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Born Poor?

Santa Fe economist Samuel Bowles says you better get used to it

February 3, 2010, 12:00 am

If Bowles has the history of wealth figured out all the way back to the Stone Age, shouldn’t he have some practical advice?

Indeed he does. Here, one number will suffice.


OK, that’s a figure Bowles picked out of the air. It’s how much each person might receive under a key economic reform he supports: universal welfare.

It could also be called direct government investment in everyone. After all, taxpayers already invest in strangers’ children through the public schools before turning them loose with nothing.

“Suppose instead what we did is this: We said, ‘Look, when somebody turns 18, he gets a quarter of a million dollars and, after that, you’re on your own,’” Bowles says. “Once you’ve got your quarter-million, you’ve got to make a decision: ‘Should I go to college or do I want to start a business?’—which you could do with a quarter of a million.”

This is a variant of an old idea, more recently popularized—at least in Europe—by the Belgian economist Philippe Van Parijs. Under his “basic income grant” proposal, the government would redistribute wealth so that everyone has enough to live.

“They just get a check. And they get it no matter what—Rockefeller, the poorest person in America, everybody gets it,” Bowles says. “There’s nothing you can do to get more; there’s nothing you can do to get less.”

Such a system eliminates the disincentives to work in the current social safety net. “The problem with the welfare system is that as soon as you get a job, they start taking your money,” Bowles says. “This basically says, ‘You’ve got this nest egg and, if you go out and get a job, you keep the whole thing—except for whatever taxes you pay.”

Can you hear the Friedmanites groaning? “It sounds very radical,” Bowles says, “but it’s very consistent with economic ideas.”

It makes as least as much sense as giving hundreds of billions of dollars to Wall Street’s largest banks—some of which helped cause the recession—so that the banks can lend it back to taxpayers at outrageous interest rates.

Bowles’ suggestions—radical yet oddly conservative—also mesh well with his general approach to economics. The SFI professor isn’t as easy to pigeonhole or dismiss as other lefties who believe the assumptions of mainstream economics—for instance, that people behave rationally—are bogus.

“Sam Bowles is somebody who straddles the boundary. He maintains the idea that there should be radical redistribution—that the current system is a terrible system in a variety of ways—but he’s also somebody who believes the methodological tools of economics have some real value,” GWU’s Farrell says. “I think what he’s doing is very smart. And it actually has some promise for a future, coherent research agenda.”

There’s also promise in some Bowlesian projects that are already underway.

For instance, in the past few years, Community Action New Mexico has helped approximately 800 New Mexicans set up “individual development accounts”—basically savings accounts on steroids. After completing a financial-ed class, IDA holders eventually have their savings matched 4-to-1, giving them a start toward buying a home, paying tuition or starting a business.

Community Action’s Porter calls it economic development “that works for the individual as well.” The IDAs, she says, have led to 93 new businesses and 67 home purchases, and have sent 110 people to college.

The state’s investment so far has totaled approximately $2,500 per IDA. If you divide New Mexico’s contribution by the number of jobs created by homegrown, IDA-supported businesses, Community Action’s approach is approximately $10,000 cheaper per job than the corporate subsidies Richardson supports.

The IDAs aren’t ideal. Not everyone qualifies. And what if somebody starts a business that fails, buys a home that falls in value or decides to study a vanishing trade (say, journalism)?

This is where Bowles has yet to be heard.

Liberals tend to think of inequality as a matter of class and race—and that’s true, he says. But individual success hinges on a big X factor: “There’s a lot of luck involved,” Bowles says.

No politician’s promise can remove that element of unpredictability. Which means the smart policy, in Bowles’ view, is for the government to care for people who suffer misfortune through no fault of their own. This is social security in the small “s” sense—an idea that was forgotten when the dominant Chicago School put thinkers like Bowles in exile.

“The whole idea of social security,” Bowles says, “is to insure the unlucky by having the lucky pay a little extra.”

Three more numbers, none of them lucky:




The first is how many years have passed since Bowles was inspired by King to “put his heart and his head together” and study economic inequality.

The second is the Gini measure of inequality for the US back then, a level comparable to other wealthy nations like Japan or Israel today.

The third is the most recent US Gini, as calculated by the Census Bureau. It’s at a level comparable to the Philippines, a former colony of islands where every other person lives on less than $2 a day, or Rwanda, an even poorer country in Central Africa that was home to a genocide 16 years ago—a country whose name is often synonymous with hopelessness.  SFR




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