Category Archive: Interviews

1. Trade Wars Are Class Wars

   June 13, 2020 12:00 am Comments Off on Trade Wars Are Class Wars

   Michael Pettis and Matthew Klein’s new book Trade Wars Are Class Wars begins with an epigraph from John A. Hobson: “The struggle for markets, the greater eagerness of producers to sell than of consumers to buy, is the crowning proof of a false economy of distribution. Imperialism is the fruit of this false economy.” Pettis and Klein update the Hobsonian thesis for the twenty-first century, arguing that, while trade wars are often thought to be the result of atavistic leadership or the contrasting economic priorities of discrete nation states, they are best understood as the malign symptoms of domestic inequalities that harm workers the world over.

   In a panoramic account of shifts in the global economy over the past several decades, Pettis and Klein detail the development of the economic ills that define modern international political economy. It is essential and provocative reading with broad implications for international politics, the study of inequality, and the future of the global monetary system.

   On May 28, Pettis and Klein were joined by Adam Tooze, author of Crashed, for a discussion about their new book. A recording of the conversation can be watched here. The transcript was lightly edited for length and clarity.

   Adam Tooze: The shock value of your book starts with its title: Trade Wars Are Class Wars. Most of us have a sense of what trade wars are, but I want to focus on the second half of the title, and the verb that joins the two together. “Class wars”—this is big, powerful language with a particular historical legacy. Your claim is not that class wars cause or trigger or create the context for trade wars; it’s that class wars are trade wars, trade wars are class wars. Can you elaborate on this statement of identity?

   Michael Pettis: Our argument is fairly straightforward: trade cost and trade conflict in the modern era don’t reflect differences in the cost of production; what they reflect is a difference in savings imbalances, primarily driven by the distortions in the distribution of income. We argue that the reason we have trade wars is because we have persistent imbalances, and the reason we have persistent trade imbalances is because around the world, income is distributed in such a way that workers and middle class households cannot consume enough of what they produce.

   Credit where credit is due: Matt really came up with the title, and it was the way that we referred to the book amongst ourselves. There’s a worry that it will color people’s perceptions of this basic argument, but ultimately it’s hard to come up with a better title!

   Matthew Klein: There are certain true-by-definition statements about the nature of the global economy and financial system, and tying these together in the right order produces some very radical sounding conclusions. It sounds radical and provocative, but it’s just the result of these basic statements about the relationship between production, consumption, and savings. The title highlights that these aren’t just abstract concepts—they are directly related to the distribution of political and economic power.

   at: There’s also an intellectual genealogy here. The book starts with a quote from Hobson on imperialism.¹ Most people will know Hobson as the inspiration for, or the foil against which Lenin developed his theory of imperialism. What is the significance of the Hobson reference for you?

   mk: Lenin’s understanding of Hobson was that capitalism inevitably leads to imperialism, which generates conflict among the capitalist powers. But that wasn’t Hobson’s actual argument. He argued that there are problems in the distribution of income and purchasing power within the major European capitalist countries, and that this explains imperialism.

   That’s an important difference. Hobson’s interpretation was that there are middle courses between overthrowing the entire system and tolerating exploitative international relationships, and we agree. We don’t argue that we’re in an inevitable crisis of capitalism, but rather that the problems we face can be solved using the kinds of redistributional tools that policymakers have used in the past.

   at: This reads to me as a sort of retro Keynesianism that in some ways turns out to be more radical than Keynes himself. But it’s the opposite of Kalecki’s move, which infuses Keynesian economics with Polish Marxism. Instead, you go back within the tradition of liberal radical thought to Hobson to discover a reformist critique that is nevertheless very penetrating in its diagnosis of social power.

   Perhaps we can get into this more concretely through the three case studies you elaborate. You divide the world into the surplus generators and the deficit countries. The strong causal claim is that imbalances are largely the result of social-structural change in the surplus countries. What do you see as the underlying logic behind China’s development towards a chronic surplus condition? Is there a logic of class war at play within the Chinese regime?

   mp: That’s why it’s interesting to go back to Hobson. He argued that the reason England and other European countries exported capital abroad was not military adventurism, but income inequality. You had incredibly high savings because much of the income was concentrated among the wealthy, and so England had to export those excess savings and the accompanying excess production. Imperialism enabled it to lock in markets for both of those exports. Hobson’s prescription was that increasing the wages of English workers such that they’re able to consume what they produce would make imperialism unnecessary—and this is where I see the connection to today.

   From the 1980s until about 2012, China’s rapidly growing productivity did not come with an equivalent increase in wages and disposable household income. A number of mechanisms transferred income from the household sector to businesses and local governments, the most important of which was a negative real interest rate for much of that period. A negative real interest rate is, basically, a hidden tax on savings. It’s a subsidy to borrowers. Within China, ordinary households were net savers, and businesses and the government were net borrowers, which meant that the interest rate transferred income from ordinary households to businesses and to the government. The undervalued currency worked the same way, and environmental degradation worked similarly.

   The net effect was that the household share of GDP contracted during that three-decade period to possibly the lowest we’ve ever seen in history. As a result, it was impossible for Chinese workers and households to consume a significant portion of what they were producing.

   Now, this is not necessarily a bad thing. After five decades of anti-Japanese war, civil war and Maoism, China was hugely underinvested. By constraining the ability of households to consume a significant share of what they produced, the government effectively forced up the savings rate and channeled all of those savings into a massive investment program. China had the highest investment growth rate in history, and the highest investment share of GDP in history. As a developing country that was significantly underinvested, this was exactly what the doctor ordered. The country grew so quickly that even with all of these hidden upward transfers, households did quite well. During this period, household income grew by roughly 7% a year.

   The problem emerged when the Chinese economy could no longer absorb new investment productively. For a developing country, that point is much lower than it is for an advanced economy, because of a completely different set of institutions that govern the way workers and businesses can absorb capital. Once China reached that point, consumption was too low to drive growth, and it entered into a state of excess production. Matt and I are not the first to have figured this out. In March 2007, then-Premier of China Wen Jiabao gave a very famous speech in which he acknowledged this problem and promised that it would be the top priority of Beijing to rebalance demand domestically.

   Not only did they not rebalance the demand, but the imbalances worsened over the next five years. We started hearing of the so-called “vested interests” that were preventing Beijing from implementing the policies it wanted to, and a distinction was drawn between the interests of ordinary Chinese citizens and those of local elites. And it’s this imbalance, we argue, that is exported to the rest of the world in the form of a capital account deficit and a current account surplus. What China needs is a major transfer of income from local governments and elites to ordinary workers, but that is a political problem which is difficult to pull off. The story in Germany is quite different, but ultimately results in the same set of problems.

   at: What’s fascinating in the Chinese case is that there’s a sort of development dialectic, which I’ll simplify: a national development strategy driven by the Communist Party elite is a bid for the establishment of China as a player in a hostile global system. It succeeds in the way you’ve described, but also creates these powerful interests at the regional level. (Of course, regions in China are the size of European nation states, so when we talk about the regional elite in Hubei we’re talking about the elite in a region the size of France.) Those elites come to constrain the autonomy of the regime, so while Chinese macroeconomists can see these imbalances, it becomes very difficult to change them.

   The origins of the dynamic you’re describing seem to be not so much in class struggle, but rather in a national development strategy that succeeds to such a radical extent that it rears up a powerful version of the bourgeoisie, which the regime struggles to master. Is that a fair translation of the story?

   mp: That’s absolutely correct. I’ve argued that the Chinese growth model follows the model put forward by Alexander Gerschenkron for US development in the 19th century. He held that developing countries face two problems. The first was that, being relatively poor and underinvested, they have insufficient savings to meet their investment needs, and must therefore rely on foreign savings to get higher levels of investment. But relying on foreign savings is risky, so you must force up the savings rate. And how do you do that? You reduce the share of GDP held by ordinary households.

   The second problem he saw was a lack of long term investment in necessary infrastructure projects. His recommendation was to centralize the investment process. China was not the first country to do this. Gerschenkron argued that the Soviet Union and even Germany had done it, and Dani Rodrik has since argued that over two dozen countries since WWII have had investment and growth miracles—Brazil being the classic case from the 1950s to early-70s, and Japan through the 1980s. It’s a very successful growth model, but once you reach the point at which you can no longer increase investment at a great pace, you are forced to make institutional reforms.

   at: What’s fascinating about this book is that it doubles as a history of the effects of the end of Communism on the world economy. The year 1989 is a pivot both from the perspective of the Tiananmen Square protests in China and from the perspective of the West German growth model which received a shock from reunification. This is where the excellent chapter on Germany begins.

   Now notorious is the story of the late-1990s break in Germany: the demand for “reform” and the transformation of the labor market and welfare system. Your excellent and punchy summary of Germany history since 1989 is pretty hard to beat, but I still end up puzzled. I understand the consequences in terms of the shift in the income distribution, and the implications of that for the macroeconomic imbalances of Europe. But, having written Crashed, I still came away profoundly puzzled by what had happened in Germany.

   There’s a basic story here of neoliberal reform. There’s a huge shock to the ex-post income distribution in a deeply capitalist society with an unequal wealth distribution, yet somehow this shock energizes Germany into this shift. You discuss the role of ideology and key elite figures, and then you take us to the income and wealth distribution. My question is: how do you understand the causal process here?

   mk: I agree that it’s a mix of all of these factors. There was an ideological component, and it’s very hard to understand why the choices were made without that, but there were other forces as well. The welfare cuts of the early 2000s get a lot of attention, but a lot of those developments were preceded by changes that occurred in the private sector in the 1990s. Sometimes those were coordinated by local governments, including in Lower Saxony, where Gerhard Schröder lived before he became Chancellor. But a lot of it was done at the business and union level.

   at: The two are linked because Lower Saxony is a key shareholder in VW.

   mk: Right. The Hartz reforms were named after Peter Hartz, who was also the head of HR at Volkswagen. During this period, there was a belief shared on both sides that the only way to preserve employment and induce growth was through a combination of wage and hour cuts. Much of this was rooted in the way German unification occurred. The belief was that there would be this incredible growth story when you brought West German technology, management, capitalism, and democracy to a new population with a shared language and history. But for a variety of reasons it didn’t work out that way. The German government lost a lot of money underwriting this whole process and that soured a lot of people on the possibilities for fiscal policy to generate growth.

   One of the concerns initially was the massive wave of migration from East Germany to the West. People in the West were afraid they would have to subsidize migrants. One of the ways they tried to prevent this was by extending the West German social security system to the East. If you worked at an East German enterprise that was not defunct, you’d be eligible for Western style unemployment benefits, pensions, and so on. The intention was to disincentivize people from leaving. Of course, that placed pressure on the future of that economy. As things stopped working, Germany’s conservative core in the rich Southwest (the Munich, Frankfurt, Stuttgart area) came to advocate cuts to Germany’s Social Security system as a way of ending the transfers.

   at: So there I have my class actor. What you’re really saying here is that trade wars are national development strategies gone terribly wrong. In the German case, the strategy was pushed by this export-oriented Southwest German elite who were struggling with the aftermath of the Cold War. And that’s what percolates up by way of the red-green coalition.

   There are two surplus-generating countries, China and Germany, with class factions and development strategies that push them into unbalanced macro positions, which generate current account surpluses and corresponding capital flows. And on the receiving end of this is the United States. One of the really eye-opening moments in the book is when you say: America doesn’t control its current account; it doesn’t control its net overall macroeconomic savings balance. That is explosive.

   One aspect of this is that the twin deficit story—which has haunted centrist Democratic politics since the Clinton era—is bogus. America’s current account balance does not fluctuate with the public sector deficit because the private sector surplus largely offsets it. It’s the inflow of foreign capital that is doing the work.

   The implication of that, though, is that it’s the class wars in China and Germany that drive global imbalances. Oddly, class wars within the United States are neutral with regards to the US current account. Insofar as inequality in the US drives your story, it’s through the notion that Wall Street is a mediator of foreign capital. Is that a fair reading?

   mk: That is largely right with respect to the balance of payments, although I’d add a couple of clarifications. We suggest what happened in the US very much resembles what happened in Germany during the same period. Whether it was the welfare reform, or the tech bust leading to corporate investment collapsing, or underinvestment in infrastructure, there were a lot of similarities. The question is, why did it end up differently?

   There’s actually a recent paper, which we didn’t have a chance to incorporate in the book, by Atif Mian and Amer Sufi and Ludwig Straub.² They say that the savings glut of the rich in the US is responsible for about half of the increase in domestic private debt in the US in the 2000s. The other half, of course, came from abroad. Some of that savings glut of the rich went abroad from the US, and some of it was internally reinvested. This is different from what happened in Germany, for example, which didn’t really have any kind of domestic debt or investment.

   Regarding the Wall Street element: there was a complementarity of interests between the rich in the US and the rich in other countries. Sometimes this shows up in quite obvious ways, in particular when we think of China’s development strategy which initially involved attracting foreign investment in technology. This was very enthusiastically embraced by American, European, and Japanese companies. If you’re going to be a net producer of financial assets, then the people who are in the business of producing and selling financial assets in the rest of the world will naturally be enthusiastic about that system.

   at: Nevertheless, one of the head-turning moments is precisely your positioning of the United States almost as a victim. You talk about the exorbitant burden; you actually say that, structurally, the United States finds itself in the position of the colonized world in the Hobsonian scheme (that is, as the recipient of excess savings being produced in the advanced economies). One could read this as an apology for the protectionist turn of American politics in recent decades. You are showing that there is, in fact, a hidden macroeconomic rationale to the desire of American policymakers to ward off other people’s imbalances. Does that seem fair?

   mp: That was the original insight, which led to a lot of our subsequent structure. It’s a very simple balance of payments argument. If money flows into the US, then the US runs a capital account surplus and a current account deficit. By definition, there must be a gap between American investments and American savings. What we always hear as part of the twin-deficit argument is that this gap is used to fund American investment. But when you just look around at the world, it’s pretty clear that the US and in fact any advanced economy, doesn’t really need foreign capital to fund investment. We’re flooded with capital. Interest rates are at the lowest they’ve ever been in history. American companies before COVID-19 were sitting on huge piles of cash and weren’t investing them.

   The argument was, inflows into the US had no impact on US investment, unlike in the 19th century, where British capital actually caused American investment to go up. It must therefore be the case that savings goes down. What we had to do was figure out what was driving down American savings, and the mechanisms we identified can be divided into two groups: those that force an increase in the fiscal deficit, and those that force up the unemployment rate.

   Now, you mentioned inequality. If the US were like other countries, the rise in domestic inequality would have forced an increase in American savings, which would have resulted in an American current account surplus. We argue this didn’t happen because of the very special role that the US plays in the global balances. The US is the automatic net recipient of the excess savings of the rest of the world, and as a result, it cannot control its current account. The corollary to that is that the US has no control over its savings rate. The savings rate is a function of a bunch of things, but if foreign savings flow into the US, or if the savings of the rich rise because of rising income inequality, both of those cannot increase total savings in the US, because savings in the US equals investment minus the current account surplus. Something else must happen: a rise in household debt, a rise in the fiscal deficit, or a rise in unemployment.

   at: I would be remiss if I didn’t end by asking: what is to be done? For me, the question arises at two levels: firstly, what are the technical prescriptions that follow from this analysis? And furthermore, what is the social force, the coalition of ideology, interests, and institutional momentum which could realistically get us out of here? Precisely because you have elaborated such a thick, sociological political economic account of the forces behind this imbalance, it simply doesn’t feel satisfying to put forth a blueprint for a new Bretton Woods.

   mk: Many of our suggestions for the Chinese context, whether it’s improving the quality of social insurance or changing the household registration system, are things that the government has already committed itself to. The argument for pessimism is that they’ve committed themselves to it for years and it hasn’t happened yet. But at least in principle, that’s something that the Communist Party leadership says that they’re supporting.

   In the European context, the financial crisis and the euro crisis have obliterated the center-left and pan-European left wing movements. Recently, however, there’s been an emerging Southern European coalition and argument for the European Commission to borrow on behalf of everyone else, as well as calls for spending to be proportionate to need and not to the size of each economy. This could be the beginning of something interesting. Within the Germany private sector up until 2008 we saw an extreme imbalance between the rising profitability of companies and stagnating income for workers. But the post-2008 low growth environment looks very different, and there is some rebalancing in the private sector that is offset by relatively high taxes and relatively low spending. To the extent that this private sector rebalancing continues, it may do a tremendous amount of good as well.

   at: What are the prospects for domestic transformation in the United States? Could one shift the balance of the class struggle, and thereby shift the imbalance?

   mp: Here’s where I’m a little pessimistic. In the current environment, the argument against increasing wages is too strong: higher wages reduce competitiveness and cause the benefits of higher wages to flow abroad. If you pay your workers more, consumers in your country will consume from abroad, because prices have to rise. If you believe that the problem is a sort of massive beggar thy neighbor problem—in which every country improves its relative position by putting downward pressure on wages, either directly like Germany did under the Hartz reforms, or indirectly through weak currencies and subsidies—then it’s very difficult to raise wages. In fact, you get a situation in which each country benefits by lowering wages. It seems to me that in order to address the problem of wages, we have to prevent the unfettered flow of capital. We need some sort of protection. But rather than trade protection, I would argue that we need to impede capital flows.

   mk: One of the things we point to is the tradeoff between managing the current account deficit and domestic inequality. The US could have addressed income inequality, but it would increase spending on foreign goods. The question becomes: is that a sustainable model for the United States, much less other countries to follow? In a surplus country like Germany, there is less of a cost. If you have 8% of GDP current account surplus, there’s really nothing for anyone to lose out on meaningfully when you increase domestic demand.

   at: Presumably one solution would be to channel the inflow of foreign capital into safe public debt, which could have been used on a large infrastructure program and upskilling the American labor force. It might leave you with more debt, but we can put that problem aside. But the problem is that this would require radically different politics.

   mp: In fact, debt wouldn’t be a problem. The US has infrastructure needs, and if it were to invest productively, the debt would rise, but the debt burden would decline. So, you’re right: the problem is political. It’s hard to justify an infrastructure spending program because foreigners have excess savings. Should the US do it? Yes, clearly, it should. Should it do it because the rest of the world has excess savings? No, it should do it for domestic reasons.

   at: In the background of this argument is a set of assumptions about the position of the dollar in the global system. What ultimately makes this unstable structure difficult to escape is that the US is the world’s safe asset provider.

   mk: Yes, that is definitely the case. The dollar became predominant after WWII, when US economic output was equivalent to that of the rest of the world. Now, the US is still the world’s largest economy, but it’s relative position is a third the size that it was when the dollar became the cornerstone of the global financial system. The relative cost of absorbing global imbalances has tripled. And it’s not clear the US domestic political system is capable of responding. It would be nice to have alternatives. In theory, the Euro should have been an alternative, and it didn’t pan out that way. But that could change. If we do develop a multi currency architecture, or impose higher limits on cross border financial flows, then the burden on the US will lessen.

   at: Is it conceivable that a coalition in favor of this institutional project might emerge within the US? There have been moments historically, where American progressive politics was willing to tangle with the money question, the role of the Fed, and the position of Wall Street. In a sense, one could read your book as a manifesto for that kind of politics.

   mp: The good news is that this isn’t the first time we’ve faced this problem. Periods of significant income inequality in the US included the 1830s, the 1860s, the period before World War One, and the 1920s. In each case, often in a very chaotic way, the US took necessary political steps to redistribute income. I suspect that maybe we’re going through that process again. We’ve reached the limits of our ability to absorb rising income inequality. At least that’s what I hope.

