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Affordability in a Fading Gilded Age?

Demos Kratia 13:

All of a sudden affordability is on every politician’s lips.  Somewhat regretfully in many cases.  Yet it is not a new issue — it has been brewing for ages.  Now it has burst on the scene, and only people branded as “extreme” seem willing to engage with it.  

That’s one narrative for our moment.

Another is transition.  From what to what?  From the defunct neoliberal era that fizzled spectacularly in the bonfires of the Great Recession to the uncertainties of a world lived within the confines of artificial intelligence?  Was it vanities as Wolfe suggested in his defining description of that time?  Is it a rejection of the accumulation of luxuries in too few hands — a sort of modernized version of the original Savonarola uprising?  Or is it something different but more fundamental: an immolation of ideas no longer relevant?  If the latter, where do we go now for our ideas?  Deeper into our machines?  Certainly not to our leadership that seems now more a library of the past than creator of the future.

Look at it this way:

“We were just then in an age of transition.  The opinions prevailing in the country were extremely heterogeneous, and often diametrically opposed to each other.  We had survivors of former generations who were still full of theocratic ideas, and who believed that any attempt to restrict an imperial prerogative amounted to something like high treason.  On the other hand there was a large and powerful body of the younger generation educated at the time when Manchester theory was in vogue, and who in consequence were ultra-radical in their ideas of freedom.  Members of the bureaucracy were prone to lend willing ears to the German doctrinaires of the reactionary period, while, on the other hand, the educated politicians among the people having not yet tasted the bitter significance of administrative responsibility, were liable to be more influenced by the dazzling words and lucid theories of Montesquieu, Rousseau, and similar French writers.”

That was Ito Hirobumi writing in the late 1800s. Back then there was a clash between traditional ways of doing things and the more modern; between the free-wheeling of laissez-faire and the statism of German bureaucracy; and between the pragmatism of commercialism and the high intellectualism of theory.  No wonder their transition was difficult to see through.  Sound familiar?

At least then the future appeared more optimistic than the past.  And they had real choices.  They had opportunities, which we seem to have exhausted.  So, the great spurt in growth — McCloskey’s so-called “Great Enrichment” — that began in the late 1800s, and which has run steadily at around a 2% improvement each year since, is sputtering.  Or appears to be.  

Now is very different from then: we are awash in unabashed prosperity.  But is no longer shared equably.  The crumbs falling off the high table are too meager.  Thus our crisis is one of confidence in very engine we rely upon to deliver that prosperity, security, and a better future.  Our institutions no longer provide the goods.  We are adrift.  Our leadership has failed us.

W.B. Yeats was correct when he said that the center cannot hold.  Our problem, though, is that what we call the center caused the crisis.  It needs re-creating.  And, I suspect the new center will occupy a somewhat different space from the one we are rejecting.

The problem is simple: our leadership is ill-equipped to deal with the problems we face.  It cannot comprehend them adequately enough to realize the depth of the struggle ahead, so it continues to see things through an irrelevant lens.  Its commitment to old ideas is hampering its ability to lead.  Perhaps it is time for new ideas.  That generally implies new people.  It definitely implies new ideas and not poor re-treads of the old.

Our elite is accountable for what we see around us.  It is time to make it responsible.

Yes, we need new leadership.

I have been talking about this for ages.

Of course, I am not alone.  Far from it.  Christopher Lasch said this in 1995 [posthumously as it turns out]:

“Most of my recent work comes back in one way or another to the question of whether democracy has a future”

He goes on:

“The decline of manufacturing and the consequent loss of jobs; the shrinkage of the middle class; the flourishing traffic in drugs; the decay of cities — the and news goes on and on.  No one has a plausible solution to these intractable problems, and most of what passes for political discussion does’t even address them”.

His book is called “The Revolt of the Elites — and the Betrayal of Democracy”.  So three decades ago, before the dot-com bubble, before the Iraq invasion, before the Great Recession, before the anemic post-recession recovery, and before the pandemic, there was commentary suggesting that democracy was at risk, and that the nation’s elite — our leadership — was either missing in action or was so culpable for the mess that it was unable to correct the nation’s ills.

I agree with Lasch: it was the latter.  Our elite made the mess in a frenzy of self-dealing that makes sickening reading in retrospect and which will take a while of strong and novel policy to undo.

Since Lasch wrote we all know what happened: a slow motion crisis gathered speed, produced the uprising led by Trump, and has now produced what we call an affordability crisis.

This is not new.  It is decades old.  We all saw it coming and accumulating.  But our leadership denied its existence and kept resorting to the old ideas with ever greater desperation.  At no point did those ideas stem the tide.  

Worse: there will now be a whole host of converts to the affordability issue who have no real empathy to what they mean.  But we can look forward to lots of earnest discussions about the “working poor” and what policies are feasible under our current constraints.  Where, of course, “constraints” means the least possible intrusion into elite wealth accumulation.  The entire conversation is already sounding, to me at least, a bit like the late 1800s:  we have a new “social question”.  What are we to do about this affordability problem?  Where did all these poor people come from?  Whatever happened to “self help”?

Short form of the argument:  our elite is so totally self-absorbed and self-involved — how many AirBnB properties do you own? — that it has no understanding of the life experience of the majority of people.  It took decades to create this new Gilded Age, it will take a while to deconstruct it.  Given the state of the stock market [note to you rich folk: only elitists have “portfolios”] the end might be closer than our leadership wants to admit.  They are all busy cashing in on the run-up in tech stocks.  They don’t have time to concern themselves with food prices.  Or rents.  Or child care.  Or petty things like wages.  Despite what they might say.

Yes, I know, I am a little dyspeptic this morning.

The government shutdown has exposed just how skewed our society has become.  One in eight Americans relies on government aid in one form or another simply to eat and put a roof over their heads.  Quite often that aid is insufficient. Many of our biggest employers [Walmart? Amazon?] game the system and pay inadequate wages in the knowledge that taxpayers will top them up in an attempt to push them over the poverty line.  This is very far from the industrial era when manufacturing wages  provided a step up and out of the lower levels of society.  Aspiration of a middle class life was real back then.  Not now.  Our big employers have no commitment to the middle class other than it being a source of profit.

