The Case for the “Poor Side of Town”: 10 Blocks podcast

Audio Transcript

Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on the show today is Howard Husock. He’s a senior fellow at the American Enterprise Institute and a longtime contributing editor of City Journal. Howard is the author of a brand new book called The Poor Side of Town and Why We Need It, which will be out on September 21st from Encounter Books. Howard, thanks for joining us.

Howard Husock: Great to be with you, Brian.

Brian Anderson: Let’s get right into it. Your book, which is imminent, combines public policy and a lot of stories proceeding from the notion that home ownership can be an important source of wealth and rootedness and stability for poor Americans. You document the ways that misguided housing policies from slum clearance to urban renewal to exclusionary zoning made home ownership very, very difficult, if not impossible for too many Americans. So tell us a bit about the structure of this book and sort of what the main takeaway is.

Howard Husock: Well, that’s a challenging question even for an author, Brian, but I’ll give it my best shot. What I’ve tried to do is to describe the trajectory of American housing policy in ways that tended to and have diminished the types of housing that we have, types of housing that accommodated the poor, allowed them to own modest homes to accumulate wealth and to advance through upper mobility. Well, how did that happen?

Howard Husock: I focus a great deal in a way that I don’t think has been done before on a series of individual progressives. I go back as far as Jacob Riis, who’s the famous muckraker who exposed housing additions on the Lower East Side of New York and started the ball rolling toward the idea that we needed to replace private housing. It was going to demean and place poor people in execrable conditions. And what I demonstrated is that Riis never actually talked to, for his famous book How the Other Half Lives, never talked to the people of the Lower East Side. How do you experience this neighborhood that you find the author so abject? And a lot of poor people in the Lower East Side were going about their normal lives and they didn’t live there that long, they moved up and out. And that’s the template for a lot of the book, that there were neighborhoods that were not wealthy neighborhoods, that were modest neighborhoods, but that afforded poor people the chance to own or rent or rent out to lodgers, modest dwellings, and accumulate wealth.

Howard Husock: Well, how did that get unraveled? It got unraveled as progressives from Riis on worked not only to replace private housing with public housing, but to pass zoning laws all over the country that made it more and more difficult to erect various forms of modest housing.

Howard Husock: So who are some of my targets, I guess you’d have to say? One of them is a woman named Edith Abbott who was a University of Chicago sociologist. She believed that home ownership for the poor was a bad idea, that they were going to waste their money and that the private market was inevitably going to fail them. Her crusade was then taken up by a woman, these are obscure people who are very influential and people live today with the legacy of their ill-considered ideas in my opinion. Her mantle was taken up by a woman named Catherine Bauer who wrote a book in 1936 called Modern Housing. She literally had photographs in the book of Soviet high-rises and extolled them as the future of housing. She took an important job in the Roosevelt Administration in the early Federal Housing Administration and set the country on this track to demolish these so-called slums.

Howard Husock: Were there neighborhoods in which there were no bathrooms inside and you had to use a shared bathroom in which there were public baths rather than private? Yes, there were such neighborhoods. But even in neighborhoods like that, black Detroit, Black Bottom, they called it. DeSoto Car in St. Louis, the Farm in my own town of Brookline, where I lived for many years, all of these were places where there was a high degree of property ownership by poor people. Once these neighborhoods were leveled, literally demolished for public housing, what happens? Private ownership becomes a contradiction in terms. And so you have these two tracks, the progressive track to limit private ownership and at the same time the progressive track to spread more and more tougher and tougher zoning across the country that made it possible to replace these kinds of neighborhoods of modest homes with new versions of them.

Howard Husock: And so we’re left today with the idea that the only way that the poor could be accommodated in the United States is through deep subsidy programs, which does them little good in terms of wealth accumulation.

Brian Anderson: You mentioned Black Bottom neighborhood in Detroit, something you’ve written about in City Journal. Black Bottom was not a wealthy place as you know, but it was a hub of African-American entrepreneurship, of culture. Many of its residents were invested in the neighborhood through their homes and businesses. So it’s really the story you tell a kind of classic tale of the Le Corbusier inflected philosophy of urban renewal sweeping in and destroying a community that had its own viability and pattern of life. So tell us a bit more about that neighborhood and why you focused on it, and what did the reformers who tore it up actually envision? What happened after their plans were implemented?

Howard Husock: Yeah. So Black Bottom was not named Black Bottom because of its racial makeup. It was back when the French controlled Detroit, they thought it had deep black soil and so it got that name. But over the years it became one of the most prominent African-American neighborhoods in the country, and what I think is really important to focus on is that many of the virtues that frankly a lot of conservatives think African-American culture lacks, entrepreneurship, property ownership, I think public safety as well through Jane Jacobs kind of eyes on the street, Black Bottom had all this. I mean, Aretha Franklin’s father had his church there. It was cleared for urban renewal. I’m not making that up.

Howard Husock: The high property ownership levels, and not just individual people owning their own homes, they had multi-family structures. So you had these networks of people who had landlords who lived in the same home as they did. This was… and there were a whole array of mutual aid organizations. The Urban League in Black Bottom was one of the most active in the country helping to resettle Southern migrants and find them jobs and find them places to live. This is the kind of immigrant neighborhood that we discuss in terms of other groups, but we minimize when it comes to African-Americans. They had it too, but it offended the sensibilities of progressives. They thought it was a slum.

Howard Husock: I toyed with naming this book In Defense of Slums and I was convinced that that was a little too provocative. The title Poor Side of Town and Why We Need It is already a little provocative, but the idea that slums weren’t the bastions of exploitation that we see them as. These were lower working class neighborhoods where there were high degrees of property ownership.

Howard Husock: So Black Bottom, there was kind of a conspiracy. There were racists in Detroit who did want to level it, who saw it as a place that was a threat. There had been literal race riots in Detroit in 1942 and they involved fights between blacks and whites bordering on Black Bottoms. So Mayor Cobo in Detroit ran on the idea that we’re going to get rid of this slum, it’s a blight. Of course, it was more a blight because it was black. And then the progressives, led by Eleanor Roosevelt and others in Detroit, she literally cut the ribbon on the first replacement public housing for a portion of Black Bottom, the Frederick Douglas houses. The idea that they would be named for a paragon of the idea of African-American independence and self-respect and you’d get a high rise public housing project in his name.

