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Wealthy venture capitalist and political activist Nick Hanauer says there have been 3 fundamental failures of capitalism over the past 40 years

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  • Nick Hanauer is a wealthy, Seattle-based venture capitalist and progressive political activist.
  • He successfully lobbied for a raise in Seattle’s minimum wage, and has been outspoken about raising it throughout the country.
  • He believes that there are three foundational mistakes in the way capitalism has been practiced in the US for the past 40 years.
  • This article is part of Business Insider’s ongoing series on Better Capitalism.

When Nick Hanauer made a fortune off both an early investment in Amazon and the $6.4 billion sale of his company to Microsoft in 2007, it felt only natural to him that he’d use his newfound influence to push for the policies he passionately believes in.

And for the last decade, Hanauer has been outspoken about the United States’ historically large inequality gap.

Through books like “The Gardens of Democracy,” essays like “The Pitchforks are Coming … for us Plutocrats,” and lobbying efforts for causes like the minimum wage, he’s made his activism its own job, in addition to both his foundation and his venture capital firm, Second Ave Partners. He’s also partnered with Eric Beinhocker, executive director of the University of Oxford’s branch of the Institute for New Economic Thinking, and the two are working on a book together.

In a wide-ranging interview with Business Insider, Hanauer told us that he believes we should not fear capitalism, but rather neoliberalism, the 20th-century strain of laissez-faire economics popularized by economists like Friedrich Hayek and Milton Friedman.

He said that, distilling it down, this approach to capitalism “is based on three foundational mistakes about how the world works.”

1. People are not perfectly rational and selfish.

Classical economics proceeds with the idea of humans acting as “homo economicus,” the economical man who is a being that is both rational and always finding ways to benefit himself.

In the second half of the 20th century, the rise of behavioral economics argued that this theory was quite simply incorrect. The development of this new way of thinking led to economists Daniel Kahneman, Robert Shiller, and Richard Thaler winning Nobel Prizes.

As Hanauer succinctly put it: “people are not rational, calculating, or selfish; they are emotional, heuristic, reciprocal, and fundamentally moral creatures because human societies are based on, built on, and constructed of norms and moral structures that enable cooperation and trust.”

2. The market is not always self-correcting.

In 1776, Adam Smith wrote in “The Wealth of Nations” that an “invisible hand” guides and individual to act in his own self-interest, and that this often leads to a more positive impact on society than trying to intentionally benefit society as a whole. Taken together, this results in a mechanism in which supply and demand are always in balance, and that through ebbs and flows, the market is an efficient and self-correcting one.

The economist Joseph Stiglitz told us in an interview earlier this year that in a paper he published in 1980, he declared that while market equilibrium can exist in theory, it was “impossible” for it to exist in a competitive economy in reality.

In his book “The Gardens of Democracy,” Hanauer and his coauthor Eric Liu take the idea professed by Stiglitz and others and compare the economy to a garden that needs trimming and pruning, but not to an excessive degree.

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Hanauer told me that the economy is subject to “positive feedback loops, like when workers are paid more, they buy more stuff, and the people they buy stuff from have to hire more workers, which creates more demand for stuff. It’s an ecosystemic perspective, an ecosystemic metaphor, if you guide your thinking about and your intuitions about how the system works, not a mechanical metaphor.”

3. GDP is not an adequate measure of progress.

In 1968, the presidential candidate Robert F. Kennedy gave a speech in which he poetically declared the shortcomings of measuring the health of America by its gross domestic product, its GDP.

Hanauer is more to the point. “The final mistake was … to believe that GDP was an adequate measure of human welfare and a good way of characterizing economic progress, which it is not!”

He said that a glaring example of this is that for the past four decades, an increasingly smaller number of people, elites, have captured much of the growth of the economy. Earlier this year, the French economist Thomas Piketty and a team of coauthors wrote “the incomes of the top 1% collectively made up 11% of national income in 1980, but now constitute above 20% of national income, while the 20% of US national income that was attributable to the bottom 50% in 1980 has fallen to just 12% today.”

