The Washington Post - 19.08.2019

MONDAY, AUGUST 19 , 2019. THE WASHINGTON POST EZ RE A

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hances are, if you live in a city, Uber and Lyft have changed your life. Even my 74-year-old mother now semi-frequently uses Uber to get around — this, a woman with whom I once spent 45 minutes on the telephone, trying to coach her through minimizing a win- dow on her desktop. As advances go, Uber and Lyft aren’t quite up there with indoor plumbing and central heating, but they’re still definitely an improvement over the prior status quo: more reliable, more available and cheaper than taxi services, especially for remote and low- income areas. And, now, they’re offer- ing urban dwellers bikes and electric scooters, as well as cars. Even when they eventually stop burning investor cash to subsidize those services, being able to spontaneously hail a ride from your phone — or grab a scooter for the morning commute, or pick up a few extra bucks as a driver — will noticeably improve millions of people’s lives. Uber and Lyft are everything we love about capitalism. And writ large, theirs is the story of the capitalist revolution that has over the past few centuries raised us from short-lived squalor to lives of comparative peace, wealth and leisure. Just 170 years ago, my ancestors fled a famine that denuded Ireland of roughly a quarter of its population. By contrast, their descendants today fret about advancing avoirdupois, a real estate bubble and the high cost of space-age diagnostic scans. The journey between 19th-century hardship and today’s abundance was composed of many steps, most of them guided by the invisible hand of the market. Markets funneled resources to promising ideas, many of them bad,

some of them pure genius, and then winnowed out the bad ones. That itera- tive process of incremental improvement has brought us to the here and now. We can reasonably hope that it will propel our grandchildren further still, to something that would seem to us an unimaginable paradise. I won’t say I think of this every time I open my Lyft app; I do say that I probably should. But recently, I’ve been thinking that though Uber and Lyft are everything we love about capitalism, they are also everything we hate. Consider the difference between the corporate cultures of these two firms. Uber’s early chief executive, Travis Ka- lanick, was a tech-bro outlaw whose desire to disrupt the taxi industry may have started with the time he was forced to jump out of a cab after a heated altercation with the driver. Dur- ing the company’s turbulent early years, Kalanick staged equally belliger- ent confrontations with local govern- ments, allegedly tolerated rampant sex- ual harassment and discrimination within his company, and pitched his services to the affluent as “a conven- ient, and classy ride.” Lyft was like Uber’s kindly hippie cousin. Its founders are explicitly idealistic about Lyft’s mission to eliminate the environmental and financial costs of personal car ownership. While Uber initially focused on fancy black cars, Lyft let people drive their modest older- model sedans and initially stuck mus- taches on the front of the car to reassure passengers that Lyft was goofily benevolent. They invited passengers to ride up front with the driver, like a friend rather than a customer. They took a conciliatory stance toward regulation. Uber and Lyft were about as differ-

ent as two companies in fundamentally the same business could be. But at this point, from the customer perspective, they’re barely different. They offer the same services, for roughly the same price, in many of the same markets. Worse, Uber, the aggressively merce- nary firm, has a higher market share than the idealists. This, too, is the invisible hand of the market, driving everyone in the same direction. As markets like to do, because markets tend to reward scale. Scale, in turn, rewards the lowest common denominator that everyone will accept, which means the homogenous and ubiquitous. And because idealistic values are costly, and decid- edly not homogenous across large groups of people, they are rarely re- warded the way storybooks tell us they ought to be. Which may explain why elements of both left and right are nearing open revolt against the whole idea of markets. Market innovation is highest in a tech sector that tends toward scale even more sharply than its industrial fore- bears: the efficient number of firms providing the services of a Facebook, a Google or an Amazon — and maybe an Uber or a Lyft — is probably one. (Ama- zon founder and chief executive Jeff Bezos also owns The Post.) The obvious rejoinder to this com- plaint is that “the market” is simply us, collectively. It is failing to reward cer- tain things because we are failing to reward them, at least in sufficiently large numbers. But then, perhaps that’s exactly why they make us so uncomfortable: because markets reflect back to us what we are, instead of what we’d like to be. Twitter: @asymmetricinfo

MEGAN MCARDLE

Uber and Lyft: Everything we

love and hate about capitalism

GENE J. PUSKAR/ASSOCIATED PRESS A Lyft logo is installed on a driver's car in Pittsburgh.

