Who talks like FDR but acts like Ayn Rand? Easy: Silicon Valley’s wealthiest and most powerful people

Tech’s toxic political culture: The stealth libertarianism of Silicon Valley bigwigs

Tech's toxic political culture: The stealth libertarianism of Silicon Valley bigwigs
Ayn Rand, Marc Andreessen, Franklin D. Roosevelt (Credit: AP/Reuters/Fred Prouser/Salon)

Marc Andreessen is a major architect of our current technologically mediated reality. As the leader of the team that created the Mosaic Web browser in the early ’90s and as co-founder of Netscape, Andreessen, possibly more than any single other person, helped make the Internet accessible to the masses.

In his second act as a Silicon Valley venture capitalist, Andreessen has hardly slackened the pace. The portfolio of companies with investments from his VC firm, Andreessen Horowitz, is a roll-call for tech “disruption.” (Included on the list: Airbnb, Lyft, Box, Oculus VR, Imgur, Pinterest, RapGenius, Skype and, of course, Twitter and Facebook.) Social media, the “sharing” economy, Bitcoin — Andreessen’s dollars are fueling all of it.

So when the man tweets, people listen.

And, good grief, right now the man is tweeting. Since Jan. 1, when Andreessen decided to aggressively reengage with Twitter after staying mostly silent for years, @pmarca has been pumping out so many tweets that one wonders how he finds time to attend to his normal business.

On June 1, Andreessen took his game to a new level. In what seems to be a major bid to establish himself as Silicon Valley’s premier public intellectual, Andreessen has deployed Twitter to deliver a unified theory of tech utopia.

In seven different multi-part tweet streams, adding up to a total of almost 100 tweets, Andreessen argues that we shouldn’t bother our heads about the prospect that robots will steal all our jobs.  Technological innovation will end poverty, solve bottlenecks in education and healthcare, and usher in an era of ubiquitous affluence in which all our basic needs are taken care of. We will occupy our time engaged in the creative pursuits of our heart’s desire.

So how do we get there? Easy! All we have to do is just get out of Silicon Valley’s way. (Andreessen is never specific about exactly what he means by this, but it’s easy to guess: Don’t burden tech’s disruptive firms with the safety, health and insurance regulations that the old economy must abide by.)

Oh, and one other little thing: Make sure that we have a social welfare safety net robust enough to take care of the people who fall though the cracks (or are eaten by robots).

The full collection of tweets marks an impressive achievement — a manifesto, you might even call it, although Andreessen has been quick to distinguish his techno-capitalist-created utopia from any kind of Marxist paradise. But there’s a hole in his argument big enough to steer a $500 million round of Series A financing right through. Getting out of the way of Silicon Valley and ensuring a strong safety net add up to a political paradox. Because Silicon Valley doesn’t want to pay for the safety net.

* * *


Workers and environmentalists of the world, unite!

by Stefania Barca on June 3, 2014

Post image for Workers and environmentalists of the world, unite!

The conflict between labor and the environment is a neoliberal construct. What we need is a broad coalition that can fundamentally transform production.

Nowadays it sounds so familiar, almost natural: the mutually exclusive demands and apparently opposing agendas of labor and the environmentalist movement. But in fact, this artificial division is nothing more than a crucial neoliberal strategy to divide two of the most powerful social movements of the industrial era, whose alliance could be a dangerous liaison with the capacity to call into question the very essence of the capitalist “treadmill of production.” It is thus essential that labor and environmental/public health organizations gain a historical perspective on their current state of conflict and become aware of the revolutionary potential of a common political project.

One place where this fact has become much clearer in recent years is the Italian city of Taranto, Apulia, where a number of citizens’ organizations and “committees” emerged in response to one of the most serious occupational, environmental and public health crises of the last decade. These organizations and committees have now begun mobilizing different resources and forms of action — from cyber-activism and film-making to street demonstrations and campaigning — to fight against the occupational blackmail of a local employer. At the last May Day celebrations, they managed to gather more than 100,000 people for a self-organized, crowd-sourced mass concert, held in open competition with the one traditionally organized in Rome by the trade unions confederation and RAI, the national public television.

Liberate Taranto!

As the biggest and one of the oldest steel factories in Europe, counting about 20,000 employees in 2012 and belonging to the formerly state-owned ILVA group (now controlled by the Riva family), the Taranto plant rose to national attention in 2011. A court decision found the company guilty of outrageous violations of environmental regulations and ordered its immediate closure until a thorough technical renovation and the environmental clean-up of damaged areas would be put into place.

The company’s response consisted in arrogantly restating the incompatibility of environmental regulation with its economic plans, thus re-enacting the occupational blackmail strategy which has traditionally functioned as way to structurally block any actions against business interests. The management even went so far as to actively organize workers’ demonstrations against the court decision, gaining ample and complicit media coverage, in order to convince public opinion that there was in fact real opposition in the city of Taranto — in which ILVA is by far the largest employer — against the public prosecutors and local environmentalist organizations.

Taranto is just one striking manifestation of the unbearable contradiction forced upon people of what Allan Schnaiberg has called the “treadmill of production” (and consumption and waste): the contradiction between production and reproduction. This can be imagined as a Hydra-like monster with many heads: occupational illnesses, job accidents, environmental contamination and ecocide, public health disasters, the annihilation of possibilities for alternative/autonomous forms of local economy, and so on. For the past 50 years, this monster has provoked an unbearable concentration of cancer, malformations and other health disorders in the Taranto bay area, something rendered even more unbearable by the weakness of public health infrastructure and the lack of adequate healthcare. Like the Alien of the science-fiction movie, the Hydra-like monster has now entered the local space and people’s bodies, taking possession of them from within.

In important ways, Taranto’s May Day concert was therefore a manifestation of discontent with what the organizers (and much of the city’s inhabitants) perceive to be the politics of the main trade unions in matters of ecology: 1) they are seen to be largely complacent with corporate occupational blackmail; 2) they are insensitive to the threats to public health that come with environmental contamination; and 3) they often strongly oppose grassroots environmental mobilization at the local level.

The truth, however, is that it is simply impossible to separate or to alienate life from work — as the industrial economy and society have tried to do for so long. Another type of economy must be built; one that makes work the human activity that sustains life and that all members of a community share in its different forms across space (the city, its sea, its hinterland, and the local ecosystem), and even across species, in respect for the daily work made by non-human nature in sustaining life in the local environment.

Another type of economy is undeniably, urgently needed. All the rage, the frustration, the pain and the conflict that working-class communities of industrial areas have embodied and carried in their lives must now lead towards a new horizon of struggle, a new and better dream than those fabricated by the market and the neoliberal state, and by the unions and political parties associated with them. A dream that can finally liberate local people from the unbearable contradictions of the “treadmill of production”; of the Alien within. The slogan Taranto libera! (“liberate Taranto!”) which was screamed again and again during the concert, spoke to just that.

Instruments of liberation

But for another world to become possible, it has to be imagined first, not only by individuals or activist groups, but also at the political level. Imagining a new world becomes essential for the struggle not to close in on itself and reproduce the contradictions of the old world, but to become constructive and hopeful. Here it is that political memory becomes essential, as a project of activist knowledge-production which engages with the world’s transformation as an instrument to usher in new possibilities for politicization. By becoming aware of what has already been done by other people, past and present, with their struggles and movements, either in our own communities or elsewhere, we will immediately get a much clearer perception of the possibility of not just one but many other worlds.

