Introduction
In "The Raging 2020s," Alec Ross explores the complex web of relationships between individuals, businesses, and governments that shape our modern world. He argues that the social contract - the unwritten rules and expectations that govern these relationships - is broken in many developed countries. This breakdown has led to a host of problems, from growing inequality to the rise of populism.
Ross takes readers on a journey through the history of social contracts, the current state of affairs, and potential solutions for the future. He examines how we got here, why it matters, and what we can do to fix it. The book offers a compelling vision for a new social contract that balances the needs and interests of all stakeholders in society.
The Importance of Social Contracts
Social contracts are the glue that holds societies together. They encompass all the written and unwritten rules that balance the rights and powers of citizens, governments, and businesses. When social contracts work well, they enable people to live and work together harmoniously. However, these contracts are not static - they evolve as societies change and new technologies emerge.
Ross explains that we're currently in a period similar to what Friedrich Engels called "Engels' Pause" during the Industrial Revolution. This is a time when the old social contract no longer fits the realities of our world, but a new one hasn't yet been established. The result is growing inequality, social unrest, and a sense that the system is rigged in favor of the powerful.
The author argues that the last major update to the American social contract happened during the Industrial Revolution of the 1800s. This led to the introduction of worker protections, antitrust laws, income tax, and other measures that helped balance the interests of different groups in society. However, since the end of the Cold War, there has been a trend towards deregulation and giving businesses more power, which has thrown things out of balance once again.
The Rise of Shareholder Capitalism
One of the key factors behind the current imbalance is the dominance of shareholder capitalism. Ross traces this idea back to economist Milton Friedman, who argued that a company's sole responsibility is to maximize profits for its shareholders. This view has become deeply entrenched in corporate culture, often at the expense of other stakeholders like employees, customers, and the environment.
To illustrate the problems with this approach, Ross uses the example of insulin production. He contrasts the altruistic actions of the scientists who discovered insulin (selling their patent for just $3) with the current situation where three companies control 90% of the insulin market and keep prices artificially high. This shows how prioritizing shareholder profits above all else can lead to harmful outcomes for society.
The author suggests that a better alternative is stakeholder capitalism, which considers the interests of all groups affected by a company's actions. He cites Patagonia as an example of a company that practices this approach, prioritizing environmental sustainability alongside profitability.
The Weakening of Government
As businesses have grown more powerful, Ross argues that governments have become weaker and less effective. He uses the example of the slow and inadequate response to Hurricane Maria in Puerto Rico to illustrate how the U.S. government has lost its ability to coordinate and distribute resources effectively in times of crisis.
This weakening of government has several causes:
- The influence of shareholder capitalism, which has led to a shrinking of government's role in society.
- The growing power of multinational corporations, which often seem more influential than nations.
- The pervasive influence of corporate lobbying, which can lead to laws that benefit businesses rather than the public.
Ross points out that while markets can solve many problems efficiently, they're not suited to addressing issues where there's no profit to be made. Only governments can ensure universal access to essential services like healthcare and transportation. Therefore, it's crucial to restore the balance of power between government and business.
The Decline of Labor Power
Another key aspect of the broken social contract is the weakening of labor unions and worker protections. Ross recounts the story of the 1936 GM strike in Flint, Michigan, as an example of how strong unions once were able to fight for workers' rights and benefits. He notes that the period of strong union influence coincided with the lowest levels of income inequality in American history.
However, union membership has declined sharply in recent decades, and many existing unions have become more focused on maintaining the status quo than fighting for new benefits. This has contributed to a massive increase in income inequality, with CEOs now earning hundreds of times more than average workers.
Ross suggests that developed countries need new ways of organizing labor to meet the challenges of the modern economy. He points to the Nordic countries as a potential model, where union federations, business associations, and the government work together to set standards for the entire economy, encouraging continuous improvement of working conditions.
Corporate Tax Avoidance
One of the most complex and troubling aspects of the current system is the way multinational corporations avoid paying their fair share of taxes. Ross explains various tax avoidance schemes using simple analogies, such as comparing transfer pricing to a pizza delivery driver artificially inflating their expenses to reduce their taxable income.
He then delves into more complex schemes like the "Double Irish with a Dutch Sandwich," which allowed Google to shift billions in profits to tax havens like Bermuda. These practices deprive governments of much-needed revenue that could be used to fund social programs and infrastructure.
Ross argues that while we can't necessarily blame companies for taking advantage of legal loopholes, it's up to governments to close these loopholes and create a fairer system. He suggests that the real culprits are countries that enable tax avoidance to boost their own economies at the expense of the global community.
