Posts

Economic Fundamentalism

We saw last time that the goal of Chicago School free market economics was to promote “noncontaminated capitalism,” which in turn would generate societal economic utopia:

“The market, left to its own devices, would create just the right number of products at precisely the right prices, produced by workers at just the right wages to buy those products — an Eden of plentiful employment, boundless creativity and zero inflation.”

The Shock Doctrine:  The Rise of Disaster Capitalism, Naomi Klein (2017)

To the School’s free market advocates, these ideas were pure science:

“The starting premise is that the free market is a perfect scientific system, one in which individuals, acting on their own self-interested desires, create the maximum benefits for all. If follows ineluctably that if something is wrong with a free-market economy — high inflation or soaring unemployment — it has to be because the market is not truly free.”

The Shock Doctrine

Scientific method requires that theories be falsifiable:  you have to be able to objectively prove them wrong.

“The philosopher Karl Popper argued that what distinguishes a scientific theory from pseudoscience and pure metaphysics is the possibility that it might be falsified on exposure to empirical data. In other words, a theory is scientific if it has the potential to be proved wrong.”

But Is It Science? Aeon Magazine, Oct. 7, 2019.

But how do you prove an economic theory based on “uncontaminated capitalism” in an economically contaminated world?

“The challenge for Friedman and his colleagues was not to prove that a real work market could live up to their rapturous imaginings…. Friedman could not point to any living economy that proved if all ‘distortions’ were stripped away, what would be left would be a society in perfect health and bounteous, since no country in the world met the criteria for perfect laissez-faire. Unable to test their theories in central banks and ministries of trade, Friedman and his colleagues had to settle for elaborate and ingenious mathematical equations and computer models.”

The Shock Doctrine

Mathematical equations and computer models aren’t the same as empirical data collected in the real (“contaminated”) world. If falsifiability is what separates scientific knowledge from belief-based ideology, then Friedman’s free market theory is the latter. Some scientists are worried that this spin on scientific theorizing has become too prevalent nowadays:

 “In our post-truth age of casual lies, fake news and alternative facts, society is under extraordinary pressure from those pushing potentially dangerous antiscientific propaganda – ranging from climate-change denial to the anti-vaxxer movement to homeopathic medicines. I, for one, prefer a science that is rational and based on evidence, a science that is concerned with theories and empirical facts, a science that promotes the search for truth, no matter how transient or contingent. I prefer a science that does not readily admit theories so vague and slippery that empirical tests are either impossible or they mean absolutely nothing at all…. For me at least, there has to be a difference between science and pseudoscience; between science and pure metaphysics, or just plain ordinary bullshit.”

But Is It Science?

The Chicago School believed so ardently in the free market theory that its instructional approach took on the dynamics of belief-based indoctrination:

“Frank Knight, one of the founders of Chicago School economics, thought professors should ‘inculcate’ in their students the belief that economic belief is ‘a sacred feature of the system,’ not a debatable hypothesis.’”

The Shock Doctrine

This dynamic applies to every ideology that can’t be falsified — verified empirically. The ideology then becomes a fundamentalist belief system:

“Like all fundamentalist faiths, Chicago School economics is, for its true believers a closed loop. The Chicago solution is always the same:  a stricter and more complete application of the fundamentals.:

The Shock Doctrine

Journalist Chris Hedges describes the dynamics of “secular fundamentalism” in I Don’t Believe in Atheists. (The book’s title is too clever for its own good — a later version adds the subtitle “The Dangerous Rise of the Secular Fundamentalist.”)

“Fundamentalism is a mind-set. The iconography and language it employs can be either religious or secular or both, but because it dismisses all alternative viewpoints as inferior and unworthy of consideration it is anti-thought. This is part of its attraction. It fills a human desire for self-importance, for hope and the dream of finally attaining paradise. It creates a binary world of absolutes, of good and evil. It provides a comforting emotional certitude. It is used to elevate our cultural, social, and economic systems above others…. The core belief systems of these secular and religious antagonists are identical.”

