Democratic Unity

The press is hard at work speculating why the current truce among Democratic factions is more apparent than real.  That may of course turn out to be true, but the real story seems the other way around—how the Covid crisis has improved the prospects for party unity.  I’d even go beyond that.  It has forced a common Democratic program that is more complete than anything we’ve had before.

This is necessarily theory, but there is logic to it.  Consider a few topics:

– Magnitude of the effort.

Any meaningful approach to Covid unemployment and climate change will be massive.  The scale is so large it’s hard even to formulate rational differences among factions.

– Jobs.

Previously the left wanted tariff protection and the center wanted retraining and support.  The answer now is something else—federal jobs.  Lots of them.  We still need to worry about trade, but that can become a matter for the WTO, where there is a real opportunity to go after all the factors that need to be taken into account.  We’ll still need retraining, but now we’re talking about real, waiting jobs better adapted the people we’re trying to help.

This is not just a temporary issue.  With Covid we’ve seen the limits of what the private sector can do.  There’s no question about the magnitude of our needs, and people must be hired to meet them.

– Healthcare

After Covid, it’s clear that an employer-based system is no solution.  Everyone wants to cover the whole population with a program that somehow or other grows out of Medicare.  The discussion is now about tactics, not policy.  Since this new form of Medicare is a non-trivial change, it seems reasonable to start with something less than a full flash-cut.  So we’re down to the size of the initial population group.  Is it really worth fighting about the 60-65 starting age group?

– Education

The Federal Government has stiffed the states and punted on federal help for the overwhelming job of reopening the schools.  Fixing this is real work.  We need Covid help, adequate state funding of K-12, keeping colleges and universities afloat, paying off student debt, and more.  At this stage you can’t really talk about factions, just a hope to make it right.

– Climate change

The current Biden proposal is the best I’ve seen yet. It even recognizes the importance of the international aspect—we need a new model for international cooperation or we will all fail.   There have been past differences of approach, but at this stage we need all of the above.

– Racial justice and national unity

This is obviously more than a Covid item.  But in any case events have made it an aspirational item for the party and even the country as a whole.  Differences may come, but for now there is commitment on all sides.

In all of these areas the biggest issues are actually planning and management—not partisanship.  These programs are not make-work precisely because there is so much that needs to be done.  We have to be the diametrical opposite of the corruption and self-dealing of the Trump people.  That’s a challenge all right, but one that all sides should be ready to embrace.

The Green New Deal is Our Moment

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“Earth” by kristian fagerström is licensed under CC BY-SA 2.0

The name “Green New Deal” has become more apt than ever.  It was always a good idea to emphasize that fighting climate change can bring important benefits elsewhere in society.  However, post Covid-19 the name means more.

We’re in a deep hole, and both “New Deal” and “Green” are now policy imperatives.  That means we have to think more broadly about what the Green New Deal needs to be.  A new New Deal with a climate focus is the way out.

This isn’t a matter of changing the legislation but of realizing its aspirations.  There is much that was left deliberately unspecified in the initial draft.  Here are some suggestions for what there needs to be.

  1. We need a national plan.

The two recent stimulus measures (whatever their value) are examples of what we cannot afford to keep doing—quickly hacked-together combinations of incomplete and conflicting policies with problems in implementation.

Green New Deal is huge undertaking.  The climate side alone is a combination of many rapidly-changing technologies with major architectural choices and all sorts of issues with competing interests and local versus national administration.  In the new scope we have even more to do in making sure that our choices deliver economic and social benefits.  Business isn’t going to do it.  State and local interests aren’t going to do it.

The Green New Deal proposal already talks about modernizing the electrical grid.  That’s important but not the whole story.  We need a comprehensive plan including priorities at each stage of development. That effort needs to be funded, competent, and free of corruption.  It will take an organization charged with planning (starting even now) and a feedback process to work with all constituencies.

  1. Don’t limit the scope of jobs.

It’s true that fighting climate change will create many jobs.  But that was never the end of the story.  The country needs infrastructure of all kinds—and not just roads and bridges.  Education and healthcare are infrastructure too.  We don’t need make-work or “universal basic income” to stimulate the recovery; we just need the work that needs to be done.

The American Society of Civil Engineers keeps a website with a breakdown of national infrastructure requirements.  We currently rate a D+, and the inventory of problems is long.  We also need to restore our much-diminished upward mobility, through education and healthcare as mentioned but also with more mundane needs such as public transportation.  As a practical matter we also need daycare.

