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Nick Romeo, "The Alternative: How to Build a Just Economy" (PublicAffairs, 2024)
00:32:03
An interview with Nick Romeo
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Hello, everybody.
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This is Marshall Po. I'm the founder and editor of the New Books Network. And if you're listening to this, you know that the NBN is the largest academic podcast network in the world. We reach a worldwide audience of 2 million people. You may have a podcast or you may be thinking about starting a podcast. As you probably know, there are challenges basically of two kinds. One is technical. There are things you have to know in order to get your podcast produced and distributed. And the second is, and this is the biggest problem, you need to get an audience. Building an audience in podcasting is the hardest thing to do today. With this in mind, we at the NBM have started a service called NBN Productions. What we do is help you create a podcast, produce your podcast, distribute your podcast, and we host your podcast. Most importantly, what we do is we distribute your podcast to the NBN audience. We've done this many times with many academic podcasts, and we would like to help you. If you would be interested in talking to us about how we can help you with your podcast, please contact us. Just go to the front page of the New Books Network and you will see a link to NBN Productions. Click that, fill out the form, and we can talk. Welcome to the New Books Network.
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Welcome to the New Books Network. I'm Stephen Pimpair, host of the Public Policy Channel, and we are joined today by Nick Romeo, who is the author of the Alternative how to Build a Just Economy from Public Affairs. Nick, welcome. Thank you for joining us.
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Thanks for having me.
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So if we can, why don't we start by asking you to say a little bit about who you are and what it is that brought you to this particular project.
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Happy to. So I've been covering this sort of intersection of economics politics for the New Yorker for several years. I also teach at the Graduate School of Journalism at UC Berkeley, and this project grew out of years of reporting for the New Yorker. I was also fortunate enough to be living overseas for much of the last five years. My wife was doing research over in Europe, and so that turned out to be very fortuitous. A lot of the examples in the book are kind of European case studies, although there's a strong American component as well.
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C
Great. So you begin the book with a critique of sort of the economics profession, economic thinking, education of economists. Why don't you give folks just a little overview of what is that critique? What's wrong with economics today and how we think about the economic world.
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Absolutely. So that's right. The first chapter of the book goes into Debates within academia about sort of the proper content and framing of an economics education. So a lot of the critique, you know, I didn't really have to mount it myself. I could just let economists critique other economists and they're very good at doing that. So to put it in a nutshell, you know, I, I love this quote from John Maynard Keynes where he says the master economist really has four components. He or she must be historian, statesman, philosopher and mathematician to some degree. The critique you might think of, like this mathematician element has kind of subsumed the other four and we've sheared off these older humanistic components of economics, which used to be conceived of more as a branch of political philosophy. After all, the field was once called political economy and the more political normative moral elements were just inescapably part of the field. It's not that math necessarily banishes those. And the critics of the current orthodoxy are in no way anti math. They just want to expand these other elements so that, you know, questions about distribution, about the impacts of our current economic arrangements on future generations in the natural world, these are not somehow muted or ignored.
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What, what in your mind are the consequences of that way of thinking and that kind of training? Why, why should we care? Why does that matter?
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Well, to quote another famous economist, you know, this American, Paul Samuelson, who wrote probably the best selling textbook that was used for much of the 20th century, he famously said, I don't care who writes a nation's laws if I get to write its economics textbooks. I think he was onto something. He got his wish. And as a sort of shaper of cultural common sense, economics is enormously powerful. It shapes political behavior, but it also shapes consumer behavior, lifestyle choices, your sense even of what is a good life, what is normal and natural for a human being to do. I mean, when I frame it that way, it sounds pretty clearly philosophical, but economics, I think has encroached on that domain and kind of given these very unsatisfying answers that get taken seriously. Where humans are primarily self interested, profit maximizing, don't work hard unless the incentives are perfectly aligned. There's not sort of intrinsic motivation. I'm caricaturing a bit, but some of the models that are still used in economics are also pretty schematic and crude.
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Yeah, so unlike a lot of books that I think we're used to, especially sort of in the policy realm, the book devotes most of its energy to laying out the problem. And then usually at the insistence of the editor, there's a chapter at the end that points towards solutions. One of the many nice things about this book is that that's reversed in.
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A lot of ways.
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You've got a chapter up front that identifies some of the problems, but then you walk through alternatives, different ways that we could be thinking about these. So why don't we take a tour? I don't know that we can get to all of them, but why don't we take a tour of some of those alternatives that you suggest? And why don't we start by talking about what you refer to as true prices or what maybe an economist would, would talk about as, as revealing the, the costs of negative externalities.
