How "baby bonds" could help close the wealth gap
-
0:01 - 0:03There is a narrative,
-
0:03 - 0:09an idea that with resilience,
grit and personal responsibility -
0:09 - 0:13people can pull themselves up
and achieve economic success. -
0:14 - 0:17In the United States
we call it the American dream. -
0:17 - 0:20A similar narrative
exists all over the world. -
0:21 - 0:24But the truth is that the challenges
of making this happen -
0:24 - 0:28have less to do with what we do
-
0:28 - 0:31and more to do with the wealth position
in which we are born. -
0:31 - 0:34So I'm going to make the case
that the United States government, -
0:34 - 0:36actually that any government,
-
0:36 - 0:39should create a trust account
for every newborn -
0:39 - 0:42of up to 60,000 dollars,
-
0:42 - 0:45calibrated to the wealth
of the family in which they are born. -
0:46 - 0:48I'm talking about an endowment.
-
0:49 - 0:53Personal seed capital,
a publicly established baby trust, -
0:53 - 0:58what my colleague William Darity
at Duke University and I -
0:58 - 1:00have referred to as baby bonds,
-
1:00 - 1:05a term that was coined by the late
historian from Columbia University, -
1:05 - 1:06Manning Marable.
-
1:07 - 1:10The reason why we should create
these trusts is simple. -
1:10 - 1:14Wealth is the paramount indicator
of economic security and well-being. -
1:15 - 1:19It provides financial agency,
economic security to take risk -
1:19 - 1:21and shield against loss.
-
1:21 - 1:25Without capital, inequality is locked in.
-
1:25 - 1:31We use words like choice, freedom
to describe the benefits of the market, -
1:31 - 1:36but it is literally wealth that gives us
choice, freedom and optionality. -
1:38 - 1:42Wealthier families are better positioned
to finance an elite, independent school -
1:42 - 1:44and college education,
-
1:44 - 1:46access capital to start a business,
-
1:47 - 1:50finance expensive medical procedures,
-
1:50 - 1:53reside in neighborhoods
with higher amenities, -
1:53 - 1:56exert political influence
through campaign finance, -
1:56 - 1:59purchase better legal counsel
-
1:59 - 2:02if confronted with an expensive
criminal justice system, -
2:02 - 2:04leave a bequest
-
2:04 - 2:10and/or withstand financial hardship
resulting from any number of emergencies. -
2:10 - 2:13Basically, when it comes
to economic security, -
2:13 - 2:16wealth is both the beginning and the end.
-
2:17 - 2:21I will frame this conversation
in the context of the United States, -
2:21 - 2:24but this discussion
applies virtually to any country -
2:24 - 2:27facing increasing inequality.
-
2:28 - 2:31In the US, the top
10 percent of households -
2:31 - 2:34hold about 80 percent
of the nation's wealth -
2:34 - 2:38while the bottom 60 percent
owns only about one percent. -
2:39 - 2:41But when it comes to wealth,
-
2:41 - 2:45race is an even stronger predictor
than class itself. -
2:45 - 2:48Blacks and Latinos collectively
make up 30 percent -
2:48 - 2:50of the United States population,
-
2:50 - 2:54but collectively own about seven percent
of the nation's wealth. -
2:55 - 2:59The 2016 survey of consumer finance
-
2:59 - 3:05indicates that the typical black family
has about 17,000 dollars in wealth, -
3:05 - 3:07and that's inclusive of home equity,
-
3:07 - 3:11while the typical white family
has about 170,000. -
3:11 - 3:14That is indicative
of an absolute racial wealth gap -
3:14 - 3:18where the typical black household
has about 10 cents for every dollar -
3:18 - 3:20held by the typical white family.
-
3:21 - 3:23But regardless of race,
-
3:23 - 3:30the market alone has been inadequate
to address these inequalities. -
3:30 - 3:33Even in times of economic
expansion, inequality grows. -
3:33 - 3:35Over the last 45 years,
-
3:35 - 3:38wealth disparity
has increased dramatically, -
3:38 - 3:43and essentially, all the economic gains
from America's increase in productivity -
3:43 - 3:46have gone to the elite
or the upper middle class. -
3:48 - 3:51Yet, much of the framing
around economic disparity -
3:51 - 3:54focuses on the poor choices
-
3:54 - 3:58of black, Latino and poor borrowers.
-
3:58 - 4:00This framing is wrong.
-
4:00 - 4:02The directional emphasis is wrong.
-
4:02 - 4:05It is more likely that meager
economic circumstance, -
4:05 - 4:08not poor decision making
or deficient knowledge, -
4:08 - 4:13constrains choice itself
and leaves people with no options -
4:13 - 4:16but to turn to predatory finance.
-
4:16 - 4:21In essence, education
is not the magic antidote -
4:21 - 4:24for the enormous inherited disparities
-
4:24 - 4:28that result from laws,
policies and economic arrangement. -
4:29 - 4:32This does not diminish
the value of education. -
4:32 - 4:34Indeed, I'm a university professor.
