Brexit’s Lesson for The Democrats
In the aftermath of Brexit, George Soros noted, “The ‘Leave’ campaign exploited the deteriorating refugee situation — symbolized by frightening images of thousands of asylum-seekers concentrating in Calais, desperate to enter Britain by any means necessary — to stoke fear of “uncontrolled” immigration from other EU member states.” But it would be a huge mistake for the Hillary Clinton campaign to conclude that because we don’t face a similar refugee crisis, the fate of the British Establishment will not be her fate. The working class backlash at the heart of Brexit is mirrored in the politics of almost every major developed economy, as President Obama’s former advisor David Axelrod observed, “There’s a fundamental issue that all developed economies have to confront, which is that globalization and technological changes have meant millions of people have seen their jobs marginalized and wages decline.” The Democratic Party has since 1992 embraced the globalization and technological agenda of Wall Street and Silicon Valley without regard to the destruction it is creating for the American working class. Without a reexamination of that agenda, the fate of the British elites may be visited on the Clinton campaign.
For the last six years I have been the Director of the Annenberg Innovation Lab at the University of Southern California. Our job has been to help some of the world’s largest corporations like IBM, Disney, Warner Bros and Cisco understand the sources of leadership, innovation and change inside and outside their organizations. What we have observed is that the rise of Globalization and the Internet revolution has produced a series of dynamic tensions — often paradoxical — that have relevance not only in the business sector, but also in the conduct of global governance. To date, neither Democratic nor Republican policy makers have recognized these factors, and yet they are now accepted wisdom in most corporate boardrooms.
The first contradiction is though the Internet makes it possible for a global corporate headquarters to communicate and control a worldwide staff, most smart corporations are pushing control out to the edges and flattening their command and control structure. As Sam Palmisano, former CEO of IBM told one of my associates, “we need to lower the center of gravity at IBM.” He did this by empowering regional managers to make many of the key decisions without having to check with headquarters in Armonk, New York. In a recent commencement speech G.E.’s CEO Jeffrey Immelt noted that GE had achieved “a local capability inside a global footprint.”
But the whole force of the European Union was moving in the opposite direction, trying to centralize power in Brussels and move it away from the member states. For the working class of Great Britain, the distant bureaucrats of Brussels were a source of pain and distraction. But the same was true for the last three years for the citizens of Greece — unable to adapt to a financial crisis, because their political and fiscal decisions were controlled from Berlin and Brussels.
And what Steven Teles calls “Kludgeocracy in America” is an equally frustrating bureaucratic mess.
Even as the government expanded in the 1960s and ’70s in areas ranging from the environment to education to health care, the federal government and the states continued to share the duties of governing in a complex web of responsibilities. While states and localities actually administer essentially all programs in these domains, the federal government is deeply involved as a funder, regulator, standard-setter, and evaluator. The result is the complicated “marble-cake federalism” structure that characterizes almost all domestic policy in the United States, making clear lines of responsibility hard to establish.
For progressives in the U.S., the dawning realization that most of the major changes in society in the last ten years — marriage equality, climate change or even gun control — have originated at the state and local level, should spur the Democrats to rethink their dependence on centralized solutions from Washington. Gay marriage started state by state and only when it reached critical mass did the Supreme Court make it the law of the land. In California, Oregon and Washington, we have much stricter restictions on pollution from both vehicles and power plants. Eventually our rules become the nation’s rules.
I think this kind of regional experimentation, gets to the heart of the idea of decentralization, which was at the core of the original World Wide Web vision. Given the political paralysis in Washington, brought about by the power of money to control government, it is only right that the real experimentation is going to happen at the state and city level. The Catholic Church has a concept called subsidiarity, which The Oxford English Dictionary defines as “the idea that a central authority should have a subsidiary function, performing only those tasks, which cannot be performed effectively at a more immediate or local level.” The Democratic Party needs to embrace a strategy of subsidiarity and decentralization. It needs to provide block grants for cities and states to experiment in education, clean energy and healthcare solutions.
But there is a second paradox inherent in the digital revolution — the Internet is a “winner takes all” economy. Peter Thiel, founder of Pay Pal told the Wall Street Journal, “If you want to create and capture lasting value, look to build a monopoly.” Three of the seven largest (by market cap) companies in America are monopolies. Google has an 88% market share in online search and search advertising. Its Android mobile operating system has an 80% global market share. Amazon has a 70% market share in e-book sales. Facebook has a 77% market share in mobile social media.
Just as we need to use the digital revolution to decentralize government control, we also need the Democrats to examine the role of monopoly capitalism in America, which (in the words of The Economist) “would involve more active, albeit cruder, antitrust actions. It would start a more serious conversation about whether it makes sense to have most of the country’s data in the hands of a few very large firms. It would revisit the entire issue of corporate lobbying, which has become a key mechanism by which incumbent firms protect themselves.” The irony of President Obama embracing Facebook’s Mark Zuckerberg and Google’s Eric Schmidt at the very moment the Brexit results were being announced is only fitting. The Obama administration has been far too close to Google and Facebook and every indication shows that Google is deep into the Clinton campaign.We need more than lip service from Hillary Clinton to the dislocations of technology and globalization. We need an understanding that centralized power, whether in Washington DC or the Googleplex is a bad thing.
