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ILR expert urges policies that support the flex economy

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Joe Schwartz

Lawmakers could ensure financial independence and security for every U.S. worker – if they learn from history and embrace the types of policies that heaved the economy out of the Great Depression.

That was the message Louis Hyman, associate professor of economic history, delivered May 24 to Washington, D.C., lawmakers who were looking for guidance on how to create more jobs.

Hyman advocated 1930s-inspired policies to channel private capital into expanding access to the internet in rural areas and strengthening the social safety net.

“In today’s digital economy, we can look to these older models that relied on our shared values to provide us with security and independence, while, at the same time, rejuvenating American capitalism,” said Hyman, who directs the ILR School’s Institute for Workplace Studies.

Hyman and three other panelists addressed members of the New Democrat Coalition, a subcaucus of the House Democratic Caucus. The coalition had invited them to discuss policy solutions for job creation, focusing on the history of economic change and forecasts for the future.

Machines continue to replace human strength and skill, as they have for hundreds of years, from the plow to the computer, Hyman said. But now the reorganization of people matters as much as, if not more than, the newest software application, he said.

“This time we’re moving out of factories and offices back into our homes,” he said. “What is new today is not just technological change, but the possibility that workers might be able to be as productive on their own as within a firm, having access to the same global distribution and production regimes. That is what is new: An independent person can function as a multinational, sourcing and selling globally through digital platforms.” In the last decade, 94 percent of new jobs have been in nontraditional employment for independent contractors, consultants, temps and freelancers, he noted.

However, the U.S. economy is experiencing a stagnation similar to the Great Depression. For the last 40 years, we have had economic growth without wage growth, he said.

To get the economy back on track, the federal government should look to the New Deal’s investment innovations, he said. Through the Reconstruction Finance Corp. (RFC), the federal government acted as a middleman between Wall Street’s idle capital and risky new ventures. For example, the RFC’s Rural Electrification Administration brought electricity to rural America by encouraging banks to lend capital to local electric cooperatives. As a result, the country went from 30 to 40 percent of rural Americans in 1930 having access to electricity to almost 90 percent 10 years later – all without spending a dime of federal money, Hyman said.

“People said it wasn’t possible, it wasn’t profitable. And yet they did it, and suddenly we were able to mechanize farms. We were able to bring rural America into the industrial age,” he said.

In the same way, the federal government could bring the internet to rural America, he said. The key is encouraging banks to unlock private capital. In 2017, U.S. banks had $2 trillion in excess capital investment reserves on their balance sheets, he said. “All that capital is money that is not invested. That is scared money.”

Robust broadband infrastructure would dramatically expand job options for rural Americans, Hyman said. A worker in a rural Appalachia could put on virtual reality goggles and control a tele-operative robot in another part of the world. A receptionist could welcome office visitors in San Francisco from her home in upstate New York.

“Will they all get $100,000 jobs? It’s unlikely,” he said. “But will they be able to figure out a new portfolio of income streams? Yes.”

At the same time, the federal government must institute a minimum social safety net offering health care, education and maybe even a basic income. That would enable workers to take a risk on new employment, he said.

“Whatever the path forward, we need to stop fixating on propping up a world of security that is tied to an employer,” Hyman said. “The flexible economy is liberation: from bosses, from a cubicle, from monotony. But those benefits will mean nothing if outweighed by the cost of fear: of eviction, of illness, of poverty.”

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