Executive summary: The propaganda catapulted by Ronald Reagan that "trickle down" is how economics works has been demonstrably bankrupt nearly from its inception, and remains supported by no facts on the ground. Yet, like a zombie, it refuses to die, persisting in the face of all evidence to the contrary. Why is this important to those who support the kinds of progressive values that FDR pioneered? Because come the next crisis (and there will be one, rest assured) if only those with the trickle down theory have a ready explanation, we'll continue to move the economy rightward, and from bad to worse. On the other hand, the "middle out" type of economics explained in the article acknowledges an alternative narrative (and is supported by facts): That if you enrich low-wage workers it enrichs everyone. The facts support the "middle out" economics, but if trickle down is the only theory, we'll only try more of the same, harder and deeper...and things will get worse. So I"ll pass this along so you'll be armed and ready, come the revolution...;-)... (3/22/15)
The 1 percent rigged everything: Why no one can end Ronald Reagan’s “dead wrong” voodoo economics
A thriving middle class is the cause of growth. The middle class creates rich people -- not the other way around
Franklin Roosevelt, Ronald Reagan, Elizabeth Warren (Credit: AP/Barry Thumma/J. Scott Applewhite)
Venture capitalist Nick Hanauer, a highly visible champion of Seattle’s $15/hour minimum wage, wrote a piece in the Atlantic last month pushing on another front in the war against toxic income inequality. “Stock Buybacks Are Killing the American Economy,” he warned, and getting rid of them would be a tremendous boon to the economy.
This latest front rebukes those who say that raising the minimum wage does little to address what ails the American middle class. First, it underscores the obvious: that battling against decades of bad economic policy must necessarily be a multi-pronged affair, with no single action able to solve everything at once. But second, it starkly highlights how much of the problem can be traced to a single source—the profoundly misguided notion that giving even more money to rich people would produce prosperity for all. Instead, the exact opposite has happened. That’s why the attack on stock buybacks is an even more profound attack on economics as usual, even if it, too, only represents one facet of what has to be a multi-faceted approach.
Corporate profits have doubled since the post-World War II boom years, from an average of 6 percent of GDP to more than 12 percent today, Hanauer pointed out, and yet “job growth remains anemic, wages are flat, and our nation can no longer seem to afford even its most basic needs.” Stock buybacks—which (as explained here) were virtually forbidden from 1934 through 1982—are a key reason why our economy is so cash-starved when it comes to wealth-producing investments:
Over the past decade, the companies that make up the S&P 500 have spent an astounding 54 percent of profits on stock buybacks. Last year alone, U.S. corporations spent about $700 billion, or roughly 4 percent of GDP, to prop up their share prices by repurchasing their own stock….
It is mathematically impossible to make the public- and private-sector investments necessary to sustain America’s global economic competitiveness while flushing away 4 percent of GDP year after year.
Hence,
Hanauer argued, it’s time to end stock buybacks—they are crippling our
ability to grow our economy robustly. Along the way, Hanauer also
sharply criticized what he called “the 40-year obsession with
‘shareholder value maximization’” [SVM] as the narrow-minded definition
of corporate purpose, which has been used to justify, rationalize and
obfuscate the buyback explosion, and other ills of corporate
misgovernance that have become commonplace in the post-1980 era.
Hanauer has plenty of company raising this argument and his critique of SVM, from UMass economist William Lazonick writing in the Harvard Business Review (“Profits Without Prosperity”) to a book by Cornell Law School’s Lynn Stout (“The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public,” author’s overview here), to the white paper Hanauer himself cited, titled “The World’s Dumbest Idea,” by GMO asset allocation manager James Montier, to a 2014 report from the Aspen Institute, cited by Steve Denning of Forbes, noting it “showed that thought leaders were coming to the same conclusion [questioning SVM]. In a cross-section of business leaders, including both executives and academics, a majority, particularly corporate executives, agreed that the primary purpose of the corporation is not to maximize shareholder value, but rather ‘to serve customers’ interests.’”