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Absolutely, yeah. And I appreciate your recognition of that reversal of the conventional framing. That was very much the objective was, you know, to say, look, we're not short on diagnosis and critique. We sort of recognize the problems at this point. What we need is a really clear, curated portfolio of plausible answers. So True Price, happy to talk about their work. The, the folks that I, I focus on in chapter two are based in Amsterdam. True Price is the name of a non profit and a sort of affiliated foundation. They're often linked to a broader set of accounting techniques People might have heard of True cost accounting. The basic intuition behind what they do, I think is pretty straightforward. Imagine you go to a grocery store and you buy a banana. Maybe the banana is organic and this is good. This tells you something, but it doesn't tell you a lot of other things. You don't know the transport and the carbon emission involved in that. Maybe you know, okay, the banana is organic and it's local, getting better. You still don't know anything about the working conditions of the people who grew the banana. So True Price says, look, all of these things matter and we can actually combine all of these costs, sometimes called externalities, unpriced costs of an economic transaction. What if we took all of those costs and simply added a surcharge onto the good? That's one model. It's consumer facing. There's actually a grocery store in Amsterdam where you can pay the additional true cost of a good. And then that extra money generated by the surcharge is used in a broad way, not super targeted, to remediate those same problems, whether those are environmental or underpayment of humans. Now consumer facing true pricing is actually one of the smallest and in my view probably least promising avenues. It can also be used as an internal auditing tool by companies. Tony's Cioccoloni, the European chocolate maker, uses true price accounting to track the size of externalities across their entire supply chain. Maybe the most promising manifestation is as a policy tool, as a lever for regulators and legislators to actually understand these costs. I mean, one of the basic insights in that chapter is that when you don't pay the extra costs that are currently externalized, they don't somehow go away, it's just that someone else pays them. Maybe the nation's health care system pays them. If you're producing really unhealthy food, maybe future generations pay pay them, maybe people far away growing that food pay them. But they're not somehow gone. It's a question of who pays them, not whether or not they should be paid. And so once you reframe the issue in that way, I think it becomes an interesting conversation about what's the appropriate manifestation or use of this tool. Should it be consumer facing, should it be a more legislative vehicle? Yeah, right.
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So why don't we take that opportunity to talk about labor a little bit? So tell us about companies that are determined and actually going about paying a minimum wage and maybe tell us a little something about well paid maids and how they do business and what are the consequences of that are.
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Yeah, so, you know, the minimum wage in America is a kind of long standing national disgrace. Hasn't been updated since 2009. The idea of living wage adjusting for.
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Inflation is lower than it's been since what, 1968, something like that?
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Exactly. Yes, exactly. So that's a sort of insane statistic. But given that that's the state of affairs, the living wage movement often presents itself as sort of virtuously and voluntarily paying enough that people can live. The chapter I have on living wages kind of critiques the dominant definition of a living wage and says it's actually far more constricted and less gener than a century ago when Teddy Roosevelt and Samuel Gompers and John A. Ryan, the priest who coined the phrase living wage in a book, they had a more capacious definition of what living meant. It should include things like getting to go on vacation, occasionally saving for retirement, saving for a rainy day, having some provision for childcare or education. All of these elements have been stripped out. So what we now call a living wage in America is incredib, narrow and ungenerous sort of construct that's largely the creation of one economist at mit, which is a sort of astonishing fact in itself. Many people, if you ask them what do you think a living wage should be, they'll, they'll give you a pretty good answer that, you know, they think living. Oh yeah, that's what I do. So it should include all of these nice things or these things that I wish that I could do. The argument in the chapter is that we need a broader definition of a living wage and that this does not necessarily put companies out of business. The well paid made example I love this is a guy named Aaron Seattle on in D.C. who started this. Actually dropped out of a job that he described as being a mental mercenary. I think he was a consultant. He wanted to start a company that paid living wages almost explicitly as an intervention into policy debates about whether raising minimum wages would cause businesses to collapse. Because that's the usual shtick that you hear from the restaurant lobby etc in.
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D.C. we love to pay more, we just can't.
