In partnership with the ESADE Business School and the City of Barcelona, the Metropolitan Policy Program planned and participated in three intensive days of learning in Barcelona in June 2011.  The focus of the session was to look at examples of strategies Barcelona, Spain and its greater metropolitan region is embracing to rebuild and re-invent their economies.  The goal is to share innovative ideas with U.S. metros engaged in similar initiatives as they face the challenge of moving to a new economic growth model.

This paper features brief synopses of the tours and meetings held with the City of Barcelona and the Catalonia Region on their economic development strategies.

Specific strategies include:

Barcelona Activa »

Barcelona Economic Triangle » (PDF)

22@Barcelona » (PDF)

Parc de l’Alba »

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Barcelona Activa
The 22@Barcelona revitalization area	The Parc de l'Alba revitalization area

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Featuring keynote remarks by Jason Furman, Chairman of the Council of Economic Advisers, and Alan Greenspan, former Chairman of the Federal Reserve Board

Productivity growth in the United States slowed sharply around 2005, which has contributed to slow growth in wages and downward revisions to estimates of long run economic growth. The global economy has grown incredibly fast since 1950, with global GDP expanding six-fold and average per capita income nearly tripling. A larger workforce and increased productivity spurred this growth. However, the global workforce is expected to grow more slowly over the coming years, and peak in size around 2050. If strong economic growth is to be achieved, in both the United States and globally, productivity must increase strongly.

On Wednesday, April 8, the Initiative on Business and Public Policy hosted an event exploring these and related issues. The event featured keynote remarks by Jason Furman, Chairman of the Council of Economic Advisers, and Alan Greenspan, former Chairman of the Federal Reserve Board. James Manyika and Jaana Remes of the McKinsey Global Institute considered the potential for faster global productivity growth. Marco Annunziata of General Electric will gave his perspective, and Martin Baily looked at explanations for slow growth in the U.S. economy.

Download a McKinsey report on global productivity trends »

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• Opening keynote by Jason Furman
• Global growth: Can productivity save the day in an aging world?
• Closing keynote by Alan Greenspan

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• Achieving strong economic growth

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• MGI_Global_growth_Full_report_February_2015pdf (3)
• 20150408_strong_economic_growth_transcript
• BAILY_slides
• GREENSPAN_slides
• REMES_MANYIKA_slides

       

      

Washington is again paralyzed and pulling back on clean energy economic development. Deficit politics and partisanship are firmly entrenched and the raft of federal financial supports made available through the 2009 stimulus law and elsewhere is starting to expire.

No wonder it’s hard to imagine—especially if you’re sitting in the nation’s capital—how the next phase of American clean energy industry growth will be financed or its next generation of technologies and firms supported.

And yet, one source of action lies hidden in plain sight. With federal clean energy activities largely on hold, a new paper we are releasing today as part of the Brookings-Rockefeller Project on State and Metropolitan Innovation argues that U.S. states hold out tremendous promise for the continued design and implementation of smart clean energy finance solutions and economic development.

Specifically, we contend that the nearly two dozen clean energy funds (CEFs) now running in a variety of mostly northern states stand as one of the most important clean energy forces at work in the nation and offer at least one partial response to the failure of Washington to deliver a sensible clean energy development approach.

To date, over 20 states have created a varied array of these public investment vehicles to invest in clean energy pursuits with revenues often derived from small public-benefit surcharges on electric utility bills. Over the last decade, state CEFs have invested over $2.7 billion in state dollars to support renewable energy markets, counting very conservatively.  Meanwhile, they have leveraged another $9.7 billion in additional federal and private sector investment, with the resulting $12 billion flowing to the deployment of over 72,000 projects in the United States ranging from solar installations on homes and businesses to wind turbines in communities to large wind farms, hydrokinetic projects in rivers, and biomass generation plants on farms. 

In so doing, the funds stand well positioned—along with state economic development and other officials—to build on a pragmatic success and take up the challenge left by the current federal abdication of a role on clean energy economic development.

Yet here is the rub: For all the good the funds have achieved, project-only financing—as needed as it is—will not be sufficient to drive the growth of large and innovative new companies or to create the broader economic development taxpayers demand from public investments.  Also needed will be a greater focus on the deeper-going economic development work that can help spawn whole new industries. 

All of which points to the new brand of fund activity that our paper celebrates and calls for more of. 

