Progressive Capitalism

torn dollar bill

Torn dollar bill image source and license.

We’ve been looking at economic winners and losers in the zero-sum economy — particularly in the context of higher education, where cultural belief in the importance of college and post-graduate degrees on upward mobility and success in the job market is driving behavior that harms both parents (the college admissions scandal) and the economic and mental health of their children (student loan debt, general anxiety disorder, depression, suicide).

This series of blog posts is now in its third year — throughout, we’ve seen how hyper-competitive capitalism and its staunch faith in the implicit justice of the “free” market is causing other economic loses. For example:

  • the stagnation of middle class real incomes;
  • the rise of the numbers of statistically poor people in the U.S.;
  • the dismantling of compassionate social safety nets in favor of expensive, counterproductive, and humiliating replacements;
  • the rise of the “rentier” economy in which formerly public benefits have been privatized, making them accessible only to those who can afford them through the payment of economic “rents”;
  • the end of the American ideal of upward social and economic mobility;
  • the high cost of housing and the death of the American dream of home ownership;
  • the elimination of “normal” jobs through off-shoring, outsourcing, and the delegation of productivity to intelligent machines;
  • the advent of the short-term, contract-based “gig economy” with its lack of fringe benefits and its precarious prospects for sustainable income;
  • economic inequality that favors the wealthiest of capitalists at the expense of the bottom 90% (or 99%, or 99.9%, depending on your data and point of view);
  • the creation instead of an insular top-level “meritocrat” socio-economic class;
  • the new state of “total work” and the “monetization” of goods and services;
  • rising rates of career burnout, mental illness, and suicide resulting from social isolation and the vain struggle to find meaning and purpose at work;
  • the rise of corporate nation-states with economic and policy-making power that dwarfs that of many governmental nation-states;
  • the private (non-democratic) social policy-making initiatives of the wealthiest elites;
  • and much, much more.

Nobody meant economic policy to do this, but it has, for roughly the past 30-40 years. Good intentions; unplanned results.

We’ve seen that both plutocrats and progressives advocate for systemic change, while status quo inertia weighs in on the side of those who don’t see what all the fuss is about, since capitalism is undeniably the best economic option and always has been, and besides it’s still working just fine, thank you very much. Instead of meaningful discourse, we have a predominant nostalgic, populist doubling down on the neoliberal socio-economic cultural ideology that jet-propelled post-WWII recovery but finished running its course in the 1970s, while the retrenchers and the media slap those who beg to differ with the kiss-of-death label “progressive.” As a result, we’re left with incessant lobbing from one end of the polarized spectrum to the other of ideological bombs that originate in data and analysis skewed by cognitive biases, intentional blindness, and fake news . Economic policy-making resembles WWI trench warfare — a tactical grinding down of the opposition and the numbing and dumbing of everyone else. It was a bad idea then, and it’s still a bad idea now.

I had no idea this is what I was getting into when I decided three years ago to research and write about the new economy and the future of work.

It’s in the context of this toxic environment that Economics Nobel Laureate Joseph E. Stiglitz, offered his “progressive capitalism” alternative, based on “the power of the market to serve society.” Progressive Capitalism Is Not an Oxymoron: We can save our broken economic system from itself, New York Times (April 19, 2019). His article, like virtually all of the economics books and articles I read these days, begins with a long parade of evils and ends with a handful of policy ideas. His version of the former is by now quite familiar:

“Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years.

“This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.

“There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying. America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens.

“We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking).

“Just as forces of globalization and technological change were contributing to growing inequality, we adopted policies that worsened societal inequities.

“Even as economic theories like information economics (dealing with the ever-present situation where information is imperfect), behavioral economics and game theory arose to explain why markets on their own are often not efficient, fair, stable or seemingly rational, we relied more on markets and scaled back social protections.

“Politics has played a big role in the increase in corporate rent-seeking and the accompanying inequality.

“Markets don’t exist in a vacuum; they have to be structured by rules and regulations, and those rules and regulations must be enforced.

“We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.

“If we don’t change course matters will likely grow worse, as machines (artificial intelligence and robots) replace an increasing fraction of routine labor, including many of the jobs of the several million Americans.

“The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society.

“Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.

“Part of this new social contract is an expanded public option for many programs now provided by private entities or not at all

“This new social contract will enable most Americans to once again have a middle-class life.