Did we create a mass middle class in order to share the wealth, or to provide a fertile market to profit from?  Was it both?  If so, the suffocation of the middle will surely deprive the elite from its main source of income. So why do it?  Is it simply the short-term attitude of “the market”?  Not that “the market” cares— it is global, not national, so it cannot even see our middle class.

What kind of morality is that?

Shareholder morality.

Asset holder morality.

Elitist morality.

In other words, no morality at all.

After decades of neoliberal political hegemony we have, at last, arrived at the denouement of its intention.  We have created such a radical divide in lifestyles that it is no longer relevant to speak of the “American economy”.  There are two, not one.  The elite lives in one.  The rest of our people live in the other.  The one feeds relentlessly off the other.  And the divide that separates them is increasingly insurmountable.

We have destroyed democracy in any decent definition of that concept and replaced it with a hollowed out shell of its former self.  In a true democracy leadership cares about its responsibility to its fellow citizenry.  Our current leadership has no such care.  It is free of accountability because of the neoliberal mantra of “individuality”.  Our people are all supposedly responsible for themselves.  So why should the elite worry? Freed of moral responsibility of course it doesn’t.  Self-help provides a veil over the destruction of citizenship, and without citizenship there is no “entitlement” and no responsibility for the elite to share or care.

The purpose of democratic government is to provide, not simply participation, but results from that participation.  One of the key results being the provision of insurance against the occasional downsides of life.  No one, in a real democracy, is left behind.  No one is abandoned to precarious survival.  No one.

Yet that is precisely what America has done.  It is what it does.

This shutdown has exposed how callous our elite is, and how cruel it can be to our people.  

Why?

Because our elite lives in a separate world where it engages in intra-elite squabbles over cultural identity and which faction can establish its own form of dominion over what is considered “important” for policy-making.

Since our elite is unified in its desire to extract wealth from those below, any jockeying for status within its ranks has to come from different battles: hence the so-called culture wars, which are nothing more than an internecine struggle to define defensible positions over various novel, and often narrow, social rights and responsibilities. All the while ignoring broad based economic issues like affordability — an issue that impinges on the wealth the elite can retain for itself.  

Perhaps our elite contains too many educated people.  That over-supply has produced a desperate struggle for status and power within the elite and an ever growing need to demonstrate cleverness by pursuing ever more siloed and detailed thinking.  As a result our educated class has made itself irrelevant to the big issues.  It cannot cope.  It has been swallowed by its own need to justify itself and the rent it extracts.  Possession of the arcane has displaced understanding of the general as the key to intellectual success.

And now here comes AI with its compendium of all that information.  It is a gale of destruction within the educated class.  The storm is just beginning.  The elite is in crisis.  How ironic: the elite built its wealth by automating the masses and elimination the social escalator up.  The professional class, so aptly described ages ago by Burnham, was the willing partner of our capitalists as the latter drove machinery ever deeper in to our lives. And now it is caught itself in the same process.  When we automate cleverness we have precious little left for the future.  Our professional class is being cast adrift by its sponsor.  It has serve its purpose.  Now what?

Meanwhile in the real world affordability is now the focus.

Consumer sentiment is at a low ebb.

Trust in elite run institutions is at a low ebb.

Consumption is increasingly concentrated in an ever fewer hands.

Living standards are under threat.

The great American dream is over.

The post-mortem on the Reagan/Clinton consensus reveals that it has failed miserably for most Americans.  The post-Great Recession recovery, guided by old neoliberal hands, was also a failure.  It left too many behind.  The pandemic added to the disillusionment: our elite escaped to the country, while our “essential workers” were abandoned to the rotting infrastructure and high costs of our cities.  

And now the people appear to be justifiably restless.  They are even voting for politicians that don’t conform to the so-called “centrist” path.  Which is to say they owe no allegiance to elitist ideas.

But enough!  I know I am ranting.

So a concluding word:  

To all those of you discovering the affordability crisis as a new phenomenon, please recall that the elite-approved path to wealth generation has, we are told, always been paved by productivity gains.  But the growth in productivity and the growth in wages diverged decades ago.  An increasing share of that productivity was syphoned off and attributed to capital and asset ownership.  Which meant that asset prices rose with respect to incomes.  Stated otherwise: income from work was penalized in favor of income from asset ownership.  The incentive to work was cut — and you all worried why labor-force participation rates stagnated!  The rewards to work were cut.  The age-old gap between those who own and those who work opened up once more, taking democracy down with it.  The disparities that resulted now threaten the entire edifice.

Two economies: one wallowing in a self-indulgent second Gilded Age; the other living in an affordability crisis.  That is not democratic by any decent measure.  It is also unsustainable if democracy is to be restored.  

There is a reckoning ahead: either we abandon any semblance of democracy and admit we prefer authoritarian rule to keep the masses quiet; or the Gilded Age has to end.  

Either path is difficult.  A transition, though, is under way whether we like it or not because the people are restless.

To hold onto its Gilded Age our leadership has to clamp down on democracy.  It has to ignore the people.  It’s a stark choice.  Degrade privilege?  Or muzzle the people?

I know which I prefer.

How about you?

/Demos Kratia

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My Humble Take on Yesterday

Demos Kratia #11

On December 22, 1757 the latest issue of Gentleman’s Magazine carried this from a irate correspondent:

“If the Legislature don’t speedily use some method effectually to suppress the present spirit of rioting, which is become general among the lower sort of people …, there will be no protection from the plundering of the mob … the Mob must be conquered.”

So it seems it was always thus.  If the people assemble in a crowd and express their feelings collectively to the discomfort and displeasure of the established sort, there will be calls for repression.  After all, who are the people to bully their way onto the political stage?  What right do they have to interfere in affairs of high state?   What education, what insight, what knowledge do they have of all the complexities of how to run a city or a nation?

