#7 Not Just Economics: How to Build a Just Economy with Nick Romeo

In this episode, Nick Romeo, a journalist and an author, discusses some of the ideas from his recent book, The Alternative: How to Build a Just Economy. He discusses widening wealth inequality and the climate crisis and argues that these are urgent challenges with existing global solutions. He emphasizes that policy choices, not natural laws, shape economic systems and critiques business models relying on underpaid workers, advocating for fair wages and worker well-being as measures of success.

Nick highlights the importance of aligning economic systems with societal values, noting that many progressive policies have broad support. He also discusses "true pricing," which includes products' environmental and social costs, suggesting a gradual implementation for essentials like fuel to avoid unrest.

He argues that political choices and calls for effective regulation inherently shape markets. While acknowledging the successes of free-market economics in emerging economies, Nick questions whether these gains could be achieved without the associated negative impacts.

Nick critiques billionaire philanthropy, questioning the morality of wealth accumulation that exacerbates societal problems and calling for a reassessment of how wealth is generated and distributed.

Tune in for a rich dialogue that challenges conventional wisdom and proposes a more equitable and sustainable future with the potential for positive change.

More inspirations from Nick Romeo:
Link to his book: https://www.amazon.com.au/dp/1541701593?ref_=mr_referred_us_au_au
New Yorker Articles: https://www.newyorker.com/contributors/nick-romeo
Website: https://www.nickromeowriter.com/

If you want to follow this podcast, please subscribe to the Business and Society with Senthil Nathan on Apple and Spotify. We welcome your comments and suggestions at bspwithsn@gmail.com.

Chapters

• 1:26 Capitalism needs a remake?
• 2:40 American Political Economy
• 5:20 Living Wage and Unions
• 7:17 What values we need?
• 9:10 Externalities
• 11:28 Regulations vs Markets
• 13:39 Capitalism in Emerging Economies
• 15:58 On true pricing
• 17:25 Pluralism in Economics Education
• 21:43 Consequences of not shifting to the alternative
• 23:23 Philanthrophy
• 26:52 Managing differences of opinion and setbacks
• 28:36 Book recommendation
• 29:30 Skills required for leaders working to build a just economy

Transcript

Senthil

00:03

Hey, it's Senthil here. Welcome to the Business and Society podcast. Every fortnight we speak to a world-leading thinker to better understand the role of business and society. Joining me today is Nick Romeo. Nick is a journalist and author who has spent years covering economic policy and ideas for the New Yorker magazine. His recent book, the Alternative: How to Build a Just Economy, uses extensive original reporting to provide a roadmap for a sustainable and fair economy. The Guardian praised the book as an enlightening, inspiring read and the Washington Post called it a brisk and sensible book that details bold and ingenious proposals and measured talks. Nick has also contributed front-page-breaking news stories, profiles and essays to the Washington Post, the New York Times, Scientific American, The Atlantic, Rolling Stone, The New Republic and many other venues. He teaches at the Graduate School of Journalism at the University of California, Berkeley. 

01:17

I sat with Nick to discuss his new book, the Alternative, and his ideas about markets and economics. Nick, thanks so much for joining me today. Congratulations on the book. 

Nick

Thanks so much Glad to be with you.

Senthil

The central thesis of your book is that capitalism needs a remake. What made you to think that change is important now? 

01:35

Yeah, that's certainly a central premise of the book. I don't think that is necessarily controversial or even very original at this point, but the two things that I think were top of mind for me were probably widening wealth inequality, both within and between countries around the world, and then the ongoing climate crisis. So, like a lot of folks you know, those two issues struck me as kind of definitive challenges for the generation, if not the century, and so then the kind of ambition of the book was to outline some policies, but not just kind of in a theoretical way, to actually look at places around the world where these policies are already being implemented and even scaled to some extent, provide a collection of these examples so that people had a very tangible sense that an alternative set of economic arrangements is possible and that it's not simply a kind of talking point or a dream. 

