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Saving Capitalism, a review

Robert Reich’s Saving Capitalism For the Many, Not the Few (2015 Penguin Random House)

Book Review by Christopher Nowlin

This review of Robert Reich’s Saving Capitalism For the Many, Not the Few is admittedly belated but perhaps timely for this very reason.   As many critical works do, Reich’s book culminated on an optimistic note (“there is much cause for optimism”), possiblIMG_1952y reassuring many 2015 and 2016 readers that the Titanic of the American socio-economy was not headed straight toward a mid-Atlantic iceberg.   Hope springs eternal, but then Trump was elected, partly on the basis of a lot of tough talk about Wall Street and Washington, Reich’s main targets.  The tricky financiers (on “the Street,” as Reich calls it) and the partisan cronies who generationally warm the benches of government were all going to get a good shaking-up from the celebrity capitalist, so Trump supporters were led to believe.  Reich could not have asked for a more perfect presidential candidate, except for Bernie Sanders, who was a close second choice for many Trump supporters.

The fact that both Trump and Sanders could be so appealing to the same voters, but that the multimillionaire deal maker would rule the day (yes, it is understood that Trump was ultimately pitted against Clinton) speaks directly to a major issue that Reich never directly addresses in his book.  In his discussion of “The Meritocratic Myth” he recalled something a blue-collar labourer had told him at a gathering of Calpine employees.  (One can witness the exchange in Reich’s 2013 documentary, Inequality for All).  Reich was explaining the economic value of unionizing when the fellow indicated that he had no moral problem with American capitalists who were “making their millions”.  Indeed, he considered their situation to be “fantastic.”  In his view, he was not like those people.  He did not go to school and, in his words, he did not have “the brains” to make millions.  “So,” he told Reich, “I’m a labourer.”

 

In his book Reich treats this man’s perception as a launching pad for an unending critique of the proposition that a person’s income neatly reflects the nature of that person’s employment or occupational contribution to the smooth operation of the broader socio-economy.   Reich’s readers are routinely reminded of how little the millionaires on “the Street” contribute to the well-functioning of Main Street and the point is very well-taken, but it has been made thousands of times before by writers from many fields in and outside of economics.  Surely Reich’s 21st century readers do not need to be convinced that meritocracy in America is a myth.  Or do they?  The Calpine employee intimated a dark truth about capitalist societies that Reich did not broach.  Working-class and wage-earning Americans do think it would be fantastic to be rich.  Many Amercans wish they were as wealthy as Trump, Bill Gates, Warren Buffett, Mark Zuckerberg, Floyd Mayweather and Oprah Winfrey.  Emulation is real.  Thorstein Veblen brilliantly documented its economic influence in Theory of the Leisure Class over a century ago.  Today it drives many people to make risky investments, to buy larger homes than they can afford, to buy lottery tickets instead of food, and to gamble away paycheques in casinos.  It explains partly why Trump could be more politically attractive than Sanders.   Trump has towers in his name.  Sanders does not.

 

Saving Capitalism For the Many might remind some readers of other commercially successful critiques of American capitalism, such as John Kenneth Galbraith’s The Affluent Society (1958) and Joel Bakan’s The Corporation (2004).   The twin facts that such eye-opening examinations of corporate power and influence in politics could be bestsellers as the income gap for Americans increases, generation after generation, should raise important questions, the first one being, why?  Reich’s nearly obsessive pre-occupation with the exorbitant and undeserved incomes of financiers on “the Street” leaves little-to-no room for an examination of why consumers behave as they do.  Reich’s passing acknowledgment that “[w]e are the authors of our own fates” is as far as Reich goes in the name of documentary balance.  He notes, for example, that the corporate colossus, Amazon, has become “the first stop for almost a third of all American consumers looking to buy anything” (his emphasis), without even suggesting that no American needs to buy anything from Amazon.   They do so by choice.  Reich observes that Walmart “siphoned away so much business from the Main Streets of America that many became ghost towns”, as if American shoppers were physically sucked away from their local mom-and-pop sellers toward impersonal, suburban box-stores.  Surely he is not suggesting that in the early 1960s, when Target, Kmart and Walmart took root across the American landscape, average Americans simply could not afford to buy merchandise from their neighbourhood retailers.   If this is the case now then indeed consumers have been at least partially the authors of such a fate.

