On the Record

Natasha Warikoo, professor of sociology at Tufts University and author of The Diversity Bargain: And Other Dilemmas of Race, Admissions, and Meritocracy at Elite Universities, leads a conversation on diversity, equity, and inclusion in college and university admissions.

 

FASKIANOS: Welcome to CFR’s Higher Education Webinar. I’m Irina Faskianos, vice president of the National Program and Outreach at CFR.

Today’s discussion is on the record, and the video and transcript will be posted on our website at CFR.org/academic. As always, CFR takes no institutional positions on matters of policy.

We are delighted to have Natasha Warikoo with us to talk about diversity, equity, and inclusion in college and university admissions. Dr. Warikoo is professor of sociology at Tufts University and an expert on racial and ethnic inequality in education. She is a former Guggenheim fellow and previously served as associate professor of education at Harvard University. Prior to her academic career, Dr. Warikoo taught in New York City’s public schools and worked at the U.S. Department of Education. She has written several books on race and higher education. Her most recent is entitled The Diversity Bargain: And Other Dilemmas of Race, Admissions, and Meritocracy at Elite Universities.

So, Dr. Warikoo, thank you very much for being with us today. We really appreciate it. I thought you could just take us through the current diversity, equity, and inclusion strategies in college and university admissions, and what you’ve seen over the course of your career, and where you see this going.

WARIKOO: Great. Well, thank you. Thank you so much for the invitation, Irina. And thank you to all of you for being here. I can see your names, although I can’t see your faces. So what I thought I would do, as I thought about this question about DEI and admissions, is sort of to take us—to zoom out a little bit. So I’ll talk about affirmative action because I think when we think about DEI in the context of admissions that’s sort of what immediately comes to mind. And I’ve written about this. But I want to take us broader and think also just about admissions more broadly. And some of the arguments I want to make are from my forthcoming book with Polity Press, Is Affirmative Action Fair?

So I want to start by saying that I think we need to move away from this idea that there is one best, most fair way of admitting students to college. At colleges we tend to see—we tend to treat admissions as a reward for individual achievement, right? You work—the narrative is that you work hard, and you can get—you show your grit, and you show your achievements, and you can get in. And then in that context, affirmative action becomes one small kind of fix to ensure that the system is fair to everyone, along with things like increasing financial aid and recruiting around the country so students are aware of the university.

And I found this in my interviews with Ivy League students in Diversity Bargain, I found that students—they thought that admissions worked, and it was because affirmative action kind of corrected underrepresentation. And they were satisfied with how admissions were done, despite the fact that multiple groups, including working-class students, Black students, and Latinx students, continue to be underrepresented. But they felt like it was sort of fixed enough. And I want to argue that, instead, we should think about admissions as something that furthers university goals and not just selects the kind of, quote/unquote, “best of the best.”

So let me explain. In a series of lectures in 1963, the president—the then-President of the University of California Clark Kerr, noticed that universities had become what he called multi-universities. They were organizations beholden to multiple purposes and goals. Teaching, research, and the public good. And not much has changed since then. A recent study of college mission statements found that these three goals endure. Most college mission statements express commitments to teaching, as well as the public good, inculcating civic values. And in general, U.S. universities see themselves as much more kind of embedded in the fabric of society compared to expressing the goal of bettering society, making it more equitable, commitments to diversity, much more so than universities in Europe and Britain.

And many Americans also imagine higher education to be a kind of engine for social mobility. We think about, you know, since the 1950s the expansion of higher education. We sort of look to higher education as a mechanism for bettering ourselves and our futures. So what colleges do—when they admit students, then, should be in pursuit of these goals, not—again, not an individual certification of merit, or who’s deserving. And, implicitly with who’s deserving comes who’s not deserving. And I think that colleges really need to make this goal to prospective and current students explicit. So rather than talking about, oh, this year we have the best class ever, the lowest admit rate ever. We should be really sort of talking about admissions in the context of what we’re trying to do as a university and embedded in society.

So the late Lani Guinier in her book The Tyranny of Merit (sic; The Tyranny of the Meritocracy) argued that we should consider college admissions as a mechanism to a more robust democracy. And when we do that, Guinier argued that it should lead us to discard standardized testing as a part of the application process in favor of broad, inclusive representation. And I want to argue, if we consider the goal of social mobility, it becomes even more unclear why certain kinds of measures of academic achievement in general have become the central focus for college admissions. In fact, one might even make the case that academics should play the opposite role to what it plays. If colleges want to promote social mobility, perhaps admissions should be akin to means-tested social supports, provided to those who need it most whether because of their financial—the financial hardships that their families endure, racial exclusion, or weak academic skills.

But of course, this is not what we do. Families of a majority of students at top colleges pay more per year—you know, are not on financial aid, pay more per year than the median household income in the United States. And a 4.0 grade point average, of course, seems increasingly to be a prerequisite to even be considered for admissions at top colleges, especially if you’re not a child of an alum or a donor—a high-profile donor. So, I think it’s hard to shake the belief that selective colleges should foreground achievement in admissions and that there’s one best way to do this. Unlike the labor market, for which we understand that applicants are chosen for jobs on the basis of what a company needs not a reward for the kind of best applicant, you know, we understand that the marketing job would go to a different person than the head of engineering job, and that would be a different person from the head of finance job.

But in higher education, we describe admissions as a reward for hard work and dedication. It’s the backbone of our beliefs in equal opportunity and meritocracy. But seeing admissions as a competition to decide who’s the most deserving reinforces ideas about who’s deserving and undeserving. Again, given the outcomes of admissions, it says that people who are economically advantaged, who are White, who are Asian American, are more worthy and deserving, because those groups tend to be who are the ones that are rewarded in the admissions process. So this tension between an individualist, winner-takes-all meritocracy and a process of selection that seeks to fulfill multiple missions of research, teaching, and the public good, and social mobility, is what lies, to me, at the heart of controversies over affirmative action.

So let me say a little bit about affirmative action. I see it less as a kind of fix to this individual meritocracy, but rather as a critical policy, an important policy, that promotes four important organizational goals. The first is a diverse learning environment. This is the argument that the U.S. Supreme Court, starting in the 1978 Bakke decision has said is allowable under the law. So Justice Powell in the Bakke decision said: Well, as long as you have a narrowly tailored version of attention to race, then, you know, if you are looking at race in order to fulfill a university mission of having a diverse learning environment in which everyone flourishes, then that is allowed.

And since then, there’s been decades of research from social scientists showing all of the benefits from these diverse environments in terms of cognitive capacity, racial attitudes, civic participation in the future. So we know that affirmative action works in this way. Now, I highlight in my book, The Diversity Bargain, the problem with solely talking about this kind of diverse learning environment argument is that it ignores inequality. So we also need to talk about inequality. And colleges, I think, need to do a lot better job of talking about racial inequality, the racial inequality that is really the root of—and the history of affirmative action.

And that leads me to my second argument for affirmative action. And when we think about the goal of promoting social mobility and opportunity, we have to take into consideration race in admissions. We have plenty of evidence of racial inequality. I won’t go through all of this, but just to say that, sometimes people say, well, it’s related to class and not race. But even within the same social class, we see racially different opportunities. So working-class Whites tend to live in more advantaged neighborhoods than working-class Blacks. And a recent study found that Black—upper middle-class Black adults—excuse me. Black adults who grew up in upper middle-class families are much more likely to experience downward mobility than are White adults who grew up in upper middle-class families. And so we see this kind of intergenerational differences in terms of the transmission of privilege.

Third, reparations. And reparations not just from the harms of slavery, but also from U.S. intervention in foreign wars abroad. And, again, if we think about these organizational goals of playing a civic role, and these universities as wanting to be kind of bastions of racial equity, we know that many elite colleges have benefitted from the slave trade, from slave labor, from—you know, have had faculty who have sort of been part of the foreign policies that led to poverty in other countries. And so reparations is another way that I think—another institutional goal that can be met through affirmative action.

And lastly, a diverse, legitimate leadership. We know that affirmative action can lead to diversity in leadership. President Obama talked about how he thinks he benefitted from affirmative action, just as Sotomayor talks about how she was an affirmative action baby. If we think that that symbolic representation matters—and it matters in order for leadership to be seen as legitimate, to be—for people to be seen—to see leadership that looks like them is increasingly important. And so, again, thinking about the contribution to society, this is one small way that higher education—a role that higher education can play.

So the last thing I want to say about this is that any way you admit students, there are winners and there are losers. There’s no one best way of defining and measuring merit. It’s always historically and geographically contingent. You know, other countries do admissions very differently. When I talk to British students, they—Britain has a very different way of admitting students, but they think their way is the best. And even within the U.S., we’ve changed the way we define merit and admit students over time as well. And so history suggests that reasonable people and selective colleges will disagree about how to admit students.

So overall, I want to—I think we need to change our typical vision for college admissions as an individualist, meritocratic competition. When we consider affirmative action within a broader consideration of the purposes of selective higher education in the U.S., we can see its true worth. College admission is not and should not be an evaluation of the worthiness or deservingness of individuals. And, you know, we need greater representation to make sure our future leaders are exposed to diverse perspectives and lived experiences, that our future leadership is seen as legitimate.