Popular revolt has always been tainted by an air of the common.  How dare such people intrude into the niceties of the lives of their betters?

Elections, however, even within the corruption of the American money-dominated system, do sometimes matter.

So, here we are.  One day later.

The day after an election is always a moment for reflection.  What just happened?

I am, of course, no different.  There is an irresistible pull towards making generalizations, which almost inevitably, have little to no relevance even a few days later.  

But.

But this time I feel something happened that ought give us pause.  The pundit class is already deep into its formulaic responses.  Let us leave them to say whatever they want.  They will write and pontificate regardless.  They will defend the status-quo with all their intelligence and wit.  Let them.  For there is a sense they are being passed by.  Their relevance is less now.  

My humble take is this:

Throughout the past few years the American political landscape has begun to change.  There are tectonic shifts taking place that defy the usual surface analysis.  Generational control is moving on.  The prosperous baby boomers are giving way to younger folk who grew up in the midst of a cornucopia and yet suffer from the anxieties of excess.  Those anxieties limit their ability to see forward with the same enthusiasm and aspiration the postwar generation exuded.

It is the realization of those limits that are shaping the new politics.  We live in an emerging era of constraint unknown to us for generations.  

This has profound implications for the nature of politics.  Democracy, I think, flourishes best when economic growth floods society with an uplift in the standard of living for all.  More to the point, that flood creates enough political space for us to avoid the hard questions of distribution.  If people are generally better off they are less likely to dwell on issues of inequality and affordability.  During periods of growth the underlying presumption is that “things will turn out OK”.  Growth supports and engenders optimism.  It provides us not only with more stuff and better health, but an excuse to avoid tough battles.

Martin Wolf recently said this:

“Why has it become so difficult to run Western democracies? ‘It’s the economy stupid’ as James Carville said during Bill Clinton’s presidential campaign in 1992. He was talking about what matters to voters. People care about their standard of living. Democracy is simply far stronger if it is possible for everybody to become better off. Growth provides that. Universal suffrage democracy was the child of modern economic growth, or more precisely, of our consistently increasing ability to produce goods and services people want. Growth was the foundation of democracy. It remains its foundation today.”

Wolf is hardly a radical.  Yes, he is obsessed with growth.  Most financial and economic observers are.  Almost reflexively people like Wolf fear the possibility of a slowdown in growth.  Perhaps it is because they intuit the implication that Wolf now makes explicit: less, or no, growth changes the nature of politics.  Things get nasty when distribution finds its way to the top of our collective mind.

You can sense something in recent elections, and especially yesterday’s, that confirms Wolf’s fear:  we are approaching, if we have not already arrived at, such a point of new politics.  Inequality is on the table.  We need to talk about it.

Already the more conservative pundits are closing ranks ready for the fight.  Populism is decried and populists urged to make peace with “business interests”.  The rich are closing ranks in fear of what lies ahead.  The crowd is on the move.

George Rudé once wrote wisely about the role of crowds throughout history.  The crowd, he suggested, had been ill-served by historians and even sociologists who had used rather pejorative terms to describe the common folk whenever they had the temerity to express their opinions en masse.  He sought to re-situate the crowd as a more regular or even normal force in events: one that represented a more positive impulse even in its occasional violent moments.

Today we would refer to the crowd in more anodyne terms because our abundance has neutered violence as a method of political expression, so our regular politics has become a more quiescent channel for the mass expression of unrest.  Still, we should recall that meaningless phrases such as “we the people” do not capture the moment well.  Every crowd, as Rudé is at pains to point out, consists of a myriad individuals whose stories intersect.  

This came to mind this morning as I looked at photos of the crowds hailing the election results in New York City.  The faces were diverse.  The energy obvious.  The youth dominant.  Yes, it was a crowd.  Yet it was an assemblage of individuals.  The number of stories untold, but each leading to that moment.  Dissatisfaction with the establishment clearly brought together and coalesced into a political instance.  A great coalescence of unrest has shocked the establishment.

Yesterday, the crowd spoke.

Only fools will refuse to listen.

The statistics of the election speak to the depth of what needs to be done.  The turn-out was historic.  The margin dominant.  The outcome crystal clear:  whatever the pundits and bosses think, New Yorkers unequivocally dislike what has happened to their city.

And it is their city.   

New York City is, of course, not representative of America.  It is massively diverse demographically.  Its population seethes with a multitude of intersecting ethnicities, religions, and other groups.  It bustles. It pulses.  It breathes its own polluted air and yet somehow thrives.  It sleeps and wakes to a rhythm that defies description.  It absorbs and exudes simultaneously.  It is a place of invention and vibrancy.  And it is also a place of neglect and poverty.  It is in constant contradiction of itself.  Both rich and poor. Both energetic and torpid.  Both optimistic and pessimistic.  Both forward looking and entrenched.  Both sides of society co-existing uneasily and content as long as the overall trend is in the right direction.   The stories all get New York City right.  It defies description.

But it is no longer a city that belongs to its people.

Along the way New York became a playground for big business, finance, and international players all oblivious to the increasing squeeze that their excesses put on the crowd.  The indignity of the pandemic drove home the inequality:  the rich folk fled for homes in the country that they could buy with ease to avoid the plague.  Meanwhile those left behind were described as “essential workers” … essential, that is, in providing the support that the rich folk wanted.  And yet, no matter how essential they were deemed, there was no accommodation given.  There was no recognition for the essential nature of the service provided.  There was no sense of shared experience.  Indeed there was no sense at all.  The rich simply assumed the existence of the poor in sufficient numbers to provide the services they craved.  So imperious had the establishment become that it gave no thought to its own role as part of the community.  There was no community.  New York was sundered into two.  

Two such divergent living standards under one roof, though, is not an equilibrium.  

Inequality, as I said, reared its ugly head.  

Wages steadily became inadequate for the essential to live well in the city they operate on behalf of the rich.  Economic exclusion became so glaring and insulting that, at some point, the crowd was forced to rise to claim its right to exist in the city it maintained.  It had to reclaim its own home.