Seeing those possibilities in their reality, with their dreams and their challenges, with their victories and their contradictions, will help us envision our own possibilities here and now and better organize our own struggles. This is the contribution that this article aims to give to all those who are struggling for self-liberation from the straitjacket of occupational blackmail. In the following part, I will “unearth” a few stories, in the hope that they may become (figurative) axes of war, as the Wu Ming writers’ collective would put it: instruments of liberation operating through the political imagination.

Worker/environmentalist coalitions operating on common platforms of labor and political struggle are not uncommon in the history of the post-war world. When truck drivers and eco-activists marched together in the streets of Seattle during anti-WTO demonstrations in 1999 under the banner of “Teamsters and turtles”, this was nothing new, but simply the resurgence of a political strategy that had already been successfully experimented with during the Fordist era, leading to important legislative reform in occupational and public health as well as in environmental protection. It was the active collaboration between labor, environmental, student and feminist movements that allowed the passage of the Clean Air and the Clean Water Acts (1972) in the USA, strongly supported by the most powerful trade-union confederation of the time, the Oil Chemical and Atomic Workers (OCAW).

In Italy, the very institution of the Public Health System (Sistema Sanitario Nazionale) in 1978 was the result of a decade of intensive  struggles and two general strikes, promoted by what was known as the “environmental club” within the unions’ confederation: a coalition of labor physicians, sociologists and union leaders who had previously produced revolutionary changes in the regulation of the work environment, promoting the principle of direct workers’ control (articles 4 and 9 of the Labor Statute, passed in 1970).

Other relevant examples of such strategic coalitions can be drawn from very different places and economic sectors, such as the successful struggle against pesticide use that was conducted in the mid-1960s by the United Farm Workers union, organizing the Latino wage laborers of the orange fields and vineyards of California to obtain decent working and living conditions and the recognition of labor rights. A struggle centered on the serious health threats that agro-chemicals posed not only to the farmers and their families, but to the American consumer and environment at large.

But perhaps the most striking example of workers’ environmentalism can be found in the deep of the Amazon rainforest of Brazil, where, in the mid-1980s, a union of rubber tappers — the seringueirossuccessfully organized to defend the forest from the attack of powerful lumber companies and ranchers, while at the same time defending their right to live and work in the forest, forming cooperatives for the management of sustainable extractive activities, such as rubber and nut collection or fisheries. Despite the violent opposition raised by powerful local interests, leading to numerous assassinations of trade unionists and environmentalists, the rubber tappers’ struggle did succeed in obtaining the creation of a number of “extractive reserves”, where landless local people are legally recognized and supported by the state as the legitimate “owners” and safeguards of the forest.

What the above stories tell us is that it is indeed possible to build social struggles that are, at the same time, environmental struggles, even though they emerge from a working-class experience, and vision, of what ecology is.

More solid premises

However, the renewed alliance between labor and environmental movements must be rebuilt on more solid premises than in the past. The ideology of economic growth as a panacea for all social problems and the only way to produce social welfare must be thoroughly questioned and ultimately abandoned by the labor movement, because growth imperatives are powerful justifications for the most shameless disregard for the well-being of people and of non-human nature. The same applies to the illusion of greening the economy (i.e., capitalism) through eco-efficient technologies and market mechanisms; an illusion embraced by large parts of both the labor and the environmental movement, with support from governments and financial institutions.

The process of de-industrialization in “developed” countries in the last 20 years shows how the greening of the economy has led to the simple transmigration of industrial hazards and their death toll to less developed countries, acting through the ferocious logic of the “double standard” regime, by which multinationals can shift abroad those productions/technologies which are banned or heavily regulated in their countries of origin. This same mechanism makes working-class communities in the first world more and more vulnerable to occupational blackmail, threatening them with the shifting of industrial activities elsewhere.

Moreover, many of today’s so-called “green” technologies actually have a very negative impact on the environment, on labor conditions, and on public health as well, especially when implemented on a large scale — a fact that has been demonstrated by grassroots struggles (and engaged research) on a number of such “green economy” projects over the last decade. Windmill parks, for instance, have been strongly opposed by local communities in Greece and Spain due to the impact they have had on extended rural areas, altering local climates and landscapes, as well as heavily conditioning land use patterns.

Even greater impacts on soil, local climate and ecosystems are associated with large solar power plants — also an object of contestation and a cause of serious occupational hazard. But the most striking example comes from the biofuel business in Brazil (and elsewhere in Latin America), where extensive monoculture plantations of sugarcane have replaced millions of hectares of forest, and are often run through semi-slave laborers working in conditions of horrible toil and health risk.

Clearly, the point is not to cynically dismiss any form of alternative energy production as equally threatening to environmental and public health. There is no doubt that renewable and non-fossil energy sources must be developed as the only possible way out of the current climate crisis. But the issue of dimension and scale is of fundamental importance: alternative energy can and should be developed on the small scale, aiming at autonomous and decentralized forms of self-provision for households and local communities. Renewable energy technologies can be really sustainable only if implemented at such a de-centralized and locally-controlled level, even if this is not the scale at which huge concentrations of profit (and political power) can be made. But this would imply a thorough transformation not only of the form and structure of urban life, but of the social organization of work itself.

Breaking out of the multiple crises that afflict the world today — both in the domains of the economy and work as well as in the domain of ecology and public health — requires no lesser effort than completely abandoning the “treadmill of production”, including the politics, economics and ideology of unlimited growth. This requires an ecological revolution as theorized by Carolyn Merchant: a complete shift in the social organization of production, reproduction and consciousness. Another way of working and living, of producing and distributing wealth, rooted in non-alienated work, in respect for life and in commonality, must be the political platform on which to build this new alliance. Workers and environmentalists of the world, unite!

Stefania Barca is an environmental historian and political ecologist working at the Center for Social Studies of the University of Coimbra, Portugal. She has published extensively on the history of the commons and on working-class environmentalism.

Cut-Throat Capitalism: Welcome To the Gig Economy

Economist Gerald Friedman warns that the much-hyped gig economy is a road to ruin for workers.

Photo Credit: Shutterstock.com

The media are all abuzz with the changing nature of work. Exciting words like “creativity” and “adaptability” get thrown around, specifically in connection to the shift away from steady, full-time employment to a gig economy of freelancers and short-term contracts. Proponents of the gig economy, from the New York Times‘ Thomas Friedman to bright-eyed TED pundits, tout it as a welcome escape from the prison of the standard workweek and the strictures of corporate America. Working on a project-to-project basis will set you free, they tell us. Wired magazine has called it “the force that could save the American worker.”

But when you’re actually stuck in it, the gig economy looks quite different.

Consider the New York Freelancer’s Union: According to a report in the New York Times, 29 percent of the union’s New York City members earn less than $25,000 a year, and in 2010, 12 percent of members nationally received some type of public assistance. Turns out that life with no health benefits, vacation pay or retirement plan is not a rosy picture.