With all this criticism out there—from corporate governance obersevers and participants in alike—and the strength of the supporting data, it seemed a bit strange to see a March 2 Wonkblog post by Max Ehrenfreund jarringly titled “The fringe economic theory that might get traction in the 2016 campaign,” particularly since the post itself treated both Stout and Hanauer quite seriously. “In what universe is this argument ‘fringe’?” Lawyers Guns and Money blogger Robert Farely tweeted, retweeted by UC Berkeley economist Brad DeLong. The title was even stranger in light of a September 2013 Wonkblog post by Steven Pearlstein, straigthforwardedly titled “How the cult of shareholder value wrecked American business.”
But it’s certainly true that you can’t reliably tell fringe from mainstream in economics anymore, especially if you’re trying to track ideas through shifting reference frames. Defaulting on the debt in order to be “fiscally conservative,” anyone? That fringe-of-the-fringe-of-the-
More fundamental, it seemed to me, was the underlying ongoing battle over how economic arguments and analysis are framed, and why that matters—a battle much broader and longer than the 2016 campaign. So I contacted Hanauer, and asked about how he had framed his his article—which in turn was a critique of how Obama had framed his comments on income inequality in his State of the Union speech. At the beginning of his article, Hanauer wrote that Obama “missed the opportunity to draw an important connection between rising income inequality and stagnant economic growth.” So I asked him what that connection was, why is it so important, and what could be done about it. In his view, Obama saw extreme inequality as wrong in moral terms, which resonates well with his base, but failed to grasp that it was wrong economically as well, which could resonate much more broadly.
“The problem I highlighted was that President Obama didn’t offer an alternative theory of growth,” Hanaauer said. “He could have, but he didn’t. He’s given six state of the unions, talked a little bit about inequality, he’s made some moral arguments about how it’s bad, he has not once offered an alternative explanation for how an economy like ours grows. And and so if you’re not willing to litigate the methods of growth, then you’re ceding that to the other side.”
It’s not just Obama, in Hanauer’s view. “This is what progressives have done for generations, is that we ceded to the other side that the rich are job creators; we ceded to the other side that less regulation equals more growth; we ceded to the other side that if wages go up, then employment goal go down. And then we wonder and complain about the policies that flow naturally and logically from that set of baseline assumptions. That’s the problem,” he said—a failure to contest the basic framework of economic thought. Hanauer has challenged that framework, with what he calls “middle-out economics”, which was the subject of the summer 2013 issue of Democracy.
He made the same point again, about the failure to contest fundamentals, with a slightly different emphasis and explanation. “The problem with our politics is President Obama and the people who surround him, don’t represent an alternative to trickle down economics, they are trickle-down-lite,” Hanauer told me. “They’re sort of kinder-and-gentler trickle-down economics. They can talk a little bit about the importance of the middle class, but, in my opinion, they haven’t quite seen clearly that they’ve gotten cause-and-effect reversed. They still think that a thriving middle class is an effect of growth, a consequence of growth, and the truth is in a technological, modern economy, a thriving middle class is the cause of growth…. The middle class creates rich people, not the other way around.”
This used to be well-understood by everyone. During America’s long post-World War II boom, the incomes of all levels growing approximately equally—though slightly slower at the very top. “That’s how you sustain virtuous cycle of increasing returns which capitalism can be. Capitalism can be constructed in a way so that everyone does better all the time. It’s a beautiful thing,” Hanauer said. “But if the power dynamics change in really extreme ways, as they have in the last 30 years, and all of the value of enterprise is sucked out by a few owners and the senior managers, then you basically killed the goose that layed the golden egg.” That’s what stock buybacks are all about.
In the article he talked about the doubling of corporate profits from 6 percent of GDP traditionally to 12 percent of GDP today. But now he added another wrinkle: this happened “at the exact same time as labor as a percent of GDP has fallen 6 percent, 53 to 46 or something like that. So, it’s $1 trillion. That extra trillion dollars isn’t profit because it has to be, or should be, or needs to be. It’s profit because powerful people like me prefer it to be. That trillion dollars can go to wages, it could go to discounts to consumers, it could be used to finance the construction of whatever you think of.” Instead, most of it’s going into stock buybacks, “$700 billion a year, 54 percent of profits, 4 percent of GDP,” Hanauer repeated.”It’s just sort of a nefarious and non-transparent way for very rich people to make themselves richer, at the expense of everybody else.”