So it did yesterday

Affordability thus became the new clarion call.  The rich need to heed that call.  They need to share.  

Now.  Because the crowd has given its opinion on the city’s state of affairs.

There is a word for all this.  One that we sometimes toss around without enough thought to its implications.  It is easy to ignore when those implications include issues of distribution.  We need to remind the rich of that word.

It is democracy.

The crowd has spoken.

/Demos Kratia

Addendum:

It occurs to me that there runs a deep hypocrisy through the pundit class.  For all the embrace of something the consultants came to call “the wisdom of the crowd”, there remains a deep disdain for popular opinion expressed in what they call populist politics.  The taint of vulgarity persists as if opinions of the “lower sort” are somehow less valid.  The so-called “deplorables” [sans-culottes?] sometimes do not conform to the neat and tidy discussions that the educated folk want to entertain.  But the crowd matters in a democracy.  Doesn’t it?

Modern democracy may be enabled, as Wolf indicates, by economic growth, but its roots run deep in the presence of the crowd in history.  

Read Rudé.

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Demos Kratia 9 – The Fall of the Technocracy?

Barbara Tuchman, who knew a bit about history, tells us that a ruler’s authority during the fourteenth century rested on a sort of social contract.  In her words:

“Its basis and justification remained the duty to protect, as embodied on the lord’s oath to his vassals, which was as binding in theory as theirs to him — and theirs was binding ‘only so long as the lord keeps his oath.’  Medieval political structure was ideally a contract exchanging service and loyalty in return for protection, justice and order.”

In our modern world this reciprocal arrangement has been replaced by a different sort of contract.  It finds itself best expressed in the commitment contemporary capitalism offers us: the myth of unending growth.  

Since the great enrichment — to use Deidre McCloskey’s phrase for our modern prosperity — began in earnest back in the late 1870s we have all been asked to set aside the pretense of such formal arrangements and rely instead on the ability of something called “the market” to deliver more and more.  The abundance of which will offset any social, cultural, or political deprivation and loss of tradition we experience along the way.  Capitalism bases its legitimacy on this vision of infinite growth stretching out before us unhindered by periodic crises such as pandemics, environmental distress, or demographic collapse.  We will always be better off in the future than we were in that past.

That is the promise.

In return we surrender ourselves to the machinery of corporate and state domination, surveillance, and the possibility of being made irrelevant by the emergence of yet another great new technology.  

To question the possibility of infinite growth is to be laughed at as being an imbecile uneducated in the ways of markets and modern economics.  Creative destruction, we are told, will tear down and rebuild.  What it produces anew is inevitably an improvement.  Any dislocation or disruption is temporary and best endured so as to allow the new to develop freely.  

So when members of the capital owning Silicon Valley speak openly of displacing workers we must not react, even cautiously, for they are the forces that will lead us into our next chapter.  Which will be inevitably richer.

We must not question their motives.

We must not question their intent.

For they are creators.  We are mere consumers.  They are makers.  We are users.

They are winners.  We are losers.

The dichotomy is stark.  And justified by our latter-day capitalist ethics.  

They are the elite.  We are the mob.

This modern capitalism is a creature of the modern state.  Our great corporations act like medieval manors: they control the lives of their employees.  They dictate our day-to-day activities.  They organize us.  They impose method on us.  Corporate governance.  Best practice.  They obey the rules set by the state with whom they have an alliance.  For it is the state that gives the owners of a modern corporation the protections of legal personhood and limitations on risk that makes owning the equity of such an organization the route to wealth that it has become.  It is the protective embrace of the state that allows the great corporations to behave with the freedom that they possess.  And in return for this legal largesse our corporations are supposed to provide society with material abundance.

Above all else the modern corporation is home to a technocratic class — consultants, lawyers, managers and so on — that act as intermediaries between capitalists and the working masses who animate the business.  This “clerisy” benefits from being such an intermediary.  It gains status, power, and wealth as long as it enforces the manorial rules and represses any potential uprising.  It also acts as a vector for the latest ideas flooding out of business oriented academia.  Outsourcing, agency theory, shareholder supremacy, core competency, the gig economy, and other organizational technologies have all been implemented by the clerisy to the benefit of the capitalists who own stock in the corporation.  The elimination of benefits, the reduction in retirement savings, stagnant wages, and no guaranteed hours contracts have been imposed by the technocrats in order to bolster returns to capital and to reduce the cost of labor.  The technocrats have surrendered morality in order to enjoy wealth in the coattails off capitalism.

And the state has acquiesced at every step along the way — no matter which political party was in power.  The consistent narrative of the past few decades has been the steady imposition of ever more restrictive work practices, the diminution of the return to labor, and the steady atrophying of the so-called American dream.

This began with Reagan.  It continues today.

The consequence is the exposure of an increasing gulf between the rich and poor that threatens social peace.  As the working poor and an ever larger share of the middle class is squeezed into relative destitution in order that the technocrats and capitalists can maintain their own status, power, and wealth, the likelihood of a popular upswing and reaction increases.

Note though my careful use of the word “relative”.

For therein lies the struggle.  If ever that relativism becomes absolutism capitalism crumbles.

Capitalism has a moral justification only so long as it provides the goods akin to the Medieval arrangement that Tuchman notes.  Once that implicit contract is broken, once capitalism fails, once the oligarchs over reach and once the plutocrats and technocrats lose all empathy with the masses, the contract is shattered and we enter a period of history that will repeat the past.  

There is no Hegelian progression through time.  There is only elite overlordship, elite over reach, and then rebellion.  To be repeated in various regime forms whether democratic or autocratic.  Whether democratic or authoritarian.  The cycle remains the same.  The elite must deliver.  Or change will be inevitable. 

In such a period grotesque corruption, struggle, and upheaval will be the norm.  The mob is well aware of the self-serving nature of the elite.  It cares much less about the abstractions that so entertain the elite.  It cares more about the possibility of progress towards greater prosperity.  It seeks fairness not equity.  It seeks safety and protection from the uncertainties that can destroy the lives of those with less.  That means health care.  It means housing.  It means employment.  It means law and order.  And it often means a connection with traditional lifestyles.  

