Progressives were surprised, confused, and frustrated by Senator Marco Rubio last week. “I definitely didn’t have Marco Rubio being more pro worker than Joe Biden on my 2022 bingo card,” one tweeted. “UGH, UGH, UGH…When Marco Rubio is more pro-labor than Joe Biden,” tweeted another. Progressive publications castigated congressional allies with headlines like “Senate Democrats Need to Fight Harder Than Marco Rubio for Rail Workers,” while offering the Florida senator reluctant respect: “Rubio is wrong about a lot of things. But he is right about this.”
WASHINGTON, DC — Today, American Compass is releasing New Direction: Conservative Principles & Policies for the 118th Congress, an agenda for economic renewal, focused on the interests of workers, their families and communities, and the nation.
The proposals include:
- Reshoring Industry: Using trade and industrial policy to restore American leadership in industry and innovation.
- Building Non-College Pathways: Shifting resources from higher education to employer-led training.
- Supporting Families: Providing a generous monthly per-child benefit to support working families.
- Decoupling from China: Channeling productively the uncontrolled cross-border flows of goods, capital, and people unleashed by globalization.
- Representing Workers: Giving workers access to non-union works councils and seats on corporate boards.
- Governing Big Tech: Creating a publicly operated tool to securely and privately verify age online to protect children.
- Rekindling Investment: Strengthening financial markets so that more capital reaches the real economy.
- Understanding America: Surveys on family and education policy that can inform policymakers’ thinking.
Conservative economics is built on three pillars: productive markets, supportive communities, and responsive politics. Public policy has an active role to play in ensuring that the rules of the game align pursuit of profit with investment in domestic production and employment; in reinforcing the foundations of institutions like the family, labor unions, and churches; and understanding and respecting the nation’s frustrations and aspirations.
Permit workers to administer their own employee benefits through organizations they control
What’s the Problem?
Government administration of public benefits like unemployment insurance is bureaucratic, ineffective, and unaccountable.
Employer-sponsored benefits such as health insurance can lock workers into jobs, reducing their mobility and ability to negotiate wages.
With benefits all managed by employers and the state, workers find few reasons to participate in labor organizations.
Everything Is Done by Someone Else
Workers in the modern labor market have a common interest in the security and flexibility of basic supports. They depend on benefits and services from unemployment benefits to health insurance to training to navigate inevitable market frictions and increase their market value and thus their wages. Americans take for granted that some combination of government programs and employers must provide these supports. But this system works poorly, and benefit providers have little direct accountability to recipients. It gives workers few or no choices in where to turn and locks them into their jobs. And it deprives them of the responsibility and opportunity to build institutions of their own.
What’s the Solution?
Policymakers should implement an American version of the Ghent system, a successful European model that gives workers the option of forming organizations to manage their benefits.
Federal legislation should:
- Remove the National Labor Relations Act’s prohibition on non-union employer-worker collaboration;
- Permit workers to form worker organizations focused on benefits provision and controlled by dues-paying members;
- Allow these organizations to administer benefits with contributions from public benefit programs, private employers, and members; and
- Prohibit these worker organizations from spending money on political activities.
Helping Workers Help Themselves
When asked what activities are most important for a labor organization to perform, American workers rank benefits provision nearly as high as collective bargaining and far above political activism. By a 3 to 1 margin, workers favor a tradeoff in which worker organizations can manage benefits with public and private money but cannot spend on politics.
The Ghent system improves benefits provision because it’s more accountable than either government or employers. When worker organizations don’t do their job, members can fire leadership or join a different one.
Frequently Raised Objections
“This would use taxpayer money to expand the power of left-wing activist unions.”
Only worker organizations that disavow political spending could receive public funds to manage. This would promote the growth of worker organizations focused on their members’ interests rather than national politics, while doing nothing to promote partisan activism.
“This is an expansion of the welfare state.”
A Ghent system would create no new entitlement programs or increases in public spending. These private organizations would administer the same benefits provided today by the government or employers and any new ones would be funded by their members. Worker organizations save money and improve service quality by competing in a free market.
“They will mismanage their budget and therefore taxpayer funds.”
Worker organizations manage funds better than governments because they are accountable to their members. They must also be subject to rigorous public standards. Those that abuse their members’ trust will not only lose membership to competing, more trustworthy worker organizations, but face legal consequences.
Wells King. “A Better Bargain: Worker Solidarity and Mutual Support.” American Compass, 2021. A policy essay outlining the benefits of worker organizations managing worker benefits and training.
Matthew Dimick. “Labor Law, New Governance, and the Ghent System.” University at Buffalo School of Law, 2012. An overview of how the Ghent system operates in Europe.
“Not What They Bargained For: A Survey of American Workers.” American Compass, 2021. A survey that shows workers’ support for innovative labor policy including this proposal.
Corrie Watterson Bryant, Shelby Clark & David Rolf. “Portable Benefits in the 21st Century: Shaping a New System of Benefits for Independent Workers.” Aspen Institute, 2016. An alternate policy proposal for an American version of the Ghent system that emphasizes portable benefits.
Policy in Brief
On this episode of Policy in Brief, Oren Cass is joined as always by American Compass policy director Chris Griswold to discuss a proposal to allow workers to administer their own employee benefits through organizations they control. This would be an American version of the Ghent system, a successful European model that improves benefit provision because it’s more accountable than either government or employers.
American Compass policy brief: Worker-Run Benefits
A Better Bargain: Worker Solidarity and Mutual Support (Wells King, American Compass)
Not What They Bargained For: A Survey of American Workers (American Compass)
Business leaders who complain constantly of “talent shortages” or “skills gaps” may, in fact, have only themselves to blame. The perceived weaknesses among their staff may be the result of overambitious or flawed plans. Anyone can see the folly in trying to hire thousands of experienced biochemists at minimum wage to develop cutting-edge drugs. The problem is not a biochemist shortage; the problem is the bad idea. Equally foolish is the software executive who expects an unlimited supply of eager coders, or the plant manager who believes well-trained technicians will line up at his door.
Why do employers believe they should have access to whatever labour they need at whatever wages they choose? Perhaps the culprit is globalisation? Capitalism generated widespread prosperity for centuries by rewarding the most productive uses of available labour. “Every individual naturally inclines to employ his capital in the manner in which it is likely to afford the greatest support to domestic industry, and to give revenue and employment to the greatest number of people of his own country,” posited Adam Smith in The Wealth of Nations. The invisible hand aligned private profit with the public interest not by magic, but because pursuing the former was best achieved through investments that also advanced the latter.
Oren Cass discusses his book, The Once and Future Worker: A Vision for the Renewal of Work in America
David Azerrad, Heritage Foundation Director of the Simon Center for Principles and Politics: Good afternoon, ladies and gentlemen. My name is David Azerrad. I’m the Director of the Simon Center for Principles and Politics, as well as the AWC Family Foundation fellow here at the Heritage Foundation and I would like to welcome you to our program today. We are very pleased to have here with us Oren Cass for the launch of his important new book, The Once and Future Worker: A Vision for the Renewal of Work in America. The book is already the talk of the town and I suspect it will remain so for the foreseeable future. In fact, Oren has sold out. So the copies we have available there are the only ones available. Otherwise you need to wait one to three weeks on Amazon.
Oren is part of a small group of thinkers who are calling into question the bipartisan consensus in Washington, that the solution to all our problems is more growth and more redistribution. I’m very eager to let you hear his argument, and I just want to get out of the way. So with his permission, I will give a very brief introduction. Oren will then present the argument of his book. And we’ve reserved plenty of time for questions.
Oren is a senior fellow at the Manhattan Institute in New York where he focuses primarily on strengthening the labor market. He’s outlined conservative policy solutions on poverty, climate change, the regulation and international trade. He’s briefed members of Congress and congressional staff in both the house and the Senate and his essays and columns have appeared in the New York Times and the Washington Post and the Wall Street Journal and National Affairs and City Journal and various other prestigious outlets. I have found him someone who is always worth reading, especially when I disagree with him.
Before he joined Manhattan, Oren worked as the policy director for Mitt Romney’s 2012 presidential campaign, as an editor for the Harvard Law Review. And before that, as a management consultant in Bain & Company’s Boston and New Delhi offices. Please join me in welcoming Oren Cass.
Oren Cass, American Compass executive director: Thank you all very much for coming. I should mention you can buy the Kindle today and it shows up instantly. So there’s always that choice. Thank you, especially to David. I don’t know where I picked up the affect of saying to people you’re a gentleman and a scholar, usually extremely tongue in cheek. David more than anyone I know truly is a gentleman and a scholar and I appreciate him having me. Really appreciate the Heritage Foundation for hosting me and also just want to thank Manhattan Institute for supporting this work that I’ve been doing.
I’d like to actually start by complimenting the New York Times, which is hopefully the most controversial and heterodox thing I’ll say today. The New York Times actually ran a very interesting feature recently where they looked at personal income and the share of personal income that comes from transfers. They had a map of the entire country and they’d shaded each county by what share of personal income had come from transfer payments. And in 1970, you had sort of a light beige map with a few splotches of pink to red where you were getting up toward 20, maybe even 30% from transfer payments. And then they had the map in 2014 where essentially the entire map was pink to red and you had some dark purple sections where literally a majority of all income in the county was coming from transfers.
And I think this is essentially a Rorschach test for where we are as a country and how we feel about our economic policy, because from one view, this is actually a quintessential reflection of the success that we have had. The model of economic development we have pursued for several generations, which is captured in the concept of the economic pie, is that we’re going to grow the economy. And then if we need to we’ll redistribute so that everyone can have more than they did before. And that’s in fact exactly what we’ve done. GDP is three times what it was at the time of the earlier map and redistribution is about four times what it was. So from one view that bright red map with all those purple splotches is success. That is in fact exactly what we were promised and what we said we were going for when we said we’re going to grow the economic pie. And as long as on net we win, we can always compensate the losers. The darker the red, the more compensating of losers is going on.
I think at the same time, most of us would say intuitively and virtually all of the evidence about where we are as a nation would tell us that this is not success, that this is actually deeply problematic. And so, I think the right analogy is to kind of movies about, the classic romantic comedy where the trailer intones about the lead figure, she had it all or so she thought, right? She has the apartment and the car and the cool job, and yet she’s not happy because these superficial things turn out to be what has not mattered most in life.
So, what have we gotten wrong? I think it comes all the way back to something Adam Smith wrote and I’ll read the quote because it’s really quite striking. “In the wealth of nations,” he writes, “Consumption is the sole purpose of all production and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that over the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it.”
Now as a rule of thumb, when you say your maxim is so obvious you don’t have to prove it, that’s a bad sign for your maxim. But in particular, this is actually the perspective that we’ve embraced. We’ve embraced an exclusively consumer-welfare focused view that says that as long as consumption is rising, as long as living standards are improving, people are going to be happy. And that ultimately is this thrust of the idea of the economic pie that does reflect the centrist thinking of our country. It reflects the Wall Street Journal editorial board and the New York Timeseditorial board talk about economic policy. You can find left of center think tanks and right of center think tanks talking about it. Virtually every president since Truman has used the metaphor.
And what the economic pie misses—to stretch the metaphor much too far—is it ignores who’s baking the pie. It says as long as you get big enough slice, everybody likes pie, so everybody’s going to be happy. But in fact we know in a sense that that’s not what people care about most. And so the focus of the book and what I want to talk to you about today and try to persuade you of is what I call the working hypothesis. I actually wanted to call the book the working hypothesis. I thought it kind of had a cool, edgy, spy thriller kind of feel. And then everyone else said it has like a wonky, nerdy, boring book kind of feel.
So, The Once and Future Worker it is. The introduction is still called the working hypothesis because you get to name your own chapters. That’s it. By the end of the book process, you’re kind of like, what can I still control? And it’s like, well, they’ll let you name your chapters. So I have that going for me.
The working hypothesis is this. It’s that a labor market in which workers can support strong families and communities is the central determinant of long-term prosperity, and so it should be the central focus of our public policy. And so the three things I want to try to persuade you of today are first of all that this really is different from how we have been thinking about economic policy. Second, that it’s true. And third, that it has some important implications, both conceptually and then in a whole host of policy areas that we should think about.
First of all, how is this different? How is it different to talk about the labor market and workers as the group that we are concerned about instead of focusing on consumers and consumer welfare? Well, I think it plays out in a bunch of ways. One is what are we optimizing for? If your focus is consumption, if this economic pie, or what I would call economic piety, is the way you’re thinking about the world, we’re optimizing for growth. Whatever produces the most growth is at the end of the day going to be best for anybody.
If you take the working hypothesis seriously, you’re actually more interested in self-sufficiency. You ask, what share of the population is able to achieve self-sufficiency and how are we moving that share up or down over time? You think differently about net versus gross effects. If growth and economic piety are what you care about, then you always just look at the net effect of your policy. And you say, as long as the gains to the winners exceed the losses to the losers, that is welfare enhancing.
If you take the working hypothesis seriously, you actually focus much more essentially on a floor below the losers. You say, you know what? Some policies, even if they’re going to create bigger gains for the winners than they create losses for the losers are not actually good for us as a society. And there’s a formal economic way to think about that, which is that at the margin, yet more wealth for the wealthy might not actually be worth as much to them as more pain for the poor. And there’s a more conceptual way to say it, which is that, once you’re past a certain threshold of wellbeing, you’re not really who we should be focusing on as we formulate our policy. Whereas for the folks who are struggling further down the income ladder, their absolute position actually matters quite a lot.
This dichotomy has an important effect for how we think about economic growth relationship to society. So I think a lot of the focus that we have had on economic growth presupposes that economic growth is the foundation of a healthy society. If we have the economic growth, if we have the rising material living standards, then all of the other things that we want in terms of a strong and stable and healthy society will follow from that.
If you take the working hypothesis seriously, you realize you actually need to flip that on its head. That it’s not that economic growth brings you everything you want, it’s that actually those basic necessities of a healthy society, of strong families and communities, that’s the non-negotiable foundation and the economic growth that we want is actually the emergent property that you get when you actually have the healthy society. And so in crass terms, because every economic talk must now refer to iPhones in one context or another, the question is, which do we care about more; having an iPhone or getting to make the iPhone?
Now, why would it be true that the working hypothesis is correct? I think there are two dimensions to this. One is focusing on why work is so important. And then the second is understanding why policymakers actually need to attend to it. So, why is work important? Well, I think we know, and virtually all of the evidence tells us that work, that productive activity that contributes to society, to one’s own wellbeing, to one’s family, is actually much, much more important to life satisfaction than is level of consumption.
We know that work, and particularly having a job, is closely tied to self-esteem, it’s closely tied to mental health, is closely tied to happiness. And I tend to be someone who is very skeptical of happiness studies. I think it’s a pretty squishy way of doing things a lot of the time. But good happiness studies look at the same people over time. So now you have a control, you have a real baseline. And one striking finding is that most people have kind of an underlying level of happiness. Some of us are just happier than others and that’s how it goes.