Thus we have Nobel prize-winning economist Milton Friedman famously saying, “Underlying most arguments against the free market is a lack of belief in freedom itself” — a statement entirely in keeping with the Mont Pelerin  Society’s idealistic Statement of Aims, which we looked at last time.

And thus we also have Nobel prize-winning economist Joseph Stiglitz countering with his thoughts about economics in a contaminated (“pathological”) world:

“The advocates of free markets in all their versions say that crises are rare events, though they have been happening with increasing frequency as we change the rules to reflect beliefs in perfect markets. I would argue that economists, like doctors, have much to learn from pathology. We see more clearly in these unusual events how the economy really functions. In the aftermath of the Great Depression, a peculiar doctrine came to be accepted, the so-called ‘neoclassical synthesis.’ It argued that once markets were restored to full employment, neoclassical principles would apply. The economy would be efficient. We should be clear: this was not a theorem but a religious belief.”

As we also saw last time, historical socialism and communism join free market capitalism in their fundamentalist zeal. In fact, some think that economics in general has become today’s dominant cultural form of belief-based thinking. More on that next time.

The Free Market and the New Socialism

Mont Perlerin

The historic Mont Pelerin castle/hotel.

In 1947, economists  Friedrich HayekFrank KnightKarl PopperLudwig von MisesGeorge Stigler and Milton Friedman convened the Mont Pelerin Society in a castle/hotel overlooking Lake Geneva, with the express intent of displacing the Keynesian economic model that prescribed government intervention and spending to pull America out of the Great Depression and install the New Deal. The Society’s founding Statement of Aims is forcefully idealistic:

“The central values of civilization are in danger.  Over large stretches of the Earth’s surface the essential conditions of human dignity and freedom have already disappeared.  In others they are under constant menace from the development of current tendencies of policy.  The position of the individual and the voluntary group are progressively undermined by extensions of arbitrary power.  Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own.”

The Statement goes on to carefully position the Society’s purpose as fostering intellectual inquiry, not the advancement of a new economic “orthodoxy.” In time, however, Milton Friedman did precisely that, championing capitalist free market economics through the Chicago School of Economics.

“The core of [the school’s teaching on the free market] was that the economic forces of supply, demand, inflation and unemployment were like the forces of nature, fixed and unchanging. In the truly free market imagined in Chicago classes and texts, these forces existed in perfect equilibrium, supply communicating with demand the way the moon pulls the tides

“Just as ecosystems self-regulate, keeping themselves in balance, the market, left to its own devices, would create just the right number of products at precisely the right prices, produced by workers at just the right wages to buy those products — an Eden of plentiful employment, boundless creativity and zero inflation.

“For this reason, Chicagoans did not see Marxism as their true enemy. The real source of the trouble was to be found in the ideas of Keynesians in the United States, the social democrats in Europe, and developmentalists in what was then called the Third World. These were believers not in a utopia but in a mixed economy, to Chicago eyes an ugly hodgepodge of capitalism for the manufacture and distribution of consumer products, socialism in education, state ownership for essentials like water service, and all kinds of law designed to temper the extremes of capitalism.

“The Chicagoans declared war  of those mix-and-match economists. What they wanted was not a revolutions exactly but a capitalists Reformation:  a return to uncontaminated capitalism.”

The Shock Doctrine:  The Rise of Disaster Capitalism, Naomi Klein (2017)

Compare that vision to that of the Democratic Socialists of America we met last time, whose Constitution unreservedly advances their own counter-orthodoxy:

“We are socialists because we reject an economic order based on private profit, alienated labor, gross inequalities of wealth and power, discrimination based on race, sex, sexual orientation, gender expression, disability status, age, religion, and national origin, and brutality and violence in defense of the status quo. We are socialists because we share a vision of a humane social order based on popular control of resources and production, economic planning, equitable distribution, feminism, racial equality and non-oppressive relationships. We are socialists because we are developing a concrete strategy for achieving that vision, for building a majority movement that will make democratic socialism a reality in America. “

Thus the free market and socialism champions have planted their flags at the poles of the economic ideological spectrum. In between, however, are those whose perspective and goals are more immediate and  pragmatic, such as greater economic equality, improved public access to healthcare (see endnote below[1]) and education unencumbered with government-financed debt.

