Must-Read: The question I always find myself going back and forward on is this: Do strong unions primarily reflect or primarily cause a high labor share of income? And I find my views on this question both disturbingly ungrounded in evidence and disturbingly volatile…
…that defined the parameters of American life. But if history has taught us anything, it’s that the signposts of our culture, economics, and politics are continually evolving, even as we believe they will be perennially rooted…. No less a figure than Dwight Eisenhower assumed an America that would always have strong unions…. Timothy Noah, relying on the work of economists Claudia Goldin and Robert Margo, describes this period in his book about American inequality, The Great Divergence (2012), as one in which “incomes became more equal and stayed that way.” Union density peaked at about 1/3rd of the non-farm workforce in the decade following the second world war…. States like Alabama and Tennessee had “low” union density rates in the high teens that were equal to the “high” density rates of “union states” like Michigan today….
During the 1972 election, Meany’s AFL-CIO, enraged by George McGovern’s opposition to the Vietnam War and the influence of the New Left and the counter-culture that permeated his campaign, remained neutral rather than endorse the Democratic candidate. Organized labor was so important to the Democrats that the wily Republican president, Richard Nixon, had courted Meany over several rounds of golf and sought to identify the administration with what Nixon and his top aides took to be the cultural symbols of blue collar, white manhood. The Federation’s neutrality was his reward…. By the middle of the 1980s, history had fooled the present again: the “secure place” of American labor which Ike had spoken of so confidently in 1952, turned out to be, in fact, evanescent. By 1991, union density had declined to just 16%. (It is now about 11%.)… In 1978, despite the most massive lobbying drive in union history, Carter placidly watched a modest labor reform bill be filibustered to death by Republicans and Southern Democrats in an overwhelmingly Democratic Congress….
Why did this happen?… For some of the same structural, macro-economic reasons it has declined in almost every advanced country… but… also occurred for reasons intrinsic to the American political economy…. Just as labor and the economic base of much of its membership lost altitude, unions faced the egalitarian necessity to modernize themselves. This was not without complications. Title VII of the1964 the Civil Rights Act accelerated a much longer struggle by black workers to have full and equal representation within unions. Arguments against racial (and gender) discrimination, especially in building trades and manufacturing unions, that had mostly been ignored by the NLRB, gained salience before the new Equal Employment Opportunity Commission (EEOC)….
Labor… today… remains the most effective institutional bulwark against income inequality. Within its blue state zones of urban power, labor has, effectively, fought inequality via the “fight for 15” led by the still formidable SEIU, and promoted the passage of minimum wage laws in states and cities around the country. Unions, despite their inability to win legislation of direct benefit to themselves, still lead efforts to augment social insurance and regulate companies and banks…. Advancing beyond their previous racism and sexism, unions are, in significant ways, better advocates for such concern today than they were when George Meany was refusing to endorse the March on Washington and, then during the McGovern campaign, railing about the Democratic party being seized by “people named Jack who look like Jill and smell like johns.”…
The numbers of union members and the dollars in the stagnant paychecks of millions of American workers tell an unhappily congruent story. If, in subsequent years, union membership numbers don’t increase dramatically, workers’ paychecks aren’t likely to increase very much either.
Peter Leyden: For those of you who do not know Brad DeLong, he is a professor of economics here at U.C. Berkeley and has been so for a while. He also did a stint at the U.S. Treasury Department in the 1990s in the Clinton administration, working under Larry Summers—which has gotten some stories behind that one…
Brad DeLong: As Gene Sperling once said: “Being Larry’s friend is never dull!”
Peter Leyden: “Is never dull.” Exactly. But I think most people outside of those circles know of him through his weblog, in which he delves deeply into economics and politics. He is quite prolific. He is quite into social media, which he is probably still banging at right now, as he sits on stage. So, Brad, one of the themes that has emerged here—particularly in some of the conversations I have had here, but also through the whole day—is a sense of technology, artificial intelligence, automation, robotics. We had drones here. There is a lot of sense of the how the technology is pushing us in different directions, and kind of disrupting life as we know it. It is continuing to push and disrupt it, and will potentially displace a lot of folks in the economy to come.