“The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest.

“America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people.”

His point seems to be that merely reciting litanies of economic woes won’t bring about systemic relief — for that, we need to embrace an essential factor:

Paradigms only shift when culture  shifts:
new ideas require new culture to receive them,
and new culture requires new belief systems.

Systemic change requires cultural change — remodeled institutions and revised social contracts that tether ideas to real life. Trying to patch policy ideas into the existing socio-economic system is like what would happen if a firm were to abruptly change its products, services, and strategic and marketing plans without bothering to change its mission statement, values and beliefs, and firm culture.

Like that’s going to work.

Coming up, we’ll look beyond policy bombs to the higher ground of revised cultural beliefs, starting with next week’s search for the “public” that’s gone missing from the Republic.

Free Market Professionalism

snake oil salesman 2

10- 15 years ago I discovered the Wannabe Economy.

It’s staffed by speakers, writers, facilitators, hosts, coaches, consultants… awake, aware, alive, attractive people ready to show us how to have it as good as they do. I needed their help. I dove in, gobbled up their wares.

At one point, I tried to be a Wannabe provider myself (books and workshops). But then doubt started stalking me: was I promoting sustainable change or just trashing people’s lives? How would know? I meant well, but so do lots of harmful people. The Wannabe Economy didn’t have an existential crisis:  it championed personal responsibility and trusted the marketplace to sort  things out.

The pitch is, “Do this, get that” — here’s the secret, the key, the code. the password, the knock. This gets you in. We want in, so we lay our money down. We feel grateful. We go for it. Then what? It’s all on us — personally responsibility, remember? — so if it works, we did it right, and if it doesn’t, we didn’t. We don’t call our guru to account; instead, we buy more.[1]

Why? Because we want desperately to play until we win. The sellers are invariably charismatic, assured, happy, rich — or appear to be. We believe in their sincerity, look for and find evidence that they live what they’re selling. (They’re making money selling to us, but we miss that point.) So we keep shelling it out, keep trying to finesse our way to the promised land. Meanwhile, our guides have no skin in the game — not our game, at least. There’s no investment, only well wishes.

I suspect that 99.999% of the helpers in the self-help industry genuinely want to help. But it’s a business, after all, not charity.[2] There’s no mens rea for buyer’s remorse in the Wannabe Economy. You pays your money, you takes your chance. Caveat emptor.

And, more pertinent to this blog, what I just described has become how “professional” services are bought and sold. Capitalism serves up both the Wannabe Economy and Free Market Professionalism.

Any problem with that?

In two words, trust and accountability, which are reducible to one word:   professionalism. And professionalism is taking a beating in the free market. That’s the message of this article: Why A Market Model Is Destroying The Safeguards Of The Professions. It’s written by a German academic mostly about the medical profession, but it applies to other professions as well.

“Wasn’t there a time when professionals still knew how to serve us – a cosy, well-ordered world of responsible doctors, wise teachers and caring nurses? In this world, bakers still cared about the quality of their bread, and builders were proud of their constructions. One could trust these professionals; they knew what they were doing and were reliable guardians of their knowledge. Because people poured their souls into it, work was still meaningful – or was it?

“In the grip of nostalgia, it’s easy to overlook the dark sides of this old vocational model. On top of the fact that professional jobs were structured around hierarchies of gender and race, laypeople were expected to obey expert judgment without even asking questions. Deference to authority was the norm, and there were few ways of holding professionals to account.

“Against this backdrop, the call for more autonomy, for more ‘choice’, seems hard to resist. This is precisely what happened with the rise of neoliberalism after the 1970s, when the advocates of ‘New Public Management’ promoted the idea that hard-nosed market thinking should be used to structure healthcare, education and other areas that typically belonged to the slow and complicated world of public red tape. In this way, neoliberalism undermined not only public institutions but the very idea of professionalism.

“This attack was the culmination of two powerful agendas. The first was an economic argument about the alleged inefficiency of public services or the other non-market structures in which professional knowledge was hosted.

“The second was an argument about autonomy, about equal status, about liberation – ‘Think for yourself!’ instead of relying on experts. The advent of the internet seemed to offer perfect conditions for finding information and comparing offers: in short, for acting like a fully informed customer.

“These two imperatives – the economic and the individualistic – meshed extremely well under neoliberalism. The shift from addressing the needs of citizens to serving the demands of customers or consumers was complete.

