UP WITH CHRIS HAYES
December 29, 2012
Guests: Saket Soni, Karl Smith, Richard Wolff, Heather McGhee, Chrystia Freeland, Christian Parenti, Juliet Schor, Susan Crawford
CHRIS HAYES, MSNBC ANCHOR: Hello from New York. I`m Chris Hayes here with
Richard Wolff, professor on a New School`s graduate program in
international affairs, the great Heather McGhee, vice president of the
progressive think-tank, Demos, Karl Smith, assistant professor of public
economics and government in the University of north Carolina Chapel Hill,
contributor to the blog, "Model Behavior," back with us in the table, and
Saket Soni, director of the New Orleans Worker Center for racial justice
and the migrant workers advocacy group, the National Guestworker Alliance.
The latest GDP revisions from the Bureau of Labor Statistics, it now looks
like the economy may finally genuinely be in a real recovery. GDP
increased in the third quarter by an annualized rate of 3.1 percent. Of
course, we`ve been here before, many times over the past four years. And
each time, it appears the economy is going to achieve escape (ph)
philosophy, it gets pulled back to earth.
There are two kinds of issues the American economy faces. Cyclical issues,
where we are in the business cycle and how and when we will once again
achieve full employment and strong growth and structural issues, what
aspects of the fundamentals of our economy work and don`t work.
In the very beginning of his president, Barack Obama has insisted it won`t
be enough to simply weather the current downturn than order the tribe the
American economy needs fundamental reform and re-invention.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I know that we`ll have to
overcome our doubts and our divisions. And we`re going to have to overcome
a determined opposition of powerful special interests before we can truly
reform a broken economy and advanced opportunity.
(END VIDEO CLIP)
HAYES: If we take seriously the idea of emerging from the great crisis
into a radically new different economy, there are some core basic questions
about what that economy will look like that almost no one in our political
class is asking. What is a worker? And what does work look like in the
future? What is the proper role of finance, a sector that accounted for an
astounding 40 percent of corporate profits before the crash?
Do we want an economy of large concentrated quasi trust or one made of
distributed small enterprises experimenting with new ownership and business
models? In other words, if we were actually creating a new economy for the
future from scratch, one that was just equitable and prosperous, what would
it look like?
I`m really happy to have all of you here, big thinkers, to wrestle with
this. And the first thing I want to talk about is work. We had some
interesting information from the census bureau on contingent work, and
actually, Saket, you had mentioned this last time in the program. This is
from back in mid-last decade.
In United States, about 30 percent of workforce could be classified as
contingent workers including roughly 13 percent part-time works, seven
percent independent contractors, five percent self-employed workers, five
percent, a combination of agency temps, direct hire temps, on-call and
contract company workers.
And one of the biggest trends, I think, is we have just -- we`re seeing
increasingly. And I see it, I have to say, in my peer group, just as a
generational fact. The old employment contract, this is the social and
legal contract that binds employer and employee being totally ripped up,
right? Everyone I know almost who`s my age, unless, they are, you know, a
lawyer or professional in that way, either is now or has in the recent past
or will in the future be essentially contract worker
I was for years in my life. And back the first time, I remember, the first
time I got a job as an employee with health benefits and direct deposit of
a paycheck -- I thought I was the richest man in Chicago. This is a
HAYES: You mean, it just goes in there, and then, you just go and then
it`s there. You don`t get a check and have to walk it there and sign and
chase it down. But that is, I think, increasingly the direction that all
work is going.
SAKET SONI, NATIONAL GUESTWORKER ALLIANCE: Chris, this is the most
inconvenient truth about the new economy. A third of the workforce is
contingent workers. That means they`re not working directly for the people
who are benefiting from their labor. They`re, instead, being sourced.
They`re temporary workers. What this means is that they have no one to
bargain with. They have to reinvent bargaining. On the flip side of that
is that not only is the nature of employment changing, but the nature of
unemployment is also changing. The contingent workers you`re talking about
are often unemployed for long periods of time, and 40 percent of the
unemployed today are -- have been unemployed for over six months.
HAYES: But there`s -- I think there`s also -- there`s two sides to this,
right? Because at one level, it increases uncertainty tremendously. But
there`s also another level and there`s a class distinction here because
there are different categories of these workers.
For workers that are doing fairly well, like if you`re a freelance designer
in New York, there`s something incredibly attractive about this vision of a
freelance economy in which you aren`t subject to the structures of
employment in which you can work, you know, in your bathrobe out of your
apartment in which you are the master of your own time.
KARL SMITH, UNIV. OF NORTH CAROLINA: For a long time, the big question in
economics is why you have these employment contracts, right? So, where
everyone is freelances what you would think economy would naturally move to
because then people are making arrangements that are efficient for them at
the time, you know, maybe you like to work in your bathrobe, maybe you
Maybe someone else (INAUDIBLE). You would think that`s a natural way an
economy would work, but, instead, economies built these unmarked like
institutions, these giant corporations inside which were command and
control. And so, we have a lot to explain about that. And I think the
insecurity was --
HAYES: We`re doing theory of firm --
SMITH: So, a lot of that was probably insecurity, right? And so what may
be happening is it`s easier for people to contract out, it`s easier for
people to connect through the internet and through online and things, and
that`s pushing some people towards the direction of working as freelance.
And the other thing is that for workers at the lower end, wages are falling
so fast that breaking that security relationship is a way to sort of slow
the fall in wages, because if you were to maintain -- it costs something.
There`s an efficiency loss to having this sort of employment contract. And
so, if you`re to maintain that relationship in order for the market -- to
have a job, wages will have to be even lower. And so, as the wages fall --
HAYES: Do you agree with that, Richard?
RICHARD WOLFF, THE NEW SCHOOL: For me, it`s a simple explanation. It is
convenient to capitalists to save on labor costs. And once you had shifted
in the 20th century from paying people a wage, end of story, to paying
people a wage and also substituting for wage increases, a package of
benefits, then it became clever for a capitalist to save on all the
benefits by switching to contingent labor because they didn`t have those
benefits. They hadn`t developed contractually over time the --
HAYES: Well, it`s not even clever. It`s just profit -- it just costs
WOLFF: I`m trying to be polite for people who are squeezing in order to
get an advantage because they`re moving production out of the country in
large numbers. They`re able to dictate to the mass of workers a set of
conditions that are driven by what`s the cheapest way to get the work done.
HEATHER MCGHEE, DEMOS.ORG: And there are also two other missing parts of
that. Of course, one is the story of power and the ability to do this,
right, and that has to do with the fact that most workers cannot bargain
with either their client or their employer without any kind of structure to
make that happen and that`s obviously the story of the decline, the sort of
planned destruction of organized labor in this country.
But the other pieces as we as a country have seen that trend happen, I`ve
seen the wages go down, I`ve seen the security go down, you could have
said, OK, so let`s detach from the employer given safety net. Let`s
compensate with the fact that, of course, you`re going to be unemployed for
weeks, months at a year.
You`re going to cobble together of paycheck with all of these things with
much more generous unemployment insurance, more kind of like the Denmark
flex security, the idea that half of America`s workers aren`t eligible for
unemployment benefits given that unemployment is the new normal.
MCGHEE: Even before the recession, periods at least is a failure of our
policy to update. Obviously, there`s portable retirement security,
retirement pensions that could be --
HAYES: Wait. So, I want you to respond to this because the historical
context here, right, is that we had this strange somewhat historical
contingency arise, basically, roughly from the new deal, particularly
during World War II into basically 1970s or 1980s has been unraveling ever
since, which is this the firm as the fight of the provision of the things
that in other industrialized democracies are provision by the state, right?
We have this sort of the UAW treaty of Detroit model in which you have a
union bargaining with a big capitalist firm and you come to this,
essentially, internal social contract for the employees, right? We work
for you and we get things like healthcare and retirement and security and
other things which in other contacts are also -- or primarily provision by
Now this relationship of employment is coming apart, and the question is,
what do we do about it? And one of the things you`re saying is, well, we
can go into model in which these things are directly provision by the state
and that will cushion the blow essentially of what`s happening to people --
into the contingent workers.
MCGHEE: And of course, it`d be a natural outgrowth of the fact that that
model has been so incredibly profitable, right? So, it has actually gained
-- resulted in gains for investors and for companies. And so, there`s a
lot of money on the table to be used to create the kind of dynamic social
But the problem is we`ve sort of just let it stay off the table in terms of
revenue. And we can afford to provide the sort of optimal sort of career
labor exchange through the government.
SONI: That`s right. And to your point, you know, you used the word
flexible. And let`s just take a good look at who this flexibility works
SONI: It works really well for the employers. It works well for the
companies. But, the rise of contingent labor, the rise of long-term
unemployment, and the collapse of the local labor market, the globalization
of the local labor market have created incredible problems for workers.
That flexibility has not worked for workers.
SMITH: I think that confuses a couple of issues, because there are
problems that workers are experiencing that probably due to globalization,
technological change, some other things, and that`s causing a bad scene for
workers in general. But these developments aren`t necessarily making it
worse. They`re just going along with the badness there, like, for example
SONI: I don`t know about that. I don`t know about that. There are 64,000
workers in Georgia who are going into Christmas just having been kicked out
of earned unemployment benefits. Why? Because they`re working in schools.
