Luckily for you, and for those who will follow you in the next half-decade or so, this assignment is due only in 2025.
Your parents, of course, were not total slouches. Overall, one might give them collectively a grade of B+, using Dean Malkiel’s excruciating new grading standards, or even a solid A, on Harvard and Yale standards.
Your parents have been hard working and entrepreneurial. They imaginatively harvested the potential of the electronic revolution, inventing and bestowing on the world the internet, Apple, Microsoft, eBay and amazon.com, along with wondrous hardware such as cell phones, PCs, iPods and Kindles. Your parents made our country the world leader in these endeavors.
Your parents’ generation also brought to this country the charm and joie de vivre that comes with sidewalk cafes and gourmet restaurants of an infinite variety. They taught Americans that in between Bourbon and Southern Comfort there exists an infinite variety of fine, home-grown wines.
Finally, your parents’ generation continued our journey, begun by the World War II generation, from a racist, sexist and otherwise intolerant society to one that cannot claim to be perfect, but arguably has gone further down that road than any other country in the world.
Alas for us all, sometime in the mid-1990s your parents’ generation contracted two serious mental diseases that fed on one another and did great harm to our country.
The first was diagnosed as early as 1996 by Harvard economist John Campbell and Yale economist Robert Shiller as “irrational exuberance.” It is the belief that asset values can only go up.
The second mental illness was an ever-growing addiction to living on credit. Starting sometime in the early 1980s, your parents’ generation persuaded itself that America could permanently spend more than the nation’s GDP on consumption, investments in housing and business, government services and imports, and that foreigners would always be willing to finance our excesses.
Most seriously affected by these two mental diseases, of course, were the leaders of our financial sector, whom President Obama’s Treasury Department and the Federal Reserve now try to cure by throwing even more credit at them, instead of banishing them permanently to the island Elba, where folks like them belong.
In the failures of your parents’ generation, you will see the tasks required for your final homework exercise.
First, you must restore to America’s financial sector the integrity for which it was once known. Honor and shame must once again become operative concepts in that sector.
Next, you must rewrite the social contract between our business and government sectors. The myth that the private sector is inherently self-regulating and invariably more efficient and welfare-enhancing than government is just that — a myth. The economics profession that brainwashed you into believing that myth should be what in China is known as xia fang, that is, “sent to the country for reeducation.”
Third, knowing now that private employers — and certainly the private financial sector — can’t be relied upon to safeguard your future family’s financial security, you must rewrite America’s social contract between government and the individual family.
Fourth, you must explore whether our economy and our democracy can live for long with a distribution of wealth in which the richest 20 percent of families receive 60 percent of all annual income and own 85 percent of all wealth, while the poorest 40 percent of families receive only 10 percent of all annual income and own only 0.2 percent of all wealth. As the poorest 40 percent of American families reach old age without a penny of net worth, yours will be the task of housing them, feeding them and providing them with health care. You will pay taxes at rates that would have had your parents consider suicide as a viable option.
Finally, you must cope somehow with one more nasty mortgage your parent’s generation has written on your name: the epidemic of obesity, whose future economic cost and consequences for the health of Americans will be sizeable. You must restructure our health system so that it does not focus only on health care and the health-care incomes it begets, but more on the better management of the individual’s health by him- or herself, with physicians as management consultants.
That’s all there is to this final assignment.
Fortunately, unlike so many dispirited European youngsters, American youngsters are inveterate optimists and can-do people. So I find much comfort in the thought that somehow you will manage all these tasks and, in 2025, our country will be richer yet again, and fairer, and better governed and even greater than it already is.
Go to it, my friends, and vaya con Dios!
Uwe E. Reinhardt is the James Madison Professor of Political Economy and a professor in the Wilson School. He can be reached at reinhard@princeton.edu.
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