“The imperatives of productivity, profitability and the market rule.

“We are all customers now; we are all supposed to be kings. But what if ‘being a customer’ is the wrong model for healthcare, education, and even highly specialised crafts and trades?

“What the market-based model overlooks is hyperspecialisation, as the philosopher Elijah Millgram argues in The Great Endarkenment (2015). We depend on other people’s knowledge and expertise, because we can learn and study only so many things in our lifetimes. Whenever specialist knowledge is at stake, we are the opposite of a well-informed customer. Often we don’t  want to have to do our own research, which would be patchy at best; sometimes, we are simply unable to do it, even if we tried. It’s much more efficient (yes, efficient!) if we can trust those already in the know.

“But it can be hard to trust professionals forced to work in neoliberal regimes.

“Responsible professionalism imagines work-life as a series of relationships with individuals who are entrusted to you, along with the ethical standards and commitments you uphold as a member of a professional community. But marketisation threatens this collegiality, by introducing competitiveness among workers and undermining the trust that’s needed to do a good job.

“Is there a way out of this conundrum? Could professionalism be revived? If so, can we avoid its old problems of hierarchy while preserving space for equality and autonomy?”

Good questions that deserve engaged, real-time answers from people with skin in the game.

[1] For a scathing description of this particular consumer behavior in the Wannabe Economy,  see 11 Billion Reasons The Self Help Industry Doesn’t Want You To Know The Truth About Happiness (Hint: Unhappy People Buy Things) Inc. (Oct. 19, 2017).

[2] Although it is very much a religion — I write more on topics like that in another context.

“What Do You Do?”

Anybody else remember when “networking” was something you did at cocktail parties? That was before it became a fact of computerized life — see this pictorial history . The idea of old-style networking mostly gets eye rolls these days — too much objectifying, I’d guess — but it’s not dead yet:  as this promo for Social Media Marketing World 2020 makes clear.

The standard cocktail party question is, of course, “What do you do?” Turns out we’ve been asking and answering that question the same way for 114 years — ever since German sociologist and political economist Max Weber published The Protestant Ethic and the Spirit of Capitalism.[1]

“We use the word ‘capitalism’ today as if its meaning were self-evident, or else as if it came from Marx, but this casualness must be set aside. ‘Capitalism’ was Weber’s own word and he defined it as he saw fit. Its most general meaning was quite simply modernity itself: capitalism was ‘the most fateful power in our modern life’. More specifically, it controlled and generated ‘modern Kultur’, the code of values by which people lived in the 20th-century West, and now live, we may add, in much of the 21st-century globe.

“The idea that people were being ever more defined by the blinkered focus of their employment was one he regarded as profoundly modern and characteristic.

“The blinkered professional ethic was common to entrepreneurs and an increasingly high-wage, skilled labour force, and it was this combination that produced a situation where the ‘highest good’ was the making of money and ever more money, without any limit. This is what is most readily recognisable as the ‘spirit’ of capitalism

“It is an extremely powerful analysis, which tells us a great deal about the 20th-century West and a set of Western ideas and priorities that the rest of the world has been increasingly happy to take up since [the end of WWII and the advent of neoliberal economics].”

What Did Max Weber Mean By The ‘Spirit’ Of Capitalism? Aeon Magazine (June 12, 2018)

“What do you do?” was culturally relevant for most of the 20th Century, when jobs as we normally think of them were still around — but not so much today, especially for the new socio-economic lower class known as “the precariat.”

 “Globalization, neo-liberal policies, institutional changes and the technological revolution have combined to generate a new global class structure superimposed on preceding class structures. This consists of a tiny plutocracy (perhaps 0.001 per cent) atop a bigger elite, a ‘salariat’ (in relatively secure salaried jobs, ‘proficians’ (freelance professionals), a core working class, a precariat and a ‘lumpen precariat’ at the bottom.

“The precariat, which ranks below the proletariat in income, consists of millions of people obliged to accept a life of unstable labour and living, without an occupational identity or corporate narrative to give to their lives. Their employers come and go, or are expected to do so.

“Many in the precariat are over-qualified for the jobs they must accept; they also have a high ratio of unpaid ‘work’ in labour — looking and applying for jobs, training and retraining, queuing and form-filling, networking or just waiting around. They also rely mainly on money wages, which are often inadequate, volatile, and unpredictable. They lack access to rights-based state benefits and are losing civil, cultural, social, economic and political rights, making them supplicants if they need help to survive.”

