- [Naomi] Hello, and
welcome to the MIT SDM
Systems Thinking Webinar Series.
My name is Naomi Gutierrez,
Communications Administrator for SDM,
and I am today's host.
Today's speaker is Nicholas A. Ashford,
Professor of Technology and Policy,
and Director of the
Technology and Law Program
at the Massachusetts
Institute of Technology.
He is a faculty associate
of the Center for
Socio-Technical Research,
in the School of Engineering,
the Institute for Work
and Employment Research
in the Sloan School of Management,
and the Environmental Policy Group
in the Urban Studies Department.
Dr. Ashford is the co-author of two books
on sustainable development,
and the author of numerous articles
in peer reviewed journals.
His talk today is titled,
"Sustainable Development at a Crossroads:
Challenges for Industrial Growth,
"Economic Welfare, and
Employment and Environment."
If you have questions for Dr. Ashford,
please enter them into the chat window
at the side of the video.
They will be addressed during
the Q&A portion of this session.
The recording of this presentation
will be available online
after today's session.
A link will be sent to all registrants.
And with that, thank you, Dr. Ashford.
- Thank you, Naomi.
It's a pleasure to give
yet another webinar
with the SDM program.
The work that I'm gonna be talking about
is drawn from years of
work on a book called,
"Technology Globalization
and Sustainable Development".
The recent edition is 2018.
Now that's a title that would
put even academics to sleep.
So, I think the sub-title,
which is "Transforming
the Industrial State",
might grab more attention.
And I will be talking
about the variety of ways
in which the industrial
state needs to be pursued.
Now, we at MIT do a lot of
work in policy analysis,
and not enough work in policy design.
Policy analysis is distinguished
from policy design,
in that you can analyze the past policies
to explain why we are, where we are.
Policy design addresses the issue
of what you gonna do about it?
Or, what are your options?
And that's where the
talk is gonna be focused.
Not only to describe the system,
but to describe what it
is that our options are
for transforming the industrial state.
One more comment, and that is,
most people think about
sustainable development,
as simply an environmental issue.
But as the title of the book emphasizes,
there is, the book is
rest on three pillars,
and at the bottom of
the picture of the book
is environment, economy, and employment.
So, really this is a three-pillar concept
which has to take into
account the policies,
which affect every one of those things.
Now, the book is used in a textbook
of the course with the same name.
But it's not just a textbook.
It is a blueprint for change.
And it's interesting that
many of the candidates
on the Democratic side for the candidacy
of the President, this time around,
have addressed some of these issues
like free tuition, or
like the minimum wage,
or like the four day work week.
Some are enthusiastic about
some of those innovations,
and interventions,
and others seem to be
silent on the matter.
And I think it's important that we wake up
the American electorate, and others,
to the options that we have.
Now, technological
change and globalization,
expressed as trade,
are the two drivers of change within,
and between the operationally-important
dimensions of sustainability.
Those three dimensions, as we said,
are environment, the economy,
or economic welfare, and work.
And we might ask, what
is the meaning, exactly,
of sustainable development?
And on the economy side, it is an economy
that provides goods and services
that are adequate to satisfy
the basic material needs
of all members of society,
and provides abundant and
equitable opportunities
for the realization of
the human potential.
This differs from other
formulations of concerns
with the environment that are
focused on market share, or GDP.
GDP, by the way, is
acknowledged to be a terrible
measure of the economic
welfare of society.
So on the economy side, the question is,
do people have the adequate
central material goods?
On the environmental side,
probably most of you are familiar with,
and it's enough flows of
environmental services
to provide a stable ecosystem,
and to support and improve
human health and welfare.
And then finally, from a work perspective,
work is just one of the ways,
where sustainable
livelihoods are fashioned
to secure satisfying engagement in work,
and equitable reward for labor,
permitting the maintenance of
a decent standard of living,
and conducted in a safe environment.
It's not only employment,
but it's also earning capacity,
which I'll expand upon.
But these things are driven
towards the corners of this triangle,
but it's also affecting the relationship
between the three corners.
The economy, obviously, has
an effect on the environment.
The economy and the environment
has an effect on employment.
And so, this a complex,
interactive system,
and it's appropriate
that this be presented
in a form which deals
with systems analysis,
because it is a systems
approach that I will follow.
Now, we start by asking the question,
how might the modern industrial
or industrializing state be envisioned?
That is, what is the system?
Well, the system has a supply side,
which is the top left.
And it has a demand side,
and the obsession, if I
may say, of the economist,
are the supply and the demand be in sync,
and the second belief is
that supply and demand
are independent quantities.
These are problematic assumptions.
