Seven Fixes for American Capitalism

Ideas from the Right, the Left, and across the Atlantic to mend what’s broken in our economy.

Antitrust Pivot

Many of the U.S.’s biggest economic ills—rising inequality, stagnant wages, low productivity growth—stem in large measure from corporate consolidation and monopoly power run amok. That’s the message from a new breed of policy wonk urging a return to the trustbusting days of the early 20th century.

The movement—labeled the New Brandeis School by its proponents and derided as Hipster Antitrust by its critics—is looking to ditch the Chicago School approach that’s dominated antitrust enforcement since the late 1970s. The Chicago School hews to what’s known as the consumer-welfare standard, which finds mergers anticompetitive only if they raise prices.

The new model takes its inspiration from Supreme Court Justice Louis Brandeis, who emphasized the need to restrain big companies and the concentration of economic power. Lina Khan helped galvanize the movement with a 2017 paper she wrote as a law student at Yale that made the case that Amazon.com Inc. is a threat to competition, even though it’s lowered some prices for consumers.

Any ambitious government-led project to reshape the U.S. economy usually runs into the same objection: We can’t afford it. One school of economic thought says that’s all wrong.

Modern Monetary Theory, a once-fringe set of ideas now getting some mainstream attention, says governments borrowing in their own currency have more room to spend than they think. The U.S., for example, can run deficits without having to worry about going bust, because it creates the dollars in the first place. The real constraint only kicks in when there’s too much spending relative to a limited supply of goods and services—in other words, when inflation spikes. And there’s been little sign of that in America for decades.

MMTers argue that their system isn’t so radical; it’s the way things already work, at least some of the time. Presidents, including the current one, haven’t balked at measures to boost the military or cut taxes, even when the resulting deficits run into the hundreds of billions. And emergencies, such as the 2008 financial meltdown, typically push concerns about balanced budgets deep into the background.

Now there’s a different sort of emergency on the horizon: climate change. Since the threat is arguably greater than economic depression or even war, it requires action on a suitably vast scale, argue Democrats who’ve picked up on the issue.

And MMT offers a key to unlock the financing. That’s why freshman Representative Alexandria Ocasio-Cortez, one of the first U.S. politicians to talk publicly about MMT, is also at the forefront of the drive for a Green New Deal. The maximal version of that program includes shifting the U.S. to 100 percent renewable energy within 10 years. If that wasn’t ambitious enough, the plan also calls for the government to guarantee a job for everyone who wants one—an MMT favorite that’s also a throwback to Franklin D. Roosevelt’s New Deal.

“Clearly, the environment matters more than entries on balance sheets,” says Randall Wray, a senior scholar at the Levy Economics Institute of Bard College and one of MMT’s most prominent proponents. “The environmental thing is real. It’s not financial.”

MMT’s detractors say government spending on that scale could trigger the kind of inflation that would wreck the whole economy. America’s national debt has already ballooned since the Great Recession, they warn, and adding more will erode the country’s creditworthiness and undermine the dollar’s role in global finance.

While those warnings are still frequently heard, there are signs that they’re losing their impact as the debate leans left. Several renowned economists who aren’t MMTers have recently tried to downplay the risks attached to deficits and debt. They include Olivier Blanchard, former chief economist at the International Monetary Fund, and Obama administration heavyweights Larry Summers and Jason Furman. Bank of England chief Mark Carney has made the case that action on climate change represents an economic opportunity, not a burden.

Ocasio-Cortez didn’t manage to garner enough Democratic support for her first attempt at actual legislation, a proposal to set up a Green New Deal committee. But there’s broad sympathy for the idea in principle, including among several of the party’s presidential candidates, and many of them have also endorsed a jobs guarantee. —Katia Dmitrieva

Tech to the Rescue

Amazon.com Inc. Chairman and Chief Executive Officer Jeff Bezos wishes there were a trillion human beings in the solar system. With room for that many people, there would be “a thousand Einsteins and a thousand Mozarts,” he told the Economic Club of Washington, D.C., in September. The world’s richest man is funneling $1 billion or more a year into a company, Blue Origin, that he hopes will help make extraterrestrial settlement a reality, creating places to live for all those Einsteins and Mozarts.