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay, Guy Standing (2017)

I Googled “how to answer ‘what do you do?’” and got lots of articles about how to give your answer the right spin and turn the question into meaningful conversation — mostly directed at job applicants and people who hate their jobs — but the question’s relevance as an accurate reflection of Kultur is lost to the “gig economy” where the precariat hang out. It could be worse, though:  you could be a member of the “lumpen precariat.” Again from Guy Standing:

 “Below the precariat in the social spectrum is what might be called a ‘lumpen-precariat,’ an underclass of social victims relying on charity … Their numbers are rising remorselessly; they are a badge of shame on society.”

I’ve written before about how I made an ill-timed (at the height of the Great Recession) and otherwise disastrous exit from law practice for a new creative career that bombed,[2] while at the same time dealing with an as-yet-undiagnosed onset of “Primary Progressive MS” (the most degenerative kind you can get). During those years, I barely slowed down as I crashed through “precariat” on the way down from “salariat,” before ending up on the roles of the “disabled,”  a lumpen subclass. I did some awkward old-style networking during those years, and eventually developed my own Q&A. When asked “what do you do?” I would simply describe what I’d been doing that day. When it was my turn, I simply asked, “Who are you?”

Great conversation starters, as it turned out.

Photo is from Nimble Bar Co., re: how to throw an unforgettable party.

[1] Naturally there’s been lots of argument about whether the work ethic was Protestant or Catholic… and if Protestant, if it would be more properly “Calvinist” or “Puritan.” Sigh.

[2] For the full story, see my book Life Beyond Reason:  A Memoir of Mania, available here as a free download and on Amazon for cheap. It’s a short, quick read, I promise.

A New Social Contract

fortnite

“Men are born free, yet everywhere are in chains.”

Jean-Jacques Rousseau,
The Social Contract & Discourses

What do Fortnite, New Year’s Day, and the USA have in common?

They all exist because we believe they do.

Political theorists call this kind of communal belief a “social contract.” According to Rousseau, that’s the mechanism by which we trade individual liberty for community restraint. Similarly, Thomas Hobbes said this in Leviathan:

“As long as men live without a common power to keep them all in awe, they are in the condition known as war, and it is a war of every man against every man.

“When a man thinks that peace and self-defense require it, he should be willing (when others are too) to lay down his right to everything, and should be contented with as much liberty against other men as he would allow against himself.”

In Fortnite terms, life is a battle royale:  everybody against everybody else, with only one left standing. As Hobbes famously said, that makes life “solitary, poor, nasty, brutish, and short.” As a recent version put it, “For roughly 99% of the world’s history, 99% of humanity was poor, hungry, dirty, afraid, stupid, sick, and ugly.”[1] A social contract suggests we can do better.

Can we really create something out of nothing, by mere belief? Yes, of course — we do it all the time. My daughter can’t figure out why New Year’s Day is a holiday. “It’s just a day!” she says, unmoved by my explanation that it’s a holiday because everyone thinks it is. Same with Fortnite — as 125 million enthusiasts know, it’s not just an online game, it’s a worldwide reality. And same with the United States — the Colonies’ deal with England grew long on chains and short on freedom until the Founders declared a new sovereign nation into existence:

“We hold these truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness.”

The new nation was conceived in liberty, but there would be limits. Once the Revolutionary War settled the issue of sovereign independence[2], the Founders articulated a new freedom/chains balance:

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

That social contract + 250 years of history = the USA. We are a nation borne of imagination and belief, continually re-defined and updated through interpretations and amendments to the terms of our social contract.

Our economic system works the same way. Adam Smith’s capitalism survived the trip to the new world, produced astonishing quality of life improvements in the 19th and 20th Centuries, and then was recast into the neoliberal framework that powered the world’s recovery from WWII. That version of our economic social contract thrived for three decades, but began to falter in the face of several unforeseen developments:

  • the democratization of knowledge in the information age;
  • accelerated automation, mass production, and eventually robotics;
  • software that at first only did what it was told but later morphed into machine intelligence; and
  • globalization, which shrank the world, homogenized culture, opened international trade, and recast national borders.