“Socialism historically has been associated with the concept of public or collective ownership of property and natural resources and has long been associated with Marxism and communism. In 1949, with the Chinese Communists just having taken control of China, and with the Communist Soviet Union creating fear of an aggressive effort to spread their ideology around the globe, Americans’ view of the term embraced the classic elements bound up in these types of movements.

“Now, almost 70 years later, Americans’ views of socialism have broadened. While many still view socialism as government control of the economy, as modified communism and as embodying restrictions on freedoms in several ways, an increased percentage see it as representing equality and government provision of benefits.”

The Meaning of “Socialism” to Americans Today, Gallup Polling Matters (Oct. 4, 2018)

Meanwhile, Millennials’ interest in this more temperate version of socialism is increasingly putting their free market elders in an awkward position:

“Perhaps the most significant thing about the rise of millennial socialism in the US is that it is forcing conservatives to articulate what exactly is so bad about a more equal system – often with results that are beyond parody.

“A writer for the ultra-conservative website the Daily Caller, for example, recently attended an Ocasio-Cortez rally and reported, completely straight-faced: “I saw something truly terrifying. I saw just how easy it would be … as a parent, to accept the idea that my children deserve healthcare and education.

“Kids deserving healthcare, imagine that! It’s a slippery slope, it really is.”

Socialism Is No Longer A Dirty Word In The US – And That’s Scary For Some, The Guardian (July 29, 2018)

What is going on, that a parent would say something like that? Digging deeper reveals a dynamic at work that is more powerful than a generation gap, polarized ideologies, or campaign issues such as healthcare. We’ll look into that next time.

[1] For those leaning toward socialism’s new version, the leading issue is healthcare. See also these Gallup survey results announced November 12, 2019:  “More than 13% of American adults — or about 34 million people — report knowing of at least one friend or family member in the past five years who died after not receiving needed medical treatment because they were unable to pay for it… Dovetailing with these results is a rising percentage of adults who report not having had enough money in the past 12 months to ‘pay for needed medicine or drugs that a doctor prescribed’ to them. This percentage has increased significantly, from 18.9% in January 2019 to 22.9% in September. In all, the 22.9% represents about 58 million adults.”

Just Say the Word

sussudio

I feel so good if I just say the word
Su-Sussudio
Just say the word, oh-oh
Su-Sussudio

Sussudio
Phil Collins

The crowd is hostile, but the tune is catchy — it wins them over. (Go ahead, watch the video — soooo 80’s. We’ll wait.)

Fast forward 34 years to a new tune:  “Su-su… socialism.” Just say the word, and it’s an instant failure to communicate. The Millennials get up and dance. Their parents think about re-writing their wills.

I found all the sources for this week’s post by Googling “when did socialism become a bad word?” This article[1] has that title, and gives two answers. The first is the word’s historical definition:

“Merriam Webster defines it thusly:

“any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

“a) a system of society or group living in which there is no private property b): a system or condition of society in which the means of production are owned and controlled by the state

“a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done.”

The second answer is also historical:  to the older generation, socialism means the Cold War, the Commies, and the other nasty stuff in this  video. (It’s short — again, we’ll wait if you want to take a moment to watch it.)

Socialism video

“Socialism” sets off alarm bells for those who lived through all that:

“For a generation with no memory of bomb shelter drills or sledgehammers smashing the Berlin Wall to pieces, the sad reality of life under socialist rule has been forgotten, and the lessons of the Cold War have been relegated to the ‘ash heap of history’ alongside communism. Instead, the concept of socialism has often been confused with liberalism. Socialism seems like a fine idea that means a more social equitable society for everyone—free health care and free education for starters.

“Socialism is not roads, welfare, and free education. Socialism has always had a more ominous goal and shares close historical and ideological connections with more reviled terms: Marxism and communism. Karl Marx took socialism to what he viewed as its natural conclusion: The ‘abolition of private property.’”

