- Billionaire Ray Dalio, founder of the hedge fund Bridgewater Associates, recently spoke wwith the founder of Khan Academy, a non-profit organization that offers free lessons on a wide range of subjects.
- In the online video interview, Dalio said that the American dream is “lost” and “does not exist” in today’s world.
- Inequality in education, as well as low income for many in the United States, produces economic disparities, he said.
- Business leaders must declare wealth inequality a national crisis, and policymakers and business leaders must come together to find solutions, the billionaire said.
- This post is part of the current Business Insider series on Better Capitalism.
Billionaire hedge fund manager Ray Dalio says the American dream is “lost” or “does not exist” right now and if the leaders do not act, the whole economic system of capitalism could collapse.
In an online video conversation with Sal Khan, the founder of nonprofit education Khan Academy, Dalio said that policy makers must take action to increase access to education and increase the income of Americans to low income, who are disproportionately affected by the coronavirus pandemic.
“If you do not have a situation where people have the opportunity, not only do you fail to exploit all the potential that exists, which is not profitable, you threaten the existence of the system and I think that is coming home very clearly with the downturn in the economy with this virus, “he said.
Dalio himself is from a lower middle class, he said. The billionaire’s father was a jazz musician, and Dalio explained how it was, in part, good public education in the 1960s that led to his personal success.
“This notion of what was right, equal opportunity on a broad basis, was what the American dream was,” he said during the video call on Thursday.
Today, that ability to move from a lower middle class to public education is lost, said the founder of the hedge fund Bridgewater Associates.
“The American dream is lost or it certainly does not exist when you take education, for example,” he said.
Income as a predictor of educational success is a big economic problem, said Dalio.
Dalio then cited research he posted on LinkedIn which shows that the richest 40% of wealthy Americans spend on average five times more on their child’s education than the poorest 60%.
And spending money on education has a big impact on a student’s success. In a blog post on LinkedIn, Dalio cited research that found that students from families earning less than $ 20,000 average 260 points less on SAT (out of 1,600) than students from families earning more than 200,000 $.
“And the gap is widening,” he wrote.
Getting a college degree has a significant impact on your earning potential. A bachelor’s degree is worth $ 2.8 million on average over a lifetime, according to the Center on Education and the Workforce at Georgetown University. Georgetown research also found that bachelor’s degree graduates earn 31% more than those with an associate’s degree and 84% more than those with a high school diploma.
“We can see that there is not only a wealth gap, there is an opportunity gap and a productivity gap. And this is a problem, “he said. ” Something is wrong. “
Government and business leaders must declare inequality a national emergency and come together to form a plan, the billionaire said.
Education is part of the problem, but it is not the whole problem, the billionaire wrote. In addition to calling for more federal funding for public schools, Dalio is calling on lawmakers and business leaders to tackle low-income people in the United States.
“The quest for greater profits and greater corporate efficiency also led companies to produce in other countries and to replace American workers with profitable foreign workers, which was good for profits and efficiency of these companies, but bad for the earnings of American workers, “he wrote.
The change, according to Dalio, requires a change in mentality on the part of business and government leaders.
“There must be powerful forces from the top of the country who proclaim that income / wealth / opportunity is a national emergency and take responsibility for reorganizing the system to make it work better,” he wrote. .
Currently, policymakers are paying too much attention to budgets over returns on investment, Dalio wrote. In other words, there is too much short-term thinking and not enough long-term planning.
“So I think management should create a bipartisan commission to bring together qualified people from different communities to come up with a plan to reorganize the system to divide and simultaneously increase the economic pie,” he wrote.