Friday, June 10, 2011

Democracy, debt and delusion

The Economist's 'Buttonwood' recently cited a BCA Research report which predicts - on the basis of some plausible assumptions concerning the continuation of current voting patterns relating to age, ethnicity and gender, and demographic trends - that the Republican Party will fade as a major force, and that even Texas will be a solidly Democratic state by 2030.

BCA believes that the deficit problems in the U.S. will not be tackled until 2013, and (this is based on new research from the Pew Research Center) that spending cuts - especially to Medicare and Social Security - will be resisted by voters. Taxes will rise substantially:

"[H]igher taxes will lead to lower labour supply and slower capital accumulation. Eventually, further tax hikes will become self-defeating. At this stage, the U.S. will likely experience a fiscal and political crisis on a scale that has few parallels in history."

The problems of American democracy are mirrored in many other Western democracies today, and they go beyond the fortunes of particular parties and indeed beyond politics.

The Western liberal democratic model seemed until relatively recently to have stood the test of time and to have achieved a degree of stability. But increased populism and the gradual erosion of traditional institutions within Western countries has led inexorably to chronic budget deficits and accumulating public debt.

In the dark days of the 1930s and 40s, a group of European and American thinkers tried to articulate a social philosophy which had at its core the key principles of economic liberalism. Ludwig von Mises and F.A. Hayek played leading roles in the movement, but there were many others, now mostly forgotten.

They shared, by and large, a belief that human reason could help to define economic and social possibilities and impossibilities as a guide to policy-making. They developed a very sophisticated understanding of the way free markets operate and are able to process and assimilate complex information. But their thought also had a socio-political dimension.

These thinkers shared a distrust of majoritarian democracy which they saw as a potentially fatal flaw in Western political thought and practice.

It is only in recent decades that the complex, traditional structures and institutions of the West (structures which often embodied privilege and elitism, but also social complexity and autonomy) have been effectively dismantled - leaving what? Naked majoritarian democracy and its corollaries, political populism and an unsustainable welfare state.

The idea of freedom, that as far as possible people should determine their own lives, is a powerful one, and most Western countries have managed - until now - to deliver a high degree of freedom with social order and prosperity. But the relative freedom and prosperity enjoyed in the West over the past two centuries or so was not just the result of a particular political model. It was also dependent on deep social, cultural and historical factors or preconditions.

And, arguably, those preconditions for an effective and prosperous free society are no longer in place in the U.S. and many other Western countries.


  1. You don't go much into causes of deterioration in "traditional structures and institutions" and for a moment I had to reflect on what, exactly, are the institutions gradually breaking down. That only took a few seconds. Government: dysfunctional, distrusted, hijacked by special interests. Business: corrupt, self-serving and uncivic. Education: dumbed down, rudderless and perpetually in crisis. Politics: corrupt, polemic, demagogic and run by the power-hungry. Religion: increasingly morally hollow, at odds with modernity, internally fractured, and wracked by scandal. Journalism: superficial, unobjective, increasingly sensational and commercial. Science: civically detached, politically influenced, self-important, and disdainfully amoral. Technology: socially disruptive, commercial and over-valued. Ethics: arid and academic in theory, ignored in practice, and largely hostage to semantics and reduced to sloganeering. But I digress ...

    Do all these disintegrations trace to a single cause? That cannot be said, but there is a common factor I've been reading into lately: what Christopher Lasch called "the rehabilitation of desire." For most of history, until the Enlightenment, "the passions" were viewed with suspicion. Wants, needs, lusts, passions -- all were viewed by wisemen, prophets, philosophers and pundits as distractions or counterproductive urges to be resisted by means of reflection and reason. Gratification of desire on this view feeds the flesh but weakens the spirit. With Hume and Smith, says Lasch, desire becomes the engine of prosperity. Even these two thinkers expressed some trepidation: constant gratification of desire would make people soft, lazy, selfish (nasty brutish and short). But they thought it would be worth it.

    Now we see their trepidation was justified. Abandon ship, everyone for oneself! We think there are shortcuts to prosperity, that money grows on trees, that responsibility is for dummies, that government should spend but not tax, that debt is not harmful and that power is admirable in its own right, that ends justify means and that material comfort is happiness. We are all corrupt.

    But I digress ... LOL.

