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A Response to that Packer Article

More ruminations on democracy …

Demos kratia … People Power.

It’s what’s missing in America.

At the end of last week a good friend of mine referred me to the recent article by George Packer decrying the end of democracy and America’s slide into authoritarian government.  Our media is full of such commentaries.  They are erudite.  They are convincingly written.  They persuade.

They are wrong.

Our problem is that we cannot define democracy.  Is it a set of institutions?  Is it a set of freedoms?  Is it simply a state of mind?  Search the literature and it is all of these things and more.  Like Pascal’s common sense it is both everywhere and nowhere.  It is both abundant and scarce. It, apparently, depends on one’s perspective.  Which is not a secure footing for something as fundamental as democracy.

Which is probably why we are all being told it is in decline. After all, our commentators, having ignored democracy for decades, are now all looking around for it and finding … nothing. Or at least not what they expected. Perhaps they should have been more attentive before.  Perhaps they should not have been so complacent and convinced of its health in years gone by.

American democracy has always been a bit tenuous.  The Constitution almost reads like a refutation of it.  Packed with defenses against majority domination of minorities it gives excessive power to those minorities and guarantees only very rare opportunities for true people-power to emerge from the shadows.  Which is why American political history has seen the dominance of various elites since the very beginning. We should not mistake the rise and fall of various elite factions as the rise and fall of democracy.

In America’s case, the original landed gentry’s dominance was overthrown quite quickly by the emergence of an industrial elite, although the struggle between the two created unprecedented mayhem and bloodshed as recently as the civil war.  The eventual dominance of the industrial elite and its control over the restructuring of society to achieve conformance with factory and urban, rather than rural life, stimulated resistance amongst working people.  This led to the two most recent upwellings of democracy.

The first being as a consequence of the economic crisis of the 1890s and the second as consequence of the economic crisis of the 1930s.  On each occasion institutional reforms were made to provide greater protection to the masses from the vicissitudes of economic cycles and capitalist self-enrichment.  And, on each, an inevitable reactionary movement evolved driven by the desire of the wealthy and industrial leadership to recapture whatever status, wealth, and power it perceived it had lost during those interludes of democratic intrusion into their dominance.

The point being that democracy is best seen as an intermittent rather than permanent feature of the political landscape, and as an ongoing struggle by the masses to re-balance the benefits of economic growth more towards the majority and away from the minority.

Democracy is about the necessary political power struggle needed to force the current elite — whoever that is — to share the benefits of modernity more fully.

Hence the ever present reaction whenever democracy has succeeded in expressing itself.

Our current politics is dominated by such a reaction.  We are deep into the process undoing the democratic gains of the 1930s and 1940s.  Indeed, it is the great success of this reactionary movement that suggests we are not presently “losing our democracy” in the way George Packer describes it because democracy as a practical matter — rather than a pro forma matter — has been systematically undermined since the 1970s.

This successful reactionary movement is called neoliberalism and was conceived by anti-democratic thinkers beginning in the 1930s specifically as a way of undoing the gains made by the majority during the New Deal era.  Those gains had come at a cost in power, status, and wealth to the established wealthy and corporate elite whose leadership had come into question during the Great Depression. Of more difficulty to the elite, the masses also wanted to reduce their risk of loss in an economic system that was clearly beneficial to those who could accumulate power and thus extract disproportionately from the growth increasing productivity was producing.  The consequent introduction of social insurance was deeply offensive to the ideological beliefs of the elite who saw any such “social” activity as an inevitable precursor to outright Marxism.  

The coincident geopolitical struggle between America and an authoritarian Marxist Soviet Union provided a fertile backdrop against which anti-democratic policies could be presented simply as an emphasis on self-reliance, individuality, and a certain amount of social freedom that was manifestly missing in the Soviet Union.  That the enhanced freedom of the individual was a restoration of the vulnerability and risk of the 1930s was glossed over.  That it allowed the shift of the rewards of collective economic growth disproportionately toward those with the power to assert control over undue rents was  buried and hidden in a welter of patriotic anti-Soviet rhetoric.

With the old order firmly back in control by the 1990s the democratic heyday of the 1950s and 1960s quickly faded and ideological control of society was well beyond the grasp of the masses.  So firm was elite grip on policy that the vast majority of legislation since the 1980s has been to the benefit of a few and even the great crisis of 2007/2008 was insufficient to engender a new bout of democracy.

So, the weight of history suggests that a determined and well provisioned elite will always succeed within a political system designed explicitly to defend minorities.  Institutions can be hollowed out or overrun.  Norms can be ignored.  Courts can be packed.  The game can, in short, be rigged against the masses.  It usually is, no matter what the system is, an elite will inevitably come to dominate.

At which point the chimera of democracy gets shaded.

My own view of democracy is that is more a value system than a set of rules and institutions.  People have to think and behave democratically in order for there to be a true democracy, so everyday behavior is the telltale sign of democratic health, not the existence of elections and so on.

And it takes little to no effort to see that such behavior eroded rapidly during the 1980s and 1990s.  The neoliberal attack on democracy, disguised as a defense of “markets” and “individuality”, twisted politics onto a deliberately anti-democratic trajectory.  The best evidence of this is in the business world where the emergence of the pernicious notion of shareholder value was a scarcely veiled attempt at repressing worker aspirations in order to move wealth back upward to the elite — thus undoing the gains of the immediate postwar era. 

It succeeded spectacularly: inequality, no matter how measured, rose back to prewar levels and has stayed at undemocratic heights for decades.

What stands out in this particular period of anti-democratic elite control of American politics is the extent of its technocratic grip on society.  The breadth and depth of complexity of modern society has bred a new elite: the educated class who populate the technocracy based on the credentials they earn during their education.  