But stock buybacks make perfect sense in the framework of trickle-down economics, so Hanauer took a moment to describe that logic:
There are rays of hope, however. The Wonkblog “fringe theory” story also cited a recent “Report of the Commission on Inclusive Prosperity,” sponsored by Center for American Progress [CAP] and co-chaired by former Treasury Secretary Larry Summers, long a poster boy for that sort of thinking who has apparently begun to change his tune. The very notion of “inclusive prosperity” indicates a more hopeful policy direction, and the report itself recognizes the need for actions on multiple fronts, including stock buybacks. Overall, Hanuer said he’d give the report “a B or a B+, because it’s pointed in the right direction…. I don’t think there’s a policy in it I would change, I just think there’s a way to more forcefully articulate for people how you grow a modern economy, that is much less a moral argument, and much more a practical, growth-based argument.”
Although not involved with the report, Hanauer is part of the conversation informing it. “I”m deeply involved in CAP,” he said. “There’s a middle-out economic center at CAP, and the inclusion argument is something we’ve been driving.” But he keeps coming back to talking about growth the way you’d expect a venture capitalist might. “Growth, in technological capitalist economies, is a consequence of the feedback loop between increasing amounts of innovation and increasing amounts of demand. And the mechanism that drives that feedback loop is inclusion. Inclusive economic policies are the thing that create growth. The more people who are included as innovators and entreprenuers, and the more people who are included as robust consumers, the better the thing goes.”
The task ahead is a daunting one, Hanauer admits. “There’s a huge amount of economic nonsense that needs to be cleared away,” he said. For example, “You have a Speaker of the House of Representatives, John Boehner, who can get up until the crowd and say, ‘You know, if you raise the price of employment, guess what happens, you get less of it.’ And most people in this country nod in agreement, right? Idiotic! It’s just not true. And until political leaders are willing to face him down and face that idea down, and point out the obvious, which is that it’s the opposite is true, essentially, that when the workers earn more money businesses have more customers, you’re in this trap, you’re just in this trap.”
One could cite this as a classic example of hegemony—the expression of a dominant ideology in drag as common sense, facilitated by a vast array of different institutional forces. The great irony is that while the concept of hegemony, and hegemonic warfare to challenge the existing hegemonic order, was developed by a famous leftist, the Italian Marxist Antonoio Gramsci, the practice of hegemonic warfare in America over the past half century or more has been almost exclusively seen on the right.
Centrist or center-left think tanks, for example, are largely focused on analysing problems and proposing “politically viable” solutions, primarily by integrating findings generated by academics. But rightwing think tanks use a completely different model. Their purpose is not to try to solve existing problems, but to continually shift the framework of acceptable solutions ever farther to the right. They aim to change the very definition of what counts as “politically viable”, whether it actually solves anything or not. Advocacy, messaging, media outreach and political collaboration are the core activities of think tanks using this model, problem-solving plays virtually no role at all. If something doesn’t work, simply suggest something else, even farther to the right than what’s already failed. Failure can actually be more valuable than success—it can accelerate the process of moving the conversation ever farther to the right.
This model was most clearly articulated on the state level, starting at the Mackinac Center in Michegan, where the model of the “Overton Window” was developed as a way to think very specifically about shifting the framework of acceptable ideas continually farther to the right. But the same sort of calibrated, ideologically premeditated thinking can be found throughout the rightwing foundation and think-tank world, while it remains extremely rare on the center-left. A big-picture view of how this has unfolded in the realm of economics can be found in Kim Phillips-Fein’s book “Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan.”
