by Alec Ross
The second chapter turns its attention to the state, and looks at how government power in developed countries has slumped as business has boomed in the last fifty years. I spoke with politicians and political scientists alike to offer a deep dive into the US government and ask why it has stopped functioning effectively. We weigh the impact of various factors—from polarization to brain drain to lobbying—and explore the changes that will need to happen within and without government to restore some sense of balance. The chapter ends with a spin of the globe, examining which factors are unique to America and which are common to other nations. We will also look at why authoritarian models are gaining ground on liberal democracies throughout the world, and what to do about it.
Chapter 3 takes up the third pillar of our traditional social contract—citizens and their labor. Just as the power of government has sagged in the 21st century, so has the power of organized labor and workers. This chapter maps out the recent history of labor’s decline and explores why unions are at such a weak point in some places—including the United States and United Kingdom—and comparatively strong elsewhere. The same forces of shareholder capitalism that led to record profits also undermined labor, but this shift is compounded by the stagnancy of organized labor. I interviewed some of the world’s biggest union leaders as well as founders of upstart labor movements to understand a single, simple question: What does the labor movement of the 21st century look like?
Companies, governments, and citizens make up the three core parties of our social contract and the first three chapters of the book. Each tells the broader story of why these pillars have started to buckle, and how each will need to adapt to meet the needs of the 2020s and 2030s. But these three chapters stay largely within the confines of national borders, asking how each of the world’s 196 countries can build a better social contract for themselves. However, the reality of our world is that many of its biggest concerns are now global; they do not stick within national borders, and instead tend to metastasize in the gaps between countries. Climate change, human rights abuses, tax evasion, cyber war, economic crises, pandemics—all of these are issues that affect people the world over and demand international responses. Any social contract for our new world needs to include means for addressing these issues and reaching beyond borders in a way that the industrial-age contract did not need to.
So the second half of the book turns to the nature of these international issues. Chapter 4 zeroes in on the subject of taxes. It is a skeleton key for understanding the limits of our global politics and economy, and the problems that emerge out of using a 20th-century set of policies to solve 21st-century problems. Of the people reading this book, 99 percent would pay less in taxes, and our governments would have more to spend, if we fixed a system where trillions of dollars in tax goes missing each year and entire nations have been captured by outside interests. Tax serves as a microcosm for many of the global issues whereby governments are divided and conquered. I talked with experts on tax havens, government officials, and bankers—all of whom have seen the ins and outs of this shadow system. We will look at what governments need to do on the global stage to solve not just the problem of tax avoidance, but also other global coordination problems such as climate change.
Chapter 5 offers a category of problem that might well be new to the 21st century. While tax avoidance serves as an example of an international problem that only governments can fix, there are other issues on the global stage on which governments are hopelessly divided or stagnant and where we will need to see companies and citizens lead. This is a controversial idea, and we will unpack that in this chapter. But there are some hotly contested issues—on subjects including data, artificial intelligence, privacy, and cyber war—where it is dangerous to give too much power to governments alone. When it comes to the weaponization of code, the private sector in the 21st century is capable of leading and providing a stabilizing force in the global social contract. Chapter 5 focuses on the race for technology dominance between China and the United States, and the two drastically different models they present for how data should be used in society. China has completely aligned its corporate sector and government, channeling both toward a stifling surveillance state. But for the sake of citizens’ privacy, and as a check on government overreach, it is possible for companies to provide an important buffer between government and citizens. For this to work out, a range of checks and balances is needed—but one of the new aspects of the social contract of the 2020s and beyond is that we are unlikely to solve some of the most contested issues in the world without leadership from the corporate sector.
In chapter 6 and the conclusion, we will begin to bring all the pieces of a working social contract together. We will have seen all the gaps and tears in that fabric, and we will look at the ways in which they can be rewoven to create a more balanced system. Chapter 6 offers a tour of the many styles of safety nets that exist across the globe. It picks out the most useful features and innovations that the world’s 196 countries have to offer, while also identifying some of the most worrying or fragile developments in social policy. By looking all around the world, we can start to get a sense of what an ideal social contract for our future looks like.
There have been many books devoted to each of the trends described in this book individually, but it is still hard to wrap one’s head around the biggest of them and see how they are all interconnected. It is harder still to imagine solutions that would begin to right the balance. But that is the goal of this book. In order for government to deliver more effectively for its citizens, we need to fill the resource gap created by tax avoidance; for tax systems to work effectively, we need to kill off the worst practices of shareholder capitalism; to improve our capitalism, we need labor to have much more power than it does today; and on and on. It is all interconnected.
The aim is simple: the 2020s have begun with citizens and systems raging, and to start the world spinning smoothly again we need acts of creation greater than the acts of destruction taking place around us.
