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Wealthy venture capitalist Nick Hanauer is on a mission to fix the American economy before it’s too late – Strategy – Pulselive.co.ke

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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.
  • Hanauer said we should not fear capitalism as a whole, but fear the system neoliberalism has given us — and change it.
  • This article is part of Business Insider’s ongoing series on Better Capitalism.

Nick Hanauer isn’t a self-loathing rich guy. But he is furious that he and his fellow wealthy Americans have reaped the majority of benefits from the United States’ economic growth for the last few decades.

He’s far from a leftist, but he does want to see significant changes made to the way capitalism is practiced in America. “I want to hold capitalism to a high standard,” he told me.

He and his wife Leslie are signers of the Giving Pledge, which means their combined net worth is at least $1 billion. He made his money from both investing in Amazon during its infancy and from the $6.4 billion sale of his online advertising company aQuantive to Microsoft in 2007. Today he’s one of the founding partners of the Seattle-based venture capital firm Second Ave Partners.

Hanauer told me that he comes from a politically active family and had experience in political campaigns, and that it was only natural for him to use his newfound wealth and the influence it brought him to further the issues he was passionate about.

He’s gotten national attention for popular essays like “The Pitchforks are Coming… for us Plutocrats,” and for being a prominent lobbyist for the successful raising of the minimum wage in Seattle. He’s also partnered with Eric Beinhocker, executive director of the University of Oxford’s branch of the Instititute for New Economic Thinking, serving as an outspoken loudspeaker for their particular critique of the economy.

In the abridged interview below, Hanauer and I discuss some of the issues he’s most passionate about, including inequality, which he started studying after seeing the IRS tax table a couple years before the financial crisis.

Inequality’s not good for anyone

Hanauer: I was like, “OK, that’s not going to work out for anybody!” That is not going to work out for anybody.

And you do not have to be a deep student of history to know that down that path leads despair.

And so I started digging in. The more I dug in, the more it became obvious that this thing that had happened was it wasn’t — this didn’t happen to us like the weather happens to us. This happened to us as a consequence of a set of very deliberate decisions that we had made on policy, people on the right and left, and that those decisions continue to be made and the situation was going to go from bad to worse. And as all cataclysms do, the financial crisis moderated the effects of inequality somewhat, like the rich did get poorer, for a minute.

But the trends have continued and are getting worse. I began to write about this 10 years ago, and made the argument then and I continue to make it now, that this is going to end badly, for everybody, and that an increasing amount of economic inequality shreds the reciprocity norms upon which social cohesion, and therefore democracy, depends. You were just going to end up with a police state, or a revolution, or both.

And I wouldn’t say I’m proud to be vindicated, but I do feel like the election of Donald Trump in 2016 was a vindication of that argument. I predicted a populous revolt and we got one. Not exactly that one, but Donald Trump is a manifestation of the anger that is created when you build an economy that egregiously enriches the few and structurally impoverishes everybody else. And so, it’s bad. And if we want to save our country, we have to fix it.

Time to rethink the economy

Feloni: In our Better Capitalism series, we’ve been looking at long-term value creation. I’ve been seeing some of that language, and the rejection of Milton Friedman’s economics, from business leaders. You’ve got BlackRock CEO Larry Fink’s letter about that getting passed around Davos earlier this year. Do you see this as just some savvy PR among these firms, or are they genuinely scared that they’re on the verge of losing traction?

Hanauer: Well, I definitely think that there are a bunch of business leaders in the country who are beginning to acknowledge that we have gone off the rails a bit, and that we have to find a better way of including more people in the economy. But converting that sentiment into the policy change necessary to do it, that’s a long and difficult road. Because those changes will involve trade-offs that lots of capitalists are not going to want to make.

You can, in fact, characterize the degree to which the middle class has been behind. If you held the median family income from rising inequality since 1980, instead of $59,000 a year, they’d earn $86,000 a year. So if you want to understand why people are so pissed off, it is that delta. It’s that delta! It’s not $300 a year, it’s $25,000 a year. And that $25,000 has to come out of somewhere. And one of the place it has to come out of is the net worth of the Walton family.


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(Business Insider/Andy Kiersz, data from FRED)

Feloni: Can you explain how you reject the ideals of the free market economy that have reigned for decades?

Hanauer: Yeah, so neoclassical economics and neoliberalism, which is the ideological layer that sits on top of neoclassical economics, is based on — and this is a massive oversimplification — three foundational mistakes about how the world works.