We also need to worry about the negative side—job loss.  The changes in fighting climate change will be significant; you only have to think how many people will be affected by the move to electric cars.  We have to guarantee that people will be made whole and plan how we’re going to do it.

  1. This really can be a locomotive for social justice.

The original New Deal was also conscious of this kind of goal, for example in bringing all regions of the country into the 20th century.  However its impact was more limited in matters of race or national origin.  For those we needed an even bigger national project—the mobilization of the population in World War II—to achieve some success (though blacks were explicitly excluded).  For many groups US history divides neatly into before and after World War II.

World War II was enough of a success to say it can be done.  The Green New Deal has to provide equal opportunity for everyone—again without corruption.  Fighting both climate change and a depression will require all of our resources in another nationwide battle against an existential threat.  Everyone has a part.

  1. This isn’t the 1930’s (any more than it was the 1950’s).

MAGA was a failed attempt to return the US to the 1950’s.  The failure was explicit: manufacturing was in recession before the virus hit, and essentially no jobs were ever brought home.  We have to be careful not to make a similar mistake about the 1930’s. This is a different economy.  As we’ve noted before, the transition of the US economy from manufacturing to services is a long-term trend with strong reasons to continue.

More and more companies are functionally software companies—with no skilled manufacturing career paths.  Amazon’s warehouse workers are not on track to the corporate offices in Seattle.  We can raise the minimum wage, but no combination of tariffs or other government policies is going to change the need to educate everyone for the good jobs that will exist.  We need a safety net and stronger unions, but above all we need to give people the tools to succeed.

We also need to think about government revenue in a different way.  Software companies are different—there is a strong tendency to monopoly, and cost of production is much less of an issue than product differentiation. Successful companies will tend to be highly international and with monopoly power.   The high profit margins and barriers to competition mean they should be taxable, but–as amply demonstrated by Apple—it’s seriously hard to do it.  That’s an international problem that needs to be solved.

  1. Don’t shortchange the international side.

Discussions of climate change tend to be parochial—solar panels on the house, then state issues, then national issues, and usually not beyond.  It’ll be tough to get carbon neutral, but then our job will be done; it’s up to everyone else to do the same.

In fact international issues are at least as important.  We control at most 15% of what happens to our atmosphere.  Our per capita energy consumption is twice anyone else’s, and we are by most measures the richest country in the world; it’s simply not going to happen that the rest of the world will just take care of itself.  We will need to be involved internationally, both for the underlying technologies and for their deployment.

The only international framework that exists for climate is the Paris Agreement.  That is entirely based on voluntary compliance in service of a common need.  There is no other mechanism.  We can’t bomb or tariff our way out of it.  We have to make it work.  Solving climate is a cooperative venture.

At worst this is a mess.  At best it is a model for international cooperation in other areas as well (trade, labor standards, taxation, environment standards).  The unanimity of the Paris Agreement was a major achievement of the Obama people.  The collapse of discussions since we opted out shows the risk.

  1. Need to create ongoing institutions.

For any activity with a fixed target—such as keeping carbon dioxide under the scientists’ limit—there is a tendency to think of reaching a new era where problems will finally be behind us. That’s a dangerous mindset.  For one thing it can produce a kind of eco-paralysis—with so many problems to be solved at once that you can’t make progress on anything.  (The recent Michael Moore movie is a symptom.)

More generally we have to recognize that even though we’re solving an existential problem for mankind, that will still leave plenty to do.  Having enough clean energy will help in many areas, but even for the environment we won’t finish all the problems we know.  And there will always be new issues beyond that.  So part of the job is making sure we will have the right institutions to go forward.

On the domestic side that means strengthening the regulatory agencies we have, and determining what is missing.  It’s possible that we will need more direct federal supervision or even operation of the power grid, for example.  We certainly need decades worth of large-scale spending on energy research.

On the international side there is also much to be done.  It should be recognized that the Covid-19 crisis was less an act of God than a failure of international governance.  China’s quarantine of Wuhan should have been matched by coordinated actions of other countries throughout the world.  That such an obvious consequence didn’t happen shows the vacuum created by the US abdication of power.  It also shows how we cause ourselves to suffer.

Most international institutions were our creation.  We had learned that the best way to exercise power was with rules we were willing to obey for ourselves.  We’ve now rejected that approach.  However, as a country, we have actual historical experience with such a situation.  The Articles of Confederation after the Revolutionary War almost destroyed the US before it could get started.  The solution was not more chaos, but an appropriate structure for success.

