February 2018

Disrupting Technological Capitalism

As progressives who believe in the power of unions and the necessity of unity against an exploitative capitalist class who treats workers as commodities, this situation forces us to ask an important question: what will the future of work look like?

With Elon Musk sending expensive cars into orbit with his privately-funded space missions and Amazon offering a grocery shopping experience free of cashiers, it would seem that the capitalist class is “innovating” its way past the need for workers or government. Even fast food companies such as McDonalds are innovating their low-wage employees out of jobs. As progressives who believe in the power of unions and the necessity of unity against an exploitative capitalist class who treats workers as commodities, this situation forces us to ask an important question: what will the future of work look like? Will automation bring a utopia where human needs are provided for and people spend their time bettering themselves? Or will it impact low wage workers disproportionately and lead to further systemic exploitation?

Issues concerning labor extend beyond debates about take home wages. The job that you have is likely your source of healthcare coverage. In the American healthcare system, access to healthcare services has been linked to employment since World War II. In exchange for their labor and loyalty to a company, workers receive benefits from their employers. This is certainly not the case in the industries most vulnerable to automation, with the vast majority of grocery and fast food workers not having union protections and receiving no benefits and only minimum wage. Changes in the makeup of the American economy, compounded by right-wing attacks on the union movement, have helped to lead to deep insecurity by wage earners about their place in American society. In many cases, a full-time job in the United States is no longer enough to provide affordable housing.

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West Virginia teachers strike over state mismanagement of the Public Employees Insurance Agency, 2018. Courtesy of New York Magazine.

While union organizing in under-represented industries continues, workers in some sectors who have already fought long and hard for collective rights have seen their jobs slowly transforming to a gig economy where workers freelance their employment and work as independent contractors as opposed to being employed directly with a company. This puts employees in a position where they are working for major corporations such as Uber, making money for them, but being forced into a tenuous economic situation where they have no real representation. While drivers are slowly fighting back, the process is slow moving and largely piecemeal.

The ridesharing economy is impacting not only the Uber drivers themselves, but also others employed in competing forms of transportation. For example, disruption to the taxi industry by companies like Uber and Lyft has left a trail of bankruptcies and debt in its wake. New York City taxi drivers routinely pay hundreds of thousands of dollars for a medallion which gives them the right to operate in New York City. At their peak in 2013, the cost of an individual medallion was around a million dollars. Traditionally, drivers have been willing to take out loans or even mortgage their homes to purchase a medallion to work in New York City. Until recently, the value of New York City taxi medallions had appreciated, and the purchase was seen as an investment. Driving a taxi in New York City also comes with union protections and offers services to its employees and protections that used to ensure a relatively stable life in a very expensive city.

Workers in some sectors that have already fought long and hard for collective rights have seen their labor slowly transforming to a gig economy where workers freelance their employment and work as independent contractors as opposed to being employed directly with a company.

Transportation options in New York City are rapidly changing, however. While there are generally between 12 and 13 thousand taxis on the streets of New York City, as of 2017 there were an estimated 46 thousand cars affiliated with Uber working in New York City. While these numbers do not tell a complete story—not all Uber drivers drive full time and some are also affiliated with Lyft and other ride-sharing companies—they do paint a picture of an industry that is quickly moving away from traditional taxi service.

Uber’s “disruptions” have caused the taxi industry to change for the worse. Taxi medallions have plunged in value and are now worth as little as $200 thousand on the medallion sales website NYCitycab.com. One livery driver, Doug Schifter took his own life in an attempt to bring attention to the deep sense of hopelessness that has come with disruptions in their livelihood. Although taxi drivers have worked hard to establish their rights through unions, Uber—which lacks a union and has faced scrutiny for sexual harassment and accusations of sexual assault by drivers, as well as exploitation of their employees—has been slowly and methodically taking over the transportation industry in New York City.

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Taxi drivers protest the rise of ride-sharing apps in Berlin, Germany, 2014. Courtesy of Mashable.

Essentially, the only ones “winning” in this disruption are the owners of companies like Uber and Lyft who make excessive profits off of the labor of people who drive consumers around for a percentage of the fare. It is becoming more and more clear that the current neoliberal economic platform is not working. Despite surviving a 2008 crash, the cracks in the current economic model are clear. The economic populism presented by both Bernie Sanders and Donald Trump in the 2016 election shows just how dissatisfied people are with the current political system.

