Tuesday, August 21, 2012

Can We Act Before It's Too Late?

Is it possible to Do Something about the federal budget mess before the nation goes over the cliff?  Probably not.  Writes Victor Davis Hanson about the Roman budget crisis:
The Roman satirist Juvenal lamented the ill effects of free food and free entertainment for the masses (“bread and circuses”) in part because he knew there was no remedy for the pathology in sight — and thus only a slow decline toward fiscal insolvency or riots were on the horizon.
Nothing changes.  The teachers of Wisconsin rioted against budget-balancing that made them contribute just a little more for their pensions.  And the Greeks are rioting against the reduction in their benefits from the state.  And these are regime supporters, people who support the idea of big government, people who should be all in favor of the government living within its means.

The irony is, as President Obama provokes the mob into rage against "the rich," that big-ticket thinkers of left and right agree that big government is a problem.  Conservatism was born in Edmund Burke as a reaction to the first hint of big government.  But it took the rise of fascism and pogroms against the Jews to get Jewish lefties like Max Horkheimer and Theodor Adorno to agree that the instrumental reason of the Enlightenment leads directly to domination and oppression: "what men want to learn from nature is how to dominate it and other men."

So you get lefties like Juergen Habermas differentiating between the strategic action of the governmental bureaucracy or the corporate bureaucracy and the communicative action of shared meaning in language.  The rational plan of the government or the corporation is domination, any way you look at it.  But the essential social nature of humans is expressed in language and consensus.  Of course, when it comes to facing up to the truth that your social consensus is transformed into strategic instrumental reason the moment you translate your consensus into a government program, the lefties go AWOL.  But at least they have begun to face the truth of their cruel and unjust system.

Meanwhile conservatives have insisted that community and society and compassion start with the face-to-face community.  Why?  Because it is at the face-to-face community that the basic social problem can be solved, getting people "to bide by the social contract [rather] than to pretend to bide by it", as Roger Scruton writes.  It is at the local level that people can judge whether their fellows are pulling their weight or freeloading.  But when the question of freeloading is obscured by "social justice" and a government program--for who is the freeloader, the businessman or the disabled on a pension--then people start to act like Sgt. Bilko.  They see all the free stuff passing by and figure, why not get my share and cash in?

Perhaps there is a silver lining to this cloud.  Maybe today in America the mass of people are frightened more by the collapse of government finances in a budget crisis than by suffering a reduction in their benefits in a budget deal.  After all, middle-class people depend on the system continuing to work for them.  They are not like the proletariat with "nothing left to lose."

But don't bet on it.  The strategy of President Obama is clear.  He will put off spending cuts until the moment of collapse.  And in that moment of collapse, of course, the people will be willing to agree to anything, from sovereign debt default to tax increases on the middle class.

Voila!  Problem solved.

Monday, August 20, 2012

America's Real Problems

Back in the 1870s Walter Bagehot, editor of The Economist, wrote his classic book Lombard Street. It was an analysis of the Bank of England's role as guarantor of the credit system. What should the Bank do to deal with a panic in the money market? That was Bagehot's topic, after two big panics in ten years, in 1857 and 1866.

You'll be amazed to learn that his solution was not more regulation. No, he wanted stronger leadership at the Bank of England, a permanent manager rather than the rotating Governors. He wanted the Bank to realize that it had to do everything in its power to stop a panic and restore confidence, principally by lending money without limit on any good security. And he wanted the Bank to maintain a higher "banking reserve."

The foundation of the credit system, he wrote, is that most people are "sound." They maintain their assets in a prudent way, and cannot be sold out because of excessive leverage. His approach to the money market assumed that people are responsible, and that the governance of market institutions should encourage people to follow their instinct to be responsible and "sound." He thought that the soundness of the credit system was the responsibility of the credit system participants.

The contrast with our own time is palpable. Today, we don't trust the business sector to mind its own business. We believe, with certainty, that political oversight is essential to a smooth economic system. But how well does that work, in business and in the other areas of government?

Of course, political oversight means bureaucratic regulation, and effective political control of the economic sector, and the record of the last century is that the cure is worse than the disease.

Money.  Two hundred years ago, the credit system in the US was founded on a funded national debt and the government ran a surplus.  This meant that the dollar was rock solid and the government was not trying to manipulate the credit system to get out of a jam.  Today the government is always in a jam, and is always manipulating the credit system to keep its operations going.  The government regulates banks not to make them safer but to make them into useful conduits of government debt.