There’s another historical parallel worth mentioning.  After the second World War the US experienced unprecedented prosperity brought on in part by our rebuilding of Europe, including Germany.  The Marshall Plan paid real dividends.  The world has a similar opportunity in the developing middle classes of China, India, Korea, and elsewhere.  Instead we’re fighting a non-productive economic war with China that neither country will win, but virtually everyone will lose.  That’s not to say we have no issues with China, but in our eagerness for war we’ve shot ourselves in the foot.

The Green New Deal has become the defining task for our national moment.  For many issues—economic, political, racial, environmental, international—it represents a coherent way forward.  It is not the same task as the original New Deal, but certainly as challenging in its scope.  We have to recognize that we have it in our power to create a bright future for ourselves and for humanity.  The founding fathers of this country rose to their occasion.  Will we?

 

Back to Normal from Covid-19

There has been much discussion of how to manage Covid-19 virus infections during the return to normal life.  There are many issues, but one in particular stands out for comment.

That issue comes from the much-noted age dependence of the virus death rate.  By now we’ve had plenty of experience of how this works.  For people under 50, the Covid-19 risk is similar to normal flu.  50-60 means more risk but still relatively small.  Over 60 it starts getting significantly worse, with the death rate more or less doubling for each ten years of age.  Pre-existing conditions make matters worse, but the age effect is still huge.  (There may be other categories of people worthy of attention, but that’s beyond the scope here.)

Overall reducing the death rate is primarily a matter of reducing the death rate for older people.  However, as a practical matter, focusing on the elderly is quite a big job.   If we’re going to protect the elderly from the virus at the very least we need to:  find them all, deliver food and other goods for them, assure fully-competent staff and daily testing at nursing homes.   No one is currently doing that.  On the contrary, death rates at nursing homes are scandalous, and individuals are largely left to manage themselves.  In Massachusetts as of this writing 610 of 1245 deaths were from nursing homes. Our extra hour of food shopping reserved for people over 60 is hardly a solution.

For the first bout with Covid-19 there has been neither the time nor the testing capability for such a strategy.  The countries that originally opted for “herd immunity”—with whatever they could do to protect the elderly—had to back off because of deaths.  The only alternative to catastrophe was to limit the spread of the virus in the population as a whole.  (There is a whole subculture of right-wing columnists claiming there was never a reason for the shutdowns, because it’s just a “simple” problem of isolating the elderly—without any proposals at all for how to do it.  For people who don’t go for that, there’s a different subculture dedicated to the proposition that the Covid-19 virus was never a problem to begin with!)

The point of this note is to recognize that the situation is different for the return to normality.  A focus on the elderly is both an obligation and an opportunity.  The obligation is that we just have to start doing a better job of protecting them.  It may be a logistical nightmare (only 5% of people aged 65+ are in nursing homes), but it’s a well-defined problem to be addressed with time, money, and commitment.  Testing is getting better.  It might even take the National Guard.  But we can certainly make things better if we start now.  We can call the right-wing’s bluff and spend the money to do it.

The opportunity of course is that reducing the elderly death rate will help ride through the ups and downs in new Covid-19 cases as people come back into the workforce.  People will still be getting sick, but children can go to school and parents can go to restaurants without risking anyone’s lives.  Whatever money is spent will be earned back in transition time.

This has to happen, it has to be fully-funded, and it has to start now.  “Flattening the curve” was essential to surviving the first onslaught of the virus.  For the return to normality, it’s “protecting the elderly” that will keep a difficult process going.

The Next 5G

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The scandal of the mobile 5G affair is not that the Europeans refused to give in to Trump administration pressure to cease all purchases from Huawei.  Who knows how bad the security issue is—the Trump people have no specific examples—but the main point is that we have no alternatives to propose.  We dropped the ball.  That’s the scandal.

The scandal is real.  Not only are there no 5G infrastructure products to recommend, but deployment of 5G equipment in our own networks is well-behind other countries.  (The TV ads for 5G are for limited and pre-standard implementations.)  That means we will be similarly late with the 5G applications that should be our bread and butter.  That’s an infrastructure problem.  Government is not doing its job.

This is happening all over the place.  Climate change is an obvious example.  The US has singularly low gasoline prices and no thought of carbon pricing.  For the auto industry we’re even rolling back fuel efficiency standards.  We’ve created an environment where US companies cannot use the US market to achieve world status.  Tesla—our shining light in this area—is the exception that proves the rule:  created with Obama seed capital and almost forced out of business.  The Chevy Bolt is a South Korean technology product.  China is already building a 21st century electrical backbone.  It’s all a great big 5G.