 

Reich devotes many pages to forms of “countervailing power,” an expression that was “dubbed” by Galbraith (in American Capitalism), as Reich acknowledges.  Whereas Reich focuses extensively on the decline of unions in this context,  Galbraith emphasized the highly significant countervailing power that department stores, supermarket chains, and drug stores exercise over large-scale commercial producers and manufacturers of goods (see American Capitalism, 1952, p.120).   In the 1950s Woolworth’s, Kresge’s, Sears, Roebuck and others were the conduits by which manufactured products reached consumers, so they had a real say in the price at which they would buy such goods.  Today this same economic dynamic has made Amazon and Walmart the corporate superstars that they have become, but the ever-shrinking price of retail goods for consumers has been accompanied by wage stagnation, outsourcing and the loss of independent or mom-and-pop sellers.

 

Reich surmises that “unlimited production” could be controlled in the future by a “handful” of corporate interests and that the products themselves will get consumed only by persons who can afford them.  The “underlying problem”, as he sees it, is not “the number of jobs but the allocation of income and wealth”.   But unemployment or underemploymentIMG_1955 will remain a significant problem.   In Inequality for All Reich was assured by Nic Hanauer, a self-described plutocrat, that mom-and-pop retailers are the economy’s best employers – that technologically efficient mass-production kills jobs.   (Reich seems to agree that “a wave” of forthcoming “inventions and innovations will…replace countless jobs”).  Yet he imagines that the institution of a widespread minimum income could offset the reduced buying power that accompanies underemployment.  Here, as usual, he maintains a romantic view of the average American consumer.  He writes, “The basic minimum would allow people to pursue whatever arts or avocations provide them with meaning, thereby also enabling society to enjoy the fruits of such artistry or voluntary effort.”   So far this crystal ball image of a society blossoming with art, culture and charitable deeds, once liberated from the need for meaningless toil, is more than hopeful.  To make it appear feasible Reich remarks, “It seems doubtful that the vast majority would choose idleness over physical and mental activity”.  Rather, “we’re likely to see a reversion to a time when many jobs were considered ‘callings’.”

 

Despite Reich’s best wishes and hopes, nothing could be more unlikely to transpire over the next half-century than economically secure persons returning to the “callings” of the 19th and earlier centuries.  Printing is not done with blocks but with software and in 3D.  Painting and illustrating are not done with paint and ink but with plastic sticks and monitors.  Photographs are not developed in darkrooms.  Music is created digitally.  Games and sports are handheld.  Significant numbers of young persons and adults willingly handcuff themselves to smartphones for hours a day.  Consciousness-raising is done with tweets.  The ability to read and write (or what was once known as “literacy”) is at crisis levels.  Et cetera, et cetera.  So no, when “iEverything” finally hits the market and delivers at the consumer’s feet whatever the consumer wants – as Reich hypothetically postulates – the “only problem” will not be that “no one will be able to buy it” unless they have a basic minimum income.   It will be that human beings have become inextricably acculturated to relationships among themselves and with the natural world that are significantly “virtual” in the sense of electronic, digital, synthetic, et cetera.    It will be that human beings have become remarkably impatient and demanding just because they have become so used to routine actions and events occurring at ever-increasing speeds, as Marshall McLuhan understood so well.

 

Why Reich ultimately believes a future full of robots (“When Robots Take Over”) holds “much cause for optimism” and why a wave of new apps will “vastly improve our lives” is a head-scratcher.  One can imagine how the heat and light of outdoor fires vastly improved lives, as did affordable tables and chairs, plumbing, penicillin, electrical light bulbs, et cetera.   But it is more difficult to imagine how the lives of tens of thousands of people who jet across the world daily to float in the warm pools of island resorts, always with an eye on the nearest plug for their smart phones so that pictures of umbrella drinks can be sent magically to others in states and countries far far away, could be vastly improved.

