The American Prospect #308

NEOLIBERALISM: Political Success, Economic Failure ROBERT KUTTNER HAROLD MEYERSON ON HOW TO AVOID A DEMOCRATIC CIVIL WAR

SUMMER 2019

MONOPOLY NATION Elizabeth Warren

Talks Antitrust DAVID DAYEN

How Facebook and Google Snatched the Digital Ad Market DINA SRINIVASAN

The Insulin Racket NATALIE SHURE

How Big Finance Blames You RACHEL M. COHEN

Antitrust Law Gone Wrong SANJUKTA PAUL

Progressives can’t afford to abandon the working class.

For decades, progressives led the way in fighting for policies to protect, strengthen and grow the working class.

From fighting against offshoring to rallying for better wages and working conditions, progressives stood up for America’s blue collar workers when nobody else would.

Progressives can’t quit the fight now. In 2020 and beyond, we must continue to fight for America’s workers.

americanmanufacturing.org

contents

VOLUME 30, NUMBER 3 SUMMER 2019

PAGE 29

PAGE 43

PAGE 14

PAGE 58

PAGE 73

COLUMNS 4 PROSPECTS THE ANTI-ENTRENCHMENT AGENDA BY PAUL STARR

NOTEBOOK 7 CAN EUROPE COME TOGETHER? BY JONATHAN GUYER 9 COUNTERING BIDEN’S STATUS QUO POLITICS BY DAVID DAYEN 10 DOES THE CIVIL RIGHTS ACT PROTECT GAY EMPLOYEES? THE COURT WILL DECIDE BY GABRIEL ARANA 12 BENEFITS ON THE LINE BY KALENA THOMHAVE

FEATURES 14 NEOLIBERALISM: POLITICAL SUCCESS, ECONOMIC FAILURE BY ROBERT KUTTNER 22 SPECIAL REPORT MONOPOLY NATION 23 IN THE LAND OF THE GIANTS BY DAVID DAYEN 25 HOW DIGITAL ADVERTISING MARKETS REALLY WORK BY DINA SRINIVASAN 29 THE INSULIN RACKET BY NATALIE SHURE 34 BIG FINANCE’S STEALTH DEREGULATORY MANEUVER BY RACHEL M. COHEN 40 THE DOUBLE STANDARD OF ANTITRUST LAW BY SANJUKTA PAUL 43 THE MONOPOLIST’S WORST NIGHTMARE BY DAVID DAYEN 46 THE VOTER SUPPRESSION CHRONICLES BY BOB MOSER 53 CLIMATE CHANGE AND THE DEMOCRATS BY HAROLD MEYERSON 58 THE RELUCTANT MAJORITY BY PAUL TAYLOR 68 MAINE EXHALES BY GABRIELLE GURLEY

CULTURE 73 HOBSBAWM, UNREPENTENT BY LEONARD BENARDO 75 MONEY AGAINST DEMOCRACY BY JORDAN ECKER 78 THE GENERAL STORE OF THE U.S.A. BY MAX B. SAWICKY 80 PARTING SHOT TRY SURVEILLAPP! BY ROBERT KUTTNER AND DAVID DAYEN Cover art by Victor Juhasz

1

PAGE 80

from the Editor

H

ello, I’m David Dayen, and it’s a high honor to take the helm of an organization with such a laudable legacy as The American Prospect. I was floored when asked to become executive editor, and hope to live up to the tradition here.

I’ll give you a little bit of background on myself. I was working in television and film when I heard about these things called political blogs back in 2002. It didn’t take me long to get hooked, and eventually I started my own. At the time, if you were writing about politics online, you were part of a select group, and you could move up through the ranks (a pipeline that has been shut down today, largely because of Google and Facebook’s dominance of digital advertising markets, which you’ll read about in this issue). I was fortunate to do so, joining several high-profile group blogs in the late 2000s, and then becoming an independent journalist.

I recently re-read my first piece for the Prospect’s digital edition, in April 2011, about a budget agreement between the Obama administration and the newly installed Republican House majority, which reflected poisonous deficit politics triggered by tax cuts for millionaires. There are different challenges today, but in many ways that fight endures, to expand the imagination of progressive policy beyond the Starr cramped agenda of the Democratic establishment.

I’ve covered many topics for the Prospect and elsewhere—presidential politics, education, finance, housing, health care—but if you wanted to boil it down to a core theme, one that I think drives the best journalism and analysis, I would call it the story of power. I write about who has power, what they’re doing with it, what the effects are on ordinary people, and how power can be democratized for the public good.

Meyerson That holds for political power and corporate power; we see on a daily basis how the Trump administration has fused the two, producing a government that benefits his cronies and his personal bank account at the expense of so many.

In this issue, you will find a cluster of articles on corporate monopoly power, and how it affects our privacy, our democracy, our lives at work, our finances, and our well-being. That also happens to be the subject of Kuttner my forthcoming book. I believe that the only way out of our new Gilded Age lies in making political choices to break the concentrations of power that have pooled throughout our economy. Explaining, analyzing, and proposing solutions to this fundamental challenge is what the Prospect will strive to do.

My plans for the future of the Prospect include more of what you’ve come to expect from us, with new writers, expanded content, and an updated website design. We will be rolling out these features over the next several months, and as always we welcome your feedback. We want to tell this story of power every day, in print and on the web, in ways that you won’t find anywhere else.

Special thanks to PAUL STARR, HAROLD MEYERSON, and BOB KUTTNER—all of whom will continue writing for us—for putting their faith in me to carry the Prospect into the next chapter of American progressivism. In particular, let me single out Bob Kuttner, who is stepping back from day-to-day management (though he’ll still be writing and editing). Bob has been such a bulwark for the liberal left in America, and his tentpole piece in these pages on the failures of neoliberalism is a capstone to 30 years of work. In fact, we scoured our archives, all the way back to the Prospect’s second issue ever, and tracked him battling the neoliberals; you’ll see excerpts in this issue. He was as right then as he is now. Thanks, Bob, and keep on fighting.

2 WWW.PROSPECT.ORG SUMMER 2019

EXECUTIVE EDITOR DAVID DAYEN FOUNDING CO-EDITORS ROBERT KUTTNER, PAUL STARR CO-FOUNDER ROBERT B. REICH EDITOR AT LARGE HAROLD MEYERSON DEPUTY EDITOR GABRIELLE GURLEY ART DIRECTOR MARY PARSONS MANAGING EDITOR JONATHAN GUYER ASSOCIATE EDITOR SAM ROSS-BROWN WRITING FELLOWS MANUEL MADRID, KALENA THOMHAVE COPY EDITOR SUSANNA BEISER EDITORIAL INTERNS DANIEL BOGUSLAW, SAMUEL BRESLOW, KATIE MALONE, IVEY NOOJIN, ANU ROY-CHAUDHURY CONTRIBUTING EDITORS MARCIA ANGELL, GABRIEL ARANA, DAVID BACON, JAMELLE BOUIE, HEATHER BOUSHEY, JONATHAN COHN, ANN CRITTENDEN, GARRETT EPPS, JEFF FAUX, MICHELLE GOLDBERG, GERSHOM GORENBERG, E.J. GRAFF, BOB HERBERT, ARLIE HOCHSCHILD, CHRISTOPHER JENCKS, JOHN B. JUDIS, RANDALL KENNEDY, BOB MOSER, KAREN PAGET, SARAH POSNER, JEDEDIAH PURDY, ROBERT D. PUTNAM, RICHARD ROTHSTEIN, ADELE M. STAN, DEBORAH A. STONE, MICHAEL TOMASKY, PAUL WALDMAN, SAM WANG, WILLIAM JULIUS WILSON, MATTHEW YGLESIAS, JULIAN ZELIZER PUBLISHER ELLEN J. MEANY COMPTROLLER ANNE BEECH COMMUNICATIONS SPECIALIST STEPHEN WHITESIDE BOARD OF DIRECTORS MEHRSA BARADARAN, DAAIYAH BILAL-THREATS, CHUCK COLLINS, DAVID DAYEN, SHANTI FRY, STANLEY B. GREENBERG, JACOB S. HACKER, AMY HANAUER, DERRICK JACKSON, ROBERT KUTTNER, ELLEN J. MEANY, MILES RAPOPORT, JANET SHENK, ADELE SIMMONS, GANESH SITARAMAN, WILLIAM SPRIGGS, PAUL STARR, MICHAEL STERN SUBSCRIPTION CUSTOMER SERVICE 1-888-MUST-READ (1-888-687-8732) SUBSCRIPTION RATES $19.95 (U.S.), $29.95 (CANADA), AND $34.95 (OTHER INTERNATIONAL) REPRINTS INFO@PROSPECT.ORG

We are making changes at the Prospect, and you can help us by answering some questions

Where did you get this magazine?

If we mailed it to you, is the information on the label correct?

Did you pay for it?

If you paid for it, was it via subscription or newsstand?

Feel free to tell us what else you think...

ANSWER BY EMAIL: SUBJECT:

Info@Prospect.org

I got your magazine

ANSWER ONLINE:

Prospect.org/Survey

THANK YOU!

Prospects

The Anti-Entrenchment Agenda

BY PAUL STARR

T

wo anxieties are currently driving American politics. On the right, the anxiety is about the demographic and cultural trends favoring Democrats.

People of color represent only 21 percent of Americans born before 1946, but they amount to 44 percent of millennials—and, according to a Pew survey, 57 percent of millennials place themselves among liberals, while only 12 percent side with conservatives.

Election by election, more liberal voters are coming of age, while more conservatives are dying off.

For decades, the right has been fighting cultural and political change and the demands of women and minorities. Now panic has set in among conservatives as they realize they are losing the future.

That anxiety has fed the obsession with immigration and increasing radicalism on the right—the willingness to support Donald Trump in the first place, and to protect him as president; to suppress the votes of minorities; and to bar the Dreamers and other immigrants from gaining the rights of citizens.

Fear of future majorities is what is driving the Republican effort to pack the federal courts with rightwing judges who can be counted on to limit Democrats in office.

The second anxiety driving American politics is a response to the first—a growing anxiety among liberals that the power of the right may get locked in.

Conservative power may become entrenched in ways that make it exceptionally difficult for popular majorities to reverse. Control

4 WWW.PROSPECT.ORG SUMMER 2019

of two governmental institutions in particular, the Supreme Court and the U.S. Senate, threatens to limit progressive possibilities. As a result, liberals are now thinking about reforms that could help rebalance institutional power.

In the 1990s, many of us were talking about an “emerging Democratic majority.” It isn’t emerging anymore; Democrats already have a national majority. They have won the popular vote for the presidency in six out of the last seven elections, going back to 1992. If not for the Electoral College, the entire history of the past two decades would be different. The Senate is a similar story. In all 15 Senates since 1990, according to calculations by Stanford political scientist Jonathan Rodden, the Democrats have won more votes than the Republicans but controlled the Senate only six times. If majority rule had determined control of both the presidency and the Senate, there would be a liberal majority on the Supreme Court too.

Remember how Republicans in the 1960s claimed to represent a “silent majority”? Democrats today are a stymied majority— and not merely in the House of Representatives. What is really stymieing Democrats is the structure of institutional power in America. Three distinct challenges confront them.

The first is the entrenched power of concentrated wealth, magnified in recent decades by increasing economic inequality.

The second is the aggressive use of political incumbency by Republicans to extend and increase their

control through such means as voter suppression.

The third consists of the advantages that Republicans derive from the structure of government institutions at a time when Democratic voters have become concentrated in cities and in the most urbanized states. The geography of partisan support is closely related to America’s racial and cultural divisions, and it has skewed not only the Senate but also the House and state legislatures in Republicans’ favor.

Each of these three distinct sources of conservative power requires a different set of responses.

CHALLENGE #1: Rebalancing Power

in the Market. Liberals have generally thought about economic and social policies from the standpoint of their first-order effects: whether they help guarantee rights to security and freedom and ensure a widely shared prosperity.

In an ideal world, there would be no need to think about the consequences for the distribution of power. In practice, there is.

Fortunately, liberal policies can be dual-purpose, serving both primary interests in rights and wellbeing and interests in power and political equality. As a recent report of the Roosevelt Institute argues, progressive taxation can serve both as “a deterrent against extraction and wealth hoarding” and as a means of limiting the outsized political sway of the superrich. A revived antitrust policy can reduce “firms’ ability to exploit competitors, consumers, and workers” as well as their ability to manipulate public policy. Empowering workers

can enable them to claim a fair share of the economy’s gains and to offset corporate political influence.

The underlying premise here is that policy is necessarily about power, and Republicans have acted more strategically on the basis of that understanding.

Democrats haven’t given the same priority to strengthening unions that Republicans have given to weakening them. Even as industries became more concentrated, Democrats paid little attention to antitrust. Changing corporate governance wasn’t even remotely on the public agenda until Senator Elizabeth Warren proposed requiring corporations with more than $1 billion in revenue to obtain a federal charter and take into account the interests not just of shareholders but of all stakeholders, including customers, workers, and local communities.

Warren would also give employees 40 percent of the seats on corporate boards and require that political contributions be approved by at least 75 percent of a company’s directors and shareholders.

But since rebalancing private power requires political power, meeting this first challenge takes us to the other two.

CHALLENGE #2: Countering the

Abuses of Incumbency. Selfenrichment and self-entrenchment are the elementary forms of political corruption, and Trumpera Republicans are doggedly pursuing both. Voter suppression, partisan gerrymanders, the inclusion of a citizenship question in the 2020 census, and the failure

Prospects

to act on election security after Russia’s interference in 2016 are all aspects of the politics of entrenchment.

Fighting voter suppression today primarily requires its opposite— voter mobilization, beginning with the engagement of a young and diverse generation that is often skeptical and despairing about politics (see Paul Taylor, “The Reluctant Majority,” in this issue). Commitments to sustained, on-the-ground field operations and community organization have become all the more necessary since the Supreme Court’s Shelby decision limited the options for going to court to vindicate voting rights.

Like its decisions on voting rights, the Court’s rulings on campaign finance also offer little encouragement for federal litigation in pursuit of political equality.

But reformers have had success at the state level with lawsuits as well as referenda. Pennsylvania’s Supreme Court overturned the Republican gerrymander of congressional districts in time for the 2018 election; Michigan voters adopted an independent redistricting commission.

Yet state-based efforts have their limits. After Floridians passed a referendum to restore voting rights to ex-felons, the Republican legislature effectively reversed that decision by requiring ex-felons to pay off fines and fees before regaining their eligibility to vote. Ultimately, there is no substitute for federal power, and that requires confronting not just the machinations of incumbents but the machinery of government that perpetuates Republican power.

CHALLENGE #3: Rebalancing the

Constitutional System. A sharply increased urban-rural divide in voting now affects the working of America’s representative institutions. The effect on the Senate is obvious since the more rural states are disproportionately white and Republican; the effect on the House and state legislatures is also substantial but needs some

explanation. Like Britain and others of its former colonies, the United States uses single-member districts for legislative elections, as opposed to proportional representation. In these elections, Jonathan Rodden shows in his new book Why Cities Lose, political parties whose voters are densely clustered in cities tend to win a smaller share of seats than their share of votes.

As it happens, the parties that lose out are all parties of the left.

The Democrats are now in this position, which enables the Republicans to control state legislatures and sometimes the U.S. House even while losing the overall popular vote (as they did in the House after the 2014 election). Proportional representation would correct this bias. But although nothing in the Constitution prohibits proportional representation in House delegations, much less in state legislatures, the idea has received little support or attention. So I concentrate on the Senate, which poses the more immediate threat to majority rule and progressive policies.

Senate elections today are overwhelmingly predicted by a state’s partisan lean. As a result, Thomas Edsall writes (citing political scientist Larry Sabato), Republicans are favored in states with 46 senators, Democrats in states with 40.

Republicans therefore need to win only five seats in competitive states to control the Senate, while Democrats need to win eleven. What could even up that competition?

No aspect of American government is more firmly entrenched in the Constitution than the Senate’s distribution of seats: Article V rules out any amendment altering the states’ “equal suffrage” in the Senate.

But there is a partial workaround: the admission of new states.

Democrats can justify the admission of two new states, the District of Columbia and Puerto Rico, on the inherent merits.

Both are anomalies: jurisdictions with substantial populations of American citizens denied full rights of political representation.

Admitting both D.C. and Puerto Rico also has a compensatory rationale: The Senate today grossly underrepresents African Americans and Latinos because they are concentrated in highly urbanized states. According to calculations

by Michael Ettlinger, African Americans have three-fourths the voting power of whites in the Senate; Latinos have just two-thirds.

Continued urbanization will likely increase this disparity. By 2040, according to demographic projections, 30 percent of the population will choose 70 percent of the Senate. If that 30 percent were chiefly black and Latino, I have no doubt the constitutional obstacles to changing the Senate could somehow be overcome. But, as things stand, the 30 percent will likely be predominantly white; admitting D.C. and Puerto Rico would help correct that bias.

Although Republicans would complain about the partisan consequences, they set the precedent: From the 1860s to the 1880s, their party carved up sparsely populated western territories into reliably Republican states to give themselves more senators.

Republicans also set the precedent for another workaround, in this case for dealing with the Supreme Court: In the 1860s, they changed the size of the Court three times to ensure Republican control—adding a seat under Abraham Lincoln, shrinking it under Andrew Johnson, then re-expanding it under Ulysses Grant. To be sure, Franklin Roosevelt is supposed to have failed when he tried to expand the Court in 1937—except that the Court then changed course, and the New Deal proceeded.

Increases in the number of states and Supreme Court justices would be examples of “constitutional hardball,” the term coined

by Harvard’s Mark Tushnet for measures that are clearly constitutional, though outside recent norms. Democrats would not be thinking about hardball if Republicans had not already begun playing it, as they did when they

refused even to hold hearings on Barack Obama’s nomination of Merrick Garland to the Court.

Contrary to those who worry about violating political norms, Tushnet responds that if the Democrats added two justices to make up for Garland, it would establish a new norm: “You can’t steal a Supreme Court seat and expect to get away with it.”

If, despite the obstacles, Democrats are able to win control of Congress and the White House in 2020, they will have to decide whether to eliminate the Senate filibuster and play hardball. It will be a weighty decision. If they go ahead, the priority should be to admit D.C. and Puerto Rico, which would then make it easier to expand the Supreme Court, though that is better thought of as a last resort if, as in the 1930s, the Court acts in a partisan way to strike down Democratic initiatives.

A new balance in institutional power in both the market and government would only level the playing field, not entrench Democrats.

These are all measures—including proportional representation for the House and state legislatures—that would bring the government closer into line with the will of the majority of Americans. And if democracy benefits Democrats, that’s nothing for them to apologize about; rather, it ought to cause Republicans to worry about the course that they have taken. Republicans didn’t have to appeal to xenophobia and white panic; they could have sought to make themselves the party of a rising majority instead of a declining one.

For Democrats, the immediate anti-entrenchment priority is to prevent Trump from gaining a second term when he could increase the Court’s right-wing majority, consolidate control of the executive branch, and use federal investigative and prosecutorial powers to pursue his enemies more aggressively. America’s rising majority has been stymied, but a second term for Trump has even darker possibilities of entrenchment.

SUMMER 2019 THE AMERICAN PROSPECT 5

Sign up for our newsletter

ON TAP hits your inbox weekdays ... featuring David Dayen, Robert Kuttner, and Harold Meyerson with quick-read commentary on breaking news, plus three links to what’s trending at Prospect.org. Sign up at Prospect.org/Newsletter

notebook Much of the continent-wide debate focused on the global climate emergency, which spelled success for greens. Left-green alliances are possible in several countries. So has the left recuperated across Europe—or simply bottomed out?

Bremen city hall

Can Europe Come Together?

The elections to the European Parliament halted the rise of the far right but produced more fragmentation—and that’s not good enough.

BY J O N AT HAN GUY ER BREMEN, Germany

mohssen a ssanimoghaddam / pic ture a l l i a n c e / d pa v i a a p i m a g e s ; f l a g : i s t o c k b y g e t t y

T

he town musicians of Bremen are riling a crowd of voters gathered in the market square.

A rapper freestyles in German, grasping for something to rhyme with “Europe is the Future,” to the gray-haired crowd. He is joined

by Social Democratic Party (SPD) Chair Andrea Nahles and their top European parliamentary candidate, Katarina Barley. On the sidelines, Federal Minister for Foreign Affairs Heiko Maas shakes hands and takes selfies with constituents before the towering 15thcentury city hall. Inside, one room is plated with gold, though the city of about a half-million is 22 billion euros in debt following the Great Recession.

Bremen, a union stronghold, has gone Social Democrat for 73 years. But the city-state was to

fall behind Merkel’s Christian Democratic Union party for the first time this spring. (And, with Merkel stepping down from the chancellorship, the CDU is already lurching rightward.) Voting took place the last weekend of May—as Theresa May announced her resignation from the British premiership and as 28 European countries voted to determine the shape of the European Parliament and, by extension, the union’s future.

Across the continent, many had anticipated further gains for far-right parties that masquerade in populism but spit raw racism. Thankfully, the so-called populist surge has been halted for the moment.

The elections offer a tale of two markedly different social democratic results: good in Spain and

Portugal, and three of the Nordic countries now have left-led governments. The left recovered in the Netherlands, where the Dutch Labor Party had been comatose, and in national elections the Danish Social Democrats wrested control from the ruling liberal party and served a decisive defeat to the xenophobic Danish People’s Party.

But for socialist or social democratic parties in the largest member nations—Germany, France, and the U.K.—it was a wipeout.

In the German EU elections, the Social Democrats came in third with 16 seats, running behind the conservative European People’s Party (29) and the Greens (24 seats). Nahles, the party chair, resigned. In France, the Socialists barely fielded a candidate list. And in Britain, Labour placed third.

THE EUROPEAN parliamentary system is convoluted, a metamulti­party affair with 751 representatives—difficult even for the union’s biggest cheerleaders to articulate. Voters view these as second-tier elections. The far left dismisses the EU as a neoliberal project, the right considers it antinationalist, and the center has been inept at defending it—assisted by the European Commission’s stubborn austerity policies, which make it far harder to embrace.

“Explaining why the European Union is important to voters takes three minutes,” an SPD legislator told me. The anti-EU message of Alternative für Deutschland, or AfD Party, “takes two seconds.”

At both the German and EU levels, this was a referendum on Brexit. Outside of the U.K., the rejoinder was: No, we don’t want to go—with about 50 percent voter turnout across the EU, better than the 43 percent turnout in 2014 and the highest in 20 years.

In Germany, a high 61.5 percent of voters showed up.

“The British experience taught us that leaving the EU is not such a good idea,” one Hamburg father told me while his children played in an inflatable jungle gym across the sidewalk. Like other voters I spoke with in Germany’s second city, he mentioned the freedom to travel among EU countries as a motivation for voting. As German parliamentary candidate Katarina Barley noted, some 200,000 people pass between France, Belgium, and Luxembourg each day.

From the podium in Bremen, seasoned SPD parliamentarian Udo Bullmann addressed the migration crisis with a moral

SUMMER 2019 THE AMERICAN PROSPECT 7

appeal: “Every refugee that drowns, a piece of Europe’s soul dies, too.”

The crowd applauded in support of protecting migrants. He added that Orban’s Hungary and Duda’s Poland wouldn’t be eligible to join the EU if they had applied today.

All told, the Euroskeptic bloc called Europe of Freedom and Direct Democracy Group got 44 seats. The very far-right European Alliance of People and Nations, which includes Marine Le Pen’s French National Rally, received 73. However, the center-right European People’s Party grouping received 179 to the Socialists’ 152.

Fears of the far right persist, but the biggest threat is a familiar face: the American president. “We don’t have an ally in the White House … We see Mr. Trump looking at the world as his business model,” Bullmann told me.

He emphasized the need for labor laws and standards that push back against the monopoly power of tech giants and international companies. As Bremen’s old church bells rang, Bullmann, a former academic who had just quoted Habermas, paused for a selfie with a father and daughter.

“The story that social democrats can’t win elections is totally wrong,” he told me, pointing to socialists’ April victory in Spain, while also expressing concern about how a shaky center-left coalition in the European Parliament could end up empowering fringe parties and spoilers. A week later, the European Parliament’s socialist bloc would put Bullmann forward as its potential leader.

THE CLIMATE CRISIS weighed heavily on the minds of many voters I spoke with, borne out with the success of the Greens: They came in second in Germany, third in France, and placed fourth in the U.K., giving the Green bloc 76 seats, or about 10 percent of the European Parliament. Even Germany’s pro-business libertarian Free Democratic Party prioritized the climate crisis in their public messaging.

The grand coalition of center-right and center-left in many countries and in the European Parliament, bringing together the SPD with the conservatives, has undermined the

8 WWW.PROSPECT.ORG SUMMER 2019

social democrats’ appeal among young people. Meanwhile, the spread of small, ineffectual political protest and the presence of nondemocratic parties has hollowed out the center. One student in Hamburg told me he was anxious about Europe’s fracturing, and—weirdly—that’s why he was voting for the satirical party Die Partei.

The German tricksters will send two representatives to Brussels.

Walking through the exhibition “Weimar: The Essence and Value of Democracy” at Berlin’s German Historical Museum earlier in the week, I couldn’t help but consider the parallels between then and now. Though the economic situation in 2019 is not comparable to Germany after World War I, liberal politicians’ failure to save liberalism felt familiar.

And considering how the demonization of Jews was so integral to the rise of National Socialism, I kept dwelling on a statistic—of the reports of mounting anti-Semitic attacks in Germany, the far-right has been responsible for some 90 percent of them. But reading the news, it seems that Arab and Muslim migrants are to blame for everything. In Germany,

German Federal Minister for Foreign Affairs Heiko Maas mingles with constituents on Bremen’s market square.

Muslims had become the Jews of the early 20th century, humiliated by hate that they had not perpetuated.

Did fake news influence the election and promote xenophobia? Of all of Germany’s political parties, the AfD has the highest engagement on Facebook by a long shot. “The empirical data shows that right-wing extremists or populists are very good at this,” one cybersecurity analyst told me. In the end, however, experts say targeted foreign-influence campaigns didn’t play a major role in swaying European-wide balloting.

After the voting, it’s the European Commission president that is the most important role; the Greens and left parties would have to band together to ensure that the EC president is a relative progressive, but that seems a long shot. One straw in the wind is that French President Emmanuel Macron is opposing the EC presidential candidacy of Manfred Weber of the Merkel-aligned European People’s Party. Macron has said he might even accept a socialist, such as Frans Timmermans of the Netherlands.

Deepening fragmentation is not good for the EU and its political process. With proliferating parties, it’s impossible to have a strong program in most countries, which means that Europe’s default setting is the austerity consensus of the Germans, the European Commission, and the European Central Bank. The question remains whether a disjointed centerleft and green coalition can take on not only the extremist right in the European Parliament but also Trump on one flank and Euro-austerity on the other. A mainstream bloc of center-right, center-left, and green representatives still holds a commanding majority in the European Parliament, but they don’t agree on much except the status quo, which is unpalatable to more and more voters. For most Europeans, the EU is necessary, but it is far from sufficient.

The Friedrich Ebert Foundation (Friedrich-Ebert-Stiftung) provided support for travel and accommodations in the EU for reporting used in this article.

c a r m e n j a s p e r s e n / p i c t u r e a l l i a n c e / d pa v i a a p i m a g e s

notebook

notebook

Countering Biden’s Status Quo Politics Elizabeth Warren and Bernie Sanders offer the most direct challenge yet to the front-runner in the 2020 Democratic primary.

BY DAV I D DAY E N SAN FR ANCISCO

‘‘W

e asked a two-word question: ‘Why not?’” said Bernie Sanders, reflecting on his 2016 challenge, at a low-dollar fund­ raiser on June 1, near the Moscone Center during the California Democratic Party convention. Many of the 14 Democratic presidential candidates who spoke here, at the first real cattle call of the 2020 primary, were asking that same question, daring to think beyond a cramped politics narrowly focused on defeating Donald Trump and exhaling. “Why not” is the language of activists, the language Robert Kennedy paraphrased from George Bernard Shaw in 1968, the language of the “si se puede” cries from farm laborers.

It’s not the language of the frontrunner in the Democratic primary, and the weekend in San Francisco offered some of the first lines of attack against Joe Biden thus far in the race. Biden had no presence at the gathering, save from quotes of his on a glossy flier being passed out by Bernie supporters (“I don’t think 500 billionaires are the reason we’re in trouble … the folks at the top aren’t bad guys”). But he hung over the convention, with numerous challengers taking on the mindset of the Biden wing of the party, if not the former vice president by name.

This challenge was expressed most deeply by Elizabeth Warren, who received the warmest welcome from the assembly on Saturday—even more than the home-state candidate who preceded her, Kamala Harris—with a speech that assailed the smallness of restoration politics, the inessentialness at the heart of Biden-ism.

“Some Democrats in Washington believe the only changes we can get are tweaks and nudges,” said Warren, who dominated the weekend, including bringing 6,500 people to a town hall in Oakland on Friday night. “If they dream at all, they dream small.

Some say if we all just calm down, the Republicans will come to their senses.”

After offering some of her bigger dreams—a wealth tax, an expansive anti-corruption plan, breaking up big ag, big banks, and big tech—Warren stuck in the knife. “When a candidate tells you about all the things that aren’t possible, about how political calculations come first, about how you should settle for little bits and pieces instead of real change, they’re telling you something very important: They are telling you that they will not fight for you.”

It was the most direct challenge to Biden-ism yet, and it fit with Warren’s stump speech in Oakland, which highlighted corruption as a disease upon the body politic, frustrating progress at every opportunity. In just five months on the trail, Warren’s weaving between her personal middle-class upbringing and the role of big money and big business in politics already reflects a finely tuned narrative that feels much more seasoned.

And her themes are big enough to cover the main case against Biden: that his hypothetical presidency would pose no threat to special interests and keep middle-class Americans depressed and voiceless. Several convention-goers expressed to me concerns about the backlash to another ineffectual Democratic regime, yielding a right-wing ascendancy that actually might be competent this time.

Other hopefuls mirrored Warren’s position in their sevenminute convention speeches.

Pete Buttigieg, who did well in the formal speech setting, proclaimed that “Democrats can no more promise to take us back to the 2000s or 1990s than conservatives can take us back to the 1950s.”

Cory Booker, in what seemed like offthe-cuff remarks riffing off a moment of silence for victims of the tragedy

The main case against Biden: His hypothetical presidency would pose no threat to special interests and keep middle-class Americans depressed and voiceless.

in Virginia Beach, condemned “the normalization of mass murder in this country” and thrummed that “beating Donald Trump is a must, but that is a floor not a ceiling.” Following John Hickenlooper, who tried to create a Dianne Feinstein circa 1990 moment, trolling the 5,000 or so attendees in a bid for moderate votes by saying that “socialism is not the answer,” Jay Inslee ad-libbed, “I am a governor who thinks we shouldn’t be ashamed of our progressive values.”

And of course, Sanders was part of this callout, too, sub­ tweeting Biden as one of “those who have for whatever reason chosen to not be in this room” and referencing a May 10 Reuters article that suggested Biden was looking for a “middle ground” on climate change. “When the future of the planet is at stake, there is no middle ground,” Sanders said, using the same construction to lambaste the middle ground on income inequality, health care, abortion, drug prices, gun violence, immigration reform, and foreign policy (ending “endless wars” was a core focus).

The simplistic rendering that Bernie’s base has splintered in California was not in evidence among hundreds at his fundraiser, the first of his campaign. But the race for state party chair, necessitated by sexual assault allegations forcing former chair Eric Bauman to resign, offered a glimpse at what happens when insurgents have more than one option. When Bauman in 2017 narrowly defeated Kimberly Ellis, who had the support of Sanders backers, she benefited from an antiBauman vote. This time around, there wasn’t the same animus against Los Angeles labor federation leader Rusty Hicks, and he steamrolled Ellis on the first ballot, 57 percent to 36 percent. To the extent that Sanders has a problem, it’s that there are other choices for those trying to overthrow the establishment.

The Democratic Party, set up as a series of silos, offers candidates multiple openings to carry the banner of “no middle ground” and “dream big” on discrete issues. At the MoveOn Big Ideas festival (marred by an animal rights protester accosting Harris and

SUMMER 2019 THE AMERICAN PROSPECT 9

notebook

grabbing her mic) and in his convention speech, Julián Castro seized on the issue of criminal justice reform, invoking the names of Eric Garner and Sandra Bland and previewing a policing plan that would ban stopand-frisk policies and track decertified police officers in a national database.

Amy Klobuchar, who hit several party caucuses, pitched automatic voter registration, which has led to higher turnout in her home state of Minnesota.

Harris went in on gender pay equity, with a complex scheme to fine large businesses that don’t comply.

And Inslee, who has led on climate, announced at the convention that he’s petitioned the DNC for a climatefocused debate. “You can negotiate with Republicans but you can’t negotiate with physics,” he told me.

The audience of 5,000 activists may be more restive than Democrats at large—they shouted during Nancy Pelosi’s speech to impeach Trump, nearly booed hapless John Delaney off the stage for criticizing Medicare for All, and criticized the state party for accepting hundreds of thousands of dollars from vaping company Juul, which actually was rewarded with a giant ad right next to big screens showing the podium. But these activists are the people who stuff envelopes and knock on doors, and they will focus their work on candidates who inspire, who offer something of value beyond the end of Trump tyranny.

As for Biden, who acting chair Alex Gallardo-Rooker said had called her before the convention and committed to attending another party meeting in November, where delegates will vote on a presidential endorsement, the contrast of where he decided to speak over the weekend was interesting. He keynoted a Human Rights Campaign dinner in Columbus, Ohio, forcefully castigating Trump for his attacks on LGBT Americans. It was an example of a “dream big” approach, which rapidly shifted the national mood from banning gay marriage to accepting it. In 2012, Biden got out in front of President Obama’s middle ground on the issue, blurting out his support for same-sex marriage before Obama was ready.

Sometimes, it pays to say, “Why not?”

10 WWW.PROSPECT.ORG SUMMER 2019

Does the Civil Rights Act Protect Gay Employees?

The Court Will Decide.

And the conservative justices will have to choose between their self-proclaimed allegiance to what a law says and their social biases.

BY G A BR I E L A R A N A

G

iven that same-sex couples can now marry, most Americans assume firing someone for being gay or transgender is already illegal.

Polls show 80 percent believe it is, and 72 percent think it should be. But despite repeated attempts by advocates over three decades, Congress has never passed explicit legislation that bars discrimination against LGBT people in employment, housing, or public accommodations.

Since 2015 however, the Equal Employment Opportunity Commission, which enforces workplace nondiscrimination laws, has interpreted Title VII of the 1964 Civil Rights Act’s prohibition on discrimination “because of … sex” to extend to sexual orientation and gender identity as well. This has allowed queer people living in states with no LGBT anti-­discrimination protections on the books the ability to sue in federal court.

“A majority [of Americans] live in one of the 30 states that lack nondiscrimination protections for queer people,” says Masen Davis of Freedom for All Americans, an advocacy group that seeks to secure such protections. “[The EEOC ’s position] has allowed LGBT people to use sex-discrimination arguments to enjoy at least a floor of legal protection.”

But federal courts have diverged on the question of whether Title VII covers queer people. The Seventh Circuit Court of Appeals and the Second Circuit have ruled that it does. The Eleventh and Fifth have found that it does not. In April, the Supreme Court decided to settle the score, agreeing to hear three cases involving employment discrimination against queer people—the case of a gay child-welfare worker in Georgia, one involving a skydiving instructor in New York, and

another about a transgender woman who was fired from a funeral home after announcing her transition. The cases will not decide whether the workers were fired for being gay, but whether federal law protects queer people from employment discrimination to begin with. It’s the first test of the Trump Supreme Court’s temperature on LGBT rights.

WHEN THE COURT announced it would

take the trio of cases—to be argued and decided in its 2019-2020 session—many in the queer community reacted in horror. “One could sense something like a deep intake of breath, of the sort one makes when a fragile object is starting to tumble off a shelf across the room,” wrote Masha Gessen in The New Yorker. “You know it’s going to shatter, you are too far away to try to catch it, and you watch, helplessly, its interminable path to catastrophe.”

With a conservative majority now on the Court, many queer-rights supporters expect the justices to strip away what few protections LGBT workers have at the federal level, possibly upending decades’ worth of sexdiscrimination law.

“It potentially casts a cloud over longstanding bans on sexual harassment and other forms of gender discrimination in the workplace,” wrote Ian Millhiser at ThinkProgress. “In its apparent zeal to legalize discrimination against gay, bi, and trans workers, this Supreme Court could shred many protections long enjoyed by women in the workplace.”

But the doom and gloom among progressives belies the especially strong legal and logical argument for reading protections for queer people into the 1964 Civil Rights Act, which made it unlawful for an employer to

p r o s p e c t i l lu s t r at i o n / i s t o c k b y g e t t y

notebook

“discriminate against any individual ... because of such individual’s race, color, religion, sex, or national origin.”

The argument goes like this: Because one cannot define a person’s sexual orientation or gender identity without referring to sex, these characteristics are a function of—linked inextricably to—sex, and therefore covered under Title VII. Put in more concrete terms, if an employer fires a woman because she dates women but does not fire a man who dates women, they are treating the employee differently because of their sex.

“The variable—the item that changes and that produces a different result—is sex,” explains William Eskridge, a professor at Yale Law School who specializes in the study of laws pertaining to sexual and gender minorities. “It’s either the sex of the employee or the sex of the partner.”

The scenario presented above, Eskridge points out, is analogous to that underlying the landmark case Loving v. Virginia, which struck down state anti-miscegenation laws. In Loving, the state of Virginia argued that because the law “equally burdened” blacks and whites—both faced the same punishment for marrying someone of the other race—it did not constitute racial discrimination. One could argue, similarly, that firing someone for being gay does not constitute sex discrimination because neither men nor women are allowed to date someone of the same sex. But in Loving, the Supreme Court rejected this logic, finding that Virginia’s ban on interracial marriage indeed constituted discrimination on the basis of race.

The argument that sex discrimination encompasses gender discrimination is even more straightforward: As with sexual orientation, an employer that fires a transgender person cannot do so without taking their sex into account. This is, by definition, discrimination “because of … sex.”

To some, the argument might come across as a sort of rhetorical legerdemain—a linguistic trick that redefines “sex” to include sexual orientation and gender identity.

Indeed, when it enacted the Civil Rights Act in 1964, Congress could not have imagined Title VII would cover

The era when queer-rights supporters could rely on the courts for protections may soon come to an abrupt end.

sexual orientation or gender identity.

At the time, homosexuality was classified as a disorder by major mentalhealth organizations, same-sex sex was a felony in all but New York and Illinois, and the federal government compiled lists of “sexual psychopaths.”

Transgender people, then referred to as “transvestites” or “transsexuals,” were treated with similar contempt.

But none of this should matter to the conservative justices on the Supreme Court, who have each at one point espoused a theory of legal analysis known as “textualism.” As Antonin Scalia, its most famous proponent, once said, “It is the law that governs, not the intent of the lawgiver.” Textualists hold that statutes like Title VII should be interpreted according to the words on the page—and their original meaning at the time the legislation was passed—rather than the intent of the drafters or their goal in enacting the law. Most of the legal profession eschews interpreting laws according to their original intent, an approach known as “intentionalism”; lawyers, after all, make bad historians and mind-readers. But none disfavor this tack more than conservatives.