But one thing we find is that life events create temporary changes in happiness, but not permanent ones. So births, deaths, marriages, divorces, even permanent disability will create a blip up or down in your level of happiness, but within a relatively short period of time you essentially get used to it and return to the level you were at. The only exception that we are aware of in the literature is joblessness. People do not get used to unemployment. People who were working and no longer work move to a permanently lower level of happiness. At least over the timeframe we’ve studied, they never recover from.
So, it’s deeply important to individuals in the sort of intangible life satisfaction respect. It’s also incredibly critical in terms of very tangible economic outcomes. Redistribution, making sure that everyone has enough to live on is a great way to maintain people at one level, but it also guarantees that they’re never going to move anywhere. You can’t get a second job if you don’t have a first job. You can’t develop skills, you can’t build a life if you are dependent on transfers. And so work also is critically important to individuals opportunities.
Work is equally important to family. And here work seems to have a particular importance for men. For men, having work is critically important to family formation, and we should expect that given both the economic and social rationales that drive family formation in the first place. Equally work is critically important to family stability. Again, for men, unemployment is a key predictor of divorce and drives divorce rates extraordinarily higher, relative to the kinds of effects you would typically see in social science literature.
And work is critical for children. Children have better outcomes in families where at least one parent is working and even more strikingly from the work that Raj Chetty does looking at the overall characteristics in different regions. Just being in a community where people are working actually turns out to be very important to the outcomes of all of the children in that community. So work’s important for individuals and it’s important for families. It’s critical to communities themselves. Communities in which people are working and contributing to the economic vibrancy of the community are ones where you’re going to have more investments in everything from housing stock to public goods, to engagement in social activities.
In a lot of communities, work is itself a nexus of community. Work is what gets everybody out of the house and to a place where they’re interacting with other people every day. And just to pause on that point, one question that comes up a lot when singing the praises of work is well, but aren’t there other great things that people do when they aren’t working, right? So you look at all the men who are out of the labor force, someone will always ask, well, aren’t they taking care of kids or sick relatives or in school? Well, no, actually we have very good time use data from the census. Women who are out of work are doing many of those things. Men who are not in the labor force are sleeping and watching TV, and video games is a subset of TV there.
So that’s what people are doing when they’re not working. And obviously that’s not conducive to community. And there’s a very real concrete economic implication for communities, which is that while it is fashionable to pretend that we just sort of have this nostalgic attachment to manufacturing, it actually has very important economic implications to make something that other people in the world want. Most of the things that the community wants need to be sold to it from elsewhere in the world: cars, electricity, medical devices, medicines, you name it. The community needs to have something it can send in return. You can’t all just serve each other coffee.
And what you find in communities that no longer have those kinds of industries and the capacity to produce tradables to send to the rest of the world is that they literally have to export need. What does exporting need mean? It goes back to that purple chart. If you don’t make anything, the only source of income from the outside world to acquire things from the outside world is transfer payments from the government. So you can drive around an incredibly depressed region of the country and find just a fantastic, shiny new occupational therapy office. That is literally the community’s exporter. It is exporting care of the people on disability in the community to the taxpayers of the rest of the country.
And as you move up to a higher and higher share of a community’s income coming in the form of transfer payments, it becomes need, it becomes enrollment in government programs that is actually now what the community has to rely on for its economic vitality. And you get to the point where under the Obama administration, the USDA was actually promoting food stamp enrollment as good for your local economy because every dollar in food stamp benefit you spend creates a multiplier effect within the local community and for the retailers. So that’s the direction community heads when you don’t have work.
And finally work is critical to the economy over time. Even if we want to focus on growth as the end all be all focus that we have, we have to recognize that whatever’s best for consumer welfare in the moment is not necessarily what is best for the trajectory of the economy over time. That the industries that are likely to be sources of productivity gains, that are going to have spillover effects into other industries, that the capacity of children to grow up and become productive contributors themselves; all of those things are tied to communities and a country that works, that not just some people are working that everybody’s working, and that’s working in the kinds of industries that are going to foster that growth. And so for all of those reasons, I think work rather than consumption is actually the most important place for policymakers to focus.
Now, that still begs the question, especially now that we’re in the economy, we’re talking about a labor market, why isn’t the answer just let the market work and you’ll get what you want? And here I think it’s important to emphasize, I love free markets, and I think that markets as the way to organize most things in society either is ideal or certainly better than any other tool that we have. But the thing that’s critical to recognize about how economists talk about markets is that markets are neutral processing mechanisms. Markets take the conditions in which they operate, and they spit out an efficient result. And in most circumstances, that’s exactly what you want. The whole point is to find out how much things should cost, how many of them we should be making.
The exception to that is the labor market. And the reason that the labor market is the exception is because people aren’t products. And I don’t, I mean, it is important that in the moral sense people aren’t product. But I mean here in the very concrete economic sense, people aren’t products. For one thing, the supply of people is not responsive to market signals, right? I mean, once you get past the sort of subsistence agriculture level where literally the population you can support is dependent on the labor market functioning, we are going to have the people we have in the society, and roughly speaking they are going to have the aptitudes they have, right? Chemists have been earning very large multiples on what cashiers earn for a very long time. And that does not allow families to shift their production line from cashier to chemist. We have the mix of people that we have, and that’s not going to change.
The second related point then is that we care where the labor market lands. If the efficient outcome that the labor market is giving us is one that says, actually, a pretty significant share of the population doesn’t have a lot of very productive things to contribute or can’t earn high wages, we can’t say, well, great, thank you for telling us that. We actually have to say, no, that’s not acceptable. And so that’s the moment where we have to take a look at our free market ideology and combine it with a view that says, well, when it comes to the labor market, we want the market to work, but we care how it works and we care where it lands.
And there’s a lot that we can do as policymakers to affect that. Not in ways that interfere with the market, not in ways that say we can trump the market, but in ways that look at those underlying conditions. Let’s say if where the market is landing is somewhere where we’re not happy, then we have to go beyond the standard right of center view that says, well, wherever the market landed was right. We have to resist the left-of-center view that says, well, we’ll just yell at it until it does what we want. We have to actually look at those underlying conditions and understand why is it landing where it is and under what conditions would it land somewhere different.
And so that’s this third point I want to talk about, which is: What does it imply, the working hypothesis? If we say that this should actually be the primary focus of our public policy to have a labor market that lands in a place where workers, regardless of their aptitudes, regardless of where they are, can find jobs that are going to support their families and their communities, how should we actually be thinking differently? So I want to mention a few conceptual things and then we’ll talk about some concrete policy, which I know is the part everyone’s most excited for.
The first thing that I think is conceptually really important, especially for the right-of-center to grapple with is to recognize that this is a place where we are going to have a fault line between libertarians and conservatives. What we call right of center or conservative economic policy in this country is almost exclusively libertarian. And libertarians and conservatives I think have achieved a great deal by finding common cause in fighting things like communism. And in general, recognizing that pursuing for your markets is going to produce better social outcomes as well.
But if you reach a point where the free market, where it lands is actually creating problems for our social infrastructure, for the stability of our families and communities, for the ability of people to flourish, libertarians and conservatives are going to part ways there. Libertarians are going to say, “No, but that’s where the market landed. That’s freedom.” Sorry, I’m not a libertarian, I’m going to poorly describe why it is that freedom is automatically always the right answer. And conservatives are going to look at that and they’re going to say “Well, but no. If just leaving everything to go its own ways is eroding the ability of our society to flourish, then we have to do something about it.”
And I think we are now at a place in our country where that is what is happening in practice. And one way to understand what happened in 2016 is that Donald Trump, despite not being a libertarian or a conservative necessarily, really sort of jammed his thumb right into that wound. And I think a lot of what we are grappling with ideologically at this point is what to do at this point. And so obviously the debate about who ultimately is right libertarians or conservatives is a much broader one than we will have at this moment, but I think it’s important to understand it in these terms and to recognize that how we feel about something like labor market outcomes, we are going to disagree within the right despite sort of always take for granted that we would agree on it.
A second really interesting conceptual point is that pluralism matters. What I propose in the book as an alternative to this economic piety, based on the working hypothesis, is what I call productive pluralism. Part of which is the productive piece. This point that actually getting to be a productive contributor is important. But equally important I think is the idea of pluralism, that we need to preserve options in society. And to offset against a little bit of a strong man, but not too much of a strong man, one response to all of our troubles is to say, “Well, everyone should become a welder and move to Houston.” Like the labor market would work fine if you just moved there and did that particular job.
But that doesn’t align especially well with what people want. One of the changes that happens when you go from consumer to producer as a lens is you realize that what people want is actually very complicated. With a consumer lens, with the obsession with GDP, one of the really convenient things is it treats just everybody as a homogenous group moving in lockstep. Money is fungible. As long as we give you all money, you can buy whatever you want. If we’re taking a lens that focuses more on what kind of work are people going to get satisfaction doing and be good at doing, what kind of family lives do they want to order, what kind of communities do they want to live in? Then we have to be attendant to whether we’re managing to maintain options that are going to align well with where people want to live. That’s going to produce much higher levels of prosperity regardless of what material living standard you might find everybody at.
And so that’s a tough principle because I, my editor wisely cut this, but I called this the astronaut princess challenge, which is: How do you define options that are important, that we should preserve, without moving into sort of unconditional wish fulfillment. “But I would be happiest if I did X. So society owes me that.” And I think that is a hard question. I don’t have a perfect answer to it. The principle that I would say we should start from is that—and this move is in a very conservative direction—we should have a bias toward preserving options that have existed in the past and that have proven their viability.
So, if a man with a high school degree could support a family of four in a thriving community 40 years ago, and now he can’t, we should be very suspicious that that represents a great success for growth. If rural and urban and ex-urban and suburban communities in all parts of the country could be flourishing communities, and now despite how much wealthier we are, a lot of them can’t, we should feel like there’s something wrong with that. That doesn’t mean every single silver mining town in the Mountain West is permanently viable, but generally speaking, the kinds of configurations that have been successful in our society are ones we should expect can continue to flourish. And at the same time, we should be able to look with a very skeptical eye at configurations that have never succeeded anywhere, and yet our policymakers continue to put all of their eggs in the basket of trying to achieve.
And here the obvious one is single parenthood. We have taken the idea that a single parent should be able to have a flourishing family and somehow elevated that to an object of public policy despite having no evidence anywhere in this country or any other country that that could plausibly work. Now, there are tradeoffs you have to make. If you’re willing to live very close to a lot of extended family, it will probably be easier to make it work. If you have a certain kind of job and career and are willing to outsource the care of your children, you might be able to make it work. But I think we can have a commitment to pluralism without opening the door to whatever social engineering people might be excited about and say that we now have an obligation to pursue that as well.
The final conceptual thing I want to raise is sustainability. And the concept of sustainability has essentially been captured by the left in the environmental context. But the actual definition of sustainability is a very important one. It’s that we can maintain the underlying endowments that are important to our prosperity over time even as we grow. It turns out that despite all of the talk about environmentalism, we’ve shown an incredible ability through technological innovation and so forth to grow in a very sustainable way that preserves the environmental endowments that our society relies upon.
But our society also relies on a whole host of social endowments. And there when we look at growth, we need to ask, are we growing in a sustainable way? Are we growing in a way in which the next generation is going to have at least as strong a set of social endowments in terms of its communities, in terms of the environments in which children are being raised, to ensure that they in fact will have even greater opportunity. As of this current generation I think we would have to say we failed on that. I think we would have to say we have pretty conclusive evidence that for a significant share of the population, we are not able to extend to children opportunities to earn significantly higher incomes than their parents, or to have the kinds of opportunities their parents had. And if the pattern of growth is one that goes in that direction, then we have to say that that’s actually a problem both in the moment and for the vicious cycle that you might worry it would set off.
So finally, some concrete policy implications. I will touch on them briefly here, happy to jump into any that the group is interested in in the Q&A, but the approach to policy I’m describing is to focus very heavily on these conditions in which the labor market operates. So what are the choices we have made? And these aren’t necessarily more government versus less government. In fact, typically they’re not. They’re about the choices we’ve made about how we have configured our society and what they mean for how the market operates.
One that looks a lot closer to a lot of conventional right of center policy is the need to reduce environmental regulation. That debate has been going on for a long time, but I think this consumer-versus-producer lens actually provides an important new way of looking at it, which is to recognize that environmentalism is focused entirely on consumer welfare. The entire premise of cost-benefit analysis is to take something like cleaner air, convert it into a dollar amount, and then claim that people get to consume it.
And so when we do cost-benefit analysis now, what we do, and EPA has literally said the Clean Air Act is producing trillions of dollars of value for households, thanks to marginally cleaner air. And then on the cost side, EPA will literally tell you, we do not consider costs in terms of jobs, investments in industries, wages; either because we have this bizarre theory that our regulation has no effect on those things, or more importantly because that doesn’t count as part of consumer welfare. And so we’re counting all of these things that consumers get in terms of cleaner air and the cost on the other side is just literally the cost of installing the pollution control equipment.
That aligns very poorly with lived experience and how we should actually be thinking of the tradeoffs that we face. And we know that because you can just go out and look at a community and see when heavier industry wants to invest in the area, do they try to chase it away or do they throw tax breaks at it, right? Especially struggling communities throw tax breaks at it. So that tells you that actually the social benefits, as perceived by these communities, greatly exceed the social costs. And if we have an approach to environmental regulation that says, no, the greater environmental quality is always worth more to people than the industrial activity, then we’re getting it wrong.
A second area that I think is very important is education. I would argue an environmental regulation is essentially the demand side of the labor market. How are we influencing which kinds of industries, which kinds of jobs investment is flowing toward and away from? On the supply side, we have to look at what kind of workers are we investing in, creating and supporting. And a very logical corollary of economic piety is our obsession with college for all. Anyone who looks impartially at the data would say college for all is a terrible idea for a large share, maybe even a majority of the population. Most Americans don’t earn even a community college degree today, and yet we’ve oriented every stage of our education system to push as many people as possible through at least a BA. And essentially it allowed everyone who falls out along the way to just be people who fell out along the way.
That’s actually a pretty great way to produce growth because you get some very productive people at the top. But coming back to those kinds of dichotomies that we thought about, if we’re concerned more about the floor under the people who are struggling, it’s the wrong focus. In fact, the people who aren’t completing college should be our primary focus. The education system should give them at least as much attention.
And so one place to start would be to say we really need a second track in our education system that’s focused on people who are not headed towards success in college, that gets at least as much attention in our secondary schools, that gets more funding at the post-secondary level. And by the way, I don’t mean let’s just create a whole bunch of new funding. I mean, let’s stop funding the kids who are going to college because they are headed toward higher wages and instead give the funding to the person who’s not going to complete college.
And so the thought experiment that I always offer to people is, we don’t like tracking in theory, but isn’t it bizarre that we’ve allowed every town to have a college prep public school and if you want a vocational education, you can kind of go three towns over or something. And if there’s a tradeoff to be made, it’s actually probably a lot more important that every town have a really great vocational program. And if you want college prep, you can go three towns over or pay more.
