*Editor's Note: This is an experimental change in the must read section. This week it comes with an excerpt, which will make for a slightly longer read overall. Write us and tell us what you think. In this terrific and thoughtful piece, Slate's John Swansburg looks at what he calls one of America's most pernicious myths, the myth of the self-made man:
The yawning gap between the dearly held ideal of the self-made man and the difficulty of actually improving your station in America, particularly if you’re poor, made me wonder about the utility of the rags-to-riches story. Is it a healthy myth that inspires us to aim high? Or is it more like a mass delusion keeping us from confronting the fact that poor Americans tend to remain poor Americans, regardless of how hard they work?
The very language we use to describe the self-made ideal has these fault lines embedded within it: To “pull yourself up by your bootstraps” is to succeed by dint of your own efforts. But that’s a modern corruption of the phrase’s original meaning. It used to describe a quixotic attempt to achieve an impossibility, not a feat of self-reliance. You can’t pull yourself up by your bootstraps, anymore than you can by your shoelaces. (Try it.) The phrase’s first known usage comes from a sarcastic 1834 account of a crackpot inventor’s attempt to build a perpetual motion machine.
I wanted to know how the self-made ideal got lodged so firmly in the American mind that even a finding that France—France!—is a better place to move on up has done little to diminish our sturdy belief in our exceptionalism. What I found is a mythology at once resilient and pliable, one that has been adapted by its purveyors again and again to suit the needs of the times. Benjamin Franklin is undoubtedly the original self-made man, but there’s only a passing resemblance between him and Andrew Carnegie, an exemplar of the ideal from a century later.
In this longish piece in McKinsey, venture capitalist Nick Hanauer and McKinsey's Eric Beinhocker contend that, while it is "correct to believe that capitalism has been the major source of historical growth and prosperity, we have been mostly incorrect in identifying how and why it worked so well":
The economy—a complex, dynamic, open, and nonlinear system—has more in common with an ecosystem than with the mechanistic systems the neoclassicists modeled their theory on. The implications of this emerging view are only just beginning to be explored. But the two of us believe it has fundamental implications for how people think about the nature of capitalism and prosperity. Significantly, this view shifts our perspective on how and why markets work from their allocative efficiency to their effectiveness in promoting creativity. It suggests that markets are evolutionary systems that each day carry out millions of simultaneous experiments on ways to make our lives better. In other words, the essential role of capitalism is not allocation—it is creation.
Once we understand that the solutions capitalism produces are what creates real prosperity in people’s lives, and that the rate at which we create solutions is true economic growth, then it becomes obvious that entrepreneurs and business leaders bear a major part of both the credit and the responsibility for creating societal prosperity. But standard measures of business’s contribution—profits, growth rates, and shareholder value—are poor proxies. Businesses contribute to society by creating and making available products and services that improve people’s lives in tangible ways, while simultaneously providing employment that enables people to afford the products and services of other businesses. It sounds basic, and it is, but our economic theories and metrics don’t frame things this way.
Today our culture celebrates money and wealth as the benchmarks of success. This has been reinforced by the prevailing theory. Suppose that instead we celebrated innovative solutions to human problems.
Over at Market Watch the Center for American Progress' Michael Madowitz says wage stagnation is one of the biggest issues facing the economy:
For workers, the good news is that hiring really is picking up steam, and the Fed isn’t — and shouldn’t be — hitting the brakes. However, the bad news is that we don’t see any signs of wage pressure and shouldn’t expect wage increases anytime soon, especially with this many prime-aged workers on the sidelines. Absent action from lawmakers, we will need a string of job reports like this one before we see wage growth start to reach most Americans, which is a real problem for an increasingly squeezed middle class.
