FACT: Haiti exported half a billion clothing articles to the U.S. last year.
THE NUMBERS: Haitian clothing exports to U.S. (2021) –
~10% of GDP
~20% of wage-paying jobs
WHAT THEY MEAN:
A vivid passage from Pamela White, an Obama-era U.S. Ambassador to Haiti, testifying to the House Foreign Affairs Committee on life in Port-au-Prince in late September:
“No legitimate government, no judiciary, no parliament, and a weak police force incapable of stopping the gangs that now rule over 60% of the capital. … Haitians are living in hellish conditions — all social services were terminated months ago. Port-au-Prince has the highest number of kidnappings in the world.”
And a very careful State Department comment last Friday:
“[T]he question of a security presence is obviously an area where we are treading very carefully to make sure that we are doing the right things and not doing the things in the past that have not worked…”
In such circumstances, neither outsiders nor Haitians have easy ways to find the “right things”. A relatively easy place to start, though, is to identify and preserve things that have worked. With this in mind, here is some opaque stuff about clothing trade, from the U.S. Commerce Department’s Office of Textiles and Apparel:
“Unlimited duty-free treatment for various apparel products [from Haiti], with certain restrictions regarding the source of the yarns and fabrics used in the apparel, and duty-free treatment for certain apparel products up to certain annual quota levels, known as trade preference levels (TPLs).”
The programs Commerce describes, designed in the late 2000s and known as “HOPE” and “HELP,”* mean in practice that a Haitian-made pullover shirt normally subject to tariffs of 16.5% (if cotton) and 32% (if polyester) is not only (a) duty-free but (b) in contrast to the intricate rules imposed on T-shirts arriving under free trade agreements, can be made of fabric from whatever country makes most economic sense.
The result is that each year up to this summer, Haiti’s clothing business has been a success and a factor providing some degree of economic stability. In brief, 29 factories in three industrial parks — Port-au-Prince, Cap Haitien, and Ouanaminthe — have been shipping about 475 million articles of clothing valued at $1 billion (279 million T-shirts, placing Haiti 6th in the world as a supplier to the U.S. last year, along with 93 million of the pullovers and sweaters, 730,000 track suits, 36 million pieces of women’s and girls’ underwear, 2 million face-masks, etc) to Americans via a 40-hour boat ride to the Port of Miami. At the individual level, these factories employ about 60,000 workers, which is about a fifth of all the formal-sector wage-paying jobs in Haiti. These start at a minimum wage of about $2000 per year (as against a national per capita income around $1,650 before this year’s crises). On the “macro” scale, clothing exports account for 6.8% of Haiti’s $20 billion GDP,** a figure roughly comparable in American terms to the Bureau of Economic Analysis’ combined figures for the U.S. agricultural, entertainment, automotive, air freight, and energy industries.
The clothing factories are pretty durable, equipped with their own generators and security services. After the 2010 earthquake, for example, they reopened in hours. But two of the three parks are closed; last month gangs began blocking factory-to-port roads, depriving the factories of fabric, fuels, or replacement parts, and making them unable to move finished products out to their customers. Looming up in 2025 is the statutory end to HOPE & HELP tariff waivers and TPLs. The combination of an immediate and indefinite interruption of trade, and the programs’ limited term, raises the prospect that this until-now healthy part of the Haitian economy will not recover from this crisis, and one of the ‘things that work’ will not return.
In these circumstances, whatever unpleasant security policy steps the outside world — the United Nations Security Council, the U.S./France/Brazil/Spain/Germany/EU “Core Group”, or something else — may take to stabilize the situation and restore public services will likely prove harder to sustain. Which is to say that Congress, thinking about possible trade bills this coming December, can do something very useful and valuable by extending, ideally permanently, the HOPE and HELP programs.
* Acronyms for “Haitian Hemispheric Opportunity through Partnership Encouragement” and “Haitian Economic Lift Program.”
** Using a 2021 World Bank estimate; link below. Take this figure as a well-educated WB guess, given the scarcity of statistics.
FURTHER READINGS:
Perspectives:
Rep. Greg Meeks chairs September’s0 House Foreign Affairs Committee hearing, with testimony and video.
U.N. Secretary-General Guterres proposes a military mission last Thursday.
A very careful State Department response to a reporter’s question on this — “[T]he question of a security presence is obviously an area where we are treading very carefully to make sure that we are doing the right things and not doing the things in the past that have not worked…”
… and also from State, a grim advisory for visitors to Port-au-Prince.
HOPE and HELP:
Commerce Department’s Office of Textiles and Apparel “explains” HOPE/HELP rules.
Florida Reps. Frederica Wilson and Elvira Salazar propose extending the programs.
And some context on garment-sector jobs:
The World Bank’s databases say that before this year’s crises, Haiti’s labor force totaled about 5.1 million, with an unemployment rate of 15.7%. “In this case, we would expect about 760,000 unemployed workers and about 4.3 million with wage-paying or salaried jobs.
“Unemployment,” though, is a labor-market term designed for wealthy countries in which workers typically have wage-paying jobs subject to national laws and taxes. Concepts and terminology like these aren’t easily applicable to least-developed country realities. An actual on-the-ground WB report from 2021 guesses that 86% of ‘employed’ Haitian workers, or about 4 million people, were in the “informal sector” — that is, doing irregular and spottily paid work in seasonal harvesting, maid and gardening work, occasional jobs on construction sites, and so on. This implies that a total of about 500,000 wage-paying jobs, such as those in the garment industry, which offer health and safety inspection, minimum wage laws, and so on.
The World Bank’s look at Haiti’s pre-COVID, pre-“gang era” private-sector economy.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
Election seasons always feature exaggerated divisions, with candidates drawing bright lines between themselves and opponents. But lasting problems come when discourse devolves into false choices between important shared goals. Improving U.S. energy security and preventing catastrophic climate change are issues sometimes falsely opposed during election cycles, when there is little reason that they should be in competition.
For the last decade, during a period of relatively stable energy prices, public discussion has focused primarily on climate risk, for good reason. But as Americans deal with higher energy prices and Europe faces a full-blown energy supply crisis, it’s clear that sustainability and security are intertwined goals. Russia’s weaponization of energy and its impacts on EU climate ambitions provide the starkest example of the interdependency of climate, costs and security.
The results of the 2021 American Community Survey (ACS) were recently released, providing important information about the causes of the digital divide and how to fix it. The ACS asks a variety of internet-related questions `including whether the household subscribes to fixed broadband such as fiber, cable, or DSL. According to the ACS, 75% of households, and 82% of individuals have fixed broadband subscriptions. To put it another way, 25% of households and 18% of individuals do not have access to the internet through fixed broadband. This is an unacceptably high number.
On the other hand, the FCC’s broadband deployment data shows that as of June 2021, fixed wired broadband of at least 25/3 (25 Mbps download and 3 Mbps upload) is available to 94.3% of the American population. Or to put it the other way, only 5.7% of the American population does not have fixed wired internet of at least 25/3 bandwidth available. If we add in fixed wireless, the “unavailability” percentage goes down to 2.4%. (We are using ‘access’ to mean actually signed up for broadband services, and ‘available’ to mean that fixed broadband subscriptions are locally available for purchase).
This difference—between 25% of households and 18% of individuals without fixed wired internet access, and the 5.7% of the population without fixed wired internet availability—can be called the adoption gap. ‘Adoption’ refers to the willingness, or lack of willingness, of households and individuals to sign up for broadband when it is available.
It used to be more appropriate to call it the affordability/adoption gap, but for several reasons price has become a much less important issue. For one the Affordable Connectivity Program (ACP)—a permanent program that replaces the temporary Emergency Broadband Benefit program–provides a $30/month subsidy for eligible low-income families and individuals, which includes anyone who in a household earning less than 200% of the federal poverty guidelines, or participating in any of a number of assistance programs such as SNAP or Medicaid. And since many providers now offer $30/month basic internet plans, the cost of getting online has effectively fallen to zero for many low-income households as long as the ACP funding holds out.
In addition, government data shows a substantial decline in the price of internet access in recent years, even without subsidies. For example, the BLS reports that the producer price of residential internet access has fallen by almost 10% over the past five years. This decline in broadband prices has continued even through the inflationary surge of the past year. As the result of all of these factors, the latest NTIA Internet Use Survey (collected November 2021, before the ACP became active) showed that only 18% of households without internet access at home cited cost as a reason for being offline. Indeed, in the NTIA survey, 58% of the offline households “express no interest or need to be online.”
The exact size of the adoption gap is subject to dispute, as in most things telecom. But it’s clear that most states have a substantial number of people who have the opportunity and means to subscribe to fixed broadband, and choose not to. Some of them may be quite happy using their smart phone and a cellular data plan as their main access route. But for many other people, lack of digital literacy or a lack of credit cards or bank accounts may be important issues keeping them from making use of online government services or private sector transportation, shopping, entertainment, work or education opportunities.
How can the adoption gap be closed? First, we know what won’t work: Building expensive new networks in areas that already have high-speed broadband. If low-income households already can get “zero-cost” high-speed internet if they want, but choose not to, then laying costly fiber in their neighborhood won’t make a difference to their adoption.
Instead, that money should be funneled into programs to improve digital literacy and show, step-by-step, how to get online and utilize government and private resources. But by themselves, such programs are not enough, since adoption is driven by financial inclusion as well. In a data-driven economy, access to the internet becomes less valuable to someone without a credit card or a bank account, since it’s much harder to use online services such as ecommerce and ride-sharing. Indeed, it’s possible that the people who express no interest in being online are actually responding to these other obstacles.
In many ways, we’ve done the straightforward part of closing the digital divide: A massive investment in physical capital, funded mainly by the private sector, combined with the latest healthy dollop of public money to fill the gaps. Now it’s time to focus on building out the rest of the social and financial online infrastructure, to include everyone. Investment in human and social capital is as important as investment in physical capital.
FACT: The largest payers of 2018-2022 “232” and “301” tariffs appear to be U.S. manufacturers and construction firms.
THE NUMBERS: Extra tariff collection via “232” and “301” tariffs, 2021
Electrical equipment ~$7.0 billion
Fabricated metal products ~$4.0 billion
Steel & aluminum: ~$2.5 billion
Auto parts ~$2.5 billion
Chemicals ~$1.5 billion
WHAT THEY MEAN:
Since the imposition of “301” tariffs on a swath of Chinese goods, and “232” tariffs on steel and aluminum, the U.S. has had a sort of two-part tariff system. One is the permanent “MFN” tariff system, which ranges from 0% (natural gas, computer, perfume) to 48% (cheap sneakers), and brings in most of its money from clothes, shoes, fashion accessories, silverware, and other consumer products. The other half is the administratively levied Trump-era tariffs, which draw their “232” and “301” nicknames from the two laws used to impose them, and include 25% on three “tranches” of Chinese goods and 7.5% on a fourth “tranche,” 25% on various steel items, and 10% on aluminum. The basic figures, with estimated 2022 figure drawn from the eight months of currently available trade data:
2021: $84 billion in tariff revenue, or just under 3.0% of $2.85 trillion in imports. 2017: $33 billion in tariff revenue, or 1.4% of that year’s $2.,35 trillion in imports.
In 2021, the two halves of this system raised more or less the same amount of money, $42 billion each. So far in 2022 the pattern is the same, though a post-COVID import boom has pushed up the figures to a likely $100 billion in tariff payments on $3.4 trillion in imports.
If the MFN system is mainly a way of taxing clothes and other consumer goods, what does the 301 and 232 system look like? A list covering about three quarters of the roughly $42 billion in extra tariffs shows nine major sources:
And if families and retailers are the main payers of MFN tariffs, who are the main 232 and 301 payers?
Academic studies typically say that the higher costs of tariffs falls on “consumers”; the lay reader of these studies usually takes this as economics-profession vernacular for “people like me!” This works for the permanent “MFN” tariff system: for example, the Bureau of Economic Analysis’ intricate Input-Output tables for 2021 imports, which track buyers of different types of products, report that about 96% of clothes come in for personal use, and these “personal users” presumably bear the cost. The 301 tariffs on furniture, which make up about a tenth of the extra tariff payments, are much the same.
But families and shoppers are not the only “consumers” in the technical economic sense. Another group is composed of businesses buying “intermediate goods” to produce finished products — say, wiring for home-builders, metals for ship-building, rubber for bicycle and truck tires. These latter industrial consumers, especially manufacturers, appear to be paying much more of the administratively imposed 232 and 301 tariffs than they do in the permanent MFN system.