The EEOC ’s reading of Title VII to cover sexual orientation and gender identity—and the concurrence of dozens of lower courts—is a textualist interpretation par excellence and thus a test of the conservative majority’s convictions.

It is true that in 1964, the definition of “sex” did not encompass sexual orientation or gender identity—a point the Trump Justice Department has made repeatedly in court briefs opposing anti-discrimination protections for queer people, citing the 1958 dictionary definition. But neither does it today. It is the entire operative phrase “because of … sex” and its logical corollaries that matter here.

Decades of Supreme Court precedent further support an expansive interpretation of Title VII. In 1986, the justices ruled that it forbids sexual harassment in Meritor Savings Bank

v. Vinson. Three years later, in Price Waterhouse v. Hopkins—a case in which a high-performing woman at an accounting firm was denied a promotion because she acted too “masculine”—they found that it also prohibits sex stereotyping, which yields yet another argument in favor of the EEOC ’s reading of Title VII. Under no reasonable theory of judicial interpretation, then, should the conservative majority on the Court find that Title VII does not cover sexual orientation and gender identity.

That doesn’t mean, given the increasingly right-wing predilections of the Republican justices, that they won’t do it anyway. The proponents of judicial modesty may well take a wrecking ball to decades of nondiscrimination law, as they already have to decades of law protecting voters’ and workers’ rights.

INDEED THE ERA in which queer-rights

supporters could rely on the courts for protections may soon come to an abrupt end. After a string of victories during the Obama era—the repeal of the Defense of Marriage Act and “Don’t Ask, Don’t Tell,” the Court’s enshrining marriage equality, and the enactment of federal hate-crimes legislation—the movement became accustomed to victories. Now, the road ahead may require the state-by-state, gritty organizing that paved the way for marriage equality. Introduced in various forms during every session of Congress since 1994 except the 109th, the Equality Act would add sexual orientation and gender identity to the actual text of Title VII and forbid discrimination against queer people in housing and public accommodations. It was passed by the U.S. House of Representatives on May 17, though it stands no chance of passage with Republicans controlling the Senate and the White House.

That explains what queer-rights organizers are up to right now: trying to pass LGBT anti-discrimination legislation in the 30 states that don’t have it, and educating the public about ongoing—and still perfectly legal— discrimination against queer people in most of the United States.

Gabriel Arana is a contributing editor at The American Prospect.

SUMMER 2019 THE AMERICAN PROSPECT 11

Benefits on the Line The Trump administration has proposed to adjust how we measure poverty, in an ill-disguised attempt to cut benefit levels.

BY K A L E N A T H O M H AV E

D

etroit resident Walter TravierEL just got out of prison after serving 48 years. He wants a job, but the state is having issues helping him secure a state ID and a new Social Security card—his old one is long lost. For now, Travier-EL survives on Supplemental Security Income (SSI), the Supplemental Nutrition Assistance Program (SNAP, commonly called food stamps), and Medicare. But it’s not enough.

Travier-EL wants a chance to improve himself: some savings to put away for a house one day, or some money to help him secure a car, to get to the jobs he’s been offered but so far can’t accept. At the very least, he wants independence. “I was looking for the standard of living, so I can be a taxpayer and not [reliant] on the state,” he tells me. “If you’re going to give me a chance, give me the standard of living.”

Those living on the edge can testify to the inadequacy of public benefits and the stinginess of the so-called welfare state for millions of Americans. The poverty line decides who is poor and who is not, and earning just $1 over the eligibility limit could mean losing food benefits or child care. Regional differences are not accounted for—it doesn’t matter that the average annual cost of car insurance is $5,414 in Detroit, almost four times the national average.

The Trump administration may be planning to reduce benefits even more, utilizing something called the Chained Consumer Price Index for All Urban Consumers (chained CPI) to calculate the inflation rate and adjust program benefits accordingly.

This simple change could reverberate across the lives of the poor, making them even poorer and putting the health of seniors and people with disabilities at risk. Though the difference would initially be slight, it won’t

12 WWW.PROSPECT.ORG SUMMER 2019

seem small for the affected population. “We’re talking about people using pennies to scrape by,” says Danielle Atkinson, director of Mothering Justice, an advocacy group in metro Detroit. After several years, millions would be affected and the erosion of benefits would be much more severe.

If chained CPI sounds wonky and boring, that’s because it is—it’s the perfect stealth way to cut public-assistance programs while both bypassing Congress and pulling the wool over the eyes of anyone who isn’t an economist. It could even bleed into the largest benefit program—Social Security.

And most confounding of all, it used to have liberal support.

THE POVERTY LINE’S origins date back to a research project by Social Security Administration economist Mollie Orshansky in the 1960s, and it doesn’t keep up with a current standard of living. No administration wants to alter the poverty threshold to more accurately reveal the extent of poverty in America, because then they’d be tagged with making poverty worse. But the Trump administration wants to move things in the opposite direction.

As part of its sustained attack on anti-poverty programs, the administration in early May opened a “request for comment” on how the poverty line is determined each year. By asking for public comment, the administration is paving the way to use regulatory, and not legislative, authority to make this change. While that may not be within their capacity, statutory ambiguity has not deterred the Trump administration before.

Currently, the poverty threshold is adjusted for inflation via the Consumer Price Index for All Urban Consumers (CPI-U). The administration is considering a variety of other inflation measures. The one to pay closest

Mollie Orshansky was a Social Security Administration economist who came up with a measurement for poverty in the 1960s.

attention to is chained CPI, which has often been proposed by conservatives as a way to reel in Social Security funding, but not necessarily for the poverty thresholds.

Chained CPI, first introduced in 2002, assumes that consumers will substitute across categories when prices change. If prices are too high for a vacation, then you’ll spend money on something else for your personal leisure, like a flat-screen TV. Or if the price of muffins is too high, you’ll buy breakfast cereal.

If consumers are choosing different purchases to counteract rising prices, the theory goes, inflation in practice rises more slowly than under other measures. (Note that the CPI-U also takes substitution into account, just not to the fullest extent.)

Many economists claim that chained CPI’s full recognition of substitution makes this measure more accurate. But chained CPI only works well for economists, who think of people as abstract “rational consumers”—widgets in a theory class. When real people come into the equation—specifically low-income people, seniors on fixed incomes, the homeless, and people with disabilities—things get tricky.

A person who receives SNAP has a limited food budget, and for them, the price of all food might be too high. In addition, chained CPI might not be as accurate for populations who cannot substitute, because they spend most of their income on necessities without comparable substitutes—medicine, transportation, housing. As Nancy Altman, president of Social Security Works, asks, “What do you substitute if your insulin is too expensive?”

You may think that simply adjusting the way inflation is measured would not have much impact. But Aviva Aron-Dine, vice president for health policy at the Center on Budget and Policy Priorities (CBPP), explains that the effect on the poverty level compounds quickly, and “continue[s] to grow over time in perpetuity.”

ap images

notebook

notebook

According to a report by Aron-Dine and Matt Broaddus, senior research analyst at CBPP, chained CPI would after ten years lower the poverty line by 2 percent and cause millions of low-income people, seniors, and people with disabilities to either become ineligible for benefits or receive less assistance. Hundreds of thousands of seniors would lose or have reduced assistance from Medicare Part D, which helps cover the costs of prescription drugs. More than 300,000 children would lose Medicaid and Children’s Health Insurance Program coverage. Many seniors would be forced to pay higher premiums through Medicare, while many adults would lose their Medicaid altogether.

And millions of people would see the amount of premium assistance through the Affordable Care Act fall.

A slew of other programs within the federal safety net would also be affected. Larger programs like SNAP would be impacted, alongside smaller programs like public legal aid, Head Start, and the Low Income Home Energy Assistance Program (LIHEAP), which helps families with heating costs. According to a 2018 report from the Congressional Budget Office, switching to chained CPI government-wide would reduce spending on federal programs by $37.5 billion over ten years.

The Trump administration knows that chained CPI would affect

The use of chained CPI would increase material hardship while also artificially making it appear that the government is achieving progress in fighting poverty.

Slowly Chipping Away at Benefits INFLATION RATES COMPARED (100=JANUARY 2002) 180 170 160

index

150 140

■ consumer price index for all urban

consumers: medical care

■ cpi for all urban consumers:

all items

■ chained cpi for all urban

consumers: all items

130 120 110 100 SOURCE: U.S. BUREAU OF LABOR STATISTICS

90

2004

2006

2008

2010

2012

2014

2016

2018

eligibility for public-assistance programs, but in its request for comment the Office of Management and Budget explicitly states that it “is not currently seeking comment on the poverty guidelines [used to determine eligibility] or their application.” To them, loss of benefits may be a feature, not a bug.

The change would increase material hardship while also artificially making it appear that the government is achieving progress at fighting poverty. “It would hurt people who are so close to getting help,” says Tracey Gronniger, directing attorney for economic security at Justice in Aging, an advocacy group for low-income seniors. “All of sudden, you have hundreds of thousands of people who are told, ‘Now you’re not poor anymore.’”

ALREADY, THE TRUMP administration has instituted chained CPI in how it adjusts tax brackets for inflation, as a part of the 2017 tax reform. Attaching chained CPI to the tax code planted the seed to use it in public-benefit programs, and perhaps others.

A shift in how Social Security benefits are adjusted for inflation would require legislative approval, but if chained CPI becomes the new standard, Republicans could simply say that they’re making the administrative state more uniform, by tying chained CPI to Social Security. Altman certainly believes so, calling the move just “a step toward getting at the largest program that’s indexed [by inflation], and that’s Social Security.”

Tying chained CPI to Social Security might sound familiar. Back in 2012, President Obama proposed it as part of his “grand bargain” to reduce the deficit. (In fairness, Obama explicitly excluded means-tested programs from his proposal.) Then–Senate Minority Leader Mitch McConnell jumped all over the concept, stating that “the President seems prepared to finally concede this time that at least something needs to be done to save entitlements from their inevitable slide toward bankruptcy.”

Chained CPI would have had the same gradual impact on seniors’ Social Security payments as it will on public benefits. Over a ten-year period, chained CPI would have cut Social

Security benefits by more than $107 billion. The average worker retiring at 65 would have seen a $650 reduction in benefits by age 75, and then $1,130 by age 85, according to Dean Baker, senior economist at the Center for Economic and Policy Research.

Some left-leaning organizations like CBPP and the Center for American Progress were open to the change. Other Democrats signed on too: Then–House Minority Leader Nancy Pelosi said the proposal amounted to “a strengthening of Social Security.” But it also received sizable progressive backlash. Senator Bernie Sanders of Vermont called chained CPI “a devious and underhanded way to wage class warfare against working families.”

Republicans ultimately didn’t bite on the compromise, recoiling from the prospect of raising taxes in the bargain. Some Republicans used Obama’s olive branch to stir up the public, claiming that he, not they, wanted to cut benefits. Altman remembers seniors calling Republican representatives to express concern over chained CPI, and getting the response that it was a Democratic proposal. In 2013, then–National Republican Congressional Committee Chair Greg Walden called Obama’s chained CPI proposal “a shocking attack on seniors.”

Obama reversed course when crafting the 2015 budget and endorsed expanding Social Security, which is now the official platform of the Democratic Party. But it seems likely that under pressure, Republicans today could point to chained CPI as a policy once pushed by a Democratic president. “They can [ask Democrats],” Altman warns, “Why are you against a Democrat’s proposal?”

For all the talk of indices and inflation, it’s difficult to remember that the economic stability and security of millions of people is at risk. Indeed, this is likely by design: The complexities of the administrative state and economic system make understanding the impact burdensome. And that burden, like the burden of switching the poverty line’s inflation measure to chained CPI, falls most heavily on the most marginalized.

SUMMER 2019 THE AMERICAN PROSPECT 13

NEOLIBERALISM: Political Success,

Economic Failure The invisible hand is more like a thumb on the scale for the world’s elites. That’s why market fundamentalism has been unmasked as bogus economics but keeps winning politically.

BY ROB E RT K U T T N E R

14 WWW.PROSPECT.ORG SUMMER 2019

S

ince the late 1970s, we’ve had a grand experiment to test the claim that free markets really do work best. This resurrection occurred despite the practical failure of laissez-faire in the 1930s, the resulting humiliation of free-market theory, and the contrasting success of managed capitalism during the three-decade postwar boom.

Yet when growth faltered in the 1970s, libertarian economic theory got another turn at bat. This revival proved extremely convenient for the conservatives who came to power in the 1980s. The neoliberal counterrevolution, in theory and policy, has reversed or undermined nearly every aspect of managed capitalism—from progressive taxation, welfare transfers, and antitrust, to the empowerment of workers and the regulation of banks and other major industries.

Neoliberalism’s premise is that free markets can regulate themselves; that government is inherently incompetent, captive to special interests, and an intrusion on the efficiency of the market; that in distributive terms, market outcomes are basically deserved; and that redistribution creates perverse incentives by punishing the economy’s winners and rewarding its losers. So government should get out of the market’s way.

By the 1990s, even moderate liberals had been converted to the belief that social objectives can be achieved by harnessing the power of markets. Intermittent periods of governance by Democratic presidents slowed but did not reverse the slide to neoliberal policy and doctrine. The corporate wing of the Democratic Party approved.

Now, after nearly half a century, the verdict is in. Virtually every one of these policies has failed, even on their own terms. Enterprise has been richly rewarded, taxes have been cut, and regulation reduced or privatized. The economy is vastly more unequal, yet economic growth is slower and more chaotic than during the era of managed capitalism. Deregulation has produced not salutary competition, but market concentration. Economic power has resulted in feedback loops of political power, in which elites make rules that bolster further concentration.

The culprit isn’t just “markets”—some impersonal force that somehow got loose again. This is a story of power using theory. The mixed economy was undone by economic elites, who revised rules for their own benefit. They invested heavily in friendly theorists to bless this shift as sound and necessary economics, and friendly politicians to put those theories into practice.

Recent years have seen two spectacular cases of market mispricing with devastating consequences: the near-depression of 2008 and irreversible climate change. The economic

collapse of 2008 was the result of the deregulation of finance. It cost the real U.S. economy upwards of $15 trillion (and vastly more globally), depending on how you count, far more than any conceivable efficiency gain that might be credited to financial innovation. Free-market theory presumes that innovation is necessarily benign. But much of the financial engineering of the deregulatory era was self-serving, opaque, and corrupt—the opposite of an efficient and transparent market.

The existential threat of global climate change reflects the incompetence of markets to accurately price carbon and the escalating costs of pollution. The British economist Nicholas Stern has aptly termed the worsening climate catastrophe history’s greatest case of market failure. Here again, this is not just the result of failed theory. The entrenched political power of extractive industries and their political allies influences the rules and the market price of carbon. This is less an invisible hand than a thumb on the scale. The premise of efficient markets provides useful cover.

The grand neoliberal experiment of the past 40 years has demonstrated that markets in fact do not regulate themselves. Managed markets turn out to be more equitable and more efficient. Yet the theory and practical influence of neoliberalism marches splendidly on, because it is so useful to society’s most powerful people—as a scholarly veneer to what would otherwise be a raw power grab. The British political economist Colin Crouch captured this anomaly in a book nicely titled The Strange Non-Death of Neoliberalism. Why did neoliberalism not die? As Crouch observed, neoliberalism failed both as theory and as policy, but succeeded superbly as power politics for economic elites.

The neoliberal ascendance has had another calamitous cost—to democratic legitimacy. As government ceased to buffer market forces, daily life has become more of a struggle for ordinary people. The elements of a decent middle-class life are elusive—reliable jobs and careers, adequate pensions, secure medical care, affordable housing, and college that doesn’t require a lifetime of debt. Meanwhile, life has become ever sweeter for economic elites, whose income and wealth have pulled away and whose loyalty to place, neighbor, and nation has become more contingent and less reliable.

Large numbers of people, in turn, have given up on the promise of affirmative government, and on democracy itself. After the Berlin Wall came down in 1989, ours was widely billed as an era when triumphant liberal capitalism would march hand in hand with liberal democracy.

But in a few brief decades, the ostensibly secure regime of liberal democracy has collapsed in nation after nation, with echoes of the 1930s.

SUMMER 2019 THE AMERICAN PROSPECT 15

Neoliberalism is not laissez-faire, since all markets require rules—to govern property, labor, capital, and terms of trade.

Even deregulation takes rules.

NEOLIBERALISM AS THEORY, POLICY, AND POWER

It’s worth taking a moment to unpack the term “neoliberalism.” The coinage can be confusing to American ears because the “liberal” part refers not to the word’s ordinary American usage, meaning moderately left-of-center, but to classical economic liberalism otherwise known as freemarket economics. The “neo” part refers to the reassertion of the claim that the laissez-faire model of the economy was basically correct after all.

Few proponents of these views embraced the term neo-

16 WWW.PROSPECT.ORG SUMMER 2019

liberal. Mostly, they called themselves free-market conservatives. “Neoliberal” was a coinage used mainly by their critics, sometimes as a neutral descriptive term, sometimes as an epithet. The use became widespread in the era of Margaret Thatcher and Ronald Reagan.

To add to the confusion, a different and partly overlapping usage was advanced in the 1970s by the group around the Washington Monthly magazine. They used “neoliberal” to mean a new, less statist form of American liberalism.

Around the same time, the term neoconservative was used as a self-description by former liberals who embraced conservatism, on cultural, racial, economic, and foreign-policy grounds. Neoconservatives were neoliberals in economics.

Beginning in the 1970s, resurrected free-market theory was interwoven with both conservative politics and significant investments in the production of theorists and policy intellectuals. This occurred not just in well-known conservative think tanks such as the American Enterprise Institute, Heritage, Cato, and the Manhattan Institute, but through more insidious investments in academia. Lavishly funded centers and tenured chairs were underwritten by the Olin, Scaife, Bradley, and other far-right foundations to promote such variants of free-market theory as law and economics, public choice, rational choice, cost-benefit analysis, maximize-shareholder-value, and kindred schools of thought. These theories colonized several academic disciplines. All were variations on the claim that markets worked and that government should get out of the way.

Each of these bodies of sub-theory relied upon its own variant of neoliberal ideology. An intensified version of the theory of comparative advantage was used not just to cut tariffs but to use globalization as all-purpose deregulation.

The theory of maximizing shareholder value was deployed to undermine the entire range of financial regulation and workers’ rights. Cost-benefit analysis, emphasizing costs and discounting benefits, was used to discredit a good deal of health, safety, and environmental regulation. Public choice theory, associated with the economist James Buchanan and an entire ensuing school of economics and political science, was used to impeach democracy itself, on the premise that policies were hopelessly afflicted by “rent-seekers” and “free-riders.”

Market failure was dismissed as a rare special case; government failure was said to be ubiquitous. Theorists worked hand in glove with lobbyists and with public officials. But in every major case where neoliberal theory generated policy, the result was political success and economic failure.

For example, supply-side economics became the justification for tax cuts, on the premise that taxes punished enterprise. Supposedly, if taxes were cut, especially taxes on capital and on income from capital, the resulting spur to economic activity would be so potent that deficits would

pa g e 1 4 p r o s p e c t i l lu s t r at i o n : h ay e k / m i s e s o r g . ; f r i e d m a n / u n i v e r s i t y o f c h i c a g o ; r e a g a n / o f f i c i a l p o r t r a i t ; t h at c h e r / a p i m a g e s , b a c kg r o u n d e l e m e n t s / i s t o c k b y g e t t y

As the great political historian Karl Polanyi warned, when markets overwhelm society, ordinary people often turn to tyrants. In regimes that border on neofascist, klepto-capitalists get along just fine with dictators, undermining the neoliberal premise of capitalism and democracy as complements. Several authoritarian thugs, playing on tribal nationalism as the antidote to capitalist cosmopolitanism, are surprisingly popular.

It’s also important to appreciate that neoliberalism is not laissez-faire. Classically, the premise of a “free market” is that government simply gets out of the way. This is nonsensical, since all markets are creatures of rules, most fundamentally rules defining property, but also rules defining credit, debt, and bankruptcy; rules defining patents, trademarks, and copyrights; rules defining terms of labor; and so on. Even deregulation requires rules. In Polanyi’s words, “laissez-faire was planned.”

The political question is who gets to make the rules, and for whose benefit. The neoliberalism of Friedrich Hayek and Milton Friedman invoked free markets, but in practice the neoliberal regime has promoted rules created by and for private owners of capital, to keep democratic government from asserting rules of fair competition or countervailing social interests. The regime has rules protecting pharmaceutical giants from the right of consumers to import prescription drugs or to benefit from generics.

The rules of competition and intellectual property generally have been tilted to protect incumbents. Rules of bankruptcy have been tilted in favor of creditors. Deceptive mortgages require elaborate rules, written by the financial sector and then enforced by government. Patent rules have allowed agribusiness and giant chemical companies like Monsanto to take over much of agriculture—the opposite of open markets. Industry has invented rules requiring employees and consumers to submit to binding arbitration and to relinquish a range of statutory and common-law rights.

c h a r l e s ta s n a d i / a p i m a g e s

be far less than predicted by “static” economic projections, and perhaps even pay for themselves. There have been six rounds of this experiment, from the tax cuts sponsored

by Jimmy Carter in 1978 to the immense 2017 Tax Cuts and Jobs Act signed by Donald Trump. In every case some economic stimulus did result, mainly from the Keynesian jolt to demand, but in every case deficits increased significantly. Conservatives simply stopped caring about deficits.

The tax cuts were often inefficient as well as inequitable, since the loopholes steered investment to tax-favored uses rather than the most economically logical ones. Dozens of America’s most profitable corporations paid no taxes.

Robert Bork’s “antitrust paradox,” holding that antitrust enforcement actually weakened competition, was used as the doctrine to sideline the Sherman and Clayton Acts.

Supposedly, if government just got out of the way, market forces would remain more competitive because monopoly pricing would invite innovation and new entrants to the market. In practice, industry after industry became more heavily concentrated. Incumbents got in the habit of buying out innovators or using their market power to crush them. This pattern is especially insidious in the tech economy of platform monopolies, where giants that provide platforms, such as Google and Amazon, use their market power and superior access to customer data to out-compete rivals who use their platforms. Markets, once again, require rules beyond the benign competence of the market actors themselves. Only democratic government can set equitable rules. And when democracy falters, undemocratic governments in cahoots with corrupt private plutocrats will make the rules.

Human capital theory, another variant of neoliberal application of markets to partly social questions, justified deregulating labor markets and crushing labor unions. Unions supposedly used their power to get workers paid more than their market worth. Likewise minimum wage laws. But the era of depressed wages has actually seen a decline in rates of productivity growth. Conversely, does any serious person think that the inflated pay of the financial moguls who crashed the economy accurately reflects their contribution to economic activity? In the case of hedge funds and private equity, the high incomes of fund sponsors are the result of transfers of wealth and income from employees, other stakeholders, and operating companies to the fund managers, not the fruits of more efficient management.

There is a broad literature discrediting this body of pseudo-scholarly work in great detail. Much of neoliberalism represents the ever-reliable victory of assumption over evidence. Yet neoliberal theory lived on because it was so convenient for elites, and because of the inertial power of the intellectual capital that had been created. The well-funded neoliberal habitat has provided comfortable

careers for two generations of scholars and pseudo-scholars who migrate between academia, think tanks, K Street, op-ed pages, government, Wall Street, and back again. So even if the theory has been demolished both by scholarly rebuttal and by events, it thrives in powerful institutions and among their political allies.

THE PRACTICAL FAILURE OF NEOLIBERAL POLICIES

Financial deregulation is neoliberalism’s most palpable deregulatory failure, but far from the only one. Electricity deregulation on balance has increased monopoly power and raised costs to consumers, but has failed to offer meaningful “shopping around” opportunities to bring down prices. We have gone from regulated monopolies with predictable earnings, costs, wages, and consumer protections to deregulated monopolies or oligopolies with substantial pricing power. Since the Bell breakup, the telephone system tells a similar story of re-concentration, dwindling competition, price-gouging, and union-bashing.

Air travel has been a poster child for advocates of deregulation, but the actual record is mixed at best. Airline deregulation produced serial bankruptcies of every major U.S. airline, often at the cost of worker pay and pension funds. Ticket prices have declined on average over the past two decades, but the traveling public suffers from a crazy quilt of fares, declining service, shrinking seats and legroom, and exorbitant penalties for the perfectly normal sin of having to change plans. Studies have shown that fares actually declined at a faster rate in the 20 years before deregulation in 1978 than in the 20 years afterward, because the prime source of greater efficiency in airline travel is the introduction of more fuel-efficient planes. The roller-coaster experience of airline profits and losses has reduced the capacity of airlines to purchase more fuel-efficient aircraft, and the average age of the fleet keeps increasing. The use of “fortress hubs” to defend market pricing power has reduced the percentage of nonstop flights, the most efficient way to fly from one point to another.

In addition to deregulation, three prime areas of practical neoliberal policies are the use of vouchers as “marketlike” means to social goals, the privatization of public services, and the use of tax subsides rather than direct outlays. In every case, government revenues are involved, so this is far from a free market to begin with. But the premise is that market disciplines can achieve public purposes more efficiently than direct public provision.

Robert Bork’s spurious arguments that antitrust enforcement hurt competition became the basis for dismantling antitrust. Massive concentration resulted.

SUMMER 2019 THE AMERICAN PROSPECT 17

18 WWW.PROSPECT.ORG SUMMER 2019

owner is free to quit the program and charge market rentals. Thus public funds are used to underwrite a privately owned, quasi-social housing sector—whose social character is only temporary. No permanent social housing is produced despite the extensive public outlay. The companion use of tax incentives to attract passive investment in affordable housing promotes economically inefficient tax shelters, and shunts public funds into the pockets of the investors—money that might otherwise have gone directly to the housing.

The Affordable Care Act is a form of voucher. But the regulated private insurance markets in the ACA have not fully lived up to their promise, in part because of the extensive market power retained by private insurers and in part because the right has relentlessly sought to sabotage the program—another political feedback loop. The sponsors assumed that competition would lower costs and increase consumer choice. But in too many counties, there are three or fewer competing plans, and in some cases just one.

As more insurance plans and hospital systems become for-profit, massive investment goes into such wasteful activities as manipulation of billing, “risk selection,” and other gaming of the rules. Our mixed-market system of health care requires massive regulation to work with tolerable efficiency. In practice, this degenerates into an infinite regress of regulator versus commercial profit-maximizer, reminiscent of Mad magazine’s “Spy versus Spy,” with the industry doing end runs to Congress to further rig the rules. Straight-ahead public insurance such as Medicare is generally far more efficient.

An extensive literature has demonstrated that for-profit voucher schools do no better and often do worse than comparable public schools, and are vulnerable to multiple forms of gaming and corruption. Proprietors of voucher schools are superb at finding ways of excluding costly special-needs students, so that those costs are imposed on what remains of public schools; they excel at gaming test results. While some voucher and charter schools, especially nonprofit ones, sometimes improve on average school performance, so do many public schools. The record is also muddied by the fact that many ostensibly nonprofit schools contract out management to for-profit companies.

Tax preferences have long been used ostensibly to serve social goals. The Earned Income Tax Credit is considered one of the more successful cases of using market-like measures—in this case a refundable tax credit—to achieve the social goal of increasing worker take-home pay. It has also been touted as the rare case of bipartisan collaboration.

Liberals get more money for workers. Conservatives get to reward the deserving poor, since the EITC is conditioned on employment. Conservatives get a further ideological win, since the EITC is effectively a wage subsidy from the

j. scot t applewhite / ap images

Bill Clinton and his Treasury Secretary, Robert Rubin, were big promoters of financial deregulation.

The evidence provides small comfort for these claims.

One core problem is that the programs invariably give too much to the for-profit middlemen at the expense of the intended beneficiaries. A related problem is that the process of using vouchers and contracts invites corruption. It is a different form of “rent-seeking”—pursuit of monopoly profits—than that attributed to government by public choice theorists, but corruption nonetheless. Often, direct public provision is far more transparent and accountable than a web of contractors.

A further problem is that in practice there is often far less competition than imagined, because of oligopoly power, vendor lock-in, and vendor political influence.

These experiments in marketization to serve social goals do not operate in some Platonic policy laboratory, where the only objective is true market efficiency yoked to the public good. They operate in the grubby world of practical politics, where the vendors are closely allied with conservative politicians whose purposes may be to discredit social transfers entirely, or to reward corporate allies, or to benefit from kickbacks either directly or as campaign contributions.

Privatized prisons are a case in point. A few large, scandalridden companies have gotten most of the contracts, often through political influence. Far from bringing better quality and management efficiency, they have profited by diverting operating funds and worsening conditions that were already deplorable, and finding new ways to charge inmates higher fees for necessary services such as phone calls. To the extent that money was actually saved, most of the savings came from reducing the pay and professionalism of guards, increasing overcrowding, and decreasing already inadequate budgets for food and medical care.

A similar example is the privatization of transportation services such as highways and even parking meters.

In several Midwestern states, toll roads have been sold to private vendors. The governor who makes the deal gains a temporary fiscal windfall, while drivers end up paying higher tolls often for decades. Investment bankers who broker the deal also take their cut. Some of the money does go into highway improvements, but that could have been done more efficiently in the traditional way via direct public ownership and competitive bidding.

Housing vouchers substantially reward landlords who use the vouchers to fill empty houses with poor people until the neighborhood gentrifies, at which point the

Looking Backward government, but is experienced as a tax refund rather than a benefit of government.

Recent research, however, shows that the EITC is primarily a subsidy of low-wage employers, who are able to pay their workers a lot less than a market-clearing wage.

In industries such as nursing homes or warehouses, where many workers qualified for the EITC work side by side with ones not eligible, the non-EITC workers get substandard wages. The existence of the EITC depresses the level of the wages that have to come out of the employer’s pocket.

NEOLIBERALISM’S INFLUENCE ON LIBERALS

As free-market theory resurged, many moderate liberals embraced these policies. In the inflationary 1970s, regulation became a scapegoat that supposedly deterred salutary price competition. Some, such as economist Alfred Kahn, President Carter’s adviser on deregulation, supported deregulation on what he saw as the merits. Other moderates supported neoliberal policies opportunistically, to curry favor with powerful industries and donors.

Market-like policies were also embraced by liberals as a tactical way to find common ground with conservatives.

Several forms of deregulation—of airlines, trucking, and electric power—began not under Reagan but under Carter. Financial deregulation took off under Bill Clinton.

Democratic presidents, as much as Republicans, promoted trade deals that undermined social standards. Cost-benefit analysis by the Office of Information and Regulatory Affairs (OIRA) was more of a choke point under Barack Obama than under George W. Bush.

“Command and control” became an all-purpose pejorative for disparaging perfectly sensible and efficient regulation. “Market-like” became a fashionable concept, not just on the free-market right but on the moderate left. Cass Sunstein, who served as Obama’s anti-regulation czar,uses the example of “nudges” as a more market-like and hence superior alternative to direct regulation, though with rare exceptions their impact is trivial. Moreover, nudges only work in tandem with regulation.

There are indeed some interventionist policies that use market incentives to serve social goals. But contrary to free-market theory, the market-like incentives first require substantial regulation and are not a substitute for it. A good example is the Clean Air Act Amendments of 1990, which used tradable emission rights to cut the output of sulfur dioxide, the cause of acid rain. This was supported by both the George H.W. Bush administration and by leading Democrats. But before the trading regime could work, Congress first had to establish permissible ceilings on sulfur dioxide output—pure command and control.

There are many other instances, such as nutrition labeling, truth-in-lending, and disclosure of EPA gas mileage

results, where the market-like premise of a better-informed consumer complements command regulation but is no substitute for it. Nearly all of the increase in fuel efficiency, for example, is the result of command regulations that require auto fleets to hit a gas mileage target. The fact that EPA gas mileage figures are prominently disclosed on new car stickers may have modest influence, but motor fuels are so underpriced that car companies have success selling gasguzzlers despite the consumer labeling.

Politically, whatever rationale there was for liberals to make common ground with libertarians is now largely gone. The authors of the 2017 Tax Cuts and Jobs Act made no attempt to meet Democrats partway; they excluded the opposition from the legislative process entirely. This was opportunistic tax cutting for elites, pure and simple. The right today also abandoned the quest for a middle ground on environmental policy, on anti-poverty policy, on health policy—on virtually everything. Neoliberal ideology did its historic job of weakening intellectual and popular support for the proposition that affirmative government can better the lives of citizens and that the Democratic Party is a reliable steward of that social compact. Since Reagan, the right’s embrace of the free market has evolved from partly principled idealism into pure opportunism and obstruction.

NEOLIBERALISM AND HYPER-GLOBALISM

Robert Kuttner has been unmasking the fallacies of neoliberalism for decades.

The following are a few excerpts: “The time is overdue to reclaim liberalism, without prefixes, qualifiers, or apologies. My neoliberal friends are right to ask hard questions and to search for creative new approaches. We can certainly debate which strategies make most sense. But that effort needs to begin with a set of clear convictions and a sense of political realism. Liberalism will not gain in persuasiveness by abandoning its past achievements, its key constituencies, or its core ideas.”

—THE POVERTY OF NEOLIBERALISM, 1990

“The market solution does not moot politics. It only alters the dynamics of influence and the mix of winners and losers. The attempt to relegate economic issues to ‘nonpolitical bodies,’ such as the Federal Reserve, does not rise above politics either. It only removes key financial decisions from popular debate to financial elites, and lets others take the political blame. … There is no escape from politics.” —THE LIMITS OF MARKETS, 1997 “Tempering the excesses of the market requires public outlays and regulations.

Yet if the world is one big free market, capital tends to avoid nations that impose burdens on it. Moreover, as the founders of the postwar financial system at Bretton Woods grasped, leaving currency values and capital movements to financial speculators leads to competitive devaluations and deflation.” —CONSTRAINING

The post-1990 rules of globalization, supported by conservatives and moderate liberals alike, are the quintessence of neoliberalism. At Bretton Woods in 1944, the use of fixed exchange rates and controls on speculative private capital, plus the creation of the IMF and CAPITAL, LIBERATING POLITICS, 1998 World Bank, were intended to allow member countries to practice national forms of managed capitalism, insulated from the destructive and deflationary influences of shortterm speculative private capital flows. As doctrine and power shifted in the 1970s, the IMF, the World Bank, and

SUMMER 2019 THE AMERICAN PROSPECT 19

later the WTO, which replaced the old GATT, mutated into their ideological opposite. Rather than instruments of support for mixed national economies, they became enforcers of neoliberal policies.

The standard package of the “Washington Consensus” of approved policies for developing nations included demands that they open their capital markets to speculative private finance, as well as cutting taxes on capital, weakening social transfers, and gutting labor regulation and public ownership. But private capital investment in poor countries proved to be fickle. The result was often excessive inflows during the boom part of the cycle and punitive withdrawals during the bust—the opposite of the patient, long-term development capital that these countries needed and that was provided by the World Bank of an earlier era. During the bust phase, the IMF typically imposes even more stringent neoliberal demands as the price of financial bailouts, including perverse budgetary austerity, supposedly to restore the confidence of the very speculative capital markets responsible for the boom-bust cycle.

Dozens of nations, from Latin America to East Asia, went through this cycle of boom, bust, and then IMF pile-on. Greece is still suffering the impact. After 1990, hyperglobalism also included trade treaties whose terms favored multinational corporations.

Traditionally, trade agreements had been mainly about reciprocal reductions of tariffs. Nations were free to have whatever brand of regulation, public investment, or social policies they chose. With the advent of the WTO, many policies other than tariffs were branded as trade distorting, even as takings without compensation.

Trade deals were used to give foreign capital free access and to dismantle national regulation and public ownership.

Special courts were created in which foreign corporations and investors could do end runs around national authorities to challenge regulation for impeding commerce.

At first, the sponsors of the new trade regime tried to claim the successful economies of East Asia as evidence of the success of the neoliberal recipe. Supposedly, these nations had succeeded by pursuing “export-led growth,” exposing their domestic economies to salutary competition. But these claims were soon exposed as the opposite of what had actually occurred. In fact, Japan, South Korea, smaller Asian nations, and above all China had thrived by rejecting every major tenet of neoliberalism. Their capital markets were tightly regulated and insulated from foreign speculative capital. They developed world-class industries as state-led cartels that favored domestic production and

The failure of the neoliberal experiment makes the case both for better-regulated capitalism and for direct public alternatives as well.

20 WWW.PROSPECT.ORG SUMMER 2019

supply. East Asia got into trouble only when it followed IMF dictates to throw open capital markets, and in the aftermath they recovered by closing those markets and assembling war chests of hard currency so that they’d never again have to go begging to the IMF. Enthusiasts of hyper-globalization also claimed that it benefited poor countries by increasing export opportunities, but as the success of East Asia shows, there is more than one way to boost exports—and many poorer countries suffered under the terms of the global neoliberal regime.

Nor was the damage confined to the developing world.

As the work of Harvard economist Dani Rodrik has demonstrated, democracy requires a polity. For better or for worse, the polity and democratic citizenship are national.

By enhancing the global market at the expense of the democratic state, the current brand of hyper-globalization deliberately weakens the capacity of states to regulate markets, and weakens democracy itself.

WHEN DO MARKETS WORK?

The failure of neoliberalism as economic and social policy does not mean that markets never work. A command economy is even more utopian and perverse than a neoliberal one. The practical quest is for an efficient and equitable middle ground.

The neoliberal story of how the economy operates assumes a largely frictionless marketplace, where prices are set by supply and demand, and the price mechanism allocates resources to their optimal use in the economy as a whole.

For this discipline to work as advertised, however, there can be no market power, competition must be plentiful, sellers and buyers must have roughly equal information, and there can be no significant externalities. Much of the 20th century was practical proof that these conditions did not describe a good part of the actual economy. And if markets priced things wrong, the market system did not aggregate to an efficient equilibrium, and depressions could become self-deepening. As Keynes demonstrated, only a massive jolt of government spending could restart the engines, even if market pricing was partly violated in the process.

Nonetheless, in many sectors of the economy, the process of buying and selling is close enough to the textbook conditions of perfect competition that the price system works tolerably well. Supermarkets, for instance, deliver roughly accurate prices because of the consumer’s freedom and knowledge to shop around. Likewise much of retailing.

However, when we get into major realms of the economy with positive or negative externalities, such as education and health, markets are not sufficient. And in other major realms, such as pharmaceuticals, where corporations use their political power to rig the terms of patents, the market doesn’t produce a cure.

The basic argument of neoliberalism can fit on a bumper sticker. Markets work; governments don’t. If you want to embellish that story, there are two corollaries: Markets embody human freedom. And with markets, people basically get what they deserve; to alter market outcomes is to spoil the poor and punish the productive. That conclusion logically flows from the premise that markets are efficient.

Milton Friedman became rich, famous, and influential by teasing out the several implications of these simple premises.