Colleges in the United States are embedded in a society plagued by rampant inequality, including racial inequality, and one in which we often turn to education as a mechanism to address that inequality. And so, I think the lack of clarity sometimes on university purposes allowed families to map their own meanings onto selection. And I think that universities need to correct these misunderstandings explicitly.

So, of course, affirmative action is enough to fully address the diverse roles of our universities. It’s one small policy. And its impact might be paltry compared to increasing financial aid, increasing funding for state and community colleges, increasing funding for Historically Black Colleges and Universities, social supports for working-class and poor families. The list goes on. But I want to remind everyone that these policies are not zero-sum. It’s not that we need to pursue one or the other. We should pursue all of them, alongside affirmative action, and not as a replacement. And so, supporting affirmative action doesn’t preclude supporting an expansion of all these other provisions to increase equity, either within higher education or beyond.

So let me stop here, and I’m really looking forward to the discussion.

FASKIANOS: Thank you so much for that overview. We appreciate it. And now we are going to go to all of you for your questions and comments.

So I’m going to go first, great, to Beverly Lindsay.

Q: Good afternoon, Natasha. It’s good to hear your comments.

I have a few comments, but I also then want to raise a question on something that was not covered. As you probably know, Manuel Justiz and I wrote the book in 2001 on The Quest for Equity in Higher Education. And you probably know a number of my colleagues, like Roger Geiger, dealing with historical aspects. For example, of how testing came into place, because there were too many Jewish students at elite universities like Yale and Harvard. I should tell you also that I am still a professor of higher education and international policy studies.

But one of the questions or concerns that Manny and I still have, and that is the change from affirmative action to multicultural education to DEI. And what we often see is there’s these changes that occur that don’t necessarily reflect what is done in the actual admissions office. That’s one issue. The second really critical issue, and you’re welcome to read my book that’s just coming out—it actually came out this past month, about three days ago, on higher education policy in developing and Western countries. And that is league tables, ratings. Parents are doing everything to be in that higher education university, whether it’s a public Ivy like Berkeley, or Texas, or Wisconsin, or Virginia.

And no one is raising—or, very few people are raising these questions about second-tier. So you have the issue of ratings. And the U.S. News and World Report, of course, is one that many American parents will look at, but internationally it’s the Times Higher Education and QS, for example. So that’s one issue. But the second issue, which I mentioned first, was DEI. Because historically and currently, many of the people who are in DEI are people of color. And they have no faculty rank. So they’re really not involved in the admission process, whether at the undergraduate or the graduate level. So if you could briefly offer some comments about those two key areas. Thank you.

WARIKOO: Thank you. Well, I didn’t know that your book was out, so I’m super excited to read it. Thanks for highlighting that. So, yeah, I think these are two really important issues. So I’ll start with the rankings. It’s clear that the rankings are just—have this terrible influence in higher education. I don’t know if you’ve seen that book by Wendy Espeland and Michael Sauder, I forgot the title of it, but they basically did this study of—they looked at law schools and how law schools seem to respond to rankings and how it’s sort of changing the organizations. And they highlight very clearly this—first, all of—having a ranking system—and I kind of see a parallel to admissions, right?

When you rank people—we’re so obsessed with selection and ranking in the United States that when you have this system people are always looking up. Like, oh, OK, well, if there’s a ranking and I’m number ten, I want to be number nine, and then I want to be number eight. And so they’re always looking up. And then they’re trying to figure out ways to sort of increase their standing. And they’re—doing things that are not always beneficial, certainly not beneficial to students who are kind of nontraditional students, right? And they are doing things like rather than more financial aid for—based on what your family needs, merit-based financial aid, which is their way of bringing in students with higher SAT scores to bump their average SAT score, so that they can get a bump in the rankings.

And then, you always have to ask yourself, for what? What does that—what does that ultimately get you? And again, I think we have to go to first principles. What is our purpose, right? What are we trying to do as a university? Do we—can we fulfill that mission with a student body that is increasingly privileged and increasingly does not look like a cross-section of eighteen-year-olds in the United States? And so, to me, the answer is no. (Laughs.) And I think we have a problem in that way.

So I totally agree with you that the rankings are a huge problem. And I think the most elite colleges maybe can get away with not participating, but I think the lower-status colleges say, well, if we don’t participate then, they look for the data and then just put us lower than we should be. So they always—they feel compelled. I think it will take an organized effort to sort of move away from those rankings. But I think they are incredibly damaging. And they—ultimately, they hurt students who are—who don’t have the educational opportunities as much as privileged students do.

In terms of DEI, I think that this is a problem not just in higher education. I think in the corporate sector, all over we see, on the one hand this promising increase in chief diversity officers, heads of diversity in a lot of different kinds of organizations. Even in school districts we’re seeing this. And on the other hand, the extent to which they have power to impact change varies tremendously. And, if that person being—a solo voice, and it really depends on how much they are backed by the administration, by leadership.

In terms of admissions specifically, my experience is that a lot of people go into admissions because they care about diversity and equity, right? And they—I had a lot of former students who were admissions officers when I was teaching students who were getting their master’s degrees in higher education. And they really—they talked about how they thought that being in this role they could help shape the student body of a selective college in a way that would increase opportunity.

And then they would—a lot of them talked about then what they would find is that there are all of these things that don’t allow them to really do that to the extent that they would like—and I think even heads of admissions would like—because, you know, they have to—they can only give out a certain number of—amount of financial aid. And even in a place like Harvard, right, with this crazy endowment, is admitting students that almost half of them can pay full price—which is, again, higher than median household income in this country. And so their whole financial model is based on the assumption that you’re not going to be a representative group of students.

So I think they come across all kinds of things. Athletic recruiting is a mechanism of privilege. The development office. And so I think—I think it’s going to take a much broader shift in the culture of higher education to expand admissions. And I really think that we need to sort of come back to what are we trying to do here? And does this fit our mission? To me, when you have a student body that is not representative, it’s not—how are you developing the leaders for tomorrow in that case? So.

FASKIANOS: Thank you. I’m going to go next to Jeff Rosensweig.

Q: Thank you, Professor. And I’ve learned a lot from you.

And I like your zero-sum versus sometimes positive-sum. I’m in Atlanta at Emory University, where we have wonderful schools like Spelman and Morehouse, and a tremendous amount of money is flowing to them now, and ultimately will be better for our society. And that’s an example of positive-sum. But let’s go back to zero-sum. At Emory, I’m very proud because we rank right near the top of the top twenty or top twenty-two universities in terms of social mobility. Having students, for instance, from the bottom fifth.

But living in Georgia, we got two Democratic senators, we voted for President Biden, very close margins, as you know, because a lot of White traditional Republicans voted—(laughs)—Democratic. But you sense a backlash as you listen to people whisper that, for instance, it sounds like—you may not use the word—but it sounds like quotas. You know, there’s 14 percent Hispanics persons in the U.S. We want 14 percent of Harvard to be Hispanic. A certain amount of people make over—make enough to pay tuition. Well, we shouldn’t have 50 percent from that group, even if it’s two Black doctors or their parents.

So I’m worried about perhaps a lack—I don’t know if you are going to issue a second edition someday of your book—but there’s been a tremendous sea-change in the last two years in college admissions, in a very big concern for DEI. We just searched for a new dean. We asked him to write three essays. An entire essay was what have they done—and done, not just talked about—to enhance DEI, and what will they do, if they become dean? The rankings are now looking at schools and seeing what are they doing for DEI. So I do worry, if you are—if your book just may be two years too late. (Laughs.) Your book maybe pre-George Floyd instead of post. So that is my main concern there. But also my main—my other main concern is with the zero-sum. We all want more diversity, but are we risking—if we use your formulaic approach—going too far and having a backlash?

WARIKOO: Yeah. Thanks for your question. You know, I think part of the problem is that we don’t—I don’t think most people, myself included until probably I was in college or maybe even later, understand the reality of racial inequality and the history of racial exclusion in the United States. So, we all learn about slavery, the heinous history of slavery and segregation and the Civil Rights Movement. But I think there’s less attention to, well, how did we get here?

Why is there—why do we see these racial differences, even among the upper-middle class, even among working-class families? What— how did that happen? And I think that—I don’t think many people really understand that, because we’re never taught it and we don’t talk about it. And I think—I actually think that is—rather than too much attention to it, I think not enough understanding of that history is part of the problem. So to me, the solution is not to move away from it.

In terms of—I’m certainly not advocating quotas. I know that—legally that that wouldn’t work anyway. And I think that to me it’s just sort of canary in the coal mine, right? Just to sort of say, well, when we see these massive differences, it should say—it should make us go, hmm. Something’s off here. What’s going on? We say that this is a fair system. When you talk to most people in the country, they—young people, they want to go to college, they think it’s important. It just gives us pause. And that’s all I meant to highlight. I’m certainly not saying that there should be—that college student bodies should explicitly mirror the population around them.

So just to take the examples that you gave, the—the Atlanta elite colleges, like Black colleges and then historically predominantly White colleges like Emory—there’s a great book by Adam Harris called The State Must Provide, which is about the history of Historically Black Colleges and Universities. And you see—one of the things you see in that history is the way that colleges—like my own college, Tufts University, like Emory, had the—even University of Georgia—have had the benefit of generations of building their endowment, right? And their endowment is built at a time from times when there was legal segregation.