“Electrical equipment, appliances, and components,” for example, is the category in which the “232” and “301” tariffs raised tariff payments most dramatically, from $1.2 billion in 2017 to $8.7 billion last year. These are things ranging from home appliances to industrial batteries, generators, switchboards apparatus, and power transformers. Assuming that purchases of specifically Chinese-made electrical goods more or less mirrored overall U.S. import patterns, BEA’’s tables show that 26% of electrical equipment imports went via retailers and hardware shops to individuals and families; 63% went to businesses for intermediate goods; and 12% went to businesses for capital goods purchases. The “capital goods” imports regrettably aren’t broken out by industry buyers, but using the intermediate goods alone, BEA’s table finds manufacturers the largest single buyer at 21% of imports, followed by construction at 18%, and farmers at 4%. Presumably the tariff payments split more or less the same way.
Likewise in “fabricated metal products” likewise, manufacturers appear to have bought 32% of imports, and construction firms 18%, and the two together would pay about half of the $4 billion or so in extra tariffs. Etc., etc. for chemicals, metals, machinery, and so on.
A likely consequence of this is that the 232s and 301s have, at the margin, imposed costs on U.S. manufacturers that producers abroad don’t face. Thus they will likely cause some a loss of competitiveness vis-a-vis imports as manufacturers sell to American customers, and more difficulty succeeding as exporters abroad. Something to consider as the Biden administration continues to think this over.
FURTHER READING
Some data sources:
The Bureau of Economic Analysis’ input-output tables.
And economic perspectives on 232, 301, and other administratively imposed tariffs:
The Bureau of Labor Statistics does some comparisons, through the lens of retaliatory tariffs on U.S. farm products in 2019, “safeguard” tariffs on automobile tires in 2009, and Bush-era steel tariffs in 2002.
A gloomy 2019 review from Federal Reserve staff finds that the “input-cost raising” effects of 232 and 301 tariffs on U.S. on manufacturing, with attendant loss of competitiveness and employment, overpowers “production-protecting” effects.
University of Chicago analysts view tariff incidence as “largely on the United States.”
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
Since his election as president in 2000, Vladimir Putin has methodically consolidated power in his hands with the expressed aim of making Russia great again. Instead, he’s diminished his country’s power and global standing in every respect but one — Moscow’s ability to threaten its neighbors with nuclear weapons.
Russian observers have characterized Putin’s increasingly autocratic reign as a tacit pact with Russian society: The Kremlin won’t interfere in the everyday lives of citizens if they stay out of politics. It’s a bad bargain for the Russian people.
For one thing, it’s cost them a rare shot at governing themselves after centuries of czarist and totalitarian despotism. Over the past two decades, Putin has steadily snuffed out post-Soviet Russia’s incipient democracy — rigging elections, jailing dissidents and journalists, suppressing independent civic associations and colluding in the assassination of regime critics at home and around the world.
A new report published today by the Progressive Policy Institute’s Reinventing America’s Schools (RAS) Project provides a deep dive into the connection between teacher autonomy and teacher retention and job satisfaction. Teacher autonomy refers to teachers’ self-direction, capacity, and freedom, which are often limited by institutional factors in traditional school districts. The report is titled “Autonomous Schools Can Help Solve the Problem Behind the Teacher Shortage Problem,” and is authored by Tressa Pankovits, Co-Director of PPI’s Reinventing America’s Schools project.
“The link between teacher job satisfaction and autonomy is not exactly news,” writes Tressa Pankovits, Co-Director of RAS in the report. “Yet, too many traditional school systems seem oblivious to the fact that nobody in their right mind would love working in a place where their agency is disrespected while at the same time, they are held accountable for things over which they have no control. Districts that have failed to respond to teachers’ oft-expressed desires for more professional agency and autonomy should not be surprised, in this tight labor market, that they are struggling to retain educators.”
Against the backdrop of this year’s historically poor National Assessment of Education Progress (NAEP) test scores, Pankovits argues that it is more urgent than ever for education leaders to take bold, pragmatic steps to recruit and retain high quality teachers, including rapidly evolving the underlying systems in which teachers work.
“We must prioritize making teachers happier and more effective in the classroom because research shows that teachers are estimated to have two to three times the effect on students of any other school factor, including services, facilities, and leadership, Pankovits writes. “Now is the moment to seize the opportunity to move away from the antiquated, overbearing command and control model of school management, and evolve into a model of independent schools that are both more easily adaptable to changing times and that afford educators more flexibility to innovate in the classroom without central office interference.”
The Reinventing America’s Schools Project inspires a 21st century model of public education geared to the knowledge economy. Two models, public charter schools and public innovation schools, are showing the way by providing autonomy for schools, accountability for results, and parental choice among schools tailored to the diverse learning styles of children. The project is co-led by Curtis Valentine and Tressa Pankovits.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
In August, the National Assessment of Education Progress (NAEP) released the grimmest “Nation’s Report Card” in 20 years. Between 2020 and 2022, America’s students dropped five points in reading and seven points in math. That bad news almost — but not quite — drowned out the summer’s other major, alarming education news: Teachers, burned out or just plain disgusted, were quitting in droves. As the predominant narrative went, many of the nation’s classrooms might be leaderless come fall.
It’s common knowledge that effective, committed teachers are critical to students’ success. At a time when there is empirical evidence that America’s students are struggling — the NAEP scores are just one indicator — it seems timely to take a deeper dive into the widely reported teacher shortage. One needn’t look very far to find many indicators that our current systems of public schools are not serving teachers well. There is no reason to think things will improve (i.e., increased teacher job satisfaction, increased teacher retention, revived talent pipelines, etc.) unless there is an evolution in the underlying systems where teachers work.
This report will examine the current teacher shortage. There is controversy about its severity and data is missing from several states. There is, however, a plethora of data to learn from regarding teachers’ attitudes toward their profession. Not surprisingly, one thing that teachers have often complained about, micromanagement or, put another way, lack of autonomy in the classroom, remains an issue.
But not all teachers work in school settings where their judgement is distrusted or their opinion is unwelcome. Schools that operate independently from a traditional central district office “command and control” model often place more authority in teachers’ hands and more value on their opinions. In some instances, this behavior is the natural result of freedom from central office edicts and the corresponding independence to engage in school-based decision-making. After all, if decisions are being made at the school level, input from the school’s members is a resource too valuable to dismiss.
In still other cases, “teacher power” is a feature of a school’s mission and vision. At the conclusion of the report’s discussion about the teacher shortage and teachers’ job dissatisfaction, we will make the case that America’s traditional “top down” central office model has outlived its usefulness. Given teachers’ perennial unhappiness about being micromanaged, the teacher shortage offers one more reason to move away from it now. The report will also suggest and describe three models of autonomous or semi-autonomous schools where the current teacher shortages have reportedly not been so keenly felt.
Finally, the case will also be made for evolving the nature of more American school systems into a “portfolio model” so that more teachers have the opportunity to flex their autonomy. In school systems that are already successfully engaged in this work, the districts’ central offices place more emphasis on accountability and performance rather than daily micromanagement of its schools’ classrooms. Expensive, alternative schemes currently underway to recruit and retain teachers are also offered for comparison.
Finally, the report will examine some common roadblocks (and some pragmatic strategies to get around them) to creating 21st century autonomous schools. These schools are more likely to provide teachers with enhanced opportunities to innovate in the classroom in the quest of student success. Given the Nation’s Report Card and other serious fallout from our response to the pandemic, there is no time to lose.
I. THE 2022 TEACHER SHORTAGE
The national outcry over teacher shortages was earsplitting by the time nearly 50 million American schoolkids trekked back to the classroom for the 2022-2023 school year. America’s teacher shortage is widely portrayed as a code red crisis that will get worse before it gets better.1 The nation’s largest teachers union, the National Education Association (NEA), claims that the country is short 300,000 teachers. The Wall Street Journal quoted one New Jersey school district human resource director who characterized competition between districts for teachers as a “dog-eat-dog” struggle. The fear and outrage sparked by the prospect of leaderless classrooms across the country is a clear indicator that systemic change is needed — even if the teacher shortage is exaggerated.
To be clear, even one shortage of a qualified teacher that shortchanges a child’s education or makes another educator’s workload more burdensome is a real problem. But there is also skepticism about the narrative around the severity of current teacher shortages. Recent data from a RAND Corporation survey indicates that while two-thirds of public school districts expect shortages this school year, 58% of them characterize their teacher shortages as “minor.” In short, it appears that the jury is still out. Despite the popular media’s embrace of the teacher shortage “catastrophe,” education researchers and writers say there is a lack of granular government data on a countrywide teacher shortage. District Administration reports that just 19 states have released teacher vacancy data for the 2021-22 school year, and only 13 have information for the 2020-21 school year.
The Annenberg Institute at Brown University spearheaded research on the shortage controversy, producing a 76-page report released in August 2022. The report includes a map raw counts of teacher vacancies by state. Nine states are shaded in grey, which indicates no official data was available from those states’ education departments — including the country’s most populous state, California, and its fourth most populous state, New York.
The incomplete data Annenberg crunched (through no fault of its own) indicates the country’s most severe teacher vacancies are in the South. But it’s more nuanced than that. Even in states with relatively lower teacher shortages, there are major variations between districts with similar student demographics.
For example, on Annenberg’s map, Connecticut shows relatively low teacher vacancies. But in the state’s urban capitol, the Hartford Public School District, which has 91.8% minority students, of which 61.8% are low-income, had filled only 86% of its teacher positions by midAugust. It reported large numbers of vacancies in special education, speech and language, math, English and elementary education. Michigan is also a “low” vacancy state, but in urban Detroit, the Detroit Public School District, which has a student population that is 97.6% minority and where 78% of students are eligible for “free or reduced lunch,” was fully staffed when classes started in August.
Given disparities in salaries, cost of living, and the robustness of local teacher pipelines, it’s not surprising that teacher shortages — like the weather and politics — vary widely from place to place, even when school districts otherwise share similar characteristics.
Some researchers also suspect this year’s teacher vacancies are inflated due to some districts adding additional positions funded by COVID relief dollars. RAND researcher Heather Schwartz told the Hechinger Report that 77% of schools went on a hiring spree in 2021-22 as $190 billion in federal pandemic funds started flowing, according to a survey RAND released in July. Among those is the Seattle Public Schools (SPS), where, despite a dramatic decline in enrollment, the district’s staffing is at its highest in nearly 10 years, including 462 added teaching positions during that period.
For the 2022-2023 school year, SPS has budgeted for an additional 501 teacher aide positions, at the demand of its teachers union. But even that wasn’t enough to keep the teachers in the classroom. The union went on strike on what would have been students’ first day of school.
II. TEACHER DISSATISFACTION
This, perhaps is the crux of the matter. While hard data on teacher vacancies is spotty — a state of affairs that should be rectified — teachers’ state of mind is pretty clear. Survey after survey demonstrate many teachers are disillusioned by working conditions in our nation’s school districts. Teachers’ attitudes about their jobs may be even contributing to a vicious cycle exacerbating the teacher shortage problem. After each survey, the media trumpets the miserable nature of today’s teaching profession. In fact, 74% of teachers surveyed say they would not recommend the profession to others. Couple the media coverage with rhetoric from union leaders who claim nearly uniform mistreatment of teachers, and it’s no wonder young people are choosing any career but one in a K-12 classroom. This, however, doesn’t mean that classroom teachers’ unhappiness is manufactured, or should not be addressed with systemic change.
Consider: A Merrimack College Teacher Survey commissioned by EdWeek Research Center in early 2022, found that only a little more than half of teachers are satisfied with their jobs, and just 12% said they’re “very satisfied” with their jobs. An American Federation of Teachers’ (AFT) survey of its union members in June painted an even bleaker picture, with only 2% reporting high job satisfaction. A full 74% described themselves as dissatisfied, with 46% reporting “high” job dissatisfaction.
Both job satisfaction studies also included, among other concerns, teachers’ attitudes about salaries, poor student discipline, and the degree of control or autonomy their jobs afford them. Teacher autonomy refers to teachers’ self-direction, capacity, and freedom, which are often limited by institutional factors in traditional school districts. With regards to autonomy, only a third of teacher-respondents to the Merrimack study said they have much control over their school’s policies, and only 57% said they have a lot of control over the curriculum they teach.
In a separate May 2022 AFT survey, teachers were specific about the types of restraints that add to their stress on the job. For example, 60% cited a lack of autonomy to select the supplies and resources needed for their classrooms as one of their biggest challenges as educators.