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here are two quite different paths toward change in the 2020 elec- tions. One would involve getting rid of President Trump but leav- ing Washington gridlocked. The other would see a Democratic president elected with a Democratic Congress. For the first time in a decade, progressives, with some help from moderates, would have a chance to govern and begin to push back against the conservative takeover of the federal judiciary. It will all come down to the fight to control the Senate. And the Democrats’ chances of winning a majority took a modest step forward last week when former Colorado governor John Hickenlooper ended his campaign for the Democratic presidential nomination and signaled he was con- sidering taking on Republican Sen. Cory Gardner. While there are already other potentially strong Democrats in that con- test, polls show Hickenlooper leading Gardner by double digits. If Democrats won the White House, they would need a net three-seat gain to control the Senate with the vote of a Democratic vice president. It’s difficult to imagine this happening without the de- feat of the three most vulnerable Republi- can incumbents, Gardner and Sens. Susan Collins (R-Maine) and Martha McSally (R-Ariz.). Alabama Sen. Doug Jones (D) faces a very tough reelection campaign in a deeply Republican, pro-Trump state. A Jones loss would move the Democrats’ victory line to four pickups. Their chances of getting there depend in part on whether Montana’s Democrat- ic Gov. Steve Bullock decides to end his own presidential candidacy to take on Republican Sen. Steve Daines. It’s hard to

see any other Democrat beating Daines. Bullock — as he never tires of pointing out — has shown he can run far ahead of his party’s ticket. Bullock has insisted he doesn’t want to be a senator, but Demo- cratic Senate strategists, with an accent on hope, sense a softening in Bullock’s stance on the Senate. Hickenlooper’s decision to withdraw points to two important dynamics in the Democratic presidential race. The first is that former vice president Joe Biden is blocking the emergence of any other moderate or center-left candidate. Ab- sent a Biden collapse in the next few months, there will be little room for candidates such as Sens. Amy Klobuchar of Minnesota or Michael F. Bennet of Colorado. It was striking that a Quinnipiac Uni- versity poll this month found that Biden was winning just 19 percent of Democrats who said they were “very liberal” and 28 percent who called themselves “some- what liberal.” But he was taking 43 percent among those who called themselves moderate or conservative. This leads to the other dynamic: Ag- gressively taking on the left, as Hicken- looper did, is not, for now at least, a winning strategy for more moderate presidential candidates. This is partly because their real competition comes from Biden but also because progressive Democrats have shown themselves far more open to moderate candidates in Senate and House races than in the presidential race. Progressives have been willing to make pragmatic judgments about who is best positioned to win a given Senate or House seat but want to make a strong statement in the presidential con- test. Thus, in the same Quinnipiac poll,

Sen. Elizabeth Warren (D-Mass.) led Biden by more than 2 to 1 among very liberal Democrats. It’s notable that in his dignified with- drawal video, Hickenlooper stressed three issues that appeal across the Demo- crats’ moderate/liberal divide and also to swing voters: lowering prescription drug costs, dealing with climate change and taking action on guns. He sounded like a Senate candidate. If Senate Democrats are hopeful that Hickenlooper and possibly Bullock could help them take the Senate, they are also looking to what they call “the Heller Effect” to get them the rest of the seats they need. In 2018, Nevada’s Republican Sen. Dean Heller lost in part because he was cross-pressured between showing support for Trump to rally his Republican base and demonstrating independence from Trump to attract middle-of-the-road voters. This political inconstancy didn’t work for Heller, and Democrats think the same neither-one-thing-nor-the-other dynamic could hurt Republican Sens. Thom Tillis in North Carolina and Joni Ernst in Iowa — as well as Gardner, Collins and McSally. Tillis was already embarrassed earlier this year when he wrote a Post op-ed opposing Trump’s emergency dec- laration to build a border wall and then turned around and voted with Trump on the same issue. His flip-flop left both sides unhappy. As for Hickenlooper, he often seemed uncomfortable as a presidential candidate but was eloquent whenever he talked about his bipartisan achievements as governor of Colorado. It’s an approach that could serve him well as he heads home. Twitter: @EJDionne

E.J. DIONNE JR.