This history has also undoubtedly played an important role in shaping how most Americans—academics, politicians, journalists, everyday people—think and talk about economics without even realizing it, the subject of implicit cognition dissected by cognitive linguist Anat Shenker-Osorio in her book, “Don’t Buy It: The Trouble With Talking Nonsense About the Economy” (my review here). Shenker-Osorio found that conservatives share a much more coherent, broadly shared—if questionable—view of what the economy is and what it’s for than progressives do, reflected in part by the sorts of metaphors used when talking economics. As I wrote in my review, “Conservative models tell us that the economy is autonomous (most typically, a self-regulating body) and morally demanding – a view encapsulated in an episode of ‘South Park’ ['Margaritaville'],” in which the market is portrayed as an angry god, an example cited prominently in the book. These shared implicit models in turn profoundly influence what may seem like “common sense,” while no single progressive model has nearly as much salience.
All this history and social science helps explain why the complete failure of trickle-down economics over the past 35 years—culminating with the fincial crisis and the Great Recession—did not result in any sort of systemic rethinking from the left, but rather unleashed an profound resurgence of even more ancient, previously discredited ideas from the right, most notably the cult of austerity, which is still strangling governments and economies around the world.
Still, the power of a single good real-world example remains extremely potent, which may explain why Hanauer loves to talk about what’s happening in Seattle, where he lives:
Rather than answering directly, Hanauer doubled down on his message. “You have to be able to define, in concrete terms, what your alternative theory of growth is. I submit to you – and I know this sounds self-aggrandizing – but no one on our side, can explain to you as succinctly and clearly where growth actually comes from than me and my gang. When I say growth in technological capitalist economies is a consequence of the feedback loop between increasing amounts of innovation and demand, that’s a theory of growth. So, you find me a Democratic leader whose said anything like that, find one, you’ll find lots of complaints, you’ll find lots of great attacks. So, our theory of the case is that until we can get people to recognize how these technological economies actually grow, and unite people around an alternative to the trickle-down economics idea, until you do that, you cannot build the machine. Once you do that, then the machine part’s easy.”
Of course Hanauer’s right to say that complaints far outnumber alternative solutions. That’s a balance that needs to shift dramatically, and Hanauer is leading the charge. But despite his acumen and his eloquence, there is no magical one-size-fits-all way of communicating ideas and insights, no matter how true or beneficial they may be. The right has long realized this, and organized itself accordingly. And the landscape of unconscious assumptions, models and metaphors strongly favors them as well. Hanauer may well have the message we need, and he’s brilliantly highlighted what’s been lacking in even Obama’s most progressive moments more clearly than anyone else. But the medium in which that message can spread to everyone—that’s a whole other can of worms that’s still crying out to be explored. Now that Hanauer has articulated that message so clearly, the time is ripe for others to step forward and take on that work as well.
Paul Rosenberg is a California-based writer/activist, senior editor for Random Lengths News, and a columnist for Al Jazeera English. Follow him on Twitter at @PaulHRosenberg.
Hanauer has plenty of company raising this argument and his critique of SVM, from UMass economist William Lazonick writing in the Harvard Business Review (“Profits Without Prosperity”) to a book by Cornell Law School’s Lynn Stout (“The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public,” author’s overview here), to the white paper Hanauer himself cited, titled “The World’s Dumbest Idea,” by GMO asset allocation manager James Montier, to a 2014 report from the Aspen Institute, cited by Steve Denning of Forbes, noting it “showed that thought leaders were coming to the same conclusion [questioning SVM]. In a cross-section of business leaders, including both executives and academics, a majority, particularly corporate executives, agreed that the primary purpose of the corporation is not to maximize shareholder value, but rather ‘to serve customers’ interests.’”
With all this criticism out there—from corporate governance obersevers and participants in alike—and the strength of the supporting data, it seemed a bit strange to see a March 2 Wonkblog post by Max Ehrenfreund jarringly titled “The fringe economic theory that might get traction in the 2016 campaign,” particularly since the post itself treated both Stout and Hanauer quite seriously. “In what universe is this argument ‘fringe’?” Lawyers Guns and Money blogger Robert Farely tweeted, retweeted by UC Berkeley economist Brad DeLong. The title was even stranger in light of a September 2013 Wonkblog post by Steven Pearlstein, straigthforwardedly titled “How the cult of shareholder value wrecked American business.”