An employer’s trust in an employee is usually a prerequisite to a grant of autonomy; HR Daily advises that trust can also go a long way toward building employee satisfaction and loyalty, thus improving retention. Yet, in AFT’s June survey, 88% of respondents complained of not being given “the trust needed to meet their professional responsibilities.”
The link between teacher job satisfaction and autonomy is not exactly news. A 1997 National Center for Education Statistics statistical analysis report found that 86.9% of elementary teachers and 77.3% of high school teachers who describe themselves as “highly” or “moderately” satisfied agreed with the statement that “Teachers in their school have a great deal of influence over school policy.”
Current public education leadership at the very top is also clued in to the correlation between teacher agency and teacher stress. During a September 1, 2022, “back-to-school town hall meeting,” U.S. Secretary of Education Miguel Cardona declared that schools need to improve working conditions, including ensuring that teachers have agency and autonomy. Secretary Cardona emphasized, “They are professionals; let’s start treating them like professionals.”
During that same town hall meeting, many of the panelists spoke of the need for America’s teacher to be treated with “more respect.” Miriam Webster defines respect, in part: “to refrain from interfering with.” A study by Swedish researchers from Uppsala and Stockholm Universities published in Current Sociology in 2012 drilled down further, concluding, “The overall impression from our analysis is that participants viewed respect as [behavior] primarily targeted at another person’s ascribed agency.”
Yet, too many traditional school systems seem oblivious to the fact that nobody in their right mind would love working in a place where their agency is disrespected while at the same time, they are held accountable for things over which they have no control. Districts that have failed to respond to teachers’ oft-expressed desires for more professional agency and autonomy should not be surprised, in this tight labor market, that they are struggling to retain educators. Mass teacher resignations — NEA says 55% of teachers say they are within a hair’s breadth of quitting — would indeed plunge our schools into crisis.
III. THE CRITICAL NEED TO SOLVE THE TEACHER MORALE PROBLEM
Teachers’ job satisfaction is an important policy issue because teacher satisfaction is associated with teacher effectiveness, which ultimately affects student achievement. To f ix America’s teacher morale problem, the school district norm of top down, centralized control over classroom practices needs to evolve, pronto. Even if teachers don’t outright quit (researchers tell The Atlantic that for every three teachers who tells a pollster they want to quit, only one actually does), miserable, frazzled teachers likely aren’t very effective in the classroom.
Unfortunately, there is irrefutable proof that education labor disruptions during two and a half years of pandemic have taken a terrible toll on students’ learning. In early September, the National Assessment of Education Progress (NAEP), or as it’s more commonly known, “the Nation’s Report Card,” released the first test scores since COVID-19 disrupted America’s classrooms. The report card assesses basic skills among nine-year-old students, comparing that age group over long periods of time. The 2022 results were historically bad, as seen in Figures 3 and 4.
With 20 years of educational progress wiped out, we cannot tolerate any condition in the classroom that might create more erosion of student achievement. One solution to this problem is to create more autonomous public schools that grant teachers more authority in the classroom as well as a greater say in shaping school policies — and ensure strong accountability measures for such schools. The federal government sent $190 billion in COVID recovery dollars to America’s public schools. Much of it has yet to be spent. Accelerating a reimaging of the traditional school district model into a decentralized, portfolio model of independent schools would be a good use for some of it.
IV. CENTRALIZED COMMAND & CONTROL: A MODEL THAT HAS OUTLIVED ITS USEFULNESS
The great irony here is that while teachers yearn for more autonomy, their unions often stand in the way of their getting it. Union contracts largely determine both the major policies and the minutia of how school districts operate their schools — often down to bell schedule and the number of teaching minutes permitted in the school day. Such bargaining agreements are at the heart of the model that keeps decisions both large and small centralized in district central office bureaucracies. A more professional, pragmatic scheme would be to empower local school employees — the people who see students day in and day out — to do what’s best to optimize teaching and learning.
Consider that the central district office “command and control” organizational structure is virtually unchanged since the late 1800s. It rarely permits school principals to choose their own teaching staff and classroom curricula. Instead, the central office issues binding rules that regulate almost all school policies and operations, including critical policies around hiring, retention, teacher placement, and curriculum mapping. No doubt it’s easier for a local bargaining unit to negotiate with a single school district board rather than individually with the leaders of dozens of schools in that district. But the collateral damage from this centralized model is hamstrung school principals, unhappy, stifled teachers, subpar academic outcomes for students, and a lack of choices for parents.
If one accepts the oft quoted definition of insanity as “doing the same thing over and over and expecting a different result,” it makes no sense to try to return America’s public education systems to their lackluster pre-pandemic status quo. The proof points are in: teachers say they are desperately unhappy, student learning has severely backslid, and the disastrous response to the pandemic has eroded parents’ trust by epic measure. Parents are voting with their feet, causing traditional school district enrollment to plunge – which is a harbinger of financial woes ahead. Even the $190 billion Washington D.C. poured into K-12 education likely can’t fix all of that if the underlying organization of our school systems don’t change.
A better use of federal dollars, in part, would be to aid in the rapid adoption of alternative models, that have already proven they can prevent or even reverse a downward spiral. It will require a willingness, courage even, to innovate and to relinquish centralized power. Such reforms have already been implemented with success in cities as diverse as Indianapolis, Washington D.C., New Orleans, and Denver, among others.
V. AUTONOMOUS SCHOOLS: AN OPPORTUNITY TO REINVENT PUBLIC SCHOOLS
If we want to make teachers happier and more effective in the classroom (and we should — RAND research shows that teachers are estimated to have two to three times the effect on students of any other school factor, including services, facilities, and leadership) now is the moment to seize the opportunity to move away from the antiquated, overbearing command and control model of school management, and evolve into the portfolio model of independent schools that are both more easily adaptable to changing times and that afford educators more flexibility to innovate in the classroom without central office interference. These benefits are in addition to those that school systems’ end-users — students and parents — would experience from having a variety of autonomous schools with a diversity of models and programs from which to choose the best fit. And principals and teachers would have bigger variety of workplace cultures from which to select their best fit, too!
We should start with by embracing the notion that principals need autonomy to hire the best teachers they can find, rather than having to make do with teachers randomly forced upon them by a distant central office. This would empower principals to lead a staff that is bought into his or her school’s mission, strategies, and goals for its students. In other words, teachers who really want to teach in that particular school. There are a variety of autonomous school models. What they have in common is freedom to empower teachers. And when those teachers are given true control of their classrooms and the respect that comes from having a voice in school policymaking (along with decent pay and benefits, of course) teacher retention likely won’t be as problematic as it now is. The profession will look a lot more professional, and perhaps the pipelines will begin to fill more naturally once more.
Teacher-Led Schools: Power, Autonomy and Respect
One intriguing model is teacher-led or “teacher-powered” schools. Teacher-powered is a type of school governance structure where teams of educators are entrusted with the autonomy to design, create, and make final decisions in areas impacting student success. Among these schools, there is no one way to “do” or “be” teacher-powered. Many have formal leaders such as principals who help coordinate the team; some do not. Many have teachers in a union; others do not. Some are district schools; others are charter schools. Some make most decisions as a full team; others divide up their decisions among staff positions or committees. Each school looks different because each team has found a form of teacher-powered that works for their students, educators, and community.
Education Evolving is a Minnesota-based nonprofit that has helped more than 250 schools in 20 states implement the teacher-led model. Education Evolving helps its member schools’ staff fully understand the autonomies their school has from normal from district policies, and trains teachers how to use them to make classroom learning more effective. The vast majority of Education Evolving schools use project-based learning and have a focus on social justice. The organization says many teachers choose to work for its teacher-led schools because they want to teach in schools that consciously seek to meet student needs that district schools weren’t meeting. The result is more empowered teachers teaching in more rewarding environments, less frustration and burnout, and stronger intent to stay in the profession.
Education Evolving is currently conducting a teacher retention study from 2017 through this summer. So far, the patterns indicate that teacher-led schools in places as far flung as Ypsilanti, Michigan, Portland, Maine, and San Diego are seeing only a “slightly” higher turnover this summer than normal. As Executive Director Amy Junge put it, “A school that might normally have zero turnover might be seeing one teacher retire.” That compares favorably to turnover at the traditional schools in the districts they sit in.
For example, since 2019-2020, the number of teachers in San Diego County has dropped by more than 8,000 countywide. At the start of the 2017-2018 school year, 2,420 new teachers entered classrooms in San Diego County. At the beginning of the current school year, those same districts had been able to hire just 1,858 new teachers.
In the state of Maine, as of late August, more than 200 teachers were employed in the state’s public schools on an “emergency certification” basis as a stop gap measure to fill open positions. But the state’s first teacher-led, teacher-governed school, Portland’s Howard C. Reiche Community Elementary School, had only one opening — for a custodian. By contrast, districtwide in July, Portland was advertising for 24 teachers and educational technicians and 15 student support positions. Every traditional school in Portland’s 6,523 students district except one was short at least one educator.
Junge says the key is giving teachers power through “collective governance” that determines important school-based decisions. In other words, teachers are treated as professional partners to school administrators through a democratic process where they vote on decisions about school policies and classroom practices. In some schools, teachers’ autonomy might mean they have decision-making authority over three or four policies; in other places, teachers might have authority over as many as 15 policies. In all cases, however, the teacher-led schools have returned to the original philosophy that fueled the charter school movement: Decisions that affect school policy should be made as close to the educator as possible.
In the student-centric model that Education Evolving supports, teachers are attracted by the practices that focus students’ academic needs and their socioemotional health, according to Junge. She described teachers as feeling effective and empowered by having control to ensure they can adapt those practices as needed to have a positive impact on their students.
“In our schools our teachers are respected,” Junge said. “Teachers know that they are the education experts and we naturally turn to them for answers, just like we would a doctor for a medical question or a lawyer with a legal problem.”
The teacher-led, student-centric approach should be music to the ears of parents frustrated by overly-delayed COVID-era school re-openings that were, ever more obviously as time went by, more closely linked to the power and influence of union leaders in a given location — Los Angeles and Chicago come to mind — than they were to virus‐related safety concerns. It’s no surprise, then, that the Los Angeles Unified School District’s non-charter schools lost about 43,000 students over the past two school years. Enrollment in the Chicago Public Schools (CPS) dropped by about 25,000 during the same period. In 2019, according to the Chicago Tribune, CPS had a 14:1 student teacher ratio.44 If that’s accurate, that’s 1,785 teachers who would theoretically no longer be needed.
Semi-Autonomous Schools
The “portfolio district” model is another way to decentralize school district management that is being implemented in various locations across the country. Similar to charter schools, some schools in portfolio districts operate autonomously, to varying degrees depending on location. These autonomous or semiautonomous schools are known by a variety of names: innovation schools, renaissance schools, iZone schools, 1882 schools, and so on. In some places they remain zoned neighborhood schools that only accept students from outside the zone if there is a surplus of seats. In other places they are schools of choice open to any student who opts to enroll, using lotteries to determine admission when there are more applicants than seats.
Both the key and the commonality to the model is that while these schools have the autonomy to make most decisions at the school and classroom level, rather than being dictated to by the central office or school board, they remain part of the district, usually in a district building. As a result, when these schools improve, they lift the district scores as well.
The current “gold standard” for these schools is the Indianapolis Public Schools’ (IPS) innovation schools. There, the school district office has given up much of its traditional role in setting policy at the school level. The district office — and through it, the school board — instead act as partners to IPS’s portfolio of independent schools. IPS also performs the critical function of holding those autonomous schools accountable for improved academic performance and sound financial management of district funds. It can, and has, declined to renew operating agreements with schools who fail to meet their performance metrics.
CASE STUDY
Innovation Schools: Keeping Teachers Motivated and Improving Student Outcomes
The teacher-led approach in Education Evolving’s member schools — which are a mix of district, semi-autonomous innovation schools, and charter schools — is not the only model that is showing high teacher retention rates. A small network of autonomous innovation schools that are part of Texas’ Fort Worth Independent School District (FWISD), the Leadership Academy Network (LAN), also had little trouble filling its teacher ranks with qualified educators during the COVID era.
A partnership between the FWISD and Texas Wesleyan University, LAN is not controlled by FWISD’s school board or superintendent, but rather, it answers to an advisory board selected by its managing partner, Texas Wesleyan. LAN’s Senior Officer was allowed to hand pick her principals, who, because of their dynamism and drive, attract all sorts of talented people who want to work for them.
