As we reimagine the rules of our political and economic institutions, it is essential that racial justice be centered in the conversation. Darrick Hamilton explains how neoliberalism exploits existing structures of racism and power in America, and shares his optimism for a course-correction that will promote broadly shared prosperity.
Darrick Hamilton is the Executive Director of the Kirwan Institute for the Study of Race and Ethnicity at The Ohio State University, and a fellow at the Roosevelt Institute. As a stratification economist, his research focuses on the causes, consequences, and remedies of racial and ethnic inequality in economic and health outcomes, which includes an examination of the intersections of identity, racism, colorism, and socioeconomic outcomes.
New Rules for the 21st Century: Corporate Power, Public Power, and the Future of the American Economy:
Nick: Hey, Hey Derek, it’s Nick Hanower. Thank you so much for agreeing to chit chat with us.
Derek: Happy to do it.
Nick: And I’m joined by my colleague, Stephanie Irvin. Say hi, Steph.
Stephanie: Hi. It’s so nice to talk to you.
Derek: Hi Stephanie.
Nick: So would you please identify yourself and where you’re from and what you’re up to?
Derek: I am Derek Hamilton, the executive director of the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University and a professor in the Glenn College of Public Affairs, with courtesy appointments in both economics and sociology and arts and sciences at Ohio State University.
Nick: I want to get right into it, because you’ve been part of this really interesting set of research around rewriting the rules and so on and so forth.
Nick: Yeah. With the Roosevelt Institute. Tell us a little about that.
Derek: Yeah, I mean the project is inspired by the trajectory we’ve had over the last 50 years of a consolidation of both economic and political power amongst the elite and the corporate sector.
And that consolidation is iterative. It is framed in neo-liberal economics, a notion that markets are the solution for all our problems, economic or otherwise. And that government intervention should be minimum unless it is trying to facilitate marketized solutions.
And which also incorporated in this narrative is the role that race plays. And I like to emphasize that race is not an issue, but frankly, a pillar in this relationship race is the mechanism that allows a dominant population to be willing to, in some ways, go along with the status quo of growing inequality, in exchange for an agreement of solidifying a horizontal positioning.
In other words, people might care about both their relative position and their vertical position. And as we become more vertically unequal, stratifications in race is unfortunately used as a tool to serve the interest of this consolidation, by offering one group material and psychological benefits associated with their identity in contrast to another group.
Nick: Yeah, that’s super interesting. So you know, the theme of the Roosevelt Report is that it’s all about power. First of all, I think we couldn’t agree more. Talk for a minute about why that diagnosis, in the context of certain neoclassical economics and neoliberalism, is novel.
And to many listeners, this seems, well, obvious and intuitively true. Of course it’s about power, but neoclassical economics sort of assumed away power.
Derek: Yeah, I think that is spot on. I think the neoclassical understanding of the ways in which markets are fair, efficient, good arbitrators and reward hard work and punish sloth and laziness, ignores power and capital in the first place.
It presumes uneven playing field without noting the role that initial endowment and power serve in constructing markets and altering markets in the first place. I think that’s it.
And without government intervention, we end up with scenarios where power does what it does. It reinforces itself. Power is used. Economic power is used to gain political power and political power is used as a mechanism by which one can facilitate and structure a society, so as to enrich themselves.
Derek: I mean, we see it with some of the great work by Thomas Piketty, some of the work by Jacob Hacker. Some of the recent work by the fellow from Brookings Institute, Richard Reeves, when he had his book Dream Hoarders, where we find that the elite and upper middle class, they try to structure society in a way that offers themselves, and their offspring, access to the criteria that gets rewarded in the market.
And also to try to structure markets through regulation through who has access, through things like access to internships in a way that privileges themselves in the first place.
And you know, one might my cast judgment on such a system and one can cast judgment on such a system, as individuals trying to basically enrich themselves. And that’s why we need a public sector. We need a strong public sector to counterbalance the power that elite individuals are able to grasp and continue to hoard for themselves.
Stephanie: You know, you really view race as a pillar in this work. Is it possible to have economic equality without also having racial justice? I think we think of these things as going hand in hand, but often people think about them in really separate contexts. Can you help connect the dots for people?
Derek: Without racial justice, we are vulnerable to a system only being temporary. I guess we can think about history. One might call the New Deal an example of economic justice, but it was not economic justice that was spread across everyone in America.
There’s a great book by Ira Katz Nelson, which describes When Affirmative Action Was White. That’s the title of the book. And it describes the ways in which blacks were, in many ways, excluded from the benefits of the New Deal.
There was the Faustian bargain, in which the federal government did not have anti-discrimination mechanisms in the implementation of the New Deal legislated and the federal government, the policies were implemented on a local level.