In recent years, increasingly ambitious efforts in a number of states have featured engagement on at least three major fronts somewhat different from the initial fund focus: (1) cleantech innovation support through research, development, and demonstration (RD&D) funding; (2) financial support for early-stage cleantech companies and emerging technologies, including working capital for companies; and (3) industry development support through business incubator programs, regional cluster promotion, manufacturing and export promotion, supply chain analysis and enhancement, and workforce training programs.

These new economic development efforts—on display in California, Massachusetts, New York, and elsewhere—show the next era of state clean energy fund leadership coming into focus. States are now poised to jumpstart a new, creative period of expanded clean energy economic development and industry creation, to complement and build upon individualistic project financing. 

Such work could not be more timely at this moment of federal gridlock and market uncertainty.

Along these lines, then, our paper advances several recommendations for moving states more aggressively into this new period of clean energy economic development. We suggest that:

• States should reorient a significant portion (at least 10 percent of the total portfolio) of state CEF money to clean energy-related economic development

• States, as they reorient portions of their CEFS to economic development, should better understand the market dynamics in their metropolitan regions.  They need to lead by making available quality data on the number of jobs in their regions, the fastest-growing companies, the critical industry clusters, gaps in the supply chain for those industries, their export potential, and a whole range of economic development and market indicators

• States also should better link their clean energy funds with economic development entities, community development finance institutions (CDFIs), development finance organizations and other stakeholders who could be ideal partners to develop decentralized funding and effective economic development programs

In addition, we think that Washington needs to recognize the strength and utility of the CEFs and actively partner with them:

• The federal government should consider redirecting a portion of federal funds (for instance, from federal technology support programs administered by the Department of Energy and other programs meant for federal-state cooperation) to provide joint funding of cluster development, export programs, workforce training, and other economic development programs  through matching dollars to state funds that now have active economic development programs, and to provide incentives to states without such programs to create them

• The federal government should create joint technology partnerships with states to advance each state’s targeted clean energy technology industries, by matching federal deployment funding with state funding.

• The states and the federal government, more generally, should look to “decentralize” financing decisions to local entities with street knowledge of their industries, relying on more “development finance” authorities that have financed traditional infrastructure and now could finance new clean energy projects and programs

In sum, our new paper proposes a much greater focus in U.S. clean energy finance on “bottom up,” decentralized clean initiatives that rely on the states to catalyze regional economic development in regions. Such an approach—which reflects the emergence of an emerging “pragmatic caucus” in U.S. economic life—is currently demanded by federal inaction. However, it might also be the smartest, most durable way to develop the clean energy industries of the future without the partisan rancor and obtuseness that has stymied federal energy policy. State clean energy funds—having funded thousands of individual projects—bring significant knowledge to bear as they focus now on building whole industries. For that reason, the funds’ transition from project development to industry creation should be nurtured and supported.

       

State clean energy funds (CEFs) have emerged as effective tools that states can use to accelerate the development of energy efficiency and renewable energy projects. These clean energy funds, which exist in over 20 states, generate about $500 million per year in dedicated support from utility surcharges and other sources, making them significant public investors in thousands of clean energy projects.

However, state clean energy funds’ emphasis on a project finance model—which directly promotes clean energy project installation by providing production incentives and grants/rebates—is by itself not enough to build a statewide clean energy industry. State clean energy funds also need to pay attention to other critical aspects of building a robust clean energy industry, including cleantech innovation support through research and development funding, financial support for early-stage cleantech companies and emerging technologies, and various other industry development efforts.

As it happens, some of these state clean energy funds are already supporting a broader range of clean energy-related economic development activities within their states. As more and more states reorient their clean energy funds from a project finance-only model in order to encompass broader economic development activities, clean energy funds can collectively become an important national driver for economic growth.

To become true economic development engines in clean energy state clean energy funds should:

• Reorient a significant portion of their funding toward clean energy-related economic development
• Develop detailed state-specific clean energy market data
• Link clean energy funds with economic development entitites and other stakeholders in the emerging industry
• Collaborate with other state, regional, and federal efforts to best leverage public and private dollars and learn from each other's experiences

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The White House Council of Economic Advisers (CEA) was created by Congress in 1946 to advise the president on ways “to foster and promote free competitive enterprise” and “to promote maximum employment, production and purchasing power.” President Truman, who signed the Employment Act of 1946 into law, was unenthusiastic about the Council and didn’t nominate members for nearly six months. Yet the CEA, comprised of three individuals whom Congress says are to be “exceptionally qualified,” has not only survived but also prospered for 70 years and remains an important part of the president’s economic policy decisionmaking.

