In early 2006, I got a call from Chris Kelly, then the chief privacy officer at Facebook, asking if I would be willing to meet with his boss, Mark Zuckerberg. I had been a technology investor for more than two decades, but the meeting was unlike any I had ever had. Mark was only twenty-two. He was facing a difficult decision, Chris said, and wanted advice from an experienced person with no stake in the outcome.

When we met, I began by letting Mark know the perspective I was coming from. Soon, I predicted, he would get a billion-dollar offer to buy Facebook from either Microsoft or Yahoo, and everyone, from the company’s board to the executive staff to Mark’s parents, would advise him to take it. I told Mark that he should turn down any acquisition offer. He had an opportunity to create a uniquely great company if he remained true to his vision. At two years old, Facebook was still years away from its first dollar of profit. It was still mostly limited to students and lacked most of the features we take for granted today. But I was convinced that Mark had created a game-changing platform that would eventually be bigger than Google was at the time. Facebook wasn’t the first social network, but it was the first to combine true identity with scalable technology. I told Mark the market was much bigger than just young people; the real value would come when busy adults, parents and grandparents, joined the network and used it to keep in touch with people they didn’t get to see often.

My little speech only took a few minutes. What ensued was the most painful silence of my professional career. It felt like an hour. Finally, Mark revealed why he had asked to meet with me: Yahoo had made that billion-dollar offer, and everyone was telling him to take it.

It only took a few minutes to help him figure out how to get out of the deal. So began a three-year mentoring relationship. In 2007, Mark offered me a choice between investing or joining the board of Facebook. As a professional investor, I chose the former. We spoke often about a range of issues, culminating in my suggestion that he hire Sheryl Sandberg as chief operating officer, and then my help in recruiting her. (Sheryl had introduced me to Bono in 2000; a few years later, he and I formed Elevation Partners, a private equity firm.) My role as a mentor ended prior to the Facebook IPO, when board members like Marc Andreessen and Peter Thiel took on that role.

In my thirty-five-year career in technology investing, I have never made a bigger contribution to a company’s success than I made at Facebook. It was my proudest accomplishment. I admired Mark and Sheryl enormously. Not surprisingly, Facebook became my favorite app. I checked it constantly, and I became an expert in using the platform by marketing my rock band, Moonalice, through a Facebook page. As the administrator of that page, I learned to maximize the organic reach of my posts and use small amounts of advertising dollars to extend and target that reach. It required an ability to adapt, because Facebook kept changing the rules. By successfully adapting to each change, we made our page among the highest-engagement fan pages on the platform.

My familiarity with building organic engagement put me in a position to notice that something strange was going on in February 2016. The Democratic primary was getting under way in New Hampshire, and I started to notice a flood of viciously misogynistic anti-Clinton memes originating from Facebook groups supporting Bernie Sanders. I knew how to build engagement organically on Facebook. This was not organic. It appeared to be well organized, with an advertising budget. But surely the Sanders campaign wasn’t stupid enough to be pushing the memes themselves. I didn’t know what was going on, but I worried that Facebook was being used in ways that the founders did not intend.

A month later I noticed an unrelated but equally disturbing news item. A consulting firm was revealed to be scraping data about people interested in the Black Lives Matter protest movement and selling it to police departments. Only after that news came out did Facebook announce that it would cut off the company’s access to the information. That got my attention. Here was a bad actor violating Facebook’s terms of service, doing a lot of harm, and then being slapped on the wrist. Facebook wasn’t paying attention until after the damage was done. I made a note to myself to learn more.

Meanwhile, the flood of anti-Clinton memes continued all spring. I still didn’t understand what was driving it, except that the memes were viral to a degree that didn’t seem to be organic. And, as it turned out, something equally strange was happening across the Atlantic.

When citizens of the United Kingdom voted to leave the European Union in June 2016, most observers were stunned. The polls had predicted a victory for the “Remain” campaign. And common sense made it hard to believe that Britons would do something so obviously contrary to their self-interest. But neither common sense nor the polling data fully accounted for a crucial factor: the new power of social platforms to amplify negative messages.

Facebook, Google, and other social media platforms make their money from advertising. As with all ad-supported businesses, that means advertisers are the true customers, while audience members are the product. Until the past decade, media platforms were locked into a one-size-fits-all broadcast model. Success with advertisers depended on producing content that would appeal to the largest possible audience. Compelling content was essential, because audiences could choose from a variety of distribution mediums, none of which could expect to hold any individual consumer’s attention for more than a few hours. TVs weren’t mobile. Computers were mobile, but awkward. Newspapers and books were mobile and not awkward, but relatively cerebral. Movie theaters were fun, but inconvenient.

When their business was limited to personal computers, the internet platforms were at a disadvantage. Their proprietary content couldn’t compete with traditional media, and their delivery medium, the PC, was generally only usable at a desk. Their one advantage—a wealth of personal data—was not enough to overcome the disadvantage in content. As a result, web platforms had to underprice their advertising.

Smartphones changed the advertising game completely. It took only a few years for billions of people to have an all-purpose content delivery system easily accessible sixteen hours or more a day. This turned media into a battle to hold users’ attention as long as possible. And it left Facebook and Google with a prohibitive advantage over traditional media: with their vast reservoirs of real-time data on two billion individuals, they could personalize the content seen by every user. That made it much easier to monopolize user attention on smartphones and made the platforms uniquely attractive to advertisers. Why pay a newspaper in the hopes of catching the attention of a certain portion of its audience, when you can pay Facebook to reach exactly those people and no one else?

Whenever you log into Facebook, there are millions of posts the platform could show you. The key to its business model is the use of algorithms, driven by individual user data, to show you stuff you’re more likely to react to. Wikipedia defines an algorithm as “a set of rules that precisely defines a sequence of operations.” Algorithms appear value neutral, but the platforms’ algorithms are actually designed with a specific value in mind: maximum share of attention, which optimizes profits. They do this by sucking up and analyzing your data, using it to predict what will cause you to react most strongly, and then giving you more of that.

Algorithms that maximize attention give an advantage to negative messages. People tend to react more to inputs that land low on the brainstem. Fear and anger produce a lot more engagement and sharing than joy. The result is that the algorithms favor sensational content over substance. Of course, this has always been true for media; hence the old news adage “If it bleeds, it leads.” But for mass media, this was constrained by one-size-fits-all content and by the limitations of delivery platforms. Not so for internet platforms on smartphones. They have created billions of individual channels, each of which can be pushed further into negativity and extremism without the risk of alienating other audience members. To the contrary: the platforms help people self-segregate into like-minded filter bubbles, reducing the risk of exposure to challenging ideas.

It took Brexit for me to begin to see the danger of this dynamic. I’m no expert on British politics, but it seemed likely that Facebook might have had a big impact on the vote because one side’s message was perfect for the algorithms and the other’s wasn’t. The “Leave” campaign made an absurd promise—there would be savings from leaving the European Union that would fund a big improvement in the National Health System—while also exploiting xenophobia by casting Brexit as the best way to protect English culture and jobs from immigrants. It was too-good-to-be-true nonsense mixed with fearmongering.

Meanwhile, the Remain campaign was making an appeal to reason. Leave’s crude, emotional message would have been turbocharged by sharing far more than Remain’s. I did not see it at the time, but the users most likely to respond to Leave’s messages were probably less wealthy and therefore cheaper for the advertiser to target: the price of Facebook (and Google) ads is determined by auction, and the cost of targeting more upscale consumers gets bid up higher by actual businesses trying to sell them things. As a consequence, Facebook was a much cheaper and more effective platform for Leave in terms of cost per user reached. And filter bubbles would ensure that people on the Leave side would rarely have their questionable beliefs challenged. Facebook’s model may have had the power to reshape an entire continent.

But there was one major element to the story that I was still missing.

Shortly after the Brexit vote, I reached out to journalists to validate my concerns about Facebook. At this point, all I had was a suspicion of two things: bad actors were exploiting an unguarded platform; and Facebook’s algorithms may have had a decisive impact on Brexit by favoring negative messages. My Rolodex was a bit dusty, so I emailed my friends Kara Swisher and Walt Mossberg at Recode, the leading tech industry news blog. Unfortunately, they didn’t reply. I tried again in August, and nothing happened.

Meanwhile, the press revealed that the Russians were behind the server hack at the Democratic National Committee and that Trump’s campaign manager had ties to Russian oligarchs close to Vladimir Putin. This would turn out to be the missing piece of my story. As the summer went on, I began noticing more and more examples of troubling things happening on Facebook that might have been prevented had the company accepted responsibility for the actions of third parties—such as financial institutions using Facebook tools to discriminate based on race and religion. In late September, Walt Mossberg finally responded to my email and suggested I write an op-ed describing my concerns. I focused entirely on nonpolitical examples of harm, such as discrimination in housing advertisements, suggesting that Facebook had an obligation to ensure that its platform not be abused. Like most people, I assumed that Clinton would win the election, and I didn’t want my concerns to be dismissed as inconsequential if she did.

My wife recommended that I send what I wrote to Mark Zuckerberg and Sheryl Sandberg before publishing in Recode. Mark and Sheryl were my friends, and my goal was to make them aware of the problems so they could fix them. I certainly wasn’t trying to take down a company in which I still hold equity. I sent them the op-ed on October 30. They each responded the next day. The gist of their messages was the same: We appreciate you reaching out; we think you’re misinterpreting the news; we’re doing great things that you can’t see. Then they connected me to Dan Rose, a longtime Facebook executive with whom I had an excellent relationship. Dan is a great listener and a patient man, but he was unwilling to accept that there might be a systemic issue. Instead, he asserted that Facebook was not a media company, and therefore was not responsible for the actions of third parties.

In the hope that Facebook would respond to my goodwill with a serious effort to solve the problems, I told Dan that I would not publish the op-ed. Then came the U.S. election. The next day, I lost it. I told Dan there was a flaw in Facebook’s business model. The platform was being exploited by a range of bad actors, including supporters of extremism, yet management claimed the company was not responsible. Facebook’s users, I warned, might not always agree. The brand was at risk of becoming toxic. Over the course of many conversations, I urged Dan to protect the platform and its users.

The last conversation we had was in early February 2017. By then there was increasing evidence that the Russians had used a variety of methods to interfere in our election. I formed a simple hypothesis: the Russians likely orchestrated some of the manipulation on Facebook that I had observed back in 2016. That’s when I started looking for allies.

On April 11, I cohosted a technology-oriented show on Bloomberg TV. One of the guests was Tristan Harris, formerly the design ethicist at Google. Tristan had just appeared on 60 Minutes to discuss the public health threat from social networks like Facebook. An expert in persuasive technology, he described the techniques that tech platforms use to create addiction and the ways they exploit that addiction to increase profits. He called it “brain hacking.”

The most important tool used by Facebook and Google to hold user attention is filter bubbles. The use of algorithms to give consumers “what they want” leads to an unending stream of posts that confirm each user’s existing beliefs. On Facebook, it’s your news feed, while on Google it’s your individually customized search results. The result is that everyone sees a different version of the internet tailored to create the illusion that everyone else agrees with them. Continuous reinforcement of existing beliefs tends to entrench those beliefs more deeply, while also making them more extreme and resistant to contrary facts. Facebook takes the concept one step further with its “groups” feature, which encourages like-minded users to congregate around shared interests or beliefs. While this ostensibly provides a benefit to users, the larger benefit goes to advertisers, who can target audiences even more effectively.

After talking to Tristan, I realized that the problems I had been seeing couldn’t be solved simply by, say, Facebook hiring staff to monitor the content on the site. The problems were inherent in the attention-based, algorithm-driven business model. And what I suspected was Russia’s meddling in 2016 was only a prelude to what we’d see in 2018 and beyond. The level of political discourse, already in the gutter, was going to get even worse.

I asked Tristan if he needed a wingman. We agreed to work together to try to trigger a national conversation about the role of internet platform monopolies in our society, economy, and politics. We recognized that our effort would likely be quixotic, but the fact that Tristan had been on 60 Minutes gave us hope.

Our journey began with a trip to New York City in May, where we spoke with journalists and had a meeting at the ACLU. Tristan found an ally in Arianna Huffington, who introduced him to people like Bill Maher, who invited Tristan to be on his show. A friend introduced me over email to a congressional staffer who offered to arrange a meeting with his boss, a key member of one of the intelligence committees. We were just starting, but we had already found an audience for Tristan’s message.

In July, we went to Washington, D.C., where we met with two members of Congress. They were interested in Tristan’s public health argument as it applied to two issues: Russia’s election meddling, and the giant platforms’ growing monopoly power. That was an eye-opener. If election manipulation and monopoly were what Congress cared about, we would help them understand how internet platforms related to those issues. My past experience as a congressional aide, my long career in investing, and my personal role at Facebook gave me credibility in those meetings, complementing Tristan’s domain expertise.

With respect to the election meddling, we shared a few hypotheses based on our knowledge of how Facebook works. We started with a question: Why was Congress focused exclusively on collusion between Russia and the Trump campaign in 2016? The Russian interference, we reasoned, probably began long before the presidential election campaign itself. We hypothesized that those early efforts likely involved amplifying polarizing issues, such as immigration, white supremacy, gun rights, and secession. (We already knew that the California secession site had been hosted in Russia.) We suggested that Trump had been nominated because he alone among Republicans based his campaign on the kinds of themes the Russians chose for their interference.

We theorized that the Russians had identified a set of users susceptible to its message, used Facebook’s advertising tools to identify users with similar profiles, and used ads to persuade those people to join groups dedicated to controversial issues. Facebook’s algorithms would have favored Trump’s crude message and the anti-Clinton conspiracy theories that thrilled his supporters, with the likely consequence that Trump and his backers paid less than Clinton for Facebook advertising per person reached. The ads were less important, though, than what came next: once users were in groups, the Russians could have used fake American troll accounts and computerized “bots” to share incendiary messages and organize events. Trolls and bots impersonating Americans would have created the illusion of greater support for radical ideas than actually existed. Real users “like” posts shared by trolls and bots and share them on their own news feeds, so that small investments in advertising and memes posted to Facebook groups would reach tens of millions of people. A similar strategy prevailed on other platforms, including Twitter. Both techniques, bots and trolls, take time and money to develop—but the payoff would have been huge.

Our final hypothesis was that 2016 was just the beginning. Without immediate and aggressive action from Washington, bad actors of all kinds would be able to use Facebook and other platforms to manipulate the American electorate in future elections.

These were just hypotheses, but the people we met in Washington heard us out. Thanks to the hard work of journalists and investigators, virtually all of these hypotheses would be confirmed over the ensuing six weeks. Almost every day brought new revelations of how Facebook, Twitter, Google, and other platforms had been manipulated by the Russians.

We now know, for instance, that the Russians indeed exploited topics like Black Lives Matter and white nativism to promote fear and distrust, and that this had the benefit of laying the groundwork for the most divisive presidential candidate in history, Donald Trump. The Russians appear to have invested heavily in weakening the candidacy of Hillary Clinton during the Democratic primary by promoting emotionally charged content to supporters of Bernie Sanders and Jill Stein, as well as to likely Clinton supporters who might be discouraged from voting. Once the nominations were set, the Russians continued to undermine Clinton with social media targeted at likely Democratic voters. We also have evidence now that Russia used its social media tactics to manipulate the Brexit vote. A team of researchers reported in November, for instance, that more than 150,000 Russian-language Twitter accounts posted pro-Leave messages in the run-up to the referendum.

The week before our return visit to Washington in mid-September, we woke up to some surprising news. The group that had been helping us in Washington, the Open Markets team at the think tank New America, had been advocating forcefully for anti-monopoly regulation of internet platforms, including Google. It turns out that Eric Schmidt, an executive at Alphabet, Google’s parent company, is a major New America donor. The think tank cut Open Markets loose. The story line basically read, “Anti-monopoly group fired by liberal think tank due to pressure from monopolist.” (New America disputes this interpretation, maintaining that the group was let go because of a lack of collegiality on the part of its leader, Barry Lynn, who writes often for this magazine.) Getting fired was the best possible evidence of the need for their work, and funders immediately put the team back in business as the Open Markets Institute. Tristan and I joined their advisory board.

Our second trip to Capitol Hill was surreal. This time, we had three jam-packed days of meetings. Everyone we met was already focused on our issues and looking for guidance about how to proceed. We brought with us a new member of the team, Renee DiResta, an expert in how conspiracy theories spread on the internet. Renee described how bad actors plant a rumor on sites like 4chan and Reddit, leverage the disenchanted people on those sites to create buzz, build phony news sites with “press” versions of the rumor, push the story onto Twitter to attract the real media, then blow up the story for the masses on Facebook. It was sophisticated hacker technique, but not expensive. We hypothesized that the Russians were able to manipulate tens of millions of American voters for a sum less than it would take to buy an F-35 fighter jet.

In Washington, we learned we could help policymakers and their staff members understand the inner workings of Facebook, Google, and Twitter. They needed to get up to speed quickly, and our team was happy to help.

Tristan and I had begun in April with very low expectations. By the end of September, a conversation on the dangers of internet platform monopolies was in full swing. We were only a small part of what made the conversation happen, but it felt good.