Another important area is how we draw boundaries around our labor market. And talking about trading immigration comes out very differently if you take this producer focus. Trade, in particular from a consumer welfare perspective, more trade is always good. It’s quite easy to prove that. From a worker perspective, it’s not true that more trade is always good and no economist would tell you that from a worker perspective, more trade is always good. And so we actually have to scrutinize that harder. I think more trade can be good, but we actually have to care about the balance.
We have to look at trade deficits and say, wait a minute. If we are engaging in arrangements where other countries make stuff for us and instead of us making stuff for them, we just send them assets. We send them our real estate equity. We send them treasury bonds, which are literally just IOUs that we’ll pay for at some other time. That’s not going to work from a worker perspective.
And then finally I think we have to look within the labor market. Organized labor is an area that conservatives have essentially celebrated the demise of because the 1930s-style unions that exist today are a disaster. But in theory, the premise of organized labor should be one that we’re excited about. We should want workers to be able to organize, to work for their mutual aid, to bargain collectively with employers. And there are other systems of organized labor in the world, some in Europe, some even flourishing kind of outside the traditional system in the US that point in the way in that direction and that we should be speaking positively about.
And then finally we have the option if you want more of something, you can subsidize it. If we need more low-wage jobs and we need them to pay better, it is perfectly within our capacity to put more money into people’s paychecks. And that doesn’t have to mean that the federal government spends more money. We spend more than a trillion dollars a year on the safety net, virtually all of which goes either toward things that actively discourage work or else ignore it entirely.
It would be perfectly within our capacity to instead say, just like we have a payroll tax that takes money out of people’s paychecks based on how much you earn, written under that on your pay stub is going to be a line that says work credit. And for low-wage workers, there’s going to be money going into those paychecks. And if you took our trillion dollars and said, a solid 200 billion of that, instead of running through benefit programs that subsidize not working and that go away when you start to work, a big chunk of that we’re actually going to put into paychecks. It would encourage the creation of more jobs. It would encourage more workers to come into the workforce and take those jobs. And it would make sure that those workers are getting closer to being able to support their families with their paychecks at the end of the day.
So obviously a tremendous amount to talk about. I think the conceptual debate in a sense where we need to start because there is, particularly in the right of center and I think in the country as a whole, there’s a tremendous amount of interest at this point in recognizing that we need to think about doing some things differently for the folks who have been struggling for so long. But beyond kind of the political talking points, I don’t know that we’ve gotten to a good enough explanation of what went wrong and therefore what we would need to do differently.
And so conceptually I think talking in producer or worker interest terms gives us a new place to start. And then if we can agree that we want to talk in those terms, there’s been a huge debate to be heard about every policy area, but I think it will be a better one for us to be engaged in.
Thank you very much. And I guess anyone who has a question should raise their hand. Oh, sorry. I’m supposed to bring a mic down, too.
Question: Just about all of the policy prescriptions you’ve advocated have been advanced by the despised Donald Trump. Therefore, I love them all. But I’d suggest one more, and that is bankruptcy, particularly with respect to the 5 or 6 million young Americans who are debt slaves by virtue of educational loans for an education which doesn’t give them jobs. What do you think of that?
Oren Cass: I think the college debt crisis is a really tough one because we don’t actually have a college debt crisis, we have a dropout crisis. And by that I mean if you look at what’s happening for people who actually complete college and successfully earn a degree, their debt burdens aren’t actually higher than their burdens have been historically. What they are paying as a share of their income, and especially as a share of the higher income that tends to accrue to the completed degrees, isn’t higher than it used to be. We also have a tremendous share of the population that has been pushed into college, told to accrue this debt, but doesn’t complete the degree and they now have the debt and they don’t have essentially the value on the other side of it.
So I think that’s the group that we should be attending to. I do think we need to find ways to offer them relief, but I would say we need to do it, A, in the context of broader reform, meaning we’re not going to do this relief while at the same time just manufacturing the next version of the crisis. And I would say we also need to do it in a way that has the institutions that collected all this money and didn’t produce any value in return somewhat on the hook and that part of the skin in the game and part of the solution, even if it turns out to be symbolic in dollar terms, needs to come from a haircut for the segment for the higher education industry that collected all this money and didn’t produce a return in the process.
Question: Excuse me. I just thought I would defend Adam Smith really quickly. In his theory of moral sentiments he does have the passages on the prudent man, which I think shows that he knew the value of work despite that glib comment in the wealth of nations. But other than that, I mean, do you really have a problem with economic growth or do you think it might just be mismeasured. In Tyler Cowen’s Stubborn Attachments, he argues for a measure of growth I think he calls “wealth plus” that would, I think, try to capture some of these ways of measuring life satisfaction. Would you be in favor of something like that? And still because, I mean, I don’t know if you really have a problem with growth in the abstract, so I’ll just leave it for you.
Oren Cass: Thank you for that question. I don’t have any problem with economic growth. I think economic growth is great and I think it’s in fact necessary. And I think we have to acknowledge the value that comes with growth and rising living standards. It’s certainly not that those are bad things. I think as you described, to some extent is a measurement problem and that better measures, I’m hesitant of just doing growth plus and saying we’re going to essentially take what we have. But if we count, we can essentially force more things into the same metric.
I think there’s in part a different set of metrics that we should give more attention to. And that if we did that, we could essentially have a more balanced view of how things are going. So there are some metrics that already exist. One that I think is really important is the savings rate. From a consumption driven perspective, in a sense almost the lower the savings rate is the better. And you see since the 1970s through today a sharp decline in the savings rate. But savings is actually really important. Having not just higher income households, but everybody be in a position to save because if they actually are saving reflects both in economic and cultural terms something closer to I think the outlook that we’d want to see if we believed we were really flourishing.
And then the other thing I’d say is that I think we just need to collect some other information. I mean, people who work on these issues know that if you dig deep enough, you can find in all of the census data and so forth great data on exactly what’s happening to family formation and family structure and opportunities for children. But it’s really hard to do and the data is typically two or three… I mean, right now we’re looking at 2014, 2015 data in some cases.
And so I think if you took this view seriously you would say, we can give just as much weight to having a real-time picture of information about those things. The example I give is there’s no reason we couldn’t have the employment report on the first Friday of every month and an update to the social index on the following Tuesday. It wouldn’t be any harder to know these things in real time than it is to estimate GDP to a tenth of a percentage point every quarter, or call 60,000 people to figure out labor force participation every month. You just have to agree that it matters and say that we actually want to give it the attention.
Question: A two-part question. One, what if any connection exists between the problems in our labor market and centralized decision-making here in DC? And as a follow-up to that, to what extent do you think a successful implementation of your working hypothesis requires a preference for state level policymaking?
Oren Cass: I think there are some places where the centralized decision-making is problematic, and the answer is better centrally made decisions, and some places where in fact the whole idea that it should be centrally made is problematic. So in the former category, I would put something like the way we do environmental regulation or the way we do employment regulation. I think for a lot of reasons, it makes sense to have an EPA and federally set standards for various things. I would like to see us do those more sensibly. And then certainly give local areas more flexibility in how they implement and in a sense how they want to prioritize. So there’s no reason you couldn’t say, look, the Clean Air Act says we have to set a standard for what we think the threshold is for clean air. But each county or each state actually gets to choose how quickly they want to try to get there. That strikes me as a very sensible balance.
Organized labor is another one where throughout time, and I think there’s a fair bit of agreement across the political spectrum, it makes sense to have a national structure of organized labor. I mean, big employers, among other things, who are operating in countless states don’t want to be dealing with a different labor structure in every place they do business. And there’s a lot of value from the labor side to being able to operate organizations that work in the same way everywhere. That’s a place where I think you just have to take the NLRA, the National Labor Relations Act, though, and say it shouldn’t be something that says you can only have one kind of union.
So, there’s a very specific provision in there called Section 8(a)(2) of the National Labor Relations Act that prohibits any kind of collaboration between management and labor outside the context of a formal union. That’s crazy. Maybe it made sense in the 1930s when you had management kind of trying to create these secret management-controlled unions. But there’s no reason to believe that would happen today. And in fact, if you survey workers, you find by huge margins they would prefer a collaborative relationship with management even if it meant they had less power over an adversarial relationship where they did have power. So for the sake of workers and employers, it would make sense to open that up.
And then when you look at how federal employment regulation works, again, I don’t think there’s necessarily a problem with saying, if you have an unorganized workplace where it’s every kind of individual worker and then the employer, there are places where it makes sense to have employment standards, but the whole premise of collective bargaining was supposed to be that the workers can look after their own interests in that context. And so it’s crazy to say, we’re going to have all of our federal standards, and then collective bargaining has to happen on top of that.
It makes much more sense to say, if you have an organized labor force in place so that you can collectively bargain, you don’t need the federal standards. You should be allowed to depart from them in whatever direction you want. And if you did that, the workers and the employers, they could use the federal standards or they could come to agreements that both sides liked better. You’d get more efficient agreements and you’d actually get employers that are wanting to have a counterparty to work with, which I think would be much more constructive.
Last one, just because I promised one place where we do need to get the federal government out. When you get to the safety net, the way we are running the safety net through the federal government doesn’t make any sense. The federal government, it makes sense for the program to raise the money through the tax system. But what we then do is we have literally more than a hundred different programs all created at different times through different legislation run through different agencies that just make rules. I mean, virtually every anti-poverty program is already implemented by the states. Because Washington knows it can’t do it, so it just sends money with crazy rules attached.
What I call, “implement Section 8 housing vouchers, however you want,” that doesn’t make sense. I do think that the federal government raising the money makes sense both for countercyclical reasons and redistributive reasons, but I would much rather have the federal government say, we’re going to run this wage subsidy with one chunk of the money and the rest of the money we’re going to send back to the states through what I would call a flex fund. Meaning each state relative to their population gets its share of the safety net funding. And with that, you can go figure out however you want to take care of those who truly can’t work and support themselves.
And if you did that, you would get to a system where state and even down to the local and nonprofit level would have a lot more flexibility to address the actual needs of individuals. First of all, to distinguish between those who can and can’t work, and then to address the actual needs of those who can’t work rather than just kind of trying to create a “not working” system that starts to look a lot like what people can achieve if they do work.
Question: You addressed the implications of the working hypothesis for a number of domestic policy areas, from education to immigration and trade. I’m curious of the potential implications in two other areas. One is in Fed and monetary policy, addressing the business cycle and the unemployment that comes with that, and the short-term risks and consequences for the market and for workers of that. Then the second is in financial reform broadly. Not just enabling Americans to work and earn money, but more importantly to build wealth. And how do we address loans and savings and the fiscal responsibility that we need to actually create the healthy families and communities that you speak to.
Oren Cass: Yeah. Thank you for that question. To address the monetary policy side of it, I do think one implication of the working hypothesis is we should probably have a bias towards slightly looser monetary policy. I mean, obviously you don’t want an economy that’s overheating; at the point where you get inflation you do have to respond. But we currently operate in this environment where even though the inflation target is 2%, the acceptable rate is 0 to 2%, right? And as soon as we just start going up, we think something must be wrong. I think it would make a lot more sense to say, all things equal, 1 to 3% should probably be the range we’re operating and 2% is the target. And we should actually say, rather than have a bias toward preempting any inflation, even at the expense of tight labor markets and wages, we’re just as concerned about preempting in the reverse. So I do think that’s one implication.
The other thing I’ll mention, I’ll take that question as an opportunity to mention is I do think it’s important as we look at the current economic moment that we’re in to distinguish between the secular and cyclical trends that we’re seeing, because there’s no question we’re in a very tight labor market right now. And that that is a good thing for workers. Two caveats are really important. One, it still does not look as good as the top of past business cycles. So the share of prime age males out of the labor force right now is worse than in 2006, which was worse than in 2000, which was worse than the late ’80s.
You see a similar trend with wage growth. And so part of what I worry about is what I call kind of bumps on a downward slope, which is that the actual secular trend in our labor market has been declining for a very long time, but thanks to the business cycle every now and then it looks better. And typically just in time to release the political pressure from actually addressing the downward trajectory. So I think we should be able to hold the two thoughts in our head simultaneously, that we should celebrate that this is better than not being going up, but we can’t lose sight of the direction we’ve been on and where we should be worried we’re going to be the next time the cycle turns.
And where this connects also back to monetary policy is to recognize that tight labor markets and wage growth feel great in the moment, but they don’t mean anything if they’re not actually linked to productivity gains. And in formal terms, that’s just what inflation means. If you have to pay people more but they’re not doing more, that can only go on so long in terms of creating real, better outcomes for people, either consumers or workers. But I also think it gives us a good way to evaluate what’s happening and to say, I think there are some very good changes we’ve seen in federal policy recently, but a lot of the ones that we would point to and say, well, that’s been good for where we are in the economic cycle look a lot more like just goosing a tight labor market than they do actually taking on these things that would change you from this trajectory to this trajectory.
And so that’s the things in the book that I want to focus on are not just how do you keep the labor market tight as long as you can, but how do you change the underlying conditions so that whether you’re in a tight labor market or not, you’re starting to move in the direction of investing in the typical worker creating conditions in which he’s going to succeed as well.
Then you had a second question. Oh, financial regulation. I apologize. As I mentioned, savings rate, I think that’s a great way to look at it. I know nothing about financial regulation so can’t say a whole lot else insightful about it. Maybe I don’t say anything insightful about anything, what do I know.
Question: Liberals from Locke to Tocqueville have talked about the importance of property and you did mention savings rates, but so let me ask you the question. Let’s assume that we put that on our index as important, but would you be satisfied if we had increased savings rate and yet we had a nation of renters or is property part of your overall equation for health of a nation as well?
Oren Cass: That’s a really interesting question. I don’t have a definitive, like I thought about this and wrote a chapter in the book about it answer, but I’ll offer a thought, which is that I don’t think real property, especially in the form of home ownership, is something we should conceive of primarily as a savings mechanism. It’s nice that historically housing prices have gone up for some people. It’s really bad for other people. Structurally and how our economy develops, I don’t think it’s good that we have a bias toward rising home prices necessarily. So I think savings and investment, first of all preferably in slightly more liquid forms. And secondly, in slightly more productivity-focused forms. If I had a bias, I would prefer to see that over an emphasis on home ownership over renting.
Question: I raised this because you can’t really have stewardship of a community unless you have ownership within it. So something to think about.
Oren Cass: Yeah. It’s interesting point. Thank you. Let’s go back this way.
Question: Thank you. I wonder if you had any thoughts on sort of domestic competition between larger and smaller companies? I mean, sort of in the context of Amazon this week flirting for two years about moving into the Midwest and then choosing New York and DC. But also something you mentioned earlier sort of the tax incentives that smaller towns and states often have to offer these massive companies which may have consequences as well.
