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Assets and the Poor: Twenty Years Later

English: Michael Sherraden at the 2010 Time 10...

Michael Sherraden

By Bob Friedman on 12/15/2011 @ 08:45 AM

Twenty years ago, Michael Sherraden’s seminal work, Assets and the Poor: A New American Welfare Policy, appeared. It changed my life, and more importantly, the lives of tens of thousands, soon to be millions or tens of millions, of low-income people and their advocates, around the world.

Actually, I had met Michael a few months before. Rona Feit, who lead CFED’s Self-Employment Investment Demonstration (SEID), which proved that some welfare moms could escape poverty and dependency through self-employment, came into my office and said, “There’s someone here you should meet.” And so she introduced me to Michael Sherraden and his ideas. Michael told me that the work we had been doing on self-employment that first decade of CFED’s existence, was in fact, asset building. I never thought of it that way, though as soon as he said that, I was reminded of the SEID participant in Iowa, who established two more video rental businesses in addition to her first one so that she could sell them to finance her son’s education.

As Michael left, he gave me the final three (policy) chapters of Assets and the Poor, to read. But I was already sold. In truth, I was looking for other avenues to economic independence beyond self-employment, as well as a simple, powerful, practical tool to that end. I had spent most of the 80’s writing The Safety Net as Ladder: Transfer Payments and Economic Development. I had convinced myself that the income maintenance system could also serve as a ladder – if the disincentives to work, saving, education and self-employment were removed and the payments made available for economic independence. But I also realized that reforming an incomplete, complex, insufficient safety net transformed would be rickety ladder. Individual Development Accounts (IDAs), seemed to me to be exactly the simple, flexible, powerful idea I had been looking for.

It has been my and CFED’s great honor to work with Michael and the Center for Social Development, and all the individuals and institutions who found inspiration and education in Michael’s ideas, throughout the last two decades. First we worked together to popularize the idea; I will never forget Jack Kemp, then HUD Secretary, carrying around his earmarked copy of Assets and the Poor and waving it around during his speeches in the early 90s. We worried that it would all be talk and no action. So, together, and with the support of a dozen leading foundations, we created the American Dream Demonstration, which proved, with more than 2,300 poor Americans, that, given a savings match and financial education, low-income and even very poor people, would save, go to college, buy homes, start businesses and move toward economic independence. In fact, participants at half the poverty line – less than $10,000 for a family of 4 – saved about as much and at 2-3 times the rate as folks at twice the poverty line, because, as they explained to us, this was the price of stability and hope. At the beginning of ADD, there were three nascent IDA programs in the country; by the end there were hundreds, as well as Federal and state legislation.

Michael did chide me that he had never intended IDAs as a time-limited intervention (as the demonstration required) and reminded me he had recommended that IDAs begin “as early as birth.” Together, and along with other national organizations like New America, Aspen Institute’s Initiative on Financial Security, Kansas’ School for Social Welfare, and the backing of another dozen national foundations, we launched the Saving for Education, Entrepreneurship and Downpayments (SEED) Initiative, which would prove that low-income and poor children of all ages, given the opportunity, would save for their futures.

Now too, we see savings and matched savings programs spreading throughout the world, to developed and developing countries alike, building on rich historical foundations. Groups like Child and Youth Savings International and Financial Assets at Birth, are proposing child accounts for every child of the world.

In the US, the next three years are the time to take the revolution that Michael Sherraden started with Assets and the Poor, and turn it into the foundation for the Save and Invest Economy that President Obama has called for, and that we will need to turn this time of debt and economic decay into a time of opportunity and prosperity.

Thank you, Michael, for inspiring and leading us.


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