Writing for Fast Company, Sarah Kessler, who went undercover to hustle for work in the gig economy, put it this way:

“For one month, I became the ‘micro-entrepreneur’ touted by companies like TaskRabbit, Postmates, and Airbnb. Instead of the labor revolution I had been promised, all I found was hard work, low pay, and a system that puts workers at a disadvantage.”

What’s really going on is the desire of businesses to chop wages and benefit costs while also limiting their vulnerability to lawsuits, which can happen when salaried employees are mistreated. The burden of economic risk is shifted even further onto workers, who lose the security and protections of the New-Deal-era social insurance programs that were created when long-term employment was the norm.

I caught up with Gerald Friedman, who teaches economics at the University of Massachusetts at Amherst and has written about the gig economy, to find out how this trend happened and what it means to workers and our increasingly unequal society.

Lynn Parramore: How did the shift away from full-time employment to the gig economy come about? What forces drove the change?

Gerald Friedman: Growing use of contingent workers (in “gigs”) came when capitalists sought to respond to gains by labor through the early 1970s, and in response to the victories capital won in the rise of the neoliberal era. Because contingent workers were usually not covered by union contracts or other legal safeguards, employers hired them to regain leverage over workers lost when unionized workers gained protection against unjust dismissal, and courts extended these protections to non-union workers under the “implicit contract” doctrine.

Similarly, the rising cost of benefits due to rising healthcare costs and government protection of retirement benefits (under the 1974 ERISA statute) raised the cost of full-time employment; employers sought to evade these costs by hiring more contingent workers.

In the early- and mid-20th century, employers created careers and job-ladders to lock valuable workers into particular jobs. Job-lock reduced the danger that low unemployment would lead to competition for workers, wage inflation, and would undermine their control over their workers. (The other side of job-lock, as Richard Freeman among others noted, was the organization of labor unions among workers who could not “exit” from no-longer-agreeable employments, and therefore, engage in collective action to improve conditions.)  Reduced market regulation, the opening of markets to international competition, and a shift in macro-economic policy focus from full-employment to price-stability all reduced the danger that workers would quit to gain higher wages or better jobs.

Instead of using job-lock to protect themselves from labor-market competition, employers rely on repressive macroeconomic conditions, relatively high unemployment, and therefore, do not need to offer job ladders, careers, or benefits to attract and to hold workers.

LP: We hear a lot of buzz from trendwatchers on a new wave of “microentrepreneurs,” “minibusinesses,” and empowered freelancers who are changing the nature of work. Why do people find this vision so intoxicating?

GF: Talk of “microentrepreneurs” presents a favorable view of the rise of the gig economy, one consistent with liberal values of individualism and opportunity, even while ignoring the oppression and poverty-wages many find in the gig economy.

There are certainly some who enjoy the uncertainty of irregular employment. When unemployment rates fell to levels traditionally associated with full employment in the late-1990s, however, we saw how workers really feel about gig jobs: they rejected them and the contingent economy contracted.

Given a choice, workers choose careers and jobs, not freelance gigs.

LP:  The reality of the gig economy often seems to be a system that puts workers at a disadvantage. From your research, how do you see the gig economy playing out in people’s lives?

The gig economy is associated with low wages, repression, insecurity, and chronic stress and anxiety.  Freelance workers fear to complain about working conditions, fear to ask for higher pay, and fear to reject any conditions imposed by prospective employers.  By removing any social protection, the gig economy returns us to the most oppressive type of cut-throat and hierarchical capitalism, a social order where the power to hire and fire has been restored to employers, giving them once again unfettered control over the workplace.

LP: How can we create jobs that are flexible and adaptable, but also give workers some security and decent benefits?

GF: We should not romanticize the situation of organization workers on careers and with job ladders. While providing more security and protection than the gig economy, this was a type of contract established by capitalists to enhance their power over workers. Instead, we should seek to enhance worker security and independence outside of work through systems of income security (enhanced unemployment insurance and guaranteed income and universal health insurance), by establishing worker-controlled guilds to regulate access to gig work through hiring halls and hiring lists, and by extending legal protections to workers’ civil rights and health and safety while doing freelance and gig work.

LP: To what extent do you see the gig economy impacting growing economic inequality?

The gig economy has been a giant vehicle transferring income from workers to capitalists. Gig work has become a vehicle not only to drive down wages but to eliminate employment-related benefits (including health insurance as well as retirement pensions and government social security). By undermining labor unions and promoting individualist competition among workers, gig work drives down wages and reduces the possibilities for effective working-class political action.

Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of “Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.” She received her Ph.D. in English and cultural theory from NYU. She is the director of AlterNet’s New Economic Dialogue Project. Follow her on Twitter @LynnParramore.


Yue Yuen: wildcat strikes and labor struggles in China

by Michael Caster on May 1, 2014

Post image for Yue Yuen: wildcat strikes and labor struggles in China

The mass strike at the Yue Yuen factory shows how China’s workers are increasingly relying on autonomous and horizontal structures of labor resistance.



Five Inspiring Struggles to Celebrate on May Day

1. Hotel Bauen and workplace recuperation in Argentina
By Marina Sitrin

2. Vio.Me: workers’ control in the Greek crisis
By Theodoros Karyotis

3. Workers’ control at Fralib: the brand with the Elephant
By Dario Azzellini

4. Tuzla: the workers’ revolt that spawned a Bosnian Spring
By Chiara Milan

5. Yue Yuen: wildcat strikes and labor struggles in China
By Michael Caster


In China, the Communist Party (CCP) and the All China Federation of Trade Unions (ACFTU) promote and protect workers’ rights. In reality, however, elite interests most often prevail, submerging workers’ rights in the tide of global capitalism. The response has been increasing civil resistance. According to one study, there were 1.171 strikes and labor protests between June 2011 and the end of 2013, and much of April 2014 was marked by one of the largest episodes of resistance in modern Chinese labor history.

On Monday, April 14, 2014, 10.000 workers at the Yue Yuen Dongguan shoe factory took to the streets in protest of the company’s ongoing failure to pay its 70.000 employees their full social security and housing allowance. Worker grievances also included the thousands of fraudulent contracts they had been forced to sign, which prevented their children from enrolling in local schools, forcing them to pay for migrant worker children’s schools. These are common grievances among China’s some 250 million migrant workers.

The strikes, which had been intermittent since April 5, came to their first crescendo that Monday as hundreds of riot police swarmed the crowd. Despite the show of force and minimal arrests, the workers were undaunted, and by the following week the demonstrators numbered around 40.000. Government censors instructed domestic media to delete content related to the incident.

The strike at Yue Yuen, the largest sports shoe manufacturer in the world, supplying Adidas, Nike, Puma, Crocs and others, was supported by labor rights organizations, such as the Shenzhen-based Chunfeng Labor Justice Service Department. Meanwhile, union presence was minuscule. That substantive union support was conspicuously absent in one of the largest labor rights demonstrations in modern China is telling.

China Labour Bulletin, a Hong Kong rights organization, quoted one striking worker: “I personally have not seen any union staff, although I heard that they have issued a comment, which no one gives damn about… They are now giving us instructions, but where the hell were they when the company violated our rights?! I have worked at Yue Yuen for almost two decades, and I don’t even know who our union president is.”