The existence and growth of this technocratic class has produced an intra-elite struggle between it and the older order represented by the wealthy and industrial class.  This struggle is best seen in the rise of the Heritage Foundation and its Project 2025 as a counter movement to the heavily academic focus on various minority rights.  Neither are mass movements.  Neither appeal to a majority. And neither are concerned with establishing a broad consensus in politics.  Instead, both want to establish ideological control over the operations of the elite.  Neither is collective, in that neither tolerates inclusion other than of those most committed to their particular cause.  So neither is democratic.

On contrast, democracy is, by definition, a collective concept.  It is “people power” not “person power”.  So the relentless neoliberal emphasis on the individual as the epicenter of social and political focus was destructive of collective thought.  Deliberately so. The erosion of social cohesion and the encouragement of political polarization was part of the attack.  The denigration of “society” was explicit in neoliberalism.  For without society there can be no citizenship.  And without citizenship there can be no entitlement.  The individual is then cast adrift to fend for themselves subject to the whims of those with greater power.  There is no recourse to the collective assertion of equal access the rights of citizenship.  The individual loses the power that comes only from the collective.  

To recapitulate: within this narrative democracy is necessarily a temporary phenomenon.  It appears only in moments of socio-economic duress when the elite loses its ability to enforce its dominance.  Such moments are rare.  They are usually economic crises during which the elite no longer provides economic security to those it rules over.  Or they are moments of external threat when the elite no longer provides physical security. Or they can be in periods of intra-elite struggle when social coherence is deliberately shattered in order to be rebuilt to the advantage of a new elitist group.

Our present democratic deficiency derives from a confluence of all these factors.

The neoliberal attack on democracy succeeded, but it also produced the economic failure of 2007/2008.  Elitist ideas were shown to be spectacularly wrong.  The door was opened for a democratic revival.  The opportunity was lost, however, because neither political party was sufficiently committed to democracy.  Elitist sentiment suffused both.  The subsequent two decades saw continued decline in democratic commitment in the business world, with the rise of the gig economy, technological surveillance, and continued  emphasis on profit rather than wages further undermining the masses.  Living standards stagnated even as the economy regained its strength.  Inequality, a sure indicator of the absence of democratic sentiment, grew back to levels not seen since the 1920s.  

A community as unequal in wealth, income, status, and particularly consumption, as contemporary America may appear “democratic” in that it preserves certain institutions, but the underlying reality is that those institutions are moribund and ineffective.  For otherwise those inequalities would not exist. It has long been said that an unequal society is not a democratic society.  America is wildly unequal.  So it is not democratic.  It has not been for decades.  

And all during the regression that produced this egregious inequality our commentariat rarely, if ever, focused on the loss of democracy. Indifference and complacency replaced the energy needed to lead the struggle for equality.  The focus shifted to niche issues insufficient to displace the grip of the elite.  It became impolite to discuss class struggle.  Inclusion became the watchword of so-called progressives.  But inclusion into what?  

Then the crisis caused by the incompetence and greed of the elite became too acute to ignore. Which is when people like George Packer woke up and realized that the historical reality of elite rule had re-asserted itself.  Only this time more openly and grossly.  

Packer, in his article refers to America’s zombie democracy as it lurches along more pretense than fact. A better examination of our circumstances suggests it was always thus. We are ruled by a well entrenched and provisioned elite.  As usual.

Meanwhile demos kratia — true people power — lies dormant as a weapon to be used to vex our corrupt and self-serving elite.  They deserve it.

Demos kratia indeed.

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Demos Kratia 3

Demos Kratia 3:

With due deference to Jill Lepore …

We dance around the subject all the time.  We never ask the big question: Is the United States governable?  Or is it too diverse geographically, culturally, and demographically to cohere in any way other than the trivia of July 4th celebrations?

I am prompted into this thought by the introductory chapter of Jill Lepore’s new book on the Constitution.  Her thesis appears to be that Article V is so constructed that has become a barrier to, rather than a door to, constitutional amendment.  That creates a failure to adapt.  Which in turn is both a negation of the Founder’s intention and a failure of democracy.  Although she is careful not to use the word democracy given the obvious aversion to it embodied in the original document itself.  One perverse outcome of the stasis imposed on American governance by this failure to amend, is that in our contemporary paralysis it is those who claim to be “originalists” who also claim the mantle of democracy.  They do this on the basis that amendment ought not be through the decidedly undemocratic process of Supreme Court decision making.  It ought to be through Article V.  So, somewhat ironically, they rely upon an undemocratic document to advocate democracy.  

Not that they actually advocate democracy.  But that’s for another day.

The failure to amend the Constitution is stunning.

The American Constitution is the least amended worldwide.  It has ossified despite multiple attempts otherwise.

The numbers speak for themselves [we owe a debt of gratitude to Lepore for compiling these numbers]:

  • About 200 amendments were proposed at the state level during the ratification process 
  • There have been approximately 10,000 petitions calling for amendments
  • 12,000 amendments have been proposed in Congress
  • There have been 250 state conventions since 1776
  • Those conventions have produced 144 new state constitutions
  • Along with approximately 10,000 amendments being proposed at the state level
  • Of which about 7,000 have been ratified

This compares with the paltry 27 amendments that made it through the Federal amendment process.  With none running the gauntlet successfully for over 50 years.

This lack of adaptation to the times and wishes of the people has not gone unnoticed: in 1916 the political scientist Jacob Tanger wrote this:

“Taken as a whole the proposed amendments to the constitution afford an index of the real problems confronting the government and the people”

Real problems?  Aren’t they the ones we use politics to resolve?  Maybe.

This especially true of the battles to extend rights more inclusively throughout society, politics, and the economy which have had to be fought at a lower level than the Constitution.  This, in turn, makes every step vulnerable to repeal.  In other words “the people” have had to conduct politics to resolve their biggest issues without using the most basic legal tool in their possession.  Indeed, they have had to ignore it because of its inflexibility.  One consequence of this is to thrust the Supreme Court into the midst of day-to-day politics. Which is what the originalists now object to.  It is through the intensity of the legal process, rather than through democratic debate, that major issues have to be resolved.  So what are inherently democratic disputes have to be resolved undemocratically, with the inevitable risk that the legal system becomes tainted and politicized.  The consequent cost to the coherence of the body politic has been enormous.  

