As delivered on Monday, October 21, 2019, in Washington, D.C.
Good morning. How are you? Mike [Froman] and Dan [Porterfield], it’s good to see you, and thank you for having us here. And what very helpful remarks from Ajay [Banga] – and I appreciate, Ajay, your leadership for many years in building trust. The very serious commitment Mastercard has made to this topic, it makes it easy for those of us in philanthropy and the nonprofit space to trust you. So thank you for having us here.
I’m particularly excited to be here because creating opportunity and helping each individual realize their full potential has been at the heart of The Rockefeller Foundation’s work for more than 100 years. And at a time when our world has been defined by often turbulent economic, social, and political changes, we believe it is more important than ever to stand up for vulnerable families who have in fact been left behind. Today we support efforts at home, here in the United States, and all around the world to harness the power of data, science, and technology to help empower every person to rise and realize their full potential.
And throughout this conference we will hear many practical, pragmatic ideas that can move that work forward, and build legitimately more inclusive economies at home and abroad. But we should also be asking ourselves some hard questions, including: How are we doing so far at including everybody?
Globally, there’s been extraordinary news to report over the last four decades. According to World Bank data the prevalence of people living in extreme poverty fell from more than 40 percent in 1981 to less than 10 percent today. Of course, we must still do much more to improve the lives of hundreds of millions of people who live in extreme deprivation: where girls are unsafe; where families regularly go to bed hungry at night; where a woman learning she’s pregnant experiences a great deal of fear and anxiety about whether she will survive to be a mother. But overall, progress against extreme poverty and its consequences has fallen dramatically. And while that poverty reduction has been most significant in economies like China, these gains have in fact occurred on every continent, including across Africa.
However, avoiding poverty is not the same as being included in an increasingly interconnected global economy, and more detailed assessments of those who struggle to meet their basic needs, such as Oxford University’s Multidimensional Poverty Index, show that the rate of people living in that condition are two-to-three times greater than the World Bank data, and in fact far more persistent – falling much less steeply than we imagine is the case. But overall the progress on a global basis, especially for developing economies, is undeniable: with more than 2 billion people lifted out of extreme deprivation in those four decades, the rise of a global middle class, and with it the slow and steady extension of agency and rights to marginalized populations, including women.
Yet over the same 40 years, we also observe a weakening of the previously optimistic middle-class populations of industrial nations, where too many working families have been excluded and left behind. This should not surprise us when we consider what they’ve seen and endured.
Our consensus framework around globalization, technology, and trade had winners and losers, and while the winners certainly outnumber those left behind, a lot of people lost good-paying manufacturing jobs and have not been compensated adequately or offered alternative skills and employment.
Public policy has always defined the inclusiveness of an economy, such as how the GI Bill and federal housing policy helped support the development of an American middle class in this country after World War II. Yet policy reforms, and particularly tax policies, have consistently preferenced capital over labor over the last several decades – effectively supporting the wealthiest amongst us, but not middle-class families, or those fighting to reach the middle class. And neither group has seen the trickle-down benefits they’ve been promised.
And as technology and data increasingly transformed our economy, we grew comfortably numb and deferential to businesses that aggregate and sell our data and information. Today these companies represent a giant part of our economy, despite employing relatively few workers – in 1979 General Motors had a $50 billion market capitalization and it rested on the work of its 850,000 employees, while today Facebook has a market cap many times that size, but has only 40,000 employees.
These major trends – globalization, technology, and the very nature of policy interacting with capitalism – which have the potential to continue to lift up much of the world’s population, will also continue to have serious consequences for inclusion in industrial economies. And this is especially true in the United States, where a second Gilded Age of extreme wealth exists alongside levels of inequality not seen since The Rockefeller Foundation was founded [more than] a century ago.
Sixteen million American households earn incomes below the federal poverty level, and that is an artificially low measure. When you look more closely at what a family actually requires to survive in 2019 – the cost of housing, food, childcare, transportation, healthcare, taxes, and other basic expenses like a cell phone – a more accurate measure is at least 50 million American households, representing 130 million Americans, have been excluded from America’s recent decades of economic growth.
