Our Latest Issue!

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Our (very late, but very timely) January/February 2020 issue is at the printers and we’ve sent out full-color pdfs to e-subscribers.  (Not a subscriber?  You can subscribe online here!)

Here is the p. 2 editors’ note for the issue:

Our Monopolized Economy

The Federal Trade Commission recently announced that it would revisit the acquisitions that several of the biggest technology companies—Amazon, Apple, Facebook, Google, and Microsoft—had made of much smaller companies over the past 10 years, and that it would consider taking enforcement actions, according to Wired magazine and other outlets. The announcement signals an about-face on antitrust and illustrates how scrutiny of the outsized power of Big Tech is now a bipartisan affair.

In this issue’s cover feature, Rob Larson lays out how the tech giants became so big and powerful, in particular how “network effects” led to market concentration for the big “platform companies”—the firms that provide indispensable digital foundations on which businesses and individuals must operate. As Larson explains, there are several ways of dealing with the tech monopolies, including not just antitrust, but also regulation and nationalization. Larson also points to a potential socialist alternative, building on “platform cooperativism,” that would move toward worker- and user-control of these platforms.

Monopoly in the U.S. and global economies is most obvious in Big Tech, where massive and powerful corporations have spread around the world through a combination of network effects and the lax antitrust laws that allowed, and even encouraged, rampant mergers and acquisitions over recent years. But monopoly pervades more than just Big Tech in the U.S. and global economies, as Armağan Gezici shows in her feature article, with extreme market concentration in industries ranging from pharmacy chains and home improvement stores to chemicals, seeds, and beer. Non-economists can be forgiven for being confused when economists of all stripes use the term “monopoly” beyond its technical definition (a market with only one seller) to refer more broadly to the kind of market power and reduced competition that comes with market concentration and reduction to just a few sellers or a few buyers. So the recent approval of a merger between telecom companies Sprint and T-Mobile will reduce the already monopolistic industry from four major wireless providers to just three—technically an “oligopoly,” but still considered an example of a monopolized market.

According to Gezici, the trend toward monopoly is part and parcel of the neoliberal paradigm, “which tends to see rising market power as the inevitable result of top firms gaining market share by adopting new technologies that increase their efficiency.” Mainstream economists tell us this is all good for consumers and for the economy, but the same period of market concentration, while delivering high corporate profits, has also seen “slower capital accumulation marked by weak investment, declining labor share of income, and lower aggregate productivity growth, signaling a slowing down in technological progress and dynamism.”

This monopolized, neoliberal economy is an engine for massive inequality. Market concentration can drive up prices (e.g., Big Tech’s monopoly rents—that premium you pay for Microsoft’s copyright) and drive down wages (e.g., when Walmart dominates a labor market, or when monopolists force workers to sign “noncompete” agreements). The monopolists amass vast fortunes while the rest of us earn lower wages and pay higher prices. Barry Deutsch’s cartoon in this issue echoes Arthur MacEwan’s column in the last issue in underlining how the system (including copyright law) is rigged in favor of the wealthy and corporations. Monopolies are part of the rigging, and addressing them will require restructuring the system so it works better for ordinary people.

What can we do about massive inequality in the meantime? John Miller’s “Up Against the Wall Street Journal” feature addresses another way of coping with massive inequality: wealth taxes. Miller explains why the criticisms of recent wealth tax proposals—the hyperventilating ones from ideologues and also the more careful criticisms from mainstream economists—don’t fly. Contra their critics, wealth taxes would be economically effective, but just as importantly, they would be politically effective, since they poll well across party lines.

Also in this issue: a Jobs-for-All Manifesto; Gerald Epstein’s contribution to our series on neoliberalism and what might come next; Dr. Dollar on alternatives to tourism-based economies; and more!

Review of Strong Towns

Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity
by Charles L. Marohn, Jr

Review by Polly Cleveland

Along with the automobile, Detroit pioneered a new American way of living: the auto-dependent housing development consisting of single-family houses arrayed around cul-de-sac streets. After World War II, the Detroit model subdivision exploded into the suburbs around the country. A post-war return to normal life, federal subsidies for veterans and new highways leading out of town—all combined to create a huge boom in suburban housing demand. Aided by federal and local subsidies for utilities, developers could build complete huge new single-family housing subdivisions outside existing cities—such as the famous Levittowns. Middle class white families moved out into these shiny new developments, leaving behind poorer and often minority families in older inner-city neighborhoods.

Before that time, most houses were built one by one, adjoining or replacing existing housing. Neighborhoods therefore represented a mix of older and newer, smaller and larger buildings. Limited transportation kept housing relatively dense. The high density in turn made it inexpensive for city governments to maintain services—police, fire, garbage, schools—and infrastructure—roads, sidewalks, sewers, water supplies, and other utilities. Moreover, due to the mixed age of structures, there were not unexpected peaks in costs.