And in such a period we can reconsider what we mean by democracy.

Elites like to view democracy as a structure.  To them, like much of what they observe, it is a legal entity.  It is a set of institutions that interlock and allow periodic peaceful regime change.  But it is sufficiently boxed in that it never undoes the underlying flow of power withheld from the masses and embodied in the knowledgeable technocratic intermediators acting on behalf of the capitalist overclass. 

Such a democracy is, however, an illusion.  It relies on the observance of rules and norms that are easily sidestepped.  It relies on networks of shared education, experience, and culture that binds the technocrats tightly under the thumb of their overclass.  Once there are competing networks or leaders willing to smash through norms the fragility of this faux democracy is exposed.

In our current crisis it is the undoing of the arrangement between the educated class and the capitalists that is most threatening.  Faced with declining growth rates and the consequent fading promise of future rewards, our overpopulated elite is at war with itself.  The search for status and power has torn it apart into warring camps separated by cultural rather than economic divisions.  The capitalists also face diminishing returns.  So they demand ever more restrictions be placed on the masses, and so they have turned to one more great technological throw of the dice to keep their dominance safe: artificial intelligence.

The great enrichment was founded on the persistence of the exchange of capital for labor.  This produced productivity gains that funded growth throughout society.  Labor left agriculture and flooded into manufacturing.  Then it left manufacturing and flooded into services.  Along the way a modernized education system produced that great clerisy needed to manage the ever more complex interconnections that the constant division of labor produced.  At all times the promise, our latter day social contract, held up even if interrupted periodically by the inevitable crises that capitalism produces when it runs up against its own contradictions.

At every step in this modern narrative there has been a new general technology that provided the impetus and foundation for the next.  The steam engine.  Electricity.  The modern corporation.  At each step method and organization became more important to maintain order in production and the promise of the future.  So there was always a safety valve that absorbed redundant labor.  More organization requires more labor.  More method organizes that labor more efficiently.  More efficiency produces more productivity.  More productivity produces more opportunity.  More opportunity produces more work.  More work requires more labor.  

The game seems inevitable and infinite.

But marginal gains are diminishing.  Which sets up a struggle over distribution.  Which undermines the social contract.

And ends democracy.

The new feudalism coming into view on the horizon is not an illusion.  It is a warning.  Once democratic values were shed in order to squeeze the masses for the benefit of the capitalists, the demise of democracy was inevitable.  Because democracy, true democracy, is a shared value system not a set of institutions.  It is the search for fairness.  It is the modern incarnation of that contract Tuchman spoke of.  Which when abandoned by our contemporary lords of the manor — our corporate bosses, their professional hangers-on, and their academic advisors — brings the system crashing down into autocracy.

Inevitably.

It is the moral collapse of our technocrats and academics who surrendered too easily to the allure of status and power offered by the capital owners that has undone us.  Too enriched by their attachment to the overclass, they tremble in fear of loss.  So they remain silent.  Useful idiots.  Morally bankrupt.  They watch frozen as the world in which they thrive is invaded by a new technology able to displace them just as they enabled the displacement of workers from the field and factories before.  

The de-skilling and displacement of the educated class is beginning.

Where will it end?

I have no idea.  But the process of capital replacement of labor goes on.  

No period of history has persisted without interruption.  No empire has endured.  Only the cycle of elite rule upset by the mob is the one that re-occurs.  We are leaving our age of democracy and entering something new.  Quite what that is will depend on the masses, not the educated class.

Demos kratia!

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Demos Kratia 8: Populism Sucks, Apparently

Oh dear.

We have a problem.

It’s the mob.  They’re causing difficulties.  Every so often the masses get it into their head that they ought to be paid attention to.  Then all hell breaks loose and we get a dose of populism.

And we all know just how evil that is.

Chaos sets in and the niceties of elite conversation get swamped by a wave of uncouth and uneducated nonsense.  How dare they?

Demos kratia:

People power

The bane of elitists for over two and a half thousand years.  I mean, just how can the uneducated masses presume to know enough to guide the ship of state?  How can they divine what is in the national interest?How can they possibly engage in all that sophisticated stuff we call policy-making and not screw it all up?

Well, you will be pleased to know that we now have proof of the downsides of populist rule.  I just read about it.  Poor Martin Wolf [in the Financial Times this past week] refers us to an academic paper that looks at twentieth century populism and concludes that it always ends up badly.  Economic growth sags: real GDP drops 15% below trend when the populism is led by crazy leftists.  It drops by only 10% when its the crazy right-wingers in charge.  Either way populism is a bad thing.  Very bad.

Wolf then rumbles on dyspeptically about the foolishness of populist outbursts.  Rightly so too judging by that research.  The only problem I have with his argument is that it sounds so … well … elitist.

For instance, he decries the damage done to “independent institutions”.  Independent from what?  From politics, where by politics we mean — roll the drums — democracy,  especially as embodied in a populist regime.  Independence is an essential aspect of elitist rule. It allows the elite to carve out certain domains of policy-making and move them beyond the reach of the whimsy of the uneducated masses and their potentially populist representatives.  Safe within their independent citadels the elite can gather, ruminate, converse, and bask in its superior knowledge.  It can indulge in, and enjoy, displays of power based upon that knowledge.  In short, it can rule free from recourse to the wishes of the mob.

“We the technocrats …”?

Personally I have no problem with such independence as long as we all recognize that it is a diminution of democracy.  It is a vivid statement by the elite that there are certain things that ought not be tinkered with by mere politicians who might be driven by incentives aligned with the wishes of the mere masses.   So the existence of independent institutions is a sure sign the elitist rule persists even if they brand it for public consumption as some sort of democracy. 

Wolf also tosses around the other pieces of the usual elite phraseology.  He refers to “core institutions” and “economic stability and growth” as if they are attributes only of elite rule.   One paragraph bemoaning the downsides of populism ends thus:

“In these ways, populism also impairs both confidence and credibility”

Whose confidence?  And credibility in whose eyes?