They`re the people who clean the schools, drive the buses, people who serve
food to the kids, and they`ve been told overnight that they should think of
themselves as getting laid off once a quarter, and therefore, they can`t
access unemployment benefits. The state and Aramark, the corporation that
hires them, wants to think of themselves as a completely flexible workforce
HAYES: Hold that thought. Yes, because I want to see -- I guess the big
question on the table, can we move towards employment that looks
increasingly contingent and freelanced and tempt out and outsourced?
That`s also one that is equitable and prosperous? Were those two
inherently in conflict of each other right after this break.
HAYES: Talking this morning about the next economy. What the American
economy will and should look like after we get out of the great recession
once we go back to full employment if that ever happens. And we`re talking
about the increasingly contingent nature of American unemployment, how that
affects workers. And Karl, the question on the table is, can we have a
prosperous, equitable economy and workers are doing well and also in this
very increasingly flexible freelance kind of situation?
SMITH: I don`t think there`s an inherent attention there. I mean, I think
that people like the security of an employment relationship and as workers
have had less and less bargaining power than less and less in the market,
they`ve lost wage growth and they`ve lost employment growth. Those are
separate symptoms of the same thing. But it`s entirely possible to provide
that sort of security through government services.
That`s entirely possible to have high wages without those things. It`s
just that those are two things that people like, and as they have gotten
worse and worse a deal, they`ve lost both. And so, I think there`s
intensity connecting (ph) say, if you don`t have a contingent job, then
you`re poor. But it`s that you`re poor, you can`t buy the employment
security of a contract. You can`t accept the low wage you would have to
accept to make --
HAYES: There`s also the problem, though, about bargain, right, which -- in
fact, in some cases, it`s actually -- I remember looking at a case of truck
drivers that were independent contractors trying to organize and actually
running up against the Sherman anti-trust contract, right, because they`re
They`re in business for themselves. There are certain ways in which they
can`t collude. And, it`s unclear how much bargaining power you can achieve
as a contingent worker. And bargaining power has, historically, been very
SONI: Well, it`s the only thing -- bargaining power is the only thing that
lifts up wages and working conditions. It`s the only thing that
historically has gotten workers a fair deal. And this is the problem.
Just hear me out. This is a problem that, you know, this is not a problem
merely of low wage workers.
Academics who are not tenure track, who are suddenly, you know, fellows at
a campus, see their wages going down. It affects everybody. And, I think,
you know, the important issue here is how do we, while the economy is
changing, still build worker organization and forms of power that get
workers a fair deal? That`s the big question.
WOLFF: There`s also another option which ought to be on the table. We
ought to be simply trapped into the question of a secure wage relationship
and a contingent wage relationship. We ought to finally grow up and
question whether we want to live in a world with a wage relationship.
Why are there people, tiny numbers of people, sitting at the top of
corporations who are in a position to bargain over what effects the mass of
people? Even if you take only a little seriously the concept of democracy,
then that`s not the way a wage ought to be determined. It ought to be
And dirty (ph) image is what we are coming to the end of the 2012 year of
the co-op, the U.N. declared. Well, why don`t we talk about that as an
option? Having organizations of work in which the mass of people decide
collectively and democratically how they want to allocate the wealth they
produce between the wages they each take home and all the other things an
enterprise has to do?
Where do we get this idea that it is written in the stars, that there has
to be a tiny group of people, major share holders, and a tiny group of
people called boards of directors who have an outside -- outsized ability
to determine this --
WOLFF: The question is, why do we accept this as a given rather than
MCGHEE: Well, more and more we`re not. So, there`s a very interesting
fact that there are actually today over three million more worker owners
working in some kind of, you know, employee-owned enterprise than there
even are union members in the private sector, right? So, we are seeing
something that was like very hip when, you know, my mom was about my age,
which was moving to --
MCGHEE: -- which is moving to people wanting more ownership, more local
ownership, more democracy in their workplace and what the problem is, we
aren`t going to see that accelerate the way needs to because we`re still
dealing with the dominant forces of the old economy that have very little -
SMITH: There are so many issues in that -- I think that it`s questionable
whether or not the boards of directors and owners have the power to
actually determine wages and they`re getting their view is the reason why
we think that might be true is because the share of business income that
goes to wages was constant for an extremely long period of time.
So, at least since about the 1880s up through the 1980s, it was roughly 60
percent. And it didn`t change when unions changed and it didn`t change
when the great depression happened. It didn`t change when all these things
happening. So much so that when economists said this, we write this down
as this is a constant.
SMITH: It`s crucial because it changed. So, labor share has fallen. And
labor share is now at 30 (ph) percent. And that`s a phenomena we have to
understand so that something that we used to just write down as a constant
is now falling and it can`t just be unions because it was .6 before their
unions and .6 after their unions.
HAYES: No, no. I just -- the reason I`m pointing to you is because I want
you to address this idea of particularly for people that are doing work
that is traditionally low wage, not inherently but traditionally low wage
work, traditionally or increasingly contingent, whether this kind of model
of ownership, of worker cooperative is viable.
SONI: I think it`s viable. I think it`s viable. I think the question is
how to make it viable at the scale and you`ll still have to bargain for the
social conditions and the wage rates. But here`s the big problem. You
know, somewhere between the big dream of worker-owned coops everywhere and
the reality that the organization described where (ph) the American dream
of retail worker is merely a $25,000 an hour, you know, job, right?
MCGHEE: Big model.
SONI: Somewhere in the middle of that, there`s a reality which is that
wages and working conditions are falling. Co-ops have not been built of
scale to the point that they can reverse that, and millions of workers in
the United States are trying to figure out how not to let the new economy
happen to them. We`re trying to figure out how to get in the driver`s seat
of the new economy.
And those of the strategists, whether they`re co-ops, whether they`re
campaigns, whether they`re new forms of bargaining or demands for a new
safety net, we`re going to have to take all of those tools in our toolbox
and really fight for a new economy.
SMITH: Yes. I was just thinking none of those things have any effect on
overall worker`s conditions. I mean, so that you can redistribute income
between workers and you can -- some workers make more and some workers make
HAYES: You can redistribute income between capital and labor also.
SMITH: I`m saying with these bargaining relationships, so the thing about
-- so one of the questions is if it`s clear that union workers make more
money, but if workers on total didn`t make more money, and that means that
non-union workers have to make less on the union agreement. So, one of the
things that happened on the union agreement is non-union workers wage is go
SMITH: But you`re not actually doing anything to increase overall worker
share. But overall worker share is falling and we think that that`s -- we
don`t know exactly why. It`s a huge question in economics. But, I don`t
think any of these things are going to do anything about that.
HAYES: Hold your thought. I want to come back to you right after this
HAYES: Richard Wolff?
WOLFF: OK. A constant share for labor, sources capital. This is a game.
You know, we`ve all been taught that statistics don`t lie, but
statisticians make use of what they do. A constant share for labor can
exist, even though a widely desperate story is told in which a tiny number
of workers get huge salary packages and wages at the top of the corporate
scale and everybody else get share (ph) at, number one.
HAYES: Hop in there just to explain, right, because we`re talking about
these things. We have wages and then we have profits, right? OK. These
are, like, different kinds of categories, but we`re talking about what
percentage every of dollar, right, is going to wages first profits and it`s
constant for a long period of time. But that -- I just want to be clear
Wages is an extremely big category in the sense that people that make
millions of dollars make millions of dollars in wages. And the kind of
folks that you are working with who are contingent guestworkers who are
getting a paycheck that is minimum wage are also making wages.
HAYES: So, what the point you`re making is, you can say, OK, a certain
percentage of the economy is -- you know, this percentage of the economy
that goes to wages is constant, but within that thing, there are massively
different distributions. I just want to be clear about that. Your second
WOLFF: Second point, we ought to be discussing not only what is the
problem in a society that sees suddenly over recent years, and I think we
all agree on that, a disproportionate increase in the share to capital
relative to wages even allowing for all of that, why do we permit this to
happen? It was rising before the crisis. It is actually getting worse --
WOLFF: There`s no excuse for this immoral, ethical, or any other kind of
grounds. And in economics, it`s not a clear idea that this is an
advantage, but we seem to lack the political will in this society to
address this as a problem and to confront it.
SONI: We don`t know what`s happening. That`s the thing.
MCGHEE: It`s also because we are in economy without principles right now.
This is the problem. I mean, we have a sort of implicit principles that
have been given to us, unfortunately, by the dismal signs of economics.
And unfortunately, my brother --
HAYES: Primarily. I would say I have a share of it, 60 percent, but the -
MCGHEE: But what we have is the set of principles that sort of implicit,
right, which is that the market which has already a disembody term that
doesn`t actually reflect the different powerful players that actually make
up any set of decisions that guide our economy and what we`re missing, all
of us, I think as Americans, as we try to figure out what happened in this
crash and why no one feels as secure or optimistic as they did before is
what are the principles that guide an economy.
Are they equity? Are they local control in the sense of sort of security
that security that is necessary for liberty? That`s the kind of
conversation that I think is happening in places as desperate as, you know,
container shipping on the west coast to the gulf workers.
SONI: That`s right. That`s right. And you know, workers everywhere know
it. Everyone knows that the economy is unprincipled. Everyone knows that
it`s a plummet to the bottom. And the reality is that while economists
might be divided over it, workers generally aren`t. While the science of
economics might be a little bit dismal, the workers who are organizing
across the country aren`t.
