What Went Wrong is subtitled, “How the 1% Hijacked the American Middle Class… and What Other Countries Got Right.” According to author George Tyler, America has been going to hell in a hand basket ever since Ronald Reagan was elected in 1980, with only a momentary respite while Bill Clinton was in office. If that viewpoint suggests that Tyler is partisan, that would be correct – i.e., he has worked in government for Democrats Hubert Humphrey, Lloyd Bentsen, and President Clinton.
According to Tyler, the other countries that have got it right are Australia, Denmark, France, Germany, and the Netherlands. These countries, at least according to the metrics that Tyler presents, have outperformed America since 1980. The metrics that Tyler relies on are focused on the economic success of the middle class, something he calls family prosperity. Although the American economy as a whole has outperformed these other economies, most of the progress in America has inured to the benefit of the 1%, which is where Tyler believes it will stay because the trickle-down concept is imaginary.
Tyler is convinced that Ronald Reagan, with his program of Reaganomics, is fully responsible for America’s dire situation. He also places a lot of blame on two of my economic heroes – Milton Friedman and Ayn Rand – for providing intellectual cover for Reagan to implement Reaganomics, which Tyler describes as follows:
- A culture of selfishness instead of a culture of responsibility
- Government is invariably dangerous
- Regulatory capture instead of wariness of corporate influence
- Shareholder capitalism instead of stakeholder capitalism
- Weak corporate governance instead of co-determination
- Tax-cut cultists
- Deficits don’t matter
- Illusory prosperity instead of genuine wealth creation
- Rising income disparity
- Reducing opportunity
- Economic mythmaking
One of Tyler’s big criticisms of the American economy and its shareholder capitalism is its excessive focus on short-term results, which contrasts with the long-term focus of stakeholder capitalism. He also complains that the objective of any economy has to be, not the amount of wealth that it creates, but rather the amount of wealth that is widely dispersed to everyone throughout the economy. I agree heartily with both of those positions, and Tyler does us a service in emphasizing them. And his proposals, such as better corporate governance, resistance to regulatory capture, and improved fiscal responsibility, can move America in a better direction.
But, despite his protestations of ambivalence about the European welfare state, I get the sense that Tyler would be quite comfortable with that, and that causes me to be skeptical of broadly adopting his thesis.
After reading the voluminous, dystopian What Went Wrong (467 scholarly pages), I shifted to something more manageable and upbeat. Giving Kids a Fair Chance by James Heckman is a short, optimistic book (only 132 small pages, with many of the pages blank). The book has three sections:
- Giving Kids a Fair Chance. Like Tyler in the What Went Wrong book, Heckman provides his analysis of the growing inequality in America, and suffice to say he doesn’t blame it on greedy corporations. Rather he blames it on bad parenting. To solve the problem of bad parenting, Heckman suggests that there needs to be early-childhood intervention by public and private entities.
- Forum. Ten experts provide their opinion of Heckman’s diagnosis and prescription.
- Aiding the Life Cycle. Heckman responds to the critics.
The lead sentence in this book is, “The accident of birth is a principal source of inequality in America today.” From there, Heckman goes on to show how the quality of parenting affects the future success of children. Parents with income and education generally produce children with better cognitive and social skills that often translate into a successful life. (Heckman is careful to point out, however, that there is a correlation between income/education and good parenting, but not necessarily a causal relationship.) And the final building block for Heckman is his studied conclusion that early intervention (pre-K) with children who are not receiving good parenting is much more effective and efficient than later efforts.
Most of the experts agreed with Heckman’s diagnosis and prescription, but quibbled over its narrow scope. Some argued that there is a lot more “rotten in Denmark” than bad parenting or that the fix has to go beyond intervening with the parents. Others, such as Charles Murray of Bell Curve fame, argued that Heckman cherry-picked favorable small studies regarding pre-K interventions and ignored larger unfavorable studies (e.g., the infamous Head Start study of 2012).
Heckman responded to the critics by baldly asserting that Murray misrepresented the studies and that unsuccessful interventions did not disprove alternative successful interventions. He also chided some for being cultural relativists who were not really interested in solving the problem.
Because socio-economic mobility has become stunted in America, and because I accept Heckman’s thesis that the parenting gap is a principal cause of the absence of mobility, I think Heckman’s public-policy recommendations for early intervention by public and private groups makes a lot of sense.
Incidentally, Heckman also points out that cognitive skills are generally formed by age 11 while social skills are malleable until the mid-20s, and this fact needs to affect the type of intervention attempted).