The elite’s of course.

Wolf, to give him credit, does – minimally – suggest reasons why populism might break out periodically.  He dismisses cultural turmoil as being a de minimus cause and suggests that economic crisis is a more likely source of trouble.

But then he never goes on to ascribe blame for such economic crisis.

So, if the elite is so good at steering the ship clean of muddleheaded democratic interference, where is elite accountability?  Whose fault is it that we have periodic economic crisis that might plunge us into the populist abyss?

And that’s where I have my greatest problem with elitist complaints about democracy.

Western democracy is, by and large, elitist rule with occasional elections cobbled on to give it an aura of modern liberal origin.  But, the broader and truer, democratic impulse is not through any formal institutional channel, but through a social acceptance and desire for equality.  Or, perhaps more accurately, fairness.  We all accept that some level of inequality will exist, we are humans after all, but what, in democracies, we do not accept is that inequality should be either oppressive or repressive.  Moreover we do not restrict the domain of fairness simply to incomes or wealth.  We expect it to run through consumption, the law, and access to the benefits of a peaceful society as well. 

Modern societies are democratic only so far as this attitude towards equality pervades everyday life and is expressed in the outcomes of policy. 

It is the responsibility of the elite to produce such fairness for the masses.  In return they get to carve out those independent institutions they revere so much.  They get to buff their credentials and their education and assume the right to govern.

This is the modern social contract.

But it is most definitely a contract.  The elite has responsibility.  If it fails to deliver then the mob has the right to depose and disrupt.  It has the right to elect populists to trash the place.  The elitists ought to know this.

Apparently not.  Our elite has become so complacent in its grip on power and so self-referential that is seems to have forgotten that it rules by consent, not by divine right —   no matter how clever it likes to think it is.

So when people like Wolf bemoan the effect that populism has on democracy they are being decidedly choosy in their definition of democracy.  What they are actually referring to is elitist rule with the acquiescence of the masses.  

To get more specific about our political moment: judging by the level of inequality that pervades deeply into society currently, our elite has failed miserably. It has failed utterly

It is not current populism that threatens democracy, it is elite failure to deliver equality and fairness that is the greater threat. 

That some of our elite — here we look at certain economists — consider inequality as not even worth thinking about, suggests a great democratic deficiency in elitist circles.  That we have allowed the returns to wages and capital to diverge substantially suggests that our elite is content to prosper at a cost to the masses.  That we have allowed public services to degrade so much is testimony the that fact the our elite provides itself with those same services elsewhere and thus does not care about whether the masses have similar access.  

The list goes on.

It is when the elite turns inward and becomes so self-referential, self-regarding, and self-serving that it loses empathy with those it rules over that the masses are likely to notice and bring out the proverbial pitchforks.  

There is — stunningly — nothing new in this.  So why do we see articles like Wolf’s?  

That age-old disdain and fear of the mob is at work.  It is a never ending conversation.  Just how much power should be invested in the people?   According to the elitists, as little as possible.

If people like Wolf want to avoid moments like this, then the elitists need to deliver the goods and not horde everything for themselves.  Conversely, when things go awry, which in this uncertain world they inevitably will, they need to have the humility and sense to admit as much. Take the blame.  Learn.  Walk away from the old ideas that led us astray.  Don’t dig in and and simply complain about the mob.

Perhaps our elite is not as clever as it thinks it is?  

Or, perhaps, it hates it when it gets caught out for ignoring the mob.

Time for a rebalance?

Time to take a few elitist folk down a peg or two?

Time to shake up those complacent assumptions and disrupt things?

Time for a little people power?

Democracy has always been a bette noir in political thought.  So it’s always a bit amusing when — like now — elitists refer to the trouble democracy is in.  They don’t like it to begin with.  It interrupts their decision making.  It interferes with their independence.

Besides, it all depends on what they mean by democracy.

Now.  About all those independent, crucial, vital, and all-so-essential independent institutions that undergird credibility, stability, and confidence.  

Just who runs them?  And for whom?

Just who benefits from a 2% inflation target the most?

Not “we the people”, that’s for sure.

/Demos kratia.

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Democracy and Economics — Demos Kratia 6

Demos kratia

People power.

This is about economics and its role in undermining democracy.

Let’s begin with Martin Wolf.  

He gives us, in this morning’s Financial Times, an excellent and succinct overview of Trump’s inevitable failure to deliver new manufacturing jobs.  He wheels out all sorts of technocratic, and thus highly sensible, arguments based on economic reasoning in order to prove his point.  Then, towards the end he shifts to politics.  Right wing populism, he suggests, is a consequence of the divergence in outcomes that less educated men and the technocratic overclass have experienced during this era of post-industrialization of the American economy.  Whereas employment in manufacturing was once an avenue upwards in status, now it is much diminished and a whole section of society is blocked from improvement.  

So far so good.  There is nothing remarkable in this narrative.  It is well worn.  

There are, however two very notable aspects I want to daw your attention to,

First, yes, the argument is well worn.  So why has nothing been done?  Why has an entire section of society been cut out of the aspiration that drives the American myth? This, surely, is an epic political failure.

Second, perhaps the answer is implicit in Wolf’s narrative.  He seems to regard arguments based on the logic of economics as unimpeachable — of course manufacturing was going away as a source of employment.  Of course it won’t come back.  Of course those workers were cut adrift.  Economic logic and the relentless search for efficiency dictate it [note the coercion implied in this logic].  How can anyone argue against that?  But then. He suddenly shifts to politics and away from economics — the cause of populism may be economics, but the consequences are all political.  

In sum, he is suggesting that politics ought to have cleaned up the mess economic logic made.

And so, in a nutshell, we can perceive the problem we have inherited from one of the greatest shifts in modern intellectual history — one that goes mostly unreported.  When economics took on the mantle of being the source of legitimacy in social organization, it displaced politics. That was the point.  It remains the point of technocracy everywhere:  we make decisions based on supposed logic and reason in order to expunge the messiness of sentiments, passion, and morality all of which motivate politics.