Peter Leyden: And so I think, just to open it up, given your economist’s perspective, why don’t you give us just a sense of how you think of the disruption that comes from a lot of these new technologies.
Brad DeLong: First, the industrial disruption has been ongoing for 225 years, at least. The pace at which people have been disrupted has been accelerating, yes. At the start of the eighteenth century the amount of technological progress we get in one year took twenty. By the start of the nineteenth century it was down to what we see in one year they saw in five. By the start of the twentieth century it was down to one in two.
But it has produced enormous dislocations for all 225 years.
Andrew Carnegie’s father was sitting at home in Scotland making a pretty-good living as a skilled handloom weaver. All of a sudden technological improvements three hundred miles south in the form of the power loom destroys his livelihood. I don’t remember whether he starves to death or whether simply his children’s immune systems are so badly compromised by poor nourishment that they die like flies. But Andrew makes it to America. He promptly gets an entry-level job in the high-tech industry of that day as one of the first telegraph operators, one of the first people who makes it their business to sit in front of their telegraph and communicate via the code of Samuel Morse with others across hundreds of miles at lightspeed. And we are off and running.
This has been going on for quite a while. What has done most to illuminate in my mind, with the force of a thousand atomic bombs, was an article—an article that I was discussing this morning with other economists up at the QualComm Cafe on the Berkeley campus—a Wired article of long ago, an article by Neal Stephenson about the submarine telegraph cables of the nineteenth century, a brilliant article called “Mother Earth, Motherboard”. I just discovered in the green room that Peter edited it. And I must say that to edit Neal Stephenson so that not only is every paragraph a diamond of prose but the thing has a proper beginning, middle, and end—that demonstrates true genius.
Peter Leyden: Thank you.
Brad DeLong: If you want to take the really long sweep of history, the argument is this: Up until 6000 years ago by and large the kind of things that we invented were things that allowed us to use all of our human capabilities to do what we had done but do what we did better and more effectively. Spears allow us to hunt large animals—as opposed to throwing rocks at rabbits and hoping you get a lucky hit. Picking the pieces of grass that have really big seeds—what we turn into wheat—allows us to harvest and gather a lot more calories in our daily gathering if we have been lucky or smart enough to have scattered some of the seeds by the riverbank the year before. The invention of the loom allows us to actually weave grasses into cloth much more effectively. But we are are using all of our standard paleolithic human capacities to do so.
Then, in 4000 BC or so, something different happens, something unusual. We domesticate the horse. All of a sudden having people pull things is economically obsolete. Strong human backs and strong thighs are very useful whenever you have big things to move around. But once you have got a horse, a horse can do it better. Horses are much more useful. Horses make human backs and human thighs technologically obsolete as far as moving heavy objects is concerned.
Thus over the past six thousand years, the argument continues, first slowly and then more rapidly, we have had more and more places where things that used to be in the province of human excellence become activities that our draft animals, our domesticated animals, and our machines can and are doing better. The horse takes care of backs and thighs. We get the spinning jenny and the assembly line. They largely take care of fingers—of fine manipulation. We are no longer economically competitive moving things around with our big muscles or, for the most past, finely-manipulating things with our small muscles and nimble fingers. I find that on this iPhone here, in terms of nagging me to actually move around, the Withings App is significantly better than asking somebody to tell me to move around once an hour—not least because the Withings App does not have feelings of its own—not yet. And I cannot snap at the iPhone no matter how many frowny faces it shows me.
Peter Leyden: But do you think that the next generation—the AI brainpower robotics—will take it to the next level? Do you think there is any material difference in this?
Brad DeLong: Up until now, it has been the case that, every time we have domesticated an animal or invented a machine, it has removed the market value from some human excellences. But every such animal or machine or device is not intelligent. Every one requires a cybernetic control mechanism. The human brain is a supercomputer that fits in a breadbox and draws only 50W of power. That is a very impressive cybernetic control mechanism. And so—up until now—whenever you have a horse-guiding task or machine-running task or a machine-programming task or an accounting task, you had to have a human brain in the loop to control what the machines and what the software and what the animals were actually going to do. Now, however, for the first time, we can dimly envision the coming of an age in which machines will be smart enough to run themselves. They will no longer need human minders in the loop to control them.