On February 11, the Hutchins Center on Fiscal and Monetary Policy at Brookings marked this anniversary by examining the ways the CEA and other economists succeed and fail when they set out to advise elected politicians and tap the expertise of some of the “exceptionally qualified” economists who have chaired the Council over the past four decades.

You can join the conversation and tweet questions for the panelists at #CEAat70.

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• Panel 1: The CEA in Moments of Crisis
• Panel 2: The CEA and Policymaking
• Panel 3: Current Economic Policy Issues

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• The Council of Economic Advisers: 70 years of advising the president

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• Uncorrected Transcript (.pdf)

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• 20160211_economic_advisers_transcript

       

       

       

       

       

       

       

       

       

       

       

       

       

       

Hillary Clinton was not ready on day one.

The autopsies of her defeat for the Democratic nomination contest all point to a series of early blunders by her campaign. Her campaign plan was simple: leverage her name recognition, early money lead, and organization to win the Super-Tuesday contests, thereby wrapping up the Democratic nomination in early February. As the inevitable winner, she could be the centrist candidate on the Iraq war and tout her experience as a problem solver.

But her over-confident and over-priced campaign consultants failed to recognize that in a “change” election, caucus attenders were not excited by an Iraq war centrist who also happened to be a Washington insider. Clinton’s lack of a plan to effectively contest the caucuses allowed Barack Obama to win what would be the all important delegate race, and more importantly, give him the mantle of momentum while she appeared mired in the mud at a crucial mid-February stage of the campaign.

But she was ready on day two.

She hit her stride late in the game by impressively winning a series of primary contests. All the more remarkable: she did so on a shoestring election-to-election budget while the media wrote her off as a spoiler. With a newfound voice that emphasized she was a populist who would fight for the people, her new message resonated particularly well as the economy continued to falter.

Unfortunately, by the time she retooled her message and got rid of the people who had driven her campaign into the ditch— campaign manager Patti Solis Doyle and chief strategist Mark Penn—it was already too late. Obama had built a nearly insurmountable lead in the delegate count.

It is here that the rules matter.

If states had not moved up or “frontloaded” the date of their primaries and caucuses, under the misimpression that doing so would give them a greater voice in the 2008 nomination, Clinton might be the Democratic nominee.

She would have received more delegates from Florida and Michigan, two states that she would have likely won if all Democratic candidates had vigorously campaigned, but was denied a full slate because these states violated party rules by holding their elections too early. Counting these contests was important for her delegate count and to her argument that she had won more popular votes than Obama.

If states had not frontloaded their primaries and caucuses, she would have recovered from her early stumbles before it was too late. She would have minimized damage from her disastrous February, when Obama racked up an impressive string of victories even in Virginia, where she might have done better given her later strength.

The irony is that Clinton was expected to benefit from frontloading. Only a candidate with name recognition, money, and organization could compete. Lesser candidates like Joe Biden, Chris Dodd, Mike Gravel, Dennis Kucinich, Bill Richardson and even John Edwards would be quickly weeded out of the field, leaving her with only one real opponent to dispense with.

The lesson is that frontloading does not well serve the nomination process. Running for president is an unrehearsed drill. Mistakes will be made. Candidates become better as they learn how to campaign and to craft messages that work. Democratic Party leaders will undoubtedly look hard over the next four years at what steps can be taken to even out the flow of the nomination contests.

While these lessons may resound loudly for Democrats, they apply equally well to Republicans. Democrats permitted the process to play out over a longer time by awarding delegates proportionately; Republicans brought their nomination to a faster close by awarding delegates by winner-take-all. John McCain became the inevitable winner of his party’s nomination without even winning a state’s vote majority before his opponents dropped like flies.

While Republicans have delighted in the continued fight among the Democrats, McCain has been in a holding pattern since winning his nomination. Unable to use his time effectively to make headway with the American public, he has incurred problems in his own party. As evidence, 30 percent of South Dakota and Montana Republican primary voters registered a protest vote by voting for someone else.

Perhaps McCain won his party’s nomination too soon. He lost to George Bush in 2000 and has yet to demonstrate that he can run an effective general election campaign. He would have benefited from being more strongly tested, making more mistakes, and learning from them in the primary season. Now, he and his campaign will have to learn on the job in the general election, while they face, in Obama, an opponent who has been tempered in his party’s nomination fire stoked by Clinton.