Howard Husock: Over time much of the demolished area was not even replaced with housing at all. The Chrysler Freeway can be found there today. Other parts of it were replaced with modernist upper middle class housing, super modernist, upper middle class housing.

Brian Anderson: Le Corbusier style buildings, yeah.

Howard Husock: Towers in the park. The offensive thing about Le Corbusier and his acolytes, the architects who thought they could plan not only buildings but plan people’s lives, they suppressed the spontaneity, the self-organization of neighborhoods like Black Bottom and so many others across the country that were demolished for urban renewal. And ultimately in Detroit, in Black Bottom, those replacement public housing projects within 40 years were themselves demolished.

Brian Anderson: Now the spirit of the great urban thinker Jane Jacobs runs through this book. Jacobs as a writer and as a thinker was a pioneering critic of urban renewal, and her argument was that the local ties that constitute the stuff of urban neighborhoods are not easy to restore once they’re dissolved as happened in Black Bottom and other neighborhoods you describe in the book. Those eyes on the street, as she calls them, they won’t always be there. So Jacobs could also be an opponent of development, believing that new housing construction sometimes could disrupt city life just like top-down central planning schemes.

Brian Anderson: So in this book, you criticize exclusionary zoning policies for constraining the housing supply and keeping it unaffordable, arguing that new construction is generally a boon, a good thing. Is there a neat way to reconcile Jacobs as a defensive organic vitality in cities with her perhaps unwise opposition to certain forms of urban growth?

Howard Husock: Well, first of all, I think Jacobs has been too often reduced to eyes on the street. She understood urban neighborhoods to be a constellation of self-organized plans. She criticized progressives for allowing as she put it nobody’s plans but the planner’s. I think, and I met Jacobs a number of times and corresponded with her, and for instance, when the Faneuil Hall Marketplace was built in Boston and this old commercial structure was refurbished as a festival marketplace, it was being denounced as a form of gentrification and serving the rich. She said, “No, wait a minute. Look at it with your own eyes. People are gathering here. All sorts of merchants are working here. This is a good thing.” So I don’t think she was necessarily against development. I think she was against top-down development. I have a chapter on her in the book as the anti-planner, if you will.

Howard Husock: But I think what we need to do is to… and this is a really, really hard thing politically, we’ve got to convince, and progressives don’t want to be involved in the business of convincing, they want to hammer local zoning boards, local planning boards across the country to relax strictures so that the same sort of small builders who built so many parts of our cities, the row houses of Philadelphia, the brownstones of Brooklyn, these weren’t planned. Architectural styles took root and builders built and they weren’t guided by master plans. That’s what Jacob’s objected to is the master plan. Let’s make it possible to build, have zoning, sure. You want to keep industrial away from residential, maybe, but it turned out to be a terrible idea to keep stores away from residential. We’re rediscovering, those neighborhoods are popular today, the ones that survived.

Brian Anderson: Mixed use as its called.

Howard Husock: Mixed use, it’s coming back. So I think what we have to do is somehow persuade all these local planning boards across the country, you need a poor side or at least a poorer side of town where the adult children of people, those who grew up in your towns, they can have a place for a starter home, police, fire, teachers, people who serve towns won’t necessarily have to commute from far away and feel no tie.

Howard Husock: One of the points I really want to make in this book is that by having a spectrum of income types within communities, not a spectrum based on subsidized housing which is artificial, but a spectrum based on households, buying houses within their means because you have small homes on small lots, you’re going to have people working together in a shared polity. It can be better for democracy. It can break down some of our social class divisions and it used to be that way. It used to be that way. And we’ve opted for large lot zoning and the effect is exclusionary. Whether the intent was exclusionary, I think varies.

Brian Anderson: Your book contains a lot of interesting observations and wisdom really about the policy failures of mid-century housing reformers. But as you note, these lessons have really not been fully internalized at all. So today’s urban leaders continue to rely on the ideal of public housing and subsidized affordable housing. Government programs to solve the problem of housing affordability. If an Eric Adams who may be the next mayor of New York or Eric Garcetti were to read your book, what lessons would you hope for them to take away?

Howard Husock: Well, I don’t know much about Garcetti just a little bit, but I followed Adams closely and he seems like a very open-minded person. I’m optimistic about his mayoralty at this point. And first of all, I would urge him… public housing in New York is not going away anytime soon. There’s 176,000 units of it. It’s vast, 600,000 people are estimated to live in it. Nobody really knows how many people live in it. I think it’s got to be reconceived, at least as we have understood it so that you’ve got to bring in private money and private management to rebuild it. It’s a complete wreck.

Howard Husock: The original progressive idea that it would be self-sustaining because there wouldn’t be any profit, well that turned out to be completely wrong-headed and the kinds of housing that it was meant to replace is valuable today. If they hadn’t torn down the Lower East Side to build the Jacob Riis houses, which is the third most dangerous place in Manhattan according to one study I read, those row houses and so-called tenements would be valuable today because they’re desirable forms of housing.

Howard Husock: So what I would tell Adams is, first of all for all, you got to change the culture of public housing as much as the physical form of it. All new residents should be short-term. You can come here five years, save money, get on your feet, and plan on moving out. There are housing authorities around the country that do this. Oh, what will happen to people after five years? Where will they go? They’ll figure it out. Maybe they’ll have to double up. It’s not the end of the world.

Brian Anderson: To make it analogous to welfare reform.

Howard Husock: Exactly, exactly. We need housing reform analogous to welfare reform versus the median time in public housing in New York City today is 19.6 years. And there are 10% of the population that have been there for 40 years or more. This is a sad state of affairs.

Howard Husock: And we have… I would personally, my most radical idea is some of it, some of public housing, and this is true in Los Angeles too and all over the country, stands on extremely valuable, very developable land. I would offer to buy out tenants based on how long they’ve lived in a place and sell the property. You can realize funds that could repair other properties or could buy out other tenants. So I think we need a radical rethink of what was a failed idea, and we should not be looking for more and more clever forms of subsidized housing, which believe me, benefit developers more than they benefit poor people. The low-income housing tax credit is a complicated subsidized housing program which is now the favorite in the federal government. The average cost to build such a unit in California is more than $400,000 a unit for poor people. That’s nuts. So we have to rethink this subsidized housing. We have to back away from it and we have to find ways to adjust that which we’re left with as an unfortunate legacy.

