The Innovation Trap

The US economy faces a number of challenges—among them a lack of job creation and an ever-growing trade deficit. Many policy-makers believe that encouraging business innovation is the best response to these particular challenges. Sounds plausible but experience suggests otherwise.

The best example of why simply encouraging business innovation is not the answer for our employment and trade problems is Apple and its iPhone. 

The iPhone was introduced in 2007 and has been incredibly successful.  U.S. sales soared from 3 million units in 2007 to over 11 million in 2009.  Global sales topped 25 million in 2009.

While the iPhone is designed and marketed by Apple, almost all the phone’s components are produced by foreign companies operating outside the United States.  These components are then shipped to China where Foxconn, a Taiwanese company, oversees their assembly and their export to the United States and other countries.  As a result, the iPhone generates few jobs in the United States.  

Two economists, in an Asian Development Bank working paper, examined the iPhone 3G production process in some detail.  The table below, taken from their study, highlights the main suppliers and the costs of the components they produce for a single phone.  Most of the components are supplied by Japanese, South Korean and German firms, although there are also some U.S. suppliers (although who knows where they actually produce their compnents). 

The total component cost of an iPhone in 2009 was $172.46.    Workers in China assemble the iPhone, but because their wages are low the assembly cost per phone (labeled manufacturing costs in the table below) is quite small, only $6.50 a phone.  The total production cost per phone is $178.96.

Because the iPhone is assembled in China all sales in the U.S. mean an increase in Chinese exports (even though the phone is largely composed of inputs produced outside of China) and an increase in U.S. imports.  In 2009, China exported more than $2 billion worth of iPhones to the United States.  Thus, the iPhone, because of the Apple’s production strategy, also adds to the U.S. trade deficit.

Apple is not alone in embracing China as its production base.  China is now the world’s largest exporter of manufactured goods. And, as the chart below shows, the share of Chinese exports that are labled high technology is growing.  This trend has encouraged many analysts to claim that the U.S. is now locked in fierce economic competition with China. 

However, as we see next, more than 80% of China’s high technology exports are actually produced by foreign companies operating in China.  Moreover, these foreign companies have significantly increased their control over this production.  In 2002 foreign owned firms that were 100% foreign owned (which means that they had no Chinese partner) accounted for only 55% of Chinese high technology exports.  In 2009 they accounted for 68%.   

Why do so many transnational corporations choose to locate production in China?  The answer is obvious: profits. Apple again serves as a good example.  The table below, taken from the Asian Development Bank working paper cited above, shows Apple’s profit margin on the iPhone.  In 2009 it was a whopping big 64%.

Struck by the size of Apple’s profit margin, the authors of the Asian Development working paper considered whether the iPhone could reasonably be made in the United States.  As they note:

The role of the PRC in the production chain of iPhones is primarily the assembly of all parts and components into the final product for re-shipment abroad. The skills and equipment required for the assembly are very basic and there is no doubt that American workers and firms are capable of assembling iPhones in the United States. If all iPhones were assembled in the United States, the US$1.9 billion trade deficit in iPhone trade with PRC would not exist. Moreover, 11.4 million units of iPhone sold in the non-U.S. market in 2009 would add US$5.7 billion to US exports.

For the sake of discussion, they assumed that assembly line wages in the United States are ten times higher than in China.   Given that Chinese production workers earn roughly $1 an hour, that is not an unreasonable assumption.  The higher wages would mean that the total assembly cost per phone would rise to $65 and the total manufacturing cost would approach $238.  If Apple continued to sell the iPhone for $500, the company would still earn a very respectable 50% profit margin.  

Moreover, as the authors point out: 

In this hypothetical scenario, iPhones, the high-tech product invented by the U.S. company, would contribute to U.S. exports and the reduction of the U.S. trade deficit, not only with the PRC, but also with the rest of world. More importantly, Apple created jobs for U.S. low skilled workers; those who could not be the software engineers needed by Apple. Giving up a small portion of profits and sharing them with low skilled U.S. workers by Apple would be a more effective way [than depreciation of the exchange rate] to reduce the U.S. trade deficit and create jobs in the United States.

Of course, shifting production to the United States would mean that Apple would earn less money and there is little reason to believe that the company is prepared to sacrifice its profits for the good of the country.  If we want to tackle our employment and trade problems we are going to have to do more than promote more attractive conditions for business.  

Market Outcomes And Political Power

The media likes to talk about markets as if they were just a force of nature.  In fact, markets and their outcomes are largely shaped by political power.  In a capitalist system like ours, that power is largely used to advance the interests of those who own and run our dominant corporations. 