In this acerbic piece on the minimum wage, Forbes contributor Liz Ryan says raising it won't break well-run businesses:
The message to employees working minimum-wage jobs is “A rhesus monkey could do your job. Sorry if I keep forgetting your name, but you minimum-wage drones all look alike to me.” When employers whine and wail about proposed increases in the minimum wage, they are bewailing not government interference but their own inability to manage a business. Anyone who’s paying the minimum wage in the talent marketplace today has no business being in business in the first place... Can you imagine running your business in such a way that a tiny shift in the supply chain, buyer preferences or any other naturally-oscillating aspect of the business ecosystem would put you out of business? Yet this is what minimum-wage slave-labor CEOs want us to believe: that a fifty-cent-an-hour uptick in the mandated minimum wage would throw their finances so out of whack that they’d go out of business or have to lay off people. That is ridiculous. Invite me over, my darling, open the books and I will show you fifteen ways to save money or make money apart from wages. Anyone with an ounce of business sense could lend the same hand.
The Huffington Post reports on an Amazon worker suit for being uncompensated during mandatory theft screenings:
Busk told The Huffington Post last year that he earned $11.60 an hour working the day shift at the warehouse and $12.35 working nights. As a temp, he didn't get any health care coverage or paid leave. He spent his 12-hour shifts scampering around the distribution center filling orders. At the end of the shift, all he wanted to do was hop in his car and get out of there. Instead, he had to wait in a screening line. "You're just standing there, and everyone wants to get home," Busk, 37, said at the time. "It was not comfortable. There could be hundreds of people waiting at the end of the shift." ...According to Schnapper, the impact of the Supreme Court case could go well beyond Amazon's distribution workforce. Depending on how broad the ruling is, a decision against Busk could essentially lead to more off-the-clock work, he said. By way of example, Schnapper said a retailer could perhaps decline to pay a cashier for the time spent tallying the cash in the register at the end of the day, on the grounds that it isn't a vital part of the job.
In Fortune Magazine, Stephen Gandel explores why people on Wall Street get paid so much:
When I have asked activist hedge fund managers or Wall Street bankers who have never worked a day of their life outside of finance why they think they can walk in and tell a CEO who has spent their entire career at their company or in one industry, how to run their business they say, “We know how to allocate capital.” It’s such a common response that I always assumed it was BS. But maybe there’s something to that. Corporate America spends more and more of its resources every year rewarding shareholders. Happy shareholders means you can raise more capital. But what if you don’t really need capital, or less than you used to. In a service and technology driven economy — which is inherently less capital intensive — it makes sense that a company should devote more of its money toward its workers. Wall Street got that a long time ago, and that’s why Wall Street and Wall Streeters have done better than the rest of us (excluding the financial crisis of course). Until the rest of corporate America also gets that, the Wall Street versus Main Street pay gap is never going to shrink.
Over at Salon, Sean McElwee looks at new research that he says debunks arguments that high levels of inequality have nothing to do with poverty:
Once rampant inequality did become an increasingly mainstream concern, Martin Feldstein insisted that the question is “not inequality but poverty.” Economists believed that redistribution slowed down economic growth, and that attempts to reduce inequality would, as a result, only worsen poverty...
There is now a burgeoning literature showing that these assumptions aren’t true, and that inequality actually reduces growth. That’s because the reasons for accepting inequality were actually backward. Instead of motivating the rich to invest, higher inequality meant that the poor took on more and more debt, destabilizing the economy. Without enough poor and middle-class families consuming their products, businesses had fewer customers, and less revenue. Further, instead of providing the poor and middle class an incentive to better their lives, higher inequality gave the rich a reason to pull up the ladder, leaving the poor behind. Instead of working harder, the rich sit back on their wealth. The poor and middle class, disenchanted by lack of opportunity, have less money to invest in their own education (and are therefore are increasingly burdened by debt). Inequality thereby reduces growth by reducing both demand and upward mobility.
In the American Prospect, Harold Meyerson says Democrats need to revisit their policy approaches to better tackle inequality and the shrinking middle class:
The single most helpful reform would be to restore workers’ bargaining power. With the rate of unionization in the private sector falling beneath 7 percent, the ability of workers to bargain collectively for improvements in their pay, benefits, or hours is effectively nonexistent. Efforts to shore up their power by strengthening their capacity to form unions without fear of being fired, however, failed during each of the four most recent Democratic presidencies (Johnson’s, Carter’s, Clinton’s, and Obama’s)... [Another] way to restore the link between the economy’s growth and most Americans’ incomes would be to enlist corporate tax reform in that battle. As William Galston, the onetime leading light of the centrist Democratic Leadership Council, has argued, lowering taxes on employers who give their workers a wage increase commensurate with the nation’s annual productivity growth, while raising taxes on employers who don’t, would go some of the way to reconnecting growth to income.