How Did America Forget What ‘Socialist’ Means?  Politico Magazine (March 22, 2016)

But the new version of socialism isn’t about state-owned means of production,[2] the abolition of private property, or a Communist revival:

“For conservatives and libertarians, the news that millennials are embracing socialism is frightening. They shouldn’t fear, because the United States is not going to nationalize the economy any time soon. That’s because the word “socialism” doesn’t mean what our newfound socialists use it to mean.

“To people who don’t like it, socialism means ‘state control over the means of production.’ Turn to your nearest dictionary and you’ll find something like that. But it means something different to the people who use the term as a positive thing. Your coworker’s son who wants to take America in a socialist direction? He simply wants more government.”

Millennials Use The Word ‘Socialism’ — And May Not Know What It Means, The Hill (Oct. 27. 2019

If it’s true that the hypothetical “coworker’s son” wants “more government,” then what for? Among other things, to support the republic — the res publica, the commonwealth — as we saw last time. I.e., the new socialism is in fact about things like “roads, welfare, and free education.” Finding a seat for those topics at the economic policy-making table is apparently a catchy idea:

 “Socialism is no longer a dirty word in the US, certainly not among millennials, anyway, who face a far grimmer economic future than previous generations. It isn’t surprising that a number of recent polls show millennials are increasingly drawn to socialism and wary of capitalism.

“The popularisation of what has been termed by some as ‘millennial socialism’ in the US arguably began with the Occupy Wall Street movement in 2011. Bernie Sanders’ presidential campaign gave it further momentum, and Ocasio-Cortez’s recent win added more fuel to the fire.

“You can see this trajectory reflected in the membership of the Democratic Socialists of America (DSA). Founded in 1982, it had about 6,000 members for most of its history. Shortly after the 2016 election, the organisation saw a boom in membership, reaching 11,000 paying members in December 2016. Since Trump took power, interest in the DSA has grown exponentially. A spokesman said it hit 47,000 members last week, and has ‘seen the fastest growth in our history following the win of Ocasio-Cortez.’”

Socialism Is No Longer A Dirty Word In The US – And That’s Scary For Some, The Guardian (July 29, 2018)

Catchy, but will it win over the hostile crowd? Aside from associations with the dictionary definition and Cold War history, “millennial socialism” is up against a more systemic, more powerful obstacle:  deeply entrenched cultural faith in the capitalist free market . We’ll look more at that next time.

[1]When did socialism become a bad word?Kimberly Bulletin (Apr. 5, 2019)

[2] Never mind that the student loan business has been nationalized, as we saw previously.

The Public Good [2]

drinking water

Photo by Kobu Agency on Unsplash

American schoolkids learn that their country has a republican form of government, which means everybody doesn’t get to vote on everything; we vote for people who do the voting for us.[1] But there’s more to the word republic than that:

republic (n.):  c. 1600, “state in which supreme power rests in the people via elected representatives,” from Middle French république (15c.), from Latin respublica (ablative republica) “the common weal, a commonwealth, state, republic,” literally res publica “public interest, the state,” from res “affair, matter, thing” (see re) + publica, fem. of publicus “public” (see public (adj.)). Republic of letters attested from 1702.

Etymology Online.

Publica (the people, the state) + Res (affair, matter, thing) = “the people’s stuff.” The republican state holds the people’s stuff in trust, and its elected representatives, as trustees, administer it for the public benefit. That’s the plan, anyway. A more elegant term for “the public’s stuff” is “commonwealth”:

commonwealth (n.):  mid-15c., commoun welthe, “a community, whole body of people in a state,” from common (adj.) + wealth (n.). Specifically “state with a republican or democratic form of government” from 1610s. From 1550s as “any body of persons united by some common interest.” Applied specifically to the government of England in the period 1649-1660, and later to self-governing former colonies under the British crown (1917). In the U.S., it forms a part of the official name of Pennsylvania, Massachusetts, Virginia, Kentucky, and Puerto Rico but has no special significance.