Wal-Mart workers, this year, by the thousands went on strike precisely to
make a point that a group of workers together --
HAYES: Wait a second, though. I have to push back on this, because if
we`re going to push back on wage earners as a category that has a lot of
people in it, then the category of workers is something that like loose
generalizations about is troubling as well, right? I mean, Wal-Mart has
1.6 million or something associates, several thousand of whom did, I think,
an incredibly admirable and brave thing by going on strike.
I`m not trying to denigrate what that did, but if we`re going to talk about
like workers in the whole, right, there`s a big category. And you know, I
am a worker, right, officially, like, I get paid a wage. I`m a cable news
HAYES: So, I don`t think we should be like --
MGHEE: No. But I think it`s easy to -- I think given how poorly this
economy has performed for the vast majority of people who earned a paycheck
and depend on a paycheck for a living, I think you can start to actually
say that there has been -- that you can generalize a bit there about
whether the economy is succeeding.
SONI: What I`m trying to do is just honing on, you know, places where
workers are actually trying to shift the economy.
HAYES: And they`re doing it by what?
SONI: And they are doing it by organizing. In New Orleans, for example,
after Katrina, just like after Sandy up here in New Jersey and New York, a
city turned into the largest construction site in the world.
SONI: Right? An entire city. And what happened? Workers who, last year,
construction workers in New Orleans, contingent construction workers were
sourced through yards, through temp agencies last year in our membership,
their two-person household income was 7,500 a year.
They`re now bargaining for union membership, for better conditions, for
higher wages. And if they succeed, they will be earning 20 to $40 an hour
in that industry. That will lift conditions. That will be of rising tide
SMITH: But, unless, unless, that changes the share that has to come out of
some other --
SMITH: I mean, that is where union wages came from is that minorities made
so much less.
HAYES: No, but they also came -- wait a second. They also came out of a
surplus that was, you know, massive. I mean, there was more surplus --
SMITH: People who -- minority made extraordinary less and that essentially
HAYES: But let me say this. This is a --
WOLFF: This is a very -- in economics, this is very old. The earliest
stages whenever they were trade unions, there were people who were both the
trade unions who said there`s a fixed pot for workers to get.
WOLFF: And so, if some workers who make a union and get it, they will
necessarily deprive others and radicals, of whom I`m a part, had to come in
and say, there`s nothing --
WOLFF: You need to understand that there`s a choice that all union and
workers have to make. Are you going to seek to get more for yourself at
the expense of fellow workers? Or, are you going to try to have a strategy
to pull it from capital? And then, there`s one more step, which is, why
are we constantly bargaining with capital?
Why don`t we change the enterprise so that we`re the ones who make the
decisions? Why do we accept this subordinated decision that seems to cost
us so much reducing us to arguing over one or the other bad situation?
HAYES: Let me make this final point. One of the things I think that when
we think about the future is that this -- the idea of the firm and the big
firm, particularly, the big three automakers has this big mediating
institution which you, yourself, said was kind of a non-market institutions
within it, right? There`s these market transactions and there`s the firm
and things that happen in the firm are just -- are described by all sorts
of organizational institutional factors.
As that evaporates, right, I think we need to be thinking about what are
the non-market institutions that replace it because labor markets don`t
function like other markets. And if they do, they end up screwing a lot of
people and we have to think about what kind of collective enterprises, if
they aren`t the big firm with negotiated firms. What are the big
What mediating institutions or non-market activity can secure relative
equity and dignity for workers? Saket Soni from National Guestworker
Alliance and the New Orleans Worker Center for Racial Justice, thanks for
joining us this morning.
SONI: Thanks, Chris.
HAYES: The economy is growing again. That is a good thing. Karl Smith
wants to talk about it more when we come back.
HAYES: All right. To hear the pundit sell it, this holiday shopping
season was a major test for our economy`s health. If people spend a lot
more relative to say last year, then the economy is growing, which is good
news. And if they don`t, it isn`t which is bad. Growth is what you get
when the productive capacity of an economy expands, when it can produce
more goods and services this year than it did last year.
The common assumption in all of our analysis of economic indicators and the
political debate is how to get the economy growing again. If we`re not
growing, then the people in charge aren`t doing their jobs. Mitt Romney
made his argument in an explicit part of his campaign and in this notable
moment from first debate in October.
(BEGIN VIDEO CLIP)
FMR. GOV. MITT ROMNEY, (R) FMR PRESIDENTIAL CANDIDATE: Economic growth
this year slower than last year and last year slower than the year before.
Going forward with the status quo is not going to cut it for the American
people who are struggling today.
(END VIDEO CLIP)
HAYES: On this comment presupposes that the notion that growth and faster
growth is always a good thing. That notion is widely accepted now, but it
hasn`t always been. Since the dawn of modern capitalism, heretics,
prominent economists, and observers have pondered whether constant growth
on a final earth (ph) is possible or even desirable.
And here, climate change are some prominent voices revisiting those debates
asking two fundamental questions, is growth necessarily good and is a happy
sustainable future with prosperity broadly and equitably distributed
possible without (INAUDIBLE).
Joining us now to discuss those questions are Christian Parenti, author of
"Tropic of Chaos: Climate Change and the New Geography of Violence", which
is a really phenomenal book I recommend and contributing editor to "The
Nation" magazine and Chrystia Freeland, author of "Plutocrat: The Rise of
the New Global Super Rich and the Fall of Everyone Else," which is also
quite excellent which I have read in the intervening weeks since I last saw
you, editor of Thompson Reuters Digital.
I think this growth question is fascination, and I remember sort of getting
very invested in the poll air like called (ph) the population bond
notorious predicting real doom, basically, from over population. It didn`t
come about partly because technological innovation --
CHRYSTIA FREELAND, AUTHOR, "PLUTOCRATS": Partly because women aren`t
having so many kids anymore --
FREELAND: -- developed economies. I mean, pretty soon, we`re going to be
talking about, you know, demographic winter.
SMITH: We`re talking about that now.
HAYES: Yes. I mean, and one of the things, I think, that was assumed,
right, one of the things that when you`re thinking about growth in the
future is assuming what is happening now will continue to happen and what
actually happen particularly along population is that much more quickly
than people would anticipate it, when women get education, access to birth
control and some autonomy over their lives and bodies, the birth rate
really falls off the cliff.
I mean, two -- I mean, in Mexico, it`s amazing how quickly it`s happened.
Faster than, I think, anyone predicted.
FREELAND: And Hispanic-Americans now, right?
HAYES: Yes. In the U.S. as well. But then there`s also the question of
climate, right? Can we, if we keep putting carbon in the atmosphere, and
we basically can only put about a fifth of the known carbon fossil few
reserves that we know into the atmosphere and hope to make temperatures
which I harp on all the time in the show, two degrees Celsius, you know,
there`s a lot that we have to leave in the ground.
And Christian, I guess, the question to you, you sort of very peace (ph)
with the nation, revisiting this famous book (INAUDIBLE) published in the
1970s, the apex of this kind of worry, how do you think about how
compatible our models of growth are with avoiding climate disaster?
CHRISTIAN PARENTI, THENATION.COM: Well, you know, the limits of growth had
sort of two areas. One is that they were running out of resources and they
were also running out of sinks. And there`s sort of wrong on the limited
nature of resources. We have found more oil, we find more resources. But
they have been correct in terms of the earth`s capacity to absorb
HAYES: Yes. What does sink mean --
PARENTI: That`s the absorb carbon --
HAYES: A place to put the ability to absorb --
PARENTI: The ocean has absorbed enormous amounts of C02, and it, as the
result, has become 30 percent more (INAUDIBLE) was hundred years ago. So,
they were right about limits of the earth`s ability to absorb pollution.
So, there`s an issue with certain types of growth, but there`s also a
problem with the rhetoric of describing the economy only in terms of growth
because that conflicts all sorts of activities.
If we are to confront climate change, that is going to involve significant
amount of economic growth. To replace the fossil fuel industry with a
clean energy infrastructure is going to involve lots of investment, lots of
jobs, lots of growth. So, it`s not a simple as growth as if what kind of
And in the long term, there may be, you know, this question of like can an
economy, can capitalism grow infinitely? I mean, that`s the question for
further out. More immediately we have this subset of that question which
is, can we keep burning fossil fuels and the answer is no.
HAYES: All right.
PARENTI: We have to get off them, and that involves a new kind of growth.
HAYES: And there`s an even non-environmental aspect to this. Demos had a
really interesting report on this.
MCGHEE: Yes. I mean, there are a lot of things that are wrong with Gross
Domestic Product. Actually, Bobby Kennedy talked about this in 1968 in a
way that I keep sort of going back and finding these Kennedy quotes that
are so beautiful. I just want to actually read it.
It says, "If we judge the United States of America by that, the GNP, it
counts air pollution and cigarette advertising and ambulances to clear away
our highways of carnage, yet, the Gross National Product does not allow for
the health of our children, the quality of their education, the joy of
And it goes on and says, "in short, it measures everything except that
which makes life worthwhile. It can tell us everything about America
except why we are proud that we are Americans.
HAYES: Great quote from Bobby Kennedy talking about the limits of our way
we measure growth. We`re going to keep talking about growth, its limits,
and how we should be thinking about it. We`re also going to bring in a
scholar who I really admire, Juliet Schor, right after this.