Facebook and Google are the most powerful companies in the global economy. Part of their appeal to shareholders is that their gigantic advertising businesses operate with almost no human intervention. Algorithms can be beautiful in mathematical terms, but they are only as good as the people who create them. In the case of Facebook and Google, the algorithms have flaws that are increasingly obvious and dangerous.

Thanks to the U.S. government’s laissez-faire approach to regulation, the internet platforms were able to pursue business strategies that would not have been allowed in prior decades. No one stopped them from using free products to centralize the internet and then replace its core functions. No one stopped them from siphoning off the profits of content creators. No one stopped them from gathering data on every aspect of every user’s internet life. No one stopped them from amassing market share not seen since the days of Standard Oil. No one stopped them from running massive social and psychological experiments on their users. No one demanded that they police their platforms. It has been a sweet deal.

Facebook and Google are now so large that traditional tools of regulation may no longer be effective. The European Union challenged Google’s shopping price comparison engine on antitrust grounds, citing unfair use of Google’s search and AdWords data. The harm was clear: most of Google’s European competitors in the category suffered crippling losses. The most successful survivor lost 80 percent of its market share in one year. The EU won a record $2.7 billion judgment—which Google is appealing. Google investors shrugged at the judgment, and, as far as I can tell, the company has not altered its behavior. The largest antitrust fine in EU history bounced off Google like a spitball off a battleship.

It reads like the plot of a sci-fi novel: a technology celebrated for bringing people together is exploited by a hostile power to drive people apart, undermine democracy, and create misery. This is precisely what happened in the United States during the 2016 election. We had constructed a modern Maginot Line—half the world’s defense spending and cyber-hardened financial centers, all built to ward off attacks from abroad—never imagining that an enemy could infect the minds of our citizens through inventions of our own making, at minimal cost. Not only was the attack an overwhelming success, but it was also a persistent one, as the political party that benefited refuses to acknowledge reality. The attacks continue every day, posing an existential threat to our democratic processes and independence.

We still don’t know the exact degree of collusion between the Russians and the Trump campaign. But the debate over collusion, while important, risks missing what should be an obvious point: Facebook, Google, Twitter, and other platforms were manipulated by the Russians to shift outcomes in Brexit and the U.S. presidential election, and unless major changes are made, they will be manipulated again. Next time, there is no telling who the manipulators will be.

Awareness of the role of Facebook, Google, and others in Russia’s interference in the 2016 election has increased dramatically in recent months, thanks in large part to congressional hearings on October 31 and November 1. This has led to calls for regulation, starting with the introduction of the Honest Ads Act, sponsored by Senators Mark Warner, Amy Klobuchar, and John McCain, which attempts to extend current regulation of political ads on networks to online platforms. Facebook and Google responded by reiterating their opposition to government regulation, insisting that it would kill innovation and hurt the country’s global competitiveness, and that self-regulation would produce better results.

But we’ve seen where self-regulation leads, and it isn’t pretty. Unfortunately, there is no regulatory silver bullet. The scope of the problem requires a multi-pronged approach.

First, we must address the resistance to facts created by filter bubbles. Polls suggest that about a third of Americans believe that Russian interference is fake news, despite unanimous agreement to the contrary by the country’s intelligence agencies. Helping those people accept the truth is a priority. I recommend that Facebook, Google, Twitter, and others be required to contact each person touched by Russian content with a personal message that says, “You, and we, were manipulated by the Russians. This really happened, and here is the evidence.” The message would include every Russian message the user received.

This idea, which originated with my colleague Tristan Harris, is based on experience with cults. When you want to deprogram a cult member, it is really important that the call to action come from another member of the cult, ideally the leader. The platforms will claim this is too onerous. Facebook has indicated that up to 126 million Americans were touched by the Russian manipulation on its core platform and another twenty million on Instagram, which it owns. Together those numbers exceed the 137 million Americans who voted in 2016. What Facebook has offered is a portal buried within its Help Center where curious users will be able to find out if they were touched by Russian manipulation through a handful of Facebook groups created by a single troll farm. This falls far short of what is necessary to prevent manipulation in 2018 and beyond. There’s no doubt that the platforms have the technological capacity to reach out to every affected person. No matter the cost, platform companies must absorb it as the price for their carelessness in allowing the manipulation.

Second, the chief executive officers of Facebook, Google, Twitter, and others—not just their lawyers—must testify before congressional committees in open session. As Senator John Kennedy, a Louisiana Republican, demonstrated in the October 31 Senate Judiciary hearing, the general counsel of Facebook in particular did not provide satisfactory answers. This is important not just for the public, but also for another crucial constituency: the employees who keep the tech giants running. While many of the folks who run Silicon Valley are extreme libertarians, the people who work there tend to be idealists. They want to believe what they’re doing is good. Forcing tech CEOs like Mark Zuckerberg to justify the unjustifiable, in public—without the shield of spokespeople or PR spin—would go a long way to puncturing their carefully preserved cults of personality in the eyes of their employees.

These two remedies would only be a first step, of course. We also need regulatory fixes. Here are a few ideas.

First, it’s essential to ban digital bots that impersonate humans. They distort the “public square” in a way that was never possible in history, no matter how many anonymous leaflets you printed. At a minimum, the law could require explicit labeling of all bots, the ability for users to block them, and liability on the part of platform vendors for the harm bots cause.

Second, the platforms should not be allowed to make any acquisitions until they have addressed the damage caused to date, taken steps to prevent harm in the future, and demonstrated that such acquisitions will not result in diminished competition. An underappreciated aspect of the platforms’ growth is their pattern of gobbling up smaller firms—in Facebook’s case, that includes Instagram and WhatsApp; in Google’s, it includes YouTube, Google Maps, AdSense, and many others—and using them to extend their monopoly power.

This is important, because the internet has lost something very valuable. The early internet was designed to be decentralized. It treated all content and all content owners equally. That equality had value in society, as it kept the playing field level and encouraged new entrants. But decentralization had a cost: no one had an incentive to make internet tools easy to use. Frustrated by those tools, users embraced easy-to-use alternatives from Facebook and Google. This allowed the platforms to centralize the internet, inserting themselves between users and content, effectively imposing a tax on both sides. This is a great business model for Facebook and Google—and convenient in the short term for customers—but we are drowning in evidence that there are costs that society may not be able to afford.

Third, the platforms must be transparent about who is behind political and issues-based communication. The Honest Ads Act is a good start, but does not go far enough for two reasons: advertising was a relatively small part of the Russian manipulation; and issues-based advertising played a much larger role than candidate-oriented ads. Transparency with respect to those who sponsor political advertising of all kinds is a step toward rebuilding trust in our political institutions.

Fourth, the platforms must be more transparent about their algorithms. Users deserve to know why they see what they see in their news feeds and search results. If Facebook and Google had to be up-front about the reason you’re seeing conspiracy theories—namely, that it’s good for business—they would be far less likely to stick to that tactic. Allowing third parties to audit the algorithms would go even further toward maintaining transparency. Facebook and Google make millions of editorial choices every hour and must accept responsibility for the consequences of those choices. Consumers should also be able to see what attributes are causing advertisers to target them.

Fifth, the platforms should be required to have a more equitable contractual relationship with users. Facebook, Google, and others have asserted unprecedented rights with respect to end-user license agreements (EULAs), the contracts that specify the relationship between platform and user. When you load a new operating system or PC application, you’re confronted with a contract—the EULA—and the requirement that you accept its terms before completing installation. If you don’t want to upgrade, you can continue to use the old version for some time, often years. Not so with internet platforms like Facebook or Google. There, your use of the product comes with implicit acceptance of the latest EULA, which can change at any time. If there are terms you choose not to accept, your only alternative is to abandon use of the product. For Facebook, where users have contributed 100 percent of the content, this non-option is particularly problematic.

All software platforms should be required to offer a legitimate opt-out, one that enables users to stick with the prior version if they do not like the new EULA. “Forking” platforms between old and new versions would have several benefits: increased consumer choice, greater transparency on the EULA, and more care in the rollout of new functionality, among others. It would limit the risk that platforms would run massive social experiments on millions—or billions—of users without appropriate prior notification. Maintaining more than one version of their services would be expensive for Facebook, Google, and the rest, but in software that has always been one of the costs of success. Why should this generation get a pass?

Sixth, we need a limit on the commercial exploitation of consumer data by internet platforms. Customers understand that their “free” use of platforms like Facebook and Google gives the platforms license to exploit personal data. The problem is that platforms are using that data in ways consumers do not understand, and might not accept if they did. For example, Google bought a huge trove of credit card data earlier this year. Facebook uses image-recognition software and third-party tags to identify users in contexts without their involvement and where they might prefer to be anonymous. Not only do the platforms use your data on their own sites, but they also lease it to third parties to use all over the internet. And they will use that data forever, unless someone tells them to stop.

There should be a statute of limitations on the use of consumer data by a platform and its customers. Perhaps that limit should be ninety days, perhaps a year. But at some point, users must have the right to renegotiate the terms of how their data is used.

Seventh, consumers, not the platforms, should own their own data. In the case of Facebook, this includes posts, friends, and events—in short, the entire social graph. Users created this data, so they should have the right to export it to other social networks. Given inertia and the convenience of Facebook, I wouldn’t expect this reform to trigger a mass flight of users. Instead, the likely outcome would be an explosion of innovation and entrepreneurship. Facebook is so powerful that most new entrants would avoid head-on competition in favor of creating sustainable differentiation. Start-ups and established players would build new products that incorporate people’s existing social graphs, forcing Facebook to compete again. It would be analogous to the regulation of the AT&T monopoly’s long-distance business, which led to lower prices and better service for consumers.

Eighth, and finally, we should consider that the time has come to revive the country’s traditional approach to monopoly. Since the Reagan era, antitrust law has operated under the principle that monopoly is not a problem so long as it doesn’t result in higher prices for consumers. Under that framework, Facebook and Google have been allowed to dominate several industries—not just search and social media but also email, video, photos, and digital ad sales, among others—increasing their monopolies by buying potential rivals like YouTube and Instagram. While superficially appealing, this approach ignores costs that don’t show up in a price tag. Addiction to Facebook, YouTube, and other platforms has a cost. Election manipulation has a cost. Reduced innovation and shrinkage of the entrepreneurial economy has a cost. All of these costs are evident today. We can quantify them well enough to appreciate that the costs to consumers of concentration on the internet are unacceptably high.

Increasing awareness of the threat posed by platform monopolies creates an opportunity to reframe the discussion about concentration of market power. Limiting the power of Facebook and Google not only won’t harm America, it will almost certainly unleash levels of creativity and innovation that have not been seen in the technology industry since the early days of, well, Facebook and Google.

Before you dismiss regulation as impossible in the current economic environment, consider this. Eight months ago, when Tristan Harris and I joined forces, hardly anyone was talking about the issues I described above. Now lots of people are talking, including policymakers. Given all the other issues facing the country, it’s hard to be optimistic that we will solve the problems on the internet, but that’s no excuse for inaction. There’s far too much at stake.

The post How to Fix Facebook—Before It Fixes Us appeared first on Washington Monthly.

No story has gripped Washington’s attention over the last year more than the Russia investigation. Robert Mueller’s inquest draws ever closer to the president. Three congressional committees are at least going through the motions of conducting their own probes. One breathtaking media scoop follows another. The question at the heart of it all is whether Donald Trump violated the law or the Constitution—and, ultimately, whether those violations merit his impeachment.

Yet all the while, official Washington has tolerated an entire other class of corrupt and potentially unconstitutional behavior being carried out in plain sight, as Trump uses the presidency to enrich himself and his family. He has installed immediate relatives at the helm of the Trump Organization, continued to accept payments from foreign governments and private interests, and lavishly billed the government for using his own properties—all without guaranteeing that he will prioritize his duties as president over his own bottom line.

No president ever entered office with the type of immense personal fortune and ongoing business interests that Trump has. Trump’s vast business empire spans more than 500 companies in twenty-five countries and has earned him an estimated net worth of $3.1 billion. Traditionally, on taking office, presidents have placed their assets in a “blind trust” whose trustee is legally barred from telling the beneficiary about the trust’s holdings. Jimmy Carter famously placed the family peanut business into a blind trust in 1977. Ronald Reagan, George H. W. Bush, Bill Clinton, and George W. Bush all followed suit.

Trump’s trust agreement is a little different. For one thing, it’s not blind—Trump’s children have admitted to providing their father with regular business updates. For another, the agreement allows him to withdraw profits and assets from the trust at any time. That means Trump has a direct and ongoing financial interest in any policy decision that could affect his businesses.

Much of this has happened in broad daylight. The mainstream media has covered Trump’s conflicts doggedly. But the steady drip-drip-drip of evidence hasn’t captured the public’s attention like Russia has, or motivated any serious response by the government—no investigations are under way, either in Congress or the executive branch. This despite the fact that the infractions raise the same terrifying possibility as Trump’s possible collusion with Russia: the sacrificing of American interests in the service of the president’s personal gain.

The only active effort to investigate Trump’s profiteering is happening through civil lawsuits in New York, D.C., and Maryland federal courts. The plaintiffs challenging Trump’s behavior include the watchdog group Citizens for Responsibility and Ethics in Washington (CREW); some 200 Democrats in Congress, led by Connecticut Senator Richard Blumenthal; attorneys general in Washington, D.C., and Maryland; and hotel and restaurant owners who compete with Trump. They all argue that Trump is in blatant violation of a provision in the Constitution meant to ensure that the president can’t exploit his office for profit. (Update: just before Christmas, but after this article went to press, a federal judge in New York dismissed one of the suits on the grounds that the plaintiffs lacked standing to sue. An appeal is likely.)

But aside from these civil suits, which may take years to resolve, Trump just keeps getting away with it. One reason this hasn’t generated more outcry is that the infractions have been a steady accumulation, rather than one smoking gun. So we thought now, one year into Trump’s presidency, would be a good time to pull everything together and document the full scope of what’s known about his corrupt behavior. (A more comprehensive list of the improper perks Trump has received can be found here.) Clearly, the Republican-
controlled Congress has no interest in holding Trump to account. But if the Democrats retake Congress, they should start an investigation on their first day. This is their background reading.

Corruption Type 1: Foreign Emoluments

Foreign interference in our political system was of grave concern to the framers of the Constitution. They knew that when a federal officeholder receives gifts, money, or other benefits from foreign governments, his judgment is compromised and his loyalties are divided. So they wrote a strict rule into the text of the Constitution, the Foreign Emoluments Clause, which provides that federal officeholders may not “accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state” without Congress’s approval.

Unlike with bribery statutes, a violation of the Foreign Emoluments Clause doesn’t require proof that an official gave something in return. It’s designed to protect against not just quid pro quo corruption, but also the mere appearance of improper influence on government officials.

With that understanding, CREW argues in its suit that Trump’s business interests are “creating countless conflicts of interest, as well as unprecedented influence by foreign governments, and have resulted and will further result in numerous violations of the Constitution.” As an example, the group cites foreign governments’ lavish spending at Trump’s hotel and restaurants, particularly at the Trump International Hotel just steps away from the White House, in some cases at the prodding of Trump’s agents. After the election, the Trump International hosted more than 100 foreign diplomats for a tour, sending them home with goody bags and brochures in an attempt to encourage their patronage. Former Mexican diplomat Arturo Sarukhan has said that the State Department urged diplomats to stay at the Trump International while on official visits.

Delegations from at least eight countries have obliged. In September, Malaysian Prime Minister Najib Razak and other members of his administration were seen hobnobbing in meeting rooms at the hotel, bringing in what is estimated to be hundreds of thousands of dollars in revenue. Saudi Arabia has spent more than a quarter of a million
dollars—$190,000 on lodging, $78,000 on catering, and $1,600 on parking—at the hotel in connection with its lobbying against legislation that would allow American citizens to sue foreign governments over terrorist attacks.

And the Kuwaiti embassy suddenly changed the venue for its National Day celebration last February from the Four Seasons to the Trump International, paying an estimated $40,000 to $60,000. A source with knowledge of the conversations between the hotel and the embassy told ThinkProgress that Trump Organization members had pressured the Kuwaiti ambassador to cancel the embassy’s “save the date” reservation at the Four Seasons, where it had held the event in the past. Perhaps it’s purely a coincidence that neither Saudi Arabia nor Kuwait were among the Muslim-majority nations singled out by Trump’s travel ban.

Moreover, foreign governments continue to hold leases on units in Trump buildings. Trump Tower’s largest commercial tenant is the state-owned Industrial and Commercial Bank of China, which pays nearly $2 million per year for office space—and whose lease is up for renewal in 2019. Other governments, including Saudi Arabia, India, Afghanistan, and Qatar, continue to pay collective charges of at least $225,000 annually on units purchased prior to Trump’s election.

The full extent of these arrangements, of course, is unknown. If Congress or the Justice Department investigated, they could very well uncover many more examples.

