The Lesson the Left Can Learn on Inequality from Occupy Wall Street

Oct 17, 2011Mike Konczal

The protesters' particular focus on inequality is a perfect starting place for a progressive movement revival.

The protesters' particular focus on inequality is a perfect starting place for a progressive movement revival.

Right now Occupy Wall Street has favorable polling. So did the Tea Party at its beginning. As Seth Ackerman pointed out to me, once people saw that the Tea Party wasn't a new thing but this old, arch-conservative thing, one that wants to take our global historical moment and wage total war against public sector workers and uteri, they turned against it. One symptom that it was an old thing was the books that it circulated: from Hayek's underwhelming Road to Serfdom to Bircher Cold War tracts from the types who thought Eisenhower was a member of the communist conspiracy.

Ackerman noted that it isn't clear what will happen with Occupy Wall Street ideologically, if only because at this point the left-liberal project and progressivism more generally is chaotic and up for grabs. This makes for a fun, fascinating, and scary moment for a potentially insurgent left.

This movement is very focused on inequality. But why? A lot of different ideas have already surfaced. With so much of the debate about the 99% and the 1% framed in the context of extreme inequality, it might be worthwhile to step back and examine the liberal arguments against inequality and discuss what I see of them in Occupy Wall Street.

This is a great cheat-sheet -- a list of objections to inequality resulting from the high liberalism tradition from TM Scanlon's "The Diversity of Objections to Inequality" (article not free online, here's a summary). Liberals, in general, have five objections to inequality:

A sixth point will hopefully be added in the future: A more equal distribution creates a better economy. There's an assumption that the market, instead of creating concentrations of wealth and power that slow growth, assigns resources to where they are best used in both the short and long term. However, it is hotly contested whether income inequality causes crashes; researchers at the IMF found models where it can. And a whole other strain of research finds that equality causes growth to be more sustained (see summaries by Georgia Levenson Keohane and Brad Plumer).

As Scanlon is quick to note, only a few of these are necessarily egalitarian -- you can be concerned with relieving the suffering of the poorest without actually caring about disparity of incomes. And there is usually a huge emphasis on how the power referred to in number three is primarily a problem of electoral politics and policy instead of a problem of dominating, controlling power relations between individuals.

So where does Occupy Wall Street stand on these? What I find fascinating is that there is much more of a focus on forms of power and domination as opposed to the more general concerns of egalitarian liberalism, those focused on stigmatization and fairness. This is a healthy move for the debate.

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One of the major concerns you hear from people in occupations is that the political process has become fundamentally corrupted. This gets right at number three: Money has become so concentrated and such an overwhelming presence in our politics that we need some ways of reforming it at a structural level. The stakes are higher in Occupy Wall Street. The government blurs into the private sector, wealth is no longer a measure of contribution but instead rent extraction, and no party or individual can be trusted to work within the system. There needs to be a reboot. How did we get here? Hacker and Pierson's Winner Take All Politics is a good place to start when looking for the answer.

Another argument is that Wall Street itself is out of control. Having failed quite profitably in its sole responsibility -- allocating capital responsibly, not towards, junk mortgage debt, strip-mining companies for short-term gains, and worthless housing stock nobody wants -- and then getting bailed out when it all collapsed, the sheer presence of the financial sector among the top 1% feels like a crime. This power is more ruthless than than that in the normal discussion. It drives the entire economy, and it appears to have just driven it off a cliff. For more, 13 BankersEconnedAge of Greed, and Wall Street from the 1990s all walk readers through this story.

What about the 99%? I've previously looked through the We Are the 99% Tumblr and found that the biggest emphasis was on debt, ranging from student loans to medical debt, and a lack of enough employment to get by month-to-month. Here inequality is less a problem related to the more traditional liberal concerns of fairness or the idea that a few are left behind, and more a problem in which inequality is making indentured peasants of a huge part of the population. Risks are shifted to individuals who are already struggling, opportunities and possibilities are ruthlessly revoked, employment is nonexistent, and month-to-month survival is a battle for more than the just the very bottom. Books such as Graeber's Debt: The First 5,000 Years approach this from an anthropological point of view. Other works include Elizabeth Warren's book on how fixed costs of the middle class drive even two-income families into poverty, as opposed to more general discretionary spending (read: "frivolous" spending), or Tamara Draut's Strapped.

This ties into traditional liberal concerns. Liberals want institutions that allow people to develop their talents and also ones that insure them against the bad luck of health and unemployment. These institutions have been unraveled, and their public nature has been replaced with debt. And when people involved in Occupy Wall Street talk about this phenomenon, they connect how debt functions as a new safety net with the experience of servitude and suffering. Not in a relative sense of inferiority and shame (although that's there too), but in actual deprivation and the feeling of powerlessness against creditors, bosses, and the top of the elite.

Indeed, these concerns are reflected in the format of the general assembly and other current, institutional characteristics of Occupy Wall Street. Without permanent, clear leaders, there is no one to arrest, corrupt, or otherwise take over. That address their concerns about political domination from sources internal and external. The focus on mass participation and consensus derives, in part, from inequality in political access. Resources and responsibilities are distributed in the most egalitarian manner because physical deprivation is just one bad month away for many in the occupations (indeed, in the country). Collective enterprises offer a potential solution to giving workers real power in the workplace, power that can be put into action across the country and isn't dependent on Obama and the Senate.