HAYES: We`re talking about the next economy and what comes after we get
through this business cycle, get out of the great recession, what kind of
economy we`re going to have in the future, and we`re talking about growth
right now and whether growth captures what we want out (ph) of economy,
what the limits to growth are, and whether we`re going to be -- if growth
is producing negative consequences in, say, of the form of carbon
production that are going to end up killing the goose that laid the golden
egg in certain ways.
I want to bring in Juliet Schor, author of "Plenitude: The New Economics of
True Wealth," professor of sociology at Boston College. And Juliet, your
book revisits like ultimately this question of growth as the basic goal for
an economy, and I think in line with as much of the thinking we talk about
later and the earlier in electoral (ph) tradition calls it into question.
JULIET SCHOR, BOSTON COLLEGE: Absolutely. I think in addition to the
problems with measuring GDP, which are very real and we`ve already talked
about, there`s, right now, the question of whether we can reconcile what we
need to do on the climate front, which, as you rightly point out, is to
reduce carbon emissions quite significantly.
So, we`ve got to decarbonize the economy and we`ve also got to provide
employment, typically, the way we did the latter is to expand the economy.
But, you know, there`s really only one country that we can point to that
has been able to continue to expand its economy, its GDP, and have any
reduction in carbon emissions at all over the last 20 years and that`s
Other countries which have reduced carbon emissions have done so because
their economies have collapsed, places like Russia, Eastern Europe. And
for the rest of the world, growth has basically meant increases in carbon.
So, the idea that comes from mainstream economics that you can decouple
carbon from the size of the economy is not at all born out over the last 20
HAYES: Well, it`s born out of Germany. I mean, if someone can do it, then
it can be done, right? Isn`t that the answer?
SCHOR: Well, they`ve got a little bit of carbon reduction. They`ve had
very slow GDP growth. That`s the other important part of it. And, there
are really unusual economy, because they`ve been able to export a lot of
their -- big export surplus.
HAYES: Everyone want to be Germany. In the future, we will all be net
exporters. That`s the recipe for a prosperous economy. Yes, exactly.
FREELAND: Yes. Can I make what is going to sound in this context like the
naive case for growth and remind us why --
HAYES: Yes. No, I want you to --
FREELAND: Why it`s actually important? So, you know, let`s stipulate yes,
climate change is really important and, yes, Juliet is absolutely right.
It`s really hard to do both at the same time. But, we have to be really
careful to sort of -- it can be easy to say, OK, let`s forget about growth.
All of these other things, children playing and being happy and so forth
are more important.
The reality is growth is essential for the poorest, most dispossessed
people in the world, and in the country that you happen to live in. It`s
essential for people in Africa. It`s essential for people in India. It`s
essential for people in China.
FREELAND: Let me just finish, Heather, right? Like, there`s still lot of
extremely poor people in the world and they need growth. That`s point one.
Point two, as we are experiencing today, in most western industrialized
economies, a period of slow growth hits the people at the bottom the
hardest. It hits people who are unemployed. It hits people who have those
And then, finally, the group that I worry about the most is young people
entering the economy in a period of slow growth. Study after study has
shown that that doesn`t just have an impact on you at the moment you enter
the economy. It is a lifelong impact. It 0845 2;12 __ chances. Now, I`m
not setting aside at all any of the -- you know, I think the big issues
with just growth --
FREELAND: If you stop with growth -- growth is not enough. It doesn`t
cover climate change and it doesn`t cover distribution. And America has
experienced in the past three decades periods of relatively high growth
with inequitable distribution so you had median wage, not just stagnation
but decline. But without growth, if you just say, let`s forget about
growth, I think it`s much, much harder to solve the other problems.
MCGHEE: Can I step in here and say something?
HAYES: Wait, Christian is going to step in, and then, Juliet, I`m going to
go to you.
PARENTI: I think too much of the discussion about growth deposits these
economic problems and environmental problems as purely technical problems.
And it overlooks power. And the issue is distribution, as you guys are
talking about earlier and qualitative questions around what kind of growth.
And I don`t see how it is possible to confront climate change without
I mean, wiping out the fossil fuel sector and replacing it even if there`s
a massive reduction in consumption and changing how we travel, et cetera,
et cetera is going to involve a whole new round of investment and
SMITH: Yes, but you`re reducing your technological frontier. I mean,
that`s pretty much the end of your case --
HAYES: No, you`re not reducing your technological frontier. Ideally, you
are pushing it out, right?
SMITH: And you are able to do this, but if you don`t allow yourself to do
carbon, right, that`s a technology that you`re taking off the table. And
any time you take technology off the table, your overall growth --
HAYES: No, but here`s -- but I think there`s actually another analogy
PARENTI: You`re replacing it with something else.
HAYES: Yes. I think there`s another analogy here. I think --
PARENTI: The main point I want to make was that fixating on growth can
overlook political questions of power.
PARENTI: Who is being challenged? The fossil fuel industry doesn`t really
FREELAND: Yes, yes. And the distribution. And I do think the key issue
in western industrialized economy is --
HAYES: Yes, please, Juliet.
SCHOR: OK. So, first point is to Christian`s point, what happens to the
overall rate of growth in your story is a question mark. Absolutely, we`ve
got to dramatically expand the clean energy sector and the sustainable
parts of the economy, but what that means for what happens to GDP is a
question that we don`t know the answer to now, I think. So, that`s the
I absolutely agree with you about power and so forth. I think to Heather`s
point, that`s the old way of thinking and that she`s talking about a growth
process which did raise the incomes of the poor, which did provide
widespread well-being. But if you look at what`s happened over the last 25
years, that`s really changed and growth operates in different ways.
So, we`re talking not about growth in incomes of poor people. Of course,
we`ve got to do that.
SCHOR: The question on the table is, what does that imply for the rate of
growth of GDP. I mean, that`s a particular measure. And the answer is
less and less. And I want to throw one more thing into the hopper here
which is the way that you solve the problems that she`s talking about at
the same time that you solve the carbon and that has to do with the
distribution of work and hours.
SCHOR: Because that`s one of the few policies that we can put in, which
reduces carbon emissions at the same time that it expands employment,
reduces poverty, makes workers better off, and improves quality of life.
HAYES: I want to talk about in a second, I want to make just two very
quick empirical interjections here, because I think there`s a real
difference what growth means in the developing world and developed world.
So, what you were saying here is increase in GDP and it mirrors a decrease
in a dollar day poverty in Sub-Saharan Africa, and this is a place that is
not enjoying very equitable growth. For me, this is just the -- the
brutest form growth. More on this after a break.
HAYES: All right. Two charts I want to show that show, I think, the
difference of the context of what growth means broadly in a social
perspective. One I was just showing you before the break which is the
increase in GDP mirrors a decrease in dollar a day poverty in Sub-Saharan,
Africa, and that`s a place that I don`t think we think the distribution of
growth is by any means optimal or equitable, right? This is just pretty
brute poorly distributed growth, and yet, it still reduces dollars in
FREELAND: And also vial crony --
HAYES: But, here is rising GDP in the U.S., right? So, we`re talking
about now in the context of a very developed economy compared with child
poverty. And you will see unlike the last chart in which there`s this
incredibly close relationship that rising GDP, which is that dark line
there, right, it keeps going up and child poverty has not gone down in the
In fact, it stayed around the same. So, what we`re seeing in the U.S. is
we`ve got growth, there`s more economy, productive capacity of the economy
is increasing. We still have as many kids who are poor and that seems to
me like a major failing and also part of the problem with talking about GDP
just as GDP as some sort of unified whole.
FREELAND: Welcome to the plutocracy, Chris.
HAYES: That`s right.
FREELAND: That`s what`s happening.
HAYES: Right. And that`s when you get the concentrations --
PARENTI: The thing that -- we`re talking about -- you know, no one
actually is after GDP growth. People want jobs. They want profits. These
are the actual --
PARENTI: And so, that`s where you get into questions of how. What`s
happened in the U.S. economy is that proportion of income that`s gone to
profits has increased while wages have stagnated and that`s a question of
HAYES: I think it -- I mean, one of -- I think one of the deeper questions
here, Juliet, and I want to come to you in a second on this is the fact
that there`s also the sense in which -- I was rereading Canes (ph) on the
economic prospects of our grandchildren which is a fascinating essay,
right? He`s projecting forward.
And if you read Canes on this, you read other economists back in the day,
they`re all thinking about what is everyone going to do once there`s no
work, because there`s all this affluence and surplus, and we don`t know --
what are we going to do? Are you going to just hang out? Are we going to
come up with staff --
FREELAND: But that is kind of what is happening. I mean, I absolutely
agree with Christian --
HAYES: Not the low ends of the wage scale.
FREELAND: No, no, but I agree with Christian that this is obviously about
-- well, maybe not obviously because we don`t talk about it enough, but it
is clearly about power and the way you deal with economic context. But I
think you also -- even if you don`t want to deemphasize the political part
of the equation, you have to also accept that the economic part of the
equation has changed.
So, my dystopia example is, do we want to move to a place where all the
super smart people run Google and it`s like just three or four and the rest
of us give them massages? And that`s kind of, you know, --
HAYES: Juliet --
FREELAND: -- in future.
HAYES: Juliet Schor is going to tell us how to solve all this by working
less right after this break.
CHRIS HAYES, HOST: Hello from New York. I`m Chris Hayes. Here with
Christian Parenti of "The Nation" magazine, Heather McGhee of the
progressive think tank Demos, Karl Smith of the University of North
Carolina at Chapel Hill, and Chrystia Freeland of Thomson Reuters Digital.