But it’s certainly true that you can’t reliably tell fringe from mainstream in economics anymore, especially if you’re trying to track ideas through shifting reference frames. Defaulting on the debt in order to be “fiscally conservative,” anyone? That fringe-of-the-fringe-of-the-
More fundamental, it seemed to me, was the underlying ongoing battle over how economic arguments and analysis are framed, and why that matters—a battle much broader and longer than the 2016 campaign. So I contacted Hanauer, and asked about how he had framed his his article—which in turn was a critique of how Obama had framed his comments on income inequality in his State of the Union speech. At the beginning of his article, Hanauer wrote that Obama “missed the opportunity to draw an important connection between rising income inequality and stagnant economic growth.” So I asked him what that connection was, why is it so important, and what could be done about it. In his view, Obama saw extreme inequality as wrong in moral terms, which resonates well with his base, but failed to grasp that it was wrong economically as well, which could resonate much more broadly.
“The problem I highlighted was that President Obama didn’t offer an alternative theory of growth,” Hanaauer said. “He could have, but he didn’t. He’s given six state of the unions, talked a little bit about inequality, he’s made some moral arguments about how it’s bad, he has not once offered an alternative explanation for how an economy like ours grows. And and so if you’re not willing to litigate the methods of growth, then you’re ceding that to the other side.”
It’s not just Obama, in Hanauer’s view. “This is what progressives have done for generations, is that we ceded to the other side that the rich are job creators; we ceded to the other side that less regulation equals more growth; we ceded to the other side that if wages go up, then employment goal go down. And then we wonder and complain about the policies that flow naturally and logically from that set of baseline assumptions. That’s the problem,” he said—a failure to contest the basic framework of economic thought. Hanauer has challenged that framework, with what he calls “middle-out economics”, which was the subject of the summer 2013 issue of Democracy.
He made the same point again, about the failure to contest fundamentals, with a slightly different emphasis and explanation. “The problem with our politics is President Obama and the people who surround him, don’t represent an alternative to trickle down economics, they are trickle-down-lite,” Hanauer told me. “They’re sort of kinder-and-gentler trickle-down economics. They can talk a little bit about the importance of the middle class, but, in my opinion, they haven’t quite seen clearly that they’ve gotten cause-and-effect reversed. They still think that a thriving middle class is an effect of growth, a consequence of growth, and the truth is in a technological, modern economy, a thriving middle class is the cause of growth…. The middle class creates rich people, not the other way around.”
This used to be well-understood by everyone. During America’s long post-World War II boom, the incomes of all levels growing approximately equally—though slightly slower at the very top. “That’s how you sustain virtuous cycle of increasing returns which capitalism can be. Capitalism can be constructed in a way so that everyone does better all the time. It’s a beautiful thing,” Hanauer said. “But if the power dynamics change in really extreme ways, as they have in the last 30 years, and all of the value of enterprise is sucked out by a few owners and the senior managers, then you basically killed the goose that layed the golden egg.” That’s what stock buybacks are all about.
In the article he talked about the doubling of corporate profits from 6 percent of GDP traditionally to 12 percent of GDP today. But now he added another wrinkle: this happened “at the exact same time as labor as a percent of GDP has fallen 6 percent, 53 to 46 or something like that. So, it’s $1 trillion. That extra trillion dollars isn’t profit because it has to be, or should be, or needs to be. It’s profit because powerful people like me prefer it to be. That trillion dollars can go to wages, it could go to discounts to consumers, it could be used to finance the construction of whatever you think of.” Instead, most of it’s going into stock buybacks, “$700 billion a year, 54 percent of profits, 4 percent of GDP,” Hanauer repeated.”It’s just sort of a nefarious and non-transparent way for very rich people to make themselves richer, at the expense of everybody else.”