Thanks to Bloomberg News we have yet another example of this reality.  In brief, as a result of Congressional and media pressure the Federal Reserve was recently forced to reveal its lending activity for the period August 2007 through April 2010.   Bloomberg News examined these Federal Reserve records and found that the Fed secretly provided selected banks, brokerage houses, and even non-financial firms (such as General Electric and Ford) with at least $1.2 trillion in loans, often with minimal collateral required and at below market interest rates.

This money was given through more than a dozen lending programs.  Many firms tapped multiple programs through multiple subsidiaries. Bloomberg arrived at its total by focusing on the seven largest programs, which included the Fed’s discount window and six temporary lending facilities (the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; the Commercial Paper Funding Facility; the Primary Dealer Credit Facility; the Term Auction Facility; the Term Securities Lending Facility; and so-called single- tranche open market operations.

If you like visuals, here is a 5 minute video that provides a good summary of what Bloomberg gleaned from its examination.

Bloomberg also has an interactive site that allows you to chart who got what and over what period.    

Some of the highlights are as follows:

The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion . . .

Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG, which got $77.2 billion. . . .

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The Federal Reserve fiercely resisted making its records public, arguing that doing so would stigmatize those institutions that received loans.  A group of the largest commercial banks actually petitioned the Supreme Court in an unsuccessful effort to keep the loan information secret.  

Perhaps one reason that the Federal Reserve and the banks were reluctant to have these records made public is that they raise significant questions of conflict of interest.  According to a statement by Vermont Senator Bernie Sanders,

the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds.  One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

Another reason may be that the Federal Reserve didn’t want it known that it was deviating from its past practice of requiring borrowers to provide secure collateral, which was normally either Treasuries or corporate bonds with the highest credit rating, and never stocks.  For example:

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25 percent of the collateral was foreign-denominated.

Moreover, as Bloomberg News also reported, many Fed loans were made at below market interest.

On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.  

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

These loans were absolutely critical to the survival of our leading companies.  A case in point:

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

These loans are also a key reason that our post-Great Recession economy remains largely unchanged in structure.  In other words, it was the exercise of political power, rather than so-called market dynamics or efficiencies, that explains the financial industry’s continuing profitability and economic dominance.

Now imagine if we had a state that engaged in transparent planning and was committed to using our significant public resources to reshape our economy in the public interest.  As we have seen, state planning and intervention in economic activity already goes on.  Unfortunately, it happens behind closed doors and for the benefit of a small minority. It doesn’t have to be that way.

The Economics of Politics

The mainstream media works hard to convince us that Republicans and Democrats are locked in heated battle, with each side advocating dramatically different economic policies.  Although there are differences between the two sides, members of both parties generally share common ground in opposing any fundamental changes to the workings of our economy.

A recent International Monetary Fund report on the U.S. economy sheds light on why this is so.  The report includes the following four color-coded charts which compare economic recoveries (including our current one) according to various criteria.

As you can see from the red boxes in the first chart (the one titled “Real GDP and components”), our last two recoveries have been quite weak compared with previous recoveries in terms of growth in GDP, personal consumption, and investment in nonresidential structures.  This indicates a growing problem with our economic fundamentals.

 The red boxes in the second chart (“Households and employment”) indicate that our last two recoveries have also not been kind to working people as measured by the growth in nonfarm payrolls, unemployment, and disposable income.

However, things look quite different in the last two charts. The green boxes in the third chart (“Business sector”) make clear that the last two expansions have generally been good for nonfinancial corporations.  And the dark green boxes in the fourth chart (“Financial”) highlight the enormous gains made by financial corporations in the last two expansions, and especially the current one.

The take-away from these charts is that business leaders experience our recent recoveries very differently than do the great majority of people.  Despite the fact that growing numbers of workers find it hard to distinguish our expansions from our recessions, business profits keep climbing.  And that is what matters to business. Not surprisingly, then, our corporate leaders are lobbying our political leaders hard not to change existing economic arrangements.  If some austerity is needed to maintain stability–so be it.  And, this lobbying has proven successful.

The connection between deteriorating economic and social conditions and high corporate profitability deserves careful study as does the question of whether this is a stable relationship. Regardless, these charts provide important insight into our national policy-making nexus.  As long as our large corporations are prospering we should not expect our political process to produce meaningful change.  The problem isnt a lack of good ideas for how to strengthen our economy and generate jobs, it is the lack of interest on the part of our elected leaders to seriously consider them.  It appears that meaningful economic change will have to await either a further unraveling of our economic and social infrastructure or the rise of a powerful social movement with a new economic vision.

A Shaky World Economy

The U.S. economy is in trouble and that means trouble for the world economy.

