23 Things They Don't Tell You About Capitalism

While it is silly to blame everything on the socio-economic environment, it is equally unacceptable to believe that people can achieve anything if they only ‘believe in themselves’ and try hard enough, as Hollywood movies love to tell you. Equality of opportunity is meaningless for those who do not have the capabilities to take advantage of it.

The curious case of Alejandro Toledo

Today, no country deliberately keeps poor children from going to school, but many children in poor countries cannot go to school because they do not have the money to pay for the tuition. Moreover, even in countries with free public education, poor children are bound to perform poorly in school, whatever their innate ability may be. Some of them go hungry at home and also skip lunch at school. This makes it impossible for them to concentrate, with predictable results for their academic performance. In extreme cases, their intellectual development may have already been stunted because of a lack of food in their early years. These kids may also suffer more frequently from illness, which makes them skip school more often. If their parents are illiterate and/or have to work long hours, children will have no one to help them with their homework, while middle-class children will be helped by their parents and rich kids may have private tutors. Helped or not, they may not even have enough time for homework, if they have to take care of younger siblings or tend the family goats.

Given all this, as far as we accept that we should not punish children for having poor parents, we should take action to ensure that all children have some minimum amounts of food, healthcare and help with their homework. Much of this can be provided through public policy, as happens in some countries – free school lunches, vaccinations, basic health checks and some help with homework after school by teachers or tutors hired by the school. However, some of this still needs to be provided at home. Schools can provide only so much.

This means that there has to be some minimum equality of outcome in terms of parental income, if poor children are to have anything approaching a fair chance. Without this, even free schooling, free school meals, free vaccinations, and so on, cannot provide real equality of opportunity for children.

Even in adult life, there has to be some equality of outcome. It is well known that, once someone has been unemployed for a long time, it becomes extremely difficult for that person to get back into the labour market. But whether someone loses her job is not entirely determined by the person’s ‘worth’. For example, many people lose their jobs because they chose to join an industry that looked like a good prospect when they first started but since has been hit hard by a sudden increase in foreign competition. Few American steelworkers or British shipbuilding workers who joined their industries in the 1960s, or for that matter anyone else, could have predicted that by the early 1990s their industries would be virtually wiped out by Japanese and Korean competition. Is it really fair that these people have to suffer disproportionately and be consigned to the scrapheap of history?

Of course, in an idealized free market, this should not be a problem because the American steelworkers and the British shipbuilders can get jobs in expanding industries. But how many former American steelworkers do you know who have become computer engineers or former British shipbuilders who have turned themselves into investment bankers? Such conversion rarely, if ever, happens.

A more equitable approach would have been to help the displaced workers find a new career through decent unemployment benefits, health insurance even when out of a job, retraining schemes and help with job searches, as they do particularly well in Scandinavian countries. As I discuss elsewhere in the book (see Thing 21), this can also be a more productive approach for the economy as a whole.

Yes, in theory, a shoeshine boy from a poor provincial town in Peru can go to Stanford and do a PhD, as the former Peruvian President Alejandro Toledo has done, but for one Toledo we have millions of Peruvian children who did not even make it to high school. Of course, we could argue that all those millions of poor Peruvian children are lazy good-for-nothings, since Mr Toledo has proven that they too could have gone to Stanford if they had tried hard enough. But I think it is much more plausible to say that Mr Toledo is the exception. Without some equality of outcome (of parental income), poor people cannot take full advantage of equality of opportunity.