We already know that a simple computer with the proper big-data regression underneath it could do a significantly better job at choosing which people to admit as graduate students in economics who are likely to succeed. And the faculty committees we currently hand this task to do not do that good a job. Faculty committees are always struck by stories that resonate with them. And such stories always lead them to place too-high a weight on replicating themselves in the next generation of professors, and giving too high a weight to the recommendations from their friends in their social network. The computer is an intelligence, vast and cool and unsympathetic, that does not suffer from such biases. We have reached the stage where it can crunch the data as well as—better than—I can.
Perhaps we are approaching “peak human”. Our last remaining really-strong comparative advantage was the ability of our brains to serve as cybernetic control mechanisms for dumb animals and dumb machines. Perhaps that is coming to an end.
Peter Leyden: But that does not seem to worry you. We were chatting about this before. A lot of that is taken away. How can this play out?
Brad DeLong: There are two roads: First is the road in which we genuinely have Turing-class machines and software assistants that can do for us everything that a human can do. They will serve as super-intelligent Jeeveses to our more-or-less inept [Bertie Woosters29. They will keep the trains running. They will keep us—with our inept bumbling lack of knowledge—from creating chaos and catastrophe. They will keep us from alienating our rich Aunt Agathas from whom we hope for large legacy inheritances, plus low-interest liquidity in the meantime. That road is very much that of the science-fiction novels of the alas!, late genius Iain M. Banks. In his “Culture” universe, every person has a robotic artificially-intelligent personal drone that follows them around and makes sure that their life doesn’t crash into chaos. And the drones—smarter than the humans—do this more-or-less as a hobby. It amuses them. It gives them something to do in the real world, while they use the rest of their brain power to do whatever else they want to do communicating with the other AIs and carrying out whatever projects the AIs have.
Brad DeLong: Second is the road that is well-marked not by science-fiction novels but rather by Regency Romance novels. Down this road, it is Regency Romances that present us with the image of our own future. In the works of Georgette Heyer—riffing off of Jane Austen in a peculiar way—wrote about a social class in a condition of material comfort that had absolutely no productive economic role to perform whatsoever. Even in Austen, neither Mr. Bingley nor Mr. Darcy have or ever will do a lick of socially-productive work in their lives in return for their £5000 or £10000 a year in income, respectively. And nobody expects either of them to a lick of socially-productive work. And everybody thinks that they are wonderful people because they have inherited £5000 or £10000 a year. They are good masters. They will bring you a basket down from the manor house if you are sick. Maybe they will forgive your rent for two months if you break a leg.
This is a society of material abundance for the upper class. Thus the entire narrative force of privation—of desperately trying to get the crops in before the hail smashes them or the grasshoppers eat them so the family of the Little House on the Prairie can survive The Long Winter—is absent. Material scarcity vanishes. So what do people then do? Well, look at what’s displayed at the supermarket checkout line. What people are interested in are: first, avoiding violent death, especially for their children; second, material subsistence, comfort, and fashion; and, third, who’s sleeping with whom. If you manage to greatly reduce the risks of the first and take worry about finding material subsistence away, what you are left with as the primary motive springs of human action and society are:
The social dance that decides who is going to sleep with whom.
The display of human excellence and the acquisition of status via the appreciation and exercise of comfort and fashion.
This is the Regency Romance world. Everyone in it—everyone in the Bon Ton of England in 1820—appears to be very happy engaging in this world. Wearing the right coat, wangling an invitation to Almacks, spending two hours a day tying their cravat so that it looks like they tied it carelessly in a hurry and yet it came out fine, choosing a gown color that compliments rather than clashes with their eyes. Combine that with the great mating-and-affection dance. The characters in Regency Romances manage to keep themselves very busy and occupied indeed. They do not feel like their lives are empty.
Peter Leyden: That assumes, of course, that society allowed for the very top to act like that. If we had this more mechanized society that would take care of material wants, the economy would have to be reorganized differently. In the near term, however, how do you deal with placing people? There has been some creative thinking about that. From the right, we have seen proposals for guaranteed incomes and other things that would essentially liberate people from the spur of material necessity and its trauma.