The first is a profound misunderstanding about human behavior, the idea of homo economicus, that people are rational, calculating, and selfish. All of neoclassical economics is built on that assumption and it is objectively false. We now know with scientific certainty that people are emotional, heuristic, reciprocal, and fundamentally moral creatures because human societies are built on, and constructed of, norms and moral structures that enable cooperation and trust.

The second foundational mistake is the idea that the system itself is efficient, Pareto optimal, and in equilibrium. That’s all just objectively false. An economy is an open, complex system. It is an ecology. It is a non-equilibrium system. It is not subject to negative feedback loops, which is like, if this goes up, something must come down. It’s actually 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. It’s an ecosystemic metaphor, if you guide your thinking about and your intuitions about how the system works, not a mechanical metaphor.

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, for a variety of really super obvious reasons, including the fact that it doesn’t talk about distribution— that you can have GDP going up and only 10 people out of 10 million benefit from that GDP while everybody else gets left behind. That’s to say nothing of what economists call externalities, which is, yeah, we created a lot of GDP and burned down all the shit, and now we’re all going to die because we polluted the atmosphere to the point where we can’t breathe.

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.

A fight to raise the minimum wage

Feloni: Unemployment is very low, but wages are growing slowly. Is one of the reasons you’re pushing for higher minimum wages across the country to adjust this?

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Hanauer: People are not paid what they are worth. [The marginal revenue productivity theory of wages] is a made-up concept that has nothing to do with how the economy actually works. People are paid what they negotiate, not what they are worth. And in a world where most workers have no power and we have let corporate power consolidate more and more, there’s no reason in the world for most businesses to give ordinary workers wage increases. And that’s why we have low levels of unemployment, but high levels of immiseration and a ton of people just staying out of the job market. Because frankly, if all you do is get a job making $7.25 an hour with no benefits, like, why would you do that? Like, f— it. Stay home.


Hanauer has been a vocal supporter of raising the minimum wage across the country.play

Hanauer has been a vocal supporter of raising the minimum wage across the country.

(REUTERS/Lucy Nicholson/Files)

Feloni: You highlighted on your site the working paper from the Census Bureau where they took a look at a rise in the minimum wage and saw it went against the Econ 101 notion, and the common critique from opponents, that raising the minimum wage reduces jobs.

Hanauer: That critique is just nonsense. It’s never been true, but it is the anchor claim of neoliberalism and trickle-down economics. Here’s the thing: If you can’t show that raising wages kills jobs, then why in the world wouldn’t you want to raise wages, by a lot? This is why the chamber of commerce clings so tightly to that claim. In the absence of that claim there’s no morally justified reason to keep wages low.

A system that works for everyone

Feloni: Alongside rising inequality in the US, we’ve seen increasing market concentration. Amazon’s a great example.

Hanauer: It’s bad. It’s super bad. Monopoly and monopsony are the evil cousins to one another, right? Nothing about either of these things is good for anyone except the shareholders of the companies.

Here’s a great way to see why it’s bad. Amazon is out shopping for what they’re calling HQ2 and because we have allowed power to concentrate so much, that decision is incredibly important to cities. And as a consequence, you’ve got this ridiculous race to the bottom to find America’s dumbest and most vulnerable mayor.

Everything gets worse for most people when you let power consolidate like this because you just have these asymmetries of power that are very, very corrosive.


Amazon's campus in downtown Seattle features "The Spheres."play

Amazon’s campus in downtown Seattle features “The Spheres.”

(Elaine Thompson/AP)

Feloni: In both the Gilded Age and our current age of inequality you’ve got weak unions. Do you feel that it’s a necessity to bring back power to organized labor, and if so, how would it need to change to fit the needs of today?

Hanauer: Unions as they sit are not likely to come back in the way that they once were, but we have to find new ways to create power for working and middle class America. I actually cannot disclose what my group of collaborators and I are working on, but we’re working on some models to do that. We’re actively trying to build some organizations to do some of that stuff. But they won’t look like unions, they’ll look like something else.

Feloni: So you have to rethink how labor would organize?

Hanauer: Yeah, the model makes less and less sense. Among other things, the American model of workplace by workplace organizing is just inefficient and it’s bad. You have a situation where one company in an industry gets unionized and another doesn’t. Well, that creates an existential crisis for the one who is. It’s idiotic to have a system where one company that makes hamburgers pays $15 an hour and another company that makes hamburgers pays $7.25. That’s nuts. I feel strongly that a much better solution both for workers and capitalists are standards that are universal.