Also joining us via satellite is Juliet Schor, author of "Plenitude: The
New Economics of True Wealth."
And we were talking about growth, GDP -- the fact that it is the
central, conceptual category that we use to think about the economy, I
think it`s fair to say. I think when the numbers come out about GDP
growth, we think about is the economy in the recession, or is it growing?
That`s the big question, right? The economy is growing a little, growing a
lot, shrinking -- that`s the way we think about the economy.
And we`re trying to zero in a little bit about what that concept
means and what it misses, and what are the sub-concepts inside it that
could make for good growth and bad growth.
And, Juliet, you just wrote a book largely on this. I first came
across your work when you wrote called "The Overworked American," which I
read when it came out. And basically, you know, asked a question like why
do Americans work so much?
I was talking about this Keynes essay about the economic prospects of
our grandchildren which he`s envisioning the future which basically no one
is working because our robots create all the value that we need and people
kind of have to figure out what to do with their day.
You think there`s a connection between the amount we work -- there`s
a way to kind of get out of the bind we`re in, in terms of carbon and
growth, in terms of figuring out the way that we work.
JULIET SCHOR, AUTHOR: Absolutely. One of the things that my
research shows is that countries with longer hours of work emit a lot more
carbon. They`ll also tend to have more unemployment, because work is
concentrated in a smaller number of people.
Once we get out of the so-called, you know, growth imperative or the
straitjacket of growth, that allows us to then ask the really fundamental
questions which we`ve been talking about here, about how should we organize
the economy? Distributions of wealth and income, but distributions of
property and opportunity and also distributions of access to work.
So, in my mind, to avoid Heather`s dystopian future, which I also
fear, we need to start talking about things like the scale of enterprise
and think about how we can start shrinking that scale of enterprise,
because it`s now really highly efficient to have small scale network
enterprises rather than the giant Googles and Microsofts and so forth,
which lead us to those dystopian outcomes in terms of mal-distributions of
either access to income and wealth, but also creative work, which is what
she`s talking about.
So, working hours are really key there, because they are central to
how we can -- if we distribute those more equitably, we not only solve the
carbon problem, but we also solve the power problem that Chrystia is
talking about, because it gives people access to livelihood and means of
production and so forth.
CHRISTIAN PARENTI, THE NATION: It strikes me that what you`re
describing is fundamentally a problem of political power. That this isn`t
a technical problem that planners can change definitions and achieve.
HAYES: Not really.
PARENTI: I mean, there are large firms organized that are organized
that way because it`s profitable. And there has to be -- you know, social
movements have to build a countervailing force to force government to check
and regulate private capital.
HAYES: Let me ask you this.
PARENTI: And also channel investment into new green technology to
write off the old --
HAYES: Let`s talk about this. Let`s imagine that we have -- hold on
one second. Let`s imagine that we have, let`s imagine that we have a
situation in which we have a real genuine carbon price, OK? Like a real
one, not like a blue pole, red farcical, like a real one.
PARENTI: We have that actually with current EPA law.
HAYES: With the current EPA laws.
PARENTI: It`s enforced vigorously as a de-facto carbon tax.
HAYES: OK. Let`s say we have that. What do you -- what does that
do to growth? What does that do to -- like is that compatible with the
continued growth of the American economy because the problem is, with
Juliet, what you said before, countries that carbon emissions go down when
they -- you know, they take a huge economic nosedive.
The problem, of course, is selling the carbon tax, it`s precisely
going around and telling people, hey, great news. We`re going to tank the
CHRYSTIA FREELAND, THOMSON REUTER DIGITAL: Yes, I am actually a
technology evangelist, right? Yes, I think in a high tech economy, which
is smart, full of brilliant innovators, which happens to be the case with
the United States, I think that you can effective do what Germany has done
and actually having a high tax is not a problem, right?
I mean, one of the central political problems in the United States is
you have to raise tax revenue. So, why not raise tax revenue from a part
of the economy where you want to discourage activity and use some of that
to think that you want to increase, for example, education.
PARENTI: The private sector -- the private sector is sitting on more
un-invested cash than in any time since 1956, according to the Federal
Reserve. This is not stock. This is not money given to owners.
HAYES: Literally underneath the mattress.
PARENTI: This is firms sitting on cash waiting to invest. They are
waiting for cues. Taxing them, taxing carbon would help give cues to drive
investment into clean energy. Another way that this could --
FREELAND: But they are very skeptical about clean energy right now.
You also have to realize --
FREELAND: It`s a terrible investment for the past decade. This is
not an easy problem.
PARENTI: One of the problems is lack of markets. The government
could do a lot to fix that by consuming clean energy, consuming clean
vehicles. The federal government in the U.S. is the single largest
consumer. It has an enormous fleet of buildings, enormous fleet vehicles.
If you add state and federal spending, if you look at the percentage of the
GDP that is the public sector, it`s over 1 percent.
FREELAND: And what helps is lots of natural gas in the United
States. So there`s even an alignment with what I think are going to be the
KARL SMITH, UNV. OF NORTH CAROLINA: So the problem is that will
probably make the unemployment problem worse in the United States over time
and the simple or the straight to the explanation is that lowers the return
to investing in a heavy industry, that lowers the average real interest
rate. The basic problem that modern industrialized economy is face is that
the real interest rate is negative and that makes it difficult for us to
achieve full employment.
So, you`re making that problem harder by taxing carbon.
HEATHER MCGHEE, DEMOS: So we don`t have to have --
SCHOR: I think that`s totally wrong. When you have a low -- when
you have a low real interest rate, typically you get a lot of growth and a
lot of employment.
And I think the --
HAYES: He`s talking about a negative interest rate.
SCHOR: What a big -- yes, but a real interest rate. What a big
carbon tax will do is it will drive activity into the things that you want
and I agree it will draw it into the low carbon type of activities. And if
you couple that with shorter working hours you can achieve what you need
because you can reabsorb the people who are getting unemployed in the
places of the economy that are no longer profitable and capital is fleeing.
You`ve got to do it that way.
One of the big -- one of the big problems that we have in this
country is that we`ve had three decades of rising work hours. We had a two
200-hour work increase in the average annual working hours per person.
It`s a big part of why our adjustment to the downturn of 2008 has been to
have so much more unemployment than in Europe where, you know, most of
these countries were able to weather it very quickly and in Germany you had
virtually no increase in unemployment at all.
FREELAND: I do have to stipulate here, I`m a big fan in how Germany
has worked, but we cannot actually say that Europe overall has weathered
the 2008 recession with less unemployment than the United States. I mean,
countries like Spain, Italy --
SCHOR: The austerity policy. When you look at the country --
FREELAND: Countries like Spain and Italy --
SCHOR: I`m talking about the labor market adjustments.
FREELAND: They have unemployment around 15 percent, 20 percent.
That is a problem.
SCHOR: I`m sorry. I didn`t hear -- what did you say?
FREELAND: Spain, Italy, unemployment around 15, 20 percent.
SCHOR: Of course they do.
FREELAND: Juliet, hang on, because it is connected to the German
point. Part of the reason that Germany has been able to have export-led
growth and be so successful internally, Germany is sort of the China of
SCHOR: I realize that. I made that point about 20 minutes ago.
My point was just in the low hours countries where you had hours
adjustments to shock at the beginning -- I`m not talking about the later
stage of austerity and self-imposed pain, which is what Europe is dealing
with right now. But if you look at the adjustment, look at the OECD`s
analysis of the adjustments to the downturn and the U.S. has a huge GNP
adjustment and loss of unemployment where a lot of these other European
countries adjust on hours and their unemployment doesn`t go up. That`s the
only point I was making.
HAYES: Adjust on hours meaning you get something more like job
FREELAND: Which is what Germany in fact did.
SCHOR: It wasn`t just Germany who did it. It`s not just Germany who
did it. Quite a few of the OECD countries adjusted like that in the early
MCGHEE: Other great concepts that we can actually bring to bear on
this, I don`t think we can just do one thing. So, for example, we have
about a dozen states right now trying in pieces and bits and starts to
mimic the idea of the Bank of North Dakota which has been around for 100
years. At Demos, we call them sort of Main Street partnership where you
say, OK, we`re paying taxes and right now pretty much, most of our states
are keeping that money in big Wall Street out of state banks.
Instead, we could create a public institution with a mandate to help
small, local banks in the state feed that money back through the economy.
So you`re increasing jobs in the state. You`re increasing small business
lending at a time when the big Wall Street banks have no real imperative to
lend locally at all. It`s not going to be profitable for them without
housing equity. You`re returning a dividend to the state.
FREELAND: Is it publicly owned?
HAYES: Yes. It`s a publicly owned, public bank.
MCGHEE: And it`s really an incredible way to both sort of give
policymakers control over their economy which is something that, you know,
people are struggling to be able to do in this time period and to create
local job growth which, of course, has, you know, if it`s done right,
FREELAND: I think this is a terrible idea. I think that publicly
owned financial institutions are a huge mistake, and actually go back to
MCGHEE: Tell that to the North Dakota bankers.
HAYES: Wait, hold that thought. Hold that thought. Hold that
thought. Hold that thought. Hold that thought. Hold that thought. Hold
that thought. Hold that thought. Hold that thought.
We`re going to debate public banks, I was going to end the block
I`m going to thank Juliet Schor, author of "Plenitude: The New
Economics of Wealth".
