Nick pitches a big idea to the mayor of Boise and political commentator E. J. Dionne: a suite of progressive labor standards that would hold large employers to higher standards nationwide. Is this the way to bring progressive, inclusive economic growth to rural America?
Dave Bieter is the Mayor of Boise, Idaho. Now serving his fourth term, he is the longest serving Mayor in Boise’s history.
E. J. Dionne writes about politics in a twice-weekly column for The Washington Post. He is also a government professor at Georgetown University, a visiting professor at Harvard University, a senior fellow in governance studies at the Brookings Institution and a frequent commentator on politics for NPR and MSNBC. He is a New York Times bestselling author, and his newest book ‘Code Red: How Progressives and Moderates Can Unite to Save Our Country’ is out next year.
Progressive Labor Standards: https://democracyjournal.org/magazine/51/progressive-labor-standards/
EJ: Working people spend their lives doing what they are supposed to do and not getting rewarded. That should be at the center of our political conversation.
Dave: The real job creation is the small business. That’s been the engine for generations.
Nick: And by holding the largest employers to the highest standard, we tilt the economic playing field back towards smaller companies and mid-sized companies and make it easier to compete and grow.
Speaker 4: From the offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer. It’s like econ 101 without all the BS.
Nick: I’m Nick Hanauer, founder of Civic Ventures.
David: I’m David Goldstein, senior fellow at Civic Ventures.
So Nick, one of the things which we have the freedom to do in this office, which I love, is examine issues, examine problems, and then say, “Hey, let’s come up with a brand new idea on how to deal with it.”
Nick: For better or worse, we do do that.
David: We do do that. The worst thing that happens is it’s no good, but sometimes we hit on something which seems like a good idea. Last December, you wrote a piece for Democracy Journal on an idea we call progressive labor standards.
Nick: That’s right.
David: Explain what’s the problem we’re trying to address and what progressive labor standards actually are.
Nick: Okay. Progressive labor standards is a framework for implementing any kind of labor standard.
David: Could be minimum wage, vacation time, paid sick leave, whatever.
Nick: Anything. Whatever it is. Just imagine the minimum wage, because that’s quite simple. Rather than implementing that policy by geography…
David: Or just everybody pays the same minimum wage.
Nick: We would implement it based, but tiered… imagine a three tier system… on the size of the company. Progressive labor standards is an acknowledgement that the typography of the economy actually isn’t geography, it’s based on the size of the enterprises in the geography.
David: And the market power that they have.
The idea came out of a bunch of interactions that I had when we challenged ourselves in the office to send me out into the community to talk to ordinary people about economic policy, because it’s really easy to persuade yourself in a small office like ours… or frankly talking to this elite policy makers and politicians that we surround ourselves with… that your ideas are smart and they make sense to people and people should just do what you wanted to do. We said, “We should really just go out and tell people about these things and get their perspective and feedback.”
So I went out and talked to a whole bunch of groups… Rotary clubs and things like that… about economic policy, and out of that experience emerged some new ideas. One of the things that was really striking about talking, for instance, to small business people about political economy issues is that they were mostly very supportive of the idea that people should be paid enough to get by without [crosstalk 00:03:32].
David: [crosstalk 00:03:32] workers more.
Nick: They absolutely wanted to-
David: Most of them.
Nick: Most of them. In general, these are good people who want the best for their community and, frankly, the best for their workers, but they are constrained by the dynamics of the market, and the more you talk to them the more you realize that they think that higher labor standards is the enemy of small business, when in fact the enemy of small business is big business and the exploitative practices that the biggest businesses in America now employ.
Those discussions got us thinking and doing research and we learned a bunch of things through that research, didn’t we? We learned, for instance, that in non-urban areas… in rural areas… most people actually don’t work for small businesses, the work for giant companies.
David: Right, because there’s so much less economic diversity in these rural areas and small towns that a larger percentage of the population is working for giant companies than in a city like Seattle, which has giant companies.