Plenty of time remains for McCain to make his mistakes and for Obama to make more—and for both to recover before November. Campaigns often become so knee-jerk reactive to criticisms of any mistake that they fail to recognize the value in the lessons that may be learned. The primary election season is thus a valuable period for candidates to plumb their strengths and shore up their weaknesses, and we need to find a way to restore it as such.

      

Federal departments and agencies received just above $133 billion in R&D funds in 2013. To put that figure in perspective, World Bank data for 2013 shows that, 130 countries had a GDP below that level; U.S. R&D is larger than the entire economy of 60 percent of all countries in the world.

The chart below shows how those funds are allocated among the most important federal departments and agencies in terms of R&D.

Those looking at these figures for the first time may be surprised to see that the Department of Defense takes about half of the pie. It should be noted however that not all federal R&D is destined to preserve U.S. military preeminence in the world. From non-defense research, 42 percent is destined to the much-needed research conducted by the National Institutes of Health, 17 percent to the research of the Department of Energy—owner of 17 celebrated national laboratories—16 percent for space exploration, and 8 percent for understanding the natural and social worlds at a fundamental level. The balance category is only lumped together for visual display not for its importance; it includes for instance the significant work of the National Oceanic and Atmospheric Administration and the National Institute of Standards and Technology.

Despite the impressive size of defense R&D, we hear little about it. While much of defense research and development is classified, in time, civilian applications find their way into mainstream commercial uses—the Internet and GPS emerged from research done at DARPA. Far more visible than defense R&D is biomedical research, clean energy research, or news about truly impressive discoveries either in distant galaxies or in the depths of our oceans.

What produces this asymmetry of visibility of federal R&D work?

In a recent Brookings paper, a colleague and I suggest that the answer lies in the prominence of R&D in the agencies’ accounting books. In short: How visible is R&D and how much the agency seeks to discuss it in public fora depends not on the relative importance, but on how large a portion of the agency’s budget is dedicated to R&D.

From a budget perspective, we identified two types of agencies performing R&D: those agencies whose main mission is to perform research and development, and those agencies that perform many functions in addition to R&D. For the former, the share of R&D in the discretionary budget is consistently high, while for the latter group, R&D is only a small part of their total budget (see the chart below). This distinction influences how agencies will argue for their R&D money, because they will make their case on the most important uses of their budget. If agencies have a low R&D share, they will keep it mixed with other functions and programs; for instance, research efforts will be justified only as supporting the main agency mission. In turn, agencies with a high R&D share must argue for their budgets highlighting the social outcomes of their work. These include three agencies whose primary mission is research (NASA, NSF, NIH), and a fourth (DoE) where research is a significant element of its mission.

There is little question that the four agencies with high R&D share produce greatly beneficial research for society. Their strategy of promoting their work publicly is not only smart budget politics but also civic and pedagogical in the sense of helping taxpayers understand that their tax dollars are well-spent. However, it is interesting to observe that other agencies may be producing research of equal social impact that flies under the public radar, mainly because those agencies prefer as a matter of good budget policy to keep a low profile for their R&D work.

One interesting conclusion for institutional design from this analysis is that promoting a research agency to the level of departments of government or its director to a cabinet rank position may bring prominence to its research, not because more and better research will necessarily get done but simply because that agency will seek public recognition for their work in order to justify its budget. Likewise, placing a research agency within a larger department may help conceal and protect their R&D funding; the politics of the department will focus on its main goals and R&D would recede to a concern of secondary interest in political battles.

In the Politics of Federal R&D we discuss in more detail the changing politics of budget and how R&D agencies can respond. The general strategies of concealment and self-promotion are likely to become more important for agencies to protect a steady growth of their research and development budgets.

Data sources: R&D data from the American Association for the Advancement of Sciences historical trends in Federal R&D. Total non-discretionary spending by federal agency from the Office of Management and Budget.

       

       

       

       

       

       

       

       

Last Thursday was finance minister day at Brookings, with three separate visits from European finance ministers who were in town for the IMF meetings. Here in Governance Studies, we were delighted to have the opportunity to host Czech Finance Minister and Deputy Prime Minister Andrej Babis for a wide-ranging conversation with our scholars, including Darrell West, Bill Galston, John Hudak, and myself, as well as Bill Drozdiak of Brookings' Center on the United States and Europe and Jeff Gedmin of Georgetown University. Brookings has a long tradition of welcoming distinguished European visitors, and so contributing to the strengthening of transatlantic ties. That is particularly important now, as Europe confronts the destabilizing effects of Russia's aggression in Ukraine, the Greek debt crisis, be continuing after effects of the great recession, and multiple other challenges. We were honored to host Minister Babis and we look forward to many more visits here from leaders of our close U.S. ally, the Czech Republic.