And so these donations to these HBCUs is great, but it’s not—it’s not even coming close to making the resources for those colleges comparable to the resources that the historically—the predominantly White universities. And so, I think we have a long way to go to sort of truly equalize those colleges, even though I think there has been more attention.

And the zero-sum thing? I think you’re totally right. And one of the things that I have been talking about is the fact that why haven’t our selective colleges expanded enrollment, right? I mean, the population has been steadily growing since—I mean, with fits and starts. But they have not kept up with the increasing population and increasing interest in elite higher education over the last half-century. And so I do think one thing we could do is expand enrollment at these places. I mean, there’s so many amazing young people, these colleges reject so many applicants. There is—you know, they—nothing—their standards would not decrease. I don’t think there’s any real worry that anything would change.

But I think that it would provide opportunity to more people. And so—and it would feel less zero-sum, in that sense. I think part of the problem is you have declining admit rates making it feel like you’re kind of constantly in competition with each other. And that’s—we know the research on kind of group threat. That’s when group threat and anxiety about, well, if we have affirmative action then what about my group? That gets heightened through these kinds of processes. So certainly, I think that’s part of the problem as well.

FASKIANOS: Thank you. I’m going to go to Eric Hoffman next. He has a raised hand and wrote a question. So, Eric, why don’t you just unmute and identify yourself and ask it yourself.

Q: Sure. I’d be happy to. Can you hear me?

WARIKOO: Yes.

FASKIANOS: Yes.

Q: Yes. Thank you, Professor, for all that important and interesting insight.

I’m the dean at a community college, and I oversee the honors college. And we—I’m in Miami, Florida. And we’re focused on, in the last two years, on a very strong DEI effort here to increase the number of Black and African American students. We are a Hispanic-serving and minority-serving institute, but our number of Black and African Americans aren’t the numbers we’d like it to be. Understanding implicit bias, institutional memory, and just plain inertia, how do we get those members of admissions committee on—sort of moving forward towards that goal?

Because it sounds easy, we put together mandates, put together programs. But at the end of the day, we’re working with people on these admissions committee, and they’re not always—there’s a little reluctance at times to change. That’s just human nature, right? So how do—what kind of evidence, what kind of strategies can we use to kind of move people along the continuum to get—to understand that we really need to examine and admit students, sometimes more holistically. Thank you.

WARIKOO: Yeah. Maybe you can answer a question, though. So what are they—what are they saying when they are kind of resisting admitting those students? What’s their worry?

Q: Well—(laughs)—not to expose too much—but it seems to be a similar refrain as it relates to let’s really focus on standardized scores as opposed to GPA and other holistic factors, when we know GPA is a five-times better predictor of college success than the standardized scores. But some individuals are so used to using sort of this metric of standardized scores, it’s hard to move them away from that, saying, you know, this isn’t really the best measure, most valid measure, of being successful in college.

WARIKOO: Yeah. Well, so I was going to say, one of the things you could do is just present this data, right? So, here’s the data on the predictive power of GPA, here’s the data on the predictive power of standardized test scores, here’s what the standardized test score adds, here’s what the racial difference is that we see in these scores. And I think, I don’t know—I mean, the history of standardized testing is a history of trying to prove the superiority of Whites over all people of color, right? I think when you understand that it’s, like, oh, OK, so this is the history of this.

And I also wonder if just observing students who are successful. Like, just profiles of students who maybe didn’t have that high SAT score and did well, and were able to sort of have—your college made a positive impact in their lives. And helping people see that either through someone coming to a meeting, or a profile, so that they—sometimes people need that story of—to sort of have this image in their head. So I think that can be something that can be convincing. Because I think sometimes there are these—there might be this sort of stereotype in their minds of, this is what these students are, they’re not going to be successful or take advantage, or what have you. But if they can see kind of what we call counter-stereotypic examples, that can sort of combat those stereotypes. So those are few things that come to mind for me. So it’s great that you’re doing that.

FASKIANOS: Wonderful. Let’s go to Jude Jones next.

Q: It’s a great presentation.

I don’t work in admissions. I’m a faculty member at Fordham University in New York. But I do a lot of things related to DEI work, and I do read applications at the admissions level for our honors program. But admission on the level of admitting for mission, I’m totally on board with that. It makes sense. I believe our universities should look and be more like a cross-section, as you said, of teenagers in our country right now. As a pragmatist—I teach philosophy and American pragmatism is one of my things—I always think in terms of, what an idea leads to as being what it means, right? And so one of the downstream consequences of admitting for mission is that mission is often—I think this relates to the previous question too—mission’s often out ahead of culture where inclusion is concerned.

Our institutions change very slowly, because that’s what institutions do, unfortunately. And students are rightly impatient with that, but there it is. And so what I find sometimes is that a disproportionate amount of the emotional labor of institutional change winds up falling to the students who come and then clamor for the reality that their admission would suggests would meet them when they get to schools that are not historically—have not historically been as committed to this as possible.

So the problem then becomes an unintended consequence of admitting for diversity as a mission value—which, again, I’m totally on board for—is that that gap between the ideal and the real then exacerbates the sense of exclusion that students come with, because our culture has—we’re still an exclusive culture, not a sufficiently just culture—that the benefit of diversity in admissions was after in the first place. It would exacerbate students’ negative experience. And I don’t want this to be an argument against admitting for this reason or on this model, but just sort of a request for how to think about this. And maybe even in terms of brass tacks, do you think that there should be metrics for levels of support and institutional change that should follow this approach? And if so, what should those be? So I hope that makes sense, what I’m asking.

WARIKOO: Yeah. Thanks for your comment. And that’s a really important point. And you can’t—you can’t change admissions alone, right? And so when you—I think absolutely we need institutional supports, right? So, part of my—when people say, well, the—I’m sorry—Eric, when you talk about, well, people are worried about are these students going to be successful, or they’re looking at test scores and maybe they’re thinking are these students going to be successful. And, my response to that is also that if a student—if someone had demonstrated some kind of excellence in their grades—they’re the top of their class, or whatever it is, then we need to be an organization that can serve them, right?

And so we need to—the culture needs to shift, right? We need to have those supports, right? We need to make sure there are a quorum of peers who have similar lived experiences. We need—and I think higher education—some colleges have done better than others in these. I mean, for decades there have been kind of Africana centers. Increasingly there are centers for first-generation students. And so having an institutional space I think is one, academic supports for students who haven’t had the same educational opportunities, who may have been a good student but did not have the same rigorous curriculum as some of their peers, I think those are incredibly important and to do those in ways that are not stigmatizing I think is incredibly important.,

And so absolutely there have to be these simultaneous—if the student body is changing and we’re expanding access, we need to change the culture and change—and the institutions can do this and be very deliberate about how they do it. And because you’re right. And I think the reality is that it will be a harder lift for students who haven’t had those educational experiences. But that doesn’t mean that they shouldn’t be there, right, that we need to work hard just to meet their needs and prioritize those as well, so.

Q: I’m thinking more in terms of, you know, there is a heavy lift, maybe, but more in terms of students become very involved in diversity-oriented activities, right? And calls for social justice. Students come in with activism experience that’s just extraordinary, you know? But that is emotional labor. And it really is a drain, especially during the pandemic, which just multiplies everything. So that’s part of where I’m worried—not so much the academic lift, but—although those supports are absolutely important. But, they want more of the change for which they were admitted, to highlight that this is a very important value.

WARIKOO: Yeah. Yeah. And it shouldn’t be their job, right?

Q: Right, exactly. (Laughter.)

WARIKOO: They’re there to get an education like everybody else. And it shouldn’t be their job. And it’s unfortunate when it kind of falls in their lap. So I agree with you that this is a problem.

Q: Thanks.

FASKIANOS: Let’s go next to John Murray.

Q: Greetings. Thank you for the presentation. I am director of international admissions at Hesston College. I’m also a member of our diversity, equity, and inclusion leadership team.

We are a very high-quality institution, but we would not be considered in an elite. (Laughs.) We are in the unfortunate position of most years receiving fewer applications than we have spaces available. I’m curious what your research would say to us about how we might work at increasing diversity, equity, and inclusion when we’re not kind of selecting between individuals.

WARIKOO: OK. So I didn’t hear where you’re teaching and where your college is located.

Q: Hesston College is in central Kansas. We’re about thirty miles north of Wichita. So we’re also in a rural setting.

WARIKOO: Got it. Got it. So, I would sort of think about—so, two things. One is that I think, DEI is not just for people of color, right? So, what does DEI look like for White students as well, and what kinds of programing or classes or course content are—or, what do our syllabi look like? And are there—is diversity reflected on the syllabi? So I think there’s a lot that is important to think about in terms of DEI for White students as well as students of color. That would be my first thing to think about.

And then the second is, if there are populations that—in the state or the geographic area—who aren’t coming to your college, sometimes it takes some creative planning, like a partnership with a particular high school, or, where there’s—where students can take a class, and if they do well in that class then they get admitted, or they get a scholarship, or they can take a class for free when they’re in high school, or, you know, these kinds of kind of linkages that can bring attention to—make a student think, oh, I could go there, and I could do well there, and this is a place for people like me. I think that’s what students need to—we need to find ways for them to think and feel in order for them to see a particular college as a viable option.

And I think the other thing is just once you start then hopefully it sort of snowballs, right? Because then there’s a quorum of people, and then they—and then there’s a network, and then it doesn’t feel as exclusive of a place, and students start to sort of see a place differently as well. So I think you’re moving in the right direction. And, the college in Miami, I would say the same thing, right? Once you get that momentum it can be very positive.