   ---

   1. “Where the distribution of incomes is such as to enable all classes of the nation to convert their felt wants into an effective demand for commodities, there can be no over-production, no under-employment of capital and labor, and no necessity to fight for foreign markets… The struggle for markets, the greater eagerness of producers to sell than of consumers to buy, is the crowning proof of a false economy of distribution. Imperialism is the fruit of this false economy… The only safety of nations lies in removing the unearned increments of income from the possessing classes, and adding them to the wage-income of the working classes or to the public income, in order that they may be spent in raising the standard of consumption.” John A Hobson, Imperialism: A Study (1902) ↩
   2. Atif Mian, Ludwig Straub, and Amir Sufi. Working Paper. “The Saving Glut of the Rich and the Rise in Household Debt”. ↩

2. Municipal Bonds, Race, and the American City

   May 22, 2020 12:00 am Comments Off on Municipal Bonds, Race, and the American City

   The rapid and expansive action taken by the Fed over the past two months in response to the coronavirus crisis has muddied the distinction between monetary and fiscal policy. In particular, its Municipal Liquidity Facility provides a path for financing emergency spending by local governments. In some optimistic accounts, MLF-backed investment has the capacity to dramatically reduce the geographical, income, and racial inequalities which have increased in recent decades. But in order to do this, the MLF must explicitly prioritize investment in these communities.

   In a recent article for the Washington Post, UChicago Professor Destin Jenkins argued the historical case. In the aftermath of WWII, a municipal bond market that valued white, middle-class consumption diverted investment outside of cities and into the suburbs. Federal housing officials, mortgage bankers and real estate agents profited off of the construction of debt-financed highways, shopping malls, schools, and parks for this upwardly mobile demographic. Cities took on billions in debt, but their black, brown, and immigrant populations saw few of the benefits. Jenkins argues that the history of municipal debt is intimately tied to the history of racial disparity in American cities, and that interventions in the politics of bond markets could enable municipalities “to avoid the punitive credit ratings that devalue certain regions or populations over others.”

   We spoke to Jenkins last fall about his research, which focusses on the history of racial capitalism and its consequences for democracy and inequality in the United States. His forthcoming book, The Bonds of Inequality, examines the role of municipal finance in growing American cities and widening the racial wealth gap. Jenkins is the Neubauer Family Assistant Professor of History at the University of Chicago. You can follow him here

   An interview with Destin Jenkins

   Daniel Kay Hertz: Your work connects municipal debt and bond markets to the story of American cities over the 20th century and into the 21st. Can you give us a bit of an overview of your research?

   Destin Jenkins: I started as an urban historian interested in the process of gentrification in post World War Two San Francisco. I began the project just as Detroit declared bankruptcy in 2013, and quickly became interested in two questions: the idea of the public, how we define what belongs to the public, and who counts as “the public”; and how negotiations and debates between bondholders and Detroit shaped the experiences of the city’s black population. I started thinking less in terms of housing and displacement, and more about access to public infrastructure and social services.

   My work follows the life of a municipal bond, considering how cities issue debt to finance public schools, parks, public housing projects, and sewage systems—and how this has, at times, held the potential to redress infrastructural inequalities, while always exacerbating the wealth gap because of the benefits that accrue to bondholders. I also make the case that municipal debt can be thought of as the mid-20th century version of offshore tax havens: it was a way of obviating the high federal marginal tax rates of the period.

   dkh: You talk about how municipal debt has the potential to undo and remake racial inequality. What sorts of policies does municipal debt make possible, and to what extent have cities actually used that potential?

   dj: The idea of “undoing” racial inequality is there to suggest that the unequal distribution of resources was hardly inevitable.

   Let me set the stage, a bit. We can take a city like San Francisco to see how the question of social infrastructure was never simply about costs, but who and what was rendered worthy of debt. San Francisco was the site of a massive influx of black Americans during World War II—the black population increased from 4,800 in 1940 to 32,000 in 1945. Like most other Americans, these newcomers demanded new public schools, green spaces, convenient transportation systems.

   Postwar cities were in luck. City officials could replace aging, deteriorating infrastructure and respond to infrasturctural demands by borrowing at very low interest rates. In the spring of 1946, for instance, many cities issued 20-year bonds and borrowed at 1 percent. Between new populations, low interest rates, and high marginal tax rates, there was a moment of immense opportunity for cities to borrow, in part to facilitate economic growth, in part to remedy the infrastructural deprivation that had become the norm for black folks and so many others.

   dkh: What happened that actually remakes, rather than undoes, those existing racial inequalities?

   dj: It turns out that a signal feature of the “golden age” of American capitalism is what I call the infrastructural investment in whiteness. Ideologically, white middle-class Americans were treated as the keystone to Keynesian domestic consumption and economic growth. Basically, during a moment of low interest rates, we see debt-financing for white neighborhoods.

   One of the central arguments of my book is that racial inequality was remade less in terms of explicit, Jim Crow-style policies, but rather through seemingly race-neutral decisions about which new schools received funds, which parts of the city received parks, and so on. Out of this moment of opportunity, you see San Francisco neighborhoods like Hunters Point or Chinatown rendered unworthy of debt. In the Western Addition, you see debt used to facilitate what James Baldwin called “Negro Removal”; the city’s redevelopment agency issued debt to buy up blighted property and turn the area into the “New Western Addition,” code for white space.

   dkh: Who was actually holding the municipal debt in the 1940s and 50s, and what was their relationship to those issuing the debt and the voting public?

   dj: Prior to the 16th amendment in 1913–which instituted the federal income tax—the typical image of the bondholder was of the laymen, widows, and orphans; they were seen as small people who pooled together their savings to invest in their city. They did so, it was said, to secure some kind of long term security during a time when private charity and philanthropy was basically all they could count on. (There are of course exceptions to this, like when the city of Mobile, Alabama went through its debt woes in the 1870s, they sent negotiators to parlay with the New York City bourgeoisie.) But certainly after the 16th amendment, bondholders were, by and large, wealthy individuals and institutional investors. This goes back to my earlier point about municipal debt as tax haven.

   The composition of these institutional investors changed over time. There are some cases in which cities purchased their own bonds. There’s great work done by Michael Glass and Sean Vanatta which argues that pension funds were used to underwrite municipal bond issues. Between 1945 and the late-1960s, fire and casualty insurance companies came into the picture. Commercial banks became major players, both as underwriters and bondholders.

   Over the course of the 20th century, then, the institutional investor became increasingly synonymous with the commercial banks. This is a huge problem, because once cities grew dependent on a single major institutional lender, they had no viable recourse if in fact these institutions scaled back their purchases of municipal debt or fled the market entirely. And indeed, by the early-70s, you start to see these institutions seek greener pastures elsewhere. In Fear City, the historian Kim Phillips-Fein offers a useful overview of the new kinds of investments that became available in that period.

   dkg: Is the argument that, as the identity of the bondholders narrowed and consolidated, there was also a concentration of power?

   dj: Certainly there was concentration, though I think the more useful way to frame the problem is in terms of dependence. The dependence of cities on the bond market gave bankers and their allies ever more power over cities.

   The other critical part of the story is federal cuts during the Reagan administration. In the early 1940s, there were calls for 100 year federal loans at minuscule interest rates, there were calls for grants that could circumvent financiers and provide cities with direct aid, and there were members of Congress who pilloried credit rating agencies publicly, saying, more or less, “We don’t need these people. We can use the federal government as a clearinghouse for information.” But, in addition to the exodus of commercial banks and the increasing power of creditors, the cutting of the federal lifeline meant that cities were firmly in the lion’s den. By the early 1980s, many municipal borrowers paid 14 percent interest for basic infrastructure and social services.

   Another interesting relationship emerged between city technocrats and bankers. The relationship that developed between technocrats and the financiers wasn’t in and of itself predatory, but was wrapped within an intractable structure: cities wanted cheap rates, and lenders wanted higher yields.

   That’s one layer of the story: the bankers and the technocrats. The other is between voters and bondholders. As voters, all we usually see on Election Day is a simple choice: Yes to more debt, No to more debt. It’s an extreme flattening of a very complex world.

   One of the things I found most interesting was the blistering and prescient criticism of bondholders by many voters during the 1960s. In a sense, they launched a progressive tax rebellion. Black San Franciscans noted that they had been servicing debt for 20 years with very little in return. And until that changed, they would boycott local bond referenda.

   dkh: The progressive tax revolt in the late-60s makes me think about recent resistance to TIF-backed bonds in Chicago. There’s an ongoing scandal about the use of property tax-backed bonds to fund infrastructure.

   Can you tell us more about the ‘70s? What accounts for the shift in the role that the bond market played in the fiscal crisis of New York City, and what parallels can we draw to its role in the post-2008 recovery of places like Stockton, Detroit, and Birmingham? Have we seen another shift?

   dj: With respect to New York City and its debt crisis, the Big Apple came to signify “urban liberalism,” as Phillips-Fein notes, and credit analysts penalized the city for excessive expenditures and flabby budgets. When George Moscone took office as Mayor of San Francisco in 1976, he vowed that his city would not become another New York. The fear of the disciplinary consequences imposed through the bond market, in other words, accelerated retrenchment. I say accelerate because for the black working class, this was only the most recent round of retrenchment, this time fueled by the debt crisis.

   The narrative about the moral failings of municipal debtors persists. But one of the biggest differences between the 1970s and recent instances of municipal debt troubles is that back then an institution like Bank of America might even offer to pay higher taxes. In recent years, this willingness, even if mere posture, is not on the table.

   dkh: Rating agencies still face these kinds of questions. These are services with clients who have very clear interests, yet they’re depicted as neutral arbiters of social value. Can you say more about that?

   dj: I like the framing of the “neutral arbiter” because it highlights the changes in how these agencies have been represented over time. Moody’s began rating municipal bonds in 1919, but during the 1930s something like 78% of AA-rated bonds went into default. The bankers I studied were very skeptical of ratings. They basically thought that ratings were little more than useful conversation starters. Throughout much of the postwar period, no one suggested that these agencies were neutral arbiters. Even when called before Congress, leading analysts confirmed that ratings were, in fact, “judgements” made by a handful of analysts.

   But since the 1970s, a reliance on new technologies and an older technocratic discourse of revenues and expenditures has been leveraged to convey the image that bond ratings are simply reflections of objective conditions.

   dkh: Gail Radford’s Rise of the Public Authority gives an account of how methods of managing and financing local economies shaped local governments. I’m wondering whether you have thoughts on how the increasing importance of the municipal bond market has actually restructured government and democratic institutions?

   dj: I think it’s productive to consider this question in relation to local social service. To fully get at this question I’d have to look at specific claims that bondholders have on revenues. But suffice to say that the creditor-debtor arrangement has led to the restructuring of the relationship between the state and the citizenry. At best, the ordinary citizen might show up to a local Board of Supervisors meeting to make the case for or against greater social services. But why is it that the course of action in particular, and infrastructural quality of life more generally, is structurally linked to the opinions of bankers, credit rating analysts, and bond buyers?

   dkh: You’ve emphasized how historically contingent this dependence is. What is an alternative world in which the negative consequences of that relationship are mitigated?

   dj: That’s a very good, very complicated question. I think that social services and infrastructure should be insulated from the market, and decommodified. The question is how to do that. During the 1930s, people like Upton Sinclair used the End Poverty in California campaign to imagine public authorities as a way to circumvent Wall Street altogether. It’s possible to fund a Green New Deal (and guarantee full employment) through federal grants and direct loans. You need federal financial power to minimize and neutralize the extreme penalties imposed on cities for the provision of basic needs. That’s what congressmen like Patman and Proxmire recognized in the late 1960s.¹

   dkh: The financier dependence on the state is an interesting point, because there is a common heuristic that situates left politics with the state and right politics with the market. You can’t really make that distinction here.

   dj: That’s what studying bonds makes very clear: that there’s no real distinction. Regulation is a different area, as the bond market remained largely regulated until the mid 1970s. But that’s not the same as being anti-state, the state is essential to structuring the market. This history blows up the artificial binary between the state and the market.

   ---

   1. See, for instance, H.R. 15991 and S 3170, March 1968. ↩

3. The Postindustrial Welfare State

   May 14, 2020 12:00 am Comments Off on The Postindustrial Welfare State

   Gøsta Esping-Andersen’s The Three Worlds of Welfare Capitalism is among the most influential works in the study of welfare states. Rather than conceiving of welfare and industrial policy on a single state-market axis, Three Worlds develops a typology to situate welfare states within broad and complex historical trajectories. In Esping-Andersen’s framework, modern capitalist states with systems of social provision developed along three general paths. Social democratic regimes like those found in Scandinavia emerged through a political coalition between industrial and agricultural workers, and are characterized by universal benefit schemes. By contrast, conservative regimes in Germany and France were born of coalitions between the left and the Church, and are characterized by fairly generous welfare provisions whose distribution is dependent on traditional family structures. Finally, liberal regimes like Britain and Ireland are ones in which the labor movement was unable to form meaningful political coalitions. The mark of these states are their limited, means-tested benefits typically available to only the very poor.

   Three Worlds is emblematic of the “power resource theory” tradition developed by Esping-Andersen and colleagues like Walter Korpi. Unlike their counterparts in the Varieties of Capitalism school, who tend to view social safety nets as the product of high value-added economies in which employers aim to foster skill development among workers, power resource theorists hold that welfare systems are primarily explainable as the product of labor’s ability to organize against profit maximizing firms. Central to this view of welfare state development is the concept of decommodification, a qualitative and quantitative measure of the degree to which basic human needs are protected from market fluctuations. Just as central is the Polanyian notion of double movement—the dialectical process through which workers organize against the market to decommodify their labor.

   In recent years, Esping-Andersen’s work has examined how institutional and political conditions have determined state responses to deindustrialization, reconceptualized class structures, and, in particular, analyzed how these changes have shaped demographics and family structure in welfare states. We spoke with Esping-Andersen last fall.

   An Interview with Gøsta Esping-Andersen

   Maya Adereth: Can we start by discussing your theoretical influences?

   Gøsta Esping-Andersen: By the 1970s, when I began researching in the social sciences, the emerging stratification patterns in Western Europe and the US were becoming very clear. In my view, they demanded a new conceptual framework that would allow for stratified class composition and alternative social dynamics. Many friends, like Erik Olin Wright, were working within a Marxist framework. I had read quite a lot of Marx, but I was looking for something to help think through these emerging patterns.

   This is where Karl Polanyi came in. The first person who suggested I read Polanyi was, as I recall, Fred Block. When I started reading it, I was very impressed with the subtlety and dynamism of his account of capitalist development—particular his idea of double movement, and the ongoing resistance to the naked market domination of society. I grew more and more interested in the movement against commodification on the side of labor, and I also grew interested in the idea that free markets are planned and developed through the power of states. This was my entry point into thinking about market failures, and my first focus was on education. A market driven education system would produce huge deficits in skill development and production because the cost of education would exclude 80% of the population. This could only be rectified with social policies.

   While looking at the development of distinct social policies in various welfare states, I came upon the idea that the counter-movement is shaped by social context. In particular, it’s shaped by the interests and coalitions formed by different classes from the 1800s until the postwar period, and still to this day. This is where Three Worlds began, but the project itself was empirical rather than theoretical. At the time, existing literature conceptualized welfare states through a single indicator: social spending as a percentage of GDP. It had nothing to say about the structural differences between societies. As I compiled data on how these social security systems were developed and how they worked, I came to understand the distinct decommodifying logics which guided the system in each instance. This was rooted in distinct histories of class development.

   What was unique about Scandinavia was the fact that the emerging working class faced similar life risks as peasants, and they consequently found common ground in fighting for a welfare state. Employer-based pension schemes made little sense in an industrial-rural coalition, because it would exclude rural workers. If you look back at discussions in Scandinavia, and Sweden in particular, during the very early decades of the 20th century, working class movements and the Social Democrats were in fact moving towards a contributory pension scheme. The Universal People’s Pension was adopted instead only due to the importance of this rural-industrial coalition. This logic of universalism which is characteristic of Scandinavia hasn’t really been instituted anywhere else. In places like the UK, you saw the development of minimal social assistance, similar to that of the US.

   ma: Jumping forward a bit, the liberalization and breakdown of different welfare models is sometimes attributed to the loosening of labor markets with the introduction of women into the laborforce. What do you make of the relationship between these two factors?

   gea: I don’t believe there is a causal relationship between the rise of women’s employment and welfare state deterioration. The changing role of women has promoted a shift of focus towards programs concerned with care work.

   I try to theorize these dynamics through multiple equilibria modeling. To me, the most interesting thing to understand is the transition from the traditional role of women as primarily dedicated to household production, to fully integrated members of the labor force. The traditional equilibrium was self-perpetuating as long as it was normatively dominant or hegemonic. What fractured this equilibrium? It had to have been a series of exogenous factors, from birth control to household technologies.

   This transition was most common among educated women. Across societies, it’s either the highly educated women, or the very poor women who work. So the question is, what were the dynamics once these exogenous factors promoted entry into the market? In the transition from the old equilibrium to this new one, we see once again widely diverging welfare state responses. For the labor supply of women to converge with that of men, the welfare state requires childcare, healthcare, accessible education, and so on. Women’s participation in the labor market is very closely linked to welfare provision.

   This is why different societies exhibit polarized patterns of female employment. But we should be very careful not to be deterministic here. It is not certain that new equilibria will ever really consolidate. The US is the best example of that so far. It was the avant-garde in terms of the feminist movement for women to join the workforce, but it stopped along the way. The empirical evidence is very clear: about 25% of American women still remain normatively dedicated to the household and not to work.

   ma: One thing that struck me about your data is that the US fertility rate declined sharply, but then recovered at a faster rate than Spain and Italy. Why is that?

   gea: During the first phase of women’s entrance into the labor market, all countries experience declining fertility. But both the US and Scandinavia recover. By contrast, continental Europe—Italy, Spain, Germany—didn’t recover.

   One of the key variables is the availability of affordable and high quality childcare. I’ve done a lot of work on that aspect. If it is not high-quality, mothers won’t want to use it. That’s why in countries like Spain, where you do have 30-40% coverage of low quality childcare, you don’t see a recovery. Whereas Scandinavia, in particular Denmark, is a key example of high quality early childcare. That’s why you have universal female participation throughout life. Part-time work in Scandinavia has become a totally new phenomenon compared to what it was and what it still is in Holland, Germany, or Britain. Part time work in Denmark is now primarily sought to transition between childcare and employment. So you have about 25% part-time workers in Denmark, but a large part of that is simply women who are transitioning back into the labor market for a couple of months.

   That is not the case in Holland or in Britain. There, if women are in the labor market, their primary role is still with one foot in the labor market and one foot in the family. That seems to become a stable alternative that reproduces itself from cohort to cohort, certainly in Germany, certainly in the Netherlands, and certainly also in Britain. It may also be that among the competing alternative equilibria of women’s new rules, you have a part-timer model. That then begs the question, how might that rupture? Maybe high quality universal childcare will make a difference.

   Germany is probably going to be our key test case. Germany, after decades, has finally decided to mount, relatively rapidly, relatively high quality childcare for all women. In the next five years, we will be able to use Germany as a test case: does universal access to childcare move women from an equilibrium of part timer-ism into the full time role?

   One thing I would like to argue explicitly is that families are not, as Lesthaeghe and his followers argue, disappearing. They emphasize the importance of postmodern values and individualism as a feature of postindustrialism. If we look at trends in the US and Europe, let’s say from the 70s up to the end of last century, all the indicators supported this thesis. Virtually all family demographers or family sociologists bought into the second demographic transition model of family dynamics.