Bezos and others argue that innovation is the essential ingredient in human betterment. They have a point. Life would be pretty awful without the advances made by past generations, such as indoor plumbing, vaccines, refrigeration, and telephones. Bezos even asserts that freedom itself, not just material well-being, depends on technological progress: “I don’t even think stasis is compatible with liberty,” he told the Washington audience.

In the view of the tech-to-the-rescue crowd, innovation can solve just about every problem humanity faces. Global warming can be fixed with better electric cars, solar cells, wind turbines, and batteries. Income inequality can be solved by educating or retraining workers for the high-tech jobs of the future.

The Information Technology & Innovation Foundation, a Washington think tank founded in 2006 to propagate this philosophy, argues that using antitrust law to break up or discipline the big technology companies can backfire, discouraging innovation and harming consumers. Robert Atkinson, president and founder of the ITIF, co-wrote a 2018 book with Michael Lind called Big Is Beautiful: Debunking the Myth of Small Business.

The techies welcome a prominent role for government in paying for education and conducting or supporting research and development. But the movement is split on trade. The nationalists want to keep the U.S. in the tech vanguard and are willing to resort to tariffs and subsidies to preserve its dominance. The globalists, including some heads of multinational companies that earn lots of their profits abroad, are happy to see other countries advance technologically, figuring that the benefits of breakthroughs—say, a cure for cancer—will be shared by all of humanity regardless of their origin.

The common theme is that prosperity depends on a robust tech sector. “We’re in a 10-year productivity depression” that’s hurting living standards, says Atkinson. “Tech is really the only way we’re going to raise productivity growth.” —Peter Coy

Tariff Truthers

If there’s one thing most economists around the world today can agree on, it’s that tariffs are bad. Protect one domestic industry with an import tax, and you hurt a swath of others. Tariffs reduce choices for consumers and push up prices for goods. They stifle competition and deter innovation. And they invite other countries to retaliate, leading to the sort of tit-for-tat behavior that’s left U.S. soybean farmers watching crops once destined for China rot in their fields.

Libertarianism

Devotees of small government were stirred by candidate Trump’s vow to “drain the swamp” and pull U.S. troops out of foreign quagmires. But President Trump, with his tariffs and deficits, has proved to be “the opposite of a libertarian,” the Libertarian Party declared in March.

Still, the free-market purists aren’t giving up the fight. One of their bugbears is the Federal Reserve and its cheap money—a distortion of the market’s natural efficiency, according to Austrian economist and libertarian idol Friedrich Hayek. When Ron Paul, America’s highest-profile libertarian, ran for president in 2012, he pushed for the Fed’s abolition and a return to the gold standard. “If you want to restrain government, you restrain the power to create money,” he said. “That’s what gold does.”

The Fed can probably rest easy. Americans aren’t exactly clamoring for a return to gold, while hyperinflation and other disasters predicted by libertarians in the easy-money decade since 2008 haven’t come to pass.

Some libertarian ideas are finding a larger audience. Among them are the call for stripping back zoning rules, because they limit the construction of affordable housing, and their criticism of patents that lock in profits for Big Tech or Pharma and licensing requirements that insulate professionals like doctors from competition. A common theme of such critiques—that the economy is rigged in favor of big and established actors—commands growing support among mainstream economists.

And beyond the realms of U.S. policy, the world is evolving in ways that give libertarians hope. Those who deplore the “tyranny” of central banks are rejoicing at the explosion of cryptocurrencies. (The Libertarian Party accepts donations in Bitcoin.) Recreational marijuana use is already legal in 10 states and backed by more than 6 in 10 Americans, according to a poll by the Pew Research Center.