Oren Cass: Yeah. Thank you. I think it’s probably overstating to say Amazon ever… Well, maybe flirting is exactly the right word, or teasing in some way all of the other places they pretended they might go. I alluded to the tax breaks being thrown at companies I think as a good illustration of how we should understand how people perceive trade-offs. I don’t think it’s a good policy tool. And in fact, in talking about wage subsidies, I like to use, could use Amazon now, but the Foxconn example in Wisconsin as sort of a really useful counterpoint where it’s really interesting to think about something like Wisconsin is going to throw a huge amount of money at Foxconn to come to Wisconsin and think about how that cuts across how we’re used to talking about policy debates.
I mean, on the one hand you’d say like, well, that’s big government, I guess, in a way. On the other hand, a lot of things they were doing was essentially just trying to compensate for all of the onerous costs. Once you open up to an international economy, you have an even bigger problem, which is free trade makes complete sense in terms of saying we want to extend our market principles. But if in doing that you include in your boundaries jurisdictions that are not employing free market principles, you create a real tension. And so, I don’t know that the worker in Wisconsin is especially concerned about whether we’re being big government or small government if we’ve already adopted a policy that says they have to compete with someone who’s being massively subsidized somewhere else.
I think partly for economic, but especially for political economy reasons, we have to resist the firm by firm incentive as the way to cope with this. And that’s why I like to talk about wage subsidies as what I see as more a way to affect the underlying conditions that the labor market is operating in. And I actually think it’s incredibly important to hold the line if we go in that direction with a policy of refusing to tailor it. So some people, including a colleague of mine, have done very thoughtful work showing how you could do a regionally targeted wage subsidy. That’d be cheaper and you could believe you’re getting kind of the most bang for your buck.
I think the political economy of trying to open up a question of like, well, which regions should get the wage subsidy is a disaster. You see the same thing with like, well, maybe we should have the wage subsidy, but just for people of a certain age or just for people who have been recently laid off. Maybe we should use it for ex-convicts. As soon as we decide who should get; first of all, it’s a political economy disaster. Now you’re just distorting the labor market more.
And so, I think the right way to think about this is all of these subsidies, all of this activity, these are symptoms of people realizing the labor market is not delivering the outcomes that we want as a society. But whether it is left or right of center approach of throwing incentives or the clearly left of center approach of just yelling at it to do something differently isn’t going to work in economic or political economic terms. We have to find neutral ways to say we can alter the conditions the market’s operating in without actually kind of picking winners and losers in the market.
Question: Thank you for talking to us. My name is Dominic. I’m an intern here at Heritage, and I’m also a student at George Mason University. And as was mentioned before, George Mason professor Tyler Cowen recently wrote a book where he claims the economic growth and human rights should be the two focuses of public policy. With the high growth we’ve seen in the last year or two, we have some of the lowest unemployment we’ve had in a long time and more jobs currently than there are people willing to work them. And I understand a lot of that is because of low labor force participation, but what do you think of professor Cowen’s argument and what do you think of those job numbers?
Oren Cass: I apologize I haven’t read his book yet. It’s right at the top of my to read list. But I’m certainly familiar with his argument and other things he’s written on this topic. One thing I would say about it is just to reiterate that I think economic growth is critically important. I’m very strongly in favor of it and want to make sure we remember that if we’re not getting it, we’re not going to be happy. But I think with that, we have to recognize that not all economic growth is created equal. That it’s perfectly possible to achieve economic growth in ways that don’t actually achieve what we mean when we say we want economic growth.
David mentioned in my old life I was a management consultant, and a little bit of my perspective on this comes from doing projects in the business world where you find a firm will choose some metric to hold people accountable for, to report to the board, to base bonuses on. You pick a metric and people will nail it on that metric, right? And at first glance it can even seem like the sensible metric, but if you put too much weight on it, even… First you have big fights like, well, do we want revenue growth or profit margins? So on and so forth. Even when everyone agrees profit margin is the thing we want, if you just then go tell everybody like, all right, bonuses are based on profit margin this year, you can get an awful lot of profit margin that leaves you in a much worse position at the end of the year.
And so part of the solution is in terms of having a more nuanced set of things to look at, but then part of it is I think also being willing to accept that we have politics for a reason and that policy making isn’t just a question of figuring the right levers to pull in the model that spits out the highest number at the end of the day. It requires more nuanced conversation about particularly for folks who are struggling why that’s happening and what they need. And then the jobs question I think I would come back to kind of the cyclical versus structural point. And certainly we should celebrate where we are while recognizing that I don’t think we have a right to have confidence that we’ve actually changed the trajectory. All right. I think I have time for one more. Last question, right in the middle.
Question: Thank you. There’s an old saying that a man with one watch knows what time it is. A man with two watches is not so sure. Similarly, a person who knows one way to live knows how to live. A person who knows more than one way is not so sure. This idea of five days a week getting up, leaving your house, going spending eight hours doing something you probably would rather not be doing in order to survive is not the only way to live. It’s not even a very good way to live. But that’s what we all know and that’s what we think about. Now, it’s been about 80 years since the US went to a 40 hour workweek. Since that time, non-farm productivity has increased by over a factor of five, farm productivity has increased by even more than that. But it’s—
Oren Cass: Sorry, they’re going yell at me if I don’t make you get to the question.
Question: The question is coming up and—
Oren Cass: If it doesn’t come quickly, I’m just going to start answering.
Question: Oh, okay. But the thing is 50 years ago major economists were predicting that by today we’d be working 24 hours a week because productivity is way up and it’s actually getting, in spite of what people are saying, it’s actually growing faster than it used to, and it’s going to be going up. And what is so terrible about not working so well? I haven’t worked in 29 years and I’ve been very happy.
Oren Cass: It’s interesting. I thought you were going to go a different direction with the question because when you talked about sort of the one watch versus two watches, I think you described the one watch person as probably happier and better off. The person who doesn’t know what time it is is better off. I would say the person who does know what time it is is better off and that for a huge share of our population, actually knowing what is expected of them, having a life script and having some clear obligations that they can fulfill through which they can attain respect and stand in actually is very crucial to definition of a good life. And one thing that we—
Question: That was the support for slavery.
Oren Cass: I’m not sure that’s quite right. All right. Well, what I’ll say is I think we misunderstand what work means for a lot of people. And survey data actually shows most people are satisfied with their jobs and the reason that they’re satisfied with their jobs isn’t that they’re changing the world necessarily. But that actually work is something that people want to have and that they’re happier when they have it than when they don’t.
Now, consistency is certainly very important. And so the last thing I’ll say to kind of conclude the talk is that I think our culture and how we think and talk about work is actually a big part of this. And that’s sort of the last piece that I address and that I think we have to grapple with is there are things outside of the policy levers that we can pull and the way we think about work and what kinds of work we treat as important and contributing and respectable actually has concrete meaning. It’s not intangible because if what matters to people about work isn’t just the money in their paycheck, it’s what they see themselves as accomplishing, what role they are playing, how they think other people see what they’re doing.
And then if you take those things away, if you say those things don’t have value, you’ve essentially given them a pay cut. I mean, you’ve done something that’s just important to how they’re going to feel about their work, whether they’re going to want to work as a change in their market wages. And so I think we have to be attuned to that as well and have a cultural discussion as well about how we treat the typical work-a-day job that is central to somebody’s life, that is the way that they contribute, and that is going to be important to their family and their community. Thank you very much.
Senator Josh Hawley talks with American Compass executive director Oren Cass about the empty platitudes and hypocrisy of “woke capital."
Excerpted Comments by Senator Hawley (edited for clarity)
On regulating markets:
Let’s remember that markets are not self-creating things, markets are the products of laws and legal frameworks. … We need to think in the present age when increasingly our economy is dominated by a handful of monopolistic or near monopolistic multinational corporations, we need to think about how do we continue to enact sensible reforms that will actually be good for American workers, good for American neighborhoods, American families, American producers, and of course, American consumers?
On corporations in the community:
If you go back to Missouri, my home state, and you talk to folks who have local businesses there, then they feel that being part of their community, their town, their neighborhood is really, really important. And a lot of times they have a face to face relationship with their customers and they know who their customers are. … And so when they think about making good products and providing good service, it’s not just in the abstract, it’s to the people that they know and it’s to benefit the community in which they live and that they serve, and there’s something I think that’s really wonderful about that. Now, if you’re talking to them about these huge multinational corporations, like say Facebook, then, there I think the attitude is different. They’re thinking about a global profits. They tend to think of their customers in the abstract and they don’t see themselves as American companies.
On local content requirements:
We’ve got to keep in mind that when it comes to economic policy, our main goal is to do something that’s good for American workers and the American nation and the American community, if you like, and we shouldn’t be bashful about that. That ought to be the goal of our American economic policy. I’m happy if American companies also benefit other people in the world, I certainly think that they shouldn’t be for instance, using slave labor in other places in the world, and we can maybe talk more about that, but I think that we shouldn’t be shy about saying, “Listen, we want our economy to work well for Americans, both as producers and as consumers.” And one of the ways I think we can do that is when we talk about our supply chains, particularly in critical areas, pharmaceuticals, pharmaceutical products, this is of course much on everyone’s mind because of the COVID crisis, we’ve got to take serious steps on the policy level to bring some of those supply chains back to the United States. And there’s a number of ways, number of different tools we can use to do that. One of them is just to actually enact requirements about manufacturing input so that a certain percentage has to be done in the United States. I think that that is really a tool worth considering among others.
On prioritizing American workers:
Is it so unthinkable that these multinational corporations maybe employ a few more American workers? I mean, I hear all the time, these corporate CEOs complain about how American workers don’t really have the skills they need anymore. They’re not really talented. And so we just can’t use them, but yet they’re willing to pay nothing to people overseas. I mean, I doubt that they’re actually shopping for talent when they’re in Uighur concentration camps. What they’re doing there is taking advantage of these people, the worst sort of advantage of people who are literally imprisoned. So listen, I mean, I’ve heard that a lot of economists have argued that for instance, in the last 20 years with the onset of this hyperglobalization we’ve been talking about that, well, the United States benefits on net. The net benefits outweigh the net cost. The question though is, who benefits precisely? Who in the United States benefits?
On Theodore Roosevelt:
I think there are very significant analogs between the early progressive period and this one, and I think there are a couple of things from Roosevelt that we can learn in a positive sense. And one of them is, is that Roosevelt really understood that concentrations of power are dangerous to democracy and they’re most dangerous to normal, everyday working men and women. Because usually when you have concentrations of power, the people who end up holding the power are the wealthy and the well-connected and highly educated. I mean, that’s typically how it works, in our country at least. The people who get left out when you have concentrations of power are everyday working people. And so he was concerned in his age about the trusts, about the huge combinations of corporate power and in a sense the trusts, to use that historical term, are back again.
And we see them at Big Tech is, is a great example of huge, powerful conglomerations. … And who do they really benefit? It’s a very small group of people. It’s a very, and ever actually decreasing set of people who benefit from the power the tech companies have and who are able to exert that control. So I think, rule number one or lesson number one, is that concentrated power tends to the benefit of the few, of the select, and it tends to work against the everyday working man and woman.
And then I think connected to that, Roosevelt had a great expression, which I will paraphrase here. He said that, “I am for business, but I am for democracy first and I’m for business as an adjunct to democracy.” And I think that’s the right attitude, which is that we believe in the free market, but we believe in the free market in large part because we think it actually aids freedom. We’re for freedom, and freedom means the ability of normal, everyday, working people to control their own lives and to have a share in their own government and to actually participate and have a say [in] what’s going on. So, for that reason we want an economy that helps reward that and where those folks have a chance to get ahead, and where they have a chance to provide for their families, and where they have a chance to be heard. So we should think about economic policy that actually reinforces the voice of the working man and woman. And I think we shouldn’t be shy about that.
Oren Cass, American Compass executive director: All right, I think we’re broadcasting. We have to give it just a moment for Zoom to escort everybody into the virtual room, but I will kick right off and thank everyone so much for joining us. We’ve been overwhelmed by the interest, we had to upgrade our Zoom subscription, which was very exciting. And we’re looking forward to doing a lot more of these, but for our first one, we’re incredibly honored to have Senator Josh Hawley here with us. Obviously Senator Hawley needs no introduction. He has been making an incredible mark in what has been a fairly short time in Washington, hard to believe, on holding corporations accountable for their rhetoric and for the obligations that they really do have to workers, to their families and communities, and to the nation. So as we kick off our own corporate responsibility project, what we’re calling Corporate Actual Responsibility at American Compass, we were really excited to talk with Senator Hawley about his work.
So Senator thanks so much for joining us.
Senator Josh Hawley (R-MO): Absolutely. Thanks for having me.
Oren Cass: Yeah. I wanted to start with a broad question just about how the right of center has typically thought about these issues. I think the standard dogma is that the role of the corporation is to maximize profit, that with that will come consumer welfare and government’s job is pretty much to get out of the way. And I was curious to get your thoughts on which parts of that you think are still basically right versus which parts we probably need to look at a little bit harder.
Josh Hawley: Well, I mean, listen, I’m all for companies making profits, that’s perfectly fine, but we’ve never said in any circumstance that making profits, no matter how, no matter what, is acceptable. And in fact, we often and we do, we structure markets. Let’s remember that that markets are not self creating things, markets are the products of laws and legal frameworks, that you’ve got to have property rights for market to exist. You’ve got to have an approved and standardized system of exchange between those property rights, for those property rights in order for markets to exist and we have long thought in this country, and I think it has been much our boast to think that the way we structure those markets matter.
So for instance, we don’t allow child labor in this country and that’s exactly right. We look out for worker safety in this country and those I think are commitments that we were right to make historically, and I think we need to think in the present age when increasingly our economy is dominated by a handful of monopolistic or near monopolistic multinational corporations, we need to think about how do we continue to enact sensible reforms that will actually be good for American workers, good for American neighborhoods, American families, American producers, and of course, American consumers?
So there’s a lot to do here in our present set of circumstances, but I think we’ve got to get to a place where absolutely we want people to go out and start a business if they want to do that. We want people to try and make that business successful, but we’ve got to structure the market in such a way that in suffice of doing, that we actually are investing in and working for the good of all of us in the country. And I think that that is something that’s very achievable and as much in our tradition, I might say.
Oren Cass: Yeah, the tradition is a really important point. I think there’s at least a sense that historically business leaders did feel more of an obligation to think about their workers, communities, and the nation for that matter. You’ve certainly spent a lot of time talking, partly interrogating, but also talking with business leaders, where do you see them coming down? Do they not acknowledge that they have these obligations? Do they feel like they can’t fulfill them? Or do they think that they’re doing a good job?
Josh Hawley: Well, I think it really depends on the leader of question. If you go back to Missouri, my home state, and you talk to folks who have local businesses there, then they feel that being part of their community, their town, their neighborhood is really, really important. And a lot of times they have a face to face relationship with their customers and they know who their customers are, whether it’s a local grocery store, whether it’s a local hardware store, whether it’s a little bit bigger regional business, but it serves the state and the region. They feel like they belong in that community and there’s a real rootedness to that. And so when they think about making good products and providing good service, it’s not just in the abstract, it’s to the people that they know and it’s to benefit the community in which they live and that they serve, and there’s something I think that’s really wonderful about that.
