Mariana Mazzucato, professor of the economics of innovation at the Science Policy Research Unit of the University of Sussex and author of The Entrepreneurial State: Debunking Public vs. Private Sector Myths, has made a passionate case for the government’s active role in the economy, sending the old laissez faire notion that markets can run themselves into the dustbin where it belongs. In a new book co-edited with Michael Jacobs, Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth, she offers a bold new vision for contemporary capitalism that works for the people and the planet. What chance does this vision have in the age of Trump and Brexit? Mazzucato shares her view. This post originally appeared on the Institute for New Economic Thinking blog.
April 16, 2018
It was the strike heard ‘round the country.
<p>West Virginia’s public school teachers had endured years of low pay, inadequate insurance, giant class sizes, and increasingly unlivable conditions—including attempts to force them to record private details of their health daily on a <a href="https://www.humana.com/go365/">wellness app</a>. Their governor, billionaire coal baron Jim Justice, pledged to allow them no more than an annual 1% raise—effectively a pay cut considering inflation—in a state where teacher salaries ranked 48th lowest out of 50 states. In February 2018, they finally revolted: In a tense, four-day work stoppage, they managed to wrest a 5% pay increase from the state. Teachers in Oklahoma and Kentucky have now <a href="https://www.nbcnews.com/news/us-news/oklahoma-kentucky-public-schools-close-thousands-teachers-strike-n861946">revolted</a> in similar protests.</p><div><p>It’s the latest battle in a contest between two countervailing forces: one bent on reengineering America for the benefit of the wealthy, the other struggling to preserve dignity and security for ordinary people.</p><p>If the story turns out the way the Jim Justices desire, the children of a first-world country will henceforth be groomed for a third-world life.</p><p>Gordon Lafer, Associate Professor at the Labor Education and Research Center at the University of Oregon, and Peter Temin, Professor Emeritus of Economics at MIT, help illuminate why this is happening, who is behind it, and what’s at stake as the educational system that once united Americans and prepared them for a life of social and economic mobility is wiped out of existence.</p><p><strong>The Plan: Lower People’s Expectations</strong></p><p>When Lafer began to study the tsunami of corporate-backed legislation that swept the country in early 2011 in the wake of Citizens United—the 2010 Supreme Court decision that gave corporations the green light to spend unlimited sums to influence the political system—he wasn’t yet clear what was happening. In state after state, a pattern was emerging of highly coordinated campaigns to smash unions, shrink taxes for the wealthy, and cut public services. Headlines blamed globalization and technology for the squeeze on the majority of the population, but Lafer began to see something far more deliberate working behind the scenes: a hidden force that was well-funded, laser-focused, and astonishingly effective.</p><p>Lafer pored over the activities of business lobbying groups like the American Legislative Exchange Council (ALEC) – funded by giant corporations including Walmart, <a href="http://amazon.com/" rel="nofollow">Amazon.com</a>, and Bank of America—that produces “model legislation” in areas its conservative members use to promote privatization. He studied the Koch network, a constellation of groups affiliated with billionaire brothers Charles and David Koch. (Koch Industries is the country’s second-largest private company with business including crude oil supply and refining and chemical production). Again and again, he found that corporate-backed lobbyists were able to subvert the clear preferences of the public and their elected representatives in both parties. Of all the areas these lobbyists were able to influence, the policy campaign that netted the most laws passed, featured the most big players, and boasted the most effective organizations was public education. For these U.S. corporations, undermining the public school system was the Holy Grail.</p><p></p><p>After five years of research and the publication of <a href="http://www.cornellpress.cornell.edu/book/?GCOI=80140100151780">The One Percent Solution</a>, Lafer concluded that by lobbying to make changes like increasing class sizes, pushing for online instruction, lowering accreditation requirements for teachers, replacing public schools with privately-run charters, getting rid of publicly elected school boards and a host of other tactics, Big Business was aiming to dismantle public education. </p><p>The grand plan was even more ambitious. These titans of business wished to completely change the way Americans and their children viewed their life potential. Transforming education was the key.</p><p>The lobbyists and associations perfected cover stories to keep the public from knowing their real objectives. Step one was to raise fears about an American <a href="https://www.alec.org/issue/education/">educational crisis </a>that did not, in fact, exist. Lafer notes, for example, that the reading and math scores of American students have remained largely unchanged for forty years. Nonetheless, the corporate-backed alarmists worked to convince the public that the school system was in dire condition.</p><p>Step two was to claim that unproven reforms to fix the fictional crisis, like online learning, were sure to improve outcomes, despite the fact that such schemes go directly against hard evidence for what works in education and deny students the socialization that is crucial to a child’s progress. Sometimes the reformers said the changes were needed because of budget deficits; other times, they claimed altruistic aims to improve the quality schools.