   But I strongly believe this is wrong, and I demonstrate that people’s partnership and child preferences have not changed much in the last four generations. Namely, the two child norm has not changed. There are some countries where it has declined a bit, Germany being one. But otherwise, it has been incredibly stable. We do see the emergence of a new kind of family. Families in the 21st century will not look like those of the 1950s. But they will probably become equally stable once we settle into the new equilibrium. I’ve done a lot of work with time use data. In Denmark, men’s contribution to total housework is about 43% on average. In Sweden, the women’s contribution to unpaid work is only about 20% higher than men’s. In Spain, it’s 100% percent more than men’s. That’s where the major difference is: in the distribution of that work, not necessarily in the composition of the family.

   ma: How has increasing women’s labor market participation changed your categorical understanding of welfare states? Is the Three Worlds model still intact?

   gea: Today we see movements in all kinds of directions. In Scandinavia, conservative parties are moving towards a Bismarckian logic by adding an insurance component to the flat rate universal benefit system. In some conservative welfare states, you have a movement in the directly of universalism. Germany’s childcare policy is one example of that. Obviously, that also has a lot to do with the changing coalitions that are driving social policy debates and development.

   ma: To elaborate on that, I wonder what you think about the transition to so-called service economies and the political coalitions they generate. What are the fault lines along which welfare politics takes place today?

   gea: I think education is clearly the most visible fault line. It’s also the most powerful engine of political polarization, partially due to the emergence of the dual earner couple. What we’ve seen is that highly educated and high earning couples marry one another: two doctors for example, or an architect and an engineer. On the other end, you have more traditional families who also have lower incomes. Labor market and education disparities multiply. This is probably the most dangerous source of polarization in our societies today.

4. The Weight of Movements

   April 24, 2020 12:00 am Comments Off on The Weight of Movements

   Few theorists of social movements are able to shape the events that they analyze. Frances Fox Piven, Professor of Political Science and Sociology at the City University of New York and one of these few, has studied and agitated within American social movements since the 1960s.

   In 1966, Piven and Richard Cloward published “The Weight of the Poor” in the Nation magazine. The essay elaborates what has since been dubbed the “Cloward-Piven Strategy”: the mass enrollment of the poor onto welfare rolls. If all who were entitled to government benefits claimed them, they argued, the system would buckle, exposing the magnitude of American poverty and the inadequacy of its safety net. The ensuing political crisis would provide an opening in which to enact broad and lasting anti-poverty policy. Cloward and Piven published the article in the midst of an intense period of grassroots activity among welfare recipients. That same year, anti-poverty groups around the country formed a broad coalition that became the National Welfare Rights Organization, of which Piven was a founding member. The rank-and-file membership of the NWRO grew dramatically through the late-60s, reaching over 20,000 dues paying members and 540 grassroots groups by the end of the decade, and gaining influence over national welfare politics.

   As the NWRO grew, in 1971, Cloward and Piven published Regulating the Poor, a historical and sociological account of twentieth century welfare movements in the United States. The book sought to explain the feebleness of American social provisioning, and argued that US welfare was cyclical: it expanded to deal with social disorder amidst mass unemployment, and contracted while retaining the features necessary to enforce employment. Six years later, and after the dissolution of the NWRO, Piven and Cloward’s Poor People’s Movements examined poor peoples movements from the Great Depression to the post-war years “to understand the features of the American political economy which explain why these eruptions occurred when they did, why the eruptions took the forms they did, and why elites responded to them as they did.” Their argument, controversial not only among the organizations under their analysis, held that disruption, and not mass organization, has been the chief mechanism by which social movements have won gains in American history.

   We spoke with Piven over the phone this winter.

   Jack Gross: Regulating the Poor develops a theoretical framework for the function of welfare in the United States—how did you develop this approach to American welfare, and how did you apply this framework to the case studies in Poor People’s Movements?

   Frances Fox Piven: At the heart of our argument in both books was the threat of disorder: the power of collective rule breaking. We argued that when people rose up and broke the rules which normally governed their behavior—like paying rent, or submitting to welfare conditions—they could impact social policy. When we first made this argument in the 1960s, it had an apparent truth to it: no matter where you looked, people were marching, rioting, and interrupting the system in which they were involved. It was a kind of strike writ large, and here I mean strike in the broadest sense. Even people who didn’t have steady jobs, who couldn’t do what we ordinarily think of as a labor strike, were able to sit in at the welfare office and organize mass claims for welfare benefits. They were equally capable of clogging the system.

   Maya Adereth: One of the distinctive things about your book still is the use of poor people as a political agent, rather than the working class. What motivated the shift in emphasis?

   ffp: I think severe poverty, and the degradation that can come with it, is a social crime. The suffering that people experience when they’re pushed down and pushed out beyond the margins of society is criminal. And in the 1960s, many people felt this way, including, of course, the poor themselves. There were proliferating forms of collective protest, particularly in big cities, and particularly among people of color. It was a widely held moral outrage at the mass poverty imposed by a rich society on some of its members.

   I was closely related to a group of women on the Lower East Side and in Harlem who were on welfare, and who were organizing resistance to the welfare department in New York City. I had been having increasingly direct lived experience of collective action by poor people who were the victims of a prosperous American society.

   jg: In “The Weight of the Poor,” a striking element of the infamous Cloward-Piven strategy is your theory of coalition. You link crisis—in this case the manufactured crisis of overloaded welfare systems—to periods of realignment, and you draw on the Great Depression and the Civil Rights movements as examples. What is the relationship between crisis and coalition, and what does it mean for the strategy of social movements today?

   ffp: The strategy that we proposed in that essay, and that we’ve proposed in many other contexts, as in rent strikes, for example, is one of disruption. To understand its relevance today, you have to step back and look broadly at social life: at the complex system of cooperation and rule abiding behavior that underpins key social functions. Society is a scheme of cooperation—but that means that nearly everybody has to play their role, not only in factories, but in our schools, our healthcare, and our housing systems. Conversely, everyone has the power to withdraw their cooperation. Protest is effective when people recognize that they play a crucial role in larger social patterns and institutions. I think that remains very much relevant today.

   One of the ways that people, poor people, have been silenced in contemporary American society is through systematic humiliation by American political leaders. That has of course been true since long before the 1970s, but can’t last forever. At a certain point, people come to realize that their role can become a lever through which they can shape public policy.

   ma: Some of your writing emphasizes withdrawl. But another aspect emphasizes increased participation—mass welfare enrollment plays on both, but voter registration more clearly the latter. Are there times when one of these approaches is more effective than the other?

   ffp: I think that protest is more likely to arise in an electoral situation, in which elected leaders are worried about the allegiance of large numbers of people at the bottom. For a long time, there has been a tendency by activists to think that electoral work precludes protest. But really, in American history, protest itself has been much more likely when we’ve had some sort of foothold in the electoral system by the same groups that are the potential constituents of the movement.

   I think it’s therefore more accurate and illuminating to think about the ways that protest and electoral politics build off of one another. Protest is more likely to be successful when at least some elected officials express sympathy for the plight of the discontented and the disenfranchised. If they’re ignored, or spat upon, or insulted, that is likely to subdue them and crush their aspirations. I think you can see that in the Civil Rights movement, for example, and you can see it in the labor movement. The Civil Rights Movement had elected allies in Washington DC, senators and congressmen who were responsible to voter constituencies that were Black or Hispanic. So there is a complimentary relationship between electoral power and protest power.

   jg: Given that kind of complimentary power, I wonder if you could talk a little bit about the Workers Alliance of America and the National Welfare Rights Organization, and the relative gains or weaknesses of those organizations.

   ffp: Even when protest movements succeed, they succeed partially. The labor movement of the 1930s didn’t achieve a utopia for working people in the United States, they won some rights for organized labor. We always win some things, and then we have to go back and fight.

   The Workers Alliance of America was a communist organization in the 1930s that tried to reach out to recipients of poor relief. In our writing about the WAA in Poor People’s Movements, we were critical of their organizers because they sought to craft a highly articulated formal organization out of the discontent of poor people in the 1930s. We thought that the mobs, the riots, and the protests that were occurring were more effective than the clubs organized by the Workers Alliance of America. And in a similar vein, we thought that in the 1960s the organizers of welfare recipients who were determined to build a formal organization ended up ignoring the protests that were disruptive to city politics and the irregular organization that already existed. In Regulating the Poor, we criticized the organizing model of the NWRO in the 1960s, although we were among the organizers.

   ma: You argue that hierarchical organizations are less effective because they are more easily infiltrated and coopted. In the absence of such an organization, how do you conceive of a long term political strategy?

   ffp: It’s through repeated mobilizations that we build long term change. When we mobilize repeatedly, we benefit from the experience of earlier mobilizations. We gain an understanding of the incentives of elites, and the potential for elites to co-opt or suppress the discontent that’s emerged.

   When we build organizations that cooperate with local governments, we also position ourselves to lose the momentum and the consciousness of our role in the greater system. But we find it again—politics goes on, and the relationship between dominant and subordinate groups continues to develop. People rediscover again and again their power of disruption.

   jg: Several decades removed from Regulating the Poor, how do you theorize the situation of welfare in the United States, relative to the rest of the global north?

   ffp: We used to think that the situation in the United States was different than that in Europe, where a comprehensive welfare state was presented as a class compromise. We didn’t have that here, and in the 1960s the sort of movements rising up were not necessarily those of the organized working class as much as those of racial minorities and the poor. There was just clearly a different composition to our movements, which weren’t able to fit neatly into the European welfare state model.

   ma: We’ve experienced for several decades now a process of deindustrialization, and declining union density around the world. How does this changing composition of the labor market impact welfare politics? How does it impact, for example, the relative importance of demands made on employers versus those made directly on the state?

   ffp: There is no way to generalize. Each group will have leverage in different social sectors. When you think of a particular social group, you have to ask yourself: Which social institutions do they have the capacity to disrupt?

   One thing that has fundamentally changed the landscape of social action in the present period is that we can no longer talk about institutional disruption without thinking about climate change. In order to have public policies that effectively control the behavior of those actors who are destroying our climate, we depend on the state. We need strong, centralized state power on the side of the movement. The crisis is just too big. Defeating the fossil fuel industry will require the support of local and federal state authorities.

   jg: There’s an ongoing debate about the merits of a jobs guarantee versus universal cash transfer schemes. What do you make of this debate, and the resurgence of interest in guaranteed income coming from a political perspective quite different from you and the NWRO?

   ffp: One way to describe the classic goal of the left is full employment at decent wages. The problem with that is that it falls completely flat when it comes to the kinds of policies we need to avert climate change. That goal was premised on the idea that the economy could grow endlessly, but today we don’t need more growth—we instead need to be thinking about the relationship between production and pollution.

   So the idea of everyone working 40 hours a week and the machines humming and more and more stuff is getting produced is a very limited utopia. We ought to be envisioning new ways of living the good life, which don’t involve the production of automobiles, the use of fossil fuels, the dirtying up of the planet, and so on.

   ma: Where do you see movement coming from in the years ahead? What do you feel hopeful about?

   ffp: There are many hopeful things happening. For instance, in the service sector, or what we now call the caring sector, there have been incredibly successful mobilizations among teachers, nurses, and retail workers. These are people who do things that everyone can see and appreciate. There is no mystery about whether we need them. To the extend that we think of labor as a force for change, we ought to be thinking about care workers and what they can do.

5. Austerity and Ideology

   February 13, 2020 12:00 am Comments Off on Austerity and Ideology

   Kim Phillips-Fein is a professor of history at New York University and the author of the books Invisible Hands: The Businessmen’s Crusade Against the New Deal and Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics, as well as the editor and co-editor of several collections in political economy, business history, and labor history.

   In a conjuncture defined by high ideological tension, in which elite consensus and power structures seem increasingly discredited and the scope of political possibility is wider than in recent memory, Phillips-Fein’s work is particularly topical. She is an historian of social movements and of ideology, and the repercussions of elite politics for the lives of ordinary people. Her two books—which deal, respectively, with the rise of conservative business movement and New York City’s 1970s fiscal crisis—also offer cautionary tales about the severe constraints under which political officials operate, and the ease with which powerful reactionary interests organize, relative to the public interest.

   We spoke with Phillips-Fein about Invisible Hands and Fear City, the contingency of the two periods they capture, and how the events of the two books continue to shape the present. A full audio recording of the conversation can be listened to here. The transcript has been edited for length and clarity.

   An interview with Kim Phillips-Fein

   Marshall Steinbaum: Invisible Hands is about the construction of an ideological movement in opposition to the New Deal, which you trace from the Roosevelt Administration to post-war efforts like the Mont Pelerin Society, the American Enterprise Institute, the weaponization of the proto-Christian-right against the IRS, and so on, up until Reagan’s election in 1980. Fear City might be characterized as the implementation of that ideology and policy in one particular high stakes episode: the New York City fiscal crisis of the mid-1970s. How do you define ideology, and what are the mechanisms by which it exerts its influence on history?

   Kim Phillips-Fein: Invisible Hands is a book about the mobilization of a section of the business community in opposition to the New Deal. It suggests that this opposition was a galvanizing force for a group of what I call ‘business conservatives’ from the ‘30s all the way through to the present. The book happens to stop in 1980, but you can also trace the continued role that this network of people has had in building the intellectual and ideological institutions that comprise the modern right.

   Part of the reason that I wrote Invisible Hands was that existing research on the conservative movement had been focused on grassroots efforts, and on the backlash politics that emerged in the 60s and 70s against the Civil Rights and Black Liberation movements, feminism, gay rights, the anti-war movement, and so on. The major story was figured in part as a white working class backlash. I thought this failed to capture the elite dimensions of the conservative movement, and the centrality of economic issues, in particular opposition to unions and whatever in the US has passed for a welfare state. In my view, those had been abiding principles of conservatives in a way that social issues hadn’t. The book was an effort to offer a different vision of the conservative movement, and to show how this group of business people mobilized politically.

   Fear City grew out of this work because the conservative press in the 1970s had an obsession with New York’s fiscal crisis, which I found really striking. But I was also concerned that the story in Invisible Hands—of a single movement developing over a long period of time—was almost too seamless. I was interested in the impact of the ‘70s and how the material circumstances of the recession affected the way this political mobilization was realized. And while Invisible Hands was really about the right, I was also interested in how liberalism had changed over the decades. And, of course, I am a native New Yorker, and I was compelled to write a story about this particular place at a particular time—to explore what it means when you have a set of social commitments that is suddenly abrogated. What does it feel like to live through that?

   To return to the question: ideology works a little differently across these two books. In Invisible Hands, much of the book is about efforts to formulate an ideological and political program centered on a set of ideas about the free market from the position of the elite. The sense of class position of the people creating these organizations is very important, but their intellectual commitments reflect a very romantic view of the free market—derived from Hayek and Von Mises—that they received and internalized from popular sources, but not from an intellectual elite of academics or professional economists.

   This is shared in Fear City. Earlier work on New York’s fiscal crisis, including David Harvey’s brief treatment in A Brief History of Neoliberalism, sees it as the application of an ideological program. But one of the things I was struck by in my research is that the ideology seems to come about ex post facto. There aren’t references about what’s happening in Chile, for example, but rather a strong and ad hoc sense that unions, poor people of color, and the irresponsible liberal bureaucrats who were beholden to them, were directly responsible for bankrupting the city. This belief wasn’t the result of a sophisticated intellectual argument or clearly defined program. What happens is that people who have economic and social power in the city come together and try to cut the social welfare programs that had defined New York for much of the post-war period. It’s only afterward that their ideas become formulated.

   ms: If ideology can cohere after the fact, it’s not necessary for conservatives to come up with and execute a plan, but rather that other people become convinced that their actions were right. This bears out in that the figures you identify in Fear City, who were at the helm of this austerian program, were not part of the movement you narrate in Invisible Hands. Treasury Secretary under Ford Bill Simon and head of First National City Bank Walter Wriston both played some role in movement conservatism, but other than that you’ve got people all the way up to President Ford who weren’t right wing ideologues in any coherent sense.

   How do we get from the backstage maneuvering in Invisible Hands to the action of Fear City, where public officials, unions, and the media are sort of using the fiscal crisis to produce what those backstage actors had wanted in politics?

   kpf: Fear City is a chronicle of the fiscal crisis of the 1970s, when New York City almost went bankrupt. Prior to the crisis, New York had a very generous set of social welfare programs, including a large network of public hospitals, public clinics, daycare subsidies, free tuition at City University, investment in public transit, and so on. It’s not that all of this disappeared after the crisis, but the commitment to such programs was fundamentally scaled back.

   An adjustment took place on a wide scale during the 1970s, as the suppositions that defined the post-war era no longer seemed to hold. People who thought of themselves as liberal political leaders were compelled to change what they were doing, and what’s so interesting about the fiscal crisis in New York is that the question of who or what was doing the compelling is often very confusing—even to those leaders as they lived through it. The city’s liberal politicians and unions were not able to advocate in any meaningful way for another solution to the problem. I’ve made the case that there was no inherent technical or economic reason that these social provisioning systems couldn’t have been sustained, but politically, the conditions for their sustenance would’ve had to be quite different. On the ground, you see people struggling to come up with feasible alternatives to austerity, as weight was bearing down from the banks, the federal government, and from Albany.

   Now there was a group of hardcore free market ideologues, including Simon, in the Ford administration. For them, New York symbolized a radical liberal vision, and its destruction was necessary to teach other cities a lesson about the dangers of excessive spending. They had a kind of gleeful willingness to let the city go bankrupt, which does seem quite divorced from reality and represents a very pure vision of states and the market. These are the people who probably have the most in common with the world of Invisible Hands.

   What actually happens, of course, is that the city doesn’t go bankrupt, and Ford comes around to supporting the extension of loans, conditional on balancing the budget.

   ms: I want to drill down on a couple of particular episodes from the book that feel particularly relevant to the present. As you alluded to earlier, one of the key demands made by the people advocating for austerity was the elimination of free tuition at the City University of New York, which the critics felt had been reducing standards at what what was once an elite institution—one that used to serve a mostly white student body, but which was transforming to be more reflective of the racial diversity in the city.

   The CUNY leadership was taken to task in the public, and the arguments made against it were quite familiar: it’s too generous, the city can’t afford it, the beneficiaries don’t deserve this expensive giveaway, they should be paying for it themselves, and so on. Recently, Hillary Clinton gave an interview with Howard Stern, where she characterized the free college plans as giving chocolate milk to everybody. Infantilizing the would-be beneficiaries of free college seems of a piece with the sort of rhetoric that was swirling around in the case of the CUNY system.

   Having researched this period, what do you think of the fact that we’re having that same debate 40 years later?

   kpf: It partly reflects conflicting ideas about the purpose of higher education. Caitlin Zaloom has put this well, asking if higher education is a private good in which each individual wants to amass as much human capital as they can in order to be a more productive asset in the future, or if it’s a public good supporting the functioning of democratic politics and therefore worth investing in on a broader social level.

   Educational institutions themselves are divided about this, as was CUNY in the early-70s. What happened with CUNY in the years leading up to the fiscal crisis was quite remarkable. It had both adopted an open admissions program so that anyone who graduated from high school in the city was guaranteed attendance at one of the city’s colleges, and it was basically tuition free. Not everyone was thrilled about this. For some people, the purpose of tuition-free college was meritocratic: it was meant to provide higher education to the best and brightest poor and working-class people who would otherwise be unable to afford it. For others, it was a far more democratic sense that higher education could benefit everyone, helping to realize intellectual talents that would otherwise not be developed and to provide social mobility. The tension between those two visions of free higher education was already present.