The ACFTU is the largest trade union in the world, with around 239 million members according to 2010 figures. However, the legitimacy of the ACFTU as a representative of workers’ rights has been tarnished by perennial subordination to the interests of the CCP. There is a regulation that party officials must approve all union chairs and the CCP’s position on labor rights is clear.

On March 27, 2001, when it ratified the International Covenant on Economic, Social and Cultural Rights (ICESCR), China issued a reservation to Article 8.1(a), the right to form and freely join trade unions, that its application must be consistent with the Chinese Constitution and other domestic laws. The word union does not appear in the Chinese Constitution. Furthermore, China has continually failed to ratify fundamental International Labor Organization (ILO) conventions CO87, The Freedom of Association and Protection of the Right to Organize and CO98, The Right to Organize and Collective Bargaining.

For these reasons China’s workers have increasingly been relying on autonomous structures of labor resistance organized horizontally within or between small groups of factories with support from independent labor rights organizations and third parties. Students in the nearby city of Guangzhou, for example, left posters outside of Nike stores in solidarity with the striking workers.

After several weeks of demonstrations, a spokesperson for the Ministry of Labor and Social Security acknowledged that Yue Yuen had been underpaying its workers and noted that the department had ordered the factory to comply.

Still, we must not forget that China is increasingly outsourcing cheap labor to countries such as Vietnam and Bangladesh. While victories for individual factories are milestones in the Chinese labor movement, until the engines of global capitalism come to a halt the same exploitive practices will continue in their voracious race to the bottom.

After all, following the initial outbreak of demonstrations at Yue Yuen, Adidas moved a bulk of its orders to other suppliers. This move earned the company criticism from the International Union League for Brand Responsibility, which, as a reminder that the struggle for workers’ rights is universal, responded by organizing solidarity protests at Adidas and Nike stores from Hong Kong to Istanbul and Los Angeles.

Michael Caster is an independent researcher, writer and activist, specializing in Asia. Follow him on Twitter @michaelcaster.

“Cubed”: How the American office worker wound up in a box

From the Organization Man to open-plan design, a new history of the way the office has shaped the modern world


"Cubed": How the American office worker wound up in a box

Over the past week, as I’ve been carrying around a copy of Nikil Saval’s “Cubed: A Secret History of the Workplace,” I’ve gotten some quizzical looks. “It’s a history of the office,” I’d explain, whereupon a good number of people would respond, “Well, that sounds boring.”

It isn’t. In fact, “Cubed” is anything but, despite an occasional tendency to read like a grad school thesis. The fact that anyone would expect it to be uninteresting is striking, though, and marks an unexpected limit to the narcissistic curiosity of the average literate American. The office, after all, is where most contemporary labor takes place and is a crucible of our culture. We’ve almost all worked in one. Of course it’s a subject that merits a thoroughly researched and analytical history, because the history of the office is also the history of us.

Saval’s book glides smoothly between his two primary subjects: the physical structure of offices and the social institution of white-collar work over the past 150 years or so. “Cubed” encompasses everything from the rise of the skyscraper to the entrance of women into the professional workplace to the mid-20th-century angst over grey-flannel-suit conformity to the dorm-like “fun” workplaces of Silicon Valley. His stance is skeptical, a welcome approach given that most writings on the contemporary workplace are rife with dubious claims to revolutionary innovation — office design or management gimmicks that bestselling authors indiscriminately pounce on like magpies seizing glittering bits of trash.

Some of the most fascinating parts of “Cubed” come in the book’s early chapters, in which Saval traces the roots of the modern office to the humble 19th-century countinghouse. Such firms — typically involved in the importation or transport of goods — were often housed in a single room, with one or more of the partners working a few feet away from a couple of clerks, who copied and filed documents, as well as a bookkeeper. A novice clerk might earn less than skilled manual laborers, but he had the potential to make significantly more, and he could boast the intangible but nevertheless significant status of working with his mind rather than his hands.

Even more formative to the identity of white-collar workers (so named for the detachable collars, changed daily in lieu of more regular washings of the actual shirt, that served as a badge of the class) was the proximity to the boss himself and the very real possibility of advancement to the role of partner. Who better to marry the boss’ daughter and take over when he retired? Well, one of the other clerks is who, and in this foundational rivalry much of the character of white-collar work was set. “Unlike their brothers in the factory, who had begun to see organizing on the shop floors as a way to counter the foul moods and arbitrary whims of their bosses,” Saval writes, “clerks saw themselves as potential bosses.” Blue-collar workers, by contrast, knew they weren’t going to graduate to running the company one day.

The current American ethic of self-help and individualism owes at least as much to the countinghouse as it does to the misty ideal of the Jeffersonian yeoman farmer. An ambitious clerk identified and sought to ingratiate himself with the partners, not his peers, who were, after all, his competitors. He was on his own, and had only himself to blame if he failed. A passion for self-education and self-improvement, via books and night schools and lecture series, took root and flourished. So did a culture of what Saval calls “unctuous male bonding,” the ancestor of the 20th century’s golf outings and three-martini lunches, customs that would make it that much harder for outsiders like women and ethnic minorities to rise in the ranks — once they managed to get into the ranks in the first place.

The meritocratic dream became a lot more elusive in the 1920s, when the population employed in white-collar work surpassed the number of blue-collar workers for the first time. Saval sees this stage in the evolution of the office as epitomized in the related boom in skyscrapers. The towering buildings, enabled by new technologies like elevators and steel-frame construction, were regarded as the concrete manifestation of American boldness and ambition; certainly modern architects, reaching for new heights of self-aggrandizement, encouraged that view. They rarely acknowledged that a skyscraper was, at heart, a hive of standardized cells in which human beings were slotted like interchangeable parts. Most of the workers inhabiting those cells, increasingly female, could not hope to climb to the executive suites.

Office workers had always made observers uncomfortable; the clerk, with his “minute leg, chalky face and hollow chest,” was one of the few members of the American multitude that Walt Whitman scorned to contain. After World War II, that unease grew into a nationwide obsession, bumping several works of not-so-pop sociology — “The Lonely Crowd,” “The Man in the Grey Flannel Suit,” “The Organization Man,” etc. — onto the bestseller lists. In turn, the challenge of managing this new breed of “knowledge workers” became the subject of intensive rumination and theorizing. Saval lists Douglas McGregor’s 1960 guide, “The Human Side of Enterprise,” as the seminal work in a field that would spawn such millionaire gurus as Tom Peters and Peter Drucker.

Office design — typically regimented rows of identical desks — was deemed in need of an overhaul as well, and perhaps the most rueful story Saval recounts is that of Robert Propst, hired to head the research wing of the Herman Miller company in 1958. Propst made an intensive study of white-collar work and in 1964, Herman Miller unveiled his Action Office, a collection of pieces designed to support work on “thinking projects.” Saval praises this incarnation of the Action Office as the first instance in which ” the aesthetics of design and progressive ideas about human needs were truly united,” but it didn’t entirely catch on until the unveiling of Action Office II, which incorporated wooden frames covered with fabric that served as short, modular, temporary walls.