Senthil

02:40

Let's unpack that in a minute, but the US political landscape has changed since we scheduled this interview. What kind of economic system are we now looking at? I ask also because you cited Keynes writing that economics is more properly called political economy. 

Nick

02:57

Absolutely. That's a great question and I think it's one that you know the verdict is still out on what the kind of the next few months, let alone the next few years, will look like in terms of American political economy. I'll just maybe offer a few tentative observations, but I certainly don't have a crystal ball, and I think anyone who tried to predict the future at this point in American politics would likely be wrong in some way. One of the things I love about Keynes' observation is that it situates economics back within an older tradition in which questions of politics and even moral philosophy are inextricably related to economics. So, there's not this separate realm of economics that obeys kind of natural laws on an analogy to physics or chemistry. On the contrary, economic systems are downstream from and always reflect policy choices. So, it's a strange time in America. I mean, you see some unexpected convergence on issues like trade and even on unions. 

04:02

From both left and right there's a surprising amount of consensus on some of these issues, although in other ways they're very different worldviews and I think, if you push beneath the rhetoric a little bit, look, for instance, at what the National Labor Relations Board, which handles union disputes in America, if you look at what they did under the first Trump administration and compare that to the Biden administration, you can see that even if the head of the Teamsters gives a speech at the Republican National Convention, as he did a few weeks ago, there's still a very sharp difference in policy between Republicans and Democrats, not only on the issue of unions, but on all sorts of other things, from how we should manage pollution, things like carbon taxes to global wealth taxes, to some of the initiatives I discuss in a book, things like a job guarantee, living wages, worker-owned co-ops, all of these different tools. 

05:00

I think there's, at least rhetorically, some consensus on some of them. But if you actually push on the records of the two recent administrations Trump and Biden there's still some pretty sharp divergence and a lot of daylight, basically between the major parties in America on economic issues. 

Senthil

05:20

You argue that living wage and unions are undermined in the United States. That said, US businesses or startups are far more successful than, say, Germany, where unions are stronger. What are your thoughts on this? 

Nick

05:35

Yeah, I mean, I think it depends on your definition of a successful business, right? I mean, if success comes on the back of workers who are treated so badly that they then rely on government handouts for food or even shelter, I think that's an unreasonable definition of success. It's interesting to look at history here. The person who coined the term living wage, or at least who popularized it in an American context, was a priest actually in the early 20th century, John Ryan. 

06:07

A priest actually in the early 20th century, John Ryan, and he made a very interesting argument that redefines success for a corporation as flourishing economically only once workers are treated well and paid a living wage, where living has a very precise definition. It includes sufficient wages to enable savings for retirement, savings for a rainy day or some kind of unexpected accident, some money for leisure and vacation, some money to save for one's children's education. I think if this were actually the definition of living that were broadly adopted by unions and by ostensibly progressive corporations, then we could actually compare success internationally, because we'd be talking about the same thing. Otherwise, I think what you hear when people say well, American companies are just so successful and a unionized economy would threaten, that there's a sort of sleight of hand or a deception that's happening, just in the way the terms are being used, and basically the success is coming at the expense of workers, and so I think, plausibly one could argue that's not in fact success. 

Senthil

07:17

In your book you wrote, and I quote what we need is not a revolution of values, but an economic system that reflects the values we already have. Could you talk a bit about what values they are? 

Nick

07:31

Yeah, I think that observation is reflecting on a lot of research about policies that are actually fairly popular. If you had a kind of direct referendum style vote on many issues I mean even things like a job guarantee poll very well, in America, at the federal level right now, it's hard to imagine something like a job guarantee program being adopted. Maybe there's. I think there is more cause for optimism at city or even state levels. But you know whether it's living wages or job guarantees or really robust worker ownership models in which workers have equity stakes in the companies where they work, a lot of these things are surprisingly bipartisan and enjoy a lot of popular support. So, the idea that we need an enormous transformation in values. 