   But for the right, free higher education is problematic precisely because it frames college as a public good. Free tuition was one of the things that the ideologues in the Ford administration picked up on early—and they did so without any fiscal rationale. It was striking. There was a sense that free higher education had to go, but without any sense of how much money that would save. They just didn’t parse out the details. But it seemed to hinge on the question of public goods.

   ms: I want to talk about race and its relevance to the events around the fiscal crisis, by way of the decades preceding the crisis. You explain that the tax base of the New Deal-style state had been hollowed out—both because of white flight to the suburbs, as well as the industrial base of the city moving south and then overseas to escape organized labor. There’s a critique of the New Deal that sees this pattern of flight and disinvestment as being built-in to the structure of the New Deal order, so that it contained the seeds of its own destruction, as it were. Does this variety of retrospective critique fit with the historical narrative you present?

   kpf: You could say the fiscal crisis reflected some of the problems of the New Deal. On the one hand, the city of the postwar years represents a kind of New Deal liberalism, but at the same time, it was undermined by some of the problems and schisms within that version of political economy, chief among them the ways that the kind of state that comes out of the New Deal subsidized suburban development.

   ms: It promised upward mobility to white people, which ended up undermining part of its foundations.

   kpf: Right. Public investment came to be figured in terms of things like highway construction, and the regional differences that left the American South as a kind of low-tax, low-union haven for industry to move to before it expanded overseas. In addition to the failure to adopt any version of National Health Insurance, which leads to Medicare and Medicaid as the alternatives in the 60s, and the particular ways that they’re financed—all of these things come to bear heavily on the structure of what we might call New Deal liberalism. One of the policy lessons of Fear City is that it’s very hard for a city to carve out a progressive exception.

   ms: Certainly the history of taxation suggests that you can’t do it alone.

   kpf: It’s very difficult to have a set of commitments entirely financed on a local level. The things that happened during the New Deal wind up limiting what’s available to New York in the 1970s. An important thing to note is the role of real estate elites in the fiscal crisis. Robert Fitch’s book, The Assassination of New York, discusses the mobilization of real estate around reducing the presence of manufacturing in New York to augment property values, which is another dimension to the flight of industry. It’s partly competition from lower-wage regions, but parts of the city establishment pushed them out to transform the city into a white-collar, tourism destination.

   ms: Your reflections on this were striking, and you argue that the race based exceptions to the New Deal that have gotten a lot of attention in the scholarly literature ended up undermining the entire thing for everyone by creating, for example, a whole region of the country where there were very few unions.

   kpf: Right. And in New York specifically, institutions like CUNY begin to come under pressure right at the moment when they begin to educate more people of color thanks to open admissions. One question I wondered about was whether there might be a sense in which white New Yorkers became less willing to support an institution that was increasingly representative of the city as a whole.

   ms: Speaking of the changing demographics of the city, one of the major threads in the book was the innovation of public sector unionization during the late 50s and the 60s. You refer to the “Little Wagner Act”—the policies of Mayor Robert Wagner, whose father authored the NLRA which enabled industrial unionization nationwide—which recognized public sector unions in city government. There was some sense that the beneficiaries of the public sector weren’t the largely white private sector industrial workers, but the less white and more female workers in public and service sectors. There was conflict over who “counted” as a worker.

   kpf: One of the ways to think about this is through the mobilization of the public sector unions during the fiscal crisis. During the first rumblings of the financial crisis, the leaders of District Council 37, which was the largest public sector union representing many kinds of city workers (from architects to zoo employees) tried to mobilize the public sector workforce in opposition to austerity. They targeted the banks, they held a big rally on Wall Street, they rejected the idea that the city was experiencing fiscal problems to begin with, and they demanded that the banks continue to lend.

   This was a newly-unionized workforce in the mid-70s, and they tried to tap into the energy of the civil rights and feminist movements. But there was a lot of difficulty forming coalitions at this time: Uniformed Services didn’t want to work with District Council 37, for example. The various unions all had different trajectories. It’s true that the public sector labor movement in New York struggled with defining who was a city worker, and the General Strike announced in 1975 never came to pass. The militancy of the early parts of the crisis dissipated fairly quickly, especially at the top levels. They were afraid of what would happen if they went to bankruptcy court: would contracts be voided altogether? Would they lose the bargaining rights they’d only recently obtained? The question of identity and identification partly comes from people’s own political identifications, but it’s enforced by these structures. In this case, the fear of what bankruptcy court was going to mean for city workers. Was that fear exaggerated? It’s hard to say, but that’s how fear works—it exaggerates itself.

   ms: The title of the book, Fear City, refers to a propaganda campaign by police unions that raised the specter of chaos if the city was devoid of police protection. It threw everybody under the bus—both the public at large and the potential other constituents of an anti-austerity movement. Can you talk about the role the police played in New York politics, and its relationship to the rest of the unions and the city?

   kpf: “Fear City” refers to these pamphlets that the coalition of police and detective unions produced in the summer of ‘75 in response to a wave of proposed layoffs. They feature this grinning skull that says “Welcome to Fear City,” and they list all the things you couldn’t do in the city any longer: ride the subway; go to the South Bronx; go outside after six o’clock. The intention was to distribute these to tourists coming to New York and to stoke fear of crime. To accompany them the police also took out big ads in the newspapers. They drove around the city with these big sound trucks, blaring messages about the last time that you or someone in your family was mugged. Mayor Beame was obviously very upset by this campaign, and he got an injunction stopping them from handing them out at the airports. They won the right to distribute them, but they never actually did. But by that time, the pamphlets had gotten a huge amount of attention.

   I was interested in how the atmosphere of fear came to change the sense of what was possible for many different groups of people. The cover of the book, which is a cityscape from above, was meant to speak to that: fear coming from the upper floors of these skyscrapers and conference rooms—fear of bankruptcy, fear of failure, fear of chaos.

   ms: And the fear they themselves were feeling, the idea that they had to do away with the threats to the social order—mobilized and militant multiracial working class, public sector unionization, the civil rights movement—which they perceived to be the result of an out of control welfare state.

   In the way you write about the popular resistance to austerity across the city, you point to episodes of solidarity that seem to push back on the notion that people were working with a zero sum frame of mind. The narrative isn’t one of working class people of different races unwilling to work with one another, but rather of elite conceptions of these different constituencies and which communities had to be preserved, versus which were politically expendable.

   kpf: The second half of the book tells the story of how austerity politics were implemented in New York, and tries to document the many organizing efforts to preserve public services. I wanted to look at instances of cross-racial organizing, and one example of this was the People’s Firehouse, which was a fire company that was slated for closure in North Williamsburg. At the time, the neighborhood was mostly Polish and Italian. It had wood frame houses, and the community had experienced a lot of fires. Local residents had an acute sense of wanting to keep the fire company open.

   They occupied the fire station and physically stopped the fire trucks from being removed from the house. They kept the station open for about 16 months, and eventually service was restored, during a time of otherwise drastic cuts to the fire department across the city. At one point, they were told that they could keep their fire house in exchange for the closure of the fire house in Fort Greene, which at that time was primarily a black neighborhood. But no one went for it. I was interested in cases like that.

   A lot of good work has been done on white resistance to desegregation in the early-70s, but I was interested in building another narrative about what was happening during the fiscal crisis, because resistance to austerity involved many instances that didn’t pit one group against another. One thing to note about the fire station example is that people were basically allowed to stay there and have these confrontations with police. The firefighters supported them, and there was a sense that the community was entitled to a fire station. Everyone accepted the basic legitimacy of the situation, which may not have been the case in a primarily black or Latinx neighborhood.

   The book ends with the case of Sydenham Hospital, which was a small public hospital in Harlem that, earlier in the century, was one of the first places where black doctors were permitted to practice in New York. There was a sustained community effort to save it under Mayor Koch, and he responded by saying “No, I’m not going to listen to a black mob.” He wouldn’t allow a claim to racial justice keep the hospital open.

   ms: I’d like to talk briefly about education. You poignantly list the services that were cut from public schools, like public health facilities. In the crisis, services like police and fire departments were deemed essential, while health clinics and schools were not.

   kpf: “Essential” versus “nonessential” rhetoric may have come up first in the set of debates over the fall of 1975, when it looked most like the city would go bankrupt. People understood that when a city declares bankruptcy, it doesn’t just disappear, and they began asking what the most essential public services were that would have to be provided.

   In this context it’s interesting to think about the way that the teachers’ unions were talked about, and the sense of hostility and animosity towards the teachers’ union in particular. It was tied to the idea that public schools were uniquely inefficient and problematic. There were various proposals to close schools during the fiscal crisis, and they largely didn’t come to pass—except in Central Harlem, which had the greatest number of schools close. Parents did try to keep the schools open, people were invested in their school communities, but they weren’t able to do it in most cases. So again, the question of essential services: Essential for whom? Essential under what circumstances, and at what level of quality?

   ms: You talk about Mike Holloman, the black president of the New York City Public Hospital Commission during the crisis, who was a product of the civil rights movement. He had the phrase “Healthcare is a Right” on a placard in his office, and he fought to keep hospitals open at a time when the city leadership needed someone who would go along with austerity politics. Ultimately, he was forced out and replaced by a white doctor who implemented the hospital closures that the city elites were demanding.

   kpf: There was an incredible amount of health care activism in NYC public hospitals in the late 60s and early 1970, Holloman had no capacity to enforce that vision in the context of the crisis. This was one of the innovations of the financial crisis which we haven’t talked much about—the Emergency Financial Control Board, which was a state agency that was specifically set up to shift power away from the city. It included four elected representatives: the Governor, Lieutenant Governor, Comptroller and the mayor, and also three people meant to represent “the public” but who in practice were all business leaders, and representatives of private companies. Community groups argued that they needed a labor representative, a neighborhood representative—but there was no interest in that. The EFCB didn’t actually set budget priorities, but had veto power over them. This was the state agency whose purpose was to shift power upwards to make it less democratically accountable.

   Jack Gross: I wonder if you can speak in a little bit more detail about the institutions that emerged out of the crisis period. We normally think of austerity as a process of paring back services, but those measures also generate new institutions. The New York that we live in today is full of, for example, public-private partnerships; the NYPD budget has consistently risen since the 1970s; there are massive incentives for private real estate development—but there’s no public hospitals or tuition-free CUNY.

   kpf: Fear City stops at the end of the crisis, but there’s another book to be written about the institutions that come out of it, and in particular public-private partnerships: Business Improvement Districts, Park Conservancies, even the expansion of the PTA in public schools—a whole set of institutions that try to mobilize private wealth into different parts of the city emerged in this period.

   Over time the city’s budget does expand again, and the city starts to spend again in the 90s. The type of austerity chronicled in the book doesn’t last, but there is a lasting change in the sense of priorities for public money. The tradition of using public money to appeal to private interests comes out of the crisis. I talk a little in the book about the deal with the Commodore Hotel.

   ms: Did you know the importance that was going to have when you wrote it?

   kpf: I had no idea! I was finishing the book in 2016 and thought it would be interesting and funny after Trump loses the election. The Commodore Hotel, which became the Grand Hyatt Hotel, was Trump’s major development project in Manhattan, which he was able to get these crazy tax abatements to build. In The Art of the Deal, it’s presented as an example of his genius, but the city was actually very interested in promoting the deal. The deal was enabled by the city’s political will and promoted extensively as a symbol of the way of the future. Benjamin Holtzman, a recent Ph.D. from Brown who worked with me on his dissertation, has a book forthcoming from Oxford University Press which describes these types of institutional arrangements that grow out of this period and into the ‘80s and ‘90s.

   ms: To return to Invisible Hands, one audience has read the book as a kind of playbook for elite movement building—that is, that there’d be a way for progressives to model the path that conservatives took over many years to seize back total control after the New Deal. After spending some time in the progressive institutional world, I’ve basically come to the conclusion that there’s an essential asymmetry between the left and right in terms of what’s achievable through top-down methods—and if your aim is to democratize power, you’re not able to just do that through top-down elite approaches. What are your thoughts about what, if any, lessons there are along these lines in Invisible Hands?

   kpf: I think that captures where I arrived at the end of the book. The power base of the right is actually quite different than that of any left movement, which means you can’t just take the type of movement I describe in the book and transplant a different set of values onto it. When I was working on the book there was a certain frisson to reading these memos or things from the 40s, from these people who felt marginalized in one way or another, and who had incredible confidence that they were going to be able to change things over the long term. There’s something very exciting about that. But there’s a fundamental difference between this kind of influence, and building a mass movement.

6. Historicizing the Self-Evident

   January 29, 2020 12:00 am Comments Off on Historicizing the Self-Evident

   This interview was originally published in the Los Angeles Review of Books.

   Lorraine Daston has published widely in the history of science, including on probability and statistics, scientific objectivity and observation, game theory, monsters, and much else. Director at the Max Planck Institute for the History of Science since 1995 (emeritus as of Spring 2019), she is the author and co-author of over a dozen books, each stunning in scope and detail, and each demonstrating an ability to make the common uncommon—to illuminate what she calls the “history of the self-evident.”

   Amidst the ever expanding reach of all varieties of quantification and algorithmic formalization, both the earliest of Daston’s works (the 1988 book Classical Probability in the Enlightenment) and her most recent (an ongoing project on the history of rules) perform this task, uncovering the contingencies that swirled around the invention of mathematical probability, and the rise of algorithmic rule-making.

   We spoke over the phone to discuss the labor of calculation, the various emergences of formal rationality, and the importance of interdisciplinarity in the social sciences. Our conversation was edited for length and clarity.

   An interview with Lorraine Daston

   Jack Gross: I’d like to start by asking about your new book project on rules—“all of them, everywhere,” as you said in a lecture this past winter. How did you begin working on this project?

   Lorraine Daston: It started with a collaborative project on Cold War rationality, when I realized there was a clear difference between traditional philosophical ideas of reason and a form of rationality that came to characterize the American human sciences in the mid-20th century.

   Characteristic of Cold War rationality was the view that certain forms of reasoning, core forms of reasoning, could not only be reduced to rules, but to a certain kind of rule in particular—namely, the algorithm: a rule that can be executed mechanically.

   For most of their extremely long history, rules have been formulated to allow a great deal of suppleness in their application. That’s because of an ancient philosophical and still unsolved problem: no universal can foresee all the particulars that it will encounter.

   In legal contexts, this situation is familiar: sometimes applying the letter of the law betrays the spirit of the law—think of The Merchant of Venice as a paradigmatic case. Rules that are less august in their domain of application than justice—rules, for example, defining the arts and crafts—are always formulated with an eye toward exceptions. They are meant to be tweaked in the face of experience, adjusted to specific circumstances. Of course, algorithmic rules also have a long history: the rules of arithmetic are the ur-algorithmic rules, but they constitute a tiny minority of all rules. Starting in the mid-19th century, when mechanical calculation genuinely becomes practically possible, the ambit of algorithmic rules grows, and by the middle of the 20th century, they become a form of rationality very much associated with the Cold War.

   The motivating question of the project was to understand how rules that intentionally involved judgment and adjustment to particular cases gave way to an understanding of rules as rigid, mechanical, and universally applicable.

   jg: It seems that there’s a thread that ties together calculation, Cold War rationality, and mathematical probability, which is the rationalization and formalization of various aspects of human judgment. This seems to follow a logic of automating material production, where you look at the total process, disassemble it into component parts, and then deskill and automate it. Is that accurate?

   ld: I think that’s correct, but I didn’t initially think of these projects as being linked. It is startling to see how consistent these interests are across my work. There is, however, a major difference between attempts to formalize reasoning from, say, 18th-century probability theory, and more modern notions of algorithmic rationality. In the 18th and early 19th centuries, probability theory was always subject to the judgments of reasonable people. If the results derived from the mathematical theory of probability diverged from those that a reasonable person might have concluded, it was probability theory that had to be revised and not the reasoning processes of a small elite of “reasonable people.”

   That really changes over the course of the twentieth century. You see it most vividly in the research done by Amos Tversky and Daniel Kahneman in their famous work “Judgment under Uncertainty,” in which human reasoning is seen to be intrinsically flawed as measured by the standards of Bayesian probability theory.

   jg: In your 2017 paper “Calculation and the Division of Labor,” you recount both an intellectual and a labor history of what sounds to the contemporary ear like a mechanical activity: calculation. There are striking parallels between the story you tell and the contemporary development of artificial intelligence, which often requires immense amounts of unseen human labor. Could you describe this history and how you came to see the development of calculation as a story about the division of labor?

   ld: The first attempts to create mechanical calculators date to seventeenth-century thinkers like Pascal and Leibniz. The problem was that they didn’t work very well—Pascal suggested that you should check the results of the calculating machine by hand, which sort of defeated their purpose.

   At that time, most heavy-duty calculation took place either in government administration or in astronomical observations. In both of these sites, a great deal of calculation had to be done by hand. Already in the eighteenth century at the Royal Observatory in Greenwich, forms had been developed that divided the task of a complex calculation into small enough steps—so that, at least at the lower end, the Observatory could employ very cheap schoolboy labor in order to complete them economically.

   Over the course of the nineteenth century, schoolboys were increasingly replaced by women as the cheapest and most reliable form of labor. We can read interesting correspondences from astronomers at Oxford and Harvard recruiting the first generation of women college graduates to perform calculations for half the wages of men. By the late nineteenth century, the Bureau of Calculation at the Paris Observatory was entirely feminized.

   One part of this story, then, is the association of calculation first with the division of labor, and then with very cheap labor. This is a simple economic story: an employer divides labor as finely as possible in order to employ the cheapest labor available on the market—schoolboys in this case, and then the highly educated, extremely conscientious labor of women.

   There’s another element, however: the actual improvements in mechanical calculation, which allowed for the smoother working of a calculating machine. By the mid-nineteenth century, insurance companies became a third site of big calculation. Prudential Insurance, for example, had a workshop entirely devoted to repairing broken down calculating machines. Technical improvements strengthened the relationship between the notions of mechanical and calculation. Until the late nineteenth century, calculation was called mechanical labor, but no machines were involved. After about 1870, it was mechanical in a double sense: machines were involved, and the people who did the labor were considered mechanical.

   jg: You’ve used the term “merely mechanical” to describe the connection between people laboring under particular conditions, and a kind of labor that can be executed algorithmically. Where does this phrase come from?

   ld: Originally, in ancient Rome, the term “mechanical” referred to simple machines like a pulley or a lever, but, by the Middle Ages, it had already developed derogatory associations. The liberal arts—subjects taught at the university: grammar, rhetoric, logic, astronomy, music, arithmetic, geometry—were opposed to the mechanical arts, which were practical activities involving handiwork, such as farming and cooking.

   The word mechanical begins also to denote the kind of person who does that work. In A Midsummer Night’s Dream, the bumbling amateur actors Bottom and his fellow artisans are called rude mechanicals, which suggests both their bumptiousness and the kind of work they do. So, already by Elizabethan times, at least in English, the word had a very pejorative, socially hierarchical meaning attached to it. Those negative connotations deepen in the 18th century. Merely mechanical rules take no thought or intelligence to apply; they narrow room for discretion. We see a hierarchy of intellectual faculties, in which those forms of human activity that are allegedly mindless are described as “merely mechanical,” even if no machines are involved.

   One of the great calculating projects of the late eighteenth century is the French attempt to recalculate logarithms on a base-10 system as a tribute to the metric system of the French Revolution. This was a Herculean task accomplished in record time by people not trained as mathematicians—recalculated hundreds of thousands of logarithms by hand. Legend has it that many of them were unemployed cooks and hairdressers previously from noble households that were dissolved when their masters were guillotined or fled.

   This labor was called “mechanical,” even though it’s done only with quill pen and paper. There’s not a machine in sight. These two senses of “mechanical” converge with Charles Babbage, the mathematician who designed the first computers. Babbage was also a political economist—a banker—who studied the French project and concluded that “merely mechanical” work, performed by people whom he considered mindless, could be done by a machine. At least in his telling, that was the insight that led him to the Difference Engine and the Analytical Engine.