Perhaps this is the best recognition of all that the Constitution is undemocratic?

But that ignores the Founders most of whom were very well aware of the idea of democracy lurking in the conversations of their day.  So they were clear that they expected their original effort at constitution-making to be updated regularly.  For, as Jefferson said: 

“Laws and institutions must go hand in hand with the progress of the human mind”  being changed as “new discoveries are made, new truths disclosed, and manners and opinions change with the change of circumstances.”

Amendment was expected.  Article V is there for a reason.

But the Founders confounded themselves. Their folly being in their disregard for the awe with which they would inevitably be held by successor generations, and the constraint that such awe would place on the willingness of those later people to take upon themselves the onus of self-government.  Instead, the easiest route within difficult later debates would be to avoid the tussle of amendment.  It would become ever more likely that later generations would submit to being governed by their long dead forbears than undertake the dangerous work of democratic politics.

So whilst the phrase “we the people” has a glorious democratic ring to it, not only is that glory stained by the limitations of the definition of “the people” in the late 1700s, but is further stained by its ever more distant definition from that in use today.

And yet the idea of democracy was clearly being tossed around back in that era.  It’s just that it had no definition.  It still doesn’t.  Instead it has become a placeholder for any number of similar notions — with the ogre of majoritarian rule being just one among many.  Jefferson, again, put his finger on the problem:

“I know of no safe depository of the ultimate powers of the society but the people themselves”

But then he appeared to equivocate: 

“If we think them not enlightened enough to exercise their control with wholesome discretion, the remedy is not to take it from them, but to enlighten their discretion.”

He sensibly leaves the definition of “we” in that sentence unresolved.  So whilst we would love to honor the promise of democracy we have to be careful.  We need to limit it.  We need to place boundaries around it so that “the people” don’t do anything too disruptive or dangerous.  But disruptive of what, or dangerous to whom?  That is left unsaid.  

Such, though, was the fear of the rawness of democracy that the Constitution became a veritable armory against it.  As Lepore points out, the Electoral College, the malapportionment of the Senate, and the lifetime tenure of Supreme Court Justices, not to mention the byzantine rules within Article V all militate against it.  She puts it rather gently:

“The US Constitution is older than modern democracy and is burdened with all manner of vestigial provisions [against it].”

Democracy, demos kratia, the power of the people, has been a slippery topic ever since it entered political discourse in the early years of modernity.  We must give the Founders credit for acknowledging its existence, although they might, perhaps, have left the door slightly more ajar for its development.  

What we can be certain of, however, is that subsequent generations of Americans have tried many times to inject a more contemporary view of politics into the original document.  Those numbers quoted above testify to that effort.  Article V, though, has stood in firm opposition.  Justice Scalia once calculated that the cumulative effect of the various Constitutional hurdles needed for an amendment to be ratified implied that a mere 2% of the population could defeat the effort.

Some democracy.

Or, rather, contemporary democracy has to hobble along regardless of the Constitution.  

Which is surely untenable.  

One of these days the dam has to break.  Amendment was designed to substitute for social and political upheaval.  It was thought to be the method to be used to avoid fracture within the republic.  It would, it was thought, vent vitriol sufficiently that violence could be avoided.

Yet it has acted in the opposite direction.  It has made the intensity of reform so dangerous that Americans prefer to avoid it.  So the urge to change gets pent up.

Until the populists break the dam?

Are we there?

Is the Constitution dead — as Justice Scalia is famous for saying?

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Is Democracy a “thing”?

Demos/Kratia.  The people rule.  

Really?  This is a provocation …

I realize that this sounds a bit odd: but does “democracy” really exist in any meaningful way?

I ask this in the context of the recent rash of angst here in America.  The arrival of an avowedly authoritarian regime along with its “Project 2025” manifesto earlier this year has addled everyones’e brains.  This is especially true of all those brought up within the warmth of the founding myths of what likes to think of itself as the great defender of democracy worldwide.

So: what is democracy?  And, more interestingly, what its its purpose?

INTRODUCTION

For a start … 

“Throughout Western history, under monarchies, aristocracies, and republics, the Many, as workers, peasants, soldiers, and taxpayers, have been exploited and excluded.  The demotic way of being is so preoccupied with existence, and with necessities, as to leave the Many with only scant political resources to contest their treatment.”

Thus says the very wise Sheldon Wolin towards the end of his epic review of Western political thought.  (My copy of his book has an updated forward by the equally wise Wendy Brown).  He is discussing what he calls postmodern democracy.  He is articulating our contemporary problem.

Brown herself says this in the epilogue to her outstanding “Undoing the Demos”:

“Over the centuries, of course, there have been many accounts of democracy’s superiority and advantages over other political forms.  However, most of them have little or nothing to do with popular rule and instead attribute features to democracy that are not inherent to it: equality, liberty, rights or civil liberties, individuality, tolerance, equal opportunities, inclusiveness, openness, procedurals, the rule of law, peaceful conflict resolution and change.  None of these belong exclusively to democracy defined as rule of the people.”

Put more bluntly she is suggesting that the concept of democracy is a rather empty vessel.  It refers only to rule by the majority.  Why? and what for? are beside the point.  

There is a certain hypocrisy in the current discussion over the potential threats to American democracy represented by the Trump administration.  Those views come from a section of our elite whose own status, power, and ability to enforce its values are under threat.  It is — possibly — not an objective critique of the state of American politics.  In this sense those who decry the the loss of democracy are simply pointing to their own loss of relevance and power.  Their complaint is representative of what Peter Turchin has well described as intra-elite conflict.  Meanwhile, Wolin’s Many have to continue their lives regardless of the conflict taking place above them in the rarified corridors of power.  Preoccupation with provisioning the necessities of life has always taken precedence over politics, which is an activity for elitists with sufficient wealth that they have spare time to engage in it.