 

Reich dedicated his book, “In fond memory of John Kenneth Galbraith”.   In 1958, when The Affluent Society was published, Galbraith famously satirized the state of American ”genius”.  It was one in which nature had been recklessly polluted and commercially wrought for the recreational purposes of the typically harried middle-class American.  Galbraith skewered prevailing economic policy in America as much as the American way of life, for lack of a better expression.  In proposing ways that capitalism in the 21st century could serve more Americans better, Reich appears to share the same wish that Galbraith had over a half-century ago.  This reader simply wishes that Reich was as circumspect and realistic about American consumer behaviours as he was about the excesses of Wall Street financiers and Washington politicians.

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The Sharing Economy: How an Economy by Any Other Name Would Smell as Suspect

Book Review of

Arun Sundararajan’s The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism (Cambridge, Mass: MIT Press, 2016)

by Christopher Nowlin

Arun Sundararajan’s The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism is a timely documentation of and rumination upon the expanding commercial trend casually labelled “the sharing ecPeace Fountain (Incomplete) 001.jpgonomy”.  Only last year, One Earth, a Vancouver-based organization, observed in Local Governments and the Sharing Economy that municipalities are facing a “tsunami” of Sharing Economy activities. Professor Sundararajan’s book aims to strike a balance between “practicality and prophecy” in relation to this broad subject and largely succeeds in doing so.  Readers will get a rough sense of the recent history of the sharing economy and a revealing glimpse of the various financiers behind it.  They will be introduced to recent, ongoing, and impending regulatory issues facing the new economy and learn in plain language about complex innovations such as the blockchain and Bitcoin.  Sundararajan discusses the way that the emerging economy is testing the conceptual limits of traditional notions of employment, self-employment, independent contracting, et cetera, and what reformulations or abandonment of such concepts will entail in terms of social security.

Sundararajan’s book deserves commendation for its willingness to ask some highly relevant and tough questions and, given Sundararajan’s expertise, the book’s unwillingness generally to offer decisive answers or strong opinions in relation to these questions is refreshing.   Sundararajan asks, for example, whether the new economy will be “populated by successful microentrepreneurs” or “disenfranchised workers who scurry between platforms as they hunt for their next wedge of piecework?”  Notably, he wonders whether the new economy will simply be the culmination of a decades-old “disparaging race to the bottom that leaves workers around the world working more hours for less money and with minimal job security and benefits?”

While safely leaving the crystal ball to others, however, Sundararajan is expressly optimistic about the direction in which the good ship Sharing Economy is headed.  This wishful outlook proves to detract at times from the reliability and credulity of Sundararajan’s analyses and observations.  (One Earth’s Local Governments and the Sharing Economy is far more even-keeled and detailed).   In imagining, for example, that a flowering of successful micro-entrepreneurs could typify the new economy, as opposed to hordes of disenfranchised workers, Sundararajan does not seriously address the real possibility that free-market tendencies toward centralized oligopolies will simply continue – that macro-entrepreneurs or deep-pocketed capitalists will acquire significant corporate control over the technological innovations (the apps) others have created precisely in order to enhance the so-called sharing economy.    Sundararajan notes an observation Lisa Gansky made in a 2014 Fast Company article, that venture capitalists funded companies such as Uber, Lyft, and Airbnb with “an eye on a big payday for investors” (quoting Gansky) and with little regard for the economic well-being of the physical service-providers themselves.  Yet the latter, disparate demographic would appear to comprise most of “the crowd” of Sundararajan’s “crowd-based” capitalism (of which more will be said shortly).  Ultimately Sundararajan’s book provides no compelling reason to believe that the acquisitive and controlling tendencies of venture capitalists and deeply-invested shareholders will yield in any significant way in the near, mediate or distant future to the idiosyncratic efforts or wishes of Sundararajan’s micro-entrepreneurs, wherever these people might be found.

Sundararajan’s optimism appears to lie in a number of considerations, including the potential for the new economy to bring income to those who need it, especially to those individuals who might otherwise be left behind in an increasingly “technology-centric society”; the potential for the “idling capacity” of goods and spaces (being the extent to which they are underutilized) to be reduced; and the prospect of an ethos of sharing actually entering the larger capitalist economy.  As regards this last possibility, Sundararajan acknowledges that the meaning of “sharing” within the context of the “sharing economy” discourse is becoming stretched.   This is a welcome acknowledgment.

