Which Side Are They On?

A titanic struggle is brewing in California between Silicon Valley capitalists and workers. Democratic Party elites will have to pick a side.

Facebook founder and CEO Mark Zuckerberg at a developer conference in April 2010 in San Francisco, CA. Getty

A few weeks ago I did an interview with Dan Denvir of Jacobin Radio’s The Dig podcast about the prospects for creating an independent working-class political party in the US. One of the points I tried to make was that American parties, unlike their counterparts elsewhere, have no mass memberships.

The real “members” of the parties are their officeholding politicians. And the primary function of the party organization is to strengthen those individual officeholders, not just in relation to candidates from the opposing party, but also vis-à-vis their own electoral base. That’s why party fundraising groups like the Democratic Congressional Campaign Committee never support primary challenges against incumbent Democrats — even when the incumbents in question take positions at odds with the party’s congressional leadership.

This set-up leaves each individual politician free to play the role of broker, balancing the competing interests of various constituencies as they see fit, with no interference from annoying party bodies or membership organizations. And in the Democratic Party’s case, that means balancing its business constituencies against various progressive or working-class interest groups.

We’ll soon see a fascinating example of that phenomenon play out in real time. This week, Bloomberg’s Josh Eidelson reported on a titanic political struggle that’s brewing in California, where the state Supreme Court issued a ruling last April imposing stringent conditions on when and how firms can classify workers as independent contractors — a practice used throughout the corporate world to get around labor laws and generally keep workers divided and weak. The ruling has stirred panic in the state’s business establishment, which is now in the process of mobilizing what looks to be a massive and very serious counter-attack aimed at neutering or overturning it.

Two aspects of this fight make it especially interesting to watch. First, California is a deeply blue state. Its governor is a Democrat, and its legislature’s upper and lower chambers are, respectively, 64 percent and 69 percent Democratic. The Golden State is now “the de facto leader of left-leaning America,” as veteran political analyst Ronald Brownstein recently wrote. So, unlike their counterparts at the national level, California’s Democrats can’t blame pro-business policy outcomes on Republicans. And we’re in a political moment in which Democrats are under unusually strong pressure to present themselves to their base as progressive champions.

Second, the underlying issue is distinctive. Many progressive policies lend themselves quite easily to the kind of political brokerage that Democratic politicians excel at. Take Medicaid expansion, for example. In terms of policy substance, it’s a clear-cut progressive measure. But in political terms, it’s a classic case of a cross-class, win-win move. Because Medicaid recipients are too poor to afford private health insurance in any case, the insurance industry is happy to let the program exist. And because Medicaid funnels money to health care providers, the latter are positively eager to support it. As a result, the most powerful groups pushing for Medicaid expansion in any given state generally aren’t unions or poor people, but hospital trade associations and other health care provider lobbies. And that’s exactly why Democrats find it so easy to embrace the policy.

Incidentally, it’s also why New York Magazine’s Jonathan Chait missed the point the other day (while on a break from accusing my boss of plotting to consign liberals to the Gulag) when he argued that the GOP is unique among the world’s conservative parties in opposing efforts “to subsidize medical care for those who can’t afford it themselves.” Sure, that’s what the Republicans’ rhetoric says. But look, for example, at the eighteen, mostly deep-red states that refused to participate in the Obamacare Medicaid expansion. Since Obamacare began, the total number of Medicaid enrollees in those states has actually increased by 11 percent, from 18.6 million to 20.9 million, with fifteen of the eighteen states seeing increases and only two seeing decreases.

The Republicans who control those state governments could have slashed those numbers if they’d wanted to. But they don’t. What they’re most keenly opposed to — besides any policy with the name “Obama” on it — are precisely efforts to provide public health insurance to people who otherwise might be able to afford to buy private insurance of some kind. Because that would be bad for business. But then, in that respect they’re not so different from Democrats, who in 2010 couldn’t stomach even a milquetoast public option open to middle-class patients. Again, those are the patients who might otherwise be purchasing private policies from private insurance companies. And, again, giving them public health insurance would be bad for business.

But let’s get back to California. Unlike expanding Medicaid, forcing companies to reclassify independent contractors as employees has no feel-good, win-win, upside for business. It’s a stark case of zero-sum politics: either the workers win or the capitalists do. This issue cuts to the core of the labor-capital contradiction that lies at the heart of capitalism. And that’s why it will be fascinating to see how the state’s Democratic leadership reacts to the ferocious lobbying blizzard now underway.

To give a sense of the stakes and scope of this fight, here are a few choice passages from Eidelson’s piece:

Leading gig economy companies including Uber and Lyft are quietly lobbying California’s top Democrats to override or undermine a court ruling that could make many of their contract workers into employees. . . .

“The magnitude of this issue requires urgent leadership,” nine companies wrote in a July 23 letter reviewed by Bloomberg, which warns of the ruling “stifling innovation and threatening the livelihoods of millions of working Californians” and says that without political intervention it will “decimate businesses.” . . .

An executive at one of the companies behind the push, speaking on condition of anonymity, said that because Brown and Newsom are both pro-tech and pro-worker, they are uniquely positioned to strike a compromise with the potential to be replicated. . . .

“If you have a business model that doesn’t lend itself to the strict structure that an employer-employee relationship dictates,” said the [California Chamber of Commerce] president and CEO Allan Zaremberg, then the ruling “puts you in a situation that it’s almost impossible to continue your business model.” . . .

Getting Democratically controlled California to pump the breaks on its new court-decreed standard could also have a significant impact on national-level discussions. . . .

Besides the letter, the companies have also met with the governors’ office to plead their case, according to a person familiar with the matter, who asked not to be identified because the meetings were private. And they have discussed the issue with the Democrats who lead the state’s assembly and senate and with Lieutenant Governor Newsom. Spokespeople for Newsom, Assembly Speaker Anthony Rendon and Senate President Pro Tempore Toni Atkins declined to comment.

Gig-economy startups aren’t the only companies concerned. The “I’m Independent” Coalition, a project of the California Chamber of Commerce devoted to opposing the [court ruling], also counts the Internet Association as a backer. The association’s members include Google, Amazon and Facebook, all of which also hire contractors. “The internet industry is concerned about the implications of the Dynamex ruling and its potential to jeopardize internet-enabled, freelance work,” the association’s California government affairs director Kevin McKinley said in an emailed statement.

The Chamber’s coalition also includes the state associations representing restaurants, retailers, publishers, hospitals, shopping centers, child-care providers, farms, grape growers, manufacturers, trucking, taxis, ambulances and insurers.

Note that last paragraph: this is an issue that unites capitalists in almost every sector.

As for the substance of the policy issue, let me suggest a compromise. Why not allow these companies to continue recruiting labor via independent contractor arrangements — but with the requirement that the contracts be with worker cooperatives rather than individual workers? Instead of Uber pretending that its drivers are the CEOs of their own little contractor companies, why not have its drivers actually be the co-owners of a real contractor company, owned in common and governed on the basis of one worker, one vote? The idea isn’t new — in fact, I wrote about it a few years ago — but I think it’s fair to call it an “innovative solution,” which is the kind of thing Silicon Valley types are into, I hear.

The only problem, of course, is that by giving workers collective power against the capitalists who boss them around, it’s anything but a “win-win.” Which is why you probably won’t see California’s leading Democrats embrace it anytime soon.