Brian Anderson: Thanks very much, Howard. The book is called The Poor Side of Town, the subtitle, and Why We Need It. It’s out very, very soon from Encounter Books. I encourage everyone to pick up a copy and read it. It’s filled with very provocative arguments. And as I mentioned at the top, filled with stories as well about real human beings. Thanks again, Howard. Don’t forget to check out his other work on the City Journal website. We’ll link to his author page in the description. You can also find City Journal on Twitter @cityjournal and on Instagram @cityjournal_MI. And if you like what you’ve heard on today’s podcast, please give us a nice ratings on iTunes. So thanks very much, Howard Husock.

Howard Husock: Brian, thank you, and I’ll just add quickly. This book could never have been written without working for you as a great editor at City Journal and for all of the thinking that you allowed me to do in City Journal‘s pages. So thank you.





Source link

Energy Regulations to Increase Cost of Mobile Homes


Amid surging home prices, mobile homes, also known as manufactured homes, provide an alternative for 22 million Americans at a fraction of the cost of a typical single-family house.

The federal government wants to close off this option. The Department of Energy proposed a new rule last month that increases the costs of mobile homes by nearly $5,000, or up to 10 percent of their current price. This will put housing further out of the reach of the poorest Americans.

The new rule, aimed at promoting energy efficiency, imposes stringent new standards on everything from insulation to water heaters to air ducts. The Department of Energy says that these standards will save hundreds of dollars a year in energy costs. This argument has fundamental flaws. For one, it assumes that consumers don’t consider energy savings when buying a home, so the government must force them to do so. In fact, decades of economics research show that consumers already calculate energy costs when making purchases. The government isn’t magically providing consumers “savings”; it is merely forcing them to buy more expensive things using less energy than they otherwise would.

The biggest problem with the government’s argument is that even its own analysis shows that many mobile homeowners will lose money with the energy savings. If one considers the new energy standards as a sort of investment—one that pays back money over time but must be financed up front—then mobile-home owners living in single-wide units for the average of 15 years will lose more than $1,000.

Even this estimate overlooks the particular burdens of the mandate on the poor. The government assumes that mobile-home buyers value the future somewhat like big corporations do, and thus they assume annual interest rates for mobile-home purchasers as low as 3 percent. Yet poor people have trouble acquiring such cheap financing. Furthermore, the poor tend to have a much greater need for money today than for money tomorrow; energy savings accruing decades from now are of no use if you go bankrupt this year.

The Department of Energy analysis also shows that the higher costs resulting from the rule will make it harder for companies to construct new mobile homes, leading to an estimated 150,000 fewer mobile homes in total. This amounts to pulling out the rung at the very bottom of the housing market.

With the poor bearing such high costs, how can the government justify the new mandate? The answer, of course, is climate change. Reductions in global greenhouse gas emissions account for about half of the regulation’s total “benefits.” Thus the mandates force the poorest Americans to sacrifice their well-being to the climate in a way the richest will never have to do. Despite President Joe Biden’s memorandum demanding that the federal government should consider the “distributional” impact of all new regulations, the Department of Energy’s new rule is silent on the obvious costs it will impose on the least well-off. This is no way to build support for what Biden calls an “equitable clean energy future.”

The Department of Energy claims that it must follow the demands that the International Energy Conservation Code and Congress have imposed on it. Yet there is no separate energy code for mobile homes, so the department had to jerry-rig a new, ill-fitting version. The department also ignores Congress’s clear mandate that any energy regulations for mobile homes be “cost effective.” This rule isn’t.

It is a truism that the poor have little voice in government. While their self-appointed tribunes claim to be spending billions for their benefit, regulators are quietly imposing enormous costs on them that they are powerless to oppose.

Photo by Tim Graham/Getty Images





Source link

No More Government Unions? | City Journal


Few states have been as profoundly shaped by their public-sector unions as California. Government labor groups there elect their own bosses and number among the biggest spenders on ballot campaigns to raise taxes and expand government. They have engineered some of the richest retirement benefits in the public sector—at the cost of hundreds of billions of dollars in public debt.

But one California businessman thinks that he can change all that. Silicon Valley venture capitalist Tim Draper has filed a petition with the California attorney general’s office for a ballot initiative that would amend the state constitution to outlaw public-sector unions. “Public employment costs have exploded, including taxpayer funded pensions and lifetime health benefits not enjoyed by employees in the private sector,” the petition reads. “Worse yet, some public employee unions have used their money and power to protect bad employees engaged in unspeakable misconduct and others who have completely failed at their jobs.”

Draper faces a strenuous uphill battle. He must collect close to 1 million signatures to qualify an amendment to the state constitution for the ballot—a path likely to be made more difficult by union-friendly election officials, who will throw obstacles in his way. If he succeeds, he’ll then face an election against the most well-heeled opponents: Golden State public-sector unions spend hundreds of millions of dollars every election cycle, and they’ll empty their coffers to defeat him.

Still, the politics of California are undergoing upheaval, as increasingly disgruntled voters consider recalling Governor Gavin Newsom, even as his closest allies, the public-sector unions, pour in money to help him stay in office. A recall of Newsom in the special election on September 14 would panic government union leaders and dramatically improve Draper’s odds of success.

Draper has long been critical of the direction of politics in his state. He made several attempts to put a question on the ballot to split California into several states in order to decentralize power and break the hold of special interests. That quixotic effort fell short in 2013, when he failed to collect enough signatures to qualify for the ballot. But in 2018, he gathered enough names for a proposal to carve California up into three states. Though opponents derided the idea as “wacky,” they raised $10 million to ensure its defeat. Meantime, Draper committed more than $2 million of his own money to get the initiative on the ballot, only to have the state supreme court order it removed. “Apparently, the insiders are in cahoots and the establishment doesn’t want to find out how many people don’t like the way California is being governed,” Draper said then. “They are afraid to know the answer as to whether we need a fresh start here in California.”