In an ostensible attempt to mitigate such impropriety, Trump has pledged to donate the profits he receives from foreign governments to the U.S. Treasury, forfeiting funds earned in 2017 sometime in 2018. But it’s an empty promise, because there is no way to know if he’s following through unless he provides transparency into his business operations. Instead, Trump has gone to great lengths to keep his dealings secret, refusing to disclose his tax returns and leaving the public to wonder just how enmeshed with foreign governments he really is. It’s possible that he plans to donate all the proceeds, but his pattern of secrecy leaves little reason to give him the benefit of the doubt.

Curiously, Trump has an easy way to protect himself from running afoul of the Constitution while still profiteering from foreign governments. The Founding Fathers inserted flexibility into the Emoluments Clause by allowing public officials to disclose foreign emoluments and request the approval of Congress. Yet Trump has not even bothered to make this request, and Congress, controlled by the GOP, hasn’t demanded that he do so. The question is, why not just do this simple paperwork? Is it arrogance? Sloppiness? Or the fear that once the process of disclosing the foreign payments starts, facts will come out that Trump doesn’t want shared?

Moreover, Trump’s emoluments from foreign governments may extend beyond traceable cash payments. The Trump Organization has earned regulatory benefits like intellectual property rights in a number of foreign countries, most notably China, Russia, Mexico, and Indonesia.

In the decade before he became president, the Chinese government granted Trump seventy-seven trademarks. In the last year alone, it has granted at least thirty-nine, some of which it had previously rejected. The now-protected marks include those for spa and massage services, golf clubs, hotels, insurance, finance and real estate companies, restaurants, bars, and more. In one case, the Chinese green-lighted a Trump trademark application in February only days after he spoke with President Xi Jinping, pledging to uphold the “One China Policy” and maintaining the U.S.’s position that Taiwan is part of China (the opposite position from the one he campaigned on). “If this isn’t a violation of the Emoluments Clause,” noted Senator Dianne Feinstein, “I don’t know what is.” (First daughter Ivanka Trump pulled a similar trick last April, hosting, with her husband, Jared Kushner, a surf-and-turf dinner with the Chinese president at Mar-a-Lago the same day her company won provisional monopoly rights to sell Ivanka brand merchandise and spa services in the world’s second-largest market.)

The framers, with their eighteenth-century understanding of economics, may not have foreseen a world in which emoluments take the form of intellectual property rights in a foreign market. But they could envision scenarios in which the president might be tempted to accept a foreign policy deal sweetened with direct personal benefits—precisely the kind of conflict of interest they aimed to prevent with the Emoluments Clause.

Corruption Type 2: Domestic Emoluments

The framers weren’t just worried about foreign influences. They intended the Domestic Emoluments Clause to ensure that Congress, other parts of the federal government, and the states “can neither weaken [the president’s] fortitude by operating on his necessities, nor corrupt his integrity by appealing to his avarice,” as Alexander Hamilton wrote in the Federalist Papers. It entitles the president to receive a salary (currently $400,000 a year) and benefits fixed by Congress, but prohibits him from taking any other profits from the public—whether from the federal government or from any of the states.

Trump violates this provision, many constitutional scholars have argued, when state or federal entities patronize his properties and spend taxpayer money. Although the full extent of these violations is unknown, public reporting has confirmed that the president is at least receiving some revenue from state and federal officials through the businesses that he owns.

Business at the Trump International Hotel in the Old Post Office Building, which it leases from the federal General Services Administration, has been booming. It’s become a place to see and be seen for D.C. Republicans, including cabinet officials and members of Congress. And it’s where Maine Governor Paul LePage stayed during publicly funded travel to Washington over the summer, spending at least $2,250 just on accommodations for his security team.

Trump’s continued control over the hotel would seem to violate a provision in the contract that prohibits any U.S. elected official from participating in the lease or benefiting from it in any way. But the GSA has allowed him to keep the sixty-year lease based on his promise—totally unsubstantiated—not to receive profits until after he
leaves office. The GSA’s director is a presidential appointee, meaning Trump is both the landlord and tenant of this prime federally owned real estate.

The forty-six-story Trump SoHo Hotel in Manhattan has also been a lucrative source of public dollars. State pension funds in California, New York, Texas, Arizona, Montana, Michigan, and Missouri reportedly contributed millions to an investment fund that owns the hotel and has compensated the Trump Organization. The arrangement predated Trump’s inauguration by several years, but he continued to receive quarterly payments from the fund for almost a year after taking office. California’s pension fund alone paid the investment fund more than $1.7 million in management fees for the first three months of 2017. The Trump Organization, which received a cut of the hotel’s revenue, only severed ties with the investment fund in November, citing a decline in business in the deeply Democratic city.

But Trump doesn’t just rely on others to put money into his businesses—he patronizes them himself with stunning frequency, having spent more than 100 days at them, nearly a third of his presidency, while in office. Unlike any previous president, Trump’s vacation properties are for-profit enterprises, meaning each visit funnels public money to Trump’s business, mainly in the form of exorbitant security costs. Secret Service has blown through its budget due to Trump’s frequent travel expenses, requesting an additional $60 million to protect the first family in March. Trump’s detail reportedly paid Mar-a-Lago, Trump’s luxury club in Palm Beach, Florida, at least $63,000 between February and April, and has spent at least $144,975 on golf cart rentals at Trump properties in New Jersey, Virginia, and Palm Beach as of November. And last spring, the Defense Department signed a $2.39 million eighteen-month lease for space in Trump Tower for a military office meant to provide various presidential services, including access to nuclear launch codes.

Again, it’s theoretically possible that these dollars aren’t ending up in Trump’s bank account. Perhaps Trump’s businesses have provided every working lunch and hotel room to the government free of charge. But given Trump’s refusal to be transparent about that information, there is no way to confirm it. And even if Trump did start donating the revenue derived from public money, each visit would still amount to taxpayer-supported advertising for his properties.

The Domestic Emoluments Clause has long been interpreted as allowing presidents to receive some governmental perks that fall outside his salary, including security and other expenses when they travel. George W. Bush received these whenever he spent time at his Crawford ranch, just as Barack Obama did when he vacationed in Hawaii. Never before, however, have these expenses gone into the coffers of a company owned by the president himself, as happens every time Trump visits Mar-a-Largo or golfs at one of his clubs. At the very least, each visit appears to involve a transfer of taxpayer money to Trump’s bottom line—which looks like the kind of “appealing to his avarice” that the founders were afraid of.

Corruption Type 3: Slimy, but Probably Legal

Many presidents have been independently wealthy, but none before Trump entered the White House with a massive on-going business empire—or brazenly used the office to drive up that empire’s value.

Almost immediately following his inauguration, the annual membership rate at Mar-a-Lago, which Trump has dubbed his “Winter White House,” doubled, from $100,000 to $200,000, reflecting Trump’s eagerness to capitalize on the market value of access to the leader of the free world. In February, Mar-a-Lago management sold a tennis shirt featuring a “45” on the sleeve in reference to Trump, the forty-fifth president. By April, rates at the Trump International Hotel had jumped to at least $660 per night, an increase in hundreds from before his election. And in November, the president plugged his New Jersey golf course during a foreign policy speech in Seoul.

Despite Trump’s vow that his companies would make no new foreign deals while he is in office, the Trump Organization is actively expanding its portfolio and, in the past year, has opened two residential projects in India, a golf club in Dubai, and a hotel in Vancouver, while two real estate projects in Indonesia are still in the works. Trump insists that the public should take him at his word that he has no involvement in the Trump Organization, yet he continues to talk shop with his sons as they charge forward in promoting the brand worldwide.

As sleazy as it is for a president to trade on his office to pad his bottom line—and to continue to make international business deals while being responsible for America’s well-being—what’s truly shocking is that there appears to be nothing illegal about it. The Emoluments Clauses target domestic and foreign government payments, but say nothing about profiteering from private sources.

That means Trump doesn’t run afoul of the Constitution each time private organizations host an event at his properties, even if they are actively lobbying the government. And they do—frequently. At least fifteen interest groups—including the National Railroad Construction and Maintenance Association, the Commercial Real Estate Development Association, the private prison company GEO Group, and conservative organizations including the American Legislative Exchange Council and the Fund for American Studies—have all hosted events at Trump hotels in the last year and are registered lobbyists.

Among the most extravagant events was a $400,000 Red Cross ball hosted at Mar-a-Lago in February and themed “From Vienna to Versailles,” referencing the route traveled by Marie Antoinette in 1770 before she was married to the last French king, Louis XVI. (And long before the couple were beheaded in the French Revolution.) With the first lady on his arm, Trump himself attended, greeted with explosive applause from the partygoers upon his arrival.

For the private organizations that dote on his hotels, Trump is likely to return the favor. He has shown himself to be susceptible to flattery, receiving twice-daily briefings on favorable press coverage of himself and condemning his media critics as universally “failing.”

Where the Constitution cannot regulate the president’s profiteering from private sources, federal ethics rules are also impotent. The rules bar executive branch employees from soliciting and accepting “gifts” from private interest groups, particularly if they have used their position to do so or have received a benefit for “being influenced in the performance of an official act,” according to the Office of Government Ethics. And political appointees, including Trump’s cabinet members, are explicitly prohibited from accepting “gifts or gratuities from registered lobbyists or lobbying organizations.” (Both White House adviser Kellyanne Conway and Treasury Secretary Steve Mnuchin have already been accused of violating those rules.)

But Trump isn’t subject to the same restrictions. Congress exempted the president from the 1978 Ethics of Government Act and the 1989 Ethics Reform Act, out of fear that presidents would have to recuse themselves from policy decisions. “They made a judgment call to rely on accountability and conscience as the restraint on presidential profiteering,” said Jed Shugerman, a law professor at Fordham University. “And for most of American history, those norms were sufficient.”

It looks like it might be time to rethink that judgment call.

The post Commander in Thief appeared first on Washington Monthly.

When I met Kendall on a November Sunday afternoon in a downtown D.C. bar, she had just finished her shift serving appetizers and drinks for a catering company. An energetic Southern California native, Kendall splits her time between the serving job and the one she actually came to D.C. to pursue: an internship on Capitol Hill.

Kendall, who is being identified by her middle name so she can speak openly about her internship, is just the type of young person any congressional office should be eager to employ. She’s articulate, shrewd, and a voracious reader (when we first met, she was paging through a tattered copy of The Culture of Narcissism, by the late political theorist Christopher Lasch). Kendall—whose father sells orthopedic implants and whose mother is a babysitter—grew up in  La Verne, in far east Los Angeles County, excelled at school, and attended Pomona College with significant financial aid, graduating last May. The work she’s doing in Congress, for two California Democratic House members, is mostly clerical—compiling news clips, sorting mail, answering calls from constituents. But she has also been given some higher-order tasks that put her closer to the action. “It was really cool to see a press release go out with what I had written,” she said.

The internship, however, is unpaid, and because her parents can’t afford to bankroll her, she has had to make sacrifices to make her stint on the Hill viable. To cut down on expenses, Kendall takes a grinding hour-and-a-half commute, on two separate buses, from the Arlington, Virginia, apartment she shares with two roommates to the Rayburn House Office Building, where she works. She could take the Metro and zip to work in thirty minutes, but during rush hour that would cost $3.25 each way, while a weekly bus pass costs her just $17.50. On days when she works her second job, she might not get home before 11 p.m.

Her parents try to help out when they can, but still Kendall says that she spends just $25 per week on groceries—“I eat lots of pasta,” she said. And the requirement that she wear business attire every day has strained her thin budget even more. “For me, it was hard because I didn’t have much of a business wardrobe,” she said. “So I went to the thrift store and bought a blazer for $8. It didn’t fit me right, but it was the best I could find.”

Up to 40,000 interns flock to the nation’s capital annually, working temporary stints in government, journalism, think tanks, and lobbying. By far the highest concentration of interns is on Capitol Hill. Visit on a muggy summer day, and you’re sure to see “Hillterns” in their recognizable ill-fitting suits, struggling to find the nearest Metro station.

Nationwide, about half of all internships are unpaid, even as they are now a nearly mandatory credential for gaining an entry-level job in many white-collar professions. Congress is especially bad: in the House, only 8 percent of Republicans and 4 percent of Democrats compensate even one of their many interns, according to Pay Our Interns, an advocacy organization that tracks payment for interns on the Hill. The partisan difference is partly due to the fact that the GOP is in the majority and can allocate more funds to its members, but it’s still a bad look for liberal politicians who claim to stand for fair pay and higher wages. The situation is better in the Senate, though the disparity isn’t, at least not by much: fifty-one Republicans and thirty-one Democrats offer at least a stipend for at least one intern each year. Still, the great majority of Senate interns are unpaid, and among the minority who are paid, the level of compensation varies widely by office. Bernie Sanders admirably pays all his interns $15 an hour, while Republican Orrin Hatch pays half that, just $7.50 an hour.

Unpaid internships are burdensome anywhere, but especially so in Washington, D.C. For renters, D.C. ranks as the seventh most expensive city in the world. The total cost of a three-month unpaid internship in cities like D.C. and New York can inch toward $6,000 once you factor in such variables as rent, food, and transportation.

As a result, Capitol Hill internships are increasingly opportunities that only young people from affluent families can afford to take. This fact has not escaped Kendall’s notice; she talks about a fellow intern who goes out for lunch on his parents’ credit card while she eats a peanut butter and jelly sandwich at her desk.

Yet unpaid congressional interns have become so embedded into the fabric of the institution that the practice of not paying them is rarely questioned.

It wasn’t always this way. Paid internships were the norm on Capitol Hill until a few decades ago. This was back when congressional staffers earned competitive salaries and there were enough of them to make Congress function more or less effectively. Back then, paid internships were a pipeline that brought kids of modest means to the Hill and gave them the opportunity to learn up close how representative government works and allowed them, perhaps, to rise through the ranks as staffers, policymakers, or even politicians themselves. But the same institutional penny-pinching that has devastated congressional staff has all but wiped out paid internships, with pernicious consequences for Washington and for American democracy.

When Charles arrived on Capitol Hill as a wide-eyed intern in 1969, he was already a paragon of the American meritocracy. His father, Abe, ran a small exterminator business in Fort Greene, Brooklyn, which provided a stable working-class income for Charles and his two siblings. “Our family always associated the smell of roach spray with love,” he would later say. Charles excelled at James Madison High School, and with a perfect SAT score he was soon on his way to Harvard, set on majoring in chemistry. Harvard then was still an enclave for the clean-cut WASP elite, and Charles—who is Jewish, and whose middle name, Ellis, pays homage to the immigrant gateway that millions passed through—wasn’t initially a natural fit at the university. “When I went to Harvard, everyone was either from very wealthy suburbs or from university towns,” he once said.

Charles’s interest in politics crystallized at Harvard, as the Vietnam War raged and college campuses nationwide were engulfed in protest. As a freshman, he went to New Hampshire to campaign for Eugene McCarthy, the antiestablishment senator challenging the incumbent Lyndon Johnson in the 1968 Democratic primary. Catching the political bug, he set off for Washington in 1969, interning for Representative Bert Podell, a New York Democrat. Luckily for him, he was paid—about $1,800 a month in today’s dollars, based on records from the era. Not a fortune, but enough for a short-term gig in D.C.

Charles graduated from Harvard in 1971—he wrote his senior thesis about the ways that Congress could function more efficiently—and three years later, at the age of twenty-three, he became one of the New York State Assembly’s youngest members since Theodore Roosevelt.

Charles, now sixty-seven years old and with graying hair and glasses that sit delicately at the tip of his nose,  is back in Washington. He’s Senate Minority Leader Chuck Schumer.

When internships boomed in Congress in the 1960s and ’70s, paid internships like the one that jump-started Schumer’s career weren’t limited to just a few generous offices. According to Ross Perlin, author of Intern Nation, the whole concept of the internship originated in government. In 1935, the nonprofit National Institute of Public Affairs selected thirty students to move to D.C. for a year in 1935, where they would be trained to be the next generation of public servants. Congressional internships appeared a few decades after that—and from there, the intern economy ballooned. Today, 1.5 million Americans intern each year. In D.C., Perlin said, “you can trace how the growth of the whole internship system on Capitol Hill has promoted lobbyists, think tanks, and other places to adopt the practice. It has a ripple effect where people go through the system and come out the other end—the practice replicates itself.”

Congress doesn’t publish statistics on what it does or doesn’t pay its interns. But individual members have to report all spending in their offices, which are released several times a year in dense tomes that account for everything from salaries for their chiefs of staff to purchases of water and candy for the office coffee table. Decades worth of these records are stored in the Library of Congress. If you page through these musty volumes, as I recently did, a pattern emerges.

In 1971, for example, virtually every House office offered paid internships averaging $300 a month, a salary that in today’s dollars would equal $22,000 annually. In the Senate, about 40 percent of offices paid in 1974—the earliest year for which data is available—but by 1980, the rate was up to just under 80 percent. Consider Senator Ernest Hollings, the South Carolina Democrat who was a fixture in the upper chamber for four decades: in 1980, his office paid thirty-six interns between April and September, most of whom made slightly more than $1,000 per month, or $3,110 today. Paid internships weren’t split along partisan lines: Nevada Republican Paul Laxalt had thirty-two interns making roughly the same amount.

