We the Future: Talks from TED, Skoll Foundation and United Nations Foundation
A daring idea to reduce income inequality. Every newborn should enter the world with at least $25,000 in the bank. That is the basic premise of a “baby trust,” an idea conceived by economists Darrick Hamilton of The New School and William Darity of Duke University. Since 1980, inequality has been on the rise worldwide, and Hamilton says it will keep growing due to this simple fact: “It is wealth that begets more wealth.” Policymakers and the public have fallen for a few appealing but inaccurate narratives about wealth creation — that grit, education or a booming economy can move people up the ladder — and we’ve disparaged the poor for not using these forces to rise, Hamilton says. Instead, what if we gave a boost up the ladder? A baby trust would give an infant money at birth — anywhere from $500 for those born into the richest families to $60,000 for the poorest, with an average endowment of $25,000. The accounts would be managed by the government, at a guaranteed interest rate of 2 percent a year. When a child reaches adulthood, they could withdraw it for an “asset-producing activity,” such as going to college, buying a home or starting a business. If we were to implement it in the US today, a baby trust program would cost around $100 billion a year; that’s only 2 percent of annual federal expenditures and a fraction of the $500 billion that the government now spends on subsidies and credits that favor the wealthy, Hamilton says. “Inequality is primarily a structural problem, not a behavioral one,” he says, so it needs to be attacked with solutions that will change the existing structures of wealth.
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