In response to these challenges to the status quo, new economic ideas have been gaining popularity. One of these ideas, supported by many on the libertarian right and in the tech community, is Universal Basic Income (UBI), which essentially offers an income that will be enough to live on regardless of one’s employment status. Techies such as Elon Musk argue that as automation replaces human labor, especially in the service industries, “The output of goods and services will be extremely high. With automation there will come abundance. Almost everything will get very cheap.” Musk is clearly utopian in his views about technology and automation, but his views demonstrate that he is seriously thinking about ways to accommodate the changes that have affected the economy through automation and disruption.

It is becoming more and more clear that the current neoliberal economic platform is not working.

Although UBI historically has had support from figures on both the left and right—everyone from Milton Friedman to Dr. Martin Luther King Jr. have at various times indicated their support for it—many progressives have soured on UBI even as it gains popularity more broadly. Countering the argument made by Musk and others, progressives argue that a UBI would not actually have a real impact on the people who need it most. Writing in the Guardian in June 2016, Jathan Sadowski argued that UBI would essentially subsidize the middle and upper middle class, by using what little is left of the welfare state to subsidize low wages. Essentially, while UBI seems on the surface like a program that would be of real benefit to the poor, in reality it mainly benefits an already exploitative capitalist class, enabling even lower wages under the justification that workers are already receiving an income from the government.

Many on the left have begun putting their support behind a relatively new, heterodox form of economics called Modern Monetary Theory (MMT). This theory works on the proposition that because the government prints money, the idea of scarcity is artificial. Their position hinges on the argument that since the United States went off the gold standard in 1971, the legitimacy of currency rests solely on the government. Dale Pierce in the MMT blog New Economic Perspectives explains, “The essential insight of Modern Monetary Theory (or “MMT”) is that sovereign, currency-issuing countries are only constrained by real limits. They are not constrained, and cannot be constrained, by purely financial limits because, as issuers of their respective fiat-currencies, they can never “run out of money.” Once one no longer worries about the threat of running out of money, it allows us to think about our relationship to money and the role of government in the economy in an entirely new way.

While Republicans have argued that running deficits is a negative for the economy, proponents of MMT argue that when the government is running at a deficit, then that is good for the economy because all of the money produced by the state is actively being used. Conversely, when the state ends up with money left over, it signifies that not enough money has gone into the economy. Given everything that we have been told about the dangers of deficit spending and the need for a balanced budget, it is clear that MMT is a revolutionary proposal. Proponents of MMT strive for full employment and argue that a government jobs guarantee would help to inject even more capital into the economy. These types of proposals and new ways of thinking about money in general have helped to elevate MMT from the fringes of academic economics to a somewhat mainstream audience.

MMT entered into the wider political discourse in 2015 when Bernie Sanders selected Stephanie Kelton, an economist at the University of Missouri-Kansas City and proponent of MMT, for his chief economic advisor. While the Sanders campaign arguably did not emphasize the details of its economic plans enough, for many who dug deeper it was their first experience with a decidedly different economic model. For the left, MMT offers a new way of thinking about macro-economic theory and breaking with the dominant neoliberal paradigm, as well as offering a counter to UBI, which many see as essentially a band-aid for deeper structural issues that will remain unresolved.

What both MMT and UBI have in common is a fundamental understanding that the current system is broken and that something drastic must be done. While the American capitalist system was in many ways saved by the Obama administration’s efforts in 2008, the crash left fundamental flaws exposed. Automation and disruption have furthered the economic malaise, and the election of Donald Trump as President of the United States shows, among other things, that status quo capitalism is not working for most Americans. It is also clear that we are reaching a level of automation that is fundamentally changing the nature of labor. The consequences of automation and disruption have had real and substantive impacts on people’s lives, and both UBI and MMT promise to make the lives of those hurt by economic changes better. Both options face fundamental challenges with implementation, and MMT forces us to reconsider our entire relationship with the American monetary system. However, they both in their own way offer paths forward in an age of uncertainty and disruption.

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Eric Morgenson is a PhD candidate in history at the State University of New York at Albany. His research interests include the intersections of race and class in the United States, the relationship between liberalism and the left in the twentieth century, and American Jewish history. Eric’s dissertation, The Last Step to Whiteness: American Jews and the end of the Civil Rights Coalition argues that allegations of antisemitism made against Black Power groups in the 1960s were part of a larger effort to distance liberal American Jews from the cause of civil rights. The work explores Jewish assimilation in the twentieth century. It emphasizes the impact that Jews becoming “white” i.e. culturally accepted had on the relationship between American Jews and African Americans. He received an MA from the University of Nebraska at Omaha, a BA from Concordia University-Nebraska, and an Associate of Arts from Southeast Community College in Lincoln, NE. Eric was born and raised in Bismarck North Dakota, but really hates cold weather. He currently lives in Connecticut where it is still too cold. He can be reached here.

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