Draper seems ready to undertake a massive effort against the state’s public-sector unions. A founding partner of the venture capital firm Draper Fisher Jurvetson, he’s made his money by investing in the likes of Skype and Tesla and has a net worth estimated by Forbes at $1.5 billion. He’s passionate about what he calls the decline of California and the role of public unions in the state’s politics. “Union bosses have run our state in the shadows for about 50 years. They punish candidates who don’t do their bidding for them. There is even evidence that they manipulate the courts,” he wrote in a recent article. “Union bosses have taken California schools from the top to the bottom, they have made it so that there are fewer jobs, more homeless, and people are fleeing the state to work. They have brought California quality of life from 1st to 50th.”

Unions have plenty of allies in state government in their efforts to thwart Draper. In 2012, for instance, Chuck Reed, a reform-minded Democratic mayor of San Jose, gathered enough signatures to place a referendum on the state ballot to allow adjustments to public-sector pensions and retiree health benefits. But then-Attorney General Kamala Harris, tasked with the job of writing a description of the initiative for voters, titled it misleadingly as a proposal that “Reduces pensions for public employees” and added several descriptions that mischaracterized the act. The Modesto Bee editorialized that her representation “read like talking points taken straight from a public employee union boss’ campaign handbook.” Disheartened, supporters withdrew the initiative.

More recently, the unions’ allies in state government have stepped in to protect them from membership losses in the wake of the U.S. Supreme Court’s ruling in Janus v. AFSCME that government workers cannot be compelled to remain in a union. In response, state government entities have given unions the power to determine when and how members can resign their membership, and labor leaders have thrown up numerous obstacles. A recent class-action lawsuit by a University of California employee, filed with the help of the National Right to Work Foundation, charges that the school allows the University Professional and Technical Employees union to impose unreasonable conditions on employees looking to leave the group, including requirements that the union creates without informing employees when they file to resign.

Despite all these obstacles, Californians may be ready for dramatic change. Led by unions, Newsom supporters have poured $68.4 million into keeping him in office, compared with just $9.5 million being spent by opponents. Among Newsom’s biggest backers are the California Teachers Association, which has contributed $1.8 million, the state’s prison guard union ($1.75 million), and several locals of the Service Employees International union, which have collectively given $4 million. Even so, polls show nearly half of voters saying that they’ll vote for recall.

When voters are angry, all the union money in the world may not be enough. Just how angry are California voters? We’ll find out soon.

Photo by David McNew/Getty Images





Source link

The Fed Shouldn’t Tackle Inequality


Last Friday, the Kansas City Fed kicked off its annual Jackson Hole Economic Symposium (now held as a virtual event). Fed watchers tuned in to listen to Jerome Powell’s speech, looking for clues about when the central bank will start winding down quantitative easing. But the most consequential discussions at Jackson Hole came after the Fed chairman spoke, because they show the intellectual underpinnings that will guide monetary policy for the next several years. This year’s theme: an “uneven economy,” in which not everyone benefits equally.

It’s certainly important to understand the dynamics of a more polarized economy, but the attention on inequality suggests that monetary policy in America risks taking a wrong turn. The Fed is not the right institution to take on this issue. In trying to do so, it would undermine its own true mission.

For starters, it’s not even clear that the Fed can do much about inequality. Income and wealth inequality in America have grown over the past 40 years, but monetary policy has little control over their causes. Inequality often emerges when an economy undergoes a major transition. More globalization and new technology create new winners but leave others behind; the Fed does not have direct control over either. Monetary policy can at best smooth out the rough edges and reduce the severity of business cycles.

Some economists argue that the Fed can heat up the labor market by keeping interest rates low, resulting in lower unemployment and higher wages for low-income earners. But good evidence is scarce that a hot labor market results in higher wages, at least not after accounting for the inflation that comes with it. The Fed’s primary tools involve lowering interest rates, which increases stock prices, which in turn disproportionately benefits high-income earners, who hold more wealth. And if loose Fed policy results in higher or unpredictable inflation, lower-income Americans will pay a higher cost, since they own fewer assets that rise in value with inflation and spend more of their income on goods more sensitive to inflation.

Before the Fed (or anyone else) tackles inequality, it should assess the potential harms of doing so, which are poorly understood. Traditionally, economists have assumed a trade-off between inequality and growth: a fast-growing economy entails entrepreneurs and innovators receiving big rewards for their risk-taking and vision. Everyone else also eventually winds up better off, but their incomes and wealth don’t grow as fast. Some inequality is thus the built-in cost of having a creative, growing economy.

Some economists worry that inequality is inherently bad for growth. According to one argument, economies with high inequality don’t consume enough, because rich people save more of their income. But it seems a stretch to argue that Americans have been spending too little over the past 40 years. This argument also presumes that growth comes from consumption rather than from the investment (funded by saving) that has fueled such growth in the past.

Others argue that greater concentrations of wealth translate into outsize political power for the wealthy, who then use that power to further their interests. If this is bad for the economy, though, evidence again is scant. The wealthy advocate for many political causes, depending on their political views, and they tend to give generously to various charitable causes. Even if this theory were true, using monetary policy to undermine the political clout of billionaires would be a clear overstepping of the Fed’s mandate, obliterating any semblance of independence from politics.

While the economic case for reducing inequality isn’t clear, a moral case can be made. One could argue that it’s wrong for the few to have so much while the many have so little. But it’s not the Fed’s job to make moral decisions about the ideal distributions of wealth. This is an inherently political calculation—one that should be addressed through institutions directly accountable to voters. Moreover, the tools at Congress’s disposal—tax rates and control over benefits, for example—are better suited for taking on inequality. And these policies involve costs, too, in terms of growth. Voters should be the ones to decide whether they want to pay them.

The Fed’s role is to balance short- and long-term interests, making the hard choices that may harm the economy now in exchange for long-term stability and expansion. Once politics are involved, however, it becomes difficult if not impossible to make this trade-off. The Fed can do what it does because it has a narrow mandate: reasonable inflation and maximum employment. It needs to stay in its lane.





Source link

Central Bank Digital Currency Risks Stifling Innovation


Money matters, but most Americans don’t give much thought to its architecture. The Federal Reserve is studying the development of a digital dollar for public use, but money is too important to be left to central bankers. Congress, not the Fed, should set policy for general-purpose digital dollars.

Banks transact in central bank money. The public relies on commercial bank money and on Federal Reserve notes, which are central bank liabilities. A central bank digital currency (CBDC) would be a new Fed liability: digital cash that the public could use, equivalent to a deposit at the central bank.