This strikes me as firmer ground on which to try and build up a resurgent left. What's your take?

Mike Konczal is a Fellow at the Roosevelt Institute.

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Why We Need the Government to Create Not Just Jobs, but Good Jobs

Oct 17, 2011Richard Kirsch

A new book exhausts all the private sector possibilities, ultimately showing why the government has to ensure decent wages for all.

A new book exhausts all the private sector possibilities, ultimately showing why the government has to ensure decent wages for all.

The millions of underemployed Americans today, working part-time or in jobs significantly beneath their skill level, underline a persistent feature of our workforce, starting long before the Great Recession: one out of four jobs pay sub-standard wages. Good Jobs America, a new book written by Paul Osterman and conceived with co-author Beth Shulman before her death, tackles this other half of the jobs crisis: the need to create more good jobs, with wages that can support a family.

A great strength of the book is the authors' creation of new data on low-wage jobs, bringing to light how little so many of us bring home from our work. The authors are exquisitely cognizant of the current policy and political climate that looks skeptically on the ability of government to intervene in the "power and correctness of the market." As a result, much of the book carefully examines the arguments and strategies that rely on non-government interventions in the labor market to increase job quality, as well as a refutation of conservative arguments against public policies to increase wage levels. In thoroughly exploring other avenues of change, and doing their best but ultimately failing to identify promising paths that don't rely principally on government, Osterman and Shulman make it clear why they conclude "what is needed is a broader political, social, and economic environment that supports progressive employment strategies." By exhausting the limits of other avenues, the book ultimately ends up making the case that we must have government action to ensure decent jobs for all.

The authors refute the "myth" that education is the solution to the problem by pointing out the obvious: "There will always be hotel room cleaners and food servers and medical assistants and the myriad of other low-wage jobs." Education may help an individual, but it won't solve the large societal problem. Furthermore, they review research that finds "most adults holding these jobs will not escape them." They describe numerous programs developed in industries like health care and hospitality to create career ladders for low-wage employees and -- while doing everything they can to accentuate the positive -- find that few of the programs are sustainable or result in many employees moving into better jobs.

The persistence of the problem is underlined in their discussion of another common bugaboo: immigration. Data they assembled show that from 1994 to 2010, while the proportion of immigrants in the workforce increased by 70 percent, the percentage of jobs that were low-wage stayed the same, 24 percent. Their data also reveal that while immigrants held more low-wage jobs in 2010, the percentage of immigrants who took jobs that were below the low-wage standard remained at just below 40 percent.

As the authors deeply believe that employers need to be part of the solution, they look closely at the problems that employers face in raising wages and promoting career training. But they find that "high-road" employers are few and far between, motivated by the rare business with a mission or CEO that is committed to decent wages and benefits. They find no evidence that a Costco has any impact on a retail job market dominated by WalMart, which when it comes into a market suppresses wages in its competitors. The history of labor partnerships also is not promising. Levi-Strauss' attempt at paying good wages collapsed under the pressure of foreign competition and when an agreement between the hotel employee union HERE and San Francisco hotels to trade employer flexibility for more training and wage increases melted in the face of non-union competition.

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The authors also highlight community and non-union worker organizing that has led to the passage of local ordinances and agreements with large employers. But they admit that these are few and far between, with the biggest benefit being a change in the political relationships of power rather than the creation of many new good jobs.

Their exploration of what could be the most promising new labor market for good jobs, green jobs, is very telling. They do a marvelous job of detailing the competing forces in Boston when the city government tried to balance the trade-off between weatherizing more homes or paying higher wages. It negotiated with multiple actors: community action agencies, environmental groups, unions, big and small contractors. The results were not promising. On the other hand, Portland, OR provided a model of success due to the rare cooperation between community and environmental groups and unions, bolstered by strong political leadership.

Which gets us back to government. The 2009 economic stimulus legislation required that prevailing wages, following the Davis-Bacon law, be paid for weatherization jobs. But the Obama administration interpreted that as prevailing wages in the already low-wage weatherization industry. That was a lost opportunity to use a major investment in green jobs to set a foundation for good jobs.

So what will work? Looking at the history of what has worked in our past -- legislation and regulations promoting wage standards, job safety, and unionization -- they conclude simply, "The government made bad jobs into good." There's plenty of ammo in the book showing that minimum wage laws do work and that unionization leads to better jobs.

The authors say that creating a climate for good jobs requires a shock to the system that will come from "public policy or employee voice." Actually, they recommend both: laws that raise wages and protect union organizing, accompanied by cooperation between community groups, more internally democratic unions, and small business associations.

On the next to last page, the authors finally reach for a broader strategy that meets the political challenge of our times. Ending where they began -- "the gap between the low-and-middle-class is collapsing" -- they conclude that "the reality is that strengthening job quality is a middle-class issue" and making the concerns of low-wage workers compelling "requires a broader political base than is currently at hand."