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Exactly, exactly. So he's this kind of vivid reputation of that people make well above the, the MIT ladies definition of living wages. So he, he pays a more robust and generous definition of living wages. And in fact he inter. Sorry, he promotes internally. So a lot of folks who start as cleaners, they end up in operations or management. So you know, one, one woman I spoke with, she was making $70,000 a year after just a few years previously cleaning hotel rooms. That's a pretty astounding transformation.
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And the business is, is not only functioning but expanding. Right. I mean he can actually make a profit doing this this way.
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That's right. His, his client lists are oversubscribed, long wait list expanding into other, other cities now, you know, to sort of, to take the critic seriously, it would be helpful if there were legislation here. Right. Just sort of relying on the goodwill of people like, like Aaron is a necessarily limited strategy. But as a proof of concept and as an example of the fact that there is demand for this within the market, it may be a niche and it would be helpful if there were a floor that was categorically imposed on all actors within a market. That's all true. But I still thought it was compelling that he had sort of done this business and made it flourish.
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But now going back to the true pricing, folks do pay more for a cleaner from his service than they would from another, correct?
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Absolutely. Yes.
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And they do, right?
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They do.
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I mean they understand that they are paying for more than just having their toilet cleaned.
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Absolutely. And you know, I think Aaron himself, like a lot of thoughtful people, kind of understands this dynamic. One thing that I quote him saying in the book is something to the effect that, you know, if, if you pay these cheaper prices for a very cheap cleaning service, you're, you're still going to end up paying the real price you're just going to pay for it sort of at a societal level in how other people's lives go, how their kids grow up, how their own mental and physical health is experienced. Like these costs are not somehow like dissolved or disappeared when you don't pay them, just someone else is paying them. It's really important insight there.
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And, and they can be very hard for people to see. Right. Particularly if they themselves are perhaps not earning enough that they feel that their own life. Right, that, that they're hiring a cleaning service because they're working two jobs and trying to care for the kids, are unable to carve that out their own selves. Right. So this becomes part of that larger dilemma we confront. Right. If we're going to actually pay the real price and what, internalize the externalities.
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Absolutely. And I mean, here too, I just was so sort of impressed by Aaron's insight because even though he started this private sector business to sort of make a point, his goal is very much a public sector policy solution. I mean, he's unambiguous and saying, like, let's just make this legislation. I've proved that it's possible. Now let's just make this the sort of the default option, the status quo. I mean, it's pretty striking to think about, like if minimum wage became what's currently called living wage, then you'd open up this whole other space where people who wanted to go above that would actually be paying a real living wage or a true living wage.
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So let's keep talking about labor for a little bit. Talk about Austria's jobs guarantee, if you would.
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Yeah, this was a fascinating chapter to research, research and report. A little town just outside of Vienna is running a pilot job guarantee. And, and the, the location of the town is interesting because it's the site of a famous sociological study on unemployment from the 1930s where the entire town depended on one industry. The factory shut down, people, almost everyone lost their job. And some, some sociologists went and sort of documented in a very rich, almost anthropological way what this did to people's psychology, how they suffered and how they thought about themselves. The current pilot was kind of consciously chosen in this area as a reversal of that. The earlier study was about unemployment. This is about guaranteed employment where anyone who would like to participate is guaranteed a job. Now the insights from that earlier study were, were pretty striking. You know, it's, it's probably not a surprise to any listeners that unemployment is implicated in a lot of mental health problems, physical health problems as well. You know, you had people saying things like, even if I have enough to eat, I. I just don't know what to do all day. I sort of, I get out of bed in the morning and then like this expanse of time just looms in front of me. So the idea that a job is more than income, that it's a source of time, structure, self esteem, social connection, purpose. This was really important to the designers of the current study. And one of the things that they do when people join the study, they work closely with social workers to kind of co design an interesting job. So they don't have total power over the work they do, but they're also not powerless. Right. If you have a set of interest skills, aptitudes that's taken seriously and that's going to be reflected in what you do. So it's important to distinguish this from programs that are closer to a kind of work fair model where the first job that comes along long, you're throwing into it, whether you like it or not, you have to take it or we'll, we'll rip your benefits away.
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And those are often really terrible jobs too, right? Dirty work.
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Absolutely, yeah. These are jobs that, you know, people do things like they work with young children, they work with animals, they work with their hands building things, they do some outdoor work, green spaces. And it's kind of interesting if you think about the potential for something like this at a national scale. I mean, care work and green transition work, these are enormous needs. Right. These are needs that the private markets are not satisfying particularly well. So you combine that with the very real benefits psychologically for people who participate in a job guarantee and it seems like a pretty compelling win win, as they say.