Now, if you’re talking to them about these huge multinational corporations, like say Facebook, then, there I think the attitude is different. They’re thinking about a global profits. They tend to think of their customers in the abstract and they don’t see themselves as American companies. I think that’s very, very clear. You just had the tech, I was about to say overlords, is that not nice? The tech titans who were just up before Congress on the House side a couple of days ago, earlier this week, and you listen to them talk about their business and how they see themselves, they’re located in the United States, but they consider themselves global corporations. It’s serving a global audience. And the problem with that is that, listen, it’s fine if you want to compete globally, but it tends towards these abstractions where pretty soon they they’re taking steps that are actually bad for American workers and American consumers. And they do it in the name of their global aspirations and commitments. So I think that’s where in the present environment and our present mode of multinational, global capitalism, we’ve got some tough questions to think through.
Oren Cass: Yeah. It’s a shift also, that is something we’re trying to point to a lot in our project. That one way the world is different is that all of our assumptions about how well markets were going to work were really based back in Adam Smith’s time on an assumption that the business leaders were folks like the people you described in Missouri. Adam Smith had no conception of the multinational corporation. And so obviously that genie is out of the bottle, we’re not going to run mom and pop Facebook’s in every town, but do you see a path toward actually kind of persuading business leaders to think differently? Or do you see particular kind of concrete changes you’d like to be making at the policy level that would force their attention back where it needs to be?
Josh Hawley: Well, I think we’ve got to keep in mind that when it comes to sort of economic policy overall, so just focusing in on policy here, that part of our goal, our main goal, excuse me, is to do something that’s good for American workers and the American nation and the American community, if you like, and we shouldn’t be bashful about that. That ought to be the goal of our American economic policy. I’m happy if American companies also benefit other people in the world, I certainly think that they shouldn’t be for instance, using slave labor in other places in the world, and we can maybe talk more about that, but I think that we shouldn’t be shy about saying, “Listen, we want our economy to work well for Americans, both as producers and as consumers.”
And one of the ways I think we can do that is when we talk about our supply chains, particularly in critical areas, pharmaceuticals, pharmaceutical products, this is of course much on everyone’s mind because of the COVID crisis, we’ve got to take serious steps on the policy level to bring some of those supply chains back to the United States. And there’s a number of ways, number of different tools we can use to do that. One of them is just to actually enact requirements about manufacturing input so that a certain percentage has to be done in the United States. I think that that is really a tool worth considering among others. My point, I guess, Oren is this, that there are various tools, policy tools, that we have at our disposal to think about structuring the market environment in a way that benefits American workers and that benefits American consumers. I think that we shouldn’t be shy about doing that and pursuing that as a goal.
Oren Cass: Yeah, the point about just requiring domestic manufacturing is a really interesting one and one that we’ve done some work on, because on the one hand, that sounds like kind of the most oppressive, invasive move you could make, but on the other hand, I think it’s actually quite simple and limited. You’re making a very straightforward rule. You have to make it here. And then within that, you’re saying by all means, let the market flourish. Let’s see all that innovative power and profit motive now actually focused on what we want, which is the American jobs and the outcome in the American economy. You alluded to China, which sort of hovers over all our conversations at this point it seems. And I want to talk about the supply chains and the slave labor side of it, but I want to start a little bit broader, which is, it seems like we’ve kind of run into this problem where all of our assumptions, particularly on the right of center, are built kind of on the basis that we’re going to have this free market, everyone’s going to kind of be a liberal democracy and then it will work.
It seems like we’ve run into a real challenge that’s frankly, confusing people when the folks we’re trying to have free trade with our communists, are an authoritarian communist country. We’re seeing these tensions between free trade and free markets on the one hand and free speech and even free labor on the other. And so, I’m curious how you’ve seen that play out in practice either in the technology context or the outright slavery context. What happens to free market fundamentalists when they realize that can lead to some pretty ugly things in China?
Josh Hawley: Well, let’s take it from this angle, from a historical angle. I think it’s important to realize that the global market and even the nature of what capitalism looks like in this country and globally, it changes over time. I mean, it’s a historical phenomenon. It’s not static. You alluded to this in your comments about Adam Smith. I mean, what Adam Smith understood the market to be and how he would have defined the free enterprise system, is he was working from a different set of historical data than we lived with today. That’s not to say his insights are irrelevant. I mean, far from it, but we should just acknowledge that markets and the system of capitalism changes over time and there can be better or worse iterations of it. I have to say that the form of hyper globalist capitalism, if you want to call it that that we have seen in since really the 1990s, I mean really accelerating beginning in the early 1990s, I think has resulted in a lot of problems for this country, because as it turns out, one of the cornerstones of that, maybe the cornerstone, of the 1990 system was this idea that it doesn’t matter who you trade with, doesn’t matter who you do business with. We’ll try to make all the world one market. The nation state is really sort of outmoded and regulation laws passed at the nation state level are impediments to progress, rather than guarantors of security or guarantors of values. And so we should try to minimize the role of the nation state plays. And what’s happened is, is that as allowed countries like China in particular, not only to gain access to the international trade system, but really to weaponize it. And it has resulted in a loss of over 2 million jobs to China since they got permanent normal trade relations and joined the WTO about 20 years ago. It has resulted in all sorts of tax arbitrage that our companies, our multinationals engaged in. I mean, so few of these big corporations pay any taxes in this country.
How is it possible? Well, it’s because they’re taking advantage now of this hyper globalist system that really came into its own beginning of the 1990s. I have concerns about this present structure. And the other point I want to make is those were the results of policy choices. That didn’t just happen accidentally. They didn’t just evolve on their own. They were deliberate policy choices about how we were going to structure trade, how we were going to structure international institutions, how we were going to structure global capital flows.
They represented in the 1990s, a deliberate choice by this country and others to actually depart from what had been our standard practice and our basic posture for the previous 50 years. I think now, given what China has done with the global market, given the results that we’re seeing for American workers, we need to ask ourselves, did some of those decisions that American policymakers and others made in the nineties, were those really the right decisions? And is this form of hyper globalized, multinational capitalism, is that really the best form of the market and free enterprise for the American people? I think there’s tough questions to be asked there.
Oren Cass: Yeah, of course, the benefit that we’re told we get is cheaper stuff. I think that there’s an interesting connection there to the supply chain question and even the idea of having slave labor in our supply chains. You’ve introduced a bill essentially requiring corporations to make sure there is no slavery in their supply chains. Talk a little bit about what do you see out there in the world that requires such legislation. Are American led companies really oblivious to, don’t care are happy to have slave labor in their supply chains? And what does the response to that look like?
Josh Hawley: Yeah, unfortunately I think the answer to that question is yes. Again, it’s not just any American companies, it’s these multinational companies that are the ones who are always talking about how socially responsible they are, what good corporate citizens they are, but you take a company like Nike, for instance, have multiple reports from multiple different outlets have said that Nike and have reported that Nike relies on the slave labor of Uighur concentration camps in China to make a series of their products. Now, my view is this, that number one, Nike, shouldn’t be profiting on such labor in China or anywhere. It should not be profiting on what is literally slave labor, forced involuntary labor. They have an obligation to report, should have an obligation, to report what labor they’re relying on. And if it’s in their supply chains, they should either eradicate it or they should be penalized for it.
I do think that one of the tough questions, and it’s a systemic question, that we ought to pose is, is one of the reasons it’s been so profitable for some of these big multinationals, to move jobs overseas out of this country and over to other countries – Is it because in a number of these countries, they’re really relying on forced labor, on slave labor? So yeah, that labor is cheap. I mean, they’re not getting compensated in any meaningful way and we can talk about Nike, or we could talk about Starbucks, we could talk about Adidas, we could talk about Apple and that connection. And that’s why I’ve introduced legislation that would require these multinationals to certify that they’re not relying on slave labor. And if they are, that they are taking steps to eradicate it or they face penalties.
Oren Cass: It’s really interesting. I want to read you something economics professor, Tyler Cowen wrote a column, I think it was earlier this week, maybe last week. He was very critical of the bill that you proposed. What he wrote is, he said, “I get a tough approach has superficial appeal, yet placing an investigative burden on companies may not lead to better outcomes. And in fact he wrote, the net effect of the bill contrary to its stated intent might be to increase slavery worldwide. And his argument was that essentially companies who couldn’t certify that something was slave free would just leave markets that might have slave labor and go to ones with shorter, transparent supply chains. And the result essentially would be to make matters worse and in the process, he emphasized, raise prices for American consumers. I’m curious about your perspective on those kinds of concerns.
Josh Hawley: Or they could just bring jobs back to the United States. Imagine that. I mean, is it so unthinkable that these multinational corporations maybe employ a few more American workers? I mean, I hear all the time, these corporate CEOs complain about how American workers don’t really have the skills they need anymore. They’re not really talented. And so we just can’t use them, but yet they’re willing to pay nothing to people overseas. I mean, I doubt that they’re actually shopping for talent when they’re in Uighur concentration camps. What they’re doing there is taking advantage of these people, the worst sort of advantage of people who are literally imprisoned. So listen, I mean, I’ve heard that a lot of economists have argued that for instance, in the last 20 years with the onset of this hyperglobalization we’ve been talking about that, well, the United States benefits on net. The net benefits outweigh the net cost. The question though is, who benefits precisely? Who in the United States benefits.
And when you have a system where the benefits are captured by a certain group of people, by a professional class and the benefits sort of pool, if you like, in one place, whereas your middle class or working class individual is not seeing benefits. In fact, is seeing historically flat wages, in some cases in industries, declining wages, then you have a policy problem. And is it a market problem? Yeah, probably is. But it’s also, it’s a policy problem because again, we’ve gotten here because of policy choices, very deliberate policy choices. So I would just say that there’s a qualitative aspect to this, Oren, that we have to ask about, or maybe better a normative. We’ve got to ask some normative questions. Is this really the kind of country we’d want to have?
Do we want to have a country where basically, if you don’t have an advanced degree, you don’t have any chance of getting a good paying job and sustaining a family. I mean, do we want to have a country where you can’t get decent skills education unless you’re willing to shell out hundreds of thousands of dollars in cash? Is that really the kind of economy and country we want to have? I think the American people have been in recent elections have been trying to send the message that that is not the kind of economy and the kind of country that they want to have. And I think they’re right about that.
Oren Cass: And what do you see as the political dynamics? I think, one reality, at least, in the short run is if we use well-paid American labor instead of underpaid, potentially not paid at all foreign labor, that does suggest things get more expensive. That people won’t be able to buy as much stuff, that the flat screen TV won’t be as big as it otherwise would have been. And that’s something in a lot of cases people are going to notice before they notice the general trends in the economy feeling better. How do you think about communicating that and what do you think the response or feeling of your typical constituent is to thinking about that trade off?
Josh Hawley: I think people know when they have work or not, and when they feel secure in their job or not, and when they feel like they have a future in that job or not. And I think that goes a long way toward their assessment of their economic prospects personally, and their economic assessment of how the country is doing. In other words, I mean, if prices are increasing dramatically but they can’t get a raise or they can’t get a good job then they’re going to be upset. That’s not a sustainable position. Unfortunately, that’s a position that we’ve been in a number of times just in recent decades. But I think if people are feeling in their own lives… I get a good job. Maybe I have a choice of jobs and I’m getting a raise. And I feel like there’s a future for me here in this country.
And that I can acquire a skill. I can practice a trade. I can support my family on that. Then I think you’ll see people say that, I feel like I’ve got the kind of purchasing power I need and that they will feel happy and satisfied with that. So we’ve heard from economists of a certain sort for many, many years that we cannot question this bargain, this globalization bargain, that we have to commit. It’s either it’s hyper globalization or nothing. It’s the ’90s way or nothing. We couldn’t possibly go back to some earlier version or craft a different way of doing business globally and internationally. I think that’s just false. Our own history proves it’s false. We did this differently ourselves in this last century. America had a different basic approach to trade, to global capital flows and from, say, then late 1940s until the early 1990s, very different from what we have today.
So in our own history we know that there are different ways to approach and to manage the global economy in ways that actually protect and encourage American workers, that actually help American families feel secure. So I just think that some of what you hear from some quarters of the economics profession that it’s like, “Oh my gosh, if we make any changes at all, it will be the end. I mean, the market will collapse and prices will skyrocket and inflation will go crazy.” And I just think that that is both ahistorical and frankly, a terrible lack of imagination, which is a bad combination for policymakers.
Oren Cass: I find myself in those conversations myself. That rings very true. We have a couple minutes left so I want to come back to the kind of the corporate actual responsibility idea. And as we think about these goals and values that we have, what is it that we actually want to ask of corporations? And what I’m struck by is that for a very long time, the left has been very comfortable asking all sorts of things of corporations. And we know the sort of standard progressive set of demands, which ironically seems to have nothing to do with actually helping workers or their families in a lot of cases. Whereas the right’s position has been, well, we don’t want to demand anything. We don’t think we should ask corporations to do anything.
It’s interesting and exciting in a sense to think, well, conservatives can make demands too. And those might be ones that advance our priorities a lot more effectively. And so, as you’re thinking about what are the most important things you want to demand and we should all demand either as a cultural matter, this is what it means to be responsible, or this is what Congress is going to tell you you have to do. We’ve talked about making things in America. Are there other things at the top of your list in terms of how you treat workers with their families, how you relate to local communities that you see as really most important?
Josh Hawley: Well, I think when we talk about writing things into law, I would start with what we’ve just been discussing, which is about the kind of labor that these multinational corporations use in this country and overseas. And we certainly would never accept them using forced, involuntary labor in this country that has been illegal and indeed unconstitutional now for over a century. Thank goodness. It took us a long time to get there, but thank goodness that, that is the law. And we need to expect the same as a baseline for these big multinationals operating overseas. If you consider yourself an American company and if you have any tie to this country, legally, you should not be profiting on slave labor, particularly not to the detriment of American workers. So I think that that is a… do you want to start the conversation about responsibility? That’s a place to start.
And then we can have a discussion beyond that about how much of your supply chain can you move back to this country? How much can you feasibly afford to put here? We could also talk about the corporations that have the wherewithal, again, it’s probably going to be these big multinationals, that have the wherewithal to set up skills training programs, and local communities who can actually help their workers or their potential workers acquire a skill so that they don’t have to go to an expensive college that they don’t want to go to in order to get a degree that won’t benefit them, but they would like to get a skill. I’d love to see more of these big multinationals rather than complaining about the fact that, “Oh, American workers just don’t have any skills.” Well, set up a program to help them get the skills and then recruit out of that pool. That would be a tremendous benefit. And they could do that, by the way, in underserved areas, in rural areas, in the urban core.