Nick: Exactly. And in fact, if you go to a small town it’s not some independent department store: it’s Walmart. And it’s not an independent gas station: it’s Exxon. And it’s not a local bank: it’s Bank of America. And it’s not a local burger joint: it’s McDonald’s or Burger King or whatever it is. Those are the big employers.
Those companies employ the most exploitative labor practices and have effectively driven all the small businesses out of business and driven down wages [crosstalk 00:05:08].
David: Through their monopsony power, they drive down wages. There are studies that show that when Walmart moves into a county, wages fall in retail and fall even further in the grocery segment.
Nick: That’s right. The other thing our research showed was that this divide between urban and rural… both the political, cultural, economic divide… is largely driven by differentials in economic growth rates and the fact that basically all the action is in the cities. By the way, whether you’re in California, where it’s all LA and San Francisco, or even if you’re in a smaller state like Idaho, which is very quickly urbanizing, where even in a red, relatively rural state, they’re now having this challenge of the urban/rural divide.
So we were like, “Man, this is really, really important.” The other thing that has gone wrong with the American economy is monopoly power, monopsony power. The country’s economy is now dominated by fewer and fewer giant companies, and that monopsony and monopoly power is bad for workers, it’s bad for politics, it’s bad for everything.
David: Right. Essentially to sum this up, we have three different types of inequalities that are growing at the same time in this country. There’s the inequality that we always hear about, which is that income inequality between individuals: that the very rich like you are doing really well and everybody else not so much. There is what you were explaining, this inequality between businesses: that it’s increasingly difficult for small businesses to increase with these giant, large, national, multi-national companies, and it’s actually leading to a decline in small business formation.
Nick: A dramatic decline.
David: Right. And there’s a third inequality which is really undermining our political and social cohesion in this country, and that is, what the experts call, a growing spacial inequality, this geographic inequality between regions, between red parts of the states and the blue cities, between the blue states and the red states, where there are this handful… maybe a dozen or so… urban centers that are doing really well, mostly on the coasts, and everybody else not so much. Partially, it’s because… Seattle: we’re growing a lot because of Amazon. Amazon has been a curse but also a blessing to this city. But Amazon is sucking wealth out of the rest of the country. Every small business they put out of business, every sale that they’re now taking, a little portion of that is coming back to headquarters here in Amazon, which is helping to pay the high wages at Amazon headquarters, but we are economically colonizing much of the rest of nation in the same that Walmart did.
Nick: Yeah. Absolutely.
There’s another addendum I’d like to add, which is that there’s now, in the press, a ton of conversation about monopolies. Amazon is a monopoly. Facebook is a monopoly. All these big companies being challenged. I think there’s an appropriate amount of legitimate conversation, serious conversation, about breaking those companies up, and I think in many cases we should do that.
But progressive labor standards suggests a way to attack this problem not from the top but from the bottom, which is to effectively tilt the economic playing field back towards smaller companies.
David: Right. Back towards small businesses, back towards workers, and back towards rural communities and small towns.
Nick: Exactly. Again, another thing that we found in our research, which frankly is both troubling and somewhat surprising, is we used to do all this. 30 or 40 years ago, many of these safeguards were in place: that in fact we taxed giant chains more than local stores.
David: Progressive taxes on chain stores: many states had them.
Nick: Yes. In many states, large chains were required to pay their workers more than local chains. This was not anti-competitive, it was pro-competitive. It was designed…
David: We had laws that prevented companies from selling things below cost, so as to drive their competitors out of business. Progressive labor standards are kind of like the progressive income tax, in that our biggest and wealthiest corporations… those who can afford to be held to higher standards are held to higher standards on things like the minimum wage and the overtime threshold.
But you know what, Nick? What do we know about how things work in the rest of the country?
Nick: Almost nothing.
David: That’s right. Therefore, we called up Boise mayor Dave Bieter to tell us what it’s like to run a city in red state Idaho and to try to pitch him the particulars of this proposal.
Dave: My name is Dave Bieter and I’m the mayor of the city of Boise, Idaho.
David: We’d like to start by talking about Boise. If you can tell us about Boise, its economy, and what you see its greatest challenges are.