</p><p>In Lafer’s view, their strategy had little to do with either.</p><p><strong>The Motivation: Keep the Masses Down as Inequality Rises</strong></p><p>It’s one thing for big businesses to be anti-worker and anti-union, but also anti-student? Why would business lobbies deliberately strive to create what amounts to widespread education failure?</p><p>It’s not hard to see how certain sectors in the corporate world, like the producers of online learning platforms and content, could cash in. But it’s harder to fathom why corporate leaders who don’t stand to make money directly would devote so much time and attention to making sure, for example, that no public high school student in the state of Florida could take home a diploma without taking an online course. (Yes, that’s now <a href="http://www.orlandosentinel.com/features/education/school-zone/os-new-law-florida-online-graduation-requirement-20160420-story.html">law</a> in the Sunshine State).</p><p>It’s about more than short-term cash. While Lafer acknowledges that there are legitimate debates among people with different ideological positions or pedagogical views, he thinks big corporations are actually more worried about something far more pragmatic: how to protect themselves from the masses as they engineer rising economic inequality.</p><p>“One of the ways I think that they try to avoid a populist backlash is by lowering everybody’s expectations of what we have a right to demand as citizens,” says Lafer. “When you think about what Americans think we have a right to, just by living here, it’s really pretty little. Most people don’t think you have a right to healthcare or a house. You don’t necessarily have a right to food and water. But people think you have a right to have your kids get a decent education.”</p><p>Not for long, if Big Business has its way. In President Trump and Education Secretary Betsy DeVos, they have dedicated partners in redirecting public resources to unregulated, privately owned and operated schools. Such privatization plans, many <a href="http://thehill.com/blogs/pundits-blog/education/318232-devos-voucher-plan-would-exacerbate-educational-inequality">critics</a> say, will reinforce and amplify America’s economic inequality.</p><p>U.S. public schools, which became widespread in the 1800s, were promoted with the idea that putting students from families of different income levels together—though not black Americans and other racial minorities until the 1950s—would instill a common sense of citizenship and national identity. But today, large corporations are scoring huge successes in replacing this system with a two-tiered model and a whole new notion of identity.</p><p>Lafer explains that in the new system, the children of the wealthy will be taught a broad, rich curriculum in small classes led by experienced teachers. The kind of thing everybody wants for kids. But the majority of America’s children will be consigned to a narrow curriculum delivered in large classes by inexperienced staff —or through digital platforms with no teachers at all.</p><p>Most kids will be trained for a life that is more circumscribed, less vibrant, and, quite literally, shorter, than what past generations have known. (Research <a href="http://news.mit.edu/2016/study-rich-poor-huge-mortality-gap-us-0411">shows</a> that the lifespan gap between haves and have-nots is large and rapidly growing). They will be groomed for insecure service jobs that dull their minds and depress their spirits. In the <a href="https://www.ineteconomics.org/perspectives/blog/noam-chomsky-on-the-populist-groundswell-u-s-elections-the-future-of-humanity-and-more">words</a> of Noam Chomsky, who <a href="https://www.ineteconomics.org/perspectives/blog/noam-chomsky-on-the-populist-groundswell-u-s-elections-the-future-of-humanity-and-more">recently spoke about education</a> to the Institute for New Economic Thinking (INET), “students will be controlled and disciplined.” Most will go to school without developing their creativity or experiencing doing things on their own.</p><p><strong>The New Reality: Two Americas, Not One</strong></p><p>Economist Peter Temin, former head of MIT’s economics department and INET <a href="https://www.ineteconomics.org/research/experts/ptemin">grantee</a>, has written a book, <a href="https://mitpress.mit.edu/vanishing">The Vanishing Middle Class</a>, which <a href="https://www.ineteconomics.org/perspectives/blog/america-is-regressing-into-a-developing-nation-for-most-people">explains</a> how conditions in America are becoming more like a third-world country for the bulk of its people. He agrees with Lafer that the corporate-driven war on public schools is not just about money, but also about a vision of society.</p><p>People like Betsy DeVos, he says, are following the thinking of earlier ideologues like James Buchanan, the Tennessee-born, Nobel Prize–winning economist who promoted current antigovernment politics in the 1970s. The “shut-the-government-down” obsession is really an extreme form of libertarianism, he says, if not anarchism.</p><p>Temin also agrees that shrinking the horizons of America’s kids makes sense to people who follow this philosophy. “They want to exploit the lower members of the economy, and reducing their expectations makes them easier to manipulate,” says Temin. “When they aren’t able to go to college and get decent jobs, they become more susceptible to things like racist ideology.”</p><p>In other words, dismantling the public schools is all about control.</p><p>Buchanan was an early proponent of school privatization, and while he echoed the fears and frustration many Americans felt concerning desegregation, he typically made a non-race-based case for preserving Jim Crow in a new form. He argued that the federal government should not be telling people what to do about schooling and suggested that citizens were being stripped of their freedom. But as Sam Tanenhaus <a href="https://www.theatlantic.com/magazine/archive/2017/07/the-architect-of-the-radical-right/528672/">points out</a> in TheAtlantic, issues of race always lurked in the background of calls for educational freedom and “choice.” In a paper he co-authored, Buchanan stated, “every individual should be free to associate with persons of his own choosing.” Segregationists knew what that meant.