To ensure that teachers’ job satisfaction (and their drive to meet improved student outcome requirements) didn’t waver during difficult recruiting times, LAN adjusted its budget and schedule to give the teachers a full half day of collaboration time each Friday afternoon. Gathered together, without students to monitor, LAN’s teachers compare notes about teaching strategies, plan for the next week’s demanding pace, and recharge each other’s batteries. These sessions also put teachers squarely in front of school leaders, where they can voice concerns and ideas. Called “Everybody Grows,” the time is made possible because LAN’s autonomy gives it the flexibility to partner with external affiliates — artists, dance studios, theaters, museums, zoos, etc. — who rotate in and out to keep students busy and engaged with enrichment activities while teachers collaborate.
Because of its autonomy from the district, LAN also had the flexibility to become an early adopter of the state’s new “Teacher Incentive Allotment,” program, which provides state-funded teacher bonuses to schools who implement a merit-based, Texas Education Agency (TEA) approved teacher evaluation system. More and more Texas school districts are now gravitating to that pot of state money, but being able to bump teachers’ salaries on the state’s dime early on gave LAN a competitive advantage to recruit and retain top teachers when it was most needed.
The LAN prioritizes hiring highly-qualified teachers because its mostly low-income, minority students were academically far, far behind and it takes talent to turnaround low-performing schools. In fact, the TEA had rated all six LAN schools as “Improvement Required” (IR) for a number of years. One of them was IR seven out of the eight years leading up to the turnaround project. When FWISD embarked upon the turnaround initiative, at one elementary school, third grade reading proficiency was at just 7%, and at three others, 21% or fewer third grade students were reading at grade level.
Now, based on 2021-2022 test scores, all LAN schools have achieved enormous academic growth, with every campus rated an “A” or “B” (except for one, which the TEA did not rate). The schools’ TEA ratings met or exceeded the performance requirements set by FWISD as a condition for LAN’s continued autonomy. Black and Hispanic students did particularly well. For example, at the Leadership Academy at Mitchell Boulevard, 96% of African American students met or exceeded the State of Texas Assessment of Academic Readiness (STAAR) Progress Measure in reading, and 92% of those students did so in math.
Hispanic LAN students also showed greater gains in the percentage proficient at grade level compared with their peers across Texas. Statewide, there was an 8% increase in Hispanic students meeting grade level proficiency in math. At LAN, the increase was 17%. For reading, there was a 9% increase in the state’s Hispanic students proficient at grade level; LAN had an increase of 12%.
FWISD Superintendent Ken Scribner credits “incredible” teachers for their students’ growth, while LAN’s Senior Officer, Priscilla Dilley gives credit to the expertise and resources provided by managing partner Texas Wesleyan University. She also heaped praise on her highly motivated educators. Dilley said, “They went to extraordinary lengths to keep students up to speed during remote learning — designing easy-to-navigate online lessons, providing packets for scholars who struggled with virtual learning, and staggering lessons to accommodate families with limited internet connectivity.”
Autonomous Charter Schools
The oldest and best known model of autonomous school are fully independent public charter schools. These free, publicly funded schools operate independently from the school board. They abide by all federal and state regulations, and are required to follow state academic standards. However, they are free to select their mission and model. And the best ones really do have a mission they adhere to, whether it’s college readiness, career and technical education, STEM focused, dual language immersion, arts integrated teaching and so on. Some are culturally relevant schools, such as those designed for Native American children. Others design their programs for a specific population, for example: high school students who are already parents themselves or students who already know they want to pursue a specific career path like nursing.
Whatever their model, public charter schools are usually governed by their own boards of directors, and they must meet the performance metrics in their charter — academic achievement, fiscal accountability, enrollment diversity targets, etc. — in order to have their charter renewed by an authorizer empowered by the state. In states that have a rigorous authorizing and charter renewal process, (Colorado, Minnesota and New York, to name a handful) the result is highly accountable schools. These schools offer parents choices to match their child with a school that can meet their needs better than a cookie-cutter, one-size-fits-all centrally-operated district school.
Charter schools are so popular with parents that many have long waiting lists for a seat. This year, the New Jersey Charter School Association reports 60,000 charter school enrollees, while 20,000 additional students languish on wait lists. North Carolina’s Annual Charter School Report says that 73% of the state’s charter schools have waiting lists, while 70 out of 78 charter schools in Massachusetts have waiting lists totaling about 18,000 individual students.
VI. ROADBLOCKS TO AUTONOMY
Unfortunately, teachers’ unions greet most autonomous public schools — regardless of the model — with skepticism if not outright hostility. For example, in an effort to cap charter school growth, the United Teachers of Los Angeles (UTLA) in 2019 staged the first strike in that city in 30 years. Teachers picketed for six days until the district agreed to ask state lawmakers to impose a moratorium on new charter schools in the area. During COVID, UTLA demanded that charter schools be shut down as a condition for re-opening traditional district schools to in-person learning. (District officials refused to meet that demand.)
While unions have historically provided teachers with support and voice in their workplaces, they should modernize to better meet the needs of the workers they currently represent. By opposing non-traditional school districts and innovative teaching models, they may be losing talent that they can’t afford to lose. If teachers quit legacy public schools in droves, parents will have no choice but to turn to alternatives such as private schools, public charter schools, homeschooling, or remote learning. In fact, that’s happened throughout the pandemic.
Today 1.2 million fewer students are enrolled in public schools nationwide than when the pandemic began.65 Meanwhile, public charter school enrollment increased during the 202021 school year in at least 39 states, growing by nearly a quarter of a million students. In 18 states that shared data through the current school year, the number of homeschooling students increased by 63% in the 2020-2021 school year, then fell by only 17% in the 20212022 school year — for a net increase of 46% of homeschoolers. If the trend continues, the unions could see their membership decline.
All of this is evidence that rather than blindly propping up a trouble status quo, all of the relevant K-12 education decision makers — school boards, superintendents, labor leaders, state legislators, and parents — should embrace modern, innovative school models organized around the principles of parental choice, autonomy and accountability for results. There’s a twofold opportunity for traditional school districts here: first, to demonstrate to teachers that their mental health and happiness matters to district management; and second, to embrace the still-important role of being the entity authorized to set broad educational policy, while shedding the never-ending challenges of micromanaging individual classrooms.
VII. (EXPENSIVE) ALTERNATIVE SOLUTIONS
While Texas officials structured their Teacher Incentive Allotment bonus program (see case study, above) to be financially sustainable, many states are spending buckets of money, at least in the short term, to lure new teachers. For example, several districts in Michigan are offering teachers $10,000 “signing bonuses.” But that type of one-time windfall is not guaranteed to hold teachers in the longer term in places where the cost-of-living is increasingly exorbitant. For example, Colorado’s teacher salaries have increased by 25% over the past seven years. Yet today, only one in five teachers who educate Colorado’s 900,000 students can afford to own a home there, and rental housing is rapidly becoming increasingly unaffordable across the state.
That problem has led some similarly situated communities to get creative. In California’s pricy Silicone Valley region, Jefferson Union High School District in Daley City routinely lost a quarter of its 500 teachers each year. In an attempt to retain more teachers, the district in 2017 came up with a plan to build a $75 million housing complex for teachers and staff to encourage them to stay in the district. The housing is not free, but rents are scaled to employees’ salaries so that they can live within walking distance to work in a community they otherwise could not afford.
Texas’ Rankin Independent School District, which is not too far from Odessa (by Texas standards), is also using housing as a strategy to recruit and retain teachers. This November, voters will be asked to approve a $123 million bond that would, in part, support building or buying 10-to-12 houses per year over the next 10 years for teacher housing.
In another instance, a teachers union even pitched in. In partnership with the state, the AFT helped open “Renaissance Village” housing for teachers in Welch, West Virginia, so that teachers could live close to schools in a poor community that was devastated by the shuttering of local coal mines.
Rather than just focusing on strategies to retain current teachers in the district, other places are reaching far, far outside district borders — and the nation’s — to recruit talent. Nevada State Superintendent of Public Instruction Jhone M. Ebert revealed during a recent Education Commission of the States’ webinar that her office is recruiting from multiple foreign countries to bring teachers to Nevada on U.S. J-1 visas, which are visas designed to promote educational and cultural exchange. She said that other sectors such as engineering and tech “routinely do this” when they can’t find enough qualified American workers. Since there are not enough teachers to go around, these foreign educators can hardly be accused of taking American jobs.
And there are organizations active in trying to help schools meet their students’ human capital needs. One such organization, Global Educator, has created a teacher pipeline in partnership with the Mexican state of Guanajuato, which is home to several colleges of education and has an abundance of under-employed, bilingual teachers. Global Educator is facilitating J-1 visas for school teachers to temporarily come to the U.S. to fill gaps, then matching them with districts, public charter schools, and private schools that are experiencing shortages. It also provides bilingual, Mexico-based remote teachers and tutors to schools who need an affordable strategy to combat teacher shortages.
Employing these teachers, who have a far lower cost of living south of the border, for tutoring or extra lessons via live video sessions is a strategy for short-handed schools to bulk up their ranks as they seek to accelerate students’ recovery from COVID-era learning loss. The strategy can be especially effective for students who speak English as a second language and may only hear and speak Spanish at home.
There is a point to cataloging a few of the creative, sometimes expensive and complicated strategies that education agencies are embarking upon in this period of teacher shortages. That point is that it costs nothing to grant teachers and teacher leaders more autonomy to innovate. It’s also worth noting that desperation in some places has resulted in some questionable schemes, like Arizona’s plan to let schools hire high school graduates as public school teachers without a college degree, for example.
While autonomy, authority and respect are free, in Michigan — where the teachers unions are strong — the new education budget includes $430 million for various teacher recruitment plans, including grants, a “grow your own teacher” project, and so forth. In Tennessee, which is short 2,000 teachers statewide, the Tennessee Department of Education is partnering with the University of Tennessee on a $20 million teacher pipeline project.
High quality teacher development pipelines are an important investment that is urgently needed in the U.S., but there is also some pressing public relations work to be done to drive significant numbers of students into these new programs.
Teachers unions — especially during contract negotiations — habitually paint teachers as overworked and underpaid. They claim that teachers are routinely disrespected by school district management, parents, students, and society at large. The near hysteria over “teacher burnout” during COVID has resounded in every corner of the nation for more than a year. Many of the complaints are highly credible — there is no doubt some teachers have been attacked in the recent, Republican ginned-up culture wars over masking, “critical race theory,” and book banning. And America’s underinvestment in teacher salaries and school infrastructure far predates the pandemic-era, even becoming a topic for Congressional hearings, to little avail. But the unions habitually present these very real problems as affecting every teacher in every school, which simply cannot be the case.
When inundated with continual hyperbole, why would young people, in the numbers needed nationwide, turn to the “miserable” profession of teaching?
VIII. LEGISLATING PROGRESS: NUDGING STUBBORN DISTRICTS IN THE RIGHT DIRECTION
Some state legislatures have taken matters into their own hands — mandating or incentivizing school districts to innovate to improve perennially substandard schools. Today, Indiana’s statute is considered by many to be the best legislative guidance for implementing the autonomous portfolio school model because its autonomous schools program provides a blanket grant of autonomies to innovation schools. However, Texas gets extra points because its statute comes with extra funding from the state.
Known as the “1882 schools” after the 2019 Texas Senate Bill that created the funding stream, the legislative intent of the bill, in part, is to encourage districts with struggling schools to partner with qualified, independent education nonprofits. The legislation directs districts and the nonprofits to enter a contract whereby the nonprofit assumes day-to-day school operations in order to improve them.
Once the TEA approves the 1882 partnership — by ascertaining that the autonomies the district is granting to the nonprofit are a sufficient relinquishment of district control — the district qualifies for extra per pupil funding. In cases where the goal of an 1882 is turning around a struggling school, the extra money from the state is specifically intended to support the turnaround effort. The Texas legislature wisely recognized that school improvement can be very expensive to sustain, especially when students need an extended school day and year, or extra wrap around services.
Happily, more states are adopting this type of portfolio model. Most recently, in July 2022, the New Mexico Public Education Department announced it is starting an “innovation zone” pilot project for 20 high schools across the state, where “the traditional education model will be transformed to improve the high school experience and academic outcomes to best serve the local community.” The schools accepted into the pilot project will be provided with additional flexibility to shift to a Career and Technical Education (CTE) focus, should they determine that is a better fit for the families they serve. While this program is brand new, it follows that the fledgling innovation zone schools will have autonomy to select teachers that meet the schools’ new missions.