But stock buybacks make perfect sense in the framework of trickle-down economics, so Hanauer took a moment to describe that logic:
Neoclassical economics and the trickle down policy framework that we have derived from it argues that there is a trade-off between fairness and growth. The general idea of trickle down economics is that the richer the rich get and the less constrained they are, less burdened in regulations, the more jobs they create, the better off everyone will be. It’s the concentrated accumulation of capital which is the principal driver of market capitalism.. So, rising economic inequality isn’t a bug, it’s a feature of the trickle down economics. It’s how you know things are getting better, right? Because the richer the rich get, the more jobs they create. This is a general principle of the thing.There’s only one problem: It’s “dead wrong,” Hanauer said flatly. And it’s based on the wrong sort of mathematics—like using addition to try to multiply and divide. “The economy isn’t this linear equilibrium system, it’s a complex, nonlinear, nonequilibrium systems, and is best understood not mechanistic terms, but eco-systemically.” Nonlinear, nonequilibrium mathematics is a good deal more difficult and complex than the math used by neoclassical economists. But the qualitative picture it paints is not that hard to grasp, as Hanauer explained it:
Once you see it eco-systemically, what you can see quite clearly is that arguing, for instance, that if wages go up employment will go down would be like arguing that if plants grow animals will shrink, right? Literally, that’s silly.With that in mind, the folly of trickle-down economics comes sharply into focus, as Hanauer highlighted next:
On the contrary, businesses essentially eat the wages of workers, right? They subsist on the wages of workers, and so obviously, to a reasonable degree, the more wages rise, the more businesses—again, pressing the metaphor—have to eat. And that’s why the fundamental law of capitalism is that if workers have more money businesses have more customers, and need more workers.
What’s very clear, is that when you concentrate income in fewer and fewer hands, you’re essentially killing that feedback loop. You create a vicious cycle. The typical worker to maintain their share of income over the last 30 years, as you well know, the median wage wouldn’t be $50,000 it would be something like $75,000. If that was true,, think about how many more cars who be purchased every year in this country. There are 3 percent of Americans who own exactly the car that they want, but the other 97 percent would like a new one!In short, Hanauer summed up, in a technological capitalist economy, growth “isn’t a consequence of concentrating capital in the hands of a few people, and hoping it will trickle down,” rather it’s “a consequence of the feedback loop between increasing amounts of innovation and entrepreneurship and demand.” And that, in turn made Hanauer’s criticism of Obama’s missed opportunity crystal clear:
When you see it that way, when you explain where growth comes from, in a realistic way, then you can see that inequality isn’t just unfair, it’s actually terrible for the economy and for business. And that’s the opportunity that Pres. Obama missed. Because he is surrounded by trickle-down thinkers who still sort of secretly believe that if we just made rich people richer, that would be fine.And this explains for instance, why it took the Obama administration six years to even notice that they had the ability, for instance, to increase the overtime threshold. Inquiring minds want to know, why it took them six years. And, by the way, that somebody else had to point it out.This also explains Obama’s timidity regarding in the minimum wage, Hanauer said:
This explains why President Obama, in his last State of the Union, thought a $9 minimum wage would be a big step in the right direction, and that’s because, again if you’re captured by this trickle down view, the only reason you increase wages for poor people is because you feel sorry for them, as a matter of social justice. But once you realize that trickle down economics isn’t true and that middle out economics is true, raising wages for low-wage workers is the quickest and fastest way to drive business activity. That’s why we [in Seattle] ended up at $15.The problem with Obama’s thinking is not so much Obama himself, but the whole entourage of policy people surrounding him. “Trust me, these guys all got PhD’s in economics in the same places, they all learn the same crappy neoclassical ideas, they are captured by them, and they can’t get out of their own way,” Hanauer said. “And I think that’s the big problem. They don’t know how to make this argument because they are so wedded to these old stale ideas. Even if they say they’re not. But they are!”