So is democracy for most of us really under threat?  

HISTORY 

Besides America has never been, nor is about to be, a democracy at its highest level in any credible sense of that word.  Does the majority really rule?  This is a nation determined to protect minorities from the majority at all costs.  The Constitution is the best example of this determination.  The Bill of Rights is not democratic.  It is liberal.  It is not for nothing that Levitsky and Ziblatt titled a book “Tyranny of the Minority: Why American Democracy Reached Breaking Point.”  The only controversy with their thesis being the assumption of a prior existence of democracy.  Was it real or simply illusion?  Just how democratic are the Senate and the Electoral College?  Have they ever been?

The legacy of a political system conceived in a long since gone agricultural age and when the nation was much more compact lingers on.  As do the attitudes of its architects to Wolin’s Many.  To suggest they were skeptical of the ability of the many to engage in matters of governing — even self-governing — is being rather polite.  The Founders excluded rather than included precisely because of that skepticism, and even though subsequent inclusion has undone this original failure, the system of representation remains out of step with modernity and allows, the oppression by the minority Levitsky and Ziblatt decry.  I would even argue it encourages it.

In any case, democracy may be an unattainable goal at the scale of a modern technocratic state.  The centers of power are too remote from the day-to-day realities of Wolin’s Many.  If democracy as a regular and particular form of political system is a possibility at all it can only be at a local level where people can engage one another, where they can recognize one another, and where their actions have an immediacy of impact that connects each person to their commitment to the debate.  Local outcomes can be seen as direct consequences of such debates.  It is only the existence of this local democracy that permits us to suggest that America has a democratic tradition.

At the national level that immediacy is lost in the layers of representation that connect the local with the national.  Those layers are inhabited by professionals hired to act as agents representing those below.  It is never possible for such agents to act with precision in their representation.  Is this not the conclusion drawn by Buchanan and his associates when they conceived of Public Choice theory?  

The inevitable impress of technocracy, and of self-interest,  intrudes into the decision making of the people’s representatives.  They consequently make claims of practicality and legalese that diminish and then destroy any vestige of true connection with the origins of the debate below.  So what emerges as political discussion at the higher levels is determined by the issues that exist at that higher level.  And each step towards the top alienates even further what remains of the connection to below.  Eventually what is presented as urgent discussion at the national level most often looks foreign and unfamiliar to the people whose votes are so expensively searched for by those engaged in that same remote national discussion.  Even when matter of high state do have an impact on the Many accountability and transparency are often lacking or disguised by all those intermediate layers.

This is inevitable and not some malicious intent on the part of the elected representatives.  Democracy is simply not possible at such a scale.  It never was.  It never will be.  A pragmatist has to argue that democracy has to be reduced to occasional mass dissent and thus is nowhere near the more genteel versions that clutter the textbooks.  Democracy as we experience daily is merely the consent and acquiescence of the Many which is not disturbed enough to resist.  It is an expression of tolerance of the current outcomes of technocratic rule.  It is the reservation of the possibility of revolt.  It is a negative not a positive impulse.

This is, of course, rather disturbing.  But the trajectory of modernity suggests it is inevitable.

The emergence of the modern state, and its counterpart the modern corporation, both militate against democracy .  Both are highly structured, tightly managed, bureaucratically populated, and focused on their own issues.  Both are designed to administer resources at scale.  Both engage in planning, strategy determination, and tactical execution.  They simply have no room for being responsive.  Far from it.  They are deliberately anti-democratic.  They have to be in order to accomplish their stated missions.  Interference in the form of democratic debate would be an impediment to smooth implementation.  Stability is vital to administration, and constant discussion inevitably creates instability.  So it is not tolerated.  Or, if tolerated, it is severely truncated. 

Worse it becomes pro forma: it exists only in a hollowed out form to ameliorate the majority’s desire for participation in its own destiny.  The reality, though is that a narrow and privileged elite is in control of both the state and the corporate world.

Those two power centers dictate the development of society at large.  The one in what is misleadingly called the public sector.  The other in what is equally misleadingly called the private sector.  A more appropriate designation for both would be the technocratic sector.  They exist in mutual cooperation and in both political and economic symbiosis.  Modern economic change is mediated through these two behemoths of planning.  It is centrally designed and implemented.  Those below receive change without direct democratic participation.  New technologies, new modes of life, new cultures, and new ideas emanate from above, then filter down to alter the possibilities lived by those below.

It was always thus.  

POWER CENTERS

The great technocratic insight of modernity was Adam Smith’s division of labor.  Specialization on an ever increasing scale necessitates ever more complex coordination, or what has become known as management.  It renders democracy impossible because it severs that immediacy and locality upon which it depends.  It also steadily increases the complexity of society as a whole.  This too adds layers that defeat the possibility of democracy.  The division of labor has added enormously to our collective wealth — indeed it is the reason we have emerged from the long millennia of Malthusian stasis — but only at the cost of creating a need for constant mediation and coordination to manage the ever increasing scale implied by the constant extension of the so-called market.  

One of modern history’s great ironies is that Smith’s vision was founded within the same simplicity of a predominantly agricultural society that the American Founders inhabited.  Both, consequently, drew conclusions and theorized based upon circumstances that no longer exist.  In Smith’s case his own great idea is the cause of the downfall of his vision of organization arising unintentionally from self-interest.  We should recall that in Smith’s day “self-interest” was very different from the rigid and isolated individuality of modern economic theory.  Back then it was more broad and inclusive of a wider definition what a free person would regard as their proper interests.  Even so, as society divided and sub-divided onto ever more finely sliced specialities, its complexity overwhelmed its ability to coordinate without the creation of intermediate centers of intentional activity.  The hidden hand had to become more explicit and less hidden in order to cope with the vastness the division of labor created. 