   There’s another aspect to your initial question: the analogy to the current day. The people behind the curtain in modern AI projects are of two sorts: those who are thinking about how to divide a very complicated task into the tiniest possible steps, very much in the tradition of the history of mechanical calculation; and those whose work is compensatory for algorithmic systems—Facebook moderators, for example, who monitor objectionable content missed by the algorithms meant to eliminate it automatically. It’s really important to distinguish between these two groups of people, because they are performing two very different tasks.

   jg: The continuity I was after was between people who work under similar labor conditions as content moderators—often low-wage workers in the Global South, contracted to large American tech firms—but who are performing tasks more closely akin to those of calculators: they are the machine behind the machine, tagging images for computer vision programs and the like. Is the moderation labor that you bring up, which compensates for the limits of machines, new?

   ld: If you look at the details of, for example, the British Nautical Almanac, you can see that there have always been people like the moderators who are tasked with cleaning up—people behind the scenes checking and proofreading calculations, and identifying where things go wrong.

   The important point is the extent to which this labor has been erased from the triumphal histories of calculation. The histories are in many ways rightfully triumphal—there has clearly been extraordinary technological advance from the clumsy machines of the 17th century to today—but it’s always been the case that effective functioning has been dependent on high-level judgment, often performed by those on the low end of the hierarchical division of labor.

   jg: I wanted to ask a general question about your first book, Classical Probability in the Enlightenment. Unlike the work of Ian Hacking and Barbara Shapiro, who were examining the emergence of the concept of probability, your project focused squarely on the emergence of mathematical probability. How did you become interested in probability, and specifically in the story of quantification?

   ld: My college education in the 1970s coincided with the first phases of what we might call quantiphrenia: the beginning of academic evaluation in the form of not only grade point averages, but also citation indices, and so on. I became interested in quantification abstractly, but also quite concretely—as I was the object of some of these attempts to quantify judgment.

   But in terms of actually working on probability, it was Ian Hacking’s The Emergence of Probability that changed my path—literally overnight. Historians of science are schooled to look for continuity, but Hacking framed his problem in terms of discontinuity. In his telling, mathematical probability hit with the suddenness of a thunderbolt. As he put it, in his characteristic style: before 1654, there was no concept of probability; it was an unthinkable concept. This was a story of radical novelty, in which suddenly, like a volcano erupting, something completely new appeared in the intellectual landscape.

   It was also because it reached into other fundamental concepts: not only concepts like evidence, which Barbara Shapiro treats so beautifully in her book on sventeenth-century English notions of probability, but also notions of truth and falsehood. For millennia, at least in the Western philosophical tradition, logic was a matter of yes-or-no: a statement was either true or false. To have a spectrum, in which there were degrees of probability between the extreme values of truth and falsehood, was a gobsmacking upheaval. These claims in Hacking’s book continue to grip me.

   jg: Your book makes a strong case that the quantification pursued by the early probabilists was founded on legal concepts, like “degrees of uncertainty” and “probabilistic expectation.” This comes as a corrective to a common notion, which is that probability theory emerged from gambling or games of chance. How did the early probabilists draw on the law for the concepts that they thought needed quantification?

   ld: To rehearse the obvious argument against gambling as the triggering factor: people have been gambling since time immemorial. If probability theory were a kind of natural evolution from gambling, it should have emerged in many places, in many epochs, long before the 17th century. It’s a nonstarter as a historical hypothesis, even if some of the early applications did deal with gambling and chance.

   As for the law, there are two aspects of legal thought that turned out to be seminal for probability: degrees of proof, and aleatory contracts.

   The first stems from a much ridiculed doctrine of the arithmetic of proof, highly developed in sixteenth-century legal and casualist thinking, in which the testimony of different witnesses and different kinds of evidence are assigned different weights. For example, a suspect seen emerging from the scene of a murder with an unsheathed bloody sword delivers a high degree of evidentiary probability that the suspect is the culprit; whereas the testimony of a maid who saw her master in an agitated state several hours later is granted a very low degree of probability. This is both because the maid is a woman in a dependent relation to her master and because of the remote inferential link between committing the crime and the observed psychological state of the subject.

   Jurists, without having any kind of measurable scale, had already assigned fractions to these so-called indices of proof. This is a form of reasoning which is quite familiar to us, even if its quantification by an arithmetic of proof now seems strange: weighing and combining strong evidence with weak evidence in order to come to a reasoned judgment.

   The second aspect of legal theory that underpinned early formulations of mathematical probability was the so-called aleatory contract, which depends on an uncertain future outcome. In commodities markets, purchasing wheat or pork belly futures for the next year would be an example. The buyer and seller are betting on whether the commodities in question will be more or less expensive than they are now. Aleatory contracts were particularly important because they were one way to get around prohibitions against lending at interest, traditionally seen as usury. Aleatory contracts opened a loophole in these prohibitions: taking a risk was considered to be a form of work that entitles the risk-taker (for example, someone who lent a merchant money for a long voyage) to collect interest on an investment. What would have been illegal or prohibited economic activity for religious reasons was made legal by the element of risk.

   These two streams of legal thought influenced the early probabilists. And, crucially, the early figures of mathematical probability—Pierre de Fermat, Leibniz, and Pascal—all had extensive experience in the law.

   jg: There’s a striking phrase that you use to describe their goals, which is that they “were seeking to quantify the intuitions of an elite of reasonable men.” They were thinking about formalizing legal concepts for business activities, and about how to rationalize certain aspects of the justice system, but they were also seeking to quantify their own cognitive capacities as “reasonable” people.

   ld: Right. And the question is why. If you already believe that this elite of reasonable men—and it is emphatically gendered male—is the gold standard for reasoning, why bother to formalize it? Why not just follow their lead? I think there are two explanations: one minor, and one major, and both are still very much with us. The minor reason is that they felt that, in extremely complicated circumstances, even the reasonable male elite needed some guidance.

   The major reason is that the vast majority of people did not belong to the reasonable male elite. This was crucial to the Enlightenment project. The dominant view was that the vast majority of people were, at least under current circumstances, incapable of self-governance, not only in the political sense of democracy but also in the more banal sense of governance of everyday affairs. Enlightenment thinkers held that this form of reasoning must be made accessible to everyone. It is therefore no accident that one of the campaigners for probability theory—the Marquis de Condorcet, who was a leader of the early phases of the French Revolution—made it his task to introduce mathematics, including probability theory, into universal schooling for all French citizens. Condorcet’s curriculum featured instruction in probability—a reasonable calculus—to give future citizens a kind of road map for decision making.

   Some very early textbooks, like Condorcet’s textbooks for the Écoles Centrales, were suffused with the view that grasping fundamental mathematical concepts could serve as a model for political decisions: it would teach future citizens what a clear and distinct idea is—and thereby inoculate them against political demagoguery. Condorcet advised against learning the multiplication tables by rote because that would be merely mechanical.

   jg: There seems to be a tension between the idea that mathematical probability can encourage the development of sovereign reasoning and the notion that we need to quantify and formalize the faculty of judgment.

   ld: It returns to the problem of consistency. The minor reason I mentioned—needing an aid for the elite group of reasonable men encountering complex circumstances—was intimately tied up with the problem of enforcing consistency in legal judgments. The challenge for judges is that what may seem just in a particular circumstance may be unjust if generalized. If there’s inconsistency in judgment, it’s prima facie evidence for injustice. The goal is to make one’s judgment consistent over the long run.

   There are some perils to this approach: no universal ever fits the particulars. Never in the history of human rulemaking have we created a rule or a law that did not stub its toe against unanticipated particulars (just ask the Facebook moderators who must clean up after the algorithms). I think machine learning presents an extreme case of a very human predicament, which is that the only way we can generalize is on the basis of past experience. And yet we know from history—and I know from my lifetime—that our deepest intuitions about all sorts of things, and in particular justice and injustice, can change dramatically.

   jg: What makes your research compelling for readers far outside your discipline is that you historicize areas of science whose language or mode of reasoning has become so commonplace that we forget they have origins in methodology. This holds through all of your projects—from probability to observation to objectivity. What motivates you to identify the histories of scientific methods that have become generalized as intuitions?

   ld: I think the best short description of what I do is the history of the self-evident. There’s an obvious and perhaps a less obvious attraction to doing this kind of history. The obvious one is the eruption of intellectual novelty, so fascinatingly presented in Hacking’s work. This is the moment when the unthinkable becomes thinkable.

   But this leads to another, perhaps less obvious question: How does the once-unthinkable become not only thinkable but self-evident? How does the unthinkable become something we cannot think away anymore? To get at that, we have to tell a history not only of emergence, but of the formation of the deepest levels of our intuition. I have a strong sense that our best reasoning takes place at a semi-conscious level, and I’m very interested in how that lower stratum of reasoning—the intuitions that drive our thinking in philosophy, mathematics, and the rest—is established.

   jg: A final question I want to ask is about your discipline. In your SSRC Fellow Lecture, you spoke about your research on rules as bringing together the “hard” and “soft” social sciences. How do you see the history of science in relation to the social sciences more broadly?

   ld: History of science lies in the middle of a triangle defined by the natural sciences, social sciences, and humanities. Many of us are trained in the sciences, while our methods are very much those of the historian. But the history of science has also been quite permeable to the methods of the social sciences. Historians of science, I think fortunately, have been unclassifiable with respect to the three great divisions of knowledge in our current classification system. I think it’s striking, if you take the longue durée view of the evolution of the sciences, to recall where these divisions of knowledge we take for granted come from. It’s salutary to work in a language like German, which, unlike English, did not narrow the meaning of “science” in the 19th century to mean only the natural sciences. Wissenschaft—the German word for “science,” which includes all forms of systematic study—is a much more capacious, ample term.

   Something as simple as shifting from one language to another can prompt you to think historically about how all these forms of knowledge are intertwined. It also leads you to think about their shared epistemic virtues. To use an example from the social sciences: if you are looking for causal mechanisms, often only a detailed ethnography will reveal what exactly is the cause of some observed pattern in behavior. And it can work in the other direction—a hypothesis developed from ethnographic work may require statistical testing. These two modes of inquiry, so often opposed to each other, seem to me to work hand-in-glove, at least from the standpoint of the goals of scientific explanation.

   Historically, it is actually something of an anomaly in the human sciences that these two approaches have split apart. I think it’s an artifact of the educational system. I find the qualitative/quantitative division to be both puzzling and provincial—provincial in a double sense of it being linked to a particular language and also to our particular historical moment. There’s nothing epistemologically inevitable about it—quite the contrary.

7. Exploitation, Cooperation, and Distributive Justice

   October 24, 2019 12:00 am Comments Off on Exploitation, Cooperation, and Distributive Justice

   Throughout his career, John Roemer’s work has been uniquely situated between the fields of microeconomics, game theory, philosophy, and political science. His research makes use of the tools of classical economics to analyze dynamics typically thought to be outside the scope of economics: from notions of fairness and morality, to the possibility of overcoming capitalist social relations. In doing so, it defends those tools against charges that they can’t describe the behaviors we see, at the same time as it renders vital social questions digestible for disciplines that rarely engage them.

   Roemer is perhaps best known for his contributions to theories of distributive justice. Within the field of moral philosophy, he is one of a handful of scholars who have sought to formalize distributive theories in order to compare their merits. To moral philosophers, he argues that outright dismissal of consequentialist theories of justice, and their replacement by complicated deontological models, is a mistake. And to the world of economics, he posits that economic theory cannot be divorced from moral philosophy—that the emphasis on reaching equilibrium itself necessarily carries moral assumptions.

   Roemer’s first major work was in Marxian economics. In A General Theory of Exploitation and Class, he identifies five classes with distinct material interests: pure capitalist, petty bourgeois, self-employed, semi-proletarian, and pure proletarian. According to his Class Exploitation Correspondence Principle (CECP), if individuals optimize according to their best interests, then those who optimize by hiring labor are necessarily exploiters, while those who optimize by selling their labor are necessarily exploited. Through the CECP, Roemer employs rational choice theory to prove as a theorem what Marxists had previously presumed from observation.

   Some of his more recent work develops a theory of “Kantian optimization.” Here, he challenges the individualist definitions of strategic behavior propagated by standard rational choice theory, instead proposing a rational model for cooperative behavior. In this framework individuals reason according to the categorical imperative, asking: “If I were to deviate from my stipulated action, and all others were to deviate in like manner from their stipulated actions, would I prefer the consequences of the new action profile?” Roemer finds not only that there are a variety of games in which this kind of optimization leads to Pareto efficient outcomes, but that it can furthermore resolve both the tragedy of the commons and the free rider problem, both of which are Pareto inefficient consequences of Nash equilibrium.

   Our discussion covers the range of his career and projects, and considers the broader import of theoretical work in the current political conjuncture.

   An interview with John Roemer

   jerome hodges: We want to start off with your background story, because, try as we might, we couldn’t find any detailed biographical information about you. Someone on Wikipedia included this very suggestive paragraph about you being dismissed from Berkeley for anti-war activism during Vietnam; I’d love to hear that story, and about the origins of the September Group.

   john roemer: I grew up in a socialist household. My parents were first-generation Americans of Eastern European Jewish descent, and committed leftists. So I grew up always thinking I was a socialist; when I was a child I remember thinking the good guys were the Brooklyn Dodgers, the workers, and the Democrats and the bad guys were the Yankees, the bosses and the Republicans. Nevertheless, I wasn’t politically active until graduate school. I chose Berkeley in large part because it was such a politically active place, and once I got there I joined a Marxist-Leninist party. I could no longer justify studying pure mathematics and changed my major to economics. In the fall of 1968, I was one of about 100 students who occupied the administration building. We were eventually arrested by about 1000 highway patrolman whom Ronald Reagan had called from around California to extricate us. During the faculty student committee hearings we were given the option to apologize for our participation and be put on probation. I told the committee that I acted on principle, and they suspended me for a year.

   Having been suspended I also lost my draft deferment, and so I began to teach math at a high school in San Francisco in order to obtain another deferment. I ended up staying for five years, past the age of 26 at which I could no longer be drafted, because I got involved in workplace organizing through the Progressive Labor Party. We organized a left-wing caucus of the teacher’s union, and facilitated a number of active strikes. It was only at the age of 29 that I went back to Berkeley to finish my dissertation.

   When I got my first job at UC Davis, I had never read any Marxian economics. My colleagues suggested that I read Michio Morishima’s Marx’s Economics and teach a course on it. It blew me away. That mathematical approach to Marxian economics set my research agenda for the next 10 years, one product of which was my book, A General Theory of Exploitation and Class. In that book I propose that the Marxist theory of exploitation was really a special case of a more general theory, and I rephrase historical materialism in terms of the evolution of different modes of exploitation.

   While writing that book, I read G.A. Cohen’s Karl Marx’s Theory of History. He was doing in philosophy what I was trying to do in economics, namely applying contemporary theories of our fields to Marx’s writings. Another person thinking about this was Jon Elster, and he and Cohen organized a meeting of like-minded Marxists in 1979. I sent Cohen, whom I hadn’t met, some chapters of the book I was working on, and he invited me to the second meeting of this group, which was in London in 1980. I attended and suggested that people like Eric Olin Wright, Pranab Bardhan, and Robert Brenner join as well. We called ourselves the No Bullshit Marxist Group. The group continues to meet every year, though most of us no longer identify as Marxists.

   Cohen was an absolutely magnetic character; he had a mind sharp as a knife combined with a fantastic sense of humor. Under his influence, I became committed to understanding the ethics of exploitation: why was it ethically bad for people to be able to purchase goods embodying less labor than they had expended in production? Neoclassical economists say it’s not a bad thing, the worker has simply paid rent for access to capital (of course, the Marxian view is that the surplus in production after workers are paid is a genuine surplus, and it should be divided among the workers rather than going to the capitalist).

   As I continued to think about that, I became increasingly convinced that what was ethically bad about exploitation was not the differential labor exchange. To the extent that the relationship between capitalists and workers is unjust or exploitative, I came to argue that it was due to the unjustness of property relations, and this unjustness had its origins in Marx’s theory of primitive accumulation. In 1974, Robert Nozick published Anarchy, State, and Utopia, in which he admitted that the historical development of capitalism depended on plunder, murder, and conquest. He argued, however, that one could conceive of capital accumulation acquired through savings decisions people have made, and in that instance there would be nothing morally wrong about capitalism as an economic system. Both Cohen and I were very taken with that; we thought the argument had some truth to it, particularly given that Marx thought workers were the just owners of their labor power. If you’re the just owner of your labor power, why shouldn’t you be able to save if you want to, and then maybe in the future, hire other workers with your savings? In 1985 I published a paper titled “Should Marxists Be Interested in Exploitation?” And my argument in that paper was that it was not exploitation as such that was ethically bad, but the injustice of property relations underlying it.

   maya adereth: I remember reading an interview with Eric Olin Wright in which he said the most consistent element in his thought has been that “the purpose of understanding the class structure of capitalism is to understand the conditions of transforming it.” Which aspects of Marx’s writing continue to influence your thinking?

   jr: Historical materialism remains very attractive to me. The notion that economic structures change to accommodate advances in the forces of production is a grand insight, and I remain very inspired by Marx’s theory of history.

   I wrote an article this summer titled “What is Socialism Today?” which articulates three models of a cooperative economic society. Socialism is back on the agenda in the United States, which is very exciting. Nevertheless, what people like Bernie Sanders and Alexandria Ocasio-Cortez are calling socialism is in fact just a series of economic reforms that don’t alter property relations. In the paper, I begin by proposing models of socialism other than social democracy, all written out as general equilibrium models, and I prove that you can have efficient resource allocations with very different (socialist) property relations in society.

   I am undecided on what the most attractive model of socialism is from among those I propose.

   ma: One of the things I wanted to ask you is about the relationship of effort and responsibility to universalist social demands like publicly provided healthcare. In Theories of Distributive Justice, you weigh the comparative responsibility of a hypothetical smoker over their condition against the environmental factors which may have led them to adopt an unhealthy habit. How do you reconcile the introduction of responsibility into a socialist call for publicly available benefits?

   jr: I’ve thought about this quite a lot, and my answer to it is following: There is both a right wing and left wing application of my theory of equality of opportunity. The right wing view is that people should be rewarded according to their effort. The left wing view is that people should be compensated according to their disadvantaged circumstances. By far, the primary aspect of the theory is compensation of people for disadvantageous circumstances. The other part is not particularly important to me. I have an example of applying equality of opportunity to health care. In the example, there are two classes of people: poor people and rich people. Poor people suffer from cancer and tuberculosis, and rich people suffer only from cancer. The probability of contracting cancer or tuberculosis is a function of your lifestyle quality, and the distribution of lifestyle qualities is better among the rich than among the poor. So there is a distribution of lifestyle quality according to circumstance, but where in the distribution you put yourself is considered to be a matter of choice.