Building that political base will require making more than a rhetorical link between the concerns of the shrinking middle class and the working poor. We will need to build a movement that unites "the 99%" to those pushing for a broader jobs agenda, that demands that we not only create more jobs, but that every job pays enough to support a family with security and dignity. The agenda must look beyond the workplace to broader systems of opportunity and social insurance: education, health care, retirement, and leave policies. Organizing that movement must link across communities, exemplified by efforts like the Caring Across Generations campaign that is uniting unions and community groups to create two million good jobs for those who care for seniors and people with disabilities. We need to build a political movement through campaigns at the local, state, and federal level that demand good jobs for everyone in America.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute and a Senior Adviser to USAction, whose book on the campaign to win reform will be published in 2012. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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What Would Our Founding Radicals Have Thought About Occupy Wall Street?

Oct 5, 2011William Hogeland

american_colonial_flagOccupy Wall Street isn't just a threat to financial elites -- it's a challenge to lazy historians.

american_colonial_flagOccupy Wall Street isn't just a threat to financial elites -- it's a challenge to lazy historians.

Among other intriguing and possibly problematic features, Occupy Wall Street, now in its third week and spreading, seems to represent an inchoate attempt at reviving an American radicalism that has deep roots in our founding period. The Tea Party has of course made its own highly explicit and politically successful claim on that period. Because OWS, like the Tea Party, focuses on national economic and financial issues, the new movement offers a disquieting, potentially illuminating alternative to the Tea Party's right-wing interpretation of America's founding economic values.

I began writing New Deal 2.0's "Founding Finance" series last winter in hopes of shining light both on the financial elitism of the famous American founders, who we often wrongly cast as pioneers (or at least half-conscious seed-sowers) of equality, and on what I see as historical tendentiousness on the part of the Tea Party, whose claims on the founding period are meant to support a low-tax, small-government, anti-debt agenda. I've tried to show that this agenda, which may or may not have its merits as policy, in no way accords with the avowed purposes of the founders across their own political spectrum from Hamilton to Madison.

In the series, I've also tried to bring to the fore some routinely marginalized yet highly resonant 18th century economic thought, as well as the actions of those who sought to obstruct wealth concentration and make cash and credit more readily available to ordinary Americans. It's an unsettling fact that our founding democratic, economic activism was not against England but against the homegrown American investing and creditor class that was leading the resistance to England.

I've explored that founding economic radicalism in the debtor riots and "regulations" of the late colonial period; in the overthrow of Pennsylvania during the run-up to the Declaration; in the period after victory over England, when foreclosed Massachusetts debtors, the so-called Shays Rebels, marched on the armory at Springfield; and in the early Federal period, when the so-called Whiskey Rebels of trans-Appalachia, criticizing the new U.S. Constitution on bases very different from those of antifederalist elites, went so far as to fly their own flag, hoping to launch a new, more economically egalitarian country in what was then the American West.

Throughout those struggles, the activists' goal was to pressure and in some cases to use government to restrain the power of wealth and promote economic equality through legislation. They wanted to outlaw monopolies, build debt relief into currency, institute easy-term, small-scale government lending, and take banking charters away from crony insiders. Some wanted progressive taxation on income; some wanted what we call Social Security. Much later phenomena like the Square Deal, the New Deal, and the Great Society, which can seem hypermodern (and even, to the Tea Party, unconstitutionally anomalous), actually have deep American roots. However, those roots are not in the thinking of the famous founders -- New Dealers' claims on Jefferson possibly to the contrary -- but in grassroots, 18th century movements that, while little-known today, were of immense importance during our founding.

So important in their day were those now-buried radical movements, in fact, that much of the famous founders' behavior can't be understood without the context of elite dedication at times to collaborating uneasily with the economic radicals, at other times to squelching them and pushing back their political advances. Many historians of the period ignore that context. Hamilton's biographers, for example, do not deem the people's movement important. Hamilton did; he spent his career trying to kill it. We therefore learn almost nothing important about Hamilton's purposes by reading his biographies. Much founder biography, and much mainstream history, operates on just such comfortably foregone, ultimately useless conclusions.

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In place of founding radicalism, historians tend to emphasize the emergence, from the Revolutionary period through the Jackson era, of a rowdy, fluid, non-deferential, competitive America. They place developing ideas of American democracy almost solely in that 19th century context. But Thomas Paine, the best-known of the radical 18th century egalitarians, would surely have been crushed if he'd glimpsed the kind of society that passed for a democratic one in Jacksonian America.

Paine's intensity gives both liberals and radicals a problem. It was a widely held view in the Washington administration -- and it's been widely held in more or less liberal American history ever since -- that Paine's awful experiences in the French Revolution give us cause to celebrate the failure of Paine-ite radicalism in America. Fair enough: Today, as every day, it would be wise to recall not only crimes against humanity committed by bankers but also those committed on behalf of a supposedly collective, supposedly revolutionary "People," from the French Terror to the Stalinist mass murders and well beyond.

Still, the French Terror, which almost killed Paine, has served as a convenient pretext for exercising historical complacency about the suppression of his and others' fervently democratic visions for America in 1776. Without those visions, anathema as they were to the famous founding elitists -- anathema as they were, for that matter, to Jacksonian capitalism and are today to high-finance "neo-liberalism" -- we might never have declared independence at all.