And for example, a hostile Jim Crowe context. And then by design, many of the occupations in which blacks were over-represented were not included in the New Deal legislation.
So with that Faustian bargain to get it passed, one might tout the New Deal as having a large element of economic justice, but not racial justice. Such as system, where we were divided and stratified, allowed for the possibility of establishing the benefits and property rights and whiteness to begin with.
And leaves a population vulnerable to want to use that. We had some gains, in terms of racial justice, with the civil rights movement, where there was huge relative progress for blacks, in comparison with white, from 1948 up to about the early to mid 1970s.
And much of that can be touted to the civil rights legislation. But then there was a backlash and that backlash is in the form of, in my opinion, this neoliberal moment. And what made us vulnerable to the notions of, and the perniciousness of, neo-liberalism was the larger population, again, was willing to sacrifice vertical positioning in order to maintain their horizontal positioning or their property rights and whiteness.
In other words, we were able to categorize and scapegoat a population like blacks and others as one threatening our way of life, as one where we could say, one could be offered. Well, however you are in vertical positioning of the income distribution, at least you are not black.
Without having a true race conscious, gender conscious and racial justice, we will always be vulnerable to that type of cannibalism and divisiveness.
Nick: What we’ve called a neo-liberalism on the podcast is a protection racket for rich people. That, you know, if you accept neoclassical economics and neo-liberalism as true, if you accept the idea that raising wages kills jobs, tax cuts for rich people create growth, that there’s always a trade off between increasing amounts of economic justice and economic efficiency.
That price equals value, that people are paid their marginal product, et cetera, et cetera, that the economy is in equilibrium and any intrusion into it, will push it away from equilibrium and harm welfare.
All of these ideas, really, are designed to enforce the status quo and keep rich and powerful people rich and powerful. Keep everybody else poor and powerless. So to me, that this whole set of ideas is just, in many ways, a modality of oppression, right? That’s what it is.
And I’m struck by the similarities of neo-liberalism to straight up racism. I mean, what you’re saying is that Neo liberalism is a form of racism. What I think of it is, is just racism, but for money. You get what I mean?
Derek: I definitely get what you mean. Perhaps I can articulate this better by saying that race becomes a tool, a mechanism, so to speak, in neoliberalism. Race becomes a mechanism by which you can use to bargain with a population.
That’s what I’m trying to get at. And you know, we’ve talked about the fear side of neo-liberalism, where one group can be said, this group is threatening your way of life, it’s threatening your economic positioning. And that’s used to reinforce a system where we say we need small government or we need government that doesn’t facilitate this population and we can scapegoat, both government and blacks as threatening our way of life.
But on the positive side, and you kind of alluded to this in your question, the allegory, the story, the narrative of neoliberalism is seductive. It’s appealing. This notion that it’s fair. This notion that you can turn your proverbial rags into riches, that all you have to do is really work hard.
If you study hard and use your ingenuity, the market can facilitate your growth and your economic mobility, that you literally can be part of the wealthy. That’s seductive.
Of course, as talked about earlier, what’s missing in that is capital in the first place, that it takes capital to generate more capital. That wealth begets more wealth. That part of the narrative is completely missing, but nonetheless, it is very appealing.
Nick: There are, of course, elements to it. You can’t point to the corner cases where such a thing does happen, but we in fact used to have an economy that was a less unequal than it is today. And as I recall, that in fact, for African Americans, the high point of their relative wealth, I believe, was in the 70s. It’s sort of the end of the Keynesian era. It’s gone sort of downhill from there. As we have embraced neo-liberalism in this really, really big way.
Derek: Yeah, and you know, just to be clear, blacks had relative improvement in wages and income, but unfortunately the reality is that blacks have never been an asset based middle-class in large part. There’s never been a middle-class of blacks that have accumulated assets.
That for the most part we’ve been a low level wealth community. But that doesn’t negate the fact that we were on this trajectory of progress until this whole Neo-liberal movement came in. And in auxiliary to it was even the war on drugs.
Again, framed in this notion of personal responsibility and accountability on the individual. We were able to come up with the war on drugs, which was what some people might call the war on black people. Which led to this mass incarceration, that destabilized family took away people’s freedom and something that we could link in our long horizon of oppressive state sanctioned policies that have inhibited black communities from inclusion and mobility.
Nick: What’s the answer? Where do we go from here?
Derek: And just for clarity, I’m not anti market, per se. I’m careful in trying to describe the market as evil, because the market itself is amoral, it’s not with morals, it’s not immoral or nor is it moral.