On the supply side, we
have what most industrial
or industrialized, a society do,
they have an extraction
industry for oil and materials,
in mining, manufacturing, agriculture,
transportation, energy, as a system.
Services, housing and information,
and communication technology,
including what is now, hot
on the lips of everybody,
artificial intelligence.
Now, on the consumer side,
there's individual consumption.
There's economic consumption
by economic organizations,
which are independent individuals,
and then the government
itself, is also a consumer.
And these two forces,
what's the supply, and what's the demand,
have created what today
we understand to be some
sustainability challenges.
Now there is first, the
inadequate supply of,
and access through,
essential goods and services.
That's the economic dimension.
And then, there is a whole set of issues,
which are in green, appropriately,
which go to the issue of the environment.
Yes, they include climate disruption,
but, it's not the only
environmental problem.
There's toxic pollution.
There's the depletion of resources,
and these things stem
from the industrial system
we have with effects on the biodiversity,
and ecosystem, and also, the
term, environmental justice,
which means that certain
people in certain communities,
not only do not receive
adequate attention,
in terms of their environmental problems,
but they are more adversely affected
and environmental
justice has come to mean,
not only the environmental dimension,
but the opportunity for employment.
So the second pillar, is in green here,
and then the third, has to
do with purchasing power
through employment, or otherwise,
and inadequacies, and inequality,
in earning capacity, lead
to economic inequality,
which parallels environmental inequality,
and these are the three dimensions
of sustainable development
which I will address during this address.
Now, never let anybody stand up
and tell you what the problems are,
if they are not also willing to tell you
what the solutions are.
And the solutions fall
into five different groups.
One is, of course, education,
and human resource development.
If we were smarter, we not
only find better solutions,
but we might vote for governments
that implement those solutions.
Then, industry that recognizes
that it has been responsible,
along with consumers, for
unsustainable economies.
Say well, leave it up to us,
we will solve the problem.
We recognize our responsibility.
Then, there's the issue of
government intervention,
or regulation, until the
collapse of the financial system,
government regulation was
often not even included
on people's intervention list,
but now, people are asking,
"Well, who is watching
the financial industry?
"And has it been solved?"
And then, of course, stakeholders believe
that neither the government,
nor the private sector
are looking out for the major interests.
And so they ask that, state
be involved in the political
and technology-related process,
in order to ensure their
interests are addressed.
But finally, the reform
of the financial system,
which so many analysts ignore,
reflects the fact that
the financial system,
which lead to the breakdown
in financing in 2008,
and what followed, here,
and in Europe, and in Asia,
means actually, unless we
reform the financial system,
we aren't gonna be able
to make much progress
in the environment, or employment.
So, this is the system that I would
have presented maybe 10 years ago.
Since that time, there is
some things that I would add,
and that is, first of all,
the assumption that supply
side and demand side,
are independent, turns
out not to be correct.
Because producers create the
demand through advertising,
and other mechanisms, control of Congress,
and so, supply and demand
are not really independent.
And secondly, the whole
financial structure
has done a number of things to distort
what you might think
would be an equilibrium
between supply and demand,
which is what classical
economists try to give us.
And one is that, there
are subsidies to industry,
so that oil is cheaper than it should be,
so that agriculture is
cheaper than it should be,
and affect markets in that way.
But credit is also
given to both producers,
and the suppliers of services,
and it's also been given
to people to buy mortgages
that they can't afford to handle,
or products that they
don't necessarily need.
And so, both finance and
producer-created demand,
really affect what the interaction between
supply and demand, and if
one doesn't understand that,
that you tend to work
at a theoretical level.
Also on the supply side,
I've put in red, energy.
Because energy, not only is essential,
for economic growth from
a historical perspective,
and we may not have that driver,
at the extent to which we had,
but energy is also a challenge
from an environmental perspective,
in terms of greenhouse gasses.
So this is the system.
I guess if the PowerPoint was frozen,
and I could only show this one slide,
it would be the slide that I would think
would be most important to understand.
Now, the factors of production,
which drives the supply side,
are in critical challenge.
There's an expanded list on the right
of the factors of production,
and the bolded, factors are the things
which are most likely in control,
or influenced by the private sector.
And the thing about the
factors of production,
is I said, is they do not
reflect their full cost.
The full freight is not contained
in the price of the factors of production,
because of a failure to
internalize negative externalities,
a concept borrowed by the economist,
and so, what is the meaning,
after all of equilibrium,
if both the supply, and the demand are not
in their natural states, so to speak,
that there's great influence
between them, and in each?
And then secondly, the use of labor,
which is an important mechanism by which
purchasing power is established,
has been made not as useful,
because when the economy is volatile,
people would rather invest
even in more expensive technology,
which they could put in
mothballs, rather than labor.