Education.  For two hundred years the ruling class has liked the idea of government-run education.  Maybe it had a point in the early 19th century when the people coming off the land into the city were often illiterate.  But now, in the United States, the education system spends about a trillion dollars a year to do--what exactly?  Most likely its real purpose is to indoctrinate students into the ruling class ideology.  In my view it is time to return education to the private sector, to churches, and charities.  And also revive the idea of apprenticeship--getting hands-on teenagers out of school and into the workforce.

Healthcare.  Everyone seems to think that without government nobody except the rich could afford healthcare.  I doubt it.  The vast majority of people buy food and transportation without government, why not healthcare?  The problem is that we really don't know what people want in health care, because the government so completely dominates the system that individual consumer preference is blocked out.

Work.  Used to be that workers worked for cash.  Now the government is right in the middle of the employment transaction in many different ways with regulations and taxes.  It's all meant to help the workers, to prevent exploitation and provide social benefits like unemployment and retirement.  Are we really so helpless that we need government right in the middle of everything?  And the problem is that all the taxes and regulation almost force low-skill employers just avoid the complicated and confusing formal employment sector completely, and hire people off the books.  How safe it that?

Environment.  The current top-down system assumes that ordinary people are helpless victims that cannot look after themselves.  Shouldn't we try to find environmental approaches that empower ordinary people to protect the environment?  Roger Scruton recommends a bottom-up approach based on the idea of "home."  People want to protect their home.

When Walter Bagehot wrote Lombard Street he admitted that it would be impossible to change the governance of the Bank of England because people just accepted the way things were and wouldn't support any change.  In other words, people won't agree to change unless things are broken.

That's where we are with America.  There are lots of things that aren't really working, but they aren't broken.  Not yet.

Do we really have to wait to fix things until they are completely broken?


Wednesday, August 15, 2012

The Missing Liberal Canon

Why don't liberals have a canon, a list of thinkers and books that liberals can go to, to learn all about liberalism?  That's what liberals like Beverly Gage have been asking lately.  And conservatives have been eager to help them out.

Actually, liberals do too have a canon.  That is what Jonah Goldberg discovered when he wrote Liberal Fascism.  He wanted to know what liberals believed and where they got it from.  His journey led him to the Progressives, people like Herbert Croly and The Promise of American Life back at the turn of the 20th century.

But the worriers have a point.  Sensible liberals don't have a set of books that every liberal is supposed to read.  Unless you call out the wilder shores of Howard Zinn and Noam Chomsky.  The reason is simple.  You don't need a canon, you don't need to study political philosophy when you are the ruling class.  Knowledge begins with a problem: why is the world so unjust?  But liberals are the ruling class. They sit in the catbird seat.  They don't have a problem, except the instrumental problem of how to pass the next comprehensive and mandatory social program.

Conservatives on the other hand do have a problem.  We cannot stand the current liberal welfare state that wants to make everyone into a compliant and obedient ward of the state.  We want something different.  So we delve into the books to find out what went wrong.  We want to know why Americans just sit there and take the welfare state without doing anything about it.  We want to know how we could change the political system so that the instrumental domination of big government bureaucracy could be changed to something less oppressive and less unjust.

So we read up on Edmund Burke.  We check out the marginal economists of 1870.  We read von Mises and Hayek.  We delve into Thomas Sowell and Michael Novak.  We check out Milton Friedman.  We read Roger Scruton, Charles Murray, George Gilder, Rodney Stark, Frederick Turner, F.S.C. Northrop.

For myself, I've deliberately looked to the left to find conservative themes.  Some lefties get that there is a problem.  There are Max Horkheimer and Theodor Adorno and their critique of instrumental reason.  There is Juergen Habermas and his attempt at solving the instrumental reason problem with the lifeworld and communicative action.  There is James C. Scott and Seeing Like a State,  my current enthusiasm.  There is even useful stuff to be learned from Michael Hardt and Antonio Negri and their wild lefty trilogy, Empire and Multitude and Commonwealth. 

Meanwhile, our liberal friends find themselves in a nasty spot, trying desperately to plug the leaks in their rusty ship.  They don't have time to read philosophical tomes.  They need to man the pumps and keep the welfare state and their power and their sinecures going for one more election cycle.

I wouldn't want to be a liberal.  Not in 2012.