Chairman Jerome Powell says that the Fed “would need buy-in from Congress, from the Administration, from broad elements of the public” to develop a CBDC, but Fed governors are split on the idea. One camp is keen to develop a CBDC for the public, while the second is inclined to let commercial banks take the lead in providing digital dollars. Fed governor Lael Brainard, a CBDC champion, contends that it would be safer than private alternatives; it would enhance financial inclusion and the ability to disburse relief and welfare payments, and respond to foreign CBDCs—such as China’s—that are used for cross-border payments. The development of a CBDC, Brainard suggests, would promote “innovation and competition in retail payments” while keeping the U.S. financial system at the cutting edge.

But a general-purpose Fed e-dollar actually risks stifling innovation on private payments. As the paramount regulator of the financial system and an entity with unlimited resources, the Fed could bury private competitors. In a talk, “Parachute Pants and Central Bank Money,” Fed official Randal Quarles questioned the need for a CBDC, highlighted the risks, and reminded us of commercial banks’ history serving consumers and businesses. In another thoughtful talk, Fed governor Christopher Waller expressed skepticism toward the case for a general-purpose CBDC. As Quarles and Waller argue, Fed e-dollars aren’t necessary to defend the dollar’s reserve-currency status or to reduce the number of unbanked households, the percentage of which has been falling. And of the 5.4 percent of households that remained unbanked in 2019, about 75 percent said that they don’t want a bank account.

CBDC advocates warn of the threat from China’s digital yuan, which Beijing is piloting in ten cities. But the dollar’s status as the world’s reserve currency won’t be challenged by the lack of a CBDC. Dollar reserves and dollar-denominated foreign debt and trade are already electronic. Moreover, it’s unlikely that non-Chinese businesses would find transacting using PBOC accounts attractive.

The private sector has a rich history innovating in payments and money. In the tenth and eleventh centuries, Chinese merchants created the first general-circulating paper currency. In the golden age of banking innovation, from the tail end of the seventeenth century to the early nineteenth century, Scottish banks pioneered interbank clearing of banknotes. More recently, banks created such global payment networks as Mastercard, Visa, and Swift, and the private sector developed person-to-person payment systems, such as Venmo, Square, and Zelle; digital wallets, such as PayPal, Apple Pay, and Google Pay; and cryptocurrencies, such as Bitcoin, Ether, and XRP.

Indeed, innovation in digital dollars is already happening. Circle’s USD Coin and Tether’s USDT are stablecoins—digital tokens, backed by dollars and dollar-denominated assets on account at regulated banks. To date, they’ve largely been used to trade in and out of cryptocurrencies. Chase and Signature Bank offer limited-purpose stablecoins that support instant payments between their business clients. Facebook’s Diem, a dollar stablecoin, has a plausible path to widespread adoption. Banks could provide dollar stablecoins for public use; they’d be commercial-bank liabilities, not central-bank liabilities, but as a practical matter they’d be digital money.

A law proposed by Congressman Don Beyer, the Digital Asset Structure & Investment Protection Act, would authorize the Fed to issue digital dollars and give the Treasury Department plenary power to ban bank stablecoins. Such regulatory absolutism would be the wrong approach, though. Instead, Congress should establish a liberal private-sector-oriented dollar-stablecoin regime, spelling out basic conditions under which banks could issue stablecoins. Unlike with a centrally planned and managed CBDC, competing and iterating bank digital dollars would continually improve.

The U.S. payment system works extraordinarily well and is already largely digital. Digital dollars would have a bigger impact abroad, generating cross-border payments and displacing debased national fiat currencies and payment systems. Because e-dollars would be easier to hold than greenbacks, they’d reduce banks’ deposit base to extend credit and curb central banks’ ability to pursue negative interest rates. However, in a normal interest-rate environment, people would still keep most savings on deposit.

In any event, banks issuing dollar stablecoins would deliver the benefits CBDC evangelists tout—and more.





Source link

The Moralistic Corporation: City Talk


Vivek Ramaswamy is a biotech entrepreneur, founder, and executive chairman of Roviant Sciences, and author of Woke, Inc.: Inside Corporate America’s Social Justice Scam. He recently spoke with City Journal associate editor Daniel Kennelly about the origins of the corporate embrace of “social justice” and why he believes there’s no place for politics in business.

How do you define “wokeism” in the book?

Wokeism is a belief system which holds that the social universe is governed by invisible power structures based on genetically inherited characteristics. This belief system makes a moral claim on those “empowered” to wake up to these invisible power structures and to correct injustices arising from them.

Critics often allege that wokeism is a form of Marxism. They have a point, but they’re off the mark. Like wokeism, Marxism was also based on the idea of invisible power structures governing social relationships, but Marxism posits that these power structures are based on economic relationships. By contrast, wokeism replaces economic power structures with genetically inherited ones.

So that’s the long version. In short, being “woke” means obsessing over race, gender, and sexual orientation. Maybe climate change, too. That’s probably the best definition I can give.

When (and why) did corporations begin to adopt this quasi-religion?

The fountainhead was the 2008 financial crisis. After that, corporations were viewed as the “bad guys,” and the old Left wanted to redistribute money from corporate fat cats to poor people. Agree or not, that’s what the old Left had to say.

But a newly ascendant wing of the Left—the new woke Left—had a different theory. To them, the real problem wasn’t economic injustice. It wasn’t poverty. Rather, it was racial injustice—and misogyny, bigotry, and so on.

That presented the opportunity of a generation for Wall Street and big business. If you’re Wall Street, Occupy Wall Street is a tough pill to swallow. But the new woke demands were easy: applaud “diversity and inclusion,” put some token minorities on your boards, and muse about the racially disparate impact of climate change after flying on a private jet to Davos.

They jumped at the opportunity. But they didn’t do it for free: their implicit demand was that the new Left look the other way when it came to leaving their power intact. And it worked for both sides. So in a nutshell, after 2008, a bunch of big banks got in bed with a bunch of woke millennials. Together, they birthed woke capitalism. And they put Occupy Wall Street up for adoption.

Soon, Silicon Valley did the same thing—censoring or “moderating” content that the woke Left didn’t want to see on the Internet. But in return, they expected the woke Left to demur when it came to leaving their monopoly power intact. The rest of corporate America then followed suit.

