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Democratizing the Knowledge Economy: Will Labor Accept the Challenge?

We are in the midst of cascading political, economic, health, and environmental crises. Perhaps most evident is the Republican Party’s introduction of over 360 legislative bills primarily aimed at making it harder for people of color and urban residents to vote. Meanwhile, we are slowly emerging from the Covid-19 pandemic that exacerbated the pre-existing economic crisis stemming from out-of-control wealth inequality. Finally, we face a climate crisis whose pace and parameters scientists cannot fully predict. Recently, for example, estimates of sea-level rise in this century have increased due to faster than expected melting of the permafrost and higher than expected release of methane gas into the atmosphere.[1] Rather  than taking aggressive measures to deal decisively with the changing climate, government has dithered.

All of these problems have common origins in elite control of an economy organized around capital accumulation, and popular racism cultivated over centuries by elites to divert white workers away from multi-racial solidarity with workers of color. These problems have plagued the nation from its beginning. The nation, in essence, was constituted as a democracy based on white racial identity and property ownership that has never afforded the multi-racial working class enough power to control the economy. The closest the United States came to a meaningful worker voice in the economy was during the heyday of the labor movement (especially the CIO) in the 1940s through 1960s. The political scientist E. Schattschneider opined in 1960, during the heyday of the labor movement, that labor power was strong enough to check corporate elites, however, he failed to recognize the looming threat to that power posed by the systematic political and economic exclusion of people of color.[2]  When Black people took to the streets demanding “Jobs and Justice” during the 1960s, many Black leaders, such as Rev. Martin L. King and A. Philip Randolph, declared their willingness to join the civil rights movement with the labor movement. They proposed that a broad multi-racial coalition— Black, Latinx, Asian, and whites together—would have the power needed to truly democratize the economy.[3] Only a few unions such as the American Federation of Teachers, Local 1199, and UAW embraced this vision of a multi-racial democracy. Conservatives quickly saw an opportunity to pit white workers against Black demands for social justice. Beginning with Nixon, Republicans (later joined by many Democrats) mounted a forty-year backlash movement fueled by racial resentment. Corporations funded this backlash movement (led by the Republican Party) heavily and used it to dramatically weaken labor unions. The tentative balance that Schattschneider described was destroyed. Democratic controls over corporate capitalism eroded and paved the way for neoliberalism deregulation, privatization, and fiscal austerity, along with tax breaks, corporate subsidies, and corporate bailouts—that created today’s extreme inequality.[4]

Progressives have for decades been unable to fashion a compelling economic vision to counter corporate power and its expression in neoliberalism. Most progressives, in labor and beyond, loosely adhere to what we call “productivism.” This is an idea about the fundamental structure of the economy holding that workers create value through their labor on the job but are not fairly rewarded because the bosses have more power. And while productivism is based on a well-founded understanding of the industrial economy, it misunderstands and fails to account for the emerging knowledge-based economy. Productivism suggests that technology has made workers less essential to productivity and weakened labor’s bargaining power. We argue that neither need be the case.

The Emerging Knowledge Economy

The knowledge economy is driven by human brainpower as opposed to physical labor. We are still at the beginning of a broad transition from the industrial/analog economy to a more high-tech knowledge economy. Machines run by computer software, gene editing, robots, big data analytics, are all examples of the emerging knowledge economy. Soon, for example, we are likely to see the demand for overseas manufacturing dramatically reduced because of the increasing availability of quality 3-D printers that can manufacture in a home or nearby store—at a fraction of the cost—items now produced and shipped from all over the world. We are likely to see custom-designed, locally manufactured, battery-powered autonomous vehicles controlled by artificial intelligence (AI) traffic managers in the digital “Cloud.” Online education and training, which exploded during the Covid-19 pandemic, is going to become a lot better, making learning easier, more fun, and affordable. “Schools” will not be buildings so much as learning clubs, both physical and online. The list goes on and on, and the potential social benefits are enormous. On the other hand, with corporate determination of how technology is deployed, high-tech companies will eliminate millions of jobs and direct benefits primarily to the rich. What fuels the knowledge economy is human creativity, honed through education, training, communication, and social-emotional development. The knowledge economy is so productive that the nation could right now solve basic issues of adequate food, clothing, and shelter for every resident.

