The Future is in Your Hands
Letter to the Millennials 5
This is the fifth of these letters I have written. The first four can be found here, here ,here and here. This is an attempt on my part to speak to a generation of students that I have been teaching for the last twelve years. I know these letters are kind of long, but I hope you will stick with me. These are complex times and so frought with emotion that I am reminded of the lines of my favorite poet, W.H.Auden.
Waves of anger and fear
Circulate over the bright
And darkened lands of the earth
The book I published this year, Move Fast and Break Things is basically the story of how a group of libertarian technology idealogues hijacked the initial promise of a decentralized Internet, and created a small number of Internet monopolies, which are now the largest companies in the world. This happened relatively quickly (Google only went public in 2004), so in a way both economists and politicians don’t really underrstand how different monopoly capitalism is from the idealized Adam Smith capitalism they still teach in Econ 101. To begin with, monopoly firms are price makers, not price takers. Amazon can tell book publishers to lower their prices and the publishers and authors have no choice. Google can dictate what advertisers will pay for a search ad for an obscure product. But the real effect is that American business is tending towards more concentration in all sectors, which allows corporate profits to rise and wages to fall.
And this has accelerated since the Great Recession of 2008. In October of 2008, as the global economy was in free fall and a month before the Presidential election, I gave a speech at the Annenberg Research Park Colloquium at the University of Southern California called America 3.0 & The Interregnum. The thesis was fairly simple. The roots of the crash of 2008 had been years in gestation. That we were in the midst of an interregnum where, “the old is dying and the new cannot be born.” That the financial and political elites, with their hierarchical, top down mindset were completely clueless to the new networked, bottom up forces that were going to dominate the future economic and political sphere. That the U.S. was entering a transition phase that would be marked by four reactionary forces:imperial overstretch, cultural wars, anti-science regression and accelerated inequality. The whole notion of the Interregnum is that it is a very frustrating period, where nothing seems to get done because the old order is fighting like mad to hold on to power and the new order cannot reach critical mass. For the Plutocrats, this kind of political gridlock is a good thing, because as long as politics is frozen, it cannot interfere with their profits. But the good thing is that time is on the side of the new order: your generation.What I think I know is that on this chart (from the Global Business Network) one can clearly see four realistic scenarios for the next ten years. Look at the horizontal and vertical vectors and tell me which of these four blocks do you think we will occupy in ten years?
I believe we will end up in “Adaptive Strain”. So, “the sources of leadership, innovation and change will come from “Decentralized, Networked, Bottom Up” forces rather than from “Centralized, Hierarchical, Top Down” forces. And because of that fact, “The Global Economic and Cultural Influence of The U.S.” will increase. The Chinese may compete with us for economic and cultural influence, but their whole society is based around top down autocratic power and control.
So the Interregnum has two dimensions: political and economic. In the economic dimension, the old order is stuck in the world of Milton Friedman and Ronald Reagan: cut taxes on the rich and eliminate business regulation and the animal spirits of capitalism will be unleashed. This is what Donald Trump is preaching. But it only worked out for the richest Americans. In 1969, the median salary for a male worker was $35,567 (in 2012 dollars). In 1980 and 2001 Republicans pushed through massive tax cuts for the 1%, based on their trickle-down economic fantasy. At the end of 2008 the average male worker was earning $33,904. So for 40 years, while wages for the top 10% have continued to climb, most Americans were caught in a “Great Stagnation,” bringing into question the whole purpose of the American capitalist economy. I think we are coming to realize that the Neo-liberal consensus is dead. In a minute, I will talk about what takes it’s place, but first I want to talk about the political dimension.
My good friend Alex Bowles has helped me think through the political implications of the Interregnum theory. He has said that the last great rupture in American politics was the Civil Rights Act. This rupture was forced by my generation when we were your age.
Representative John Lewis was 21 when he first got arrested for a sit in.By splitting one of the two major parties over the issue of basic human equality, it set the stage for people like Newt Gingrich and Lee Atwater to transform the Republican party into a deeply reactionary movement. By the time Reagan made his first campaign stop in Philadelphia Mississippi to champion “state’s rights”, the landscape of the post-Civil Rights Act era was starting to follow the contours of the Reconstruction era, in which the North won the war but the South won the peace.
This region became the political base for the “American Exceptionalism” of the late and post Cold War era, where military expansion went largely unquestioned in Washington and many of our strongest allies were deeply anti-democratic. But research by the Pew Research Center shows that Americans of all political persuasions are tired of being the unpaid cop of the world.