    Sometimes your somewhat elliptical posts stir me up the most. BTW hello, I hope you are well ...

  2. At The_Moxie_Files, my Nov 2010 essay critiques the (mistaken or fallacious) notion that markets are rational, which is the foundation especially of the libertarian school of economics (vonMises etc):

  3. And I thought my attitude to current trends was negative! You go a bit further than me here, GC, though I agree with much of it. Moral decline has been associated with cultural changes but I don't know if one can identify causes. I just reread that November piece of yours. You seem to suggest that capitalism is the culprit. But do you think (like Marx) that changing the system radically will lead to radical moral improvement?

    I'm fine. Hope all is well with you too.

  4. Eh, not sure I agree with much of any of your analysis, GC, sorry. I tried to think of a period in the West when government was not hijacked by special interests; when business wasn't self-serving; when education wasn't perpetually in crisis;[1] when politics wasn't corrupt; when religion wasn't morally hollow; when etc.

    I'm afraid I can't think of a better era for those institutions. (I can think of a few worse eras for some - the indulgence-sellers of the pre-Reformation era were probably more nakedly soulless than today's televangelists.) I leave a possible exception for the academic ethics of the late 19th century, though I hesitate to declare ethics stronger then because of the institutional racism in the West.

    Sure, I agree that the West is at great risk, but more because we risk governmental collapse than anything else. If the institution that enforces contracts and dispenses justice can't function because of debt, civil society is in peril. (If I were to guess at a social cause for this, I suppose I'd peg it on an overdependence on the welfare state and personal fiscal prudence no longer being the virtue it once was.)

    But I don't think I'd go so far as to declare that the institutions you mention are seeing the decline you see in them. They're not doing well, but they never were doing well to begin with.

    [1] Higher education is hardly doing swimmingly, certainly, but our era has an advantage over previous ones in that at least most everyone comes of age literate. The 1920s have nothing on the 2010s there.

  5. @Hortensio: I agree there are some improvements on the margins in many areas. We teach all children to read. Education is not restricted to princes and priests. It's possible to be born in abject poverty anywhere on earth yet become, by age 25, a rocket scientist or brain surgeon. And on the flipside, every past age has been degenerate in some respects; the Spanish inquisitioneers were no better than the Taliban, the Roman Empire was bloodthirsty and mostly ruled by sots, etc. Soooooo ... today's situation is traditional, eh?

    And Mark: No, I don't lay blame on capitalism and (remember my posts on Marxism) I'm certainly no Marxist. But the core of modern capitalism is Smithian "gratification of desire" which drives demand (transforming luxuries into necessities, for instance). When the core assumptions are questionable (corrupt or detrimental to character), the system built around it is fundamentally flawed. What we lack is a way to retain the dynamism of capitalism -- the innovation, the motivation to strive, the general progress in material comfort -- without numbing civic virtue or diminishing the human impulse to compassion. Our current sorry state includes the characteristic that we are losing not only civic virtue (compassion, etc), but our ability to understand them. Even our discourse about them is surrounded by doubt and skepticism. On the day we no longer understand even the vocabulary (MacIntyre), evil has won.

  6. Part of the failures of the Western world is the belief in Democracy. the US was not founded on Democratic Principles (and therefore most other Western "Democracies") but on Republican Principles. The founding fathers, be they here in the US or in France or anywhere else, understood that having all peoiple with an equla vote would destroy the country. They knew this because they understood that passions control people far more easily than rational thought does. They attempted to minimize the effect of the average persons passion but the bicameral legislature, one appointed (in England it is one given a seat by birth and in France by appointment as well) and one elected with the appointed one holding more power over specifics of government and the elected one holding more power over the monies of the government. Starting in the 1870s and continuing through the 1920 we dismantled that system here in the US. The 1940s and 1950s gave rise to the notion of a "Democratic" government over a non-representative government being better. The passsions written about and hinted as the cause of our downturn as a government have always been there, the exciting of these passions, whether by MSNBC, FOX, or newspapers and speeches has always been there the difference is now we as a society have decided to allow the passions to rule because we believe in "democracy" and the idea that each persons opinion is equal to any real fact. That someone who makes up a fact has as much right to present there ignorance as someone who speaks the truth. We no longer look for facts and truths we look for what feels right and sounds believable because, instead of leeting those who are less driven by the "idol of the moment", we have given away our country (and most of Western Civilization along with it) to the American Idol block of voters.

