As part of our regular series on how to be more strategic in our charitable giving, we’re pleased to present this piece from Gonzalo Schwarz, president of the Archbridge Institute. Archbridge explores the root causes for economic inequality and faltering social mobility and its impact on the American Dream. In this piece, he discusses how donors can support efforts that seek to get to the root problems of inequality in America.
This past decade has been marked by lackluster economic growth, extreme social and political division and unrest. Working age men are dropping out of the labor force at unprecedented rates, and participation in civic life is declining. Our academic and cultural leaders dogmatically claim that income inequality is underscoring it all.
Along with this ironclad consensus comes another that firmly believes government can and should solve this problem, prompting policy solutions aimed exclusively at rectifying material inequality.
But far from alleviating poverty and reducing income inequality, these policies generally make things worse. Elected officials of every political persuasion increasingly float promises of even more government intervention into every aspect of life including more wealth redistribution, trade protectionism, increases in the minimum wage, and other employment regulations.
I founded the Archbridge Institute on the belief that this is a misguided focus. What has mattered now and throughout American history is the belief that everyone should have a shot at the American Dream of upward mobility, earned success, and personal achievement.
Underlying this belief is the trust in a simple truth, one in which we are now in danger of forgetting—given the opportunity, people can and will improve their own lives and the lives of those around them. This should be the focus of all our policy conversations.
The Current Conversation on Inequality
Current conversations on mobility and inequality revolve around what the 1 percent can be forced to do for the 99 percent. However, we should focus more on the 44%. According to our latest research, that is the percent of people who are born in the lowest income quintile and remain there as adults. Even though 73% of adults have higher incomes than their parents in absolute terms, meaning the American Dream still abides, 44% of the poorest people still can’t climb past the bottom rung of the income ladder.
There are a number of major philanthropic and research institutions that have grabbed the attention of influential entrepreneurs and policymakers by working on initiatives to reduce inequality. Unfortunately, they are approaching the problem from the wrong direction–attacking symptoms rather than causes, sometimes with counterproductive results.
Private Philanthropy’s Role
Fortunately, there are many things that private philanthropy can do to improve economic mobility and shift the debate away from inequality to a focus on economic mobility. Private philanthropy can focus on charities and initiatives that rekindle a culture of personal responsibility, earned success and entrepreneurship.
Our vision at the Archbridge Institute is a world where social and economic mobility is a dynamic process, uninhibited by the policy barriers or personal barriers that prevent people to find their way up the ladder. In our vision, culture, character and personal agency are reinforced through private initiative and self-reliance in a society that prizes entrepreneurship. If barriers can be removed, the potential for people to lift their own lives is unlimited.
Sadly, these ideas are not shared by the majority of academic and policy professionals. Building this case will take time and effort. In doing so, academic and policy research should expand beyond what are considered traditional policy topics in this area.
Instead, we need to build a consensus and focus more on key structural economic and institutional indicators like rule of law, entrepreneurship, family structure, civic engagement, and social capital. These topics are often overlooked by traditional economics, but are linked to trends regarding economic mobility.
The economic mobility debate suffers from a lack of reliable and well-interpreted data and meaningful analysis of the cultural and social factors behind economic stagnation.
For example, Utah boasts the highest rates of mobility, where people whose parents were in the bottom income quintile moving out of it themselves. Utah also relies heavily on religious institutions and private charities to work personally with those in need rather than expensive and far reaching government programs. It might seem obvious that this is not just an incidental coincidence or statistical anomaly, but the whole of our current academic and policy discussions treat it that way.
Policy Change Isn’t Enough
But while building an academic consensus and translating that into policy change can accomplish a great deal to lift the artificial barriers people face when seeking to improve their lives, it is only half the story. The other half is addressing personal and cultural barriers to flourishing, and here the role for government or traditional public policy research organizations in lifting the natural barriers people face is much more limited.
These natural barriers cannot be lifted by cookie-cutter government programs that focus on purely material concerns, but rather must be changed by the institutions of civil society. These institutions are flexible, community based, and highly personal. Empowering and growing these institutions is a far more effective means to lifting the natural and often personal barriers people face when seeking to improve their lives and climb higher up the income ladder.
There is exemplary work being conducted on these latter issues with organizations like Flourish Now, which was created by the Foundation for Government Accountability, as well as coalitions of these types of organizations such as the Better Yes Network and Stand Together. Organizations such as these are leading the charge in a field that desperately needs to be connected to traditional policy work. Part of our own work at Archbridge is an attempt to create an information superhighway that will connect these two sides of the poverty alleviation coin and allow us to lift barriers to economic mobility through a more holistic approach.
As Arthur Brooks is fond of noting, people are assets to develop and not merely liabilities to manage. A sole focus on alleviating material poverty and inequality fails to foster an environment where individuals can be restored and truly grow.
This can only be achieved when private philanthropy supports more impactful and rigorous research on the structural barriers preventing economic mobility. We need to fight for the 44 percent, but that does not mean fighting against the 1 percent. If we can succeed in lifting barriers, people will succeed in lifting lives.
Gonzalo Schwarz is the founder and president of the Archbridge Institute. His research interests are economic mobility, economic development and monetary policy. He was until recently the director of Strategic Initiatives at Atlas Network. He holds an MA in economics from George Mason University and a BA in economics from the Catholic University of Bolivia. He has lived in five countries throughout his life, including Uruguay, Israel, Ecuador, Bolivia, and the United States. Gonzalo lives in Dumfries, Virginia with his wife Stephanie and two kids.