Domestically, the right’s low-tax supply side economics and laissez-faire views carried the day. This scheme picked up so much momentum that the then-gutted Democratic Party couldn’t hope to stand in its way. When Bill Clinton won the Presidency, he did so on terms established by Reagan. Obviously Bush pushed the Republicans ever further to the right in terms of military expansionism and cutting taxes on the rich. All of this laissez-faire philosophy led directly to the crash of 2008.
At the time of the crash I argued that unless we undertook a massive public and private investment program in a next generation operating system — America 3.0 — “we could limp along like Japan for ten years; in a flat economy and the social strife that would result from that would be disastrous.” This is what I thought we needed to do.
What I want you to do is imagine where we want to be in the year 2020. What would we want as features of this next generation operating system? For me it comes down to four goals. First, I think we want to be energy-independent with a radically reduced carbon footprint. Second, I think we want to have universal healthcare. Third, a world-class public education system from Kindergarten through college that was your right to attend free as a citizen. Finally, we want to have a multilateral foreign policy that has completely rejected the Bush-Cheney notion of “Pax Americana.”
Needless to say, eight years later, we did not undertake such a massive program (though Obama made a big downpayment on healthcare and cut back some on “Pax Americana”), and we limped along with flat economic growth. Even under Trump’s extraordinary fiscal stimulus, I doubt that GDP growth can get above 3%. And The Upshot’s Neil Irwin raises a far more frightening question: “Why is Productivity So Weak.”
More than 151 million Americans count themselves employed, a number that has risen sharply in the last few years. The question is this: What are they doing all day? Because whatever it is, it barely seems to be registering in economic output. The number of hours Americans worked rose 1.9 percent in the year ended in March. New data released Thursday showed that gross domestic product in the first quarter was up 1.9 percent over the previous year. Despite constant advances in software, equipment and management practices to try to make corporate America more efficient, actual economic output is merely moving in lock step with the number of hours people put in, rather than rising as it has throughout modern history.
Let me suggest an answer to Irwin’s question. Perhaps the Interregnum I described in 2008 is actually in its death-throes. Perhaps the dying, carbon-based manufacturing economy of “things” is actually yielding to the digital service based economy of experiences. We will spend more on bits than on atoms. And what if that digital economy is both more efficient and harder to make a living off of, so that output as measured by GDP will be permanently muted? If for instance, as I suggested last week, the sharing economy means that a larger population of millennials needs many fewer automobiles, because they would rather use Uber than own a car, then GDP is going to be lower. And then gas prices will fall because of low demand, and that will also reduce the GDP. And if for instance revenues for the music business fall from $22 billion a year to $7 billion a year because people can get the music for free on YouTube or Pirate sites, then GDP is going to be lower.
There is one more piece to the “why is productivity so weak” puzzle. On the most recent Facebook earnings call, Mark Zuckerberg boasted that the average user spent 50 minutes per day on Facebook services (including Instagram and Messenger). So assuming the average U.S. worker also spends time on Google, Whats App and other web services, it would not be a stretch to assume that the lost productivity has something to do with people wasting more than an hour a day on social networks.Even Facebook’s first President , Sean Parker recently confessed that “Facebook probably interferes with productivity in weird ways.”
We studied you millennials at the USC Annenberg Innovation Lab. You are much more about access than ownership. According to the Digital Marketing firm Mondo, you spend almost 18 hours a day consuming some form of media. And very little of it is paid for, although Facebook and Google do earn billions on advertising guiding you to content.
Most importantly, you are the largest generation and will dominate politics for the next thirty years.
As Bowles has pointed out, as a general rule, people’s political orientations tend to solidify between the ages of 18 and 22, and tend to do so based on what seems to be working at the time, beautifully illustrated here by the New York Times. For your generation (the largest in American history) to witness such catastrophic failures — and such and anemic response — during the most formative stage of your political lives gave the crash of 2008 far-reaching consequence.
The extent of this shift is now becoming clear. A Harvard poll of Millennial’s views on capitalism produced results that would be inconceivable to most of those who came of age twenty years earlier. You are clearly willing to question the most basic nostrums of American capitalism. Now that the GOP itself is going the way of the Whigs, the ideological dark star that’s been pulling the Democrats to the right is fading even faster.
So if the old that is dying is a laissez-faire economic philosophy handed down from Milton Friedman and and an American Exceptionalism philosophy handed down from John Foster Dulles; then we very well may be entering a new era of America 3.0. Had a candidate less flawed than Sanders recognized the depth of the GOP's instability earlier, it's unlikely that Hillary Clinton would have been the nominee.