FASKIANOS: OK. I’m going to go next to Jonathan Aronson, who also wrote his question. But, Jonathan, please do ask it.

Q: I’m coming from a different age. But I will just read my question: My concern is with mental health and anxiety in the students once they get here. Elite schools can accept a class of nothing but valedictorians. But 25 percent of them, by the math, are going to be in the bottom quarter of the class. Fifty years ago a then-dean of admissions at Harvard said, well, we deal—you know, this is before all of the equity, all of the diversity. He said, you know, we accept, what he called, “the happy bottom quarter.” Twenty-five percent of the class was taken on non-academic grounds. And that could be dancers and football players. But he said—we wouldn’t do it that way today, but how do admissions people deal with the whole problem of mental health in—when thinking about admissions of the class as a whole?

WARIKOO: So, it’s interesting. I mean, I think mental health is a really important issue. I don’t—I don’t know if kind of—there’s not a lot of emphasis on ranking within a college, like once students arrive. Especially on elite colleges, there seems to be a considerable grade inflation. And so I think no one—I mean, students—I think students who aren’t academically prepared may struggle, but for the most part I think that’s become less—I don’t know that that’s the driver of some of the increasing concerns about mental health for college-age students. I think there are other sort of drivers of that, like, social media—obviously, the pandemic is probably number one right now.

Even prior to the pandemic, social media, increasing—you know, I think there’s that great book by William Deresiewicz—I’m blanking on the title—but it’s about this sort of lack of—there’s so much focus on achievement and meeting certain—kind of jumping through particular hoops put in front of us, and that sometimes young people can be—get really good at that, doing what they’re told to do, and then when, you know, stop to ask, what do I really want, or what am I really interested in, or who do I want to be? That becomes even harder. Excellent Sheep is the name of that book. That becomes even harder.

And I think those are some of the things that I think are driving some of the mental health issues. And I think they’re very real, particularly in this pandemic. And so—but I think that that is not unique to elite colleges. I mean, what drives kind of mental health issues may be slightly different for different young people. But we really see that certainly at the high school level as well across the board, across lines of race and class.

FASKIANOS: Great. I don’t know, Beverly, you wrote a comment. I don’t know if you wanted to surface that yourself, Beverly Lindsay?

Q: It was just a comment about—that the gentleman made about mental health. And having been a dean at two different types of universities, we can’t really consider a lot of individual-type mental health unless it’s been in the public sphere. However, once the student enters, there is a considerable amount of resources for students to deal with mental health. And I am in the University of California system now. And I know we’re very, very concerned. But I taught a unit, for example, after the very sad situation at VPI, Virginia Polytech, over a decade ago. And unfortunately, that student had mental health issues, but we were not able—not “we”—the university was not able to have access to that. So there are two types of kinds of dimensions to the mental health issues.

WARIKOO: Yeah.

FASKIANOS: Thank you, Beverly.

Let’s go to Jennifer Brinkerhoff.

Q: Hi. Thank you so much for a very interesting conversation.

I wanted to go back to the comment that was made earlier from the gentleman from Emory in Georgia about backlash. Because a lot of the DEI programming is significantly hampered by what I would call lawsuit harassment, right? I mean, we know that there are political constituencies out there who really want to fight this. And it makes it extremely difficult for universities to advance these agendas when they know that the cost of lawsuits, even when they’re right—when they’re doing the right thing and they’re doing something that is legal—but the cost of lawsuits becomes prohibitive. So I wondered if you encountered that or you addressed that at all in your research, and what advice you would have related to that. Thanks.

WARIKOO: Yeah. I think this is very real. I feel like it’s kind of grown exponentially in the last few years. (Laughs.) So it’s not in my research. But—and it’s K-12 education, as we see with this sort of supposed anti-CRT—critical race theory—stuff. My only response to that is I don’t know what the solution is besides just keep doing what we’re doing. Because you can’t back down in the face of these impending lawsuits because I feel like—I feel like the right is so organized in their attacks on anything related—any acknowledgment of racial inequality in American society that, OK, if we don’t talk about DEI, then there’s talk about admissions.

If we don’t talk admissions—if we look at the K-12 level, there’s this new attack on selective high schools, where most recently a judge—there was a lawsuit towards a selective high school in Virginia that went from exam-based admissions to holistic admissions. They’re not talking about race. And there was still a lawsuit, right? (Laughs.) So I think you can sort of back off and you’re still going to get sued. So I think the solution can’t be to back off because we don’t want to be paralyzed. And, I mean, I think it’s very real. I mean, some of the research on affirmative action shows that there seems to be a sort of backing away from affirmative action because of these fears of lawsuits. Not at the very elite places, but the kind of second-tier kinds of colleges. So we have seen that.

But, again, I’m not sure—obviously colleges have to protect themselves and are going to be thinking strategically about their finances, the likelihood of being sued. But I don’t think—I’m not sure what to do about that threat besides saying, I don’t think it’s a reason to not do this work. You’ll get attacked anyway.

FASKIANOS: Thank you. (Laughs.) Natasha, can you talk a little bit more about college admissions lotteries, and how that methodology is affecting DEI?

WARIKOO: Yeah. Well, no one’s doing a lottery, but I have written a little bit about it. So, one of the things that I—as I’ve been talking, I’ve been saying we have to stop thinking of this as an individual certification of merit, is that part of the way to do that is to change the meaning of selection. It’s funny, I’ll tell you a story, my husband was just on jury duty for the first time yesterday, because he’s a naturalized citizen.

So he came home and said, “You know, I didn’t really want to be put on this trial because it would mean—they said it was going to be, like, a long trial. But I—you know, but I answered honestly.” And then he got interviewed by the judge and these two lawyers. And then he said, “When they said, OK, you’re dismissed at the end I felt a sense of disappointment. And he was, like, because it felt like I was—I didn’t win, right?” He was like, “But I didn’t want to be on this. I never wanted to be—I mean, obviously if you’re selected, you’re selected. You don’t have a choice.”

But I think these systems—and the reason I tell you that story is that these systems of selection kind of do a number on us, right? It’s, like, we get so caught up in them. And I think what a lottery would do is say, you know what? It’s random. (Laughs.) Like, because the reality is it’s kind of random, you know? Did you grow up in a family that has the resources to pay for you to go to private music lessons, and now, this college needs an oboist because the oboist is graduating? Or did you get to sign up for—did your parents pay for you to sign up—in my latest research in a high school, kids are—they have, like, a private pitching coach. And so now you get recruited to be the pitcher on the baseball team.

And so it’s—that’s kind of random, you know? And the reality is that—but we act as if this is, like, a selection. So, to me, a lottery—we could say: Let’s put all the potential people, all the names in a hat, and let’s just have a lottery. And, we can think about, like, do we want to have—and then make clear, like, we want to have a quorum of full fee-paying students. And that doesn’t feel very good. But that’s kind of what we’re doing, so let’s call a spade a spade, you know? People who, athletes or whatever it is that that college is sort of looking at. Intended majors.

I think that—and we can think about diversity holistic—I think we can’t have kind of set metrics like, you get extra points or anything like that for being underrepresented, but we can think about it holistically, and being put into this lottery. And it would acknowledge the fact that there are a lot of amazing young people in this country who could thrive at most of these selective colleges. And I think it would change the meaning in a way that I think is very productive for society. So that’s sort of why I think that a lottery is a very promising idea.

FASKIANOS: Great. I don’t know if anybody has other questions or comments, but I will ask one more. In your research you found that White students and students of color perceive the benefits of diversity differently. What lessons can we learn from this, or have you learned, and how do you think you shift this—the perception differences?

WARIKOO: Yeah. I think one of the problems of the way that we talk about affirmative action and diversity only as a sort of, everybody benefits, everybody wins, is that it kind of leads to these expectations on the part of White students of their peers of color, right? Well, if diversity is all about improving my own educational experience, and I can see how I have benefited from those diverse voices in the classroom, then why—like then—and some of them would get annoyed when they saw, like, a table of Black students in the cafeteria.

And of course, they didn’t notice all those other tables of White students in the cafeteria, but they would say, well, if they’re here to enlighten me, then they should be kind of integrating into these White spaces. And of course, that student wouldn’t then go and sit at that table of Black students, but they’re expecting the Black students to integrate into these predominantly White spaces. And so I think there are all these unfair expectations on the underrepresented students of color. And of course, they’re all assumed to have benefitted from affirmative action, and we know that’s not the case.

And so I think there’s also this sort of assumption that they should always win, right? So I had a student admitted to Harvard say, well, if I hadn’t gotten into Harvard, I would have felt that I experienced racial discrimination, right, if, you know, the student of color at my high school had gotten in and I hadn’t. And so there is this belief that they should always be winners. And even with affirmative action, it’s just there to benefit themselves.

And I think we need to get away from that and really focus in on racial equity and, again, the history of racial exclusion in this country. And the way that even these institutions themselves have benefitted from—again, from slave labor, from the slave trade, from building their endowments at a time of racial segregation, at a time where there were very few, if any, students of color on their campuses. And then, legacy benefits that sort of continue that sort of intergenerational racial exclusion.