It’s amoral and the market has some positive attributes, but what we can do is we could have race justice, government interventions to ensure that goods that are so essential for individual self determination and dignity are not at the whim of firms trying to meet their fiduciary responsibility by using price by reducing quantity.
And using price as a rationing mechanism so as to not ensure that everybody has access to these goods. And we can be specific. I’m talking about the right to a job. I’m talking about the right to healthcare, the right to a quality education, from grade school all the way through college.
I’m talking about the right to decent housing, the right to food, clothing, shelter, et cetera, the right to capital. In other words, there are a set of essential goods and services, that without them, people really don’t have agency in their lives.
So this turns the whole rhetoric of neoliberalism on its head. Oftentimes, we use terms like markets provide freedom and choice. We know if you have no income, you don’t really have choice. If you don’t have a place, if you are homeless, choice becomes a concept that is really not tenable for you.
You need a certain set of basic goods, so that you can flourish in your life and if the market is inadequate in providing them, there is a role for the government to provide adequate alternatives. Not in a way that that neo-liberalism talks about, in terms of using the market to sanction irresponsible behavior.
But in a way that the government uses market mechanisms by providing public alternatives as a way to discipline firms that are engaged in extractive, exploitive activities for these essential goods.
You know, I’m not talking about replacing all private activity, of course not. Clearly, there’s no role for the government to intervene in providing entertainment or access to a disco tech. And I just used that example, obviously, as a farfetched example, but really what I’m talking about is a set of enabling goods that are essential for people to be self-determining in their lives.
And let me say one more thing about this. I think we also need to reckon with the race justice aspect of this economic race-conscious bill of rights, and that would include a systematic program of reparations.
And what we need to begin with is something like HR 40, which the former Congressman John Conyers had been champion for a long time and which is now starting to gain momentum, at least on the democratic society.
And this is the impetus for reparation, because it simply provides an authentic study that includes a congressional committee with technical knowhow, with authority, and with some integrity to really understand how we got to this position today, in terms of all the atrocities that might’ve taken place against black Americans in particular.
And not only documenting this, demonstrating the ongoing effects of these atrocities, in terms of the economic wellbeing of the offsprings of individuals that went through this atrocity.
I think this sets the groundwork for two things. One, it sets the groundwork for redress, so that we can have justice in an egalitarian society and move beyond our race problem.
But it also allows us to come up with alternative narratives to neo-liberalism that situates poverty as the fault of poor people, that characterizes poor people and black and brown people with caricatures of welfare queens, as somehow undeserving.
If we were to have this commission and really grapple with a lot of the sources of inequality today, these narratives that fueled neo-liberalism perhaps would have less saliency going forward.
Nick: I come at it a little bit differently. I think you’re right when you say that markets in and of themselves are amoral.
Nick: But markets are simply human constructs and if they’re set up effectively, they actually deliver moral outcomes.
Derek: Markets, in a theoretical sense, are amoral, but we don’t have a theoretical sense in the way we apply and construct markets. Those are concepts in our economic textbook. But you are right that the construct of markets always had a human element and are always based, in some thought, I thank you for that correction. You’re spot on.
Nick: Yeah. Yeah. And the markets work because they’re evolutionary systems that enable groups of people to come together, to cooperate, to solve one another’s problems. And if you set them up right, you have a really robust circumstance where that takes place.
And I think all of the best new empirical evidence suggests that the more inclusive, genuinely inclusive, a market economy is, the more prosperity it creates for everybody. The faster the system grows.
And this is why exclusionary modalities like racism and sexism and all the rest or neo-liberalism actually are self defeating. That, frankly, makes no sense to impoverished people of color. In an economy that depends entirely on demand for its dynamism. I mean, when you just step back a tiny bit from it, it’s completely insane. Why in the world would you want to hold the economy back in that way?
And I think that, my own view is, that it, and of course we’re using words that have variable meanings, but I think that there’s so much that we can do to define, well as the folks at Roosevelt put it, the rules of the game, that the terms upon which we set up markets, that would make a huge difference in terms of generating sort of the essential goods that you’re talking about.
‘Cause you know, here’s the thing, in an economy where no company is able to pay people less than it takes to lead a dignified, stable and secure middle class life, a lot of the problems that we’re talking about drop away, right?
Like the vast majority of poor people in America aren’t poor because they don’t have jobs, it’s because they do. Right? And we made a choice to enable companies to pay people so little that they can’t get by. And we could reverse that choice. And then you have a much better circumstance.
Derek: Oh, the irony that you point out. I agree with you,. I think the other element that I would add is that markets left to their own druthers does trend towards concentration.
Nick: Yeah. Yeah. That’s right.
