Fault Lines: How Hidden Fractures Still Threaten the World Economy Read Online Free PDF Page B

was to believe that once countries had developed a steel frame of institutions, political influences would be tempered: countries would graduate permanently from developing-country status. We should now recognize that institutions such as regulators have influence only so long as politics is reasonably well balanced. Deep imbalances such as inequality can create the political groundswell that can overcome any constraining institutions. Countries can return to developing-country status if their politics become imbalanced, no matter how well developed their institutions.
    There are no silver bullets. Reforms will require careful analysis and sometimes tedious attention to detail. I discuss possible reforms in Chapters 8 to 10 , focusing on broad approaches. I hope my proposals are less simplistic and more constructive than the calls to tar and feather bankers or their regulators. If implemented, they will transform the world we live in quite fundamentally and move it away from the path of deepening crises to one of greater economic and political stability as well as cooperation. We will be able to make progress toward overcoming the important challenges the world faces. Such reforms will require societies to change the way they live, the way they grow, and the way they make choices. They will involve significant short-term pain in return for more diffuse but enormous long-term gain. Such reforms are always difficult to sell to the public and hence have little appeal to politicians. But the cost of doing nothing is perhaps worse turmoil than what we have experienced recently, for, unchecked, the fault lines will only deepen.
    The picture is not all gloom. There are two powerful reasons for hope today: technological progress is solving problems that have eluded resolution for centuries, and economic reforms are bringing enormous numbers of the poor directly from medieval living conditions into the modern economy. Much can be gained if we can draw the right lessons from this crisis and stabilize the world economy. Equally, much could be lost if we draw the wrong lessons. Let me now lay out both the fault lines and the hard choices that confront us, with the hope that collectively we will make the right difference. For our own sakes, we must.

CHAPTER ONE

Why Is the United States Falling Behind?
     
    Why is the educational system failing the United States? With a university system that is still considered the best in the world, and which attracts students from every corner of the globe, the failure clearly does not lie in the quality of university education. Instead, there are three obvious problems that my earlier discussion suggests. First, the quality of the learning experience in schools is so poor that far too many students drop out before completing high school. Second, in a related vein, even among those who graduate from high school, many are unprepared for the rigors of university education. Finally, as the college premium increases, the cost of higher education also increases: it is a service that is provided by the well-educated with very small increases in productivity over the years (college class sizes have not increased dramatically at my university despite all the improvements in communications technology, though the learning experience has probably improved). Despite attempts to expand financial aid, a quality education at a private university is passing beyond the reach of even middle-class families. And with tight state budgets, even state schools are raising fees significantly.
    Of course, learning does not take place only in the classroom. Differences in aptitude for education emerge in early childhood as a result of varying nutrition, learning environments, and behavioral expectations. The family matters immensely, as do the kind of role models children want to emulate and the attitudes their friends have. At my daughter’s university-affiliated school, the smartest kid in class is pushed to excel and is