Neoliberalism couldn’t keep up. Tensions rose until the year 2016 became a worldwide referendum on the social contracts of democracy and neoliberalism. New social contracts would have required a new freedom/chains balance. 2016’s response was, “Not on my watch.”

That’s the context into which universal basic income would now be introduced. For that to happen, the American Dream of independence and upward mobility fueled by working for a living must give way to a belief that basic sustenance — job or no job — is a human right so fundamental that it’s one of those “self-evident” truths. As we’ve seen, that radical belief is slowly changing the North Carolina Cherokee Reservation’s culture of poverty, and has caught the fancy of a growing list of techno-plutocrats. As Mark Zuckerberg said, “Now it’s our time to define a new social contract for our generation.” Law professor James Kwak makes the same point[3]:

“We have the physical, financial, and human capital necessary for everyone in our country to enjoy a comfortable standard of living, and within a few generations the same should be true of the entire planet, And yet our social organization remains the same as it was in the Great Depression:  some people work very hard and make more money than they will ever need, while many others are unable to find work and live in poverty.

“Million if not billions of people today hunger to live in a world that is more fair, more forgiving, and more humane than the one they were born into. Creating a new vision of society worthy of that collective yearning … is the first step toward building a better future for our children.”

To be continued.

[1] Rutger Bregman, Utopia for Realists (2016),

[2] In Hobbes’ terms, social contracts end the battle royale. Ironically, they often also create war as ideals of one contract conflict with another’s.

[3] James Kwak, Economism (2017).

 

Archeconomics

archangelI made up the term “archeconomics.” I’m using “arch” in the sense of “first principles” — e.g., as in “archetype.” An “arch” is the larger version of the smaller expressions of itself — e.g., not just a villain but an arch-villain, not just an angel but an archangel. Life goes big when an arch-something is at work:  experience expands beyond circumstance, meaning magnifies, significance is exaggerated.

Archeconomics is therefore the larger story behind economics.

I ended last week’s post by referring to the larger story behind the rentier economy. As usually happens when I’m on a research trail, several commentaries have appeared in my various feeds lately that look beyond the usual opinionated mash of current events and instead address over-arching ideas and issues. All of them deal in one way or another with the current status and possible future of the liberal worldview — an arch-topic if there ever was one.

The term “liberal” in this context doesn’t refer to political liberal vs. conservative, but rather to historical liberalism, which among other things gave us post-WWII neo-liberal economics. Mega-bestselling author Yuval Noah Harari describes this kind of liberalism in his latest book 21 Lessons for the 21st Century:

“In Western political discourse the term “liberal” is sometimes used today in a much narrower sense, to denote those who support specific causes such as gay marriage, gun control, and abortion rights. Yet most so-called conservatives also embrace the broad liberal worldview.

“The liberal story cherishes human liberty as its number one value. It argues that all authority ultimately stems from the free will of individual humans, as expressed in their feelings, desires, and choices. In politics, liberalism believes that the voter knows best. It therefore upholds democratic elections. In economics, liberalism maintains that the customer is always right. It therefore hails free-market principles. In personal matters, liberalism encourages people to listen to themselves, be true to themselves, and allow their hearts — as long as they do not infringe on the liberties of others. This personal freedom is enshrined in human rights.”

If you read Harari’s books Sapiens and Homo Deus. you have a sense of what you’ll find in 21 Lessons, but I found it worth reading on its own terms. Two recent special magazine editions also take on the fate of liberalism:  Is Democracy Dying? from The Atlantic andA Manifesto for Renewing Liberalism” from The Economist. The titles speak for themselves, and both are offered by publications with nearly two centuries of liberal editorial perspectives.

Another historical liberal offering from a conservative political point of view is “How Trumpism Will Outlast Trump,” from Time Magazine. Here’s the article’s précis:

“These intellectuals are committed to a new economic nationalism … They’re looking past Trump … to assert a fundamental truth: whatever you think of him, Donald Trump has shown a major failing in the way America’s political parties have been serving their constituents. The future of Trump’s revolution may depend on whether this young group can help fix the economy.”

Finally, here’s a trio of offerings that invoke environmental economics — the impact  of the global ecology on global economics being another archeconomics topic. The first is a scientific study published last week that predicted significant environmental degradation within a surprisingly short time. Second is an article about the study that wants to know “Why We Keep Ignoring Even the Most Dire Climate Change Warnings.” Third is last week’s announcement that the winner of this year’s Nobel Prize in Economics is an environmental economist.