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Is, is that something that, that. Can you see how to scale that up?
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Absolutely, yeah. I write in the chapter about the work of several economists who have done national modeling of what that would look like. And it's, I think, very plausible to scale it. It would be a pretty trivial percentage of GDP actually to have a national job guarantee in America. And I think it would pretty instantly have a lot of positive effects. I mean, one of them would be to put upward pressure on private sector employers. They would have to improve the quality of their jobs in the. And also probably the quantity of the compensation. Right.
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Which they would of course fight tooth and nail.
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It would, yeah. I mean, as soon as people have a good outside option, as soon as they're less desperate, this tends to be a good thing. Right. We saw this in the pandemic. So imagine a kind of expansion of.
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That same principle, a KFC tale in the pursuit of flavor. The colonel made his $10 Tuesday bucket so full with eight pieces of juicy crispy chicken or tender that it might just last you till Wednesday if you've got that kind of self control. I mean, some people want leftovers, others are more into right nowers. The Colonel lived so we could chicken. 10 bucks, 8 pieces. One big deal with KFC. $10 Tuesdays.
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Prices and participation may vary. Taxes, tips and fees extra.
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I mean, it's also expanding onto a lot of the analysis about why we are seeing, at least in US terms, a fairly large boon in strike activity and organizing is because unemployment is low and people feel more secure and therefore have the ability to assert themselves in ways that they don't necessarily feel they can do when they feel more vulnerable. I think you and I would describe that as a good thing. I think there are a lot of people who would describe that as a terrible thing.
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Absolutely. It's another example of how economics is inseparable from ethics. You know, your assessment of these kinds of programs and policies is a reflection of sort of previous ethical commitments and sort of, you know, dressing that up with equations and saying, look, the math just tells us that doesn't. That doesn't go very far to actually having a meaningful, interesting conversation, which in.
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Some instances is the very point of the math.
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Right.
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It is precisely to obscure the ethical and moral dimensions of the issue.
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Absolutely.
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So speaking of ethics and morals, talk about gig workers and the notion that we should make gig work a public utility.
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Yeah, I thought this was such a sort of fascinating puzzle. Yeah, yeah. I mean, you know, people talk about the Overton Window, right, Of this kind of the set of imaginable conceivable ideas at a given time, like what's thought of as possible. This one, I think is maybe hovering right on the edge of the window frame, sort of just about to get in. I hope the idea is that we don't have to have only private sector platforms like Lyft and Uber and DoorDash monopolizing the gig workspace. We've tried that now for close to a decade. The results are pretty clear. There's a lot of precarity for workers. A huge part of every transaction is taken by the companies. It goes back to venture capitals, who in many cases these companies have lost money year after year to try to increase market share, etc. The idea of a public option simply proposes that all of the same sort of infrastructure would exist, but it would be in the public interest. More like A road system or a water system. These are complicated infrastructural projects and they do benefit from network effects. It's helpful to have everyone using the same, same one. You don't want a bunch of parallel ones. But the idea that this has to be run by private operators, that's where the public option system sort of becomes relevant. You could imagine a system where every transaction, maybe only 2 to 5% of the value of the transaction gets taken as a fee to support overhead. Now that's much less than 30 to 50%. With that savings you could actually have, have more money for workers, conceivably also cheaper costs for consumers. You could also more easily enforce labor law. You could give people within that system sort of pathways to further training and advancement. So as soon as you strip away the like profit maximizing imperative and you say this is just to help people find jobs, there are going to be people who need and want part time jobs. Gig work isn't going away, but it doesn't have to be this kind of desperate exploitative realm dominated by a few enormously rich companies that, that care very little for the welfare of the workers.
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C
And there are, there are some pilot programs occurring.
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A
Yes, there are, yeah, this, this is very interesting. There are pilots happening at, at the city level in, in places around America. One is in Long Beach, California and another is, is going to start soon in Portland, Oregon I believe. And, and these are sort of small scale instantiations of the concept where, you know, maybe within a certain set of industries you have people who can use a kind of public option to find part time work. Where it gets really exciting I think is when these start to scale to larger levels like an entire region. One person I talked to in the book predicts that in a part of Canada an entire regional government will want to roll this out within the next few years. And this was a person with very senior contacts in that part of Canada. So it wasn't a sort of random guess. He was saying the people I know want to do this in a few years.