And we`ll have more on public banks, right after this.
HAYES: All right. We weren`t going to talk about this, but then
Heather brought up, you know, I want -- well, we`re going to talk about in
the rundown and it got blown through earlier in the show. But then Heather
brought up this fascinating thing that people don`t know about. There`s a
state bank in North Dakota and it`s been around since 1919. It came out of
the populous progressive movement.
And it`s a state-owned bank and --
MCGHEE: The public love it in North Dakota.
HAYES: And the Republican government was very successful. His
previous job was running that bank. It`s provided $313 million to the
state in the last 10 years. It hasn`t been corrupt. It hasn`t -- in fact,
it weathered the financial crisis much better than the public banks did.
FREELAND: Does it lend to farmers?
MCGHEE: So, it does produce special loans. It lends through small
banks in the state to, you know, borrow in the state, both individuals and
most of business.
HAYES: There`s a movement in California to -- it starts running
California, and Oregon has been considering it.
MCGHEE: Yes, Oregon is going to (INAUDIBLE) this actually.
HAYES: Chrystia, before we went to break, the reason I have one more
break is that you`re like, oh, God, the idea -- get the governments out of
banks. Why is it --
FREELAND: I`m going to stipulate these small examples. It`s great
that they work and I`m not opposed to those self-contained ones. What I
would say is I actually think one of the lessons of the 2008 financial
crisis is it is actually really dangerous to have the state and politicians
have a direct state in major lending institutions because then you have
real dangerous, moral hazards at those institutions, and the politicians
have moral hazard, too.
MCGHEE: Are you referring to Fannie and Freddie?
FREELAND: Yes, the two places that I think we`ve seen that playing
out is the Europe. A lot of the European state-owned banks have created
this huge banking crisis, which is kind of underneath -- the tip of the
iceberg is the European financial and political crisis, but underneath that
is a huge banking crisis that hasn`t fully been resolved. And that was
driven a lot actually by the German Landesbank which had this state
guarantee that allowed them to do really stupid things. They were more
leveraged than a lot of the American banks. So, that`s argument one.
And argument two is Fannie and Freddie. And I -- I don`t see Fannie
and Freddie as the heart of darkness in the financial crisis, but I think
they were part of the problem. And they were part of the problem because
they were used to solve what should have been a political problem.
So I think the issue of redistribution in the U.S. economy, instead
of taxing rich people and helping poor people earn more money, what the
U.S. political system did is lower interest rates and allow poor people to
think they were richer because they could take out home equity loans --
thanks to Fannie and Freddie.
PARENTI: I have to bring back the climate crisis because all of
these discussions --
FREELAND: Of course, you do, Christian. We love it.
PARENTI: All these discussions of the future of the economy run into
this question of whether or not the climate system is going to fall apart
on us and there needs to be a radical transformation of how we use and
produce energy if that`s not going to happen. And I think there`s actually
-- that involves a type of green industrialization. This is not to say
that growth is always good. But in the short term, this is what has to
And if you look at the history of rapid industrialization -- China,
South Korea, Japan, there`s been a very robust and positive role for public
SMITH: All of that --
PARENTI: Because you can use it as a tool for driving investment.
So, I`m not opposed to public finance at all.
HAYES: I think we`re going to see -- I would like to see more
experiments, even if they start at the local level with experiments in
public finance because I think our financial system right now, just in
doing the basic thing it`s supposed to do, which is channel savings to
investment, is doing a terrible job with it in almost everyway.
FREELAND: So regulate them.
HAYES: I would like to see -- regulation is one way, or competition.
That`s the other way, which is competition with a public institution.
I want to thank Christian Parenti from "The Nation" magazine and
Heather McGhee from the progressive think tank Demos. The battle control
intellectual property, the currency of the future of the U.S. economy.
HAYES: When politicians talk about the future of the American
economy, one thing they seem to all agree on is that our strength comes
from our ideas, the power and importance of U.S. innovation.
(BEGIN VIDEO CLIPS)
SEN. JOE LIEBERMAN (I), CONNECTICUT: The unique culture of freedom,
innovation and entrepreneurship that flourishes in our country --
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This country`s legacy
SEN. MARCO RUBIO (R), FLORIDA: American innovation.
MITT ROMNEY (R), FORMER PRESIDENTIAL CANDIDATE: Some of these small
businesses, the entrepreneurship and innovation in their hearts just
OBAMA: We need to out-innovate.
RUBIO: American innovation.
UNIDENTIFIED FEMALE: Encourage that innovation.
HILLARY CLINTON, SECRETARY OF STATE: Our shared obsession with
(END VIDEO CLIPS)
HAYES: Indeed, it is an obsession.
The United States is undeniably one of the most innovative economies
in the world. It also has a legal regime in governing intellectual
property, is widely viewed as a total and utter disaster.
The U.S. Constitution grants Congress the power to, quote, "promote
the progress of science and useful arts by securing for limited times to
authors and inventors the exclusive right to their respective writings and
discoveries." With all sorts of odd bound (ph) capitalization as was the
one at the time.
This idea to protect the rights of American innovators, large and
small, through patent and copyright protections was at one point truly
revolutionary. Today, there`s broad concern these protections have been so
distorted and expanded, they are squashing the innovators and ideas they
purport to protect, killing off the one thing that everyone seems to agree,
America does right, which is innovate.
According to "The New York Times" last year, this is really
fascinating piece of information, for the first time ever, Apple and Google
spent more money on patent lawsuits and patent purchases than on research
and due products. Think about that for a moment. More money went into
legal wrangling over new ideas that generating actual new ideas.
Increasingly, the property that really matters in the next economy is
intellectual property and the fight over who controls that intellectual
property is only going to get more vicious.
As a tiny glimpse of what that looks like, just last month, the House
Republican study committee put out a report in favor of liberalizing
current copyright law, saying, quote, "Today`s legal regime of copyright
law is seen by many a form of corporate welfare that hurt the innovation
and hurt the consumer. And it`s a system that picks winners and losers,
and the losers are new industries that could generate new wealth and added
Within one day, the report, which brought attention to a large
special interest who benefit from current copy law, was scrubbed from the
Internet and disowned by Paul Tiller (ph), the executive director of the
committee, who said it was not subjected to, quote, "adequate review." The
author of the report, Derek Hanna (ph), has since been fired.
Joining us now, Richard Wolff, visiting professor in New School`s
graduate program and international affairs, host of WBAI-FM "Economic
Update"; and Susan Crawford, author of the book, "Captive Audience: Telecom
Monopolies in the New Gilded Age," and professor at the Center on
Intellectual Property and Information Law Program at Carodozo School of Law
and former special assistant to President Obama for science, technology and
Great to have you here.
SUSAN CRAWFORD, AUTHOR, "CAPTIVE AUDIENCE": Great to be here.
Thanks so much.
HAYES: So since this is your area of expertise, I will start with
you, which is our I.P. regime a total disaster?
CRAWFORD: So, this was a great idea at the outset, which is it means
people have a incentive to create things by giving them a limited period of
time which they exclusively own it and get to exploit it.
HAYES: When you step through that economic logic a little more, why
should the government grant -- let`s just begin with the most basic thing,
right? I come up with an idea and the government grants me an exclusive
license, a monopoly --
HAYES: -- over using that idea to make money for a small period of
time. Why should the government do that to begin with? Right?
CRAWFORD: There is deep concern about this idea, actually a lot of
fear, because you are creating monopoly. But the problem was that, people
really felt that a very short period was a good idea because it gives so
some exclusivity, and then it goes back to the public. But the gift was
supposed to be the public after just 14 years, and then after 28 years if
Now, it`s life plus 70, which is essentially endless.
CRAWFORD: And there`s no fair use left as far as we can tell. The
ability of the second innovator, the second actor to use this
infrastructure, to use all of this free-flow of information has been
sharply cut back. So, we`ve handed a series of private monopolies to some
very autocratic players who are now using technical commands over the
Internet and Internet access producers to fulfill their own business
desires, and it`s not good for our economy or the future of innovation in
SMITH: The basic idea, though, right, is to give people the ability
to make a living as an innovator, so if you are in monopoly, profits, and
you have to make a living as an innovator. You can actually do that,
CRAWFORD: Actually, the basic idea was to get stuff to the public
and that you get more stuff to the public if you initially give an
incentive to initial action.
SMITH: Yes, because you could devote yourself -- you could devote
yourself to giving new ideas and creating things. You can make a living --
you can make a living as a writer if you could tap copywriting, you
couldn`t, otherwise, so there`s more things written, right?
FREELAND: I`m with Susan. It`s actually -- It doesn`t have to be
all or nothing. I think it`s essentially a good idea for a limited time,
but it`s gone way too far. It`s not just with the Internet, it`s not just
media. I mean, my dad is a farmer and one of the things that drives him
completely crazy is the patent on seeds and on herbicides and fertilizers,
CRAWFORD: Patent scientific articles. People do great research on
open federal data, and then they like articles which are behind paywalls
that no one can access. That`s a huge problem for America. That means
that the publishers, these intermediaries that asserted themselves in the
middle of, you know, scientific questions, are making all of the profits
and what we really need is Americans to do better because of those
RICHARD WOLFF, THE NEW SCHOOL: Yes, again, we must beat the
proverbial death hole. We have a profit-driven society which is going to
try to make money out of anything we do. The presence, the absence of a
law, all of these are occasions to try to make money out of it and we`ve
seen this happen in the very evolution, as Susan points out.