There are rays of hope, however. The Wonkblog “fringe theory” story also cited a recent “Report of the Commission on Inclusive Prosperity,” sponsored by Center for American Progress [CAP] and co-chaired by former Treasury Secretary Larry Summers, long a poster boy for that sort of thinking who has apparently begun to change his tune. The very notion of “inclusive prosperity” indicates a more hopeful policy direction, and the report itself recognizes the need for actions on multiple fronts, including stock buybacks. Overall, Hanuer said he’d give the report “a B or a B+, because it’s pointed in the right direction…. I don’t think there’s a policy in it I would change, I just think there’s a way to more forcefully articulate for people how you grow a modern economy, that is much less a moral argument, and much more a practical, growth-based argument.”
Although not involved with the report, Hanauer is part of the conversation informing it. “I”m deeply involved in CAP,” he said. “There’s a middle-out economic center at CAP, and the inclusion argument is something we’ve been driving.” But he keeps coming back to talking about growth the way you’d expect a venture capitalist might. “Growth, in technological capitalist economies, is a consequence of the feedback loop between increasing amounts of innovation and increasing amounts of demand. And the mechanism that drives that feedback loop is inclusion. Inclusive economic policies are the thing that create growth. The more people who are included as innovators and entreprenuers, and the more people who are included as robust consumers, the better the thing goes.”
The task ahead is a daunting one, Hanauer admits. “There’s a huge amount of economic nonsense that needs to be cleared away,” he said. For example, “You have a Speaker of the House of Representatives, John Boehner, who can get up until the crowd and say, ‘You know, if you raise the price of employment, guess what happens, you get less of it.’ And most people in this country nod in agreement, right? Idiotic! It’s just not true. And until political leaders are willing to face him down and face that idea down, and point out the obvious, which is that it’s the opposite is true, essentially, that when the workers earn more money businesses have more customers, you’re in this trap, you’re just in this trap.”
One could cite this as a classic example of hegemony—the expression of a dominant ideology in drag as common sense, facilitated by a vast array of different institutional forces. The great irony is that while the concept of hegemony, and hegemonic warfare to challenge the existing hegemonic order, was developed by a famous leftist, the Italian Marxist Antonoio Gramsci, the practice of hegemonic warfare in America over the past half century or more has been almost exclusively seen on the right.
Centrist or center-left think tanks, for example, are largely focused on analysing problems and proposing “politically viable” solutions, primarily by integrating findings generated by academics. But rightwing think tanks use a completely different model. Their purpose is not to try to solve existing problems, but to continually shift the framework of acceptable solutions ever farther to the right. They aim to change the very definition of what counts as “politically viable”, whether it actually solves anything or not. Advocacy, messaging, media outreach and political collaboration are the core activities of think tanks using this model, problem-solving plays virtually no role at all. If something doesn’t work, simply suggest something else, even farther to the right than what’s already failed. Failure can actually be more valuable than success—it can accelerate the process of moving the conversation ever farther to the right.
This model was most clearly articulated on the state level, starting at the Mackinac Center in Michegan, where the model of the “Overton Window” was developed as a way to think very specifically about shifting the framework of acceptable ideas continually farther to the right. But the same sort of calibrated, ideologically premeditated thinking can be found throughout the rightwing foundation and think-tank world, while it remains extremely rare on the center-left. A big-picture view of how this has unfolded in the realm of economics can be found in Kim Phillips-Fein’s book “Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan.”
This history has also undoubtedly played an important role in shaping how most Americans—academics, politicians, journalists, everyday people—think and talk about economics without even realizing it, the subject of implicit cognition dissected by cognitive linguist Anat Shenker-Osorio in her book, “Don’t Buy It: The Trouble With Talking Nonsense About the Economy” (my review here). Shenker-Osorio found that conservatives share a much more coherent, broadly shared—if questionable—view of what the economy is and what it’s for than progressives do, reflected in part by the sorts of metaphors used when talking economics. As I wrote in my review, “Conservative models tell us that the economy is autonomous (most typically, a self-regulating body) and morally demanding – a view encapsulated in an episode of ‘South Park’ ['Margaritaville'],” in which the market is portrayed as an angry god, an example cited prominently in the book. These shared implicit models in turn profoundly influence what may seem like “common sense,” while no single progressive model has nearly as much salience.