That this is impossible, given that we are all human, is one of the reasons economics generally fails outside of the classroom.  Humans, unfortunately for economists, just aren’t that reasonable or logical.

With that all said …

“In many ways the political thought of the two centuries after Locke constituted a long commentary on the three themes just discussed: the equating of government with physical compulsion, the emergence of society as self-subsistent entity, and the willingness to accept compulsion from an impersonal source.”

That’s Sheldon Wolin in 1960.  A few lines later he says this:

“In recent years this same cluster of ideas reappeared when classically minded liberals attacked the notion of “planning”.  Once again the same pejorative contrasts was drawn between “the spontaneous forces of society” and the “coercion” employed by political direction.  Once again the same suspicions of power exercised by a determinate, identifiable authority were coupled with an explicit preference for “the impersonal and anonymous mechanism of the market”.  Since the market represented merely the registered response of the consumers, i.e., “society”, the resulting compulsion and inequalities had the advantage of being not only an impersonal, collective judgment but also a “democratic” one”.

And so there we have it. Economics is associated with the liberal tradition with its focus on the use of implicit rather than explicit compulsion.  The hidden hand drives us inexorably towards a result.  We have no choice.  It is an act of compulsion, but it is hidden.  One that, somehow and in the minds of many, is preferable to an act of politics where compulsion is overt.

The key to the whole trick is that everything becomes passive.  There is no intent.  No purpose.  No direction, and thus, crucially, no politics.  The outcome is drained of overt controversy where we can all say that we did this to us … we did it collectively to ourselves.  So no one is to blame.  It just is.  It just happens. The logic of economics may produce anti-social results, but it is logical.  It is reasonable.  It is defensible.  No one can, or ought, argue with such logic.  Not unless, that is, they want to be accused of pre-modern ignorance.

With society transposed into something called a market, and thus drained of discussion and debate about the ends of the work being done within it, everything is sanitized.  It is whitewashed.  It becomes colorless and devoid of possible critique.  It can be presented as something outside of human intervention even whilst it being consequent to palpable human activity.

It is, as Wolin would say, impersonal.  I would call it inhuman.

How did we get to this supposedly “apolitical” moment?

The liberal reaction to centuries of intense politics and religious strife lapped over into this process of dehumanization.  The point was to lower the temperature, open spaces for new entrants into elite participation, and to deconstruct ancient and corrupt centers of authority.  The problem, though, was that power still existed — the new elite was in need of justification.  How better, then, to accommodate it by claiming that there was no center of power?  There was simply a marketplace full of actors of equal status.  No one had outsized influence.  Stuff simply happened.  Spontaneity was the order of the day.  And all that unfettered activity automatically produced the optimal result.  By definition.  No authority was needed.  Just a hidden hand.

This was somehow interpreted as democratic.  Society still existed, but in the background where it played no part in the structuring of the outcome of work.  Only the market could possibly coordinate all that emerging complexity.  Which is ironic because it was the market creating all that complexity also.  What interdependence the division of labor brought was more than offset by more intense self-interest.  The greater the interdependency, the greater the social conformity needed to ensure an efficient outcome.  The more collective enterprise became, the less unique each individual could be.

Economic logic required the elimination of the individual as an independent being and its replacement by a cipher — powered not by self expression but by social complicity.  Complicit that is in the application of economic logic.

That Smith could misinterpret this complicity as personal interest is understandable because in his time the complexity of society and not run beyond comprehension.  His successors, though ought to have realized what they were saying: what they called “self interest” had nothing to do with the ”self”, it was entirely dictated by whatever was necessary to produce the collective magic of efficiency.

To accomplish this magic, economics replaced the laws of politicians with the laws of “nature”.  People are driven in both cases.  In one case they can resist.  In the other they cannot. In order to guarantee the production of efficiency economics had to displace politics as the primary source of social engineering.  It had to take on the mantle of being the legitimating epicenter of the structure of society.  Of greater satisfaction for the thinkers of that early industrial era, economics spoke in terms of implicit rather than explicit compulsion.  The great citadels of ancient authority could be overthrown and replaced by more subtle and less obvious centers of power.  

This displacement of politically driven social construction by the supposed spontaneity of something called the market is simply a sleight of hand.  In order to carry off the trick, economists have to abstract away from their theorizing any human touch.  In order to achieve the democratic or “spontaneous” outcome they prefer, economists have to expunge the active demos from the calculation.  Passivity is substituted for activity, but passivity needs justification in an age of action, so they predetermine the outcome as being optimal so long as we ignore the collective and throw the weight of responsibility onto mythic individuals, each endowed with superhuman qualities of calculation and data collection.  

They distract us with the glitter of the mythic perfect in order to force us to march according to their logic.  They put us into the harness of rationality in order to optimize.

Then, to ensure liberty for all, they need to force us all into what they call an “equilibrium”.  For only when we are corralled at equilibrium can we be assured of having arrived at a point of cooperation that brooks no improvement.  Finally, the mechanism of the market is, we are told, governed by laws that cannot be resisted lest we interfere with the market’s mechanism and consequently fail to arrive at the most efficient allocation of our collective resources.  We are given choice as long as we arrive at only one answer and follow the predetermined logic scrupulously.  So, the choice of economists is no choice at all but the dictatorship of reason.  Or, rather, what passes for reason in the minds of economists.   

The logic of rationality replaces the logic of strategy.  Individuality is lauded and then crushed.  

Some democracy.

Delivered as if spontaneous, and as if the consequence of free choice, it is limited to the achievement of only one thing: maximum efficiency, which replaces the old attainment of a good or moral life as the sole goal of society.  Economics triumphs over politics. 

It is a victory of technocratic idealism.  It depends on perfect data gathering and calculation without any actual active data collection and calculation.  Not that is, into any center of collection and calculation because it declares that such centers cannot do the work sufficiently.  Then, having eliminated the center it proclaims that the periphery is quite capable of that same task.  Authority is removed and re-introduced around the edges, but is dissipated so as not to become oppressive or intentional.  For, supposedly, it is — please recall — entirely spontaneous.  It lacks such intent.  It lacks personality whilst embracing individuality.  Most importantly of all: it lacks politics.