Brad DeLong: If not—if people have to earn their daily bread by the sweat of their brow by doing something economically-valuable—then we have an immense problem. We have needed a guaranteed income here in the North Atlantic since 1800 or so. Whenever we have not had a social-insurance system, the results of technological change in producing social terror and distress have been enormous. And we economists have more often than not been the bad guys on this.
My most unfavorite line from a nineteenth-century economist comes from Alexis de Tocqueville’s friend Nassau Senior, the first Professor of Political Economy at Oxford. I was, in fact, just an hour ago reciting this line to one of our brand-new assistant professors here at Berkeley, the brilliant young Danny Yagan, who we have been very lucky to hire. Senior was well-known for taking the position that the government of the United Kingdom should not spend any money relieving the distress of Andrew Carnegie’s father and the other handloom weavers whose livelihoods had collapsed out from underneath them with the invention of the power loom. Why not? Because the spur of material privation was necessary to induce them to shift occupations and find other jobs. And if you fed them in idleness to keep them from dire material deprivation and possible death, they wouldn’t search so hard for work. It would take them longer to find other jobs. And in the end the government would waste a great deal of money on outdoor relief without diminishing the total sum of misery created by technological displacement. Misery was the spur needed to induce people to get on their bikes and look for jobs.
The story is this: The Irish Potato Famine created by monoculture and blight stuck. The six million people of Ireland start to starve. It’s pretty clear that the comfortably-sustainable population of Ireland given mid-nineteenth century technology is more like four million or so. One million people, we think, die in the course of the Irish Potato famine. Classicist Benjamin Jowett, Master of Balliol College, distressed, asks Senior about what is going on—how disastrous will it be. Senior replies: “A million Irishmen will die—and that is not nearly enough.”
Peter Leyden: Let’s say we want…
Brad DeLong: Senior says: “We need another million to die to get Ireland down to a comfortably-sustainable population of four million.” What you should say is: We should give them an income—Britain is rich enough to pay. Or: We should move them to Britain, where there are plenty of jobs. Or: We should pay to ship them to Australia, Argentina, Canada, the United States—where there is a great deal of land that can be farmed, of trees that can be cut to build houses, a great deal of work in general to be done productively. People are useful and ingenious. You should give them the power and ability to be so—rather than concluding that they are social waste.
Peter Leyden: Now, this guaranteed income. It is not just a progressive thing. There are roots in conservative thinking too. There is some possibility that…
Brad DeLong: Well… There is, but that was an earlier generation of conservatives than we have here and now. There were roots in conservative thinking. Milton Friedman was always a very big backer of a simple negative income tax—something like the Earned Income Tax Credit we currently have, but more generous and not tied to your having a job. The one that Russell Long started and that Bill Clinton expanded his this property: you have to have a job, you have to work to receive it. Friedman thought it was profoundly undignified and unfree for people to have to justify to the welfare office or the IRS why they qualified for their benefit check. The overwhelming proportion of what we produce, he thought, was the joint collective product of everyone who has come before us and handed us our knowledge. That is our collective inheritance. That has all been given us for free by our predecessors, starting even before the people of Catal Huyuk noticed that the plant that was to become wheat had a really big and tasty seed, continuing with the guy named Ish-Baal or whatever in Phoenecia in 1200 BC who saw that a stylized picture of an ox could represent the phoneme “b” and thus invented the alphabet, on down to here and now. A good society, Friedman thought, would be a relatively unequal society, but it would not have a bottom extreme of dire poverty and people who were unfree because of the harsh spur of absolute material necessity.
But that was an earlier generation of conservatives.
Brad DeLong: That is vanishing from the right. That is, especially, vanishing from the right if the people who are kept out of poverty by social insurance are the wrong kind of people.
Consider what I saw crossing my desk last week. I was in Kansas City, MO, just across State Line Road from Samuel Brownback’s Kansas. Governor Brownback denounced the liberal churches of Kansas and the meager and powerless Democratic Party of Kansas for pushing for Kansas to expand Medicaid. Medicaid expansion is, at the state level, a true no-brainer. The people of Kansas are paying taxes to the federal government for Medicaid expansion all over the country. If they don’t expand Medicaid in Kansas, their tax money will go to pay for medical care for the poor and disabled and elderly disabled here in California and in New York and in Colorado and Arkansas and Illinois, and now Pennsylvania. If they do expand Medicaid they get value back for those federal taxes they are going to pay anyway. As long as Medicaid does not make its recipients sicker and the doctors, nurses, and hospitals who collect it worse off—which it does not—it is a true no-brainer.