“So when you line up those three mistakes, which is what all economic thinking and all economic policy is currently based on, yeah, things go wrong,” Hanauer said. But he’s hopeful, he said, because “there’s a huge effort going on in academia and in the philanthropic world to tear down all these old bad ideas and replace them with new ideas. New ideas about human behavior, new ideas about the dynamics of human social systems, new ways of measuring economic progress and human welfare.”



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Public officers above 58 years and with pre-existing conditions told to work from home: The Standard

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Head of Public Service Joseph Kinyua. [File, Standard]
In a document from Head of Public Service, Joseph Kinyua new measure have been outlined to curb the bulging spread of covid-19. Public officers with underlying health conditions and those who are over 58 years -a group that experts have classified as most vulnerable to the virus will be required to execute their duties from home.

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However, the new rule excluded personnel in the security sector and other critical and essential services.
“All State and public officers with pre-existing medical conditions and/or aged 58 years and above serving in CSG5 (job group ‘S’) and below or their equivalents should forthwith work from home,” read the document,” read the document.
To ensure that those working from home deliver, the Public Service directs that there be clear assignments and targets tasked for the period designated and a clear reporting line to monitor and review work done.
SEE ALSO: Thinking inside the cardboard box for post-lockdown work stations
Others measures outlined in the document include the provision of personal protective equipment to staff, provision of sanitizers and access to washing facilities fitted with soap and water, temperature checks for all staff and clients entering public offices regular fumigation of office premises and vehicles and minimizing of visitors except by prior appointments.
Officers who contract the virus and come back to work after quarantine or isolation period will be required to follow specific directives such as obtaining clearance from the isolation facility certified by the designated persons indicating that the public officer is free and safe from Covid-19. The officer will also be required to stay away from duty station for a period of seven days after the date of medical certification.
“The period a public officer spends in quarantine or isolation due to Covid-19, shall be treated as sick leave and shall be subject to the Provisions of the Human Resource Policy and procedures Manual for the Public Service(May,2016),” read the document.
The service has also made discrimination and stigmatization an offence and has guaranteed those affected with the virus to receive adequate access to mental health and psychosocial supported offered by the government.
The new directives targeting the Public Services come at a time when Kenyans have increasingly shown lack of strict observance of the issued guidelines even as the number of positive Covid-19 cases skyrocket to 13,771 and leaving 238 dead as of today.
SEE ALSO: Working from home could be blessing in disguise for persons with disabilities
Principal Secretaries/ Accounting Officers will be personally responsible for effective enforcement and compliance of the current guidelines and any future directives issued to mitigate the spread of Covid-19.

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Uhuru convenes summit to review rising Covid-19 cases: The Standard

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President Uhuru Kenyatta (pictured) will on Friday, July 24, meet governors following the ballooning Covid-19 infections in recent days.
The session will among other things review the efficacy of the containment measures in place and review the impact of the phased easing of the restrictions, State House said in a statement.
This story is being updated.
SEE ALSO: Sakaja resigns from Covid-19 Senate committee, in court tomorrow

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Drastic life changes affecting mental health

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Kenya has been ranked 6th among African countries with the highest cases of depression, this has triggered anxiety by the World Health Organization (WHO), with 1.9 million people suffering from a form of mental conditions such as depression, substance abuse.

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Globally, one in four people is affected by mental or neurological disorders at some point in their lives, this is according to the WHO.

Currently, around 450 million people suffer from such conditions, placing mental disorders among the leading causes of ill-health and disability worldwide.

The pandemic has also been known to cause significant distress, mostly affecting the state of one’s mental well-being.

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With the spread of the COVID-19 pandemic attributed to the novel Coronavirus disease, millions have been affected globally with over 14 million infections and half a million deaths as to date. This has brought about uncertainty coupled with difficult situations, including job loss and the risk of contracting the deadly virus.

