In Case You Missed It: A Tale of Two Economic Futures

In this issue, the trouble with buying American, disappearing retail jobs, why employers are replacing government, and regressing into a low-income nation.

The Way the Past Wind Blows

Let's start with a cartoon:

This week the president signed an executive order encouraging companies doing business with the government to buy and hire American. Some folks offered up criticism for the move, such as the National Review's Ben Shapiro who called it redistribution by another name:

The goal of an economy is to create better products and services at a lower price, thereby creating new cycles of supply and demand. The goal of an economy is not to freeze the available pool of labor, thereby confiscating wealth from employers on behalf of employees lucky enough to be born inside the United States. It’s difficult to understand why people who think that we should have a closed immigration system in order to preserve jobs don’t also think that we should have dramatically higher minimum wages or forced price controls.

Over at the Atlantic, we have a different critical take from Nicholas Clairmont who says that the order will reduce competition and other incentives:

So the view of these two economists is that the net effect of the executive order will be to make the services the U.S. government relies on more expensive by reducing competition. And it’s not just about prices; without needing to have an edge on foreign rivals, American companies don’t have as big an incentive to innovate. The products themselves will be worse, too. Plus, one of the biggest worries is that other countries could ramp up similarly protectionist policies in response, cutting American firms off from competing for vastly more business than the U.S. contracts; Most of the world is “foreign.”

In the Nation, David Madland says that what workers really need are unions if they want more protections:

Unions—more than any other organization—give people a real say in the economy and in politics. They help raise wages, reduce inequality, and boost economic mobility. But even more importantly, unions help people feel their own agency. They provide workers—particularly those with less education and lower incomes—with the means and opportunity to stand up for themselves and participate more fully in our democracy. Union members are much more likely to vote, take political action, join other groups, and be more charitable.

Unions serve as an alternative source of power that workers control—not the government, and not the wealthy.

The Atlantic's Derek Thompson looks at the worrisome trend of disappearing retail jobs--department stores, for example, have lost 18 times more workers than the coal industry since 2001:

So, how has the retail bloodletting been so much quieter than the decline in mining and manufacturing? There are several plausible explanations...Coal mining is still 95 percent white and 95 percent male. Department store workers are 40 percent minority and just 40 percent male. The emphasis on work that is white, male, and burly may represent an implicit bias against the working class of the modern service economy, which is more diverse and female. Third, mining and manufacturing jobs feed into a national nostalgia for the mid-century economy, with its unionized workforce, economic growth, and high pay for men without much education.

But the decline of clothing-store jobs has something in common with the demise of manufacturing and mining jobs, too. They are both victims of the familiar forces of globalization and technology, which have conspired to make clothes cheaper and accessible online. Both forces can make the country richer while specific areas suffer.

There is a glimmer of good news here he says since ecommerce retail has created about six times more jobs than were lost in traditional retail thank to full-fillment centers which pay abotu 25 percent more as well.

In the American Conservative, Greg Jones is here to tell you why he thinks universal basic income is stupid. "UBI is little more than a cocktail of Communist, Luddite, and Malthusian paranoias, rehashed to prey upon the fears of an uncertain, automated future'" he writes. "But futures have always been uncertain, and historically speaking, innovation and automation have consistently led to greater prosperity; from the Industrial Revolution to the assembly line to the Internet, there have always been John Henry-types preaching dire warnings about the threats posed to labor by technology."

A Tale of Two Economic Futures

In the New Republic, we have a sweeping piece on a new book about the nature of work by Miya Tokumitsu and why large companies have essentially subsumed government:

We can try to convince ourselves that we are free, but as long as we must submit to the increasing authority of our employers and the labor market, we are not. We therefore fancy that we want to work, that work grounds our character, that markets encompass the possible. We are unable to imagine what a full life could be, much less to live one. Even more radically, both books highlight the dramatic and alarming changes that work has undergone over the past century—insisting that, in often unseen ways, the changing nature of work threatens the fundamental ideals of democracy: equality and freedom...

Anderson’s most provocative argument is that large companies, the institutions that employ most workers, amount to a de facto form of government, exerting massive and intrusive power in our daily lives. Unlike the state, these private governments are able to wield power with little oversight, because the executives and boards of directors that rule them are accountable to no one but themselves. Although they exercise their power to varying degrees and through both direct and “soft” means, employers can dictate how we dress and style our hair, when we eat, when (and if) we may use the toilet, with whom we may partner and under what arrangements. Employers may subject our bodies to drug tests; monitor our speech both on and off the job; require us to answer questionnaires about our exercise habits, off-hours alcohol consumption, and childbearing intentions; and rifle through our belongings. If the state held such sweeping powers, Anderson argues, we would probably not consider ourselves free men and women.