(Photo credit: Embassy of the Czech Republic)

      

One of the great parts of being at Brookings has been the many champions of government reform in the US and around the world who have reached out to visit us here, meet me and my colleagues, and talk about how best to transform government and make it work better for people. The latest was MK Erel Margalit, who before joining the Israeli Knesset started a leading venture capital firm in Israel (and was the first Israeli to make the Forbes Midas list of top tech investors globally). My Brookings colleagues, including Elaine Kamarck, Bill Galston, Natan Sachs and John Hudak talked with MK Margalit about the lessons he learned in the private sector, and about his efforts to bring those lessons to his work in government. 

Coming not long after our meeting with Czech Deputy Prime Minister and Finance Minister Andre Babis, who enjoyed similar success in business and has ambitious reform goals of his own informed by his business career, it was fascinating to talk about what does and does not translate to the government sector. MK Margalit’s focus includes supporting peace and economic development by developing enterprise zones in and around Israel that encourage economic partnerships between Jewish and Arab Israelis and their businesses, and that include Palestinians as well. It was an impressive melding of business and government methodologies. The meeting built on similar ones we have had with other innovators including CFPB Director Rich Cordray, former Mayor and Governor Martin O’Malley, and of course DPM Babis, all of whom have in common innovating to make government function more effectively.

      

       

       

We can be sure that the 2016 presidential candidates, whoever they are, will be in favor of promoting opportunity and cutting poverty. The question is: how? In our contribution to a new volume published today, “Campaign 2016: Eight big issues the presidential candidates should address,” we show that people who clear three hurdles—graduating high school, working full-time, and delaying parenthood until they in a stable, two-parent family—are very much more likely to climb to middle class than fall into poverty:

But what specific policies would help people achieve these three benchmarks of success?  Our paper contains a number of ideas that candidates might want to adopt. Here are a few examples: 

1. To improve high school graduation rates, expand “Small Schools of Choice,” a program in New York City, which replaced large, existing schools with more numerous, smaller schools that had a theme or focus (like STEM or the arts). The program increased graduation rates by about 10 percentage points and also led to higher college enrollment with no increase in costs.

2. To support work, make the Child and Dependent Care Tax Credit (CDCTC) refundable and cap it at $100,000 in household income. Because the credit is currently non-refundable, low-income families receive little or no benefit, while those with incomes above $100,000 receive generous tax deductions. This proposal would make the program more equitable and facilitate low-income parents’ labor force participation, at no additional cost.

3. To strengthen families, make the most effective forms of birth control (IUDs and implants) more widely available at no cost to women, along with good counselling and a choice of all FDA-approved methods. Programs that have done this in selected cities and states have reduced unplanned pregnancies, saved money, and given women better ability to delay parenthood until they and their partners are ready to be parents. Delayed childbearing reduces poverty rates and leads to better prospects for the children in these families.

These are just a few examples of good ideas, based on the evidence, of what a candidate might want to propose and implement if elected. Additional ideas and analysis will be found in our longer paper on this topic.

      

As a rhetorical ideal, greater opportunity is hard to beat. Just about all candidates for high elected office declare their commitments to promoting opportunity – who, after all, could be against it? But opportunity is, to borrow a term from the philosopher and political theorist Isaiah Berlin, a "protean" word, with different meanings for different people at different times.

Typically, opportunity is closely entwined with an idea of upward mobility, especially between generations. The American Dream is couched in terms of a daughter or son of bartenders or farm workers becoming a lawyer, or perhaps even a U.S. senator. But even here, there are competing definitions of upward mobility.

It might mean being better off than your parents were at a similar age. This is what researchers call "absolute mobility," and largely relies on economic growth – the proverbial rising tide that raises most boats.

Or it could mean moving to a higher rung of the ladder within society, and so ending up in a better relative position than one's parents.

Scholars label this movement "relative mobility." And while there are many ways to think about status or standard of living – education, wealth, health, occupation – the most common yardstick is household income at or near middle age (which, somewhat depressingly, tends to be defined as 40).

As a basic principle, we ought to care about both kinds of mobility as proxies for opportunity. We want children to have the chance to do absolutely and relatively well in comparison to their parents.