And that is its purpose.

Politics, you see, can be interpreted as the expression of power in order to achieve a distribution of wealth, incomes, consumption, or resources.  Such power is vested in an authority, which, of necessity, is an overt intrusion in the activities of the individuals that it oversees.  And, in modernity, we want those individuals to be “free”.  So, economics, like all products of the rise of liberal thought, wants to liberate the individual and put them front and center.  It wants decisions to flow bottom-up and not top-down.  It wants to prove the efficacy of decentralization.  Economics is, in fact, a rebellion against pre-induistrial authority.

Where did this revolution against politics begin?

This intellectual heritage of the hyper-individuality and decentralization central to economics, which yet produces superior collective results, is found deep in the religious civil wars of the 1500’s and 1600s.  It owes its origins to the likes of Luther and Calvin who sought to destroy the centrally planned authority of the Catholic church.  It was their philosophy that then was infused into subsequent liberal thought.  They invented the modern conception of the individual precisely as counter to the authority of the Catholic Church, which by their time had become synonymous with corruption.  The purpose being to undermine the explicit coercion inherent in the traditional church-to-congregation power relationship. Instead of power being visibly concentrated in a central authority, it was to be diffused invisibly throughout the whole. Collective power displaced authoritarian power.  It was a great act of democratization of faith.

Economics simply transferred these same notions of individuality and decentralization from the congregation into the market to achieve its effect.  Coupled with the rising confidence in the reasoning of science of that era, the invention of the market as a substitute center for social construction did away with the oppression of the old order.  It instituted a new order.  

A consequence of this institution was to rob politics of its primary purpose — the structuring of society and the infusion of a concomitant moral system — and replace it with something that was pre-political.  It was a vision that depended on the existence of a natural world uncluttered and uncorrupted by overt authority, which was subject only to natural laws — the laws of economics, which, by being pre-political, were also assumed to be objective and immune to human biases.  If these laws were allowed to operate uninterruptedly they would guarantee the best possible outcome.

At its inception this seizure of the right to structure society by economics was a more modest construction than it became through time.  Its earliest and greatest proponents — Smith and Hume amongst others — suffered from none of the hubris that its later proponents did.  However, as the economy multiplied in complexity their initial simplicity was overrun by the scale of activity.  Industrialization introduced new social relationships unknown to the founders of economics.  And far from power being diffused throughout the new economy it was concentrated ever more in the hands of actors able to own capital rather than behave as the self-sufficient artisans described by Smith.  In other words far from being a sea of interdependent and equal individuals, the economy was fragmenting into a patchwork of centers of power and hierarchies of wealth and status.  Conflicts arose within this new environment.  The very debates that economics wanted to crush re-appeared.  

Politics flooded back and challenged the pre-eminence of economics.  Society was re-emerging as a challenge to the market.  The demos, far from being pacified and merely adhering to the logic of the market, expressed disappointment in the outcome — an outcome that appeared far from optimal.  There was a rising recognition that the market was a little less spontaneous than had been promised and that there were considerable biases in the system.  That game, people began to argue, was rigged.

Even worse: far from running smoothly, the market occasionally had major problems.  All that supposed efficiency and those mechanics had glitches now and again that caused doubts to arise about the efficacy of the entire economic project.  Especially since it seemed that it was the demos bearing the brunt of the subsequent damage.

Which gets us back, does it not, to Martin Wolf.

In a world dominated by technocratic calculation and the presumption that we can calculate our way through the uncertainties of the future, economics plays a critical role in structuring socio-economic outcomes.  It leaves manufacturing workers aside as its logic rumbles on.  It assumes that the unemployed will find new work because growth is inevitable.  After all growth is the common factor of the entire industrial era.  And growth seems to have carried on, albeit somewhat more slowly, into the post-industrial era.  So economists do not have to concern themselves with unfortunate downsides to their logic.  Everything, they say, will be right.  Just wait for more growth.  

And the distribution of the benefits of this efficiency?  Well that all flows to those who contribute the most.  Inequalities of wealth, income, or consumption are logical outcomes of that application of those laws we must not transgress lest we diminish the potential.  Lest we miss that optimal.  Lest we disturb the equilibrium.  

So, yes, Trump will fail to create more manufacturing jobs.  The logic is impeccable.  

But it is profoundly anti-democratic.  That logic says that the attainment of peak efficiency is more desirable than social cohesion and any semblance of fairness.  It says that the less fortunate ought be left to fend for themselves as a sort of sacrifice along the way towards the greater good.  Unfair?  Certainly.  But logical?  Absolutely.

Justified by all that supposed spontaneity.  Unemployment in the rust-belt?  That’s just how we self-organized things.  Tough.  There was no intention to ruin lives.  It just happened.  Honestly.  Besides we all followed the logic.  Spontaneity has no authority exposed to blame.  How fortunate.  For the technocrats pulling the strings. 

And that is why economics replaced politics.  The rising industrial elite needed cover for its accumulation of wealth and power.  How better to accomplish that than by claiming there is no center of wealth and power dictating the structure or society?  Replace the demos of politics by subsuming it into the anonymity of the market.  Where it is demos no more.  

Wolf recognizes the problems that economic logic has created.  But he then refuses to ask economics to produce a solution.  He is content with its destruction of the democratic expression of power through politics and its neutralization by that very same logic.  

It was the intention from the very beginning of economics to eliminate the power of the demos in order to enforce the discipline and conformity of its logic.  It wasn’t the expression of self-interest that produced the collective good.  It was the subjugation of self-expression and idiosyncrasy in order to be part of a machine that did the trick.  Authority was not dissolved, it was simply hidden when explicit coercion was made implicit.

Wolf is cheeky, is he not, to suggest that the loss of democracy is a problem of politics and not economics.  On the other hand, perhaps he is correct.  Economics needs to be made subordinate to politics in order to elevate the demos above the logic that currently subjugates it.

Demos kratia

People power 

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