In Kenya the first Coronavirus case was reported in Nairobi by the Ministry of Health on the 12th March 2020.  It was not until the government put in place precautionary measures including a curfew and lockdown (the latter having being lifted) due to an increase in the number of infections that people began feeling its effect both economically and socially.

A study by Dr. Habil Otanga,  a Lecturer at the University of Nairobi, Department of Psychology says  that such measures can in turn lead to surge in mental related illnesses including depression, feelings of confusion, anger and fear, and even substance abuse. It also brings with it a sense of boredom, loneliness, anger, isolation and frustration. In the post-quarantine/isolation period, loss of employment due to the depressed economy and the stigma around the disease are also likely to lead to mental health problems.

The Kenya National Bureau of Statistics (KNBS) states that at least 300,000 Kenyans have lost their jobs due to the Coronavirus pandemic between the period of January and March this year.

KNBC noted that the number of employed Kenyans plunged to 17.8 million as of March from 18.1 million people as compared to last year in December. The Report states that the unemployment rate in Kenya stands at 13.7 per cent as of March this year while it stood 12.4 per cent in December 2019.

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Mama T (not her real name) is among millions of Kenyans who have been affected by containment measures put in place to curb the spread of the virus, either by losing their source of income or having to work under tough guidelines put in place by the MOH.

As young mother and an event organizer, she has found it hard to explain to her children why they cannot go to school or socialize freely with their peers as before.

“Sometimes it gets difficult as they do not understand what is happening due to their age, this at times becomes hard on me as they often think I am punishing them,”

Her contract was put on hold as no event or public gatherings can take place due to the pandemic. This has brought other challenges along with it, as she has to find means of fending for her family expenditures that including rent and food.

“I often wake up in the middle of the night with worries about my next move as the pandemic does not exhibit any signs of easing up,” she says. She adds that she has been forced to sort for manual jobs to keep her family afloat.

Ms. Mary Wahome, a Counseling Psychologist and Programs Director at ‘The Reason to Hope,’ in Karen, Nairobi says that such kind of drastic life changes have an adverse effect on one’s mental status including their family members and if not addressed early can lead to depression among other issues.

“We have had cases of people indulging in substance abuse to deal with the uncertainty and stress brought about by the pandemic, this in turn leads to dependence and also domestic abuse,”

Sam Njoroge , a waiter at a local hotel in Kiambu, has found himself indulging in substance abuse due to challenges he is facing after the hotel he was working in was closed down as it has not yet met the standards required by the MOH to open.

“My day starts at 6am where I go to a local pub, here I can get a drink for as little as Sh30, It makes me suppress the frustration I feel.” he says.

Sam is among the many who have found themselves in the same predicament and resulted to substance abuse finding ways to beat strict measures put in place by the government on the sale of alcohol so as to cope.

Mary says, situations like Sam’s are dangerous and if not addressed early can lead to serious complications, including addiction and dependency, violent behavior and also early death due to health complications.

She has, however, lauded the government for encouraging mental wellness and also launching the Psychological First Aid (PFA) guide in the wake of the virus putting emphasis on the three action principal of look, listen and link. “When we follow this it will be easy to identify an individual in distress and also offer assistance”.

Mary has urged anyone feeling the weight of the virus taking a toll on them not to hesitate but look for someone to talk to.

“You should not only seek help from a specialist but also talk to a friend, let them know what you are undergoing and how you feel, this will help ease their emotional stress and also find ways of dealing with the situation they are facing,” She added

Mary continued to stress on the need to perform frequent body exercises as a form of stress relief, reading and also taking advantage of this unfortunate COVID-19 period to engage in hobbies and talent development.

“Let people take this as an opportunity to kip fit, get in touch with one’s inner self and  also engage in   reading that would  help expand their knowledge.

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