Etymology Online

Several online searches turned up a surprisingly long and illuminating list of things that are or used to be considered part of the common wealth trust portfolio. For example:

  • education
  • news
  • law
  • governmental administrative functions
  • healthcare
  • childcare
  • clean water
  • clean air
  • certain interior spaces
  • certain exterior spaces — e.g. parks
  • natural wonders
  • shoreline and beaches
  • mail and home/rural delivery service
  • trash removal
  • public toilets
  • sewage processing
  • food, clothing, and shelter
  • heat and lights
  • streets, roads, highways
  • public transportation
  • freight shipping
  • telephone and telegraph
  • pest control
  • use of public lands/wilderness access
  • the “right to roam”
  • the “right to glean” unharvested crops
  • the right to use fallen timber for firewood
  • defense
  • police and fire
  • handicapped access

Some people argue for the inclusion of additional, more contemporary items on the list:

  • information
  • internet access
  • net neutrality
  • open source software
  • email
  • fax
  • computers
  • cell phones
  • the “creative commons”
  • racial, gender, national, and other forms of equality
  • birth control
  • environmental protection
  • response to climate change

The res publica is made up of those goods, services, and places everybody is entitled to just by being human, or by being a citizen or member of the applicable socio-cultural institution. Somebody’s got to administer all that, and somebody’s got to pay for it. Plus, as we saw last time, there are competing private interests as well.

You’ve heard of technological singularity — the point at which technology overtakes human ability — e.g., artificial intelligence and machine learning. Nowadays, administration of both private interests and the commonwealth has been delegated to a near-universal economic singularity:  the “free” market, carried out in the form of American-style capitalism, as also exported to the rest of the world. Superstar Italian-American economist Mariana Mazzucato[2] thinks this practice has skewed the private/public balance to the point where the commonwealth has been eliminated from policy-making:

“[Government is] an actor that has done more than it has been given credit for, and whose ability to produce value has been seriously underestimated – and this has in effect enabled others to have a stronger claim on their wealth creation role. But it is hard to make the pitch for government when the term ‘public value’ doesn’t even currently exist in economics. It is assumed that value is created in the private sector; at best, the public ‘enable’ [that privately created] value.

“There is of course the important concept of ‘public goods’ in economics — goods whose production benefits everyone, and which hence require public provision since they are under-produced by the private sector.

“… the story goes [that] government should simply focus on creating the conditions that allow businesses to invest and on maintaining the fundamentals for a prosperous economy:  the protection of private property, investments in infrastructure, the rule of law, an efficient patenting system. After that, it must get out of the way. Know its place. Not interfere too much. Not regulate too much. Importantly, we are told, government does not ‘create value’; it simply ‘facilitates’ its creation and — if allowed — redistributes value through taxation. Such ideas are carefully crafted, eloquently expressed and persuasive. This has resulted in the view that pervades society today:  government is a drain on the energy of the market, and ever-present threat to the dynamism of the private sector.”

The Entrepreneurial State: Debunking Public vs. Private Sector Myths (Rev. 2018) See also The Value of Everything: Making and Taking in the Global Economy (2018)

Prof. Mazzucato isn’t the only one concerned about this. When Occupy Wall Street puts up its “We are the 99%” sign, when voters support populist politicians[3], when French farmers don yellow vests and riot in Paris, when Malala Yousafzai advocates for educational opportunity, when Greta Thunberg scolds world leaders on climate change… all these are advancing their own responses to the current public/private balance.

In the search for remedies, the younger generation is more likely than their elders to reject populist nationalist politics and private capitalist solutions, and to push instead for an expanded commonwealth administered under a new version of an economic system many of their elders consider an economic dirty word.

More on that next time.

[1] Pure democracy — all those ballot initiatives — has joined republican lawmaking since California’s 1978 Proposition 13.

[2] The Times called her “the world’s scariest economist.”

[3] Here’s a list from the BBC of European nationalist politicians.

The Public Good

14er

Back in the day, my wife and I used to hike Colorado’s “14ers” — mountains with summits 14,000 feet or higher. We got to a trailhead brutally early one morning to find a gate and a mining company’s sign warning us off.

Seriously — how can somebody own a mountain?! Or put up a sign telling you kids to stay off my lawn?

Another car was parked nearby, empty. They’d obviously ducked the gate. We met them at the summit.