FASKIANOS: Great. And Beverly Lindsay has suggested Beverly Daniel Tatum’s book, Why Do All the Black Kids Sit Together in the Cafeteria. Just want to share that resource. We are at the end of time, if you want to just make any final remarks before we close.

WARIKOO: Yeah. I mean, I guess I’ll just say that I think it’s important to pay attention to admissions, but I also have started to think much more broadly about DEI and higher education. And I think we need to also look well-beyond these, sort of, selective colleges. Most colleges in the United States are not selective, right? And, you know, we’ve heard from folks from of those colleges. And, we need to—when we look at the endowment per pupil at some of these selective colleges, compared to—and what they’re doing for social mobility compared to, I’m sure, like the college in Miami, community colleges, open access state colleges. I think we just need a lot more supports for those colleges that are engines of social mobility. And, again, if we think about the mission of higher education and how we, as Americans, see how we want to—sort of, what kind of society we want to be, I think it’s incredibly important to look also beyond admissions. So I’ll leave it at that.

FASKIANOS: Thank you. Thank you, Natasha Warikoo. We appreciate it. We look forward to reading your forthcoming book. And to everybody taking the time to participate and for your great questions and comments. Again, this is a forum to exchange ideas and best practices. So we loved hearing your comments as well.

So our next higher education webinar will be on Tuesday, April 19, at 3:00 p.m. Eastern Time with Tony Allen, president of Delaware State University. We’ll talk about the role of HBCUs in the United States. So please look out for that invitation. And in the meantime, I encourage you to follow us at @CFR_academic, visit CFR.org, ForeignAffairs.com, and ThinkGlobalHealth.org for more resources. I look forward to communing again. And thank you, Natasha.

WARIKOO: Thanks for having me.

(END)

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Roger W. Ferguson Jr., Steven A. Tananbaum distinguished fellow for international economics at CFR, leads a conversation on the future of capitalism. 

FASKIANOS: Welcome to today’s Winter/Spring 2022 CFR Academic Webinar Series. I’m Irina Faskianos, vice president of the National Program and Outreach at CFR.

Today’s discussion is on the record, and the video and transcript will be available on our website, CFR.org/academic. As always, CFR takes no institutional positions on matters of policy.

We’re delighted to have Roger Ferguson Jr. with us to talk about the future of capitalism. Roger Ferguson is CFR’s Steven A. Tananbaum distinguished fellow for international economics. Previously, he served as president and CEO of TIAA, and before that he was head of financial services for Swiss Re and chairman of Swiss Re America Holding Corporation.

He is the former vice chairman of the board of governors of the U.S. Federal Reserve System, and he currently serves on the board of several corporations and organizations, as a fellow of the American Academy of Arts and Sciences, and is an advisor with various private fintech companies.

So, Dr. Ferguson, thank you very much for being with us today to talk about the future of capitalism, and it is kind of astonishing that we are talking about the future of capitalism. Can you talk about this area and what you see the strengths are and weaknesses as well?

FERGUSON: So thank you very much, and I’m going to actually start with a quote. I think this is a quote from 1938 that roughly captures why we are talking about the future of capitalism. So this was from FDR, a famous U.S. president. In 1938, he said, “Democracy has disappeared in several other great nations, not because the people of those nations disliked democracy”—or you might say capitalism—“but because they had grown tired of unemployment and insecurity, of seeing their children hungry while they sat helpless in the face of government confusion and government weakness through lack of leadership in government.”

Now, that is a strong statement. It is not exactly where we are today. But there are a few points here that are relevant and resonant with where we are today. So the reason that we’re looking at and talking about this question of the future of capitalism is that there are many surveys that suggest that young people, in particular, are not sure that capitalism is the system that they want to use to organize their economic life.

We know that capitalism has been very successful in many ways. It has brought, literally, hundreds of millions, if not billions, of people around the world out of abject poverty. It has created some of the most iconic and successful companies that the world has ever known. We’ve seen dramatic transformations in our lives in terms of our ability to do everyday tasks using smart phones, and they’ve only been around twenty years or so. All these things are the outcome of a capitalist system that is very robust, that has created new entities, that has allowed other things to grow—business, et cetera.

Having said that, for many people, capitalism is still a bit of an enigma. They look around and they observe, at least here in the United States, that income has been gradually rising and inequality, starting, roughly, in the mid-1970s. They’ve seen very unexpected crises here in the U.S. and in other countries emanating from mysterious and misunderstood financial tools such as subprime mortgages.

They see longer-term challenges for many people around health inequities, which became very clear during the COVID-19 crisis that is still with us in some ways. And, obviously, there are for many people, the ongoing challenge of climate change with very extreme weather, and we’ve experienced that as well.

And so while capitalism is, I think, really recognized as the organizing force that has brought many people out of poverty, allowed new tools, new capabilities, a very comfortable lifestyle for many, it’s also seen as, perhaps, not doing everything it’s supposed to if you have increasing income inequality, increasing wealth inequality, and you look and see health inequalities and different outcomes, that they guess maybe the system should be somewhat better.

The second point I’d make is, for me, it’s really quite ironic because I grew up at a time when there was conflict between capitalism and communism, and then in late 1980s, early 1990s, communism disappeared. The Soviet Union fell apart. And since that time, capitalism is the way that almost all societies have organized themselves.

In the United States, we have capitalism that is regulated market capitalism, and Europe tends to be the kind of capitalism that leans a bit more towards social democratic norms. In Japan, there’s a kind of collective capitalism.

Even China, sometimes called communist China—when I was growing up called Red China—under Deng Xiaoping. He had this famous phrase, “It doesn’t matter if the cat is black or white as long as it catches a mouse,” and people took that to be a dramatic move towards a capitalist kind of system, even in communist China.

And so capitalism, for a period of time, was and still is the dominant way of organizing all—almost all of the major economies of the world. There are a few outliers. But the major economies have different versions of capitalism. There are five or six versions of capitalism. And now, suddenly, here we are in 2020, 2021, 2022, and we had an election in the United States when some of the candidates were talking about socialism. We see in China a reversion back to some skepticism about the kind of capitalism they had and the great wealth inequality that resulted. We see other surveys that suggest people around the world are less enamored of capitalism.

So it would seem to me a very important topic to say, well, what is the future capitalism? The system that was the dominant system in the world for, roughly, thirty years is under question in almost every location and why is that? And so, that is what we’re looking at.

Now, I know that we sent out some readings to the individuals who are joining us here—the academics, the students from around the country—and if you look at those readings you’ll see that we don’t really know the answers yet.

And so one of those discussions was a discussion I led with Glenn Hubbard, the former dean of the Columbia Business School. And Glenn’s solution was to go back to the very early days of capitalists, to go back to Adam Smith and to adopt, as Glenn would say, the little “l” liberal view of capitalism, which is, basically, one in which he used the phrase, we should be building bridges and not walls, driving, I believe, for a kind of empathetic opening where we understood each other better and saw that we had our futures all intertwined.

And so that’s, certainly, a view of, perhaps, how the future of capitalism might evolve, where it looks very much like a small “l” liberal view, going back to Adam Smith and the book that he wrote on so-called moral philosophy. If you look at some of the other readings, you’ll see that some people are saying, gee, one of the challenges that we have now is businesses are being allowed to sort of drive much of the agenda. And this discussion in businesses about the purpose of business and should it be so-called stakeholder value and stakeholder—so-called stakeholder primacy, thinking not just about the shareholders, but employees and the communities and the supply chain, et cetera.

And so, that article suggested, well, maybe we really need stronger government influence as opposed to leaving the fixing of the system to the private sector, with maybe stronger antitrust regulation, perhaps, more progressive taxes. And so we have that as a question.

 One of the articles looked at the most recent G-7—Group of Seven—discussion that seemed to move from the notion of free trade being best to maybe thinking about different metrics to make sure that the wealth of capitalism is distributed more evenly.

I wrote another piece that said, in this period of inflation let’s make sure that we don’t go back to wage and price controls.

So what the Council has been doing through these roundtables, through publications in Foreign Affairs, through posts on CFR.org, is, really, looking at and mixing up lots of different ideas, bringing many different views on what is it going to take to return to a position where everyone, both in the U.S. and more broadly, still believes that capitalism, for all of its flaws, is still the best way to organize our economic activity.

At the end of the day, I think everyone would agree capitalism has done a really good job of getting us out of poverty. But the challenges now are how to think about the inequality that seems to have emerged in almost every country, and is the answer to that sort of more regulation or less regulation—more taxes, different taxes.

Here in the United States, we’ve seen under President Biden a number of proposals that, while they are described as being fiscal stimulus, are really about social policy that, in many ways, are meant to fix some of the challenges of capitalism. For example, the question of should we have early childhood education as free for all—would that help to drive better outcomes in terms of income and wealth inequality. Obviously, the notion of investing more in infrastructure, particularly twenty-first century infrastructure as well as the older infrastructure is allowing us to knit the society together a bit better and maybe in a more equitable way.

So it’s not just think-tank individuals and academics and business leaders, but government leaders as well are really coming to ask this question of what systems—what could we change in the system of capitalism to make it more resilient, to make it more robust, and to solve some of the issues and challenges that we’ve seen emerging only gradually over the last several years. And so those are some of the things that we’re focused on when it comes to the so-called future of capitalism.

