The Brave New World of 21st-Century Capitalism

Google. Facebook. Amazon.

 

These so-called platform firms are big companies that are a huge part of our everyday lives.

 

But are they just like the major companies of the past? Or do they represent a new kind of business altogether?

 

A recent article in Politics & Society says that they are indeed a different kind of company. And whereas most studies attribute the differences to developments in markets and technology, the article in Politics & Society emphasizes instead political reasons.

 

The article is by K. Sabeel Rahman, associate professor of law at the Brooklyn Law School, and Kathleen Thelen, Ford Professor of Political Science at MIT.

 

Professor Rahman and Thelen begin by tracing the changing nature of large companies in the United States.

 

After World War II, the dominant model was the so-called Fordist model, as in the Ford Motor Company. Companies like Ford employed huge numbers of people. They offered benefits and permanent contracts to their employees. Fordist companies were interested in stable, long-term growth. And all stakeholders—ownership, management, labor—were seen as equal partners in a common endeavor.

 

Beginning in the 1980s, the Fordist model broke down with the rise in globalization. Unlike the old Fordist companies, the new breed of company relied not on employees but on a vast network of outsourced labor. Rather than stable, long-term growth, its main concerns were its daily stock price and its quarterly profits.

 

Today, platform firms like Google and Amazon represent yet another kind of model. Professors Rahman and Thelen say that this model differs in three ways.

 

First, investors are in it for the long haul. Second, the goal is not stable, long-term growth or quarterly targets but market dominance. And third, platform firms enjoy a direct link to their users that companies of the past never did. How many times have you visited Amazon or Google or Facebook today?

 

This brings us to the distinguishing feature of the article: its emphasis on the political factors behind the rise of this new kind of firm. Professor Rahman and Thelen identify three.

 

The first is the regulatory environment or rather the lack thereof. When platform firms burst onto the scene, the existing business regulations were holdovers from a very different kind of economy, one dominated by manufacturing. Those regulations were totally unsuited to the regulatory needs that arose in the wake of the new firms.

 

The second reason why platform firms have become so big concerns antitrust law. Antitrust law in the United States is today largely interpreted in terms of consumer welfare. What matters is not the size of a firm but its affect on prices. If a merger will result in lower prices for consumers, then, hey, it must be a good thing, right?

 

That brings us to the third and final reason behind the growth of platform firms, and that is the astronomical growth of the financial sector. There’s simply a lot of investment capital available, and a lot of that capital has been poured into platform firms.

 

Where, then, does this leave us?

 

It certainly leaves workers in a precarious position. In the 1980s and 1990s such companies as Kodak and Nike became well known for outsourcing their labor, replacing relatively expensive US workers with cheap workers overseas. The platform firms have only continued that trend by relying on a large pool of independent contractors who have no job security and receive no benefits. Professors Rahman and Thelen end their article by suggesting reforms that would strengthen the position of workers, including making it easier for workers to organize, promoting consumer-producer coalitions, and reinterpreting antitrust laws to focus on size and not just consumer prices.

The Long-View History of Sanctuary Cities

When the Trump administration started seizing and deporting undocumented immigrants, many American cities responded by declaring themselves to be so-called sanctuary cities. Sanctuary cities protect undocumented immigrants by refusing to cooperate with federal immigration officials. Often, that means releasing a jailed undocumented immigrant before the federal government can secure a warrant to begin deportation proceedings.

Many historians claim that sanctuary cities have their roots in the sanctuary church movement of the 1980s. But a recent article in Politics & Society challenges that claim. The author of the article, J. Matthew Hoye, suggests instead that sanctuary cities are rooted in a republican (with a small r) tradition that goes all the way back to the colonial era of the early 1700s.

Hoye, a senior lecturer in the Department of Political Science and Public Administration at the Free University of Amsterdam, explains it this way. In Britain, the king and Parliament always had trouble exerting their will on the American colonies—after all, the colonies were well over 3,000 miles away, and modern communication systems had yet to be invented. By the middle of the eighteenth century, the colonies had become so politically autonomous that the mother country began seeing them as a threat to its power. This included the power of Britain to decide who emigrated to the colonies and which immigrants would be granted the "rights of Englishmen." 