We’d heard rumors of this. Not long after, it made the headlines. A couple years later the sign and gate were gone. Chalk up a win for Mother Nature and wide open spaces, for a change.

At the time, I’d been in law school long enough to spot a handful of legal issues. One was the notion of “the general welfare,” expressed in the Preamble to the U.S. Constitution:

“We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.”

Hiking up to the view from the top of a 14er promotes the general welfare, no doubt. On the other hand, the mining company’s lawyers were afraid of compromising its private right to buy, sell, own, rent, and otherwise use and profit from land. Which raised a second legal issue:  the doctrine of “adverse possession”:

“Adverse possession is a legal theory under which someone who is in possession of land owned by another can actually become the owner if certain requirements are met for a period of time defined in the statutes of that particular jurisdiction. Adverse possession was historically used as a means of encouraging people to bring unused or uninhabited land into productive use.

“In past centuries in England, a person who farmed otherwise unused land for a long period of time could be rewarded with title to that land for helping to provide food to the hungry nation. In America, the adverse possession theory was often used to encourage settlers to move onto frontier properties and occupy and improve them in exchange for ownership of the land. This has evolved into the modern day theory requiring a set of common conditions to be met for a period of time, which is defined in the law of a particular jurisdiction.”

Study.com

Tilling fallow ground to feed the hungry benefits the general welfare, but nobody was going to till a 14,000’ mountaintop. Still, the mining company didn’t want hikers tapping its gold and silver veins. Which raises a third legal issue:  the “freedom to roam.”

“The freedom to roam, or “everyman’s right”, is the general public’s right to access certain public or privately owned land, lakes, and rivers for recreation and exercise. The right is sometimes called the right of public access to the wilderness or the “right to roam.”

“In Scotland, Finland, Iceland, Norway, Sweden, Estonia, Latvia, Lithuania, Austria, Czech Republic and Switzerland, the freedom to roam takes the form of general public rights which are sometimes codified in law. The access is ancient in parts of Northern Europe and has been regarded as sufficiently basic that it was not formalised in law until modern times. However, the right usually does not include any substantial economic exploitation, such as hunting or logging, or disruptive activities, such as making fires and driving offroad vehicles.

“In England and Wales public access rights apply only to certain categories of mainly uncultivated land.”

Wikipedia

I wanted my “freedom to roam” that morning, and ducking the gate was a crude way to balance  public benefit and private rights:  the mining company could have all the gold and silver it wanted (their mine was hundreds of feet downslope — my brother-in-law worked there), it was safe from anybody trying to turn its claim into food for the hungry, and I was in it for the “recreation and exercise” — and the vast, stark, unforgiving beauty, and (if the wind ever stopped blowing) the immense solitude and silence that makes you feel about the size of a microbe. (Roaming in the wilderness will do that to you. No wonder it’s a public right.)

Economic and legal analyses make finding that balance much more complicated, of course, and whoever wrote this Wikipedia article did a nice job of distinguishing among terms of art like the general public good, specific public goods, general societal welfare, common goods, the public interest, etc. For our purposes, we’ll just note that some things about life on this planet benefit everybody, and for them we need to balance private and public benefit (ownership, use, enjoyment, access, rent, etc.) and cost (development, maintenance, preservation). Finding that balance has also become the basis of a wide and widening economic generation gap.

More on that next time

Progressive Capitalism

torn dollar bill

Torn dollar bill image source and license.

We’ve been looking at economic winners and losers in the zero-sum economy — particularly in the context of higher education, where cultural belief in the importance of college and post-graduate degrees on upward mobility and success in the job market is driving behavior that harms both parents (the college admissions scandal) and the economic and mental health of their children (student loan debt, general anxiety disorder, depression, suicide).