But let me emphasize that while I’m talking about this in terms of the future of capitalism and capitalism has been adopted in many different kinds of political environments—democracy, presidential democracy in the U.S., parliamentary democracy in the U.K., obviously, state-controlled in China—one of the reasons that I think, at least in the United States, we should be focused on the future of capitalism, going back to that Roosevelt quote that I started with, is that it may well be that capitalism and democracy are intertwined, and I believe that it is really very difficult, challenging, maybe impossible, to have a representative democracy where individuals go to the polling place and trust their government and trust their government leaders and trust the outcomes of democratic systems themselves if they don’t think that the economic system works well for them.

Back to the point that Roosevelt was making, in societies where it looks as though the economic system isn’t working well, where unemployment lingers, where income and wealth inequality become major problems, where the individuals think that their children will not have better lives than they did, perhaps they’ll say, hmm, this is not just a problem of capitalism, this may be a problem in our political leaders. And maybe we might need a very, very different political system.

And so I think, without panicking or creating hyperbole, the linkage between capitalism and democracy, I believe, is a fairly tight nexus, and some of the challenges that we’ve had, perhaps, around trusting elected outcomes, et cetera, may well be due to the fact that people feel that the economic system has worked well for a few but not for most, and they may see in many ways their lives are improved because they have new technologies and they can use Zoom and other things to communicate. But they may also think they’re stuck in a job where they are a so-called essential worker and confronting health crises and health challenges on a daily basis, and maybe that’s not the outcome that they’re looking for.

And so we should recognize that this question of the future of capitalism is important unto itself. We don’t know yet the answers. But it may be tied a little bit to the question of future democratic institutions, at least in the United States.

And the final point I’d make by way of opening is to say this is not the first time that we’ve seen questions of capitalism on the table. If one thinks about the economic history of the United States, there are many times when we’ve had rollercoaster rides in the economy. If we think about the beginning of the Industrial Revolution with child labor and individuals forced to work in very, very unsanitary conditions and, indeed, not being sure of the quality of food, and we had novels written about those kinds of challenges, yet, we came through that. We rebuilt capitalism in a different way. We added a social safety net. We created government agencies to think about food and drug safety. We thought about and developed laws around occupational safety and health. We created antitrust mechanisms to make sure that—in Teddy Roosevelt’s era, we had the so-called trust busting that institutions didn’t get too large. We had antitrust regulations about price fixing, for example, and rules about the hours that individuals could be made to work. And we’ve had—so we see that, at least in the United States, the capitalist system has historically righted itself when it seems to get a little bit out of kilter.

So I close these opening remarks by saying while there may be some issues and questions that people have, while a number of us are even studying the future of capitalism, I, at least come at that with a sense of optimism, knowing that in the history of America, during some of the challenges when capitalism was at its roughest and most unfair and even dangerous to people, our leaders and our society stepped forward and created a kind of capitalism that was fair, more equitable, and smoothed out some of the rougher edges.

So count me optimistic that the younger people listening to this and my own children will continue to live in a capitalist system. It might be a little different from what we have today. But I have every great confidence that with the goodwill of the people that we’re working with and millions of others we’ll end up with a modern capitalism that is suitable and fit for purpose for generations to come.

So with that, let me stop and see if there are any questions, comments, from the audience.

FASKIANOS: Great. Thanks so much, Roger.

And now we’re going to go to all of you for your questions and comments. We already have a couple or several written questions in the Q&A box and raised hands. So if you are typing a question in the Q&A box, if you could also include your affiliation, that would be great.

The first raised hand goes to Joseph Bower, and just be sure to unmute yourself and say who you are.

Q: I’m Joe Bower. I’ve been teaching at Harvard for a long, long time.

And around our centennial, which was 2008, in the run up we talked to business leaders all over the world about this problem and they identified major factors which they thought would disrupt the system. First of all, by the way, they did not talk about capitalism. They talked about the market system and—because China, basically, has a state market system. We have a private market system, which has something to do with ownership.

 You’ve done a very good job of pointing out that, in fact, our government has played, historically, a very important role in influencing that system. We started dismantling that. We did not have a financial crisis in the United States until something like 2000 since the 1930s. But we dismantled that apparatus that, in fact, protected the market system and we’ve done that in a—I mean, when you and I went to school we were taught about countervailing power. That was dismantled. In a whole series of areas we have, in fact, undermined the infrastructure of law, of public health, and a whole series of pieces that made—enabled the market system. The market system doesn’t work by itself.

So I would think that it’s a very hard problem and our—I have grandchildren who feel the way you described, that our system is—capitalism is problematic, but they think—they’re talking about the state arrangements. They’re not really talking about the value of markets. And I wonder if you can help us—can you talk about where your group has gotten to about that distinction?

FERGUSON: Well, first—and Joe Bower is being modest. He’s—(laughs)—one of the most distinguished professors at Harvard Business School and, Professor Bower, it’s an honor and pleasure to have you here.

And so, our group, I think, fully recognizes that the kind of capitalism we have here, as I think I said, is regulated capitalism and regulated free—a regulated market, so to speak, as opposed to state-driven markets or other things.

I think the challenge for all of us—and you know this, Professor Bower—is in the history of America the pendulum swings back and forth, you know, on regulation. So I identified, that Teddy Roosevelt-, FDR-aligned regulation that came in and sort of saved capitalism and saved the markets at the very beginning of the nineteenth century—of the 1900s—the twentieth century. And then you fully understand that there have been periods of time here in the U.S., starting recently in the 1980s, when both parties, Democrats and Republicans, agreed that to some degree large government was the problem—that we needed to be deregulatory, and that is not—that was not one party or the other. It was a bipartisan consensus starting in the 1970s that, perhaps, regulation had become too much. And I think where you may be right and it may be part of the solution to this question of well-regulated capitalism is maybe the pendulum needs to swing back a little bit. Perhaps we do need to have—and there are folks who, certainly, think we need to have—a more progressive tax system to redistribute income.

We had an election where there was debating about wealth taxes. They don’t work very well in other countries but it’s an important debate. We also, clearly, are right now having a conversation about it in the Congress under the president’s proposals about spending more on a social safety net, early childhood education.

So I think you’re pointing out something that’s real important: In the swinging of the pendulum in democracy here in the United States, where that pendulum often swings around the question of how big should the state be versus private citizen initiative? How much should we have redistribution versus not? How much should we have government regulation versus not? And it may well be that is where it feels that’s part of where the debate is. And we can look back over history and say, all right, is it time for that pendulum to swing back—have we gone a little too far in the deregulatory mode and getting away from the well-regulated markets that have allowed us to be the envy of the world.

So a good question, and it will be one of the things that I know we’ll continue to debate as a society and in the groups that we’re working.

FASKIANOS: Thank you. So we’re going to take the next question from Willem DeVries, who got five up-votes. He’s a professor of philosophy at University of New Hampshire. You say capitalism has done a good job of getting us out of poverty. But who is the us here? Colonialism, a form of capitalism, certainly, did not help get the colonies and the colonized out of poverty.

FERGUSON: Very good question. And so, to be fair, when I say global capitalism has done a good job getting us out of poverty, you point out something that’s real important, which is when economists say that they’re often thinking about a dramatically larger middle class in China. There is an intellectual class in India that is tied to global capitalism. We see in some of the Eastern European states, again, technology-driven jobs that are more middle income.

And so one of the points that you’re making, and it’s one of the points that one of the articles made, is this free trade environment created by the WTO may have helped some people get out of poverty if they could get themselves linked to the U.S. economy and the U.S. engine, but not everybody. And one of the points that some of the articles made is free trade and the WTO process may have been very good in some places but there were costs paid, perhaps, here in the United States and other places in terms of jobs—manufacturing jobs, in many cases—that had existed here in the United States and then were moved overseas or moved to other countries.

So you’re right to say be cautious. A global statement that millions and maybe billions have been lifted out of poverty is not the same as saying that everybody is made better off and there, certainly, are individuals here in the U.S. and we’ve had these discussions, obviously, in our process around bringing manufacturing jobs back, increasing tariffs on goods from other countries. And so, a very, very good point.

And, finally, let’s be quite clear. Some of the joys that we have here in capitalism come, as you point out, from other countries that, perhaps, where they’re giving up their natural resources, where the nature of agriculture has changed, and all that to support our habits, and it may well be that there are places where individuals’ lives have been disrupted, not just in the U.S. but in other places, in a way that aren’t good.

And so I think that is one of the things that drives some people to question what’s the future of capitalism when you look at global inequality and when you look at those who are feeling left behind here. So all of that is very much on the table. Thanks for raising it.

FASKIANOS: Thank you. I’m going to go next to Horace Bartilow, who has raised—a raised hand, from the University of Kentucky.

Q: I’m no longer at the University of Kentucky. I’m at the American University School of International Service.

FASKIANOS: Great.

Q: I’m an international political economist, but I am—my question today—and thank you, Mr. Ferguson. Excellent opening. Is—capitalism came from—it evolved out of a feudal era. It came from somewhere, right?

FERGUSON: Mmm hmm.

Q: My concern is, and don’t take my question as if I’m against capitalism. I live in a home that is, technically, owned by a bank. I’m paying a mortgage and my retirement is wrapped up in the stock market.

But my concern and my question is, is that the very fact that we’re asking the question about capitalism’s future is that we are worried that it might have a future, and the question is it might not have a future and that the next stage of human evolution could be developing a system that doesn’t look like capitalism.

