Surveying the last 200 years of economic history the single most dominant theme is the theoretical battle between capitalism and collectivism.
Largely unfettered Capitalism, following the theoretical underpinnings of Adam Smith that individual self interest was the most efficient economic engine, ruled the 1800's (albeit often with a huge dose of state support). Growth and development often bordered on manic, but it chewed up workers with little regard for their welfare.
The sheer brutality of its treatment of workers provoked the worker backlash that produced the communist revolutions of the early part of the 20th Century that led to the biggest chunk of the worlds population living under despotic communist regimes for much of the 20th Century.
In the United States the worker backlash was channeled into laws to protect workers that moderated the tendency toward exploitation that the markets produce. While much of the world was turning communist we enacted workers compensation laws, minimum wage laws, payroll laws, worker safety laws and laws to give labor unions more bargaining power in the early part of the 20th century. That calmed the worker unrest, but didn't address the tendency of unfettered capitalism to speculate itself into a crisis, so our unfettered free markets let the scramble to get rich obscure good judgment and we led the world into the stock market crash of 1929 and the subsequent depression. After the stock market blew up in 1929 and we sank into the great depression, we enacted a series of laws to put some limits on unfettered capitalism. This mix of capitalism with state regulation (which also occurred in most other western democracy's) proved to be much more conducive to growth than the communist state planning approach. For the rest of the 20th Century we enjoyed a long period of economic stability and growth.
But late in the 20th Century, probably because times were good for so long, people drifted away from labor unions and capitalists chaffing under the government restrictions put in place after the 1929 Stock Market collapse began to sound sensible to voters. When the Soviet Union collapsed in 1989, the true believers in unfettered free markets declared the total victory of Capitalism over collectivist notions and over the next decade and a half dismantled much of what had been enacted after the 1929 crash. The unfettered market did what it always does, lost sight of common sense in the scramble to get richer and richer and in 2007-08 we led the world economy into disaster once again.
So now we are back in what will probably be years of high unemployment and slow growth, and are seeing worker unrest again. The Occupy Wall Street protests in the US, and workers unrest around the world are sort of aimless shouts of pain at this point. Will they coalesce into some pendulum swing toward a collectivist future in some countries?
We need to hash out a middle way. A coherent body of theory that recognizes the ability of capitalism to organize people and generate growth, but also recognizes that the human emotions that drive capitalism sometimes need to be restrained and channeled.
The notion of a middle way is timeless, from Aristotle teaching moderation in all things, to traditional Chinese culture based on yin and yang, the balance of opposites. As individual voters we need to cultivate more recognition of Yin and Yang and try not to allow the excesses of the last two decades toward free markets push us into excesses in collectivism.
Saturday, November 19, 2011
Tuesday, November 15, 2011
History has made Republicans reactive
Historically in my lifetime there have always been more voters registered Democratic than Republican. I don't know how far back in history that situation has existed, but it certainly has been the case in the last 60 years.
Ideologically I have always understood that Republicans champion individual self responsibility and government fiscal responsibility. Those are goals that I certainly think are basic and fundamentally required to formulate good public policy. But as I contemplate political history for the last thirty years I find Republican fingerprints on virtually all the really major policy mistakes we are currently trying to clean up.
I have began to understand, I think, why Republicans have made such major mistakes in public policy matters, from the Reagan tax cuts in the 1980's that first exploded the deficit, to the Republican changes in tax law and financial regulations laws that led to the great recession, to the Bush II tax cuts and changes in Congressional rules that redirected the trajectory of the deficit skyward early in the last decade.
Republicans have become reactive. Because there are more Democrats, Democrats controlled the agenda. Between 1955 and 1980 Democrats controlled both houses of Congress - the period when most the current Republican political leadership, and most current voters, were developing their political ideas. So to the extent there were good policies to be enacted, Democrats got to claim them. Republicans were left trying to distinguish themselves from Democrats by looking for mistakes and hammering on them. They become so focused on being something different than Democrats they picked up ideas that are contrary to Democratic positions without really critically thinking through the consequences.