Oh, what a difference 30 degrees makes! Propst’s original Action Office II arranged these walls in 120 degree-angles, an orthogonal configuration that looked and felt open and dynamic. One of Propst’s colleagues told Saval of the dismal day that “someone figured out you don’t need the 120-degree [angle] and it went click.” Ninety-degrees used up the available space much more efficiently, enabling employers to cram in more workstations. The American office worker had been cubed.

The later chapters of “Cubed” speak to more recent trends, like the all-inclusive, company-town-like facilities of tech firms like Google and wacky experiments in which no one is allowed to have a permanent desk at all. Saval visits the Los Angeles office of the ad agency Chiat/Day, which is organized around an artificial main street, features a conference table made of surfboards and resembles nothing so much as a theme park. Using architecture and amenities to persuade employees that their work is also play is a gambit to keep them on the premises and producing for as much of the day (and night) as possible. It all seems a bit desperate. In my own personal experience, if people 1) are paid sufficiently; 2) like the other people they work with; and 3) find the work they do a meaningful use of their energy and skills, then they don’t really care if they work in cubicles or on picnic benches. Item No. 3 is a bitch, though, the toughest criteria for most contemporary corporations to meet. Maybe that’s what they ought to be worrying about instead.


Laura Miller is a senior writer for Salon. She is the author of “The Magician’s Book: A Skeptic’s Adventures in Narnia” and has a Web site, magiciansbook.com.



How Finance Gutted Manufacturing

Since the 1980s, financial market pressures have driven companies to hive off activities that sustained manufacturing.
Monday, March 10, 2014

In May 2013 shareholders voted to break up the Timken Company—a $5 billion Ohio manufacturer of tapered bearings, power transmissions, gears, and specialty steel—into two separate businesses. Their goal was to raise stock prices. The company, which makes complex and difficult products that cannot be easily outsourced, employs 20,000 people in the United States, China, and Romania. Ward “Tim” Timken, Jr., the Timken chairman whose family founded the business more than a hundred years ago, and James Griffith, Timken’s CEO, opposed the move.

The shareholders who supported the breakup hardly looked like the “barbarians at the gate” who forced the 1988 leveraged buyout of RJR Nabisco. This time the attack came from the California State Teachers Retirement System pension fund, the second-largest public pension fund in the United States, together with Relational Investors LLC, an asset management firm. And Tim Timken was not, like the RJR Nabisco CEO, eagerly pursuing the breakup to raise his own take. But beneath these differences are the same financial pressures that have shaped corporate structure for thirty years.

Urging Timken shareholders to vote for the split, Relational Investors argued that they should want “pure-play” companies, focused on a single industrial activity. Investors would then be free to balance their portfolios by selecting businesses in industrial sectors with varying degrees of risk and sensitivity to different phases of economic cycles. A firm such as Timken—about one-third a steel company (a materials play) and about two-thirds a bearings and power transmission business (an industrial components play)—would lock investors into a mix that, Relational Investors claimed, leads to a discount on share price.

Timken management argued that making both materials and products enabled them to bring to market higher-quality goods that met customers’ needs: for example, their ultra-large bearings for windmill towers, which measure two meters in diameter, weigh four tons, and have to stand up to extreme wind and temperature conditions. Controlling the entire value chain, they said, allowed them to fine-tune the attributes of the steel in order to make superior products. Nonetheless, the financial calculation about how to maximize quarterly returns won out.

Timken’s story is not only about stock prices and product quality. Since the 1980s financial market pressures have transformed U.S. corporate structure itself. The system was once dominated by a few dozen very large, vertically integrated firms in which most or all of the functions needed to take a new idea about a product or a service to market—from R&D, design, manufacturing, testing, and logistics through sales and after-market services—were contained within the four walls of a single corporation. Now even the big firms are smaller, leaner, and centered on “core competencies,” with much of their production outsourced and overseas. Those pressures have driven companies such as Timken to hive off activities that involve heavy capital outlays, require large workforces, or promise less profitability in the short term.

The contribution of this decades-long trend to the rapid decline in American manufacturing has not been fully acknowledged. But understanding its role is essential to a revival of American manufacturing that will create jobs and promote long-term economic health. Both private and public sectors are taking constructive steps. Will American finance get in the way?

Timken was one of hundreds of manufacturing companies in a sample of firms interviewed by an MIT research team about their experiences in bringing novel ideas, products, and processes to market. I was a principal investigator in that project. The aim of the project—Production in the Innovation Economy—was to discover whether we really need manufacturing to gain the benefits of innovation: economic growth, new companies, new profits, and good new jobs in this country. After all, Apple and other companies like it—which do R&D, design, and distribution but little or no production in the United States—reap the lion’s share of their profits here. To explore these issues, the MIT researchers collected data on the efforts to scale innovation up to market by startup firms, Main Street small and mid-sized manufacturers, and Fortune 500 companies. When we learned about the Timken shareholders’ vote, we realized that we were seeing up close and in real time the forces that over the past thirty years have transformed and shrunken manufacturing in the United States.

In the radical downsizing of American manufacturing, changes in corporate structures since the 1980s have been a powerful driver, though not one that is generally recognized. Over the first decade of the twenty-first century, about 5.8 million U.S. manufacturing jobs disappeared. The most frequent explanations for this decline are productivity gains and increased trade with low-wage economies. Both of these factors have been important, but they explain far less of the picture than is usually claimed.

Since the 1980s, financial market pressures have driven companies to hive off activities that sustained manufacturing.

In the case of productivity gains, there have clearly been major advances over the long term. The periods of advance, however, do not correlate neatly with the years of greatest job losses. Some periods of rapid productivity growth also saw employment growth, or at least of stability in the manufacturing workforce. Research by economist Susan Houseman and her colleagues on the past decade—when manufacturing employment has fallen off the cliff in the United States—suggests productivity growth in manufacturing was actually modest, but national statistics fail to account for the rising volume and value of imported components and thus systematically overstate productivity. The corrected numbers indicate that productivity growth over the past decade took place primarily within one manufacturing industry: computers and electronics. So productivity gains alone can hardly explain the shrinking of U.S. manufacturing employment.

Nor can trade and outsourcing to low-wage countries account for manufacturing declines that began well before China became a factor. Today there is overwhelming evidence for the powerful effects of globalization and trade on manufacturing employment, particularly in those regions home to labor-intensive industries such as apparel and furniture, which were heavily exposed to import competition. But the big impact of low-wage imports hit in the United States only after the entry of China into the World Trade Organization in 2001. Before then the proportion of imports coming from low-wage economies relative to imports from high-wage economies was very low. Economists generally found it too small to explain manufacturing job losses. Even taking into account the outsourcing of existing jobs as well as import competition, it was implausible a decade ago to attribute a significant share of job destruction in manufacturing to these causes. Department of Labor surveys found that outsourcing and offshoring jobs represented less than one percent of all layoffs in 2003, and two percent in 2004. These surveys did not catch the total volume of jobs being transferred overseas, but in all estimations those jobs amounted to a small fraction of total annual job turnover in the American labor market.

To better understand the decline of American manufacturing, we need to go back well before the last decade to see how changes in corporate structures made it more difficult to scale up innovation through production to market.