It is much harder to articulate the case for a mixed economy than the case for free markets, precisely because the mixed economy is mixed. The rebuttal takes several paragraphs. The more complex story holds that markets are substantially efficient in some realms but far from efficient in others, because of positive and negative externalities, the tendency of financial markets to create cycles of boom and bust, the intersection of self-interest and corruption, the asymmetry of information between company and consumer, the asymmetry of power between corporation and employee, the power of the powerful to rig the rules, and the fact that there are realms of human life (the right to vote, human liberty, security of one’s person) that should not be marketized.

And if markets are not perfectly efficient, then distributive questions are partly political choices. Some societies pay pre-K teachers the minimum wage as glorified babysitters. Others educate and compensate them as professionals. There is no “correct” market-derived wage, because pre-kindergarten is a social good and the issue of how to train and compensate teachers is a social choice, not a market choice. The same is true of the other human services, including medicine. Nor is there a theoretically correct set of rules for patents, trademarks, and copyrights. These are politically derived, either balancing the interests of innovation with those of diffusion—or being politically captured by incumbent industries.

Governments can in principle improve on market outcomes via regulation, but that fact is complicated by the risk of regulatory capture. So another issue that arises is market failure versus polity failure, which brings us back to the urgency of strong democracy and effective government.

AFTER NEOLIBERALISM

The political reversal of neoliberalism can only come through practical politics and policies that demonstrate how government often can serve citizens more equitably and efficiently than markets. Revision of theory will take care of itself. There is no shortage of dissenting theorists and empirical policy researchers whose scholarly work has been vindicated by events. What they need is not more theory but more influence, both in the academy and in the corridors of power. They are available to advise a new progressive administration, if that administration can get

elected and if it refrains from hiring neoliberal advisers.

There are also some relatively new areas that invite policy innovation. These include regulation of privacy rights versus entrepreneurial liberties in the digital realm; how to think of the internet as a common carrier; how to Looking Backward (continued) update competition and antitrust policy as platform monopolies exert new “One of the most touchforms of market power; how to modingly innocent syllogisms RED ernize labor-market policy in the era of of neoliberal economics APPEA E the gig economy; and the role of deepONLIN holds that we optimize er income supplements as machines economic outcomes by replace human workers. letting market forces allocate resourcThe failed neoliberal experiment es; then if we don’t like the distributive also makes the case not just for betresult, we redistribute from winners to ter-regulated capitalism but for direct losers after the fact. Lovely, but who public alternatives as well. Banking, are “we”? It comes as a revelation that done properly, especially the provision winners actually resist redistributing of mortgage finance, is close to a pubsome of their (presumably earned) lic utility. Much of it could be public. winnings to losers, who are, after all, A great deal of research is done more losers, and that winners enjoy substanhonestly and more cost-effectively in tial political power.” —WHY LIBERALS public, peer-reviewed institutions such NEED RADICALS, 2001 as the NIH than by a substantially corrupt private pharmaceutical industry.

“By the late 19th century, Social housing often is more cost-effecperiodic financial panics tive than so-called public-private partand depressions mennerships. Public power is more efficient aced both society and the to generate, less prone to monopolismarket system. This got tic price-gouging, and friendlier to the displaced into nationalism, culminating needed green transition than private in World War I. The European Union’s power. The public option in health care austerity follies are recapitulating the is far more efficient than the current perverse policies of the 1920s and crazy quilt in which each layer of cominviting the same brand of know-nothplexity adds opacity and cost. Public ing backlash. In the upcoming elections provision does require public oversight, to the European Parliament, voters but that is more straightforward and disgusted with the failure of politics to transparent than the byzantine dance remedy the prolonged recession are of regulation and counter-regulation. poised to deliver big gains to nationalist The two other benefits of direct pubfar-right parties. In Polanyi’s beloved lic provision are that the public gets Budapest, where he and Ilona are burdirect evidence of government deliveried, the right already governs.” ing something of value, and that the —KARL POLANYI EXPLAINS IT ALL, 2014 countervailing power of democracy to harness markets is enhanced. A mixed economy depends above all on a strong democracy—one even stronger than the democracy that succumbed to the corrupting influence of economic elites and their neoliberal intellectual allies beginning half a century ago. The antidote to the resurrected neoliberal fable is the resurrection of democracy—strong enough to tame the market in a way that tames it for keeps.

SUMMER 2019 THE AMERICAN PROSPECT 21

After decades of near-silence, antitrust—the idea and the movement—has been reborn, midwifed by an economy warped by the concentration of business and the concentration of power.

IN THE LAND OF THE GIANTS B Y DAV I D DAY EN

I

victor juha sz

spent the day after the 2016 election at Yale Law School, Hillary Clinton’s alma mater. I was supposed to speak to a foreclosure litigation class about my book Chain of Title, and then address the local chapter of the American Constitution Society over lunch. I got through the class, but the lunch speech never came off; Yale Law students were too deep in grieving mode over the results of the election. The catered lunch was still there, so my contact and I went down to eat in this huge, empty lecture hall where I had been scheduled to speak. As I looked up, already demoralized by the day’s events, I saw the massive portrait of one of Yale Law’s former professors: Robert Bork.

What struck me in that moment, and now, is that Robert Bork had won. Not because Donald Trump was elected, although there is a direct through line between Bork’s contributions to jurisprudence and Trump’s success, as I’ll explain later. No, Bork had won long before he became nationally known as a failed Supreme Court nominee. In a very real sense, we’re living in a world Robert Bork constructed. We’re all breathing Robert Bork’s air, suffering through Robert Bork’s wage stagnation and inequality, limping through Robert Bork’s twisted version of democracy.

Robert Bork changed U.S. policy toward concentrated corporate power without ever serving as an elected official, without altering a single line of text in any statute. His book The Antitrust Paradox simply reinterpreted the Sherman Antitrust Act as entirely concerned with consumer welfare, defined narrowly as efficiently delivering goods at low prices. He had written the concepts of democracy or economic liberty or protection of markets completely out of the story.

After a decades-long crusade, aided by a network of University of Chicago scholars, Reagan administration appointees, judges, corporate lobbyists and executives, and even some willing Democrats, Bork got the antitrust establishment to adopt his circumscribed, dangerous vision.

Federal policy on monopolies, once a subject of public

interest, became a cloistered venue for economists, who build models singing the praises of the efficiencies derived from corporate combinations.

The next 40 years tell the rest of the story. We’ve seen economic gains funneled to the very top; monopolization of core industries in technology, health care, communications, defense, and agriculture; a completely anomalous situation of soaring corporate profits amid low private and public investment; a degradation in quality service, because monopolists don’t have to compete for your business to thrive; a slow death of entrepreneurship and innovation, with incumbents sitting on their personal fiefdoms and talented people unable to get their ideas into the marketplace; and a democracy that responds only to the very few.

Whether you’re an environmentalist trying to save the planet from devastation, or a fast-food worker in need of a living wage for your family, or a student survivor of a mass shooting who wants to save lives, you’re fighting concentrated corporate power. If you want to travel on an airline, or sign up for cable and internet, or drink a beer, or get treatment for illness, you’re transacting with concentrated corporate power. You can see concentrated corporate power’s effects in a supermarket aisle, with shelves and shelves full of brands and products that, if you look at the name of the corporate parent on the back, turn out to be from a

SUMMER 2019 THE AMERICAN PROSPECT 23

It was Robert Bork who wrote the concepts of democracy and economic liberty and protection of markets completely out of the antitrust story.

handful of companies. We have the illusion of choice, but the reality of a captured economy.

And yes—the presence of Too Big to Fail banks that crashed our economy and then held up the political system for a bailout convinced many Americans that we had a rigged system, beliefs ripe for a right-wing demagogue to exploit. Moreover, a primary reason Trump sneaked through the Electoral College despite losing the popular vote is that corporate concentration has led to a regional hollowing out, where a few superstar cities with dominant firms have pulled away from the rest of the country, leaving despair in their wake. Startups are heavily concentrated in big cities, while everywhere else, chain stores have replaced mom-and-pop businesses, finance comes from Wall Street instead of local lenders, and money flows out of these regions instead of into them. That too is a monopoly problem.

There was a time in America, during the last Gilded Age, when monopoly power played a central role in our political debates. The 1912 election presented multiple solutions for the problem of monopoly, and Woodrow Wilson (and his top adviser, Louis Brandeis) won, with their economic vision of dismantling concentrated power and democratizing corporate America—a project largely halted by our entry into World War I. But today, after decades of near-silence, antitrust—the idea and the movement—has been reborn, midwifed by an economy warped by the concentration of business and the concentration of power. There hasn’t been this much talk about monopoly on the presidential campaign trail in over 100 years.

Bernie Sanders, in his June speech defending democratic socialism, stated: “We see huge private monopolies— operating outside of any real democratic oversight and often subsidized by taxpayers—with the power to control almost every aspect of our lives.” Sanders has little in common with centrist John Hickenlooper, who has antagonized Sanders supporters by excoriating their socialist beliefs. But the former Colorado governor, too, has decried “competition-strangling mega-firms in many sectors after decades of erosion in antitrust enforcement.”

This unanimity spans the full spectrum of the Democratic field, from John Delaney to Amy Klobuchar to Elizabeth Warren, whose proposal to break up tech giants has galvanized talk of anti-monopoly policy in the 2020 race.

She’s backed that up with plans to bust up Big Ag, and has long sought to take on big banks. I interviewed Warren about her anti-monopoly work for this section (see page 43).

The broader political system is coming around, too. The Federal Trade Commission and the antitrust division of the Justice Department, in what seemed like a prelude to longdelayed action, announced they had divvied up Facebook and Amazon (FTC) and Google and Apple (DOJ) for future

24 WWW.PROSPECT.ORG SUMMER 2019

investigations. In early June, the antitrust subcommittee of the House Judiciary Committee held hearings on the market power of tech platforms and its effect on a free press. This was “the first significant antitrust investigation undertaken by Congress in decades,” noted subcommittee chair David Cicilline (D-RI). The hearings, along with the investigations, were bipartisan.

So was a remarkable hearing in the House Oversight Committee in May about a military spare-parts contractor called TransDigm. Committee members ranging from Alexandria Ocasio-Cortez on the left to Freedom Caucus leader Mark Meadows on the right successfully demanded that the company return $16.1 million in excess profits gained through controlling a monopoly on small parts and marking them up, in one case, by as much as 4,451 percent.

This special section of The American Prospect highlights several sectors where monopoly power has run amok, and seeks to understand how these markets went awry and what we can do about it. We examine how the digital platforms control vast amounts of online advertising, peeking under the hood of the process to show the linkages between the loss of our privacy and the concentration of market power. We delve into the insulin market, questioning how a 100-year-old drug could possibly have tripled in price in a decade. We explain the big banks’ latest maneuver to frustrate regulation by touting financial literacy programs in an effort to displace the burden for fair dealing onto the individual customer. And we show how antitrust laws have been distorted to reinforce the power of big business, while preventing associations of workers or small producers from banding together to exercise power on their own.

The destruction of antitrust policy and the resulting extreme concentration of market power is one more example of the disgrace of neoliberal ideology—the claim that markets can regulate themselves in the public interest. In a concentrated, laissez-faire economic system, regulation does not go away: But private businesses in effect become the regulators, and instead of democratic decision-making we get decisions handed down from the corporate boardroom. The result is naked, predatory self-interest. We intend to stay on the case, as we keep exploring the multiple failures of neoliberal ideology when it is applied as policy.

The new awakening on the campaign trail, among regulators, and in the halls of Congress on the dangers of monopoly power won’t get very far, however, unless it’s matched by a wave of public indignation. Historically, the ability to counteract monopolies has come not from Washington but only when the public demands that their representatives put America back on track. The first step to pursuing a sustained battle lies in understanding the full scope of the challenge that corporate concentration poses. Let this section be part of that guide.

MONOPOLY NATION

How Digital Advertising Markets Really Work They’re shaping our market, our democracy— our entire reality. If we’re going to fix them, we need to understand them.

B Y DI N A S RI N I VASAN

A

rapid-fire series of announcements in June foreshadow an increase in antitrust scrutiny of the tech companies that shape our economy.

Nancy Pelosi summed it up on Twitter: “The era of self-regulation is over.” The House Judiciary Committee has opened an investigation into competition in digital markets, while the Department of Justice and Federal Trade Commission have divided authority between themselves over Alphabet (Google), Amazon, Apple, and Facebook. The DOJ will oversee any antitrust investigation of Google and Apple, leaving Facebook and Amazon to the FTC. Google and Facebook are presumed to be the focus.

The momentum to do something has been building, and for good reason. Consumers get to search the internet and connect with friends for free. But the cost is surveillance— across the whole web. This surveillance has concentrated the powers of influence and persuasion in the hands of two companies, with the sanctity of our democracy as the price.

Congress recently investigated Russia’s use of Facebook advertising to influence our 2016 presidential election, and is currently investigating whether Google is partly to blame for the wholesale decline of news publishers in America.

Even this is not the whole story. With the companies’ revenues a function of sucking up more and more of users’ time, their game becomes one of addiction. This may be why, at the World Economic Forum at Davos last year, George Soros branded them as a “menace” to society, and Salesforce CEO Marc Benioff called on coun-

tries to regulate them like they do the tobacco companies.

But what exactly do we need to regulate or investigate from an antitrust perspective? We know Google and Facebook as “tech” companies that let consumers connect with their friends, find information, share photos, and get directions. In each of those product markets, Google and Facebook have high, persistent market shares. We should ask why. Have Google and Facebook been keeping competitors out by engaging in exclusionary conduct, as search competitors (like Yelp) have complained of?

But Google and Facebook don’t only have dominant positions in search and social networking. They make almost all their revenues selling advertising (Google, 86 percent; Facebook, 99 percent), and they have crushed the competition along the way, becoming a veritable duopoly in another critical market—the digital advertising market.

Jointly, they control around 60 percent of the $129 billion that will be spent on digital advertising in the U.S. in 2019, according to a study by industry publication eMarketer. Even more indicative of their power is the fact that together they capture the vast majority of new dollars that enter the market.

The online ad market as a whole is growing (expected year-over-year growth of 20 percent), but growth is not a market trend. Outside of Google, Facebook, and a few others, the rest of the market, which includes thousands and thousands of independent news publishers (that depend on digital advertising as their primary source of revenue), will shrink by 11 percent.

If we are going to start understanding what the competition concerns are in the digital advertising industry—and why these companies invariably cause consumers privacyrelated harms—we need to understand how online advertising really works. We need to stretch our fluency with tech language, and better understand how and why, precisely, these companies have such persistently high margins that competition is currently unable to break through.

We shouldn’t let the complexity of advertising markets blindside us. Understanding the mechanics of these markets is also the key to enforcing existing antitrust laws.

Consumers get to search the internet and connect with friends for free. But the cost is surveillance— across the whole web.

HOW DIGITAL ADVERTISING WORKS

Advertising campaigns used to be planned and managed by media buyers—usually 22-year-old, newly graduated communications majors. If that media buyer needed to help a car manufacturer reach men looking to buy a car, she might place an ad in Car and Driver, or in the automotive section of the newspaper. Advertising used to be something you could place, count, then see in the front cover spread of a magazine.

But this is not digital advertising today. Digital advertising is automated, data-driven, and opaque in its mechanics.

SUMMER 2019 THE AMERICAN PROSPECT 25

The prices that any company is able to fetch for its ads depend on two crucial factors: the ability to identify who is loading the page, and the ability to then connect the user’s identity with more information about the user.

That 22-year-old communications major has had to make way for data scientists, mathematicians, and computer programmers who, behind the scenes, use statistics, calculus, and linear algebra to optimize advertising campaigns, by micro-targeting users and constantly tweaking algorithms.

Does that car manufacturer still want to reach men looking to buy a car? A data scientist may tell them the optimal target is a 39-year-old man, carrying on an extramarital affair, who’s on the brink of divorce. They can model this hypothesis (and prove it works), and advertising companies like Google and Facebook can put that into execution, finding ways to home in and target those types of people online.

When you go to a website and load a page, in the milliseconds that it takes for that page to load, there are realtime auctions running in the background that determine which ads to load on your page. Almost all online ads are delivered in this way, where highly complex auction markets make their money by competing on who can better track users and invade their privacy more thoroughly.

The targeting begins the moment you as a reader visit any website. Typically, your IP address, your location, and the URL of the page you are on are swiped from your browser without your explicit knowledge, and shared with advertising companies that run these ad auctions. The goal, of course, is to build as specific a portrait about you as possible—by linking your device with your identity—and cookies are a common tool for doing so.

A “cookie” is a small text file that a site can install on your computer when you visit. The text file fingerprints your device with a unique identifier, or “cookie ID” (such as 12345qwert). If the website knows your real identity (for example, if you log on to the site with your real name), the company can link it to your cookie (here, 12345qwert) and begin to gain an advantage in determining which ads to load onto your page.

For example, if you’re on the hypothetical URL newspaper.com/how-to-fight-melanoma, this probably means you’re reading an article about melanoma. Companies might use that information to make a prediction about whether you or someone you love may have cancer. And they most certainly use that info to determine which ads to load onto your page.

The prices that any company is able to fetch for its ads depend on two crucial factors: the ability to identify who is loading the page, and the ability to then connect the user’s identity with more information about the user.

Imagine a person visits espn.com to read an article about the upcoming Super Bowl. Assume first he doesn’t log on to the site, and blocks his browser cookies, so maybe the website he is visiting can’t know who he really is. An advertiser can nonetheless bid on the opportunity to display an ad to this anonymous reader. Maybe the slot goes

26 WWW.PROSPECT.ORG SUMMER 2019

to a beer brand that wants to generally reach people who like football. Perhaps the going price is a $2 CPM (cost per thousand) and the ad gets sold at this price (meaning, this is the clearing auction price).

But you’re not usually anonymous when you’re online, even when you think you are. Again, advertising companies might know your identity because you log in, or because you are using a browser that allows tracking. Now it’s not simply an anonymous person loading a page about the Super Bowl, it’s “Michael Greenberg,” of Wichita, Kansas.

Now, companies can combine Michael’s identity with other commercially available datasets in real time. For example, they might stitch Michael’s identity with the fact that he makes $1 million-plus per year, which means that they can match Michael with an ad for a private jet service instead of a Bud Lite. The private jet ad might sell at a $200 CPM as opposed to the $2 CPM beer ad targeted to an anonymous user.

“The exact same ad, on the same website, at the same time, could be worth vastly different amounts to two different buyers depending on how much they know about the consumer being targeted,” explains Ari Paparo, now founder and CEO of advertising company Beeswax and a former Google exec. “User data is everything.”

Advertisers gain an even better advantage when they’re able to track what users do as they move from site to site, app to app, site to app, and vice versa, which is exactly how Facebook and Google operate (and exactly the type of information traditional publishers don’t have).

If a company that sells online ads can know what their readers are reading on other sites, then they can target the users based on that information when the user returns to their own site. For example, say Michael visits CNBC ’s website in the mornings and reads about the markets, but visits The New York Times in the evenings and only reads the book review section. CNBC knows Michael is someone who follows the markets, and might monetize his view at a $30 CPM. The Times knows that Michael is someone who likes to read books so might only monetize Michael at a $10 CPM. If the Times can somehow find out that Michael is reading CNBC in the mornings, then when Michael visits the Times book section in the evening, the Times can target him as someone who follows the markets and monetize him at $30, too.

Would CNBC want to share with the Times what Michael reads on cnbc.com? Of course not. The two are competitors on the advertising side of the market. If CNBC is selling its audience of financial readers at a cost of $30, and the Times can copy CNBC’s readers and their reading patterns, then the Times could theoretically undercut CNBC and sell ads targeted to CNBC financial readers for, say, $20 instead of $30.

But publishers like the Times and CNBC have no choice

c ar sten br andt / istock by get t y

MONOPOLY NATION but to share this information with Facebook and Google.

How, might you ask, does Facebook currently get this data from news publishers that are also advertising competitors? Well, Facebook has a number of derivative products that flow from the social network, including “Like” buttons and log-in tools. Facebook licenses Like buttons to publishers so that their readers can “like” and then “share” news stories across the Facebook social network. But Facebook now conditions these licenses on the ability to track publishers’ readers, whether the readers click the Like buttons or not, and Facebook can now use publishers’ reader data to sell its own ads.

Google, which now tracks users on over 70 percent of the top one million sites, also uses its ability to track users across the internet to extract an advantage in advertising markets. Google tracks users via its analytics and ad-serving products, which Google consolidated and rebranded last summer as the Google Marketing Platform. Google was actually the first of the two companies to consolidate products under a rubric of privacy.

The implication of all this is that the money that Google and Facebook can make selling advertising goes well beyond what other ad sellers can demand in the market.

The Big Tech duopoly can track billions of users across millions of sites and mobile apps, creating longitudinal profiles on users. News publishers simply cannot compete with that kind of an informational advantage.

But there is another thing going on in these markets that explains the duopoly in the advertising market. When most people think about Google and Facebook, they think the companies make so much money by selling ads on their own properties—Google search, Gmail, the Facebook social network, Instagram, and so on. This is partly true.

Google and Facebook also run auctions through which publishers now sell their own advertising.

Unlike in finance, there are several auction markets where digital ads trade. Anyone can create one. But Google and Facebook make sure their own advertising inventory (YouTube, Facebook) can only be bought through their own, proprietary auctions. Google made almost $20 billion last year from selling other companies’ ads. This is why Google today is the largest seller of advertising, globally, period.

WHAT CAN BE DONE

If we review the history of these markets, and how they evolved, we see how this was not always the case. Think back to 2004, when the social network Facebook entered the market as a privacy-centered alternative to MySpace.

“We do not and will not use cookies to collect private information from any user,” the company’s privacy policy of that era proudly assured its fledgling community of college

students. For ten years, competition in the social-network market constrained Facebook’s ability to surveil users across the sites of other news publishers to juice Facebook’s internal ad targeting. For example, when Facebook tried to start tracking users outside of Facebook itself in 2007, consumers pushed back strongly, and Facebook retreated.

It was competition that held Facebook back and protected the privacy of both users and news publishers. Even in 2007, MySpace still had twice as many users as Facebook. And it wasn’t just Facebook that was mindful of user privacy in a competitive market. Reflecting on how this dynamic similarly constrained MySpace in 2007, an industry analyst commented to CNN Money: “News Corp. and Fox [which purchased MySpace in 2005] recognize the importance of allowing people to be alone with their friends so they do not feel like they are being looked at by Big Brother. They understand how many competitors they have nipping at their heels right now, so they are doing everything they can not to alienate their users.”

But after other social networks folded, Facebook’s power grew. In June of 2014, Google announced it would pull its social network competitor Orkut from the market, and that same month, Facebook announced it would start tracking users on millions of other sites and apps, including news sites.

It was at this moment that for Facebook, the monopoly began and consumer privacy took a precipitous decline.

This history is why I made the case in an academic article earlier this year that Facebook’s antitrust fact patterns here have everything to do with privacy. And their monopoly power doesn’t just hurt consumers from a privacy perspective, it hurts competitors in digital ad markets too.

What are publishers to do? They need to access this era’s only major social network to distribute their content.

There are no competitive social networks of any scale that offer better terms.

Google and Facebook are rolling out new initiatives to seem better about privacy, but often these are simply smoke screens using the new language of “tech” to actively obscure and distract from what they are really doing and how they really make their money.

Take Mark Zuckerberg’s announcement in March that Facebook’s new focus would be to build a “privacy-focused messaging and social networking platform.” The word

The exact same digital ad, on the same website, at the same time, has a different value depending on the consumer being targeted.

SUMMER 2019 THE AMERICAN PROSPECT 27

Despite the promise of privacy, Facebook still uses the metadata of encryped conversations to track and target consumers for advertising purposes.

merger. When Facebook made their case to regulators to approve the Instagram acquisition, they said Instagram was not a competitor, it was a photo-sharing site for smartphones (even though internally Facebook was talking about acquiring Instagram to eliminate competition). “It takes years of education to reach a conclusion this absurd; every teenager knew that Instagram was taking users from Facebook,” says Tim Wu, a frequent critic of tech monopolies and author of The Curse of Bigness. But the strategy of distracting to gain advantage is working.

The advertising industry has gone through a cataclysmic technological metamorphosis, and it is not just older politicians who are struggling to keep up with the change.

Some of the biggest players at the brute end of this are the advertising holding companies, the big four publicly traded conglomerates that own advertising agencies globally, and control the marketing budgets of the largest brands in the world. They include my former employer WPP, and Publicis, IPG, and Omnicom, and they control the decisioning and budgets of the likes of the U.S. Army, Ford, Daimler AG, Volkswagen, Mars, and countless others. Internally, these companies have to grapple with finding new relevant

28 WWW.PROSPECT.ORG SUMMER 2019

talent, and re-educating their workforce. Over the last two years, we’ve seen significant declines in their market caps.

The upstart companies in Silicon Valley have found their competitive advantage usurping the privacy of a citizenry at large, and the benefits of this usurpation funnel to a small tech elite based on the coasts. While consumers benefit from these “free” products, there are questions about the structure of these new economies. Facebook and Google are incentivized to make their platform as addictive as possible, so they can gather more data, and sell more ads. The average American now spends almost an hour per day on Facebook properties. But the U.S. economy also struggles with productivity declines and wage stagnation.

One way to unhook Facebook and Google’s business model over the public at large is through more competition.

That’s why antitrust has been the focus of conversation in the U.S. and across the globe. Consumers can pay for ad-free video subscription services like Spotify Premium or Hulu—why can’t they in search or social networking?

Why are these markets stuck? An antitrust investigation or lawsuit could result in a specific order, with Google and Facebook being rendered unable to track consumers across the web without their opt-in consent. Such an antitrust remedy could rein in Google and Facebook’s power in digital advertising markets far more quickly and drastically than could breakup alone.

Legislation could separately deal with the privacy problem. Senator Josh Hawley (R-MO) has proposed a “Do Not Track” list that would prevent companies like Google and Facebook from tracking an individual’s online activities, and from creating profiles of those individuals from various datasets. Users who opt in to the Do Not Track list could not be discriminated against with diminished services from the platforms.

Once we lift the hood on how Google and Facebook make money, and better understand how digital advertising markets tick, the competition issues that need to be examined under antitrust law become clear. When the FTC cleared Google’s acquisition of DoubleClick in 2007, the FTC largely brushed off privacy issues on the grounds that competition policy was not the right place for privacy concerns. But if we understand that user identity and user data are drivers of ad pricing, and that the terms that Google and Facebook are able to extract from independent publishers drive the health of the wider news ecosystem, it is impossible to continue to make this argument today.

Dina Srinivasan, a former advertising executive and antitrust scholar, is the author of “The Antitrust Case Against Facebook,” published in the Berkeley Business Law Journal. She advises on the economics of digital advertising markets and competition issues in the space.

c h a r l e s k r u pa / a p i m a g e s

“privacy” appears 22 times in Zuckerberg’s 3,000-plus word post. We are led to believe Facebook’s future is about privacy because it will encrypt more messages that consumers send to each other. But the encryption of conversations is a distraction. Facebook still uses the metadata of those communications (whom you called, when, from what location) to track and target consumers for advertising purposes. If we are concerned about reining in Facebook’s power to influence, encrypting messages doesn’t do that.

The language of distraction can also push through a

MONOPOLY NATION

The Insulin Racket

Insulin is a 100-year-old drug whose wholesale price has tripled in ten years. The reasons why explain everything wrong with America’s broken prescription drug market.

B Y NATALI E S HU RE

steve k arnowski / ap images

O

n June 22, 2017, Alec Raeshawn Smith, a recently promoted restaurant manager with Type 1 diabetes, left his local pharmacy empty-handed. He’d gone in to pick up a month’s worth of insulin supplies, which he assumed would set him back around $1000—the amount he and his mother Nicole Smith-Holt had budgeted the month before when he turned 26 and, under Obamacare rules, had to drop off her insurance coverage.

For Alec, that price was already steep: Even with his promotion, he was making $35,000 a year with no benefits. He and Smith-Holt had combed through Minnesota’s Obamacare marketplace for months in search of a decent plan, but the affordable ones all had sky-high deductibles.

That meant that he’d be paying full price for his insulin for months before his junk insurance kicked in, on top of hundreds of dollars in monthly premiums—sucking up some 80 percent of his take-home pay once he paid the rent.

So he made a rational decision: He’d go uninsured, save the cost of the premium, and just pay for his meds out of pocket, while racking up work experience that could serve as a springboard to a better position with health insurance.

As it turned out, it wouldn’t have made a difference if Alec had been insured or not: The price of his insulin had apparently gone up again to $1300, which was more than he had in his bank account. Perhaps he felt embarrassed, too proud to borrow money so soon after finally moving out of his parents’ place. Perhaps he didn’t want anyone to worry about him, and figured he could keep his blood sugar down until payday.

So he left. He never told his mother and he never told his girlfriend. Five days later, he was dead.

The autopsy later determined the cause of death to be

ketoacidosis, a complication of diabetes typically brought about by not taking insulin. Recounting hearing the news of her son’s death, Smith-Holt didn’t quite put everything together at first, wondering if Alec had inadvertently taken too much insulin, inducing hypoglycemic shock. “Rationing insulin never even crossed my mind,” she told me. “It wasn’t until later, when the medical examiner said to me that Alec had absolutely no insulin left in the apartment whatsoever—every single pen he picked up was completely empty. And he was amazed by how many pens looked like they had been tampered with … like he was trying to extract whatever little bit was left in them.”

In the two years since her son’s death, Smith-Holt has fought alongside diabetes patients and their allies to make insulin the public face of the drug-pricing crisis. The story of how an otherwise healthy young adult could die of a $300 shortfall in an apartment full of mutilated insulin cartridges in the richest country on earth is a hundred years in the making. It’s a story of what happens when a country delegates both the provision and financing of lifesaving drugs to an oligopolistic private industry, and then prioritizes that sector’s business interests above patients. If the grassroots organizers of the #insulin4all campaign get their way, it will become the story of how the diabetes community can force a political reckoning with the ever-rising prescription drug costs that dominate their lives.

TODAY, SOME 30 MILLION

Americans are living with diabetes, a chronic disease caused by the pancreas being unable to properly metabolize carbohydrates, leading to high blood sugar levels. Likely cases—judging by a telltale constellation of symptoms including weight loss, frequent urination, and insatiable thirst—are speckled throughout medical texts dating back to antiquity, but were virtually untreatable until the 20th century. For most of its history, a diabetes diagnosis carried with it a death sentence within mere months, a duration that could be prolonged only slightly with near-starvation diets that kept blood sugars low by practically eliminating food (the tactic Holt imagined her son must have tried when he couldn’t afford his meds).

Fortunately, a modern diabetic’s outlook is far sunnier.

A patient can expect to live for decades if their disease is properly managed. For seven million Americans, treat-

Nicole Smith-Holt and her husband recalled how their son Alec died of diabetic complications in 2017, during a news conference at the Minnesota Capitol in St. Paul.

SUMMER 2019 THE AMERICAN PROSPECT 29

Eli Lilly’s control of the insulin market in the U.S. has led to arbitrary price hikes for a drug that can mean life or death for people with diabetes.

your entire life just as you do today, but you have to play a game of Tetris 24/7 on your cellphone.”

It’s not a game that T1 patients can opt out of: Just a few days without insulin can be deadly, or trigger severe complications like gangrene or renal failure. But its crippling cost makes a mechanized routine increasingly difficult to pull off. Most T1 diabetics use two or three vials of fastacting insulin a month, plus a secondary basal insulin, on top of any necessary supplies. But the wholesale prices of the most common insulins tripled from 2007 to 2017.

The three pharmaceutical companies that manufacture insulin—Lilly, Novo Nordisk, and Sanofi—rake in billions in profits annually from insulin sales alone, with the U.S. market accounting for 15 percent of global insulin users but almost 50 percent of its worldwide revenues. Insulin ranks among each company’s top-selling drugs; one BMJ study showed that prices could be slashed considerably and the drugs would still be profitable.

Media coverage tends to frame skyrocketing insulin prices as a betrayal of the miracle drug’s origins, the definitive account of which was offered by historian Michael Bliss in his 1982 classic The Discovery of Insulin. In 1922,

30 WWW.PROSPECT.ORG SUMMER 2019

months of exhaustive experimentation surgically removing dogs’ pancreases to induce diabetes and re-injecting them with an extract made from their former organs finally vindicated the efforts of an orthopedist named Frederick Banting and his small University of Toronto lab team. Not only did their extract keep diabetic dogs alive far longer than the unfortunate control group, but the injections also revitalized human patients so close to death they’d consented to participate in small-scale trials as a last resort.

Realizing the significance of their drug, three members of the Toronto team sold their patent rights to the university for $1 apiece in an effort to protect its integrity from greedy commercial enterprises. That included a pharmaceutical company in Indianapolis called Eli Lilly and Company, which had expressed interest in manufacturing insulin for humans as soon as they caught wind of the Toronto team’s research.

Having refused to cooperate with Lilly, Banting and his colleagues believed they were protecting future access.

Determined to prevent insulin from becoming a business racket, the Toronto team kept Lilly at bay through months’ worth of repeated attempts to collaborate. The university had been doing its best to manufacture insulin on its own, but struggled to meet the demands of even the small group of patients participating in early trials. What limited supply it did produce was subject to shortages and contamination, which Lilly reps were all too happy to emphasize in making their case that a professional, scaled-up manufacturing operation was in the best interests of diabetes patients. Eventually, Banting and his team reluctantly agreed: Lilly was granted exclusive rights to manufacture and distribute insulin in the United States for one year, with European rights going to a Danish firm called Nordisk (later merged to become Novo Nordisk, as it is known today). Thereafter, both firms were entitled to patent any future innovations on their products, and competitors were hypothetically free to enter the market.

FOR NEARLY A HALF-CENTURY, the price stayed relatively

affordable for U.S. patients. Arguably, it was precisely this lack of price-gouging that allowed Lilly to maintain de facto dominance over the U.S. insulin market even after their period of exclusivity had ended: Rival firms had no real incentive to compete with an already entrenched, scaledup manufacturer whose prices were already relatively low.

Moreover, there was reason to believe the Department of Justice was prepared to intervene on behalf of exploited diabetes patients, after leveling small antitrust violation fines in 1941 to three players in Lilly’s insulin supply chain.

The delicate circumstantial balance that kept insulin prices low for years began to wobble in the 1970s, when a broader neoliberal turn in politics set the stage for the pharmaceutical industry to become the single most profitable

darron cummings / ap images

ment entails several daily doses of insulin, a synthetic version of the hormone excreted by a healthy pancreas. For Type 1 diabetes patients, uninterrupted access to insulin is especially critical. Their health outcomes depend heavily not only on taking proper doses, but on minimizing variance between blood sugar levels—an imperative that demands a vigilant routine of measurement and monitoring, often facilitated by supplies and multiple variations of insulins. As Type 1 patient Laura Marston described to me the ongoing balancing act: “Imagine you have to live

MONOPOLY NATION sector in the American economy. The Institutional Patent Agreement program introduced by the National Institutes of Health in 1968, as well as the Bayh-Dole Act of 1980, created pathways for private entities to patent and commercialize public research. This emboldened the profit motive within science. Meanwhile, mid-century breakthroughs in DNA sequencing were on the cusp of paying off in the form of groundbreaking new drugs, at the very moment that both speculative investment and maximizing shareholder value became Wall Street dogma. All of this sparked staggering investment in pharmaceutical companies.

For insulin manufacturers, recombinant DNA technology promised to shake up a market that had been relatively placid since the days of Frederick Banting. Insulins had become more purified and precise, but remained fundamentally similar to the pork and bovine versions produced since the 1920s. That changed in 1982, when Eli Lilly debuted Humulin—the first so-called “human insulin,” made out of bacteria instead of animal pancreas. Just as it was going off-patent, the company introduced a new fastacting insulin called Humalog in 1996. Patent evergreening is also common; Sanofi, whose insulin product is called Lantus, has filed 74 different patent applications on just that one drug, meaning it could go without competition for 37 years. As of 2014, the top three insulin manufacturers held 19 active patents on insulins alone.

While research suggests that the new, more expensive insulins offered minimal benefits for many users (particularly those with Type 2 diabetes), Lilly’s aggressive marketing campaigns—combined with partnerships with newer, more convenient delivery devices—convinced a majority of health-care providers to prescribe the costliest available medicines. With back-to-back exclusivity patents precluding generic competition for decades, insulin prices began to climb. In 1996, diabetes patient Laura Marston recalled her mother paying $25 for her first-ever vial of Humalog; the same dose runs $275 today.

If it’s difficult to pinpoint the exact moment the pricegouging began, it’s easy to see how it ends: with patients like Alec Smith dying of arbitrary price hikes that break already stretched budgets. Since her son’s death, Nicole Smith-Holt told me, she’s met five or six other parents who lost diabetic children at age 26, after they’d become uninsured. Other people she met were fortunate enough to get the drugs they needed, but still described how dramatically ever-rising insulin costs impacted their lives. “You know, I’ve heard of people having to sell all their possessions or relocate where rent is more affordable,” Smith-Holt recounted. “I’ve heard of people staying at jobs they don’t want just to have insurance coverage. I’ve heard of people dropping out of college, I’ve heard of people cashing in their retirement just to keep their spouse or child alive …

I’ve heard of people my age having to move in with their children because they can’t afford to live independently with the rising cost of insulin. I’ve heard of people reaching out through the black market and buying questionable products in dark alleys.”

Such desperation isn’t just anecdotal: One study recently published in JAMA Internal Medicine found that one in four diabetes patients reports rationing their insulin due to costs. Lead author Dr. Kasia Lipska told me her study was inspired by increasing complaints from clinic patients, who would beg her not to prescribe higher doses for financial reasons. “It’s a terrible, terrible situation,” she told me by phone. “The conversations are heart-wrenching because the truth is as a clinician I have few choices. It makes me so angry because I wish I could do more.”

And however striking her study’s results may have been, Lipska stressed that they didn’t capture the extent of her subjects’ suffering: “That one-in-four number only reflects people who actually used less insulin because of costs, but other people make trade-offs,” she explained. “They may be spending less on food or other necessary items, even on other medications.”

THE ASTRONOMICAL COSTS STRAINING Lipska’s

patients and all the others I’ve talked to stem from a very obvious problem. In the United States, drug companies have near-unilateral power to name their own price, and insulin manufacturers don’t face significant competition that might compel them to lower prices. In other industrialized countries, regulatory bodies are more stringent when it comes to which drugs they approve for sale, and aggressively negotiate prices with manufacturers. In the United States, drugmakers need only to prove their drug effective against a placebo rather than existing products, and the government is far less involved in pricing. In the case of Medicare Part D, government negotiating of drug prices is explicitly illegal.

Instead, U.S. drug-pricing negotiations are the responsibility of individual insurance plans, of which there are thousands. Each of them has relatively little leverage against price hikes, which drug manufacturers have every reason to push as high as possible to pay off shareholders, whose investments were predicated on the promise of some of the highest returns in the stock market. If you’re a pharma exec whose goal is to maximize short-term profits, then jacking up prices on a drug like insulin—whose millions of patients are practically captive—is a sensible strategy.