</p><p>Policies that end up reducing educational opportunities for those who lack resources creates inequality, and economic inequality reduces support for public schools among the wealthy. It’s vicious feedback loop.</p><p>In his book, Temin describes a process that happens in countries that divide into “dual economies,” a concept first outlined by West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. Lewis studied developing countries where the rural population tends to serve as a reservoir of cheap labor for people in cities — a situation the top tier works very hard to maintain. Temin noticed that the Lewis model now fits the pattern emerging in the richest country in the world.</p><p>America, according to Temin, is clearly breaking down into two sectors: Roughly 20% of the population are members of what he calls the “FTE sector” (i.e., the finance, technology, and electronics sectors). These lucky people get college educations, land good jobs, enjoy social networks that enhance their success, and generally have access to enough money to meet most of life’s challenges. The remaining 80% live in a world nothing like this; they live in different geographies and have different legal statuses, healthcare systems, and schools. This is the low-wage sector, where life is getting harder.</p><p>People in the low-wage sector carry debt. They worry about insecure jobs and unemployment. They get sick more often and die younger than previous generations had. If they are able go to college, they end up in debt. “While members of the first sector act,” Temin has <a href="https://www.ineteconomics.org/perspectives/blog/america-is-regressing-into-a-developing-nation-for-most-people">said</a>, “these people are acted upon.”</p><p>Temin traces the emergence of the U.S. dual economy to the 1970s and 80s, when civil rights advances were making a lot of Americans uneasy. People who had long been opposed to the New Deal began to find new ways to advance their agenda. The Nixon administration gave momentum to anti-government, free-market fundamentalist ideologies, which gained even more support under Reagan. Gradually, as free-market programs became policy, the rich began to get richer and economic inequality began to rise. Economist Paul Krugman has called this phenomenon the “<a href="https://en.wikipedia.org/wiki/Great_Divergence_(inequality)">Great Divergence</a>.”</p><p>But it was still possible to move from the lower sector to the affluent sector. The path was tough, and much harder for women and people of color. Yet it existed. Through education and a bit of luck, you could develop the skills and acquire the social capital that could propel you out of the circumstances you were born into.</p><p>The dismantling of public education, as Temin sees it, will shut off that route for vastly more people. Like the privatization of prisons, which has increased incarceration rates and cut the mobility path off for more Americans, putting schools into private hands will land even more on the road to nowhere. Even those who were born into the middle class will increasingly get pushed back.</p><p><strong>The Future: Mobilization or Bloodshed?</strong></p><p>Temin relates that in human history, unitary economies are more the exception than the rule.</p><p>In the U.S., there was the Jim Crow era, the Gilded Age, and before that, slavery, which was an extreme form of dual economy. But from the end of WWII through the 1960s, the country began to develop a unitary economy. The idea that everybody should have opportunities became more and more widespread. But there was a backlash, and America still dealing with it.</p><p>In the Lewis model of the dual economy, there is still path to the upper sector, but Temin warns that America may be on the way to going one step further. “If you really prevent people from moving up, you get something that looks like Russia or Argentina,” he says. In these two-tiered societies, life is difficult for most people. Life expectancies for all but the affluent go down.</p><p>Unfortunately, once you’ve developed a dual economy, getting out of it isn’t pretty. Temin notes that it often happens through devastating wars. “Sometimes the kings who are all cousins turn on each other,” he says. “Other times, the leaders sleepwalk into the war as Trump could possibly do with North Korea.”</p><p>Such upheavals create instability that sometimes opens up the possibility of restructuring society for the benefit of more people. But it’s a painful, bloody process. Political mobilization can work, but it’s very hard to get various groups who are dissatisfied to join forces.</p><p>Lafer points out that we don’t yet know how this story is going to turn out. “Politics remains forever contingent, never settled,” he says. “The struggle between public interest and private power will continue to play out in cities and states across the country; even with the heightened influence of money in the era of Citizens United, the power of popular conviction should not be underestimated.”</p><p>The teachers in West Virginia and now other states across the country have turned the anger fueled by the corporate vision of the future in a positive direction. They are fighting back, peacefully, and winning something—not just money, but a sense of dignity suited to the job of preparing the country’s kids for life. It remains to be seen if the rights of the many can triumph over the selfishness of the few, and whether economic servitude will be the fate of the children of the wealthiest nation the world has ever seen.</p></div>
Keep reading... Show less