A couple of questions. One, we ought to be more concerned about the
benefits to be gained by letting innovations be widely understood and used
than by rewarding the innovator.
Number two, the notion that the innovator is an individual strikes
strike me as bizarre. The individual is just a moment in that process of
research that involves thousands of institutions over a long period of
time. They come together in one person, but the celebration of the one
person who takes the last step, as opposed to all of the others is, again,
removing the social did I mention of this process and making it an
FREELAND: Or the fact that five people might come up with the same
idea, and really recognize the single person.
WOLFF: People are not so pecuniary as people imagine them to be.
There are a hundred ways of rewarding people who come through with
innovation and we ought to explore them, celebrate term publicly.
HAYES: Presidential --
WOLFF: The notion that the only way to get them to do it is by giving
them private profit in perpetuity to create them to be wonderful moments
for our corporation to get an advantage they couldn`t otherwise have,
that`s a pandering to an economic system that we ought to be questioning,
FREELAND: So, I have a question --
CRAWFORD: The thing here that we need to focus on is who get the
FREELAND: Right. That`s what I was going to ask. Who are the
CRAWFORD: But we face this issue in many parts of American society.
And right now, we`re facing it with Internet access as well. So, we`ve
handed a monopoly originally to cable operators in America for wired
Internet access. They are dividing the world up between them and wireless
guys. For me, that content issues are just secondary. They all make deals
with the RIAA and MPAA --
HAYES: Explain who those people are.
CRAWFORD: I`m sorry. The Recording Industry Association of America
and the Motion Pictures Association of America have tremendous power in
HAYES: Yes, let me show an example of this, because this is former
senator from Connecticut, Senator Chris Dodd, who is now head of the MPAA.
He`s telling lawmakers who count on Hollywood not to expect money if they
don`t vote for the Stop Online Piracy Act, which was a piece of
intellectual property legislation that was pushed by our employer here and
"Those who count on, quote, `Hollywood for support` need to
understand that this industry is watching very carefully who is going to
stand up for them when their job is at stake. Don`t ask me to write a
check for you when you think your job is at risk and then don`t pay
attention to me when my job is at stake."
So, that`s the, you know, the big stick --
CRAWFORD: Does he make it self-interest depicted --
HAYES: Right. But that is -- the question I think -- the next
question I want to ask is, this has happened both in copyright and patent
which we`ve seen this overgrowth of property claims. I think people
increasingly on the left and the right agree with that.
So, the question is, what to do about it? Let`s talk about that
HAYES: We had a big case this year that focused people`s attention,
which was Apple and Samsung over a set of patents, right? So, when you
think about something as complex as an iPhone, right, there are lots of
patents in there.
HAYES: Hundreds of patents. And increasingly, I didn`t know this
until I stepped through the patent process. The patent process is kind of
a remarkable process in that it is this bulwark of the civil servant,
right, the patent applicant, the Einstein sitting in the table and they get
this little diagram drawing and they either put a check mark and saying
yes, this is novel and this is -- you`ve come up with this, and this is a
distinct thing --
CRAWFORD: And years go by, years go by. There`s a timeline in your
story as well.
HAYES: And so -- or in some cases, you apply and you get rejected
the first time, and then you tweak the language and you`re rejected. And
then on the 10th time, they finally say, OK, fine, here`s the patent.
So there`s the patent. So Apple then sues Samsung and says, no, no,
you can`t make your smartphone because we have the patent for that and they
CRAWFORD: Well, the expensive loony (ph) on reality of the system is
-- we really have to be talking about as a country. And Google is
announcing it is trying to step back and get out of these wars because they
have dozens of litigation pending all over the world and all they are doing
is inventing patents, not patent inventions. It seems backwards.
CRAWFORD: And it`s actually frustrating for the inventors involve
and for everybody because --
HAYES: There is this industry now that people call patent trolls
HAYES: Where there`s now a business model in which you just cycle
through and try to get a bunch of patents, like spending your pen, for
instance. Maybe that`s a novel thing that you can patent.
HAYES: Here`s the growth of the patent lawsuits involving patent
trolls from 2001 to 2012. And you see it steadily shoots up and now, it`s
like, it`s become this growth industry.
The idea is you can essentially blackmail people, for a lack of word,
because you have this property claim and then they come out with something
and you say, you send them a letter and you say, we have a patent ongoing
like this to minimize an image or breathing or some process that everybody
CRAWFORD: Two problems here. One is that you can box out your
competition with a threat of this lawsuit, but also you`re making it very
difficult for anybody else to invent something new. You`re just -- you
know, everybody`s afraid. And that`s no good for innovation.
HAYES: Right, it`s providing the opposite of incentive. I mean, if
the idea is to secure in limited turn to promote the useful arts and
sciences, and instead you`re creating a situation in which if you invent
something, you`re going to get your butt sued.
HAYES: Right? It`s like literally the opposite of creating
incentives for -- sSo what do we do about it?
CRAWFORD: Start over.
Seriously. Think very seriously about software patent. That`s where
a lot of the ridiculousness is coming from. Each one of those phones has
hundreds of patents, not just for the design and hardware, but for
everything little thing, how it works together.
FREELAND: And so, you can wipe it all out?
CRAWFORD: We should not have software patents?
FREELAND: No software?
CRAWFORD: You want to help me out on this one?
FREELAND: I think it`s a mistake.
SMITH: I think it`s right. I mean, that`s my approach because it`s
extremely complicated, extremely involved, just wipe out and if there are
problems, they`ll use themselves and we`ll do it again.
HAYES: No, wipe out the category of software patents.
SMITH: Yes, just completely wipe out --
HAYES: There`s also this very controversial -- I remember reading a
story about this, the controversial category of business method patents,
right, which is more bizarre because presumably coming up with a business
method is on its reward? Right, like the way capitalism work, right? You
come up with a good business idea, that`s the thing that rewards you. You
don`t need a govern monopoly on it.
But I remember writing about a case about a place that was selling
cereal to college students in Gainesville, Florida, that got a cease and
desist letter from a cereal serving store chain in Chicago called Cereality
which had patented the business method of selling people bowls of cereal
with milk in a retail store.
CRAWFORD: Oh, I want to apologize of half of America`s law schools
who graduated 40,000 lawyers a year and a lot of them aren`t finding jobs
and maybe too many of them are becoming patent litigators. But a lot of
this is driven by litigation.
FREELAND: Can I really strongly endorse Karl`s great idea? Because
one of the sort of meta things that this discussion makes me think about
and also our financial regulation discussion is, you know, we`ve had modern
industrial capitalism for a long time, for two centuries and it`s become
very, very complicated. There are barnacles all over, pretty much of what
Our tax system, our financial regulation, our patent system, the way
health care works in America. And I think more and more we have to
actually be willing to say, you know what, you are going to have to start
over in some areas because, you know, adding more band-aids and bubble gum,
it`s not going to work.
WOLFF: I love the imagery. Can we just play for a moment with that?
FREELAND: Barnacles and bubble gum.
WOLFF: No, no, suppose it`s not just the patent law. Suppose the
whole system is a collection of band-aids and ad hoc drugs that -- let me
just finish -- interact with one another. So we are having good
conversations of intelligent people trying to figure out where they are
substituting another band-aid or adding another wrinkle might be -- when
you`re saying and you`re saying, stop.
Maybe we have to rethink from the basis of what`s going on. Maybe
part of our problem is not this or that law, or this or that regulation,
but the way we have a system that responds to regulation.
HAYES: Can I weigh in on the side of ban band-aids and bubble gum?
Which is basically the product of civilization, is like coming up with
band-aids and bubble gum, ad hoc solutions and kind of keeping things
WOLFF: Unless you want to start from the beginning.
HAYES: On software patents, one area. Not with industrial
CRAWFORD: Richard, very important way which I do disagree.
WOLFF: One is on the way to the other.
CRAWFORD: I disagree with you. I think what we`ve lost is the
ability to think about public infrastructure which could include commodity
banking, that gives out lots of loans, that is publicly overseeing, or
maybe even own, includes Internet access, includes, you know, working
CRAWFORD: It`s weeks after Sandy and two-thirds of the buildings in
Lower Manhattan still don`t have phone service. That`s because we haven`t
been working on our infrastructure. We don`t have a functioning
electricity grid that`s strong enough to carry the country forward.
We need a sustainable plan for moving America forward.
WOLFF: I rest my case.
HAYES: I want to ask you the question of what --
CRAWFORD: That is a free market to operate. That`s not -- that`s so
that we can have --
HAYES: Let me ask you -- I want to answer this question about how
intellectual property is different than other property, because that`s also
part of the thing that`s at issue here -- right after we take this break.
HAYES: Intellectual property and the future of American economy and
increasingly people talk about the source of American innovation,
ingenuity, being, you know -- everyone loves Silicon Valley. Everyone
wants to make their own Silicon Valley. Every country is talking about
getting their own Silicon Valley, it`s like --
FREELAND: That`s right. The Russians have the plan.
HAYES: And we`re talking about maybe some of the problems that are
encroaching us in the Silicon Valley. The problems with how we regulate
And, Susan, I want to just talk for a second about how intellectual
property is different than physical property and why those differences are
important for how we think about regulating it.
CRAWFORD: Well, people spend their lives talking about this and my
life is short. So I don`t want (INAUDIBLE).
