Capitalism is dead! Well, not exactly. But capitalism as we know it is evolving in a distinct new direction, according to Kauffman Foundation Senior Scholar Brink Lindsey. He contends that we have entered the era of human capitalism – a time in which having the right knowledge and skills is the key determinant of an individual’s economic success.
In his compelling new e-book, Human Capitalism: How Economic Growth Has Made Us Smarter – and More Unequal, published this week by Princeton University Press, Lindsey shows why brainpower matters more than ever, why the advent of a knowledge-driven economy has coincided with a dismaying degree of social and economic inequality, and how a package of policy reforms could equip more Americans with the human capital they need to succeed.
Here’s a quick cheat-sheet on what Human Capitalism is all about and why this meticulously documented extended essay (one of the great virtues of the e-book format is that it eliminates the temptation to pad excessively) is worth taking very seriously.
The core premise of Lindsey’s argument is that, since the advent of industrialization, economic growth has gone hand-in-hand with unprecedented social complexity. Division of labor is more specialized and more globally distributed. Knowledge is growing at exponential rates. The degree of choice in daily life – from information sources to consumer goods — is dizzying. All this complexity, writes Lindsey (whose previous books include The Age of Abundance: How Prosperity Transformed America’s Politics and Culture and Against the Dead Hand: The Uncertain Struggle for Global Capitalism), places enormous mental demands on individuals.
That’s why, he argues, “today the primary determinant of socioeconomic status is the ability to handle the complex mental demands of a complex social environment. If you can do that, you’ll likely have ample opportunities to find and pursue a career with interesting, challenging, and rewarding work.”
Many Americans have responded to the demands of a complex economy by making ever-greater investments in human capital. To take just two of the many examples and studies Lindsey cites, the U.S. high school graduation rate has climbed from 6 percent in 1900, to 75 percent today, and the percentage of 20-somethings with college degrees is up from 8 percent in 1950, to 32 percent today.
For a variety of reasons, however, not everyone has been able to take the steps necessary to build human capital – with dire results.
“If you can’t [adapt],” Lindsey writes, “you’ll probably be relegated to a marginal role in the great social enterprise — where, among other downsides, you’ll face a dramatically higher risk of falling into dysfunctional and self-destructive patterns of behavior.”
With demand outpacing supply for workers with skills and knowledge, he laments the “growing economic cleavage opening up between the well-educated elite and everybody else.” This is exemplified by the enormous wage premium and lower unemployment rates generally enjoyed by those who possess a bachelor’s degree.
Lindsey’s e-book offers a readable, nuanced synthesis of the available social science evidence on why human capital matters and why social mobility in the United States has failed to live up to the expectations generated by our national creed. He makes an unabashed case for the importance of culture in giving children the skills they will need to thrive. He points out, for instance, how child-rearing among the elite – managers, professionals, entrepreneurs – gives kids fluency with “intellectual, social, and personal abstraction” of a kind that is much rarer among working-class children who badly need such abilities.
Education is crucial to overcoming such stark disparities, of course, but in both K-12 schools and postsecondary institutions, our system is underperforming for too many students.
The nation’s growing social and economic divide, Lindsey warns, could cause a political backlash again our entire system, leading to unwise public policies that actually undermine future economic growth. That would be bad for everyone. “Potential unrealized is bad enough, but potential eliminated altogether is even worse,” he observes.
So what is to be done? Human Capitalism lays out an agenda for increasing the number of people who can compete and prosper in our evolving knowledge economy. Without suggesting that any of his reform proposals are silver bullets, Lindsey lays out a broad agenda:
- innovation-friendly economic policies;
- K-12 reform;
- early childhood interventions;
- help for low-skilled adults through wage subsidies;
- penal reform to reduce mass incarceration;
- linking higher education tuition subsidies to successful outcomes; and
- facilitating upward mobility by streamlining land-use rules and trimming the red tape that surrounds occupational licensing.
Some of Lindsey’s ideas will surely cause heated policy debate. But what should not be in dispute is his fresh, lucid explanation of the considerable benefits human capitalism has come to offer – and the urgent need to unlock opportunities for those citizens not reaping the rewards. Anyone who cares about economic growth, inequality, education, or all three, would be wise to read this important book.