Such power grated more and more on colonial governors, who were eager to increase their populations—even if it meant circumventing or changing the law. Hence, the colonies began developing theories with which to claim autonomy over their handling of immigrants. Hoye classifies those theories as republican because they asserted the right to be free from social and political domination. Such republicanism, Hoye points out, is present our founding documents such as the Declaration of Independence and the Constitution.

By taking a 400-year view, Hoye reveals what he says is truly at stake in today's debates over sanctuary cities: freedom for citizens as well as aliens from the unrestrained power of the federal government. He acknowledges that his focus on republicanism is not without controversy: republicanism is often associated with settler colonialism, genocide, and racism. 

But there is another side of republicanism that is relevant to his interpretation of sanctuary cities, and that is the "radical Enlightenment" tradition of people like Thomas Paine, the author of The Rights of Man. The radical Enlightenment "encompasses a cluster of ideas grounded in principles of reason, toleration, equality, universal rights, and the common good." It is that side of republicanism in which one can find the theoretical and historical underpinnings of today's sanctuary cities.

Minimum Wages in Indonesia

In the United States, minimum wages are set by Congress. But in other countries, circumstances differ. Take Indonesia, for instance. There, minimum wages are set every year by wage councils. The councils consist of representatives from three parties: unions, employers, and the government.

Normally, annual increases in minimum wages in Indonesia are modest—around 2.5%. But in 2012–13, something extraordinary happened: the minimum wage increased by leaps and bounds. In Jakarta, for example, the minimum increased by 45%.

What made the double-digit increases possible? Simply put, unions in Indonesia leveraged their political power. In a first step, they set aside internal divisions and became unified around the minimum-wage issue. Then they pressured local elected officials, becoming more and more contentious in their activism. Unions were also able to play one locality off the other, in what amounted to a race to the top.

The story of the minimum-wage gains in Indonesia is told in a recent article in Politics & Society by a trio of authors: Teri L. Caraway, a professor of political science at the University of Minnesota; Michele Ford, a professor of Southeast Asian studies at the University of Sydney; and Oanh K. Nguyen, a PhD candidate in the Department of Political Science at the University of Minnesota. As the authors point out, the success of the unions was surprising: unions in Indonesia perform poorly on traditional measures of organizational power. But by playing politics, plain and simple, they secured higher wages for their members. In other words, they fought hard. "It was through politics—not striving for consensus behind closed doors at the negotiating table—that unions altered the balance of power in their favor," write the authors.

Employers naturally fought back, and in recent years the increases in the minimum have returned to their usual levels. Still, the case of Indonesia shows how even apparently weak unions, by organizing and finding ways to exert political pressure, can win at the bargaining table.

Forest Protection in Argentina

Just because a law exists does not mean it will be enforced. Take for instance a major environmental law passed in 2007 in Argentina. The law was meant to protect the Chaco Forest, which is part of South America's second-largest forest and the site of the vast majority of deforestation in Argentina. But the law has not been as successful as conservationists hoped. Why not?

Many studies that seek to answer such a question concentrate on two things. One is so-called state capacity, or the ability of a state, through its institutions and governmental apparatus, to organize society and impose its will. The other is the incentives faced by elected officials, especially when it comes to levying fines for breaking a law.  

But the typical approach may not reveal the whole story. Thus, with regard to the environmental law in Argentina, a recent study in Politics & Society takes a different tack. The authors, Belén Fernández Milmanda at Trinity College (CT) and Candelaria Garay at Harvard, use what they call a multilevel approach. 

The multilevel approach takes into account the various interested parties who have a hand in the design and implementation of a law; unlike typical approaches, the multilevel approach treats the design and implementation as closely connected. In the case of the 2007 law in Argentina, the interested parties included conservationist coalitions and large agricultural producers—"organized actors operating at different moments of design and enforcement of the [2007 law]." As the authors write, "Analyzing the politics surrounding the design of the law as well as the rules implementing it across levels of government" best allow them to understand enforcement of the law.