New Mexico’s new initiative demonstrates that education agencies and organizations don’t necessarily need to wait for the state legislature to act before turning to autonomous innovative options for students and teachers. While a state law that guarantees and protects innovation schools’ autonomies is a “best practice” scenario, the idea of forging ahead without waiting for the legislature to act is not new.
In the case of the previously discussed teacher-powered Reiche school in Portland, Maine, teachers saw an opening and grabbed it. Reiche’s successful and popular school principal departed in 2011, leaving behind a results-oriented, turnaround school culture. Teachers didn’t want the district to assign a new principal who might implement a sea change that would possibly drag the school backward, so they appealed to the district to become a teacher-led school.
Operating at first under a Memorandum of Understanding (MOU) with the Portland School district, Reiche became not only the first teacher-led school in the state, it also became the nation’s first existing school in the country to convert from a traditional district to an independent, teacher-powered school.
According to teacher-leader Dave Briley, who has been at Reiche since its transformation 11 years ago, what makes both the school’s academic success and its democratic management model sustainable is Reiche’s teachers’ autonomy to control hiring and retention. In an interview, Briley described the teachers’ accountability to one another as a far more powerful force than any top-down accountability that could be imposed by a board or a superintendent. In a culture of such strong accountability, Briley said, “We are upfront about it — we make job applicants ‘sip the Kool-Aid’ so they know what they are getting into and are comfortable with it before we consider hiring them.”
Reiche no longer uses an MOU to define its relationship with the district. Maine passed an innovation school statute in 2014, which is a best practice recommendation for regions new to autonomous innovation schools. Maine’s statute means Reiche is now protected from whims of both the local and state school boards, whose makeups will change periodically and could become filled with anti-school choice members who might strip the school’s teachers of the autonomy and authority they’ve enjoyed for more than a decade.
This happened in the Denver Public Schools (DPS) after the teachers union invested heavily in successive school board election cycles. As a result, the union-endorsed DPS school board spent much of the 2021-2022 school year trying to strip DPS’s innovation zone schools of their hard won autonomies. Specifically, the Board passed a measure that prevented innovation zone schools from opting out of the teachers union contract as they have been able to do for many years. Ostensibly, this was to prevent teachers from being “overworked during the pandemic.” However, the DPS innovation zone schools weren’t clamoring for such an action — the union was. After strong pushback from teachers, parents and even some district staff, the Board has walked back some of the more odious provisions of the regulation, but damage was done. Colorado’s innovation school statute, passed in 2008, prevented the DPS Board from doing even more.
This is why Indiana’s innovation statute is the gold standard. It flatly guarantees innovation schools a blanket grant of autonomy from the district — there is no wrangling over “this autonomy” as opposed to “that autonomy,” and so on.
Legislators who have gotten an earful from parents who are angry about how school districts managed instruction during the pandemic or who are concerned about perennial teacher shortages should consider seizing the opportunity to respond by introducing an innovation school bill. If a state already has an autonomous school statute, consider legislation to amend it to require a blanket grant of autonomy, like in Indiana. Passing a state innovation school statute is a way for state lawmakers to take decisive action to support both families and teachers. If a district stubbornly refuses to give up control of substandard schools or refuses to listen to a majority of teachers in a particular school who want the authority to lead their school — or if the unions won’t allow the district to act — an innovation statute can force pragmatic change.
Passing such bills would kill two birds with one stone: It would further professionalize teaching by creating more schools that afford teachers autonomies to make adjustments and have more credibility with students; and it would mean happier teachers in the classroom, which just might keep more students in public schools. This should be an appealing proposition in many, many districts where parents are “voting with their feet,” and dragging enrollment down.
CONCLUSION
The debate is still on about the seriousness of America’s current teacher shortage, but there is no doubt that our teacher pipelines are insufficient. Even the White House recognizes the problem, and has recently undertaken new efforts to strengthen the teaching profession and support schools in their effort to address teacher shortages.
District and state teacher recruitment and retention efforts are reaching creative new levels in many places, but the cost of these efforts may not be sustainable. More states and districts should grab an under-utilized tool in their human resources toolbox: autonomous schools. The post-COVID era is opportunity to improve school systems nationwide by freeing schools from nation’s antiquated central office command and control model.
As parents “vote with their feet” and traditional public school district enrollment plunges, it’s beyond time for the pragmatic solution of adopting the portfolio district model with its variety of autonomous or semi-autonomous school models. This will require the bold but necessary step of recasting the central office as the quality control agent, not the school and classroom level decisionmaker.
Decades of research show that when teachers are granted trust, and the autonomy that flows from that trust, they are happier and ultimately more effective teachers.86 For those who doubt, watch an inspiring video (see URL in footnote 87) of Indianapolis teachers who teach in autonomous innovation schools. Over the course of seven minutes, they make their passion for autonomy from burdensome district rules and regulations quite clear. While combatants in the culture wars demonize teachers and heavy-handed collective bargaining agreements stifle them (whether the teacher themselves realize it or not), policymakers should take steps that will allow teachers to have more control over their classrooms and more influence over school policies, as is more common in autonomous schools.
Fostering growth in autonomous schools is a sustainable strategy for encouraging teachers to rethink leaving the profession. Teachers who have a passion for their students’ academic success and socio-emotional health must be respected and encouraged to stay in America’s classrooms — even if it means rethinking the system, passing legislation, or taking bold, pragmatic administrative policy steps to keep them there.
A quick response after reading last Wednesday’s lengthy, startling, and troubling letter from Sen. Elizabeth Warren and Rep. Pramila Jayapal to Commerce Secretary Gina Raimondo: Don’t charge people with bad faith unless you have evidence of it. Progressives can do better.
By way of introduction, the two Members’ letter continues a correspondence begun in July whose point of departure is a disagreement on digital trade policy matters such as cross-border data flows, divergences in national privacy regulation, and data localization. Sen. Warren and Rep. Jayapal object along left-populist lines to potential Biden administration negotiating positions on some of these topics in trade venues such as the Indo-Pacific Economic Framework and U.S.-EU Trade and Technology Council.
Were these disagreements the core of their letters, this would be the standard stuff of Congressional correspondence and advocacy. Digital trade issues are intellectually and technically complex. Conclusions about the best way to define U.S. interests on them can vary in good faith. And while Sen. Warren and Rep. Jayapal may be mistaken, dissent is perfectly legitimate and their rights to their opinions are obvious.
But the core of their letter is not the substance of policy but an insinuation – unsupported by evidence – that the Commerce Department is forming its positions in an improper or even a corrupt way and is likely pursuing specifically tech-industry goals rather than acting on good-faith Biden administration judgments about American interests. The letter uses two quite troubling lines of argument to back this up:
(1) Charges without evidence: For the Commerce Department as a whole, the letter notes that “several former employees” of tech firms work at the Department, and uses this bare fact to claim that “Big Tech” has an “untoward influence” on trade negotiations and may be “exploiting the revolving door with the Department” to set policy from outside. Apart from noting that several Department officials once held tech-sector jobs, the letter provides no evidence that the Commerce Department has taken any decision on any grounds other than its best assessment of U.S. interests and policy goals.
(2) Guilt by association: For individual officials, the letter cites past tech sector employment as evidence of “Big Tech’s current influence within the Department”, and a likelihood that “the Department’s revolving door with Big Tech firms will provide those companies the avenue they need to push their proposals across the finish line.” That is to say, some Department officials are pushing for goals they know are not in the general interest. Again, the letter does not cite any specific case in which any individual might have acted in bad faith, or provided advice that he or she did not sincerely view as good policy
The October letter, as did the July letter, then concludes by asking for lengthy lists of names – all Commerce appointees and civil servants who have previously held tech-sector jobs; all who left the Department after President Biden’s inauguration for tech-industry work – and accompanying lists of all tech-industry meetings these officials attended, or for which they helped in preparation and follow-up work. Again, no such list would provide any evidence of bad faith or improper policymaking.
Two thoughts on this:
First, as a practical matter, the letters’ premise leads to an absurd conclusion about policymaking and government personnel. To wit, U.S. government agencies should never employ people from sectors in which they have any oversight or policy responsibility, because such a person will inevitably put the interest of former employers above the national interest and his or her sworn duties. Applied to the Department of Agriculture, for example, such a standard would bar hiring farmers or people who might want to work in production agriculture later on. At the Centers for Disease Control, the presumption would be against hiring doctors and public health professionals. The Labor Department would likewise be well advised to avoid union members, and the Transportation Department should steer clear of airplane pilots and bridge architects, and even the Justice might need to stay away from anyone with a law firm background.
Second and more fundamentally, this premise – past employment with tech firms should entail presumption of bad-faith policymaking, and the Department and the individual officers need to disprove it – is wrong and unfair. Accusations of bad faith policymaking should require evidence of wrongdoing. American government officials, whether civil servant or political, qualify for their jobs based on three things: (1) they take an oath of office; (2) they pass an FBI security clearance investigation at the appropriate clearance level; and (3) they understand and respect national ethics laws and administration policy, for example by recusing themselves in cases these laws and policies define as posing a conflict of interest. If there is evidence that any official has fallen short on these responsibilities, provide it. If not, keep your argument to the merits. But neither letter provides any evidence that any Administration official has fallen short on any of these responsibilities.
The digital trade agenda as such is important in immediate economic terms, and more basically as a question of future world Internet policy. Obviously it has lots of implications for growth, for science, and for individuals. There’s no reason to shy away from spirited debate over it. But there’s also no reason at all to substitute attacks on character and integrity for this sort of debate. Progressives really need to do better.
The 164 WTO members, having agreed in June on a five-year waiver of patent rules for COVID-19 vaccine production, are discussing a next question: should a similar waiver apply to a wider array of “therapeutics and diagnostics”? Their self-imposed decision point for this is December 17th. As this date approaches, some background on the WTO’s intellectual property rules, their aims, and their possible effects:
Per the U.S. Constitution, the core goal of intellectual property laws is “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. laws on these topics date to the 1790s; international IP agreements and treaties, to 1883 for patents and 1887 for copyright. The WTO’s 73-article IP agreement, known as the “Agreement on Trade-Related Aspects of Intellectual Property Rights” or “TRIPs,” dates to 1995 and requires WTO members to adopt baseline IP patent, copyright, and trademark laws, enforcement procedures, and so on. Subsequent decisions provide exemptions for patenting rules for least-developed countries, and note that TRIPS rules do not prevent WTO members from acting on public health emergencies. Two data points on the intervening 28 years:
Research and Development: R&D spending, according to a World Bank database, averaged 1.97% of world GDP* in the mid-1990s. Between 2018 and 2020, R&D averaged 2.39% of world GDP. In practical terms, this now means about $2.5 trillion per year. Had the 1.97% figure remained constant, therefore, world governments, businesses, and universities would be spending about $400 billion less per year on science. By income group, high-income country R&D spending has risen from 2.3% of GDP to 2.8%. Low- and middle-income country spending has grown a bit faster, from 0.65% of GDP in 2000 (the first year in the World Bank’s database) to an average of 1.6% in 2018-2020. Based on the estimates in the table, about half of low-middle income country R&D spending growth was in China, and half in other countries.
Patenting: More research does seem to have meant more new inventions, or at least more patent awards. The World Intellectual Property Organization in Geneva reported 943,000 applications for patents around the world in 1994, 2.0 million applications in 2010, and nearly 3.3 million in 2020. The rise in actual patent grants has been faster, up four-fold from 450,000 patent awards in 1994 to 1.6 million in 2020: mRNA vaccines, touch-sensitive glass for smartphones, disposable satellite-launch rockets, biodegradable garbage bags, etc.
What to make of this? Causality is obviously hard to determine, and to some extent R&D investment likely rises with national wealth as well as responding to IP incentives. But the post-TRIPS world does appear to be one in which, as the Constitution’s references to incentives for useful Arts and Sciences” hoped, investment in science has grown (and grown especially rapidly in developing countries) and new inventions have cropped up.
Turning back to the WTO and its next steps, the June waiver for COVID vaccines is a highly specific one, and consistent with the existing 2005 “Declaration on TRIPS and Health,” on action during public health emergencies. No country so far, however, appears to have used this waiver (and the U.N.’s voluntary Medicine Patent Pool has arranged voluntary production licenses for 14 COVID medicines and therapies). This seems to indicate that the major challenges in raising vaccination rates are related to logistics and delivery to patients in low-income countries rather than to IP rules. “Diagnostics and therapeutics” are less specific terms, suggesting that a waiver for these products could apply to a variety of multipurpose medical devices and medicines yet to be invented. The data on R&D and patenting, meanwhile, suggest that the TRIPs agreement has at least contributed to a long-term upturn in scientific research and invention, a public good well worth preserving; which makes this next decision one that raises some systemic questions.