I mean, there are things that I think, that these corporations can do voluntarily, that we should be encouraging them to do, that would be a tremendous benefit and would be far more significant and have far more impact than the sort of virtue signaling that they routinely performed by contributing this or that to this or that cause, or charity or outfit. So, I would say to summarize or not it’d come back to, in the law, let’s start now by saying that you can’t use force slave labor. Surely we can all agree on that. And then let’s move on from that to think about how we can encourage them and ask them to actually work for the benefit of local communities, American workers, helping them get those skills to get good jobs.
Oren Cass: That seems reasonable to me. Last question for you, I want to ask you about Teddy Roosevelt, because I know it must seem like a lifetime ago or an entirely different one. You wrote a frankly excellent scholarly biography of Teddy Roosevelt. You are an expert on the man and he, at the turn of a previous century, faced in some ways parallel challenges of extraordinary corporate power and in some respects, irresponsibility. And so I’m curious, to what extent do you see analogs between then and now, and what would Teddy do?
Josh Hawley: Well, I think there are very significant, actually, analogs between the early progressive period and this one in the turn of the last century, and I think there are a couple of things from Roosevelt that we can learn in a positive sense. And one of them is, is that Roosevelt really understood that concentrations of power are dangerous to democracy and they’re most dangerous to normal, everyday working men and women. Because usually when you have concentrations of power, the people who end up holding the power are the wealthy and the well connected and highly educated. I mean, that’s typically how it works, in our country at least. That’s typically how it works. The people who get left out when you have concentrations of power, are everyday working people. And so he was concerned in his age about the trusts, about the huge combinations of corporate power and in a sense the trusts, to use that historical term, are back again.
And we see them at Big Tech is, is a great example of huge, powerful conglomerations. Big Tech, probably the most powerful corporations in history, certainly in the history of this country. And who do they really benefit? It’s a very small group of people. It’s a very, and ever actually decreasing set of people who benefit from the power the tech companies have and who are able to exert that control. So I think, rule number one or lesson number one, is that concentrated power tends to the benefit of the few of the select, and it tends to work against the everyday working man and woman. And then I think connected to that, Roosevelt had a great expression, which I will paraphrase here. He said that, “I am for business, but I am for democracy first and I’m for business as an adjunct to democracy.”
And I think that’s the right attitude, which is that, we believe in the free market, but we believe in the free market in large part because we think it actually aids freedom. We’re for freedom, and freedom means the ability of normal, everyday, working people to control their own lives and to have a share in their own government and to actually participate and have a say what’s going on. So, for that reason we want an economy that helps reward that and where those folks have a chance to get ahead, and where they have a chance to provide for their families, and where they have a chance to be heard. So we should think about economic policy that actually reinforces the voice of the working man and woman. And I think we shouldn’t be shy about that. Teddy Roosevelt wasn’t and I don’t agree, by the way, with all his policies. He had some really bad ideas and he did some really bad stuff.
Oren Cass: He was the original progressive.
Josh Hawley: Way too much concentration of power in government, actually. And we could talk about that a different time, but I think that while he maybe answered those questions in a way that I wouldn’t, I think the questions that he posed are really worth hearing again.
Oren Cass: I can’t wrap it up any better than that. So, thank you for posing those questions and pushing forward this discussion in Washington, and for joining us. It’s a fascinating topic and one that we’re hoping to work on and look forward to seeing the work that you continue doing as well.
Josh Hawley: Thanks for having me.
A conversation with Alec MacGillis about his book, Fulfillment, the Amazon behemoth, and the growth of regional inequality in the U.S.
In his new book, Fulfillment: Winning and Losing in One-Click America, reporter and author Alec MacGillis provides an eye-opening look into the growth of the Amazon.com behemoth, its “one-click” model, and its effects on regional inequality in the U.S. While its dominance has produced tremendous returns for its winners, the losers—workers in cities where fulfillment centers have replaced unionized manufacturing jobs, for example—show the human costs of this new model of doing business.
On Wednesday, March 31, author Alec MacGillis joined research director Wells King for a conversation exploring what the growth of Amazon means for the future of inequality in the U.S., the pros and cons of “one-click America,” and how policymakers and consumers should respond.
Wells King: Hello everyone, and thank you for tuning into this American Compass event. I’m Wells King, the research director of American Compass. And I am delighted to be joined today by Alec MacGillis, a reporter at ProPublica and author of the new book, Fulfillment: Winning and Losing in One-Click America. Alec, welcome and congratulations on the book.
Alec MacGillis: Thanks very much. Thanks for having me. It’s really, really good to be here.
Wells King: Well, it’s great to have you, and it’s a really impressive book. You’ve covered just a tremendous amount of ground, both figuratively and literally, in Fulfillment. You cover several cities and regions, several decades at different levels and altitudes, too, from macro trends to individual narratives. It really is an impressive portrait of American life.
But Fulfillment is also a book about Amazon and about the America that enabled Amazon to grow into a colossus, to transform the American economy and society. As you write at one point, “Over time in its astonishing proliferation, Amazon had segmented the country into different sorts of places, each with their assigned rank, income, and purpose. It had not only altered the national landscape itself, but also the landscape of opportunity in America, the options that lay before people, what they could aspire to do with their lives.” So Alec, what is “one-click America” and why is Amazon so critical to understanding it?
Alec MacGillis: This book actually started out not about Amazon, but about these enormous disparities that I was seeing around the country when I would go around as a reporter. Probably even goes back to my growing up in Pittsfield, Massachusetts, a former GE town in Western Mass, that just has fallen a long way from its peak in the mid 20th century. It’s now lagging so badly behind metro Boston. I saw it as I was growing up, and I was very bothered by it. And then again, as I traveled around the country as a reporter for the Washington Post and others in the Great Recession years, the early Obama years, seeing these incredible divides between Midwestern cities and coming back to Washington, DC, and seeing this incredible prosperity and complacency disconnected with what was happening out in the rest of the country. I wanted to capture that in a book, especially after Trump’s election.
I decided to focus or frame the book through Amazon for two reasons that I sort of settled on, that one-click America as a frame for what was happening. One was just that Amazon is now so extraordinarily ubiquitous in our country that it’s just a handy thread to take you around the country because it is everywhere and it’s everywhere in different ways. And it just is a very good metaphor for what we’re becoming as a country because it is so omnipresent. But it’s also a frame for talking about these disparities because it is itself contributing to them. The tech giants have, through their concentration of so much of our economy, in a handful of companies are helping concentrate wealth and prosperity in certain places. So that’s how I got from regional inequality, regional disparities to Amazon as the frame for telling a story.
Wells King: You spend a lot of time in the book in two particular winner-take-all cities, the two Washingtons: Seattle and DC, or as Amazon would call them, HQ1 and HQ2. Both have been transformed by the company, but in different ways. Can you just describe a little bit the ways that they really made Seattle and Washington what they are today and the power and influence they’ve used?
Alec MacGillis: Sure. Actually, I picked Washington, DC, as the second winner-take-all city in the book to feature before Amazon chose it for HQ2, so that was serendipitous, I guess. Seattle, it’s just astonishing what’s happened to that city, a city that was very much kind of a middle-class town. It started out, of course, as really more like a natural resource outpost, the place that you brought the timber down from points north and east to ship off to San Francisco. When I first came to Seattle in 2004 or so, I was just so struck that it still felt like a national resource outpost with big rail yards and the harbor and all that.
Now it just completely transformed, principally by Amazon, which now has 45,000 people working there in the headquarters—even more now, I think. It’s just been turned into this hyper-prosperous city where you have some of the highest housing costs, the highest housing cost increases in the country, really second only to San Francisco. Very few children. It’s the second lowest rate of children of any city in the country after San Francisco. Huge homelessness problem. What I focus on partly in the book is the complete displacement of Seattle’s historically Black neighborhood, the Central District. This once very vital Black community that produced all these great musicians, and really just a complete change of the character of the city.
Then in Washington, DC, you have a city that has, over the last couple decades, even before Amazon arrived, became essentially the wealthiest city in the country. If you’re looking at the full metro area, five or six or ten of the wealthiest counties in the country, principally through the growth of first the lobbying industry, huge growth in the influence industry, and then the growth of the whole Homeland Security complex after 9/11. Now in the crucial winner-take-all moment, the rich get richer moment, is Amazon’s deciding to put a second headquarters there, despite the fact that the city is so crowded and expensive already. They decided that they want to be there.
Their public reason for that, of course, is that there’s just a very skilled workforce. You have all these tech guys already there, tech guys and women, who were there already because of that IT contractor universe. So they want to be there to be able to get some of that talent for their second headquarters.
But the other reason, of course, for them wanting to be there is that it’s the seat of the federal government. And right now the largest threat to Amazon is not so much other companies, but it’s the threat of federal intervention, some attempt to rein them in. So it’s useful for them to build up their presence there in town. And they’ve been doing that, of course, well before HQ2. Bezos bought the Washington Post, bought the biggest mansion in town, renovated it, total price tag of $35 million to turn it into sort of a salon. Greatly increased their lobbying spending to the point where they’re pretty much the biggest lobbying spenders. Tons of federal contracts that they’re getting for their cloud side, and now 25,000 jobs in a massive investment over in Arlington. So the presence of Amazon in DC is just extraordinary right now.
Wells King: Well, the influence in government, I’m glad you pointed that out. I mean, you described that Amazon’s vision is really commerce at its freest and most frictionless.
Alec MacGillis: Right.
Wells King: And you talk about really when Bezos has professed his belief in free markets and entrepreneurship. But you spend, I think, a lot of time really trying to focus in on the ways that Amazon hasn’t just disrupted old models and been a tech company, but the extent to which it’s actually used influence in government to accelerate its growth and to really become the behemoth that it is. You talk about the Swiss Army knife approach to this. What exactly is Amazon’s relationship to government, and to what extent is it actually an embodiment of free and frictionless markets? Or is it more a product of government subsidy?
Alec MacGillis: Well, the Swiss Army knife was a metaphor I used for just all the different forms of, essentially, tax avoidance that the company has prospered from and benefited from, going all the way back to its founding when its initial competitive advantage had a lot to do with the fact that it did not have to assess sales taxes on sales, like brick-and-mortar bookstores had to. Its initial decision to put the company in Seattle had a lot to do with that exact point. The general rule was if you had a physical presence in a state, you had to assess sales taxes in that place.
So, they didn’t want to be in California where most of the other tech companies were, because then they would’ve had to assess sales taxes on the biggest market in the country. So instead they go to a smaller state, like Washington state, where that’s not as much of an issue. And then for all the years following, they kept… Even as they were growing, and even as it would have been helpful to have warehouses in big states where most of their buyers were, their customers were, they often avoided putting warehouses into big states because that would, again, have meant they would have had to assess sales taxes there.
That goes on, on, and on for years. They didn’t get to Ohio, for instance, one of the biggest states in the country, until not long ago with warehouses because they didn’t want to have to assess the taxes there. So you have that whole tax avoidance game, and then of course you have, at the top level, federal income taxes. They’ve been incredibly successful in avoiding paying taxes there through claiming very large losses, through the Luxembourg game. Just a couple of years ago they paid zero federal income taxes at all. Last couple years, it’s been more like a billion a year, which is nothing as a percentage of what they’re bringing in.
But then the key thing that I spend a lot of time in the book talking about, the other part of the Swiss Army knife, is this aggressive pursuit of subsidies from local governments. When you’re coming in, offering to build a warehouse or data center, just this incredibly aggressive pursuit of those subsidies along with demands of secrecy. I got a lot of emails back and forth showing all that kind of pressure, those demands. It really is, if you think about it, just kind of a twofold undermining of government, in the sense that you’re both denying the revenues needed for basic services, services that you’re going to be demanding as your trucks are going on the roads and as your workers are falling ill in the warehouses. You’re reducing the revenues and then you’re also reducing any kind of accountability and transparency through your demand of total secrecy from local officials.
Wells King: Yeah, it really is a striking pattern and strategy for economic development. I like the way you juxtapose it with the past, right? Your treatment, for example, of Dayton, Ohio, and how it evolved from really an innovation hub in sort of the Silicon Valley of its own day, into this post-industrial logistics hub that produces cardboard and sends it elsewhere. Is this winner-take-all pattern of development, is this really a novelty? And how does it differ from past patterns of development and corporate behavior that you note?
Alec MacGillis: What we can say is that, first of all, we’ve always of course had wealthy parts of the country and less wealthy, poorer parts of the country, of course. But those gaps have just gotten a lot bigger in recent decades. Similar to the way that the gaps have grown so starkly on our income ladder between individuals, it’s happened in places, too. There are two striking ways of thinking about this. One is that as recently as in the mid-1960s, the wealthiest 25 cities in the country by median income included all sorts of cities in the Midwest, including Cleveland, Milwaukee, De Moines, and my favorite, Rockford, Illinois. Which now, when you go to Rockford, Illinois, it just breaks your heart and you think that this city was once top 25. Now only a small handful of the top 25 cities are not on the coast.
But then another way of looking at it that’s even starker is that in 1980, only small parts of the country had median income that were 20% above the norm, above the average or above that. Only the Deep South and Appalachia basically had median incomes that were 20% below the average or below that. Now huge swaths of the country are above or below those extremes. The entire Midwest, most of the Great Plains are 20% below or lower.
This concentration of wealth in regional terms has grown much, much more dramatic. What is not unprecedented, of course, in our country, is the concentration of wealth, of the economy in certain companies. We are, in a sense, kind of returning to a gilded age moment, 1910, 1915, pick your date in terms of that level of concentration. We’re back to our own Standard Oil in a sense. And the question is whether we’re going to respond as we did back then.
Wells King: Right. And certain structures and certain ethics too, you note, like sort of a sense of corporate responsibility guided some actors in the past, but Amazon, you note, is somewhat different, at least in terms of the way it thinks about its responsibility to its workers and the communities in which it operates. How is Amazon so different and how does it consistently get away with the types of activities that it does, even at the most local level?
Alec MacGillis: That’s such a good point about that contrast. In Dayton, for instance, I talk about just the way that the industrialists that made that city what it was just took such incredible responsibility for the city as a whole. After Dayton suffered a terrible flood, just a really horrific flood of the Great Miami River, it was essentially the recovery effort was really led principally by the local corporate fathers.
So such a stark contrast with Amazon and, say, Seattle, where the whole chapter of the book focuses on Amazon’s very aggressive and successful fight to repeal a local tax that had been passed to address that city’s terrible homelessness and housing crisis. What was so striking about that was that the company had actually agreed to a compromised tax amount, a lower amount that they kind of negotiated the mayor down to, the council down to. They got it done, they signed it, and then just two days later the company launches, heavily funds a referendum repeal effort, and is successful, just completely outmatches the opposition with their spending to get that law repealed, the tax repealed. So just a much different conception of what corporate citizenship means.
Wells King: And also the action of citizens themselves. You, I think, make some really interesting points about the ways that it’s actually shaped political incentives at the local and national level. Could you talk a little bit about the ways that it’s shaping political attitudes, the extent to which the attitudes of Amazon consumers who tend to be suburban, high net worth, in and around the metros, how they now have a different set of incentives, at least when it comes to Amazon, compared to, say, the workers in the exurbs and in the warehouses?