   If you’re a utilitarian, you want to maximize the average life expectancy. That will lead you to spending much more on treating cancer than tuberculosis. However, if your goal is to maximize the life expectancy of the more disadvantaged group, you’ll spend much more on tuberculosis, even though you hold people responsible for their lifestyle. In fact, one rule which I insist on as a postulate is that when a person comes into the clinic with cancer or tuberculosis, nobody asks them what their lifestyle quality was. So, in the model, the amount you spend depends only on the disease, not on people’s lifestyles.

   jh: When I first read Theories of Distributive Justice, I was blown away. It was the first time I’d seen someone provide a general, systematic framework for thinking about how consequentialist theories of justice can be constructed. Of course this is incredibly valuable from a scholarly perspective. But I’m curious as to whether you think formal theory and metatheory of this sort has a more applied role.

   jr: The purpose of my work is to conduct an argument within academic economics for what justice and socialism consist of, and what is ultimately desirable for human society. I am carrying out a debate of ideas, and getting the ideas right is the most important thing I can do. The hope is that if you get the ideas right, you will attract other people to agree with them, and that shapes society at a broader scale. I’m not particularly worried about the application of these ideas because I’m sure if the ideas are right, there are going to be people who figure out how to apply them.

   jh: One reason the applied question interests me is because of work in digital ethics. Decisions from predictive policing to municipal zoning are made based on algorithms and machine learning, and there’s a growing community of people thinking about algorithmic justice. Have you been thinking about that?

   jr: Actually, I attended a conference at Harvard in May to talk about equality of opportunity to an audience of computer scientists. Again, I know nothing about their algorithms, but I hope that understanding this approach to equality of opportunity will shape the way people write them. This is an excellent example of where theory is of paramount importance: If you don’t have the right theory, you’re not going to have the right practice.

   jh: You might be interested to know there was a paper presented at this year’s ACM FAT* conference that included a Roemerian test for algorithmic fairness. It seems like the scale and consistency at which these models can now be applied really raises the stakes for theory. I wonder if this new environment wherein mathematical models are implemented by algorithms actually begins to break down the division of labor and place the theory closer to the action?

   jr: Yes, it seems like it would. But given that the stakes are higher, it should only strengthen our commitment to finding and disseminating the right theories. At the Harvard conference I learned that one of the results that computer scientists are rediscovering is the impossibility theorem, which we’ve known about for 70 years in economics.

   jh: One last question along these lines is about the role of idealization and the limitations of models. Inevitably, formal models abstract and simplify. And sometimes it’s not obvious that the complexities that are smoothed over are unimportant, or that the results of the idealized theory will continue to hold, at least approximately, if those bits are added back in. For instance, it seems to me that one of the lessons of feminist theory is that a lot of the goods essential to human thriving are socially constituted—they don’t make sense outside of particular social arrangements. Gender expression is one example. If this is right, there is cause for concern about how much we can generalize from theories that presuppose a fixed set of goods. Do you have thoughts about that, or about the role of modeling generally?

   jr: In terms of modeling, what economists do is take a theory they have, and try to reduce it to a model. In doing that, you have to make huge simplifications about the world you’re describing so that the model is tractable. The disadvantage of proceeding to the modeling stage is that you cut off imagination, because once you’ve got the model, you stop questioning its premises. On the other hand, the advantage of getting to the modeling stage is that you can check whether you’ve isolated the correct parts of the system—does the model imply what we observe? I don’t think there’s a general rule for deciding when you should proceed to a model, but I think models are invaluable.

   People who don’t know how to model often think that we are just using the mathematics to communicate our ideas. For me, the most important aspect of modeling is the learning process. I’ll give you an example from General Theory: Marx had always maintained that the embodied labor times of commodities were ‘logically prior’ to prices—leading to the so-called transformation problem, of how labor values are ‘transformed’ into prices. I certainly believed that when I began working on the book. Initially, I took the Marxist definition of exploitation, whereby an individual is exploited if the labor that she expends in production is greater than the labor embodied in the goods she can purchase with her earnings from work. I also defined class by considering two factors of production: labor power and capital. An individual in my model could either sell their labor, work their own capital without hiring others, hire other workers, or any combination of the three. Given reasonable preferences over income and labor, I showed that an individual would occupy one of five class positions: a pure capitalist or landlord, who only hires others to work on her capital stock; a petty bourgeois or rich peasant, who hires others and works her land herself; an artisan, who only works her own land; a poor peasant or semi proletarian, who both works her land and sells her labor power; or finally, a pure proletarian or landless laborer, who only sells her labor power. Each one of these class positions is the result of optimizing in the standard (neoclassical) way, subject to one’s constraints defined by the amount of capital and labor one owns.

   The theorem I proved—called the Class Exploitation Correspondence Principle—was the following: any individual who optimizes by hiring labor will necessarily be an exploiter, in the sense that the goods that he can purchase with his revenues will contain more labor embodied than he himself expended in production. Conversely, any individual who optimizes by selling labor power must be exploited. In this way I proved as a theorem, from primitives, what Marx had taken as a tautology.

   At this point I made the technological premise of the model more complex by assuming multiple production possibilities. It turned out that the theorem wasn’t true if you maintained the classical definition of exploitation. If you defined “labor embodied” as “the minimum labor needed to produce goods, given your technology,” the theorem was false. However, if you defined “labor embodied” as “the minimum way of producing goods using only processes which were maximally profitable at equilibrium prices,” then the theorem was true. That meant that in order to preserve the Class Exploitation Correspondence Principle, I had to define labor values as depending on equilibrium prices! I could no longer maintain the view that labor values were logically prior to prices. That is an example of how modeling can teach you something that you couldn’t see with the naked mind.

   jh: It seems like you’re engaged in a similar method in your recent work on cooperation and Kantian optimization.

   jr: Recently, I’ve argued that that it’s incorrect to define capitalism and socialism as simply differing in property relations. There’s an old tradition that says ethos matters: capitalism has an individualistic ethos, socialism has a cooperative ethos. But nobody has ever modeled that. Using Kantian optimization, I can embed a theory of cooperation into models of the economy. In fact, I found that there’s a real difference between what happens in the economy when people optimize in the cooperative manner, rather than the Nash manner. So I’ve enriched the model of socialism by embedding in the model a formal protocol of cooperation. For instance, in social democracy, where we still have private distribution of firm ownership, but workers optimize their labor supply decisions in the Kantian protocol as opposed to the Nash protocol, one can have redistribution through income taxation to any degree, and regardless of the tax rate, the equilibrium is Pareto efficient.

   Using Kantian optimization, I’m therefore able to separate the issue of equity from the issue of efficiency. Under capitalism, if you tax people at a rate of one—so that everybody pays their entire wages in taxes, but receives back the average product as his income—nobody will work. In my model of social democracy, you can tax people at a rate up to and including one, and you still get a Pareto efficient allocation. Again, I made advances through the modeling process that I wasn’t able to see with the naked mind.

   What’s an example of a model that is more socialist than that? Well, one model is what I call worker management. The key idea here is that socialism as we conceive of it in the United States today cannot be socialism as Marx conceived of it, because when Marx was writing, there was virtually no middle class. Today, people between the 50th and 99th percentile of the income distribution own 56% of the wealth in the United States. Two percent is owned by the bottom half of the wealth distribution. The other 42% is owned by the top 1%. If socialism is going to come about democratically, it can’t involve confiscating all of the middle class’s wealth. So one formula for socialism is that the entire product of firms should be distributed to investors and workers in proportion to the labor and capital they’ve invested, leaving no profits. More generally, in an arrangement like this, you have to design a way of paying people that: (i) can be decentralized, (ii) exhausts the whole product, and (iii) is Pareto efficient.

   There’s also a worker-managed model in which investors are paid a competitive interest rate and the profits that remain after interest is paid are divided among workers in proportion to their labor expended. I have not concluded as yet the extent to which suppliers of capital (that is, middle class people who invest their savings) should share in the economic surplus.

   Societies will have to choose how much to remunerate capital. As I said, if we confiscate savings, who is going to advocate socialism? Those who occupy the 50th to the 99th percentiles of the income distribution are not the enemy. This seems to be a big intellectual puzzle for socialists: today, we have a very large middle class which hasn’t accumulated its wealth through robbery, plunder, and murder. They have accumulated capital and savings through processes that are unjust because of unequal opportunity. Our message has to be that under socialism we want to eliminate unequal opportunity—in particular, inheritance of large amounts of wealth—but people should not be discouraged from saving, and hence investment will bring a return. The growth of significant middle class wealth since 1850 (what Piketty calls the “patrimonial middle class”) means that socialism can no longer be thought of as a system in which the economic product is distributed according to labor expended.

   jh: I understand why forms of Kantian optimization are Kantian in spirit, in the sense that this universalization procedure involves thinking: what would happen if everyone changed their behavior in the same way I’m considering? But one feature of this principle is that the results are going to strongly depend upon what counts as “the same way.” That’s exactly what leads to the difference between, for instance, additive and multiplicative Kantian optimization; if I’m working two hours instead of one, should I be imagining a world in which everyone worked one more hour (additive) or one in which everyone worked twice as much (multiplicative)? Is there an easy intuition as to why a particular Kantian variation would emerge in a given context, or to what ethical and social norms the different variations capture?

   jr: My view is that the most prevalent kind of Kantian optimization is what I call simple Kantian optimization, where an individual takes the action she would like all others (in the given situation) to take. In a strictly monotone game which is symmetric, where the producers are all similarly situated, simple Kantian optimization is always Pareto efficient. It ‘resolves’ the two negative consequences of the Nash equilibrium: the free rider problem and the tragedy of the commons.

   The question next becomes whether the model is generalizable to asymmetric game. The two main generalizations are multiplicative and additive Kantian equilibrium. Here, instead of thinking about “the same action,” we should think about vectors of contributions. Global emissions are a good example of this; if no nation would like to rescale the whole vector, by any constant—increase everybody’s emissions by 7% or decrease everybody’s emissions by 3%—that produces a multiplicative Kantian equilibrium, and it’s always Pareto efficient. But re-scaling is not the only thing you can do. Another thing you can do is translate the vector by a constant: would everyone like to add one gigaton to the emissions of each country? If given the possibility of translating, everyone would rather stand pat, then that’s an additive Kantian equilibrium, and that turns out to always be Pareto efficient also.

   jh: Have you looked at the stability of Kantian equilibria when people deviate from Kantian optimization?

   jr: We can conceive of a situation with some Nash players and some Kantian players. If the Nash players optimize in the Nash way and the Kantian players apply Kantian optimization among the group of Kantian players, holding fixed the other group’s behavior, you reach an equilibrium. But the equilibrium won’t be Pareto efficient, and it will deviate from efficiency in proportion to the number of Nash players, roughly speaking.

   ma: How do you think the nature of political coalitions has changed in the United States? And how are automation and new forms of labor relations feeding into this realignment?

   jr: Given capitalist property relations, automation may hurt a lot of people. There’s no question that it’s economically feasible to design a way of using these technologies so that everybody’s life improves. Automation should be a good thing—it should liberate people to engage in activities other than work—in particular, other than dull work. Society must invest in more education, so people can learn how to use additional free time in stimulating ways. In Keynes’s 1930 essay “Economic Possibilities for our Grandchildren,” he wrote that by 2030 the work week was going to be 12 hours long, and the big problem would be how people would occupy themselves. He wasn’t worried about mass poverty—he thought that society would arrange to share the work reasonably and everybody would have a decent income. (Of course, Keynes underplayed the reality that serious class struggle would be required to implement those desirable social arrangements.)

   Now, will a capitalist society learn how to use these new technologies in a socially fair way? Not unless there are mass social movements that demand that the gains of automation are shared. I think this will mean transforming what Marx called the relations of production—just as the industrial revolution transformed the relations of production from the era of household and artisan production. This is the theory of historical materialism in practice: advances in the technology (the forces of production) bring about changes in property relations. The midwife that facilitates the birth of the new property relations is class struggle.

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8. Optimizing the Crisis

   September 26, 2019 12:00 am Comments Off on Optimizing the Crisis

   Software that structures increasingly detailed aspects of contemporary life is built for optimization. Services like Uber, Airbnb, and Facebook require mapping the world in a way that is computationally legible, and translating the messy world into one that makes sense to a computer is imperfect. Even under ideal conditions, optimization systems—constrained, more often than not, by the imperatives of profit-generating corporations—are designed to ruthlessly maximize one metric at the expense of others. When these systems are optimizing over large populations, some people lose out in the calculation.

   Official channels for redress offer little help: alleviating out-group concerns is by necessity counter to the interests of the optimization system and its target customers. Like someone who lives in a flight path but has never bought a plane ticket complaining about the noise to an airline company, the collateral damage of optimization has little leverage over the system provider, unless the law can be wielded against it. Beyond the time-intensive and uncertain path of traditional advocacy, what recourse is available for those who find themselves in the path of optimization?

   In their 2018 paper POTs: Protective Optimization Technologies (updated version soon forthcoming at this same link), authors Rebekah Overdorf, Bogdan Kulynych, Ero Balsa, Carmela Troncoso, and Seda Gürses offer some answers. Eschewing the dominant frameworks used to analyze and critique digital optimization systems, the authors offer an analysis that illuminates fundamental problems with both optimization systems and the proliferating literature that attempts to solve them.

   POTs, as an analytical framework and a technology, suggest that the inevitable assumptions, flaws, and rote nature of optimization systems can be exploited to produce “solutions that enable optimization subjects to defend from unwanted consequences.” Despite their overbearing nature, optimization systems typically require some degree of user input; POTs use this as a wedge for individuals and groups marginalized by the optimization system to influence its operation. In so doing, POTs find a way to restore what optimization seeks to hide, revealing that what gets laundered as technical problems are actually political ones.

   Below, we speak with Seda Gürses and Bekah Overdorf, two members of the POTs team, who discuss the definition of optimization system, the departures the POTs approach makes from the digital ethics literature, and the design and implementation of POTs in the wild.

   An interview with Seda Gürses and Bekah Overdorf

   Francis Tseng: How did each of you come to the POTs project?

   Seda Gürses: The POTs project came out of work I was doing with Martha Poon and Joris Van Hoboken looking at the political economy of software infrastructures. Joris and I had been trying to understand how the software industry moved from what we call shrink-wrapped software in the 90s to what could be called the service-oriented architectures of the present, and from the “waterfall” to “agile” models of software development. Through our research, it became clear that these newer cloud-based services are distinct in their underlying logic from earlier information and communication technologies. Earlier systems aspired to enable knowledge-making and gathering, were designed to collect, process, store, and communicate information, and raised concerns primarily around surveillance. Newer systems use feedback from how users or environments react to them to optimize for various goals like software features, the organization of engineering teams, the use of resources, and so on. What is distinct about these new systems is not only that they have this feedback mechanism, but that they adhere to a logic of optimization—the goal is not simply to know things, but to be able to show that you can optimize behavior and environments for a certain kind of profit interest, broken down to various metrics.

   From there, the question became: if the issue at hand isn’t knowledge per se—meaning that the associated risk is not just surveillance—what are the kinds of new risks and harms posed by optimization systems? We began by building on literature from AI safety, and we thought, well, these risks and harms are already here—what if we start listing them and thinking about technologies that could respond to them and protect people? The key thing is that protection here, unlike with privacy, is not just for individuals, but for groups of people, collectives of people and their environments. Where privacy gets you to focus on personal data and the profiling of individuals, optimization gets you thinking about how groups of people and entire geographies are optimized for profit.

   Bekah Overdorf: My background is generally in security and privacy: applying machine learning to attack private systems, and studying how machine learning can be used first to attack a system, and then to defend that system against attacks. I came into POTs from this angle, through talking about how attacks on systems that use machine learning could be conceived of as positive attacks on a given system. We have three more members on our team: Ero Balsa, who works on obfuscation; Bogdan Kulynych, who studies adversarial machine learning; and Carmela Troncoso, who works on privacy and cryptography.

   That’s kind of how POTs came to be what it is now, and what the team looks like.

   ft: To situate the discussion, could you describe in your terms what an optimization system is, as it relates to POTs?

   sg: We define optimization systems as systems that sense and manipulate the world—that co-create the world—for the purpose of extracting value.

   The high-level example I give during talks is that, a long time ago, when you went into a shop and bought a shrink-wrapped box of software, for example Microsoft Word, you’d install it on your machine, and any usage metrics and files you created just stayed on your machine. When software was released, the developers had to freeze and maintain a static version of the binary, and the way the software was being used wasn’t constantly communicated back to Microsoft’s servers. With something like Google Docs—or really any other service you want to imagine—what you have is every interaction being metricized continuously, and those interactions being used to decide how to modify that service.

   bo: It goes beyond the update cycle changing. The feedback mechanism means that what you and others are doing in the world is continuously affecting the way that the system operates, so the system is constantly optimized along a bunch of changing variables, including people who are not using the system, but whose inputs it nevertheless is taking in.

   Jack Gross: Could you speak further to the distinction you made between privacy being focused on the individual’s information, while the concerns that are raised with optimization technologies, and which you target with POTs, are oriented towards groups and environments? How does this relate to the shift towards a service-oriented model?

   sg: Although there are many theorists who have talked about social privacy—like Priscilla Regan and Helen Nissenbaum, whose idea of contextual integrity comes to mind—the actually dominant framework for data protection laws and conceptions of privacy is the right to be left alone—the individual imagined to require some space apart from society, and individual control over one’s data flows. This is true for privacy technologies as well which, although they may have had the notion and effect of protecting collectivities, are built around individuals’ communications. We see this in encryption, which, although involving multiple people in contact with one another, doesn’t scale up particularly well to groups. It’s very difficult to protect group communications, and I see this being inherent to technology, law, and philosophy—all three of which operate from a logic of individual privacy protection.

   There’s an essay called “The Smartness Mandate” by Orit Halpern that discusses the shift from systems addressing individuals to addressing populations—even as “personalization” becomes the watchword of the day. They optimize over populations, which means that their errors are distributed across populations. Individuals are individually impacted, but the systems are concerned with the population-wide effects they can achieve.

   bo: The insight here is that, if you’re optimizing for some particular goal, you’re going to have people who lose out in the system. The goal of optimization systems is to optimize for the largest, or most valuable, group of people—in that sense, many individuals are left out. And, to push back on your question a little, I think that POTs can be created to help individuals who are negatively affected by these strategies, in the same way that PETs (Privacy-Enhancing Technologies) can.

   jg: Can you describe the POTs approach, and walk through how a POT might work in practice?

   bo: Say you have a credit scoring system that’s inherently biased against some group of people. We have two different types of attacks—two POTs if you will—that we can use on the system. The first is a machine learning tool that does what is called data poisoning. The target system is running models that are regularly updated and trained with new data as it comes in. In the case of the biased credit scoring system we would strategically take out and repay loans in such a way that the retrained model would be debiased against this target group.

   This is similar to the techniques that spammers use to get their spam through email filters. They shove enough spam—perfectly and artificially crafted spam—into a model such that it now thinks that spam is not spam. It’s that same approach that we’re talking about here, where we can manipulate variables in order to de-bias the target machine learning algorithm from the outside, without ever having direct control over it. This is maybe an unrealistic attack because it requires a bunch of people to take out potentially bad loans, depending on the situation, but it’s a very nice illustration of how we can use adversarial machine learning techniques to buck systems we don’t agree with, or that have inherent biases and problems.

   The second type of attack you can do here is called an adversarial example, which is another adversarial machine learning tool, where you create the perfect sample with the smallest edit distance that you would submit to the system that lets you pass, even with the variable you can’t change still unchanged. For example, if the system is not giving loans out to women at the same rate as it is to men, you can change the variables of the inputs such that, even without changing the gender field, it will still let your loan through. This kind of tool gives you the minimum amount of changes that you would need to produce that effect. Here we see the distinction between individualistic POTs, like this one, and the more collective POTs, like the former example.

   sg: Maybe I can add that when we implement a POT, we may sometimes find out that the intervention is not working or is situated at the wrong place. Talking with Martha Poon, who studied the 2008 financial crisis, we came to understand that current lending practices do not exclude high-risk individuals. On the contrary, lenders use dynamic pricing models, a form of optimization, that favor giving “high-risk” populations loans at disproportionately higher interest rates. As a result, the financially marginalized pay more for access to money and are included in a system that during the last financial crisis caused mass dispossession. Is a POT that enables inclusion—even if it were to enable access to loans at lower interest rates—in a system that causes dispossession, what we want? I don’t think we can answer this question very easily. It is also interesting that, in comparison, “what is it that a POT should do?” was somewhat easier to address in the case of Waze, the other example, where we have plenty of anecdotes of people contesting Waze that we can translate into a POT. Maybe we can talk a little bit about that.

   bo: Sure. Waze is a routing app, like Google Maps, that has crowdsourced elements like reporting on traffic accidents, traffic lights, speed traps, and so on. And, anecdotally, it’s known to be more aggressive in its routing. As we know, pre-optimization systems, we could have routing algorithms give us directions, like MapQuest, but once we were on the road we were on our own—they didn’t know what the traffic was. Now we have a feedback system that’s meant to be constantly adapting to variables in the real environment. From this we get what economists call externalities—and the negative externalities of a system like Waze are many. There are many reported instances of little towns just off of highways getting inundated with traffic, because Waze would route users away from the slow-moving highway. So it’s the people in these communities that lose out in this optimization process: suddenly their roads are overburdened, they have trouble getting to school or the grocery store on time, maybe they have to finance more road maintenance, and so on. Very early in our POTs work we found these incredible examples of people fighting against Waze by reporting traffic on their blocks where there was none, so that the app wouldn’t route people there as a shortcut.