Before addressing such points it seems fair to ask why Sundararajan prefers to call the new app-enabled economy “crowd-based capitalism”.  (He told The New York Times  that he used the expression because “a crowd of consumers obtains services, via  a platform, with a crowd of suppliers”, to quote Steven Greenhouse.)  In his book he notes that Chris Dixon calls this economy the “on-demand” economy, which is precisely what it is.  This expression itself is not especially telling except insofar as the American economy is becoming increasingly on-demand, propelled largely by apps.  It has been an on-demand economy at least since the mail order catalogue, dating back to the late 19th century, but today the expectations of consumers to acquire the goods or to use the services they purchase as soon as possible – indeed, in seconds or minutes in some cases – are novel.  Adults who scold their children for making impatiently selfish demands now need to recognize their double-standard like no other moment in history.  Not only is the speed with which delivery is expected new.  The vast range of choice or selection of goods and services that can be demanded is unprecedented.

It is difficult to picture what Sundararajan means by “crowd-based” capitalism, especially given that he expressly imagines “decentralized crowds of individuals” or “networks” supplying “capital and labor” in the new economy.  Surely networks of people can be decentralized but they do not necessarily or even realistically form crowds.  The new myriad of individuals taxiing other people around or renting out their rooms are not geographically confined.  They are not pressed shoulder-to-shoulder at Coachella or hip-to-hip in hockey arena seats.  They form generally two widely distributed groups of individuals.

Many members of the “crowd” provide the exact same service for others that restaurant servers, fast-food chain employees, bell hops, and regulated taxi drivers do, except that some of these people perceive themselves to be more commercially independent than their old-fashioned kin.  The significant remainder belong mainly to what Thomas Piketty called in Capital in the Twenty-First Century “a society of petits rentiers”– middle-class homeowners who rent out spare residences, floors or rooms.   Some of these small “c” capitalists have always rented out floors (such as top floors or basement suites), often on a monthly or annual basis.  Now they can do so for shorter periods and at a much greater profit for themselves.  Sundararajan notes the opposition such a reality garnered in New York and that in France private-residential room rentals are permitted without restriction.  Another “crowd” that grounds the new economy in any loose sense of the word appears to be the groups of technical wizards at Silicon Valley and elsewhere who create desirable apps and sell these to corporations for millions of dollars.  These people might become the shareholders of billion dollar companies such as Uber and Airbnb.  They lead vastly different lives than the widely scattered-about individuals who physically service the new economy.

Sundararajan seems most enthusiastic about the potential of the new economy to minimize idleness and underutilization of goods and services.  (One Earth also heralds the sharing economy’s potential to “unlock” idling capacity).  Sundararajan notes, for example, that digital platforms will enable resources to be used “at capacity more easily”.   Such expectations are reminiscent of certain aspects of Taylorism and scientific management.  They reflect a longing for productive efficiency that bears no obvious or positive relationship to economic, environmental or human well-being.  Sundararajan’s book makes no reliable case for the proposition that maximizing the usage of things (cars, rooms, skills, free time), especially by renting out such things to more people or more often, via apps, will lead to less industrial production of such things or improve in any meaningful way the general economy of a society.

For some reason Sundararajan looks forward to the day when an able-bodied person’s refrigerated carton of milk will contain a “transducer” that will tell the fridge that the milk is about to reach its expiry date, in which case the fridge will add milk to the grocery list at an on-line delivery store.  What is this reason?  In Sundararajan’s view, the people who need not open and sniff the carton any more can “focus [their] attention on more important things.” Surely Sundararajan is not being serious here.  Realistically, persons with “important things” to do will not be distracted by the potential for their refrigerated milk to sour.  If and when their milk does go off they could always walk or bike to a nearby grocery store and get a fresh carton.  They need not be idle in doing so.  They could think entrepreneurial thoughts during their trip.