Dave: Well, I’m a little partial, as you’d expect. I’m a Boise native. My mother was also from Boise. Boise is blessed geographically: we’re at the end of the desert where it starts up into the mountains. We’re 153 years old. Originally, we were not a mining town, but we provided the goods and services for the miners, which is actually a better gig than mining.
David: Yeah, Seattle did that for the Alaskan Gold Rush. That’s where the money is.
Dave: The mining itself is tough, but the suppliers do pretty well. We’re the state capital, obviously. Boise State University is home here, and that’s grown steadily. We historically had many headquarters of corporations: Albertson’s was founded here, Micron Technology. Over the years we’ve diversified our economy. HP also has a division in Boise. Increasingly, we have a lot of tech start-ups and a lot of tech activity. That’s been quite good to us. But a pretty diversified economy that helps us sustain in downturns. And now, we have great outdoors, a pretty mild climate, an increasingly diverse population, and a lot of good press nationally and otherwise.
Our real challenges are, because of that, we have pretty intense growth going on right now, and how we deal with that… especially in a state that’s red, besides our little part of the world… that’s our biggest challenge. Probably transportation without a funding source. Wages that don’t keep up with housing, and affording housing challenges without a lot of tools to deal with that. So that’s kind of where we are right now. If we do the right things in the next five to 10 years, we can avoid some of the real… those dynamics of too high a cost of housing, and stay a livable, socioeconomically diverse city.
David: We’ve got some ideas that we want to pitch to you. We thought we’d get the input of a medium-sized city. I don’t know how…
David: Yeah, a medium-sized city mayor. You’ve been there a long time. You’re also familiar with the politics and economics throughout the rest of Idaho, which is fair to characterize as a red state.
Dave: Oh, you bet.
David: A lot of it is very rural. So Nick, you cooked up this idea of what we call in the office progressive labor standards.
Nick: We often think of imposing labor standards by geography, and certainly we have done that around the country. We did it in Washington State. We have a 15… actually, now it’s a 16 dollar minimum wage in the city of Seattle, but 13.50 statewide, to account for a lower cost of living, etc. But having been through that fight, I should say, longer than anyone else has, because the whole fight started here, a group of us have begun to come to terms with the notion that we may have made a mistake in implementing these things by geography, because the true typography of the economy has nothing to do with geography. It has to do with the size of the companies that are in the geography.
Progressive labor standards is a very simple idea, which is to hold the biggest companies to the highest standards. The largest companies, for example, would be held to a 15 or higher minimum wage… 18 dollars an hour, 20 dollars an hour… and medium-sized companies to a 15 dollar minimum wage, and maybe the very smallest companies would be held to an even lower minimum wage, or some sliding scale, I don’t know what it is. The truth is that Walmart and McDonald’s and Citigroup and Wells Fargo and HP can easily afford to pay people 20 dollars an hour. How do we know? We can simply look at their P&L statements. It’s very easy to see that these companies could easily afford to pay their workers enough to get by without food stamps: in fact, to pay their workers enough to lead stable, secure, and dignified lives.
By holding the largest employers to the highest standard, we tilt the economic playing field back towards smaller companies and mid-sized companies and make it easier for them to compete and grow. One could imagine, particularly in a state like Idaho, doing something like this, because in the smallest town in Idaho the Walmart can afford to pay 20 bucks.
Nick: Right? They can. And if they did, and if all those people working for Walmart were paid that, those people would have enough money to spend on the small businesses in the town that they lived in, and that would be good for everybody. We’re beginning to socialize this idea as a way to account both for geographic inequality, which we have a big challenge around in this country. Even in Idaho, a relatively rural state, you have that same challenge. There’s way more affluence in Boise than there is in the smaller areas of Idaho, and that’s creating a divide even in a place like Idaho.
Dave: What’s kind of a misnomer is that we’re a rural state. Increasingly, we’re an urban state, because agriculture needs so fewer workers that the urban centers around the state are growing. All of them are growing, all around the state. Even in a state like Idaho, the urban dynamics are really important.
David: Right. A lot more jobs in processing potatoes than in growing them.