Because you can't get rid
of a third of the workers
at your workplace for two
years, and then bring them back.
So, it turns out that the
volatility of the economy,
which is exasperated by
the financial crisis,
has really downplayed the importance,
ability to labor serve, as a
important factor of production.
I would say that we, the financial crisis,
actually has presented and
put us in a perfect storm.
We tend to become involved
with presidential politics,
but if you go a little deeper,
you'll find that the perfect storm is fed
by more fundamental issues.
And we are facing the
longest recovery period
of jobs or employment in modern history.
Unemployment rates do
not tell the full story,
and I'm embarrassed for the press
that only announces the good news
to say that unemployment
rates are down historically,
but they ignore the
people who are retired,
and no longer looking for jobs.
People who've been looking
for jobs for two years,
and no longer look to jobs,
and it also ignores temporary,
and contract employment.
So you have to ask,
what is the job rates at various sectors
of both permanent and contingent workers?
And how have the wages, and
the unemployment changed?
Because if you don't take into account
the shifting wage structure,
giving somebody a statistic
on, as Trump has done,
on unemployment rates
is only half the story.
And that we are facing,
as many of you know,
unprecedented wealth
and income inequality.
Bears on the work of Piketty in France,
who studied this U.S. situation.
And this has a profound
effect on economic,
and the political agenda,
in democratic countries
on both sides of the pond.
And as Brynjolfsson and
McAfee in their book,
"The Second Machine Age",
talk about, we are hollowing
out the middle class
with a divergence
between the stock market,
which some people think
is the real economy,
and the real-real economy,
where people are feeling high pressures.
Now I will give you statistics
to show you how all of
these are bearing out.
And then finally, as I mentioned,
there's great volatility in both the U.S.
and the global economic system.
We can't expect labor and the environment
to play a principal role,
when in fact, there is
volatility, as we see it.
Now, part of MIT's religious conviction,
and both leftist and rightist,
on the government side,
is that we seem bent on believing
in an economic recovery.
And we believe not only in GDP,
which is a terrible metric,
but we believe in productivity,
which is an even worse metric.
Because it is total output
by all factors of production,
divided only by the labor input.
And, it is this recovery,
should be contrasted
with the transformation
of the industrial state,
which is not just going
back to where we were,
with R&D and innovation
driving the economy,
the real economy.
We continue to believe that
increasing technological innovation
is the most-assured
pathway to better times,
and as Brynjolfsson and McAfee have warned
in parts of their writing,
this may not be the most
assured pathway to better times.
Global climate disruption,
and environmental issues
remain, basically, unaddressed.
We have not really taken it seriously,
and the different democratic candidates
have different solutions, some adequate,
some really inadequate, to
these continual problems.
And as I indicated, reform
of the financial system,
remains illusory.
We have to control the great
inflation in investment,
that goes beyond the
traditional leveraging
of financial institutions
of a factor of six,
to invest in technology.
And we have, frankly, an
unresponsive political system.
That's what the presidential debate
seems to be centering on.
But you and I know how unresponsive
the political system really is.
Now, I said that we had a perfect storm.
And we have a current crisis.
And what does that imperfect storm,
if you saw the movie, or otherwise,
is a reinforcement of bad
outcomes that are connected.
Finance leads to terrible differences
in wealth, and income concentration,
which affects the willingness
to create jobs and employment.
And because consumption is down,
and if consumption is
down, production's down.
And so, you don't have employment
linked to that production.
And at the end of the day,
how much attention can be
paid on the environment?
And the answer is, not much.
So, the book that I have
written, and revised,
deals with the inter-connection
between these forces,
which all combine to give
you the worst perfect storm
you could ever imagine.
You couldn't write a
film score, or a play,
to have things be worse
than they really are,
in terms of the direction
that things are going.
Now, the solutions are
provided in the book.
And I won't go through any kind of detail.
That we are detailing many
things that you can do.
First there should be
a shared responsibility
between government and the private sector,
as well as, stakeholders to
basically take responsibility
for the solutions to solve this problem,
and promote more sustainable
industrial production,
and consumption.
And the strategies to
improve health, safety,
and the environment are clearly needed,
not only global climate disruption,
but health, safety, and the environment,
I don't need to point out to you
how the environmental
agencies are being decimated
by this administration,
with the acquiescence of the Congress,
at least with the
acquiescence of the Senate.
And we have to pay attention,
and solutions have to be designed for
meaningful, rewarding,
and safer employment,
with adequate employment capacity,
and more sustainable trade.
Because if trade is not sustainable,
the impact on labor and prices
is what we don't want it to be,
and we need to embark
on a deliberate strategy
to decrease unsustainable growth.
And I will give you specifics
of what interventions
we need to consider to
achieve these goals.