Reforming the Global Tax System
To address the problem of corporate tax avoidance, Ross proposes a system of unitary taxation with formulary apportionment. While the name sounds complex, the basic idea is simple: treat multinational corporations as single entities rather than collections of affiliates, and tax their total profit based on where their revenues and costs are actually generated.
This system would make it much harder for companies to shift profits to low-tax jurisdictions, as they would be taxed based on their real economic activity in each country. It would also end the "race to the bottom" where countries compete to offer the lowest tax rates to attract businesses.
Ross acknowledges that companies would still find ways to game the system, but argues that it would be far less damaging than the current situation. He emphasizes that implementing such a system would require international cooperation, but could result in a much fairer distribution of tax revenue globally.
The Importance of Digital Power
As technology becomes increasingly central to both economic and military power, Ross argues that governments need to develop stronger partnerships with tech companies. He uses the example of Chris Lynch, a tech industry veteran who initially doubted government's effectiveness but changed his mind after working on digital projects for the U.S. military.
Ross points out that while the U.S. still has a huge advantage in traditional military power, it lags behind in cyberwarfare capabilities. This is largely because the leading developers of new digital tools are in the private sector, not working for the government.
The author emphasizes the destructive potential of digital weapons and technologies, from disrupting nuclear reactors to identifying individuals in crowds using AI. He argues that it's essential for governments to work closely with tech companies to shape policies and influence how new technologies are built.
Ross also highlights the rise of China as a major player in the digital realm, warning that its brand of "techno-authoritarianism" poses a threat to liberal democracies worldwide. He suggests that if China wins the race to develop advanced AI, it could lead to a dystopian future reminiscent of George Orwell's "1984."
Open vs. Closed Social Contracts
As the world grapples with these challenges, Ross argues that countries must choose between two models of social contracts: open and closed.
The closed model, exemplified by China, offers economic growth and stability in exchange for limited individual freedom and political control. In this system, the government tightly regulates society and discourages dissent, but may be able to implement changes quickly and amass geopolitical power.
The open model, best represented by the Nordic countries, provides strong social safety nets and individual freedoms. Citizens in these countries enjoy high-quality healthcare, education, and social services, funded by high taxes that most are willing to pay because the benefits are universal. This model also allows for freedom of speech, press, and assembly.
Ross argues that developing countries, particularly in Africa (where the population is expected to triple by 2100), now stand at a crossroads between these two models. The choices they make will have profound implications for the future of global democracy and human rights.
The Need for a New Social Contract
Throughout the book, Ross makes a compelling case for the urgent need to update our social contract for the 21st century. He argues that the current system, which prioritizes shareholder profits above all else and allows unchecked corporate power, is unsustainable and harmful to society as a whole.
To address these issues, Ross proposes several key changes:
Shifting from shareholder capitalism to stakeholder capitalism, where companies consider the interests of all groups affected by their actions.
Reforming the global tax system to prevent corporate tax avoidance and ensure that companies pay their fair share.
Empowering workers through new forms of labor organization that can effectively advocate for their interests in the modern economy.
Developing stronger partnerships between government and tech companies to harness digital power for the public good.
Encouraging developing countries to adopt open social contracts that balance economic growth with individual freedoms and strong social safety nets.
Ross emphasizes that implementing these changes will require cooperation between governments, businesses, and citizens. He argues that by working together to create a more balanced and equitable system, we can build a future that benefits everyone, not just a privileged few.
The Role of Business in Society
One of the central themes in "The Raging 2020s" is the evolving role of business in society. Ross argues that the current model, where businesses focus solely on maximizing shareholder value, is outdated and harmful. He provides numerous examples of how this narrow focus has led to negative outcomes, from skyrocketing drug prices to environmental degradation.
The author makes a strong case for stakeholder capitalism, where companies consider the interests of all groups affected by their actions. This includes employees, customers, suppliers, local communities, and the environment. Ross argues that this approach not only leads to better outcomes for society as a whole but can also result in more sustainable long-term success for businesses.
He cites examples of companies that have successfully adopted this model, such as Patagonia, which has made environmental sustainability a core part of its business strategy. Ross suggests that as consumers become more socially conscious, companies that prioritize stakeholder interests may gain a competitive advantage.
However, Ross also acknowledges that changing deeply ingrained business practices won't be easy. It will require a shift in mindset among business leaders, investors, and policymakers. He argues that governments have a role to play in incentivizing this change through regulations and tax policies that reward companies for considering broader stakeholder interests.
The Future of Work
Another crucial aspect of the social contract that Ross explores is the changing nature of work. He discusses how technological advancements, particularly in artificial intelligence and automation, are reshaping the job market and creating new challenges for workers and policymakers alike.