So from a certain historical point of view, I think Occupy Wall Street rebukes, even more sharply than it rebukes rightist Tea Party claims on the founding, a familiar and complacent history of American democracy -- especially that history's failure to confront our long struggle over the relationship between high finance and government. Occupy Wall Street may be going about things all wrong, as some on what remains of the American left have asserted. I find those assertions hard to dispute. I've been critical of what I suspect may turn out to be a cultural premium, part and parcel of objections to elitism, on intellectual sloppiness and incoherence. That mode was never adopted by the activist 18th century working class, whose objections and demands (pace the lazy snobbism of Hamilton's biographers) took the form not only of action but also of crystal-clear, deeply informed, published resolutions. The 18th century activists remind us that resolutions don't have to be handed down from above; they can filter up and be adopted by majority or by consensus.

The very concept of "up" may be anathema to the new movement. We'll see.

But the most honest answer to any and all objections to Occupy Wall Street may be "So what?" Criticism often comes down to no-cost fantasizing about more appealing actions that nobody has actually bothered to take. When American high finance takes over America, "occupy" is what some American people do, and have always done.

William Hogeland is the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History. He has spoken on unexpected connections between history and politics at the National Archives, the Kansas City Public Library, and various corporate and organization events. He blogs at

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Mark Schmitt: Reinvent Government So Americans See the Benefits

Oct 4, 2011

FDR and his New Deal programs may best be remembered for how they transformed the way the American people related to their government. He himself reminded them, "Let us never forget that government is ourselves and not an alien power over us."

FDR and his New Deal programs may best be remembered for how they transformed the way the American people related to their government. He himself reminded them, "Let us never forget that government is ourselves and not an alien power over us."

But times have certainly changed. A much-circulated graph in an article by Suzanne Mettler showed that half of Americans who have been the recipients of a social program say they have "not used a government program." This is on full display when Tea Partiers demand government get its hands off their Medicare. And as Roosevelt Institute Senior Fellow Mark Schmitt draws out in his fantastic review out today of Mettler's new book, The Submerged State, this is a feature of our current governmental system, not a bug.

Want some recent evidence? As Mark points out, in one poll only 12 percent of voters said their taxes had gone down under the Obama administration, even though they received a tax credit that was more likely to be spent than even the Bush tax cut we all received in the mail. This is because the tax credit, while delivered efficiently, was invisible to those whom it benefitted. As Mark puts it:

Countless federal benefits are delivered so unobtrusively, through the tax system or through public-private partnerships, that their beneficiaries hardly know government played any role. It is difficult to have a real democratic debate about the role of government, Mettler argues, when so much of what government does is unknown and unseen.

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The answer to this problem isn't just a better PR machine spreading the gospel of all the good government does for its people, though. As Mark points out, "Mettler is not calling for a change in the public image of government; she wants to change government itself." He wants to take this even further by sparking a totally new era of government:

[I] is not just a matter of "revealing" submerged policies or replacing them with more visible ones. It is time for a new era of reinventing government, in which the goal is to establish certain clear, unambiguous public functions, and put energy and resources behind them... Responsibilities should be clearly delineated between the public and private sectors, and between governments at different levels. If providing affordable housing is a public responsibility, for example, agencies such as Fannie Mae should be fully public and fully accountable to the public, and to the extent that it's not a public function, they should be private. Such a radical rethinking of government would not only make it more efficient and more effective, but possibly better respected. It would also allow a level of public engagement that is impossible in the current world of half-seen and little understood programs. And instead of making small gestures to show government cares about problems, this approach might actually solve them.

FDR couldn't have put it better himself. Read his full review here -- it's definitely worth reading in its entirety.

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Economic Arguments Progressives Could Be Making

Aug 22, 2011Adam Gluck

idea-100A recent Roosevelt Institute summer intern gets inspired by early progressives on how to make a winning economic argument.

idea-100A recent Roosevelt Institute summer intern gets inspired by early progressives on how to make a winning economic argument.

Recently, my libertarian friend and I had a debate. We found ourselves circling around the classic libertarian argument that the state should stay out of economic affairs, except to affirm a fair backdrop for people to enter into voluntary (economic) exchanges.

For a starter, I argued, how voluntary is "voluntary?" If I need a job to eat and stay alive, I could certainly choose to not accept an offer because the wages were too low. But the alternative would be starving, which is not really a choice. This situation, to me at least, really resembles a mugging rather than a voluntary exchange. There was something morally troubling for me here, but I couldn't put my finger on it.

My friend countered that my argument was "old, boring, and wrong." I returned that his idea that the only coercion in our lives comes from the state is at least equally old and boring, but much, much more wrong. Yet, having just read The Progressive Assault on Laissez Faire by Barbara H. Fried, I realized he was right about one thing. Both of our arguments are old, and I was right that his ideas were older! Score one for the progressive. Almost one 150 years ago, conservatives were arguing much the same things that they are arguing now. And, I think more importantly for progressives, 80 years ago our side was making the arguments that we should be making now but aren't.