This brings me back to the election of 2020. I want to make the case that a progressive realignment is at hand if you vote Democratic. To begin with, if the Democrats recapture the Presidency and the Senate, the change in the Supreme Court towards a more progressive outlook will be in place for the next 30 years. That would allow us to overturn Citizens United and the recent cutbacks to voting rights enforcement. Secondly, if your generation are clearly aligned with a Progressive political outlook, then the 2020 election could see the end of both Republican gerrymandering and Republican efforts to limit voting rights. Progressive majorities in Congress could lead to a reduction in the military budget and a redeployment of some of that money to both a single payer health plan and subsidized state university tuition for the poor and middle class.
At the same time, a new order is coming in the economic sphere.As I have been writing for a while, the new oligarchs (Google, Facebook and Amazon) base their business model on a kind of monopoly that regulators can not get their minds around. The British economist Paul Mason sees it clearly.
The cognitive capital theorist Yann Moulier-Boutang puts it this way: the entire question of 21st-century capitalism is who captures the externalities. Shall it be the corporation, who’ll own them and utilise them, as Google does? The positive externality for Google is that it can see what we are searching for but we can’t see what each other are searching for. So it can now construct a monopolised business model on the basis of the secrets [revealed by] its data-mining.
But as Steven Johnson points out in his important essay Beyond the Bitcoin Bubble, Blockchain may offer us a path to “re-decentralize the web”.
But in a way, the Bitcoin bubble may ultimately turn out to be a distraction from the true significance of the blockchain. The real promise of these new technologies, many of their evangelists believe, lies not in displacing our currencies but in replacing much of what we now think of as the internet, while at the same time returning the online world to a more decentralized and egalitarian system. If you believe the evangelists, the blockchain is the future. But it is also a way of getting back to the internet’s roots.
Of course fighting the Google/Facebook duopoly will not be easy, for as the Google Transparency Project has shown, with monopoly power comes political power.
Your generation still seems to believe Google’s “Don’t Be Evil” motto, even though their CEO, Larry Page flies his jet to secret meetings with Mitch McConnel and Paul Ryan, sponsored by the right wing think tank, The Heritage Foundation.And remember how easily Google rolled over to the NSA, when the Bush Administration wanted to search their logs? Will they stand up to a President Trump seeking revenge on his enemies list? It remains to be seen.
But of course, Google and Facebook’s business model is all based on advertising. But I think your generation is becoming immune to advertising. Certainly your adoption of ad blockers points in that direction. Here is what I said about that in the 2008 speech.
In the ’50s John Galbraith wrote a pretty interesting book called “The Affluent Society” and he said “It can no longer be assumed that welfare is greater at an all around higher level of production than at a lower one. The higher level of production is merely a higher level of want creation necessitating a higher level of want-satisfaction.” In other words he basically said that the average middle-class citizen was like the gerbil on the treadmill; he was not gaining status altitude in relation to his peers, but merely spending more money to stay even. Because we have learned ways to imbed advertising everywhere you looked, we were able to constantly drive people to buy things they didn’t need. But it seems to me this world is ending, and every sign points to a major pullback by the consumer at the mall.
Although consumer spending rose in the third quarter of 2017, the Commerce Department noted that much of that had to do with repairs to the hurricanes and other extreme weather. Clearly the malls are closing fast.
Perhaps we are entering a new phase, where the elevation of “growth at all costs” is rethought. The British economist John Stewart Mill had a notion of a “steady state economy”. At a time when we are wrestling with both ecological limits to growth and technological improvements which will put many people out of work, we could heed Mill’s words.
It is scarcely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the Art of Living and much more likelihood of its being improved, when minds cease to be engrossed by the art of getting on.
More recently, the economist E.F. Schumacher published a book called Small is Beautiful.
Many of the issues Schumacher raises we are still wrestling with. He questioned the shibboleth of economic growth as the central preoccupation of politics; he talked of resource constraints on economic development. Above all, he insisted again and again that human happiness would not be achieved through material wealth.
What encourages me when I give speeches now is there seems to be a remarkable desire on the part of your generation to create a sustainable capitalism. It’s clear that Trump, The Koch’s and the Mercer’s have no interest in such a project. They are far too invested in the extraction capitalism that has made them billions. But that doesn’t mean they will be in control past 2020, because Trump’s support is mostly among older Republicans.
This movement is just getting started. I was heartened by the response to my last letter. Lots of good feedback. Lets keep the conversation going.