The evidence is all around us. We pay farmers not to grow food in order to keep prices high. The richest 1 percent of Americans own 40 percent of the nation’s wealth but pay only 20 percent of the taxes. Raising their taxes 10 percent, to something like the 1950s, would generate $300 billion/year.5 The obstacle is politics. Specifically, what hobbles the potential Social benefits of the knowledge economy are lack of investment in the people and institutions that nurture brainpower, and the misdirected use of science and technology solely for corporate profits. Brainpower (the engine of the knowledge economy) is not created by venture capital; it is the cumulative achievement of parents, schoolteachers, social workers, interactive internet jam sessions, colleges, workforce training programs, places of worship, and all the parts of civil society that cultivate critical thinking and skill in social interaction. In the myopic view of neoliberalism, only the private sector creates value in the economy, thus the way to improve the economy is by giving big businesses more money and power through tax breaks and deregulation. The neoliberal approach leads to less investment in precisely those things the knowledge economy needs: good schools and childcare, affordable and high-quality colleges and universities, increased attention to social-emotional needs, job training, and lots of attractive public spaces to foster social interaction.

. . . [W]hat hobbles the potential social benefits of the knowledge economy are lack of investment in the people and institutions that nurture brainpower, and the misdirected use of science and technology solely for corporate profits.

The second problem is misdirected investment for profits rather than for social good. Amazon, for example, already uses large numbers of robots to stock shelves in warehouses. Because the corporation is driven to maximize profits for investors, Amazon uses robots to replace workers. As other profit-driven companies do the same, the demand for products marketed by these companies will ultimately decrease because under-employed workers cannot afford them. Yet, if companies like Amazon were employee-owned, workers would not lay themselves off. They might instead use robots to give themselves fewer work hours and spend more time with their families, take courses to upgrade their skills, look at new ways to expand Amazon’s services, donate time to their communities, or tackle major societal problems inside and outside of the company. The whole society would benefit from these things.

. . . [W]hen the U.S. government funded pharmaceuticals to develop Covid-19 vaccines but allowed companies to patent the inventions . . . the companies subsequently refused to share vaccine technology with countries like India.

Narrowly profit-oriented firms also hoard information so they can profit from inventions, but this process slows down the exchange of ideas that drive innovation, and it limits social benefits from innovation. We saw an example of this when the U.S. government funded pharmaceuticals to develop Covid-19 vaccines but allowed companies to patent the inventions. In order to boost their profits, the companies subsequently refused to share vaccine technology with countries like India.[6] This has contributed to Covid-19’s recent explosion in India and elsewhere. Corporate-dominated, neoliberal decision-making is  equally disastrous for the climate. Dealing with climate change requires global cooperation and prioritizing public investments in green infrastructure and research—even when these things collide with private interests (See Sean Sweeney’s “Earth to Labor” column, “Sustaining the Unsustainable: Why Renewable Energy Companies Are Not Climate Warriors,” in this issue.)

Productivists have been mostly silent in the debates concerning the emerging knowledge economy. Productivists are accustomed to thinking and organizing that aims at claiming a bigger piece of the pie for workers in individual sectors and firms, but they rarely involve themselves in deciding what kind of pie to make—the bosses are the cooks. Unions, for example, have long acceded to “management’s rights” clauses in their labor contracts. This is a fatal approach for the labor movement. As large workplaces shrink, as work becomes more transient and “gig-” oriented, as people order their products and services online, and as humans are displaced by robots that answer phone calls, productivists will see the power of their traditional organizations shrinking. Without a shift in productivist thinking and methods toward shaping the economy, tech companies ultimately will crush labor unions.

