New America (board chair emeritus Eric
Schmidt, President the aptronymic Anne-Marie Slaughter), a nominally center-left Beltway think tank (funding) “took
up the mission of designing a new social contract in 2007 and was the
first organization [anywhere?] to frame its vision in these terms.” On May 19,
2016, New America sponsored an annual conference (there was no 2017 iteration)
entitled “The Next Social Contract.” Elizabeth Warren, presidential contender,
was invited to give the opening keynote (transcript, whicn includes video). Warren shared a number
of interesting ideas. I will quote portions of her speech, followed by brief
commentary, much of it already familiar to NC readers, in an effort to situate
her more firmly in the political landscape. But first, let
me quote Warren’s opening paragraph:
It is so good to be here with
all of you. And yes I will be calling on people. Mostly those of you standing
in the back. I always know why people are standing in the back. That’s what
teachers do.
Professional-class dominance
games aside, it’s evident that Warren is comfortable here. These are her
people. And I would urge that, no matter what policy position she might take on
the trail, these policies and this program are her “center of gravity,” as it
were. Push her left (or, to be fair, right) and, like a bobo doll,
she will return to this upright position.
So, to the text (all quotes from Warren from the transcript). I’ll start with two blunders, and then move on
to more subtle material.
Warren Does Not Understand
Uber’s Business Model
Or, in strong form, Warren
fell for Uber’s propaganda.[1] Warren says:
Thank you to the New America
Foundation for inviting me here today to talk about the gig economy… You know,
across the country, new companies are using the Internet to transform the way
that Americans work, shop, socialize, vacation, look for love, talk to the
doctor, get around, and track down ten‐foot
feather boas, which is actually my latest search on Amazon….
These innovations have helped
improve our lives in countless ways, reducing inefficiencies and leveraging
network effects to help grow our economy. And this is real growth…. The most
famous example of this is probably the ride‐sharing
platforms in our cities. The taxi cab industry was riddled with monopolies,
rents, inefficiencies. Cities limited the number of taxi licenses…
Uber and Lyft, two ride‐sharing platforms came onto
the scene about five years ago, radically altered this model, enabling anyone
with a smartphone and a car to deliver rides…. The result was more rides,
cheaper rides, and shorter wait times.
The ride‐sharing story illustrates the
promise of these new businesses. And the dangers. Uber and Lyft fought against
local taxi cab rules that kept prices high and limited access to services….
And while their businesses
provide workers with greater flexibility, companies like Lyft and Uber have
often resisted efforts of those very same workers to try to access a greater
share of the wealth that is generated from
the work that they do. Their business model is, in
part, dependent on extremely low wages for their drivers.
“In part” is doing rather a
lot of work, there, even more than “the wealth that is generated,” because as
NC readers know, Uber’s business model is critically dependent on massive
subsidies from investors, without which it would not exist as a firm. Hubert
Horan (November 30, 2016):
Published financial data shows
that Uber is losing more money than any startup in history and that its ability
to capture customers and drivers from incumbent operators is entirely due to $2
billion in annual investor subsidies. The vast majority of media coverage
presumes Uber is following the path of prominent digitally-based startups whose
large initial losses transformed into strong profits within a few years.
This presumption is
contradicted by Uber’s actual financial results, which show no meaningful margin improvement through 2015 while
the limited margin improvements achieved in 2016 can be entirely explained by
Uber-imposed cutbacks to driver compensation. It is also contradicted by the
fact that Uber lacks the major scale and network economies that allowed
digitally-based startups to achieve rapid margin improvement.
As a private company, Uber is
not required to publish financial statements, and financial statements
disseminated privately are not required to be audited in accordance with
generally accepted accounting principles (GAAP) or satisfy the SEC’s reporting
standards for public companies.
The financial tables below are
based on private financial statements that Uber shared with investors that were
published in the financial press on three separate occasions. The first set
included data for 2012, 2013 and the first half of
2014… The second set included tables of GAAP profit data for full
year 2014 and the first half of 2015;
the third set included summary EBITAR contribution data for the first half of 2016.….
[F]or the year ending
September 2015, Uber had GAAP losses of $2 billion on revenue of $1.4 billion,
a negative 143% profit margin. Thus Uber’s current operations depend on $2
billion in subsidies, funded out of the $13 billion in cash its investors have
provided.
Uber passengers were paying
only 41% of the actual cost of their trips; Uber was using these massive
subsidies to undercut the fares and provide more capacity than the competitors
who had to cover 100% of their costs out of passenger fares.