Dave: Yes. Exactly right. That’s a great example. Chobani has their largest facility in the world in Idaho.
Nick: Yeah, but as we look at the population of Idaho, you’ve got about 700,000 people in the Boise metro and there’s only 1.7 million… that’s half the people in Idaho.
David: That’s a bigger concentration than the Seattle metro, compared to the…
Nick: Yeah. One of the things that we wanted to chat with you about and just get your perspective is this urban/rural divide is a terrible problem in American politics and culture today, and from our point of view one of the biggest parts of it is the prosperity divide: that it’s very hard to be economically secure and prosperous in these smaller places as urbanization unfolds at the rate at which it’s currently unfolding.
This progressive labor standards idea, I guess, was part of our hope in beginning this socializes is to get more prosperity flowing in those non-urban areas, where those big companies that tend to dominate the economies of these tiny towns actually… we insure that they make affluent. Not affluent, but at least stable and secure.
Dave: You’re onto something important in that… boy, I don’t want to go too far in the weeds, but… I didn’t know this until recently, but there’s a group called the Kauffman Foundation, and they are the best entrepreneurial new business nonprofit in the country, and they got us onto the fact that for decades the number of new businesses started in America was relatively consistent. There were swings in the economy, but the number of new businesses started remained constant until the downturn. There’s this notion that people took more risk after they were downsized and lost their jobs in the downturn, and it’s just not true. We haven’t seen… both locally here and across the country… The number of new businesses started has not kept up, which makes the bigger companies even stronger. They’ve got more political influence. And the real job creation is the small business. That’s been churning out jobs in America because a chunk of those small businesses become big. That’s been the engine for generations.
From a policy standpoint it’s really tough, but the favor of those companies compared to the legacy corporations that have even more influence is the right policy to do. How that works out into it is tough, but we’re onto that and doing whatever we can locally to try to help that, because that engine of new business and jobs is not cranking like it used to, and we all have an interest in seeing that happen.
Nick: One of the interesting things that happened for us as we began to explore this issue was that we discovered that this is actually what we used to do in this country: that in fact we used to tilt the economic playing field towards smaller businesses.
David: We taxed chain stores higher than we taxed local businesses.
Nick: Yeah. We used to do all these things in America to make it easier to be a local business or a small business than a giant multi-national corporation. Over 30 or 40 years, we just forgot all of those lessons and all of those rules and structures were pushed aside to enable a few giant corporations to get ever bigger. Obviously, there are some people in America who benefited a hell of a lot from that.
David: You’re one of them, sitting across the table from me.
Nick: But everybody else didn’t. That’s where we went wrong, basically.
Dave: That’s what this Kauffman group points out. I mean, they’re capitalists to their toes and entrepreneurial… I mean, it’s anti-capitalist in a sense, it really is, because the newer ideas and the real engine of innovation and job creation is at the smaller company level and we’re… Like you said, they pointed that out: that it hasn’t come back since the downturn and then it gets worse because… and this is their words… the legacy corporations have even more authority. It sounds good in a way because we have prosperity and we have growth, but underneath it is this real concern that we’re just not generating these jobs and new companies that eventually lead to bigger companies, and out a little ways we’re in trouble. You’re onto it.
David: Can I ask you a political question?
David: I think you are an officially nonpartisan position, but you’re a Democrat, right? Self-described Democrat?
Dave: I am. I was in the legislature before I ran for mayor.
David: So you are a Democrat in a slightly blue city… bluish tinged city… in a deep red state. I know how strong that urban/rural divide is both politically and culturally. Any chance of persuading folks outside of Boise that this sort of progressive labor standards approach might be good for them and good for the rest of the state?
Dave: Well, the definition of an optimist is being a Democrat in the state of Idaho. Of course there’s a chance to convince them. I need to live a nice long life so I can see that happen, but I do believe that we’re starting to see the beginnings of that: people understanding, “Why do I keep voting for those people that don’t understand my life, that don’t support policies that help me?” You’ve got to think these dynamics will change. By 60% we voted for Medicaid expansion initiative in the state of Idaho. 60%. But then they voted for the people who wouldn’t do that through the legislature.