These paid internships enabled countless young people to get a foothold in government service. Jean Bordewich interned in 1970 for L. Richardson Preyer, a House Democrat whose North Carolina district included Guilford College, where she was then a student. “It was just assumed that I was going to be paid,” she said recently. “I couldn’t have done it had I not been paid. I was expected to go home and earn money, like I had the previous summer, to pay for college.”

As an intern, Bordewich earned the equivalent of a staff assistant’s salary, which allowed her to share an apartment in Southwest D.C. close to her office on Capitol Hill. After college, she spent more than two decades in Congress, including as Schumer’s appointed staff director on the Senate Rules Committee, before joining the Hewlett Foundation. (The Washington Monthly is a Hewlett Foundation grantee.)

After Lyndon Johnson’s death in early 1973, lawmakers thought about how to adequately pay homage to the former president, who had himself spent a quarter century in the halls of Congress. They soon decided to appropriate funds for a new program: the LBJ Congressional Intern Program. Each House office was given money to hire interns in two-month stints who would be paid $500 per month, a stipend that was routinely raised to match inflation, and which today would amount to around $2,700.

The LBJ internship program “prepared a whole generation of people for leadership in members’ offices,” said John Weinfurter, who, as chief of staff to Congressman Joe Moakley from 1979 to 1999, ran the program in Moakley’s office. Brandon Wood, who runs the Texas Commission on Jail Standards, made the trek to Washington from Pampa, a remote town of 18,000 in the Texas Panhandle where he had been working construction on oil pipelines for school money, to intern for Representative Bill Sarpalius. “The pay was one of the things that made the internship possible,” said Wood. Eddie Gouge, another former LBJ intern from a modest background, said he wouldn’t have been able to accept the internship without the stipend. The LBJ program “actually led to me getting a job on Capitol Hill, and probably led me to success throughout my career in D.C.,” said Gouge, who now works at the American Association of Public and Land-grant Universities. Sylvia Burwell, raised in small-town West Virginia, came to D.C. as an LBJ intern and, after a fast rise through government ranks, became secretary of health of human services in the Obama administration, She’s now the president of American University. Brad Fitch, the son of a public school teacher, was an LBJ intern for Representative Jack Kemp. Today, after spending decades as a congressional aide and eventually as a chief of staff, he runs the Congressional Management Foundation.

In 1992, presidential candidate Bill Clinton promised that, if elected, he would slash the White House staff as an indication of his seriousness about cutting the deficit, then a raging issue in American politics. After President Clinton followed through on his campaign pledge, Congress—led by Speaker Tom Foley, a Democrat—followed suit, imposing its own 4 percent budget cuts. As Congress tightened its belt, the LBJ internship program was among the first things to go. In May 1994, offices saw their funding yanked away, leaving them scrambling to pay their incoming summer interns.

The following year, Congress engineered a bit of legal jujitsu to accommodate its growing appetite for unpaid labor. The Congressional Accountability Act of 1995, which codified minimum wage and other labor protections for congressional staff, stipulated that the definition of an employee “shall not include an intern,” effectively carving an exception for Congress from the labor regulations it levies on the private sector. (The same legislation, by the way, denies interns the ability to file sexual harassment cases on the job.)

Just as Congress was passing the CAA, a congressman named Newt Gingrich assumed the House speakership as Republicans ended forty years of Democratic majority. Among the first priorities of the Gingrich revolution was to deeply cut the congressional workforce. Gingrich sliced committee and individual member staff ranks by a third, and those numbers never fully recovered. Indeed, they were cut even further when the Tea Party–led GOP Congress swept back into power in 2010. In 1993, Congress employed 27,000 people; by 2015, that number had dropped to under 20,000. Meanwhile, the nation’s population increased by sixty million, and real federal spending grew by 62 percent. The scope of Congress’s work, in other words, hasn’t shrunk, only the capacity of its staff to do the work.

This has had a number of deleterious effects. One is the outsourcing of work Congress used to do in-house, like generating and analyzing policy, to think tanks and lobbying shops (see “The Big Lobotomy,” Washington Monthly, July/August 2014). Another is a growing reliance on unpaid interns. A large portion of the front-end interactions with constituents that were once handled by junior staffers—answering phone calls, giving tours of the Capitol, handling flag requests—has been delegated down the food chain to interns. “The need to have a successful intern program has only increased as a result of the budget cuts to congressional offices,” the Congress-focused publication Roll Call advises its readers on the Hill, and “having professional interns who contribute to the office’s productivity is not only desirable for congressional offices, it is now an absolute need.”

Since unpaid interns became the norm in Congress, the cost of living in the city, especially rent, has exploded. Real incomes have risen by a third in the District since 1980, but housing costs have increased by almost 90 percent. The plane ticket to D.C. alone can be a hardship. When Jessica Padron, the daughter of working-class immigrants, interned for Harry Reid in 2013, she had to crowdfund the cost of her move to D.C. from Las Vegas.

A growing number of colleges provide their students with intern stipends, but most are institutions with vast endowments serving mostly wealthy students. Foundations and nonprofits also generously fund Hill interns—for example, the Congressional Hispanic Caucus Institute has funded internships for Latinos for almost forty years. But this funding is available for only a small subset of interns.

By failing to pay interns, Congress not only dissuades children of the non-affluent from becoming interns, but also limits the talent pool from which it draws most of its paid staff. “Whenever we had an opening on our staff, we would always hire from the ranks of former interns above everyone else,” said John Weinfurter, the longtime chief of staff for Joe Moakley. Nicholas Larsen, a legislative correspondent for Representative Jim Himes and a former intern himself, estimated that 40 percent to 60 percent of entry-level staffers were previously interns.

This pinching of the talent pipeline has another downstream effect: fewer minorities in the intern pool—a direct consequence of not offering payment—means fewer minorities in the ranks of the paid staff. In 2015, the Joint Center for Political and Economic Studies found that among the 336 top staffers populating Senate offices, only twenty-four were minorities. House staffers aren’t much more diverse—as of 2010, the most recent year for which data is available, 82 percent of chiefs of staff, 77 percent of legislative directors, and 80 percent of legislative correspondents were white. “While I was an intern, one of the biggest things for me was walking down the halls of Congress and not seeing anyone that looked like me,” said Carlos Vera, founder of the group Pay Our Interns, who is Latino. “Actually, the only people that looked like me were the janitors.”

Senate Democrats, led by Chuck Schumer, profess concern over this problem. In March, they approved new conference rules encouraging offices to consider at least one minority candidate for open positions, and, in February, reinvigorated the Senate Diversity Initiative, which collects and distributes resumes of minority applicants for open positions. But the Democrats made no mention of internships, apparently oblivious to the role they play in their own caucus’s homogeneity.

There are hints of a growing movement against unpaid internships. In 2011, Eric Glatt, who interned for Fox Searchlight Pictures on the film Black Swan, sued the company for back pay under the Fair Labor Standards Act. Glatt ended up settling with Fox Searchlight after the Second Circuit Court of Appeals ruled in favor of the production company, but the lawsuit brought unwelcome attention to the companies and nonprofits that for years have relied on unpaid labor. Since 2011, at least fifty suits have been brought on behalf of unpaid interns, and organizations like NPR, the Democratic National Committee, and, yes, the Washington Monthly, have started paying their interns. (I was one of the Monthly’s first paid interns in 2015.)

Congress, however, which did so much to initiate the trend of unpaid internships, has been slow to pick up on the countertrend. This is largely because of its general resistance to hiring and paying staff adequately—that is, to undoing the damage the Gingrich revolution did three decades ago. The irony is that while Congress has many legitimately vexing, headache-inducing problems, this isn’t one of them. Lawmakers control the power of the purse, so they can hire as much staff as they want and pay them as they choose. A couple hundred million dollars a year—a rounding error in a $4.1 trillion budget—would be more than enough for Congress to hire all the staff it needs at competitive salaries. A fraction of that—say, $25 million—could cover paying the minimum wage, currently $12.50 an hour in D.C., to all of its interns.

It’s true that voters aren’t exactly clamoring for lawmakers to expand their staffs, even if doing so would help fix the congressional dysfunction that drives voters crazy. But throughout America there is a growing recognition, long overdue, that not paying interns is shameful and undemocratic. Sector after sector is responding by paying its interns. The failure of Congress to pay its interns could stir emotions of voters in a way that arguments about “insufficient staff capacity” never will. Addressing the unpaid intern issue could therefore be the tip of the spear in the attack on Congress’s failure to invest in its own people, and the beginning of the effort to make Congress work again.

The post When Congress Paid Its Interns appeared first on Washington Monthly.

Should you ever find yourself crossing the Coon Prairie, you’ll come in good time to a place where the speed limit slows and a wooden sign reads “Velkommen til Westby.” Affixed below are insignias from the Jaycees, the Kiwanis Club, and other local fraternity groups, and a plaque reading “ ’78 ’85 ’86 State Football Champs.” Founded by Norwegian settlers in the nineteenth century, today Westby, Wisconsin, is a hamlet of 2,200, populated mostly by their descendants.

Unlike most farm towns across middle America, Westby is holding its own. South Main Street is graced by the Treasures on Main antique shop, Dregne’s Scandinavian Gifts, and Borgen’s Café, where a hanging sign promises “Good Food” to passersby. There’s also the handsome but unpretentious Bekkum Memorial Library, dedicated in 1986 with more than 16,000 books. Few, if any, rich people live here, but poor people are rare, too. Thanks in part to Westby’s strong support for its public schools, 90 percent of the adult population has graduated from high school and more than one in five has a bachelor’s degree or higher, roughly in line with national averages.

If you stay a spell in Westby, you’re likely to notice another of its distinguishing features. Most of the major businesses in town are cooperatives, meaning they’re owned by the same people who use their services. The local phone, cable, and Internet service provider is a co-op dating back to 1950, when local farmers, tired of waiting for distant monopolies to run wires to their homesteads, got together and formed their own telephone company. Similarly, the local electrical utility is a co-op formed in 1938 to bring electricity to the countryside when the power companies didn’t see enough profit in it. The Vernon Electric Cooperative, part of the region’s larger Dairyland Power Cooperative system, is still going strong as it expands into solar and continues to write checks to its 10,000 local owner-users for their share of its surplus revenues. Meanwhile, the Westby Co-op Credit Union offers Westby residents the chance to be their own bankers, and an old-line farmers’ co-op, now called Accelerated Genetics, offers cattle-breeding services to its members.

And then there’s Westby’s most storied cooperative business, the Westby Cooperative Creamery. It dates back to 1903, when dairy farmers in the surrounding area each pitched in $10 to form a co-op that would provide a stable and competitive market for their milk. Today, around 220 local dairy farm families share ownership of the co-op, many of them third-, fourth-, or even fifth-generation “patrons,” as they’re known locally.

Every day, a dozen gleaming silver tank trucks transport both conventional and organic milk from these local family farms to a brick creamery roughly the size of a small supermarket on Main Street. The creamery employs about 130 people and generates $50 million in revenue for the local economy, turning out products ranging from cottage cheese and yogurt to sour cream and French onion dip. You can buy Westby-brand milk products at the small store on the premises or at selected outlets throughout the region, from the Piggly Wiggly in Beaver Dam, Wisconsin, to the Hy-Vee in Owatonna, Minnesota. They’re also now available online.

Darin Von Ruden, an organic dairy farmer and the president of the Wisconsin Farmers Union, says he joined the co-op in 1991 because “it’s still a true cooperative.” He’s pleased that it’s not controlled by highly paid executives who live somewhere else, but by active local farmers like him who “[milk] cows morning and night.” As a part owner of the co-op, he is not only paid for his raw milk, but also shares in the revenue the creamery earns from selling milk and milk products to food processors, retailers, and the public.

All in all, Westby is a corner of rural America that’s still modestly prosperous. And while its legacy of locally controlled cooperative businesses isn’t the only reason, it’s a big part of the story. Local farmers are not totally at the mercy of giant agribusinesses when they bring their products to market. Their ownership of the Westby creamery allows them to cut out middlemen and bargain collectively with food processors and retailers to get a fair price. The rest of the town benefits as well from the creamery and the other locally owned co-ops, as money and power that would otherwise flow to the absentee owners and managers of distant corporations instead stay within the community.

But Westby is the exception, not the rule. It’s a holdout from an earlier era when co-ops helped farmers and rural communities keep a much larger share of the nation’s wealth than they do today. Most everywhere else across rural America, the powerful cooperative movement has either faded or, worse, become co-opted by giant monopolies that prey off the very small-scale producers they’re supposed to protect. In that way, they reflect a broader change in the economy. While pretending to represent farmers’ interests, these co-ops in fact dictate prices to farmers just as Amazon dictates prices to book publishers and Walmart to its suppliers.

The depressed state of rural America is getting a fresh look as a result of the 2016 election, and rightly so. People are asking how to bring back rural prosperity and restore small-town civic life. A good first step would be to recreate the successes of places like Westby. That starts by asking why co-ops aren’t doing the same thing elsewhere.

For Vince Neville, it was trucking. The independent New York State dairyman, who passed away last year, complained that Dairy Farmers of America used its control over local milk haulers to prevent him from doing business with anyone else. For Garrett Sitts, it was the abuse of food safety protocols. He charges that milk inspectors controlled by DFA threatened him and many other farmers with health care violations if they dared to raise questions about DFA’s business practices. For Jonathan Haar, it was a failed attempt to escape DFA’s grip. After nearly ten years with DFA, he tried to leave for another co-op, Agri-Mark. But after promising negotiations, Agri-Mark suddenly went silent. Haar says he was told that Agri-Mark and DFA had an unwritten agreement not to work with each other’s farmers.

Over the last several years, dairy farmers like Haar, Neville, and Sitts have banded together with thousands of others to sue DFA, the largest milk processor in the country and possibly the world. They charge that DFA conspires with other large agribusinesses to drive down the prices they receive for their milk. And they say DFA retaliates against any farmers who complain or try to escape its clutches.

In a statement, DFA senior vice president Monica Massey said, “These allegations are ridiculous. Indeed, a small sliver of farms have brought litigation. There are no facts to back up the claims.”

The odd thing is that the farmers who are suing DFA also own it. At least on paper, DFA is a co-op. Just like the Westby Cooperative Creamery, it’s supposed to work on behalf of its member farmers. But DFA certainly doesn’t look or behave like Westby.

In 2006, DFA got rid of its private jet after it became too controversial, but today its executives are still doing quite well for themselves. In 2017, they moved into a spanking-new $30 million world headquarters in Kansas City that they had built to their own specifications. The sprawling, glass-enclosed, 110,000-square-foot building, designed by the global architect firm HOK, has amenities like bocce and basketball courts, a gym, family rooms, and a milk bar “where employees can help themselves to a variety of milk flavors all day long,” in the words of the building’s designer.

Artistic features pay homage to DFA’s origins and continuing formal status as a dairy co-op. As you enter the lobby, you’re greeted by a glossy, white, 25-foot-high, floor-to-ceiling molded sculpture meant to evoke a cascading, seamless flow of milk. Other flourishes include faux barn boards and walls decorated with molded white patterns depicting old-fashioned milk bottle caps, cow tags, cheese graters, and ice cream scoops. Acquiring and installing these objets d’art cost $1.5 million.

When the facility opened in June, president and CEO Rick Smith praised its appropriation of old-time dairy imagery, telling a trade publication, “This building is a testament to our family farmers and the sustainable practices they employ on their dairies each and every day.” Other executives spoke of how the new headquarters made DFA such a cushy place to work. Monica Massey, senior vice president and chief of staff, told the same publication, “Our goal is to be an employer of choice in Kansas City and this building and all its amenities reflects that commitment to focus on employee satisfaction.”

Yet if DFA’s management is pleased with its new digs, many of its putative owners are not. The distance DFA has traveled from a traditional dairy co-op is breathtaking. The co-op reported a net income of nearly $132 million in 2016; meanwhile, the number of dairy farmers in the U.S. continued to plummet, hitting a new low of 58,000. Historically, the role of a dairy co-op was to engage in collective bargaining with the typically much larger corporations that process and market milk and milk products. This was, and remains, crucial to farmers’ receiving a fair price, because of what economists call monopsony power.

Monopsony occurs in markets where many sellers compete for the business of a few big buyers. In such markets, sellers have to accept the terms and prices the buyers dictate. This has always been a particular problem for individual dairy farmers because there are always more of them than there are food processors and potential buyers of their raw milk. Making matters worse, milk is a highly perishable product. Unlike with grain, farmers can’t store it in silos waiting for the right price.

In days of old, the co-op was the answer to the dairyman’s monopsony problem. Co-ops typically negotiated on behalf of their member farmers with food processors like Borden or Carnation Evaporated Milk and with retailers that sold dairy products under their own private labels. Co-ops also helped farmers negotiate better rates from the trucking firms they depend on to get their milk to market on time. In some cases, such as in Westby, dairy co-ops also became involved in processing and marketing their own milk products. Perhaps the best-known example of this is Land O’Lakes, which started out as the Minnesota Cooperative Creamery Association in 1921.