Many other tech startups lost
money as they pursued growth and market share, but losses of this magnitude are
unprecedented; in its worst-ever four quarters, in 2000, Amazon had a negative
50% margin, losing $1.4 billion on $2.8 billion in revenue, and the company
responded by firing more than 15 percent of its workforce. 2015 was Uber’s
fifth year of operations; at that point in its history Facebook was achieving
25% profit margins.
Now, in Warren’s defense, it
is true that she, on May 19, 2016, could not have had the benefit of Horan’s
post at Naked Capitalism, which was published only on November 30, 2016.
However, I quoted Horan’s post at length to show the dates: The data was out
there; it wasn’t a secret; it only needed a staffer with a some critical
thinking skills and a mandate to do the research to come to the same
conclusions Horan did, and Uber’s lack of profitabilty, information that is
easily accessible, is a ginormous red flag for anybody who takes the idea that
Uber “generates wealth” seriously. How is it that the wonkish Warren is
recommending policy based on what can only be superficial research in the trade
and technical press? Should not the professor have done the reading?[2]
Warren Does Not Understand How
Federal Taxation Works
The second blunder. Warren
says:
First, make sure that every
worker pays into Social Security, as the law has always intended. Right now, it
is a challenge for someone who doesn’t have an employer that automatically
deducts payroll taxes to pay into Social Security. This can affect both a
worker’s ability to qualify for disability insurance after a major [injury],
and it can result in much lower retirement benefits. If
Social Security is to be fully funded for generations to come, and if all
workers are to have adequate benefits, then electronic, automatic, mandatory
withholding of payroll taxes must apply to everyone, gig workers,
1099 workers, and hourly employees.
It is laudable that Warren
wants to bring all workers in the retirement system. But as NC readers know,
Federal taxes do not “pay for” Federal spending, and hence Warren’s thinking
that Social Security will be “fully funded” through “payroll taxes” is a
nonsense (and also reinforces incredibly destructive neoliberal austerity
policies). I will not tediously rehearse MMT’s approach to taxation, but will
simply quote a recent tweet from Warren Mosler:
MMT condensed by Warren Mosler
#auspol
And if Mosler isn’t good
enough, here’s John Stuart Mill on currency issuers:
“governments...determined
to...make a piece of paper issued by them pass for a pound, by merely calling
it a pound, and consenting to receive it in payment of the taxes.” - John
Stuart Mill, 1848, Principles of Political Economy
Warren Supports Medicare for
All Only Nominally
Warren is indeed a co-sponsor of Sanders’ (inadequate)
S1804. But read the following passages, and you will see #MedicareForAll not
where her passion lies:
As greater wealth is generated
by new technology, how can we ensure that the workers who support the economy
can actually share in the wealth?
(The idea that workers
“support” “the” [whose?] “economy,” instead of driving or being the
economy, is interesting, but let that pass.)
Warren then proceeds to lay
out a number of policies to answer that question. She says:
Well, I believe we start with
one simple principle. All workers, no matter where they work, no matter how
they work, no matter when they work, no matter who they work for, whether they
pick tomatoes or build rocket ships, all workers should have some basic
protections and be able to build some economic security for themselves and
their families. No worker should fall through the cracks. And here are some
ideas about how to rethink and strengthen the worker’s bargain.
So, she’s not just laying out
policy for the gig economy (the occasion of the speech); she’s laying out a
social contract (the topic of the speech). Picking through the next sections,
here is the material on health care:
We can start by strengthening
our safety net so that it catches anyone who has fallen on hard times, whether
they have a formal employer or not. And there are three much‐needed changes right off the
bat on this.
I hate the very concept of a
“safety net.” Why should life be like a tightrope walk? Who wants that, except
crazypants neoliberal professors, mostly tenured? She then makes
recommendations for three policies, and sums up:
These three, Social Security,
catastrophic insurance, and earned leave, create a safety net for income.
Hello? Medical bankruptcy?[3] She then moves on from the “safety
net” for income to benefits, which is the aegis under which she places health
care:
Now, the second area of change
to make is on employee benefits, both for healthcare and retirement. To make
them fully portable. They belong to the worker, no matter what company or
platform generates the income, they should follow that worker wherever that
worker goes. And the corollary to this is that workers without formal employers
should have access to the same kinds of benefits that some employees already
have.