Because private insurers are fundamentally ill equipped to negotiate drug prices, another for-profit industry began to rise in the late 1970s promising to do better. So-called pharmacy benefit managers, or PBMs, act on behalf of multiple insurers to negotiate with drug companies as a

If it’s difficult to pinpoint the exact moment the price-gouging began, it’s easy to see how it ends: with patients like Alec Smith dying of arbitrary price hikes that break already stretched budgets.

SUMMER 2019 THE AMERICAN PROSPECT 31

32 WWW.PROSPECT.ORG SUMMER 2019

care costs onto policyholders themselves. Average deductibles have quadrupled in the past decade, nearly half of all people with employer-based insurance have highdeductible plans, and co-pays have risen or been replaced with coinsurance, a frequently higher percentage of the overall price. Taken altogether, the deterioration of insurance quality and rising list prices mean that individual patients are bearing more and more of the brunt of high drug costs. In other words, $275 isn’t just the jumping-off point for an opaque back-and-forth negotiation between Lilly and insurers; it’s the amount that untold numbers of diabetics pay out of pocket for a few days worth of medication to stay alive.

At this point, defenders of the pharmaceutical industry would likely point out that high drug prices are a necessary evil to recoup R&D costs and facilitate innovation. Extremely high industry profit margins, the fact that pharmaceutical marketing budgets exceed those for R&D, and the relative lack of genuine drug innovation in recent years all cast doubt on this argument. But Lipska is particularly skeptical of it when it comes to insulin. “We’re not even talking about rising prices for better products here,” she said. “I want to make it clear that we’re talking about rising prices for the same product … there’s nothing that’s changed about Humalog. It’s the same insulin that’s just gone up in price and now costs ten times more.”

And even when pharma companies do invest in R&D (Lilly sank at least $40 million into developing what would become Humulin, according to a 1980 article in Science), they depend on the vast annals of knowledge unlocked by publicly funded scientific discovery. Government is often the only entity with the will to pursue the long, careful research that would make quarterly profit–seeking executives bristle. “There’s a highly symbiotic relationship between publicly funded science and industry-developed innovation,” explained Dr. Jing Luo, the lead author on several papers on insulin pricing. “Recombinant human insulin could not have been introduced by Eli Lilly without the discovery of recombinant DNA technology. Where does that come from? None of it is possible without sequencing DNA , or the technologies used to do science around DNA … you can’t do innovation without standing on the giants of publicly funded science.”

In a statement, a spokesperson for Novo Nordisk said, “We know that as the healthcare

victor juha sz

group, which theoretically gives them more leverage to buy in bulk. But there’s mounting evidence that this isn’t how PBMs work—because they often get paid in rebates from drug manufacturers, they’re often incentivized to keep prices high, the opposite of what they exist to do. Lilly has claimed that, despite rising prices, the price it has been paid for Humalog fell over the past five years, because of all the rebates captured by the PBMs. Finally, as insurance companies feel the squeeze of rising drug and health-care costs and strive to maximize profits of their own, they’ve shifted more and more health-

MONOPOLY NATION system has changed a growing number of Americans with diabetes struggle to pay for their healthcare, including medicines made by us. As a company focused on improving the lives of people with diabetes, this is not acceptable … we are focused on doing all we can so these patients can afford their medicine.” Lilly and Sanofi did not respond to a request for comment.

There is one proven method for lowering prices: fomenting robust generic competition after the drug goes offpatent. Lilly’s patent on fast-acting insulin expired in 2014, but because insulin is a “biologic” drug made from human genetic material as opposed to a simple molecule, manufacturing a biosimilar version is relatively complicated and far from guaranteed to drive prices down. And drug companies fight to keep their exclusivity: When Merck tried to create a biosimilar to Sanofi’s Lantus, Sanofi sued and Merck eventually dropped the effort. (Another biosimilar was ultimately approved in 2016, but not until after a similar patent lawsuit.)

But if only one generic enters the market, it typically doesn’t make a big price difference—the biosimilar version of Lantus is priced at only 15 percent below the name brand. Studies show that the market price sees a dramatic reduction only after the entry of several generic competitors into the market—begging the question of whether waiting out two decades of exclusivity, followed by the mobilization of numerous different companies to eventually compete prices down, is really the best route to humane drug pricing.

Plenty of politicized diabetes patients like Laura Marston in Washington, D.C., can’t afford to wait that long, and have taken up the fight themselves. “We all live this way,” she said. “I’m scared all the time. I’m scared if I don’t keep fighting they’ll just go back to raising the prices.

We’re almost being forced to fight for our lives because the government won’t do it for us, and the toll that takes on someone who already has a chronic illness is time consuming … because even though I have a stable job, even though I’m insured, god forbid my industry could go in the tank tomorrow … this is America! Anything can happen.”

THOUSANDS OF DIABETES PATIENTS and their allies

have joined the #insulin4all campaign, begun by nonprofit T1International in 2014 to force a national dialogue on insulin prices. Advocates have organized rallies at Lilly’s Indianapolis headquarters, shaming the company into releasing its own licensed generic Humalog at half price.

This is still over $100 per vial more than it sold for in 1996.

Lilly’s generic is also only available out of pocket; insurers will only be able to get Humalog at full price, with much of that burden passed on in patient deductibles—and more broadly, into our premiums.

Advocates have also forced congressional hearings on insulin, a federal investigation from House Oversight Committee Chair Elijah Cummings (D-MD), at least two active lawsuits for price fixing, and even state legislation like the recently passed co-pay cap on insulin in Colorado. The law is a nice start, but applies only to state-regulated employer insurance plans and will thus shut out many diabetics who need it, like those in non-qualifying plans or the uninsured.

Other players in the insulin supply chain are scrambling as well. Sanofi has set a fixed price of $99 per month for monthly supplies, but also only for patients paying cash.

Express Scripts, one of the largest PBMs, recently created a program to lower out-of-pocket insulin costs; again, this covers only a small section of the patient population, and health plans have to affirmatively pick up the option.

Walmart sells an old version of human insulin for $25, but as Lipska explained, it doesn’t work for all patients and is incompatible with many new delivery devices. Patient outrage is driving these moves, but they mostly amount to half measures.

As one blogger noted, the recent Colorado legislation— along with most of the measures listed here—doesn’t pass the Alec Smith test. Removing all financial barriers to insulin to ensure that all patients have an uninterrupted supply of it would require governmental intervention, not just relying on multinational companies to devise better deals. It might even demand making moves that end our reliance on those firms to make the drugs we need most.

Elizabeth Warren has written legislation providing for the public manufacturing of generic drugs, and explicitly stated in the bill that generic insulin would have to be produced within a year of passage. Even President Obama’s former head of Medicare and Medicaid, Andy Slavitt, has recommended the total nationalization of the insulin market.

For her part, Nicole Smith-Holt no longer has a relative who needs insulin, but has stayed to fight for others.

In early May, she joined eight members of the Minnesota chapter of #insulin4all on a so-called “Caravan to Canada”—a five-hour road trip across the border to demonstrate the pressures on diabetes patients in the United States. Once they arrived, the same vials of insulin that retail for nearly $300 here were being sold for $30 apiece.

Smith-Holt didn’t need any insulin, but bought some as a memento. “If I had known that by driving five hours north that I could have saved my son’s life for a couple hundred dollars, then he would still be here,” she told me after the trip. “Because I would have crawled, I would have swam, I would have biked, I would have done whatever I had to do to get there.”

“We’re not even talking about rising prices for better products here ... there’s nothing that’s changed about Humalog. It’s the same insulin that’s just gone up in price and now costs ten times more.”

Natalie Shure is a writer and researcher whose work focuses on health, history, and politics.

SUMMER 2019 THE AMERICAN PROSPECT 33

Big Finance’s Stealth Deregulatory Maneuver

How financial literacy programs, now mandatory in many K-12 schools, benefit banks and burden consumers

BY RACHEL M. CO HEN

I

n early January, with near-unanimous support, New Jersey legislators passed a law mandating financial literacy instruction for all middle school students across the state. The law says that lessons should provide students with the skills for “sound financial decision-making” and that topics addressed should include budgets, savings, credit, debt, insurance, investment, “and other issues associated with personal financial responsibility.” Courses could involve teaching 11-year-olds how to save for retirement, or 12-year-olds about mutual funds. The primary sponsor of the bill pledged to keep fighting until schools start teaching the topics as early as kindergarten, insisting the next generation couldn’t afford to wait.

Across the country, a movement to teach financial literacy in public schools has gained tremendous traction.

Nineteen states now require financial education to graduate, according to the Council for Economic Education, up from 13 in 2011. In 2018, 29 states and Puerto Rico introduced bills around financial literacy, and 17 states enacted laws or adopted resolutions.

The movement mirrors a similarly vigorous push in Washington to promote financial literacy. In just 2019, Congress introduced at least six pieces of legislation to promote financial education—ranging from a House resolution to “support the goals and ideals of Financial Literacy Month” (which falls in April) to a Senate bill that competitively awards grants to school districts that teach financial literacy. The push has gained even more momentum thanks to Kathy Kraninger,

34 WWW.PROSPECT.ORG SUMMER 2019

the new head of the Consumer Financial Protection Bureau.

She announced in April that her federal agency will focus less on enforcement action and more on education.

Legislators from both parties have embraced financial literacy—undeterred by both its cost and the dearth of research supporting its effectiveness. They argue that in a world where citizens must make ever more complicated and high-stakes decisions, empowering the public to be competent economic actors is the most important thing we can do.

But critics counter that nothing would make financial institutions happier than placing the onus of responsibility on individual consumers. Indeed, some of the most enthusiastic backers of financial literacy come from the financial services industry itself—with banks, investment firms, and insurance companies eager to sponsor trainings and school curricula, even as they lobby hard against regulation for their own businesses.

THE NATIONAL MOVEMENT to teach financial education

in schools dates back to the mid-1990s, with the push to sell subprime auto loans. As financial journalist Helaine Olen traces in her book Pound Foolish, when the nation’s bankruptcy rate shot up, auto companies responded not with more prudent lending, but by offering new high-interest loans to high-risk consumers. Then- CEO of the Ford Motor Credit Company William Odom said that the trick was to teach people how to better handle credit. With the backing of the American Financial Services Association, he aired a public service announcement on auto leasing to 2,000 radio stations in the fall of 1995.

Odom pivoted to K-12 shortly after, helping to launch the Jump$tart Coalition, an initiative dedicated to boosting personal-finance education in America’s schools. It fit snugly with the general ethos of the era—that our nation and our students were at risk of falling behind other countries. At Jump$tart’s first convening in December 1995, as Olen reports in Pound Foolish, attendees discussed “a plan to create the demand for personal finance education through various publics, including the general public, business leaders, parents, students, administrators and teachers.” By 1998, Jump$tart released the first-ever set of national standards for financial education.

A flurry of federal, state, and local action soon followed.

In 2003, Congress passed the Financial Literacy and Education Improvement Act, which established a commission to develop a national strategy. A congressional caucus dedicated to financial literacy formed in 2005, and the National Association of State Boards of Education established its own financial literacy commission by 2006. In early 2008, George W. Bush issued an executive order to create the President’s Advisory Council on Financial Literacy, a body that would ultimately recommend expanding and improving financial

charles rex arboga st / ap images

MONOPOLY NATION education for students in kindergarten through high school.

The enthusiasm was not limited to the United States.

Beginning in 2005, the Organisation for Economic Cooperation and Development (OECD) issued a recommendation that financial education be taught in schools and start as early as possible.

Yet despite the excitement, nobody seemed to know how to actually teach financial topics in a way that could meaningfully change behavior. All anyone agreed on was that it was surely important to do, and increasingly so, as the economy started to tank in 2008. That spring, Federal Reserve Chairman Ben Bernanke championed its importance: “In light of the problems that have arisen in the subprime mortgage market, we are reminded of how critically important it is for individuals to become financially literate at an early age so that they are better prepared to make decisions and navigate an increasingly complex financial marketplace.” In other words, his response to cascading frauds at every point in the mortgage process was to say borrowers must be smarter shoppers.

While the Obama administration failed to prosecute banks responsible for the mortgage crisis, Congress did create the Consumer Financial Protection Bureau, designed to centralize enforcement of consumer protection statutes and safeguard the public from predatory bank schemes. But in a nod to the faith in teaching our way out of the problem, “Consumer Education and Engagement” was made one of the six divisions of the agency. A year later, the U.S. Senate would hold a hearing entitled “Financial Literacy: Empowering Americans to Prevent the Next Financial Crisis.”

All of this was driving Lauren Willis, a law professor at Loyola University in Los Angeles, up the wall. Willis was studying predatory mortgage lending, and noticed that Bernanke had praised financial literacy as a way to avoid personal ruin. “I remember looking at the literature [Bernanke] cited and I was just aghast at their quality,” she recalls.

She’s since emerged as a leading critic of financial literacy education, which she says is pushed by large financial interests that fight commonsense reforms to help consumers make safer choices. “We don’t ask consumers to fix their own cars,” she says. “People aren’t dumb, they’re just busy, and we should regulate around those things, with the assumption that there are certain things a consumer can do and other things they can’t, and that it would be silly to ask them to do.”

Willis also notes that there’s nothing about financial education that’s designed to teach students how to challenge the economic system. For example, it does not involve teaching people how to organize unions and collectively bargain for defined-benefit retirement plans—even though we know pensions have helped millions lead more financially secure lives. “Financial literacy education sends the message to people that if they’re in financial trouble, then

they must have failed to make the right decisions,” she says.

“It’s not designed to say, ‘Hey, society is not organized in a way that gives everyone equal opportunity and we want to teach you the skills to challenge that.’”

For skittish policymakers, financial literacy offers too many benefits. “Financial literacy is always a go-to for corporate-friendly Democrats who want to look like they’re doing something but don’t actually want to regulate bad conduct,” says one congressional staffer. “Or it can be useful for banks to bring up in meetings that would otherwise be adversarial.”

Raj Date, the former deputy director of the CFPB, goes so far as to say it provides “a fig leaf for people who don’t want to do other things that are technically or politically harder.”

After Willis started publicly critiquing the research studies Bernanke and other advocates relied on, the hate mail started pouring in. Olen, the journalist, says people reacted with similar agitation whenever they’d read her criticisms of the field. “Yeah, it makes me feel like a total grouch, like I’m coming out against apple pie,” she says. “But they can’t seem to accept that I have this opinion and I formed it for a reason, and short of significant research that shows I’m wrong I’m not changing it. People just tell me, ‘We will make this work, it’s too important to not make work.’”

Above, sixth graders at the Ariel Community Academy in Chicago participate in a personal finance class.

There is a movement afoot to teach financial literacy in public schools: 19 states now require financial education to graduate.

IN 2010, THE NATIONAL Endowment for Financial Education (NEFE), a nonprofit founded in 1972, launched an effort

to review the hundreds of studies conducted on personal finance over the previous 25 years, and then present the most significant findings to an invite-only colloquium in Denver with 50 of the field’s top researchers and practitioners. The goal for this so-called “Quarter Century Project”

SUMMER 2019 THE AMERICAN PROSPECT 35

Some of the most enthusiastic backers of financial literacy come from the financial services industry itself ... even as they lobby hard against regulation for their own businesses.

was to identify gaps in knowledge and chart out future steps.

John Gannon, then president of the Financial Industry Regulatory Authority’s Investor Education Foundation, presented one of the conference’s four summary papers.

Among other things, it concluded that the evidence behind the efficacy of financial education is very thin, and given diminishing resources, experts should proceed with caution. “While it is too early to give up totally on school-based financial education, the difficulties inherent in successful implementation must cause us to look to alternative solutions to major consumer financial mistakes,” his paper said.

John Lynch, the director of the University of Colorado’s Center for Research on Consumer Financial Decision Making, was an attendee at the 2010 colloquium, and he says other guests “went nuts” during the Q&A session, pleading with Gannon to not include criticisms of financial literacy programs in his public report. Gannon, who is now a Vermont legislator, says he doesn’t recall that specifically, “but it could have very well happened.” (He did include those findings in the public report.)

Shortly after the conference, NEFE hired Lynch and two other business professors to conduct meta-analyses on financial literacy and financial education, which they published publicly in 2013. Looking at 168 papers covering 201 prior studies, they concluded that financial education is not particularly helpful at changing behavior, especially for lowincome people. They also found that unless the educational intervention came just before one planned to use the information—say, before shopping for a mortgage—then consumers would inevitably forget it and it’s not worth the cost.

In October 2011, Lynch was invited to present his findings to the newly created Consumer Financial Protection Bureau, and a year later he participated in a panel at the President’s Advisory Council on Financial Capability.

“The cause of financial literacy education is so good, and it sounds so plausible, but to me that’s like saying obesity is a major problem so let’s give billions of dollars to some particular fad diet,” Lynch says. “It’s an utter waste of time to be teaching this stuff, the effect sizes are trivial in magnitude.”

Moreover, studies began to show that despite all the new attention being paid to financial literacy, teenagers’ self-reported financial knowledge was getting worse. In 2011, a Charles Schwab Corporation survey found teens’ self-reported financial knowledge had declined since 2007, though more than three-quarters of teens surveyed believed they were in fact knowledgeable about money management.

WITHIN THE FIELD OF financial literacy, critics like Lynch,

Willis, and Gannon have largely been cast as naysayers. “I have to be candid and say that I get a little ticked off when I read about how personal finance education doesn’t work,” complained Tim Ranzetta, founder of Next Gen Personal

36 WWW.PROSPECT.ORG SUMMER 2019

Finance, which seeks to “revolutionize the teaching of personal finance in all schools.” And indeed, the movement to spread financial education in public schools has marched assertively on, aided substantially by two new organizations that came on the scene at the beginning of this decade.

One is the Global Financial Literacy Excellence Center housed at George Washington University, which launched in 2011 to be “the world’s leading center for financial literacy research and policy.” Its founder and academic director Annamaria Lusardi, an economist at GW’s business school, has emerged as the nation’s most devoted advocate for financial education, regularly touting its value, and the need for more of it. She generally dismisses negative research findings, especially the 2013 meta-analyses. “This comes from people who really do not understand what education is, and do not like what education is, and do not understand the power of education,” she tells me. “So that’s my take on that study.”

Ultimately, to Lusardi and her colleagues, financial literacy is so important that negative empirical research findings could never really convince them that the practice is not worth pursuing; it just means we haven’t cracked the code on how to do it well enough yet. “The answer is not let’s not do it,” Lusardi says. “It’s how do we make it effective? To me this is a basic skill. Ignorance is not an option.”

The Global Financial Literacy Excellence Center also doesn’t shy from partnering with and fundraising from the financial industry. Its advisory board includes individuals like StormHarbour investment banker Nicoletta Zappatini, and John Woerner, president and chief of strategy for insurance and annuity company Ameriprise Financial.

The center’s website lists supporters like Wells Fargo, T. Rowe Price, and Commonwealth Bank. While Lusardi says most of the grants come from foundations, she doesn’t shirk from working with the financial industry “because we can understand better how they work and think and we want to have that direct connection and to tell them how important financial education is.” If banks want to promote financial education, she adds, “I think we should let them.”

Then there’s the Center for Financial Literacy at Champlain College in Vermont. After working as the chief legal officer for several investment companies, such as asset management firm Eaton Vance, John Pelletier says he hit a personal transition point. In 2010, he decided to pitch the president of Champlain College with setting up a center, and volunteered to do all the fundraising himself. “I thought a center focused on financial literacy tied to a collegiate institution might be able to move the dial on some public-policy issues,” he explains.

His center also has ties to the financial industry. “NEFE can be pure as the snow because they have a multimilliondollar endowment,” Pelletier says. “I look for partners who

j u l i e a n n w o o d f o r d p h o t o g r a p h y / g e o r g e wa s h i n g t o n u n i v e r s i t y

MONOPOLY NATION believe in the mission and I think you can partner with financial institutions without somehow being corrupted.”

By 2011, Pelletier was organizing a national financial literacy summit, and starting in 2013, he developed a national report card to grade states’ efforts on teaching financial literacy in high schools. The report cards, released every two years, don’t attempt to measure whether schools or certain kinds of curriculum are successful at teaching financial literacy. They just give high marks to states that require high schoolers to take at least a half-year personal financial course or its equivalent to graduate.

“I wanted to focus on where I thought I could make a difference, which is providing research for advocates like a governor, a treasurer, a banking commissioner, a legislator, and maybe the head of an education committee or citizens who want to lobby their local state senator,” Pelletier says. His strategy seems to be working. Since the end of 2017, when his last report card was released, six states that received poor grades legislated changes that brought their scores up.

Meanwhile, two more meta-analyses have been published since 2013—both by the World Bank—which include a greater number of randomized experiments. The first found financial education could help with savings and record keeping, but did not help to prevent loan defaults.

The second found that, while financial education can boost financial literacy, teaching financial literacy has less of an impact on low-income populations, and borrowing behavior is more difficult to impact than savings behavior. Yet another study published in 2015 found personal-finance lessons had no impact on financial outcomes, though additional math instruction did.

Proponents commonly cite a separate 2015 study, where researchers looked at three states with financial literacy mandates—Georgia, Idaho, and Texas—and compared the credit scores of graduates before and after graduation.

The researchers found that at age 22, students who graduated after the mandate went into effect had higher credit scores and lower default rates than those who graduated before the mandate.

Carly Urban, one of the study’s co-authors, quibbles with earlier research that found less-encouraging results.

She says financial-education standards implemented before the year 2000 were less focused on “salient topics” like credit card debt and auto loans, and more focused on general concepts like defining compound interest. So when academics find those standards to be ineffective, she claims that doesn’t surprise her. “There’s no reason it should have worked,” she insists.

Urban, like Lusardi, thinks Lynch’s meta-analyses combine too many disparate interventions and do not consider the newer school-based research studies. She also criticized them for treating all types of financial education the same.

“For practical purposes,” Urban says, “this means that being handed a brochure has the same effect as a 3-month class.”

Lynch defends his methodological approach and says all the meta-analyses certainly looked at whether there was something special about one form of financial education versus another. “Meta-analysis is the standard rebuttal to someone who wants to cherry-pick one finding or another from a broad literature, claiming that one set of results are somehow special and not to be compared to other results,” he says. “It is the gold standard tool for summarizing diverse studies in the social sciences.”

One might ask Lynch and other skeptics: Does teaching financial literacy really hurt? If it helps even a few people stave off financial misery, then might that be worth it?

Few in the field have addressed these questions rigorously. While some, like Gannon, Lynch, and their coauthors, have tried to spark discussion around the price tag required to teach financial education, hardly anyone seems interested in those practical details. In one of the World Bank meta-analyses, the researchers note the “surprising and yet common omission” that virtually all financialeducation studies included no cost-benefit analysis, or really any discussion of potential alternatives.

“The hopes and desires and aspirations for financial education are woefully out of step with the actual reality of results delivered, and the reality is that even when results are delivered they are distressingly sub-scale and not obviously scalable,” says Date, the former CFPB deputy director. “In other words, if you take some of the seemingly successful models and then added money—even a LOT of money—there’s no evidence that you could effectively cover a country of 300-plus million people.”

AS ACADEMICS BICKER, the number of providers offering

financial literacy training in schools has exploded. Even Ivy League schools like Penn and Harvard now have personal-finance courses, along with growing numbers of K-12 schools. Educators can select among hundreds of different lesson plans, online videos, and games developed by banks, foundations, advocacy groups, and for-profit companies.

They can pick “Money Smart Curricula” from the Federal Deposit Insurance Corporation; or H&R Block’s “Budget Challenge” game; or the online “Stock Market Game” offered by the Securities Industry and Financial Markets Association Foundation; or Biz Kid$, videos and lesson plans underwritten by the National Credit Union Foundation.

There’s “Better Money Habits” provided by Bank of America and Khan Academy, and “Practical Money Skills” developed by Visa. There are educational resources produced by the Federal Reserve, Jump$tart, NEFE , and the Council for Economic Education. The choices expand every year.

“I think we’re drowning in a sea of curriculum,” admits Pelletier. “We don’t even know what is really good.”

Annamaria Lusardi, founder and director of the Global Financial Literacy Excellence Center, insists she’s not trying to supplant regulation with financial literacy, and that we need both.

SUMMER 2019 THE AMERICAN PROSPECT 37

Urban agrees. “We don’t know a lot about who is using what and which one is better, but no one really wants to fund that study,” she says. “The big Senator Elizabeth Warren, who created funders [of financial education] all the Consumer Financial Protection Bureau, have free curriculum and they probably talked to the Prospect’s David Dayen don’t want to come out and say, ‘Well, about financial literacy programs. this one is better than ours.’”

EW: We all love education. But Gannon, the Vermont legislator, also people can’t learn their way out of a thinks foundations are deterred from terrible loan. … I used to teach this investigating which financial literacy in contract classes. I’d come in with curriculum actually works. “There’s the three credit card contracts, and ask fear that if research shows a curriculum the most obvious question, what’s the is ineffective what does that mean for interest rate on the credit card. These your program, especially if it’s someare all college graduates, who got into thing you’ve been touting for years?”

Harvard Law School, who have nearly Many financial literacy programs completed a semester of contract law, are offered to schools for free or at a along with others, and they’re learning low cost—often sponsored by banks to read legal documents. Tell me the that say they believe in the mission, but interest rate. And there would always are also intrigued by the marketing and be some people who would look at it public relations opportunities associand say, “Oh it’s 3 per- oh wait …” And ated with branded content. The educathen somebody else would say, “Oh it’s, tors, students, and even their parents um, I got it, I got it, it’s 8 and a half, oh all represent potential customers. that’s not right either.”

But even if foundations or financial DD: So if a college student can’t do companies cover the up-front costs of it, how would a fourth grader? I mean curriculum, schools still need to pay the in New Jersey, when they passed the salaries of the educator, and in most law, this lawmaker said, I want this cases that teacher will require traindown in kindergarten! Like that’s going ing and ongoing professional develto help with buying a car? opment. One study published in 2010 EW: Like that’s going to help? But found more than 80 percent of teachers that’s what they keep doing. It’s your say they don’t feel competent teaching problem. personal finance. Advocates for finanDD: It’s your problem, it’s a risk cial literacy in turn say if past research shift. shows that financial literacy has not EW: I used to say, nobody makes been effective, then the solution is to you read a wiring diagram before empower the teachers to teach it better. you buy a toaster. They don’t say, it’s Pelletier calls training the educator “the all right there in the wiring diagram. leverage point” in the system, where Including that part that there are two he thinks advocates can find the most bare wires that touch each other, and cost-effective investment. “If we can have a one in five chance of bursting give educators the confidence and skills into flames. to really succeed in the classroom,” he says, “we can change so many lives.”

So does it fall on states and school districts to pick up the tab on this teacher training? “I hope not,” Pelletier says. “In a perfect world, if Bill Gates or Warren Buffett wanted to … I wish someone like that would step to the gate and throw some money at it.”

In 2018, financial trade groups like the American Bank-

Shifting the Risk

38 WWW.PROSPECT.ORG SUMMER 2019

ers Association even urged the federal government to let financial institutions claim more Community Reinvestment Act credits by providing financial literacy training and creating online education materials.

And then there are programs sponsored by for-profit companies like EverFi, which currently offers financial literacy curriculum in 7,000 school districts around the country. Financial institutions typically pay EverFi for the software, and then underwrite its offering in public schools.

It’s good advertising and PR for banks, credit unions, and insurance companies. As Sean Tynan, the vice president of sales for EverFi, explains, financial institutions “are increasingly wanting to give back to the community, at scale and in a measureable way.” Since school districts are more likely to direct resources to subject areas that are subject to standardized testing, Tynan says EverFi’s “public-private partnership model really helps out” to bring teachers technology their schools might otherwise not have purchased.

Beyond that, every choice regarding what to teach in schools involves opportunity costs. Time spent on financial literacy is time not spent on other subjects, like foreign language or computer science. In Virginia, for example, one of the 22 credits required to graduate high school must be dedicated to personal finance. Meanwhile, school districts across the state and the nation—citing budget shortfalls—have eliminated courses like physical education, art, and music.

Susan Sharkey, the senior director of NEFE ’s High School Financial Planning Program, says she understands it’s not necessarily an easy task for a school district to add financial literacy to their course offerings. “Schools have to make decisions based on the number of students and the money they have available, and in some cases they may have to drop one program or reduce it if they see a need for something else,” she acknowledges. But getting an F on a well-publicized state report card, as Pelletier knows, is a useful way to pressure school districts into investing in financial literacy courses.

Though it’s not even just about finding the resources to dedicate one semester to personal finance in high school anymore. Advocates for financial literacy have largely coalesced around the idea that schools should be teaching financial literacy as soon as possible, and throughout a child’s entire academic career. If a study shows that financial literacy training did not improve financial outcomes, well maybe the problem is their training just started too late.

IN STATE LEGISLATURES and throughout D.C., it’s proven

difficult to raise concerns about financial literacy. One Senate aide reflected on how the advocacy has helped shift the policy conversation toward one of victim-blaming. “Every moment that we spend on financial education is a moment

MONOPOLY NATION that the financial institutions are winning in defining what’s wrong with the economy,” they said. “I credit the financial services industry for making this such a big deal.

No politician really wants to use up their political capital opposing education.”

But things might finally be changing. In mid-May, for the first time, the top Democrat on the Senate Banking Committee spoke about the normalization of financial literacy as a salve for unsafe financial products.

In a financial regulator oversight hearing, Ranking Member Sherrod Brown (D-OH) posed an unusual question to one of the witnesses, Joseph Otting, the Comptroller of the Currency.

“Mr. Otting, if a car manufacturer cut corners and sold unsafe cars that harmed millions of American families, would you recommend that the government respond by recommending car mechanic literacy so they could decide for themselves if the car is safe? Yes or no.”

Otting looked confused. “I … I … I don’t think it’s a yes or no answer,” he said. “I think you’d have to understand the …”

Brown interrupted him. “Well, it kind of is.”

The senator then turned his attention to another witness, the chairman of the National Credit Union Administration.

“Mr. Hood, if a drug company cut corners and sold tainted prescriptions that hurt millions of Americans, would you suggest that we adopt a pharmaceutical literacy program in our schools so students could decide for themselves which drugs are safe?” Brown asked.

“I would need a bit more information on that, but likely … I would need to …”

“Well, common sense would be the information that would come to mind,” Brown interjected. “It begs the question, why can’t we protect Americans from dangerous financial products like we do in every other industry?”

Pelletier argues that there’s an equity element to his work. He points to a study sponsored by Next Gen Personal Finance, which shows that students from low-income backgrounds are half as likely to have taken a financial literacy class in high school than their wealthier peers, and another study showing that rich adults have better financial skills than the poor. “So you have people who are subject to high user lending fees not really understanding the APR ,” Pelletier says.

But is the problem that low-income people can’t adequately describe annual percentage rates, or is it that they are paid too little as their costs of living go up, and financial institutions capitalize on their desperation? Few in the financial literacy world speak of “scarcity mindset”—a powerful psychological state that occurs when people are struggling to manage with less than they need. The concept was pioneered in 2014 by Sendhil Mullainathan, an economist at Harvard, and Eldar Shafir, psychology professor at Prince­

ton, who explain in their book, Scarcity: Why Having Too Little Means So Much, how scarcity “captures” the mind, and leads inexorably to dealing with one’s most pressing needs, at the expense of any other longer-term goals or considerations.

They call this mental phenomenon “tunneling” and note that when people tunnel, they can’t make decisions using a careful cost-benefit calculus. It’s why, they say, poor farmers in poor countries often resist purchasing rainfall insurance even though such decisions might appear financially prudent. “To a farmer who is struggling to find enough money for food and vital expenses this week, the threat of low rainfall or medical expenses next season seems abstract,” they write. “And it falls clearly outside the tunnel. Insurance does not deal with any of the needs—food, rent, school fees—that are pressing against the mind right now. Instead, it exacerbates them—one more strain on an already strained budget.”

Pelletier says the point is “valid” and concedes that people need not just educational training but “better alternatives.”

Lusardi also insists she’s not trying to supplant regulation with financial literacy, and that we need both. But actions can speak louder than words. CFPB Director Kraninger has said her agency would be focusing more on “giving consumers the tools they need to understand how to make the best decisions possible for themselves and their families,” and she means it: This year, she suspended a federal rule on payday lending designed to protect borrowers from ballooning debt, a rule which lenders had ardently fought.

More than 420 civil rights, labor, faith, senior, and consumer protection organizations sent a letter to Kraninger in mid-May, pleading with her to reverse her decision. “We have known since before the 2017 Rule was finalized that the payday lenders—a powerful, well-resourced, savvy lobby—would pull out all the stops to preserve their debt trap business model, including through Congress and through the courts,” they wrote. “We did not expect, however, that new Bureau leadership would side with payday and car title lenders at every turn.”

Date, the former CFPB official who now works as a managing partner at a financial services investment firm, likens the enthusiasm for financial literacy to the movement for greater consumer disclosure on products like loans and credit cards.

“If I were five years old and gullible, and heard that we’re going to just use disclosure to even the playing field, I might have thought that made sense,” he says. “But after decades of evidence to the contrary—that is, evidence that in general people don’t read the damned disclosures, at least not the interminable legalese that often passes for disclosure—at some point you have to admit that it doesn’t work like you thought it would.”

Financial literacy education sends the message to people that if they’re in financial trouble, then they must have failed to make the right decisions.

Rachel M. Cohen is a journalist based in Washington, D.C., and a former American Prospect writing fellow.

SUMMER 2019 THE AMERICAN PROSPECT 39

The Double Standard of Antitrust Law How today’s antitrust law strengthens top-down corporate control and weakens democratic cooperation

BY SANJUKTA PAUL

A

ntitrust law, established originally to limit corporate power, has become its friend. Think about the following anomalies:

■ If a group of independent truck drivers forms an association to jointly bargain their prices, that combination is a cartel: automatically illegal, perhaps criminal. But if the same truck drivers go to work for a company that charges customers for their services on a single price schedule, there is no antitrust violation, even though this arrangement suppresses price competition precisely to the same extent. What is illegal outside a corporation is legal within it.

■ If a group of small suppliers gets together to jointly bargain with Amazon for a better deal, that too is an illegal cartel. But if Amazon contracts with them and charges the same price for their goods, there is nothing illegal about it.

■ If drivers for Uber join in an association to demand higher pay, the competition authorities currently assume that their joint action is illegal. But Uber itself has evaded antitrust scrutiny even though it fixes the prices that customers pay for the drivers’ services.

All these anomalies stem from the same double standard. Antitrust law has come to reinforce the power of large business firms, while preventing workers, small producers, and micro-enterprises from exercising collective power. Markets and economic activity can be coordinated in a variety of ways—in fact, economic coor-

40 WWW.PROSPECT.ORG SUMMER 2019

dination of one kind or another is inevitable. Under prevailing legal doctrine, however, the courts have made the large corporation the principal means of economic coordination and excluded other forms, putting aside all considerations of fairness.

By preventing associations of workers or small producers from coordinating their activities, the evolution of antitrust has contributed significantly to the rising inequalities of the past half-century. Millions of people now work as independent contractors and suppliers who in the past would have been employees. But if they try to organize, they run afoul of the antitrust laws.

Antitrust law today defines a variety of worker and producer associations as cartels and assumes that they lack “productive efficiencies”—yet it automatically imputes these efficiencies to business firms that dominate markets. Consequently, the law grants economic coordination rights to firms that it denies to other forms of association. In addition, when firms seek to merge with one another, the law permits them to prove that the merger will have social and economic benefits or even assumes those benefits. That opportunity to demonstrate advantages, however, is denied to an otherwise similar economic association of individual or small producers, service providers, or firms.

The business firm has long enjoyed a kind of “exemption” from antitrust. But over time, the attitude of antitrust authorities toward other forms of economic coordination has hardened, while their attitude to the firm itself has softened. At its root, this special treatment reflects a preference for economic coordination through hierarchical authority.

Antitrust authorities have come to favor top-down corporate organization without being required to demonstrate its advantages empirically, much less to defend the political and moral choice that preference represents. Maybe some top-down command relationships are cost-minimizing; maybe they are not. Maybe other sorts of economic organization, more democratically and equitably organized, can be cost-minimizing in similar ways while also supplying other social and economic benefits.

Antitrust law has never addressed these questions because it has not grappled with the fact that economic coordination is inescapable. Instead, both the antitrust establishment and even some of today’s antitrust reformers suppose that the ideal of pure competition supplies all necessary criteria to resolve rival claims, while remaining blind to the special treatment given inherently competition-suppressing corporations. If we have any hope of rectifying the inequalities in today’s economy, we need to re-examine antitrust and rethink how it should work.

MONOPOLY NATION

libr ary of congress

HOW ANTITRUST WAS TURNED UPSIDE DOWN

Although federal antitrust law has become a means for the strong to dominate the weak, it was originally enacted to help balance power in society. Its legislative and popular purpose was to deconcentrate economic power.

Legislators at the time the antitrust laws were originally enacted did wish to preserve competition in the sense of healthy business rivalry. But they had no concept of ideal prices as defined by a perfectly competitive market and sought to balance the power of business with other democratic interests.

The popular anti-monopoly movement that ultimately produced the Sherman Act of 1890 comprised both small farmers and wage workers organized in the Knights of Labor, the major American labor organization of the time.

Contrary to an influential misreading of the legislative history, the intent of Congress was not to promote low consumer prices as such. Legislators were worried about the subjection of ordinary people, as both consumers and producers, to the power of the newly emerging business corporations. When Senator John Sherman introduced the bill, he described it as a means of addressing the “inequality of condition, of wealth, and opportunity that has grown within a single generation out of the concentration of capital into vast combinations to control production and trade.” Legislators did not intend to prohibit economic cooperation among workers, small farmers, and other small producers.

Nevertheless, the courts went on to use the statute to punish and inhibit labor strikes and other expressions of solidarity almost as soon as it was passed, ruling them conspiracies in restraint of trade. The often-terrifying “government by injunction” to which American working people were subjected undermined the nascent labor movement. In the same era, federal courts also struck down publicly legislated forms of market coordination such as wage-and-hour laws on the grounds that they violated individual freedom of contract. Ironically, the same judges twisted the antitrust law in order to subvert workers’ rights to contract freely through their own voluntary associations.

The New Deal order only partially and temporarily rectified this situation. With the National Labor Relations Act in 1935, Congress recognized workers’ right to organize unions and bargain collectively, thereby extending to working people a voice in economic coordination. But in 1947, when it passed the Taft-Hartley Act, Congress imposed several critical limitations on unions, including a ban on secondary boycotts, outlawing the community-wide expressions of solidarity that had led to the recognition of unions and union contracts in the first place.

Meanwhile, antitrust law in the New Deal era became more committed to the aim of dispersing private power.

Yet even liberal policymakers and judges also gradually adopted the framework of the competitive order associated with neoclassical economic theory. Meanwhile, during the mid-20th century, a group of lawyers and economists—many of them at the University of Chicago and hence known as the Chicago school—were busy figuring out how to reverse New Deal policies in antitrust and other areas with arguments that they claimed to draw from economic theory. The Chicago school finally succeeded in implementing that vision beginning in the 1970s, in antitrust and beyond.