Here's the crux of the problem. Conservatives tend to argue morals and assume policy, whereas we progressives tend to argue policy and assume morals. When you read an article that suggests a liberal policy, you'll often notice an assumed moral framework that isn't justified. Conservatives, on the other hand, constantly justify their views in terms of rights and values that answer the question of "why" we should view a policy issue in a certain light. For example, most progressives feel like income inequality is wrong and will assert as much. But why is it wrong? Probably the answer has something to do with equality -- that we should be equal, but how equal? And how do we balance liberty with equality? And how do we affect that change? Often the answer is, "Umm...taxes and social programs."

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Conservatives, particularly libertarians, often have an immediate and developed moral response. Their hero Milton Friedman often made his arguments within explicit moral frames that highlighted how we should look at his more functional arguments. A typical conservative argument about inequality, for example, would insist that it is a result of choices (voluntary exchanges) people make. Any government interaction to change it is coercive, like putting a gun to someone's head and taking her money. By interfering with our choices, the government is hurting us, rather than protecting us, they say. And this is morally wrong.

Meanwhile, progressives continue to argue policy rather than morals. We fail to affect the change we want because we don't answer the essentially moral question of "why" we should act in a certain way. Maybe we assume that our moral arguments are understood because at one point we won them, as Fried's book illustrates. Utilitarianism, for example, helped earlier progressives provide a moral frame for economic issues. This theory focuses on "the greatest good for the greatest number of people." Many of its great proponents were laissez-faire economists on the face, but they justified government intervention where it would help the largest number of people. Progressives of the early 1900s took this position over and over again, insisting that the best way to help the most is through progressive policy. So if we apply this thinking to current debates about the tax code, we can argue that it is not good for the greatest number of people to let the rich get richer while the poor get poorer. We can say plainly that it is not moral to let poor people starve while rich people become increasingly gluttonous.

On the issue of coercion, early progressives developed a framework of "positive liberty" in which people have the right to be free of the coercion of others. This, they argued, requires a degree of state intervention. Here's an argument we could use far more frequently today. We can press for using the strength of the state to defend people who are getting horribly coerced by others, for example. Instead of the state being a bully, it becomes a protector of those who can't defend themselves. This re-framing gives moral justification to state action. The powerful cannot exploit the powerless, and unequal deals between capitalists and laborers are a form of exploitation. It is the role of the state in a democracy to defend and represent the interests of all its constituents. That is how we establish the greatest good for the greatest number of people, and in so doing, create the greatest good for society as a whole.

For progressives, the more we explain our moral assumptions and re-define them for current debates, the more we can make headway with conservatives who have been refining their values message for decades.

Adam Gluck is formerly a communications intern at the Roosevelt Institute New York office and is a rising sophomore at the University of Chicago.

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Can Social Impact Bonds Solve the Problems Government Won't?

Aug 9, 2011Tracy Palandjian

spending-money-150In a week-long series, prominent thinkers will look at ways to harness the private sector or extract more from a recalcitrant public sector in order to combat poverty and inequality.

spending-money-150In a week-long series, prominent thinkers will look at ways to harness the private sector or extract more from a recalcitrant public sector in order to combat poverty and inequality. In the second post, Tracy Palandjian, CEO of Social Finance Inc., looks at the promise and challenges of using Social Impact Bonds to address deep issues.

Across the United States, community groups, government agencies, and nonprofit organizations are working to tackle the root causes of poverty, crime, and other disabling economic and social conditions. There are successes, to be sure, but these are exceptionally difficult days for disadvantaged individuals and communities, in part because of the current fiscal crisis, but also because multifaceted problems have become too complex for one-dimensional, prescriptive solutions. At the same time, state and local governments too often address problems only after they occur. Poor outcomes are frequently repeated, requiring the public sector to spend ever increasing amounts on crisis interventions.

Fortunately, there are encouraging signs that access to private capital markets can reverse this cycle and drive more capital toward preventive programs that can create better outcomes, lessen the need for remediation, and reduce overall costs. A new impact investment product, the Social Impact Bond (SIB), was recently launched in the UK -- the first one in the world -- to finance effective social programs.  It represents an innovative financing mechanism and a new form of cross-sector collaboration to drive systemic change.

SIBs tap a significant new funding source for evidence-based nonprofit programs. An SIB is a financial instrument in which investors front working capital to nonprofit organizations to implement preventive programs aimed at achieving specified social outcomes. If an independent evaluator determines that predefined metrics have been achieved, the government repays investors their principal and a rate of return; otherwise, investors lose their capital.

Ben Franklin's adage that "an ounce of prevention is worth a pound of cure" provides the motivation for SIBs. The savings that SIBs produce enable activities that generate social progress to be monetized into an investable asset. SIB-funded programs include preventive interventions (such as supportive housing for chronically homeless individuals) that produce better social outcomes (increased residential stability and better health) and deter costlier crisis responses (repeated emergency room visits, hospital admissions, incarceration, and use of shelters).

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Everyone benefits under a successful SIB program. The public sector sees better results for less upfront investment and only pays if social outcomes and cost savings are produced. Investors put capital to work while achieving robust financial returns and meaningful social impact. Nonprofit service providers get stability and predictability in their revenue model, which frees them up to do what they do best -- deliver critical services to populations in need. Disadvantaged individuals and their communities benefit from both increased and improved social goods and services.