What is “stakeholder capitalism,” and what role does it play in the corporate embrace of woke politics?

“Stakeholder capitalism” is the idea that corporations should not only serve their shareholders but also advance other social causes. It used to be a challenge to the system. Today, it is the system. Milton Friedman might have worried that the expansion of politics to infect business would make businesses less efficient. I share that concern, but my principal concern is the inverse: that the expansion of business into politics represents a threat to the integrity of American democracy itself. Why? Because it demands that a small group of business elites use their economic power to settle political and moral questions that ought to be settled through the open exchange of ideas in our democracy. That might be how Old World Europe worked, but America represents the rejection of that elitist worldview.

“Stakeholder capitalism” is the intellectual progenitor of corporate wokeism. It was the response to Occupy Wall Street and the old Left: instead of taking the risk that the old Left would defang capitalism through the political process, stakeholder capitalism and corporate wokeism offered to address the concerns of the new Left not as an alternative to capitalism, but through capitalism itself.

The consequences are staggering, and I think we are only beginning to understand some of them. For example, once a corporation becomes a vector for advancing a social agenda, progressives don’t have a monopoly on pulling the strings. Sovereign nations—China, above all—have learned that they, too, can wield power as a nebulous “stakeholder” of a business under the new “stakeholder-centric” model. That’s one of the untold stories that I lay out in the book, and the details are downright frightening.

You write that the corporate dedication to social-justice causes is, for some, cynical and opportunistic—a modern form of “capitalist excess.” Yet you also regard it as one of today’s “defining challenges.” How does it threaten American democracy?

The idea that a small group of elites should settle normative questions behind closed doors is a cultural rejection of democracy. Capitalism works according to a one-dollar, one-vote system. That determines which products get voted to the top of Amazon’s bestseller lists, or which directors are selected to serve on the board of a corporation—and that’s okay. But democracy is supposed to work on a one-person, one-vote system, where each person’s voice and vote is unadjusted by the number of dollars that he or she controls in the marketplace. Stakeholder capitalism violates that principle by conflating market power with power properly exercised in the marketplace of ideas.

And democracy loses in another way. We live in a divided polity right now, and we depend on an apolitical private sector to bridge those divisions—whether we’re Democrat or Republican, black or white. Major League Baseball used to provide one of those apolitical sanctuaries. The NFL used to provide one of those sanctuaries. The workplace used to provide one of those sanctuaries. But as the private sector becomes politicized, we lose the solidarity that is itself a precondition for a thriving democracy.

How can we roll back the tide of corporate wokeism?

There’s no silver bullet. The solution requires a combination of legal solutions, policy solutions, and—most important of all—cultural solutions. In my book, I discuss solutions in all three categories. I view legal and policy solutions as symptomatic therapies, but what we really need in our country is a cultural cure—a revival of a shared American identity that runs so deep that it dilutes wokeism to irrelevance. What does it mean to be an American in the year 2021? I can’t remember a time when we more badly needed an answer to that question. The absence of an answer is the black hole at the center of our nation’s soul, and when you have a void that runs that deep, that’s when bad things start to fill it.

Today, corporations prey on our hunger for purpose and our moral insecurities to make an extra buck, much as a Virginia Slims manufacturer may have preyed on the adolescent insecurities of teenage girls in the 1990s. Banning corporate behaviors isn’t the answer. The real solution is to fill our moral hunger with more substantial fare. That’s really what the book is about.

Photo: akinbostanci/iStock





Source link

The Moralistic Corporation: City Talk


Vivek Ramaswamy is a biotech entrepreneur, founder, and executive chairman of Roviant Sciences, and author of Woke, Inc.: Inside Corporate America’s Social Justice Scam. He recently spoke with City Journal associate editor Daniel Kennelly about the origins of the corporate embrace of “social justice” and why he believes there’s no place for politics in business.

How do you define “wokeism” in the book?

Wokeism is a belief system which holds that the social universe is governed by invisible power structures based on genetically inherited characteristics. This belief system makes a moral claim on those “empowered” to wake up to these invisible power structures and to correct injustices arising from them.

Critics often allege that wokeism is a form of Marxism. They have a point, but they’re off the mark. Like wokeism, Marxism was also based on the idea of invisible power structures governing social relationships, but Marxism posits that these power structures are based on economic relationships. By contrast, wokeism replaces economic power structures with genetically inherited ones.

So that’s the long version. In short, being “woke” means obsessing over race, gender, and sexual orientation. Maybe climate change, too. That’s probably the best definition I can give.

When (and why) did corporations begin to adopt this quasi-religion?

The fountainhead was the 2008 financial crisis. After that, corporations were viewed as the “bad guys,” and the old Left wanted to redistribute money from corporate fat cats to poor people. Agree or not, that’s what the old Left had to say.

But a newly ascendant wing of the Left—the new woke Left—had a different theory. To them, the real problem wasn’t economic injustice. It wasn’t poverty. Rather, it was racial injustice—and misogyny, bigotry, and so on.

That presented the opportunity of a generation for Wall Street and big business. If you’re Wall Street, Occupy Wall Street is a tough pill to swallow. But the new woke demands were easy: applaud “diversity and inclusion,” put some token minorities on your boards, and muse about the racially disparate impact of climate change after flying on a private jet to Davos.

They jumped at the opportunity. But they didn’t do it for free: their implicit demand was that the new Left look the other way when it came to leaving their power intact. And it worked for both sides. So in a nutshell, after 2008, a bunch of big banks got in bed with a bunch of woke millennials. Together, they birthed woke capitalism. And they put Occupy Wall Street up for adoption.

Soon, Silicon Valley did the same thing—censoring or “moderating” content that the woke Left didn’t want to see on the Internet. But in return, they expected the woke Left to demur when it came to leaving their monopoly power intact. The rest of corporate America then followed suit.

What is “stakeholder capitalism,” and what role does it play in the corporate embrace of woke politics?

“Stakeholder capitalism” is the idea that corporations should not only serve their shareholders but also advance other social causes. It used to be a challenge to the system. Today, it is the system. Milton Friedman might have worried that the expansion of politics to infect business would make businesses less efficient. I share that concern, but my principal concern is the inverse: that the expansion of business into politics represents a threat to the integrity of American democracy itself. Why? Because it demands that a small group of business elites use their economic power to settle political and moral questions that ought to be settled through the open exchange of ideas in our democracy. That might be how Old World Europe worked, but America represents the rejection of that elitist worldview.