I don’t know what that system is. But it just seems to me that from your exposition over the period of capitalism’s life there have been different attempts to make it compatible, make it more legitimate, make it more egalitarian, and then the question is what happens when we run out of options to make it more egalitarian, to make it more legitimate. Then what?

Because it just seems to me that we’re dealing with a system that we are trying to tame against its own self, that if we let it be itself it could destroy itself, right. It’s almost as if you’re trying to stop an addict that needs to be fed. (Laughs.) And so what happens when we run out of options?

FERGUSON: So I think to put it in historical context, you’re, certainly, true that capitalism came from someplace. As you say, it came from feudalism. That was a system that had even more brutal inequality than anything you can imagine. And knowledge evolved. Ideas evolved. You know, Adam Smith, various things, emerged, and there was a whole intellectual ferment around how the system should be or the economic system should be organized in a way that it was perceived to at least overcome some of the obvious limitations of feudalism.

To be very honest and transparent, it may well be, to your point, that out of what we currently have will be a gradual evolution towards something else whose name we haven’t even imagined yet. You know, it could well be that someone’s going to write the book that’s the functional equivalent of The Wealth of Nations that Adam Smith wrote to help drive a view of the way markets should be organized or that there should even be markets.

And so I think that’s—the reason we’re having this conversation is that many people, some of whom have already spoken, are looking at the current way we organize the economy kind of globally and say maybe there is a better way. And so, the process of talking about the future of capitalism is to start with what we understand and, in your word, taming the beast. So we’ve seen this beast in operation for, roughly, three hundred years. We’ve tamed it many, many different times—creating new institutions, central banks, creating new laws, creating progressivism, all of which has tamed capitalism, so to speak, to use your analogy.

And so I think we’re in the process of seeing how that we can continue to do that. You may be right that someone, an Adam Smith type person or whoever she may be, may come along, imagining a brand new world and all of us will rally around that or our children will.

But right now, perhaps because of the lack of creativity or imagination, I think we are attempting to do what our forefathers and predecessors did, to your point, continuing to sort of manage and tame this beast as best we can.

The reason I think that’s important is we also know that there were—there was a different view of how to organize economic activity called communism. That, obviously, didn’t work very well. And the point that I made, and I think Joe Bower jumped in as well, even in so-called communist China they adopted a market system allowing elements of capitalism to flourish.

So the other reason, I think, to continue this discussion is we did have an experiment with a different system and the folks under that system, clearly, didn’t like it and it eventually fell on its own weight. So, right now, having had that experience, the absence of, that author who is going to imagine the new future, I think it behooves us to see, to your language, if we can continue to evolve this one to hold on to some of the strengths and ameliorate some of the obvious problems.

FASKIANOS: Thank you. I’m going to go next to Kate Landino, who is an undergrad in—majoring in political science at Skidmore College. One of the main reasons capitalism is under fire is that it’s benefiting some and oppressing most. How would you suggest that within the U.S. we can address the wealth gap and redistribution of wealth within the capitalist system?

FERGUSON: Well, look, we know how to do that is through taxes, and the challenge is always—and it’s been challenging us forever—how much should we tax the rich and redistribute and is there a point at which individuals say, oh, gee, I know I don’t want to work because that last hundred dollars, thousand dollars, whatever, is mainly going to the government and not staying with me. And to be quite clear, we had a point in this country when we didn’t have an income tax and that required a constitutional amendment to drive it.

We’ve had periods when the marginal tax rate—the tax rate on the last $100,000 whatever the number would have been at the margin—was well over 50 percent, in some cases 70 percent, and that was true in the late 1950s and the early 1960s. So, John Kennedy and his team came in and reduced the marginal tax rate and that drove quite a bit of growth.

We’ve had more recent tax cuts where some people felt you’ve gone too far. And so I think we know how to deal with this question of income inequality, at least, and redistribution, and the main way that we do it is through the tax system.

Now, having said that, you could also look overseas because people have talked about taxes on wealth, and it turns out that many countries have tried that. Right now, I think, only two other major developed countries are using it. Many tried it and reject it—rejected it. So, we can also learn something about tax structures that, perhaps, didn’t work as well as their creators had hoped.

And the final point I’d make is, even at our marginal tax rates one can look to Europe—when I say our I mean in the U.S.—one could look to Sweden and the other Scandinavian countries to see countries that have a much higher tax rate and they seem to do all right with that, and maybe we can learn and understand how that works as well.

So the answer to your question is it all runs through the taxes. It’s a big debate here in the United States and has been going back to should we even have an income tax, and I expect that, and we saw it in this most recent election, we’ll continue to debate what’s the right level of taxes to do what we want to do when many of us, I think, want to maintain the capitalist system, but to your point, smooth out the edges so that it doesn’t feel as though a few of us benefit at the expense of others.

FASKIANOS: Terrific. I’m going to go next to Ken Mayers, who is a senior adjunct professor at St. Francis College.

You mentioned different forms of capitalism in your introduction and Professor Bower mentioned different market systems. One can argue that all systems are mixed and that systems in many places around the world today involve mixtures that include elements of oligarchic capitalism. Can you point us to people within your group who are taking the role of oligarchic capitalism in the emerging future of capitalism globally into account?

FERGUSON: Well, so this project started with a paper that I wrote with my research associate, Upamanyu Lahiri, and we identified six types of capitalism in the world and they may be market systems, to pick up on Professor Bower.

So, in the U.S. we describe that as a regulated market system. In Western Europe—we’ve heard her talk a little bit about it—it has more of a social democratic nature to it but very much capitalism, not too much state ownership; a bit more than what we have. I would describe Russia as, to your point, an oligarchic capitalism. You know, some people would say that.

We looked at Japan, and I think I would describe that as being a collective kind of capitalism. Obviously, China, to Professor Bower’s point, I think, is very state-directed capitalism, and we have in other countries a bit more of a bureaucratically-driven capitalism.

So that is where we’re thinking about it. We’ll have someone talking on each one of those. I would say most of us don’t believe that an oligarchic capitalism where a small number will get the wealth of the society, an even smaller number than we have here—that doesn’t look like it works. It, certainly, doesn’t feel—if we’re worried about the inequality of the current system we have in the United States imagine if we had a system where even a smaller number of people controlled the major industries and were not paying taxes.

So we will take a look at all of these. I don’t think we’re going to look to an oligarchic capitalism system as the way that we want to go because the evidence suggests that that probably is not the best for the vast majority of people. But we will, certainly, look at all of them and figure out if there is, to your point, an admixture that works better for more people than what appears to be the case now for many.

Thank you.

FASKIANOS: Next one is Valerie Luzadis, who is at SUNY Environmental Science and Forestry at Syracuse in New York. One might easily understand that climate change is a direct result of the dominance of capitalism in which homogenization requires additional use of energy to homogenized globalization.

When considering this, huge questions arise about the ability of the offending system to, truly, address the problem, especially when the power distribution is not adequately addressed. Comments?

FERGUSON: Well, I find that very interesting because it feels to me, after some fits and starts, that there’s a consensus that’s emerged that we have to confront climate change. Some folks may still debate is it man—is it caused by human interaction, what it may be. I think, in general, the consensus is we must figure out numerous ways to attack this problem.

To put it another way insofar as climate change or climate degradation is due to a market that doesn’t work very well, we’re finding people say we need to create a new market. We’re finding investors saying we must invest in—in mitigation processes. We find shareholders saying to companies, what are you doing about this topic?

It feels to me as though a consensus is strongly emerging that this is an existential threat, and what I find fascinating is some of the answers are regulation, but some of the answers are also markets. And, how that’s going to work I’m not sure. But, there’s a great deal of talk about putting an adequate and accurate price on carbon, which would drive up the price that we all pay for, a number of commodities and services that are driven by, the use of carbon for energy. There is an ongoing effort to create a better market for what’s called carbon offsets—using different ways to reduce carbon in the atmosphere and paying people to do that.

So I actually find it fascinating that this big existential issue is being confronted more directly now than ever and that some of the answers are around regulation but some of the tools of capitalism are being called in to help drive solutions here. And so this feels to me as though to some people, many of us, it took too long to get there.

It feels to me very much as though this is a place where insofar as climate change is being driven by poor markets, there’s an effort to make better markets as well as better regulation to drive as quickly as we possibly can a solution to this really daunting and, potentially, existential challenge.

FASKIANOS: Great. The next question comes from Steven Jones, who’s at Georgia Gwinnett College. How would you respond to critics of capitalism such as Piketty, who advocated transition from capitalism to socialism?

FERGUSON: Well, look, I think we start by saying, as Piketty did, what is the thing that seems to be the fundamental Achilles’ heel of capitalism, and I think all of us agree—and it’s come up a few times and Piketty and his co-authors have identified it as well—which is the tendency in capitalist systems for income and wealth to become increasingly unequal.

Now, we know how to deal with that. As I said, it’s through tax arrangements, different kinds of tax arrangements, and all of them don’t work equally well, and so we can create an overlay that ameliorates those effects.

Now, is that still capitalism? I would argue it’s, certainly, still capitalism. Just as we have more progressive taxes in Scandinavia and other places, they still have, fundamentally, a capitalist system where it’s still primarily individuals who control the means of production, if I were to use that phrase.