And when it’s that hard to get by, it’s even harder to get ahead and be optimistic about the future. The economist Raj Chetty has shown how people born in the 1940s… had a 90 percent chance of making more money than their parents – ironically, unless your last name was Rockefeller, in which case you were on the far end of that spectrum – and those born in poverty in that time period had a 50-50 chance of ending up in the American middle class. But for people born four decades later, those odds are basically cut in half. And if you take out four to six major metropolitan statistical areas in the United States, the shriveling up of economic opportunity is far more pronounced for the rest of our own population.
The reality is that tens of millions of Americans are working hard and playing by the rules, but the American Dream of upward mobility feels more out of reach than ever before – and for many marginalized communities, it was not all that accessible to begin with.
As I mentioned, policy has always defined the inclusiveness of our economy, and tax policy is part of how we got here. We learned last week that in 2018 for the first time ever, the 400 wealthiest Americans paid a lower effective total tax rate than any other income group. That is a seismic change compared to half a century ago, when the wealthiest 400 families, with names like Rockefeller, paid vastly higher tax rates than middle-class or poor families. The 2017 tax law will cost America $2.3 trillion over 10 years – and provides 83 percent of its benefits to the wealthiest 1 percent – according to the Congressional Budget Office. And unfortunately not every company is like Mastercard, which chose to use part of its savings to create a real and sustained commitment to inclusive growth, so that others could participate.
So I’m not shocked by renewed calls for a wealth tax in America, because people are concluding that words like “growth” and “wealth” are code for a deeply unequal economy in which many, maybe most, households are on a regular basis falling behind.
Now, we are all here because we believe economic growth should in fact be more inclusive. So what can we do collectively to make that the case?
At The Rockefeller Foundation we believe innovative public-private partnerships like the type Ajay described can help illustrate what’s possible and motivate much needed policy change.
One effort we’re backing is significantly expanding the Earned Income Tax Credit and the Child Tax Credit, by building public-private coalitions in states around the country to educate lawmakers and innovate at the state level – because we know this is a strategy that can help millions of American families have more economic security.
We’re also partnering with Mastercard and others – investors, cities, and communities – to make sure that the bipartisan part of the tax bill, the federal Opportunity Zones tax incentive, in fact allows tens of billions of dollars of private investment to be steered into nearly 9,000 lower-income census tracks in this country that have in fact been left behind, and therefore lifts up the families living in those communities.
And we’ve been working to make sure America’s safety net works for more Americans, so fewer people slip through the cracks and more can access essential benefits that offer a lifeline out of poverty.
That’s why today I’m announcing a new investment The Rockefeller Foundation is making together with the Mastercard Center for Inclusive Growth: a $7.5 million commitment to Benefits Data Trust, a Philadelphia-based nonprofit. Their CEO, Trooper Sanders, is here today. And their group uses data analytics, targeted outreach, and policy change to help millions of Americans access essential benefits that can improve their health and economic mobility.
Remember the 50 million American households I mentioned that are effectively falling behind? Most have at least one person working full time, sometimes multiple jobs, but they still don’t have enough to meet their basic needs. And even though dedicated public programs can help them move up the ladder of opportunity, tens of millions of eligible Americans are not enrolled in any of these available services. Some may not know how, or get overwhelmed by the complicated process and policies involved to do so. Others are turned off by cruel, often racial stigmas that have plagued us for decades. But whatever the cause, the effect is tens of billions of dollars that go unused every year.
Benefits Data Trust shows how data science and technology can help create a better path. They work in partnership with six states already – and we hope that that expands dramatically across the country. … Nearly 3 million households live below the poverty line in those states. And by correlating household data with program eligibility requirements, they can proactively help families access benefits that they’re qualified for but are not using. Since 2005, they’ve helped 1 million households secure $7 billion in public assistance, using a process that’s fast, dignified, secure, and safe. Our partnership with Mastercard and others, we hope, will help them scale this effort dramatically so that everyone in this country who qualifies for benefits can draw them down.
Working together, we can help create a more inclusive economy here in the United States and around the world. Philanthropy and great nonprofit work, as Ajay said, alone is overmatched for the scale of the challenge we face. But working with corporate leaders, policymakers, nonprofits, scientists and technologists, we can in fact illustrate what’s possible on the innovation frontier, and usher in the major structural and policy changes – and genuine trade-offs – needed:
To restore economic opportunity for those who have been left out;
To reward hard work and responsibility, no matter who provides it;
And to create a fair and level playing field – because everyone deserves a chance to rise.
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