Robert Bork, a professor at Yale Law School and later a federal judge, exerted the most inf luence among Chicago school theorists upon antitrust law. For Bork, the ultimate purpose of antitrust law was consumer welfare, though his writing on the subject is ambiguous about the meaning of that standard. Consumer welfare, as he used that concept, could refer to either lower consumer prices or competitive prices, which may not be the same thing. This basic ambiguity persists today.

According to the Chicago school, any cooperation between economic equals or participants in the same market distorts the competitive order. That understanding was imported into antitrust in the form of a much stronger rule against economic cooperation among relative equals, even individuals and workers, than courts previously imposed. Bork admitted that mergers among big firms were even more competition-suppressing than combinations of small producers. But he argued that antitrust law ought to be much more tolerant of market concentration and large firms, including those formed through mergers and acquisitions. His rationale was that firms enjoy economies of scale and other cost advantages and would pass those savings on to consumers.

Antitrust policy, Bork contended, had long made an exception for economic coordination by firms—and he was not wholly wrong. But earlier understandings of anti-

Senator John Sherman

SUMMER 2019 THE AMERICAN PROSPECT 41

Antitrust law today grants economic coordination rights to business firms that it denies to other forms of association, like guilds and trade organizations.

trust limited how far that exception could be taken. Bork effectively magnified the firm exception by insisting that the benefits of firm-based coordination outweighed the dangers of market concentration. These claims have no basis in economic theory itself; they are debatable empirical claims. Yet Bork traded on the intellectual prestige of mainstream economics in order to turn these defenses of big business into uncontested legal rules. He also passed off as a neutral social-scientific principle what was essentially a political choice, in favor of corporate hierarchy over democratic cooperation.

The effects of defining economic associations among small players as per se illegal have become especially stark with the breakdown of labor unions and traditional employment today. Many working people, driven out of unions and even out of statutory employment relationships, seek to coordinate directly among themselves as individual service providers or producers, only to have those organizations prosecuted or threatened with prosecution as cartels. Antitrust has prevented numerous individual service providers and small producers in trade associations, guilds, and similar organizations from engaging in coordination. The Federal Trade Commission, for example, has recently investigated and prosecuted guilds and associations of piano teachers, ice-skating instructors, and church organists. Many more don’t bother to try to engage in cooperation at all, for fear of antitrust prosecution.

Deemed independent entrepreneurs by firms like Uber and Lyft, the drivers in the app-based ride services sector are among those presumptively denied the right to organize collectively under the antitrust laws. When the city of Seattle recently sought to give them a right to collective bargaining, business interests immediately challenged the ordinance in court as preempted by federal antitrust law. After an unfavorable court ruling, Seattle removed payments to drivers—the key issue and the determinant of other working conditions—from the ordinance’s subjects of collective bargaining. That case did not reach the merits of antitrust liability for collective action. But as long as federal law views associations of independent workers and suppliers as cartels, local measures that seek to help them defend their interests face an uphill battle at best.

WHAT IS THE ALTERNATIVE?

debate about first principles and masked political choices as neutral economic ones.

While public interest in limiting monopoly power has been on the rise, proposals to reform antitrust have, at least until recently, generally stopped short of questioning the idea that its primary function is to promote competition. Progressive antitrust reformers have mainly wanted to see antitrust laws enforced more vigorously against big business.

But while antitrust law ought to be more aggressive in some respects, it should be less aggressive in others.

Rather than automatically barring associations of independent contractors and other small suppliers, the law should be open to democratic forms of economic coordination. Such forms of coordination ought to be accepted when they confer social benefits without creating undue power imbalances. Those social benefits include not only healthy business rivalry but also living wages for workers, sustainable returns for businesses, and human and ecological flourishing.

This more balanced approach could address the anomalies I mentioned at the outset. A joint-bargaining agency of independent truck drivers ought to be no less eligible than a trucking firm for recognition as a legitimate form of economic coordination. Such an association could confer many of the social benefits typically claimed for firms as well as benefits that they fail to provide. For example, such associations might avoid firms’ one-sided devotion to short-term shareholder interests that has eroded patient investment in technology, workers, and communities.

Of course, not all coordination, even relatively democratic coordination between smaller players, is always good. Coordination that results in undue power over other groups—consumers, workers, or other producers—should not be permitted. To help determine the benefits and disadvantages in particular cases, the Federal Trade Commission ought to take up the task it was originally given of studying various markets and sectors.

The central reality is this: Economic life requires coordination and therefore antitrust law is unavoidably involved in allocating and regulating economic coordination rights.

Governments can do that job efficiently or inefficiently, justly or unjustly. But they must do it, and therefore they should try to do it fairly, balancing power in society. That was the original purpose of antitrust law, and we ought to recover that tradition and build on it to deal with the inequalities we confront today.

“Antitrust,” Bork wrote, “is a subcategory of ideology, and by the time a once militant ideology triumphs … its adherents are likely long since to have left off debating first principles.” That is exactly what has happened under Bork’s influence. Aided by a complex technical apparatus, Bork’s ideological recasting of antitrust successfully cut off

Sanjukta Paul, assistant professor of law at Wayne State University, has written widely on the intersection of antitrust and labor policy. The ideas here are developed further in “Antitrust as Allocator of Coordination Rights,” forthcoming in the UCLA Law Review.

42 WWW.PROSPECT.ORG SUMMER 2019

MONOPOLY NATION

The Monopolist’s Worst Nightmare An interview with Elizabeth Warren B Y DAV I D DAY EN

W

wrong in this country. It’s not like somebody woke up and just said “antitrust”—we’re not that nerdy—but it’s about what’s wrong in this country. And as people increasingly see that the problem is not an overreaching government, the problem is a government that won’t get in the fight on the side of the people. Antitrust becomes one of the clearest places to see that.

DD: Now you did a speech at the end of 2017, you talked about this issue, and at the beginning of the speech you said something like, you know, people don’t have to know the Herfindahl-Hirschman Index to know that there’s something wrong.

EW: Exactly.

DD: But how do you talk about it on the trail? How do you talk about it to really drive that home so that it doesn’t get bogged down in numbers and economic theory and stuff like that?

elise amendol a / ap images

e have the most intense concentration of corporate power in America since the Gilded Age of the late 1800s. And Senator Elizabeth Warren has a plan for that, as you might have heard. The presidential candidate has long been one of the few public officials to address the growing dominance of monopolies, and she’s highlighted the problem—and how to fix it—on the campaign trail. (She’s even placed billboards demanding the breakup of Big Tech in Silicon Valley’s backyard.)

I had a chance to talk with Warren between Senate votes in Washington. We discussed how she talks about monopolies to the public, what Congress can do with its authority, and building an antitrust movement.

DAVID DAYEN: We’re doing this issue about economic concentration. And one thing I’ve noticed is that, probably since 1912 there hasn’t been this much talk about monopoly in a presidential context, in a presidential race. To what do you attribute that? I mean, why do you think this issue has inspired this interest at this time?

ELIZABETH WARREN: I believe the central question in America today is who government works for. Yeah, it’s got a lot of different directions, but that’s the fundamental one.

Is it just going to work for the rich and the powerful, or is it going to work for everyone else? Antitrust cuts right to the heart of that. We’ve had a government that has kissed up to every giant corporation for decades. It has weakened antitrust enforcement, looked the other way on mergers, passed on deals that everyone knew were anti-competitive and would be bad for the economy and bad for competition but good for the bottom line of the companies that wanted it. And no one so much as fluttered an eyelash over it. And that’s started to change. And I think—So here’s my thinking: it’s because we’re focusing more on what’s

EW: It’s important to give examples of how it touches

people’s lives. So when I talk about Amazon, for example, I talk about the platform where everybody goes to buy coffee makers and pet cookies, and that the platform works great. But that Amazon does something extra. It’s not just an ordinary marketplace. It’s a marketplace where Amazon, the owner of the platform, sucks up information from every transaction and every near-transaction, the fact that a shopper looked at the item, right, searched for the item, spent a little time hovering, it’s been in your cart.

And I talk about that. And then they use that information to go into competition with the businesses that are trying to sell you coffee makers or pet cookies. And the consequence of that is that the guy who busted his tail, figured out the pet cookie business, got out there and marketed it—Amazon looks over the edge and says, hmm, profit to

Democratic presidential candidate Senator Elizabeth Warren on the campaign trail in Windham, New Hampshire

SUMMER 2019 THE AMERICAN PROSPECT 43

44 WWW.PROSPECT.ORG SUMMER 2019

business, the platform has to be broken off from all of the ancillary businesses. And there’s just—We shouldn’t have to litigate it. Just make it happen. It’s too much concentration of power. And so I’m both ways on this: there’s a lot we can do without—I’m delighted Congress is doing this.

There’s a lot we can do, even if Congress doesn’t change any law. But, there is at least one good place Congress could change the law and make this whole system work better.

DD: You mention your plan on the platforms, but you’ve also made the point that, you know, if we broke up Google and Amazon and Facebook tomorrow, we’d have a terrible concentration problem in America.

EW: Oh, it’s much broader than just that. Platform is such an obvious one and we’ve— DD: And everyone interacts with it.

EW: That’s exactly right … the analogy from history where someone—one business—could not only control the marketplace, but also be a dominant player in the marketplace simultaneously. It’s not that you can’t find them in history. It’s that when we found similar economic concentrations in history, we broke them up.

DD: Sure, sure.

EW: Especially when they started buying everything else. And then, of course, doing—as I recall in the railroads—doing a discriminatory pricing map. Charge themselves a different price from May Lynn’s grain outfit.

DD: Absolutely. So, I mean, the sort of elephant in the room on this is the judiciary, which has a very particular theory and view of antitrust and even if you put in enforcers that want to take that in a different direction, you still have to argue that in court. So what do you think can be done there? I mean, obviously a new president would have judicial nominations, but you know, that’s going to take some time, so how—Is there a way to sort of get the judiciary to realize that they need to do their part here?

EW: Use every tool in the toolbox. So part of it is get an aggressive antitrust team. Part of it is presidential leadership. Get out and talk about this issue. And explain to the American people why the laws are working for the big guys and not for them. Encourage the academics to get out and make their case. Remember— DD: The ones not on the payroll— EW: I was gonna say—That’s exactly right. Remember, it was the academics that got this started in the wrong direction, arguably.

DD: I would argue that as well.

EW: Yes, exactly, so I think it’s all of the above. And, at the same time, move on the congressional front. I just don’t want this to feel like, gee, if we can’t move Congress, we can’t do anything. No. Bang away without Congress, but also, bang away on Congress to make change. Just move on all the fronts.

victor juha sz

“Is government just going to work for the rich and the powerful, or is it going to work for everyone else?

Antitrust cuts right to the heart of that.”

be made there, let’s do pet cookies, don’t even identify it as an Amazon business, and move the guy who built this business back to page seven in the search. Routine, and now Amazon has sucked up one more business.

DD: The other issue with Amazon is, that pet cookie business, they take a cut out of every transaction he makes anyway.

EW: Exactly, exactly.

DD: And they can raise that price, they can change and say, “Oh, we’re charging more for shipping now, we’re charging more for storage now.”

EW: Every part of it. So, in other words, the way I describe that particular point is, it’s like baseball. You can run the platform—that is, you can be an umpire—or, you can have a team in the game—that is, you can run competition against others who are trying to sell the items. But you don’t get to do both at the same time. And people in the room all say, “Right.” That makes sense to me.

DD: You just break it down and it makes sense.

EW: That’s right.

DD: So we’ve seen, very recently, these hearings in the House on the digital platforms.

EW: Yay. DD: And, you know, I’m wondering about your thoughts on the role of Congress in this policy. These are policies that Congress wrote, that they have oversight function on.

You know, in the ’40s we saw something called the Temporary National Economic Committee, which was a series of investigations into all sorts of sectors over the economy.

Do you think, is that something we need now? How can Congress get involved in this?

EW: Okay, I’m glad to see Congress doing this. I think it’s great. I want them to call witnesses, to let people tell their stories, I want them to expose the data. I want to see the books and records of some of these companies.

Remember, Congress has got a lot of muscle if it decides to use it. But I want to make two other points. The first is current law gives the Justice Department and the FTC and the banking regulators a lot of power to move now. Even without Congress, a president who put a strong team in place could change antitrust enforcement in this country, without a single change in the laws from Congress.

DD: And it’s interesting you say the banking regulators, because people don’t realize how much power is in, you know, other agencies, not just the FTC and the Justice Department.

EW: Exactly right. I picked banking, but you’re exactly right. But it’s the reminder—There’s a lot we could do right now. But also, and this is what I argue should come out of all this, there are places where Congress should draw a bright line in this. So I have a plan to break up the big platforms. If a platform is doing more than a billion dollars in

MONOPOLY NATION DD: Excellent, excellent. And finally, there’s a famous—It was Richard Hofstadter wrote this thing in the ’60s. And he said—And the title of it was “What happened to the antitrust movement?”

EW: Yes. DD: That there was a movement that created all these laws and then the movement sort of went away and said, “Regulators will take care of it.” It seems like a movement is what is necessary at some level, and how do you inspire that?

EW: Okay, now let’s move back up to the 10,000 feet where we started this, because I think that’s what this is all about. When we started this conversation, I said that I think the question is who government works for. I think much of the antitrust relaxation over time in the ’60s was confidence the government would handle this. Confidence that we had regulators who knew their stuff and who were technically adept and who had shown that they would be on the side of the American public. And when the big corporations started pushing back, started advancing the academic work that said, “No, let the giant corporations do whatever they want. What could possibly go wrong?”—That it’s taken a long time for people to see the implications of that. Look, for 40 years now, the mantra in Washington and in most of the Republican Party and a big chunk of the Democratic Party has all centered around Ronald Reagan’s “What are the nine worst words in the English language?

I’m from the government and I’m here to help.”

Ha ha ha. The idea that it’s government that poses the threat to all of the rest of America and must be held at arm’s length, and missing the fact that it’s government that balances out the power of these giant corporations.

And without an effective government to enforce antitrust laws—and other laws—we’re all in trouble.

DD: Well, it’s the idea that if there’s—If government takes away the regulation, the regulation doesn’t go away, it’s just in the hands of the giant corporations.

EW: It’s just in the hands of the giant corporations.

DD: So they get to do regulation from the boardroom.

EW: And that’s how we keep hearing lately about selfregulation. Aircraft manufacturers that self-regulated; how did that work out? You know, it’s—But it’s over and over.

It’s wait, what? They’re doing what? The oil companies that were doing the drilling offshore were self-regulating? You know, they filed some reports that nobody read. That’s not a government that’s working for the public. So when you say about, is it going to take a movement? The answer’s yes.

That is the movement we’re starting to build.

This interview has been edited for publication.

SUMMER 2019 THE AMERICAN PROSPECT 45

The Voter Suppression Chronicles When the Roberts Court all but nullified the Voting Rights Act, it said the pre-1965 practices were long gone.

New hearings by the House make clear: They’re back.

BY BO B M O S E R

K

ristin Scott had a mess on her hands. In June of last year, less than three months before the start of early voting for the midterms, the news had come down to the elections director of rural Halifax County, North Carolina: The state’s Republican lawmakers, those mad scientists of American voter suppression, had voted to create uniform hours for early voting across the state. Every polling place would have to be open Monday through Friday, 7 a.m. to 7 p.m. The bill had seemingly popped up out of nowhere, tacked on to a budget bill the day before and waved through in just 40 hours with no public testimony, committee hearings, or input from local or state elections officials.

“In the most undemocratic way possible, we’re undermining democracy,” fumed Democratic state Senator Jay Chaudhuri.

Scott’s reaction was more pragmatic: “Uhoh. What do we do now?” Like other counties, Halifax had always been free to set its own hours for early voting, based on when folks were likeliest to show up. In recent years, it had three sites open from 8:30 to 5. That meant one shift per poll worker, which helped to keep costs down. And that mattered in Halifax, a vast stretch of northeastern North Carolina pine hills with a 53 percent African American population—and not a place that could easily handle what ProPublica accurately deemed an “unfunded mandate,” since the legislature had authorized no funds to help counties expand their hours. “We’re ranked as one of the poorest counties in the state,” Scott says, “and our commissioners had just allotted us a little over $160,000 to purchase new voting machines.”

46 WWW.PROSPECT.ORG SUMMER 2019

(The old models had been melting down on Election Days.) “And then you’re talking about going back to request more money they hadn’t budgeted for?” She laughs. “Right.”

Scott and her two-member staff, their plans for the fall suddenly scuttled, scrambled to figure out a solution. The new edict meant that the costs of keeping open Halifax’s three early-voting sites would multiply; poll workers would have to be found for two shifts per day, and “we already had trouble recruiting enough of them,” Scott says. But if they eliminated one or two of the early polling places, it would create a real hardship for many voters: Halifax’s population is little more than 50,000, but it’s spread out across an area that’s larger than Houston, Texas. One in eight households have no cars, and there’s no public transportation.

“Now, no matter where we located the one site,” Scott says, “some people were going to have to go upwards of 20 miles to get there.”

But the budget was what it was. Even though most of its eligible residents tended to vote early, Halifax would have only one place for them to go—a long way to go, for many. When Scott announced the decision, she braced for what she knew would come next. “People called from the time we opened till we closed, every day,” Scott recalls. “They felt slighted. They thought we were trying to keep people from voting, and they accused us of trying to ‘rig’ the election by taking away citizens’ right to vote.

People found my personal number. It got ugly.”

She understood the frustration and fury.

Halifax voters had been hit hard, repeatedly,

by North Carolina’s flurry of voter-suppression laws following the Supreme Court’s Shelby

v. Holder decision in 2013. In a 5-4 vote, the Court’s conservatives struck down the Voting Rights Act’s key provision, which had required states and locales like North Carolina—places with histories of racial discrimination in voting—to seek approval from the Department of Justice before making any changes to voting.

From the moment Barack Obama carried North Carolina in 2008 with a massive surge of black and young voters, Republicans had been champing at the bit to overturn the state’s progressive voting laws. They’d done careful research, as The Washington Post later reported, diving into statistics showing what kinds of “reform” would reduce turnout from black, Latino, and young voters the most. With Shelby, they had their chance. Less than two months after the decision, they passed what became known as the “monster” voting law, mandating voter IDs that hundreds of thousands of black North Carolinians lacked, eliminating same-day registration at the polls (used predominantly by black and student voters), and ordering counties to throw out provisional “out-of-precinct” ballots (used disproportionately by low-income folks who move often).

The new law also eliminated “pre-registration” for 16- and 17-year-olds at their high schools, which had sent young voters’ turnout soaring, and outlawed “souls to the polls” Sunday voting prior to elections, which had become a tradition for black churches. And all this was on top of one of the nation’s most extreme gerrymanders of state and congressional districts, passed in 2011 by the first majority- GOP legislature in North Carolina since Reconstruction.

Ever since, Scott says, “it’s been nothing but

chuck burton / ap images

Early voting for the 2018 midterm election in Charlotte, North Carolina—a practice Republicans have sought to curtail because it increases minority turnout.

chaos and confusion.” With lawsuits against the monster law and the gerrymander constantly percolating through the courts, officials couldn’t tell voters with confidence what to expect from one election to the next. “It seems that every time we have an election, the rules are different,” Jake Quinn, a member of the Buncombe County Board of Elections, told ProPublica. “We’re looking at different district boundaries, or we have to have voter IDs, or you can’t vote out of precinct, or the hours have to be changed. This is a problem. When you change the rules for voting every single election, some people are going to get discouraged by that. All of this is very destabilizing.”

Scott started holding voter-education sessions around Halifax, trying to explain the implications of the latest bills—they just kept coming—and court decisions. “All I can really say is, ‘As of right now, this is what it is, but it could change.’ Because it always does. The last

thing you want is for citizens to leave thinking, ‘This is what it’s going to be for the next few years’; then they find out six months later that it’s changing again. And then they get mad at the elections people: ‘Y’all don’t know what you’re doing!’”

But Republican lawmakers knew what they were doing. Mitt Romney and Donald Trump carried the state in 2012 and 2016, thanks largely to sagging turnout among voters of color, and the Republicans built huge majorities in the General Assembly despite Democrats holding an advantage in the number of registered voters. When a federal court finally struck down the monster law in 2016, saying that black voters had been targeted “with almost surgical precision,” lawmakers simply repackaged most of the provisions and passed them again, while adding fresh hurdles for voters—and groups that try to register them— along the way.

The early-voting change worked just as intended last fall: In a midterm election that saw turnout soar both statewide and nationally, Halifax was a rare exception. With its lone site, the county ranked dead last in the state in early voting. Worse yet, North Carolina voters approved a constitutional amendment requiring a photo ID to vote, replacing a struck-down provision of the monster law. Typically, nobody knew what exactly that would mean—the Republican legislature would get to decide what kinds of IDs to allow and disallow.

With local elections coming up in 2019, and the state looming as a presidential battleground in 2020, Scott and her fellow election officials would soon have another mess to deal with.

But in February, Scott got a different kind of news: The U.S. Congress was coming to Halifax. More precisely, the House Subcommittee on Elections, which then-Speaker Paul Ryan had eliminated (no voting problems to investi-

SUMMER 2019 THE AMERICAN PROSPECT 47

Representative Marcia Fudge (center) presided over seven hearings in states with especially troubling voting practices, including this one in Atlanta, Georgia.

48 WWW.PROSPECT.ORG SUMMER 2019

jurisdictions now approach parity. Blatantly discriminatory evasions of federal decrees are rare. And minority candidates hold office at unprecedented levels.”

Congress, Roberts continued, would have to build a “robust” case for an updated formula. Representative Marcia Fudge, the voting-rights firebrand from Ohio whom Pelosi tapped to lead the Subcommittee on Elections, took up that challenge. She scheduled seven hearings for this spring in states with especially troubling voting practices, from Florida to North Dakota. “What the courts said to us is that they could not continue to enforce Section 4 because they did not have a contemporaneous record,” Fudge said. “We are doing these hearings to create a contemporaneous record, so that we can go back to them and say, ‘Not only did we have these problems in 1968, but we had these problems in 2018.”

THE HEARINGS ENDED UP being extraordi-

nary—something one could rarely say about congressional hearings of any kind. Witnesses painted a bleak, vivid, and sometimes heartrending picture of voting rights in the postShelby era. Some of the hearing sites were predictable enough—Broward County, Florida; Atlanta, Georgia; Fudge’s home district of Cleveland, Ohio. But the series would kick off in Brownsville, Texas, before visiting the Standing Rock reservation in North Dakota; Birmingham, Alabama; and Halifax County.

“We’re going to small communities who people forget about who are punished year after year after year,” Fudge said. It didn’t hurt that subcommittee member G.K. Butterfield, who once worked on voting-rights cases before becoming a district judge and landing in Congress, represents Halifax County.

And so on a sweaty Thursday morning in

a ly s s a p o i n t e r / at l a n ta j o u r n a l- c o n s t i t u t i o n v i a a p i m a g e s

gate, folks!) and new Speaker Nancy Pelosi had revived, would be coming—for one in a series of field hearings across the country looking into voting discrimination since Shelby.

While the new Democratic House majority was eager to revive the struck-down “preclearance” provisions of the Voting Rights Act for frequent offenders like North Carolina, Justice John Roberts, in his Shelby decision, had issued a challenge to Congress: Prove that we still need it. “History did not end in 1965,” Roberts tartly observed. “Coverage today is based on decades-old data and eradicated practices” like Jim Crow–era literacy tests and poll taxes, he wrote. “The conditions that originally justified these measures no longer characterize voting in the covered jurisdictions. Nearly 50 years later, things have changed dramatically. Largely because of the Voting Rights Act, voter turnout and registration rates in covered

mid-April, Congress came to town. A couple of hundred curious Halifax residents, sharpdressed for the occasion, filed past presidential-visit-level security at Halifax Community College for the proceedings. Two high school classes huddled near the back of the big brown auditorium; a large contingent of Fudge’s Delta Sigma Theta sorority sisters, dressed in bright red, arrayed themselves near the front. Kristin Scott, who’d submitted written testimony, took a rare day off with her deputy election director so she could witness what might go down. “I have to see this,” she’d told me. “It’s so weird that they’re here. Good, mind you, but weird.”

After ordering the buzzing crowd to hush, Fudge said she “could not think of a better place to continue our hearings. When the Supreme Court struck down a core provision of the Voting Rights Act in 2013, Chief Justice Roberts wrote nonetheless that, and I quote, ‘Voting discrimination still exists. No one doubts that.’”

Fudge glanced up from her notes and gave the audience a knowing look. “Legislators in North Carolina,” she said, “proved that point.”

The six witnesses in Halifax, as at most of the hearings, were a mix of voting-rights scholars, lawyers, activists, and elected officials. The star of this show was the Reverend William Barber, the former state NAACP chair who began leading Moral Monday protests after North Carolina’s monster law was enacted. “We have been battling for 2,023 days—five years, nine months, and 24 days—since the Voting Rights Act was gutted in 2013,” he thundered. Barber talked about how Obama’s victory had set off the white supremacist backlash that helped elect a Republican legislature, which then crafted artificial advantages through gerrymandering, dreamt up the “worst voter-suppression laws we have since Jim Crow,” and then sat back to wait for the Supreme Court to decide the Shelby case.

“They waited, and they waited, and then as one legislator said, ‘Now that the headache has been removed, we can move forward.’

“The Southern strategy is still being worked through all of these efforts to suppress the vote at a time when we have more power and potential than we’ve ever had,” Barber said.

The resistance in North Carolina had been fierce, both in the courts and in the streets.

“Thousands marched, thousands were arrested,” said Barber, who went to jail six times

himself. “It took us years, but in July 2016 a federal appeals court ruled that it was unconstitutional. However, they have not stopped.”

No they didn’t! came a voice from the audience.

In every hearing, the details differed (somewhat), but the story was much the same: Republican lawmakers, in the South and in GOP-led states where Democrats are competitive, have been both relentless and deviously innovative in targeting the other party’s voters—and when one law is nipped in the bud by the courts, two others always seem to bloom.

It’s precisely what Justice Ruth Bader Ginsburg predicted in her searing Shelby dissent.

“Past is prologue,” she wrote, riffing on Shakespeare while puncturing Roberts’s fantasy of

IN HER SHELBY DISSENT, JUSTICE GINSBURG PREDICTED A RASH OF “SECONDGENERATION BARRIERS” TO VOTING WOULD SPRING UP. SHE WAS RIGHT. racial harmony circa 2013. Before the Voting Rights Act and preclearance for states that discriminated, Ginsburg wrote, “attempts to cope with this vile infection resembled battling the Hydra. Wherever one form of voting discrimination was identified and prohibited, others sprang up in its place.” Now, she said, the Supreme Court was giving states a green light to do their worst again. Ginsburg predicted a rash of “second-generation barriers” to voting that would supplant the old Jim Crow literacy tests, poll taxes, and (once a North Carolina specialty) requirements that black voters recite the preamble to the U.S. Constitution.

She proved to be prophetic. The field hearings, which concluded in Birmingham in late May, provided ample evidence of the Hydra-headed nature of the new voter suppression—and how Republicans in Southern and battleground

states have been learning from each other since the monster law set the tone for the post-Shelby era. “Notes are compared,” Tomas Lopez, head of the civil rights group Democracy North Carolina, said in Halifax. “You see something in one place, it gets used in another.”

The recent battle cry for “uniformity,” for instance, hadn’t originated with North Carolina lawmakers; it was the brainchild of Ohio Republicans. And that, in turn, means that the 900,000 voters in Ohio’s largest county, Cuyahoga, have just one polling place till Election Day—making Cleveland a supersized version of Halifax County. At the hearing there, longtime county board of elections member Inajo Chappell projected photos of the predictably long lines that ensued. She couldn’t tell the subcommittee how many voters in her majority-black county had simply given up and gone home. “There is no way to estimate the number. But I can say that uniform rules have continued to be implemented in a manner that limits voter access,” she testified. The Republicans’ justifications for the changes did not pass muster, she said. “The constant clamoring about rampant voter fraud is discouraging voter participation, and my experience over the years permits me to say that persistent claims about voter fraud are wholly without merit.”

Ohio Republicans also popularized voter purges, with former Secretary of State Jon Husted (who’s now lieutenant governor) showing other states how to perfect the art of tweezing minority voters from the rolls. As Tom Roberts of the Ohio NAACP testified, Husted used a provision in the 2002 Help America Vote Act— Congress’s timid response to the Florida debacle in 2000, which “we all thought was a helpful law,” said Roberts—to start removing voters from the rolls if they’d sat out two straight elections. The Supreme Court upheld the practice, which stripped 270,000 voters from the rolls in Ohio in 2018. There’s ample evidence that the practice disproportionately affects poor people and voters of color, who tend to move more and miss the notices that come in the mail from the state, directing them to update their information to remain active voters. “The decision allows states to treat the fundamental right to vote as a use-it-or-lose-it right,” Roberts said.

Fudge’s Elections Subcommittee heard about purges everywhere it went. North Car-

SUMMER 2019 THE AMERICAN PROSPECT 49

olina has struck 12 percent of its voters from the rolls, according to Brennan Center figures, with voters of color overrepresented in 90 of 100 counties. Georgia, under its notorious voter-suppressing Secretary of State Brian Kemp (now governor), had eliminated 750,000 voters even before the 2016 election. At the hearing in Atlanta, a visibly nervous Fulton County voter, Stacy Hawkins, testified about the “postcard trick” that Kemp’s office used last year to try to disqualify her and her three grown children— even though they’d all voted in 2016. “I can’t really explain all the ranges of emotions I felt when I saw this notice,” she said. “It’s an abbreviated feeling of the stages of grief—except the one thing I couldn’t do was accept it.”

Holding up the plain white card mailed to her former home “so people can see how innocent they look,” Hawkins explained what it took to regain her right to cast a ballot—namely, a bundle of determination, a lot of wasted time, and lawyers from the ACLU. “In my wildest dreams,” Hawkins said, “I never imagined that I would be here in 2019 fighting the same issues my ancestors have waged since arriving on these shores in 1619. I am asking Congress to intervene in what was fought for and, many of us thought, won.”

In Alabama, another Republican election chief, John Merrill, took the trickery to a new level as he sliced a whopping 780,000 voters from the rolls. “As long as I’m secretary of state,” he’d boasted in 2016, “you’re going to have to show some initiative to become a registered voter in this state.” The following year, with a special U.S. Senate election in the offing, Merrill sent non-forwardable postcards to all 3.3 million Alabama voters containing their registration information. If the details were accurate, and the voter hadn’t moved, they were asked to “retain” the card. If the details were wrong—usually meaning someone had moved, but wouldn’t be getting the card—they were asked to drop the card back in the mail, marked “return to sender,” but without being able to change their information. It was no great surprise that on Election Day, many Alabamians showed up at the polls to be told they could no longer vote, having been moved to the “inactive list.”

At the hearing in Birmingham, Fudge and the subcommittee heard about an even more devilish ploy to disqualify black and poor voters in Alabama. After passing a law, soon after

50 WWW.PROSPECT.ORG SUMMER 2019

the Shelby decision, that required a photo ID to vote, the state announced the closure of 31 driver’s license offices, almost all in predominantly black parts of the state. “The rationale was saving taxpayer money,” University of Alabama law professor Jenny Carroll testified. But it didn’t save much—between $200,000 and $300,000, in a state where annual budgetary shortfalls typically range from $100 million to $200 million. The main effect was forcing tens of thousands of citizens to drive hours to get the newly required ID. After a court challenge, the state agreed to reopen the disputed offices—one day a month. “But good luck finding them, or figuring out their hours,” Carroll said, since the state doesn’t post them.

THOUGH FLORIDIANS VOTED TO RESTORE 1.6 MILLION EX-FELONS’ VOTING RIGHTS, GOP LEGISLATORS RESPONDED BY RAISING NEW BARRIERS. THE SHEER INVENTIVENESS Republicans

have displayed since Shelby opened the votersuppression floodgates would be impressive if it were directed at something other than denying a constitutional right. In Florida, the subcommittee heard from Andrew Gillum, the narrowly defeated gubernatorial candidate turned voting-rights activist, who described how lawmakers set out this year to undercut last November’s referendum to allow the state’s 1.6 million ex-felons to vote. “We were unambiguous as voters,” Gillum said quite accurately—65 percent voted for restoring the rights. “We were going to be a state that didn’t judge people forever for their worst day.” But Republican lawmakers, fearing the consequences of letting so many ex-felons vote, decided to attach some serious strings: Only those who pay all fines and fees associated with their cases (which accrue

interest at a steep rate while they’re incarcerated) will be eligible to vote again. The Brennan Center has estimated that in other states with a similar rule, only 3 percent of former felons end up getting their rights restored.

And so it went on the Elections Subcommittee’s spring road trip: gruesome and welldocumented examples of suppression piling up everywhere, attesting to the resurgence of Jim Crow–style voting restrictions since 2013.

If Congress ever passes a new Voting Rights Act, and the Supreme Court considers it again, Justice Roberts should be played a highlight reel of these hearings—especially from the most poignant and emotional of them, held on the Standing Rock Indian Reservation in the Dakotas.

The leaders of five different tribes testified about what happened after a Democrat, Heidi Heitkamp, won a U.S. Senate seat from North Dakota in 2012 by a margin of fewer than 3,000 votes. “We believe Standing Rock votes had a significant impact in that election,” said the tribe’s judicial chairman, Charles Walker, “with Native votes putting her over the top.”

The state’s Republican legislature responded by imposing a photo-ID requirement, knowing that most Natives lacked them—because many don’t drive, don’t have traditional street addresses, and because, as Walker said, “IDs cost money that people simply do not have.

Our family poverty rate is 35.9 percent. The nearest driver’s license site is 40 miles away.”

Like most of the other tribes, the Standing Rock Sioux figured out a way to make voters eligible for Heitkamp’s re-election attempt last November—by spending money it couldn’t afford to map new street addresses and print IDs for free. Alysia LaCounte, a lawyer from the Turtle Mountain Band of Chippewa, broke down as she described the economic suffering on her 19,000-person reservation, and the Herculean effort and expense required to make longtime voters eligible again. “Our unemployment rate is 69.75 percent,” she said, not wishing to round it up. “In the past we’ve made IDs, but they cost $15. Fifteen dollars is milk and bread for a week for a poor family.” The Chippewa decided to make the IDs free, but on the first day of printing them, the machine melted down.

So they sought donations for a new one. Staff worked endless overtime hours to make 2,400 new IDs to satisfy the legislature. Get-out-the-

andrew krech / news & record via ap images

vote rallies were held, and turnout went up by 42 percent. “But please understand,” LaCounte said. “This took a great amount of financial and time resources. The tribes organized like never before. Students led a march to the polls on Election Day, in a snowstorm with windchills.

But luckily most of that was downhill.”

After hearing all this, the Elections Subcommittee’s ranking Republican member, Rodney Davis of Illinois, lauded the tribes’ patriotic efforts. But their stories offered no evidence of voter suppression, he said: Turnout had gone up, hadn’t it? Walker shot down that line of argument in a hurry. “The lack of cultural understanding and knowledge is so wide a gap,” he said. “A lack of understanding, or even wanting to understand. If it comes to this, are you gonna eat, or are you gonna vote? You’re gonna choose to take care of your family first.”

By the time her subcommittee reached Florida’s Broward County, Fudge had heard quite enough Republican talk about rising vote totals giving the lie to voter-suppression claims. “It’s interesting that we talk about the numbers of people voting,” she said with a small smile.

“Because we vote in spite of difficulties doesn’t make those difficulties right. It doesn’t make it right that they tell us in Standing Rock they are voting in chicken coops. In Brownsville, it doesn’t make it right that they are voting in police stations, because they are afraid of police. It doesn’t make the purges right: Poor people move more, so they don’t get the junk mail. And the Constitution of the United States does not say that if you miss a vote, we’re not going to let you vote anymore. The Constitution does not say if you miss two votes we’re not going to let you vote anymore. It says you have a right: an unfettered, unabridged right to vote in this country if you are a citizen.

“We will support democracy in Venezuela, in Russia, in China, everyplace but here,” Fudge said. “Every time we change the rules, which we do in every single election, we make it more difficult for people to vote. If you’re confused about what time of the day you can vote, it is suppressing your vote.”

SEVERAL TIMES DURING the field hearings,

Fudge was moved to repeat a pledge that won’t be easy to fulfill. In Atlanta, for instance, after hearing from Stacey Abrams about how “mal-

feasance and incompetence worked in tandem” to create the conditions for her narrow defeat in the 2018 governor’s race, Fudge leaned forward on the dais. “As they say at home, we gonna fix it,” she said, nodding. “I promise you we will.”

But there’s only one real fix for the 24 states that have restricted voting rights since Shelby, aside from overcoming Republican gerrymanders to elect Democratic majorities in state capitols: Congress has to update the Voting

The uncertainties, the news coverage, the confusing court battles have effectively spread what Cliff Albright, co-founder of Black Voters Matter, calls “a fog of confusion over voting.” The skepticism Albright and his Selma-based group face when they try to engage voters throughout the South can be intense, he says. “It’s a combination of all this stuff we’re talking about, right? When you know the powers that be don’t want you voting,

North Carolina passed a voter ID law in March 2016; months later it was blocked by a federal appeals court, which found that the law was intended to make it harder for blacks to vote in the presidential battleground state.

Rights Act in a way that passes muster with the Supreme Court. Without a federal solution, the endless round of new restrictions, followed by equally endless rounds of court battles—then followed by newly worded laws or amendments after one voter restriction gets struck down—will continue in the states.

“Restoring preclearance in states like North Carolina is the only solution,” says Tomas Lopez. “Otherwise, you’ll still have this catand-mouse game that’s been going on. Shelby happens; North Carolina passes its voter-ID law; then you’ve got three years of litigation and it’s declared unconstitutional. Then you have voters pass an amendment, as they did in 2018, and now we’re all back in court. You have ID in place; you don’t have ID in place; maybe you have ID in place.”

The game itself is a form of suppression.

it says, ‘Everything you’re already thinking about how this is a rigged system, all of that is true.’ People say, you know: They don’t want us to vote, they’re not going to let us vote, and anyway my vote isn’t going to make a difference. And the Republicans—they know this.

Just like they know the impact Voter ID is going to have. They know.”

They also know that Democrats face a daunting set of obstacles in restoring the Voting Rights Act to its full powers. The Voting Rights Advancement Act, which aims to do that, is likely to pass the House later this year—and then, unless a handful of Senate Republicans can be brought on board, be sentenced to a quiet death by Majority Leader Mitch McConnell. The Voting Rights Act used to win bipartisan agreement; when Congress reauthorized it in 2006, it sailed through the

SUMMER 2019 THE AMERICAN PROSPECT 51

trying to do just that—but without preclearance, they’ll have no teeth. The first measure the new House majority passed in March, the For the People Act, was a progressive mirror image of North Carolina’s monster voting law: It would make voter registration automatic for all qualified citizens, allow online registration, set minimum hours for early voting nationwide, create a donor-matching finance system, and mandate independent redistrict-

People waited in line outside the Supreme Court to listen to oral arguments in the Shelby v. Holder voting rights case.

lenge brings it back before the Supreme Court.