Unfortunately, in his enthusiasm for an increasingly technology-centric economy, Sundararajan missed a great opportunity to note (at the very least) an increasingly important thing to do in an increasingly convenience-based, on-demand socio-economy, which is to get exercise.  His Introduction noted that the early 20th century brought a socio-economic transition away from small-scale farming.  Not surprisingly, many researchers across the globe today are writing with great concern about socio-medical costs of increasing rates of human obesity.  Professional and personal sedentariness contribute to this problem.  On-demand delivery apps and drone-delivery will play an increasingly large part of this problem.  They will not be a solution.  Bike-sharing systems will dent this problem only slightly because they do not involve bikes in the delivery of goods.

The transformative new socio-economy is already promising to resemble the world depicted in Disney’s film, Wall-E – a world of spaceships filled with overindulgent individuals reclining in Barco-loungers as bots attend to their every whim.  In “Your Coffeemaker is Watching You”, a piece Adrienne LaFrance just published in The Atlantic, LaFrance notes that eventually robots will bathe people, “fold laundry, cook meals and pick up clutter.”   This is what “on-demand” service and delivery looks like; the death knell to patience and natural human movement.   To stick with the grocery shopping theme, Sundararajan notes that people spend roughly three hours per day on their smart phones.  In his words part of this time is spent on “required tasks” such as “ordering groceries” but “most” of the time is spent on “less-necessary” and “unproductive things” like playing Candy Crash or Fruit Ninja.  In other words, much of the time spent on smart devices is not dedicated to the “important things” that Sundararajan seemed to have in mind earlier.   So one can see his efficiency preoccupation directed full steam ahead on two levels.  For Sundararajan, ordering groceries via an app is “required” and time wasted on Candy Crash could be productively transformed into “money-making moments” by the likes of Spare5.  Sundararajan does not appear to want to be a party pooper – to pull people away from the wasteful fun of Fruit Ninja – but he is serious that “labor efficiency…is increased by foraging for lost moments of time that can be turned into work.” He does not kid himself that the “work” he has in mind here is anything but “simple tasks” but unnervingly he insists on calling these menial digital accomplishments “necessary”.   As with the word “sharing,” so too does “necessary” lose its meaning in Sundararajan’s book.  One is reminded of John Kenneth Galbraith’s skepticism in The Affluent Society – written almost 60 years ago – about economists’ perceptions of what type of employment and production is necessary for socio-economic security.  Galbraith suggested that the pre-occupation of economic conventional wisdom with increased production brought society “to the dubious world of make-work and boondoggling.”  Sundararajan is so keen about the new economy’s potential to increase “money-making moments” that he implicitly welcomes the trivial make-work and digitally boondoggle nature of this economy, labelling even its lowest-level service providers “microentrepreneurs.”  At best such a label does not mesh with reality.  It is reminiscent of yesteryear’s sandwich “engineers” and “artists” for minimum-wage employees making submarine sandwiches on demand for others.  At worst such an appellation is insulting to intelligent individuals who feel a need to use their cars to taxi others around on demand but who do not consider themselves entrepreneurial for doing so.  Now “sharing,” “necessary,” and “entrepreneur” have lost their meanings.

A discerning reader might wish that Sundararajan had made a more categorical distinction between private-lodging renters and private-ride suppliers, as One Earth did, for example, between “Shared Mobility” and “Shared Spaces” in Local Governments and the Sharing Economy.   Sundararajan notes that there are over a million Airbnb hosts and with “some exceptions” the people who Airbnb a small room (yes, Airbnb is apparently a verb as well as a service) “have less rather than more capital.  They may not be poor but they certainly aren’t part of Occupy Wall Street’s fabled 1%.”  Putting aside the unhelpful reference to the world’s few plutocrats (as readers won’t assume that billionaires rent out small rooms to budget travelers), one is left with the fact that Airbnb hosts of private rooms are homeowners.  Again, they are petits rentiers with a home or wealthy professionals who have multiple residences, individuals who are “moonlighting” or looking to “top off their retirement income.”  The point is simply that most Airbnb hosts are economically well-off and choose to supplement their wealth with minimal labor and virtually no overhead costs by renting out a spare room or residence to frugal travelers in an ever intensifying race-to-the-bottom.