Ross argues that the traditional model of full-time, long-term employment with a single company is becoming increasingly rare. Instead, we're seeing a rise in gig economy jobs, freelance work, and short-term contracts. While this can offer flexibility for some workers, it also often comes with less job security and fewer benefits.
The author suggests that our social safety nets and labor laws need to be updated to reflect these new realities. He proposes ideas such as portable benefits that aren't tied to a single employer, and new forms of worker organization that can represent the interests of gig economy workers and freelancers.
Ross also discusses the importance of education and lifelong learning in preparing workers for the jobs of the future. He argues that governments and businesses need to invest in retraining programs and continuous education to help workers adapt to rapidly changing skill requirements.
The Role of Government in the Digital Age
As technology becomes increasingly central to our lives and economies, Ross argues that governments need to adapt and develop new capabilities. He points out that many government agencies are woefully behind the private sector in terms of technological sophistication, which hampers their ability to regulate effectively and provide services efficiently.
The author makes a strong case for increased collaboration between government and the tech industry. He argues that governments need to attract more tech talent and develop in-house capabilities to understand and regulate new technologies effectively. At the same time, he suggests that tech companies have a responsibility to work with governments to ensure that their innovations benefit society as a whole.
Ross also discusses the challenges of regulating global tech giants that often have more economic power than many countries. He proposes new approaches to antitrust regulation that take into account the unique characteristics of digital platforms and data-driven businesses.
The Geopolitics of Technology
One of the most thought-provoking sections of the book deals with the geopolitical implications of technological advancement. Ross argues that we're entering a new era where digital capabilities are becoming as important as traditional military might in determining global power dynamics.
He pays particular attention to the growing technological rivalry between the United States and China. Ross warns that China's model of "techno-authoritarianism," which combines state control with advanced surveillance and AI technologies, poses a significant challenge to liberal democracies.
The author argues that Western countries need to invest heavily in research and development, particularly in areas like artificial intelligence, to maintain their technological edge. However, he also emphasizes the importance of developing these technologies in line with democratic values and respect for individual privacy.
Ross suggests that the choices countries make about their technological development and regulation will have profound implications for the future of democracy and human rights globally. He urges democratic countries to work together to set global standards for the ethical development and use of new technologies.
The Importance of Global Cooperation
Throughout the book, Ross emphasizes that many of the challenges we face - from tax avoidance to climate change to technological regulation - require global cooperation to solve effectively. He argues that the current trend towards nationalism and isolationism in many countries is counterproductive and potentially dangerous.
The author makes a compelling case for renewed commitment to international institutions and agreements. He suggests that we need new forms of global governance to address 21st-century challenges, particularly in areas like digital regulation and taxation of multinational corporations.
At the same time, Ross acknowledges the legitimate concerns that have fueled populist movements in many countries. He argues that any new global arrangements must be designed to benefit ordinary citizens, not just elites, and must respect national sovereignty while addressing transnational issues.
The Path Forward
In the concluding sections of "The Raging 2020s," Ross outlines his vision for a new social contract that can address the challenges of the 21st century. He emphasizes that this will require a collaborative effort involving governments, businesses, and citizens.
Key elements of this new social contract include:
A shift towards stakeholder capitalism that balances the interests of all groups affected by business decisions.
Updated labor laws and social safety nets that reflect the changing nature of work.
A reformed global tax system that prevents corporate tax avoidance and ensures fair contributions from multinational companies.
Stronger partnerships between government and the tech industry to harness digital innovations for the public good.
New forms of global cooperation to address transnational challenges while respecting national sovereignty.
A commitment to open social contracts that balance economic growth with individual freedoms and strong social protections.
Ross argues that implementing these changes will not be easy, but is essential for creating a more equitable and sustainable future. He calls on readers to engage with these issues and push for change in their own spheres of influence.
Conclusion
"The Raging 2020s" offers a comprehensive and thought-provoking analysis of the challenges facing modern societies. Alec Ross makes a compelling case that our current social contract is broken and in urgent need of reform.
By examining the complex relationships between individuals, businesses, and governments, Ross provides valuable insights into how we got to our current situation and what we can do to improve it. He offers a vision for a new social contract that balances the needs of all stakeholders in society, from workers and consumers to businesses and governments.
While the challenges Ross outlines are daunting, his book is ultimately hopeful. He argues that by working together and making conscious choices about the kind of society we want to create, we can build a future that is more equitable, sustainable, and prosperous for all.
"The Raging 2020s" is an essential read for anyone interested in understanding the forces shaping our world and how we can work towards a better future. It challenges readers to think critically about the systems we live in and to take an active role in shaping the social contract for the 21st century.