Yet Brownback said that he was not going to do it. Why not? Because Medicaid expansion was Barack Obama’s Trojan Horse to keep alive “big city” hospitals that ought to close, and that were going to going to close.
Now, first, this is false. The big-city hospitals of Kansas City, KS, of Topeka, and of Wichita are in better shape than the rural hospitals.
It is small rural hospitals that are going to close. It’s small rural hospitals that white people go to that are under threat. But the only argument Brownback could think to make sotto voce was that Medicaid expansion gives free stuff to urban people who carry ghetto blasters. They are the ones who are going to benefit. And, Brownback hints to his audience of supporters: “We really don’t like that, do we?”
It is scary out on the prairie.
Peter Leyden: We do not have a lot of time here. And there are some interesting questions here. We have been talking about the long-term displacement from technology through a big picture lens. Right now, however, the pressing issue around here now is income inequality. This idea of our politics being trapped, and unable to deal with this. Any thoughts on what could be done relatively quickly, knowing what we know now or what we need to know soon, to shift gears on this and make some substantial progress?
Brad DeLong: First: higher taxes on the rich; more benefits for the poor. That is the first and most obvious plan. We have the least progressive tax-and-transfer system in the North Atlantic. There is no reason why we should. We are still one of the richest. So we should have a somewhat more progressive tax-and-transfer system than the average. We do not.
Second: Back at the start of the 1970s, I think we made a large collective mistake in deciding that we should charge for public colleges. At the time, that decision make some sense. People who are going to college colleges and graduate wind up being richer than average. Why should you tax the average taxpayer in order to subsidize the education of those who are going to, say, Berkeley who will be substantially richer than the average? That makes little sense—or so we thought back in the 1970s. The upper middle class do not need more subsidies.
Third: We have an enormous problem with figuring out how to work our technology. George Eastman was a marvelous inventor and innovator. He produced Kodak as we knew it, and brought middle-class prosperity to 50,000 engineers and to the surrounding city of Rochester New York for generations. Larry Page and Sergei Brin also had truly genius ideas. They grabbed Eric Schmidt to make their company run smoothly—who had grown up a lot since his days writing the Berkeley UNIX clone in the basement of Evans Hall. But Google has not produced broad-based middle-class prosperity for its workers anywhere. It has created a much-smaller group of very, very well-paid engineers, plus a few billionaires. Why did high-tech do one thing in the case of Kodak and another thing in the case of Google? Hell if I know. I wish I did.
Peter Leyden: It could be a very different kind of technology. Unfortunately, we have run out of time. We could probe your brain for a long time here. He gave us a lot of food for thought that we can continue to think about for the rest of the conference for the next couple of days. Thank you.
Must-Read: Josh Marshall: Our Big Series On Inequality: “Bob Dylan’s line that ‘he who is not busy being born is busy dying’…
… [we] need to constantly reinvent, experiment and never settle into the comfort of the deathly hand of the past. So this is something… new…. We were able to get AFSCME to sponsor the series which gave us the funds to really do it right… polished… go deep without the standard need… to sweat whether… [it] pays off in page views and clicks….
Half a century ago… wealth and income inequality were at historically low levels. The US… [was] the factory for rebuilding the world… unions were… pervasive…. So how did we get from there to here?… Our aim is to provide some of the building blocks to to think critically about the question…. Teasing apart this often chicken and egg interplay between economic forces and political change is critical to understanding the unfolding story. The first installment… kicks off next week with Rich Yeselson… [on] the politics of the left and the decline of organized labor…. But it is only part of the story….