The first example is the Reagan tax cuts in the early 1980's. Republicans had found a chink in the Democratic electoral armor - everyone likes paying less taxes. They found an economic theory that would allow them to make tax cuts without making sufficient cuts to offset the loss of revenue - supply side economics, the theory that giving more money to rich folks would cause it to "trickle down" to the rest of us. Mr Reagan sold the theory to American voters with slogans like "a rising tide raises all boats". I voted for Ronald Reagan, and his willingness to embrace supply side was one of the things that turned me into Democrat. I respected Mr. Reagan, and still do. I believe he had the best intentions, and I think he was masterful in his handling of the Soviet Union. But even at the time I had a hard time understanding how a "conservative" could build his view of how to build an economy on an Ivory Tower theory that seemed to contradict history, human psychology and common sense. How could cutting government revenues without cutting expenses produce anything other than a deficit?
Immediately after the Reagan Tax cuts the deficit skyrocketed. And now a couple decades later the "rising tide" data is in. To continue the rising tide analogy, the rising tide only lifted the yachts, the rest of the boats are now submarines. Virtually nothing trickled down over the last 25 years.
I think what happened was Republicans rejected the Keynesian economic theories of the time that tolerated small deficits because it was associated with Democrats. Republicans had been out of power so long they were in an emotionally reactive mode where they latched onto something, not because it was sensible, but because it was different, and it allowed them to promise voters tax cuts. Sort of like giving out candy to curry favor with the kids. It is effective but not good for the kids in the long run.
In foreign policy George Bush II came into office in 2001 determined to do foreign policy differently. The Clinton years had been marked by worldwide engagement, largely avoiding muscle flexing in favor of soft power. We were highly admired around the world, Mr Clinton helped broker the (hopefully) final resolution of the problems between Ireland, Northern Ireland and England, and came close to resolving the Palestinian issue. Although this approach seems to me to be carrying forward the policy of the great Republican Teddy Roosevelt (walk softly and carry a big stick) Republicans had predictably taken an anti-Democrat stance, arguing we should be tough guys. Mr Clinton was to nice.
Mr. Bush came into office with the notion we were the biggest kid on the block and everyone else needed to respect that. He made a point of snubbing the Palestinians, basically turned his back and stopped all efforts to solve the problem. The rest of the worlds view of the US began sinking. Then 9/11 happened and the world extended their support and sympathy, but it evaporated as we threw our weight around, and then invaded Iraq. By the time Mr. Bush left office in 2008 Iraq had become widely viewed as a terrible mistake and the rest of the world disliked and distrusted us. Mr. Bush seems to be a likable guy, whom I believe acted from good, if mistaken motives. As I try to understand how he, with all the assets and knowledge afforded a President, could have made this kind of mistake, I find myself back to the notion that people emotionally attached to the Republican party have to be the anti-Democrat. They have to find theories that distinguish them from Democrats, and become so focused on Democratic flaws they don't allow themselves to question the sensibility of the policies they are pushing.
In economic policy the Republicans obsession with being "not democrat" gave us the Bush II tax cuts. The data was already trickling in that trickle down theory did not in fact work and the Reagan tax cuts had blown up the deficit, but Reagan's tax cuts had worked wonderfully politically. So even though we were engaged in two wars, Mr Bush and the Republican Congress went back to supply side theory - big tax cuts, no effort to insure spending would match the loss of Revenue.
Now here we are, three years into the economic doldrums, carrying a huge debt load and Republicans are still obsessed with being the anti-Democrat, espousing proposals that history, economic data and common sense notions about human behavior say are almost certain to make things worse.
Voters need for Republicans to stop obsessing about distinguishing themselves from Democrats and start formulating policies with an eye to history, economic data and common sense about human behavior. The fundamental Republican message is important but has been ill served by their reactive policies of the last three decades.
Ideologically I have always understood that Republicans champion individual self responsibility and government fiscal responsibility. Those are goals that I certainly think are basic and fundamentally required to formulate good public policy. But as I contemplate political history for the last thirty years I find Republican fingerprints on virtually all the really major policy mistakes we are currently trying to clean up.
I have began to understand, I think, why Republicans have made such major mistakes in public policy matters, from the Reagan tax cuts in the 1980's that first exploded the deficit, to the Republican changes in tax law and financial regulations laws that led to the great recession, to the Bush II tax cuts and changes in Congressional rules that redirected the trajectory of the deficit skyward early in the last decade.