08:25

I'm sympathetic to that to some extent, and there are economists who have argued very persuasively. I'm thinking of folks like Tim Jackson and some of the post-growth economists who say look, we actually really do need to fundamentally change values and consciousness and lifestyle. I think there's something to that argument. At the same time, it's interesting to recall that when you have a political system in which there are very few campaign finance laws and very wealthy elites and corporations can capture a lot of the legislative process, then it's natural to predict that a very large gulf will open up between the values of ordinary people and the policymaking of the legislative process. So that was my point with the passage you quoted. 

Senthil

09:10

Let's talk about negative externalities you talked a lot about in this book, such as people's ill health due to fast food and soft drink businesses. What is the real benefit here, I ask because those businesses also create positive externalities for society, such as employment, product benefits and taxes. I was reading a recent research that found that Starbucks store opening in a US neighbourhood without a coffee shop leads to a creation of about one to three new companies a year over the next seven years. So, if we start taxing companies for negative externalities, they'll start claiming tax exemptions for positive externalities. They'll start claiming tax exemptions for positive externalities. I was wondering what is the benefit of this merry-go-round? 

Nick

09:55

Yeah, well, you know, I think again these things are sort of policy choices, right? 

10:00

I mean, it's perhaps a false choice to imagine that the only two options are either to have absolutely no taxes or awareness of externalities, or to you know, and then to lose all of the positive benefits like the ones you alluded to, or to tax all externalities. 

10:21

Right, one can imagine a kind of reasonable discussion, ideally somewhat democratic, in which again, the definition of success for a company is one that can succeed without underpaying workers or, in the case of Starbucks that you mentioned, spending lavishly on union busting and really pretty aggressive assaults on legally protected organizing activity. So, it just doesn't seem true to me that the only way to derive some of those benefits would be to leave the status quo in place. I mean, it also seems plausible that you could prevent Starbucks from union busting, from underpaying workers, from buying coffee with enforced or forced labour in its supply chain in different parts of the world. I mean, all of those sort of very reasonable suggestions could in fact be made policy, could apply to companies like Starbucks, and then just, it seems like it would still be possible to get whatever benefits in terms of employment or new companies starting. I mean I would also be very interested to actually dig into the study you mentioned. 

Senthil

11:28

Absolutely, Nick, more than happy to share that with you so you can take a look later. What is your position on government regulation of big businesses? Do you think government regulation solves societal challenges such as those faced by workers or labourers in supply chain you talked about, or should it be left to markets? 

Nick

11:50

Yeah, you know, I think it might be helpful almost to reframe the sort of dichotomy between, like leaving things to markets versus government regulation, because the implication of that distinction is that there is such a thing as a free market right, that is a kind of natural kind that exists out there in the world and of course that's not true at all. Right, I mean markets as currently configured, already reflect all kinds of political and historical and social values, whether that's, you know, in America, a 40-hour work week, some protections for workers like occupational safety and health, things like child labor laws although there's been pushback against those recently in some conservative states minimum wage laws, however inadequate, there are already so many regulations that exist. I mean, so there is no sort of completely free market. And if you sort of push on that logic, even the very things that are for sale within a market right. I mean, should we be selling organs? Should we be selling humans? Should we be selling assault rifles? 

12:57

I mean, every society makes delineations where they say here is what is sort of the scope and range of markets, here's how they function, here's how much they will be taxed. There's like the mythology of the free market is that somehow these choices cannot be made, but the choices are always being made. It's just a question of which choices we make. So, if you sort of accept that reframing of the premise, then I think the question becomes a little more complicated. But also interesting, because you have to think about, well, what are the potential trade-offs with different policies and regulations. But it's never a choice between regulate or don't regulate, it's just regulate in which ways and to what extent and for what ends. 

Senthil

13:39

Most of the examples in your book are from OECD countries which have already reached some standard of living and aspire to progress further. Would you agree that in emerging economies such as China and India free market economics has helped, for example, by pulling many people out of poverty? 