-
4:34 - 4:37There are clear
intrinsic values to education, -
4:37 - 4:40along with a public responsibility
-
4:40 - 4:43to expose everyone
to a high-quality education, -
4:43 - 4:46from grade school
all the way through college. -
4:46 - 4:48But education is not the panacea.
-
4:48 - 4:52In fact, blacks who live in families
where the head graduated from college -
4:52 - 4:54typically have less wealth
-
4:54 - 4:57than white families
where the head dropped out of high school. -
4:58 - 5:03Perhaps we overstate
the functional role of education -
5:03 - 5:07at the detriment of understanding
the functional role of wealth. -
5:07 - 5:11Basically, it is wealth
that begets more wealth. -
5:12 - 5:14That's why we advocate for baby trust.
-
5:14 - 5:17An economic birthright
to capital for everyone. -
5:17 - 5:20These accounts
would be held in public trust -
5:20 - 5:24to be used as a foundation
to an economically secure life. -
5:25 - 5:30The concept of economic rights
is not new nor is it radical. -
5:30 - 5:34In 1944, President Franklin Roosevelt
-
5:34 - 5:37introduced the idea
of an economic Bill of Rights. -
5:37 - 5:40Roosevelt called for physical security,
-
5:40 - 5:45economic security,
social security and moral security. -
5:46 - 5:49Unfortunately, since
the Nixon administration, -
5:49 - 5:52the political sentiment
regarding social mobility -
5:52 - 5:57has radically shifted away from
government mandates to economic security -
5:57 - 5:59to a neoliberal approach
-
5:59 - 6:03in which the market is presumed
to be the solution for all our problems, -
6:04 - 6:05economic or otherwise.
-
6:07 - 6:11As a result, the onus of social mobility
has shifted on to the individual. -
6:12 - 6:17The pervasive narrative is
that even if your lot in life is subpar, -
6:17 - 6:22with perseverance and hard work
and the virtues of the free market, -
6:22 - 6:25you can turn your
proverbial rags into riches. -
6:27 - 6:30Of course, the flip side
is that the virtues of the market -
6:30 - 6:35will likewise sanction those
that are not astute, -
6:35 - 6:38those that lack motivation
or those that are simply lazy. -
6:38 - 6:43In other words, the deserving poor
will receive their just rewards. -
6:45 - 6:48What is glaringly missing
from this narrative -
6:48 - 6:50is the role of power and capital,
-
6:50 - 6:53and how that power and capital
-
6:53 - 6:57can be used to alter the rules
and structure of transactions and markets -
6:57 - 6:59in the first place.
-
6:59 - 7:02Power and capital become self-reinforcing.
-
7:02 - 7:04And without government intervention,
-
7:04 - 7:10they generate an iterative cycle
of both stratification and inequality. -
7:10 - 7:13The capital finance provided by baby trust
-
7:13 - 7:17is intended to deliver a more
egalitarian and an authentic pathway -
7:17 - 7:19to economic security,
-
7:19 - 7:22independent of the family
financial position -
7:22 - 7:24in which individuals are born.
-
7:24 - 7:28The program would complement
the economic rights to old-age pensions -
7:28 - 7:32and provide a more comprehensive
social security program, -
7:32 - 7:36designed to provide capital finance
from cradle all the way through grave. -
7:37 - 7:43We envision endowing American newborns
with an average account of 25,000 dollars -
7:43 - 7:47that gradually rises
upwards to 60,000 dollars -
7:47 - 7:50for babies born into the poorest families.
-
7:50 - 7:52Babies born into the wealthiest families
-
7:52 - 7:55would be included as well
in the social contract, -
7:55 - 7:59but they would receive a more
nominal account of about 500 dollars. -
8:00 - 8:02The accounts would be federally managed,
-
8:02 - 8:05and they would grow at a guaranteed
annual interest rate -
8:05 - 8:09of about two percent per year
in order to curtail inflation cost, -
8:09 - 8:12and be used when the child
reaches adulthood -
8:12 - 8:15for some asset-enhancing activity,
-
8:15 - 8:18like financing a debt-free
university education, -
8:18 - 8:21a down payment to purchase a home,
-
8:21 - 8:24or some seed capital to start a business.
-
8:25 - 8:29With approximately four million babies
born each year in the US, -
8:29 - 8:34if the average endowment of a baby trust
is set at 25,000 dollars, -
8:34 - 8:37the program would crudely cost
about 100 billion dollars a year. -
8:38 - 8:39This would constitute
-
8:39 - 8:43only about two percent
of current federal expenditures -
8:43 - 8:47and be far less than
the 500-plus billion dollars -
8:47 - 8:49that's already being spent
by the federal government -
8:49 - 8:54on asset promotion
through tax credits and subsidies. -
8:54 - 8:56At issue is not the amount
of that allocation -
8:57 - 8:58but to whom it's distributed.
-
8:58 - 9:02Currently, the top
one percent of households, -
9:02 - 9:05those earning above 100 million dollars,
-
9:05 - 9:08receive only about one third
of this entire allocation, -
9:08 - 9:13while the bottom 60 percent
receive only five percent. -
9:14 - 9:16If the federal asset-promoting budget
-
9:16 - 9:19were allocated
in a more progressive manner, -
9:19 - 9:23federal policies could be
transformative for all Americans. -
9:24 - 9:26This is a work in progress.
