This paper discusses the concept of literacy and proposes several theses with regard to the difficulty experienced by youngsters from disadvantaged backgrounds in acquiring literacy in present-day school environments. It recommends studies to explore the funding of programs designed to improve schools as educational organizations, rather than programs that are targeted to the individual student. Compensatory programs should be developed that: (1) do not put the blame for school failure on the student; (2) help children from poor homes achieve literacy; (3) promote adequate levels of achievement in literacy; and (4) make the school the appropriate (and perhaps the essential) unit for improving instruction in reading and writing. In support of the paper's arguments, a view of demographic trends in students, homes, teachers, and schools is given and policy implications for compensatory reading programs are considered. There is also a brief discussion of a framework for developing a curriculum of literacy. Current curricula for "regular" and "compensatory" students are described. A summary and tentative recommendations for federal, state and local policies conclude the paper. A list of references is appended. (PS)