Must Reads: Check out this New York Times piece about the success of the Coalition of Immokalee Workers for tomato-pickers in not only improving their own labor conditions but in raising the bar for agricultural labor. Matthew Yglesias argues that “one of the big myths of our time” is the idea that the tradeoffs between equality and efficiency can translate to a societal level. Lastly, don't miss NBC's "Tale of Two Deltas," a beautiful photo essay revealing the stark contrast between a poor black community and an affluent white community separated only by a river.
You might find relevant this 2005 cartoon from Garrick Tremain:
Your editor is sure you haven't missed the recent onslaught of commentary on Thomas Piketty's Capital in the Twenty-First Century, although if you haven't had time for all 696 pages, Justin Fox has a summary on the Harvard Business review's blog network:
Capital (which by Piketty’s definition is pretty much the same thing as wealth) has tended over time to grow faster than the overall economy. Income from capital is invariably much less evenly distributed than labor income. Together these amount to a powerful force for increasing inequality. Piketty doesn’t take things as far as Marx, who saw capital’s growth eventually strangling the economy and bringing on its own collapse, and he’s witheringly disdainful of Marx’s data-collection techniques. But his real beef is with the mainstream economic teachings that more capital and lower taxes on capital bring faster growth and higher wages, and that economic dynamism will automatically keep inequality at bay.
In response, a few writers ask, “So, now what?” Dean Baker of CEPR discusses the full bag of U.S. policy tools, all ways in which “a lower return to capital should be associated with increased economic efficiency.” On Quartz, Tim Fernholz suggests ten ways to avoid Piketty’s proposed global wealth tax, such as more sovereign-wealth funds and limiting the financial sector. The Manhattan Institute's Scott Winship takes Piketty up on the invitation to question and debate his conclusions--arguing that a closer look at the data shows there is less American income inequality than Piketty claims. Meanwhile the Economic Policy Institute’s Josh Bivens has an interactive chart showing that the top 1 percent has substantially increased their share of overall capital income in the past 30 years:
In the New York Times, Washington University's Mark Rank does a deep data dive to find out who actually makes up the much-discussed affluent 1 percent, finding more people may spend time in that percentile than we think:
It turns out that 12 percent of the population will find themselves in the top 1 percent of the income distribution for at least one year. What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution, 56 percent will find themselves in the top 10 percent, and a whopping 73 percent will spend a year in the top 20 percent of the income distribution... It is clear that the image of a static 1 and 99 percent is largely incorrect. The majority of Americans will experience at least one year of affluence at some point during their working careers. (This is just as true at the bottom of the income distribution scale, where 54 percent of Americans will experience poverty or near poverty at least once between the ages of 25 and 60).
Recently we shared the Social Progress Index, which ranks the United States 16th on combined measures of basic needs and well-being, but the Washington Post’s Larry Bartels says that Americans lead the world in class conflict about government spending--even though "The United States does less to redistribute income than virtually any other economically 'advanced' democracy"
Meanwhile, Canada's middle class now has moved ahead of the U.S in terms of wealth and the NYT's David Leonhardt and Kevin Quealy argue things are even worse for America's poor:
Although economic growth in the United States continues to be as strong as in many other countries, or stronger, a small percentage of American households is fully benefiting from it. Median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then. Median incomes in Western European countries still trail those in the United States, but the gap in several — including Britain, the Netherlands and Sweden — is much smaller than it was a decade ago... The struggles of the poor in the United States are even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country makes significantly less money than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.
You might be interested in this graduation speech from Nobel prize winner Thomas Sargent summarizing "everything you need to know about economics in 297 words".
According to Jason Tanz of Wired Magazine, the sharing economy is making a huge comeback and suggests that trust-based companies like Lyft, Airbnb, and Uber are enabling consumers to engage in behaviors that would have seemed unthinkable as recently as five years ago:
Introducing people to one another may encourage them to behave better—it may reduce insurance payouts and help a company’s bottom line. But it also makes for a radically different experience than we’ve come to expect from our service economy. In my conversations with Lyft riders and drivers, practically everyone said some version of the following: “I like dealing with real people.” Of course, the licensed cabbie is a real person. So is the bellhop, the line cook, the kennel owner. But when we interact with them, they are operating as agents of a commercial enterprise. In the sharing economy, the commerce feels almost secondary, an afterthought to the human connection that undergirds the entire experience. (This is due in part to the fact that the payment itself so often happens electronically and invisibly.) In this way, it suggests a return to pre-industrial society, when our relationships and identities—social capital, to use the lingo—mattered just as much as the financial capital we had to spend.
