Inequality and Growth at Home and Abroad
Below are the remarks of John Podesta, Chair of the Center for American Progress, as delivered at Georgetown University Law Center’s annual Faculty Scholarship Luncheon on April 24, 2013.
Good afternoon. I want to begin by sincerely thanking Dean Bill Treanor for inviting me here to speak with you all today. It’s truly an honor to be here on the day that you celebrate each other’s scholarship. I think the depth and breadth of research, analysis, scholarship, and policy advice at Georgetown Law is amazing. I deeply enjoy being able to participate in this faculty as a visiting professor and look forward to each semester I’m able to teach here at my alma mater.
If you’ll indulge me, I want to talk today about two topics that I am currently immersed in but that don’t usually get linked in the same conversation: ending extreme poverty abroad and the deep challenges we face around inequality here at home.
To give you some context, last summer I was named by U.N. Secretary General Ban Ki-moon as 1 of 27 members of a high-level panel on the post-2015 development agenda. The panel is tasked with making recommendations for a framework to guide global development after the Millennium Development Goals [or MDGs] expire at the end of 2015.
Some people think of me as more of a domestic-policy person since I have spent my career on Capitol Hill and at the White House working on issues from federal budget and tax policy to government secrecy. But that little bit of Jesuit DNA in me has always drawn me to work on addressing the needs of the poorest of the poor, so it has been a real honor and privilege to serve on the high-level panel alongside government officials, activists, academics, and business leaders from around the world. And I’ve learned so much about the rapidly shifting paradigm of development and in such a short time that I sometimes feel I’ve earned a Ph.D. in development studies over the past year.
What has surprised me is that I am finding that while there are, no doubt, differences, the international development context and the lessons drawn from the successes and failures of the Millennium Development Goals in particular can help inform political and economic decision making in the United States.
The high-level panel has met four times over the last eight months in New York, in London, in Monrovia, and in Bali. In comparison to the process that created the Millennium Development Goals, which was very much like a monologue spoken by the U.N. development experts to the member states and civil society, the post-2015 process has been a dialogue of many passionate and distinct voices. As a member of the high-level panel, I’ve done more than 100 consultations with civil society, activists, women, the disabled, the private sector, and young people about their priorities for development.
The Millennium Development Goals, of course, focused on a wide range of targets, goals, and indicators—everything from cutting the number of people living on less than $1 a day in half to reducing child mortality rates to increasing access to clean drinking water to increasing access to drugs to combat HIV and AIDS. The consultations the high-level panel has participated in around the world have found a similar shopping list of proposals to help end extreme poverty: clean cookstoves, reproductive health care, universal literacy, banking and financial services.
But over and over again, we on the high-level panel hear the message that we won’t bring an end to extreme poverty if we ignore the forces and factors that drive inequality.
It’s the issue of inequality and its solution—the goal of equitable, sustainable growth and shared prosperity—that I ultimately want to consider today. As you all know, inequality, and particularly inequality of income and of wealth, is a topic that has received an incredible amount of attention in the domestic context in recent years. And I do want to talk about our country—about inequality, isolation, and distrust in the United States.
But first, I want us to consider the Millennium Development Goals because I think we can take important lessons from what has and has not worked in this agenda and apply those lessons not only to the post-2015 framework but to the challenges we face here at home.
It’s important to remember that the success of the Millennium Development Goals—where we have seen success was not entirely expected. There were plenty of MDG skeptics back in 2000 and 2001. Nothing resembling a comprehensive global development agenda—an agenda for which the nations of the world would be held accountable—had been attempted before. There were questions about what, if anything, the MDGs would achieve.
With a little less than 1,000 days until the end of the MDGs, I think it is safe to say that this agenda has made the world rethink how we approach development. The MDGs have shown us that international aid can be accountable, progress can be tracked and compared between regions and populations, and we can achieve some remarkable progress together.
The World Bank tells us that the goal of halving the proportion of people living on less than $1.25 per day has been achieved ahead of schedule, for instance. This alone moved some 600 million people out of extreme poverty, a figure we can surely improve upon before the end of 2015. The most recent U.N. progress report on the MDGs says that poverty rates have continued to fall, even in the aftermath of the global economic downturn and, perhaps most significantly, in every region of the world.
And after rising precipitously in the first part of the decade, the number of people dying from AIDS-related causes has fallen by 24 percent since its 2005 peak. This is significant progress and puts us well on our way to achieving an AIDS-free generation.