Nick

13:59

Yeah, I think there's a lot of evidence that people in a lot of emerging economies have experienced absolute gains on all sorts of dimensions of health, income. That I think is sort of widely accepted, you know. The question again, as we were talking about earlier, is whether that could be achieved with fewer externalities. Right? So, do all of the environmental externalities, do all of the workplace safety and labour violations are all of those necessary features for achieving those results? Or could we get some of those results while also eliminating some of those externalities? Perhaps, very, very wealthy multinationals would have slightly lower returns because they would be cutting fewer corners on worker safety and environmental protection. 

14:53

But again, I think it's probably implausible to suggest that the only way in which people could be lifted from poverty in the developing world necessarily entails violations of human rights and massive destruction of ecosystems. Seems like there is a reasonable argument that some of those negatives can be eliminated, maybe most of them, although there would be some cost to wealthy multinationals and it would also require kind of enforcement of regulation across borders and along supply chains, which is a tricky issue, you know, and in the book, some of the work of organizations like True Price in Amsterdam. They're very interested in trying to achieve global supply chains that can lift people out of poverty, that can pay them fairly and that reflect the values of consumers in the developed world, most of whom, if you asked in a survey, would you like to be consuming chocolate that was grown by human slaves? Would say no, I would not like that. That's not actually reflective of my values. 

Senthil

15:58

You argue the importance of true price to determine the cost of remediating all major harms caused by producing and transporting a good to the market. While this seems feasible for discretionary consumer products such as chocolate, it's hard for essential commodities. Let's take the example of fossil fuels. Even a small increase in fuel prices spook people and trigger revolts in countries such as Brazil. Why should any elected leader encourage this idea when society rejects it? 

Nick

16:36

Yeah, that's a great question. I mean, I think if you apply the concept of true prices to something like fuel and you have no other alternative energy sources available, then I would agree that it's likely to result in massive unrest and that it might be irresponsible for leaders to do this. Again, that's not the only conceivable option. The gradual introduction of true pricing, even for essential commodities, could raise funds that could then be invested in infrastructure for clean energy. That could also crowd in more private sector investment that could fund public transportation. There's a sort of a slope of adoption that one could imagine that might gradually phase in some of the benefits, while avoiding sort of revolt in the streets, as you were mentioning. 

Senthil

17:25

The other important concept you touched upon in your book is your unhappiness with the lack of pluralism in the academic field of economics. What kind of change you want to see there?

Nick

17:36

Sure, I mean. So, you know the unhappiness is not mine so much as it's. Many economists are very worked up over this. It's a huge flashpoint within the field. So, I spoke to economists around the world who are sort of for different reasons and to different extents very unhappy and very critical of orthodox, neoclassical economics, which has a very idealized notion of markets as highly efficient as the perfect allocation mechanism for goods and for a broad range of human goods, things even like healthcare, education. So, the effort to introduce pluralism in economics I mean another way to think of it would just be the effort to introduce realism and to unmask ideology and economics, so the sense of economics as a hard science rather than a natural science. I think that's one target of critique for many contemporary economists, like we were talking about at the beginning with John Maynard Keynes. Many of the smartest economists in the world recognize that you can't actually make economic policy in a vacuum. There are always moral and political presuppositions and sort of the guise of neutrality is actually a very convenient camouflage under which a lot of very dubious policies have been smuggled into policy over the last 30 or 40 years, and that's true for everything from taxation to wages, to regulation. So an economics education that kind of reflected the empirical richness of the world in which market imperfection and market failure are quite common, in which not only do you sort of have humans acting to maximize their utility but you also have humans who are motivated by cooperative and other regarding preferences, and there's a sort of complex institutional framework that often determines whether our more self-interested or our more other regarding preferences are expressed. All of these kinds of insights are making their way into curricula that the pluralist economics community are sort of interested in seeing spread more broadly. 