This series of blog posts is now in its third year — throughout, we’ve seen how hyper-competitive capitalism and its staunch faith in the implicit justice of the “free” market is causing other economic loses. For example:

  • the stagnation of middle class real incomes;
  • the rise of the numbers of statistically poor people in the U.S.;
  • the dismantling of compassionate social safety nets in favor of expensive, counterproductive, and humiliating replacements;
  • the rise of the “rentier” economy in which formerly public benefits have been privatized, making them accessible only to those who can afford them through the payment of economic “rents”;
  • the end of the American ideal of upward social and economic mobility;
  • the high cost of housing and the death of the American dream of home ownership;
  • the elimination of “normal” jobs through off-shoring, outsourcing, and the delegation of productivity to intelligent machines;
  • the advent of the short-term, contract-based “gig economy” with its lack of fringe benefits and its precarious prospects for sustainable income;
  • economic inequality that favors the wealthiest of capitalists at the expense of the bottom 90% (or 99%, or 99.9%, depending on your data and point of view);
  • the creation instead of an insular top-level “meritocrat” socio-economic class;
  • the new state of “total work” and the “monetization” of goods and services;
  • rising rates of career burnout, mental illness, and suicide resulting from social isolation and the vain struggle to find meaning and purpose at work;
  • the rise of corporate nation-states with economic and policy-making power that dwarfs that of many governmental nation-states;
  • the private (non-democratic) social policy-making initiatives of the wealthiest elites;
  • and much, much more.

Nobody meant economic policy to do this, but it has, for roughly the past 30-40 years. Good intentions; unplanned results.

We’ve seen that both plutocrats and progressives advocate for systemic change, while status quo inertia weighs in on the side of those who don’t see what all the fuss is about, since capitalism is undeniably the best economic option and always has been, and besides it’s still working just fine, thank you very much. Instead of meaningful discourse, we have a predominant nostalgic, populist doubling down on the neoliberal socio-economic cultural ideology that jet-propelled post-WWII recovery but finished running its course in the 1970s, while the retrenchers and the media slap those who beg to differ with the kiss-of-death label “progressive.” As a result, we’re left with incessant lobbing from one end of the polarized spectrum to the other of ideological bombs that originate in data and analysis skewed by cognitive biases, intentional blindness, and fake news . Economic policy-making resembles WWI trench warfare — a tactical grinding down of the opposition and the numbing and dumbing of everyone else. It was a bad idea then, and it’s still a bad idea now.

I had no idea this is what I was getting into when I decided three years ago to research and write about the new economy and the future of work.

It’s in the context of this toxic environment that Economics Nobel Laureate Joseph E. Stiglitz, offered his “progressive capitalism” alternative, based on “the power of the market to serve society.” Progressive Capitalism Is Not an Oxymoron: We can save our broken economic system from itself, New York Times (April 19, 2019). His article, like virtually all of the economics books and articles I read these days, begins with a long parade of evils and ends with a handful of policy ideas. His version of the former is by now quite familiar:

“Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years.

“This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.

“There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying. America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens.

“We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking).

“Just as forces of globalization and technological change were contributing to growing inequality, we adopted policies that worsened societal inequities.

“Even as economic theories like information economics (dealing with the ever-present situation where information is imperfect), behavioral economics and game theory arose to explain why markets on their own are often not efficient, fair, stable or seemingly rational, we relied more on markets and scaled back social protections.

“Politics has played a big role in the increase in corporate rent-seeking and the accompanying inequality.

“Markets don’t exist in a vacuum; they have to be structured by rules and regulations, and those rules and regulations must be enforced.

“We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.

“If we don’t change course matters will likely grow worse, as machines (artificial intelligence and robots) replace an increasing fraction of routine labor, including many of the jobs of the several million Americans.

“The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society.

“Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.

“Part of this new social contract is an expanded public option for many programs now provided by private entities or not at all

“This new social contract will enable most Americans to once again have a middle-class life.

“The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest.

“America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people.”

His point seems to be that merely reciting litanies of economic woes won’t bring about systemic relief — for that, we need to embrace an essential factor:

Paradigms only shift when culture  shifts:
new ideas require new culture to receive them,
and new culture requires new belief systems.

Systemic change requires cultural change — remodeled institutions and revised social contracts that tether ideas to real life. Trying to patch policy ideas into the existing socio-economic system is like what would happen if a firm were to abruptly change its products, services, and strategic and marketing plans without bothering to change its mission statement, values and beliefs, and firm culture.