But there are goals and targets where progress has been uneven and where progress has not been broadly shared. Child mortality is one of these. Overall, we are only halfway toward meeting the Millennium Development Goal of reducing the childhood-mortality rate by two-thirds. Under-five mortality has fallen worldwide, but 82 percent of deaths among very young children now occur in sub-Saharan Africa and southern Asia. These regions now account for a higher overall percentage of child deaths than they did before the MDGs were enacted.
What lessons can we take from these experiences? One is that we need to be considerably more deliberate in the post-2015 agenda about ensuring that the poorest and most marginalized populations and nations are able to share in the world’s progress.
The extreme poor lead lives of extreme isolation. And unfortunately, within countries, the MDGs alone have often been insufficient to reach traditionally disenfranchised populations. Geography, ethnicity, gender discrimination, caste, religion, and conflict have all contributed to this problem. Marginalization does more than hurt the affected individuals, though the harm, deprivation, and fear these groups often face are tragic. But the isolation of traditionally marginalized groups and the extreme poor also hinders and inhibits economic growth. We know, for instance, that as women achieve greater levels of social and political participation, living conditions and public polices improve accordingly. Countries that still systematically exclude women from public life are limiting themselves economically and socially.
We’ve learned the hard way that even the very best and most well-financed programs that intend to lift the poor out of poverty won’t make a dent in some places if families don’t have the right to own land, if women can’t inherit land, if individuals lack a legal identity, and if people are under constant threat of violence. We know we won’t achieve broad-based and inclusive economic growth if government budgets remain cloaked in secrecy or if a country’s natural resources are looted by a kleptocracy.
This broad agenda of combating the isolation faced by the poorest of the poor by better connecting them to the economic, social, and political lives of their countries is one that I have repeatedly advocated at the high-level panel meetings. Given the enormous disparities between regions and countries in progress toward achieving the Millennium Development Goals, this message of improving connectivity in order to address the root causes of poverty, and not just its symptoms, is one that resonates.
We on the high-level panel are now in the process of preparing our report to the secretary general, which is due at the end of May. Including new proposals for specific, measurable goals and targets—as in the Millennium Development Goals—is important for accountability to the agenda. But in addition to a set of goals, the post-2015 agenda needs a unifying vision—a series of aspirations that cut across and tie together individual targets for a broader purpose.
Addressing inequality, boosting livelihoods with social protection, and ensuring that marginalized populations are reached by development efforts is one part of that vision. Connectivity to economic, physical, and social infrastructure is another. Making development both environmentally and economically sustainable is similarly important. Each of these broader narratives ought to have its place in the post-2015 agenda.
The Millennium Development Goals have also demonstrated something that will be familiar to many of you. We can take an important lesson in economic policy from the MDGs, namely that increasing GDP is insufficient in and of itself to guarantee widely shared prosperity. Equitable growth is difficult to achieve without a trusted and transparent government, without a social safety net to provide resilience in the face of economic shocks, and without active investments in education, health care, and infrastructure.
This is as significant for policymaking and politics in the United States as it is overseas. For generations America’s economic dynamism has been shaped and sustained by the strength of a broad and prosperous middle class and by the efforts of lower-income families to move up the economic ladder. But over the last 30 years, with one brief interruption in President [Bill] Clinton’s second term, changes in the distribution of income, wealth, and provision of opportunity have altered the formula that helped make the United States a global economic powerhouse. Economic inequality has returned to levels unseen since the Roaring ‘20s, putting the United States squarely in the top one-quarter of the world’s most unequal countries.
It seems as though the American Dream is disappearing before our eyes. We tell our children that if they work hard, stay in school, respect one another, and play by the rules, they will be successful. We tell talented children from low-income families that they can move into the middle class through education and entrepreneurship. But in recent decades, economic mobility—which is the measure of a child’s ability to occupy a different position on the income ladder than his or her parents did—has fallen well behind mobility in Canada, Britain, and other advanced economies.
As the wealthiest Americans accrue ever more income and wealth; as middle-class wages stagnate and indeed fall; as the costs of important services like health care and education rise faster than the rate of inflation; as the poor face ever more stringent rules governing food, housing, and cash aid; as all of these trends continue, our common vision as a country becomes tested and frayed.