“Stakeholder capitalism” is the intellectual progenitor of corporate wokeism. It was the response to Occupy Wall Street and the old Left: instead of taking the risk that the old Left would defang capitalism through the political process, stakeholder capitalism and corporate wokeism offered to address the concerns of the new Left not as an alternative to capitalism, but through capitalism itself.

The consequences are staggering, and I think we are only beginning to understand some of them. For example, once a corporation becomes a vector for advancing a social agenda, progressives don’t have a monopoly on pulling the strings. Sovereign nations—China, above all—have learned that they, too, can wield power as a nebulous “stakeholder” of a business under the new “stakeholder-centric” model. That’s one of the untold stories that I lay out in the book, and the details are downright frightening.

You write that the corporate dedication to social-justice causes is, for some, cynical and opportunistic—a modern form of “capitalist excess.” Yet you also regard it as one of today’s “defining challenges.” How does it threaten American democracy?

The idea that a small group of elites should settle normative questions behind closed doors is a cultural rejection of democracy. Capitalism works according to a one-dollar, one-vote system. That determines which products get voted to the top of Amazon’s bestseller lists, or which directors are selected to serve on the board of a corporation—and that’s okay. But democracy is supposed to work on a one-person, one-vote system, where each person’s voice and vote is unadjusted by the number of dollars that he or she controls in the marketplace. Stakeholder capitalism violates that principle by conflating market power with power properly exercised in the marketplace of ideas.

And democracy loses in another way. We live in a divided polity right now, and we depend on an apolitical private sector to bridge those divisions—whether we’re Democrat or Republican, black or white. Major League Baseball used to provide one of those apolitical sanctuaries. The NFL used to provide one of those sanctuaries. The workplace used to provide one of those sanctuaries. But as the private sector becomes politicized, we lose the solidarity that is itself a precondition for a thriving democracy.

How can we roll back the tide of corporate wokeism?

There’s no silver bullet. The solution requires a combination of legal solutions, policy solutions, and—most important of all—cultural solutions. In my book, I discuss solutions in all three categories. I view legal and policy solutions as symptomatic therapies, but what we really need in our country is a cultural cure—a revival of a shared American identity that runs so deep that it dilutes wokeism to irrelevance. What does it mean to be an American in the year 2021? I can’t remember a time when we more badly needed an answer to that question. The absence of an answer is the black hole at the center of our nation’s soul, and when you have a void that runs that deep, that’s when bad things start to fill it.

Today, corporations prey on our hunger for purpose and our moral insecurities to make an extra buck, much as a Virginia Slims manufacturer may have preyed on the adolescent insecurities of teenage girls in the 1990s. Banning corporate behaviors isn’t the answer. The real solution is to fill our moral hunger with more substantial fare. That’s really what the book is about.

Photo: akinbostanci/iStock





Source link

Verizon’s Critical Race Theory Training


Verizon has launched an internal program teaching that the United States is a fundamentally racist nation and encouraging employees to support a variety of left-wing causes, including “defunding the police.”

According to documents that I have obtained from a whistleblower, Verizon launched the “Race & Social Justice” initiative last year and has created an extensive race reeducation program based on the core tenets of critical race theory, including “systemic racism,” “white fragility,” and “intersectionality.”

In the flagship “Conscious Inclusion & Anti-Racism” training module, Verizon diversity trainers instruct employees to deconstruct their racial and sexual identities and, according to their position on the “privilege” hierarchy, embark on a lifelong “anti-racism journey.” Employees are asked to list their “race, ethnicity, gender, gender identity, religion, education, profession, and sexual orientation” on an official company worksheet, then consider their status according to the theory of “intersectionality,” a core component of critical race theory that reduces individuals to a network of identity categories, which determine whether they are an “oppressor” or “oppressed.”

In a video presentation featuring a full-screen title card reading “Let’s talk about privilege,” then-Global Chief Diversity, Equity, and Inclusion officer Ramcess Jean-Louis (who has recently moved to Pfizer in a similar role) says: “As a black man in [America], we are viewed as less than. We are viewed as inferior. We are viewed that our life is not as valuable as anyone else.” Set to dramatic piano music and intercut with footage of the “Central Park dog walker” Amy Cooper, the video states that “weaponized White privilege” causes grave “danger” to African-Americans. Jean-Louis, speaking dramatically, to the point of nearly crying, concludes: “If we are not being viewed as humans, if we’re not being viewed as whole people with souls, these things happen and they will continue to happen.”

After establishing the intersectional hierarchy and threat of “weaponized White privilege,” Verizon instructs employees on the firm’s elaborate racial-etiquette system, which provides specific rules for engaging in “conversation about race.” The diversity trainers explain that employees should not commit “microaggressions” and “microinequities,” defined as “indirect expressions of racism, sexism, ageism, ableism, or another form of prejudice” that are “seemingly innocuous” and often “unconscious or subtle,” but make members of certain racial and sexual classes “feel different, violated, or unsafe.” Members of the privileged classes must instead engage in the “lifelong process” of demonstrating “accountability with marginalized individuals.”

As part of the company’s “antiracism” education series, #Next20, Verizon vice president David Hubbard interviewed Khalil Muhammad, great-grandson of former Nation of Islam leader Elijah Muhammad and newly minted professor of race at Harvard. During his presentation, called American History 101, Muhammad argued that America is fundamentally racist and needs a “new origin story,” replacing the narrative of “American exceptionalism” with the narrative that America was founded on “systems of racism” that remain at the root of our society. Muhammad argued that the Founding Fathers built a slave economy and that “this early version of global capitalism” produced the “economic incentives” that prevail to this day, with modern corporations “exploiting poor people in low-income communities” in a similar way to the slaveowners of the past. “This isn’t just Marxist talking points,” Muhammad said. “It’s just the fact.”

Later in the discussion, Muhammad claimed that the current American police force is designed to maintain a “two-tier society,” enforce geographic segregation, and protect the “wealth gap” between white and black Americans. The raison d’être of policing, Muhammad said, is to “make sure that kids are locked up,” “make sure that people stay in their communities,” and “make sure that they’re criminalizing poverty”—what he called “the bread and butter of systemic racism.” Black crime statistics showing that black Americans commit crimes disproportionately, Muhammad contended, “are themselves an expression of systemic racism,” used to establish “the collective guilt of black people” and to “[justify] inequality and racism and discrimination.”