Some or all of those titles should satisfy if you’re in the mood for some arch- reading.

Next time, we’ll return to plain old economics, with a look at how the low income social strata is faring in all the dust-up over rentiers and economic inequality, robotcs and machine learning, and the sagging paycheck going to human labor.

Utopia

utopia-fox

“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back”

John Maynard Keynes

We met law professor and economics visionary James Kwak a few months ago. In his book Economism: Bad Economics and the Rise of Inequality (2017), he tells this well-known story about John Maynard Keynes:

“In 1930, John Maynard Keynes argued that, thanks to technological progress, the ‘economic problem’ would be solved in about a century and people would only work fifteen hours per week — primarily to keep themselves occupied. When freed from the need to accumulate wealth, the human life would change profoundly.”

This passage is from Keynes’ 1930 essay:

“I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue–that avarice is a vice, that the exaction of usury is a misdemeanor, and the love of money is detestable, that those who walk most truly in the paths of virtue and sane wisdom are take least thought for the morrow. We shall once more value ends above means and prefer the good to the useful. We shall honour those who can teach us how to pluck the hour and the day virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not neither do they spin.”

The timing of Keynes’ essay is fascinating:  he wrote it right after the original Black Friday and as the Great Depression was rolling out. Today, it seems as though his prediction was more than out of time, it was just plain wrong. Plus, it was undeniably utopian — which for most of us is usually a warning sign. Someone says “utopia,” and we automatically hear “dystopia,” which is where utopias usually end up after “reproduc[ing] many of the same tyrannies that people were trying to escape: egoism, power struggles, envy, mistrust and fear.” “Utopia, Inc.,” Aeon Magazine.

commune family

It’s just another day in paradise
As you stumble to your bed
You’d give anything to silence
Those voices ringing in your head
You thought you could find happiness
Just over that green hill
You thought you would be satisfied
But you never will-

The Eagles

To be fair, the post-WWII surge truly was a worldwide feast of economic utopia, served up mostly by the Mont Pelerin Society and other champions of neoliberal ideology. If they didn’t create the precise utopia Keynes envisioned, that’s because even the best ideas can grow out of time:  a growing international body of data, analysis, and commentary indicates that continued unexamined allegiance to neoliberalism is rapidly turning postwar economic utopia into its opposite.

But what if we actually could, if not create utopia, then at least root out some persistent strains of dystopia — things like poverty, lack of access to meaningful work, even a more even-handed and less unequal income distribution? Kwak isn’t alone in thinking we could do just that, but to get there from here will require more than a new ideology to bump neoliberalism aside. Instead, we need an entirely new economic narrative, based on a new understanding of how the world works:

“Almost a century [after Keynes made his prediction], we have the physical, financial, and human capital necessary for everyone in our country to enjoy a comfortable standard of living, and within a few generations the same should be true of the entire planet, And yet our social organization remains the same as it was in the Great Depression:  some people work very hard and make more money than they will ever need, while many others are unable to find work and live in poverty.

“Real change will not be achieved by mastering the details of marginal costs and marginal benefits, but by constructing a new, controlling narrative about how the world works.”

Rooting out the persistent strains of economic dystopia in our midst will require a whole new way of thinking — maybe even some utopia thinking. If we’re going to go there, we’ll need to keep our wits about us. More on that next time.

Race Against the Machine

For the past several years, two MIT big thinkers[1] have been the go-to authorities in the scramble to explain how robotics, artificial intelligence, and big data are revolutionizing the economy and the working world. Their two books were published four and six years ago — so yesterday in the world of technology — but they were remarkably prescient when written, and have not diminished in relevance. They are:

Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy (2012)

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (2014)

Click here for a chapter-by-chapter digest of The Second Machine Age, written by an all star cast of economic commentators. Among other things, they acknowledge the authors’ view that neoliberal capitalism has not fared well in its dealings with the technological juggernaut, but in the absence of a better alternative, we might as well continue to ride the horse in the direction it’s going.

While admitting that History (not human choice) is “littered with unintended… side effects of well-intentioned social and economic policies”, the authors cite Tim O’Reilly[2] in pushing forward with technology’s momentum rather than clinging to the past or present. They suggest that we should let the technologies do their work and just find ways to deal with it. They are “skeptical of efforts to come up with fundamental alternatives to capitalism.”