-
9:26 - 9:30There are obviously many details
to be worked out, -
9:30 - 9:34but it is a policy proposal
grounded in the functional roles -
9:34 - 9:37and the inherited advantages of wealth
-
9:37 - 9:41that moves us away
from the reinforcing status quo -
9:41 - 9:44behavioral explanations for inequality
-
9:44 - 9:46towards more structural solutions.
-
9:47 - 9:51Our existing tax policy
that privileges existing wealth -
9:51 - 9:54rather than establishing
new wealth is a choice. -
9:55 - 10:00The extent of our dramatic inequality
is at least as much a problem of politics -
10:00 - 10:02as it is a problem of economics.
-
10:03 - 10:07It is time to get beyond
the false narratives -
10:07 - 10:11that attribute inequality
to individual personal deficits -
10:11 - 10:13while largely ignoring
the advantages of wealth. -
10:15 - 10:19Instead, public provisions of a baby trust
-
10:19 - 10:23could go a long way towards eliminating
-
10:23 - 10:28the transmission of economic advantage
or disadvantage across generations -
10:28 - 10:31and establishing a more moral
and decent economy -
10:31 - 10:35that facilitates assets, economic security
-
10:35 - 10:39and social mobility for all its citizens.
-
10:39 - 10:41Regardless of the race
-
10:41 - 10:44and the family positions
in which they are born. -
10:44 - 10:46Thank you very much.
-
10:46 - 10:51(Applause)
-
10:51 - 10:53Chris Anderson: Darrick.
-
10:53 - 10:57I mean, there's so much
to like in this idea. -
10:57 - 11:02There's one piece of branding around it
that I worry about, -
11:02 - 11:07which is just that right now,
trust-fund kids have a really bad rap. -
11:07 - 11:10You know, they're the sort of
eyeball-rolling poster children -
11:10 - 11:14for how money, kind of,
takes away motivation. -
11:14 - 11:17So, these trusts are different.
-
11:17 - 11:22So how do you show people in this proposal
that it's not going to do that? -
11:22 - 11:25Darrick Hamilton: If you know
you have limited resources -
11:25 - 11:27or you're going to face discrimination,
-
11:27 - 11:28there's a narrative that, well,
-
11:28 - 11:31the economic returns
to investing in myself -
11:31 - 11:32are lower than that of someone else,
-
11:33 - 11:35so I might as well enjoy my leisure.
-
11:35 - 11:37Of course, there's another
narrative as well, -
11:37 - 11:40so we shouldn't get caught up on that,
-
11:40 - 11:43you know, somebody who's poor
and going to face discrimination, -
11:43 - 11:46they also might pursue
a resume-building strategy. -
11:46 - 11:50The old adage, "I have to be
twice as good as someone else." -
11:50 - 11:52Now, when we say that,
we never ask at what cost, -
11:52 - 11:55are there health costs
associated with that. -
11:55 - 11:58I haven't answered your question,
but coming back to you question, -
11:58 - 12:02if you know you're going to receive
a transfer at a later point in life, -
12:02 - 12:06that only increases the incentive
for you to invest in yourself -
12:06 - 12:08so that you can better use that trust.
-
12:09 - 12:11CA: You're giving people
possibilities of life -
12:11 - 12:14they currently cannot imagine having.
-
12:14 - 12:16And therefore the motivation to do that.
-
12:16 - 12:18I could talk with you
for hours about this. -
12:18 - 12:20I'm really glad you're working on this.
-
12:20 - 12:21Thank you.
-
12:21 - 12:24(Applause)
- Title:
- How "baby bonds" could help close the wealth gap
- Speaker:
- Darrick Hamilton
- Description:
-
Hard work, resilience and grit lead to success, right? This narrative pervades the way we think, says economist Darrick Hamilton, but the truth is that our chances at economic security have less to do with what we do and more to do with the wealth position we're born into. Enter "baby bonds": trust accounts of up to $60,000 for every newborn, calibrated to the wealth of their family. Learn how this bold proposal could help us reduce inequality -- and give every child personal seed money for important things like going to college, buying a home or starting a business. "Without capital, inequality is locked in," Hamilton says. "When it comes to economic security, wealth is both the beginning and the end."
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 12:36
Brian Greene edited English subtitles for How "baby bonds" could help close the wealth gap | ||
Brian Greene edited English subtitles for How "baby bonds" could help close the wealth gap | ||
Brian Greene edited English subtitles for How "baby bonds" could help close the wealth gap | ||
Brian Greene approved English subtitles for How "baby bonds" could help close the wealth gap | ||
Brian Greene edited English subtitles for How "baby bonds" could help close the wealth gap | ||
Brian Greene edited English subtitles for How "baby bonds" could help close the wealth gap | ||
Brian Greene edited English subtitles for How "baby bonds" could help close the wealth gap | ||
Joanna Pietrulewicz accepted English subtitles for How "baby bonds" could help close the wealth gap |