Before I do that, I wanna point out that
the last four industrial revolutions
in 1771, 1880, 1829, and 87, and 1908,
was driven because, as
Robert Ayres has shown,
there was a cheap supply of energy
that became available, cheaper,
and cheaper, and cheaper.
But the Newton Next Industrial Revolution,
is by, said by Carlota Perez,
an economist at University
College, London,
that is likely to be an ICT
revolution, add AI to that.
And the problem with that,
is that it's probably not gonna happen.
The assumption that AI and ICT will create
computer-driven growth, is
gonna create enough jobs
across the needed sectors,
is probably not the case,
and the expectations and belief in this,
even though Carlota Perez says,
"Providing we go green,
"I'm gonna show you that
going green is not enough."
It's not enough to give
the people the jobs
and the earning capacity.
Good for the environment,
but not good for creating
the traditional mechanism
of jobs associated with
industrial development.
So, we are basically not
moving on the so-called boom,
that's gonna come from
unrealistic expectations
about the industrial revolution.
So I'm probably one minority, of one,
that do this, not how,
not taking for granted,
that just training workers
for the new technology
is gonna create enough jobs.
I am in the process of creating a plan B,
which is what if the jobs aren't there?
How do you give people money
to purchase both our heating oil,
and their needed pharmaceuticals?
Now, the troublesome
realities which I will
demonstrate to you, in a
series of subsequent slides,
is that there's job polarization,
and the hollowing of the middle class,
just like Brynjolfsson
and McAfee talked about.
And that there is a three decade decline
of labor share of total income,
going down from the traditional
50% to less than 33,
with the evolution of the
winner-take-all economies,
and small number of firms
that dominate the important sectors.
That there is an increased
cost-of-living at the same time.
There's growing income
and wealth concentration,
even since Piketty studied it.
And the economy has substantial,
unutilized productive capacity.
We could produce more,
but that would have an
environmental problem,
but we are not for a variety of reasons.
So the problem is not
the technological ability to produce more.
So the problem is to do so profitably,
equitably, and sustainably.
And I will come back to
showing you two ice hockey's.
One is the change of income
concentration at the top.
And the second, of course,
is the increased production
of greenhouse gases,
like methane and carbon dioxide.
And so the currently
discussed, long term solution,
especially on the
conservative, or economic side,
is that the solution to un-sustainability
is technological advance.
This is an advance promoted,
and by both the U.S.,
and the European Union.
And my question is, and you
can guess what my answer is,
is optimism justified?
I think optimism is not justified.
Technological advance can eliminate labor
that contributes to effective demand.
So if you get rid of labor in this sector,
and you get rid of labor in this,
and you lower wages in that sector,
here's my rhetorical question.
Who's gonna be left to buy the products
of the industrial state?
And when people, one
part of the society says,
"Oh well, we'll just trade;
we'll just have more trade."
But this is happening all over the world.
So you're not gonna
have more people buying
things from abroad either,
because the same dynamics are functioning.
Now here's a series of
slides which will show you,
what it is that's happening.
First of all, the median
family, I'll go back to this.
The median family income, right?
Is below the labor productivity,
and this means that the productivity,
which is created by replacing
labor with technology,
that labor is not getting the share,
families are not getting
the share of those advances.
And then, meanwhile, real
GDP per capita is going up,
but it's not enjoyed by most people,
and private employment is
still yet to be desired.
The chart of Manufacturing
Output versus Employment,
is even more revealing.
The blue curve is manufacturing output,
which continues to go up.
And manufacturing employment,
which continues to go down.
And I should say, also, union membership
in manufacturing is
probably the order of 4%.
Nationwide, union membership is 7%,
11%, and this is considered to be lower
than the historical 25% that we had.
Now here's a set of
slides that are dashed,
lines that are dashed and solid,
the, in the three different countries,
the U.S., Sweden, and Japan,
and you see that the employment,
the output of the society
continues to go up
in those three countries,
but the manufacturing
employment continues to go down.
So this is the great decoupling
that people talk about.
And if you look at the skill of workers,
which Brynjolfsson had talked
about, you'll see that,
what's happened with the orange employment
in the period 2007 to 2012,
is that it's decreased.
That is the percent change
in employment has gone down,
mostly in middle-skilled workers.
So we're re-allocating, instead
of a Gaussian distribution
of skills, we've got a bimodal
distribution of skills,
and the middle is being
relegated to the extremes.
There's job polarization,
and 94% of the net employment growth
in the U.S. economy from 2005 to 2015,
has occurred in alternative
work arrangements
like contract work, or
contingent employment.
The conventional full-time
job is disappearing.
The Millennials are even in
a worse state of affairs.
