Fareed Zakaria GPS – CNN 08-18-13

Salient to Investors:

Fareed Zakaria said:

Both the American left and right are concerned about the declining mobility of the American dream. Countries that invest more heavily in children’s health care, nutrition, and education, well-being more generally end up with a much stronger ladder of opportunity and access than America.

For over a decade, Northern European countries have done much better than the US at moving poor people up the ladder.

Miles Corak says Canada is a very valid comparison for the United States because it is much like America. The percentage of foreign-born Canadians is higher than Americans, and people in Canada and Australia have twice the economic mobility of Americans.

Many of the factors that seem to explain the variation across countries also explain the variation across the US.

The Harvard-Berkeley study found that cities with strong families, civic support groups and a community-service orientation do well on social and economic mobility. E.g. Salt Lake City, which is dominated by Mormons, has extremely high mobility rankings. America in general fares badly because it has many more broken families, single parents and dysfunctional domestic arrangements than Canada and Europe.

The Harvard-Berkeley study found that cities where the poor live far from the middle class do much worse than those that are more mixed.

Social capital cannot be rebuilt in five years. Cities cannot be quickly redesigned to integrate them or to create greater density.  This leaves public policy.

America spends much less on the education and well-being of poor people, especially poor children, than any other rich country and that retards their chances of escaping poverty. The OECD says the US is one of only 3 rich countries that spends less on disadvantaged students than others, largely because education funding for elementary and secondary schools in the US is tied to local property taxes.

Poor neighborhoods end up with badly funded schools. The US spends most of its education funds on college education or is otherwise directed towards those already advantaged in various ways.

In 2009, for every 100,000 citizens, 760 Americans were in prison; 5 times the rate in Britain, 8 times the rate in Germany and South Korea, and 12 times the rate in Japan. Federal prisons account for 14 percent of our total inmates, and the most serious charge for nearly half of all inmates is a drug offense versus 20 percent in state prisons,.

The federal prison population has increased every year since 1980, whereas state prison populations have been declining in recent years. The overall prison population is down in each of the past 3 years, in both red and blue states, partially because budgets were collapsing, but partly because of a growing acknowledgment that the war on drugs has failed.

The Drug Policy Alliance says the US has spent a trillion dollars on the drug war in the last four decades but there has been no real change in addiction rates. Americans are not more prone to drugs or crime than citizens of other countries

Cass Sunstein at Harvard Law School said Obama is friendly to business and the number of rules issued in the first term of the Obama administration were lower than the number in the first term of the Bush administration, which was not regarded as regulation-happy. Sunstein said the cost of regulation in the first term of the Obama administration is very much in accord with standard numbers of the last 25 years.

Kent Greenfield at Boston College said it is easy to be overwhelmed with choice, making us open to manipulation by people who know more about our own tendencies than we do. Studies that when that part of the brain is activated, people get really short-term oriented, but very creative in satisfying those choices.

Author Sheena Iyengar said that when people encountered more choice, they might actually be less motivated to make a choice. Iyengar recommends that when making a choice, some is good but more is too much, and to be choosy about choosing: which tasks are worth doing, and which are not worth your time.

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