Alec MacGillis: Right. This was one reason that Amazon was successful in getting that tax repealed in Seattle. They had managed to, even though Seattle is very, very liberal—90% voted against Trump in 2016—Amazon managed to tap into really an unpleasant kind of anti-government, almost Tea Party-ish, leftist Tea Party-ish feeling that whatever money will be raised by this tax, the government will probably just waste it anyway. They won’t really be effective in addressing homelessness.
And also a sort of conflicted feeling on Amazon, where in theory they let the people in Seattle know that the company is not good in all sorts of ways, and has brought Seattle worse traffic and all that and has kind of changed the character of the city. But at the same time, also a feeling that they’ve also made me more prosperous. My home, my little house that I bought for 200,000, it’s now worth a million bucks. There’s a pride in the golden goose that was Amazon and a reluctance to take it on. And you see that more broadly on the left as well.
I mean, the key thing about Amazon is that Amazon’s biggest demographic, its strongest demographic, it’s universal, but its strongest demographic is the upper middle class, urban, mostly liberal consumer. That’s why you see boxes stacked outside apartment buildings in Manhattan that doormen don’t know what to do with. There is a deep affinity for the company among liberal Democrats who would otherwise be sort of wary of the big corporation. Amazon is the most trusted entity in America among Democrats, according to one poll.
That affinity has gotten so much stronger this past year, of course. That reliance, that cultural, deep cultural reliance on the one-click life got even stronger in blue America than it did in red America this past year because blue America had a strikingly different risk assessment about the coronavirus. It was even more insistent on adopting a one-click approach to daily life.
Wells King: Right. And now we’re seeing, or have seen, a pretty aggressive organizing campaign in a red state, in Alabama. To what extent are these concerns and this push for a re-invigorated organized labor movement at Amazon warehouses, to what extent does that show some promise, and to what extent do you think that’ll potentially shape the future of a public relations with Amazon, the way that we think about the winners and the losers that Amazon creates?
Alec MacGillis: It’s hard to say because we don’t know what’s… So much depends actually on what’s going to happen. The stakes are enormous. I think of it kind of in grand historical terms that this has become, the warehouse has become the mass employment option now in our country. They’re hiring so many people, the warehouses are growing so fast, proliferating so fast, this is where you go if you’ve got to get a job at a given moment. The way you used to go down to the mill.
Those mill jobs were uplifted through organizing. They were really low paid, really tough jobs that became middle-class jobs largely through unionization. So the question now is will these warehouse jobs also be somehow uplifted in years to come from something that’s just a $15-an-hour thing that you kind of pass through when you really need a job, but you don’t stay long. Or that it becomes something that can actually sustain some kind of a middle-class family lifestyle.
But as far as how it’s going to affect our attitude or our view of them, I mean, the fact is that even short of unionization, even when we, in theory, know that these jobs are really tough and are not being paid enough and are really grueling and rudimentary and isolating, we as consumers, that has not kept us from…
Wells King: Right. Certainly not during the COVID period where we’ve seen just a surge in online shopping. What do you see as being the future of one-click America as we move on from the COVID-19 pandemic, as we’re awaiting the results of the union vote in Alabama, potentially at an Amazon warehouse there? What do you see as being the future of one-click America, the public’s attitudes and critiques and distrust of Amazon potentially, and the way that we think about trying to bridge these regional divides that Amazon and largely the one-click economy have created?
Alec MacGillis: In addition to the organizing, I see really two main strands right now. One is the antitrust fight in Washington. So much is going to depend on how much reform happens there. And that’s going to be fascinating because it’s largely an intra-Democratic fight between the general affinity for big tech among Democrats, the revolving door from the Obama administration, to Silicon Valley. Then specific voices now on the left, like Lina Khan and Warren, who are trying to do something about this. And whether the Biden administration is willing to break from the Obama laxness toward big tech will be very interesting to watch.
The other strand is us, is the American citizen and consumer, and whether we are going to be willing to… Not go cold turkey, not somehow just… But in some way, re-engage with the physical world around us after this year, and not just in our shopping, but in all sorts of ways. Going back to the theater after having gotten addicted to Netflix, and somehow getting back into the communities around us, the physical world around us. Because if we don’t, then they’re going to continue to wither. The book is really meant partly as a goad to all of us, to some degree, just re-engage in our physical space, our physical place that we live in, our towns and our cities, because they need us.
Wells King: Yes, you spend a lot of time doing interviews and documenting the stories and biographies of Amazon workers and people who have interacted with the one-click America economy on the ground. Do you get a sense, from your experience with them, that things will turn around? Do you see some glimmers of hope? The book does end on a pretty pessimistic note, so where do you see the glimmers of hope beyond Washington and in individual consumer behavior?
Alec MacGillis: I’ve got to say, I have been discouraged this past year by the alacrity with which people… How eager we seem to be to take the permission that we had from the authorities to kind of just to close in. I really do hope that it passes. I find there are people in the book who definitely do give me hope, and I think give readers hope too. They’re small business owners who are still trying to find their way, fight off the goliath. This young man in Southeast Ohio who came back home from Washington to try to help rebuild his very struggling Appalachian town in Southeast Ohio. He’s still at it out there. He’s an amazing young man. He’s in the book. He gives me hope.
I still think that there’s something in all of us that knows that this is not really a good way for us to exist with each other. I do hope that we can find our way forward from this moment and just get back to some kind of a more human way of living our daily life.
Wells King: Well, it certainly is an eye-opening book in that regard, I think in really exposing the underlying facts and features of American life today. Ones that we don’t immediately notice, be it here in Washington or elsewhere. So thanks for writing it. With that, we are out of time, but thank you so much for joining me, Alec. And again, congratulations on the book.
Alec MacGillis: Thank you.
Wells King: Again, the book is Fulfillment: Winning and Losing in One-Click America.
Alec MacGillis: Thanks so much. Thanks for having me.
A conversation with Leader McCarthy about what it will take to build a GOP that is better attuned to the concerns of working class Americans and where he sees the party going in the coming years.
Following the 2020 election, pundits and scholars have speculated about the growing support for the Republican Party among a broadly working class and increasingly multi-ethnic base. House Republican Leader Kevin McCarthy has embraced this growth for the future of the party, which has been emphasized by House Republicans and highlighted in his Starting Line initiative, which tells the stories of American workers and entrepreneurs and the challenges and opportunities they face.
On April 21, 2021, Leader McCarthy joined us for a conversation about his efforts to reach out and grow the Republican coalition, what it will take to build a GOP that is better attuned to the concerns of working class Americans, and where he sees the party going in the coming years.
Oren Cass: Good afternoon, everyone. Thank you very much for your patience. We are delighted to have you this afternoon for our conversation with Leader Kevin McCarthy. Obviously, there’s been a tremendous amount of conversation in recent months about the future direction of the GOP and Leader McCarthy is at the heart of those deliberations and in his communication with his constituents and other members of the Republican caucus. So we’re delighted to have him with us today and looking forward to hearing his thoughts on where the Republican party is going to go from here. So, thank you very much, Leader McCarthy, for joining us.
Leader McCarthy: Thanks for having me.
Oren Cass: No, our pleasure. We really appreciate you making some time. And I guess I think a really terrific place to start would just be, of course, Congressman Jim Banks, the chairman of the Republican Study Committee had a memo a couple of weeks ago, really underscoring what he saw as the importance of the GOP focusing more on the working class and developing a policy agenda that would focus in that direction on. And so I’d love to hear your reactions to it and how you see that likely to play out going forward.
Leader McCarthy: Well, Jim Banks and I are very, very close and I thought it was an excellent document. It’s something we’ve been talking about even before Banks did the document. I think you’d find some of my writings and some of the stuff I talked about where president Trump was able to move the party. Especially policy-wise, that we are able to open ourselves up. That if you really look at things today, corporate America’s Democratic Party. The American worker is the Republican Party in essence. And Jim Banks, what he did, we were traveling. I was flying up to do an event in his district and we were flying on the plane and he goes, “Look, I’ve been thinking about this.” Putting it together and handed over to me, and exactly what we were looking to doing. How do we take our gains and expand them even further, right?
If somebody sat back and they said, “You know what? I disagreed with President Trump.” Or, “I didn’t vote for him.” They would say they agreed with his policies. If they ever had problems, they’d say something about personality, right? But those policies united people and it unites the party at the same time and it expands the party. Think for one moment in the last election. We won in Miami. Of the 15 Democrats we beat, every Democrat lost to a Republican woman or a minority. California, where the president didn’t compete because he couldn’t win California. He loses California by 5 million votes, but we defeat four Democrats. All four districts, three of them, he loses by double digits. But it’s the policies that made us win in a state that he wasn’t even competing. California was actually our best state for Republicans.
And in Congress, when you think about it, everybody thought we were going to lose 15 seats. So the first time since 1994, no Republican incumbent lost. And it’s only two times in the history of America that the party lose the White House and actually gains seats in the House, in 1892 and 1992. And both times, they won the majority two years later. So I think what Jim is saying, let’s look at our successes and let’s expand on it. And the way you expand on it is you expand on the policy that we just started. And it’s reached more people, it’s made the party more diverse, reflecting more of America. And I think that is an excellent roadmap to start with. We’re actually going to our retreat next week, and I’m putting together seven task forces. We’ll have members all assigned to different ones. And we’re going to be working on our policy doing exactly that, building it out further for big tech. When you think of big tech, there’s two major issues, privacy and competition. And to me, it’s not sitting back, are you Republican or Democrat? But from the aspect of this competition, these big industries are just squashing any entrepreneur or small business who wants to start up. Then we’re finding the privacy of ourselves.
Leader McCarthy: And why don’t we just sit back and think, we believe in private property. Why don’t we apply that same thing when it comes to big tech? And at big tech, when you think about it, if you go onto Google, people say, oh, they give all these free products. No, no, no, no, no, no, no. Anything free on the internet, you are the product. It’s your data is what they’re selling. So why don’t we make it like private property, that you have control of your data. They have to tell you what they’re taking. You have the right to move it, you have the right to delete it. And if they’re monetizing it, you have a right to get part of that. You have the choice. If they want to monetize your data, you could say yes, but you get a piece of that. And maybe that’s a gift card. Maybe that’s financial resource. Maybe it’s some other product. But you have the choice. Again, you’re in control.
Oren Cass: Yeah. And so, I think the idea of sort of the task force is really interesting. And you described, this comes down to policy. Is one of those task forces a sort of working class or worker focused task force? And what do you see as kind of the policies that are for workers and maybe focus differently on workers than the Republican party would have in the past?
Leader McCarthy: Well, let’s look for instance what we would go through. We’re going to do a number of different task forces, and they’re going to be built upon the China task force that we just did. A Jim actually served on that. And let me give you a little background behind that. I had worked with Pelosi for eight months and the Democrats to try to get a co-equal number taskforce about China, because we have no policy when it comes to China. That’s a big challenge for us for the next century. And why create one party or the other? Let’s take American policy about China. Pelosi finally agrees and agrees to the number equal. We went so far as to ready to name them. We had the Washington Post interview, they’re ready to do the story and she backed away. So I went forward with it anyways.
And with all the different issues that would come upon China, it’d be the military, could be from technology, it could be from what they’re doing in our education system, I put people from all those different committees and they came up with solutions. Two thirds of them were bipartisan. I had Democrats coming to me telling me they wanted to be a part of it. So I would see that all these different elements go into that. Immigration would be something about workers. Here we are with the Biden Administration, just by a stroke of a pen, changes the course of what’s happening on the border. And what really concerns me here with the Biden Administration, they never take into consideration by just opening up a border, what does it do to the American worker for their jobs? What’s it do with COVID that’s happening right now? What does it do to society itself on the expense and others of what’s going forward? That basis that I think people should have to have input to and have a policy about.
We were actually successful the things we were doing along the border, and now the president’s fundamentally changed that. And it wasn’t by legislation itself. And what is it when it comes to education? To me, everybody will sit back and so many people think, oh, you got to be a doctor or a lawyer to be successful. I don’t believe that to be the case. Everybody should have opportunity for whatever they believe is successful. I think we have an education system that’s more than 100 years old trying to deal at a 21st Century idea. And these universities pricing yourself out of the ability. I look at a couple of different areas when I look. Sebastian Thorn, he created … What’s the name of his? Udacity. Okay. Have you ever heard of Udacity?
Oren Cass: Sure.
Leader McCarthy: So I found Udacity, my son, he was going to college and I started paying for this Udacity, $200 a month. Said, “what is this?” He goes, “I’m just getting this other education too, dad.” So I go and see Sebastian. And Sebastian’s brilliant guy, invented the driverless car. Stanley that’s in the Smithsonian. Google hires him, and while he’s out at Google, the thing he wanted to do out there is teach a course at Stanford. So unbeknownst to Stanford, you know what he does? He offers his course for free online. 140,000 people sign up. Even people in our military who was out in theater. So here he has these 20 brilliant Stanford kids, they get to see them in person. And he assumes they’re 1 through 20 when the grades come out.
They’re not. The very brightest kid that’s in there at Stanford that’s seeing him in the classroom is like 550th. So you know what he does at your Udacity? You pay $200 a month. Maybe he’s changed it, I don’t know. Once you get the course done, you get half your money back. And he had at the beginning, you get a Nanodegree. But once you get the Nanodegree, if you don’t have a job in six months, you get your full tuition back. Could you imagine a university doing that? Instead of just saying, I’m going to put you all in debt and you’re responsible, but I’m not responsible for getting you a job or anything else.
Oren Cass: No, that’s really interesting, I think, and points to just the amount of innovation there’s the potential for here. I’m struck in, sort of as you were describing some of the issues you’re focused on. You mentioned the question of sort of corporations and the degree to which corporate America seems to be on the other side on a lot of issues at this point. And we touched a little bit on tech and on globalization with China as well. Where, if at all, does Wall Street fit into the picture? And do you see them and sort of Wall Street versus Main Street as also an area where Republicans are rethinking things?
Leader McCarthy: I mean, think about in 21st Century. I mean, I was just on CNBC the other day. And here you have Yellen putting together a climate change person. She’s very proud of that, inside the Federal Reserve. I look at FinTech. I look at Bitcoin. I mean, here we are moving into 21st Century, and I think it’s the Republicans out there that have led the charge. When we crafted the bill for COVID relief and others, we allowed FinTech, we allowed credit unions, we allowed your community banks all in. Before you had to just do this one little entity. Now it’s where the people go. Let them prosper what’s happening. And where capital is king, jobs are created. And before Wall Street, they had a monopoly on capital so you just go to them. Let’s disperse it out where anybody could provide the capital and the risk. Just so you understand my background, I wasn’t born into the Republican party, I chose to be in this party. I have a family who are all Democrats.