I want to be clear here. The
Affordable Care Act is a big step toward addressing this problem for
healthcare. Providing access for workers who don’t have employer‐sponsored coverage and
providing a long-term structure for portability. We should improve on that
structure, enhancing its portability, and reducing the managerial involvement
of employers.
Remember, this is a Democratic
audience, and what do we get? “Portability,” “access”, and reduced “managerial
involvement.” That’s about as weak as tea can possibly get and and not be
water, and this is a liberal Democrat audience. (“The same kinds of benefits that some employees already have.” Eeesh.) But
wait, you say! This speech is in 2016, and in 2018, Warren supports
#MedicareForAll! For example, “Health care: Supports the “Medicare for All” bill led by Bernie
Sanders” (PBS, January 17, 2019). But notice how equivocal that support is.
Quoting PBS again, Warren “called that approach ‘a goal worth fighting for.'”
Rather equivocal! And following the link to that quote, we find it’s from a speech Warren gave to Families USA’s Health Action 2018
Conference. The equivocation is clear:
I endorsed Bernie Sanders’
Medicare for All bill because it lays out a way to give every single person in
this country a guarantee of high-quality health care. Everybody is covered.
Nobody goes broke because of a medical bill. No more fighting with insurance
companies. This is a goal worth fighting for, and
I’m in this fight all the way.
There are other approaches as
well…I’m glad to see us put different ideas on the table.
So, we have a gesture toward
#MedicareForAll. But then, Warren, instead of going straight on into detail
about how #MedicareForAll would work (“You get dental!”), immediately
backtracks and emits a welter of detail about minor
fixes improvements, on the order of “portability,” “access,”
and reduced “managerial involvement.” (Different details from her New America
speech, but details still). Then she moves on to Massachusetts. Read this, and
it’s clear where Warren’s heart is:
Massachusetts has the highest
rate of health insurance coverage in the nation. We are the healthiest state in
the nation[4].
That didn’t just happen
because we woke up one morning and discovered that insurance companies had just
started offering great coverage at a price everyone could afford.
We demanded that insurance
companies live up to their side of the bargain. Every insurer participating in
our exchange is required to offer plans with standard, easy-to-compare benefits
and low up-front costs for families. Last year, we had the second-lowest
premiums in the ACA market of any state in the country. Massachusetts insurers
pay out 92% of the dollars they bring in through premiums to cover costs for
beneficiaries – not to line their own pockets.
The rules are tough in
Massachusetts, but the insurance companies have shown up and done the hard work
of covering families in a responsible way. We have more than double the number
of insurers participating on our exchanges, compared to the average across the
country. They show up, they serve the people of Massachusetts, and they still
make plenty of money.
Look, we still have plenty of
work to do, particularly when it comes to bring down health spending, but we’re
proud of the system we have built in Massachusetts, and I think it shows that
good policies can have a real impact on the health and well-being of hard
working people across the country.
Never mind that Warren can
say, virtually in the same breath, that insurance companies “still make plenty
of money” and “we have plenty of work to do… to bring down health care
spending.” RomneyCare was the beta version of ObamaCare. We tried it, as a
nation, starting in 2009, and here we are.[5] If that’s what Warren wants,
fine, but why not simply advocate for it?
Warren Has No Coherent Theory
of Change
Except, perhaps, one
distinctly slanted toward insiders. “Work hard and play by the rules” is a Clintonite trope, but
let’s search on “rules” and see what we come up with. More from the transcript:
But it is policy, rules and regulations, that will determine
whether workers have a meaningful opportunity to share in the wealth that is
generated.
Here, workers are passive,
acted upon by rules, and those who create them. But Warren contradicts herself:
“Lyft and Uber have often resisted efforts of those very same workers.” Here,
workers are active. But if workers are active in the second context, they are
also active in the first! Where does Warren think change comes from? The
generous hearts of Uber managment and its marks investors?
More:
Antitrust laws and newly‐created public utilities
addressed the new technological revolution’s tendency toward concentration and
monopoly, and kept our markets competitive. Rules to prevent cheating and fraud
were added to make sure that bad actors in the marketplace couldn’t get a leg
up over folks who played by the rules.
Note the lack of agency in
“were added.” Warren erases the entire Populist Movement! She also can’t seem to get
her head round the idea that workers didn’t necessarily play by the existing
ruies in order to create new ones. And:
Workers have a right to expect
our government to work for them. To set the basic rules of the game. If this
country is to have a strong middle class, then we need the policies that will
make that possible. That’s how shared prosperity has been built in the past,
and that is our way forward now. Change won’t be easy. But we don’t get what we
don’t fight for. And I believe that America’s workers are worth fighting for.