* The World Bank reports R&D spending at 2.33% of GDP in 2019, and 2.63% in 2020. We’re using a recent average on the assumption that the large one-year jump in 2020 was not an actual R&D increase but a COVID-related anomaly, reflecting less a jump in actual R&D than the temporary GDP effect of closing restaurants, hotels, construction sites, etc. for public health reasons.
FURTHER READING
TRIPS:
The World Trade Organization’s TRIPS page, with links to the agreement text, the 2005 Declaration on TRIPS and Health, and other matters.
… and the waiver for Covid-19 vaccine explained, with a link to text.
Medicines and COVID vaccination:
Tracking vaccinations by country and income level, ourworldindata.orgreports 4.74 billion people fully vaccinated as of the WTO’s June Ministerial, and 4.95 billion now.
Alternate approach: The WTO waiver authorizes “compulsory licensing” of medicines. The UN’s Medicine Patent pool, based on voluntary licensing agreements with companies, government science agencies, and nonprofits, now covers 14 COVID-19 vaccinations and treatments.
Research and Development:
The National Science Foundation reports on R&D spending among the top 8 R&D countries (U.S., China, Japan, Germany, U.K., France, Korea, India). At 3.5% of GDP, the U.S. is the world’s fourth-most R&D intensive economy; Israel is first at 5.4%, followed by Korea.
The World Bank has figures worldwide, by country, and by country categories (“low- and middle-income”, “Latin America and the Caribbean”, “Arab states”, and so on).
Patenting:
The World Intellectual Property Organization — WIPO, which continues to oversee the descendants of the 1883 Paris Convention on patenting — maintains a database which tallies patent applications and grants worldwide. The trend for grants post-1994:
And for comparison, the U.S. Patent and Trademark Office’s tallies of patent awards by year and origin. They count 388,000 patent grants in 2020, including 183,000 to U.S.-based applicants, and 205,000 to applicants abroad. Over a quarter of the foreign grants, 53,770, went to Japanese applicants. PTO’s tables.
A sample: A Corning fiber-optic cable patent, granted in 2001 and expiring last May.
IP Income:
According to the Bureau of Economic Analysis, revenue from overseas use of U.S. inventions (including trade secrets as well as patents) was $56.4 billion in 2021, or about two-fifths of $125 billion in total U.S. overseas IP revenue. This is about equal to the U.S. export figures for automobiles or of microchips. Worldwide, WTO’s figures on IP revenue show a global total of $470 billion in 2020, with the U.S. accounting for $144 billion or 31%. The EU was next at $90 billion, followed by Japan at $43 billion. By way of comparison, in 2020 top manufacturing exporter China had 19.7% of world manufacturing exports; the U.S. led in energy and agriculture, with respectively 8.6% and 9.4%. The WTO data here.
And the Bureau of Economic Analysis’ services database has U.S. IP receipts and payments, by country and type.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
Over the last two years, Congress has passed a series of landmark bills that together fund more than $500 billion in clean energy investment, by far the largest ever enacted. More importantly, generous tax incentives can spur many trillions in direct private sector investments, creating a powerhouse U.S. advanced energy sector. Yet, right now, a broken U.S. energy permitting system short circuits thousands of major projects, imposing tremendously high costs in time and money to build clean infrastructure projects, if they get built at all.
Congress had an opportunity to fix this roadblock through a permitting reform bill, but despite claiming to support reform, Senate Republicans effectively killed the measure in a nakedly political effort to deny Democrats a popular policy win. Democrats should turn the tables on the GOP, making the economic and climate costs of this hypocritical action a major campaign issue in the upcoming midterm elections.
Ironically, in the name of environmental protection, a perverse process has developed over decades whereby often unnecessary and duplicative government reviews and nuisance lawsuits have pushed average time for permitting to 4.3 years for electricity transmission, 3.5 years for pipelines and 2.7 years for renewable energy generation projects. In the mid-Atlantic and near-Ohio valley alone, more than 2,500 projects are awaiting approval, 95 percent of which involve renewable energy. In fact, a new Progressive Policy Institute (PPI) report finds that without extensive permitting and regulatory reforms, large projected economic benefits and emissions reductions from recent laws would be substantially limited, and fail to meet policy goals.
LIVERPOOL, England — Brexit is done, and Donald Trump, given the boot by U.S. voters, is angrily pacing the political sidelines. But the upsurge of rightwing populism that produced them both continues to roil transatlantic politics.
Last Sunday, the far-right Brothers of Italy party, which has a fascist lineage, finished first in national elections. Its leader, Giorgia Meloni, will become Italy’s first female prime minister. She’s a socially conservative Christian who opposes immigration, abortion and LGBTQ rights. Although she’s toned down her Euroskepticism, Meloni also is an “Italy First” nationalist likely to align with illiberal regimes in Poland and Hungary.
A virulent strain of national populism also is advancing in Europe’s social democratic heartland. The Sweden Democrats (SD), formerly a fringe party with neo-Nazi roots, finished a strong second in national elections earlier this month and will join a right-leaning government.
The Progressive Policy Institute (PPI) recently commissioned a national survey by IMPACT Research of midterm voters’ attitudes on competition issues across a variety of industries. The survey found that a large bipartisan majority of voters are not focused on competition issues and do not want Congress or the federal government to take new regulatory action within the beer industry, as outlined in the Treasury Department’s February 2022 report. The polling finds that inflation is top of mind for likely 2022 voters and they generally don’t blame companies for high prices across industries.
“This data shows that overwhelmingly, voters want Congress and the Biden Administration to focus on inflation and the rising cost of living — and not on imposing unnecessary regulations on successful U.S. companies and a thriving industry. Americans have more choices for beer and more opportunities to buy from different brewers than ever before, with over 9,000 in the U.S. alone,” said Lindsay Mark Lewis, Executive Director at PPI. “This isn’t the time or place for the White House to raise prices on working families.”
Inflation continues to be the top priority of voters ahead of the 2022 midterm elections, while increasing competition between big companies ranks last. According to IMPACT Research’s findings, voters have concerns that new rules or regulations would raise the price of beer. PPI found in September 2021 that beer actually had a low rate of inflation compared to the overall price levels for personal consumption expenditures.
The memo on this exclusive polling can be found here.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C., with offices in Brussels and Berlin. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
FACT: U.S. trade with Russia is down by 80% since February.
THE NUMBERS: American imports from Russia, 2022 –
January: 8.3 million barrels of crude oil, 35,700 carats of diamonds, 2,100 tons of Arctic crab June: 0 barrels of oil, 0 carats of diamonds, 0 tons of Arctic crab
WHAT THEY MEAN:
Reporting on the impact of sanctions, war, and conscription on Russia now tends by force of circumstance to be anecdotal, sometimes hard to verify, and relate to larger systemic trends: A tank factory halting production in March as a result of parts shortages, retail chains and international auto manufacturers departing, 98,000 young Russian men leaving for Kazakhstan last week and lines of cars at Georgian and Mongolian border crossings, and so on. Macro forecasting provides some context for these individual stories but is very abstract: The International Monetary Fund’s World Economic Outlook update this July projects a contraction of -6.0% this year (comparable to the 2008 financial crisis experience) and -3.5% in 2023.
Visible trade flows also provide only a partial picture (and an unusually limited one since Russia has declined to publish monthly trade data since the invasion), and can perhaps bolster anecdotes and macro vistas with some of the information in between. Two international sources, and a more detailed look at the post-February trends in U.S.-Russia trade flows, seem to show (a) a significant, but far from total disengagement, from world goods trade, and (b) in the context of the IMF’s overall prediction, probably a sharp domestic-economy effect given that Russia’s energy revenue remains high:
(1) The IMF’s “Direction of Trade Statistics,” a standard source for top-line goods trade totals, has country-by-country data for exports through May of 2022. Their figure for “world exports to Russia” reports $23.6 billion in exports to Russia in January, and $14.6 billion — i.e. a drop of about 38% — in May. Reporting on individual countries suggests that this may understate the total decline in Russian imports, as the IMF database finds Chinese exports to Russia down from $7.3 billion in January to $4.3 billion in May, the EU’s from $8.1 billion to $4.2 billion, Japan’s from $600 million to $190 million, Korea’s from $813 million to $339 million. These trends are not universal; Kazakhstan’s and Turkey’s Russia export figures, though smaller than those of the big economies, were both slightly up. The database unfortunately does not seem to have 2022 figures for “imports from Russia.”
(2) Analysts at Bruegel, an economic think-tank in Brussels, carry this a bit further, collecting national trade data through June from 34 countries accounting for about 75% of Russian trade, and adding imports as well. This concurs with the IMF’s less up-to-date finding, with Russian purchases from the relevant countries dropping from $18 billion in January to a low of $8 billion in April, then bumping up to $12 billion in June. Bruegel finds Turkey the only major economy whose Russian exports are at or above pre-invasion levels. Russia’s sales to other countries have been less affected: Russian energy exports rose a bit as world prices rose (from $26 billion in January to $27 billion in June, with the other months in between), but non-energy exports dropped by slightly more, from $17.5 billion to $13.4 billion. This matches EU data, showing less purchasing of Russian manufactures and farm products offsetting higher energy prices.
(3) The U.S. data is complete through July and quite detailed, showing drops of 80% in both the export and import accounts. U.S. exports to Russia have dropped from $500 million to $83 million, with sales to Russian industrial buyers now close to zero: semiconductor sales, for example, fell from $8 million in January to $0.25 million in July, computer equipment from $8.3 million to $0.4 million, motors and generators from $6 million to $0.2 million. The remaining significant U.S. exports to Russia appearing to be mostly medicines and medical equipment. Imports are likewise down by about 80%, from $2.5 billion in February to $484 million in July. The month-by-month figures looks like this, with energy-price related jumps in February and March followed by steady decline:
Overall, energy and luxury-good bans have eliminated almost all U.S. purchases of Russian oil and gas, diamonds, and seafood. The remaining Russian exports to the U.S. are mostly metals (exempted in most cases from the import bans and also little affected by withdrawal of MFN tariff rates) and fertilizer. Aluminum imports in fact are up from $41 million to $89 million, and nickel from $9 million to $52 million.
As with the macro forecasts and anecdotal reporting, the goods-trade figures suggest an economy (a) contracting sharply though not in free fall, (b) continuing to raise money through energy sales, and (c) possibly seeing somewhat sharper industrial declines than the macro figure suggests.
FURTHER READING
Big Picture:
The IMF (July) projects a contraction of Russian economic contraction of -6.0% this year.
Data:
Census’ basic month-by-month data on U.S.-Russian trade.
Bruegel analysts Zsolt Darvas and Catarina Martins review Russia import, export, and balance data for 34 countries. Sharp drop in imports, exports steadily more concentrated in energy, trade balance a secondary issue.
The IMF’s somewhat challenging “Direction of Trade Statistics” database.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
Online platforms face an increasingly complex regulatory environment in the European Union. Altering their business models to comply with EU regulation while simultaneously experiencing intense scrutiny from competition authorities, American tech companies are being pushed to evaluate their profitability in Europe. Yet, proposals circulating within the EU are seeking to capitalize on this profitability by taxing these same companies to subsidize broadband infrastructure expansion.
While the sector is currently engaging in high levels of investment and enjoying consistent revenue growth, the notion that any industry can withstand significant taxation on top of mounting regulatory compliance costs threatens both the jobs created by the sector and the promise of future investment. These are circumstances that the European telecommunications industry knows well. With amassed regulation corresponding to relatively weak revenue growth over time, EU telcos have struggled to invest in the development of new high speed network technology such as 5G at the same rate as their counterparts in the United States and China. As high-capacity networks become the norm for consumers who rely on data-heavy services like streaming high-quality video and video conferencing tools, Europe risks being left behind in the next era of technological innovation. Though plagued with its own set of problems such as the ongoing debate over net neutrality, the U.S. telecommunications industry has managed to sustain a high level of investment, resulting in widespread 5G infrastructure and connectivity. Concurrently, European telcos have faced weak revenue growth and difficulty translating the demand for online services into a demand for new subscriptions.