So, much as in theories of democracy that seem to only to have relevance in a small locality, we have the similar issue with ideas of the market.  The constant extension of the market may produce great prosperity, but it, too, alienates its actors from unintentional coordination.  Instead it encourages the emergence of layers of local coordination within smaller spaces.  We call those local centers of coordination corporations.  And we must remember that the modern corporation began its life as a subcontractor of the state.  The two are intermingled from their origins.  Both are power centers for the technocracy behind which lurks that part of the elite with sufficient wealth that they can purchase influence and steer politics to its own advantage.

More, in Wolin’s words again:

“The fact that democracy continues to be invoked in American political rhetoric and popular media may be tribute, not to its vibrancy, but to its utility in supporting a myth that legitimates the very formations of power which have enfeebled it.  The actual weakness of democracy is the consequence not of frontal attack but of judgement that democracy can be managed, and when necessary, ignored.  The strategies are as anti-representative as they are anti-democratic.  Typically they are couched in economic and managerial terms: efficiency, balanced budgets, the economy’s need for political stability, the government’s need for a governable citizenry, and the military’s need for a ‘rapid response’.”

Exactly.

The invocation of democracy, in a vast technocratic state, is simply a veil or illusion.  It is an attempt to lull the Many  with what has become a mythic concept that evokes a nobility of purpose and unifying theme.  Its most current version emerged during the Cold War when America claimed to be a center of, and defender of, democracy against the repressive alternative situated in the Soviet Union.  Democracy became a rallying cry of unity.  It became a pawn within the geopolitical struggle between alternative forms of elite social control.  All the while America was not an actual democracy — its centers of power in the administrative state and its business corporations were steadily and determinedly entrenched against it.  Worse: they cooperated and combined to defeat it.

So the paradox becomes clear: the great defender of democracy was never, in its own domain, a democracy.   

This paradox exists throughout the structures and debates that provide the intellectual justification for the defense of the illusion.

TECHNOCRATIC EXAMPLES

Take economics as an example.

Its obsession with self interest and individuality expressed as competition in something called a market, mimics the debate about democracy.  Neither the market as theorized by economists nor democracy as discussed in most textbooks actually exists.  Yet both exert an irresistible pull on those who want to provide cover for the formation of power within the ruling elite.  And economics also sinks deeper into technocratic obscurity with its endless focus on something called equilibrium, an inevitability associated, we are told, with the attainment of efficiency, which in turn depends on various marginal activities over which no one has any control.  How convenient.  Power accrues, but with no intent on the part of the powerful.  It just is.  A law of nature beyond the reach of democratic interference.  

Was economics deliberately constructed to justify the actions of the powerful?  The case appears strong.

Or, perhaps more topically: take the conversation about central bank independence.   Those banks are said to be independent because they are set beyond the reach of the assumed meddlesome nature of democracy and placed into the hands of technocrats who, apparently, are uniquely equipped to understand, interpret, and respond to the complexities of the outcomes from deep within the economies of modern states.  Undemocratic to their core, these banks are being defended by the very same people who are decrying the loss of democracy to the whims of an emerging authoritarian regime.  The irony could not be more obvious, the paradox more clear, or the elitist confusion and hypocrisy more on display.  Unmentioned throughout this heated discussion is the very clear bias that a 2% inflation target offers to the asset holding class, whereas a higher target would offer more to the more debt-laden masses.  

This is not a battle over democracy.  It is a battle over power within a fractured elite.

UPRISING

No wonder popular disengagement and loss of faith in both government and large corporations has grown throughout recent decades — especially since the financial catastrophe of 2007.  Neither even tries to deliver the sort of experience that would create loyalty to either.  The empathy necessary for national action to respond to local needs is entirely lacking.  The intervening technocracy obliterates the possibility and takes on a life of its own.  So the state, big business, and, yes, academia, have become indifferent to the people.  And yet, as evinced by local displays of activity and resistance, democracy of a sort is thriving down below.  It’s just that such activity cannot be replicated at scale.  Not without revolution.

This is not unusual.  

To return to the beginning: throughout western history elites have dominated and exploited those below, who rarely, if ever, have the time or resources to mount a credible resistance.  The only moments of democratic occurrence have thus been during the very infrequent upheavals we call revolutions from below.  Populism is a variant of such a revolution.

It is this infrequency that gives us insight into the reality of democracy.  It is the resistance to too intense an activation of power by the elite whose indifference to the Many eventually, but rarely, activates sufficient resentment that a power struggle becomes inevitable.  Democracy is not, therefore an ongoing or permanent political arrangement.  It is a periodic re-set of the terms and conditions under which the many consent to be ruled.  It is a periodic show of brute force.  It is an expression of dissatisfaction with the status quo.  It is a reminder to the elite that their status, wealth, and power depend on the acquiescence and trust of the Many.   A majority who want their lives disrupted as little as possible, their traditions respected, and their modes of living stable enough that they can provide themselves with those necessities of life whose provision takes up so much daily time that civic engagement is possible only at the local level.

Such a definition may disappoint those searching for higher values, but it has an earthy and longstanding morality.  It situates democracy within the limitations Brown identifies.  It has no value content in and of itself, it is simply a form of popular social and political discipline exerted rarely and specifically as a restraint on an elite that needs to be reminded of its obligation to the Many.  It is the ever present existence of the potential for dissent.  It is a statement to the elite that, for all their education and self-reference, they do, indeed, rule only, in extremis,  at the consent of the Many.  So beware the revolution from below, for it will assuredly offend your elitist sensibilities and threaten your security.  

Meanwhile.