These are the Millennials
and their deviation of wealth
produced previously has gone down,
and so, if we thought the Millennials
were being as good as their parents,
you've got to take a look
at Bloomberg's statistics,
which indicate there's
really a problem here.
Now, the distribution of family income
over the last 50 years, is
that the 90th percentile
does really well, the 10th
percentile does pretty badly.
The 50th percentile
doesn't do much better.
And so, the skills are
driving income inequality,
as the amount of skilled workers
are no longer encouraged,
and that the ownership
of capital is taking out,
basically the income
that used to be shared
after the war, with labor.
And this is a world-wide phenomenon.
The black indicates that the change
in occupational employment
is present in all countries.
And so, this is not
just a U.S. phenomenon,
that trade and automation isn't going up,
while labor share of GDP, is declined
in 42 of 59 industrialized countries.
So it is a global phenomenon,
which is one of the
reasons that both trade
and international
agreements are important.
In the age of automation,
as production becomes
more capital intensive.
And owned by the capitalist
distribution of earning,
will become even more capital intensive.
And with the breaks
that we give to capital,
and investment, and the
taxing that we do to labor,
this problem is just gonna get worse.
The premiums that people pay by workers,
and for family coverage,
have gone up tremendously,
and employee owners,
earnings have gone down,
even compared to inflation.
And so you find this great
decoupling continuing.
And some of this work is
also been done at MIT,
with David Autor, and Acemoglu's
work, just to name a few.
Now, if I break up that premium,
you see that premiums for hospital work,
and tuition, has gone up.
Medical care has gone up.
Wages have not kept up,
that's the dotted line.
And then housing may have
come, become slightly,
a little cheaper than it was, or new cars.
But basically what people
have to spend their money on,
has become out of reach.
And the non-tradable
services like child care,
have become very expensive.
You can't simply substitute that.
So manufactured goods,
with import competition,
like TVs, is very different
than it used to be.
Here's a distribution by
both whites and blacks,
and Hispanics.
And you'll see on the left graph,
that black family wealth
has hardly gone up.
While white has gone up tremendously,
Hispanic parallels for
that distribution problem,
so, there is a discriminatory affect,
as interestingly, parallels
the role of immigration
and migrancy in both
the U.S., and in Europe.
But it's very clear who's benefiting
from what economic growth occurs.
The richest 1% bagged 82% of
the wealth created last year.
And the poorest half of the community,
of humanity, got nothing.
Stiglitz is one of the
economists that I teach,
that is really worth listening to.
He and Guy Standing, economists,
who are not routinely taught
in economics departments,
or business schools anywhere,
and what Stiglitz says is,
"Inequality and unearned
income, kills the economy.
"The rules of the game can be changed."
And he's written something
for the Roosevelt Foundation,
which is called "Changing the Rules".
Which is a detailed list of
mostly economic interventions.
That I have adopted in my final slides.
But Stiglitz is maybe, I
think, our best economist.
And hard to beat in terms of
what he writes and talks about.
And yet, you know, his
writing is not popular.
Even though he won a Nobel prize.
Now, the two hockey sticks.
One is the past, this is
the global climate change.
And you can see, towards
the right of the graph,
things are going out of control.
At the same time,
look at the changing
concentration of wealth.
It's becoming much,
much more concentrated.
From '92 to '95, to '98, to 2001,
2004, 2007, 2010, 2013, 2016,
so we have a real dispersion of wealth.
And this relates to who
controls the economic agenda.
Now the book has these 13 chapters in it.
It provides a framework
to enable practitioners,
students, readers,
to understand the
critical levers of change.
If you don't hit those,
you know, it's not, for
example, just unemployment rate.
And then, there's a whole discussion about
the attempts to internationalize trade
through the Trans-Pacific Partnership,
in which the U.S., withdrew,
and the Trans-Atlantic Trade
and Investment Partnership,
which the U.S. is not letting happen.
And by the way, Brexit has
its own problems in the U.K.,
and Boris Johnston says to Barnier,
negotiator for the European Union.
Well, we want a trade agreement
like Norway, with European
Union, and Barnier says,
"Well, yeah, you can
have a trade agreement,
"but, you have to adhere
to European health
"and safety standards."
He said, oh, no, no, no, no,
we'll pay attention to
World Trade Organization,
and safety standards.
But it turns out that
World Trade Organization
is dead, it's moribund.
The U.S. has not appointed
people of the appellate board,
so there is no international agreement
that people really can enforce.
And we are not successful,
but that's one of the
reasons that we have,
for example, negotiated so
many bilateral agreements,
us and Jordan, us and
South American countries,
individually.
If you do it individually,
it turns out that developing countries
get a very poor deal.