In the 1980s about two-dozen large, vertically integrated companies such as Motorola, DuPont, and IBM dominated the American scene. With some notable exceptions (for example, GE), large vertically integrated companies today have pared off activities and become not only smaller but also more narrowly focused on core competencies. Under pressure from financial markets, they have shed activities that investors deemed peripheral—such as Timken’s steel.

This process has been fostered by great technological advances in digitization, which have allowed companies to outsource and offshore many of the functions they previously had to carry out themselves. In the 1970s a Hewlett-Packard engineer who designed circuits for a new semiconductor chip had to work together with a technician with a razor blade to cut a mask to place on silicon. Now the engineer can send a complete file of digital instructions over the Internet to a cutting machine. The mask and the chip fabrication can take place in different companies, anywhere in the world. A senior executive of Cisco told MIT researchers:

The separation of R&D and manufacturing has today become possible at a level not even conceivable five years ago. Progress in technology allows us to have people working anywhere collaborating. We no longer need to have them located in clusters or centers of excellence. We now have the ability to sense and monitor what’s going on in our suppliers at any place and any time. Most of this is based on sensors deployed locally, distributed control systems, and new middleware and encryption schemes that allow this to be done securely over the open Internet. . . . In other words, not only do we monitor and control what’s happening inside a factory, but we’re also deeply into the supply chain feeding in and feeding out of the factory.

Digitization and the Internet continue in multiple ways to enable the fragmentation of corporate structures that financial markets demand.

The breakup of vertically integrated corporations and their recomposition into globally linked value chains of designers, researchers, manufacturers, and distributors has had some enormous benefits both for the United States and for developing economies. It has meant lower costs for consumers, new pathways for building businesses, and a chance for poor countries to create new industries and raise incomes.

But the changes in corporate structures that brought about these new opportunities also left big holes in the American industrial ecosystem. These holes are market failures. Functions once performed by big companies are now carried out by no one.

Vertically integrated companies used to provide semi-public goods through apprenticeships, basic research, funding to bring innovation to scale, and diffusion of new technologies to suppliers. The resulting spill-overs into the economy were enormously important: they subsidized community college education, provided job training, and more generally created an industry-wide ecology that fed job creation and growth. Companies such as Alcoa, AT&T, DuPont, and Xerox used to support long-term R&D in facilities such as Bell Labs. Over the past twenty years, those laboratories have been shuttered or greatly reduced in size and scope. As companies downsized, they could no longer, or would no longer, keep these activities in house or pay for them.

Today companies harness R&D to specific business divisions and to near-term product development. Most basic and precompetitive research starts out in public and private laboratories isolated from manufacturers. When cutting-edge innovations come out of such laboratories, it is not clear where to find capital to bring their new products and processes to market. Who will handle prototyping, pilot production, testing, and large-scale commercialization? When DuPont brought nylon into mass production in the 1930s and 1940s, it could draw on its own retained earnings as well as established relations with investors, bankers, factories, and suppliers. Today’s innovative small company lacks virtually all of these resources. Investors excel in providing venture capital funding for startup companies, but once these companies reach the stage of commercialization and venture capital is no longer available, they find few financial backers. Now that investors have curbed their appetite for startups going public, acquisition by big companies and recourse to foreign capital seem to be the main avenues for bringing to market the innovations that begin life in university and public laboratories. Both of these routes have troubling implications for American innovation and jobs. When big companies acquire startups, the MIT researchers found, much of the dynamism and promise of the new technology can be lost in the process of integration. When commercialization takes place outside the United States, opportunities to learn about scaling new technologies are foregone. Over time, it becomes more likely that innovation will shift to places where companies have more experience with scale-up and commercialization.

The loss of apprenticeships and job training are similarly problematic. Today’s companies do not intend to keep employees in lifetime careers, so they no longer invest in the skills they nonetheless need from employees. This not only creates challenges for companies that once could rely on workers trained in house; it has a negative effect throughout the economy. Even in the days of long job tenure, significant numbers of workers who started in large firms moved around, so big-company investments in training benefited the broader industrial community.

More generally, with the shrinking of publicly available resources once generated within big companies and with the disappearance of many suppliers as production moved offshore, it has become more difficult for all manufacturers to move new products and processes to market. It is not only startups that face the hurdle of finding resources to substitute for the capabilities and coordination once provided within the four walls of the vertically integrated corporation. For established small and mid-sized manufacturers, too, the process of commercialization has become more challenging. To bring a new product or process to life, a firm needs to find additional capital, skills, suppliers, and possibly expertise. Today small and medium-sized companies find little that they might combine with their own resources. They drip in money from retained earnings and develop their products in small increments. Even promising new projects move ahead haltingly, and few jobs are created.

The depletion of the industrial ecosystem is hardly inevitable in advanced high-wage economies. Consider Germany. In 2010 manufacturing employed 22 percent of Germany’s workforce and contributed 21 percent of value-added to GDP. In the same year in the United States, just under 11 percent of the workforce was employed in manufacturing, which contributed 13 percent of value-added to GDP. Many factors explain the difference, including the role of government in supporting innovation and Germany’s education system. But, importantly, German companies operate in ecosystems rich in research consortia, Fraunhofer Institutes, specialist suppliers, technical universities, apprenticeship training, and local and regional banks.

This ecosystem supports innovation and commercial production through diverse mechanisms. Through their connections to larger firms and to each other, small and medium-sized companies are able to obtain information that would otherwise be difficult to access. In research consortia, companies come together to discuss road maps for new technologies and to work collaboratively on them. The consortia build equipment and facilities to be used by multiple firms that could not afford to buy these themselves. They distribute public funds through competitions.

In such an environment, German companies find valuable complements to their own legacy strengths when they move into new domains. In contrast, small and mid-sized U.S. manufacturers are home alone when they try to bring innovation to market.

There is no returning to the corporate structures of fifty years ago. The question is how to fix the holes in the U.S. industrial ecosystem, given that we now have companies with smaller domestic footprints who face powerful and agile competitors around the world. In a globally distributed economy, how can we generate the coordination, knowledge diffusion, resources for scaling-up, and leadership that could accelerate and deepen the flow of innovations into the market? The MIT researchers looked for initiatives promising complementary capabilities—skills, expertise, finance, services, technologies—that can be drawn on by multiple firms in diverse sectors. The cases we identified are experiments in rebuilding the American industrial ecosystem. No one of these models would fit every situation, though they do have common features of working to build trust among partners, reduce and spread the financial risks of innovation, and convene private and public actors.

The depletion of the industrial ecosystem is hardly inevitable in advanced high-wage economies.

A number of these initiatives have been spearheaded by state and federal government. The Obama administration’s new manufacturing innovation institutes form one such initiative. The federal government announced a competition in which it would invest $30 million for a center to work on additive manufacturing (3d printing) technologies. A dozen groups made up of universities, companies of all sizes, and economic-development organizations competed for the center, which eventually was granted to a Northeast Ohio/Southwest Pennsylvania team and was set up in 2012 in Youngstown, Ohio. The private sector has now contributed more than $60 million to this project. Fifteen more manufacturing innovation institutes have been announced. On the state side, the Massachusetts Clean Energy Center, for example, acts as a convener and coordinator in the renewable energy sector, bringing universities, turbine makers, energy storage device makers, the Massachusetts Maritime Academy, and others together in new projects. None of these particular parties had worked together before. MassCEC also invested $18.2 million in state funding to secure an additional $26.7 million in federal Department of Energy funds to build a world-class wind-blade testing facility.