 The permanent revolution from above — what we call ongoing technological change and innovation — continues to roil, upend, and disrupt the continuity of lived experience of the Many.  The undemocratic imposition of such continuous and unrequested disruption is the cause of our present unsettled polity.  Its inequalities are too clear.  Its biases too deep.  Its cultural and social intrusions too rapid.  And its consequences too uncertain.  It is beginning to threaten the stability of continued provision of necessities.  Elites glibly discuss the possibility for the loss of jobs.  Those with such jobs are naturally motivated to resist.  We have been here before when the “machinery question” loomed so large in politics, and, once again, technological change has become a danger that the elite seems either unable or unwilling to mitigate.   Perhaps because they benefit so mightily from the profits it generates.

This might not be so urgent had our technocracy not failed so obviously in 2007.  Its credibility to deliver a constant and preferably increasing supply of the necessities of life to the Many collapsed with its complicity in the Great Recession and its self-serving reaction.  Its inability to restore that supply and its ongoing internecine struggles over control of social cultural values has rendered it even more inept.  So it continues to fail.  It has flailed for answers to its own questions ever since 2007 despite its ongoing self-satisfaction and indifference to the damage wrought to the Many back then.  Perhaps it is time for one of those infrequent re-sets.  Perhaps now is a time for a dose of democracy-as-dissent.

It is not the purpose of democracy to deliver prosperity or freedom and so on.  That is the purpose of liberal values and an elite supposed to rule at least mostly benevolently.  No.  Democracy is the gut punch delivered to that elite when it doesn’t.  

Like now.  For instance.

/ / , , /

Where to Next?

A veritable blizzard hit me this morning.  A blizzard, that is, of articles and various snippets that seem to tangle together somehow.  They speak to deep transformations.  And yet none of their authors offered that depth.  Such is our moment.  I wonder when, and indeed if, this will all make sense.  Perhaps we will have to leave it to future historians to report on that.

Meanwhile this is what I came across.  In no particular order:

First: In Project Syndicate, Ricardo Hausmann bemoans the slide in economics towards what he characterizes as a more “auditing” mindset, which he contrasts with his preferred “architect” mindset.  Economists, he suggests, have become too detailed, too timid, and too lacking in imagination.  He wants to inject a greater level of energy and commitment to larger-scale thinking in order to get economics back to its former glory as a source of big ideas.  

This, I think, is a worthy goal.  As I have said repeatedly through my twenty-five years of writing these sorts of things: I regard economics as a vital discipline.  Its contribution ought to be rather more than designing auctions or discussing the merits of surge pricing.  But it cannot.  And it does not.  Why?

Hausmann offers an interesting starting point for the retreat from what he calls “design thinking”.  He points to Arrow-Debreu and their first fundamental theorem of welfare economics.  This piece of elegance sets a trap from within which economics cannot escape.  It posits that, in the absence of various aspects of reality called “market failures”, free markets inevitably move the economy towards what are called efficient outcomes.  You can see the problem instantly.  Once you are within the imagined world of perfection you are dealing with inevitabilities.  There are no options, choices, alternatives, differences, asymmetries, bumps, hillocks, mountains, rivers, or any other novelty.  Everything just is.  And undisturbed history unwinds towards a utopia.  Like clockwork.  Very Newtonian.

This is, of course, an absurdity.  Arrow knew full well what rubbish it is.  But his purpose was not to be useful to the real world.  His purpose was to burnish the make-believe of what was then the emerging alternative universe called neoclassical economics.  When Arrow re-entered reality he recognized that it was chock full of those market failures he carefully had to eliminate in order to “prove” the efficacy of free markets.  So, in effect, he had proved nothing.  I doubt he foresaw that economics would subsequently go all in on his utopia rather than explore reality.  

But it did.  And so we are left where Haussmann picks up: with a discipline that has deliberately severed itself from reality in terms of being a “big picture” discipline, and has, instead emphasized its deployment of techniques appropriate to solving smaller puzzles.  It has, as I pointed out recently, voided itself of subject matter [i.e. the real economy in its entirety] and retreated into being a sort of social statistics.  All method and model, devoid of the ability to tackle major moments and movements.  

So I sympathize up to a point with Haussmann.  Economics needs a re-boot.  There are tons of good economist out there talking about big issues.  It’s just that when they do so they are forced to leave the rigor of things like Arrow-Debreu behind and ignore it.  They then begin to engage reality.  They sometime have great ideas and insights too.  They become the architects that Hausmann wants more of.  The problem being that, when they do, they sound less like economists and more like general social scientists.  They de-emphasize economics in order to be useful.

Second: which gets me to my next article.

Or, rather, pages in a book.

I have been reading Jonathan Levy’s “The Real Economy” lately.  Here, perhaps is someone doing the work that Hausmann wants economists to do.  Levy, though is s historian and thus free of the Arrow-Debreu like traps economists are caught within.

Somewhere towards the latter part of Levy’s book we find him discussing stocks and flows and the movement of capital around the world.  That leads him to quote Robert Lucas.  Which is always good for a laugh.  It is a perfect illustration of the problem Hausmann has raised.  Levy’s conversation — it’s on page 192 of his book — wanders into Lucas’s famous discussion of why capital does not flow easily from wealthy economies to poorer ones.  Or from developed to those less developed.  Trapped as he is within neoclassical economics, and thus cut off from reality,  Lucas hits a conundrum: in that unreal world capital ought to flow.  But it doesn’t seem to want to move.  Why not?

Levy gives us a relevant quote from Lucas:

“If it is profitable to move a textile mill from New England to South Carolina, why is it not more profitable still to move it to Mexico?  That fact that we do see some capital movement toward low-income countries is not an adequate answer to this question, for the theory predicts that all new investment should be so located until such a time as return and real wage differentials are erased … I do not have a satisfactory answer to the question, but it seems to be a major — perhaps the major — discrepancy between the predictions of neoclassical theory and the patterns of trade we observe.” [Italics in original]

And here we have a response to Hausmann.  Stuck as he is within neoclassical theory Lucas can offer us nothing.  The ability to be an architect in the way Hausmann encourages economists to be is foreclosed by a theoretical sinkhole.  All Lucas can do is admit he has no “satisfactory answer”.  Which is because, obviously, the theory does not match reality.  Undaunted Lucas carries on.  Elsewhere, again discussing movements of capital, he makes this remarkable statement:

“I will also be abstracting from all monetary matters, treating all exchange as though it involved goods-for-goods.  In general, I believe that the importance of financial matters is very badly over-stressed in popular and even much professional discussions and so am not inclined to be apologetic going to the other extreme.”