Real change depends on the Senate

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hat is striking about the latest bouts of financial turmoil — the recent wild swings in global stock and bond markets — is that they provide a sobering reminder of the potential hazards of economic instability. There are parallels between the present tumultuous situation and past episodes of economic disrup- tion, including the Great Depression of the 1930s. Just for the record: This is not a fore- cast of another Depression, when annual U.S. unemployment peaked at about 25 percent in 1933. For the moment, we are not anywhere near that level of dis- tress. Still, if a deeper crisis ensues, Presi- dent Trump’s strident economic national- ism will be partially blamed, because he ignored the lessons of history. The name that comes to mind is Charles Kindleberger, an eminent economic historian of the post-World War II era who taught for years at the Massachu- setts Institute of Technology and was a prolific author of books and articles. One of his masterpieces was “The World in Depression, 1929-1939.” The crux of Kindleberger’s thesis was that the underlying cause of the Depres- sion was a vacuum of leadership. By this, he meant that Britain — which had pro- vided that leadership in the 19th century — had been so weakened by World War I that it could no longer perform that function in the 1920s and early 1930s. Meanwhile, the United States — which would fill that role after World War II — was not ready to do so. In this context, the dominant country would keep its markets open to imports, so the trading system would not collapse under the weight of mounting protec- tionism. Another requirement was that the leading country (the “hegemon”) had to have the financial strength so it could lend to banks and other needy borrowers during a crisis so that the financial system, the repository of much wealth, would not self-destruct. In the recent foreword of the latest version of Kindleberger’s book, econo- mists J. Bradford DeLong and Barry Eichengreen of the University of Califor- nia at Berkeley put it this way: “The root of Europe’s and the world’s problems was the absence of a benevolent hegemon: a dominant economic power able and willing to take the interests of smaller powers and the operation of the larger international system into account by stabilizing the flow of spending through the global [economy]... by act- ing as a lender and consumer of last resort.”

Kindleberger’s own explanation is similar: “The 1929 depression was so wide, so deep and so long because the international economic system was rendered unsta- ble.... When every country turned to protect its national private interest, the world’s public interest went down the drain, and with it the private interests of all.” Flash forward. Look around. Leader- ship is conspicuous by its absence. Na- tions pursue their self-identified private interests. The United States and China — the world’s two largest economies — are engaged in a bitter trade war that hurts both countries. The British are poised to leave the European Union (Brexit), with what consequences no one knows. At home, the Federal Reserve is under re- lentless assault by Trump, making its job doubly difficult, even granting that the best monetary policy is a legitimate sub- ject of debate and disagreement. What about Germany, Europe’s tradi- tional powerhouse? In the past year, its industrial production is down about 5 percent, says economist Desmond Lach- man of the American Enterprise Insti- tute. If Germany does not change its “rigid policy view on the need to balance their budget under all circumstances, both Germany and Europe should brace themselves for a hard economic landing,” he argues. Economic leadership is a two-step process, each difficult. First, you must conceptualize the nature of the crisis; then you must devise and implement remedies that prevent it from worsening. In the 2007 to 2009 financial crisis, that is what happened. The administrations of George W. Bush and Barack Obama recognized that the financial system might collapse, as panicked deposi- tors and investors withdrew their funds. The remedy, organized on a global scale, was to pump money into the system until confidence returned. Trump officials don’t seem to think Kindleberger matters. Their pursuit of “greatness” might prove self-destructive. The good news is that the financial system is stronger now, meaning it has more capital to absorb losses, than in 2008. The bad news is that private debt levels in many countries, including the United States and China, are high. If too many borrowers default, losses may still cripple the financial system. There’s the old cliche that those who don’t remember history are condemned to repeat it. Let’s hope that’s not true this time.