Massachusetts recently became the first state in the nation to formally pursue SIBs by issuing a Request for Information (RFI). Social Finance Inc., the nonprofit sister organization of the UK firm that launched the world's first SIB, responded to the RFI, announcing its intention to develop, finance, launch, and manage high-quality SIBs over the life of the instrument. Social Finance identified a number of promising SIB applications, including permanent supportive housing for chronically homeless individuals; housing-based support for homeless families; home- and community-based aging-in-place programs for elders; community-based alternatives to juvenile detention; and alternative community corrections for adult offenders.

Developing detailed business cases for specific SIBs will be challenging, however, given the inherent uncertainties involved in producing and measuring social outcomes. Social Finance has been conducting extensive research around various evidence-based interventions, growth-ready nonprofits with strong track records of successful delivery, and the costs and outcomes of existing and proposed services, all of which must be presented in credible financial models. We know that investors will also conduct demanding due diligence in a number of areas, including nonprofit capacity, the ability of chosen interventions to increase social impact, decision-making and control, outcomes, metrics and evaluation.

Some of our current social challenges are too widespread, deep-rooted and costly to be addressed by traditional sources of private philanthropy and government funding. SIBs draw from a new pool of capital that can enable proven models of intervention to expand. In addition, SIBs advance Stephen Goldsmith's "governing by network" model, a form of shared collaboration among the public, private, and nonprofit sectors, facilitating cooperation across governmental silos, to address pervasive economic and social problems.

Tracy Palandjian is the CEO of Social Finance, Inc., a nonprofit organization dedicated to connecting the social sector to the capital markets. It is the sister organization to Social Finance, Ltd. which launched the world's first Social Impact Bond in September 2010.

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How Can We Fight Poverty in This Age of Austerity?

Aug 8, 2011Georgia Levenson Keohane


In a week-long series, prominent thinkers will look at ways to harness the private sector or extract more from a recalcitrant public sector in order to combat poverty and inequality. In the first post, Roosevelt Institute Fellow Georgia Levenson Keohane reminds us that while the government should be tackling these problems, there are practical and potentially exciting ways to get things done without it.


In a week-long series, prominent thinkers will look at ways to harness the private sector or extract more from a recalcitrant public sector in order to combat poverty and inequality. In the first post, Roosevelt Institute Fellow Georgia Levenson Keohane reminds us that while the government should be tackling these problems, there are practical and potentially exciting ways to get things done without it.

If there is any silver lining to the debt ceiling fiasco, it is that it has reshaped the contours of our national debate. No longer are we simply concerned with fiscal, economic or credit rating calamity; the crisis has gone existential.

Facts, it turns out, are stubborn and occasionally inconvenient. A budget deal that shreds the fabric of our social contract cannot ignore the following: that the recession has severely exacerbated poverty in the U.S.; child poverty remains shamefully high; inequality soldiers on; record and persistent unemployment -- either by official or more sobering measures -- has made life for millions of Americans scrambling to stay out of poverty cruelly hard and stressful. And all this before an unprecedented round of cuts to basic programs and services that comprise our safety net that will worsen, rather than improve, matters. The best route out of this mess, to say nothing of long-term prosperity, is jobs. Full stop.

On the question of employment, one does not need to be a student of history, Keynes, or a host of recent examples to face up to reality. Just take a look at the current British experiment in slash and burn austerity, the successes of the U.S. stimulus package (and in particular the tax credits, food stamps, unemployment insurance, and other social welfare provisions) that kept poverty from getting a whole lot worse, the basics of cost benefit (investments in things like early childhood education or healthcare for everyone, and for poor people especially, yield positive returns) or the basic levers of public policy (budgets have two sides, expenses and revenues). Job creation will require government spending. Full stop number two.

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When it comes to fighting poverty, it is critical that we continue to wage these ideological and political battles. Yet at the same time, we must also embrace a pragmatic approach to policy formulation that recognizes the harsh realities of austerity: government sorely lacks the resources -- cash and political will -- to meet the surge in human needs. In the coming days, a series of posts will address issues of poverty and equality of opportunity in exactly these terms, illustrating important 'social innovations' that allow us to do more with less. Broadly speaking, we will hear about two kinds of approaches: initiatives that enable us to do a better job with the government funds we already have, and those that help attract new sources of capital to bear on social problems. Topics will include recent efforts to improve measurement and evaluation of critical social services, new programs designed to help poor people access benefits for which they are already eligible, experiments in designing 'social finance' instruments that aim to monetize the value of raising people out of poverty, and others. These are collaborations between non-profit organizations and their allies in local, state and the federal government to harness new sources of philanthropic or other private investment in improving social welfare.

The progressive project would be wise to remember that these social innovations are in no way a capitulation to our current and fractured tail-wagging-the-dog politics. Rather, they represent a forward looking recognition that economic recovery and sustained, shared prosperity will require practical, cross-sector and creative solutions to our most pressing problems.

Georgia Levenson Keohane is a Fellow at the Roosevelt Institute.

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Thomas Paine's 'Common Sense' is the Cure for Cynical Citizens

Jul 27, 2011Harvey J. Kaye

american_colonial_flagPaine's pamphlet is portable and jam-packed with potent messages.

american_colonial_flagPaine's pamphlet is portable and jam-packed with potent messages.