Paul, who outperformed most expectations during his own tilt at the presidency, says a popular Libertarian candidate could well emerge in 2020. It’s a stretch to say he’s cheerful about the wider outlook, though. “It’s a bubble economy in many, many different ways, and it’s going to come unglued,” he told the Washington Examiner. —Andrew Mayeda

Tucker Carlson Versus Conservatism

The Fox News host amplifies a debate the right needs to have.

The most interesting thing in conservative politics right now is not the government shutdown and Donald Trump’s flailing attempt to claim victory while being defeated on all fronts. Instead it’s an ideological battle over Tucker Carlson’s recent Fox News soliloquy, in which he accused his fellow Republicans of building an anti-family, finance-dominated economic system that might be “the enemy of a healthy society.”

Carlson’s monologue was an expansion of themes that have dominated his reinvention as a Trump-era populist — the general folly of elites, the unwisdom of the bipartisan consensus on immigration and foreign policy, the failure of Republican leaders to defend the national interest.

But in expanding on those themes he went somewhere that Fox hosts rarely go — from culture into economics, from a critique of liberal cosmopolitanism into a critique of libertarianism, from a lament for the decline of the family to an argument that this decline can be laid at the feet of consumer capitalism as well as social liberalism.

Just about every conservative worth reading was provoked into responding.

If there is to be a healthy American right, after Donald Trump or ever, this is the argument that conservatives should be having. And it is especially an argument that Fox News should be highlighting, since Fox is frequently responsible for stoking populism but keeping it vacuous or racialized, evading the debates the right really needs.

Now let me attempt my own quick contribution. A key issue in the Carlson contretemps is distilled in this line from David French of National Review, one of the monologue’s critics: “There are wounds that public policy can’t heal.”

This is a crucial conservative insight, a caution for policymakers everywhere — but it can also become a trap, a cul-de-sac, an excuse for doing nothing. And that has happened too often for conservatives in recent decades: They’ve leaped to despair without even trying policy.

But in hindsight this was wrong, the feared inflation never came, and the economic recovery was slowed because of the Republican fixation on tight money. Of course, in the Trump era some Republicans have conveniently become dovish on inflation. But in the preceding eight years, wage-earning Americans suffered unnecessarily because of a wrongheaded right-wing counsel of despair.

A second example: While it’s true that family breakdown has deep and tangled roots, it’s also true that in the 1940s and 1950s, a mix of government policy, union strength and conservative gender norms established a “family wage” — an income level that enabled a single breadwinner to support a family.

Maybe it isn’t possible to recreate a family wage for a less unionized and more feminist age — but are we sure? Is there really nothing conservatives can do to address

  • the costs of child care,
  • the unfulfilled parental desire to shift to part-time work,
  • the problem that a slightly more reactionary iteration of Elizabeth Warren once dubbed “the two-income trap”?

If marriages and intact families and birthrates declined as the family wage crumbled, perhaps we should try rebuilding that economic foundation before we declare the crisis of the family a wound that policy can’t heal.

A final example: Historically conservatism has been proudly paternalist, favorable to forms of censorship and prohibition for the sake of protecting precisely the private virtues that Carlson’s critics think government can’t cultivate. But in recent decades, the right’s elites have despaired of

  • censoring pornography, acquiesced to the spread of
  • casino gambling, made peace with the
  • creeping commercialization of marijuana, and accepted the
  • internet’s conquest of childhood and adolescence.

Yet none of these trends actually seem entirely beyond the influence of regulation. It’s just that conservatism has given up — once again, in unwarranted despair — on earlier assumptions about how public paternalism can encourage private virtue.

The deeper point here is that public policy is rarely a cure-all, but it can often be a corrective. And the part of Carlson’s monologue his critics should especially ponder is the end, when he suggests that absent a corrective that “protects normal families,” even the normal will eventually turn to socialism — choosing a left-wing overcorrection over a right that just says, Well, you see, we already cut corporate taxes, so there’s nothing we can do.

