This op-ed is part of The Hill’s “How to Fix America” series exploring solutions to some of the country’s most pressing problems.
As a global macro-investor, I’ve spent most of my five-decade career studying and betting on leading indicators of success for countries, companies and people. My conclusion is that it all comes down to productivity.
Productivity equals prosperity, from the individual level on up. And when it comes to countries’ success, productivity-prosperity must be broad-based. When productivity and prosperity are confined to a small percentage of the population, as they are now, there is a high chance that there will be internal conflict over wealth and values.
At this time, our biggest economic problem is that we don’t have broad-based productivity. Neither political party has a plan to establish it or is addressing the need for it.
I see both Democrats and Republicans this election season talking a lot about bringing greater prosperity to America, but I don’t hear much about how they will broadly increase productivity to make that happen. We know that the left will tax the rich and companies to give money to people; we know that the right will make it easier to make and keep money for those who have the ability to do so. But we don’t hear anything about how to improve the fundamentals of education, training and other programs to give people who are unproductive opportunities to become productive.
The reason that I can’t now bring myself to support either side — though I will always try to help whichever side is in office — is that I don’t see strong, bipartisan leadership to bring the country together and make the reforms that are needed to have a united and prosperous United States.
In 2019, I published a study called “How and Why Capitalism Needs to Be Reformed.” I diagnosed this problem by looking at how the natural dynamics of capitalism’s profit-making system leads to a breakdown of broad-based opportunities to be productive and prosperous. To summarize, the study showed that, if left unreformed, capitalism will increasingly produce a self-reinforcing feedback loop that widens wealth and opportunity gaps, eventually leading to harmful political conflict that threatens the capitalist system itself.
That is because the “haves” increasingly accumulate wealth and reinvest that wealth in things like education and opportunities for their children; the market shifts toward providing these services, which reinforce the position of the haves instead of providing similar opportunities for the children of the “have-nots.” I know that if I had to raise my children in the failing school systems and unsafe neighborhoods that too many Americans must resort to today, I’d probably become a revolutionary.
Rising populism of both the right and the left has been the main trend in American politics since I published that study. The patterns of history show that unless this trajectory is altered by restoring broad-based productivity and political cooperation, things are likely to get worse from here. So, as I see it, the focus needs to be on coming up with smart ways to redistribute opportunities to learn and be productive.
In the long run, the national debt is a big prospective problem for America. It’s another big thing we don’t hear the candidates talking much about. That is because dealing with it requires raising some kind of taxes or lowering some kind of spending, which are politically very difficult to do. The problems we are facing exist because we didn’t have the discipline to be productive and to save. The best way to solve it is with greater productivity and financial discipline.
There is a lot that can be done, though it has to start with the will to do it. While fiscal conservatives typically focus only on the budget, rather than the needs that it can fund, and fiscal liberals typically borrow too much money or fail to spend it wisely, there is without doubt a middle ground for well-run programs that can be invested in by capitalists to raise productivity in ways that improve both finances and peoples’ lives.
For example, we should commit to building excellent, or at least acceptable, broad-based education, starting by treating educational expenses as investments rather than costs. That is because money that is well-spent on education raises incomes and cuts costs. We should seek out and fund good programs that do that. This study from Dalio Education, our philanthropic education arm, illustrates the costs of inadequate education. It also shows how much better off we’d be if we were to establish proven, cost-effective programs that help high school students who wouldn’t otherwise graduate to get jobs.
America continues to lead the world as a vibrant, innovative environment where people with great ideas can pursue their dreams and make a big impact. I have no doubt that it has the creativity and the capital to solve the problem of restoring broad-based productivity. It just has to set doing that as a strategic objective and incentivize it — or at least start talking about it.
Ray Dalio is a philanthropist and investor, and the founder of Bridgewater Associates. He is the author of the New York Times’ bestselling book “Principles: Life and Work.”