David Rotman, editor of the MIT Technology Review cites The Second Machine Age extensively in an excellent, longer article, “How Technology is Destroying Jobs.” Although the article is packed with contrary analysis and opinion, the following excepts emphasize what many might consider the shadowy  side of the street (compared to the sunny side we looked at in the past couple posts). I added the headings below to emphasize that many of the general economic themes we’ve been talking about also apply to the specific dynamics of the job market.

It used to be that economic growth — including wealth creation — also created more jobs. It doesn’t work that way any more. Perhaps the most damning piece of evidence, according to Brynjolfsson, is a chart that only an economist could love. In economics, productivity—the amount of economic value created for a given unit of input, such as an hour of labor—is a crucial indicator of growth and wealth creation. It is a measure of progress. On the chart Brynjolfsson likes to show, separate lines represent productivity and total employment in the United States.

For years after World War II, the two lines closely tracked each other, with increases in jobs corresponding to increases in productivity. The pattern is clear: as businesses generated more value from their workers, the country as a whole became richer, which fueled more economic activity and created even more jobs. Then, beginning in 2000, the lines diverge; productivity continues to rise robustly, but employment suddenly wilts. By 2011, a significant gap appears between the two lines, showing economic growth with no parallel increase in job creation. Brynjolfsson and McAfee call it the “great decoupling.” And Brynjolfsson says he is confident that technology is behind both the healthy growth in productivity and the weak growth in jobs.

A rising economic tide no longer floats all boats. The result is a skewed allocation of the rewards of growth away from jobs — i.e., economic inequality. The contention that automation and digital technologies are partly responsible for today’s lack of jobs has obviously touched a raw nerve for many worried about their own employment. But this is only one consequence of what ­Brynjolfsson and McAfee see as a broader trend. The rapid acceleration of technological progress, they say, has greatly widened the gap between economic winners and losers—the income inequalities that many economists have worried about for decades..

“[S]teadily rising productivity raised all boats for much of the 20th century,” [Brynjolfsson] says. “Many people, especially economists, jumped to the conclusion that was just the way the world worked. I used to say that if we took care of productivity, everything else would take care of itself; it was the single most important economic statistic. But that’s no longer true.” He adds, “It’s one of the dirty secrets of economics: technology progress does grow the economy and create wealth, but there is no economic law that says everyone will benefit.” In other words, in the race against the machine, some are likely to win while many others lose.

That robots, automation, and software can replace people might seem obvious to anyone who’s worked in automotive manufacturing or as a travel agent. But Brynjolfsson and McAfee’s claim is more troubling and controversial. They believe that rapid technological change has been destroying jobs faster than it is creating them, contributing to the stagnation of median income and the growth of inequality in the United States.

Meanwhile, technology is taking over the jobs that are left– blue collar, white collar, and even the professions. [I]mpressive advances in computer technology—from improved industrial robotics to automated translation services—are largely behind the sluggish employment growth of the last 10 to 15 years. Even more ominous for workers, the MIT academics foresee dismal prospects for many types of jobs as these powerful new technologies are increasingly adopted not only in manufacturing, clerical, and retail work but in professions such as law, financial services, education, and medicine.

Technologies like the Web, artificial intelligence, big data, and improved analytics—all made possible by the ever increasing availability of cheap computing power and storage capacity—are automating many routine tasks. Countless traditional white-collar jobs, such as many in the post office and in customer service, have disappeared.

New technologies are “encroaching into human skills in a way that is completely unprecedented,” McAfee says, and many middle-class jobs are right in the bull’s-eye; even relatively high-skill work in education, medicine, and law is affected.

We’ll visit the shadowy side of the street again next time.

[1] Erik Brynjolfsson is director of the MIT Center for Digital Business, and Andrew McAfee is a principal research scientist at MIT who studies how digital technologies are changing business, the economy, and society.

[2] According to his official bio on his website, Tim O’Reilly “is the founder and CEO of  O’Reilly Media, Inc. His original business plan was simply ‘interesting work for interesting people,’ and that’s worked out pretty well. O’Reilly Media delivers online learning, publishes books, runs conferences, urges companies to create more value than they capture, and tries to change the world by spreading and amplifying the knowledge of innovators.”