The honesty is refreshing.  

He might well have simply said that he knows and is proud that economics is plainly dumb.  Why, after all, bring matters of money into discussions of an economy?  How absurd.

But the journey from places like Arrow-Debreu to the deliberate and obstinate denial of reality inherent in Lucas is an easy and predictable one.  The decline in relevance seems to be in direct and inverse proportion to the increase in rigor and commitment to the theory.  Whereas Arrow knew he was ignoring reality only to produce a proof of something that could never actually exist as a representation of reality, Lucas is doing the opposite.  He is lamenting that reality refuses to conform to his ridiculous theory and so he just lest out a primal scream of defiance and blathers onwards. 

How can someone so committed to such a deep deviance from reality ever offer the sort of helpful design thinking Haussmann wants to encourage?

So what Haussmann is looking for is not a minor movement within economics.  He is asking for a wholesale shift.  A great deal of stuff needs to be forgotten in order to move forward.  I wish him well.

Third, and last blast in that blizzard I mentioned at the outset is something entirely different.  It concerns politics and democracy.

It comes in the form of an Op-Ed in the morning’s Financial Times.  Janan Ganesh, who always tries to entertain us with sweeping and colorful commentary, want us all to calm down.  I paraphrase: Trump is not that much of an oddity.  American politics always re-centers itself.  Indeed it is all rather dull: Americans seem predisposed to reversion to some sort of political mean.  They regularly vote out incumbents.  So this mayhem will pass.  No need to get too upset.  Trump’s power is at its height.  Decline and rejection are inevitable.  The only two elections in the last century to mark true “change” were 1932 with the arrival of FDR, and 1980 with the election of Ronald Reagan.  The implication being that neither 2024 nor 2028 will be such change elections.   

Really?

Yes, things changed in 1932.  America took a major step towards social democracy and cut back the power of its traditional elite — the wealthy and business community, whom as Schlesinger pointed out in his 1945 defense of the New deal, usually rule the roost in America.  Obviously, the 1980 election was the counter attack orchestrated by that elite.  It succeeded spectacularly.  So well, indeed, that the erstwhile left of center Democratic Party has emerged as the bastion of an establishment committed to defense of a market based economy, technocratic rule, and the de-emphasis of class conflict.  The combination of market obsession, technocracy, and deregulation is called neoliberalism.  There are quite a few of our analysts who still refuse to recognize it as a coherent program or philosophy.  They have been blinded by the mythology created since 1980 to hide the re-emergence of the old elite.  They have bought into the stuff of Lucasian economics where reality needs to be bent to look like theory rather than the other way round.  They seek efficiency where it cannot be found.  They speak the language of markets even though they are comfortable with never having to define what a market actually is.  They too prefer myth to reality.  

In any case the shift in 1932 towards social democracy and then the 1980 shift towards neoliberalism are the only two elections that have truly mattered in the last hundred years.  So far I agree with Ganesh.  But I am not so sure 2024 doesn’t represent another significant shift.

Both of those major elections signaled a shift in power within the body politic.  In 1932 the masses moved center stage.  In 1980 business reestablished itself as dominant.  In 2024 another shift seems to have occurred.  

It’s the arc of democracy I am concerned with.

1932 saw the emergence of what I call really-existing democracy.  Policy started to respond to the wishes and aspirations of the majority rather than to the much more narrow interests of the wealthy, the business community and/or their hangers-on.  That election summoned into being a period of actual democracy in America.

1980 saw its reversal.  The burden of being socially responsive not only cost the former elite its status and some of its power, but not imposed costs on its ability to accumulate and retain wealth and income.  That intrusion had to be undone.  And so it was.  The alignment of Cold War geopolitics, oil dependency, inflation, and 1960s political unrest provided fertile ground for the old elite to reassert itself.  Modern economics played its part by going all in on the absurdities I mentioned above and as perfectly represented by the likes of Lucas.  It became steadfastly anti-democratic.

The subsequent undoing of democracy is marked in the record by the rise in inequality since 1980.  

The 2024 election marks another major change to the extent that it is the final rejection by a substantial portion of America’s ruling class of any semblance of residual democracy.  It represents the victory of that part of our elite that was never committed to democracy.  The battle was not within the body politic so much as within the elite.  One part wanted to continue with the appearance of democracy — elections, freedom of speech, and the other structural elements that allow the masses into the political conversation.  The other part wanted to finish the job and get rid of such things altogether.  After all why continue the pretense and run the risk of a resurgence of a democratic inclination from below?

Between 1980 and 2024 both political parties advocated similar market oriented policies.  They bought into the sort of economics that rejected the social in favor of relentless commodification of the individual.  That’s where modern economics seeps into and pollutes reality.  As the legislative agenda increasingly favored the creation of rent extraction by the business community and our technocratic so-called “knowledge workers”, it encouraged the growth of a more concentrated oligarch class even less committed to democracy.  Our oligarchs regard democracy with contempt.  They are open in expressing the view that democracy is both a cost and an impediment to their construction of our future.  They are the group that wants final separation from democracy.  

Which is why they so openly encouraged and supported Trump.  2024 was their moment.

And which is why the infamous Project 2025 contains so much overt anti-social content.  

It is this context that I differ from Ganesh.  I see 2024 as further transformation.  It confirms and entrenches the elimination of really existing democracy.  It starts the work of getting rid of the last vestiges of democratic institutions.  If thoroughly carried out it makes the work of relocating a democratic future difficult if not impossible.  2024 completes the journey begun in 1980.  The two elections bookend an era during which America turned its back on any substantial effort to realize democracy as its foundational political purpose.  It returned, instead, to its prior 1800s quasi-aristocratic norm.  