This system never worked perfectly. During periods of overproduction and slack demand, dairy farmers’ income has depended on federal government “marketing orders” that maintain the minimum prices they can be paid for raw milk. But throughout most of the twentieth century, co-ops helped to maintain reasonable competition within the dairy industry by making sure that large agribusinesses didn’t abuse their monopsony power in negotiations with farmers.

Today, however, DFA has upset that balance by joining forces with the parties on the other side of the negotiating table. The organization says it represents more than 13,000 member farmers in forty-eight states. But it simultaneously has grown to the point that it owns or controls entities up and down the entire dairy industry supply chain, from milk truckers to food processors to marketers. It’s an obvious conflict of interest: the less these entities have to pay DFA farmers for their milk, the more money they—and DFA—make. According to its 2016 financial statement, 60 percent of DFA’s net income that year came from “non-member business earnings,” none of which was shared with members.

DFA claims that controlling the supply chain helps protect farmers. “Cooperatives of any reasonable size, in the U.S. and around the world, own manufacturing and trucking assets,” Massey said.

In all, DFA controls about 30 percent of all milk sales nationally and a far higher share in many regions. That means that many, if not most, dairy farmers don’t have a way to even get their milk off their farms without accepting the terms imposed by DFA. “You can’t look at DFA as anything now but a corporation,” says Nate Wilson, a longtime journalist for the Milkweed, a publication that covers the dairy industry. “The management of DFA is consistently working against the rank-and-file members.”

To all appearances, Gary Hanman was a man of the people. Often seen in worn overalls, muddy boots, or bright red suspenders, the Missouri native had a down-home appeal that charmed the many dairy farmers he worked with. His affability helped him climb the ladder in the dairy cooperatives where he made his name. As the head of Mid-America Dairymen, he grew the cooperative through nearly fifty mergers. Then, in 1998, he spearheaded the biggest merger in dairy cooperative history, uniting Mid-America and three others to form Dairy Farmers of America.

From there, Hanman went on to expand DFA’s vertical control over milk production and distribution. For example, he and DFA worked to engineer mergers giving the food processor Dean Foods a dominant market share of milk sales in many regional markets—and then forged deals with Dean making DFA its sole supplier. Meanwhile, through its marketing arm, Dairy Marketing Services, DFA’s dominion extended to milk testing and hauling from farm to market in many parts of the country.

All this was done, Hanman said, in order to help the little guy, the local dairy farmer, to better bargain with giant food processors and retailers, who were themselves merging at a frenzied pace. The story Hanman told dairy farmers was that they had to let him consolidate their local co-ops into a vertically integrated Goliath in order to stand up to the even bigger agribusiness giants.

But, over time, more and more farmers began to wonder who Hanman was actually working for. During his time at DFA, executives traveled on a private jet, called Delta Foxtrot Alpha. Hanman made $31 million during his seven years as CEO of the cooperative, while, as the New York Times has reported, other executives and DFA business partners also came away with multimillion-dollar side deals.

Hanman’s indulgences didn’t sit well with dairy farmers. Farmers’ margins narrowed each year he was at the helm of DFA, and many lost their farms. During the Clinton and George W. Bush administrations, some tried to interest the U.S. Department of Justice in prosecuting DFA for antitrust violations. But regulators made only a minimal effort to investigate anticompetitive practices in the dairy sector. In 2004, the Department of Justice began an investigation into the relationship between Dean and DFA, but it ground to a halt in 2006 for unexplained reasons. Peter Carstensen, a law professor at the University of Wisconsin at Madison and an expert on the dairy industry, says that the DOJ “is absolutely petrified of the dairy industry,” and “that’s the only explanation for their failure to enforce the antitrust law.”

In 2008, the Commodity Futures Trading Commission fined Hanman, who had retired in 2006, and another DFA executive $12 million for illegally manipulating the price of milk by purchasing block cheddar cheese on the Chicago Mercantile Exchange. Hanman’s successor, CEO Rick Smith, sold off the corporate jet and promised other reforms. But none of these efforts brought structural change to the role and power of DFA.

One reason DFA has gotten away with all this is, perversely, its legal status as a co-op.

Coming into the 1920s, the cooperative movement in the United States was flourishing, particularly in the agricultural sector. Not only was the cooperative that became Land O’Lakes taking off, so were co-ops like the American Cranberry Exchange, which handled 66 percent of the nation’s cranberries, and the California Associated Raisin Company, which shipped 86 percent of U.S. raisins. The promise of collective ownership became an appealing platform for political leaders in both parties, as it provided an all-American alternative to both monopoly capitalism and socialism. It was also especially popular among civil rights leaders. The scholar Jessica Gordon Nembhard wrote in her 2014 book Collective Courage that “almost all African American leaders were involved in Black co-ops in some manner.”

But as cooperatives grew in size and power, they also attracted powerful enemies. Large food processors charged that farmer co-ops were illegal cartels, and pressed regulators to prosecute them under the Sherman and Clayton Antitrust Acts. After decades of debate and unsettled law, two Republican members of Congress offered what they hoped would be a solution. They were Arthur Capper, who served as governor of Kansas from 1915 to 1919 and then as a senator from 1919 to 1949, and Andrew Volstead, a congressman from Minnesota who had recently become chair of the House Judiciary Committee.

The two men persuaded Congress and the Harding administration that as long as co-ops were comprised of genuine, small-scale producers, they should be largely exempt from antitrust prosecution. “Participation by farmers in the marketing of farm products through cooperative associations,” Capper argued, amounted to “giving them the right to bargain collectively with buyers.” This would result, he promised, “in stabilizing the market, preventing waste, and . . . [giving] the producer and the consumer their due.”

The Capper-Volstead Act of 1922 establishes an antitrust exemption for farmer co-ops, which has left room for intensive lobbying and litigation over just who is and is not a real farmer. In 1977, the Fifth Circuit Court of Appeals ruled that members of farmer co-ops had to be “ordinary, popular sense of the word ‘farmers,’ ” and not processors, packagers, or other supply chain actors. The court also asserted that at the time of its passage, Capper-Volstead was meant to protect the interests of “small, individually-owned farms.”

But in subsequent years, neither the courts nor Congress nor successive Democratic and Republican administrations have applied any real scrutiny to the question of whether entities operating as co-ops are really representing the little guy. The Capper-Volstead Act empowers the secretary of agriculture to take action against a co-op that engages in anticompetitive behaviors, but that power has never been used. Because of that, Dairy Farmers of America has been able to expand into all aspects of food processing, marketing, and distribution while still being protected as a co-op from antitrust prosecution.

Frustrated by the refusal or inability of government officials to constrain DFA’s power, thousands of DFA farmers have banded together to bring their own private class-action antitrust lawsuits, charging DFA with engaging in conspiracies to fix prices. The results have been mixed. One of these suits, brought by DFA members in the Southeast, ended when DFA agreed in 2013 to a settlement of $140 million. Another, brought by 8,900 members in the Northeast, led to a $50 million settlement, or about $4,000 per farmer. But it is being contested by some of the plaintiffs, who charged that DFA colluded with their attorney and strong-armed other farmers into signing the settlement. In the most recent development, a group of 115 DFA members won standing to pursue a separate suit against DFA. In refusing DFA’s motion to dismiss the case, the judge ruled that because the plaintiffs are clearly subject to DFA’s monopsony power, they “may plausibly allege anti-trust injury.” Just maybe they’ll get justice before they go broke.

What lessons can we take from this sad story? One, obviously, is that it’s high time for Congress to take a hard look at the laws governing co-ops. It needs to be made clear that no corporation gets the legal privileges of a co-op unless it truly represents the little guy without any conflicts of interests. While there is nothing wrong per se with co-ops becoming vertically integrated, the law should ensure that the money co-ops make on all their operations goes back directly to their members.

Another lesson is that monopoly begets monopoly. Gary Hanman wasn’t wrong when he told farmers that the increasing concentration of ownership among agribusinesses meant that farmer co-ops had to grow bigger, too. But he didn’t tell them that as their traditional co-ops merged and consolidated into the Goliath that became DFA, they were creating a new oppressor. This dynamic is what Supreme Court Justice Louis Brandeis meant when he referred to “the curse of bigness.”

The final lesson is that we are all dairy farmers now. As more and more sectors of the economy become highly concentrated, more and more of us become victims of monopsony power. That’s true if you’re a nurse trying get a raise after the last two hospitals in town merge. It’s true if you’re a doctor trying to negotiate fees with the last remaining health insurer doing business in your county. It’s true if you’re a small manufacturer trying to get Walmart to stock your product. It’s true if you’re a small retailer who can’t reach customers except by agreeing to the fees and terms that Amazon sets. And it’s true if you work for a newspaper, magazine, or journal that has no choice but to take the prices Google or Facebook offer for internet ads.

Everywhere we turn, employees, independent contractors, and small-scale producers of all kinds, including members of the creative class, find that corporate consolidation leads to fewer and fewer companies competing for their services. Stronger antitrust enforcement is part of the answer. But so is finding new ways of re-empowering cooperative enterprise in every sector of our political economy.

The post How Rural America Got Milked appeared first on Washington Monthly.

In November 2015, the man who led the operations to capture Saddam Hussein and kill Osama bin Laden stepped to the podium in a wood-paneled boardroom in Austin, Texas, to embark on a new and very different mission: launching a public university system into the highest level of prominence and respect.

Former four-star admiral and Navy SEAL Bill McRaven had been hired almost a year earlier, with great fanfare, to serve as chancellor of the University of Texas system, which oversees the University of Texas at Austin and thirteen other college campuses and medical schools. Now, addressing the UT board of regents, he was proposing nine “quantum leaps”—major initiatives that, he declared, “will make us the envy of every system in the nation.”

Some of the “leaps” are things other public universities could only dream of doing, in an era of budget cutting. Ten million dollars for a “UT Network for National Security.” Thirty-six million dollars (so far) to “develop a collaborative health care enterprise.”

McRaven was able to secure that funding because of a mountain of money that few outside the UT system know much about, called the Permanent University Fund. The fund, derived from oil drilling in state-owned land in West Texas, is worth about $20 billion. Two-thirds belongs to the UT system, making up the majority of its $24 billion endowment and putting it in an exclusive club with wealthy private schools. The UT system has more endowment money per student than Georgetown.

And yet, just three months after his “quantum leaps” speech, McRaven once again found himself before the board of regents—this time asking for a tuition increase. “The fact is, we fall well below our peers in terms of national rankings,” he said. To climb in the rankings, he argued, would require spending more money—money that would have to come from students.

How could McRaven propose a tuition hike when the system has a multibillion-dollar oil fund in its pocket? This question has only started brewing at the UT system, but members of the public, and lawmakers, have long been asking wealthy private schools pointed questions along the same lines. Massive endowments at places like Yale and Stanford add up to an enormous public subsidy. Donations are tax-deductible, and universities don’t pay taxes on the investment income endowments generate. Meanwhile, they typically spend only a small percentage of the endowment per year. That has spurred suggestions that universities be forced to spend their endowments on affordability as a condition of those tax benefits.

Even Donald Trump, during the 2016 campaign, told a Pennsylvania crowd that he would “work with Congress on reforms to make sure that if universities want access to all of these special federal tax breaks, and tax dollars, paid for by you, that they are going to make good-faith efforts to reduce the cost of college and student debt, and to spend their endowments on their students rather than other things that don’t matter.”

The tax bills that the House and Senate passed in December finally took action, imposing a 1.4 percent tax on the largest endowments. (As this article went to press, the final bill was still being negotiated.) That move appears to be driven more by a growing Republican antipathy toward academia—the House version of the bill would have taxed the tuition waivers granted to graduate students—than by concerns about affordability. But universities haven’t done themselves any favors by being extremely cagey about how they spend their endowments. When Congress asked dozens of schools to report on their spending in 2016, for instance, Harvard declined to say exactly how much of its $37 billion endowment is paid to the people who manage it. While most colleges did tell Congress what percentage of their annual endowment payout goes to financial aid, they generally didn’t elaborate further—such as on the proportion of aid that’s based on academic merit, which tends to benefit upper-middle-class students, versus financial need.

But there is one institution that serves as an exception to the black box of endowment spending. Unlike most other American public universities, which have miniscule endowments, the University of Texas system is tremendously wealthy, with an endowment more than double that of the next-richest public institution. And unlike private universities, it has to reveal how it spends that wealth.

Thanks to the fracking boom, record-high oil prices, and some smart investing, the oil fund’s value has skyrocketed in recent years. That provides an unprecedented opportunity to examine not just how a wealthy endowment-like fund is spent in general, but also what university administrators decide to do with a sudden windfall of cash.

And if the UT system’s choices are at all representative of well-endowed institutions across the country, we can pretty safely conclude that universities spend their endowments primarily to elevate their status—not to help students afford college.

The typical university endowment begins as a combination of private donations from deep-pocketed individuals, corporations, or foundations. The oil fund is different. In 1876, the authors of the Texas constitution ordered the state to create a “university of the first class,” and over the next few years, 2.1 million acres of land were set aside for that purpose.

It was a huge donation, covering an area larger than Delaware and Rhode Island combined. But for decades, it remained mostly useless brushland where grass was sometimes too sparse even to graze cattle in the dry heat of West Texas. Then, in 1923, a wildcatter named Frank Pickrell struck oil on the land at a well called Santa Rita No. 1. (Its remains are now a monument on UT-Austin’s campus.) From then on, the land became a uniquely lucrative resource for the state’s two largest public university systems.

Texas law has set up the oil fund to operate almost exactly like an endowment. Only a small percentage of the fund’s value—about 5 percent in recent years—can be distributed annually. Two-thirds of the distribution goes to the UT system, while one-third goes to the separate Texas A&M University system. The state constitution generally allows the money to be spent on two broad categories: debt on capital projects, and general administration. But after paying its debts, the UT system can give as much of its share as it wants to its flagship, UT-Austin—which enrolls about a quarter of the system’s students—with no restrictions on how it’s spent.

In 2011, the UT system got $352 million from the oil fund. Thirty-three million dollars of that went to what is referred to in budget reports as “general administration”—a term that includes top administrative offices like that of the chancellor and various vice chancellors. About the same amount, $33 million, went to financial aid.

Then came the fracking revolution and a four-year spike in oil prices. By 2017, the yearly payout to UT had grown to $603 million. So how did the system decide to spend those hundreds of millions of extra dollars?

Not on affordability.

According to the fiscal year 2017 budget, the amount spent on general administration had quadrupled since 2011, to a peak of $143 million. (It has since decreased slightly.) The amount that went to financial aid, meanwhile, had barely budged, inching up to $38 million.

The spending spree really began back in 2011, about three years before McRaven was hired, and as the system was expecting a record payout from the oil fund. That year, the system’s board agreed to devote $50 million from the fund to something called the Institute for Transformational Learning. The institute’s goals were as lofty as the title: to change the landscape of higher education from the world of brick-and-mortar classrooms to one where technology helps make learning more effective and accessible.

But the 2011 cash infusion did not come with any discussion of how that money might be recouped, or how UT students would gain any immediate value from it. The institute’s first big play was a $10 million investment into massive open online courses (MOOCs), which are, by definition, free to enroll in. UT leaders were thrilled, especially because the deal included a partnership with Harvard.

In one case, tens of thousands of people signed up for “Energy 101,” taught by famed UT-Austin professor Michael Webber. As with most MOOCs, only a fraction of enrollees finished the ten-week course, and hardly any of them were university students—probably because the course couldn’t actually be taken for college credit. By 2014, the campus newspaper was urging the system to “stop investing millions of dollars on gambles like these.” (Today, officials at the Institute for Transformational Learning say MOOCs are no longer a part of their core strategy.)

Instead of scaling back its ambitions for the Institute for Transformational Learning, the UT system board dug in deeper. In 2014, months before McRaven became chancellor, the board decided to make a “special one-time distribution” of oil fund money, resulting in $130 million extra for the system that year.

Some of that additional money has gone toward cost cutting. The UT system now pays for property insurance premiums and software licenses on various campuses, costs that were previously borne by the individual schools. But a full $48 million of the distribution went to the Institute for Transformational Learning—even though the initial $50 million allocation hadn’t been completely spent.

During McRaven’s tenure, the institute’s budget has exploded, all with money from the oil fund. It has grown almost tenfold, to $25 million, with a staff of fifty, in the last academic year. (It’s a major reason that the UT system’s overall administrative budget has risen so much.) But enthusiasm is starting to wane. One much-hyped product, the “TEx” platform (for “Total Educational Experience”), was abandoned by a UT campus in South Texas after a failed pilot there. The institute had invested millions of dollars into the platform, which had promised to deliver “a beautiful, engaging mobile-first learning environment.” (A new version, TEx 2.0, is in the works.)

What caused the unraveling may have been another large expenditure—even bigger than the cost of the
institute—that put McRaven on the defensive. It was the last of his nine “quantum leaps”—which, McRaven said at the time, were all “about improving the human condition in every town, every city, for every man, woman and child.” The system, McRaven announced, would buy 300 acres of land in Houston, where it would build . . . something. That’s right: the system spent $215 million to buy a vacant lot without any plan for what to do with it. More than a year later, the land still sat empty. Would it be a campus? Would it be a research center? No one knew.