  7. ... we as a society have decided to allow the passions to rule because we believe in "democracy" and the idea that each person's opinion is equal to any real fact. That someone who makes up a fact has as much right to present their ignorance as someone who speaks the truth.

    Much of that is the legacy of post-modernism (doing its best to imply there is no such thing truth) in higher education and its trickle-down dumb-down strategies in primary education -- skepticism, uncertainty and doubt from top to bottom. Science is presented as opinion and every opinion is equally valid -- look at the creationism debate for a good example. And then we wonder why non-US countries produce more scientists (not to say better, but that might slip too) than we do.

    You're right, with a few changes in law we've drifted towards more direct democracy (US Senators are directly elected now). But even without that, inflaming the passions of "the masses" (as the old liberals called them) has risen to a high art -- PR. Bush justifying war in Iraq is an especially vivid example. Obama elected on a one-word slogan, "Change," arguably is another. Sloganeering rather than rational persuasion is endemic in today's politics. Hort might say that's always been true, or something like it has always existed. Might be a good point, except there are more numerous and more powerful channels of communication and the art of PR has been fine-tuned since the 50s to nearly Big-Brother status.

    Very good rant, Anon. I liked it. There's a black cloud over our heads about solutions, though. I look at the Arab spring and see naivete ... when they get their democracy, what will they have? If it looks like ours, they may be disappointed.


  8. GC, I did not mean to suggest you were a Marxist, but I do believe that there is in your thinking a kind of radicalism. I don't think moral ideals (such as you espouse) can be realized in or through political or economic systems. In particular, I see no reason to believe that any system - capitalist or otherwise - could meet your criteria. Sounds Utopian to me.

  9. Interesting comments all of them. It seems to me that a crucial question is how rational we deem ordinary people to be. If people are not rational then libertarianism has no basis. In fact, people are, I think, fairly rational in the conduct of their personal lives (not that it's any of my business!). But this doesn't translate into the political sphere where 'majority rule' tends to lead to trouble.

    The welfare dependence and erosion of personal fiscal prudence mentioned by Hortensio have arguably been encouraged by government policies developed in the context of political populism.

  10. All men are ordinary, but some are more ordinary than others?

    The problem for non-democrats is to name a category of persons that is better able to govern than the average taxpaying voter. Who, for example, did Hayek have in mind?

    We're back to democracy being the worst system apart from all the others.

  11. Alan, you mention taxpaying voters - many voters are net recipients of rather than contributors to government revenue. But I am not making specific proposals here. I am just making the point that in the past Western democracies may have worked well only because of certain non-democratic or extra-democratic factors - political, social and cultural - which no longer prevail.

  12. Yes, it's glaringly obvious that entrenched welfare state privileges are now proving unsustainable -- but in my view this is far more troubling for most of Europe than for the US. In the US, government uses about 30 per cent of GDP; in the OECD it is around 42 per cent.

    There's an excellent analysis of the Australian case, here:

    This shows that Korea, Japan, Germany, Spain, Greece, Italy, France, Austria, Poland and Portugal spend most of their welfare transfers on the wealthiest half of the population. (See Chart 5.) The US is ranked in the middle on this statistic.

  13. But you must admit, Alan, that the US - with its massive government debt - is in trouble. The US has traditionally been a low taxing country but demographic changes will increase demand for services and political support for those services will make it very difficult to reduce them. So taxes will probably have to rise... I just have the sense that many Western democracies are not working anymore - high government indebtedness is an objective measure of dysfunction. Australia is doing okay largely because its mineral resources are in such high demand - without the resources boom I suspect government debt levels would be much higher.

  14. Agreed, the US government is now highly indebted, around 100 per cent
    of GDP. But that's less than half the debt ratio of Japan, which is by
    far the most indebted government anywhere.

    But, as you suggest, low tax rates imply a greater capacity to pay off
    debt. So the US is not as badly situated as countries with both high
    taxes and high government debt. Also its demographics are good compared with Europe and Japan and the Chinese countries.

    Australia is just about the only country with low debt, low inflation, low unemployment, low taxes and good demographics. This has been the case for a long time, so the recent China boom (since 2006) is not the basic factor.