The VRAA , authored by Alabama Representative Terri Sewell, meets Roberts’s demand for a “contemporaneous” formula. States with 15 or more voting-rights violations in the last 25 years would qualify; right now, that would include most of the South—Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas, and Virginia—along with California and New York. (Arizona and Arkansas are right on the edge, and Ohio is coming up quick.) The law would task the Justice Department with maintaining a list of violations in every state and county. And once again, the states that make a habit of suppressing voters would have to submit every voting change, right down to a new polling location, for approval.

Congress can pass other laws to mandate better voting practices—and Democrats are

52 WWW.PROSPECT.ORG SUMMER 2019

ing commissions to quell gerrymandering.

“What’s compelling is that it takes the offensive, when voting-rights advocates have been on the defensive for so long,” says Lopez. “It’s a turn toward encouraging voter participation.”

But even if the bill got through the Senate and withstood court challenges, it would be difficult to enforce under what’s left of the Voting Rights Act. If states thumbed their noses at the law, the only recourse would be for voters and civil rights groups to sue under Section 2 of the VRA . But Section 2 litigation is hugely expensive; for just one of the dozens of lawsuits in North Carolina, a lawyer testifying in Halifax said, “counsel estimated more than $10 million in costs just on the plaintiff’s side.” Besides, as Abrams pointed out in Atlanta, “preclearance allows us to cure harm before it’s caused. Under the current system, that harm has to already

exist, and that harm has far-reaching and deleterious effects,” no matter the outcome of a particular lawsuit. “We have to understand that voter suppression is not simply a momentary act. It is a system of disconnecting our citizens from the policies that govern their lives. When you have no faith in the system, you have no reason to participate in the system.”

When Roberts wrote the majority opinion in Shelby, he took issue with singling out particular states for federal oversight. “In 1965, the States could be divided into two groups: those with a recent history of voting tests and low voter registration and turnout, and those without those characteristics,” the chief justice wrote. “Today the Nation is no longer divided along those lines, yet the Voting Rights Act continues to treat it as if it were.” But even if you granted Roberts’s rosy view that Alabama had become just another Vermont when it came to voting, the reality is clearly different in 2019. While many blue states are passing progressive laws—including their own versions of parts of the For the People Act—Republicans in red and battleground states have spent the last six years winding back the clock to the good old days when voting was a (white) privilege, not a right.

President Lyndon Johnson, when he introduced the Voting Rights Act, noted, “Every device of which human ingenuity is capable has been used to deny this right.” Johnson would not have been surprised at the ingenuity unleashed by the Supreme Court’s evisceration of the law almost 50 years later. “It is so Jim Crow, what we’re seeing,” voting-rights scholar and White Rage author Carol Anderson told me last fall. “We often think about the violence, the clash on the Pettus Bridge, the murders of Herbert Lee and Louis Allen, who were working to get people registered to vote. But Jim Crow operated under the legal system. That’s what we miss. The literacy tests, the poll tax, that all had the aura of legitimacy—‘We don’t want voters who don’t understand the U.S. Constitution to vote, do we?’ But it had the purpose of delegitimizing American citizens. Then as now.”

Bob Moser, the author of Blue Dixie: Awakening the South’s Democratic Majority, is a contributing editor at The New Republic, Rolling Stone, and The American Prospect.

e va n v u c c i / a p i m a g e s

Senate with unanimous Republican support.

But the white backlash to Obama’s 2008 victory, which elevated a harder-right Republican Party to power in Washington and most states, has made that sort of amicable agreement seem as antiquated as Leave It to Beaver.

And even if the VRAA made it through Congress, before or after 2020, its new formula for putting states under preclearance would face an uncertain fate when a Republican chal-

Climate Change and the Democrats If they have the smarts, Democrats can prevent a schism in the progressive coalition, and turn the Green New Deal into a jobs machine for workers displaced from the carbon economy.

B Y HA ROLD M EYERSO N

ap images

I

’ve seen the face of a Democratic Party civil war, and it’s not pretty.

As an 18-year-old staffer for the presidential campaign of Eugene McCarthy, I was at the tumultuous 1968 Democratic National Convention in Chicago. The images that form the popular memory of that convention are of the what-do-we-have-to-do-to-end-this-damn-VietnamWar kids in the streets being countered—and clobbered—by Chicago cops running amok. But by mid-’68, the conflict between the antiwar kids and many of their elders reflected a whole series of increasingly bitter differences not just of belief, but also of identity—and not just in Chicago’s streets but inside the convention hall as well. To the cops, to the Daley machine that controlled them, and also to many of the convention delegates, from organizations like Daley’s or from George Meany’s AFL-CIO, the antiwar legions were a bunch of coddled upper-middle-class kids who’d managed to evade the draft, and their elders who’d coddled them. Correspondingly, those kids and their elders viewed the party’s old guard—the pols, the cops, and the unions—with an understandable fury.

These divisions were perhaps most intensely felt within the broad labor left. In 1964 and ’65, all wings of that left had worked for landmark civil rights and Great Society legislation. Vietnam sundered whatever strategic unity and dispositional comity had held that left together, as most unions maintained a hawkish posture toward what many middle-class liberals and the young regarded as a disgraceful, murderous debacle. Richard Nixon owed his narrow victory over Hubert Humphrey in the 1968 presidential election, and some of his non-narrow victory over George McGovern in 1972 (in which the AFL-CIO went neutral), to those Democratic divisions.

This Era of Bad Feelings persisted at least for the next 20 years, as such younger Democratic leaders as Gary Hart, Paul Tsongas, and Jerry Brown viewed labor with disdain, while a number of the old-line unions viewed the rise of newer social movements—the women’s movement, the environmentalists,

and others—with suspicion and occasional rage. The centrist Democrats who intermittently held the White House—Jimmy Carter and Bill Clinton, particularly—pretty much ignored labor. It took decades until time, changing circumstances, and the emergence of new issues healed these rifts—and also opened new ones, such as the division on the regulation of finance between Wall Street Democrats and progressive ones.

Today, the potential rift over decarbonization is just one of several that could damage the Democrats going into the 2020 election. The policy differences between the Sanders-Warren wing of the party and more centrist Democrats—particularly many traditional big-money donors—are very real. The particular peril posed by the politics of the climate crisis is that it could pit two key constituencies in next year’s election against each other: young voters, whose turnout levels may depend on the party’s embrace of the Green New Deal, and blue-collar workers in Midwestern swing states that may go Republican if those workers’ support for Donald Trump remains at 2016 levels. Worse yet, the cultural differences between these two groups could pit them against each other well beyond 2020, just as the split occasioned by the Vietnam War didn’t subside when that war ended.

For which reasons, healing this rift must be a top priority for Democrats, most especially for their presidential candidates. Recognizing this, some leading candidates—Jay Inslee, Elizabeth Warren, and Joe Biden, for starters—have come forth with decarbonization plans that link the Green New Deal with the creation of high-wage blue-collar jobs.

That’s a necessity, because the intraparty divisions today have begun to echo those of the Vietnam era. Once again, a movement powered by the young is insisting on radical solutions, with the young fearing, quite reasonably, that

What the Democrats don’t need again: The Chicago cops and the antiwar kids outside the Conrad Hilton, the headquarters hotel for the 1968 Democratic Convention.

SUMMER 2019 THE AMERICAN PROSPECT 53

as they grow older, the planet will grow relentlessly less habitable. Once again, a wing of the labor movement—the heavily male blue-collar construction and fossil fuel unions—is pushing back, insisting that these changes can’t come at the expense of their jobs, families, and communities.

And, as was not the case when the Vietnam War was in question, today both sides are right.

IT DIDN’T TAKE LONG for a backlash

54 WWW.PROSPECT.ORG SUMMER 2019

pol who managed to get landmark environmental legislation through Congress that threw thousands of workers out of work—and managed to do it with their support.

BY THE MID-1970S, San Francisco Congressman Phil

Burton had established himself as the legislative wizard of American left liberalism. Driven, profane, and altogether overbearing, Burton had managed in his decade and a half in the House to dethrone the Dixiecrat oligarchs who’d chaired House committees by changing the selection process, lead the House opposition to the Vietnam War, abolish the House Un-American Activities Committee, create and fund the program to treat miners who suffered from black lung disease; steer to passage numerous pro-labor, pro-consumer, and welfare rights bills; and get all this and more done by crafting deals with some of Congress’s most reactionary members. (He’d vote for their agricultural subsidies if they backed the bills he sponsored.) “I spent 32 years in elective office and I only met one absolute political genius,” Senator Gaylord Nelson told Burton biographer John Jacobs. “That was Phil Burton.”

Genius or no, in 1977 Burton faced a political conundrum. Jimmy Carter had just become president after eight years of Richard Nixon and Gerald Ford, and high on Burton’s to-do list was legislation to expand the dysfunctionally small Redwood National Park, which stretched along the California coast north of Burton’s district. With logging companies denuding the hills of redwoods in areas adjacent to the park, in such a way that the redwoods within the park were endangered, Burton’s plan was to have the government purchase the surrounding land, which would greatly enlarge the park—and throw several thousand unionized, well-paid loggers out of work.

j. scot t applewhite / ap images

Congressman Phillip Burton of California

against the Green New Deal to form. This March, the AFL-CIO’s Energy Committee, consisting of the presidents of the Mine Workers, the Steelworkers, and of a number of construction unions, sent a letter to Senator Ed Markey and Representative Alexandria Ocasio-Cortez saying that the Green New Deal resolution they had authored “is far too short on specific solutions that speak to the jobs of our members and the critical sectors of our economy. … We will not accept proposals that could cause immediate harm to millions of our members and their families.” In California, construction unions have demonstrated against Democrats (including Los Angeles Mayor Eric Garcetti) who’ve supported the Green New Deal.

Yet despite this dissonance, this clash shouldn’t turn out to be as politically cataclysmic as the one over Vietnam. By no means is labor united in opposition to, or even apprehension over, the Green New Deal. The national AFL-CIO’s executive council—a larger, more diverse body than its energy committee—hasn’t taken a position on the Green New Deal, and at least one major union, the Service Employees International Union, has endorsed it, as have the Maine and Los Angeles AFL-CIO federations. The policy proposals from Inslee, Warren, and Biden include plans and funding for transitioning the affected workers into more sustainable endeavors.

But to blue-collar workers who’ve seen their nation’s indifference to the destruction of working-class lives and communities, it will take more than position papers, even from the most pro-labor of Democrats, to allay their anxieties. That outlets like Fox News demonize not just the Green New Deal but its sponsors, too—Ocasio-Cortez in particular—only complicates the tasks for Democrats who understand the need for such a policy and for an economic-transition plan credible enough to forestall the furies that the likes of Fox seek to unleash.

Herewith, then, the story of one brilliant Democratic

The reaction of the loggers, the surrounding community to which their income made an appreciable contribution, and the union movement generally was predictably choleric. Burton’s initial response was to convene a daylong hearing in a hall adjacent to the park, which close to 5,000 furious loggers and locals attended. “[A]t times

States had ever seen. His signature creation was what Reuther had termed a “guaranteed annual wage”: companyprovided payments that added to the unemployment insurance autoworkers collected when the Big Three laid them off due to slackening purchases or plant retooling. It took years of union pressure and Weinberg’s frequent modifications, but by the 1960s, laid-off UAW members were able to collect 95 percent of their regular wages when the government’s and the company’s contributions were added together.

In the economy of mid-20th-century America, autoworkers’ layoffs were temporary. What the loggers faced, however, was permanent, and there’d be no money for them coming from the logging companies. What Burton wanted was to create a federal fund for the loggers, not subject to the vagaries of annual congressional appropriations. What Weinberg came up with was a fund that would provide the loggers with the same level of pay and benefits—tax free—they’d received on the job, for a period of six years, unless and until they found other work.

Young climate crisis activists protest in the Capitol office of Democratic House Leader Steny Hoyer in support of the Green New Deal (left). Unionized oil workers from refineries slated to close meet with lawmakers from Pennsylvania and Delaware at the Capitol (right).

m a n u e l b a lc e c e n e ta / a p i m a g e s

Young voters want a Green New Deal—which many blue-collar workers believe imperils their jobs. In 2020, Democrats will need high turnout from the young and lower levels of Trump support from those workers. it bordered on an open riot,” wrote Jacobs. When Burton walked onto the stage, “a loud chorus of boos greeted him and lasted for several minutes.” The environmentalists who testified in favor of park expansion required police protection. The next day, at a second hearing, this one in San Francisco, John Henning, the longtime head of the California AFL-CIO, gave indignant testimony. “Where the hell are the liberals to stand up for our people?” he asked.

“What the hell are the jobs they’ll get? Where are they?

There are none.” What the loggers felt, Henning continued, “is more than fear, it is a sense of rage and hatred for those who will displace workers. Believe me, Mr. Chairman, I know you are a friend of labor. … Don’t underestimate the passions of the rank and file on this.”

Burton didn’t underestimate those passions, or the justice of the loggers’ claims. Instead, he hired the nation’s most creative labor economist to craft a solution. Nat Weinberg had headed the research department of the United Auto Workers during Walter Reuther’s tenure as president, where he’d helped Reuther devise the closest thing to social democracy in one industry that the United

For older workers, who were unlikely to find any other comparable work, the payments could extend to 11 years.

Congress had never before enacted anything remotely like this. Burton nonetheless found enough votes to pass it in the House, and while the program was not in the version the Senate passed, Burton had it reinserted in the conference committee. When the bill, thus amended, returned to the Senate for final passage, Burton wanted it to quickly go through before conservatives discovered his logger compensation fund. (Burton was never much for process.) One of his Senate allies, however, South Dakota’s James Abourezk, wanted to speak at length about the redwoods just before the vote would be taken—giving South Carolina’s Strom Thurmond, flipping through the bill while Abourezk spoke, enough time to come across Burton’s fund. Furious, Thurmond asked Abourezk to explain why the government should pay the loggers. Improvising on the spot, Abourezk replied, “The federal government has the power of eminent domain. If you take a man’s property, you have to compensate him. What’s more important to a man than his job?”

SUMMER 2019 THE AMERICAN PROSPECT 55

“I guess that’s okay,” said a confused Thurmond, and sat down.

When the bill came to its final vote in the House, members were buttonholed on their way to the floor and urged to vote yes by lobbyists for both the Sierra Club and the loggers’ union. Burton had also worn down the logging companies to a position of neutrality. The only opponents, to Burton’s great delight, were lobbyists for the association of chainsaw manufacturers. The bill became law— one of the first bills expanding or creating national parks that Burton was to get enacted, though he had no affinity whatever for the outdoors. After another feat of legislative legerdemain, which created the Golden Gate National Recreation Area (GGNRA), he turned to his colleague George Miller and said, “Isn’t the GGNRA beautiful?”

“Yeah, Phil,” Miller answered. “It’s a nice place.”

“Not the place,” Burton said. “The bill.”

PHIL BURTON DIED, suddenly, in 1983. And while the

number of coal miners has been shrinking for decades, they clearly outnumber the number of loggers displaced

by Burton’s Redwood Park expansion. There are roughly 50,000 coal miners in the U.S. today, and as of 2015, about another 400,000 workers in support jobs for the industry, according to economists Robert Pollin and

of a just transition for fossil fuel workers could run to $500 million a year. Were that transition as comprehensive as the one Burton and Weinberg crafted for the loggers, it might well run a good deal more than that. The Green New Deal plans that Inslee, Warren, and Biden have proposed allot between $150 billion and $300 billion yearly for the costs of building a sustainable-energy system and helping fossil fuel workers either move to this new economy or have their pensions and benefits secured. A substantial chunk of those funds—much more, I suspect, than $500 million— would have to go to the displaced workers.

But it’s not just workers within the fossil fuel industry who’ve expressed apprehension about the Green New Deal. It’s also a number of the construction unions whose members work on infrastructure projects, among them the Laborers (many of whose members work on laying pipelines), the Electrical Workers, and the heavy-equipment operators in the Operating Engineers. These unions have formed alliances with the oil industry that seek to retard the climate change movement. One such group— Common Ground California—is an alliance of that state’s Building and Construction Trades Council and the Western States Petroleum Association.

To labor supporters of the Green New Deal—and there are many—the involvement of the trades with the oil

The plans released by Jay Inslee, Elizabeth Warren, and Joe Biden go a good deal of the way toward creating a decarbonized economy that doesn’t place currently well-paid workers in $19-an-hour jobs.

Brian Callaci, writing in the Summer 2016 issue of the Prospect. Pollin and Callaci also calculated there were roughly 194,000 workers employed in oil and gas extraction, while another 200,000 worked in refineries and in fossil fuel distribution. For unionized workers, at least, these are well-paying jobs: United Mine Workers members make roughly $60,000 annually, while the Southern California refinery workers who belong to the United Steelworkers (which absorbed the Oil, Chemical and Atomic Workers some years ago) make about $125,000 a year, according to USW local leader Dave Campbell.

That’s close to one million workers, more or less, who could lose their jobs—many of them well paying—in a fossil fuel–free economy, though support workers for the industry might well find comparable support work in the renewableenergy industry. For the workers actually mining the coal, or drilling for or refining oil, comparable prospects would be dimmer. And while oil refineries are often close to major cities, oil fields and coal mines are usually not. Closing them down generally devastates local economies.

In their article, Pollin and Callaci estimate that the cost

56 WWW.PROSPECT.ORG SUMMER 2019

industry is both disappointing and a bit mysterious, since, as Joe Uehlein, the president of the Labor Network for Sustainability, says, “addressing the climate crisis can be a full employment plan for the building trades far into the future. We need to do a better job of making that case.”

For a union like the Laborers, that does so much work laying and repairing pipelines, Uehlein says, installing new water systems to replace a nation of ancient pipelines would create millions of jobs. “The entire system of storm management and the delivery of fresh water needs to be rebuilt,” he says. “Our storm management system was never designed to deal with the current level of rain or the more intense storms we’re now experiencing.” A new water system, a new grid, a national commitment to assembling wind turbines and installing solar panels, he says, will generate “a huge amount of work.” The green-energy infrastructure plans that Inslee, Warren, and Biden have unveiled all call for a range of projects that could employ literally millions of construction workers, and specify that the jobs they create should be high-wage and union.

The commitment of some of the building trades to the

current system, however, could enable both the oil industry and the conservative movement to drive a deeper wedge between those unions and the climate crisis activists—and, by extension, the greener-growing mainstream of the Democratic Party. Since the protests over the Keystone XL pipeline, a number of Republican-controlled states have enacted legislation drafted by the right-wing American Legislative Exchange Council (ALEC) to penalize protests at the site of pipelines, and to make those who participate in or even encourage such protests subject to felony charges. (In every state, actually damaging a pipeline is already a crime.) This year, for the first time, that bill was introduced in a Democratic-controlled state—Illinois—and when it was amended to exempt union protests (over wages, working conditions, and such) from its otherwise sweeping prohibitions on demonstrations, the state AFL-CIO endorsed it. It then passed in the lower house, before environmental groups, the ACLU, and other organizations (and, likely, the Democratic representatives who’d voted for it) realized what the bill entailed.

The bill has now been pulled from consideration in the state Senate, but its near success illustrates both the conservative movement’s belief that it can deepen the split between at least some of the labor movement and the climate change movement, and the strength of the alliance between some of those unions and the oil industry. “They’re thick as thieves,” one labor leader told me.

k r i s t i n d i l lo n / b lu e h o r s e p h o t o g r a p h y

THANKFULLY, THEY’RE NOT all thick as thieves. A num-

ber of the refinery locals within the Steelworkers have long histories of working with environmental justice groups to try to limit the levels of pollutants in the working-class neighborhoods where refineries are frequently located.

In 2006, the national Steelworkers Union founded the BlueGreen Alliance to speed the transition to a cleaner economy—provided it doesn’t entail mass downward mobility for workers in the existing energy economy. As Steelworkers President Leo Gerard wrote in the Prospect earlier this year, “Some USW members work at oil refineries in good, family-supporting jobs that enable them to buy homes and help their kids pay college tuition. It is arrogant and unacceptable for out-of-touch policy wonks to suggest that they simply retrain to become non-union rooftop solar panel installers at $19 an hour with no benefits, and that their communities simply swallow the resultant loss in tax revenue and commerce. That’s no kind of ‘just’ transition.”

The plans released by Inslee, Biden, and Warren go a good deal of the way toward creating a transition that doesn’t strand workers in those $19-an-hour jobs. Inslee’s emphasizes legislation to facilitate forming unions, and in conversation with me, he advocated what he called “pricing adjustments that take into consideration the lack of carbon controls in foreign producers,” which is a nicely euphemis-

tic way of saying tariffs on imports like Chinese steel produced in coal-fired plants. For her part, Warren emphasizes a much more serious commitment to domestic production all along the supply chain, which would also be a boon to American manufacturing. Her plan calls for yearly federal purchases of American-made renewable-energy products totaling $150 billion.

In states and cities with no mines or oil or gas fields or refineries, the labor movement has been more receptive to policies like the Green New Deal. In New York state— where, by Pollin and Callaci’s count, there are just 13,000 workers in the fossil fuel industry—a number of unions have worked alongside environmental groups in developing legislation that promotes workerfriendly clean-energy projects (such as mandating that solar-installation workers be paid the prevailing wage of construction workers).

In Maine, the state AFL-CIO was the first group consulted by newly elected state assembly member Chloe Maxmin as she began writing that state’s Green New Deal legislation, which effectively guaranteed that union apprentices would work on the state’s new power grid. The state federation almost unanimously endorsed her bill in March (with some objections from the Machinists, whose Lobster Fisherman local feared that offshore wind turbines could disrupt the lobster beds), and the legislature passed it in June.

Maxmin is a 27-year-old Democrat from a rural district that had been Republican for decades until her upset victory last November; she’d also led the fossil fuel divestment campaign when she was a student at Harvard. She had the Burton-esque smarts to write her bill with labor in the room. “When we talk about transition, we’re talking about opening a whole new economy, and labor should be an integral part of that conversation,” she says. “This is something the political system has largely failed to do.”

The refinery workers’ Dave Campbell would agree with Maxmin’s assessment. “No family will sacrifice themselves for someone else’s family,” he says. “We’ll be willing to make sacrifices if it’s for the future of our children as well as their children. Just transitions have to be very concrete: People on the edge of losing their careers want to know what exactly will happen to them and their families.”

That’s what Phil Burton knew. That’s what Chloe Maxmin knows. If those smarts get spread around enough, we may have a viable Green New Deal yet—and avoid a ferocious generational fight in the labor-left universe.

Chloe Maxmin with her campaign manager Canyon Woodward

SUMMER 2019 THE AMERICAN PROSPECT 57

THE RELUCTANT

MAJORITY TODAY’S TEENAGERS WILL BE A GIANT BLUE WAVE— IF THEY VOTE.

B

rianna took me aback. She was the first to speak when I asked students in her high school government class if they planned to vote once they turned 18.

“No way!” she said, mixing bravado with disdain. “It would be a waste of my time! I don’t feel like giving my time to this country.

“No politician is going to help me put a roof over my head. Nobody is going to put bread on my table. Nobody is going to take care of me. I need to take care of me.”

58 WWW.PROSPECT.ORG SUMMER 2019

I was visiting her New York City classroom the week before the 2018 midterm elections.

All the students were black or Hispanic. I’m an old white guy who was there trying to understand what the next generation thinks about politics, civics, democracy, voting, America.

“What do we think, guys?” I asked. “Is she right?”

The room stayed quiet for a few beats before Chloe weighed in, softly. “My mom says every vote counts. She says the reason we got Trump is that too many people didn’t vote. And every-

thing he’s done since he got elected has been racist. If we get someone new, maybe things will get better.”

Another round of awkward silence. The class was like a jury mulling over two closing arguments, neither of which it found persuasive.

Luis spoke next.

“America has always been racist,” he said.

“With Trump, people are just more up-front about it.”

This drew approving nods around the room and a thumbs-up smirk from Brianna. “When

camrocker / istock by get t y

B Y PAU L TAY L O R

gender diversity, their respect for rules, their penchant for collaboration. But there are troubling signs too—a victim mentality, an intolerance of viewpoint diversity, a distrust of institutions, a wariness about human nature, an aversion to risk, a cynicism about the whole American experiment.

The historian Thomas Bender wrote that “nations are, among other things, a collective agreement, partly coerced, to affirm a common history as a basis for a shared future.”

When it comes to American history, young and old agree about almost nothing. Older adults take pride in the official version: We’re the greatest nation on earth, with noble ideals and, yes, some messy realities. Today’s teenagers learn mainly about the mess, especially those realities stemming from our original sins, racial oppression and slavery. Nearly half of adults over the age of 65 say that America stands above all other countries of the world.

mosaic created by a modern immigration wave that has brought more than 60 million newcomers here since 1965, nearly nine in ten of them nonwhite.

For them, diversity isn’t merely demography; it’s the beating heart of their value system.

Throughout the 20th century, “melting pot” was our go-to metaphor for an America transformed by immigration. It no longer parses.

Given their skin color, today’s immigrants and their children couldn’t melt if they wanted to.

And most don’t want to. They want to live in a society where boundaries of race, gender, and sexual orientation are porous, and everyone is free to be whoever he/she/they wants. Not a melting pot; a “mosaic”—which is my nominee for a label for this new generation (let’s act fast before “Generation Z” gets more traction, with its creepy intimations of end-times).

Politically and ideologically, Mosaics are a tsunami-in-waiting. Four million will turn 18

IN 2018, VOTERS OVER 45 WERE EVENLY SPLIT. VOTERS UNDER AGE 30 FAVORED DEMOCRATIC CANDIDATES BY A WHOPPING 35 PERCENTAGE POINTS. Just 14 percent of 13-to-21-year-olds agree.

As the generations cast their gaze forward, these perspectives flip. Teenagers are far more hopeful than older adults about what America will become, probably because both know the future belongs to the young. But there’s no guarantee that this coming-of-age generation will funnel its optimism into the civic habit most likely to create a brighter future: voting.

THE STAKES COULD NOT be higher. In 2018,

I see white people now,” she said, “they look at me like I make them afraid.” More nods.

These teenagers belong to the most distinctive coming-of-age generation in American history. Today’s old skew white and conservative; today’s young skew brown and progressive. We’ve never had such a big chasm between the two.

For a liberal boomer like myself, there’s much to admire about the young: their passion for social justice, their empathy for the underdog, their celebration of racial and

voters under age 30 favored Democratic congressional candidates by a whopping 35 percentage points, while voters over the age of 45 were evenly split. It was the biggest age gap ever in a midterm election. Throughout the 1980s, 1990s, and early 2000s, there was often no age gap at all.

And there’s more to come: Today’s teenagers are likely to be even more progressive than the millennials who voted in 2018.

For the first time ever, half of all Americans under the age of 20 are Hispanic, black, Asian American, or mixed race. They’re the

this year. Another four million next year. And so on, for as far as the eye can see. If you’re wondering why the new guard of the Democratic Party has put forward such an audacious agenda this year—wealth tax, carbon-neutral economy, tuition-free college, Medicare for All, universal child care, racial reparations—wonder no more. They’re racing left to keep pace with their future base, which wants leaders who shoot for the moon.

According to a study by social scientists Yair Ghitza and Andrew Gelman, the political landscape that people encounter at age 18 leaves three times the mark on their values and partisanship as do events they experience at age 40. With that in mind, let’s take a quick tour of what politics looks like to most of today’s high school students.

The White House is occupied by a villain from central casting who got there by riding a backlash to the demographic changes they embody. Large chunks of the GOP establishment and the conservative media echo chamber have become captive to a xenophobic

SUMMER 2019 THE AMERICAN PROSPECT 59

right-wing fringe. Meanwhile, one diverse new crop of Democrats has planted itself noisily in Congress and another is running for president.

Mosaics may hate politics and have no use for party labels, but they’re beginning to see their own lives, likenesses, and values reflected in a new generation of Democratic leaders. The moon and stars have aligned to make them a blue wave of historic proportions.

If they vote. And here’s where the crystal ball grows cloudy. Even with the “Trump bump” that took midterm voter turnout rates to their highest levels in a century for all age groups, the rate among eligible adults under age 25 was still barely half the rate among voters ages 45 and older (32 percent versus 62 percent).

As they form families, start careers, buy houses, send their kids to school, and pay taxes, will Mosaics start pulling their weight on Election Day? Historical trends say yes. But what if history isn’t a guide? What if this generation’s allergy to voting isn’t a function of life stage only? What if it’s also the by-product of coming of age at a time when an embittered right and aggrieved left disagree about everything else, but lock arms around their shared conviction that politics is rigged? If that’s where the story of American democracy starts for you, why wouldn’t you stand with Brianna and take a hike on voting?

For someone like me, it’s easy to rail against President Trump for conducting his civics-­ lesson-in-reverse, with daily rage tweets against the courts, Congress, the political parties, the FBI, the intelligence community, the media, immigrants, minorities, the rule of law, and just about every cherished democratic norm under the sun.

But to the young, the woke left also throws plenty of shade at America. Some comes from a popular culture that often seems fixated on our deepest moral failings—witness, for example, the three Grammy Awards and 500 million YouTube views taken in by “This Is America,” the 2018 rap video that intersperses joyful singing and dancing with shocking images of blacks being gunned down. And some comes from an education establishment that can take political correctness to self-parodying excesses—as when the University of California advises faculty members to avoid phrases like “America is the land of

60 WWW.PROSPECT.ORG SUMMER 2019

opportunity” because they might be seen as a microaggression.

These days, there are a dwindling number of college courses that explore the majesty of the Bill of Rights or the genius of checks and balances. “Ten years ago I could teach Madison,” says Peter Levine, a professor of citizenship and public affairs at Tufts University. “Now I can’t because the only thing my students are interested in is slavery.”

Levine helped launch and for a decade ran CIRCLE , a nonprofit research group that tracks youth civic engagement and voting. “I have complicated feelings about where we are now,” he says. “Lots of Americans, especially African Americans, have reason to read our history in a jaundiced way. But the worry is that you create a narrative for the next generation that says this country is too deeply racist and sexist to ever fix itself.”

Some data points illuminate the challenge:

Washington, D.C., to do what’s right. Back when baby boomers were that same age, 73 percent of them trusted the government to do what’s right.

They Don’t Trust People. Over the past halfcentury, the American public, young as well as old, has been hemorrhaging confidence in nearly all major institutions of society. But among the young, there’s something else even more daunting: They also don’t trust other human beings. Just 24 percent of Mosaics say most people can be trusted. Together with the young adults of the millennial generation, they register the lowest scores for interpersonal trust in the half-century that this topic has been explored by the General Social Survey.

The drought in social trust among the young is especially worrisome. In a fast-paced entrepreneurial economy, trust is the grease that keeps the gears from grinding. In an increasingly pluralistic society, it’s the glue that

WHAT IF THEIR ALLERGY TO VOTING IS PARTLY A BY-PRODUCT OF A TIME WHEN BOTH RIGHT AND LEFT SAY THAT POLITICS IS RIGGED? The Young Don’t Put Voting on a Pedestal.

Nine in ten older adults say voting is essential to citizenship. Just 56 percent of 18-to29-year-olds agree, according to a 2018 Pew Research survey.

Their Diversity Might Not Draw Them to the Voting Booths. The historic turnout

gap between blacks and whites closed during Barack Obama’s two presidential campaigns but opened back up in 2016, due mainly to a decline in turnout by younger blacks. Among Mosaics, blacks aren’t the largest minority group; Hispanics are. And here the turnout prospects are even more problematic. Election after election, Hispanic turnout rates lag about 20 percentage points behind those of whites.

They’re Not All-In on Patriotism. Just a third of 18-to-29-year-olds say they are extremely proud Americans, compared with nearly six in ten adults ages 50 and older, according to a 2018 Gallup survey.

They Don’t Trust Government. Today, just 20 percent of teenagers and young twentysomethings say they trust the government in

holds the mosaic together. In a self-governing democracy, it’s a rationale for voting and predicate for pragmatic compromise.

Why are Mosaics so distrustful? There’s an oversupply of explanations. A record share are minorities, and in all societies, minority groups tend to be less trusting. In their young lives, many have been given “the talk”—guidance from protective parents (but also popular culture, personal experience, and street wisdom) that cops, courts, pols, and even priests aren’t on their side. They’ve grown up doing lockdown drills in school, wondering if that strange kid from fourth period might be the next mass shooter. And they spend tons of time on social media, where it takes a nanosecond to figure out that not all their friends really are their friends.

So how do you persuade Brianna and her classmates that America is worth a vote?

Ultimately this is a job for candidates and campaigns, and there’s a good chance that 2020 will serve up a stark enough choice to energize the youth vote. But at a time when politics is stuck in a doom loop of mutual provocation,

m i c h a e l n i g r o / s i pa v i a a p i m a g e s

Distrustful of government, the “Mosaic” generation has turned out in full force to call attention to the climate crisis.

reciprocal outrage, and relentless cynicism, it would help to have the backstop of a robust civic culture that promotes the habit of voting.

Happily, a vanguard of savvy social entrepreneurs and idealistic educators is on the case. Unhappily, they’re working on a scale that doesn’t begin to measure up to the size of the challenge. And to watch them in the classroom is to appreciate the magic trick they have to pull off: How do you empathize with your young charges’ sense of victimization without adding to their sense of disempowerment?

I was steered to Brianna’s class by Generation Citizen, a decade-old group that has developed an “action civics” curriculum being used in eight urban public-school systems across the country, mainly serving students of color. “Our job is to teach them that politics isn’t a dirty word. And that they have the power to make change,” says DeNora Getachew, executive director of New York City’s Generation Citizen.

In the GC program, students in a social studies, government, or history class spend a semester choosing among themselves an issue they want to tackle, then figuring out how to make

their case and whom to lobby—be it a principal, school board member, city councilman, state legislator, or member of Congress. The issues run the gamut from small bore (dress codes, cellphone bans, cafeteria food) to big ticket (gentrification, mass incarceration, gun violence). The students often don’t get results.

They sometimes have trouble getting anyone’s ear—or even agreeing among themselves which problem to tackle. It’s all part of the curriculum.

“When they find out that getting a consensus can be hard, we tell them: ‘Welcome to the rest of your life,’” says Getachew, who worked in city government before taking on her job at GC. At the end of each semester, New York’s GC program hosts a citywide civics fair where students show off their projects on poster boards.

This year it was held in the Midtown Manhattan office of the New York City Bar Association, with generations of white male lawyers peering down from their austere oil paintings on the walls, no doubt disoriented by the proceedings below.

Most of the students were female; few were white. Getachew opened the assembly by noting that 2018 marked the 50th anniver-

sary of the election of the first African American woman to Congress, New York’s Shirley Chisholm. “She used to say that if they don’t have a seat for you at the table, bring your own folding chair!”

That exhortation drew whoops and cheers.

And the underlying message clearly registers.

Research by Generation Citizen and a handful of programs like it shows that students who take these courses go on to become more active than their peers in civic and political life.

SOME OF THIS, NO DOUBT, is a “selection

effect”—the students who enroll tend to be predisposed to civic engagement. And even within this atypical group, there’s often a layer of cynicism that can be hard to breach. “These kids feel like the world is rigged against them,” said Brianna’s teacher, Lisa Hicks. “They know what’s going on, much more than I did when I was a kid. They’re aware of the hate and anger that’s out there.”

Over the past six months, I’ve interviewed scores of students and sat in on a handful of high school action civics classes, mostly in

SUMMER 2019 THE AMERICAN PROSPECT 61

minority neighborhoods in New York City and Washington, D.C. I’ve been blown away by just about everyone I met, teachers and students alike—their passion, street smarts, resilience. True, the classes I got access to were selected by the folks who run these programs, so I suspect I was seeing the cream of the crop. Even so, it was impossible to come away from my field visits without feeling hopeful about America’s next generation. But also a little worried.

This ambivalence is underscored by a nationwide survey of 13-to-21-yearolds conducted at the end of last year by the Pew Research Center. It shows that Brianna’s downbeat take on the state of America is widely shared by others in her generation. Among Mosaics, 83 percent of blacks and 76 percent of Hispanics say this country is headed in the wrong direction, as do 60 percent of whites. (There’s a similar racial divide on this question within older generations.)

But the same survey also shows that Lauryn Renford, 16, is organizing an installation of murals around D.C. that memorialize youth victims of gun violence.

Chloe’s civic hopefulness resonates, especially with minority teens. Some 63 per- immigrants or the children of immigrants, the in rural Oregon. “We took it for granted that cent of black and 62 percent of Hispanic Mosa- chill of the Trump era was palpable. everything would be okay because Obama was ics say that “ordinary citizens can do a lot to “Until Trump came into office, I’ve never president.” Trump came as a shock, but Mike influence the government in Washington DC,” felt uncomfortable here before,” said Ruba, a sees a silver lining. “The fact that we’re in such a view shared by just 45 percent of white Mosa- hajib-wearing college sophomore whose fam- a toxic environment is going to get more young ics. This survey question didn’t ask about vot- ily emigrated from Pakistan a few years after people involved,” he said, adding, “I still see ing, so it’s possible these young respondents 9/11. “I always assumed I would spend the rest America as a great shining light.” were thinking about the protest marches that of my life in America. Now, I’m not sure. After But for most others in his generation, that’s have proliferated during the Age of Trump. college, we’ll see.” a hope for tomorrow rather than an appraisal Either way, it’s one of the few encouraging surFrancina, a high school junior whose par- of today. vey findings about youth civic engagement that ents emigrated from the Dominican Republic, I’ve come across. said she too despises Trump’s immigration THE SOAPBOX Similarly, 83 percent of black, 71 percent policies. But she counts her blessings to be At the Thurgood Marshall Academy in Washof Hispanic, and 60 percent of white Mosaics living in America. “Over there,” she said of ington, D.C.’s Anacostia neighborhood, Karen say the national government should do more to her visits to relatives in Santo Domingo, “you Lee opened her AP government class by scrawlsolve problems. Their generation far outpaces can’t go out on the street with your cellphone ing a question on the whiteboard: “What’s the older adults in their support for an activist gov- because someone will snatch it.” biggest issue facing young people today?” ernment. Thus, a paradox: Mosaics are cynical Many students I interviewed, regardless Nearly every hand shot up. Lee asked for about government but want more of it. This of race, party, or immigrant status, spoke of short answers. will make for fascinating crosscurrents as they feeling whipsawed by a political culture that “Lack of opportunity.” age into the electorate. in their young lives has produced two such “Lack of guidance.”

Not surprisingly, they’re also a very pro-immi- different presidents.

“We aren’t taken seriously.” grant generation: 78 percent of Mosaics say legal “When I was younger, I worried that my “Oppression.” immigrants are having a positive impact on soci- generation would be the most apathetic ever,” “Guns.” ety. But in my interviews with students who are said Mike, a college sophomore who grew up “No role models.”

62 WWW.PROSPECT.ORG SUMMER 2019

“Broken homes.”

“Decline of mobility.”

“Gentrification.”

“Internalized enslavement.”

“Valuing your own life.”

“Overprotective parents.”

“Drugs.”

“Materialism.”

“Bullying.”

“Inferiority complex.”

“Selfies.”

“The media.”

“Fear.”