While public-driven efforts to rebuild the industrial ecosystem are the most visible, the MIT team also recognized that private sector companies were taking steps to create resources that could be used in combination with others. Indeed in the sample of firms we interviewed, Timken stood out as one of the companies most engaged in such initiatives. Before the shareholder-driven breakup, Timken and Stark State College of Technology in North Canton, Ohio were building a test center for ultra-large bearings for use in wind turbines. Students would get hands-on experience in the center, which would also be used by Timken for its own product testing. At the University of Akron, Timken took the lead in expanding research and degree programs on engineered surfaces. Timken transferred its coating laboratory equipment and staff to the university and initiated an industrial consortium that other firms could join—on condition that they too contribute to the programs. Although coatings are vital to Timken’s products, they were essentially a “stranded technology” in a company whose business lines are bearings and special steels. At the new industrial consortium at the University of Akron, coatings research can be developed into startups; one has already emerged. Timken also became one of the most active promoters of the coalition that eventually won the first federal manufacturing innovation institute grant in additive manufacturing.

Timken obviously has a business interest in these initiatives: sharing costs for activities that were once borne entirely in-house, educating students who can be recruited for employment, gaining eligibility for new state and federal grants. But in fulfilling its own goals, Timken was also acting as a convener for industry and education. It placed its own resources on the table in order to attract others to do the same. As Timken prepares to split into two smaller publicly listed companies, how likely is it that either of them will be so active in strengthening the Ohio industrial ecosystem? Judging by the records of other companies that have gone through similar restructuring, I am not optimistic.

With domestic shale gas and oil exploitation pushing energy prices down, rising wages in China, and new corporate realism about the costs involved in outsourcing and offshoring, there is a more favorable climate for manufacturing in the United States today than there has been in decades. Yet these changes are unlikely to have durable effects if the basic weaknesses of the system are not repaired.

The new public-private partnerships to rebuild capabilities in the industrial ecosystem seem to have enormous promise. But, as the Timken case illustrates, the financial pressures that broke up American companies in the ’80s persist.

The solution may be out of reach. Today California teachers need to protect their pensions by dismantling Ohio manufacturers. The structures of U.S. capital markets and fiscal policy reward investors whose decisions are based on maximizing returns over the short-term. While the Dodd-Frank financial reforms may cut down on some of the riskiest securitization-based investment strategies, new regulations have not created real incentives for the more patient investment that growing production in America requires.

Photograph: Timken Company.


How America chose inequality

The message the nation needs to hear tonight

Inequality was no accident, and the president’s new focus on “opportunity” is a mistake, a leading economist says

How America <em>chose</em> inequality: The message the nation needs to hear tonight
Donald Trump, Mitt Romney, Lloyd Blankfein (Credit: lev radin via Shutterstock/Reuters/Steve Marcus/Jim Young/Salon)

Following prior pieces suggesting “income inequality” would be the centerpiece of tonight’s State of the Union, multiple outlets are reporting that’s not quite the case.  “Income inequality is out,” wrote the Associated Press, “‘ladders of opportunity’ is in.”

That’s a shame, contends economist John Schmitt, and it’s bad for policymaking as well as politics. Schmitt, a senior economist at the progressive Center for Economic and Policy Research, spoke with Salon about the problem with emphasizing economic mobility, the limits of attacking inequality through education, and what Obama should say – but won’t – tonight. A condensed version of our conversation follows.

A “senior administration official” told the Wall Street Journal that, in the Journal’s words, “income inequality would be addressed” in the speech, “but would be just one piece of the broader challenge to increase opportunities.” What is at stake in this question of whether the challenge is economic mobility, or the question is inequality?

Obviously, both are very important and they’re highly interrelated …

An important issue whenever people talk about opportunity and mobility is to keep in mind that if we’re talking about … starting to change it today, we’re talking about having an impact on mobility or opportunity, and ultimately on inequality, that is for most purposes possibly decades away. So you know, I think the time frame that we see results is going to be a lot different depending on whether we focus on trying to address inequality in the present or trying to address economic opportunity and economic mobility for basically young people today when they’re 40 and 60, not 20 …

If your strategy is to get people to go to college, finish college and get college-educated jobs, you’re basically leaving that group of workers that are, say, 25 and older, that are unlikely to go back to college and finish – I mean, some will and some do, but not in large numbers – you know, you’re leaving them out to dry. And you’re basically saying we’re going to solve inequality by slowly increasing the share of the workforce that has a college degree … It’s a very, very slow way to address the economic inequality question. It will work to a certain degree, but it takes a very long time. And … the thing that economists don’t say is: … How is it that making more people have a college degree is going to reduce inequality? Well, one important reason is that it’s going to lower the wages of recent college graduates, and bring them back down, because there’s going to be an increase in supply …

We have a pressing economic inequality problem right now. And we know how to address that. It’s just that making the politics happen is what the obstacle is. It’s a shame that there’s a shift away from directly the issue of inequality, to … questions like mobility and opportunity. Because I think those are much harder to pin down, they’re a much longer time frame, and they take us away from the direct kinds of issues that have an immediate impact.

In the State of the Union last year, the president said, “to grow our middle class, our citizens have to have access to the education and training that today’s jobs require.” This is something you hear a lot, from Democrats and from Republicans. How much of an answer is that to the mobility problem, or the inequality problem?

The focus on training, on education, on skills — those are things that are extremely helpful, and they’re very useful in the medium- and long-term … But that’s not the problem that we have right now.

The problem that we have right now is not that there are tons [of jobs] out there going vacant because we don’t have the workforce that can fill those jobs. We have the exact opposite problem. We have something on the order of three unemployed people for every vacancy that’s available. And we have a situation where even highly skilled workers are having trouble finding work … We have recent college graduates working for free as interns, and struggling to find a job that’s not something that they could’ve done with just a high school degree …

The [supposed] skills shortage problem … If there’s not enough workers who have particular skills, then employers start to bid, to get the workers that do have those skills. They steal them away from their competitors, and they bid the wages up. That’s not happening anywhere in the economy right now. So it makes me deeply skeptical that the problems that we face are related to skills. And it makes me deeply skeptical that we’re going to solve those problems in the short-term by increasing training and education – as much as I might favor doing those things.

Your “Where Have All the Good Jobs Gone” research – what does that suggest about the limits of education and productivity as ways for workers broadly to make it into the “middle class,” so to speak, or as solutions to these problems?

Workers today are a lot older than they were in the 1960s or the 1970s, and they are enormously better-educated than they were in the 1960s or 1970s. The fact that most workers are doing barely better, and some workers are doing worse than their counterparts from 40 or 50 years ago … suggest that the problem is that the way the economy converts people’s skills, people’s experience, people’s education and their training, into good jobs is what has deteriorated over this period. Not people’s underlying skills, or work experience, or education.