Like that’s going to work.

Coming up, we’ll look beyond policy bombs to the higher ground of revised cultural beliefs, starting with next week’s search for the “public” that’s gone missing from the Republic.

Economic Darwinism

social darwinism

The 19th Century’s Gilded Age of the Robber Barons came hot on the heels of The Origin of the Species. Little wonder that…

 “Soon, some sociologists and others were taking up words and ideas which Darwin had used to describe the biological world, and they were adopting them to their own ideas and theories about the human social world. In the late nineteenth and early twentieth centuries, these Social Darwinists took up the language of evolution to frame an understanding of the growing gulf between the rich and the poor as well as the many differences between cultures all over the world.

“The explanation they arrived at was that businessmen and others who were economically and socially successful were so because they were biologically and socially “naturally” the fittest. Conversely, they reasoned that the poor were “naturally” weak and unfit and it would be an error to allow the weak of the species to continue to breed. They believed that the dictum “survival of the fittest” (a term coined not by Charles Darwin but by sociologist Herbert Spencer) meant that only the fittest should survive.”

Social Darwinism in the Gilded Age, Kahn Academy

The result was Social Darwinism:

“The term ‘social Darwinism’ refers to the deterministic philosophy of Englishman Herbert Spencer that applied, to humans and markets, Darwinian biological and evolutionary concepts of natural selection.

“Spencer offered his philosophical defense of individualism and laissez faire in Social Statics (1851). He coined the term “survival of the fittest” in Principles of Biology (1867), arguing that human progress resulted from the triumph of superior individuals and cultures over their inferior competitors; poverty was evidence of inferiority.

“Anything that interfered with the self-improvement of superior individuals or markets was to be resisted. What came to be called “social Darwinism” was used to argue for unrestrained economic competition and against aid to the unfit poor. The state was not to hinder the strong or assist the weak, interceding only to protect individual freedom and rights. “

Capitalism and Western Civilization: Social Darwinism, National Association of Scholars

Social Darwinism has since been widely discredited in academia, but Pulitzer-prize winning economics columnist and professor of public affairs Steven Pearlstein was dismayed to find it alive and well in current hyper-competitive, zero-sum economic policy, as revealed in numerous studies showing that certain genetically inherited traits play “an outsized role in determining economic success.” The list includes intelligence, personality, height, and good lucks, all of which statistically affect income and likelihood of being favorably judged on leadership qualities. Add parental nurturing practices — such as those of the new “Meritocrat” economic class we’ve been looking at — and “whether it’s by way of the genes we inherit or the circumstances in which we are raised, the parental lottery is more important than ever in determining economic outcomes.” It’s Time To Abandon The Cruelty Of Meritocracy, The Guardian (Oct. 13, 2018).

Pearlstein concludes that the luck of the genetic and nurturing draw “must always play a significant role in who achieves economic success” and that “we must also acknowledge that there is a point beyond which the consequences of the parental lottery can never be overcome.” Disconcerted by his own findings, Pearlstein calls for remedial action:

“No matter how hard we might try to make it otherwise, there is a fundamental and irreducible level of unfairness to market competition, one that undermines the moral legitimacy of market outcomes and provides a justification for taking reasonable steps to make them more equal.

“Because of heritability and upbringing, there can never be genuine equality of opportunity. More socialist countries in Europe and Asia have gone a long way toward equalizing access to healthcare, education, nutrition, childcare and even disposable income, and yet they have not come close to eliminating the transmission of family advantage or disadvantage. Surely we should do more along those lines to equalize opportunity in the United States?”

It’s Time to Abandon the Cruelty of Meritocracy

Economics Nobel laureate Joseph E. Stiglitz offers an alternative to economic Darwinism which he calls “progressive capitalism.”

“Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years. This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.

“But things don’t have to be that way. There is an alternative: progressive capitalism. Progressive capitalism is not an oxymoron; we can indeed channel the power of the market to serve society.”

Progressive Capitalism Is Not an Oxymoron: We can save our broken economic system from itself, New York Times (April 19, 2019)

More next time.