What should be done? In another #Next20 conversation on “criminal justice reform,” Verizon hosted an activist named Adrian Burrell who openly advocated for “defunding the police.” As Burrell told Verizon employees: “I feel like over policing doesn’t work. And I feel like those same resources that are aimed towards hiring [police officers] with racist biases . . . need to be aimed at bringing more resources to the community at a at a root level, and then you just won’t need so many police.” Burrell added: “If you want to call that ‘abolishing the police,’ or if you want to call that ‘defunding the police,’ so be it.”

Verizon claims that this conversation, and its broader antiracism program, will “accelerate systemic change.” In reality, however, the company is promoting the conventional wisdom of the academic Left and the American bureaucracy. Diversity lecturers such as Muhammad, pretending to bring radical insights, have simply commodified critical race theory and sold it back to Fortune 100 companies—ignoring how fashionable ideas such as “defunding the police” are deeply unpopular with voters, including the majority of African-Americans.

Verizon’s corporate slogan is “Built Right.” If Verizon executives want to live up to it, they should scrap their antiracism program.

Photo by Christian Petersen/Getty Images for BIG3





Source link

Cutting Unemployment Insurance Benefits Led to Job Gains


In mid-May, the United States embarked on a labor-market experiment. The results are in: cutting unemployment insurance (UI) benefits led to job gains.

During the Covid-19 pandemic, the federal government had provided enhanced UI benefits, initially set at an extra $600 per week on top of the regular state benefits. The top-up was later pared back to $300 per week, and scheduled to run through September. In addition to the top-ups, the federal government extended the duration of unemployment benefits and expanded benefit eligibility to workers not previously covered under the state UI systems. While these enhanced benefits may have made some sense during the lockdowns in the pandemic’s initial phase in the spring of 2020, by early 2021 most states had experienced strong economic rebounds and businesses were looking to hire.

Many critics (including me) had noted from the outset of the program that the federal benefit enhancements meant that many workers would earn more while unemployed than they did while working, providing a strong disincentive to find a job. However, the unprecedented economic upheaval and volatility during the pandemic made it hard to isolate the role of unemployment benefits from other factors. Indeed, early economic studies failed to identify an effect on employment of the enhanced benefits through the summer of 2020.

But data released in early May proved decisive. On May 7, the April employment report was released, showing job growth far below expectations. On May 10, news broke that March job openings had risen to a record level. The simultaneous signs of strong labor demand by businesses but slowing employment confirmed anecdotal reports of difficulty in hiring and pointed toward labor-supply difficulties. Within days, several states announced that they would be ending participation in the federal unemployment-benefit programs. Eventually, the list of states ending benefits would grow to 26.

Thus began the great labor-market experiment of 2021. The experiment was not perfectly controlled, as the states did not decide to end benefits at random; rather, all but Louisiana were run by Republican governors. Relatedly, the labor-market conditions in May 2021 differed. The ending “red” states generally had fewer public-health restrictions during the pandemic and reopened their economies faster than the continuing “blue” states. As such, the ending states generally had lower unemployment rates and had seen a greater recovery of employment toward pre-pandemic levels than did the continuing states. Nonetheless, the subsequent performance of the labor markets in the two groups of states could show the extent to which the enhanced unemployment benefits were keeping workers on the sidelines.

While it is still early, the results of the experiment are starting to roll in. The first signs of an effect came in unemployment claims, which rapidly declined in the states ending enhanced benefits. While the termination of the federal programs extending the duration and eligibility for unemployment directly led to fewer workers on the total unemployment rolls, the terminating states also saw a sharp reduction in workers on the regular state UI system. The eligibility for these programs was not directly affected by the termination, but saw a cut in the UI benefit amounts only with the end of the $300 per week federal top-up. Between June 5 and July 17, the first four states (stopping benefits on June 12) saw a reduction of 26.3 percent in continued unemployment claims, while the next eight states (ending benefits on June 19) saw a 15.1 percent reduction, while continued claims in the rest of the nation fell only 0.1 percent. The relative declines in unemployment occurred in the weeks around the benefit expiration, consistent with previous research showing that reemployment rates are relatively constant over the duration of an unemployment spell but rise sharply around benefit expiration.

The evidence is clear: reducing unemployment insurance benefits sharply reduced unemployment rolls. And evidence is now emerging that the termination of the enhanced federal benefits has led to a modest boost in employment. Data on employment are less widely available, and constitute a short, noisy sample. But comparing the 22 states that ended benefits in June with rest of the U.S., and comparing the growth rates in the two months after the announcements with the prior two months, offers some evidence on the impact of the policy change.

Across all indicators, I find that the terminating states experienced improved labor market outcomes compared with the rest of the U.S. In these states, employment growth accelerated by more (in both household and payroll surveys) and the labor force grew more rapidly. The relative gains in private employment were even more than in total employment, and employment growth in the leisure and hospitality sector was especially strong. This sector was hit hard by the Covid-19 recession and, due to its low average wages, was likely most affected by the disincentive effects of enhanced unemployment benefits.

More granular data on the leisure and hospitality sector are available from private sources. Looking at daily employment records for a sample of mostly small businesses with hourly workers (largely concentrated in accommodation and food services), I found a notable, but modest, employment effect of the enhanced unemployment benefit termination in the first 12 states ending benefits. Shortly after the termination announcements in mid-May, employment among these lower-wage hourly workers rose by about 1.5 percent on average in the terminating states relative to the rest of the U.S.

While employment is recovering across the country, the termination of the enhanced federal unemployment benefits has provided a modest employment boost. Many other factors affect labor supply—greater child-care duties, continued health fears, possibly changing attitudes toward work—so reducing UI benefits is not a cure for all that ails the labor market. But of these factors, unemployment insurance is the most directly affected by policy decisions. Advocates could previously claim that there was no evidence that the enhanced benefits were restraining job growth. The labor-market experiment of 2021 renders that claim untenable—and shows, once again, that subsidizing unemployment leads to more of it.

Photo by ANGELA WEISS/AFP via Getty Images





Source link