Productivists are accustomed to thinking and organizing that aims at claiming a bigger piece of the pie for workers in individual sectors and firms, but they rarely involve themselves in deciding what kind of pie to make . . .

Yet, the knowledge economy is not inherently bad for workers. Labor’s weakness in the face of technological change stems from productivism’s inability to grasp the defining and revolutionary feature of the emerging knowledge economy: it is profoundly social and inclusive. Productivity in the knowledge economy is not, in the main, created by workers making goods or performing services. It instead comes from the superior coordination, precision, speed, flexibility, and capacity that machines, AI, geographic information system (GIS), the internet, advanced computation, and other technological tools bring into production and service delivery. These tools, again, are the products of brainpower and brainpower is a social product. So, while productivists see technology as shrinking the working class, they miss the other side of the dynamic, which is that nearly all of society plays a part in producing the brainpower needed for the knowledge economy. Labor’s narrow focus on workers as producers, for example, which translates into workers being acknowledged on the job, does not recognize the work of social reproduction such as raising and teaching children, or the work of buying things in the market to support  families. (The implicit disregard of women’s role in the economy is just below the surface in productivism). Workers, in their role of social reproduction, comprise most of “the market” and they are also critical contributors to society’s brainpower. Rather than the working class having shrunk, nearly everyone, both on the job or raising kids at home, is, in effect, laboring for a small number of corporate capitalists that are hoarding the benefits of the knowledge economy. And, the entire society
should be fairly compensated through social wages for their role in creating human brainpower. A social wage is different from firm by firm bargaining for wages, and is closer to what happens in many parts of Europe where wages and social  benefits are standardized across broad swaths of society. The result is few billionaires and far less poverty. In fact, it is only through supporting society as a whole that the knowledge economy can truly flourish. To achieve a livable social wage, producers of the knowledge economy cannot continue to organize only as narrow interest groups. Organizing needs to create a common interest through engagement of the diverse working class. In a country where white people will soon no longer be a majority, common interest can no longer be a pseudonym for favoring the perspectives and demands of whites over people of color.

Labor’s narrow focus on workers as producers . . . doesn’t recognize the work of social reproduction such as raising and teaching children, or the work of buying things in the market to support families.

Importantly, productivists’ failure to grasp the social nature of the knowledge economy hides the vulnerabilities of corporate tech companies. Their first vulnerability is the oldest: technology in the corporate economy makes it easier and cheaper to make things, but because corporations lay off and squeeze workers to increase profits, workers’ incomes have been stagnant for a generation, causing the consumer market to shrink and making profits harder to come by in the “real” economy. As a result, investors’ interest in speculation keeps growing, as has corporate need to capture government revenue through privatization, tax breaks, and bailouts. A newer dynamic is the intensified market competition for workers’ dollars using the incredibly powerful communication tool of the internet. What makes internet giants like Facebook or Google successful is not their superior physical plants and equipment, it’s the social popularity of their brands built over the internet. Even Amazon’s physical components were until recently mainly warehouses, they relied on the U.S. Postal Service or other companies for deliveries. But social popularity, like fashion, can change. Productivists have largely ignored the tech industry’s dependence on, and vulnerability to, changes in consumer buy-in. More than 95 percent of Facebook’s profits, for example, come from selling data about personal spending habits of their vast customer base to corporate advertisers. But, social media is a world of constant disruption, fashion, and fads. Facebook customers could be lost to other platforms; witness the explosive growth of TikTok. Another giant online buying platform, China’s Alibaba, is poised to challenge Amazon. What if such platforms could also align with political, social, or other goals that could materially benefit communities?

. . . [P]roductivists’ failure to grasp the social nature of the knowledge economy hides the vulnerabilities of
corporate tech companies.

Right now, the consumer market is like the Wild West. Companies like Facebook and Twitter can monitor messages and sell ads based on what people say in what many think are private conversations. If consumers were organized, they could force Facebook, Google, and similar companies to share profits these companies make from selling consumers’ personal data tax-free, and could push them to change business practices across the board. As banking and other industries becomes more digital, they too will be vulnerable to consumer organizing in the same way. But, here again, the organizing has to be broad and inclusive, or social. Narrowing organizing to a single sector or geography of workers only weakens bargaining power against these corporate giants.

