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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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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.

KBC Radio_KICD Timetable

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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