According to the United Nations Conference on Trade and Development’s Trade and Development Report, 2010, “Buoyant consumer demand in the United States was the main driver of global economic growth for many years in the run-up to the current global economic crisis.”

Before the crisis, U.S. household consumption accounted for approximately 16 percent of total global output, with imports comprising a significant share and playing a critical role in supporting growth in other countries.  In fact, “as a result of global production sharing, United States consumer spending increas[ed] global economic activities in many indirect ways as well (e.g. business investments in countries such as Germany and Japan to produce machinery for export to China and its use there for the manufacture of exports to the United States).”

In short, a significant decline in U.S. spending can be expected to have a major impact on world growth, with serious blow-back for the United States.

There are those who argue that things are not so dire, that other countries are capable of stepping up their spending to compensate for any decline in U.S. consumption. However, the evidence suggests otherwise.  As the chart below (from the Trade and Development Report) reveals, consumption spending in the U.S. is far greater than in any other country; it is even greater than Chinese, German, and Japanese consumption combined. 

Moreover, there is little reason to believe that the Chinese, German, or Japanese governments are interested in boosting consumer spending in their respective countries.  All three governments continue to pursue export-led growth strategies that are underpinned by policies designed to suppress wage growth.  Such policies restrict rather than encourage national consumption. 

For example, China is the world’s fastest growing major economy and often viewed as a potential alternative growth pole to the United States.  Yet, as the following chart from the Economist magazine reveals, the country’s growth has brought few benefits to the majority of Chinese workers.

 

According to the U.S. Bureau of Labor Statistics, despite several years of wage increases, Chinese manufacturing workers still only earn an average of  $1.36 per hour (including all benefits).  In relative terms, Chinese hourly labor compensation is roughly 4 percent of that in the United States.   It even remains considerably below that in Mexico.  

Trends in Germany, the other high-flying major economy, are rather similar. As the chart below shows, the share of German GDP going to its workers has been declining for over a decade.  It is now considerably below its 1995 level.  In fact, the German government’s success in driving down German labor costs is one of the main causes of Europe’s current debt problems–other European countries have been unable to match Germany’s cost advantage, leaving them with growing trade deficits and foreign debt (largely owed to German banks).    

The Japanese economy, which remains in stagnation, is definitely unable to play a significant role in supporting world growth.  Moreover, as we see below, much like in the United States, China, and Germany, workers in Japan continue to produce more per hour while suffering real wage declines. 

For a number of years, world growth was sustained by ever greater debt-driven U.S. consumer spending.  That driver now appears exhausted and U.S. political and economic leaders are pushing hard for austerity.  If they get their way, the repercussions will be serious for workers everywhere. 

Our goal should not be a return to the unbalanced growth of the past but new, more stable and equitable world-wide patterns of production and consumption.  Achieving that outcome will not be easy, especially since as the United Nations Conference on Trade and Development’s World Investment Report 2011 points out, transnational corporations (including their affiliates) currently account for one-fourth of global GDP.  Their affiliates alone produce more than 10 percent of global GDP and one-third of world exports.  And, these figures do not include the activities of many national firms that produce according to terms specified by these transnational corporations.   These dominant firms have a big stake in maintaining existing structures of production and trade regardless of the social costs and they exercise considerable political influence in all the countries in which they operate. 

Social Security Is In Danger

Social security is in danger.  The recently approved deficit reduction plan includes the establishment of a Congressional super committee that is supposed to propose ways to achieve $1.2-1.5 trillion in deficit reduction over the next ten years.  Everything is on the table, including Social Security.  It must complete its work by November 23, 2011.

While the committee could decide to spare Social Security, the odds are great that its final proposal will include significant benefit cuts.  Most Republicans have long sought to dismantle the program and President Obama is willing to accept a reduction in Social Security benefits for the sake of deficit reduction.  Standard and Poor’s downgrade of the federal government’s credit rating only adds to the pressure.  The rating agency explained its decision as follows:

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.

Significantly, there has been little media discussion of the importance of Social Security to those over 65.  According to the Economic Policy Institute:    

The average annual Social Security retirement benefit in 2009 was $13,406.40, slightly above the $10,289 federal poverty line for individuals age 65 and older, but less than the minimum wage. While modest in size, Social Security benefits comprise a substantial share of household income for most elderly recipients.

The chart below shows that the poorest 40% of households with a head 65 years or older rely on social security for more than 80% of their income.  Even the middle 20% depend on social security for more than 60% of their income.  In sum, cutting social security benefits will hit hard at the great majority of seniors.

