God bless Harold Alfond. By providing every child born in Maine with $500 to start a college savings account, this legendary Maine entrepreneur and philanthropist, and the foundation that continues his legacy, has provided a pragmatic foundation for the almost Pollyannaish phrase “our children are our future.” His generosity makes manifest the Ben Franklinesque truth that frugality and foresight will provide for a prosperous life.
But for this third panel in my triptych on human capital, it is another, and perhaps less obvious, value manifest in Mr. Alfond’s generosity that I wish to emphasize — the value of his gift in building engagement in the economy. What each family does with the $500 gift is, of course, its own decision. It is clear, however, that because of its long gestation period, the gift will, or at least can, become a focus of continued attention. If invested in an index fund of stocks, it will rise and fall over 18 or 20 years with the overall prosperity of the United States and even world economy, and demonstrate to its owners their stake in that economy.
While not required, one hope embodied in Mr. Alfond’s little seed of capital, is that recipients will add to it over time. What better way to convey the lesson that education is an investment in human capital that will pay dividends over a productive life than by providing a bit of financial capital and encouraging its growth as a way of accumulating the funds to finance a subsequent investment in human capital.
Indeed, I think it would enhance this sense of personal engagement in the economy to create an Alfond Index composed of a selection of Maine-based and Maine-connected stocks and bonds — Idexx, WEX, Unum, state bonds supporting FAME loans and Maine research institutions — and publish the returns of that index widely. Publish it in the business and sports pages and include it in the quarterly and annual reports of college savings account funds. The more young people (and their parents) see that their ability to pay for the education that will make them part of a prosperous economy is itself enhanced by the success of that economy, the more engaged they will become.
For generations of Mainers, the role model for economic success was the mill by the river. While many manufacturers still offer an avenue to economic success, their place in the public eye has been vastly diminished. We need new role models and hooks to engage young people in ways that will provide pathways into the economy of information, the economy of human capital. One way to do that would be to make the success of their college accounts — their vehicle for financing their own human capital — as interesting and easy to follow as team standings, batting averages and fantasy league points.
The hottest topic in economics today is inequality. French economist Thomas Piketty’s book Capitalism in the Twenty-First Century is all the rage. He argues that historic returns to capital far exceed overall rates of economic growth with the natural result that the owners of capital gradually accumulate a larger and larger share of the whole economic pie.
Piketty’s response to this apparent dilemma is to urge higher taxes on capital and expanded government programs of redistribution. This would be a great idea as long as such programs are modeled on Harold Alfond’s trick of making every child a small owner of capital from birth.
Charles Lawton is chief economist for Planning Decisions Inc. He can be reached at:[email protected]