On the One Hand…

So how are we doing? The good news is that economic standards of living have improved over time. Most children are therefore better off than their parents. Among children born in the 1970s and 1980s, 84 percent had higher incomes (even after adjusting for inflation) than their parents did at a similar age, according to a Pew study. Absolute upward income mobility, then, has been strong, and has helped children from every income class, especially those nearer the bottom of the ladder. More than 9 in 10 of those born into families in the bottom fifth of the income distribution have been upwardly mobile in this absolute sense.

There's a catch, though. Strong absolute mobility goes hand in hand with strong economic growth. So it is quite likely that these rates of generational progress will slow, since the potential growth rate of the economy has probably diminished. This risk is heightened by an increasingly unequal division of the proceeds of growth in recent years. Today's parents are certainly worried. Surveys show that they are far less certain than earlier cohorts that their children will be better off than they are.

If the story on absolute mobility may be about to turn for the worse, the picture for relative mobility is already pretty bad. The basic message here: pick your parents carefully. If you are born to parents in the poorest fifth of the income distribution, your chance of remaining stuck in that income group is around 35 to 40 percent. If you manage to be born into a higher-income family, the chances are similarly good that you will remain there in adulthood.

It would be wrong, however, to say that class positions are fixed. There is still a fair amount of fluidity or social mobility in America – just not as much as most people seem to believe or want. Relative mobility is especially sticky in the tails at the high and low end of the distribution. Mobility is also considerably lower for blacks than for whites, with blacks much less likely to escape from the bottom rungs of the ladder. Equally ominously, they are much more likely to fall down from the middle quintile.

Relative mobility rates in the United States are lower than the rhetoric about equal opportunity might suggest and lower than people believe. But are they getting worse? Current evidence suggests not. In fact, the trend line for relative mobility has been quite flat for the past few decades, according to work by Raj Chetty of Stanford and his co-researchers. It is simply not the case that the amount of intergenerational relative mobility has declined over time.

Whether this will remain the case as the generations of children exposed to growing income inequality mature is not yet clear, though. As one of us (Sawhill) has noted, when the rungs on the ladder of opportunity grow further apart, it becomes more difficult to climb the ladder. To the same point, in his latest book, Our Kids – The American Dream in Crisis, Robert Putnam of Harvard argues that the growing gaps not just in income but also in neighborhood conditions, family structure, parenting styles and educational opportunities will almost inevitably lead to less social mobility in the future. Indeed, these multiple disadvantages or advantages are increasingly clustered, making it harder for children growing up in disadvantaged circumstances to achieve the dream of becoming middle class.

The Geography of Opportunity

Another way to assess the amount of mobility in the United States is to compare it to that found in other high-income nations. Mobility rates are highest in Scandinavia and lowest in the United States, Britain and Italy, with Australia, Western Europe and Canada lying somewhere in between, according to analyses by Jo Blanden, of the University of Surrey and Miles Corak of the University of Ottawa. Interestingly, the most recent research suggests that the United States stands out most for its lack of downward mobility from the top. Or, to paraphrase Billie Holiday, God blesses the child that's got his own.

Any differences among countries, while notable, are more than matched by differences within Pioneering work (again by Raj Chetty and his colleagues) shows that some cities have much higher rates of upward mobility than others. From a mobility perspective, it is better to grow up in San Francisco, Seattle or Boston than in Atlanta, Baltimore or Detroit. Families that move to these high-mobility communities when their children are still relatively young enhance the chances that the children will have more education and higher incomes in early adulthood. Greater mobility can be found in places with better schools, fewer single parents, greater social capital, lower income inequality and less residential segregation. However, the extent to which these factors are causes rather than simply correlates of higher or lower mobility is not yet known. Scholarly efforts to establish why it is that some children move up the ladder and others don't are still in their infancy.

Models of Mobility

What is it about their families, their communities and their own characteristics that determine why they do or do not achieve some measure of success later in life?

To help get at this vital question, the Brookings Institution has created a life-cycle model of children's trajectories, using data from the National Longitudinal Survey of Youth on about 5,000 children from birth to age 40. (The resulting Social Genome Model is now a partnership among three institutions: Brookings, the Urban Institute and Child Trends). Our model tracks children's progress through multiple life stages with a corresponding set of success measures at the end of each. For example, children are considered successful at the end of elementary school if they have mastered basic reading and math skills and have acquired the behavioral or non-cognitive competencies that have been shown to predict later success. At the end of adolescence, success is measured by whether the young person has completed high school with a GPA average of 2.5 or better and has not been convicted of a crime or had a baby as a teenager.