We ourselves have proved over and over again that government needs to lead—before there’s profit to be had.  Sure we’re now funding AI, but that’s late in the game.  By contrast the Energy Department research budget is nowhere near what’s needed:  next year—for the first time—we are funding work on in-network electrical power storage.  Research universities were specifically hit by Trump’s 2017 tax plan.

Dominant countries have a tendency to believe their position was given by God.  (My favorite example is the 17th century Brits who wasted fortunes looking for gold in South America, because they couldn’t believe God would have given it all to the Spanish!)  It’s all too easy to get complacent, and with the ever-more-powerful Evangelicals it’s even doctrine.  In the current technology environment, our ascendance could disappear in a heartbeat.  We’ve got to stop believing in our divine anointment (and also stop counting our aircraft carriers on defense).

Our business-minded leaders need a business metaphor.  As a country we’ve gotten ourselves stuck in a harvesting strategy—with all the benefits flowing (literally!) straight to the investors.   We’d better get back to reinvesting for growth.

 

Software

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This note is a follow-on the previous item about prosperity.  Software was mentioned there, but it deserves its own focus.

There isn’t enough discussion of software businesses.   That’s an important gap, because it lets people fantasize away the changes that are taking place in employment.  Without that discussion we can blame just about anything on globalization, and then believe tariffs will fix it.  Or we can talk about automation, and still think about unions and incremental retraining as the answer.  But that’s wishful thinking.

Software businesses are different.  There is essentially nobody doing production, so there is essentially no incremental cost of production.  Product cost is research and development.  As we noted before that tends toward monopoly businesses that are hard to tax and regulate.

We also mentioned the effect on employment.  It’s not that these companies don’t hire people.  Apple and Google are getting up toward 100,000 people.  But the vast majority of the jobs, well beyond development, require a high degree of technical sophistication.   Even sales and low-level support must deal with the technical sophistication of the products.  In a company like Amazon, with close to 600,000 people, there is a rigid distinction between the sophistication of the good jobs in headquarters versus the hordes of people filling boxes.  Our current technology leaders are all software companies, with all that entails.

But they’re not the only ones.  Globalization and automation are essentially equivalent ways of dealing with non-core functions.  More and more companies can think of themselves as software companies, designing products that can be produced either by machines or some arms-length operation that might just as well be.  In this it is important to recognize that outsourcing is itself a technology area.  Growth in outsourcing reflects how much easier and more reliable it has become. Production becomes machine-like.  That trend is not going away.

There are several types of conclusions to be drawn here.

–  For businesses, the real money is to be made in staying on top of the heap.  That’s the software model.  It will continue to be the direction of business focus, and with it profit margins have proved substantial.

– For employment it means that we have to be realistic about where good jobs are going to be.  There are two types:

  1. There will be technically sophisticated jobs of many sorts. But all will require a sophisticated educational background. We cannot stint on education.
  2. There will be jobs that can’t be easily outsourced or automated. These can be significant in number, but not necessarily in traditional areas. Example areas are human interactions, such as healthcare, daycare, or personal services.  There is also infrastructure, which is largely outside of controlled, automatable environments and not easily moved offsite.  Much of this work will require government intervention to get done.

– We can’t expect things to just work out.   Full employment is not going to produce good jobs for everyone.   We are supposedly living in economic heaven—lowest unemployment in years—but wages still have grown only barely beyond inflation.  And in that, things are far worse at the bottom than at the top of the income scale.  Unions should be strengthened, but they can only do so much about technology (both automation and outsourcing).  And tariffs always sound good, but they are extremely expensive ways to create jobs and historically do more harm than good.

 

In this world, if we want to avoid a declining two-tiered society of haves and have-nots, we have to recognize the role of government—not just to protect people but for national success.

– We have to do better than the current hodge-podge support of education and infrastructure.  Both are critical to the good jobs of the future.  Both require government commitment.

– We have to produce a system of taxation and corporate governance that supports business success without starving that environment that feeds it.  As Apple (among many others) has shown, software profits can be moved anywhere to avoid taxes.  The latest tax changes have actually that easier.

– There are serious problems that are simply outside the scope of the private sector to fix.  The most obvious example is climate change, where we are not only ignoring not only the threat but also the business opportunities it presents.

– We have to understand roles for people in making it happen.

This isn’t actually radical.  It’s closer to the economy we had in the 1950’s and 60’s, when government supported education and research, and businesses reinvested earnings.  We just have to stop believing in good fairies.  There are no miracles solutions delivered by the private sector or anyone else.  We collectively have to provide the environment for both business success and the well-being of the population.

That is a big job, and we’d better start planning for it.  Heaven helps those who help themselves.