The authors compare the design and enforcement of the law in four provinces: Chaco, Formosa, Santiago del Estero, and Salta. What they find is that the law was such a product of compromise that it contained numerous ambiguities--ambiguities that provincial governors have exploited to reduce political pressure coming from conservationists or large producers. The result has been massive inconsistency in implementation rules and enforcement. Overall, though, the agricultural producers have largely won the day: deforestation has continued in the Chaco Forest apace. In Salta, for instance, forestland declined by 16% between 2002 and 2015, with most of the decline coming after the 2007 law was passed. 

In other words, it's not just whether lawbreakers are fined. Also important, the authors write, are the rules by which a law is implemented, the loopholes a law might have, and the interactions among officials at the federal and state levels with regard to the design and implementation of a law.

The authors base their study on documents, newspaper articles, and close to seventy interviews with governors, legislators, peasant and indigenous movement leaders, and environmental activists.

Resistance during the Chinese Famine, 1959–61

There was a terrible famine in China between 1959 and 1961. Anywhere from 16 to 40 million people starved to death. Most of them were peasants. The causes of the famine were many. Perhaps the biggest cause was the diversion of resources—especially labor—from agriculture to industry as part of Mao's Great Leap Forward.

Some observers contend that the people put up no resistance. Rather than breaking the law by, say, stealing grain from government granaries, nearly everyone chose to suffer and die. Obedience and trust in party leaders were more important than saving one's life.

Others take a different view and cite evidence showing that peasants did, in fact, resist. A former deputy head of the Public Security Bureau of Anhui Province, for instance, claimed in 2011 that 1,300 cases of grain grabbing occurred in the province from 1955 to 1961, with more than twenty participants in each case.

A recent paper in Politics & Society by Yongshun Cai supports the second view. A professor of social science at the Hong Kong University of Science and Technology, Cai argues that there were indeed peasants who resisted by stealing grain from granaries, rail cars, and other places, as well as hiding grain from the authorities. To be sure, the number who resisted was comparatively small. Nevertheless, there was resistance, and it is important to make sure that that part of the story is established.

But how did resistance happen? Why did some peasants rob granaries while others did not? As Cai points out, local leadership was key. The Chinese government had organized peasants into rural collectives, leaving local cadres to do the actual work of organizing. Some local cadres, along with some rural elites, were sympathetic to the suffering of the starving peasants and made resistance possible. Still, the Chinese government exerted enough control over the cadres to keep resistance to a minimum.

It is impossible to say just how many peasants resisted. Cai estimates that there were at least around 2,000 incidents involving grain theft and the like, and perhaps as many as 500,000 peasants staged acts of rebellion—this at a time when the population of China was around 667 million.

Cai's paper, titled "Community Elites and Collective Action: The State and the Starved during the Chinese Famine (1959–61)," appears in the March 2020 issue of the journal.

Inequality a Major Theme in Latest Issue of Politics & Society

Three of the four articles in the June 2020 issue of Politics & Society deal with dimensions of inequality. In his article on housing for the poor, John Robinson III, an assistant professor of sociology at Washington University in St. Louis, looks at the way in which a new kind of organization, which Robinson calls "grassroots for hire," competes with traditional community-based organizations for federal tax credits. The grassroots-for-hire organizations have ties to elite constituencies such as state officials and the world of finance and real estate. Robinson concedes that the new organizations have succeeded in providing housing for the poor. But something has been lost in the bargain, as the grassroots-for-hire nonprofits are not embedded in the communities they serve and treat housing as an independent concern rather than as part of a broader effort to improve the lives of the poor.

In "Varieties of Urbanism," Yonah Freemark, Justin Steil, and Kathleen Thelen discuss how wealthy areas in the United States form their own jurisdictions and use their new independence to hoard resources. Over the past twenty years, the number of independent jurisdictions, be they municipalities or school districts or something else, has increased by more than 2,500. The new jurisdictions separate themselves from their poor and middle-class neighbors, making inequality even worse than it was before. The authors compare two US cities--Boston and San Francisco--with Toronto, Paris, and London to show that the proliferation of jurisdictions in the United States is the result of deliberate policies. As the authors conclude, "The United States stands out among the rich democracies in the way the institutional structure of local governance facilitates (indeed, incentivizes) jurisdictional proliferation and actively supports resource hoarding, typically by affluent white homeowners."