  

If the super committee does decide to go after social security, it will likely do so by proposing that social security benefits be adjusted using a new measure of inflation.  Right now benefits are adjusted using the CPI-W, which measures the change in prices of goods and services commonly consumed by urban wage earners and clerical workers.  The new measure is called the Chained Consumer Price Index for all Urban Consumers.

This all sounds very technical, but the basic idea is simple.  The CPI-W measures the increase in the cost of a relatively fixed bundle of goods and services.  The Chained Consumer Price Index assumes that consumers continually adjust their purchases, giving up those goods and services that are expensive in favor of cheaper substitutes. The chained index would produce a lower rate of inflation because the goods and services whose prices are rising the fastest would be dropped from the index or given lower weight.  The result would be a smaller annual cost of living adjustment for those receiving Social Security, thereby cutting Social Security outlays.

Those who support using a chained index argue that it is a more accurate measure of inflation than the CPI-W.  In reality, it just masks the fact that people are unable to buy the goods and services they once enjoyed.  If we are really concerned about accuracy, we could use the CPI-E, which measures the change in prices of those goods and services commonly consumed by seniors.  The CPI-E has risen much faster than the CPI-W, demonstrating that current cost of living adjustments are actually too low, not too high. 

The following chart should leave no doubt as to what is at stake in this “technical” adjustment.  A medium earner retiring this year at age 65 would receive $15,132.  The retiree’s real (inflation adjusted) earnings would remain constant over time assuming that Social Security benefits were adjusted using the existing CPI-W.  If benefits were adjusted using the proposed Chained CPI, the retiree’s real earnings would steadily decline, falling to $13,740 at age 95.  By comparison, benefits would grow to $16,131 if the CPI-E were used. 

Of course, this is all about deficit reduction, and the experts have calculated that adopting the Chained CPI would lower federal spending by some $300 billion over the next ten years.    

Perhaps the biggest outrage is that Social Security shouldn’t even be part of the deficit reduction discussion.  It is a self-financing system, one with a large surplus.  According to many analysts, the system will not have sufficient funds to meet its obligations in 2037.  Economists can’t predict what will happen with any confidence over the next year and yet we are close to weakening a vital social program because we need deficit reduction now and/or Social Security might have trouble 25 years in the future. 

In fact, the claim that the system might have trouble in 2037 is based on very extreme and unlikely assumptions about future economic activity.  Even if we accept these extreme assumptions we don’t have much of a crisis.  Currently, Social Security taxes are paid on all labor income up to $106,800.  Earnings above that amount are not taxed.   Why is this important?  As the Wall Street Journal explained in a recent article titled “Pay of Top Earners Erodes Social Security”:

Social Security Administration actuaries estimate removing the earnings ceiling could eliminate the trust fund’s deficit altogether for the next 75 years, or nearly eliminate it if credit toward benefits was provided for the additional taxable earnings.

In sum, those who want to shrink/privatize Social Security are trying to take advantage of our alleged debt crisis.  Of course, they will call what they are doing a technical fix to save both the economy and Social Security.  Hopefully no one will believe them.

The Deficit Deal: We Got Taken

Congress has finally agreed on a deficit reduction plan that President Obama supports.  As a result, the debt ceiling is being lifted, which means that the Treasury can once again borrow to meet its financial obligations. 

Avoiding a debt default is a good thing.  However, the agreement is bad and even more importantly the debate itself has reinforced understandings of our economy that are destructive of majority interests.

The media presented the deficit reduction negotiations as a battle between two opposing sides.  President Obama, who wanted to achieve deficit reduction through a combination of public spending cuts and tax increases, anchored one side.  The House Republicans, who would only accept spending cuts, anchored the other.  We were encouraged to cheer for the side that we thought best represented our interests. 

Unfortunately, there was actually little difference between the two sides in terms of the way they engaged and debated the relevant issues. Both sides agreed that we face a major debt crisis.  Both sides agreed that out-of-control social programs are the main driver of our deficit and debt problems.  And both sides agreed that the less government involvement in the economy the better.

The unanimity is especially striking since all three positions are wrong.  We do not face a major debt crisis, social spending is not driving our deficits and debt, and we need more active government intervention in the economy not less to solve our economic problems.

Before discussing these issues it is important to highlight the broad terms of the deficit reduction agreement. The first step is limited to spending cuts. More specifically, discretionary spending is to be reduced by $900 billion over the next ten years.  Approximately 35% of the reduction will come from security related budgets (military and homeland security), with the rest coming from non-security discretionary budgets (infrastructure, clean energy, research, education, as well as programs that help low income people with child care, housing, community service etc.).  In exchange for these budget cuts the Congress has agreed to raise the debt ceiling by $1 trillion. 