Workers can also exercise great leverage over corporate capital by paying greater attention to how their elected representatives spend public money—through careful attention to government contracts and subsidies, by demanding either paybacks or equity shares when government helps corporations, or by demanding public ownership of emerging tech infrastructure such as electric vehicle charging stations or poles for broadband connectivity. The key challenge for productivist thinking is moving beyond the notion that resources and campaigns should be driven merely by a union’s or a community organization’s “self-interest.” Building power in the knowledge economy requires the opposite of narrow self-interest: social awareness, seeing the whole, bigger picture, and strengthening cooperation across trades, sectors, and communities.

Stepping Stones to Economic Democracy

The term “economic democracy” refers to the ability of citizens, particularly workers, their family members and neighbors, to exercise the power to make major economic decisions affecting society. Building economic democracy, in our view, is less a matter of creating new institutions than democratizing and reorienting traditional and emerging ones. Following we briefly describe examples of how this can be done in the areas of financial technology and in what some call, “bargaining for the common good.”

The Impact of Fintech

The racial wealth gap and the financial vulnerability of families in the U.S. is unprecedented in our history. At the same time, many low-income workers, and at least half of Black and brown workers, are unbanked or underbanked, and spend over $1,000/year in excess finance charges.[7] In 2018, unbanked and underbanked workers spent $189 billion in fees and interest  on financial products like payday loans, check cashing, or sending remittances to their home countries.[8] Big financial institutions invest their depositors’ savings and take a healthy slice of the return. They see little profit in addressing low levels of banking access for low-income workers who have little to invest in the first place. Large banks have closed scores of bank branches in poor communities nationwide to cut back on staff and real estate expenses in those “low margin” communities.[9] This, in turn, has created a market for predatory financial companies that impose unfair high fees and loan terms on low-income workers.

Fintech companies, like online banks, are starting to enter this market as well. Fintech offers the possibility of increased consumer access to information, check deposits from one’s phone, online and chip card payment ability, improving personal credit ratings by tracking regular payments such as rent, and reducing the time it takes to approve loans and administer financial transactions. But bad Fintech actors can also use technology to lock out consumers, reinforce existing financial barriers, or sell peoples’ data to advertisers without their awareness. Financial technology itself is thus not inherently good or bad; what matters is who controls it.[10] Labor unions, for example, working with fintech companies and mission-driven institutions, could co-design products and services that tackle financial insecurity while building community wealth and political power at the same time. Because labor is good at organizing, partnering with unions could also be strategic for fintech firms. Labor union partnerships in densely unionized cities offer a powerful opportunity for fintech firms to build a customer base. Labor and community organizations are also credible messengers that can deliver products and services they trust to members and communities. For fintech and other tech companies that market over the internet, these are invaluable assets.

Labor unions . . . working with fintech companies and mission-driven institutions, could co-design products and services that tackle financial insecurity while building community wealth and political power at the same time.

We have seen up close the potential for such collaborative economic organizing around fintech. In New York City, local government sought proposals from fintech firms to provide financial services to more than one million users of IDNYC, the City’s municipal identification card. The request for proposals yielded far better financial terms for low-income consumers than conventional and nontraditional financial institutions. Some of the firms offered to contribute all profits above a certain level to a fund that would be run by their customers. Customers could use the funds for community organizing, summer camps for their kids, political advocacy or whatever other priority they might have. There are other institutions following a similar path. Inclusiv, a national network of community development credit unions, has partnered with a fintech firm to better compete with conventional banks and improve their products and services. The fintech platform that underpins Inclusiv’s efforts also powers the Trentino cooperative banking model in Italy as well as cooperative banks in Mexico.[11]