The third article dealing with inequality examines the effective tax rates paid by the largest corporations. As Sandy Brian Hager and Joseph Baines show, the effective tax rates of the largest corporations have declined since 1970 from 37% to 28%. At the same time, the rates of the remaining corporations have increased from 34% to 41%. In short, corporate taxes are now regressive. The authors situate their findings in the context of today's economy, one increasingly dominated by fewer and fewer companies. Their findings discredit "the notion that lower corporate taxes will 'trickle down' to the benefit of everyone in society. On the contrary," they write, "in a system in which successive rounds of corporate tax reform translate into a persistently regressive corporate tax structure, wealth and income become further concentrated at the top." They argue that in trying to understand corporate concentration, scholars should pay more attention to corporate taxation.

Inequality, of course, has long been an important theme in the pages of Politics & Society. The three articles discussed here continue the journal's focus on the kinds of policies and practices that weaken democracy and community while exacerbating plutocratic trends.

Property Rights in Medieval Egypt

Property rights are a central institution in Western democracies. But rights to property have existed in one form or another, and at one time or another, all over the globe. Take, for example, Egypt in the Middle Ages.

In Egypt back then, there was a group of people known as the mamluks. Mamluks were both soldiers and slaves. They were not native Egyptians but were purchased in slave markets in Europe and brought to Egypt as children. Trained to fight, these slave-soldiers served Egypt's leaders as a military elite.

In time, the mamluks overthrew their masters and created their own sultanate—their own autocratic state. That was in 1250.

The mamluks suddenly controlled much of Egypt's arable land--and found themselves confronting a property rights question: Who should have rights to the land they controlled, and in what form? They decided to administer the land as a collective, granting temporary rights to pieces of land to individual mamluks in exchange for services to the state.

The mamluks, though, lived by certain rules, one of which undermined their ability to retain their land as a collective: mamluk status—and hence access to the collectively owned land—could not be passed down to one's sons. That was, as they say, a design flaw. Why? Well, most mamluks wanted to provide for their male descendants. One way to do that was to secure for them a piece of land—land that was privately owned and would remain in the family. So, individual mamluks began making deals with the sultan, deals that allowed them to slowly build wealth. Eventually, they built enough wealth to convert what had been temporary rights to land into permanent rights.

The most popular means of securing land for one's sons was to transform the land into a religious endowment, or waqf. Descendants of a mamluk who founded a waqf could be named a custodian of the waqf and enjoy the benefits thereof. But regardless of the means, little by little, the land that was owned collectively by the sultanate passed into other hands. By 1517, the mamluk sultanate no longer owned enough land to support itself and came to an end.

This account of the mamluks is found in an article by Lisa Blaydes, a professor of political science at Stanford University. The article appears in the September 2019 issue of Politics & Society. As Professor Blaydes points out, scholars have paid little attention to the development of property rights in non-European parts of the world. Her analysis of the mamluks of medieval Egypt complements European-centered studies, thereby opening up new new points of comparison and new ways to understand how autocratic regimes manage—or perhaps mismanage—their institutions.

When They Cut Taxes in Kansas, All Hell Broke Loose

Kansas thought they had achieved the conservative dream. In 2012, the state eliminated taxes on many business owners. The thinking, of course, was that taxes prevent growth: eliminate the taxes that businesses have to pay, and a new era of prosperity for all Kansans will follow.

The trouble is, taxes actually pay for state services—services that many businesses, especially small businesses, need. It wasn't long before the cut in services forced by the cut in taxes began to be felt.

That's when small businesses said enough was enough. They organized and, in 2017, persuaded the legislature, over the governor's veto, to repeal the tax cuts. As a farmer from Ellsworth County explained, "We feel that it is very important that we all contribute to ensure that we maintain good schools and infrastructure in our communities and state. Without everyone contributing to these programs, we will lose them and the high standard of living we have enjoyed in the state of Kansas."

A study of the tax cuts and the reaction against them can be found in a paper by Daniel R. Alvord, a professor sociology at the University of Kansas. The paper, titled "What Matters to Kansas: Small Business and the Defeat of the Kansas Tax Experiment," appears in the March 2020 issue of Politics & Society.

Alvord reflects on the "sociology" of small businesses. He contends that they should be seen as "embedded community institutions," and as such their success depends highly on a community's quality of life—and hence on the state services that taxes support.