These metrics capture common-sense intuition about what drives success. But they are also aligned with the empirical evidence on life trajectories. Educational achievement, for example, has a strong effect on later earnings and income, and this well-known linkage is reflected in the model. We have worked hard to adjust for confounding variables but cannot be sure that all such effects are truly causal. We do know that the model does a good job of predicting or projecting later outcomes.

Three findings from the model stand out. First, it's clear that success is a cumulative process. According to our measures, a child who is ready for school at age 5 is almost twice as likely to be successful at the end of elementary school as one who is not.

This doesn't mean that a life course is set in stone this early, however.

Children who get off track at an early age frequently get back on track at a later age; it's just that their chances are not nearly as good. So this is a powerful argument for intervening early in life. But it is not an argument for giving up on older youth.

Second, the chances of clearing our last hurdle – being middle class by middle age (specifically, having an income of around $68,000 for a family of four by age 40) – vary quite significantly. A little over half of all children born in the 1980s and 1990s achieved this goal. But those who are black or born into low-income families were very much less likely than others to achieve this benchmark.

Third, the effect of a child's circumstances at birth is strong. We use a multidimensional measure here, including not just the family's income but also the mother's education, the marital status of the parents and the birth weight of the child. Together, these factors have substantial effects on a child's subsequent success. Maternal education seems especially important.

The Social Genome Model, then, is a useful tool for looking under the hood at why some children succeed and others don't. But it can also be used to assess the likely impact of a variety of interventions designed to improve upward mobility. For one illustrative simulation, we hand-picked a battery of programs shown to be effective at different life stages – a parenting program, a high-quality early-edcation program, a reading and socio-emotional learning program in elementary school, a comprehensive high school reform model – and assessed the possible impact for low-income children benefiting from each of them, or all of them.

No single program does very much to close the gap between children from lower- and higher-income families. But the combined effects of multiple programs – that is, from intervening early and often in a child's life – has a surprisingly big impact. The gap of almost 20 percentage points in the chances of low-income and high-income children reaching the middle class shrinks to six percentage points. In other words, we are able to close about two-thirds of the initial gap in the life chances of these two groups of children. The black-white gap narrows, too.

Looking at the cumulative impact on adult incomes over a working life (all appropriately discounted with time) and comparing these lifetime income benefits to the costs of the programs, we believe that such investments would pass a cost-benefit test from the perspective of society as a whole and even from the narrower prospective of the taxpayers who fund the programs.

What Now?

Understanding the processes that lie beneath the patterns of social mobility is critical. It is not enough to know how good the odds of escaping are for a child born into poverty. We want to know why. We can never eliminate the effects of family background on an individual's life chances. But the wide variation among countries and among cities in the U.S. suggests that we could do better – and that public policy may have an important role to play. Models like the Social Genome are intended to assist in that endeavor, in part by allowing policymakers to bench- test competing initiatives based on the statistical evidence.

America's presumed exceptionalism is rooted in part on a belief that class-based distinctions are less important than in Western Europe. From this perspective, it is distressing to learn that American children do not have exceptional opportunities to get ahead – and that the consequences of gaps in children's initial circumstances might embed themselves in the social fabric over time, leading to even less social mobility in the future.

But there is also some cause for optimism. Programs that compensate at least to some degree for disadvantages earlier in life really can close opportunity gaps and increase rates of social mobility. Moreover, by most any reasonable reckoning, the return on the public investment is high.

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Editor's note: This piece originally appeared in the Milken Institute Review.

       

       

       

       

In advance of President Obama’s historic trip to Cuba and Argentina, three Brookings scholars participated in a media roundtable to offer context and outline their expectations for the outcomes of the trip. Richard Feinberg and Ted Piccone discussed Cuba–including developments in the U.S.-Cuba relationship, the Cuban economy, and human rights on the island–and Harold Trinkunas offered insight on Argentina, inter-American relations, and the timing of the visit.

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Richard Feinberg:

The idea is to promote a gradual incremental transition to a more open, pluralistic and prosperous Cuba integrated into global markets of goods, capital, and ideas. It is a long-term strategy. It cannot be measured by quarterly reports.

Ted Piccone:

...the key [is] to unlock a whole set of future changes that I think will be net positive for the United States, but it is going to take time, and it is not going to happen overnight.