And so I think we should be cautious here that just looking around the world there are already different types of capitalism and we’ll probably end up picking and choosing—every country will probably pick and choose. And I wouldn’t be surprised if we start to sort of coalesce globally around a kind of capitalism that meets some of the challenges of inequality as best we can without creating so many disincentives in the private sector that we also don’t have the opportunity to have the kind of really creative growth and development of new ideas and new technologies that we’ve had.

So that’s sort of the way I think about it, and when I read Piketty’s work it feels to me as though what he’s looking at is something that’s a more European-style capitalism with more progressive taxes and I don’t know if one wants to call that socialism. I think that’s a little strong. Socialism involves state ownership of many of the means of production.

But it may be what he’s talking about is something that looks like a social democratic kind of capitalism, which major societies have found quite comfortable and quite amenable.

FASKIANOS: I’ll take the next question from Gabriela Rivera, who’s an undergrad at the University of Notre Dame majoring in economics and global affairs.

To what extent do businesses influence environmental and social change? Is a massive change needed to create equity and reduce carbon emissions possible through corporate responsibility without extreme government regulation?

I think you did touch upon this. But—

FERGUSON: Yeah. So one of the articles talked very much about that, and I guess I believe it’s a both/and. So I think we need governments to set regulations, as we’ve had in the past. One of the best government regulations that we had was around sulfur dioxide emission when we had a big concern about acid rain, and so we’ve seen the government can set regulatory constraints.

We’ve seen governments setting—creating markets that deal with some of these problems, and we also need, as we do now, as we have now, to have companies that are also voluntarily thinking about how to reduce their carbon footprint.

So I think the answer is a both/and. We still need government regulation. We’re going to need markets to be created to give prices to carbon that all of us will have to pay to consume less of it.

But we also need—and we need businesses that understand they’ve got a responsibility to manage their carbon footprint and they’re doing that—these businesses—in part because their investors are asking for it, their consumers might be asking for it, and, certainly, in many cases, their employees are asking for it as well.

And so, I think one of the good things about the current system is pressure, internal and external, can get businesses to think about these big long-term issues as well as having government regulation and having new markets come into existence.

FASKIANOS: Great, and I—that does segue nicely into Dick Cavanagh’s question from Harvard. How does stakeholder capitalism address economic inequality?

FERGUSON: We’re very lucky today because we have distinguished Harvard professors and I—total transparency, I’ve known Dick Cavanagh for decades. So, I think it’s very interesting to me to think about economic history, that there is a great deal of talk about that famous Milton Friedman article that said the purpose of businesses is to make a profit and that drove this notion of shareholder capitalism was always the dominant capitalism.

Well, the truth of the matter is—and you know this—there were always people that said, oh, wait a minute, businesses have other responsibilities as well. And I think, for sure one cannot create a long-term viable business without thinking about impact on the environment, impact on communities, impact on employees, and all that is wrapped up in this new concept of stakeholder capitalism.

But there’s always been that discussion, as you well know. And so I believe fully that the resurgence of the question stakeholder versus shareholder is a good thing and my view is that businesses have always been forced to think about their environment, think about their shareholders, thinking about their stakeholders, as it’s now called, in order to be successful.

And, ironically and most importantly, you know and all of us know the story of Henry Ford, who raised the wages of his workers so they could afford to be good consumers and wanted to buy his automobiles. And so this notion of stakeholder capitalism goes back in the history of America and I think it’s one that’s been resurfaced and I think it’s an important way to think about the future of capitalism.

FASKIANOS: So this goes to the next question from Deborah Burand, a professor at NYU Law. We’re in proxy season now. Do you see the market increase in shareholder proposals in 2021 related to ESG and the support many of those proposals garnered as another way that markets are moving to fill gaps or augment shifts in corporate purpose?

FERGUSON: Absolutely. Again, as a person who believes that capitalism will continue to right itself, that is one of the examples. So, shareholders, particularly, our large institutional shareholders, fought to get proxy access, fought to get say on pay. We’re now finding that they are voting around some of these social issues quite a bit more.

We’ve also seen a case of a small fund—I think it’s called Engine No. 1—getting access to the proxy at ExxonMobil and, I think, replacing two or three of their directors. And so, through capitalist mechanisms and through the ownership of shares, which is an essence of private market and private capitalism, we’re finding individuals, institutional shareholders, and others really forcing change even to some of our largest, most important, and historically iconic companies.

So I do think that you put your finger on one of the ways that capitalism is righting itself, which is using a capitalist tool, the proxy.

FASKIANOS: Great. The next question from Skyler Ruderman, who’s an undergraduate student at University of California Santa Cruz.

You mentioned earlier the linkage between capitalism and democracy as almost being inherent, yet we see that the United States is propping up or supporting dictatorships like Pinochet, Suharto, and kingdoms like Saudi Arabia, protects or advances financial interests of the state and its major corporations. Given this direct link between authoritarianism and capitalism, along with the drive within the U.S. to inhibit voting and with historic regulations around restricting voting and participation in democracy, can we say capitalism can be conflated with democracy?

FERGUSON: So I think what I said was it’s hard for me to imagine that we’re going to continue to have sort of a well-functioning representative democracy if people think that the system doesn’t work for them economically. That is back to that 1938 quote from Roosevelt and I agree with that.

So one of the reasons that it’s important to drive an improvement in capitalism is that people have got to believe that the system, broadly written, is fair for them, and in a democracy, if you don’t believe the system is fair, what do you do? You go to the ballot box. You may end up listening to the most extreme voices and that, potentially, could lead to an unraveling of capitalism and democracy, and that was sort of the point that Roosevelt was making. I want to associate myself with that point, that there’s a certain amount of determinism that comes from economic outcomes that in a representative democracy spills over into, frankly, the democratic system.

Having said that, I’m not in a position to defend every foreign policy decision that was made back in the 1970s about supporting dictatorships in different places. And, to the point around the hydrocarbon economy, there, obviously, are decisions that people make and the markets make around supporting different governments, different regimes, in part to get hold of raw materials that are necessary.

I can’t defend or attack any structure of government any place. But you, certainly, make a point to observe that in the history of the United States we’ve had various different kind of alliances that maybe to the modern eye don’t look—isn’t that consistent with who we are and what we stand for.

On the question of voting, I’ve said publicly and signed letters that say that literally, 1.3 million Americans, I think, have died in various wars defending democracy and the right to vote, and I continue to believe that that’s a sacred element of our democracy, to have everyone have access to the ballot.

I grew up in the civil rights era when people, literally, were killed, if not beaten, around this question of access to the ballot. So, count me fully committed to having the largest possible legitimate vote that we possibly can. And I emphasize legitimate vote and as large as we possibly can, because I think that’s one of the hallmarks of democracy and because, as I said, more than a million Americans have died so that all of us had the right to vote.

FASKIANOS: Thank you. There are many more questions but we only have time for one because we have a hard stop to let you prepare for your 2:00 p.m. So I’m going to give the last one over to Laila Bishara, who is an assistant professor at SUNY Farmingdale, teaching international business.

Your thoughts on the role of educational institutions to lead on ESG issues and, hopefully, its impact on industries. I think this is a good way for us to close.

FERGUSON: Absolutely. So I have said many times that education in general is the great leveler. It brings all of us up. I, personally, have benefited from that, and I fully understand that education institutions are often where some of the rough and tumble as we move forward goes forward.

So I’m not at all surprised to see that on educational campuses, educational institutions are driving some of the heaviest debates around ESG. That was true when I was a student back in the late 1960s through the 1970s. One of the great joys of universities is that is where ideas are felt most passionately and people sort of drive to make change from the academy, both the students and faculty.

So, I fully expect to see more of that because that’s simply one of the great benefits of having the kind of robust higher education systems, the state schools such as SUNY and with private schools as well, driving all of us to think more critically about what we do.

And, by the way, I also think that a functioning democracy depends on individuals capable of thinking critically for themselves, based on having a solid foundation of a liberal arts education with the right degree of science and technology and math and engineering as well.

FASKIANOS: Great. Any last words before we close, Roger?

FERGUSON: Three things. One is I really want to thank all of you. I know we didn’t get to all the questions but, clearly, a very, very thoughtful group with wonderful questions.

Two, this is really an important topic for all of us to engage in, not something that the elite can establish but all of us need to have a point of view about our system. And three, I continue to be optimistic, knowing that there are weaknesses and failures.  We’ve tried other solutions. None of them would seem at this stage better than capitalism. Something better may come along. But until that happens, I, at least, will continue to try to think through how we can improve the capitalist system that we have.

FASKIANOS: Great. Thank you, Dr. Roger Ferguson. We really appreciate your taking the time to be with us today. Again, my apologies to all of you for—who had your hands raised and we couldn’t get to them. But we will have to invite him back to talk about how his project is going.

So, as I mentioned at the outset, we will be posting the video and transcript to this so you can revisit it or share it with your colleagues who are unable to join.  Our next Academic Webinar will be on Thursday, March 10, at 1:00 p.m. Eastern Time with Rose Gottemoeller, who is at Stanford University, talking about international security and cooperation. Please continue to follow us at @CFR_academic and visit CFR.org, ForeignAffairs.com, and ThinkGlobalHealth.org for new research and analysis on global issues.

Again, thank you all for being with us, thank you to Dr. Ferguson, and we hope you have a good rest of the day.

(END

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