Derek: Which is why we constantly need a countervailing public force or public power to ensure that we have fairness, inclusion, equity, that those values are certainly reinforced.
Nick: Yeah. And for listeners of the podcast, I mean, again, one of the things about complex systems, evolutionary systems, which is what a human social system or an economy is, is just always to remember that in the absence of deliberate counter forces, advantages and disadvantages compound over time.
Which is why you need interventions. It’s like a market is not that different from the game of Monopoly. If you play the game of Monopoly for long enough, one person will have everything and everyone else will have nothing and in Monopoly, that’s quite fun, because then you are a winner.
In a market economy, it’s not so much fun.
Derek: Because it’s real life.
Nick: Because if one person does it. Exactly, if one person has everything and no one else has anything, then obviously, well, the game is over, too, but in a, in a much more corrosive and difficult way.
Derek: You know, another element that we should think about is how we define economic value in general. That the neoliberal self interested notion of accumulation without bounds perhaps needs to be redefined into one where we think about human capabilities as our value.
We think about humanity as valued. We think about sustainability as value. We think about inclusion as value.
Derek: I think that ultimately to get to the type of society that my morals would desire, and I believe that many other humans would share these same morals. We need to really start to think about our common humanity, our common sustainability and our common morality.
Nick: And the neoclassical trick of making value equal the price, of course, is one of the ways in which we dehumanize the economy and essentially, technically, permitted all these kinds of exploitation, right?
Because in that world, if you make $7 and 25 cents an hour, by definition, that’s all you’re worth, right? Because that is equal to the value of your marginal product, which is-
Derek: And when all you have to exchange is your labor, you are vulnerable to a particular type of perniciousness with a market mechanism of valuing humans with price.
Stephanie: So the thing I really like about this report series is this frame of the rules. ‘Cause I think lots of folks were done a disservice by their economic education and it’s sort of a lot of people just feel like the economy happens around them.
Like it’s just a part of the air they breathe and being really intentional about saying we can change the sort of structures around how our economy is sorted is super powerful and empowering. Right?
We didn’t get into the situation we’re in because people didn’t change the rules. They for sure changed the rules. That was done intentionally.
Derek: Yeah, excellent point. We cede too much authority to economic technocrats. The technocrat are presumed to be governed by just positive relationship, but ignores the norms that come about from these technocrats, based on the dogma of our profession in the first place.
In other words, we are not able to think out of the box, because we present a frame that is limited to the ways in which our discipline describes markets and transactions in the first place.
Nick: And people. Right? As self interested rational calculators, right?
Derek: Yes. And again, ignoring the role as we began the conversation, of power and initial endowments in the first place.
Stephanie: So you’re saying we should change the structure of corporate power, but also give some really specific roles for government and how government should assert itself in American lives?
You mentioned education, I think you mentioned climate change. What else is on the table? Where else should the public sector be more engaged and involved in providing sort of basic goods?
Derek: Yes. In the report, we talked about a one, two punch response and one is to break up plutocracy at the top. In other words, we have such a high concentration of economics at the top that that much power allows for not only economic capture, but political capture as well.
So we need something to break that up. You know, some of the presidential candidates are out talking about wealth tax, inheritance tax, et cetera, but we will need something to break up that concentration of wealth at the top.
But that’s not enough. We need a public sector that is proactively engaged in using its power to provide facilitation for the population to flourish. And what might that be in concrete terms?
I’ve talked a lot about a federal job guarantee. A federal job guarantee would not only eliminate involuntary unemployment. It would eliminate working poverty, the notion of working poverty and it would allow workers that are already working bargaining power to attain better wages and working conditions without the fear of being destitute from the threat of unemployment.
It would also allow us to rebuild our public infrastructure, in order to provide a care economy, for example. What if we were to think about, just like we did with public schools, ensuring that everybody has adequate childcare, adequate eldercare and adequate adult care.
That’s one example, but we can use the benefits of a federal job guarantee in ways that I can’t even imagine right now. We could rethink the type of economy we want and the type of society we want. We could literally green our entire economy.
The only constraint on America could be productivity itself and there’s plenty of productive things that I’m sure we can come up with, in addition to a federal job guarantee.
I mean, I’ll just give a couple of more, but the list, we can think of several items. I talked about baby bonds. Ensuring that everybody is endowed with capital as a birthright?
We know that wealth begets more wealth, that if you want to own a home, as opposed to being a renter, what is the key ingredient? It’s that down payment in the first place.
If you want to start a business, you need seed capital to do so. Without capital, inequality becomes locked in, in a capitalist society. So why don’t we seed everybody with capital, so that they have an opportunity to have asset security over their lifetime.