Feloni: I think a lot of why we’re having these sorts of conversations is because we’re in the early stages of a shift on the scale of the Industrial Revolution.

Hanauer: Right.

Feloni: I’ve seen you talk about your contempt for the so-called Luddites. But how do we make sure that we don’t leave too many people behind?

Hanauer: People are freaking out about robots and jobs and the future of work and all of this stuff. I think that’s bullsh–. We will not run out of jobs until humanity runs out of problems. And that is never going to happen. We do not need to fear innovation. Innovation is how human societies create better living standards. Innovation has been with us since the beginning. The more of it we have, the better.

And we do not need to fear capitalism, which is simply a social technology that enables people to come together in large, complex groups to cooperate to solve to solve human problems. What we need to fear is an ideological framework that uses innovation and capitalism to enrich the few and impoverish the many. Which is not necessary! You can have a highly innovative capitalist economy where everyone benefits from it. You just have to decide that’s what you want to do. And so the only thing we have to fear is neoliberalism, which is the idea, among other things, that the only purpose of the corporation is for its shareholders. Which is bullsh–. Just bullsh–.



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Sentence Jane Muthoni to death, the State urges court in husband murder case

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Jane Muthoni hired men, including her co-accused, to kill her husband Solomon Mwangi in November 2016. [File, Standard]

The Office of the Director of Public Prosecutions (ODPP) wants Jane Muthoni, who was found guilty of her husband’s murder on April 22, sentenced to death.
Muthoni, alongside her co-accused Isaac Ng’ang’a, was declared guilty of Solomon Mwangi’s murder, which occurred in November 2016.
State Prosecutor Catherine Mwaniki told the Nakuru High Court on Tuesday, May 18 that the crime committed by the two; and the manner in which the murder was executed, “deserves a severe punishment such as death sentence”.
“This is a case that meets the threshold of a death penalty,” said Mwaniki.
“We are looking at the seriousness of the acts that led to Solomon Mwangi’s death. In our conclusion, we pray that this court finds that the element of the statutory premeditation was satisfied in this case,” she submitted.
According to the prosecutor, her team proved beyond any reasonable doubt that there was “substantial orchestration and planning” of Mwangi’s execution by Muthoni and Ng’ang’a.
“Mwangi’s death was not caused by a spontaneous act of violence, or an act of self-defense by the accused,” said Mwaniki, who proposed Muthoni and Ng’ang’a be sentenced to death.
Lawyer Wokabi Mathenge, who represented Solomon Mwangi’s family in the case, reiterated the Prosecution’s recommendation, terming Mwangi’s killing as “Murder Most Foul”.

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“He was defenseless while being killed,” said Mathenge.
The lawyer said Muthoni was yet to express any remorse to Mwangi’s family over his murder.
“The first accused (Muthoni), being a teacher, was expected to impart ethics to learners. In this case, she was the mastermind of her husband’s death. She, therefore, conducted herself in a manner not expected of a person of her stature,” said Mathenge.
According to the lawyer, Mwangi’s murder deprived his four children of fatherly love.
“We urge the court to find that a death sentence will suffice. Mwangi’s death was premeditated and well-planned,” he emphasised.
The accused’s lawyer, Francis Njanja, however defended Muthoni and Ng’ang’a against death sentence, stating the two have cooperated with the courts thus far.
Njanja maintained that even though the courts found the duo guilty of murder, they were “still innocent”.
Muthoni, who addressed the court via video conferencing, pleaded her innocence, saying her family had suffered throughout the period she’s been in custody.
“I’m the only hope and surviving breadwinner in my family. My children are suffering, yet those who killed my husband are out there walking freely,” she said.
Ng’ang’a, on his part, pleaded with the court to consider a lenient sentence on him.
Justice Joel Ngugi said the two persons will be sentenced on June 3, 2021.
How Mwangi’s murder was planned
During the trial, the court heard that in early November 2016, Muthoni hired two men to kill her spouse, the principal of Kiru Boys’ High School in Mathioya, Murang’a County. One of the hired killers was Muthoni’s co-accused, Isaac Ng’ang’a. The other, Nelson Njiru, disappeared shortly after learning that Muthoni and Ng’ang’a were being hunted.
Muthoni had been directed to Ng’ang’a and Njiru by Joseph Kariuki, who turned into a Prosecution witness following a plea negotiation. Kariuki was, however, sentenced to seven years in jail for manslaughter.
Upon arrest in mid-November 2016, Muthoni and Ng’ang’a, alias Gikuyu, were charged with Solomon Mwangi’s murder.
The court, through Kariuki, heard that Muthoni engineered her husband’s killing after he allegedly kick-started a relationship with another woman, identified in court as MWK or M-Pesa Lady. The plan was to eliminate Mwangi’s lover and then kill him, the court was told.
After four years in court, the case came to a close on Thursday, April 22, 2021, when Muthoni and Ng’ang’a were declared guilty of Mwangi’s murder.
“The offence of murder is established against both the first and second accused persons (Muthoni and Ng’ang’a respectively). Consequently, I find and hold that both accused persons are guilty of the murder of the deceased. I hereby convict both of them accordingly,” Justice Ngugi pronounced himself on the case.
In the ruling, the judge observed that Muthoni did not physically kill Mwangi, but “evidence demonstrated that she was the author of the plot”.
Muthoni reportedly parted with Sh50,000 for Mwangi’s killing, which was conducted by Ng’ang’a and another person not before the court Nelson Njiru. The hired killers strangled Mwangi to death on November 6, 2016, and dumped his body in Karakuta Coffee Estate in Juja, Kiambu County.
The court relied on 18 SMSs between Muthoni and Njiru, and 21 Prosecution witnesses to conclude that Muthoni had masterminded her husband’s murder.