Now, on the one hand, this is
great. I, too, believe that “America’s workers are worth fighting for.” What
Warren seems to lack, at the visceral level, is the idea that workers
should be (self-)empowered to do the fighting (as opposed to having the
professional classes pick their fights for them). Here is Warren on unions:
Every worker should have the
right to organize, period. Full‐time,
part‐time, temp workers, gig
workers, contract workers, you bet.
Very good. More:
Those who provide the labor
should have the right to bargain as a group with whoever controls the terms of
their work….
The idea that workers
themselves should control the terms of their work seems to elude Warren. This
erases, for example, co-ops. More:
Government is not the only
advocate on behalf of workers.
“Not the only?” Like, there
are lots of others? This seems a tendentious, not to say naive, view of the
role of government. More:
It was workers [here we go],
bargaining through their unions [and the qualification], who helped [helped?]
introduce retirement benefits, sick pay, overtime, the weekend, and a long list
of other benefits, for their members and for all workers across this country.
Unions helped build America’s middle class, and unions will help rebuild
America’s middle class.
Here, at least, Warren grants
workers (partial) agency, but only through the institutional framework of
unions. That distorts the history. Granted, “helped introduce” is doing a lot
of work, and who they were “helping” isn’t entirely clear, but the
history is enormously complicated. (Here again, Warren needs to do the
reading.) For example, the history of the weekend long predates unions. And
“bargaining through their unions” isn’t the half of it. Take, for
example, the
Haymarket Affair. From the Illinois Labor History Society:
To understand what happened at
Haymarket, it is necessary to go back to the summer of 1884 when the Federation
of Organized Trades and Labor Unions, the predecessor of the American
Federation of Labor, called for May 1, 1886 to be the beginning of a nationwide
movement for the eight-hour day. This wasn’t a particularly radical idea since
both Illinois workers and federal employees were supposed to have been covered
by an eight-hour day law since 1867. The problem was that the federal
government failed to enforce its own law, and in Illinois, employers forced
workers to sign waivers of the law as condition of employment.
Fine, “rules.” Which weren’t
being obeyed! More from the Illinois Labor History Society:
Monday, May 3, the peaceful
scene turned violent when the Chicago police attacked and killed picketing
workers at the McCormick Reaper Plant at Western and Blue Island Avenues. This
attack by police provoked a protest meeting which was planned for Haymarket
Square on the evening of Tuesday, May 4. Very few textbooks provide a thorough
explanation of the events that led to Haymarket, nor do they mention that the
pro-labor mayor of Chicago, Carter Harrison, gave permission for the meeting….
Most speakers failed to appear…. Instead of the expected 20,000 people, fewer
than 2,500 attended…. The Haymarket meeting was almost over and only about two
hundred people remained when they were attacked by 176 policemen carrying
Winchester repeater rifles. Fielden was speaking; even Lucy and Albert Parsons
had left because it was beginning to rain. Then someone, unknown to this day,
threw the first dynamite bomb ever used in peacetime history of the United
States. The next day martial law was declared, not just in Chicago but
throughout the nation. Anti-labor governments around the world used the Chicago
incident to crush local union movements.
This is how workers “helped
introduce” the eight-hour day.
Yes, America’s workers are
“worth fighting for.” But they also fight for themselves, and are fought
against! Warren’s theory of change — which seems to involve people of good will
“at the table” — cannot give an account of events like Haymarket or why, in the
present day, it’s Uber’s drivers who are also the drivers of change, and not
benevolent rulemakers. Warren’s views on the social contract are in great
contrast to Sanders’ “Not me, us.”
NOTES
[1] Warren is far stronger in
areas where she has developed academic expertise than in areas where she has
not.
[2] Google is Google, i.e.,
crapified, but if Warren has retracted or changed her views on Uber, I can’t
find it. She was receiving good press for this speech as late as August 2017.
[3] Oddly, bankruptcy is where
Warren made her academic bones. I’m frankly baffled at her lack of
full-throated advocacy on this, especially before a friendly audience.
[5] Warren focuses on health
insurance, not health care. I’m nothing like an expert in the Massachusetts
health insurance system. However, looking at this chart, I’m seeing all the usual techniques
to deny access to care: Deductibles, co-pays, out-of-network costs, and
(naturally) high-deductible plans. Health care should be free at the point of
delivery. Why is that so hard to understand?