Need refreshment from the summer heat? A respite from the debt-ceiling debacle? A break from the sense that all the hope was for naught? Read the book that turned America's colonial rebellion into a revolution, the work that transformed British subjects into American citizens, the pamphlet that imbued American life with democratic imperative and impulse. Read Thomas Paine's Common Sense.

Paine's first great work not only inspired the founding generation to make history. It also encouraged generations of progressives from freethinkers, abolitionists, and suffragists to labor unionists, populists, and socialists to redeem America's exceptional purpose and promise and carry on the fight to extend and deepen freedom, equality, and democracy.

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Common Sense will remind you of what it means to be an American. Lines such as "The sun never shined on a cause of greater worth" and "We have it in our power to begin the world over again" will give you the strength to deal with both rightwing rants and "creeping cynicism." Plus, at just under fifty pages it is not only guaranteed to be low priced in these trying economic times, it is also easy to take along to the beach...

Of course, then you'll want to read more of Paine's words. So, you might want to pick up an anthology of his writings. That way you can also read:

The Crisis: "These are the times that try men's souls..."

Rights of Man: Paine's attack on Britain's political and social order that outlines a pioneering plan for a social security system.

The Age of Reason: A devastating critique of the power of clerics and organized religion.

Agrarian Justice: Avisionary plan for taxing the propertied rich to provide stakes for young people starting out and pensions for the elderly.

The more you think about it, Paine's work should be read not only by vacationers and beach-goers, but year-round by citizens, students, and especially the folks in the White House and up on Capitol Hill.

Harvey J. Kaye is the Ben & Joyce Rosenberg Professor of Democracy and Justice Studies at the University of Wisconsin-Green Bay and the author of Thomas Paine and the Promise of America. He is currently writing The Four Freedoms and the Promise of America: FDR, the Greatest Generation, and Us. Follow him on Twitter:

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What Conservatives Don't Want You to Know About Government's Role in the Economy

Jun 28, 2011Jon Rynn

fdr-we-need-you-200If we don't learn the lessons from the Great Depression, our infrastructure will crumble, the recovery will stagnate, and our economy will be left behind.

fdr-we-need-you-200If we don't learn the lessons from the Great Depression, our infrastructure will crumble, the recovery will stagnate, and our economy will be left behind.

The current conventional wisdom for many in the U.S. is that the less government is involved with the economy the better. But this is precisely the moment in history when more government is needed. Without government intervention, the recovery will continue to stagnate, the economy as a whole will remain off balance, and we won't be able to meet the challenges facing the country.

I have been proposing a different way of looking at an economy than the traditional, neoclassic one. In my view, each industry fits into a wider system, as say trees or deer or bears fit into a wider forest ecosystem. In the same way, goods manufacturing, machinery industries, service industries, infrastructure, and the myriad other parts of a functioning society -- including the health and education systems -- have to work properly in order for the economy as a whole to function, with manufacturing functioning as the central sector. All industries are co-evolving, dynamically growing, concentrated within discrete geographical regions. And it is the responsibility of government to help orchestrate this interaction, or else it can turn into an ugly riot.

But at the root of the neoclassical world view is the idea that the economic system is self-regulating, that is, if the economy is pushed off course by "external" forces, then it will become stable by itself -- without government interference. And yet we know that economies are constantly growing and changing -- that is, they are not stable -- and they are often under threat of recession and depression. That is why governments always have to be part of the solution. They are needed in order to support economic growth, maintain the right structure of the economy, and intervene when the economy goes bad.

FDR's presidency is the perfect example of this. When he became president, Herbert Hoover had just spent several years trying to reverse the Great Depression with market-based solutions, but FDR championed a set of governmental policies that turned the country around. To deal with unemployment, FDR established the Works Progress Administration, or WPA, which was not only designed to employ one fully able member of each household in which no one could find work, but also to build up the country's physical infrastructure. Building infrastructure is what governments do best. In fact, one could say that civilization started when the first governments constructed the irrigation and drainage systems that enabled agriculture to flourish. The United States, like every successful country, has a long and rich history of infrastructure building, without which the country would have very likely stayed poor. From canals like the Erie Canal before the Civil War, to the railroads after, from the dams that even conservative Republicans like Calvin Coolidge initiated, to the WPA that built libraries, schools, airports, roads, and other structures in virtually every town, to the Interstate Highway System championed by a Republican president, the United States has kept itself at the forefront of the global economy by making the building of transportation, energy, communications, water, education, and other systems the foundation of prosperity.

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Partly as a result of his interventions into the economy, FDR was able to lead the nation into World War II by fundamentally transforming the economy to produce military equipment. At its height, one third of the country's GDP was devoted to the war effort, with millions fighting overseas. That's five trillion dollars in today's economy. In other words, even assuming the continuation of a one trillion dollar military budget in the face of no wars of necessity, the economy has four trillion dollars left over to remake itself while providing for a comfortable standard of living for its inhabitants.