You’ve got to hope… and I do have hope… that eventually they’ll see…
Nick: The disconnect.
Dave: The disconnect there. That makes me think it’s coming back around. The disconnect will become apparent. I’m not going to say we’re going to be blue real soon, but then we get competitive. Then we can start to win some and make the arguments that people start to listen to and get traction.
David: We’ve got one final question for you we like to ask all our guests: why do you do what you do?
Dave: Because I love it. I get to wake up every day and try to make my hometown a better city, and they pay me for that. That’s really good fortune. Short of playing full back for the Green Bay Packers, it’s the best job I could ever imagine.
David: It’s like me, Nick. I wake up every day and you pay me to insult me.
Nick: Yeah, I know.
Dave: It doesn’t mean that it’s not a pain for a chunk of the time, especially campaign time, but that’s a good fortune.
Nick: The thing about being mayor of Boise is you probably have a longer career than a full back for the Green Bay Packers.
Dave: Exactly. A lot longer. Doesn’t pay near as well but longevity is part of it.
David: Well, it was a pleasure talking with you. Thanks for joining us.
Nick: Yeah, thank you so much.
Dave: Likewise, likewise. It was great. Thank you.
Nick: Best of luck out there.
Dave: You guys, too. Keep at it.
Nick: Okay. Bye.
Dave: Bye bye.
David: So it was interesting, Nick, that Mayor Bieter had been talking about data he got from the Kauffman Foundation. We actually cite, in our progressive labor standards piece talking about the startup rate, which by the way is at a 40 year low, according to the Kauffman Foundation drawing from US census data the percentage of new businesses that are less than a year old… this percentage of all the businesses in the country… is actually 44% lower than it was in the pre-tickle down era. The Brookings Institute actually confirms that there are more businesses dying each year than are being created.
Nick: This is the inevitable consequence of an unfettered economic system leading to increasing levels of corporate concentration.
David: Right, but it’s actually really bad for the economy. Republicans always talk about small businesses as being the job creators and the source of all this innovation, and historically that’s true. If you have less small business creation in this creation in this country, you’re getting less innovation and you’re getting less job creation and that means lower wages and worse products and services than you otherwise would have. That market concentration, when you look at it, it’s amazing when you actually look at the numbers. We all know intuitively, but when you look at the numbers in multiple product categories, today 74% of ebooks are sold by Amazon, 75% of candy is sold by Hersey or Mars, 86% of basketball shoes are sold by Nike. In retail, 69% of the office supply market is controlled by two companies: office depot and staples. 90% of home improvement is Lowes or Home Depot, and an astounding 99% of the drug store market is now dominated by just three companies: CVS, Walgreens, and Rite Aid.
I know you and I, we’re kind of old, but I remember when there were locally owned pharmacies on the corner, not just giant chain stores.
Nick: That’s right. The fact that we don’t have that stuff anymore is an artifact of forgetting about the value of small and medium-sized firms. This problem is even more acute in non-urban areas, where it has become essentially impossible to open up a small business in one of these markets because they are so dominated by these giant players.
David: Right. There’s no way they can compete with a giant buyer like Walmart.
Nick: Exactly. In the interest of efficiently or theoretically lower prices we have eviscerated the most important parts of our economy, which frankly was small and medium-sized businesses.
David: We’re essentially allowing the big capitalists to monopolize capitalism.
Nick: Yes, as always.
David: That can’t be good for the country.
So we talked to Mayor Bieter. He seemed to think a lot of these ideas would be a good idea for Boise and for Idaho in general. But of course, he’s in this red state where it’s tough to get things through the legislature. What do you say at the national level? Where do you think the chances are we can get movement on this idea there?
Nick: I do think that progressive labor standards should be a harmonizing principle for Democrats and for people who care about a more inclusive economy. I think that if Democrats win in 2020 I think that this idea is something that we may be able to get traction around. There are people who understand the lay of the land better than me, including our next guest, EJ Dionne, who is one of the most insightful commentators on politics and culture in America. We’re excited to have him on to talk about this more.