19:53

I mean, I quote in the book the American economist Paul Samuelson, who wrote one of the bestselling textbooks in the 20th century. And Samuelson famously remarked near the end of his career I don't care who writes a country's laws, if I get to write its economics textbooks. So, he's very aware that he was the sort of shaper of cultural common sense. You know, apart from being quite undemocratic, it's also a sort of sinister comment where, you know, this economist is sort of saying I am more powerful than all of the legislators in America and there are real examples of how his influence has held back progress. I mean, one of the things I talk about in the book is worker ownership. 

20:33

Samuelson also sort of famously on American television in the 70s. He was asked about employee stock ownership plans, and he said, well, sure, that would be nice, and it would also be nice if lollipops grew on trees. So just completely dismissive of the idea that workers could ever own capital in the businesses where they worked but today in America there are more than 14 million people who have an ESOP plan. So, his scepticism was unfounded. But one does wonder, had he not been in such a position of kind of unelected authority controlling so many undergraduates' view of the world through economics education? What if we could have 50 million workers who owned shares in their businesses? You know, including very sort of blue-collar, simple, not high-skilled jobs. Right, not to say that all blue-collar jobs are low-skilled but imagine a broad range of jobs across the American economy that had an ESOP model. There's no sort of a priori reason that's not possible. This is sort of downstream again from your concept of what the economy is. 

Senthil

21:43

Nick, what are the consequences of not shifting to the alternator the just economy you wrote about? 

Nick

21:51

Yeah, that's a great question. 

21:52

I mean, I think probably just the headlines in most papers most of the time are a good guide to what that looks like. 

21:59

You know, I think it's an increasing level of wealth and income inequality, increasing precariat, where many, many people are pushed into a sort of on-demand labour model and have very little security and very few benefits for their jobs. There's further fraying of a social safety net, and then of course, all of the kind of social and political and societal dysfunction that wealth inequality can cause, where there's tremendous polarization, resentment, anger, searching for targets right, and I think this is true both left and right. You can see this dysfunction working itself out in America. The other thing, of course, that comes to mind is the continuing acceleration of the climate crisis. I think really shifting our economic system to not just to sustainable energy sources, but actually reducing the material and emission intensity of every unit of GDP is a very important goal, without which there are frightening scenarios that are well documented by climate scientists who know far more than I do. But I think those would be the two major kind of concerns is just acceleration of more wealth inequality and acceleration of climate change. 

Senthil

23:23

I'll ask one more question before we move into a last section, because you talked about inequality. I was watching a YouTube video of Jim Simons, the quant billionaire investor who passed away this year. He said I did a lot of math; I made a lot of money and I gave almost all of it away. Bill Gates and Warren Buffett, too, made massive wealth but decided to give it away. So yes, capitalism creates a wealthy few, but it also seems to trigger philanthropy and circulation of wealth. Would you agree that it's a good thing or what are your thoughts on this? 

Nick

24:00

Yeah, I think a few points come to mind. One is that there's no guarantee that billionaires do give away their wealth. There are many examples of billionaires who have not made those decisions. So even for the set of billionaires who do, or we should say the subset of billionaires who choose to give away their wealth, one might also reasonably worry about the highly undemocratic nature of those decisions. They essentially could decide to support whatever eccentric cause they want and they could support it in whatever way they want. And so, you know, if you have any sort of minimal commitments to democracy, then I think the power of billionaires to kind of shape the agenda for how all of that money gets distributed, which causes are addressed in which ways, that might also be concerning. So, then you might say well, ok, what if we had sort of deliberative, democratic sort of citizen assemblies in which that money was given away? 

25:02

Well, I think there's still perhaps a moral hazard in the accumulation of all of that wealth in the first place. 

25:08

I mean people all the way back to the 18th century, like Jean-Jacques Rousseau, the French philosopher, many, many people have been worried about the kind of paradox whereby the very causes of your fortune are partially remedied by the creation of that fortune. 