It`s very similar to property in that you`re given a bundle of
exclusive rights for a period of time. It`s very different in that anybody
else can access, it`s non-rigorous (ph), which means like if I have a pie
and I cut the pie, I take half, and I get that half and you can`t have it.
If I have an idea --
HAYES: Of making pies.
CRAWFORD: -- of making pies, you can have it and there`s plenty left
over for me. So, that`s the difference between intellectual property.
That`s a very important difference.
That`s why the framers wanted to make sure that as quickly as
possible, America got the benefits of what creators had come up with.
HAYES: Are there people, other countries right now doing
intellectual property in an interesting and exciting way comparatively that
we can look to, or rethinking intellectual property?
CRAWFORD: We have a lot of bilateral and multilateral trade
agreements with other countries.
HAYES: On which we are opposing our bad system on them.
CRAWFORD: So, in fact, it very important to our foreign policy and
we`re exporting our way of thinking of intellectual property.
HAYES: This is Treasury Secretary Tim Geithner slamming China on
exactly this, on intellectual property incursions. Let`s take a look.
(BEGIN VIDEO CLIP)
SEC. TIMOTHY GEITHNER, U.S. TREASURY DEPARTMENT: We`re seeing China
continue to be very, very aggressive in a strategy that they started
several decades ago which goes like this -- you want you to sell to our
country, we want you to come produce here. If you want to come produce
here, we want to you export from China. If you want to come to produce
here, you need to transfer your technology to us.
And they have made possible systematic stealing of intellectual
property of American companies and have not been very aggressive in trying
to put in place the basic protection for property rights that like serious
economy needs overtime.
(END VIDEO CLIP)
HAYES: This suggests and I know this is one of the MPAA`s big, you
know, in the content of producers, including again our parent company, one
of their big objectives is making sure that there are essentially legal
agreements in place that are going to export our intellectual property
CRAWFORD: Right. And economic espionage is a real problem and
Secretary Geithner is talking about something that could be draining
American economy with a lot of money. What I`m talking about is getting
this balance right between the public`s access and the investors` incentive
and that`s where we`re completely out of whack. And where we`re actually
now using levers of technical power to make it impossible to unlock things,
to use them, to reuse them, to remix them and we may be missing out on a
big part of the economy that other countries get.
SMITH: And the interesting thing I think there`s even a debate over
whether industrial espionage is on that bad, because one of the stories of
Detroit was that industrial espionage in the auto industry was so intense
that that drew everyone to the central location to be involved in the
process of building automobiles and created an enormous industrial base.
SMITH: And actually go there because they might steal those ideas
and, you know?
HAYES: Fascinatingly, I was doing research for a show we did a few
weeks ago about energy and I was looking at the oil plain in North Dakota.
One of the things that`s fascinating there which is that this kind of
stealing is totally endemic to the oil extraction industry, which everybody
comes up with essentially secret methods of extracting oil because it`s a
comparative advantage. But everyone eventually -- it all gets out, right?
Everyone eventually learns and, in fact, that probably produces a net
positive surplus because of the shared information even though it`s shared
ostensibly in violation of the secrets.
WOLFF: The response to Geithner is welcome to the world of economic
history. What he`s complaining about, every single country at its
comparable stages in its history has done in one way or another. He would
like to arrest that process because he decides it`s not convenient for us
to do that now when every country, including us, has done that at another
point in history.
This is an attempt to play on people`s naivety as if the outrage has
just happened and he wants to declaim against it.
FREELAND: Well, it`s the history of how the Industrial Revolution
spread through Europe and democracy, because one of the really interesting
things if you see that you would have Industrial Revolution go so far and
then you would the state kind of start messing things up and the inventors
would move to the next European country where they could invent stuff.
There was more freedom and that country then surged --
HAYES: People should read the story of how the first rubber plant
was smuggled out of Brazil by the British, which is an incredible caper and
CRAWFORD: And, actually, this is a nice segue to getting away from
the dismal science of economics, to talking at language of abundance and
increasing returns to scale and new ideas.
And what`s the problem with our copyright system and Internet access
that a lot of other oligarchies get painted is that it`s not allowing more
people to discover new ideas and new ways of making a living, and that`s
how you push an economy forward.
HAYES: Right. Well --
FREELAND: Can I ask the brilliant Susan a question?
HAYES: Actually, no. Because we have to go to what you should for
the year ahead, coming up next.
HAYES: All right. So, what should you know for the year 2013?
Well, you should know that North Carolina Republicans who will
control both legislative chambers and the governor`s mansion next year have
vowed to repeal the state`s Racial Justice Act which allows for death
penalty appeals showing racial factors at work in capital punishment cases
You should also know that a report this month by the death penalty
information center suggests the rest of the country will rely less on the
death penalty next year, not more. Thirteen states executed people in
2011, but that was down to nine this year.
Most states, 29 of them, now either don`t have the death penalty at
all or haven`t executed anyone in the past five years. And the list of
states that did not execute anyone included anyone last year included
Alabama, Georgia and Louisiana.
The center`s executive director Richard Dieter (ph) credits two
factors: fear of executing the innocent and the high cost of death penalty
You should know that sometimes when injustice feels to motivate, cost
effectiveness can suffice.
You should also know the nation will take another step forward in how
it cares for the general population next year as the Affordable Care Act
continues its slow but now increasingly inevitable appearing crawl towards
full implementation, specifically on October 1st of next year, open
enrolment will begin for state-based health care exchanges -- meaning
health insurance will become available in a marketplace for which the
government will act as a gatekeeper, demanding higher standards and lower
cost than our current market has provided in the marketplace of life and
You should know that the exchanges won`t be perfect. We should also
know that the government`s involvement makes them responsive to factors
other than the bottom line, the fight over health care will continue.
And, finally, you should know of one other sign of hope for those who
need it most. Ten states are raising their minimum wage next year, along
with several cities. We should know the federal minimum wage stands at
$7.25 an hour, essentially poverty level income for family of three.
And you should know the low wage jobs are increasingly important,
representing 58 percent of new jobs created since the recession according
to the National Employment Law Project.
You should know that forcing business to pay workers a living wage is
not popular in some quarters, but you should also know it`s one of the few
ratchets we can use to improve the lives of working people, and arrest the
growth of massive inequality that is the defining feature of our political
I want to find out what my guests think you should know for the next
year, and I will begin with you Professor Richard Wolff.
WOLFF: I think you should pay some attention to a remarkable company
in the northern part of Minnesota called the Marvin Window Company. They
got into the news as they were praised by both President Obama and by his
opponent Mr. Romney as Paragon Corporation.
Here`s what they did. They got through the great crisis of the last
five years without laying people off. They had the imaginative idea that
they could share the unemployment among all of the people there, and so
nobody would have to fall into unemployment. What an interesting idea that
both Republicans and Democrats would celebrate.
They also just as interestingly made the decision to take a
significant portion of their profits and share it among the workers to
compensate them even for the little bit of unemployment they had this year.
What a wonderful idea.
Here`s the thought. Instead of relying on extraordinary family that
owns the company to make that decision, just imagine if American
enterprises were owned by the workers that worked in them and run by them
and gee, they could make that decision and everybody would have the
wonderful story that both of our candidates celebrated without defending on
the whim of a particular capitalist.
HAYES: I`m sure that Mitt Romney would love that.
CRAWFORD: You should know that in front of the D.C. circuit, Verizon
right now is claiming it is just like "The New York Times" when it carries
broadband data, that it`s a speaker. That any regulation of its activities
is therefore unconstitutional, this would wipe out all of the
communications protection of consumers in pricing and service, and
CRAWFORD: And it`s a brazen attempt to turn our First Amendment
freedoms into their control, of their cartel, which is enormously
HAYES: It reminds me of the rating agencies that make the same
argument about the ratings and why they can`t be sued over them because
they say we`re just basically -- these are basically editorials, when they
CRAWFORD: This has a kind of consumer impact.
SMITH: So, you should know that I`m increasingly concern that the
housing bubble, the dynamics of the housing bubble will reassert themselves
I think that`s particularly interesting because people feel that the
shock of the last time or the reforms of the financial sector, all this,
have done anything about it, and I don think that they have. I think the
fundamental liquidity issues are still with us.
HAYES: That`s interesting. To look for the re-expansion of the
FREELAND: OK. You should know that the focus of the past four years
rightly has been getting the economy out of recession and into growth. I`m
actually kind of bullish on the U.S. economy in 2013 provided that the
cliff issues are avoided. But that means that the focus should and I think
actually will turn to issues of redistribution, and that is actually
essential, because there are a lot of reasons to think that even as the
economy moves into growth, the distributional problems will become worse
and not better.
HAYES: I want to thank my guests. Richard Wolff from New School,
Susan Crawford from the Cardozo School of School, Karl Smith from the
University of North Carolina at Chapel Hill, and Chrystia Freeland of
Thomson Reuters Digital -- thanks a lot. That was really enjoyable.
FREELAND: It`s great to be here.
HAYES: Thank you for joining us today and throughout 2012. It`s
been an amazing year, and we hope you will continue to join us next year.
We will be back like next weekend, Saturday and Sunday at 8:00 Eastern
Time. Our guest will include filmmaker Oliver Stone will be here to talk
about his new series "The Untold History of the United States." I`m really
looking forward to that. It`s going to be fun to do.
Coming up next is, of course, the one and only Melissa Harris-Perry.
And we will see you next week here on UP.
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