EJ: My name is EJ Dionne. I write a column for the Washington Post. I teach at Georgetown and Harvard. I’m at the Brookings Institution. I’m a fan of Nick Hanauer and all that he does, so I’m very happy to be here, and David too. I have a book coming out in February. The pub date is the day after the Iowa caucuses. The book is called Code Red: How Progressives and Moderates Can Unite to Save Our Country.
Nick: We wanted to talk about progressive labor standards with you, which is this very simple idea we’ve had to impose labor standards not by geography but essentially by company size: holding the largest institutions to the highest standards. But what we wanted to do was try to contextualize our conversation with you, because you have been both a witness, an observing, and a commentator on these changing dynamics for… and I don’t want to pin you down… a very long time. You’ve been at this for a long time, haven’t you?
EJ: It’s nice of you to say that. I guess that means I’m getting old. But these issues have engaged me for pretty much all of my adult life, going all the way back to a doctoral dissertation I wrote on the Labor Party and the Democratic Party from the ’50s to the ’80s on how we ended up with Thatcher and Reagan and what role the working class politics played in that. So yes, these have been issues that have concerned me. I also say that I grew up in an old union factory town called Fall River, Massachusetts, which was been on the wrong end of the economy a lot, even since the Great Depression. I always liked to say that probably 80% of what I believe comes from growing up in Fall River and feeling that working people who spend their lives doing what they are supposed to do and not getting rewarded: that should be at the center of our political conversation.
Nick: Let’s just start the conversation… and you can agree or disagree with my observation, which is that in my lifetime this is the first political cycle where the basic consensus from the Democrats running for president is that we should really actually do something about some of these problems.
David: I’d say it’s the first election in my adult life where the Democratic Party seems to be shifting left.
Nick: Yeah. Do you agree with that?
EJ: Yeah. I argue in my book that what we are seeing is the death of the Reagan economic consensus, which really dominated politics from Reagan’s election to 2008. After the great crash, Reaganite economic ideas came under scrutiny, under question. But even President Obama felt he needed to operate, to some degree, within that consensus, and I think that progressives and moderates alike should celebrate the successes of both the Clinton and Obama years, and there were some real successes, but also acknowledge that they left some problems unsolved because they were so constrained by this consensus.
Starting in 2016 and definitely now, I think you’re starting to see people throw off the shackles of that consensus. If I can just go back to healthcare, think about how different this debate is already from the debate that we had over Obamacare. President Obama was said to be a socialist because he wanted subsidies for private health insurance with some beefed up Medicaid. There was nothing radical about President Obama’s healthcare plan. Now the range of debate is essentially between Medicare for all and Pete Buttigieg’s Medicare for all who want it. Joe Biden’s healthcare plan is far more progressive than the original Obama plan was, and I think that shows that there is much more room here.
Similarly, the demand for free college… which, by the way, isn’t as radical as it looks. If you go back 40 years, state universities were very close to free for a lot of people. Wherever we end up there, it goes from free college to President Obama’s proposals for two year free community college. Wherever you end up, there is a consensus that both college and other forms of post-secondary training, so [inaudible 00:33:55] decent jobs, should be vastly expanded.
And then to go to your proposal, there are many, many more people now talking about worker rights and regulatory actions that would help workers than were doing so four, eight, 12 years ago.
David: We know where the American people are. What about DC? Is it possible to actually enact any of these reforms given the structure of the US Senate? Maybe the Democrats win the White House and the House and maybe in 2020 we win the Senate, but it doesn’t look like we can hold the Senate for a generation or more given the partisan divide in the country. Can anything liberal, progressive, constructive, actually get done in DC any more?
EJ: I’m glad you raised the Senate, which is the least… I think this is an accurate statement. If anybody out there wants to challenge it, please let me know, because I want to hear the argument. I think the United States Senate is the least democratic… small D… elected body in any democracy in the world. The ratio between the smallest state and the biggest state is over 70 to 1 in population. By the way, when the Republic was founded, the ratio between the smallest to biggest state was 13 to 1. By 2040, 70% of us will live in 15 states, which means that 70% will have 30 senators out of 100.