   There was also a really good spoofing attack where researchers spoofed the locations of a bunch of phones with the Waze app open so that the app thought that the phones were in the middle of a highway, kind of crawling along. This made Waze think that there was a lot of traffic on this highway and it routed everyone off of it. There was actually much less traffic on the highway since all of the Waze users were routed elsewhere.

   We used these interventions as inspiration to develop a POT to change real life variables inside of the town—things like speed limits on roads, artificial traffic essentially—to penalize the route through the town enough such that the routing algorithm sends it elsewhere. This illustrates the key element of POTs: these systems are using technology to optimize, and POTs are a technological response to that. Routing algorithms use graphing algorithms, which look at the world as though it’s a graph, with nodes and edges with weights, and they create routes on these roads using a variety of algorithms to find the fastest route. Our response is to look at the world in the same way they do—look at the world as a graph—and see if we can then figure out how to change the town, or to penalize the route through the town such that it’s no longer worth exploiting.

   sg: This is one strategy, wherein you work against the fact that optimization systems simply do not care about non-users and the broader environment. POTs takes a more holistic approach: we identify the costs of a given optimization system, and find ways to diminish them or, if that’s not possible, to make the lives of people who benefit from that optimization system difficult enough that they begin to complain to the service provider, such that everyone benefits.

   Another strategy is to more directly sabotage a given optimization system so that it just gives random useless results, forcing users to drop the service. These are just a couple options.

   ft: In the paper you speculate about using POTs to prevent the introduction of optimization systems in the first place. Do you have any thoughts on what that could look like?

   sg: There needs to be a bigger discussion about whether optimization should be the logic applied to everything around us. When we speak to computer scientists especially, and also people who have done traffic analysis, they say “we’ve always optimized, and what’s the problem, isn’t everything optimization anyways?” There’s a quick move from “we always optimize systems” to “the world is just a collection of optimizations,” by which they mean something like individuals optimize, societies optimize, systems optimize, birds optimize—everything optimizes. This is an extreme reduction of how life works, and an attempt to naturalize a particular way of organizing the world—namely, certain kinds of utilitarianism oriented by the profit motive.

   I’m continuously struck, particularly in computer science, by how pervasive the idea is that these systems are optimizing over our individual preferences. We hear “Google gives you advertisements that fit your preferences,” or “we offer Waze users the best path.” Part of the effect of this is to suggest that these firms are in the process of doing some neutral or beneficent resource allocation, contributing to social welfare, when what they’re doing is profit calculation, with significant negative externalities.

   bo: There is a second, harder to quantify political effect that we’re interested in the POTs work, which has to do with the power of these companies. If you’re a small town in New Jersey with a sudden influx of traffic, whereas before you might be able to talk to the highway administration on the state level, now you have to go to a private company and convince them that their algorithm is hurting your town. That’s a much different strain on governance than we’ve seen in previous analogous problems.

   sg: The relationship with political institutions is important. There’s been growing resistance to the use of facial recognition in the US, which is an encouraging example of people simply saying “no, we don’t want these systems introduced in the first place.” This is great, but if you think about the fact that service architectures are already installed, with many facial recognition training databases and services out there, you’re basically relying on institutional mechanisms to make sure these things don’t get deployed. The problem is that optimization takes political contention and turns it into a mathematical issue, arguing that a system is “optimal” and it’s therefore not always easy to argue or regulate such systems from a normative standpoint.

   jg: I understand the POTs intervention as trying to require politics of technology, rather than allowing the two to be falsely separated. It seems like much of the literature in digital ethics falls into two broad camps: either attempting to turn questions of fairness and justice into optimization problems, by formalizing definitions of fairness; or else by pointing out the serious problems with existing technologies and then advocating for corporations or political institutions to place limits on their use. How do you see the POTs work in relation to these two tendencies?

   bo: What we’ve seen in the fairness literature is a focus on what the service providers, and their developers, can do to systems that they’re creating or deploying in order to make them more fair. What POTs argues is that companies and services providers and often the developers themselves do not have the incentives to create fair models, because they are already optimized to the variables that the service provider needs them to be optimized for—namely, increased user base, increased profits. (There’s some research out of CMU by Kenneth Holstein that looks at these dynamics.)

   POTs is a direct reaction to that, which is to say: if we can’t trust the service provider, at least in the immediate term, because they’re always going to be optimizing for their own variables above all else, what can we do from outside the system as technical people making technical solutions to try to counter these externalities?

   sg: I think that one of the things that we imply in our work is that you can’t really improve optimization systems with more optimization. Much of the fairness work is exactly that—attempting to optimize for fairness criteria. This doesn’t put into question all of the categorization and classification of populations that needs to take place before the fairness definition is developed. It just proposes a more gentle way of manipulating those classifications—usually still for profit, or sometimes, in more speculative work, general social interest.

   bo: Another practical element here is that companies are very likely to have an incentive to appear fair, but much less likely to actually be fair.

   sg: Right. In the US, there’s the four-fifths rule, so often companies will go for simple models of fairness that satisfy existing criteria. No one is going to pursue a more general social justice as an outcome. There are limitations to how the legal system conceives of injustice, say, through discrimination, and a lot of the fairness community believes that the law gives them sufficient guidance. This is a shortcoming.

   When we first presented this work, some people said, “It’s unethical, you’re messing with systems”—yeah, we’re showing you how the system is messing with you! Why did you never question the ethics of this optimization system piggybacking on tax-funded infrastructure, but you’re now questioning us? That happens less now, as more and more news emerges about these companies creating a mess.

   If anything, as you say, it opens a conversation. These are big, systemic problems that POTs just tries to point at by saying there’s something going on here, by providing temporary relief, let’s say, or sabotage.

   ft: What are your plans for the future of POTs? Do you have any plans to implement more of them?

   bo: So right now we have a few that we’re actively working on creating, you could call them prototypes. We’ve especially been focusing on the Waze example and on credit scoring and how to counter continuously training systems like credit scoring and ad services.

   jg: To push the question a bit further, I was thinking about the relationship between Francis’s work with the rhetorical software framework—projects like Bail Bloc—and POTs. Clearly a restrained use-case of counter-optimization technology isn’t going to save people from being punished for being poor by credit scoring agencies, and mining Monero isn’t going to make pre-trial detention obsolete. Do you see your work as operating in a similar rhetorical register, or do you envision broader practical applications based on your research?

   sg: What’s really interesting is that, since we started doing the POTs talks, people come to us and say, “Oh, I guess I’ve been doing POTs already.” The fact that everyday users install Waze and report roadblocks, and understand what that does to the system, is a huge thing. There are lots of studies about how people don’t understand what the systems they use do, and how common understandings of these systems can be far from reality, but people are understanding ways to respond to them concretely in their lives.

   At the Obfuscation Symposium at NYU in 2013, gender studies professor Susan Stryker said that we’re always obfuscated—we’re not clean, well-ordered beings. There will always be noise, and there will always be resistance or noncompliance. In that way I don’t think it’s simply a rhetorical device. I feel like POTs and what Francis is doing is just what always happens: optimization systems give rise to counter-optimization systems.

   Now, I don’t think POTs are sufficient, I think we need to be working against this huge infrastructure of service-oriented architectures, the immense investment money funneled into optimization, and so on. It’s not sufficient to hit these smaller points, but it is necessary.

   ft: My initial impression with POTs was that they present a technical solution to political problems dressed up as technical ones, and that, like other technical approaches, they would be biased towards individual or small group action. But some of the examples you work with are contingent on large-scale organizing and coordination—do you think the majority of POTs actually fall into this category?

   sg: There are classes of POTs that you’re referring to, which is exemplified by Uber drivers turning off their apps in a synchronized manner.

   ft: Yeah, that’s the one I was thinking of.

   sg: We did see one article that showed that there’s actually an app that facilitates this—which shows how sticky all this infrastructure is, that you need to build an app to go against another app. Not to be too romantic about it, but my impression thus far is that the most successful organizing we’ve seen that can be described as POTs is when there is classical online and offline organizers: Uber drivers organizing face-to-face, Deliveroo riders organizing face-to-face. Or at least on platforms dedicated for this, like Turkopticon that was initiated by Lilly Irani and Six Silberman. When we contacted some Deliveroo organizers and said “could we build POTs for you,” it was clear we’d have to go to some of these people and ask them about their experiences, and now Carmela and Bekah and Bogdan are working with gig workers for another project, and there again we depend on their organizing to get that work done.

   jg: I would love to hear any very speculative comments on places that you think you could or others could take POTs, especially thinking about where and how you could collaborate with people who are most directly affected by any particular optimization system.

   bo: One area we haven’t explored very much, so this is super speculative, is predictive policing. Again, predictive policing is an optimization system, you have n officers who work m hours: how do you optimize their positions? What are the negative externalities of optimizing the system in such a way? There’s a lot of work going on right now from a policy perspective—how do we stop these practices—which is the bigger and important question. But there’s the smaller question of what we can do in the meantime to fight back against these systems. Is there a way to get a predictive policing algorithm to be less effective?

   sg: We also had an AirBnB example, right?

   bo: It’s not solved, which maybe makes it an interesting example. On AirBnB you can manually set the price of the apartment you’re renting out, but you can also have the price be set by the system itself. So this is optimizing for price vs vacancy: How low do you have to make the price to have people there all the time? We’ve been looking at places where AirBnB has tanked the housing market, so I think the best example of this is Barcelona, where they’re having a problem with AirBnB that they’re working on from a legal and legislative perspective. We were looking at what are the inputs to this system that we can manipulate such that the recommended price algorithm is sabotaged or made useless.

   sg: I think these examples show, how, if I compare it with what Francis and Sam and Brian did with predicting financial crime, where you’re inverting the proposed objective function, you’re not just doing the inputs to the algorithm to arrive at a different outcome, but you’re literally proposing a different system, I think that’s where POTs could be said to be a bit conservative, because we assume that the system is there, we assume that what we can do is predominantly—not only—but predominantly give it unsolicited feedback, as we like to call it, that then gives us different results. The question is how far can you go.

9. Networks, Weak Ties, and Thresholds

   August 8, 2019 12:00 am Comments Off on Networks, Weak Ties, and Thresholds

   Few living scholars have had the influence of Mark Granovetter. In a career spanning almost 50 years, his seminal contributions to his own field of sociology have spread to shape research in economics, computer science, and even epidemiology.

   Granovetter is most widely known for his early contributions to social network analysis—in particular his 1973 article, “The Strength of Weak Ties.” In that paper, Granovetter demonstrated that, because of the way social networks evolve, “weak ties” between people often form bridges between clusters of more strongly connected individuals and thus serve as important conduits of novel information. This surprising finding has proven to have important and enduring implications for a diverse range of fields. The paper remains one of the most cited social science articles of all time.

   Granovetter was also key to the development of the “New Economic Sociology,” who argued—against the disciplinary divide separating economics and sociology—that economic action is another form of social action. This implies that individuals engage in economic activity to pursue non-economic goals like status and power, and it also means that economic activity occurs within a web of social relations: people do business with existing family, friends and neighbors, and these roles and their associated meanings shape behavior. Granovetter aptly describes the research value of this framework in his widely influential 1985 work, “Economic Action and Social Structure: The Problem of Embeddedness.”

   Finally, Granovetter laid the foundations for what is now known as “threshold analysis.” By examining differences in individuals’ willingness to act before others have acted similarly, threshold analysis can determine whether such actions generate behavior cascades that lead to, for example, riots and effective collective action. Equipped with modern computing power, a new generation of scholars is continuing his work on threshold modeling, some of whom are working to wed it to social network analysis.

   We met Granovetter at his home in California, where we spoke about his career, the state of interdisciplinarity, and the legacy of his research.

   An Interview with Mark Granovetter

   Stephen Nuñez: It would be great to start with the story of how you gained an interest in sociology.

   Mark Granovetter: When I applied to college, my admissions essays said I wanted to go to law school. As soon as I started freshman year I lost that ambition. I took a world history course and, as you do when you’re a freshman, I fell behind by about 1000 years’ worth of readings. So I had to do 1000 years of reading in about a week, which I found to be an exhilarating experience. It was as if I could see the march of history unfolding before my eyes. I became a history major very early on, and I loved being a history major. I decided that I wanted to stay in college forever, and in order to do that I had to become a professor.

   It was very simple and logical, but to become a professor you need to get a PhD, and to get a PhD in History would have meant that I had to become a historian of 18th century France, or 17th century Russia, or some very restricted subject like that. I realized that I was interested not so much in why there was a French Revolution, or why there was a Russian Revolution, but why there were revolutions in general. I was interested in these big questions which were not the kinds of things that historians asked, but they were the kinds of things that sociologists found out.

   So I found myself reading sociology in my spare time, and I imagined that if I became a sociologist I would have a lifetime of fun. It doesn’t work like that, because when you’re doing it professionally it becomes more of a job. I applied to graduate school in sociology, though I only applied to Berkeley, where Seymour Martin Lipset was, and Harvard, where the department was at that time called “social relations.” It had been designed by Talcott Parsons in the ‘40s, and it included sociology, social psychology, developmental psychology, clinical psychology, and social anthropology. Ellen Granovetter, my wife, worked in Skinner’s lab, where she worked on the pigeon experiments.

   But social anthropology was distinct from the so called “stones and bones”—the archeological part. Parsons’ hope was that you could bring all of the social studies from different disciplines and they would unify in the department of social relations. By the time I was a graduate student, the faculty and the different departments were no longer interested in talking to one another. But for the students it was great taking courses from separate disciplines.

   Sara Constantino: I’m curious to hear where you think the trajectory of interdisciplinarity has gone.

   mg: As I mentioned, there was this social relations department at the time, which was dying. Today, we have a number of interdisciplinary institutes, but they’re usually focused on some particular set of issues, like international security or public policy. They bring together people from different disciplines that have a unified interest, but the departments themselves are not getting particularly close to one another.

   The reason for that is that disciplines are the unit by which resources are allocated in universities, and the way that disciplines get resources is by saying that they have special expertise, and the more they work with people from other disciplines the less they can claim that they have special expertise.

   sn: Going back to your intellectual development, I know that there was a sort of anti-functionalist revolution against Parsons, which you were a part of. What else influenced you?

   mg: With respect to the debate between functionalism and anti-functionalism, I can say that as an undergraduate student of Carl Hempel I engaged very deeply with Parsons and was conscious of the limits of his work by the time I entered graduate school.

   The other thing I came to graduate school with was an interest in the details of what happened on the ground. There’s a book called The Great Fear of 1789, by the great French historian Georges Lefebvre, in which he draws maps linking the spread of the revolutionary panic to postal routes. That was fascinating to me—I gained an interest in causal mechanisms from that book, and I also gained an interest in what I didn’t know at the time was called networks.

   My dissertation advisor was Harrison White, who was particularly interested in social networks, and listening to him speak, I realized that the thing I was interested in had a name, and that there were all kinds of new theories about social networks being developed. So I intuitively situated myself in that scholarship, and for my dissertation I wanted to do something that demonstrated the importance of social networks. I had two ideas for my dissertation: one was to study how people found spouses, and the other was to look at how people found jobs. I settled on jobs because I was also interested in inequality and this gave me an opportunity to study the labor market. I tried to find already collected data that I could use, but it wasn’t there. I could have either changed my topic, or collected my own data, and I chose the latter. I created a survey and interviewed people in Newton, Massachusetts. And that’s how I almost accidentally wandered into what came to be called—but was not yet called—economic sociology.

   sc: Was empirical work in sociology common at that time, or was this a departure from the norm?

   mg: It was a departure. Ethnographers would of course immerse themselves in settings and talk to people, but actual random sample surveys in which the researcher chooses a sample and interviews them are still pretty rare. In retrospect, I realize that’s because it’s very hard!

   The people I chose to interview had recently found a new job in Newton, and I had narrowed my focus to white collar men per my committee’s recommendation. I sent them letters which said “We’ve drawn your name in a random sample. We’re really interested in the mobility of people like you, and I’m coming to your house to interview you in the next few weeks.” The actual letter and my methods for finding the subjects are all in the appendix to my book.

   The amazing part for me looking back is that I was what, 25 years old? I just assumed you could do anything if you wanted to, and you could tell people you’re coming, and they would open up and talk to you. Amazingly, that’s what happened! I interviewed 100 people, and of all of the letters I sent out only 1 person wrote back saying he was not interested. For all the rest, I just went to their houses in the evening, after dinner but before sunset, and said “I’ve come to interview you.” Nobody threw me out, many people said “sure come in, we’ll talk,” and we would talk.

   It turned out that networks were the most important factor in determining what kind of jobs people found. While writing the dissertation I had read a lot of what economists were saying about all of this, and found that their theories had no relationship to the decisions that real people make. So I was sucked into a critique of labor market economics, which gradually pulled me deeper into a critique of economics in general from a sociological perspective.

   In 1937, Talcott Parsons wrote that economists talk about how people achieve their goals, while sociologists talk about where they get them. However, he later tried to integrate the two together again. I don’t think he realized that the book, with its diagrams, boxes, and lines, ended up convincing people that the two disciplines had nothing to say to each other. In the 70s, we took a different approach and tried to use sociology to see more of what was missing in economics and how you could actually reassemble it in a more plausible way. I published a paper in ‘85, called “Economic Action and Social Structure: the Problem of Embeddedness”, which argued that it doesn’t make sense to talk about economics as if people didn’t know each other.

   sn: Your most famous paper is, of course, “The Strength of Weak Ties,” which obviously draws from your dissertation research. But what else inspired it? Does it, for example, draw from cognitive balance theory, which argues that it’s unusual to not be friends with your friends’ friends?

   mg: I put the theory of weak ties together from a number of things. I learned about hydrogen bonding in AP Chemistry in high school and that image always stuck with me—these weak hydrogen bonds were holding together huge molecules precisely because they were so weak. That was still in my head when I started thinking about networks.

   In tandem with that was the paper by Anatol Rapoport and Willian Horvath, in which they asked junior high students in Ann Arbor Michigan to name their best friends, all the way up to their 8th best friends. They found that the networks of first best friends were much smaller than those of 7th or 8th best friends, because responses to the first and second best friends tend to fold back. Basically, Rapoport and his colleagues already knew that weak ties were strong, but they didn’t understand why that was interesting.

   So I had hydrogen bonds in my head, I had these friend graphs in my head. I’m interviewing people about how they found their jobs and they tell me, “Joe helped me find this job,” and I would respond, “your friend Joe?”, and they would say “oh no, he’s only an acquaintance.” I heard this over and over again: acquaintances, not friends. I was just getting hit in the face from all directions about how important weak ties are. Then Stanley Milgram did the chain letter experiment, and he figured out that people are connected to other people in distant places in their social network through a chain of acquaintances. If you try to connect people through close friends it bounces back and never gets there.