That purchase seems to have been a bridge too far. After backlash from legislators, McRaven backed down and has agreed to sell the land. But he defended his original decision to lawmakers by stressing the need to take “a risk and a gamble” to launch the UT system into national prominence. “Too often, university systems are forced to maintain the status quo,” McRaven told a panel of angry state senators at the Texas capitol in early 2017. “If you don’t do something big, bold, you don’t become a great University of Texas system.”

Lawmakers from both parties didn’t buy it. Some have even started to take their own look at exactly how the system is spending its oil money; in January 2017, Republican State Senator Kel Seliger noted that $1.5 million is set to go toward “branding.” In fact, the money is for a study on how the UT system could brand itself in the future; doing the actual branding will probably cost a lot more. “It looks to me like an entity that has more money than it knows what to do with,” Seliger said.

(Update: after this article went to press, McRaven announced that he would be stepping down in May.)

When asked why they only spent $38 million out of last year’s $603 million oil fund payout on financial aid, UT officials point out that there are legal restrictions on how the fund can be spent.

This is a common refrain among wealthy universities. Harvard, for instance, claims that a full 84
percent—$31 billion—of its $37 billion endowment is earmarked for uses dictated by donors. The question, of course, is whether university fund-raisers make any effort to encourage donors to direct their gifts to uses that directly benefit students.

In the case of the oil fund, it’s true that the Texas constitution only explicitly identifies two ways the UT system can spend the money: paying the debt on capital projects, like the $215 million empty lot in Houston, as well as new buildings, labs, and classrooms at all the UT schools (that’s how the system spends about a quarter of its oil fund share); and paying for system-wide administration, which includes initiatives like the Institute for Transformational Learning.

But if the UT system’s leaders really wanted to give more of the oil fund money directly to students, they could propose amending the state constitution. This is not quite as difficult as it sounds: in the last three elections, voters overwhelmingly approved twenty-three constitutional amendments. Yet the system has never called for such a change, and, in fact, McRaven said in a written statement that the “current design” of the oil fund serves the state “exceptionally well.” (He declined multiple requests for an interview.)

Moreover, recall that the state constitution already allows the UT system to direct essentially as much of its yearly cut of the oil fund as it wants to its flagship, UT-Austin, with absolutely no restrictions on how that money is spent. In fiscal year 2017, that no-strings-attached payout totaled nearly $300 million. That’s enough money to cut tuition for all its students—graduate and undergraduate—in half. Or to provide free tuition for almost all in-state undergrads.

Of course, the flagship university did not do that. Last year, while it spent just $38 million of its oil fund share on financial aid, UT-Austin reported more than $244 million in unspent oil fund money, much of which is reserved for hiring around 100 new faculty members.

University officials argue that spending big money to recruit faculty will make UT-Austin more attractive to students from all over the state, country, and even the world. Marquee professors can help attract revenue, too, in the form of competitive research grants. And they can draw other well-known academics to campuses, in turn bringing in even more top students and more revenue, and so on in a virtuous cycle.

This is ultimately how UT leaders see the oil fund—not as a way to offset a decline in state funding, or to make college more affordable, but to boost the system’s prestige and bring in even more money. “The key word here is, we want to spend that money on ‘excellence,’ ” UT-Austin’s chief financial officer, Darrell Bazzell, said in an interview. His counterpart at the UT system, Scott Kelley, added that the purpose of the oil fund should be maintaining “a level of excellence and competitiveness” that lets UT “compete with any institution nationally.” Bazzell was right—the word “excellence” came up constantly in interviews with UT officials. The question is: Can the system continue to spend its oil fund money on that goal at the same time that it asks for more from students?

UT-Austin is the state’s premier public university; one of its main reasons for existence is to enrich the minds, and improve the prospects, of young Texans. But Texas is on its way to becoming a majority-Hispanic state, and nearly 60 percent of its grade-schoolers are considered economically disadvantaged. Right now, poor and minority students are drastically underrepresented in the UT-Austin study body. If the university is going to truly provide opportunity for all, financial aid will have to play a major role.

But when Chancellor McRaven asked for tuition increases in 2016, he had a different priority in mind: staying competitive on the national stage. UT-Austin was only number 52 in the U.S. News & World Report rankings, he pointed out. Those rankings heavily weight factors like admission selectivity and faculty resources. (The Washington Monthly publishes alternative annual rankings that emphasize affordability and upward mobility.)

“There are a lot of folks that do not like the U.S. News & World Report,” he acknowledged at the time. But, he said, “the fact of the matter is, it is the industry standard. It is about, to some degree, the quality of the university.” He added that UT-Austin’s annual in-state tuition, about $10,000, is far lower than higher-ranked public flagship peers such as UCLA, where tuition is around $13,000.

But tuition doesn’t tell the whole story. Despite its higher sticker price, UCLA’s average “net price”—
a measure of the actual cost of attendance for a full-time undergraduate who receives at least some financial aid, when considering aid, room and board, and other factors—is lower. According to the most recent federal data, UCLA’s average net price is around $14,200, compared to $16,000 at UT-Austin. (These numbers are for in-state students.) Not surprisingly, UCLA enrolls a much higher share of low-income students.

How can UT-Austin’s net price be higher than UCLA’s, when its tuition is so much lower and the cost of living in Austin so much less than in Los Angeles? A lot of it comes down to financial aid. The average UCLA aid package includes around $10,700 in institutional grants and scholarships, compared to about $5,300 for UT-Austin. (California students also get more in-state and local grants.) The upshot is that the University of California system boasts far higher-ranked and more affordable schools on average than the UT system—and the UC system has no oil fund.

Still, UT’s leadership insists it needs to raise more money if it’s going to realize McRaven’s dream of “excellence” and rise in the rankings. Indeed, the flagship in Austin recently announced a new fund-raising drive. Instead of using the oil fund, or hitting up wealthy alumni, the new drive solicits donations from a less traditional source: current students. As of this writing, thirty students have donated. But money may not be the point. Getting graduating seniors to donate a few dollars is a way of upping the rate of alumni giving. And that’s a U.S. News ranking metric.

*Correction: due to an editing error, a previous version of this article mistakenly stated that the “Energy 101” MOOC cost $400,000 annually. In fact, that was a one-time expense. The article also said it generates no revenue. In fact, while the course is free to enroll in, the software costs $50. 

The post How Rich Universities Waste Their Endowments appeared first on Washington Monthly.

In metropolitan regions across the U.S., you’ll see remarkably similar patterns of inequity, in which a “favored quarter” attracts wealth like a magnet. Economically thriving neighborhoods—where you find coffee shops, start-up businesses, and top-ranked schools—begin downtown and fan out in one direction toward the ritziest suburbs. Think north in Atlanta and Dallas. West in Houston and St. Louis. Southwest in Minneapolis. East in Cincinnati. Northeast in Phoenix.

Chicago offers perhaps the most dramatic example. “Of 53 construction cranes currently at work in the city, only one is south of 22nd Street,” David Doig, president of Chicago Neighborhood Initiatives (CNI) and former CEO of the Chicago Park District, noted last summer.

Local planner Pete Saunders divides the city into “New” Chicago and “Old” Chicago. New Chicago—the North and Northwest neighborhoods—is a “business service hub, a global financial center, and an emerging tech center, with a strong desire to be the greenest and most sustainable city in America.” Even with the city’s outsized reputation for homicide, murder rates in many neighborhoods on the North Side are among the lowest in urban North America.

Chicago’s South and West Sides—Old Chicago—are a different story. Plagued by crime, unemployment, and economic disinvestment, “Old Chicago has struggled to recover from severe deindustrialization over the past fifty years,” Saunders said. As in many other cities facing stark geographic divides, race is the critical factor. While the prosperous North Side is largely white, the struggling South and West Sides are heavily African American and Latino. There’s no doubt that generations of racism and exclusion have left visible scars on the city’s development.

These “unfavored” sections of American cities aren’t just stray pockets of neglect. They represent half or more of the landmass of these cities. And rather than simply failing to keep up with progress in the favored quarters, many are continuing to lose residents and economic activity. The differences between the favored and unfavored portions are so vast and stark that some experts have raised questions about whether the much-ballyhooed revival of America’s cities isn’t something of a mirage.

Yet one lower-income South Side neighborhood manages to defy the ironclad logic of the favored quarter: historic Pullman, a vibrant enclave in the middle of the South Side that is home to equal numbers of African Americans, Latinos, and whites. (Not all South and West neighborhoods are poor, but most of those doing well economically—Hyde Park, the Near West Side, Bridgeport, and Beverly—are predominantly white and Asian.)

Strolling down Pullman’s St. Lawrence Avenue, whose shaded sidewalks are fronted by side-by-side duplexes, you notice the same redbrick charm that characterizes the North Side. Yet in Pullman, you can land a well-kept three-bedroom duplex down the block from a cozy café and around the corner from one of the city’s top-rated public elementary schools at a price that wouldn’t go far in swank precincts across town. Residents enjoy many of the conveniences of North Side living, too. At the new Pullman Park development, there’s a Walmart (watering this former food desert), a clothing store, a Planet Fitness health club, a locally owned dry cleaners, and Pullman’s first sit-down restaurant in decades.

The relative peace and prosperity of Pullman in the midst of the hard-hit South Side highlights the promise of “asset-based” community development—the idea that focusing on the strengths of a particular place is just as important as targeting the problems. This model offers practical lessons for other neighborhoods across the country suffering from economic disinvestment and social unraveling. In Pullman’s case, a remarkable degree of resilience has arisen from these assets: high levels of civic engagement; a physical environment that encourages walking and social interaction; access to resources tied to historic preservation; and an ambitious community developer planting stakes in the neighborhood.

If the name Pullman sounds vaguely familiar, it’s likely because of the legendary railroad sleeping cars built here from 1881 to 1955. Pullman was no grimy slum, but actually one of the most celebrated urban planning projects of the nineteenth century—providing a good place to live was part of owner George Pullman’s mission to elevate the character of his workers. The London Times declared the elegant public buildings and squares flanked by single-family homes for managers and handsome brick townhouses for workers “the most perfect town in the world.” The other reason you may have heard of Pullman is that in 1894 the company’s workers responded to wage cuts with no reduction in rent at company-owned housing with a historic strike.

This architectural legacy is important to Pullman’s sense of identity, which has helped fuel its revitalization. Although the Pullman company pulled out decades ago, some of the factory buildings and most of the houses still survive intact and have long been a rallying point of community pride. In 1960, when the city announced plans to bulldoze the neighborhood to build an industrial park, the Pullman Civic Organization (PCO) was mobilized to stop the project. Through the years, this group has succeeded in getting Pullman declared a national and state historical landmark and finally, in 2015, a National Historic Monument.

“The community bonded together to get the Park Service and President Obama to declare it a monument,” said Kathy Schneider, the National Park Service superintendent for the Pullman Monument—203 acres covering the factory site, the historic town center, and adjacent worker housing. They made the case based on the neighborhood’s historic value as one of America’s first planned communities, as the home of the innovative Pullman sleeping car, as the site of one of the most famous labor-management battles in U.S. history, and for its strong connection to African American sleeping car porters, who organized the first national black-led labor union and played a role in forging the civil rights movement.

The enduring campaign to protect and celebrate their community instilled a strong spirit of civic involvement in local residents, which helped spare the neighborhood from the decline that engulfed surrounding areas. “We’ve been identifying and protecting our assets for years—even when people from outside of the community claimed we had no assets, or didn’t appreciate the assets that we have,” recounts Arthur Pearson, who moved here from the North Side twenty years ago.

When problems arise, the PCO becomes the vehicle for taking swift action. “The ethos of this community is that people show up,” Pearson adds, noting that neighbors rallied to fight Pullman Elementary School from being closed and to keep a historic clock tower on the factory site from being torn down after a 1998 fire.

Beyond sturdy local institutions, Pullman benefits from the informal connections forged by residents. Rachel Smith, a professional fund-raiser who relocated from Hyde Park because it was more affordable, says, “We love how active so many of the people are here.”

Smith is the first African American PCO president anyone can remember. “The diversity you see now is fairly new,” she said. “There was an effort to keep people of color out of Pullman, but now it’s a melting pot of all kinds of people,” Smith adds.

The recognition of Pullman’s historic status was more than a source of community spirit—it brought in much-needed dollars. Some of the benefits are direct. Under Illinois state law, for example, homeowner improvements in areas designated as state historical districts get property taxes frozen for eight years. The savings have been a boon for residents such as Arthur Pearson, whose Swedish immigrant grandfather worked at the Pullman factory. “I’ve made significant investments in restoring my historic home,” he said.

The National Park Service also offers a 20 percent income tax credit for rehabilitation of properties deemed historic by the Interior Department, which ignites the interest of private developers. According to the National Trust for Historic Preservation, this program (on the chopping block in the Republicans’ tax bill passed by the House) is a great deal for the federal government, with every dollar of tax credits bringing in at least $1.20 to the federal treasury from new economic activity. One study of ten new National Monuments shows that communities were able to boost local economic activity by $15.6 million on average, including $5.8 million in additional labor income.

Pullman’s historic character, even before National Monument status, also attracted increased philanthropic funding as well as private investment. Among the neighborhood’s consistent benefactors has been the Chicago-based Driehaus Foundation. “It has the potential to serve as a model for the redevelopment of urban areas rooted in history,” said the foundation’s executive director, Kim Coventry.

Traffic is brisk on Pullman’s sidewalks on a late-summer evening, and even an out-of-towner gets hellos from people on their porches. “It can take forty-five minutes to mail a letter at the corner mailbox because you have conversations with so many people,” says Arlene Echols, a flight attendant who grew up on the South Side.

On top of community cohesion and convenience, Pullman’s friendly walking environment is a key element of its social and economic progress. Indeed, the National Association of Realtors’ most recent community preference survey found that 85 percent of Americans want to live near good places to walk—the highest-ranked asset for a prospective neighborhood.

In Pullman, jobs, shopping, schools, recreation, transit connections, a bank, and congenial gathering spots are all within strolling distance. It’s a short trot to the Pullman Cafe, a Metra commuter train line, a bike shop, an architecturally stunning community church, and the Pullman Park shopping center and industrial park. Chicago Neighborhood Initiatives is constructing storefront space for restaurants and retail on 111th Street to enhance the pedestrian environment between the historic neighborhood and Pullman Park. While not loved by everyone in Pullman, the presence of Walmart means you don’t have to travel miles by transit or car to find a quart of milk, drug prescriptions, school supplies, and other everyday needs.

Busy sidewalks also keep the neighborhood’s public spaces—Arcade Park, the community’s original town green; Market Square, which resembles a plaza out of a European capital; and a neighborhood playground—
lively and safe gathering spots. “The way the neighborhood is designed, you feel like you’re part of something bigger,” observes resident Andrew Bullen. “It’s got a communal feel.”

The assets Pullman had to offer—its historic status and the tax credits that came with it; its strong local leadership and a can-do attitude; its walkability and high levels of social interaction; plus proximity to transportation, available vacant land, and access to a skilled workforce—helped draw in another essential ingredient in its success: a community developer determined to make the neighborhood a launching pad for its efforts to stabilize the city’s South Side.

A nonprofit organization founded seven years ago, Chicago Neighborhood Initiatives so far has attracted investments of more than $225 million to the community and added more than 1,100 new jobs. CNI’s first step was to attend more than sixty community planning meetings and host three workshops in 2010–11 to collaborate with residents, listening to what amenities and services they wanted for their neighborhood. “What we heard, loud and clear, was the need for more jobs, more retail options, more recreation opportunities, and more senior housing,” said CNI president David Doig.

Since then, CNI, with its community partners, has renovated hundreds of homes, launched a micro-finance program to jump-start small businesses, and developed the Pullman Park industrial and shopping center on the site of a former steel mill. In addition to the jobs at Walmart and surrounding retail stores, the new development has brought in employers such as a natural cleaning products manufacturer, a rooftop commercial greenhouse, and a soon-to-open Whole Foods distribution center. CNI also built a new indoor community recreation center nearby and is working with the National Park Service to transform Pullman’s historic clock tower building on the factory site into a visitors’ center for the National Monument (a project that may be delayed, following recent revelations of higher-than-expected toxic materials in the soil and groundwater).

Among CNI’s renovation projects are a number of nineteenth-century townhouses in North Pullman, where homes are smaller and farther from the neighborhood center. This part of the neighborhood was not included in the original 1970 historic district, and the foreclosure crisis hit big here in 2008.

“When we bought this building, the block was full of drug dealers, with a liquor store on the corner that was a constant source of problems,” Doig says, standing in front of one nearly finished project. “So we bought the liquor store and tore it down, putting in the community garden you see now.” At-risk local kids were trained to do all the demolition and cleanup.

CNI is also working with Pullman Arts, a neighborhood group refurbishing two historic apartment buildings and building a new one to create thirty-eight affordable live/work units for artists. CPO president Rachel Smith has big plans for this space. “I can see Pullman being a hub for the arts with a festival celebrating the culture of the South Side,” she said.