1
SHAREHOLDER AND STAKEHOLDER CAPITALISM
Gabriella Corley was seven years old when the family pediatrician diagnosed her with Type 1 diabetes. Like 1.6 million Americans, her body did not produce enough insulin, the hormone responsible for maintaining proper glucose levels in our blood. For most of human history, the condition has been a death sentence—sooner or later an unregulated spike in blood sugar would have sent her into ketoacidosis, which would have led to a coma and eventually death. But luckily, Gabriella’s diagnosis came in 2014.
Nearly a century earlier, a trio of scientists at the University of Toronto discovered a method for extracting insulin from the pancreases of cows. In 1922, a fourteen-year-old boy named Leonard Thompson became their first patient. As Leonard lay dying in a bed at Toronto General Hospital, the scientists injected him with their insulin solution. Within hours, his blood sugar levels had returned to normal. Soon after, the trio visited one of the large wards where the hospitals kept children dying from ketoacidosis. They went from bed to bed injecting patients with insulin. By the time they reached the final patients, the first few had already started to wake from their comas, their families rejoicing around them. As a parent, I imagine it felt like witnessing a miracle.
Back then, most people with Type 1 diabetes died within two years of their diagnosis. Insulin gave them a new lease on life. Realizing the implications of their discovery, the three scientists—Frederick Banting, Charles Best, and James Collip—sold the patent for insulin to the University of Toronto. The price of their miracle drug: three Canadian dollars (roughly thirty-two 2020 US dollars), split three ways. As a reward for discovering insulin, Banting, Best, and Collip got to treat themselves to lunch.
Even their small sale was controversial—at the time, many considered it inappropriate for scientists and universities to patent medical innovations at all. The University of Toronto ultimately let pharmaceutical companies start manufacturing insulin
royalty-free. In 1950, George W. Merck, president of Merck at the time, delivered a speech in which he famously said, “We try never to forget that medicine is for the people. It is not for the profits.” A century later, this mindset and approach is largely nonexistent.
Today, three different pharmaceutical companies sell insulin, which comes in the form of fast-acting or slow-acting formulas, through pumps or pens. Instead of using their market power to make the drug more affordable for diabetics, the companies have leveraged their clout to increase their profit margins.
Andrea Corley, Gabriella’s mom, works as an administrative assistant and her husband as a janitor, both for the public school district in Elkins, West Virginia, not far from where I grew up. Together, they make approximately $60,000 a year. Their health insurance is provided by the West Virginia Public Employees Insurance Agency. When Gabriella first got her diagnosis, the Corleys’ health plan covered all her supplies, Andrea told me. But after the first year, co-payments for Gabriella’s insulin prescription increased to around twenty-five dollars a month. The family joined a program that covered the payments as long as Gabriella regularly met with a pharmacist, but their insurance company capped the coverage at two years. As Andrea noted, Type 1 diabetes does not go away after two years. “It’s not something that she can fix. It’s not something she can reverse. She’s stuck with it the rest of her life.”
Then the Corleys discovered that Gabriella was allergic to an ingredient in her medication. She switched to a different brand of insulin, but the insurance provider informed the family that it would cover only 20 percent of the cost. That left the Corleys paying $300 per month out of their pocket, not including the cost of pumps and other supplies. Their doctor also recommended they keep an EpiPen at the house just in case Gabriella developed another serious allergic reaction. That added another $200 to the cost of keeping their daughter alive.
This scenario would be unimaginable in many parts of the world. Dozens of countries provide universal health care to their citizens. The quality of care varies widely, but everyone can get it. Among the world’s most developed countries, the vast majority of governments provide universal or near-universal health coverage to their citizens. Two countries—Switzerland and the Netherlands—offer universal coverage through a heavily regulated and subsidized market of nonprofit providers. In others, like Germany and Chile, a small portion of the population pays for private insurance while the rest are covered by government plans.
The US government provides health insurance for the elderly and the poor through the Medicare and Medicaid programs. The 2010 Affordable Care Act expanded Medicaid, but enrollees still needed to pay hundreds of dollars per year. While the developed world embraces health care as a human right, the United States instead relies on the market to care for many of its citizens. Approximately three in five Americans receive their health care through private insurance companies. As we will see, when decisions of life and death are left to the market, people do not always get the best results.
Eventually, the Corley family was able to secure affordable insulin and EpiPens only through a special program at their pharmacy, a program that kicked in after the family’s insurance dropped its coverage of the drugs. This gave them a narrow window of affordability within a convoluted system, but it could still close at any time. And even with the savings program, even with insurance, the Corley family still spends between $14,000 and $18,000 on health care every year. Andrea Corley said that even as they struggle to keep up, she fears for the future. Insulin prices are rising rapidly, and Gabriella, now twelve years old, may not be able to afford the medication when she grows up.
“I’m afraid that by the time she gets old enough to get her own, that she won’t even be able to,” Andrea said. Her fear is not unfounded. When adults lose coverage and cannot afford their own diabetes medication, they discover just how brutal the American health care system can get.