I don’t think it’s a coincidence that today, with income inequality at an all-time high, trust in government is at an incredible low. Washington must look strange indeed to the single mother working two jobs to make ends meet or for the service worker who has been out of work for more than a year or the college student who didn’t finish his degree but still faces a mountain of debt.
We urgently need to find policies that will promote sustainable, equitable economic growth. Conservatives in Congress and on cable news like to say that “we can’t afford” this program or that one—spending on education here, low-income heating assistance there. The sequester really doesn’t matter until it interferes with the shuttle to New York City. What we really cannot afford is to allow our middle class, the most powerful engine of economic growth the world has ever seen, to continue to stagnate and decline.
We need to find policies that are actionable and accountable, much as the post-2015 development agenda will need specific, measurable goals and targets. But I would go further and say we also need a new vision for our country and our politics.
The think tank I founded, the Center for American Progress, bills itself as a progressive organization, and I think of myself as a progressive. Progressivism at the turn of the 20th century, of course, with roots in both major parties, was born out of a response to the sweeping social changes of the industrial revolution. The Progressive Era helped bring down political corruption and curb the labor and economic abuses of robber-baron capitalism. The Progressive Era helped create the regulatory regime that we still rely on today to make sure our food and consumer products are safe. The Progressive Era saw the beginnings of the American tradition of land conservation under [President] Teddy Roosevelt. And the Progressive Era saw the rise of an expansive American middle class.
Progressives today, of course, differ somewhat from progressives of the early 20th century. But we need a vision that maintains individuality and individual agency but also acknowledges the enormous debt we owe to one another. None of us has made it on our own. We are in this room today because of common investments we and our forebears made—investments that were both deliberate and accidental. We didn’t die from smallpox or polio because vaccines were developed and paid for. I attended public schools in Chicago and received a public scholarship to help pay for my college education. Closer to the present day, some of us, I’m sure, took the government-run Metro to get here, while others drove on government-financed roads.
But the more unequal we become as a country, the harder it is to garner public support for investments like these. Sometimes I worry we are trapped in a negative feedback loop: As inequality increases, trust in government declines, enabling the most antigovernment forces to justify cutting public programs, thereby exacerbating inequality and further decreasing trust. Daron Acemoglu and James Robinson’s important book, Why Nations Fail, provides a chilling analysis of where that cycle ends.
The Law Center is a somewhat unusual institution in that so much of our scholarship here is already very policy-oriented and very engaged in the debates of the day. But I think the academic community more broadly—here at the Law Center and particularly in the more cloistered law schools and economics departments around the country—have an enormously powerful role to play in informing this conversation. While researchers have done a great deal to document the rise in inequality over the last 30 years, we know less about what has been driving those trends and even less about what we can do to reverse them. We need better information on the relationship between inequality and economic growth because we need to know what effect our increasingly unequal society will have on our prosperity as a nation. And we need to know which policy levers are best equipped to make our economy work for all Americans again.
As we’ve seen from 30 years of trickle-down ideology and as we’ve seen from the uneven progress of the Millennium Development Goals, we simply cannot count on progress to be widely shared unless we are deliberate about ensuring that it is.
The Center for American Progress is launching a new initiative focused on spurring academic research into inequality and economic growth. It’s time for academics to help bridge the gap between rigorous research and public policymaking. The parameters of the work we will undertake and support under this new initiative are still being finalized, but I’m enormously excited by what I think the intellectual energy of American academia can bring to these issues.
[University of Massachusetts] economists Samuel Bowles and Herbert Gintis have shown that 50 percent of wealth variation in the United States and 35 [percent] to 43 percent of income variation is due to the wealth and income of a person’s parents. Of course, we’ll never have a perfectly egalitarian or meritocratic society. I am not sure any of us would want such a world even if it was achievable. Competition can be beneficial, and families and friends will always strive to help their own.
But I think that we certainly do not need to accept this status quo. The American public in my view will support concerted public efforts in education, in research and development, in infrastructure, and in health care if they believe that they will work—and specifically, that these investments will work to build shared prosperity. But we need academic research to demonstrate to the public that the empirical evidence shows what their hearts already believe: that the American economy and our American democracy is at its strongest when we’re playing on a level field and when all parts of society can enjoy the fruits of progress. We need academic research to help policymakers identify those investments that will make our eventual success less dependent on who our parents happen to be, whether we’re from Milwaukee or Monrovia.
Thank you again for having me here today, and I look forward to taking your questions.
John Podesta is Chair of the Center for American Progress.
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