In the New York Times, the University of southern California's Edward Kleinbard argues boosting government revenue to help reduce inequality does mean you have to tax the rich:
Reformers have blundered by confusing what seems fair — more progressive taxation — with what is actually important, and lacking: a progressive fiscal system. As other developed countries have figured out, reducing inequality is not about where the money comes from, but where the money goes, and how much of it is spent...
Our peer countries typically rely on large, regressive tax systems to mitigate income inequality far more than we do.
In the New York Daily News, Christopher Ketcham looks at the transformation of New York City into a place that fewer and fewer people can afford. And Susan Cagle in Next City says cities have been getting a raw deal on municipal debt while Wall Street makes a killing:
Municipal bonds used to be a city’s way of funding a big infrastructure project that would otherwise be beyond the reach of a general fund — almost everyone has needed a loan now and then. But as tax revenue fell and expenses rose, cities increasingly borrowed against payments they’d contractually promised to their own workers. When those deals didn’t pan out, some cities made even bigger bets, swapping their debts for variable interest rates offered by large financial institutions. Many were losing bets. A handful of cities and counties went bankrupt balancing the debt on top of myriad other financial obligations. Others are stuck with huge interest payments on top of their unpaid principles. Meanwhile banks continue to rake in the profits at the expense of taxpayers, despite federal inquiries and settlements. Thanks mostly to a newly recovering market, American cities are limping back toward solvency, and the municipal bond market is making a comeback. But rebound aside, urban America remains sorely dependent on Wall Street and continues to pay dearly for the relationship — and it’s not clear how broke municipalities can get out of the bind.
In depressing news, Orlando's poverty rate is approaching 20 percent, reported Bloomberg news this week:
It costs a family of five about $1,500 for a four-day pass to the theme parks at Disney World near Orlando, Florida. It takes Weston Vlier, who drives a bus there, four weeks to earn that much. "If nobody is able to help us out with food, we just don't eat," said the 42-year-old father of three who makes less than $25,000 per year. "I can't even pay my rent this week." Vlier belongs to a growing class of working poor in Orlando, which has the lowest median pay among the 50 most- populous American metropolitan areas, according to U.S. Labor Department data. Three of the city's largest employers, including Walt Disney Co., increased starting pay this year. Even after Disney raised its minimum wage to $10 per hour, Vlier still lives below the federal poverty line.
In this Heron Field Notes, we highlight a couple of excerpts from the Ford Foundation roundup of thought leaders who weigh in on the importance of aligning the interests of the market you work with and the society you live in. You also might be interested in this piece by Jessica Leber in Fast Company on spend-down foundation Atlantic Philanthropies and its founder Chuck Feeney:
If the goal is to increase charitable giving, Feeney’s “giving while living” philosophy may be particularly well-suited for today’s generation of philanthropists, who live at a time when growing income inequality is a global flashpoint. “Giving while living” is a more radical version of Gates’ and Buffett’s Giving Pledge, which asks billionaires to donate at least half their wealth, but not necessarily to have it spent in their lifetimes or become deeply involved in how it’s used. (Buffett reportedly described Feeney as the “spiritual leader” of the Giving Pledge a few years ago.) It’s also a reflection of the more recent mindset of consumers who grapple with the broader social repercussions of all their spending--whether that means buying fair-trade coffee and greener energy or launching a social good venture... ...Inequality is an increasingly destabilizing force in today’s global economy, and in to answer that, today high net-worth philanthropists are giving more than ever. But it's worth questioning the system that creates billionaires, even those with the best philanthropic intentions. Wouldn’t it be better to have a society that mitigates the accumulation or inheritance of massive wealth and creates more equality through government investments and policy, rather than relying on voluntary gestures and individual whims?