Despite the apparent lag, the European Union’s “Plan for the Digital Decade” has set the goals that by 2030 every home in Europe will have Gigabit connectivity and every populated area of Europe will have access to 5G service. While this sounds like a great leap forward in digital expansion, the reality is that each of these goals presents a massive capital investment challenge to European telecommunications companies. Aware of this funding gap, the governments of France, Italy, and Spain released a joint paper in August 2022 calling on the European Commission to craft legislation requiring large online platforms pay a “fair share” of network infrastructure in Europe. EU regulators and industry groups such as the European Telecommunications Network Operators’ Association have echoed this proposal, with the idea being that the growth of these online platforms is dependent on the quality of network infrastructure. They make the claim that “over-the-top” (OTT) companies such as Google and Netflix need improved networks because of the data-intensive nature of their content and should thus contribute to the cost.
But there are regulatory factors preventing European telecommunications companies from accruing the revenue needed for significant network infrastructure investment which additional regulation will not solve. A recent letter signed by 13 European telecom CEOs points out the harm that EU price regulation causes to the competitive market for telecom services, 4 and major operators such as Vodafone have been vocal in their calls for market consolidation to support the scale needed for companies to invest in network expansion. In light of this, those calling for similar action against the tech sector should evaluate whether an additional tax in the face of strict competition guidelines and increasing regulatory hurdles will result in more network investment in the long run, or similarly impair the ability of the tech sector to contribute. This report offers a comparative analysis of the performance of the U.S. and European telecommunications industries, focusing specifically on their ability to achieve widespread high-speed network connectivity to examine the relationship between capacity for investment and heavy regulation. It finds that U.S. companies generally have had greater success in terms of connectivity and services speeds while Europe’s emphasis on low consumer prices may have resulted in underinvestment in its telecommunications sector. It recommends that for Europe to realize its full potential in terms of future technological innovation, the EU must adjust its regulatory policies to acknowledge the trade-off between low prices and investment, avoiding overregulation of high investment industries and supporting a sustainable digital transition for EU’s telecommunications industry.
COMPARING TELECOMMUNICATIONS MARKETS IN THE UNITED STATES AND EUROPEAN UNION
Over the last decade there has been a global shift in consumer preferences from a reliance on voice-enabled communication to more data-driven internet services such as online messaging and video-calling. The consequence has been a shift in profitability from telecommunications operators to companies which operate internet platforms.
This trend is evident when looking at the percentage of profit held by telecom companies and internet platforms over time. Combining the telecom and internet sector, the global industry had a cumulative profit of $251 billion in 2014. Of this, 74% was profit by telecom companies, leaving the remaining 26% as the profit made my internet platforms. Just five years later, the cumulative profit remained similar at $260 billion, but internet companies now accounted for 60% of the profit.
However, when looking at the telecom industry with a more regional lens, this loss in revenue may not be equally distributed across all telecommunications markets. Though they face similar challenges, there’s a difference in capital investment and subsequent levels of connectivity when comparing the United States and Europe.
Capital Investment by Telecom Operators
Telecommunications is a capital-intensive industry which requires continuous investment to maintain and develop efficient networks able to meet the challenges of rapidly evolving technology. With the struggle to reach new consumers looming over these companies, revenue growth is slow across the industry. However, while a handful of top European telcos experienced negative revenue growth in 2021, top American telecom operators grew a minimum of 4% — with T-Mobile’s U.S. division experiencing growth of almost three times that.
Figure 1 displays five of the top telecom operators by annual revenue in the European Union and United States, as well as their 2021 capital expenditure. Displayed are only the revenue and expenditures of these companies as they relate to telecommunications — excluding other lines of business. This data is reflective only of the company’s activity within the United States and EU member states and thus does not encompass global operations. Discrepancies such as the inclusion of spectrum licensing fees and inclusion of small amounts of overseas data may be present based on a company’s methods of reporting.
Despite the wavering profitability of the telecom business model globally, American companies are experiencing higher rates of revenue growth and therefore have the wherewithal to boost their capital spending on broadband. Many companies’ annual reports note that a significant amount of this expenditure is being directed to the expansion of 5G networks in the U.S., increasing American capacity for data intensive services. European consumers are not benefitting from the same level of investment in high-capacity networks, and European telecom operators are not experiencing the revenue growth required to catch up.
Service Speeds and Connectivity
The heightened need for investment in network infrastructure comes as global online traffic increased roughly 60% in 202018— tasking the telecom industry with ensuring not only widespread connectivity but that their networks have the bandwidth for high levels of consumer use. European networks were not prepared for the surge in online activity, making bandwidth comparatively scarce. As a result, in 2020 the EU called on streaming platforms to lower the quality of their video streaming services to reduce the bandwidth needed to bring video to consumers. In response, platforms such as Netflix and YouTube lowered the quality of video offered to consumers in certain European countries, lightening bandwidth needed to use their services to free capacity for other users.
But bandwidth has not been the only challenge. The EU also trails behind the United States when it comes to levels of coverage. Though by 2020 Europe had begun to match the U.S. on the percentage of households covered by broadband networks, there are still disparities in levels of rural and high-speed coverage. The following figure considers connection to be “high speed” if it allows download speeds above 30 Mbps. In the U.S. in 2020, 98% of all households were covered by high-speed broadband, while in Europe only 87% percent of households had access to the same speeds. This is largely driven by the lack of high-speed connection in rural areas of Europe.
When it comes to internet connection speeds, America holds a substantial lead. Median download speeds in the United States more than quadrupled in the period between 2017 and 2020, when download speed grew by 157.7% year over year. Europe’s median speed also increased with a year over year growth rate of 76.2%, but this still left them lagging substantially behind. In 2021, the U.S. median of 83 Mbps was more than double the EU’s median of 38 Mbps. Only four European cities (Copenhagen, Stockholm, Bern, and Budapest) had reported median download speeds faster than the nationwide median reported stateside in 2021.
The United States has also pushed deployment of advanced networks, including fiber optics, at a higher rate than in Europe (see Figure 2). In general, American consumers are more likely to opt into internet subscriptions with higher service speeds. A study by USTelecom found that in 2020, 55% of connected U.S. households had subscriptions with speeds reaching at least 100 Mbps, while only 34% of connected European households had subscriptions capable the same speeds. Whatever the reasons for this wide performance gap, it’s clear that the United States proved better able to support surging demand for online services and commerce during the pandemic.
Differences in the Price of Service to Consumers
One metric by which the European telecom industry has the upper hand is prices paid by consumers for internet services. A study by New America’s Open Technology Institute found that in 2020, the average monthly cost of internet service in Europe was $44.71, compared to $68.38 in the United States.
During a period of global inflation there is considerable value in the EU’s prioritization of maintaining low costs to consumers who are juggling rising prices across other sectors. In the context of analysis of the sustainability of the telecommunications industry, however, is important to take account of the trade-offs associated with low prices. European telcos exhibit lower revenue growth, lower levels of capital investment and lower rates of high-speed connectivity than their U.S. counterparts. As Figure 2 shows, the United States also has a significantly higher proportion of rural households with access to high-speed broadband. Rural broadband comes at a high cost to the network operator. As companies expand coverage into less dense areas, the average cost per potential customer rises. Sparsely populated areas don’t provide companies with the return on investment through user fees needed to cover the cost of that network expansion. This generates pressures for both government subsidies and price hikes. Rural regions often also present geographic challenges, both in terms of remote locations and rough terrain for laying cables, further raising the cost to companies.
Prices in the European Union are also lower because of more aggressive regulatory intervention. Europe has maintained a stricter approach to competition policy in the telecommunications industry, contributing to the lower prices when compared to the more consolidated American sector. Additionally, regulations like the EU’s “roam like at home” policy, which requires telcos based in one country to provide service across borders within the European Union at no additional charge, also keep prices down — protecting consumers from predatory behavior by companies overcharging for roaming fees but at the expense of the profits firms need to make robust investments in high-speed networks.
Adoption of 5G Service
With the newfound prominence of data services, the telecommunications industry has largely looked to rising demand for 5G to fill the hole in revenue created by consumer preferences shifting away from traditional telephone lines and voice traffic. 5G technology is integral to business innovations such as driverless cars, virtual reality-based platforms like the Metaverse, the development of more integrated smart cities, and other Internet of Things applications. But many of these products are in their infancy, meaning that for consumers who would be accessing 5G networks from smartphones, which operate just as effectively on lower capacity networks, the benefits of 5G are relatively intangible. Without consumer need for these networks, the incentive for companies to invest the capital required for widespread deployment is low.
Still, European companies have joined their international counterparts in deploying 5G technology in preparation for that next wave of consumer tech products. The industry association GSMA estimated that as of May 2022, 34 out of 50 European countries had some level of 5G deployment and 92 of 173 operators in the region launched 5G networks. However, even though there are networks available in most countries, only 2.5% of all online connections in Europe were 5G connections in 2021. When compared to other leading economies such as the United States, where 5G accounted for 14.2% of connections, and China, where 5G accounted for 28%, this demonstrates a significant lag in deployment and consumer adoption. This is a trend which is also reflected in the types of hardware being purchased by consumers. The majority of smartphones purchased in Europe are 5G enabled, but 5G smartphones accounting for 60% of smartphone sales in Europe adoption still falls behind the 73% of smartphone sales in North America.
Advocates for 5G expansion tout its potential to support much higher speeds, superior network reliability, and negligible latency. But consumer tech products like smartphones aren’t going to operate much differently between 4G and 5G networks — leaving the appeal of 5G dependent on the promise of future technology. Telecom companies have invested in these networks nonetheless but, without an influx of products on the market which rely on it, the demand is unlikely to translate into the revenue needed for more network expansion. When you add the premium price operators would have to charge to improve their networks, consumers may not consider it a good deal. This is why analysts expect business adoption to be the main driver of 5G demand, though the lag in consumer adoption compared to the United States and China is concerning for the immediate financial state of the European telecom industry.
CONTRIBUTIONS OF OVER-THE-TOP COMPANIES TO NETWORK INVESTMENT
A 2022 report by MTN Consulting found that investment by global telecom operators as a proportion of their total revenues peaked at 17.3% in 2021, driven by 5G network deployments. However, because of the low return on 5G investment, this proportion is expected to decline in coming years. In any case, telecom investment alone doesn’t give us a full picture of the size and extent of broadband infrastructure in Europe or the United States. Six American companies — Meta, Google, Apple, Amazon, Microsoft, and Netflix — currently account for 56% of all global data traffic between both fixed and mobile networks.
They are considered “over-the-top” or OTT platforms because they are companies reliant on the internet to deliver their products to consumers, in contrast to content mediums such as cable and broadcast. Each of these companies offers highly data-intensive products such as streaming, putting significant strain on areas where the coverage does not offer sufficient bandwidth to run these services.
This is the rationale for the notion that over-the-top platforms are free riders on the telecom investments that allow them to reach their users. However, contrary to over-the-top moniker, these platforms have also made significant global investments in the underlying infrastructure required to support their services. The aforementioned six American companies invested a cumulative $137.3 billion globally in 2021, including $58.2 billion from Amazon 31, 24.6 billion from Google, and $24.2 billion from Microsoft. Included in these figures are investments into the construction of data centers, subsea cables, and network edge locations — all which store and transmit the data traffic that European networks are currently struggling to support.
These investments have been largely focused on supporting the creation and expansion of a cohesive global internet. For example, a partnership between Microsoft, Facebook, and Telxius, a Spanish telecom infrastructure company, finished construction of a transatlantic cable in 2017 connecting the U.S. to Spain with the capability to transmitting up to 160 terabits of data per second. Additionally, Google has least 15 subsea cable projects underway around the world, totaling over 10,000 miles of submarine cable. Outside of the EU and U.S., the company has announced $1 billion in investment to support network expansion in Africa in 2021.
Each of these cables can cost several hundred million dollars apiece, signaling that capital investment by these companies is both large and growing as more of these types of projects are announced. Combined, it is estimated that the subsea cable projects by American OTT platforms contributed to an increase in global data transmission capacity by 41% in 2020.
As they seek to extend the efficiency and accessibility of their products to new customer bases, OTT platforms are expected to increase their capital expenditure from an average of 26.4% of their revenues over the past five years to more than 37% over the next half-decade. That means OTTs likely will be the main driver behind global network infrastructure investment moving forward.
Another overlooked aspect of network infrastructure is the construction of global data centers and network edge locations. Data centers are facilities crucial to storing, processing, and disseminating data and applications over the internet or through the cloud, and network edge locations are facilities geographically distributed to efficiently deliver content to nearby end-users. These are vital investments for over-the-top platforms which, while relying on telecom networks to reach users, need physical locations to support global data transmission.
Five of the six big U.S. tech platforms (Netflix is the exception) the EU identifies as bandwidth hogs own and operate their own data centers and edge locations with both U.S. and European presence, as shown in Figure 3, highlighting the investment made to the larger network. Without construction of their own centers, companies outsource to third party content delivery networks to store and transmit data over the cloud. Netflix, for example, largely relies on Amazon’s AWS network for data storage and computing.