The Big Blockchain Lie

Now that cryptocurrencies such as Bitcoin have plummeted from last year’s absurdly high valuations, the techno-utopian mystique of so-called distributed-ledger technologies should be next. The promise to cure the world’s ills through “decentralization” was just a ruse to separate retail investors from their hard-earned real money.

.. Faced with the public spectacle of a market bloodbath, boosters have fled to the last refuge of the crypto scoundrel: a defense of “blockchain,” the distributed-ledger software underpinning all cryptocurrencies. Blockchain has been heralded as a potential panacea for everything from poverty and famine to cancer. In fact, it is the most overhyped – and least useful – technology in human history.

In practice, blockchain is nothing more than a glorified spreadsheet. But it has also become the byword for a libertarian ideology that treats all governments, central banks, traditional financial institutions, and real-world currencies as evil concentrations of power that must be destroyed. Blockchain fundamentalists’ ideal world is one in which all economic activity and human interactions are subject to anarchist or libertarian decentralization. They would like the entirety of social and political life to end up on public ledgers that are supposedly “permissionless” (accessible to everyone) and “trustless” (not reliant on a credible intermediary such as a bank).

.. Yet far from ushering in a utopia, blockchain has given rise to a familiar form of economic hell. A few self-serving white men (there are hardly any women or minorities in the blockchain universe) pretending to be messiahs for the world’s impoverished, marginalized, and unbanked masses claim to have created billions of dollars of wealth out of nothing. But one need only consider the massive centralization of power among cryptocurrency “miners,” exchanges, developers, and wealth holders to see that blockchain is not about decentralization and democracy; it is about greed.

For example, a small group of companies – mostly located in such bastions of democracy as Russia, Georgia, and China – control between two-thirds and three-quarters of all crypto-mining activity, and all routinely jack up transaction costs to increase their fat profit margins. Apparently, blockchain fanatics would have us put our faith in an anonymous cartel subject to no rule of law, rather than trust central banks and regulated financial intermediaries.

A similar pattern has emerged in cryptocurrency trading. Fully 99% of all transactions occur on centralized exchanges that are hacked on a regular basis. And, unlike with real money, once your crypto wealth is hacked, it is gone forever.

.. Moreover, the centralization of crypto development – for example, fundamentalists have named Ethereum creator Vitalik Buterin a “benevolent dictator for life” – already has given lie to the claim that “code is law,” as if the software underpinning blockchain applications is immutable. The truth is that the developers have absolute power to act as judge and jury. When something goes wrong in one of their buggy “smart” pseudo-contracts and massive hacking occurs, they simply change the code and “fork” a failing coin into another one by arbitrary fiat, revealing the entire “trustless” enterprise to have been untrustworthy from the start.

.. Lastly, wealth in the crypto universe is even more concentrated than it is in North Korea. Whereas a Gini coefficient of 1.0 means that a single person controls 100% of a country’s income/wealth, North Korea scores 0.86, the rather unequal United States scores 0.41, and Bitcoin scores an astonishing 0.88.

As should be clear, the claim of “decentralization” is a myth propagated by the pseudo-billionaires who control this pseudo-industry. Now that the retail investors who were suckered into the crypto market have all lost their shirts, the snake-oil salesmen who remain are sitting on piles of fake wealth that will immediately disappear if they try to liquidate their “assets.”

.. Moreover, in cases where distributed-ledger technologies – so-called enterprise DLT – are actually being used, they have nothing to do with blockchain. They are private, centralized, and recorded on just a few controlled ledgers. They require permission for access, which is granted to qualified individuals. And, perhaps most important, they are based on trusted authorities that have established their credibility over time. All of which is to say, these are “blockchains” in name only.

Digital Nomads Are Not the Future

A privileged escape that’s hurting communities at home and abroad

.. The privilege of digital nomads

The World Domination Summit (WDS) takes place annually in Portland, Oregon and serves as a gathering place for the lifestyle-entrepreneurship, do-what-you-love (DWYL) community that has grown around the writings of Chris Guillebeau, Tim Ferriss, and the other gurus that dominate the niche.