And NAFTA, re-negotiation
is nothing to brag about.
So the book, which deals
with these 13 chapters
in these parts, is really something
you will not find anywhere else,
and which, I am told by
students who take my course,
based on this textbook,
that I changed their life
in some significant way.
Now, there are policies that exist
to produce impacts from trade agreements.
You should use domestic policy,
which I will talk about to compensate,
or offset the losses, to
negatively-effected workers.
Because there's no question,
initially it was technology displacement
that caused a loss of jobs,
and latter, the latter
time, from 1990 onwards,
it was increased trade with
very low wage countries.
We should stop pursuing
new trade agreements
that protect the returns to capital,
while undercutting wages.
And finally, we have to
re-orient international policy
away from regressive trade agreements,
and towards measures that will
benefit workers both here,
and abroad, but merely
most of the money goes
to the importers and the exporters,
and not to the people who
benefit from the economy.
This is the average
greenhouse gas footprint
from the first quintile
to the fifth quintile.
People have suggested,
without thinking very carefully about it,
that you could tax these people more,
and give it to the poor,
but it turns out that the poor
spend a higher proportional rate
of their income to goods,
which are harmful to the environment.
So, you can redistribute the consumption,
but if you don't limit
consumption as a whole,
you're actually gonna end
up with more problems.
And so, the redistribution
of income, not wealth,
but income, has been pursued with the idea
that you would consume less.
It's not necessarily the case,
and so you've got to do other things
to decrease consumption.
Now here's a picture
having to do with trade.
These are the climate goals
pledged by China, and the U.S.
And the U.S., at the same time,
China was saying, we're
gonna turn around in 2032,
but we're still in great excess
of the greenhouse gas
emissions in the U.S.,
and by the way, one of the
reasons this is going down,
is because the economy
is not hot any more.
And that's the problem.
Europe is here.
Russia is here.
Japan is here.
Now, you can say, ah, the Chinese are bad.
But it takes eight times as much energy
to deliver a refrigerator in Pittsburgh
that's made in China,
than to make it here.
So, from this great emissions
of the wrong kind of energy,
greenhouse gases from coal in China,
you should subtract China's contribution
for the substances that are, in fact,
bought by the Americans.
If you change that, American
emissions don't look good,
and China is much, much less.
Either trading partners
for goods and services
that you could see that
the exports are here.
The imports are much
higher in China, Canada,
and Mexico, and even
in Japan, and Germany.
So, when I say that we
have deficit spending,
it's because we import much
more goods than we export,
and this has an enormous impact
on employment, and prices.
Stiglitz reminds us that
inequality is not inevitable,
it is a consequence of the
way growth is taking place.
Piketty documented this, of our
viewing for re-distribution.
Stiglitz wrote about
re-strengthening individual rights,
and regulation of the financial markets,
and the Euro Foundation,
which is an European organization,
documents that unemployment
has been the main driver
of growing inequality
since the Great Recession.
So we have a major problem.
Employment is not just a
consequence of producing more.
So, what are the causes of
unsustainable industrial system?
What are the visions for
a sustainable future?
And what are the carrots to be fashioned
to achieve that future?
Most analysts will present
these three questions
as sufficient to describe
the task in front of us,
trying to find the economic
carrots and sticks that work.
But there's a missing question,
which is who's standing in the way?
And the people who are
standing in the way,
are the owners of capital.
The corporate policies,
and the lack of government
to rein in the problems.
So, you can't just ask,
what's a good idea?
How do you implement it?
You have to ask, who's
likely to resist it?
And when I now talk
about the interventions,
we'll talk about that.
Is growing inequality an inevitability?
Will it eventually hinder growth?
The answer is yes.
And Gilens stated from Northwestern,
has documented the fact,
that the very wealthy, now
the extreme in consumption,
really basically control the agenda.
And the policies that we have in store,
or the ones that we don't adopt,
are a consequence of the elite,
basically producing the agenda.
There's a vast discrepancy
in government responsiveness,
decisions with different levels of income.
The research revealed the negative effects
of inequality, on
democracy and governance.
So inequality has effect
not only in economics,
but it has an affect on what
we're gonna do about that.
So, you have to redistribute
income and wealth.
One of the ways to redistribute income
is to change the tax system.
Obviously more, a higher
tax rate for the wealthy,
as income, and a wealth tax,
is something you need to think about.
That's not likely to go down very well.
Unless it's, although,
Sanders talks about a
small increase in wealth
to fund basic education.
To fund hospitalization, a
health care system that works.
You can increase the minimum wage.
And the studies have shown that cities
or states that increase minimum wage
do not decrease economic growth.
You can adopt a four day work week,
which some countries in Europe,
and New Zealand have adopted,
and they found out that workers
produce more in four days,
than they've produced under
the old system, under five.