What has not happened in Pullman, however, is the displacement of lower- and middle-income residents. That’s because the focus on community development is to serve the area’s existing residents. When Walmart was looking to locate inside Chicago six years ago, for example, CNI and the Pullman community were able to negotiate the first-ever community benefits package with the mega-retailer, stipulating a $10-an-hour minimum wage, $25 million for job opportunities and training for neighborhood youth, a green rooftop, and a commitment that union labor would construct all future Walmart stores in Chicago.

Likewise, at the Method factory, where more than thirty million bottles of natural cleaning products are produced, 65 percent of the facility’s eighty-seven workers live nearby. Proof that you live in one of two local zip codes, plus a high school diploma or GED, automatically gets you a job interview at the plant.

Gentrification ranks far below many other issues as a concern to Pullman residents with whom I spoke, even with recent research from Chicago’s Metropolitan Planning Council showing that the number of households earning more than $100,000 has risen 58 percent since 2008. That’s because it amounts to only 9 percent of households in what is still a very racially mixed neighborhood.

CNI aims to recreate what’s happening to Pullman in other South Side neighborhoods. They brought a Whole Foods store and local Mariano’s supermarkets to two other neighborhoods that were food deserts, and are developing or expanding a year-round community center, a community hospital, a neighborhood health center, a Salvation Army center, a charter school network, and a domestic violence center in other disinvested South Side communities.

Pullman’s success also brings a new perspective to a heated debate now under way about America’s urban future. Both sides are poring over census figures, real estate sales, and public opinion surveys of Millennials to determine whether U.S. cities are undergoing a full-blooming renaissance. The prevalence of construction cranes and skyrocketing real estate prices in and around many downtowns unmistakably shows that something’s up. Loft apartments and freshly painted bikeways are now part of the social fabric in places like Des Moines, Oklahoma City, Boise, and Greenville, South Carolina—not just the glamour capitals of the coasts.

But the real point of contention is whether this is a blip stemming from the 2008 real estate collapse abetted by a short-lived demographic bulge of young people in their most city-happy years. After all, the urban renaissance predicted in the late 1970s, when out-of-the-nest Baby Boomers migrated to funky studio apartments, left few lasting traces, aside from a few gentrified neighborhoods in bigger cities.

The New York Times’s Upshot column has already declared that we’ve reached “Peak Millennial,” meaning that Kendrick Lamar and Arcade Fire fans will soon join earlier devotees of Public Enemy, the Ramones, and the Grateful Dead out in the suburbs. Some skeptics claim that the entire urban resurgence is a delusion—neither Millennials nor empty-nest Boomers are flocking to reincarnated center cities at anywhere near the pace reported in lifestyle publications.

Yet many dispute these naysayers, explaining that the revival of cities extends beyond downtowns to include neighborhoods (and even some suburbs) that offer urbane qualities such as busy sidewalks, convenient transit, buzzing local business districts, inviting public spaces, and a village atmosphere where you can spontaneously interact with neighbors.

So who’s right?

Maybe both sides. Only a die-hard urban antagonist can deny that America’s cities are flourishing to a degree not seen since at least World War II. But evidence of progress is not apparent everywhere. Many low-income neighborhoods are bereft of any uptick in commercial activity or refurbished housing.

Indeed, Pullman is not alone as an example of a thriving neighborhood far from the “favored quarter.” Residents from all walks of life coexist in Denver’s River North arts district (RiNo), where Joe’s Liquor Store and MANNA Pilates are just a block apart on Larimer Street. Extended Latino families sit on their porches while hipsters walk past with their pit bulls.

And Northeast Minneapolis, a blue-collar eastern European enclave until the 1990s, retains the village feel of an ethnic neighborhood but with a more diverse cast of residents—artists, students, African Americans, Latinos, and many young families. Homegrown revitalization came gradually—art galleries and vintage stores popping up, trivia nights and indie rock replacing polka bands at corner bars.

The urban renaissance so far has not bridged the chasm between affluent and those left behind in inner cities. Many of America’s cities are experiencing the best of times and the worst of times, in Charles Dickens’s words. But a place like Pullman shows that it is possible to create a tale of one unified city, in which prosperity and social well-being flow in all directions.

The post South Side Story appeared first on Washington Monthly.

We have lately become used to seeing professional football as a battlefield not only for athletes, but also for broader cultural and political issues, like domestic violence and political dissent in the workplace. But the most instructive parallel we can draw from the National Football League is not to the culture wars, but to the American economy. Even after a lengthy recovery, the economy seems incapable of generating broad prosperity. The NFL, despite controversies that have hurt viewership, remains extraordinarily competitive and profitable. This is due to three rules that the league’s billionaire owners willingly live under.

The first rule is that teams in the biggest metro areas, with the largest fan bases and media markets, have to share revenue with teams in smaller metro areas. The second rule is that the teams with the best win-loss records get the last draft picks, and vice versa. The third rule is that the season schedule is determined not by individual team preferences but by formulas overseen by the NFL that assure that each team plays an equal number of home and away games against the maximum number of other teams. (The other pro sports leagues have versions of the same rules, but none are as strong as the NFL’s.)

Now, imagine if the NFL scrapped these rules tomorrow. Without the revenue sharing, owners in the biggest cities would be able to buy up more of the best talent. Without the draft rules, teams with winning records this year would be more likely to win next year, and the year after that, while teams with losing records would have a tough time ever catching up. And without the league controlling scheduling, teams would negotiate game calendars among themselves to maximize their revenues rather than the number of other teams they play.

Under this scenario, what would the game be like ten, twenty, thirty years from now? Well, the teams from the big cities—the New York Giants, the Houston Texans, the Chicago Bears—would probably go from sucking to winning. Smaller-market teams that have been highly competitive in recent years—like the Indianapolis Colts, the New Orleans Saints, and the Green Bay Packers—would become consistent losers. Over time, some of these smaller-market teams might even fold for lack of revenue. Meanwhile, the same three or four teams would bring home the Super Bowl trophy every year. The game as a whole would be less interesting. It would draw fewer fans and generate less overall revenue. But the winningest teams from the biggest cities would be way more profitable than they are now.

That, in a nutshell, is what’s happened to the U.S. economy. Since the 1980s, Washington has changed the rules in ways that help the already advantaged and make it harder for others to catch up. This is true not just of tax and labor policies, but also of the rules that set the terms of economic competition. Those rules historically kept corporations from getting too big and powerful for smaller competitors to have a fair shot. Beginning with the Reagan administration, weakened antitrust enforcement sparked waves of corporate mergers that have left industry after industry dominated by a few huge firms. That gives consumers fewer choices and leaves workers increasingly at the mercy of the terms set by one or two giant employers. Loosened restrictions on interstate banking allowed local and regional banks to be swallowed up, making it harder for local entrepreneurs to get a loan. Airline deregulation allowed carriers to merge with each other and reduce service and raise prices to less profitable airports, which cripples the ability of small cities away from the coasts to attract jobs and investment.

The result is that it has gotten harder for most Americans to compete. While a handful of metropolises like New York and San Francisco, where the big corporate headquarters are, have prospered wildly, to the point where the working class can’t afford to live there, smaller cities and towns in 90 percent of the country have seen median incomes fall further and further behind, as jobs and opportunities are sucked toward the coasts. This regional inequality hurts all of us. With fewer and fewer cities and companies able to compete, the overall U.S. economy has experienced slower job growth, fewer start-ups, less innovation, and a smaller economic pie than would otherwise have been the case, while inequality has risen to Gilded Age levels. It’s like an NFL where two teams are the Patriots, and everyone else is the Browns.

Longtime readers of this magazine are familiar with these arguments. The current issue advances them, with stories about the multiple threats posed by monopolistic social media companies like Facebook (see “How to Fix Facebook,”) and the co-opting of agricultural co-ops that once helped rural communities prosper (see “How Rural America Got Milked,”).

The NFL certainly has its share of problems, from traumatic brain injuries to the shameless soaking of local and state governments for subsidies for new stadiums. But you don’t have to be a fan of the game to appreciate the genius of the rules that make football the most competitive and beloved sport in the country. And you don’t have to be a fan of government to realize that abandoning the rules that once made the American economy the most competitive and admired in the world was probably a mistake.

The post The NFL’s Secret Formula for Saving the U.S. Economy appeared first on Washington Monthly.

The last twenty-five years have seen the rise of a Political Comedy Industrial Complex, but unlike Ike’s warnings about the Pentagon, I won’t tell you it’s a bad thing. Politically Incorrect with Bill Maher first aired in 1993, and The Daily Show with Jon Stewart in 1999. The Clinton years, with Baby Boomers in the White House, were ripe for a surge in political comedy. A little over two decades ago, when I started to do political stand-up as a side gig to my day job as a journalist covering the Clinton administration, there was plenty of political humor on TV and in clubs, but a middle-aged guy with a modestly good Clinton impersonation could still get some stage time in New York and D.C.

But the fact that there’s much more political comedy now is one of the reasons I don’t do it anymore. (That, and it takes a lot of time.) There was the expansion of the comedy industry in the Bush and Obama years, not only on television but with acts as varied as Between Two Ferns with Zach Galifianakis and Funny or Die on the internet to the paper and web versions of the Onion to a book industry that helped lift a former Saturday Night Live bit player named Al Franken into the role of best-selling author and then into a career as a U.S. senator (until the end of 2017, at least).

The age of Trump has only accelerated what a political comedy analyst at Goldman Sachs (how I wish there were such a thing on CNBC) might call double-digit growth in the sector. Jimmy Fallon’s largely apolitical Tonight Show is getting crushed by the more overtly political and partisan offerings of Stephen Colbert and Jimmy Kimmel. A new genre of what might be called “reported comedy” has grown up around the forty-fifth president in the form of John Oliver’s HBO show Last Week Tonight and Samantha Bee’s Full Frontal. As has often been noted, young people are more likely than ever to get their news via comedy shows rather than from the New York Times. 

Today’s Trump-hating audiences have a need for reassurance baked into their comedy, and they consume it as much not to cry as to laugh. No wonder Alec Baldwin’s merciless portrayal of Trump has reinvigorated Saturday Night Live. Like New Yorker covers or The Rachel Maddow Show, political comedy like Baldwin’s gives hope to the resistance, a comforting vision of the president as evil, yes, but, more importantly, as ignorant and buffoonish. On all of these shows, the audience laughter is as important as the comedian’s words, a reminder that you out there with your Hope and Change posters and Obama nostagia are not alone. Others are laughing too.

Much of the best of this new political comedy, and of modern comedy in general, comes from performers with roots in improv. Colbert, whose transition from the brilliant Colbert Report to host of the Late Show was initially rocky but is now red hot since he dialed up the political quotient, began his career at Chicago’s Improv Olympics. Tina Fey, whose wolfing down of sheet cake on Saturday Night Live to cope with the Charlottesville killing stands as the comedy bit to beat of the Trump era, cut her teeth at Chicago’s famed Second City. Samantha Bee came out of Toronto’s improv-sketch comedy scene.

All of this makes Sam Wasson’s Improv Nation an interesting book right now. Wasson, a Los Angeles–based author who has penned several books on Hollywood, traces the history of improvisational sketch comedy from its post–World War II roots to today’s late-night stars. It’s not an account of political humor per se. His is a breezy, enthusiast’s rendering of sketch comedy pioneers—beginning with Mike Nichols and Elaine May, who emerged at the end of the Eisenhower years and became national sensations almost overnight, as their naturalistic, sophisticated characters appealed to a more cosmopolitan country aching for something more than “Take my wife . . . please” gags.

Wasson follows the proliferation of ensemble theater groups from the Compass Players, which included Nichols and May, to its successor, Second City in Chicago (and later Toronto), to L.A.’s Groundlings and Saturday Night Live’s Not Ready for Prime Time Players, whose New York fame was sometimes political but more often of the John Belushi “Samurai Delicatessen” variety. This is not a history of a related but distinct genre, stand-up comedy, the lone comic at the microphone. Rather, it’s about the ensembles who created and refined comedy based on improvised scenes. It’s the story of a collaborative art, not solo practitioners. And it is amazing how many of the comedians we’ve come to adore from film and television in recent decades spent time in improv troupes: Amy Poehler, Steve Carell, Bill Murray, John Candy, Christopher Guest, Gilda Radner, Julia Louis-Dreyfus—the list goes on and on.

Wasson’s larger point is that improvisation is, to use that hackneyed phrase, a uniquely American art form, a form of expression that could only have arisen in a country that enshrined free speech in its Constitution and valued bold, persistent experimentation, to use FDR’s famous phrase. “How We Made a Great American Art” is the book’s subtitle, although he allows that the sixteenth-century commedia dell’arte had elements of improv.

Wasson seems to have spent a particularly large amount of time with the late Mike Nichols and makes a good case that the famed director’s years at the Compass Players in Chicago informed his later work on Broadway and in Hollywood. “Just go to the people and they’ll tell you what they want,” implored Viola Spolin, the Compass matriarch who developed improv techniques as a way of helping poor children express their feelings at the settlement house where she worked and who later, with her son, Paul Sills, built Second City.

Wasson shows how Nichols took the techniques of improvisation—among them, asking the audience for the first line and the last line of a story—and employed it in the tightly scripted world of making Hollywood films. For instance, when directing the The Graduate in 1967, Nichols encouraged costars Dustin Hoffman and Anne Bancroft to ad-lib lines during a bedroom scene. A discussion with Hoffman about his real-life brother’s sometimes nervous response to girls led to one of the film’s funnier sight gags: Hoffman nervously and stiffly placing his hand on Mrs. Robinson’s breast while she tries get a stain out of the sweater she had just taken off.

The improv sensibility, with its high-wire sense of danger born of live television and theater, and its willingness to offend, built postwar comedy. But, as Wasson notes, so too did the parallel track of stand-ups like Lenny Bruce, George Carlin, and other iconic comedians of the 1950s and ’60s.

AAfter finishing this good-natured, oral history–style read, I couldn’t help but think of what threatens this florishing moment in comedy. One is the boorish-to-criminal behavior of comedians unearthed in the post–Harvey Weinstein era. After Al Franken’s groping and Louis C.K.’s masturbating, it’s difficult to imagine laughing at anything either of them says ever again, and hard not to wonder which other comedians are next to be outed as harassers.

The greater looming threat to comedy is political correctness. When comedians as innocuous as Jerry Seinfeld don’t want to perform on college campuses for fear of offending, when Chris Rock avoids playing universities because, as he says, “You can’t even be offensive on your way to being inoffensive,” when Bill Maher has a campus invite rescinded from Berkeley, the home of the Free Speech movement, we’ve got a problem. The closing of the campus mind, of course, predates Trump, but his grotesque presence has made it worse. In an age when the president cruelly and with no apparent reason other than spite proposes to kick transgendered members of the Armed Forces out of the military, it makes it that much harder to even think about any humor involving transpersons even if it’s good-natured. South Park’s portrayal of Caitlyn Jenner’s arrests for reckless driving would never play before a Trump-era college audience.

But probably the biggest challenge to today’s political comedians is Trump himself. There are lots of able Trump impersonators belting out his mantras like “Believe me” and “You’ll get tired of winning.” But these portrayals are already becoming tired, familiar like jokes about Bill Clinton being horny or John Boehner being orange. Moreover, Trump isn’t the fool portrayed by Alec Baldwin, but a dangerously clever man. We need a humor that stares down the very real possibility that he could be with us for seven more years. I’m thinking of Charlie Chaplin’s 1940 film about Hitler, The Great Dictator. I’m not equating Trump with the Nazi mastermind; I’m just raising how an ingenious comedian can deal with a horrifying political leader. The film was a splendid satire of Nazis, at times funny and at times deeply moving. Chaplin at once belittles Hitler, mocks his ideology, and takes the threat seriously. We don’t have that kind of Trump humor yet, but maybe there’s an improv group out there that will find it.

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Speaking at the 2016 Republican National Convention, Ivanka Trump won plaudits for pledging to work with her father, now President Donald Trump, to combat the gender pay gap. Women, she explained, make up 46 percent of the labor force but still earn only 83 cents for every dollar earned by men. She disputed that gender discrimination was the root of this inequality. Instead, she said, “[a]s researchers have noted, gender is no longer a factor creating the greatest wage discrepancy—motherhood is.” Her speech earned nodding approval from liberal outlets. Vox, for example, cited Columbia professor Jane Waldfogel’s seminal 1998 article arguing that “the greatest barrier to economic equality is children.”

As with many attempts to explain the stubbornly persistent pay gap, the motherhood theory suffers from a few flaws—such as the fact that when men have children, their pay goes up. But it also falls into a long line of academic research that blames women for their lesser earnings while ignoring the very real effects of simple discrimination.

Since the passage of the 1963 Equal Pay Act, academics have devised a variety of theories to explain the gender gap, such as the suggestion that women lack the same experience and training as men. But since women have outnumbered men on college campuses since the late 1970s—reaching 55 percent of undergraduates in 2014—that argument is largely moot. Another claim is that women simply self-select into lesser-paying jobs. Data show that this gets it exactly backward: in fact, when women move into a male-dominated field in large numbers, salaries plummet. (Conversely, when men move into a female-dominated field, such as nursing, salaries rise.) Moreover, a woman’s “decision” to avoid a certain field might not be a choice at all. In the tech and science worlds, for example, many women have been effectively harassed out of jobs by men.