25:27

So, if you make a lot of money by underpaying workers and creating harm in the world and then you donate a lot of that money to other organizations that partly remediate those harms, that maybe restore ecosystems, I mean, think about technology. I mean maybe you make a huge fortune addicting teenagers to social media and then you donate a lot of money to a nonprofit, that's all about teenage mental health. There's a much more simple and elegant solution to this problem, which is not to destroy the mental health of millions in the first place, right? Not to sort of enrich yourself through violation of antitrust laws, through underpayment of workers, through union busting, I mean whatever fortune you want to sort of take as your case study. I think one has to ask those kinds of questions, is there a basic paradox that has been built into a model where you are allowing the accumulation of this huge fortunes which then only partially and in a very undemocratic way are trying to solve the problems that they were instrumental in helping to create. I think that's the most fundamental worry philosophers and observers have had for centuries. 

Senthil

26:36

That's enlightening! Nick, let's move to the last segment we call it as how I Did it where we ask all our guests three personal questions to draw lessons from their life and career. How do you handle conflicting views or setbacks? 

Nick

26:52

Yeah, maybe I'll take both parts of that question. That's very interesting. I mean conflicting views I think are very important to consider and to try to take seriously your opponent's arguments, right? I mean people talk about straw men in arguments, but they also talk about sort of iron men, right, and I think the iron man is like the strongest possible form of the argument against your position. I think if you haven't considered that, then you know your argument is fairly weak. 

27:22

I mean, I keep somehow getting back to the history of philosophy, but that's John Stuart Mill, right. Like the person who only knows their own side of the argument doesn't know very much at all. You have to understand the other viewpoint to have any kind of credibility advancing a position on controversial issues. You also asked about sort of handling setbacks. I think anyone who spends a long time writing things but really doing anything sort of takes a lot of cognitive energy and months and months of research and many many drafts… I think that inevitably involves getting stuck, getting confused, needing to subject your own work that you thought was completely polished to very intense criticism and realizing that in fact it's not anywhere close to what you would hope. So, I think that's just sort of a necessary part of improving and sort of achieving expertise is some tolerance for that kind of high level of criticism of your own work. 

Senthil

28:27

Excellent. Can you recommend a book or two on business or sustainability or on any other subject to our listeners? 

Nick

28:36

One really interesting economist I've been reading recently is Tim Jackson, who I mentioned earlier. He's an ecological economist from the UK and I would strongly recommend both of his books, but maybe his first one in particular, which is called Prosperity Without Growth: Foundations for the Economy of Tomorrow. So, it's a kind of ecological lens on the impacts of economic activity. So sometimes Jackson is lumped in with degrowth economics, sometimes he's called a post-growth person. Labels aside, he's picking up on something very important about the relationship between ecosystems and biosphere and economic activity, and he asks a lot of very provocative questions and has a lot of interesting arguments and a lot of rich data to support what he's saying. 

Senthil

29:30

Finally, what are one or two essential skills required for leaders working to build a just economy, the kind of ones you wrote about in your book? 

Nick

29:40

Yeah, that's a great question. I'm thinking here of the Mondragon cooperatives in northern Spain, which are the largest set of worker-owned cooperatives in the world. I think a lot of what distinguishes leaders in organizations like Mondragon is a tolerance for a kind of democratic procedures in the workplace. So, at Mondragon they have a one worker, one vote policy where workers get to vote on very important decisions. This shapes the culture of an organization in pretty profound ways if everyone has decision making power. Abuses by managers and owners are just severely curtailed if they can be sort of held democratically accountable. It's not coincidental that Mondragon has a six to one ratio for highest to lowest pay within the organization, so no one is making more than 6x the lowest paid worker. I think those types of policies like enabling democratic voice and decision-making at work and then actually backing up the rhetoric of democracy and inclusion with real policies like a pay ratio cap between highest and lowest, those are the sorts of things that I think distinguish leaders of organizations that deserve epithets like just or fair or progressive. 

Senthil

31:07

Great. Thanks so much, Nick, for joining me and sharing your valuable perspective. It was wonderful talking to you today. 

Nick

31:14

Thanks so much for having me. 

Senthil

31:19

Thanks for listening to the Business & Society podcast. 

00:00 / 31:46