So, you can increase the
leisure time that workers have,
which will have less
deleterious effects on them,
although you've gotta be careful,
because people have new leisure time,
they're gonna buy a snow mobile,
and they're gonna have, take more trips,
and so, you may increase the consumption.
The original push for a four day work week
didn't come from making
it better for workers.
It made it to try to decrease consumption.
But that turns out to be not a driver
that you really wanna talk about.
You can change the kind of dynamic
that exists in labor law.
Because, obviously we've
fallen dramatically
in unionization, and that's
where collective bargaining
decreasing has suppressed the labor
increases that were legend.
You can engage in something
which used to be talked about,
and is present in Scandinavia,
which is called technology bargaining.
That is before technology is adopted,
which displaces workers with the union,
you bargain about how that technology,
which technologies adopt.
So workers having a say
in the kind of technology
that is adopted by the firm,
is not an American practice.
But it is a European practice.
We ought to think seriously about that.
You can pay women mostly,
who take care of children,
and the elderly, they are
not paid, it's unpaid work.
You could have an universal basic income,
although that will put a lot of pressure
on the government debt that exists.
And that reminds me.
A lot of what needs to get
transferred to ordinary people,
either as earning capacity,
or as increases in wages,
may require losses in
private sector profit.
But it also may end up giving you
a large amount of deficit spending.
Now, of course, we as a nation,
spend more money executing wars
than any other country in the world,
or five or ten countries combined.
And so, we can do deficit spending,
by populating those programs.
But also, we could, instead
of giving people more money,
we could provide a healthcare system
that operated, an educational
system, which was free.
Environmental protection,
all the things which are not being done,
would require government spending,
but you could tax the firms.
You could tax the corporations
which now pay a legendary low
percentage of corporate tax.
You could tax individual
wealth, which is different.
So in the book, and in the paper,
which I will extend, for this lecture,
are a whole variety of interventions,
which basically correct
what has been wrong.
Increased collective
bargaining have changed
the nature of demand,
so that people don't want,
the 80% of new cars sold is SUVs.
You get just as fast
from one place to other,
if you drive a small car.
Maybe you'll park a lot faster, as well.
So, I mean, the problem,
we're operating under a system which says,
if you wanna make more money,
you gotta sell more stuff.
We could implement a system,
where the less you sell, the
more profit industry makes.
You just have to do it
through a pricing mechanism
which, for example,
part of the water
conservation in the Southwest.
You give industry more
money for selling less,
and consumers are taxed for
things which they don't need,
and which are environmentally harmful.
All of these things, is
gonna dislodge somebody
who has a dog in that fight.
So it's gonna take a
lot to have that happen.
It is not impossible.
Some things are more difficult.
There are specific changes
which could be listed,
and I will append the paper.
So let me stop here, it's
seven minutes to one.
And you probably wanna
take some questions, right?
- [Naomi] Sure, thank you
Dr. Ashford, for that talk.
I think it covered a lot of ground.
And has given us all a lot to think about.
We did have some questions come
in while you were speaking,
so I'll start with those.
If any of our viewers
have further questions,
please feel free to enter
them in the chat window.
And we will make the
missing slides available
after this presentation.
So the first question is from
Charlotte Sullivan, who asks,
"How can we address the bias in higher ed,
"that social entrepreneurship
is the most powerful means
"for progress versus policy design?"
- Well, I think that the fault
in the American educational
system, isn't the higher education,
it is the lack of an
operating school system
at the primary and secondary level.
My daughter who graduated Syracuse,
at the top 1/10th of her class,
learned at the university
what I learned in high school.
So the quality, what's being taught,
the remuneration to teachers,
which is something Sanders talks about,
the quality of schools being
dependent on local finance,
and when people have
educated their own children,
they don't wanna educate anybody else's.
So I think, social, I
don't know what you mean
by social entrepreneurship.
But social entrepreneurship for some,
means social investment in hospitals
and educational institutions and the like.
But part of the failure
of the political system,
is the fact that critical
thinking no longer
is responsible for real facts.
Alternative facts, it's
an astounding observation
that people would vote against
their interest, but they do.
I hope that answers your question.
- [Naomi] I think that's a start.
I don't know that there
was more information.
Charlotte, if you would like to clarify
what you mean by social entrepreneurship,
I'd be happy to expand on that.
George MaCrae asks probably
a fairly loaded question,
but, whether there's any politician
who's addressing these issues,
and calls out specifically
Yang, Steyer, and Bloomberg.
As whether they bring
anything useful to the table.
- Well, I think Steyer brings
something to the table,
by pointing out the
corporations, so does Bloomberg.