In its early years, Amanda Palleschi wrote about the event for the New Republic, calling WDS out for being attended primarily by white people who “have advantages or significant successes that enable them to see the world through DWYL-colored lenses (and to pay for the $500 entry fee to WDS).” Guillebeau himself even acknowledged that he was “mostly attracting other Westerners” and told Palleschi, “[j]ust because we have privilege doesn’t mean we can’t enjoy our lives.” The summit has advertised a more diverse set of speakers in recent years, but that doesn’t mean its audience is significantly more diverse. As the community has grown, there were bound to be minorities who did well within it, just as in regular society, but that doesn’t mean they make up a sizeable chunk of its followers.

The reality is that the promise of digital nomadism is built on a quasi-libertarian worldview that’s closely related to the ideologies of Silicon Valley titans. In short, certain measures to promote social progress might be acceptable, but many believe that the government needs to take a hands-off approach on economic matters and not interfere significantly in the market.

DWYL is a privileged orientation focused on individual success, which ignores programs in developed societies the were designed to promote collective wealth and well-being. Miya Tokumitsu, a Jacobin contributing editor, called it “the secret handshake of the privileged and a worldview that disguises its elitism as noble self-betterment.” The movement’s gurus make a gesture toward charitable causes to not seem too selfish, but their initiatives often forward their worldview: helping others to escape the tyranny of traditional work and life structures by building their own lifestyle businesses.

The fierce individualism of digital nomads is damaging to communities, both at home and abroad, because people who feel “liberated” from space have no stake in improving their local area. They’re far less likely to work toward positive local change, fight for the rights of disadvantaged peoples, or be interested in halting the gentrification that displaces long-term residents — to which they usually contribute — because those issues don’t affect them.

.. Into this situation come the digital nomads, looking for locales that are inexpensive by Western standards, but where they can easily outspend residents to maintain a quality-of-life that would be difficult to achieve on local salaries. Chiang Mai, Thailand and Bali, Indonesia are some of the leading destinations for those seeking the location-independent life, causing a predictable development: developers chasing Western money.

.. The gurus talk of finding destinations where one’s money will go further, ignoring the consequences for local people because the only thing that matters is the achievement of their personal success.

.. Even though digital nomads come from developed countries and benefited from taxpayer-funded education, health, and social programs throughout their lives (and expect to in the future when they return to their home countries), they rarely feel any obligation to give back. Similar to tech libertarians, they do all they can to minimize their tax burden by finding the jurisdiction or country with the lowest tax rate to establish their business and, depending on the tax rules of their country of citizenship or residence, move often enough that they aren’t obliged to pay income tax.

.. Rhetorically, digital-nomad gurus say that everyone should follow their hearts and pursue their passion, but it’s clear that their message is only meant for a particular group of privileged Westerners, as their lifestyles are made possible by people rooted to place and not necessarily enjoying their work.

.. They may achieve an additional degree of freedom and enjoyment from structuring their lives in an unconventional way, but that’s only possible because they ignore the consequences of their actions by surrounding themselves with people who have similar levels of privilege and an unquestioning adherence to an ignorant, individualistic worldview strongly influenced by Silicon Valley’s brand of libertarianism.

.. Low-cost destinations exist because rich countries looted and plundered the rest of the world for centuries through colonialism and unequal trade relationships. The privilege to even consider becoming a digital nomad is a result of legal structures and high-quality public services that are funded through the wealth generated from those centuries of global dominance.

.. Privilege allows digital nomads to ignore all these things and live in a fantasy world where they need only worry about themselves. They take full advantage of their positions to live more fulfilling lives, while trying to avoid the responsibility to contribute to the society that granted them their privilege in the first place and actively augmenting the forces displacing locals in the places they treat simply as destinations, rather than communities. Digital nomads do not care about the societies they live in, and for that reason they have no place in the future.