In New York Magazine, Kevin Roose looks at the depressing labor context for the sharing economy:
A huge precondition for the sharing economy has been a depressed labor market, in which lots of people are trying to fill holes in their income by monetizing their stuff and their labor in creative ways. In many cases, people join the sharing economy because they've recently lost a full-time job and are piecing together income from several part-time gigs to replace it. In a few cases, it's because the pricing structure of the sharing economy made their old jobs less profitable. (Like full-time taxi drivers who have switched to Lyft or Uber.) In almost every case, what compels people to open up their homes and cars to complete strangers is money, not trust...
As Sarah Kessler discovered in her Fast Company investigation, it's hard to make it in the sharing economy. Many of the people renting out their labor and goods through these services will end up making a fraction of what they did at their full-time jobs, and having none of the benefits.
Janelle Orsi of the Sustainable Economies Law Center both applauds and cautions the sharing economy, which is thriving without much regulation:
On one hand, these companies open economic doors. In times of high unemployment, it is comforting to know they are there. I know of people who, right now, simply couldn’t make ends meet without Airbnb or TaskRabbit. But it’s dangerous to take comfort in the simple fact that these companies create new opportunities to make a living. It’s a double-edged sword, because the shareholders of these companies are getting rich because good stable jobs are otherwise scarce in this economy. In that respect, the sharing economy companies could even have a disincentive to create a world where we have zero percent unemployment.
For a deep dive into scaling impact, take a look at Omidyar’s newest report, Beyond the Pioneer: Getting Inclusive Industries to Scale, says “wherever market-based solutions have impact and are commercially viable, we want to see them scale up so that they can change the lives of more of these people." Meanwhile, the New York Times reports on the White House effort to bring in wealthy young philanthropists for a summit to find common ground between the public sector and philanthropy, where impact investing was the favorite topic du jour. We also featured this brief from ImpactAssets on millennial philanthropists in What Heron is Reading this week, which explores the motivations that drive the next generation of investors. Jed Emerson and Lindsay Norcott summarize the report on Stanford Social Innovation Review:
The concept of seeking positive social impact as well as financial return has existed since humans began to lend money. In today’s modern financial markets, however, impact investing is still regarded as a niche, albeit an increasingly popular one. The wealth transfer to millennials has the potential to direct billions of dollars toward social and environmental good, and cement this important practice as a mainstream investment strategy.
Nell Edgington interviews Cynthia Gibson on how social outcomes can improve with honesty and transparency not only within the social sector but also in collaboration with the private and governing sectors. In Entrepreneur, Jason Daley discusses ways the franchise model of entrepreneurship has been applied to social issues.
You may have noticed that Earth Day happened this past week—or perhaps you didn’t, says Patrick Michaels in Forbes, who argues that “the decline of Earth Day is in part an unintended consequence of its success.” Andrew Winston in HBR offers how to thoughtfully put a balance-sheet value on environmental considerations in three steps to start with:
Consider three steps. First, ask some leading questions: What do climate change and extreme weather mean for your business, your customers, and your supply chain? How do growing resource constraints like water shortages, or rising commodity prices, affect your value chain and your margins? Then paint some pictures and scenarios of sectors under pressure already: Consider what food and agribusiness businesses are going through dealing with ongoing drought in California. Or think about the choice forced on apparel makers and retailers by a 300% rise in cotton prices over one recent 2-year period: either pass along higher costs and reduce sales, or take a hit to margins. Then ask yourself what could happen to your sector to shake things up this much.
George Monbiot in the Guardian agrees that natural resources need to be valued by businesses, but says care must be taken not to treat natural resources as purely fungible assets. And Tony Juniper suggests that solutions may be borrowed from the art world and we need to reframe what we value:
Nature is not destroyed because it is not beautiful or wonderful to some people, but because many believe it must be sacrificed to achieve progress. Breaking that frame is at the top of the to-do list.