WHAT REGULATORY DIFFERENCES ARE HOLDING EUROPEAN COMPANIES BACK?
Although wireless prices have largely been flat in both European and American markets, U.S. telcos have been able to invest more in 5G and other high-speed network expansion. While some of this investment gap may be explained by lower prices and varying consumer interest in paying for high-capacity networks, the difference in regulatory strategies also is likely at play.
The EU has prioritized the lowest possible price to consumers through rigorous enforcement of competition law to discourage consolidation as well as caps on the prices paid for certain services. In contrast, U.S. policymakers have emphasized investment in high-capacity networks and rural broadband. Though favorable to consumers, it is difficult to see how the EU can sustain its strategy of price-focused regulation and still meet its aggressive connectivity targets for the next decade.
Enforcement of Competition Law Telecommunications networks present a unique challenge when it comes to competition law. Barriers to entry for new telecom operators are high given the capital needed to compete with established networks.
Because the cost of entry is so high, large companies utilize economies of scale to expand and maintain massive networks.
The United States and Europe tackle this challenge in different ways. The U.S. telecommunications market tend to be dominated by a few massive players. European countries aim at forming more localized markets with multiple providers, with regulations that ensure high levels of cooperation between companies to maintain a single coherent network.
High levels of competition help to keep consumer prices low. But as the U.S. case shows, a more consolidated market may allow for the economies of scale required to invest in areas where the return on investment is very low — allowing for higher quality service to rural communities.
This is not to say that the American model is ideal. Too many areas of the United States are served by only one provider, leaving consumers without the ability to shop for prices or consumer-friendly contracts. But for there to be substantial competition in more remote areas of the country, there either needs to be an influx of small telecom operators building rural networks — unlikely given the extremely low return on investment of expanding networks into sparsely populated places — or more large companies which can serve remote areas. This is the logic behind a federal judge’s approval of the merger between T-Mobile and Sprint in 2020. The judge reasoned that the combined company would be better equipped to compete with established industry giants Verizon and AT&T. Thus, despite the market becoming more consolidated, the merger would bring a new player to the top of the market putting pressure on incumbent companies in terms of service quality and price.
In contrast, the EU has been far stricter about the size of telecommunications companies, preventing consolidation and instead encouraging network sharing between operators. As a result, the European telecom market is highly fragmented with most countries hosting as many as four mobile operators, many of which are wary of making significant investment in 5G without clear signals that they will see a profitable return. This has prompted companies such as Vodafone and Orange to call for consolidation, claiming that overcrowding in European markets is making it difficult to invest and that network providers do not currently have the financial capacity to pay for the infrastructure needed to develop 5G technology
Europe’s fragmented broadband market necessitates a complex array of network sharing agreements between operators to ensure that their services work throughout the country. EU regulators have been clear in the goal that European consumers should have seamless access to data and voice services when traveling within the EU, requiring companies to negotiate with one another to ensure that their customers will have service in areas of the continent not covered by their own networks. In order for these agreements to be acceptable under EU antitrust law, they must ensure that they’re not reducing incentives for competition in deployment of infrastructure, putting an additional burden on companies which are struggling to achieve the scale needed to expand. It is for these reasons that CEOs of European companies such as Telefonica, Vodafone, and Norway’s Telenor have said that consolidation is necessary because current price wars and low margins are limiting funds available for 5G deployment. Critics of the movement for consolidation cite the likelihood that it will result in higher prices.
Government Funding for Network Expansion and Accessibility
In the U.S., the government spends billions annually to expand access to affordable internet service. Its efforts are mainly directed at subsidizing private companies to offer discount prices to low-income households. The pandemic-induced transition to online school and work in 2020 provided fresh impetus for these programs. In 2021, the Bipartisan Infrastructure Law allocated $65 billion broadband infrastructure deployment and affordability programs, including $401 million to provide access to high-speed internet for 31,000 rural residents and businesses in 11 states. Other programs such as the Affordable Connectivity Program are targeted specifically at long-term affordability for low-income households with a discount of $30 per month for internet service plans.
European funding for such projects differs on a country-by-country basis, but there are also initiatives being spearheaded at the EU level. The EU’s targets for the “Digital Decade” detail a series of initiatives for member states between 2021 and 2030. In addition to the ambitious connectivity targets, Brussels envisions a broader digital transformation in which at least of 80% of the population have digital skills and 75% of EU companies utilize the Cloud or other data services. As previously mentioned, under this plan the EU hopes to have Gigabit connectivity for everyone in Europe and 5G connectivity in all populated locations. To finance these goals, the EU suggests that member states allocate 20% of their funding from the Recovery and Resilience Facility — an EU program meant to finance reform and recovery post-pandemic — to the digital transition.
In addition to funding from the EU, member countries have put varying levels of public investment into expansion of fixed and mobile networks. While not a comprehensive list, the table below provides examples of the funding initiatives taken on by a handful of European countries since 2021.
European Price Caps on Telecom Services
While the U.S. government has negotiated with private network providers to lower prices of internet service for low-income Americans and implemented programs to give benefits for these households to front the costs, capping the prices that telecom operators can charge for given services without subsidy is a policy that is uniquely European.
Potentially the most consequential example of this is the EU’s “roam-like-at-home” policy, which allows customers with EU service plans to travel within the EU without additional charges for data roaming. In addition to requiring no charge to the consumer for crossing national borders, companies are required to ensure that data usage is available abroad at the same capacity and speed as the consumer would be paying domestically, with any additional surcharges for surpassing that data usage at €2 per GB of data. It would be infeasible for companies to have network infrastructure everywhere in the EU to meet the requirements of this policy, so it is made possible through network sharing. European telecom operators must enter agreements with other companies so that their customers can access other networks. This can be a costly process for telecom companies so, in the interest of supporting the sustainability of this policy for the telecom operators, wholesale caps are in place to provide a maximum amount that a visited operator may charge for the use of its network in order to provide roaming services.
The problems associated with this policy from a business standpoint are intuitive. By capping roaming fees, the EU limits telecom profits. On top of that lid on profits, companies are not allowed to charge one another more than the wholesale cap. If a company’s costs are at or above the cap, it loses money whenever its customers travel within the EU.
In addition to caps on roaming charges, in 2019 the European Parliament approved a rule to control the prices of intra-EU communication, capping cross-border phone charges at 19 cents per minute for calls and 6 cents per text message. Its purpose is to lower costs to consumers and bolster competitiveness for EU businesses, which will pay less for telecom services. However, for EU telecom operators forced to offer services with a lower profit margin, the net result is less global competitiveness.
There is no question that this is a beneficial policy for consumers in the short term, but the long-term impact is that such policies will disincentivize investment into Europe, ultimately hurting the individual who is having to consume other products at a lower quality than others around the world because of a lack of bandwidth and might not have access to future data-heavy services without network updates. Disincentivizing investment in Europe also pushes European telecom providers to bring their capital investment elsewhere. Vodafone has been in the Indian market since 2007 and continues to invest heavily in expansion in the region, working on bringing 5G to India. Similarly, as shown in Section I, T-Mobile in the United States is now much larger in terms of both revenue and capital investment than their parent company and European line of business, Deutsche Telekom.
CONCLUSION
The United States and the European Union have vastly different telecommunications sectors in terms of market structure, regulation, and operating capacity. Though these differing approaches have worked in the past, the recent influx in demand for bandwidth has exposed cracks in the European system which differ from those in the United States.
As Europe’s example shows, heavily regulated industries tend to invest less. In deciding how to move forward with goals for connectivity and digitalization, the trade-off between low prices to consumers must be weighed with the telecom operator’s propensity to invest such that the industry is not crippled by inability to achieve sufficient scale for network expansion.
This trade-off must also be weighed in the case imposing a fee on internet platforms. While over-the-top internet platforms are currently experiencing high growth, the mentality that they are therefore too big to fail and can withstand heavy regulation and taxation is an oversimplification of the market. This is a heightened risk given the other regulatory activities affecting the tech industry in Europe such as the Digital Markets Act passed in July 2022, which identifies many of these same companies as “gatekeepers” for purposes of competition law, further regulating their ability to profit in European markets. When an entity is taxed, it will also invest less. To add responsibility for network expansion to a growing list of recent EU regulations on leading American online platforms puts strain on an industry which currently engages in enormous capital expenditure, altering the incentive for them to continue to operate and invest within the EU.
With China and the United States leading the way for 5G and high-capacity networks, now is the time for Europe to strengthen its own networks to compete in the next era of technological innovation. As we move toward products that require higher data traffic there is a demonstrated need for updates to global network infrastructure. This will require global cooperation and investment, both from the telecom sector and the OTT platforms which are investing in ways to connect the international internet ecosystem in ways which are not necessarily covered by telecommunications companies. For a successful push toward global digitization, governments must recognize and support this private investment such that European innovation isn’t left behind.
Today, the Progressive Policy Institute (PPI) led a coalition letter to House Congressional Leadership urging their opposition to H.R.3460, The State Antitrust Enforcement Venue Act.
As explained in the letter, the bill would reduce the efficiency in the American judicial system — which is already backlogged — and disregards a clear opportunity for centralization that would conserve time and taxpayer dollars. The letter also lists additional concerns related to politically motivated judicial consequences from state attorneys generals where a company may be politically unpopular in a state or region.
Read the full letter:
Dear Speaker Pelosi, Leader McCarthy, and Leader Hoyer:
State enforcement of antitrust law plays a key role in protecting consumer welfare in the face of corporate monopolies. However, the national nature of our economy means that, in many cases, consumers across state lines are buying the same products and services. H.R.3460, the State Antitrust Enforcement Venue Act, retreats from the national nature of many markets by attempting to refocus antitrust law on a state-by-state basis. It makes this shift by preventing venue transfers for antitrust cases brought by state attorneys general in favor of a system where states can bring antitrust claims against companies with more control over the venue in which these cases are carried out. A major change such as this will have unforeseen consequences in a variety of antitrust situations. It is for this and the following reasons we urge you to oppose H.R.3460, which is incorporated in the House Rules Committ9.26.22 Venue Act Coalition Letteree notice hearing for the modified version of HR 3843, the Merger Filing Fee Modernization Act.
A July 2021 letter from the Director of the Administrative Office of the U.S. Courts explains the ways in which the bill would reduce efficiency in the American judicial system. It highlights that currently under 28 U.S. Code § 1407 similar civil cases in different districts are consolidated by the Judicial Panel on Multi-District Litigation, which then transfers the case to a single district. This can be requested by the defendant and the intent is to minimize duplicative processes and prevent inconsistent rulings.
By discarding this means for centralization through the passage of H.R.3460, the processes through which states approach antitrust cases is fundamentally changed. As is pointed out by the Administrative Office of the U.S. Courts, efficiency is compromised, as courts will need to separately engage in similar discovery and pretrial proceedings in different venues, even in cases where it would conserve the time of the court and taxpayer money to carry out in a single district.
Additional concerns lie in the potential for politically motivated judicial consequences associated with the bill. The bill’s elimination of the consolidation process for antitrust cases brought under 15 U.S.C. § 15c will give rise to a reality where different states could simultaneously pursue their own separate antitrust actions against the same companies across various federal courts. As such, state attorneys generals may harass companies that are politically unpopular in a particular state or region.
Creating a fragmented and inefficient antitrust system is not the optimal remedy for potential corporate antitrust violations. We urge you to oppose H.R.3460, the State Antitrust Enforcement Venue Act, and avoid the unintended consequences that may come with it.
Sincerely,
Progressive Policy Institute (PPI)
Center for New Liberalism (CNL)
Computer & Communications Industry Association (CCIA)
President Biden and lawmakers in both parties have prioritized slashing Americans’ out-of-pocket spending on insulin. And they recently made significant strides by including a $35-a-month co-pay cap for insulin for Medicare beneficiaries in the Inflation Reduction Act.
But as promising as these cost reduction measures are, they raise a key question: Why limit the co-pay price caps to just insulin?
More than 6 million North Carolinians live with at least one chronic condition, and 2.5 million are living with two or more. For seniors on Medicare, chronic disease prevalence is even higher, and for millions with fixed incomes, out-of-pocket costs are increasingly problematic.
If a $35-a-month co-pay cap makes sense for insulin — and it does — why not implement the same policies for medicines that treat asthma, hypertension and other common chronic conditions and focus on Medicare where chronic diseases are so prevalent?