The agreement also established a 12 person committee (with 6 Democrats and 6 Republicans) to recommend ways to reduce future deficits by another $1.2-1.5 trillion.  Its recommendations must be made by November 23, 2011 and they can include cuts to every social program (including Social Security, Medicare and Medicaid), as well as tax increases.    

Congress has to vote on the committee’s package of recommendations by December 23, 2011, up or down.  If Congress approves them they will be implemented.  If Congress does not approve them, automatic cuts of $1.2 trillion will be made; 50% of the cuts must come from security budgets and the other 50% must come from non-security discretionary budgets and Medicare.  Regardless of how Congress votes on the recommendations, it must also vote on whether to approve a Balanced Budget Amendment to the Constitution.  Once this vote is taken, the debt ceiling will be raised again by an amount slightly smaller than the deficit reduction.  

Check out the following flowchart from the New York Times if you want a more complete picture of the process.  If you are content with the above summary skip to the text below the flowchart for some analysis.

  

Many commentators, trying to explain why President Obama embraced an agreement so heavily weighted towards spending cuts (potentially including cuts in Social Security benefits), claim that he was outmaneuvered by Republicans.  In reality, President Obama has long supported deficit reduction along the lines of this agreement. 

As early as March 2009, his staff told David Brooks, a columnist for the New York Times, that the President was “extremely committed to entitlement reform and is plotting politically feasible ways to reduce Social Security as well as health spending.”  In fact, according to Brooks:  

The White House has produced a chart showing nondefense discretionary spending as a share of GDP.  That’s spending for education, welfare, and all the stuff that Democrats love.  Since 1985, this spending as hovered around 3.7% of GDP. . . . The White House claims that it is going to reduce this spending to 3.1%, lower than at any time in any recent Republican administration.  I was invited to hang this chart on my wall and judge them by how well they meet these targets.

The White House Fact Sheet issued to explain why the President supports the recently negotiated deficit reduction agreement reveals the consistency in Obama’s position.  It notes favorably that this agreement “puts us on track to reduce non-defense discretionary spending to its lowest level since Dwight Eisenhower was President.”

Those who favor reducing spending on government programs generally argue that we have no choice because our public spending and national debt are out of control, threatening our economic future.  But, the data says otherwise.   

The chart below, from the economist Menzie Chinn at Econbrowser, shows the movement in the ratio of publically held debt to GDP over the period 1970 to 2011; the area in yellow marks the Obama administration. While this ratio has indeed grown rapidly, it remains well below the 100% level that most economists take to be the warning level.  In fact, according to Congressional Budget Office predictions, we are unlikely to reach such a level for decades even if we maintain our current spending and revenue patterns.

The sharp growth in the ratio over the last few years strongly suggests that our current high deficits are largely due to recent developments, in particular the 2001 and 2003 Bush tax cuts, the wars in Iraq and Afghanistan, and the Great Recession. Their contribution can be seen in the chart below from the New York Times.

The effects of the tax cuts and economic crisis on our deficits (and by extension debt) are especially visible in the following chart (again from Menzie Chinn), which plots yearly changes in federal spending and federal revenue as a percentage of GDP (the shaded areas mark periods of recession).   As we can see, the recent deficit explosion was initially driven more by declining revenues than out of control spending.  Attempts to close the budget gap solely or even primarily through spending cuts, especially of social programs, is bound to fail.

 

Tragically, the debate over how best to reduce the deficit has encouraged people to blame social spending for our large deficits and those large deficits for our current economic problems.  As a result, demands for real structural change in the way our economy operates are largely dismissed as irrelevant.

Recent economic data should be focusing our attention on the dangers of a new recession.  According to the Commerce Department our economy grew at an annual rate of just 1.3% in second quarter of this year, following a first quarter in which the economy grew by only 0.3%.  These are incredibly slow rates of growth for an economy recovering from a major recession.  To put these numbers in perspective, Dean Baker notes that we need growth of over 2.5% to keep our already high unemployment rate from growing.

Cutting spending during a period of economic stagnation, especially on infrastructure, research, and social programs, is a recipe for greater hardship.  In fact, such a policy will likely further weaken our economy, leading to greater deficits.  This is what happened in the UK, Ireland, and Greece—countries with weak economies that tried to solve their deficit problems by slashing public spending.

We need more active government intervention, which means more spending to redirect and restructure the economy; a new, more progressive tax structure; and a major change in our foreign policy, if we are going to solve our economic problems.  Unfortunately for now we don’t have a movement powerful enough to ensure our side has a player in the struggles that set our political agenda.