The think tank the Third Way has some interesting research on business investment in machines versus humans using a fast food chain owner as an example:

Incentives to invest in physical capital have enjoyed bipartisan support for a long time on Capitol Hill. This is generally for good reason. Capital investments and capital accumulation have been and still are important for economic growth. But human capital investments in an advanced economy like the United States are arguably becoming more important.

The incentives to invest in human capital have not adjusted to a changing economy that continues to provide fewer reasons for employers to invest in employees. Even though investments in human capital are fully deductible, while physical capital investments have to be amortized, it is often not enough to make the IRR favor the workers. Such is true not only in our scenario above but also in reality, as evidenced by the steady decline of employer-sponsored worker training.

In Quartz, Itai Palti says the future of the modern economy is not machines but creativity. "The modern economies that will undergo a fourth industrial revolution will not be those that worship machines, but those that support human creativity," Palti writes. "When we understand how people think and work best, we will be compelled to put our workers’ well-being first in the name of both health and economic productivity."

But over at The Institute for New Economic Thinking analyst Lynne Parramore says the United States is regressing into the traits of a low-income nation for many of its citizens:

 The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression,and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S.

The result is profoundly disturbing.

In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration - check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.

Parramore says the best path to economic mobility is education but that it is being defunded. Over at Brookings, researchers are investigating what the achievement gap and why using school lunch programs may be hurting the data:

[T]he income-based achievement gap is a large and growing source of educational inequality in the United States. The test-score gap between high- and low-income students is 40 percent wider today than it was 25 years ago.

One widely-used marker for poverty in schools is a student’s eligibility for free or reduced-price lunch. But while nearly half of students nationwide are eligible for subsidized meals, only a quarter of US children live in poverty. These two statistics make clear that eligibility for subsidized meals is a blunt measure of economic disadvantage. This rough measure may be perfectly appropriate for determining which children should receive school lunch subsidies, but it may be less useful for other purposes, such as measuring income gaps in achievement, determining the effectiveness of educational interventions targeted to low-income families, or steering resources toward the neediest children.

You might be interested in this Boston Basics Initiative targeting kids under three with parenting techniques that maximize love and manage stress to improve educational outcomes. "This can be especially important when it comes to developing executive-function skills in children," says founder Ronald Ferguson tells the Atlantic's Tara Garcia Mathewson. "Those who get a strong sense of safety and love from their parents are better equipped to control their own behavior later on and develop intentions they then follow through on, skills that are important for academic achievement."

In the American Conservative, the Manhattan Institute's Max Eden says Head Start should be fixed not abolished:

The ideal early education policy would look a lot like the newest frontier in school choice: Education Savings Accounts. Unlike education vouchers, which act functionally as certificates parents can take to traditional providers, Education Savings Accounts are essentially a restricted-use debit card that a parent can put toward a wide range of (government-approved) educational expenses. School-choice advocates imagine that, if brought to scale, ESAs could cultivate a vibrant, varied, and dynamic educational landscape. But in K–12 education, ESAs face a long uphill battle in the shadow of an entrenched, all-encompassing public monopoly.

Social Futures

In the Stanford Social Innovation Review, FSG founder Mark Kramer looks at systems change in a polarized world:

The challenge today is not merely that we have dysfunctional systems nor that we lack innovative solutions to our society’s problems. Instead, it’s that our country has no unifying narrative that binds us all to a common fate. Too many factions separated by race, gender, wealth, religion, education, politics, geography and more are working toward fundamentally incompatible goals in the false belief that their success is unaffected by the failure of others. The vision of a just and equitable society with opportunity for all is being undermined by the poisonous myth that the pursuit of prosperity depends on the eradication of compassion.

Even the most basic assumptions that many of us hold can no longer be counted on: that government will act on hard facts, respect scientific proof and democratic principles, or respond to humanitarian and environmental concerns. No mere programmatic intervention can overcome these obstacles. Instead, we need to find ways to change attitudes and relationships throughout every level of society in order to co-create a new future across our perceived differences...The challenge we face now, however, is not merely to support good nonprofit programs or to follow a theory of change toward some targeted program goal. Instead, we must work across a fragmented and contentious society to nurture the mutual interdependence and alignment necessary to co-create a better future for all.

NPR's Lulu Garcia-Navarro says we have entered into a philanthropic ideological arms-race:

Today, every single person on the Forbes 400 list is a billionaire.

Many have become philanthropists, and they are reshaping public policy, and society, as they see fit. And because of their numbers, they have far more influence than the philanthropists of the past, argues David Callahan, author of a new book on philanthropy, The Givers: Wealth, Power and Philanthropy in a New Gilded Age.

Many are now household names: the Gates, the Kochs, the Waltons, the Steyers, the Mercers, to name a few. They come in all political stripes...Callahan says this philanthropic money comes at a time when most Americans feel disenfranchised. "More and more public policy debates looks like Greek gods throwing lightning at each other, billionaires on the left and the right, as the rest of us watch from the sidelines," he says.