins remain obscure, but whose moral is familiar to most people who have thought about the problem of poverty: Give a man a fish and he will beg for another tomorrow. But teach him to fish and he will feed himself forever. The metaphor neatly confirms conventional notions about the means and ends of welfare policy. The goal is to make people more independent. But the fable misses an equally important consequence: The new fisherman joins and thus enriches the productive system. Once he learns to catch more fish than he can eat himself, or tires of an all-seafood diet, he starts to trade with the gardener, the butcher, the vintner, the baker—with the rest of us. He expands the network of mutually beneficial interdependencies. Our initial contribution to his education was thus not simply a donation meant to ease his dependency; it was also an investment in our own future prosperity.

  3

  Muscle was once more important than brains for generating wealth. When work literally meant “labor,” when employees were accurately termed “hired hands,” physical strength was a prime asset. But as machines came to be powered by more efficient sources of energy, the importance of muscle receded. The wealth of a society has come over time to depend ever more on the value added by thought. As the world economy has grown more integrated, brains have become the determinists of international advantage. Modern machinery, technologies, and money are increasingly footloose; the only factors of production that remain unique to a nation, and determine what it can sell on favorable terms to the rest of the world, are the minds of its citizens—how they are utilized and interconnected. The capacity of its citizens to generate conceptual value-added is the source of a nation’s standard of living.

  Consider that in 1986 the average Mexican was willing to work for about a tenth of the average American wage. Many of the machines with which he worked were identical to those that equipped his American counterpart; the money to buy the machines came from the same international capital markets; the factories were often similar to American factories, and were sometimes located within a few miles of American cities. Yet Mexico was a much poorer society; had the United States suddenly annexed Mexico, by far the majority of the new American citizens would have been counted below the poverty line. What was the explanation for this striking disparity in wealth? What did American workers have to offer that their Mexican counterparts lacked? Little beyond their membership in a more supportive productive culture. The innate capacities of United States citizens and Mexicans were no different. The difference lay in how this potential was developed and applied. It depended on such advantages as good prenatal care, attention to the acquisition of early skills, good basic education, sound nutrition, good health care, the accessibility to specialized training later on, and a culture of mutually reinforcing, productive relationships.

  By the late 1980s, however, there was disturbing evidence that an increasing proportion of American children were growing up without these advantages. Almost 30 percent of American teenagers did not finish high school. In our largest cities, the dropout rate reached 50 percent. One in five of our young adults was functionally illiterate, unable to perform simple tasks like reading help-wanted ads or writing grocery lists.2 More disturbing still was evidence that growing numbers of American children were suffering from inadequate nutrition and health care, the grim consequences of which would plague them in later life.3

  One answer has been to resign ourselves to this deterioration and simply look for ways to keep even the most inept and unambitious youths busy once they reached working age. Some have argued that we should reduce the minimum wage and create “enterprise zones,” sheltered from taxes and regulations, where the untalented could undertake the sorts of jobs that would otherwise drift overseas to low-wage nations. But to compete with places like Mexico, while doing the same jobs as Mexicans, these new entrants into the work force would have to accept wages far below the present minimum. There is no reason why customers would be willing to pay any more. Our poor young people would end up with jobs, but the jobs would lead nowhere except to further types of Third World employment.

  Others have preferred to place their faith in the service sector of the American economy, which has remained largely sheltered from international competition. It was here that America had created millions of new jobs during the 1970s and 1980s. Many of these jobs were challenging and rewarding positions as doctors, architects, and so on; most were not. The majority involved the kinds of mindless tasks that the uneducated poor could perform—as custodians, security guards, waitresses, clerks, and orderlies. Jobs like these would provide
a modicum of financial independence. But they lacked any possibility for future advancement or learning. More to the point, these types of jobs offered “us” little in return. Compared to the production of service-goods whose added value was primarily conceptual (involving design, engineering, programming, customizing), menial tasks like these contributed only marginally to our common wealth. The scope for continuous productivity improvements was limited; they made our lives less troublesome but hardly richer; they did not summon goods and services from abroad.

  The core challenge has been misconstrued as finding something for the disadvantaged young to do forty hours a week in lieu of plotting mayhem. It has never been difficult to come up with almost any number of menial chores. The real challenge, if we were to take seriously the idea of national economic wealth, is to develop the potential in all of us for creating value. A society whose young were taking on thoughtless jobs in ever greater numbers squanders its most precious resources. But this loss, again, has remained invisible.