Lee’s classroom is a shrine to the civil rights movement. Its walls are covered with pictures of Martin Luther King Jr., Malcolm X, and Rosa Parks, along with iconic photos of the marchers at the bridge in Selma and the protestors at the lunch counter in Greensboro.

Other wall hangings evoke more-recent struggles. One poster displays the hashtag “#NoBan-

that rapid-fire opening survey, she assigned each of her students to put together a short talk about an issue they feel passionately about. Describe problem; propose remedy; construct argument. This is a centerpiece of a Project Soapbox curriculum developed by Mikva Challenge, a program similar to Generation Citizen that was launched 20 years ago by friends of Abner Mikva, the late congressman, judge, and White House counsel.

A few weeks later, the students began giving their talks in class (eventually some would go on to a citywide Soapbox competition). Relatively few presentations covered topics that fell into the orbit of politics, government, or civics. A good many were about sexual stereotypes and mores, not surprising given today’s turmoil in gender relations.

Jassmyn took on “slut shaming.” She wanted to know why teenage boys are treated “as heroes and gods for having multiple sex part-

j a h i c h i k w e n d i u / wa s h i n g t o n p o s t v i a g e t t y i m a g e s

THE ACTION CIVICS MOVEMENT HAS SET OUT TO SHOW THAT “DEMOCRACY IS A CONTACT SPORT” BY HAVING STUDENTS EXPERIENCE IT FIRSTHAND. NoWall.” Another depicts the Statue of Liberty with a caption, “I’m with Her.” Another offers guidance about “How to Stop Fake News,” advising: “Be Skeptical. Verify. Look for Other Clues. Get Help.”

Lee is the only person in the room (besides me) who’s white. She was born and raised in Idaho in a “mixed household” (one parent liberal, the other conservative), making for spirited dinner table conversation. She majored in political science at the University of Idaho but left her home state not long after graduating because she found it too insular.

For the past 15 years, she’s lived and taught in Anacostia, “also insular, but in a different way,” she says. It’s a historic black neighborhood, long plagued by crime and poverty, that has seen some promising spurts of economic development in the past few years. There’s a new Starbucks down the street from the high school, a new branch office of a bank, a new bookstore. But there’s still a lot of crime. “I know because I hear the gunshots,” she says.

Her classroom has an electric vibe. After

ners,” while girls are treated “like sluts and ho’s … for wearing clothes that show off their bodies and their self-confidence.” Jayla railed against the “Angry Black Woman” trope by calling on her female classmates to “get loud.

Take back the word ‘angry.’ Be the change you want to see.” Marquis delivered a riff on “black masculinity” that poked fun at his friends for wearing their pants below their butts and buying designer brands they can’t afford, all in an effort, he said, to mask their insecurity. “I love to party and I dress to impress,” he concluded, “but I buy my clothes at Walmart.”

Other topics ranged across a varied landscape—from the school-to-prison pipeline to the scarcity of mental-health services to the overuse of antibiotics on farm animals. All got boisterous receptions from the class. “You have incredibly beautiful ideas about the way the world should be,” Lee told them. “And what chokes me up is the way you care for each other.”

The formula behind the Soapbox is “as old as Alinsky,” says Brian Brady, nationwide director of Mikva, referring to Saul Alinsky, the

radical community organizer whose writings have inspired, among others, Barack Obama.

“The way you empower people is to ask them what they care about. And then you give them a platform. And then you listen.”

Brady has been doing this work for two decades. He says the apathy and cynicism of these teenagers “is only skin deep.” In today’s youth culture, he says, “if you want to fit in with your peers, showing your idealistic side is going to put you at risk. So programs like ours need to come up with ways to make civics and politics a safe thing for kids to do. Basically, it’s Adolescent Development 101.”

Mikva started in Chicago, has since expanded to Los Angeles and D.C., and is looking to add a half-dozen more cities next year. Generation Citizen operates in New York, Providence, Boston, Austin, Oklahoma City, Camden, Oakland, and San Diego. Together these action civics programs enroll a total of about 33,000 students per year, a tiny sliver in a nation with 15 million high school students.

Meanwhile, school systems around the country have been de-emphasizing traditional history and social studies courses for decades as they devote more resources to their STEM curriculum. One by-product has been a gusher of civic ignorance. Just 12 percent of the nation’s 12th graders are proficient in history, according to the National Assessment of Educational Progress (NAEP), the lowest score of nine subject areas tested. Civics ranks third from the bottom, at 24 percent.

The educators and social entrepreneurs leading the action civics movement believe that things are ripe for a turnaround. “I sort of joke that Trump is the best thing that’s happened to my course,” said Lee. “I used to get eye rolls when I told people what I did,” said Scott Warren, who launched Generation Citizen from his dorm room at Brown University a decade ago. “Now people can’t wait to tell me how important this work is.”

Even so, it’s no small feat to come up with a civics course that engages teenagers. “We aren’t Schoolhouse Rock and we don’t do a lot of ‘How a Bill Becomes a Law,’” says Getachew. Instead, they set out to show that “democracy is a contact sport” by having students experience it firsthand, both in and out of the classroom. For example, whenever an Election Day rolls around, Gen-

SUMMER 2019 THE AMERICAN PROSPECT 63

eration Citizen and Mikva Challenge encourage their students to serve as poll watchers.

But seeing the sausage being made isn’t necessarily a source of inspiration. In Lee’s class at Thurgood Marshall, students who’d volunteered as poll watchers last November reported back with anecdotes that made it clear they were underwhelmed.

“It was pretty much only old black ladies who came to my polling place.”

“Nobody seemed to know how to follow the rules.”

“People kept asking me who to vote for. I had to say, ‘I can’t tell you that!’”

The following week, student leaders from eight D.C. high schools gathered at the downtown Mikva office for a citywide post-election debrief. In short order, their shoptalk moved beyond war stories about poll watching to critiques of how the electoral process dilutes the power of minorities—voter suppression, partisan gerrymandering, big money, the Electoral College.

“Basically, it’s the old white guys who still call the shots,” said Lucy. “People of color, especially women of color, are the ones who get screwed over.”

“Every time I learn more about the Electoral College, it makes me feel like voting is pointless,” said Tia. “It is pointless,” said DiJohn. “You vote, and if they don’t get the result they want, they throw it out and put their own candidate in there.”

None of this surprises Lee, who’s been hearing this kind of despair from her students for a long time. “They are absolutely correct when they say no one is listening to them,” she said.

“And it’s very hard for them to get traction.”

SHOOTINGS AND STRESS

The months I was observing these classes coincided with the aftermath of the Parkland, Florida, school shooting, the horrific slaughter that led to what’s arguably been the most effective outbreak of youth activism since the Vietnam War era. Student survivors from Marjory Stoneman Douglas High School captivated the nation with their passion, eloquence, vulnerability, and media savvy. They became fixtures on cable news, late-night television, and social media; their faces were on the cover of Time

64 WWW.PROSPECT.ORG SUMMER 2019

magazine, and their activism earned them the top spot on Fortune’s annual list of “The World’s 50 Greatest Leaders.”

Gun safety legislation remains an uphill climb in Congress, but state legislatures have passed 78 new gun safety laws since Parkland.

And for the first time in decades, the National Rifle Association seems to be on its heels.

Yet all of that drew a mixed reception in all the minority schools I visited. “Nothing against those kids, but the feeling here is that they got all that media coverage because they’re privileged, upper middle class, and white,” said Lee. “And for us the issue isn’t just mass shootings at school. It’s everyday gun violence.”

It’s an issue that hits very close to home. The boyfriend of one of Lee’s students was shot to death in a robbery a few paces outside his home as he returned from a college prep class. Lauryn Renford’s civics project has been to install murals around D.C. that memorialize her

A nationwide survey last year by the American Psychological Association (APA) found that, among a half-dozen current events tested, mass shootings were the leading source of stress for teens. In a related vein, a 2018 Pew Research survey found that teens consider “anxiety and depression” the biggest problem their generation faces, ahead of bullying, drinking, drugs, and poverty. And in the past decade, a new APA study shows, there’s been a 52 percent increase in the number of 12-to-17-yearolds who report symptoms that indicate major depression. Among 18- and 19-year-olds, suicidal thoughts are up by 46 percent.

But even if today’s teens are stressed, they’re exceptionally well behaved. Youth crime is down by two-thirds since the mid-1990s, teen pregnancies are down 70 percent, and teens today are much less likely than their same-aged counterparts were a generation ago to smoke, drink, use illicit drugs, or drop

“THE FEELING HERE IS THAT [THE PARKLAND KIDS] GOT ALL THAT MEDIA COVERAGE BECAUSE THEY’RE PRIVILEGED, UPPER MIDDLE CLASS, AND WHITE.” “muse” and other young gunshot victims. She’s been a dynamo: Her GoFundMe page has raised more than $12,500, and she’s lined up support from artists, businesses, and political leaders.

One mural is already up, a half-dozen blocks from the U.S. Capitol. More are in the works.

And yet. During Lauren’s year of activism, gun violence spiked in D.C., with homicides rising by 40 percent between 2017 and 2018.

“It would help if these kids could get some wins,” says Lee. Gun violence has left a mark on the entire Mosaic generation. Just how deep hit home for me a few months after the Parkland massacre as I watched media coverage of yet another mass shooting by yet another deranged student, this one at a high school in Santa Fe, Texas, that took the lives of ten. One of the student survivors, Paige Curry, gave a TV interview shortly after the slaughter that quickly went viral. The reporter asked if she ever thought anything like this could possibly happen at her school. “Of course,” she replied in a numb voice. “It’s been happening everywhere.”

out of high school. What makes these positive trends all the more notable is that today’s teens are also more likely to have been raised in poverty or single-parent households, or both, than teens were back in the 1990s. Apparently, someone has been raising them well.

CIVICS AND HISTORY

Yet civic engagement and social trust remain a black hole for the young. Given that generations are made, not born, let’s look more closely at what the old have done to sour the young on their own democracy.

Obviously, political gridlock and venomous public discourse haven’t helped, but there’s something deeper: a society-wide failure to pass along to the next generation the full story of America, in all its richness, complexity, highs and lows.

And here the progressive left, including the idealistic folks in the vanguard of the action civics movement, bear some responsibility.

Warren, the founder of Generation Citizen and son of a Foreign Service officer, grew up living in Third World countries, witnessing first-

wilfredo lee / ap images

Gun violence, like the Parkland, Florida, school shooting in 2018, has left a mark on the entire “Mosaic” generation.

hand the corrosive effects that weak democratic norms can have on society. As he saw the demographic shifts unfolding in his own country, he set out to replace “stale and monotonous” high school social studies courses with a curriculum that would resonate better with a new generation of students. “In a country that has historically oppressed people who are not white, acknowledging this real history is crucial in cultivating an effective civics education,” he says.

How does that approach play out in the classroom? “Nobody is on a pedestal,” Karen Lee says about the way she teaches the American Revolution and the U.S. Constitution.

“Basically, we look at the founding fathers as wealthy white men, slaveholders, who were out to protect their own economic interests.”

If you’re so inclined, you can tell the whole American story this way—400 years of topdown greed and racial oppression. Historian Howard Zinn wrote the classic of the genre, A People’s History of the United States, which has sold more than two million copies since it was published in 1980.

The trouble with that story is that it’s only

part of the story. Jill Lepore, author of the 2018 best-seller These Truths: A History of the United States, fills in the rest. “There is … a great deal of anguish in American history and more hypocrisy,” she writes. “But there is also … an extraordinary amount of decency and hope, of prosperity and ambition, and much, especially, of invention and beauty.”

Not much of that fuller version seems to be filtering down to Mosaics. In their own 2018 best-seller, The Coddling of the American Mind, Jonathan Haidt and Greg Lukianoff inveigh against a left-leaning academic establishment for encouraging students to think of themselves first and foremost as victims, whether by virtue of their race, gender, religion, or sexual identity. This, they argue, has helped make students emotionally fragile and risk averse. And it fosters a culture of liberal intolerance—witness the spate of campus shout-downs of conservative speakers.

Political correctness even has critics among the Mosaic generation. “Sharing your opinion can be dangerous, especially in New York City,” said Cooper, a white high school junior. “I feel

like I’m always walking on eggshells.”

In the Pew survey, 57 percent of white Mosaics say that too many people are easily offended by the language other people use; 54 percent of Hispanic Mosaics agree, as do 43 percent of black Mosaics. But nearly half of all Mosaics (46 percent) take the opposite view—that people need to be more careful with their language in order to avoid offending those with different backgrounds.

Mosaics are much more likely than older generations to see racism as a pervasive feature of American life.

They’re also more supportive of reparations, more inclined to evaluate public policy through a racial prism.

Whatever the merit to this perspective, it carries political and social baggage.

Twenty-five years ago, the philosopher Richard Rorty warned that the progressive left’s “focus on marginalized groups will … help to make our country much more decent, more tolerant and more civilized. … But there is a problem with this left: it is unpatriotic. …

It refuses to rejoice in the country it inhabits.

It repudiates the idea of a national identity, and the emotion of national pride.”

To be clear, the left isn’t alone in stoking identity-based grievances. The populist right is busy doing the same, led by a hate-mongering president and a right-wing media mortified by the erosion of white privilege. At the moment, these two tribes coexist in an angry equilibrium, with the right in control of most of the government and liberals and the left in control of most of the media, academia, and the zeitgeist—leaving everyone with reason to be pissed off about something.

This won’t last. The same demographic storms that blew us into this stalemate will eventually blow us out of it. With each new presidential election, 16 million Mosaics will age into the electorate and 10 million older adults will exit. One birth, one death, and one graduation ceremony at a time, a progressive new generation will build up the political muscles to match its cultural clout. The math is inexorable. What’s less clear is what kind of citizens Mosaics will become, what sort of

SUMMER 2019 THE AMERICAN PROSPECT 65

future they’ll create, and whether their political activism will be more throat than vote.

THE BIG BLUE GENERATIONAL WAVE

As they age into adulthood, Mosaics pose three political puzzles that will shape America’s destiny through mid-century: (1) Will they remain progressive? (2) Will they start voting? (3) Will they outgrow their tribalism?

Before taking a stab at some answers, let’s take stock of what sometimes gets lost in today’s all-Trump-all-the-time hellscape: The demographic changes that created the Mosaic generation have already transformed America.

It was only a dozen years ago that same-sex marriage, legal marijuana, and transgender rights were barely imaginable; Confederate statues stood tall; and no one had heard of Black Lives Matter, #MeToo, March for Our Lives, or Occupy Wall Street. Even in electoral politics, times have changed, though it doesn’t feel that way with Trump in the White House.

66 WWW.PROSPECT.ORG SUMMER 2019

But since 1992, Democratic presidential candidates have won the popular vote in six of seven elections. No political party in American history has ever accomplished that feat before (or had less to show for it, due to Electoral College inversions in 2000 and 2016).

Now, as Mosaics start pouring into the electorate, this big blue wave will keep getting even bigger. So, back to our questions.

WILL THEY REMAIN AS PROGRESSIVE AS THEY ARE NOW?

The best argument in the negative comes from the famous quip variously attributed to Georges Clemenceau, Winston Churchill, and a host of others. “If you’re not a liberal at age 20, you have no heart; if you’re not a conservative at age 40, you have no brain.” It’s a clever line, and it more or less traces the ideological journey of some (but by no means all) generations, most recently the baby boomers.

But I can’t see it fitting the Mosaics. Their

political values are tethered to their racial diversity, something they’ll never outgrow. It’s possible that some of their “out-group” identity will diminish over time, through intermarriage, growing social acceptance, or some future existential crisis that braids e pluribus unum back together. But Republicans who are counting on Mosaics en masse to make a Churchillian life stage conversion will be sorely disappointed.

Consider another oft-quoted adage, this one coined by Ronald Reagan after his poor showing among Latino voters in the 1980 presidential election. “Latinos are Republican. They just don’t know it yet,” he said, projecting onto America’s newest immigrants the same 20thcentury journey that had carried millions of second- and third-generation Italian, Irish, and Polish Americans from their families’ Democratic roots into his own winning coalition.

Reagan was a good historian but a lousy seer.

In the past 40 years, Hispanics have become less Republican, not more. Reagan got 37 per-

m i c h a e l n i g r o / s i pa v i a a p i m a g e s

By the sheer size of their pool and strength of their ideology, the “Mosaic” generation will transform the electoral landscape and turn it a deeper shade of blue.

cent of the Latino vote in 1980. Trump got just 28 percent in 2016. Among Asian Americans, the other big immigrant group of the modern era, Trump got just 27 percent.

It’s hard to see things going much better for the GOP with the children of these voters, not when they’re coming of age to a Republican Party that’s so thoroughly marinating itself in anti-immigrant policy and rhetoric. Reagan’s home state offers the cautionary tale. California had been a Republican stronghold until the latter stages of the 20th century and was the political base for two late-century GOP presidents, Reagan and Richard Nixon. As immigration started to spike in the 1970s and 1980s, the state GOP became the anti-immigrant party—a fatal political mistake. Latinos now account for 39 percent of California’s population; whites 37 percent; Asian Americans 15 percent; blacks 6 percent; mixed race 4 percent. And California is not just the most diverse big state in America,

candidates, it’s yet another demographic albatross that the GOP will have to bear.

BUT WILL THEY START VOTING?

Voter turnout correlates with age. Young adults turn out at much lower rates than the middle-aged and old. In 2016, for example, just 39.4 percent of 18-to-24-year-olds voted, compared with 70.1 percent of those ages 65 to 74, according to the Census Bureau. In 2018, just 32 percent of 18-to-24-year-olds voted, compared with 46 percent of 25-to-44-year-olds; 60 percent of 45-to-64-year-olds; 68 percent of 65-to-74-year-olds; and 63 percent of those ages 75 and older, according to the Census Bureau. Then, once the young grow older, they too start voting in greater numbers.

This pattern might play out for Mosaics, but there’s plenty of room for skepticism. Here, too, diversity is the key factor. Their generation is composed of a record share of Hispanics and

SO FAR, THE NEWER IMMIGRANT GROUPS HAVE NOT BECOME HABITUAL VOTERS—NOT THE OLD AMONG THEM, NOT THE YOUNG. it’s also the bluest. Every statewide elected official is a Democrat, as are 46 of the 53 members of its congressional delegation.

The rest of the country isn’t on track to become quite that diverse, but generational turnover is creating a coat of many colors that grows less white with each tick of the clock.

In today’s America, the fastest-growing racial group is “mixed race.” It’s also the hardest to define, and we don’t really have an agreed-upon classification scheme. But here’s what we do know: 17 percent of all new marriages today are across lines of race and ethnicity, up from 2.4 percent half a century ago. We also know that Mosaics will be the largest and most diverse generation in the electorate within 15 years.

And here’s one more thing we know about Mosaics. Young women vote at much higher rates than young men, the reverse of the pattern that prevails for the oldest voters. In 2018, among 18-to-24-year-olds, the turnout rate was 35.3 percent for women and 29.5 percent for men. Given the long-standing preference of women of all ages for Democratic

Asian Americans (about 30 percent), and these two groups punch below their weight on Election Day—typically lagging white turnout by 15 to 20 percentage points.

The gaps have been consistent over many decades and all age groups. They stem from language barriers, cultural barriers, voter suppression, poverty, and underdeveloped getout-the-vote infrastructures.

This may finally be starting to change—and if it does, Trump’s immigrant bashing will surely be a factor. In 2018, while turnout rates shot up for all racial groups, the biggest increases came among Hispanics and Asian Americans, whose turnout rates rose by 50 percent above what they had been in 2014. Even with this spike, however, Hispanic turnout (40 percent) and Asian American turnout (40 percent) in 2018 still lagged far behind that of whites (58 percent) and blacks (51 percent), according to the Census Bureau. Fear and anger can be powerful inducements to vote, but nothing trumps habit. So far, these newer immigrant groups have not become habitual voters—not the old among them, not the young.

WILL THEY MOVE BEYOND TRIBALISM?

Even if their turnout rates stay low, Mosaics will by the sheer size of their pool and strength of their ideology keep turning the electorate a deeper shade of blue. This doesn’t guarantee that Democrats will win every election for the foreseeable future. Candidates matter, campaigns matter, stuff happens.

It does mean they’ll have the stronger hand.

Might they fritter it away? Hey, they’re Democrats! Already this year we’ve seen plenty of friction between the party’s progressives and pragmatists in Congress, and there’s more to come during the long, crowded contest for the Democratic presidential nomination. If the party’s primary voters are smart, they’ll pick a candidate who can energize the progressives without alienating the pragmatists (easier said than done). If they don’t, they risk throwing Trump a lifeline next year.

Beyond the politics of 2020, a longer-term challenge looms for the Mosaic generation.

Once they gain power, how will they use it?

Will they govern by the tribal politics of their upbringing, or as repairers of the breach?

That’s too far over the horizon for a prediction. So let me close with a wish. America always needs new generations to clean up the mess their forebears leave behind. Mosaics are coming of age at a time when climate change is an existential threat, economic inequality has risen to record levels, and politics has rarely been as toxic or dysfunctional. We’re lucky to have them. They seem to have the right DNA to rescue democratic capitalism from its periodic excesses. We’ll be even luckier if they can pull off this salvage operation by drawing on our common humanity rather than our reciprocal grievances.

Brianna, I know that’s asking a lot. When you say America is rigged, you’re right. But if you think it’s irreparable, you’re mistaken. I hope you learn more about your country, our glories as well as our debacles. Then I hope you do yourself, your generation, and the rest of us a good turn. Once you turn 18, go out and vote.

Paul Taylor is the author of The Next America. He was formerly a politics reporter at The Washington Post and executive vice president of the Pew Research Center.

SUMMER 2019 THE AMERICAN PROSPECT 67

MAINE E X H A L E S

Democrats are ascendant in the Pine Tree State. As officials begin to clean up the mess left behind by former Governor Paul LePage and his cabal, can Maine provide a beacon for the rest of America?

BY G ABRIE LLE G U RLE Y

L

iesha Petrovich kept tropical-fish antibiotics on hand just in case. You could get them online and they were much cheaper than the prescription medicines her family might need but couldn’t afford. Two years ago, she stumbled walking and broke her foot. A black-belt karate teacher who co-owns a dojo with her husband in the western Maine town of Norway, Petrovich had broken her foot once before and she decided to power through: Her daughter turned 18 shortly before the injury, leaving her and her husband without the Medicaid coverage that the family had relied on since the older of her two children was born. So instead of racking up thousands of dollars in emergency room bills, she ordered a walking cast from Amazon.

But her worries multiplied as the kids neared age 21, the cutoff for their own Medicaid coverage. Her daughter was addicted to opioids, had ended up in rehab, and had other mental-health issues. Then there was her husband’s diabetes and her own fears about Lyme disease, the deer tick–borne illness prevalent in Maine. Petrovich looked into Affordable Care Act plans, but an “affordable” plan of about $600 per month in premium costs with a deductible around $3000 was both too expensive and inadequate.

Like tens of thousands of Mainers, Petrovich could have qualified for health care under Medicaid expansion. But Governor Paul Le­Page vowed not to implement it. State legislators passed multiple expansion bills. LePage vetoed them and Republicans sustained his vetoes.

When voters overwhelmingly passed expansion via a referendum in 2017, he ignored the result.

Maine’s health-care crisis—the inability of

68 WWW.PROSPECT.ORG SUMMER 2019

low-income and poor Mainers to get health coverage and a severely underfunded publichealth sector—was the defining issue in last year’s governor’s race. Attorney General Janet Mills, the Democratic candidate, promised to implement Medicaid expansion on her first day in office; Republican businessman Shawn Moody vowed more LePagism.

Governor Mills signed the Medicaid expansion executive order on January 3.

Petrovich got her health-care coverage back in March after voters decisively repudiated the LePage clone. She sometimes uses a cane now since her untreated foot did not heal properly, and she has an appointment to see a specialist.

“When you don’t have health care, you just do a lot of crazy things,” Petrovich says. “I’m sure I’m not the only one.”

For the first time since 2008, the Democrats have a trifecta in Augusta, capturing the governor’s office, the state Senate, and a larger majority in the House of Representatives. In January, a record number of women lawmakers took seats.

Although the prospect of significant Democratic gains was attractive, getting rid of Le­Page was the prime motivation for many voters. A palpable sense of relief has enveloped the state: Nearly everyone I interviewed invoked respiration metaphors like “a breath of fresh air” to explain the collective mindset.

As Maine exhales and state leaders begin picking up the pieces of government that Le­Page and his Republican enablers took a chainsaw to, perhaps Maine can provide clues to how America can return to something like normal after four years of Donald Trump, a man like LePage exquisitely unfit to lead.

PAUL LEPAGE PROPELLED Maine, a state

known for its live-and-let-live ethos, into a very dark place—one that left the rest of the country wondering how such a nasty piece of work got elected. Long before Donald Trump appeared on the national political scene, Paul LePage’s outrageousness served up material for headline writers and late-night talk show hosts.

In LePage World, drug dealers with B-movie names were going to descend on Maine to “impregnate” “young white girls.” He didn’t stop there: “Black people come up the highway and they kill Mainers,” he once said. Le­Page compared the IRS to the Holocaust, and talked about bringing back the guillotine for public executions. He proudly pointed out that he was “Donald Trump before Donald Trump became popular.”

As the rest of the country guffawed, LePage unspooled a much more sinister project back home. The loose talk that characterized his public statements masked his considerable skill, like Trump’s, in implementing the farright public-policy playbook—with a big assist from the foot soldiers of the American Legislative Exchange Council (ALEC), the Koch brothers–funded organization that helps conservative state lawmakers craft policy.

LePage destroyed the institutional capacity of Maine state government to do its job. The recovery from this epic maladministration will take years. With a Republican legislature backing him during his first two years in office, LePage passed income tax cuts for the state’s wealthiest residents, effectively slashing revenues available for municipal services, education, and other areas. The Maine Center for Economic

r o b e r t f. b u k at y / a p i m a g e s

Maine’s health care crisis was the defining issue in last year’s governor’s race. In his final year in office, Governor Paul LePage announced that he preferred jailtime to expanding Medicaid.

Policy estimates that the LePage-era income tax cuts will cost the state $860 million in revenues during the fiscal 2020-2021 budget cycle.

He prohibited department heads from testifying before legislative committees, which forced lawmakers to try to obtain financial information from low-level agency employees or to have a LePage-friendly Republican ally ask for the data in order to craft state budgets, according to Senate Majority Leader Nate Libby. LePage vetoed climate change planning strategies and had no use for renewable energy, imposing a moratorium on commercial turbine projects and dismantling the state’s net metering program.

LePage, however, often miscalculated.

Republicans in the legislature who had a history of supporting environmental-protection measures going back to the 1970s banded together with Democrats to defeat more than 100 bills, such as a 2018 proposal that would have prohibited municipalities from banning or curbing pesticides. The plan appeared to have originated with ALEC. Overall, LePage

vetoed more than 600 bills, more than all Maine governors together since World War I. LePage liked to boast about the state’s budget surplus, but it’s easy to have extra money on hand if you fire department heads, shut down agencies like the state planning office that handled economic analysis and technical assistance for the governor’s office and municipalities, cut back others, and refuse to replace the chaos-weary state workers who quit, taking their institutional memories with them. The hundreds of vacancies left phones unanswered at state unemployment offices and other agencies. By 2017, LePage’s perpetual feuding with state lawmakers over taxes led to a three-day government shutdown before the Fourth of July.

However, LePage saved his most destructive impulses for the public-health sector, where he wreaked the most havoc on Mainers, many of them white and poor LePage voters. In his final year in office, LePage announced that he preferred jail time to expanding Medicaid. After the election, he continued to claim that the

state did not have the money to fund the program and threatened to appeal (even though he was weeks away from being out of office) when a state superior court judge ruled that he had to file an implementation plan.

His cabinet officials were unremarkable cronies, ALEC connections, or private-sector officials. The most notorious of these disruptors was Mary Mayhew, a former Maine Hospital Association lobbyist, who presided over the evisceration of the state Department of Health and Human Services for most of LePage’s tenure. There were debilitating reductions to the numbers of public nurses who provide preventive care to vulnerable parents and infants and handle responses to disease outbreaks. Thousands of childless adults and parents lost their eligibility for MaineCare, the state Medicaid program. Senior citizens and people with disabilities faced higher prescription drug co-pays.

Maine landed in the top ten states for opioid overdoses, due in large part to LePage’s opposition to measures designed to fight the opioid

SUMMER 2019 THE AMERICAN PROSPECT 69

crisis, like over-the-counter distribution of naloxone. (A consequence of the failure to expand Medicaid was that many people who would have been eligible for drug treatment wouldn’t get it.) Maternal mortality rates jumped (which some Republican lawmakers disputed) and Maine had the second-highest rate of neonatal abstinence syndrome (exposure to drugs in utero) in the country. Meanwhile, between 2011 and 2015, the number of children suffering from deep poverty skyrocketed. Petrovich, the karate teacher, also works with after-school programs. She often sends kids home with food, something she never did before LePage moved into the governor’s mansion in Augusta.

After a scandal-plagued tenure that included allegations of destroying records for public grant programs and a brief stint in Washington overseeing the national Medicaid program, Mayhew now heads up Florida’s Medicaid program, the Agency for Health Care Administration.

70 WWW.PROSPECT.ORG SUMMER 2019

MILLS WON THE SIX-CANDIDATE Democratic

gubernatorial primary, the first time any state used ranked-choice voting (RCV), after four rounds of tallying votes over the course of a week. RCV (which only applies to the gubernatorial primaries, not the general election) helped ease the way for Mills, but was not a huge factor since she was the clear favorite going into the race and her opponents never gained any real traction. Under the Maine constitution, a candidate for governor can win with just a plurality of the popular vote, and independents can often serve as spoilers, factors which contributed to both LePage victories. In 2010, LePage won in a five-candidate field with less than 40 percent of the vote. He won a second term in 2014 in a three-person field, with less than 50 percent. RCV has emerged as a solution to the perils of Maine’s plurality dynamics in certain races.

Mills, a moderate Democrat, went on to gar-

ner the most votes for governor in Maine history. Born and raised in Farmington, a town in the mountain region north and west of Portland on the New Hampshire border where she still lives, Mills, a member of a well-known Republican political clan, was the first woman to serve as a district attorney in New England and as Maine attorney general.

As AG, Mills checked LePage’s excesses, cementing her reputation as someone willing and able to deal with difficult people. The former governor was obsessed, as Trump is, with testing the limits of the executive branch powers. If Mills didn’t agree with the legal underpinning of an issue he wanted to fight in the courts, she refused to argue the case, forcing him to dip into other state funds if he wanted to proceed. When he tried to deny state funding for her office, she threatened to sue him.

As governor, Mills has methodically eased into tackling issues that LePage left to fester.

r o b e r t f. b u k at y / a p i m a g e s

Graffiti in Portland depicts Governor LePage in a white hood and robe with a Ku Klux Klan insignia. LePage proudly pointed out that he was “Donald Trump before Donald Trump became popular.”

pat w e l l e n b a c h / a p i m a g e s

She has started to fill vacancies and raised teachers’ starting salaries to $40,000, a $10,000 increase, and, in her budget plan, slightly hiked the percentage of state revenues that are shared with municipalities, a sore point with communities since Maine has long failed to provide communities with their statutory allocations. LePage tried to zero them out altogether. Mills has signed an earned paid leave law, the first in the country to allow time off for any reason. A bill that would guarantee family and medical leave is pending in the legislature. She created a climate council to handle emissions and energy issues and has generally done more for climate (and other areas) in her first six months than Paul Le­Page accomplished in eight years. And as other states pass new abortion restrictions, Mills signed legislation that expands access, allowing nurse practitioners and other healthcare professionals to perform procedures like medication abortion.

For her cabinet picks, Mills strove for qualifications that eluded her predecessor: demonstrable competence in public service. She tapped Jeanne Lambrew, a former Obama administration official who worked on the passage and implementation of the Affordable Care Act, to reconstruct the state Health and Human Services agency. Eight of Mills’s 15 cabinet members are women, including the first woman to head the state Inland Fisheries and Wildlife Department. Her pick for the Education Department, a veteran educator, drew kudos after years of chaos—LePage went through five education commissioners, once threatening to name himself as commissioner after leaving the post vacant for several years.

Most voters were exhausted and frustrated by the clown show in Augusta and craved a return to civility that a responsible chief executive offered. In January, Mills attended the Maine NAACP ’s annual Martin Luther King breakfast in Portland. In her remarks, she noted how, after a 1964 speech at Bowdoin College, Dr. King responded to a white student who asked why he should care about civil rights: “If your conscience stops at the border of Maine, you are less of a person than you should be, and you are as responsible for what happens in Birmingham as you are in Brunswick.” In 2011, when the NAACP extended an invitation

to LePage, he told the group “to kiss my butt.”

Even though both LePage and Mills clashed with Maine’s Native American tribes over longstanding issues like fishing, the new governor has worked to begin to repair relations by supporting legislation to restore sustenance fishing and clean up waterways through tribal lands and to re-establish a tribal-state commission that had gone dormant. She has signed proclamations recasting Columbus Day as Indigenous Peoples Day and banned schools and colleges from using Native American logos, mascots, or nicknames, the first state to put a ban in place.

Progressives in the legislature see a Democratic trifecta as a not-to-be-missed opportu-

revenue sharing, and other needs. “If they don’t get reversed, we are not undoing the damage that LePage did,” says Mike Tipping of the Maine People’s Alliance, a progressive social, racial, and environmental justice advocacy group. Even without a new tax plan, Mills has produced a flurry of forward-looking strategies that have people excited about her even if they express impatience on issues like taxes.

With memories of the Hillary Clinton–Bernie Sanders tensions very fresh in the run-up to the November general election, most Democratic voters understood that there was little to be gained from intraparty ideological warfare.

Mills convinced Democratic voters that she

The loose talk that characterized LePage’s public statements masked his considerable skill, like Trump’s, in implementing the far-right public-policy playbook. could win. She appealed to traditional Democratic constituencies, bridged the state’s urbanrural divide, and took on the liberal wing of the party with a no-taxes pledge that appealed to Republicans. After the Paul LePage horrors, that was more than enough.

HAILEY BRYANT WAS ENERGIZED by the

Governor LePage (left) and Mary Mayhew, his Health and Human Services Commissioner

nity to require rich Mainers to take on more of the state’s tax burden. Mills has yet to exhibit any interest in doing that after pledging not to raise taxes in her first two-year budget, a major disappointment for progressives who wanted to see the LePage tax cuts repealed and new revenues redirected to education, municipal

prospect of electing the first woman governor.

The University of Maine Orono rising senior worked on a student voter-registration drive on campus during the campaign season. Bryant, 21, saw LePage as out of touch with life in a multicultural America. She grew up in a liberal Democratic family and went to school with immigrants in Gorham, a Portland suburb (and Shawn Moody’s hometown), and was tired of the incessant screeds against immigrants.

“We don’t see those things as abnormalities: They’ve been incorporated into the landscape as we’ve known it,” Bryant says.

Maine had one of the highest youth voter turnout rates in the country in 2018. A new study by Tufts University’s Center for Information & Research on Civic Learning and Engagement found that youth voter turnout in Maine increased by nearly six percentage points, from 30.5 percent in 2014 to 36.4 percent in 2018.

Robert Glover, a University of Maine professor

SUMMER 2019 THE AMERICAN PROSPECT 71

72 WWW.PROSPECT.ORG SUMMER 2019

policy discussions. But some debates, like a recent one on banning conversion therapy for LGBT minors, can still be quite tense.

The Democratic leadership remains so committed to the Maine values of civility and bipartisanship that they are willing to forgo easy victories to avoid the appearance of forcing their agenda on the Republican minority.

Under Maine’s legislative rules, the Democrats could have chosen to pass the state budget by a simple majority earlier this year; they

Janet Mills, a moderate Democrat, went on to garner the most votes for governor in Maine history.

decided not to, and will have to get a two-thirds majority to pass the spending bill. Yet in June, the committee working on the next two-year spending pact passed bills with unanimous votes, including one sending more money to municipalities. (When the GOP controlled the Senate for four years and the Democrats the House, LePage could count on House Republicans to pressure enough members to switch votes to sustain his vetoes.)

Maine politics is different—so far. The tone and the tenor of public discourse turned around fast after the former governor and his cronies left Augusta. It is certainly better for the state to have rural and coastal lawmakers smiling and sharing stories about their kids,

and a governor who does not leave profanitylaced messages on a lawmaker’s phone.

But the inescapable lesson of the LePage years is that treating the former governor—or current president—as an anomaly would be a dangerous miscalculation. The deep-seated racism and economic insecurity that helped speed each man’s rise to power have not been excised from American political culture. Petrovich, the karate teacher, remembers a conversation she overheard in a local convenience store the morning after Trump won. After expressing excitement about the victory, a customer opined, “Now we can get that fuckin’ nigger out of the White House.”

And Paul LePage is still around to stoke hate. The former governor may have nominally retired to Florida, but he’s morphed from a snowbird into a gadfly. Like the national GOP, which has become a wholly owned subsidiary of Donald Trump, the Maine Republican Party remains enthralled by LePage. He phones in to Maine talk radio programs to rattle the state’s political cage on issues like Electoral College reform. (“White people will not have anything to say; it’s only going to be the minorities that would elect,” he said in February.) But extremism may only go so far in Maine. Eleven of 16 Republican candidates who ran on a virulent anti-immigrant platform lost. “Not only were conservatives rejected, but those who had the most Trump/LePage-like bigoted, xenophobic views did the worst,” says Tipping of the Maine People’s Alliance.

Maine experienced a course correction that enabled the state leaders to move on. Voters’ interest in moving forward won out over smallminded ideologues who wanted to crater the state government but didn’t have a plan for what happens after the smoke lifts and the human wreckage appears. Whether these developments lead to better policy outcomes is an open question. Mainers wanted credible state leaders who were up to the job of trying to make government work. That may sound like the tritest of takeaways, but in Maine it’s a constant refrain.

National politics are far more complex and the appeal of far-right populism is still virulent. But as the country approaches 2020, most Americans are looking for the same blend of reform and sheer normalcy.

elise amendol a / ap images

of political science who helped coordinate campus voter mobilization and is studying the 2018 turnout, says that 2016 “jarred” students out of “assuming that a certain outcome is inevitable and that elections go forward and don’t have significant consequences.”

Brett Kavanaugh’s nomination to the Supreme Court and Senator Susan Collins’s vote to confirm him also shook up Maine’s electoral dynamics. For Bryant, the vote was a serious misstep that discredited the stories of women who have experienced sexual assault, such as Kavanaugh’s accuser, Christine Blasey Ford. Collins’s job approval rating has sunk to 41 percent, a dip of 17 percentage points since the fall of 2017, a vulnerability that could persuade a number of prominent women, including House Speaker Sara Gideon, to take on Collins in 2020. “The Kavanaugh nomination really brought it home for folks,” says Nicole Clegg, vice president of public policy for Planned Parenthood of Northern New England. “The level of political literacy of the population has changed dramatically.”