If you look at bill after bill, especially when the filibuster is on, bills that pass with votes from senators representing 60% or more of the American population fail. Gun reform is a good example of that. The problem is that the Constitution makes it exceeding difficult, virtually impossible, to change the United States Senate, which would be at the top of my list of reforms, and it’s very unlikely you could get a constitutional amendment through because the smaller states would have enough clout to block it.
This is a huge problem. This points to two things. One is there has been talk of splitting states. There has been talk of letting some other entities have representation who don’t: certainly, DC should have it, Puerto Rico, the Virgin Islands. That equalize things a little bit. But I think that for the time being, given this very un-democratic structure, progressives have to try to figure out how to gain a foothold again in some of the smaller, more rural states. It’s worth noting that the two Dakotas, not so long ago, had four Democratic senators. Now they have four Republican senators. We’ve got to live with this very un-democratic body for a while.
So I think progressives need to think about policies that lift up rural areas and small towns and to challenge conservatives and Republicans right at their base, because the Senate is an enormous problem for those who are looking for progress and change.
David: Right. That was one of the inspirations for our progressive labor standards proposal, which was to address this growing spacial inequality between thriving cities like Seattle and much of rural America, and addressing some of the very real problems in the agricultural sector where there’s this huge monopsony power that is driving farmers into bankruptcy because they really only have one or two buyers for their hogs or their chickens or their wheat, their corn, etc. But that is addressing an economic problem. Is it possible to create today another farm-labor alliance purely on economic issues, when the cultural divide seems to be so stark that people are willing to vote against their own economic issues and… well, for whatever their personal reasons are, whether it’s racism or anger or fear.
Do you see any hope in addressing that divide?
EJ: I think a lot of people have lost faith over time in government’s capacity to succeed. Some of that is the result of right wing propaganda, but some of that is a sense of particular government failures. I actually think reforming government and persuading Americans that yes, actually, not only does this thing often work better than they realize, but actually progressives are committed to making it work much better than it has in the past.
Then the third thought I will offer you will certainly agree with, because I’m going to read directly from the Democracy Journal piece about your idea. This is one of my favorite sentences in your piece, where you’re talking about progressive labor standards that really hit bigger companies harder, that put regulations up there. Your sentence reads, “By harmonizing the interests of workers with the interests of small business and farmers, progressive labor standards enable Democrats to build a majoritarian coalition strong enough to combat the dangerously growing political power of our nation’s largest monopolists.” I really like this idea of reestablishing links with small business.
My own feeling… and I think you guys agree with this… is that you rarely get reform in America without support from some part of the business community. When the business community unites as one unit against something, they have a lot of power to stop things. But when progressives find support from pieces of the business community… and by the way, there are a lot of business people out there who would rather pay their people more, who actually do care about their employees, and if they do care about their employees too much they’re worried that competitive pressures will put them out of business. So let’s favor high-end businesses that seek to succeed on the basis of helping their workers. In your proposal, let’s make sure that these regulations start with bigger businesses.
Anyway, I just appreciated that sentence very much, because when we think about policy ideas we can’t just think this is good policy, we also have to think of the politics that underlies the policy and allows it succeed.
Nick: One of the things that we have to remind small business people is that the enemy of small business isn’t higher labor standards or government regulation. The enemy of small business is big business and the exploitative practices and the scale advantages and all of that that has made it almost impossible to operate a small business.
David: If you’re a small shopkeeper, your enemy is Walmart and Amazon, not the minimum wage.
David: We really enjoyed talking to you. I know our time is up, but we want to ask you one last question, which we do with all of our guests: why do you do this work?
EJ: I grew up in a very political household where we talked about… It was actually, in many ways, a conservative household, but I had parents who were very engaged in community work of various kinds. My mom was a teacher and a librarian. My dad was a dentist who actually started a free dental clinic in our town in the 1930s. I have been animated by a series of political impulses, but also I think democracy and engagement is actually fun. I enjoyed politics from the time I was small. I have been teaching now for almost 20 years and I find engaging students not only exciting but they teach me new things every day.