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C
Yeah, excellent. Let's shift gears a little bit and talk to us about perpetual purpose trusts, which I confess not having run across previously.
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A
Yeah, yeah, it's called different things. Sometimes people talk about employee ownership trusts, but the idea is simple. It's that, that a trust, you know, a legal document, can actually own a business. And when you shift ownership to a trust, instead of, you know, having private shareholders or public shareholders, the trust is the owner. And so the trust can specify certain purposes which then become the Kind of defining point of the company. So it's a way of making the values of a business owner exist in perpetuity once they retire. A lot of the people I talk to in the chapter on purpose trusts are folks who are close to retirement and they want to keep the values of their business once they're no longer running it. So these tend to be very sort of attractive values, things like profit sharing with employees donating a sizable chunk of revenue every quarter to an environmental nonprofit, maybe capping the ratio of highest to lowest worker at 10 to 1, maybe hiring workers who were formerly incarcerated. All of these things become threatened when a business is sold to new owners. They become threatened even more acutely when those new owners come from private equity, typically. Right. So a purpose trust says, okay, the, the owner is now the, the legal document and the purpose of the business is simply to fulfill the, the legal charter, whatever those goals are in perpetuity. Now it's, it's a little bit counterintuitive because you might think, well, how can a sort of inanimate document own a company? There's still a trustee. There are humans who oversee. There's a sort of board of people who are experts and stakeholders who meet and assess how effectively the company is fulfilling the, the purpose. So it's not like you've sort of locked up all power in a document. There are still humans making decisions. But what you have done is kind of enshrined something other than profit maximizing as the basic goal of the business. And that makes it sort of secure potentially for many, many generations, against takeovers. I mean, Patagonia is a kind of household name that just did this in the last last few years and became pretty famous for doing it. But there are lots of small businesses and mid sized businesses, you know, maybe 10 to $50 million in annual revenue, not a trivial amount. And if you think about all of the baby boomers close to retirement in America who have businesses and who would like something good to happen to those businesses, people who are worried about the climate crisis, worried about wealth inequality. Purpose trusts are this kind of, of hidden but very powerful vehicle for actually improving economic outcomes by making businesses behave well in perpetuity.
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C
So as we work our way toward concluding, why don't you, if you would finish us up by talking a little bit about participatory budgeting and where that came from and what it looks like and what that does to again, shift our attention toward more what open, ethical and democratic means of interacting with politics and the economy.
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Absolutely, yeah. Participatory budgeting is a really fascinating process by which citizens are given very direct democratic control over some portion of the public budget in a political territory. It could be a city, it could be as small as a neighborhood, it could be as large as a national government. The case study in the book is a town just outside of Lisbon in Portugal called Cascais. You know, a few hundred thousand people. So not a small town, but also not, not Lisbon. Lisbon as well has participatory budgeting. The way it works in Kashkais is a little bit unique. I think it's a very successful model. They have visitors from all around the world who come and sort of study their processes and their all. All of the kind of details that, that make people actually participate. Because you can imagine, and if you set this up and then sort of no one shows up, you have very high abstention, low participation. That's not exactly the goal. The idea is that people care about certain things in their communities, and they're also sort of experts on what needs to happen. They know what's missing, what would make life better. They also, in Cascais very consciously sort of recognize its power to build coalitions across somewhat unexpected demographic differences. This could be in age, in. In ethnic background and political outlook. If everyone in a given neighborhood actually wants the new community center to get €300,000 of funding and you're competing against other projects in a competitive sort of voting environment, you have to then kind of get organized, get together, talk to your neighbors, go campaign, persuade people that what you care about is a good idea. All of these things have kind of salutary, democratic properties in their own right, so independent of the fact that it actually does give people lots of things that they want and need, real infrastructure improvements, things that make them safer, healthier, etc. There's also this political dimension which I thought was really fascinating. Where in Cascais they have have many years, they'll have higher turnout for participatory budget elections than they do for actual elected, official democratic elections. So it's almost like direct democracy beating representative democracy. In some ways, it goes back almost to the ancient Athenian model where you're very involved in decisions that affect your life. You vote on things that are going to shape your. Your neighborhood and your circumstances directly.
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C
You're listening to the Public Policy Channel of the New Books Network, and we have been speaking with Nick Romeo, talking about some of the alternatives he identifies in the Alternative how to Build a Just Economy. New out from Public Affairs. Nick, thanks so much for joining us today. Much appreciated.
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A
Thanks for having.