ROBERT J. SAMUELSON

Learning from

the Great Depression

BY FREDERICK W. SMITH, WILLIAM BROCK AND CHARLENE BARSHEFSKY

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resident Trump’s trade policy has been controversial for any number of reasons, but it has made Americans think seriously about trade for the first time in a generation. The president believes that much of our trade has been unfair — that other countries have taken advantage of us. He does not remind Americans that trade has become an essential element of our prosperity, accounting for more than 27 percent of our economic output and support- ing 1 in 5 U.S. jobs. Today, the trading system is under attack from two directions. On one hand, we face assertive economies such as Chi- na that have a limited and largely mercan- tilist stake in the system and have chosen to press forward through a program of state-directed capitalism. At home, many Americans feel the policies that promised to advance their economic interests have failed them. Polls show Americans under- stand that trade can be a positive force, but at the same time, they worry that their personal situations have not improved. Only the top 20 percent of U.S. house- holds have fully recovered from the 2007 to 2009 recession. Progressives see trade agreements benefiting large companies rather than workers, while conservatives are reluctant to cede sovereignty through international agreements. Both left and right are firing at the center instead of trying to build consensus. The United States seems to be losing both these arguments. Internationally, we have rested on our record instead of defending the rules we created and chal- lenging those who reject the rules and the values that underlie them. Congress has failed to legislate — and the executive branch has failed to effectively adminis- ter — programs that would provide new opportunities for workers displaced by trade or technology. When the answer to China’s challenge is containment rather than competition, it demonstrates a loss of confidence in our ability to compete and win when engaging with the world. The chief arrow in the president’s quiv- er has been tariffs, but they are not an effective weapon. In the short term, they are a tax on U.S. consumers. The New York Federal Reserve Bank estimates that, to date, the administration’s tariff policy has cost the median earner $831 per year, nearly offsetting the $930 per year benefit from the 2017 tax cut. In the long term, tariffs raise costs for U.S. businesses and consumers, eroding our competitive advantage. We should instead play to our

strengths. First, we must recognize our success in creating and leading the global system that has been good for us as well as the world, maintaining peace and stability, and creating economic opportunity. Our willingness to lead was founded on our economic strength: the most produc- tive workers and the best technology and world-class companies working together in a favorable policy environment to pro- mote growth and prosperity here at home and around the world. If we withdraw from the world or alienate our friends and allies, we lose our ability to shape the international environment. Healthy, growing economies throughout the world benefit the United States, directly through expanded trade and indirectly by promoting peace and stability according to mutually agreed rules. The United States needs to contin- ue to guide the system as 95 percent of the world’s population and 80 percent of its purchasing power lie outside our bor- ders. Engagement is essential to our sur- vival; trade is an integral part of our engagement. How do we reestablish a pro-trade consensus here at home while respond- ing more effectively to the global economic landscape? We have to fight for it. We have the advantage of strong domestic economic growth, but we need more. Internationally, we must maintain our support for a rules-based trading system, avoid a cycle of competitive currency devaluations and pursue additional mul- tilateral agreements that set rules for the new economy. In the United States, we must revitalize our culture of innovation and take back our leadership in research and development. We also must protect our intellectual property, which sustains our economy and strengthens our national security; and we must ensure that current and future American workers are prepared for a world where work will require more agility and new skills. Several presidential administrations, including the current one, have found that withdrawing from the world threat- ens our growth. The United States must recommit itself to continued economic engagement with the rest of the world, not isolation and trade wars. The Center for Strategic and International Studies is launching a new Commission on Affirm- ing American Leadership. As co-chairs of this effort, we look forward to exploring these issues and charting a path forward for our nation. The time is right.

Frederick W. Smith is chairman and CEO of FedEx. William Brock was U.S. trade representative (USTR) under President Ronald Reagan. Charlene Barshefsky was USTR under President Bill Clinton.

Recommitting to trade

The Washington Post - 19.08.2019

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