Republicans have become reactive. Because there are more Democrats, Democrats controlled the agenda. Between 1955 and 1980 Democrats controlled both houses of Congress - the period when most the current Republican political leadership, and most current voters, were developing their political ideas. So to the extent there were good policies to be enacted, Democrats got to claim them. Republicans were left trying to distinguish themselves from Democrats by looking for mistakes and hammering on them. They become so focused on being something different than Democrats they picked up ideas that are contrary to Democratic positions without really critically thinking through the consequences.
The first example is the Reagan tax cuts in the early 1980's. Republicans had found a chink in the Democratic electoral armor - everyone likes paying less taxes. They found an economic theory that would allow them to make tax cuts without making sufficient cuts to offset the loss of revenue - supply side economics, the theory that giving more money to rich folks would cause it to "trickle down" to the rest of us. Mr Reagan sold the theory to American voters with slogans like "a rising tide raises all boats". I voted for Ronald Reagan, and his willingness to embrace supply side was one of the things that turned me into Democrat. I respected Mr. Reagan, and still do. I believe he had the best intentions, and I think he was masterful in his handling of the Soviet Union. But even at the time I had a hard time understanding how a "conservative" could build his view of how to build an economy on an Ivory Tower theory that seemed to contradict history, human psychology and common sense. How could cutting government revenues without cutting expenses produce anything other than a deficit?
Immediately after the Reagan Tax cuts the deficit skyrocketed. And now a couple decades later the "rising tide" data is in. To continue the rising tide analogy, the rising tide only lifted the yachts, the rest of the boats are now submarines. Virtually nothing trickled down over the last 25 years.
I think what happened was Republicans rejected the Keynesian economic theories of the time that tolerated small deficits because it was associated with Democrats. Republicans had been out of power so long they were in an emotionally reactive mode where they latched onto something, not because it was sensible, but because it was different, and it allowed them to promise voters tax cuts. Sort of like giving out candy to curry favor with the kids. It is effective but not good for the kids in the long run.
In foreign policy George Bush II came into office in 2001 determined to do foreign policy differently. The Clinton years had been marked by worldwide engagement, largely avoiding muscle flexing in favor of soft power. We were highly admired around the world, Mr Clinton helped broker the (hopefully) final resolution of the problems between Ireland, Northern Ireland and England, and came close to resolving the Palestinian issue. Although this approach seems to me to be carrying forward the policy of the great Republican Teddy Roosevelt (walk softly and carry a big stick) Republicans had predictably taken an anti-Democrat stance, arguing we should be tough guys. Mr Clinton was to nice.
Mr. Bush came into office with the notion we were the biggest kid on the block and everyone else needed to respect that. He made a point of snubbing the Palestinians, basically turned his back and stopped all efforts to solve the problem. The rest of the worlds view of the US began sinking. Then 9/11 happened and the world extended their support and sympathy, but it evaporated as we threw our weight around, and then invaded Iraq. By the time Mr. Bush left office in 2008 Iraq had become widely viewed as a terrible mistake and the rest of the world disliked and distrusted us. Mr. Bush seems to be a likable guy, whom I believe acted from good, if mistaken motives. As I try to understand how he, with all the assets and knowledge afforded a President, could have made this kind of mistake, I find myself back to the notion that people emotionally attached to the Republican party have to be the anti-Democrat. They have to find theories that distinguish them from Democrats, and become so focused on Democratic flaws they don't allow themselves to question the sensibility of the policies they are pushing.
In economic policy the Republicans obsession with being "not democrat" gave us the Bush II tax cuts. The data was already trickling in that trickle down theory did not in fact work and the Reagan tax cuts had blown up the deficit, but Reagan's tax cuts had worked wonderfully politically. So even though we were engaged in two wars, Mr Bush and the Republican Congress went back to supply side theory - big tax cuts, no effort to insure spending would match the loss of Revenue.
Now here we are, three years into the economic doldrums, carrying a huge debt load and Republicans are still obsessed with being the anti-Democrat, espousing proposals that history, economic data and common sense notions about human behavior say are almost certain to make things worse.
Voters need for Republicans to stop obsessing about distinguishing themselves from Democrats and start formulating policies with an eye to history, economic data and common sense about human behavior. The fundamental Republican message is important but has been ill served by their reactive policies of the last three decades.
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