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Tracking and monitoring motor vehicles is not new to Kenyans. Competition to install affordable tracking devices is fierce but essential for fleet managers who receive reports online and track vehicles from the comfort of their desk.

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AG withdraws application for stay of BBI judgment opting for appeal court route » Capital News

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NAIROBI, Kenya, May 18 — Attorney-General Kihara Kariuki on Tuesday withdrew an application he had filed at the Constitutional Court seeking to stay the Building Bridges Initiative (BBI) judgment which had nullified the process.

Kihara will instead seek a stay alongside a substantive appeal at the Court of Appeal.

“The Attorney General hereby withdraws his notice of motion Application dated 14th May as that he is desirious of invoking the concurrent jurisdiction of the Court of Appeal to seek similar reliefs,” the AG said in a statement dated May 18.

The AG withdrew the case moments after the five-judge Constitutional Court bench confirmed receipt of his stay application and set a date for the ruling on the application.

“The court notes that the application has been served electronically on all the parties and directs that all the parties file their response on 19 May. The applicants to file and serve their submissions before 20 May,” the bench had said of the AG’s application.

The court was expected to give a ruling based on the written material placed before it by email on May 26.

Justices Joel Ngugi, George Odunga, Jarius Ngaah, Chacha Mwita, and Teresiah Matheka were to decide if they will temporarily suspend the judgement they issued pending the hearing at the apex court.

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Raila Odinga, a co-sponsor of the BBI process, through his lawyer Paul Mwangi had already filed an application at the Court of Appeal seeking to dismiss the ruling that halted the constitution review process.

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In his withdrawn application, the AG said any move by the applicants to implement the judgement would render his intended appeal nugatory and cause him irreparable harm.

“Being dissatisfied with the decision of the five judge-bench consisting of Justice J.M Ngugi, Justice J.V Odunga, Justice Ngaah Jairus, Justice E.C Mwita and Lady Justice Mumbua T Matheka, intends to appeal to the Court of Appeal against the whole of the said decision,” he said.

Kihara was contesting the ruling by the five-judge bench in the Constitution and Human Right Court which also found President Uhuru Kenyatta to have violated the Constitution, particularly Chapter 6, when he initiated the process following his handshake with former Prime minister Raila Odinga.

In its ruling, the court declared the basic structure of the constitution could only be amended by invoking a four-phased process entailing, “civic education; public participation and collation of views; Constituent Assembly debate; and ultimately, a referendum.”

“A constitutional amendment can only be initiated by Parliament through a Parliamentary initiative under article 256 or through a Popular Initiative under Article 257 of the Constitution,” the bench ruled.

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You should be humble, Tuju tells judges after BBI ruling

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Judges should be humble and realise that they depend on other arms of government like the police, even as they exercise their authority in court, Jubilee Party Secretary-General Raphael Tuju has said.

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Listening to legal advice

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