Community Collective Bargaining

Many essential consumer goods and services, such as diapers, smart phones, and the internet, have prices set by corporate monopolies because of corporate consolidations and weak regulation. “Bargaining for the Common Good,” represents a strategic approach that builds lasting alignment between unions, community organizations, consumers, and student groups, to leverage the bargaining and buying power of workers to bargain for cheaper prices and better services, and to hold corporate firms accountable for priorities such as restorative justice in schools and labor standards.[12] Movements in many other countries also have well-established “community collective bargaining” groups. In Japan, the Seikatsu Club Consumers’ Cooperative Union was founded in 1965 as a buying club among 200 women seeking affordable and healthy milk options for their families. The purchasing cooperative has since grown to more than 340,000 members and now sets terms with suppliers in a network that has annual turnover of $1 billion, and it also includes 600 worker-owned producer coops that employ over 17,000 people in food preparation and distribution, catering, recycling, childcare, and education.[13]

. . . [A] worker-owned internet service provider that was launched in spring 2021 by IBEW Local 3 members . . . includes ownership and control by both workers and consumers . . .

Additionally, unions can partner with community groups and tech companies to create worker-owned “union-cooperatives” that can provide community services—competing with corporate platforms such as TaskRabbit and Care.com—and soon tech start-ups in homecare. Silicon Valley has raised $125 million to support three start-ups aimed at disrupting the homecare/ domestic care market.14 Such union cooperatives could help unions organize large numbers of unorganized, unrepresented gig workers who otherwise must fend completely for themselves in the market. Lastly, unions can form their own worker-owned companies in traditional business sectors and become their own bosses. Some former worker center organizations are doing just that, such as Up & Go, a cleaning company/tech platform cooperative based in Brooklyn, New York. An emerging example in New York City is People’s Choice Communications, a worker-owned internet service provider that was launched in spring 2021 by International Brotherhood of Electrical Workers (IBEW) Local 3 members who had been engaged in the longest strike in U.S. history, against Spectrum, the internet, phone, and cable provider. Their business model includes ownership and control by both workers and consumers; cutting out a corporate profit-seeking employer helps to control prices for customers while upholding job quality for their worker-owners.[15]

Economic Democracy in Context

The struggle for economic democracy is as old as the nation itself. Thomas Jefferson’s vision of widespread property ownership (in the form of land and slaves) won the imagination of early America. It was the original American Dream.[16] Yet, land ownership became bitterly contested between ordinary citizens and slave plantation owners; this was one of the causes of the Civil War. The Civil War, Reconstruction, and the thirty-year struggle after the war for control of the economy, brought other battles for economic democracy. Elites won those battles when former slave owners joined with northern industrialists and financiers to beat back white labor, repress Blacks (who consistently have fought for economic democracy), wage war on Native tribes, again invade Mexico, and establish corporate capitalism.[17] From the defeat of Reconstruction through the 1960s, labor unions resisted racial inclusion, keeping workers divided, and providing Southern legislators and businesses the power to fight both unions and racial equality. Reagan, building on Nixon’s early effort to form a conservative white base, nationalized the Southern approach of dividing workers by race and attacking unions at every opportunity, starting with PATCO immediately after his election. Reagan thus created a conservative movement that decimated unions as well as communities of color, leading both to Trump and today’s gross inequality.

“Economic Democracy” is a call to renew the fight for an inclusive economy and robust, participatory and responsive democracy. It also provides a needed framework for unleashing the positive future social potential of the emerging knowledge economy. The heart of the struggle for economic democracy is building and cherishing social cooperation and unity. Cooperation and unity have been thwarted time and again by racial divisions, preventing workers and communities from building the power to tackle income inequality and climate change, or even protecting their basic democratic rights. We must learn that the only democracy America can have, or ever could have had, is a multiracial inclusive democracy. Organizing local initiatives for economic democracy on the ground, which make clear and tangible the benefits of unity and social cooperation, is the most promising approach and context for engaging working people in a discursive process to overcome racial divisions.