Some gender pay gap skeptics offer up an even more dubious theory: We’re paid less because we want to be! Women, the argument goes, would rather have a nice working environment and flexible hours and are more interested in nurturing others and socializing than in raking in the big bucks. We leave the workforce by choice to care for children and aging parents. Or maybe we’re just bad at asking for raises; if only more of us would embrace “Getting to Yes,” we could simply negotiate our way to a more equitable salary.

Montclair State University sociology professor Yasemin Besen-Cassino apparently found these explanations as insulting as I do. Her new book, The Cost of Being a Girl, offers new empirical evidence that blows up decades of research about the origins of the gender pay gap and shows why blaming women’s “choices” for wage inequality is so wrong.

Besen-Cassino found the perfect control group with which to test her theories: teenagers. As a cohort, teen boys and girls aren’t saddled with confounding factors such as inexperience, education, or parenthood obligations. Theoretically, they should be paid the same amount of money for similar work. What Besen-Cassino found, however, is that the gender pay gap starts early and runs deep. Using the National Longitudinal Survey of Youth, she plumbed twenty years’ worth of data about babysitting, snow shoveling, yard work, and other freelance-type jobs young people hold. She found that when kids were twelve or thirteen, girls earned slightly more than boys ($125 a year for girls, versus $120 for boys), a finding Besen-Cassino flags as important because it’s the first and possibly only instance of gender pay parity in the U.S. labor market. But by age fourteen and fifteen, boys out-earned their female counterparts in similar jobs. By nineteen, boys in the study were making $200 more a year than girls, for a total of $950.

These differences can’t be dismissed for the reasons often given for the adult pay gap. Besen-Cassino looked at survey data on youth values as well, and found that there was no difference between boys and girls in what they wanted out of a job or why they worked. After controlling for the number of hours worked per week, the types of jobs performed, and other factors, Besen-Cassino found that “girls can expect to earn about $93 less per year solely by virtue of their gender,” or about 13 percent less than boys. She pegs this as the start of a lifetime pay gap that will cost the average woman more than $400,000 (and more than $700,000 for college-educated women).

Besen-Cassino also conducted dozens of qualitative interviews with young women working as babysitters or in customer service jobs, along with a handful of boys in the same jobs. Ethics rules prevented her from interviewing younger kids, so she interviewed young people eighteen and older. Even so, the interviews helped to explain how wage divergence takes root. Babysitting, for example, the classic first job for young girls, can be a trap that has long-lasting effects on how women navigate the workplace as adults.

The young women in the study described how informal, occasional babysitting arrangements, often started when they were preteens, gradually morphed into extensive child care duties as the girls got older and went to college. They described employers making demands for housework, cooking, and chauffeuring, but without more pay. Parents expected the women to stay long after their shift to chat about the children’s day—again without extra pay. Male babysitters, on the other hand, who were often hired for their sporting abilities, were not expected to cook, clean, or stay late to chat.

The young women Besen-Cassino interviewed described having great difficulty in extracting themselves from such arrangements, in part because the initial jobs came through family or neighbors, and in part because they often faced enormous pressure by the families to stay. The girls remained trapped in child care jobs for many more years than they’d expected, while boys headed off into the formal economy, where they typically made more money.

When female babysitters asked for raises, parents often refused. Besen-Cassino found that employers viewed young women babysitters asking for raises as manipulative and less likeable, whereas boys asking for raises were seen as more competent. These early experiences have long-term effects, she argues: “[W]omen seem to internalize learned helplessness: by the time they enter the adult labor force, they have already asked for raises, been turned down, and experienced the negative effects of negotiation firsthand.” This is not a situation that Sheryl Sandberg’s exhortation to Lean In can solve.

Girls working in the customer service and retail sector as teens didn’t fare much better. Besen-Cassino found that companies often treated girls—and paid them—as if they were only working for employee discounts and to hang out with their friends, an attitude not attributed to boys. Girls in retail were expected to use the products they sold and to keep up appearances to further the brand. That pressure frequently left girls heavily in debt, usually in the form of a company credit card, by the time they exited the business. Besen-Cassino found that the longer girls worked in customer service jobs like clothing stores or restaurants, the more likely they were to suffer long-term body image problems, including eating disorders, and the less they earned as adults. None of this happened to boys in the same jobs.

Besen-Cassino doesn’t get too far into policy remedies for the gender pay gap, but she is critical of exhortations (as in Lean In) that young women try to assume more management roles, and of programs to get girls into STEM fields. She says such attempts are too little, too late.

[A]ll of these efforts target the workers and seem to ignore the workplace. Women do not start working after finishing their education: work is an important part of young people’s lives, but is markedly absent from policy initiatives. . . . No matter what young people are told at school or by their parents about gender in the workplace, they are learning about gender at work by working, and unless we change the workplace, these initiatives are doomed to fail.

The lesson here may be: “Mamas, don’t let your babies grow up to be babysitters—or Forever 21 clerks.” But as with the gender pay gap generally, addressing the problem one girl at a time is doomed to be ineffective. It seems clear from Besen-Cassino’s research that gender pay equality will never be achieved so long as the burden for correcting it falls entirely on women in salary negotiations. Given how much employers punish women, young and old, simply for asking for money, any solution will require a more systemic approach to changing the workplace.

During his tenure, President Obama created a rule that would have required large corporations to report pay data by race and gender. This might have been a good first step toward eradicating the pay gap, by at least quantifying it accurately. The rule would have taken effect next year, but Donald Trump blocked it in September, calling it “enormously burdensome” to corporations. Ivanka Trump supported the move. Despite the lip service Ivanka has paid in support of wage parity, her actions, and those of her father, are leading the country in the opposite direction.

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Two decades ago, the Harvard political economist Dani Rodrik wrote a book, Has Globalization Gone Too Far?, in which he argued that global trade was creating dangerous fissures in developed nations between the better educated, who prosper under the new regimes, and the less educated, who do not. If not addressed, he warned, these fissures could lead to “social disintegration.” As is customary, Rodrik requested an endorsement for the book’s back cover from a well-known fellow economist. This person declined the request, not because of significant disagreement with the book’s analysis, but because he was worried that Rodrik’s book might “provide ammunition for the barbarians”—that is, protectionists, mercantilists, and other enemies of free trade.

Now, with the barbarians at least partway through the gates and in the act of taking over the helm of government, Rodrik has published another hard-hitting book, Straight Talk on Trade. In it, he relates the story above and blames his fellow professional economists for giving the barbarians their opening. He also predicts worse to come at both national and international levels if the professoriate doesn’t start playing straight with the masses. In public, the economists have stubbornly stuck to a theory of free trade and globalization, which holds that free trade (even if practiced unilaterally—meaning that I reduce tariffs to zero even if my trading partners don’t) is always and everywhere a win-win proposition.

Among themselves, however, economists admit that the theory is full of questionable assumptions and contingent conclusions and is not only a cause of growing income inequality and middle-class anxiety in many countries, but also the stimulator of rising international disharmony and of potential outright conflict. Yet they have persisted in publicly discounting the domestic costs of free trade, and wildly over-estimating the gains, in the face of mounting evidence that this consensus view is wrong.

When the North American Free Trade Agreement was being debated during the 1992 presidential campaign, candidate Ross Perot predicted that it would result in a “giant sucking sound” as jobs left the United States. Economists blasted Perot and asserted that the deal would, instead, generate rising American trade surpluses and thousands of new jobs. When the U.S. agreed to admit China to the World Trade Organization in 2001, economists foresaw a sharp decline in the $80 billion U.S. trade deficit with China. In the case of the U.S.-Korea Free Trade Agreement of 2007, economists predicted a dramatic decline in the $17 billion U.S. trade deficit with Korea as notorious Korean tariffs and trade barriers were removed.

In all of these cases, the facts turned out to be the complete opposite of the predictions. U.S. trade with Mexico went from a surplus to a $50 billion deficit. In the case of China, the deficit rose to over $400 billion. Rather than falling, the deficit with Korea about doubled. More importantly, Perot’s prediction turned out to be right. There was, in fact, a giant sucking sound—later confirmed by MIT economist David Autor—as jobs fled the U.S. There was also increased global tension, as much of Asia increasingly orbited China rather than the United States, and as China stole U.S. technology and openly spoke of its own system of “socialism with Chinese characteristics” as superior to America’s free market democracy model.

Rodrik wonders if economists were the underlying cause of Donald Trump’s election as president. He writes, “[E]ven if they may not have caused (or stopped) Trump, one thing is certain: economists would have had a greater—and much more positive—impact on the public debate had they stuck closer to their discipline’s teaching, instead of siding with globalization’s cheerleaders.”

For instance, the economist who turned down Rodrik’s blurb request worried that protectionists would seize on the book’s arguments about the downsides of globalization to justify their narrow, selfish agenda. But, points out Rodrik, many trade enthusiasts are no less motivated by their own narrow, selfish agendas. Pharmaceutical firms using free trade talks to obtain tougher patent rules and multinational firms seeking special arbitration tribunals have no greater regard for the public interest than do protectionists. Indeed, they seek protection in the name of free trade. So when economists shade their arguments, they are largely just favoring one set of barbarians over another.

Rodrik argues that the unspoken rule that compels economists to champion free trade in public and not to dwell much on the fine print has produced a curious situation. “The standard models of trade . . . typically yield sharp distributional effects: income losses by certain groups of producers or workers are the flip side of the ‘gains from trade.’ And economists have long known that market failures—including poorly functioning labor markets, credit market imperfections, knowledge or environmental externalities, and monopolies—can interfere with reaping those gains.” By not listening to their critics, who warned about such things as currency manipulation, and by sticking to models that assumed away such things as trade-related unemployment and income inequality, economists lost the ability to argue effectively against many demagogic criticisms of free trade now enjoying popularity.

Rodrik thus offers this new book to show how a more honest narrative can be constructed and to outline ideas for creating better-functioning national economies as well as a healthier globalization. In doing so, he is following in the footsteps of none other than the great John Maynard Keynes, who wrote, “A favorable balance, provided it is not too large, will prove extremely stimulating; whilst an unfavorable balance may soon produce a state of persistent depression.”

Rodrik sees the key issue as that of “getting the balance right”—in this case, the balance between the difficult if not impossible to achieve globalization of the economists’ dreams and the loyalty that people everywhere persistently show to the nation-state, which, contrary to Davos Man and globalists everywhere, will long continue to be the only effective mechanism for providing the rules and institutional arrangements on which the markets they so adore must rely. Rodrik—who was born in Turkey but also carries a U.S. passport, teaches at Harvard, and roots for a European soccer team—would agree with British Prime Minister Theresa May: “If you believe you’re a citizen of the world, you’re a citizen of nowhere.”

Does this mean Rodrik is aligning with the barbarians and calling for a return to protectionist mercantilism? No. But it does mean that he in no way embraces the popular, early-twenty-first-century notion of a “flat world” in which mercantilism and authoritarianism automatically fade away in the face of a universal embrace of Anglo-American concepts of free trade and democracy. Unlike some free trade prophets who think of globalization as just another form of Americanization, Rodrik warns it could as easily turn out to be a form of Sinicization.

Indeed, he sees the global trading system, as currently constructed, as more likely to cause international crises than to stem them. The reason is that the main global trade institutions—the International Monetary Fund, the General Agreement on Tariffs and Trade, and the World Trade Organization—have evolved in a way that denies Keynes’s first principle of balance.

The original intent and assumption of the institutions was that no country would have chronic overall trade surpluses or deficits. With initial (1948) exchange rates fixed to a dollar that was itself indexed to gold, trade deficits would result in painful outflows of gold reserves. The International Monetary Fund would provide emergency lending to deficit states, but only on condition of following IMF economic policy dictates. Keynes also argued for penalties on countries accumulating chronic surpluses, which in his mind were as detrimental as chronic deficits. Lamentably, the U.S. (a surplus country in 1948) objected, and such penalties were never adopted.

After the United States began to accumulate balance-of-payments deficits and experience rising outflows of gold, President Nixon blew up the postwar international economic system by detaching the dollar from gold and allowing its value to be set entirely by the buying and selling of currencies on international markets. This floating exchange rate system removed all discipline from the United States, which, in effect, now printed the world’s money and could therefore accumulate trade deficits more or less indefinitely without apparent cost.

But, says Rodrik, there has, in fact, been a cost. The new system made mercantilism a sure bet for our trading partners. He emphasizes that the countries that experienced economic growth miracles—China, Taiwan, South Korea, Japan, Germany, and Singapore—all did so by specifically ignoring and not copying the economic policies and government-business relationships of the United States and to a lesser extent of Europe. Free trade doctrine assumes that there are no cross-border flows of capital, labor, and technology. It also assumes that there are no economies of scale (prices fall as output rises). The Nixonian system obviated the assumption of closed capital markets, and the international flow of capital accelerated an international flow of technology and even, to some extent, of labor. This, combined with the fact that economies of scale do indeed exist—especially in capital-intensive, traded goods such as steel, cars, and electronics—meant that mercantilist, national export-led growth strategies would in effect be rewarded, not penalized, by the new international trade system. Moreover, while the United States did not seem to experience an immediate cost and did benefit to some extent—by obtaining inexpensive imports and creating prosperous allies who would generally support its larger geostrategic and military objectives—it did ultimately pay a cost, in the form of lost jobs, lower wages, stolen technology, and the exacerbation of inequality.

But why didn’t the economists and their econometric models pick up on all this?

This is where Rodrik shreds his fellow economists. Essentially, he says they are not at all the scientists they pretend to be. Unlike the natural sciences, he points out, economics does not deal with objective laws, but with often unquantifiable human behavior in social and institutional contexts. Because these are infinitely complex, economists must make simplifying assumptions and can never be sure that a particular type of situation will be indefinitely repeatable.

Take the proposed Trans-Pacific Partnership free trade agreement, which President Trump has vetoed. Trump has been roundly criticized by economists who argue that the deal would have brought substantial benefits to the United States. Rodrik notes, however, that these claims are mostly based on the results of what is known as the Petri/Plummer trade model, which predicted that the deal would increase real incomes for all the participating countries by 2025, with only a relatively insignificant cost to trade-sensitive industries. On the basis of this rosy forecast, President Obama and most of the American foreign policy elite worked to complete the deal. But, notes Rodrik, the model assumed sufficiently flexible labor markets that job losses in some parts of the economy would be compensated by job gains elsewhere. Thus, the possibility that the deal might result in some increase in unemployment or decrease in wages or both is ruled out from the start by the very assumptions of the model.

A competing analytic tool, the Capaldo/Izurieta model, used different assumptions and came to quite different conclusions, predicting wage cuts and increased unemployment in many areas, as well as declining income in the U.S. and Japan. But the Capaldo/Izurieta results tended to be discounted by the trade/foreign policy community, in part because they were at odds with the conventional economic consensus. Yet, as noted above, real-world outcomes over the past thirty years don’t seem to line up very well with the assumptions underpinning Petri/Plummer.

As Rodrik explains, underneath these numbers and the missed forecasts is a fundamental clash of two ways of thinking about trade. The Anglo-American free trade concept is based on the thinking of Adam Smith and the notion that the “unseen hand of the market” should be allowed to perform wonders without government interference. Consumers are king, and the ultimate objective is to increase the consumption potential of households. The alternative way of thinking is mercantilism, which offers a corporatist vision in which the government and private business are allies in pursuit of societal economic welfare and national power. Liberal free traders emphasize consumption, while mercantilists emphasize production. Although America has been a champion of the Smithian free trade approach for the past seventy-odd years, it got rich as a mercantilist power in the nineteenth century and the first fifty years of the twentieth. Indeed, all countries that have gotten rich, including the Great Britain of the eighteenth and early nineteenth centuries, did so while practicing mercantilism.

While not calling for a new mercantilism, Rodrik emphasizes the need for a more “balanced” American way of thinking about and adopting policies for dealing with globalization. He doesn’t go into a lot of detail, but a starting point would be the conscious adoption of a policy of long-term trade balance for the United States. An important step would be taking measures to prevent the tendency of the past sixty years for the dollar to be overvalued, thus making American exports artificially expensive and imports artificially inexpensive. Another step would be to copy virtually all other advanced economies by imposing a value-added tax on all goods and services sold in the United States, but which is rebated on exports.

In addition, Washington could match foreign investment subsidies. Countries like Singapore and China seek to induce the offshoring of factories and R&D facilities to their shores from America by offering free land, tax exemptions, and investment grants. These deals mean that goods that could and should be competitively produced and exported from the U.S. are actually increasingly being produced abroad and imported back into the country. An American war chest to match such offers along with an initiative to impose World Trade Organization disciplines on this practice would go a long way toward restoring long-term American trade balance.

There are many other options, but Rodrik’s main point is that where there is a will, there is a way. What he is calling for is a newfound American will.

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