When the legislature convened after the November election, Speaker Gideon and Senate President Troy Jackson decided to mix Republican and Democratic seating assignments rather than relegating members to the opposite sides of their respective chambers by party. Pointing to more unanimous votes on noncontroversial issues, Senate Majority Leader Libby says, “It’s definitely not hurting.” In the House, Gideon initially faced more pushback from both Democrats and Republicans who didn’t feel safe voicing unpopular opinions in mixed groups.

The National Institute of Civil Discourse, a nonpartisan advocacy, research, and policy center at the University of Arizona, named Maine as the state most committed to civil governance in 2016. The group had been working with lawmakers for several years throughout the LePage rancor to discuss how to debate controversial issues without name-calling, handle heated committee hearings, and use the seating changes to help create more camaraderie.

Even though Republicans are on the losing side of most votes, the atmosphere is much lighter compared to the LePage years. Republican State Senator Matt Pouliot notes that the new seating has helped lawmakers get to know one another better, increased trust, and improved

C U

L

Hobsbawm, Unrepentant A new biography connects the life and work of the great radical historian of capitalism. BY LEONARD BENARDO B

oxford univer sit y press

W

hen I was in graduate school, I had the good fortune to hear Eric Hobsbawm lecture on nationalism. The year was 1992.

Hobsbawm had just published his widely read and sharply debated book on the theme, and in the aftermath of the implosion in communist Central and Eastern Europe and the revival of the so-called captive nations, everyone wanted to hear his take

O O

K

S

on the subject. Hobsbawm’s talk was packed. Edward Said, the esteemed Columbia University professor of literature, arrived late and found a spot only on the floor in the back. With Hobsbawm at perhaps his reputational apogee, the event felt more like an Event, a happening of unusual significance.

Richard Evans’s appreciative and deeply researched biography of the Marxist historian and

intellectual, only a handful of years since Hobsbawm’s passing, is an event in itself. Clocking in at nearly 800 pages, it is an imposing summation and a contribution to a boutique subgenre: historical biography of major historians by practicing historians.

In a university age where disciplines punish scholars for moving off-script, Hobsbawm was an old-fashioned person of letters. Trained in Cambridge,

T U R

E

Hobsbawm ranged far and wide, disallowing the strictures of disciplinary pressure to confine his intellectual reach. No subject was too remote, no idea un-germane.

Devoted to a general approach that prized economic explanation, it was never an economics at the expense of culture, politics, or ideology, even if the economic “base” generally would have primacy. There was a logic to history for Hobsbawm, a materialist logic, yet contingency was never sacrificed at its altar.

Born in Alexandria, Egypt, in what was then an outpost of the British Empire, Hobsbawm spent his youth in Vienna and Berlin.

Orphaned by the age of 14, he bounced between uncles and aunts before ending up in the United

SUMMER 2019 THE AMERICAN PROSPECT 73

C

U

L

T

U

R

E

Kingdom, where he would begin to consume books the way mere mortals take in liquids; the range of volumes Hobsbawm vacuumed up as a gangly and sometimes solitary teen is nothing short of remarkable. His first language, German, became the voice of his diaries that Evans uses to great effect, Hobsbawm’s family giving him unparalleled access. Hobsbawm would later learn Spanish and Italian so proficiently that he would effectively lecture in both.

Pellucid and gently ironic, each paragraph embroidered by a blizzard of erudition, Hobsbawm’s prose is instantly recognizable. His masterwork—an economic history tetralogy spanning from the French Revolution through the long 20th century— remains required reading for graduate student orals, and is a constituent part of the literature on Europe.

Hobsbawm wrote additionally on the outsider in history, whom he dubbed the “primitive rebel,” which turned his attention away from Europe and to the developing world. And, not to be neglected, under the pseudonym Frances Newton, Hobsbawm penned magazine essays for a number of years on one of his great passions, jazz. The name chosen was taken from the only jazz musician, trumpeter Frankie Newton, known to have been a Communist Party member.

Hobsbawm was part of an eminent circle of left historians that in the early 1950s founded the journal Past & Present. The academic publication would be instrumental in helping burnish Hobsbawm’s reputation. For Hobsbawm, Past & Present was the British companion to the Annales, the French historiographical school which insisted on a long-term social lens to its subjects, and deployed social-science methods in its analysis. His opening salvo for the new journal was an Annales­esque piece on the Luddites in the early Industrial Revolution, in which Hobsbawm gave the group a stirring, revisionist defense. Rather than the customary interpretation which impugned them for being a nonrational bunch of anti-progressives, Hobsbawm re-read the Luddites into the history as creatively conceiving an early form of industrial bargaining.

Hobsbawm’s instinctual sympathy

74 WWW.PROSPECT.ORG SUMMER 2019

Hobsbawm’s appeal was such that he was, at once, a historian’s historian and a scholar prized by a popular audience.

ERIC HOBSBAWM: A LIFE IN HISTORY

BY RICHARD J. EVANS

Oxford University Press

for those challenging the excesses of industrial power would be witnessed time and again in his economic history. He had a particular affinity for those left behind, victims of a menacing and no-holds-barred capitalism.

This brief for the common person is seen in his fascination with social banditry in Latin America. A resistance to political power that economic degradation inspired remained the lens through which he understood fundamental social change. The headlong rush toward industrialism brought in its wake a misery beyond words— whether in Europe or outside of it. This was a historical position he would hold close despite the clear working-class gains of the postwar period.

Hobsbawm’s appeal was such that he was, at once, a historian’s historian and a scholar prized by a popular audience.

That he was a Communist, or more accurately, a card-carrying member of the Party if never an adherent to the latter’s catechisms, meant Hobsbawm was unable to secure a job as an Oxbridge don. Though he was recognized as a young historian of startling brilliance, he spent his career teaching at Birkbeck College in London, a school for men and women who could afford to take classes only after dark.

Left out of Hobsbawm’s voluminous writings is anything distinctly interior about the person himself, despite the almost Zelig-like aspects of his life: present at more than a few world-historical moments, whether in the late Weimar period watching Hitler’s rise, engaging Spanish Republicans, or translating for Che Guevara in Havana. Hobsbawm’s own memoir, Interesting Times, had few mentions of his personal or psychological history, a corrective that Evans’s book neatly turns around. A first marriage, we learn, was less for love and more for lust and party discipline but left him nonetheless discombobulated, obsessive, and meditating on suicide.

In the end, Hobsbawm’s comme il faut emotional register won out as the historian wondered what ached him more—the ending of his marriage or the execution of the Rosenbergs. By the early 1960s, he would find his true love, Marlene Schwarz, and remain together until the end.

Hobsbawm became a member of the British Communist Party in 1935 and continued so until the collapse of the Soviet Union more than a halfcentury later. This fact, perhaps more than any other, presented him with the greatest pushback from those unforgiving of his loyalty. Hobsbawm faced a bien-pensant liberalism that neither tolerated nor stomached that the great historian would stay true to the party after the horrors of 1956, the latter year, of course, when others of his cohort—historians E.P. Thompson and Christopher Hill, most notably— left the party in disgust after the Soviets crushed Budapest’s uprising.

Hobsbawm’s reasons for retaining his membership are well known by now and Evans’s biography does little more than detail them. The crucible of Weimar, the substitution of a family for the orphaned boy, the ferocious struggle against national socialism are all adduced as explanations for the historian’s fealty. Evans’s important contribution, however, is to underscore through abundant evidence how detached and often dismissive Hobsbawm was of the U.K. CP. Seeing it as orthodox, dogmatic, and unyielding on issues relevant to the cause and to the USSR , Hobsbawm had a tenuous relationship to it, not once angering the party’s top brass by his out-of-step behavior. The alleged revisionism in his historical writing or his sensitive appreciation of an apolitical jazz were fodder for the CP’s ire. Tired of the simple-mindedness of the party’s tastes, Hobsbawm saw jazz as an inspirational and radical alternative to “the bankruptcy of most orthodox arts in our time.” And his unwillingness to bow to any sectarian party line made his history writing often politically haram. Hobsbawm was uninterested and unwilling to write for party organs or spew party propaganda, his commitments far less “to the Communist Party as the broad cause of socialism in general.” He was interested in the solidarity of the left, tout court, not necessarily the revolutionary triumph of the proletariat.

The insistently barbed questions of why Hobsbawm remained a party member were scarcely helped

by Hobsbawm’s sometimes clipped

C

explanations. On a BBC radio show, Desert Island Discs, the petulant host, Sue Lawley, asked how Hobsbawm could excuse the deaths of so many at the hands of the Soviet Union: “Dead is dead,” Hobsbawm brusquely replied. Yet having to explain himself time and again could have been nothing short of enervating.

Were I to have guessed who was chosen as Hobsbawm’s authorized biographer, Richard Evans’s name would not likely have tripped off the tongue.

A prominent liberal historian of Nazi Germany, Evans’s talents are less in the practice of “immanent critique” or in the sweeping prose trademarked by his subject. Yet upon reflection, the choice reveals itself to be understandable. Both Evans and Hobsbawm are purveyors of a traditional historical method wherein facts count. Evans even penned a long historiographical essay—In Defense of History—that makes the claim explicitly. Although he would likely depart from some of the economic arguments Hobsbawm specifies and likely does not share his hardcore leftism, Hobsbawm’s approach to historical writing mirrors Evans’s own. Hobsbawm’s own late collection of essays succinctly titled “On History” begins with his contention that “I strongly defend the view that what historians investigate is real.” That “without the distention between what is and what is not so, there can be no history.”

Amid the truth-skeptical nostrums of postmodernity, Evans and Hobsbawm are true modernists at heart.

Hobsbawm would surely have been tickled by the unlikely reappearance of socialism as presented by Bernie Sanders, or the breakout popularity of the socialist journal Jacobin. Historical patience has its virtues, he might have counseled. In a period where truth is called into question as a matter of course, Hobsbawm’s stubborn appeal to evidence and the accumulation of knowledge could seem out of place. But the great 20th-century Marxist historian, who may have stayed too long at the party, left us with a corpus of scholarship that will undeniably stand the test of time.

Leonard Benardo is vice president of Open Society Foundations.

U

L

T

U

R

E

Money Against Democracy How neoliberals captured the machinery of the state to keep citizens from regulating markets. BY JORDAN ECKER B

A

O O

re democracy and capitalism compatible? For much of the postwar era, mainstream economists, foreign-policy decision-makers, and the political commentariat believed not only in the intrinsic compatibility of a market economy and a liberal democratic polity, but in the idea that each strengthened the other.

But that faith has been shattered in the years since 2008, by the rise of farright political parties in many liberal democracies and the anti-democratic abuse of political power by elites in North America and Europe. Rather than capitalism and democracy being soulmates, political life seems a threeway battle among moneyed interests, nationalist populists, and pro-democracy progressives.

For many progressives, writing in the tradition of Karl Polanyi or echoing concerns as old as JeanJacques Rousseau’s social-contract theory, the recent rise of the market to pre-eminence in political life has had familiar negative effects on democracy. The decline of union membership, the shareholder revolution, tax cuts for the wealthy, and wage stagnation for the working and middle classes are injustices not only because of the dramatic economic inequality they produce, but because of the unequal distribution of political power and the loss of democratic legitimacy that results. On this telling, the assault on unions has hollowed out working-class political power, while rising wealth inequality and the deregulation of campaign finance beneath the banner of “money is speech” has created a plutocracy where money, and not the people, speaks and rules.

On the right, the inverse has long been the worry. There, the fear is that democracy may grow too strong and intrude on the market. This is the story line of theorists such as James Buchanan and Mancur Olson, and

K

S

the rational choice revolution that resulted. Democracy, supposedly, is incapable of giving the people what is really in their interest (if that was knowable at all), and instead ineluctably degenerates into special-interest “rent-seeking.” In 2009, Peter Thiel said the quiet part out loud: “I no longer believe that freedom and democracy are compatible.”

One of the invaluable services provided by Quinn Slobodian’s Globalists: The End of Empire and the Birth of Neoliberalism is to trace this anti-democratic tendency’s theoretical origins, and demonstrate how for generations, ultra-market intellectuals have viewed democracy as a potential threat to the market. For some commentators—Jonathan Chait made the case two years ago in New York magazine—“neoliberalism” is an empty epithet, just a word angry leftists use to lump the Clinton wing of the Democratic Party in with conservative free-marketeers.

Hopefully, Slobodian has forever put this line of thought to bed. Beginning in post–World War I Austria, Slobodian shows how an internally consistent body of thought reproduced itself through the 20th century, eventually providing the intellectual inspiration for institutions like the World Trade Organization.

The protagonists of Slobodian’s story are the Austrians Friedrich Hayek and Ludwig von Mises, and German Wilhelm Röpke. Hayek and Mises are famous today in the U.S. as the intellectual forefathers of Milton Friedman, the Chicago school of economics, and the Goldwater presidential campaign, but Slobodian frames his story around the problem of international organization that Austrians faced after the dissolution of the Austro-Hungarian Empire.

Beginning with the meetings held in Mises’s office at the Chamber of Commerce in Vienna, these Austrians

SUMMER 2019 THE AMERICAN PROSPECT 75

C

U

L

T

U

R

E

quickly concluded two things: First, Austria, isolated from its empire, was dependent on international trade for economic growth. Second, stimulating international trade would mean sharply reducing domestic wages. A series of strikes and violent worker unrest in Austria demonstrated the unpopularity of these measures. It also reinforced what would become a central plank of neoliberal thought: that unions and the democracy that gave them power could not be trusted; and that for the market to function, it had to be put beyond the reach of democracy.

After the rise of Nazism in Germany, Slobodian follows his cast of intellectuals to the 1938 Walter Lippmann Colloquium in Paris, an initial gathering of intellectuals who would go on to become key figures in the Mont Pelerin Society. The Mont Pelerin Society, named for the Swiss mountain resort where they met annually, was a collection of intellectuals who self-styled themselves as neoliberals or classical liberals, and would go on to be enormously influential: Eight of their members, including thinkers of worldwide repute like Milton Friedman, George Stigler, and James Buchanan, along with the aforementioned Friedrich Hayek, would win Nobel Prizes in economics.

As the international order spiraled into global war and the Great Depression was fought partly with tariff walls, the neoliberals of the Mont Pelerin Society became increasingly skeptical of the ability of economists to ever understand, well, economics. The global flow of economic trade, the accumulated variables expressed in each object’s discrete price, was simply too complex, they argued, to ever be captured by a macroeconomic model.

Neoliberals believed that the state was likewise incapable of comprehending, much less managing, the economy. All the state could do, under neoliberal tutelage, was to “encase” the market—ensure that the flows of goods and services are safe from the interference of states’ political whims and sovereignty. The neoliberals imagined an international order that safeguarded the rights of capital to

76 WWW.PROSPECT.ORG SUMMER 2019

travel across boundaries, what Slobodian dubs “xenos rights,” namely, the rights of foreign capital to supersede state sovereignty.

Protecting those xenos rights became key to the political practice of the inheritors of neoliberalism. Littleknown figures who were faithful students and readers of Hayek and other first-generation neoliberals worked at institutions like the General Agreement on Tariffs and Trade and its successor the World Trade Organization, and the European Economic Community and its successor the European Union. There, they secured the right of capital to move across state boundaries, and sue sovereign states when they engaged in “anti-trade” activity. After World War II, the United Nations attempted to make human rights universal, guaranteed without any reference to a nation-state; so too, now, were the rights of capital.

As with any historical story about the development of a global institution, the precise causal role played by neoliberal thought in the development of GATT and the WTO is difficult to pin down. Slobodian’s book is at its strongest and most provocative where it demonstrates the clear symmetries between neoliberal thought and the anti-democratic, pro-capital tendencies of international organizations. It is at its weakest where it sees the latter as sufficiently caused by the theories of the former.

Neoliberals then, value democracy for only instrumental reasons. The goal of good governance is to encase the market; at times, democracy threatens to intrude upon the market for principled reasons, and in those cases it must be reined back. Slobodian’s book is at its most engaging when he shows in detail the practically metaphysical dignity the neoliberals bestow upon the market: Rather than just a way of distributing goods and services, the market is a spontaneously self-organizing decentralized system of information that always knows more about the world than the humans that inhabit it can hope to. Read through this lens, Hayek’s Road to Serfdom or Constitution of Liberty is less a paean to individual liberty than it is an argument about

GLOBALISTS: THE END OF EMPIRE AND THE BIRTH OF NEOLIBERALISM QUINN SLOBODIAN

Harvard University Press

STATE CAPTURE: HOW CONSERVATIVE ACTIVISTS, BIG BUSINESSES, AND WEALTHY DONORS RESHAPED THE AMERICAN STATES— AND THE NATION ALEXANDER HERTELFERNANDEZ

Oxford University Press

the limits of economic knowledge and a veneration of the market.

Slobodian’s book concludes with a tour de force reading of this Hayek, for whom the economy is sublime, operating beyond the scope of human reason and revealing its dazzling knowledge in elliptical signals humans can respond to but not understand. Each price is a sum of the value of a good to society. Attempting to understand how a good came to be priced is always hubristic; humans cannot understand the signals they respond to, only the basis upon which the signals function—that is, the free market. A democratic government robustly committed to making collective judgments about how the world ought to work is, in Hayek’s view, always worse than a market system that can spontaneously allocate resources according to a larger pool of information. The market is a gargantuan information-processing system, explicitly analogized by Hayek to the human brain or the process of biological evolution, which no human mind can rival. To preserve its smooth functioning, it must be protected against the meddling of governments.

Slobodian’s book focuses on politics at the international level. There, elite agreement is sufficient to curb national sovereignty, moments of intense opposition like the 1999 Seattle WTO Protests or anti-EU populisms aside.

The question that it does not answer is how at the domestic level of a liberal democratic state, policies that curb democracy and encase the market can be implemented.

Enter Alexander Hertel-Fernandez’s new book State Capture: How Conservative Activists, Big Businesses, and Wealthy Donors Reshaped the American States—and the Nation . In this book, Hertel-Fernandez sets out to explain how American states rapidly enacted policies, from Wisconsin’s anti-union Act 10 of 2011, to standyour-ground legislation, that have little to no popular support.

Slobodian’s protagonists were the intellectuals who theorized the market’s right against democracy—Hertel-Fernandez’s protagonists are the interest groups funded by dark money that enact those rights at the level of

mont pelerin societ y

C

state policy in the U.S.: the State Policy Network (SPN), the American Legislative Exchange Council (ALEC), and the Koch-funded Americans for Prosperity (AFP). Together, these three groups form what Hertel-Fernandez calls the conservative troika. The SPN networks various conservative think tanks across the nation that otherwise would be siloed in their state context.

ALEC drafts legislation for its corporate stakeholders that is then copied and proposed in various state legislatures. It also holds annual trainings for state legislators and enlists them as members, forwarding copies of corporate-sponsored legislation to each. AFP, in concert with the SPN and ALEC, provides the foot soldiers and cash. AFP is a multibillion-dollar operation with claimed connections to millions of activists around the country.

American political scientists have searched for years for hard quantitative proof that big-money donors to politics are rational actors, getting bang for their buck. Hertel-Fernandez provides us with evidence they are just that. Wherever the troika is more active and better funded, states are more likely to pass right-to-work legislation that cripples unions; more likely to spur on pro-corporate deregulation; and more likely to resist the expansion of Medicaid since the passage of the Affordable Care Act.

Friedrich Hayek (far left) was the first president of the Mont Pelerin Society, a group of neoliberal intellectuals.

For neoliberals, the fear is that democracy may grow too strong and intrude on the sublime genius of the market.

Hertel-Fernandez persuasively shows that in all these cases, there was practically never a robust majority in favor of the troika’s line. Instead, the troika hijacked democracy.

The 2011 passage of Act 10 in Wisconsin, which effectively gutted public-sector collective bargaining rights and shifted the burden of public pension plans onto workers, is one site of this hijacking. As Hertel-Fernandez notes, Governor Scott Walker himself was a member of ALEC, and several of his early legislative initiatives as governor were ALEC model bills. ALEC could also claim members among GOP leadership in both chambers in the statehouse. As Walker began pushing Act 10, AFP bused in hundreds of supporters for the legislation from around the state, and bought hundreds of thousands of dollars in TV ads to prop up the anti-union legislation. A local SPN affiliate, the MacIver Institute, promoted editorials in state papers arguing in favor of the legislation.

And, after massive resistance from the teachers union, including a lastditch effort to recall Governor Walker, Act 10 passed.

And Act 10, like much of the legislation pushed by the troika, had its intended effect. In 2011, about half of Wisconsin public-sector workers were union; that number was below 20 percent in 2017. The value of teachers’ pensions and health care fell by a fifth

U

L

T

U

R

E

during the same period, and their pay has stagnated or fallen. And, crucially, the political power of the Wisconsin teachers union has fallen precipitously, too: In 2012, during the Walker recall election, one out of every 20 dollars spent in the race was union. In 2016, less than 1 percent of every dollar spent was union. The troika succeeded in crippling the political power of unions, a political power that had so profoundly disturbed the early neoliberals in early-20th-century Austria.

Proving that neoliberalism is suspicious of democracy does not require trips to the dusty archive and the turning up of smoking guns. In her controversial Democracy in Chains, Nancy MacLean believed she had done just that, produced archival evidence that James Buchanan and Charles Koch had conspired to uphold segregation and resist the power of democracy. Her book has been criticized by writers on the right and left, and it is unlikely that Buchanan personally was a segregationist. But it is absolutely the case that Buchanan belongs to an intellectual movement suspicious of democracy. Public choice theory’s axiomatic denigration of the possibility of there being anything like a public interest distinct from the aggregation of private interests is evidence of this inheritance. And it is overwhelmingly evident that the Koch brothers’ AFP wants to reduce worker participation in democracy wherever it can, and hijack democracy with dollars. The disaggregated conservative interests represented in the troika, from the gun lobby to big business, to oil interests, to evangelical social conservatives, are united by one common interest: a belief that left alone, democracy will decide against them.

The fight is money against democracy. For neoliberals, the market knows best. Even when what the market knows is that workers’ wages must stagnate or sink for a country that opens itself up to international free trade; even when what the market knows is that poisoning a nation’s water with cyanide is worth it if that means you can mine gold; even when what the market knows is that

SUMMER 2019 THE AMERICAN PROSPECT 77

C

U

L

T

U

R

E

sweatshops and the disasters they bring with them are a necessary stage in industrial development.

How can progressives empower democracy against money? HertelFernandez’s research tells us that better-funded state legislatures are better equipped to resist the troika.

State legislators who are well paid and equipped with aides are much less likely to consort with ALEC and sign on to conservative bills. Publicly funding elections and creating public pools of money candidates can draw on as an alternative to AFP funding would also probably help. And we can also fix the gerrymandered electoral map and pass a new voting rights act to robustly expand the franchise.

On an international level, a prodemocracy left needs to rethink the repercussions of free-trade agreements not only for the future of the economy, but for the future of democracy. That Canadian companies felt empowered to sue El Salvador for the right to mine their mountains for gold, risk of poisoning rivers with cyanide be damned, is only one of the more visible examples of the rights private companies are afforded in a free-trade regime.

And progressives need to get there before the right steals their clothes.

Already, Trump’s tough-on-China trade policy suggests a right-wing awakening to the possibility of being the party that is pro–American worker. Progressives need to robustly defend the right of sovereign states to regulate their economies, emphasize fair-trade agreements, and, when international competition threatens the livelihood of domestic workers, develop a robust industrial policy that prioritizes the needs of American people above international capital.

Finally, the pro-democracy left also has to rise to the intellectual challenge posed to it by neoliberalism. Thriving debates about the possibility of a jobs guarantee or a universal basic income suggest a reawakening of a democratic imagination that refuses to let the market be the only decider.

Jordan Ecker is a writer and a doctoral student in the department of government at Cornell University.

78 WWW.PROSPECT.ORG SUMMER 2019

The General Store of the U.S.A. Do Walmart and Amazon’s logistics triumphs reveal a path forward for a centrally planned economy? BY MAX B. SAWICKY B

M

O O

ore and more people are talking about socialism, but nobody’s doing anything about it. If we’re talking about “nationalizing the means of production,” Bernie Sanders’s democratic socialist political revolution falls well short. Old notions of the state owning the “commanding heights” of industry and employing central planning to guide the economy fit a classic concept of socialism. Oldfashioned lefties are given to gripe that Bernie’s vision extends little beyond a beefed-up New Deal.

An extension of the space that Sanders has cleared is the book by Leigh Phillips and Michal Rozworski, People’s Republic of Walmart: How the World’s Biggest Corporations Are Laying the Foundation for Socialism. Their elevator pitch could be: The success of firms like Walmart and Amazon, rooted in extensive planning systems, demonstrates the growing feasibility of socialist planning.

Central planning means the government owns and directs the operations of the bulk of land, plant, and equipment—capital—used to produce most of the economy’s goods and services.

It is distinct from the expanded public sector promised by Sanders that would provide more benefits, facilities, and services where the private sector is most delinquent. Health insurance is currently the most cited example.

In centrally planned economies, instead of business firms we have enterprises. These enterprises are given instructions from a central authority on what to produce, how to produce it, and what to sell it for. Capital investment is decided by the government, which owns all the capital goods. For an enterprise to expand, or switch to some different production method, agreement must be secured from higher authorities. The “lower authorities”—the enterprises—must obey.

An alternative to central planning is the market socialist model. In that system, individual enterprises are

K

S

controlled by their own workers. They produce for profit and compete with other enterprises for market share.

The authors are noncommittal as to a preference for either model, though libertarian socialist sympathies for market socialism are detectable in their account.

Central planning was taken up by the communist governments of Eastern Europe and the Soviet Union, and in recent decades, abandoned. Stateowned enterprises were sold to private parties. Usually the beneficiaries of these transfers, at fire sale prices, were former communist bureaucrats. Meet the new boss, literally the same as the old boss. Exhibit A is the fabulously wealthy president of the Russian state, Vladimir Putin, whose business experience was acquired in the KGB. Market socialism has also mostly left the scene, unless you count the social wealth fund ownership and stateowned enterprises in Norway and other Scandinavian states. This libertarian socialist vision scratches the right itches—decentralization, democracy, communal ownership, equality.

State-owned enterprises and staterun economies were famously unproductive, among other deficiencies.

When it came to providing a competitive supply of consumer goods, central planning failed. “Competitive” in this context means that these planning systems could produce, but they could not produce enough at acceptable quality to discourage their citizens from envying capitalist alternatives in the West.

Yugoslavia’s market socialism story was different. The authors might have devoted more attention to its devolution, since it goes to the heart of their appeals. At any rate, there is little question that today, labor-managed firms, cooperatives, and nonprofit organizations are relatively ubiquitous in capitalist economies and have proven capabilities of producing marketable, profitable goods and services.

C

The burden of analysis from Phillips and Rozworski is that communist planning systems, multiple affronts to human freedom aside, failed at logistics, and were further handicapped by the limited computing power available in their heydays. Now we have giant corporations that rely on planning, and they are doing just fine.

The authors are keen to emphasize that the prosperity of these firms does not hinge on market efficiency, since the internals of these firms are not organized along market lines. They are right to cite the economist Ronald Coase of the University of Chicago, who pointed this out in the 1930s, though they might have also given attention to John Kenneth Galbraith, who cultivated this field in more recent decades.

Under the hallowed theory of supply and demand, we get an efficient market when many wellinformed buyers and sellers come together, prices are thrown back and forth, and equilibrium is reached.

The departures of really existing markets from this best of all possible worlds were always obvious. Coase’s insight was that internally, business firms’ operations do not rely on market forces at all. The custodian summoned to fix the furnace does not begin dickering with the supervisor over his fee. There is no bidding war for who will sweep the floor. Workers on an assembly line do not auction off their services for each task performed.

Internally, business firms have always run as little command economies, or “islands of power.” What’s remarkable about Amazon or Walmart is not only the fact of this planning, but the scale at which they operate successfully. These corporations’ outputs exceed the gross domestic product of entire countries. Has planning become feasible for an entire nation?

The analogy of corporate giants’ internal operations to central planning is tantalizing but limited. One reason is due to what economists call survivorship bias. Walmart is successful, but what about firms with internal planning that are no longer with us, or that were never able to scale up in the first

The output of corporate giants like Amazon or Walmart exceeds the GDP of entire countries.

Has planning become feasible for an entire nation?

PEOPLE’S REPUBLIC OF WALMART: HOW THE WORLD’S BIGGEST CORPORATIONS ARE LAYING THE FOUNDATION FOR SOCIALISM

BY LEIGH PHILLIPS AND MICHAL ROZWORSKI

Verso

place? The authors offer one counterfactual bit of evidence: the failure of Sears, whose attempt to organize competition among different subdivisions of the firm ended in fiasco.

Second, one feature of Walmart’s operations vociferously rejected by the authors—the squeezing of labor costs and the suppression of workers’ voices at work—could inform its success. It’s true that “flatter” organizational pyramids with bottom-up participation can function effectively, but if such alternatives are more profitable, why don’t more firms resort to them?

Third, another egregious practice that helps Walmart and Amazon to succeed is a feature of their scale and dominance: the ability to grind down the prices paid to their suppliers. A large share of these suppliers operates in nations that suppress labor costs in ways that the most rapacious American robber baron might envy. Neither state-owned nor worker-managed enterprises would necessarily be immune to such temptations.

Fourth, Walmart and Amazon are in large part intermediaries—they don’t manufacture the products they sell. As large as they are, so too are the worlds of their suppliers and customers.

The planning problem is largely solved for them. They can obtain information on costs of production and consumers’ willingness to pay by surveying external markets. They are similarly informed on whether to contract out some component of their production, such as custodial services.

They know the prices offered by outside vendors. This information would be lacking under central planning, if not under market socialism.

Fifth, one feature of corporations is that decisions are made in a hierarchy. The results may be unlovely from a social standpoint, but they are arrived at more quickly. A drawback to the authoritarianism of extinct communist governments was the tendency for the information flow to be stifled. The authors urge the replacement of hierarchy by democratic procedure: “Democracy is the beating heart of socialism.”

But democratic rule by councils

U

L

T

U

R

E

of interested, not always unbiased or informed, parties brings its own costs, particularly in time. A decision arrived at by a central authority that must be run back and forth through subordinate councils, or councils of councils, takes longer to resolve. By the time it is resolved, it could be obsolete.

Great advances in computing power combined with Big Data certainly enlarge the ability to plan.

The extent to which such capacity is adequate to the problem of determining production and consumption decisions is still an open question.

Alongside the greater scope for calculation, moreover, comes the greater threat to individual privacy.

Socialism in the U.S. is back, at least as something to talk about, so chances are we are not done talking about planning either. A myriad of social problems cries out for the intervention of a regulating authority to restrict or transform the way business firms operate. These interventions imply planning, though not necessarily of the sort hoped for in this book.

We need better planning for cities and regions. We need a plan to reduce carbon emissions through the reorganization of transportation and electricity generation and distribution. We need a plan to reverse the trend of residential segregation by race. The lowest priority for planning may be the basic production decisions of corporations.

The government could require Walmart to phase into renewable energy. It could devise trade agreements that inhibit the super-exploitation of labor in nations that export to the U.S. It could put floors on the wages Walmart can pay its employees and, indirectly, its vendors, and mandate equal pay by race and gender.

It could tax the incomes and inheritances of Walmart’s chief shareholders and executives at progressive rates. It could purchase shares and expand public ownership stakes in corporations. None of these measures requires central planning, but with their proliferation, the U.S. would be a different country. You might even call it “democratic socialism.”

Max B. Sawicky is an economist and writer in Virginia.

SUMMER 2019 THE AMERICAN PROSPECT 79

Parting shot

WONDER WHAT YOU’VE BEEN UP TO?

T

hese busy days, it’s hard to keep track of all that you’ve been doing. You may not remember what websites you’ve visited, who you’ve talked to and texted on your phone, every angle of every room in your house, and your precise location at every waking moment.

Well, we’re the big web platform companies. And we know more about you than you do. So we are

offering you this handy app to share our information about you— with you. In real time!

With SURVEILL APP, you can review everywhere you’ve been and who you’ve been with; what products you’ve browsed, clicked on, or offhandedly glanced at; what movies you’ve watched and what songs you’ve listened to; what politicians and political messages you’ve liked; actually everything you’ve ever liked; all of your entire

social media activity and your friends’ activity and the friends of your friends’ activity, and also their friends. And of course the people you’ve dated. And the people they’ve dated. And the people you’re likely to date soon.

So far, we’ve provided this kind of information only to our advertising partners. They want to know all about you, and pay us good money to find out. But we figured that you might also want

to know. Just for your own files.

This is incredibly lucrative information. But with SURVEILLAPP we’re giving it to you for free!

Mainly because you gave it to us for free and we made just gobs of money off it. I mean, you don’t even want to know.

Maybe you thought you opted out of giving us this information by clicking a button that prevented data collection. Really, it’s very quaint of you to think that would work! But if it did, SURVEILL APP wouldn’t be as robust as it is, now would it? And wouldn’t you be sorry? There is no point in trying to resist—you might as well take advantage of all that we know about you, for your own benefit.

In principle, we could provide you with similar information that we have on your spouse or your lover, your boss or your coworkers, your friends and your enemies. That app is still in development, and you’ll be the first to know! Well, actually, we will.

What can you do with all this information? The possibilities are endless—at least, they are if you’re a digital platform and you have like two billion of these puppies to sell to advertisers. What can you do with, well, one? I’m sure you’ll think of something.

If you act now, whenever you use the app, we will learn which of your activities are most important to you, and that will go into our database, too!

So give SURVEILL APP a try today!

Warning: Not available where privacy is respected. —robert

kuttner and david dayen

VOLUME 30, NUMBER 3. The American Prospect (ISSN 1049-7285) is published quarterly by The American Prospect, Inc., 1225 Eye Street NW, Suite 600, Washington, DC 20005. Periodicals-class postage paid at Washington, DC, and additional mailing offices. Copyright © 2019 by The American Prospect, Inc. All rights reserved. No part of this periodical may be reproduced without the consent of The American Prospect, Inc. The American Prospect ® is a registered trademark of The American Prospect, Inc. Postmaster: Please send address changes to The American Prospect, P.O. Box 421087, Palm Coast, FL 32142. PRINTED IN THE U.S.A.

80 WWW.PROSPECT.ORG SUMMER 2019

art by ja son schneider

Try SurveillApp!

advertisement

The Best Economy Ever?

By Randi Weingarten, President AMERICAN FEDERATION OF TEACHERS

act-checkers have their hands full during Donald Trump’s presidency, but one point is indisputable: Trump ran for president as a populist yet is governing to benefit America’s elites.

Trump boasts that the economy is the “best ever,” but nearly all of the benefits of economic growth have gone to the wealthiest Americans and large corporations. And, while Trump promised that “everybody is getting a tax cut, especially the middle class,” in the first year after Trump’s tax law went into effect individual taxpayers paid $93 billion more in taxes, after refunds. Big businesses paid about $91 billion less.

Trump’s economy hurts the very people he pledged to champion—working and middle-class Americans.

Nobel Prize-winning economist Joseph Stiglitz notes that 90 percent of Americans have seen their income stagnate or decline in the past 30 years. Today, the 400 richest Americans, 0.00025 percent of the population, have more wealth than the 150 million adults in the bottom 60 percent.

Trump promised to address this new Gilded Age, but, as president, he has carried out an agenda that helps oligarchs like him and Education Secretary Betsy DeVos and leaves the rest of us behind.

starting to understand that, like entrepreneur Nick Hanauer, who explains in the July issue of The Atlantic why he no longer believes that education is the cure to all that ails America. Hanauer realizes that our education system can’t compensate for the ways our economic system is failing Americans. Research shows that the single greatest driver of student achievement is household income, which has barely budged since 2000. “Pay people enough to afford dignified middleclass lives,” he writes, “and high-quality public schools will follow. But allow economic inequality to grow, and educational inequality will inevitably grow with it.”

what they would need to survive even one year in retirement. So much for the “best economy ever.”

These statistics make clear why there is so much anger and anxiety today in the United States, and why unions are getting a second look. My union, for example, stands at the nexus of two of the surest vehicles to increase opportunity for ordinary Americans—the labor movement and public education, both of which the Trump administration has sought to undermine. Trump has packed federal courts with pro-business, anti-worker judges. His administration has moved to undercut the power of unions and restrict workers’ opportunities to join unions. Trump and DeVos have pushed to cut more than $9 billion from education funding, and DeVos works overtime to get her friends in state governments to defund and destabilize public education.

Public schools play a vital role in developing skills and knowledge, reducing polarization and strengthening the economy. But there is something of a “chicken and egg” quandary: Do great public schools help create a thriving middle class, or vice versa?

As important as schooling is, it alone cannot overcome the country’s vast inequality. I am glad to see others

Our political and economic systems are so weighted toward the wealthy that opportunity will only come through the power of collective action that unions and voting—the third vehicle to increase opportunity— provide. As inequality grows and the middle class shrinks, we must organize, not agonize. From teacher walkouts to fast-food worker strikes to union drives in newsrooms, working people are coming together to accomplish what they cannot do alone.

Americans live with daily reminders that elections have consequences. We must use the power of our vote to elect leaders who will govern in the best interest of all Americans, not just the wealthy few.

Trump ran for president as a populist yet is governing to benefit America’s elites.

While the rich have never been richer, 40 percent of Americans say they wouldn’t be able to come up with $400 to cover an emergency. Trump has reneged on his pledge to raise the federal minimum wage, and his administration has limited workers’ eligibility for overtime pay. Despite promising “insurance for everybody,” Trump’s first priority as president was passing legislation to strip healthcare coverage from 20 million Americans and end protections for tens of millions more with pre-existing conditions, leaving them one illness away from bankruptcy—or worse.

In this season of college commencements, newly minted graduates are facing the first of many student loan payments. Student loan debt has reached $1.5 trillion. The Trump administration has completely sabotaged debt relief options for teachers, nurses and other public service workers. I hear from too many people who worry they will be paying off their student “debt sentence” until they die.

Between student loans, higher healthcare and housing costs, and stagnant wages, millennials are far worse off financially than generations before them, with the average net worth below $8,000.

And retirement doesn’t look much rosier. About 42 percent of Americans will retire broke, meaning they have less than $10,000 saved, a fraction of

Photo by Jennifer Chang

Weingarten at an AFT member town hall in Houston on May 28.

Follow AFT President Randi Weingarten: www.twitter.com/RWeingarten

Hey...

We are Old Oldenough enoughto torun runfor forSenate Senate**

30!

Founded Foundedin in1989, 1989,The TheAmerican AmericanProspect’s Prospect’sfirst firstissue issue appeared appearedin inthe theSpring Springof of1990 1990 Consider Considerdonating donating$30 $30to tohelp helpus uscelebrate celebrate our our30th 30thanniversary anniversaryyear year

IfIfyou’re you’refeeling feelingespecially especiallyliberal, liberal,make makeititrecur recurat at$30 $30aamonth month Every Everydollar dollarsupports supportsindependent independentjournalism journalism YOUR YOURDONATION DONATIONIS IS100% 100%TAX TAXDEDUCTIBLE DEDUCTIBLE

Prospect.org/Donate Prospect.org/Donate

*It’s *It’saashame shamewe wedon’t don’tlive liveininKentucky Kentucky