In 2017, Alec Smith decided to move out of his childhood home in Minneapolis and get his own apartment. He was almost twenty-six years old, the age when young adults in the US can no longer be covered by their parents’ health insurance. This transition would be complicated, considering he had been diagnosed with Type 1 diabetes two years earlier.
Alec had planned to become a paramedic, but with his disease, that was not an option. He took a job managing a restaurant—his new plan was to open his own sports bar. In the meantime, however, his job did not provide insurance. When Alec’s mother, Nicole Smith-Holt, started to research different health care plans available to her son, she was stunned. He would need to pay more than $400 per month, and insurance would kick in only after he had paid $8,000 out of his own pocket. Alec made less than $40,000 per year, meaning more than a third of his income would go to health care. Ultimately, Alec decided to forgo insurance and pay for his insulin out of pocket. Neither he nor his mother realized the cost of that choice.
More than 90 percent of the insulin market is controlled by three companies: Denmark’s Novo Nordisk, France’s Sanofi-Aventis, and Eli Lilly and Company in the United States. Despite the appearance of competition, numerous lawsuits have alleged that the trio operate as a cartel to keep the price of insulin artificially high. On more than a dozen occasions, the companies raised the price of their drugs in near lockstep. In 2001, a vial of insulin cost an average of $14. In 2019, that same vial cost $275. Across the United States, the scarcity of affordable insulin has had dramatic effects. Insulin thefts—from pharmacies or even people’s doorsteps—have been on the rise in recent years. And nearly a century after insulin’s inventors brought children back from the brink of death, data suggests that people are once again dying because they cannot access the drug. A Yale University study found that a quarter of diabetics in the United States used less insulin than they were prescribed due to its cost. Between 2017 and 2019, researchers found, thirteen people died after rationing their insulin.
One of them was Alec Smith. After talking with Alec’s girlfriend, the coroner, and the detective, his mother Nicole realized he had been holding out on buying his medication until his next paycheck. Initially, Nicole said she was angry at Alec for not asking his parents for help. She was also angry at herself for failing to recognize the warning signs. It was not until she went public with her story that she realized Alec’s experience was not unique. Other people began to write to her, describing loved ones in their midtwenties managing diabetes diagnoses, trying to support themselves for the first time as young adults and paying for their newfound independence with their lives.
Like Alec, Jesy Boyd was living in an apartment on his own for the first time while managing his Type 1 diabetes. Since Jesy was only twenty years old when he moved out, he was able to stay on his family’s insurance. Still, he paid for the cost of the medication with his own job as a restaurant manager. “He was trying to manage everything on his own,” said Jesy’s mother, Cindy Scherer Boyd.
Cindy realized Jesy was struggling to pay for his insulin in the spring of 2019. He had asked his parents to pick up his insulin prescription and bring it to his apartment. When they got there, they found Jesy incoherent. They took him to the hospital, where he was treated for a blood sugar spike and released. Jesy assured his parents that he would never let his supply get so low again.
But the following month, Cindy heard that Jesy had called in sick to work. She tried calling him, but he did not answer. Cindy hurried to his apartment with a friend, where they found Jesy dead. In his backpack was an application for an electrician job. In the obituary, the family wrote that Jesy had died from complications from Type 1 diabetes. Not long after, Cindy received a message from Nicole Smith-Holt, asking if Jesy had been rationing his insulin.
Nicole, whose previous political activism had been limited to voting, became an outspoken advocate following her son’s death, and she recruited other parents to join the fight. In 2019, she helped organize a demonstration outside Eli Lilly’s Indianapolis headquarters, protesting the high
cost of insulin. Nicole stood in the middle of the street, blocking traffic and reading off the names of people who had died after rationing their insulin. Among them were her son and Jesy. She was eventually arrested.
Nicole and her husband, James, worked to get the Minnesota legislature to pass a law that limited insulin co-pays to thirty-five dollars if an uninsured patient’s supply was running low. The Alec Smith Emergency Insulin Act was passed in April 2020. It was a victory, but Nicole knows that state-level reforms will not fix the underlying system that lets medicine like insulin and EpiPens get so expensive.
“Pharmaceutical companies can get away with it because we don’t have any laws in place that restrict them or prohibit them from raising the price to whatever they feel the market will bear,” Nicole said. “When you’re presented with a pay-or-die situation, typically somebody is going to go with, ‘I’m going to pay it, and I’m going to do whatever I have to do to pay for it.’ Just because the companies can, they do.”
This point is worth stressing. The state of the insulin industry is a far cry from the three-dollar patent sale a century ago, or even the postwar era when George Merck could say “medicine is for the people … not for the profits.” The drastic contrast is representative of a broader change that swept through the entire business world in the last half century. The power and size of companies have skyrocketed since the mid-20th century, as has their influence on our everyday lives. This is true within the United States and the world as a whole. The world’s major companies have grown larger, more concentrated, and more profit-motivated, while governments and individuals have seen their power fade. The balance has been shaken so thoroughly that in recent years even business leaders, who are benefiting massively from the state of affairs, lament the power they have rapidly gained.