All that changed with the new subdivisions. At first, they generated substantial tax revenues, making cities eager to encourage and subsidize more of them by extending utilities. But this pattern of growth contained a fatal flaw: Because all the utilities and houses in a subdivision were built at the same time, they all aged at the same rate. After 25 years or so of fiscal surplus, costs began to rise steeply for repairing infrastructure. In wealthier subdivisions, the city could raise property taxes to cover costs. In ordinary middle-class subdivisions, when city maintenance lagged, those residents who could afford it moved to newer subdivisions further out, leaving shabby houses on crumbling streets inhabited by ever poorer and often minority residents. This happened first in Detroit, where huge areas now lie abandoned. It is now happening in inner suburbs around the nation. Yet as inner suburbs crumble, towns pursue the same old financial fix: subsidizing brand-new subdivisions on raw land.

Ferguson, a suburb of St. Louis Missouri, makes a good example. In 1970 the population of some 29,000 was 99% white. By 2010, the population had fallen to 21,000, only 29% white. Ferguson came to national attention in 2014 when a police officer shot and killed an unarmed black teenager, setting off widespread protests. Investigative reporters found that the financially-strapped local government, still largely run by white officials, funded itself in part by imposing fines on the poor residents for minor offenses like driving with a broken headlight, jailing them when they couldn’t pay. Ferguson turned out to typify many aging suburbs.

Today the tragedy comes full circle: the more affluent members of the younger generation are moving back into the run-down central city neighborhoods that their grandparents abandoned. In part, that’s because today’s families need both parents to work, making central locations more desirable. As these people return, they gentrify old neighborhoods, pricing out seniors as well as working-class or poorer residents. The local residents of course fight back, with rent control and severe restrictions on new construction or modifications of old buildings. New York City’s newly-fortified rent control laws essentially forbid landlords from raising rents to cover the cost of renovations. California has seen an explosion of homeless and “housing insecure” people, including people with steady jobs.

The author of Strong Towns, Charles Marohn, is a civil engineer and planner. He began his career advising towns on how to attract and support those so-desirable new subdivisions. Eventually the numbers caught his attention, particularly the staggering cost of maintaining the infrastructure in aging single-family subdivisions. He came to recognize that much of this infrastructure was simply long run unsustainable, and that towns were committing financial suicide in their pursuit of “growth.”

Marohn also found that in their pursuit of “shiny and new,” towns may destroy the most financially productive parts of their tax bases. These are often not the most valuable properties, but roughly those that yield the most revenues per acre. He gives an example from his home town of Brainerd, Minnesota. There were two identical adjoining blocks in an area the town had labeled “blighted.” Aided by municipal subsidies, one block was razed and replaced with a Taco John’s franchise with plenty of parking. But while the Old and Blighted block had a tax value of $1.1 million, this Shiny and New block had a value of only $620,000. Moreover, Old and Blighted housed 11 small businesses with local owners plus 6 extra full-time workers. On Shiny and New, Taco John’s provided 20 to 25 part-time jobs. Not even new jobs, because Taco John’s had merely relocated from three blocks away.

Marohn advises towns first of all to prioritize maintenance of the most financially productive areas, whether blighted or not. As he writes, “Mow the grass. Sweep the streets. Patch the sidewalks. Pick up the trash. Fill the potholes…See a streetlight out: replace it. See a weed: pull it. See a crosswalk faded: repaint it…The neighborhoods that are generating such wealth for the community need to be showered with love.”

But then Marohn makes a recommendation that will shock most communities: reconsider the policies that restrict change and discourage denser development. Oversized new buildings pop up in the wrong places, he says, because it’s so difficult, time-consuming and expensive for developers to battle all the restrictions that when they do finally get a permit, they build as high as they can. Property owners, he says, should have the right to develop their properties to the next level without their neighbors’ permission. That is, an owner in a single-family neighborhood should have a right to install a mother-in-law unit, or even build two or three units. In a neighborhood of three units, owners should have a right to build low-rise apartment buildings. And so forth. Meantime, towns should scrap those off-street parking requirements, which waste land, raise housing costs and encourage reliance on cars.

In all his compelling case for allowing higher density, I wish Marohn had addressed the role of property taxes. As I wrote in How a Progressive Tax System Made Detroit a Powerhouse (and Could Again), a tax system that relies heavily on taxing land is both highly progressive and pro-density. Detroit collapsed not just due to unsustainable low density subdivisions, but also due to the loss of such a system. But the book is essential reading for local officials and all of us who love cities.

Marohn now spends his time on his Strong Towns non-profit media organization, setting up events and webinars to discuss growth, development and the future of cities.