One must be careful to recognize, therefore, that when Sundararajan writes of consumers who supply “the rental market” as being “disproportionately below median income” he only discusses people who rent out their cars, not their homes.  He constrains his observations in this regard to Getaround taxi drivers in San Francisco. One Share’s Local Governments and the Sharing Economy provides a far more extensive and in-depth look at shared mobility arrangements.

So, is a sharing ethos creeping meaningfully into the new economy Sundararajan has documented?  Sundararajan does not offer readers any compelling indication that it is doing so or will do so in the near or mediate future.  Near the beginning of his book Sundararajan notes that people’s spare time and “spare capacity” in assets and space are becoming “increasingly shareable.”  No one would dispute such a claim but what he really should have conceded, for accuracy sake, was that such assets, time and space are becoming increasingly rented out.  His book should have been entitled, for accuracy sake, The On-Demand Rental Economy.  By his own concession, in today’s “sharing economy….[m]oney is generated from ‘renting out’ rather than selling,” but then he writes, “and what can be borrowed ranges from a room or entire house (e.g., Airbnb) to a seat in someone’s car (e.g. BlaBlaCar), to a few hours of someone’s time (e.g., Postmates).” Somehow “renting out” translates immediately into “borrowing.”  Now “sharing,” “necessary,” “entrepreneur,” and “borrowing” acquire meanings in Sundararajan’s book that won’t be found in a 20th century dictionary.

Sundararajan’s provocation about the “end of employment” also deserves a few words.  Sundararajan would have readers imagine the new economy returning in digital-service form to late 19th and early 20th century scales of economic self-reliance.  Instead of farming small plots or being engaged in localized crafts or trades, millennials who own cars can taxi others around and millennials who own houses or condos can rent them out.  If these 21st century facts spell the end of “employment” per se and the beginning of self-employment or independent contracting (even though the scent of the newly-labelled flower has not changed), then so be it, but Sundararajan omits to discuss some important considerations about the direction of the emerging technology-centric economy.

The nature of the businesses or what this reader would call the busy-nesses that Sundararajan discusses in his book are what any reasonable economist would characterize as “low-urgency”.  Over and above discussing vacationers’ room rentals and transportation modes, Sundararajan considers, for example, an island entrepreneur who sells floral essences sourced from homegrown orchards, an Etsy user who makes over $100,000 a year selling hand-crocheted scarves, and an Etsy graduate, ThreeBirdNest, which sells women’s clothing and accessories “with a bohemian look”.   Many hard-working people across the world will never have the time, energy or money to concern themselves with such fanciful creations.  Paying rent, eating and perhaps educating themselves will be higher priorities.  (The dozens of sewers now employed by ThreeBirdNest will present no compelling rejoinder to the problem).  The globally weighty underbelly to the bazaar of superficial goods that Sundararajan documents goes unexamined.  So the book on this level is light reading.

Under the fluff also lies the palpable reality that an intensifying global reach in low-urgency goods exacerbates an already troublesome level of international shipment in such goods.  Sundararajan notes that ThreeBirdNest “offshores” some of its production.  His optimism for the new macro reach of micro economies might be tempered by a perusal of Gordon Laird’s The Price of a Bargain: The Quest for Cheap and the Death of Globalization (2009).  Laird presents a compelling case for the proposition that neither the cheap price of low-urgency goods being increasingly transported overseas nor the cheap price of energy required for the transportation itself can continue as usual through the 21st century.   The environmental impacts are also significant.  Drone delivery and automated truck transport of low-urgency goods will not broach this problem.   People need to consider the cumulative environmental effects of having low-urgency goods sent to them individualistically from great distances.

Ultimately this reader wishes that Sundararajan would have reeled the fanciful economic kites that flitter across his pages back to earth just once and awhile.  Sundararajan could have counter-balanced his exploration of technologically intense, decentralized sharing economies with old-fashioned, more physical types, such as those organized around food production (urban agriculture and community gardens), food distribution (bicycle delivery), food consumption (Farm2Fork restaurants), and waste management (composting innovations).   As the 21st century unfolds, the latter could prove to be far more “necessary” than those explored in Sundararajan’s book.

 

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