I feel very blessed in what I’m able to do.
Nick: EJ thank you so much for spending some time with us. We’re really looking forward to your next book.
EJ: Bless you. Thank you.
Nick: Talk soon.
EJ: Take care.
Nick: Bye bye.
EJ: Bye bye.
David: I’ll tell you what I really love about this more than anything, is that it’s a great narrative for educating people about the core problems, because we hear about all this stuff about inequality and we think of it in this narrow sense of poor people versus rich people, but in fact there’s inequality throughout the economy in all of these rich and nuanced ways that are not just pulling people down but also pulling the economy down with it.
Nick: Yeah. Progressive labor standards is one of those things where litigating it teaches people about the problems that we face in, I think, really useful and constructive ways. Just talking to people about it teaches them, I think, about where the economy has gone wrong and how we could work together to fix it in constructive ways.
We didn’t talk about this that much, but I love the politics of this idea because what it allows progressives and Democrats to do is drive a wedge between the biggest companies in America and the other 99.5% of them.
David: The farmers and small businesses and self-employed.
Nick: Yes. Because the enemy of small business and medium-sized isn’t labor standards or regulation. The enemy of small and medium-sized businesses is big business and their exploitive practices and the way in which we have tiled the economic playing field towards big business and away from small business. I think that’s bad in all sorts of ways: for the economy, for the culture, and for the democracy. This is a way to begin to push stuff in a better direction.
David: And by crafting a policy that is designed to both level the playing field for small businesses and level the playing field for rural areas and small communities, it’s an opportunity to help rebuild that farmer-labor alliance that used to be part of the New Deal majority.
Nick: That’s right. What really excites me about progressive labor standards is… Imagine that you implemented a 20 dollar minimum wage for the largest companies in America. Just close your eyes for a second and imagine for a moment what would happen to all of the small towns in America that are dominated by these huge companies: Walmart and Bank of America and Exxon and McDonald’s and so on and so forth. Instantaneously, the next day, the median wage in these places would double, or more.
David: More than double in most of these places.
David: Yeah. I mean, whether you’re making 7.25, but going 7.25 to 20 is huge. What would that do for the economies?
Nick: Exactly, and for the small businesses that, of course, would also have to raise their wages, but where everyone in town would now have so much more money to spend. And here’s the thing: of course McDonald’s and Walmart and Exxon and Bank of America would squeal and squawk and say that they’re all going to go bankrupt, which is always a lie. They would pay, and all of a sudden these communities would be vital and economically secure and stable.
Here’s the even better news. Let’s say Walmart says, “Fine, we’re going to leave.” Great. I mean, definitely short-term inconvenience to have the Walmart leave, but here’s the beautiful thing: now there’s space for somebody to open up a competing store, to have that small or medium-sized business once again in this small town.
David: And to be clear, Walmart is not the only way to achieve the efficiencies that you get from economies of scale. There’s a long history of cooperative grocery stores which are pooling their buying and distribution powers. There other ways to do it. Maybe it takes a little government assistance to get this built back up again. But it doesn’t mean we’re sacrificing low prices just because maybe there aren’t as many Walmart, or because the Walton family loses a little of their stock value in the dividends.
Nick: There’s all sorts of ways to skin a cat and we can have a very different kind of economy where prosperity was more fully distributed, both up and down the economy but also geographically, too. It’d be a good thing.
David: The way it used to be. That makes us conservative.
Nick: Maybe. Reactionary.
David: Reactionary. That’s right, we’re just a couple of reactionaries here.
We talk to a lot of left-leaning economists on this show, but next week, for a change of pace, we’ve reached out to the University of Chicago and we’ll be talking to Luigi Zingales about the Democrat’s economic platform.
Speaker 4: Pitchfork Economics is produced by Civic Ventures. The magic happens in Seattle in partnership with the Young’s Turks Network. If you like the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on Medium at Civic Skunkworks. And peak behind the podcast scenes on Instagram at pitchforkeconomics.
As always, from our team at Civic Ventures, thanks for listening. See you next week.