People should not be at their most vulnerable position when they’re sick. The threat and stigma of finance, people should not be faced with that. We should have some system of health care that ensures that, in our most vulnerable position, we’re not at the point of making tragic choices in our lives where we end up going bankrupt to finance a medical procedure.
Stephanie: Are there principles in your mind that are organizing things that should be left to the private sector versus things that should be left to the public sector? How would someone spot a problem or an issue that only the public sector can solve versus ones that should be left for the private sector to innovate around?
Derek: I guess I have the reciprocal interpretation, which is when should the public sector intervene and that would mean that the transpose would be in any other sphere the private sector can act and do what do what they do.
Even when I describe scenarios of when the public sector should intervene, it does not exclude the private sector. So for example, when I talk about public jobs with a federal job guarantee, it will do away with low wage jobs, but it will not do away with jobs in general.
In fact, some of the goods produced by a federal job guarantee can facilitate new private sector jobs. And we have historical precedent from that. We could think about WPA, CCC, the public infrastructure that was created facilitated the private sector.
So what I’m talking about is a public sector that ensures, and I have a report coming out that includes two other Roosevelt Fellows, in which we talk about public options.
And what we’re talking about in that report, which will come out on Wednesday, will be public sector intervention in a way that ensures adequate access, adequate quality and adequate quantity of goods that are so essential in people’s lives that we don’t want to leave it up to the private sector, which again, is at the whim of the fiduciary responsibility to their shareholders.
Nick: Yeah, but you’re already living in the neoliberal world. If you are granting that it is legitimate for businesses to only have a fiduciary duty to their shareholders. Even that is a, man, a construct that was essentially imagined out of thin air in the,-
Stephanie: And one we don’t have to accept.
Nick: Yeah. And we don’t have to accept that. That’s nuts. In fact, I would argue that’s crazy. We should have a multi-stakeholder standard of accountability for corporations. I mean, the simple truth is that limited liability is granted by a societies to corporations at their will.
And if corporations aren’t improving welfare generally, then why in the world would you want to grant limited liability? The truth is that, you know, we can push back on that radically and expect corporations, businesses of every type, kind and size to contribute to the common good.
That that should be the standard. And if you adopt that standard, you don’t have to rely on the public sector so much. You can insist that the private sector deliver public goods, which it should. It just should and can and did and used to in many ways before.
Derek: Well, perhaps we are into semantics, but regulating the private sector is indeed a use of public sector power. So I’m not opposed to-
Nick: Yeah, we may be talking about the same thing.
Derek: Yeah. I’m not opposed to the public sector regulating corporations and indeed, I think they should. I don’t think corporations should be free to do whatever they want to do.
I think we have a public infrastructure to one, provide competitive alternatives, but also to regulate the private sector, so that they don’t leave us vulnerable to their for-profit motives, which might be myopic and not interested in social welfare to the extent that the public sector is charged with.
I guess the point I’m trying to make is that I start with the presumption that capital and corporations are amoral. They’re not immoral nor are they moral. They are motivated, so in this sense I might agree with Milton Freeman that they are designed, they are intended to maximize profit, but again, within that paradigm, I certainly believe there is a role for a countervailing public power to protect us from those self-interested motivations which might be detrimental to social welfare at large.
Nick: Are you optimistic or pessimistic? If we enacted a bunch of this stuff in the report, will we get everything done? What do you think?
Derek: I’m extremely optimistic. I am gleeful that we are in this moment where we’re starting to push back against the 50 year narratives of neoliberalism. I am ecstatic that we can even have a conversation about reparations in a national frame and it’s not ostracized as something that is radical and it still might be considered radical.
But the fact that we can even have this in the mainstream media format, in the past, we treated race as something that was a third rail of politics, where we only euphemistically talked about it. Now we can be explicit about racism.
Now we can be explicit about a need to curb corporate power and and instill a wealth tax. Now we can be explicit about the role of the privates of the public sector, to offer competitive alternatives. If you could see my face, you’d see a big smile because I’m excited about the possibilities that we really can have the society that affords everyone an opportunity to be their best selves.
Nick: That’s awesome.
Stephanie: Very cool.
Nick: That’s awesome. Well, listen, thank you so much for spending time with us. It was really great to talk to you and hear your perspectives. Hopefully, we’ll chat again soon.
Derek: I was just going to say, this is a lot of fun for me as well, so thank you.
Nick: Well, talk soon. Thank you.
Derek: Thanks so much.
Speaker 4: Pitchfork Economics is produced by Civic Ventures. The magic happens in Seattle, in partnership with LARJ Media, that’s L-A-R-J Media and the Young Turks network.
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