Harold Trinkunas:

Cuba is really about moving, among other things, a stumbling block to better relations with Latin America, and Argentina is about restoring a positive relationship with a key swing state in the region that was once one of our most important allies in the region.

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A 2010 publication of the U.S. Geological Survey caused major excitement in Cyprus, an island that at the time was suffering from the economic collapse of its neighbor and major trading partner, Greece. According to the publication, the seabed of the Eastern Mediterranean could contain up to 120 trillion cubic feet (tcf) of natural gas.3 Three years later, the Cypriot administration has high hopes that natural gas exports may get Cyprus—the third smallest European Union member state—back on its feet, after its own financial collapse in 2012. Unfortunately for the Cypriots, the reality on the ground is sobering, and it is currently unclear whether Cyprus will become a producer, or an exporter, of natural gas. Around Cyprus, other countries hope to benefit from the energy potential as well, including Israel, Lebanon and the Palestinian Authority. In the Israeli Exclusive Economic Zone (EEZ), in particular, substantial reserves of natural gas have been found, though the verdict is out whether these will in fact all be produced.

Exploration of Cyprus’s offshore concessions is at an early stage. Energy majors such as ENI and Total are among the first to explore possible gas (and oil) reserves and they expect results not before 2015. To date, only two test wells have been drilled by Houston-based Noble Energy. Proven reserves have been downgraded since and are currently estimated to be between 3 and 5 tcf. At this level of reserves, investing in a natural gas liquefaction terminal, which the Cypriot administration has supported, is not economically viable. A better alternative would be to construct a pipeline to Turkey, which has a large and rapidly growing market for natural gas.

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• Politics Trump Economics in the Complex Game of Eastern Mediterranean Hydrocarbons

       

Turkish Foreign Minister Mevlut Cavusolu’s decision earlier this month to decline to participate in the Munich Security Conference due to Israeli ministerial participation marks a new low in the troubled Turkish-Israeli relationship.

And yet, the latest statistics released this week by the Israeli government document an overall volume of $5.44 billion dollars in Turkish-Israeli trade during 2014. This marks an all-time high point in Turkish-Israeli economic relations, up 11.5 percent from 2013, including $2.75 billion in Israeli exports to Turkey (a 10 percent year-to-year increase) and $2.68 billion in Turkish imports to Israel (13 percent higher than 2013).

This pattern of an almost non-existent political dialogue at the senior levels accompanied by robust bilateral trade has characterized the Turkish-Israeli relationship since 2011. Short of unexpected dramatic changes, the relations between the two former allies will likely continue in this pattern for the foreseeable future. 

Almost two years after Israel’s official apology to Turkey over the Mavi Marmara incident (which I wrote about in depth here), the two countries continue to move in different directions, despite sharing similar strategic concerns on a range of regional issues – the civil war in Syria, instability in Iraq and Iran’s nuclear program.

The main bone of contention between the AKP-led Turkish government and the Likud-led government in Israel remains the Palestinian issue. Turkey continues to speak out against Israeli occupation and settlement activity in the West Bank, as well as on Israeli human rights violations towards the Palestinian population. In addition, Turkey remains one of the main (very few) patrons of Hamas, providing the group with political and economic support and allowing the organization to maintain representation in Istanbul. Israel viewed with disdain Turkish attempts, together with Qatar, to facilitate a ceasefire with Hamas during the summer 2014 war. Anti-Turkish sentiments in Israeli public opinion skyrocketed in response to President Erdogan’s allegations that Israeli policies on Gaza are genocidal. 

Amidst rising tensions in the relationship, President Erdogan publicly vowed after his August 2014 election that as long as he’s in power, Turkey’s approach to Israel will not change. As a result, there are no serious expectations that any senior-level political dialogue will resume, and mutual representation is likely to remain at a junior diplomatic level (after ambassadors were withdrawn from Tel Aviv and Ankara in 2011).

The interesting aspect of the relationship continues to be the booming trade between the two countries, which despite political tensions continues to grow at a rapid pace. Clearly there is an interest on both sides to insulate the economic sphere from the political sphere. Robust trade serves both countries’ economic interests and during a very unstable period keeps the relationship afloat. Nevertheless, an Israeli – Turkish natural gas deal which was considered in the past as a likely scenario and possibly a regional and bilateral “game changer” seems at present to be “off the table.” Potential energy cooperation between Turkey and Israel around the Eastern Mediterranean natural gas discoveries may be possible only in the context of political rapprochement.