Next John Judis looks at the complicated politics of inequality… how those who are in many ways most affected by the flattened economic prospects of the middle class have become increasingly skeptical about government’s ability to shift the trend…. Next, Jared Bernstein looks at the numbers…. Finally, Brad DeLong looks at the debate over Thomas Picketty’s book Capital in the 21st Century. Piketty argues… that we have the question basically wrong. What is happening now is simply how capitalism works, says Piketty…. DeLong looks at Piketty’s thesis through the prism of economic and politics and surveys the reactions his work has generated over the last year…
…non-Hispanic men and women in the United States between 1999 and 2013… revers[ing] decades of progress in mortality… unique to the United States… confined to white non-Hispanics… at midlife… increasing death rates from drug and alcohol poisonings, suicide, and chronic liver diseases and cirrhosis…. Those with less education saw the most marked increases. Rising midlife mortality rates of white non-Hispanics were paralleled by increases in midlife morbidity. Self-reported declines in health, mental health, and ability to conduct activities of daily living, and increases in chronic pain and inability to work, as well as clinically measured deteriorations in liver function, all point to growing distress in this population…
9:00: Welcome & Introductions: Steven Maynard-Moody, Director, Institute for Policy & Social Research and Professor, School of Public Affairs & Administration
9:10: Morning Keynotes – The State of the Economy and Economic Opportunity in Kansas
Kenneth Kriz, Regents Distinguished Professor of Public Finance and Director, Kansas Public Finance Center, Wichita State University
Gary Brunk, Executive Director, Kansas Association of Community Action Programs
10:00: Break* 10:15: Conversation about Economic Opportunity
Patricia Clark, State Director of Kansas, USDA Rural Development
Shannon Cotsoradis, President and CEO, Kansas Action for Children
Shawna Chapman, Senior Analyst, Kansas Health Institute
BREAK
Conversation about Policy and Economic Opportunity
Senator Jim Denning, Kansas Senate District 8, Overland Park
Representative Melissa Rooker, Kansas House District 25, Fairway
Host: Jim McLean, Executive Editor, KHI News Service, Kansas Health Institute
NOON: Luncheon and Luncheon Panel
Remarks & Introduction: Jeffrey S. Vitter, Provost & Executive Vice Chancellor, The University of Kansas
Luncheon Panel: Economic Inequality and Economic Growth in the U.S.
Brad DeLong, Professor of Economics, University of California, Berkeley and Washington Center for Equitable Growth
Timothy Kane, Research Fellow, Hoover Institution, Stanford University
Host: Donna Ginther, Director, Center for Science, Technology & Economic Policy, Institute for Policy & Social Research and Professor, Department of Economics, The University of Kansas
1:45: Closing Remarks: Donna Ginther, Director, Center for Science, Technology & Economic Policy, Institute for Policy & Social Research and Professor, Department of Economics, The University of Kansas
…Economic inequality appears to cause state Democratic parties to become more liberal. Inequality, however, moves state legislatures to the right overall. Such findings suggest that the effect of income inequality impacts polarization by replacing moderate Democratic legislators with Republicans…
…is, as always, ‘it depends.’… Many of the conditions under which free trade between nations is guaranteed to be desirable are unlikely to hold in practice. Market imperfections, returns to scale, macro imbalances, absence of first-best policy instruments are ubiquitous… particularly in the developing world…. This does not guarantee that import restrictions will be necessarily desirable. There are many ways in which governments can screw up…. But it does mean that a knee-jerk free trader response is faith-based…. OK then, what about trade restrictions within nations? If I am a skeptic on free trade between nations, should I not be a skeptic on trade within a nation as well?
No…. The set of circumstances under which free trade within a nation may be undesirable is substantially smaller than the set of circumstances under which free trade between nations is undesirable…. Consider a case where a region loses out from trade within a nation–say because it de-industrializes rapidly and ends up specializing in technologically non-dynamic primary activities…. The workers in that region can migrate…. There is an overarching state that will engage in transfer payments and other policies that aid the lagging region. The region will have political representatives…. A third–particularly important–feature is that a nation shares a common set of regulations (in labor, product, and capital markets). Changes in inter-regional trade patterns are unlikely to be the result of what many people feel are ‘unfair trade practices’ or ‘tilted playing fields.’… The boundaries of a nation are defined by shared sense of collective purpose, as embodied, in part, in that nation’s common laws and regulations and in its instruments of solidarity…. So the national market and the international market are different….
A libertarian might view much of the regulatory apparatus of the nation-state as superfluous at best and detrimental at worst. For me, the apparatus is what makes capitalism feasible and sustainable at the national level–and problematic at the global level.