   There were so many ways in which these dynamics were being discovered, but no one had pieced them together yet. So I wrote “The Strength of Weak Ties,” which initially was rejected vigorously by the American Sociological Review. The original draft was titled “Alienation Reconsidered” and the journal sent it to European alienation theorists, who thought it was terrible because it had nothing to do with Marx.

   sn: Didn’t you actually scan and upload the rejection letter a few years ago?

   mg: I did, I like to show it to graduate students. I was 25 when I submitted it, and I was crushed by the rejection. I didn’t get back to it until a few years later, and I got rid of alienation in the title and rewrote the text. I sent it to the American Journal of Sociology and got a revise and resubmit. Once it was accepted it just took off, I was shocked. Today it’s one of the most cited articles in sociology, with upwards of 52,000 citations.

   sn: Can you tell us a little bit about your work on threshold models, and the renewed interest in that approach?

   mg: I ended up becoming an economic sociologist, but I’ve always had an interest in politics. In 1971, I came across a paper by Thomas Schelling on residential segregation. In the paper, he developed models that indicated that if people had even just a slight preference to live in neighborhoods which were mostly home to people of their own skin color, each of these slight preferences feed on each other and generate huge phenomena.

   This idea was really interesting to me, and it related to my intuition that sociologists often wrongly assumed a linear model, which holds that the size of outcomes is roughly proportional to the size of their causes. In 1978 I published a paper called “Threshold Models of Collective Behavior” in which I talked about models of collective behaviour in which slight differences in the distribution of people’s individual thresholds would lead to huge differences in outcome.

   Riots are my simple empirical example for this idea: if people’s threshold for joining a riot is determined by how many people have joined the riot before them, such that there might be someone with threshold 0, someone with a threshold of 1, and so on and so forth in a uniform distribution from 0-99, then the 0 person does something which activates the next person and so on until all 100 people are in on the activity. But if you took out that person with threshold 1, or changed it to threshold 2, then the first person breaks the window but the action goes no further—the outcome is completely different.

   sc: What are your thoughts on recent papers that apply thresholds and tipping points in policy spheres to influence people’s behaviors? The idea is that we can influence the likelihood of adopting birth control, or norms around female genital mutilation, by targeting nodes in social networks and trying to change values.

   mg: I don’t think we’re at the point yet where we can confidently determine things like that. There’s a lot of discussion about whether we can intervene in social networks and make a difference: are there certain nodes which might encourage adolescents to smoke less, or engage in less risky sexual behavior? Can we identify the right nodes in the network to target?

   If you target people with high centrality in a network, you might be able to have more influence. You also have to integrate it with thresholds, which complicates things. I don’t think we know how to integrate research on networks and thresholds yet. People like Damon Cintola, Nicholas Christakis and James Fowler are making some progress on that, I think, and some of it might derive from the work I did earlier. But I’m not really engaged in doing this anymore.

   sc: How do you think new data and computational capacities are changing the nature of research in social networks?

   mg: Today, we can do social network research with multiple datasets, each of which has many millions of elements. We never imagined that that was possible. One of the propositions in my original paper was that a tie that connects people who otherwise wouldn’t be connected without a long chain must be a weak tie. There was an interesting paper in Science Magazine last year which showed that although the principle of weak ties is valid over networks of most sizes, when you look at networks which are really enormous and take really long chains those bridging ties are actually strong ties. What does that mean? No one knows yet. There are always new surprises.

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10. Elections, Social Democracy, and the Neoliberal Shift

    June 13, 2019 12:00 am Comments Off on Elections, Social Democracy, and the Neoliberal Shift

    Recovery from the 2008 financial crisis has coincided with the revival of social movements like Occupy Wall Street, the movement of the squares, and Black Lives Matter, and their corollaries in policy proposals aiming to democratize access to wealth and political influence. These movements are rooted in an international radical tradition that, throughout the 20th century, was plagued by its relationship to existing state institutions. Across Western Europe, labor movements found political expression in parties like the Swedish Social Democrats, the German SPD, and the French Socialist Party. These organizations were widely criticized by the movements they represented for moderating popular demands in favor of cross-party compromise. And, while social democratic governments did make significant gains in the postwar period, today’s landscape seems to testify against the durability of these reforms.

    The same dynamics extend far beyond the history of left wing politics: whether or not politicians prioritize the needs of their constituents, they often fail to deliver on their promises. This Spring, I met with Adam Przeworski—Professor of Politics at NYU, former member of the September Group of analytical Marxists, and a leading theorist of political economy—to discuss the role of elections in effecting social change, and the political transformations underway today.

    During a career spanning thirteen books and more than 150 published articles, Przeworski’s foremost contributions have been in the study of democratic transitions, distributional politics, and the determinants of economic growth. In Democracy and Development, he persuasively challenged modernization theory by proposing an alternative causal narrative: While economic growth does not by necessity generate sustainable democratic institutions, Przeworski found that rich countries that experience radical movements for democracy are more likely to see successful transitions. In Democracy and the Market, he analyzes the political, factional, and economic dynamics behind the wave of revolutions that swept Eastern Europe and Latin America during the late 20th century. Using philosophy, economics, and game theory, Przeworski offered an intricate and groundbreaking evaluation of the failures and successes of movements for democracy and liberal markets. With this unique methodology, in Capitalism and Social Democracy he studied the choices faced by social democratic movements throughout the 20th century, modeling the decisions of both their leaders and supporters through the framework of rational choice.

    His most recent book, Why Bother with Elections? wrestles with both the necessity and imperfections of electoral politics. His next book, Crises of Democracy, is forthcoming in September from Cambridge University Press.

    An interview with Adam Przeworski

    Maya Adereth: Could you start by telling us about your early political development?

    Adam Przeworski: I grew up in communist Poland, where both domestic and international politics impacted everyone’s life at all times; I have politics in my blood. As for political science, it was an accident. I’d been studying philosophy and sociology in Warsaw, and a visiting American professor of political science asked me whether I would like to go to the United States and study political science. I didn’t know what political science was, we didn’t even have it as a discipline. But I was 21, and I would have gone anywhere to do anything, so I said why not?

    ma: What were the big questions that concerned you when you started out? How have they changed over time?

    ap: Initially I was very interested in how different political regimes affect economic growth. That interest is one which persisted throughout my life; I wrote my dissertation on it, I wrote a big book about it in 2000, I just published an article on it. Beyond that, I’ve always had methodological interests. When I left Poland and came to the US, I couldn’t study domestic politics because I knew nothing about them, but I also didn’t want to study Poland from the outside, because I don’t believe in doing that. So I settled on methodological work, which was my primary preoccupation until I landed in Chile.

    I lived in Chile first in 1968 and then for a year in 1970-71, which was Allende’s first year in office. Then came the coup in 1973, and the question of democracy became paramount. There were two aspects to this question: the first had to do with which reforms could be achieved through democratic means, and the second was how democracies could be destroyed.

    This was when I realized that while we were dreaming of transitions to democracy, we never thought about democracy itself. At that time, we thought of democracies as everything good, and dictatorships as everything bad. All we wanted was to stop the killing and establish democracy, and we assumed everything would be fine. We used to joke—first you have liberalization, then you have transition, and then you have disillusionment. It was during this time that I started thinking about democracy systematically.

    Chile

    ma: I’d like to ask more about your experience in Chile. I’ve always thought of the lessons from Chile in terms of the power of the capital strike: property relations were highly unequal at the time Allende took power, and investment came to a standstill in response to his policies, so the economy collapsed and political chaos ensued. Do you agree with this analysis?

    ap: I was actively sympathetic towards the “Allende experiment” as it was called. He put forward a reasonably moderate program; it included some nationalizations, but they were mainly motivated by the highly monopolized and inflationary nature of the Chilean economy. It was not ideological. The problem was that Allende did not control his supporters, and the movement was divided over whether to prioritize socialism or democracy. There were some people who said that socialism could not be reached through democratic means because those whose interests were going to be adversely affected would necessarily resort to violence to prevent socialism. And there were some, like Allende, who had a reformist strategy, who basically held that they could do everything for which they had popular support, and nothing more. If they were to lose the next election, they would simply hope to win again some time in the future and make further progress.

    The problem was that Allende’s own party did not believe in socialism through democratic means. In fact, the only responsible people in his coalition were the communists. They were very disciplined and they took a long term perspective. But many other groups in the coalition urged him to do things that were undemocratic and illegal. It was not completely infeasible that they would have gone further, because the center left party agreed to compromise on nationalization. But this agreement broke down, and once it did there were no legal instruments for Allende to make use of and the situation turned to violence.

    I think the entire left learned a big lesson from that experience. As a matter of fact, the Italian communist party published a document written by Enrico Berlinguer titled “Reflections After Events in Chile.” The conclusion was basically that jeopardizing democracy is a big tactical error. From a strategic angle, the idea of democratic socialism was then theorized mainly by the Italian political philosopher Norberto Bobbio, who said that liberal values are fundamental to any socialist vision.

    Elections and Social Change

    ma: The time-honored question on the left has always been “reform or revolution.” It seems like your answer is neither. Can you elaborate on the constraints that you see on electoral change, specifically with reference to the argument that elections can only give us the best possible solution for the most number of people, which you make in your most recent book? And, given that you have argued that revolution by a minority is unlikely to have long term democratic consequences, do you think there is any way to enact meaningful political and economic transformations?

    ap: I don’t think that elections are an instrument of change. I think they are impotent when it comes to reducing inequality. It’s astounding that we have persistent inequality; not the same in all countries, not the same at all times, but we have persistent inequality in countries which satisfy all the criteria for democracy. There are all kinds of mechanisms for why that happens, but that is the sad conclusion.

    The point of departure for thinking about this problem has to be that we live in capitalist societies. Most decisions concerning employment and investment are privately made, and they are made to maximize profit. Any government has to anticipate the effect of its decisions on the reaction of firms, as indicated by the stock market. I’ll give you an interesting fact from Larry Bartels’ Unequal Democracy. One of the things Larry shows is that poor people are more likely to vote for the incumbent following an increase in the income of the top quintile one or two quarters before an election. Why is that?

    In this country, the piece of information you get several times a day about the economy is the Dow Jones. Where is stock value going? To the top 10%. But that’s the information the public is bombarded with. So I think this is one generic constraint of capitalism. In 1985 I wrote a book called Capitalism and Social Democracy, where I tried to understand how that works. Suppose you have a completely pro labor government, and it chooses the tax rates. It knows, however, that if taxes increase, investment will decline, reducing everyone’s future consumption. It is therefore forced to exercise tax moderation. The same with unions: take for example Scandinavian unions, which at one time had monopoly power. They had to practice systematic wage restraint, precisely for those reasons. These are just constraints imposed on democracy in a society where decisions on investment are privately made: capitalist society.

    Now, this doesn’t mean that there is no room to make progress. I think there is limited room—some parties and some societies were able to both produce development and reduce inequality. But these societies are still pretty unequal.

    Most people obey the results of elections when they don’t lose too much. If a left wing party were to come to power and redistribute a lot of income, and the right had no chance to win any elections in the future, I think they would revert to other means. Which means that in elections, you cannot do too much at a time, and you also have to lose from time to time, which means you get some social change, but not much.

    Neoliberal Shift

    ma: The experiment of social democracy was basically present during a brief period in European history during which trade unions exercised wage restraints and employers made some concessions. But then came the 1970s, and that social contract fell apart. I read a paper you wrote about this transition, called “How Many Ways Can Be Third.” You describe the shift in terms of policy regimes: there were competitive elections, one party had a political innovation, they ran on that innovation, they won, and then subsequent parties adopted that policy. To me, that sort of ideological explanation for neoliberalism doesn’t seem to capture all of the forces at play. I’m wondering whether you can elaborate on why the social democratic system was unsustainable, and how we can best understand the neoliberal shift.

    ap: We can begin to understand these dynamics initially just by looking at one graph: productivity and wages from the mid-century to now. Have you seen this graph?

    

    Clearly something happened in the late-70s. One crucial element is the deliberate offensive against trade unions: Thatcher halved union membership; Reagan also destroyed them. I think of the neoliberal shift as an autogolpe—a self-coup. It was deliberate, it was planned—it was the second bourgeois revolution. There were think tanks, blueprints, international organizations like the IMF, the World Bank, and the US Treasury, which began to impose these policies on countries around the world. What I don’t understand, and where you’re completely correct to comment, is what happened to social democrats.

    People don’t realize this, but the social democratic ideology and strategy were not motivated by justice and equality. To some extent that language was used, but the motivating belief behind the program was that social expenditures are productive. It was a development strategy. I frequently cite the Swedish minister Olin, who said something like, “We used to think that expenditures such as housing and health are consumption. But now we understand that they are an investment in the most important resource we have: the people itself.” That was the motivation: when you make people healthy, when they live well, when they are educated, they’re going to be more productive.

    In the ‘70s we got the oil crises, and inflation skyrocketed. Everyone started to talk about the fiscal crisis of the state, arguing that we cannot support “decommodification,” in the words of Claus Offe. And the Social Democrats began speaking like neoliberals. Once I asked the secretary of Andalucia why the Spanish socialist party was falling apart—was it corruption, or what? His response was telling. He said, “They made us speak a language that wasn’t ours.”

    ma: I’m thinking about the Callaghan government, which ran on a left wing platform but ended up restructuring the economy before Thatcher came to power. Part of that had to do with the weakening of the Soviet Union and the proliferation of American-backed debt—in 1946, Attlee was able to leverage the availability of Soviet finance to ensure that the loans from the US allowed for a Keynesian fiscal policy. In 1976, Callaghan wasn’t able to do that.

    ap: Well, yes. He made a mistake and he had bad luck. He should have called for an election before the winter; he was hit by a bad winter and the oil crisis combined. But why would this cause him to change his entire worldview? I’ll tell you two stories: Felipe Gonzalez, the former prime minister of Spain, once said that during the run on the peseta in 1985-6 he lost his annual health budget over the course of three days. And I once had a conversation with the former president of Brazil, Fernando Henrique Cardoso, in which I asked him, “What do you find to be the greatest constraint on your decision making, public opinion?” and he said “Eh, public opinion… I go on television.” “The congress?” I asked. “I can deal with them,” he said. “So what is it?” And he answered, “the stock market.” But why is it that the stock market was not a huge constraint before the 70s, and suddenly came to constrain everyone? I don’t know.

    One thing I do know: the transition was not due to visible economic success. When the Swedish Social Democrats came to power, by sheer luck, they had great success. Everyone looked at their economy and thought, “This really works!” It was not like that with neoliberalism. These policies produced destruction for years. The conservative French Minister of Justice, Alain Peyrefitte, said, I think in 1980: “This is not gonna last, this is producing terrible results.” And yet…

    Social Democracy and Authoritarianism

    ma: There is some sort of fracturing of the neoliberal consensus in the contemporary political landscape. How do you feel about the change in narrative that we’re experiencing?

    ap: I am pessimistic because I think that the current situation has very deep social and economic roots. This is not just a matter of Trump winning, or the AfD gaining 12% of the votes, or Front National getting 33%, or any of that. This is something deeply embedded within our social structure. People often talk about polarization. In my view polarization has two aspects: the first is how far the preferred policies of different people are from one another; the second, which I think people haven’t studied systematically enough, is what people with different preferred positions are willing to do to one another. There was a study which showed that last year Thanksgiving dinners in which attendees lived in oppositely voting districts were nearly 30 minutes shorter than those where they came from the same district. Why? Because people are afraid to talk to each other. In 1960 about 5% of people said they would be unhappy if their offspring married a person from the opposite party. Now this is in the range of 50%. So this has entered into the basic unit of social structure—the family.

    Why this is happening is extremely hard to tell. Economists think everything is driven by economics, so they say it’s because of the economy. And there are good reasons to think it’s because of the economy. However, if you look at systematic research, you find that economic factors always matter, but less than assumed. They are always statistically significant, but they don’t add up to everything. There was one European study which I like very much, which studied the effect of industrial job loss on votes. It concluded that job losses account for 0.5% of right wing votes. For the German AfD, this would be 11.8% instead instead of 12.3. What accounts for the rest?

    These changes are somewhere deep in the social and economic transformations of recent decades, and I don’t think palliative policies will be effective.

    ma: It doesn’t seem like you’re particularly hopeful about the resurgence of social democracy as a political force.

    ap: This country is the only one among rich democracies where you’ve begun to hear social democratic voices. I recognize them. Strangely enough—I have to admit, this is my daughter’s observation—the fact that Donald Trump broke so many taboos on the right may have had the effect of breaking taboos on the left. We can say things on the left now that we couldn’t before. And some of them are wonderful. So maybe I’m not as pessimistic as I said. Even if a fraction of the policies being proposed are realized, things are going to improve.

    Larry Bartels also has this graph of inequality by administration: every time Republicans come to power, inequality increases. Then, when the Democrats come to power, it just stays stable. But some of these ideas—free health care and the like—are wonderful. They’re not going to change the relations of political power in the foreseeable future, but they might generate improvements.

    ma: I know you’re skeptical of the media frenzy over the rise of authoritarianism. You wrote in your most recent book that Trump and Le Pen ran on populist messages which offered greater public participation, rather than an authoritarian message.

    ap: My target with this argument is twofold. I have a problem with analogies to the Weimar period. Both for ideological reasons and economic reasons, I think that’s just wrong. But I also have more empathy for “populism.” A lot of people complain at the same time about inequality and populism. But doesn’t our persistent inequality indicate that something is wrong with our representative institutions? You can’t just say “Inequality is terrible, but the institutions are perfect.”

    I feel more alarmed by the recent discovery we seem to have made, that one can destroy democracy by democratic means. Governments take a series of steps each of which seems to be democratic, and undermine the possibility of being removed or resisted. Think of the use of legally ratified national emergencies.

    When I look at the experiences of Erdogan, Chavez-Maduro, Orban, to some extent my native country—it’s all legal, it’s all constitutional, it’s all democratic. I call that “subversion by stealth,” and it really worries me.

    ma: Can you elaborate on this tendency with respect to the theory you developed with Fernando Limongi, which states that democracies with a high enough per capita GDP never die?

    ap: At that time I was not sensitive to the gradual erosion we are seeing today. I think the consequences of this type of transition remain unclear. When we were writing that article, Botswana was a case in some ways similar to the ones we see today. The country gained independence in 1975, and the same party has won every election since then. It has unions, it has freedom of the press, but is it a democracy? This was a country we couldn’t classify at the time. What’s happening now is that the number of these cases is growing. This process of gradual erosion has become much more widespread than it used to be. There are fewer clearly marked events—democracies seem to be dying slowly.

    Game Theory

    ma: The final question I have for you is about game theory. What value do you see in game theoretical models, predictive or otherwise?

    ap: I think of game theory as in line with the natural way we think about people. People want something, they think something, and they try to do what they think is best. It is intuitive that people think strategically. If I made sense at one time of the politics of social democracy—and I think I did—I did it precisely because at one time I asked myself: what would I have done if I were in their shoes?

    The problem with game theory in big terms is that it only works if it’s accompanied by good sociology: that is, if we know who the relevant actors are and what they want. It’s hard to theorize based on an abstract notion of “individuals.” Economists say: “all individuals care about consumption and leisure,” and they get theory out of it. In politics it doesn’t work that way. We have to get the actors right.

    Game theory has changed a lot. We can accommodate people who have “false” beliefs, we can accommodate people who are “stupid”—that is, people who behave the same way regardless of the outcome. We don’t have to make the assumption that people are selfish, rational, hold accurate beliefs, or act based on their beliefs. So game theory is just about thinking that people behave strategically, based on the options that they have before them. And I can’t imagine that things happen otherwise.