Instead of learning this lesson of history, however, our current political class seems determined to follow Herbert Hoover, not FDR. Meanwhile, the long-term domestic problems we face are worse than what FDR confronted. In the 1930s, the US was by far the leading manufacturing power and the top producer of oil; now the manufacturing sector is sinking fast, and not only do we import almost two-thirds of the crude oil we process, the global supply of oil is becoming harder to produce and is shrinking. In addition, we desperately need to eliminate the use of fossil fuels and transform agriculture and forest management in order to avoid the worst of global warming. The path forward is clear: we need an electric transportation system based on high-speed rail for long-distance travel, electric rail for freight, transit and small electric cars for intra-city movement, wind and solar power for electricity generation, recycling on a serious and massive scale, a densification of urban areas, and a more labor-intensive, localized, organic agricultural system. And these could provide the market for a revived manufacturing sector.

Only the government can build all of these systems in the time needed to both save the economy and save the environment. Incentives can go part of the way, but not fast or far enough. Taxing carbon or trading rights to carbon won't solve global warming or decrease the use of oil as quickly as we need them to; lowering taxes or reducing the deficit won't bring the manufacturing sector back. Government-as-builder does not mean government-as-warrior or government-as-Big-Brother. It is possible to have a strong government that is peaceful, democratic, and not beholden to our economic royalists, as we currently are. But maintaining democracy is never easy; the political system is no more a self-regulating system than is the economy. At least we can have a clear vision of where we are heading.

History doesn't care if the political conversation of the United States won't allow for talk about large-scale government intervention into the economy. The path to economic and ecological collapse is paved with "realistic" intentions. If the conservatives can be audacious enough to threaten policies that will further destroy the middle class and poor for the sake of the superwealthy, why can't progressives draw on a rich American history, from before FDR and after, to rebuild a once mighty nation and help the rest of the planet move toward a sustainable future?

Jon Rynn is the author of the book Manufacturing Green Prosperity: The power to rebuild the American middle class, available from Praeger Press. He holds a Ph.D. in political science and is a Visiting Scholar at the CUNY Institute for Urban Systems.

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Goolsbee's Gone: Another Top Obama Econ Advisor Exits

Jun 7, 2011

A Monday night announcement has shaken things up in Obama's economic team. Austan Goolsbee, chairman of the Council of Economic Advisers, is packing his bags, heading back to Chicago to resume his teaching gig. What does the exit of a man central to the crafting of Obama's economic policies for the past two-and-a-half years really mean? Roosevelt Institute fellows weigh in.

A Monday night announcement has shaken things up in Obama's economic team. Austan Goolsbee, chairman of the Council of Economic Advisers, is packing his bags, heading back to Chicago to resume his teaching gig. What does the exit of a man central to the crafting of Obama's economic policies for the past two-and-a-half years really mean? Roosevelt Institute fellows weigh in.

"Anyone who is a good economist does not want to be associated with the policies of this Administration that has turned a blind eye to idle resources and tragic levels of unemployment."
-Robert Johnson, Senior Fellow, Roosevelt Institute

"There shouldn't be a wet eye in the place. Goolsbee's legacy is wretched: He approved of bailing out the banks, insisted that prosperity was just around the corner, and recently kept repeating that the private sector must drive recovery, in the face of overwhelming evidence that recoveries from financial crashes take years if the government does not move vigorously to offset private sector deleveraging and caution. But it's an ill wind that blows no one any good: Now the President has yet another vacancy to fill; at least there is a chance that somebody who takes to heart the great lesson of the New Deal -- that government can stimulate the economy if it doesn't lose its nerve (as in 1937 and, it appears, now) -- can find a place in the White House."
-Thomas Ferguson, Senior Fellow, Roosevelt Institute and Professor of Political Science, U Mass, Boston

"Goolsbee is another champion of the 'fiscal austerity lite' ideology that continues to wreak havoc on the US economy. As one of the President's main economic spokesmen, he has championed the Administration's Wall Street-centric approach, notably in regard to the bailouts. These programs have fostered the impression that there is already plenty of fiscal related stimulus, though virtually all employment measures indicate that full recovery is far from accomplished and many needs that are more pressing remain unaddressed. He won't be missed."
-Marshall Auerback, Senior Fellow, Roosevelt Institute

"Austan Goolsbee is a well-trained and by all accounts affable economist. But these have been unusual times and he seemed unequal to them. The current administration policy is a wish and prayer that GDP will grow at 3 to 4 percent a year. It is construed that this will be sufficient to get the president elected as the unemployment rate, if high, starts to fall consistently.

As I have noted before, the risks to that forecast are very high. This seems lost on an administration, and perhaps on Goolsbee. They are unwilling to take the action needed, despite the political obstacles, to keep the economy growing. To the extent Goolsbee contributed to this, he wil not be well-remembered and his leaving may be useful. This of course depends on his replacement, about which there is no reason to be optimistic.

But the main issue is that this Administration has never evinced a passion about the loss of jobs in this economy and the suffering and confusion of tens of millions of Americans. Goolsbee was in a position to make this clear to the president. Apparently, he did not. There is no jobs program, no outrage about levels of unemployment, no anger at nonsense written about structural unemployment. Goolsbee seemed to be one of those people who didn't want to rock the boat much. We need a boat rocker."
-Jeff Madrick, Senior Fellow, Roosevelt Institute

"I hope he has a few million apologies ready for the foreclosure victims he did nothing to help."
-Matt Stoller, Fellow, Roosevelt Institute

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