Thursday, August 2, 2012

How To Defend Capitalism

Mitt Romney, writes Ramesh Ponnuru, ought to respond to Barack Obama's attack on capitalism with something more than ten point programs.
To respond to Obama’s attacks on outsourcing and Bain, Romney ought to unveil something more compelling than another tax return.
Yes, but how?  People are right to fear outsourcing.  And they are right to fear private equity companies like Bain.  Capitalism is a fearsome thing.  It may be true that you work for a company that is getting slowly flushed down the toilet, but if it lasts until you retire, why rush out to get Bain to fix things if they ain't quite broke?

Don't look back, as Satchel Paige said.  Something may be gaining on you.

Capitalism has always had to take the rap that it doesn't give a rip about people.  The market economy is the law of the jungle and the weakest go to the wall.   Back when I worked for a consulting firm, my fellow workers would get shocked when the firm laid people off.  Look what it says in the employee manual, they said.  Look how it says that the firm cares about employee development.

Yeah.  They may care a lot, but when they see the company in the red for three months in a row, they will do the instinctive thing.  They will act to save the company, not the employees.  And really, this is nothing out of the ordinary.  What do you think an army is all about?  It is about sacrificing young men so the nation as a whole will survive.  The government may idolize the Fallen every Memorial Day and  those who served every Veterans Day, but the fact is that those mother's sons are still dead.

Both corporations and governments are pretty ruthless when it comes to survival.  They sacrifice their employees and their young men generously during hard times.  But people understand the social requirement for the government to defend them.  Anyway, most people aren't young men.  But when it comes to corporations acting to save the corporation, people identify with the folks losing their jobs to machines or outsourcing.  There but for the grace of the fickle market go I.

But there are ways you can protect yourself against the vicissitudes of the market, just as there were ways for the agricultural villager to protect himself against the vicissitudes of the weather.  Workers can save.  If they don't earn much they can mutualize their savings by joining a benefit club or fraternal association.  In the old days, labor unions were mainly mutual-aid associations.  For those with a bit more money, there is insurance.  For those with more money still there are savings accounts, bonds, and stocks.  Oh, and guess what:  there is family.

Yes, but shouldn't all these benefits be provided by your employer or by the government?  Well, you tell me.  That employer thing didn't work out so well for the old-line steel companies, and the only reason that the auto workers aren't totally screwed is that the government stepped in, screwed the widow-and-orphan bond-holders, and made good the corporation's broken promises, courtesy of the taxpayers.  And as for government, how do you feel about collecting on your Medicare or your Social Security in 20 years?  The latest estimate is that we are about $100 trillion short if the government means to pay out on its promises.

The point is that both corporations and governments are ruthless outfits interested only in #1.  Individual people, to corporations and governments, are expendable.  But there is a solution.  It is called civil society.  It is the social space in between the mechanical monoliths, the megastructures of business and government.  Civil society includes every organization that is in the business of people helping people.  They don't have power; they don't have influence.  That is why they can afford to think about the needs of their members rather than the glory of the collective.

Conservatives have been banging on about civil society since Edmund Burke and his "little platoons" over two centuries ago.  Civil society flourished mightily in the 19th century, as ordinary people formed fraternal associations, churches, labor unions, charities, benefit clubs, friendly societies, you name it.  Of course, they couldn't perform miracles; for one thing, the world was a lot poorer back in the 19th century.  In the 20th century, government got into the act and nationalized most of the functions performed by the "little platoons."  There turned out to be a problem with that.

The problem is the age-old problem in any association of social humans.  It is the freeloader.  In any community, there will be people that don't pull their weight.  They figure out how to game the rules and they do.  Traditionally, society has confronted this problem with naming and shaming, which works in the face-to-face community.  And religion has solved the problem with the concept of divine justice.  You may think you are getting away with your cheating, but God is not mocked.  He knows, and he will deal with you in the next life when you find yourself burning in Hell or, in Plato, in the river of Tartarus down at the center of the Earth.  But the welfare state has turned out to be a veritable Springtime for Freeloaders.  Just get yourself defined as a victim and you can live at the expense of your fellows forever.  That is why the welfare state is going broke.

The solution to big business is not big government.  And the solution to big government is not big business.  Nor can we go back to an imagined Garden of Eden where true community reigned.  We have invented modern business and modern government and we can't uninvent them.

But we can create a human space in between the ruthless megastructures.   We can grow a vibrant civil society in the spaces between the Bigs. That is what conservatism has wanted to do for decades.  And that is how we reckon we can defend capitalism from itself.