My family is not wealthy. I get out of high school, I don’t have the grades that I can get a scholarship. And my folks can’t send me away to college, they don’t have the wealth so I go to community college. But I always had a strong work ethic. That’s what my family believed in. And so I worked jobs, just like every job you would think about, from behind the meat counter, to boxing groceries, and you name it. Firefighter seasonal. But I meet a guy that owns a liquor store that has a car dealers license. I talk them into taking me to the LA car auction. It’s not far from my hometown, two hours. And I started buying and selling cars, and I’m flipping them to pay my way through college. While I’m doing this, when you’re at community college, you go visit your friends who are away at college.
I have friend at Stanford, friend at SD, some friends at San Diego State. So I’m going to go visit some buddies at San Diego State. This is probably before you were born. This is 1985. So I go to the grocery store to cash a check. Not to the bank, but to the grocery store, so you can understand my wealth. When I cash the check for money for that weekend, the day before lotto started in California, so I bought a lottery ticket, and I won the lottery. True story. I’m 20 years old. It’s Friday night. I just won $5,000, the most you could win in 1985 money. And I ended up 10 minutes from Tijuana. So I come back, take my folks to dinner, give my brother and sister each a hundred bucks. I take the majority of the rest of money, I put it all in one stock.
Because one thing you’ll learn about me, I’m a risk taker. I made 30% of my money in six weeks. So I go out and I try to buy a franchise, but no one’s going to sell me a franchise because I’m 20 years old. I go to the bank, where’s my business plan? They’re not going to loan me any money. So I opened up my own deli. I sell my stock. I refinanced the cars I was trying to sell, and I put money on a credit card and I take a risk. And I opened this deli, and there’s three lessons I learned that have never left me from any of my small business. I was the first to work, I was last to leave and I was last to be paid. And you know what? I was pretty successful. So at the end of two years, I didn’t have enough capital I could pay my way through college without working.
So I sell my business. I’m going to college. And there’s an article in the paper to be a summer intern in Washington, DC with my local congressman. Don’t know him, but think he’d be lucky to have me. So I applied. You know what he did? He turned me down. But you want to know the end of the story? And now sit in the congressional seat I could not get an internship for. Only in America could that happen. But was that Wall Street loaning me money? Was that the local bank loaning me money? No. I took a risk. So in today’s world for capital, why does government put all these restrictions? What if I knew somebody that had capital that wanted to invest? What if I had other ways of selling shares within there? Let’s unshackle our ability for people with ideas and people who are willing to take risks, because you know who it’s going to help the most? It’s going to help a person that has probably less money. It’s going to help more minority communities with opportunity zones and others.
That’s the way Republicans should be thinking. So they’re going to go in communities that they normally don’t vote Republican, but our policies are going to lift them out of the idea of what government is today. We’ll just give you a paycheck, or we’ll give you housing, or we’re going to give you childcare. What Americans truly believe, they want self worth. They want to do it themselves. But just don’t put these obstacles up where I can’t get there. These corporations that come out now and say, oh, Amazon, I’m for raising the corporate tax rate. Well, they don’t pay the corporate tax rate because of some loophole they take off. But you know what Amazon does? Amazon competes. They sell tools now too. So they also compete against the Milwaukee tool that they actually sell on there. So they don’t kill. But you know what? That small business that make that tool, they’re going to pay the 28%.
So what we’re finding is these large corporations, they like more government regulation. Why? Because it keeps the small guy out. It keeps the competition away. We should be fostering more competition, because if you really sit back and think, who should have been Amazon first? Sears and Roebuck. They had the catalog, they sold everything. Just the efficiency, they weren’t there. But we should allow the next Amazon to come and the next Google. And yeah, they should start in the garage. But when you become big, you shouldn’t be able to wipe everybody else out that you can’t have competition. And that’s what I’m seeing happening today.
Oren Cass: I think the point about getting capital out to small businesses and entrepreneurs is incredibly important. And it’s funny to hear your description of the challenges you saw in the 1980s, which I think a lot of people would describe as probably a lot of the same challenges they would face today. And yet in the meantime, obviously we have a financial sector that’s much, much larger than it used to be, but that’s concentrated in other kinds of activities, whether that’s private equity, hedge funds, you mentioned Bitcoin and some of the cryptocurrency.
Leader McCarthy: Everybody’s got a SPAC.
Oren Cass: That’s right. I saw Shaquille O’Neal is advising a SPAC. And I was wondering, who put their money into that one? Is that a related problem? Or do we have too much of that and not enough of the good stuff or you let Wall Street do what it wants?
Leader McCarthy: Well, I’m not into letting Wall Street do what it wants. I don’t want Wall Street to control, because what you’re finding today is… Think about this. When people retire, they get their 401ks and others. Let them invest, let them have the ability. But many of the rules are arcane and 100 years old, they gave an advantage to Wall Street. You don’t need that much anymore. So, let’s let others spur it off because what happens, when you create a small business and you create it successful and you have others, locals invest in it, they reap the benefit. Well, they become angels and have those angels, and they redevelop an entire community and it only fosters from within.
And in today’s world, you can do it anywhere. You and I are talking, we don’t have to be in person anymore. So I don’t have to live in Silicon Valley. I don’t want to have to be on Wall Street. And so now any community could have the benefit and anybody living anywhere. I don’t have to have the library that I have to go into, I could get it downloaded to me. And that could change my education. It could change my opportunity. It could change the investment. It changes my ability to sell. It changes the competition. I’ve got better quality. I’ve got the ability to reach more market. I could do more market share. Who wins in that? The consumer wins in that. The entrepreneur wins in that. So we’re all at a benefit.
Oren Cass: That certainly makes a lot of sense. I think I have time for maybe one more topic and I’m reflecting on how, as is often the case in these types of conversations, we’ve focused a lot, ultimately on the entrepreneurs and the job creators.
Another issue that’s been in the news a lot, also related to Amazon, is unions and labor. And I think particularly the Republican party, for both political and economic reasons, has not been a fan of big labor by any means. But on the other hand, I think there are some folks who have at least expressed an interest in saying, “Well, what could we give workers?” Workers don’t especially seem to want what big labor is offering, but they might want more than nothing. And so I’m curious as you think from the worker’s perspective, do you see any interest or opportunity to think about what else could they have that’s not a labor union, but that’s more than nothing? Or what else, at all, can public policy offer to workers as they approach the labor market?
Leader McCarthy: That’s a great idea because in today’s workplace, all unions are not equal. I’ve watched them grow and change over time. Some of the biggest unions today are government employee unions. And they’re just fighting to carve out more of a pension than others. But when you think of unions where they’re created in others that are almost a manual labor working in that process, that they got lost in the shuffle.
I look for a prospect at this. If I’m going to invest in something, I want the return for it. If I’m a worker, I want accountability, I want the reason why I’m providing resources from my paycheck, what is it going for. And you raise a good issue here, we should rethink almost everything we do, is it the best use of what we’re doing? Looking at a union today, is there a better way to provide it? Especially, you could have greater technology today, so you have greater accountability. You could provide more service for less fee. And could you empower the worker themselves?
So let’s take from a philosophical approach. If we believe within healthcare, we can pool because it would help us, more people pool together to save money within our insurance, well, we have the choice. If we look from our cable, well, we got choice. We don’t have to go with one cable company like we did in the 80s, whoever was wired. And we could create a package, right? I could get the Dodgers and the Lakers, but I could have HBO or something else that I want.
Why can’t we have that competition when it came to unions? And it’s not thinking from a negative point of view about unions. What I’m looking at is the worker themselves, because who’s providing the money to the union, the workers. So the power for the workers is, who’s giving me the greatest return on my money? So maybe this other one will have better healthcare, charge me less, or provide a better service. Why can’t we open them up then? Because then that’s competition. And we’re using our philosophy and our principles that benefit the worker that they’re empowered greater to have a better option for the future. We should rethink. And that would have to change labor law to allow them to do that. And instead of looking after the one person at the top, we’re looking at the bottom of the pyramid. Let’s empower them.
Oren Cass: Yeah, no, I think that’s a really good way of putting it. The point about it coming down to worker choice in a lot of cases. And whereas the historical view has been, maybe the business would just be best off if there was just no union.
Leader McCarthy: They have that choice. I mean, why are you forced into something? Just as an American themselves, I don’t want to have to be forced into anything. Let me make my choice. I think I’m smart enough to fail or succeed on my own. And if I earned it and I worked for it, let me decide what I’m going to do. And if I think it’s worthy to have one, I can choose to be in one, but I could have a choice of many.
Oren Cass: And do you think, is our economy ultimately better off if workers do find unions that they’re happy with and represent them or in a world where the managers are in charge and you don’t have the union on the scene?
Leader McCarthy: Think about the gig economy, right? It’s growing so big. I live in California, the first thing they did, they watched Uber and everybody else grow. Well, think about Uber themselves. Here you are. You may have another job, your refrigerator breaks. I can go drive for Uber for a little while. I make enough money, buy a refrigerator. Or I could drive whatever I wanted and I can earn enough money to take my kids to Disneyland. I may be retired and I want to do something for my grandkids. The worker has the choice then. But what do they do? They go and put in a union, try to force it upon them, where they wouldn’t be able to succeed. We had to do an initiative to change that.
If you’re going to have an economy of the 21st century, it’s not going to be successful if you have ideas of the 1950s. And that’s the basis of what a union looks like today when an economy totally changes. They never thought of an Uber. They thought of a cab company. You got to buy a medallion. But think about what an Uber allows you to do. I can rate my driver. I can tell them when they come. They can rate me. I could find out what’s cheaper. I could take an Uber share. I am empowered.
So why don’t we take that same philosophy to government? Why wouldn’t, if you were a veteran and we hear all these problems about veterans trying to get appointments, why can’t they make an appointment on their phone? Why can’t they rate their doctor? I mean, think about what that would do. It’d be more efficient. It’d be empowering the veteran for the care of best where to go. You’d have a rating system to know who’s good, who’s not. I mean, we could transform it, but we can’t live in the 1950s being in the 21st century.
Oren Cass: No disagreement there. And I think it certainly lays out a terrific framework for the work that you’ve described that, that you and your caucus will be doing. So I think we’re out of time. We really appreciate you joining us and we are looking forward to hearing about the task forces and the policy work to come. So thank you very much for all your leadership.
Leader McCarthy: I love that Rockwell behind you. Do you know the story of that Rockwell?
Oren Cass: I do actually. I am in the town north of where Rockwell painted.
Leader McCarthy: It was a school board meeting, right?
Oren Cass: Yes. That’s exactly right. I’m delighted you’re familiar with it as well.
Leader McCarthy: Well, great to see you. Thanks for having me. Look forward to continuing talking to you.
Oren Cass: Thank you very much, Leader McCarthy.
Statement on a conservative future for the American labor movement.
Community is the product of people working together on problems, of autonomous and collective fulfillment of internal objectives, and of the experience of living under codes of authority which have been set in large degree by the persons involved. … People do not come together in significant and lasting associations merely to be together. They come together to do something that cannot easily be done in individual isolation.
– Robert Nisbet, The Quest for Community (1953)
American conservatives rightly place economic freedom and limited government among our dearest values. The defense of markets, though, has at times made us overly solicitous of businesses. As we advocate for owners and managers in their pursuit of profit, and celebrate the enormous benefits their efforts can generate for us all, we must accord the same respect to the concerns of workers and ensure that they too have a seat at the table. In a well-functioning and competitive market, participants meet as equals able to advance their interests through mutually beneficial relationships.
Institutions of organized labor have traditionally been the mechanism by which workers take collective action and gain representation and bargaining power in the private sector. Strong worker representation can make America stronger. Unfortunately, our nation’s Great Depression–era labor laws no longer provide an effective framework, many unions have become unresponsive to workers’ needs and some outright corrupt, and membership has fallen to just 6 percent of the private-sector workforce. Rather than cheer the demise of a once-valuable institution, conservatives should seek reform and reinvigoration of the laws that govern organizing and collective bargaining for three reasons:
- Economic Prosperity. We believe that workers share more fully in our nation’s prosperity when they have a seat at the table. Free markets have proved their unmatched capacity to generate growth, wealth, and innovation, but they offer no guarantee that the gains will reach all participants. We pursue and celebrate tight labor markets because we know that the result is beneficial to workers and their families and communities; likewise, we should support institutions that reinforce those effects through economic agency and self-reliance, rather than retreat to dependence on redistribution.
- Limited Government. We prefer the private ordering of bargains between workers and management to overbearing dictates from Washington. Policymakers have stepped into the void left by workers’ loss of collective representation with a vast and unwieldy edifice of employment regulation. By contrast, when workers have a seat at the table, discussions occur on a level playing field and the parties can make tradeoffs tailored to their circumstances and preferences, rendering much bureaucratic oversight superfluous. Layered atop extensive regulation, the process works poorly; as a substitute, it can yield fairer outcomes that better meet people’s needs.
- Strong Communities. We consider solidarity indispensable to the health of our communities and the nation. Well-functioning private-sector worker organizations are vital mediating institutions for establishing stronger bonds among workers, facilitating mutual aid, and affording meaningful participation in the public square. Giving workers a seat at the table also fosters shared understanding and mutual respect between workers and the managers, owners, and political leaders who have become socially and economically isolated from the American mainstream.
The standard partisan arguments over labor have tended to accept our nation’s current legal framework as the only one, and thus to present its expansion or contraction as the only options. Entirely different arrangements deserve consideration. In parts of Europe, for instance, “right-to-work” is the norm, but so is sectoral bargaining. On one hand, labor and management in Germany often partner on “works councils,” which are illegal in the United States and opposed by American labor unions. On the other hand, such “co-determination” can also extend to labor holding seats on corporate boards, which American unions support but shareholders resist. In some places, unions manage functions like unemployment insurance and job training that we take for granted as government responsibilities. In Canada, collective bargaining offers the parties autonomy to depart from government mandates in regulating their own workplaces.
Conservatives should be willing to consider all these approaches, and others besides. We endorse no specific proposal, but believe that various combinations hold the potential for substantive reform that would advance our priorities of improving the lives of workers and their families, deepening our communities, and strengthening the nation. We are eager to pursue discussions with policymakers from across the political spectrum and representatives from all facets of the economy. Here, too, workers must have a seat at the table.
Partner, Boyden Gray & Associates
Former Acting Assistant Secretary for Policy, U.S. Department of Labor
Executive Director, American Compass
Henkels Family Collegiate Chair & Assoc. Prof. of Economics, University of Notre Dame
William J. Kilberg
Retired Former Senior Partner, Gibson, Dunn & Crutcher
Former Solicitor, U.S. Department of Labor
G. Roger King
Senior Labor and Employment Counsel, HR Policy Association
President, R Street Institute
Director, Social, Cultural, and Constitutional Studies, American Enterprise Institute
Editor in Chief, National Affairs
U.S. Senator (R-FL)
Executive Director, American Principles Project
Former Chairman, National Job Corps Association
Former Undersecretary, U.S. Department of Labor
Former President, Bethlehem Steel Corporation
Former U.S. Attorney General
Former U.S. Senator (R-AL)
Executive Director, Institute for Family Studies
Visiting Fellow, American Enterprise Institute
* Institutional affiliations provided for identification purposes only.