All this history and social science helps explain why the complete failure of trickle-down economics over the past 35 years—culminating with the fincial crisis and the Great Recession—did not result in any sort of systemic rethinking from the left, but rather unleashed an profound resurgence of even more ancient, previously discredited ideas from the right, most notably the cult of austerity, which is still strangling governments and economies around the world.
Still, the power of a single good real-world example remains extremely potent, which may explain why Hanauer loves to talk about what’s happening in Seattle, where he lives:
Washington state has the highest wage of any state in the nation. If Speaker Boehner was right, we would be sliding into the ocean. And yet, Seattle is the fastest-growing big city in the country. Washington state has the high highest small business rate of small business job growth in the country. And this is because workers here earn enough money so that they can afford to shop at stores. It’s positive feedback loop.In fact, Hanauer points out, part of their strength has been doing the most for those who are otherwise helped the least—tipped workers:
In Washington State, tipped workers, who make up a big proportion of the low-wage workforce, earn $9.47 plus tips. So that’s I think it’s like 440 percent more than the federal tipped minimum of $2.13 plus tips. That’s not 4% more, that’s not 40% more, it’s 440% more. So, if the trickle-down economic idea was true, that these sort of his extravagant wages would destroy businesses, restaurants and so on…. And yet, there is no more faster growing city in the country than Seattle, and there isn’t a restaurant industry is going crazier than Seattle. It’s not. It’s booming. You can’t get a table. And here’s why, because, when restaurant workers earn enough so that even they can afford to eat in restaurants, it turns out that’s good for the restaurant business, despite what the Restaurant Association may tell you.Hanauer is extremely good at what he does, which is communicate ideas, a vision. But the history Phillips-Fein unearths in “Invisible Hands” strongly indicates that communication alone is not enough, any more than ideas in ivory tower isolation are. Institutions must be built to sustain, enhance and shape future communications. As I put to Hanauer, “It seems to me that that’s what happened on the other side, they have this theory of trickle-down economics, which is not really good for most people; it’s bad for them. And yet they built a political machine that engages them, swallows them up, even. So what I’m asking is what we do to build the political machine that works on behalf of what works.”
Rather than answering directly, Hanauer doubled down on his message. “You have to be able to define, in concrete terms, what your alternative theory of growth is. I submit to you – and I know this sounds self-aggrandizing – but no one on our side, can explain to you as succinctly and clearly where growth actually comes from than me and my gang. When I say growth in technological capitalist economies is a consequence of the feedback loop between increasing amounts of innovation and demand, that’s a theory of growth. So, you find me a Democratic leader whose said anything like that, find one, you’ll find lots of complaints, you’ll find lots of great attacks. So, our theory of the case is that until we can get people to recognize how these technological economies actually grow, and unite people around an alternative to the trickle-down economics idea, until you do that, you cannot build the machine. Once you do that, then the machine part’s easy.”
Of course Hanauer’s right to say that complaints far outnumber alternative solutions. That’s a balance that needs to shift dramatically, and Hanauer is leading the charge. But despite his acumen and his eloquence, there is no magical one-size-fits-all way of communicating ideas and insights, no matter how true or beneficial they may be. The right has long realized this, and organized itself accordingly. And the landscape of unconscious assumptions, models and metaphors strongly favors them as well. Hanauer may well have the message we need, and he’s brilliantly highlighted what’s been lacking in even Obama’s most progressive moments more clearly than anyone else. But the medium in which that message can spread to everyone—that’s a whole other can of worms that’s still crying out to be explored. Now that Hanauer has articulated that message so clearly, the time is ripe for others to step forward and take on that work as well.
Paul Rosenberg is a California-based writer/activist, senior editor for Random Lengths News, and a columnist for Al Jazeera English. Follow him on Twitter at @PaulHRosenberg.
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