And I think it points to something completely different — and I think it’s absent from a lot of the discussion as [to] the reasons why we have economic inequality, and the reasons why we have these continuous problems with mobility and opportunity. And that has to do with bargaining power of workers. And you know, that I think is a piece that’s unfortunately missing from the president’s discussion of economic inequality, and it’s absent from his discussion of mobility and opportunity.

The way the economy has been restructured over the last three or four decades has removed the bargaining power of workers at the middle and the bottom. And it’s done that in a very systematic way.

The president’s rightly focused on the question of the minimum wage because I think it’s kind of a core example of where we’ve used public policy in a way to reduce the bargaining power of workers at the bottom. Because we’ve just allowed the minimum wage to fall far below its historic value, no matter how you measure it. … It’s definitely below where it was four or five decades ago, even though we’re much richer than we used to be. That’s a conscious or semi-conscious decision that we’ve made …

That’s just one example. Another is this big decline in unionization in the private sector that we’ve seen over the last four or five decades … We have a labor law that is completely unresponsive to workers’ desires to form a union in the private sector … That undermines the power very much of workers, in particular in the middle of the wage distribution …

We pretty regularly keep the unemployment rate too high, much higher than even economists, who are pretty conservative about these things, think is the level of full employment. And that goes directly to workers’ bargaining power … If you have a job and the unemployment rate is 10 percent, you are much less likely to go to your employer and ask for a pay increase, or improvement in benefits, or a better schedule, than if the unemployment rate is 4 percent …

We have this kind of systematic setup where the minimum wage is down, unions are down, the unemployment rate is too high.

It doesn’t stop there … Immigrant workers have almost no rights under our labor law … Because their position is so weak, it undermines the power of low-wage workers who were born here and have — barely — more rights … It creates a perfect set of circumstances for low-wage employers, because they can play immigrant workers against U.S.-born workers, in an environment where neither of them has very many rights. So businesses don’t have a big incentive to try and fix that situation …

We’ve had trade deals such as [the proposed Trans-Pacific Partnership], which we’re discussing right now, which are basically organized to increase the power, economic power of corporations, and to undermine the power of their workers and consumers.

You know, we privatized state and local government functions at quite an alarming rate … The main advantage that the private sector has over the public sector is not that they’re more efficient at organizing school buses. It’s that they pay their workers less and they don’t give them benefits …

That discussion of bargaining power, and the politics and the policies around it, is firstly what’s going to be missing from the State of the Union address. And broadly from the discussion of economic inequality. From, you know, even the Democratic Party, for the most part.

Alan Kreuger’s Gatsby curve [tying inequality to mobility] – what do you make of that contention, and how should that inform these debates about income inequality and mobility?

To me, the most important single conclusion to draw from the Gatsby curve is just that the United States has both very high levels of economic inequality, and very low levels of mobility. The rest of the debate and discussion around the curve is whether or not one causes the other — and then there’s a separate question of whether or not the level of mobility has been falling relative to the past …

One of the arguments I think that you sometimes hear is that … it doesn’t matter if economic inequality increases, because we have lots of economic mobility in the United States. And I think that what the data that Alan Krueger and many others have shown is that the United States actually has low levels of economic mobility relative to almost every other country that looks like us in terms of standard of living.

And so you can’t take a lot of comfort from the prospects of economic mobility … even if it’s the case that economic mobility is exactly the same as it was 20 or 30 years ago, that’s small comfort for somebody born into the economy today. Because the penalty for not moving up is, we know, substantially higher than it used to be … the 20th and the 50th percentile have, you know, basically both fallen relative to the top … If we had a big increase in economic inequality, at least to stay where we were, we would need to have a big increase in mobility — which we certainly have not had.

But my own view is, you know, the mobility question is important, and opportunity is important — but it’s also the case that we want to make sure that workers at the 10th percentile … or a low-income family at the 20th percentile, that those folks move with the growth in the overall economy. And that is something that simply has not happened over the last four decades or so …

People’s resources, particularly when kids are young, are going to make a big difference to where their kids end up. And if we focus on inequality in the short term, we are going to have an impact on mobility in the medium and the long term. And that’s what we see in the examples of other countries: The other countries that tend to have more mobility than we do have … a lot more equality, and more resources available to children in particular.

In England, the attitude of “New Labor” was once characterized [in 1998] by [Blair cabinet member] Peter Mendelson saying he was “intensely relaxed about people getting filthy rich, as long as they pay their taxes.” What do you make of that worldview … that it doesn’t hurt people at the bottom to have extremes at the top, as long as you then tax the money?

Even since he made those comments … I think there’s been a much better consciousness of the broader social costs of inequality. It’s very divisive. It creates a lot of political problems. It’s not just, you know, some sideshow. I mean, it’s a real core issue about fairness, and how people understand and identify with their society …

The other truth is that we don’t actually tax the money away. One of the big problems that we have is that we don’t have tax rates that actually … take back a significant chunk of what people at the very top make … Hedge fund managers pay a tax rate of 15 percent … No low-wage worker in the United States probably pays less than that, when you add in all the different taxes they have to pay …

There’s a big cost to the way we have things organized, because there’s a lot of oneupmanship in the CEO world, and there’s a lot of competition to get paid a little bit more … If we had taxes that made it less important to make the extra million dollars, because you knew you were going to get 90 percent of it taxed away, people might focus on other things, and do other stuff …

A lot of very, very highly paid people get “[economic] rents” — they get [paid] money they don’t need to [be paid] in order to [be willing to] do their jobs. So from a societal point of view, we’re paying the top 1 percent enormously more money than we need to in order to get them to do whatever job it is that they do, whatever socially valuable function that they think that they have …

I’m pretty sure that Bill Gates would have probably done everything that he did for, I’m just going to say, $50 million … Maybe I’m terribly, terribly wrong, and he would have only done what he did for $5 billion. But the point is that as a society, we’ve given him $50 billion, essentially. We’ve arranged a market system that has awarded him with $50 billion or more …

From a societal point of view, that’s an enormous waste. Because we could have gotten all the good products and services from all of the work that consumers value from Microsoft, by giving Bill Gates $45 billion less than we did. We would have all sorts of resources to invest in all sorts of other things, and we didn’t do that. So it’s a real case of inefficiency.

What would be the dream State of the Union speech on these issues?

One that recognizes the political constraints that are operating on the president and on progressive forces … but would spell out an alternative story to why we’re in the mess we’re in, and an alternative set of solutions …

Instead of focusing on how kind of abstract forces of technology, and you know, abstract forces of globalization are dragging down the American workforce, and creating all sorts of inequality, it would focus instead on how, you know, very clear politics, and very clear policy decisions are undermining the bargaining power of workers at the middle and the bottom.

And that is the cause of economic inequality. And that the solutions involve restructuring the economy in ways that give power to workers at the middle and the bottom …

It tells us a different story about why we’re in the circumstances we’re in, and gives us a set of recipes that are focused on the present, and on dealing with economic inequality in the present, as a way toward improving economic mobility and economic opportunity. Rather than offering us, you know, the opportunity to change things 15 or 20 years down the line if all goes well.