Yang, has a lot of these
ideas incorporated.
But so does Elizabeth
Warren and Bernie Sanders.
Buttigieg doesn't seem to have that many,
and neither does Klobuchar.
But whether America is
ready for a shared economy
in the sense, there still
is retained a belief,
that the way you get an
industrial society moving
is by supporting the entrepreneurs
and corporate investment.
But that isn't what the facts show.
That isn't what the facts show.
Because the labor share
and the standard of living
has fallen for, across the
board, across the board.
And it's not my preference
for a socialist agenda.
It is my observation that
the economics of the times.
- [Naomi] Sure, I think the next question
actually kind of touches
on that a little bit.
Which is a question as to whether
there are studies that look
at levels of participation,
in government and democracy,
in relation to income inequality.
I think you touched on that a little bit
as far as the policy outcomes,
not really reflecting
the preferences or needs
of poor, or middle-income people.
- Well the work by Gilens and Page,
shows that the private
sector, and the elite,
the top 1/10th of a percent
get from government the
kinds of regulations
and legislation that they
want 94% of the time.
So the public doesn't
get from the legislation
what they actually want,
because they do not control
the political agenda.
This is both a problem with
finance, campaign finance,
but it's also, the more
powerful have access.
And they're given access.
And other people are not given access.
I think at the lower end
of the economic scale,
people concerned with
environmental justice
in their communities do have impact,
and they do affect local policy.
But, which brings me to a point,
which is, it may be that
more power has to devolve
to some of the states, than
to the federal government,
because the federal
government seems truly broken.
- [Naomi] And I do have a clarification on
the social entrepreneurship--
- Okay.
- [Naomi] Question, excuse me.
Which was asking, basically
looking at centers
like innovation hubs, and the general idea
that designing our way out of these issues
is encouraged, but that's
by starting responsible
businesses versus political
organizing around better policy.
So I think, they're thinking of things,
like you know, green startups,
or groups that are trying to
create solutions, rather than--
- Okay, I have indicated that
going green is not enough.
So the green startups may have,
very often, have a negative effect
on unemployment someplace.
This place, cool, increase
solar panel employment.
But it doesn't balance out.
I am, I mean, I've been
in this area 47 years.
And I think that the issue
that the private sector
adheres to corporate social responsibility
is highly exaggerated.
- [Naomi] This one's a
little more philosophical.
Can we become sustainable
without addressing
greed and fear?
Is changing our beliefs
a way from the idea
that income growth is
the key to a better life,
the real change we need?
I think you also need less greed.
I mean, I think the Greeks have a saying.
They say that the suit that
they bury you in has no pockets.
And people ought to understand that.
But increase the minimum wage.
Provide a guaranteed basic income,
or institute a negative income tax.
Provide funds to transition
or re-educate workers.
Provide guaranteed government jobs
through Keynesian spending.
Fix the potholes and paint the bridges.
It will start things.
Pay those doing unpaid work,
I've already mentioned that.
Shorten the work week,
I've mentioned that.
Change the effects of taxing
of labor, by taxing pollution,
and reducing the tax on labor.
If we don't want pollution,
and we want work,
why are we taxing work, and not pollution?
Change the taxation and incoming wealth.
Increase the participation
of worker and employee
stock ownership plans.
Adopt the recommendations
of Marjorie Kelly
in the ownership society,
by creating B corporations,
that invest in public services.
Have people invest in building hospitals
and educational institutions
for the community.
Institute the central
tenants of binary economics.
Let people earn more money by owning.
Make them into mini capitalists.
Increase the contribution of employment
to productivity by designing work
back into the production process,
and the delivery of services.
So all of these things
affect different parts
of the way the economic system works.
And there's another whole
slide that I didn't include.
We'll do, we'll change and
add it, if we can, okay.
- [Naomi] All right.
- It's now three minutes after one.
- [Naomi] Yeah, it's unfortunately,
I think we do have to wrap up.
- Do you have any more questions?
- [Naomi] I think we
partially addressed them.
So I think we'll be okay wrapping up.
So I'd like to.
- [Man] Have an email
that he can be reached at?
- [Naomi] Is there an email address
where people can reach you after--
- NAshford@MIT.edu
- [Naomi] NAshford@MIT.edu
- Right.
- [Naomi] We'll also put
that on the SDM website.
- Okay, all right.
- [Naomi] After this.
I'd like to thank our audience
for attending the webinar,
and for bearing with us
through technical issues.
Again the presentation recording
will be available online
after this session,
and we will make the
slides available, as well.
Please join us in March for
a webinar with Jayraj Nair,
on challenges facing the
industry of internet of things.
And on behalf of the System
Design and Management program,
thank you for joining us.
- Thank you.