Notes
1. Marlowe Hood, “Latest Estimates on Sea Level Rise by 2100 Are Worse Than We Thought,” www.sciencealert.com, May 11, 2020, available at https://www.sciencealert.com/oceans-areon- their-way-to-rising-over-a-meter-as-soonas-2100.
2. Elmer E. Schattschneider, The Semisovereign People: A Realist’s View of Democracy in America (Hinsdale: Dryden Press, [1960]1975).
3. Martin Luther King, “If the Negro Wins, Labor Wins,” in A Testament of Hope: The Essential Writings and Speeches of Martin Luther King, Jr., ed. J. M. Washington (San Francisco: HarperCollins, 1986). Bruce Nelson, Divided We Stand: American Workers and the Struggle for Black Equality (Princeton: Princeton University Press, 2001), 201-207.
4. Jacob S. Hacker and Paul Pierson, Winner-Take-All-Politics (New York: Simon & Schuster, 2010).
5. Michael Linden, “What Could the US Afford If It Raised Billionaires’ Taxes? We Do the Math,” www.theguardian.com,
December 13, 2019, available at https://www.theguardian.com/us-news/2019/dec/13/billionaires-taxes-inequality-one-percent.
6. “China Says It Will Support India, South Africa Proposal for Global IPR Waiver for Covid-19 Vaccines,” The Times of India, May 18, 2021, available at https://timesofindia.indiatimes.com/world/china/china-says-itwill-support-india-south-africa-proposal-forglobal-ipr-waiver-for-covid-19-vaccines/articleshow/82727991.cms.
7. Heather Long and Andrew Van Dam, “The Black-White Economic Divide Is as Wide as It Was in 1968,” The Washington Post, June 4, 2020, available at https://www.washingtonpost.com/business/2020/06/04/economic-divide-black-households/.
8. Karen Graham and Elaine Golden, “2019 Financially Underserved Market Size Study,” Financial Health Network, 2019.
9. Scott Horsley, “‘What Are We Going To Do?’ Towns Reel as Banks Close Branches at Record Pace,” NPR, March 26, 2021, available at https://www.npr.org/2021/03/26/979284513/what-are-we-going-to-do-towns-reel-as-banksclose-branches-at-record-pace.
10. “Fulfilling the Promise of FinTech: The Case for a Nonprofit Vision and Leadership,” September 11, 2018, available at https://www.aspeninstitute.org/publications/fulfilling-thepromise-of-fintech-the-case-for-a-nonprofitvision-and-leadership/.
11. CU Insight, “Federation Partners with EPL on CU Impact,” Press Release, July 20, 2016, available at https://www.cuinsight.com/press-release/federation-partners-epl-cu-impact.
12. Available at http://newlaborforum.cuny.edu/2018/01/18/going-on-offense-during-challenging-times/.
13. Steve Dubb, “C-W Interview: Seikatsu Club Consumers’ Co-operative Union,” September 30, 2012, available at https://democracycollaborative.org/learn/publication/c-w-interviewseikatsu-club-consumers-co-operative-union.
14. “A Home Care Uber Goes Off the Road: Lessons Learned About the Intersection of Technology and Health Care,” available at www.thebraffgroup.com.
15. Janet Burns, “Spectrum Strikers Launch ISP For (and by) the People of NYC,” Forbes, April 13, 2021, available at https://www.forbes.com/sites/janetwburns/2021/04/13/spectrum-strikers-launch-public-isp-for-and-by-the-peopleof- nyc/?sh=3d01895e6494.
16. Jonathan Levy, Ages of American Capitalism: A History of the United States (New York: Random House, 2021).
17. Steven Hahn, A Nation without Borders: The United States and Its World in an Age of Civil Wars, 1830-1910 (New York: Viking, an imprint of Penguin Random House LLC., [2016] 2021).


Author Biographies

J. Phillip Thompson is New York City Deputy Mayor for Strategic Policy Initiatives.

Christine Curella is a Senior Policy Advisor in the mayor’s office of New York City.

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