Just how economics plays a role in the next few years is hard to see.  If Hausmann is correct in his analysis of it being severely reduced as a contributor to “big thinking” and it stays as a technocratic and detail oriented methodology I doubt it has much to tell us.  Instead it will remain a tool for use by those abetting the oligarchs: advocating extreme individualism rather than anything collective.  It will continue, as Lucas admitted, to have no answers, and will, instead retreat even more within itself and to the safety of method.

What a shame.  We need to break through limitations not hide behind them.  We need imagination.

/ / , /

Well Said Ha-Joon Chang!

I shouldn’t.  But I will 

Well, well.  Is there life in economics yet?

Not so fast.

My own journey into the swamp of economics began in the late 1980s when, out of the blue, my boss at the bank decided that because I had attended LSE I ought to be conversant with the subject.  That I had studied history and politics seemed to carry no weight.  So there I was a little later standing in front of large audiences trying to look and sound authoritative on a topic that I was simultaneously trying to catch up on in real time.  

A few years later, and now known as the Chief Economist — something I never aspired to be — I turned my thoughts elsewhere.

Well sort of.

By then I had become intrigued by this new thing called the Internet.  I was already tinkering with what was then called informations systems — how antique it all seems now.  The question I kept returning to was simple: what was the likely impact on business of all this newly assembled and released flood of information?  For some reason I could never let that question go.  After all it was apparent to me the entire function of banking is to handle information and make decisions based upon it.  I began to generalize that thought.  If banks are information processors what about other businesses?  What about the economy as a whole?

About this time I found myself with a lot of spare time.   I had been fired!  So I persisted.  

And this is when I stepped further into the mire known as economics.

What more natural place to go look for answers about the construction of business, its relationship to the economy, and so on?

Wrong answer.

The haughty silence was deafening.  What a trivial question!   When someone as famous as Coase asked the question “Why do firms exist?”, the profession immediately rallied to protect the sanctity of “the market” in which is has invested most of its intellectual capital.  So firms were reduced to some sort of kludge because, occasionally, there are costs associated with transactions and that muddies things somewhat.  With that fixed, economists could go back to the safety markets without having to confront Coase’s question more definitively.

The answer is, of course, rather obvious.  Markets are hopeless at coordination of actual production.  They don’t design, innovate, construct, market, advertise, or perform any of the other tasks that need to happen in order for stuff to cohere into what we call products.  Markets are only where stuff changes hands.  All that other activity evaporates in economics.  Because it takes place in firms.  Coase was right to ask the question.  The response was absurd.

This was how I learned just how far economics had removed itself from reality.  Not only had it no answers, it had no questions.  It no longer engaged with the day-to-day experience of the economy — whatever that is — and, instead had devolved into tinkering with idealized situations that appeared laughably trivial when I first encountered them.  The best and brightest privileged their excellence at method over the dirty work of pulling apart or explaining actual economies.  Nobel prizes were routinely dished out to people who, on the face of it, had simply formalized common knowledge and elevated it into some sort of discovery.  They invariably gave these discoveries complicated sounding names.  None really contributed much to improving our ability to manage economies.  Endogenous growth theory?  Enough said.  Who knew that technology had something to do with growth?  Or that firms innovate and invent new technologies to get leg up?  Goodness!  Whatever next?  

Only in the context of a desert can the occasional oasis look like a jungle.

Worse: when economics made contact with reality it seemed to do damage.  No!  Even worse: it makes economics look farcical.

Surge pricing?  Do economists not realize that things like lunch hours exist?  Or that businesses know about lunch hours and plan for them?  So why do they persist in saying that prices ought to”surge” when lunch hour comes around and more people are looking to by food than, say, midafternoon?  The concept of surge pricing became justification for price gouging.  Why?  Because our “price theorists” said it was appropriate to raise prices when demand spikes.  Like in lunch hours.  Or rush hours.  The theorists then smugly say that all they are trying to show is that we can “smooth” demand and make everything more “efficient” — whatever that is.  I think they should have their lunch hour at three in the morning.  Let them smooth themselves before they dump silly ideas on the rest of us.

And don’t get me started on tenure for economists.  Interference in markets … discuss.  

Which brings me, ever so slowly, to Ha-Joon Chang and this morning’s Financial Times.

In an Op-Ed he berates economics for being pretty much what I just said.  Only he is more polite and much less snarky.  As an academic he pulls his punches somewhat — the guild closes ranks easily and quickly against criticism.  But he goes there when he says:

“The consequences of bad economics teaching not stop at the university gates.  They spill out into the world.  They shape our policies, our pay cheques and our climate.”

If economics blithely ignores its impact on the world outside itself, and, instead, revels in its abstraction, what is the point of it?

Chang then goes on to talk about an initiative called “Rethinking Economics” which is an attempt to break the stranglehold of orthodoxy on the subject as it is taught.  

Good luck.  No.  Really:  good luck!

In my experience there have been many such efforts each with — so far — limited effect.  Orthodoxy still rules in all its ugly irrelevance.  This is, perhaps, because all the so-called “best” schools remain firmly in the grip of the high priests of the old ideas, and they are rather proud of their lineages: who mentored whom matters to them more than what they know.  It is also, perhaps again, because the entire edifice needs reconstruction rather than modification.  Then there is, of course, the rather practical problem that economics is a profession, and like all professions, advancement within it relies on reputation as well as contribution.  Being a squeaky wheel is, therefore, not a good career option, and so-called “peer review” becomes a weeding out process designed to protect the guild rather than to invite or encourage novelty.

Speaking of which: isn’t “peer review” something of a restraint on trade?  Put it in the same bucket as tenure?  

“Do as I say, not as I do”?

Enough.  You’ve all heard this before.  You have grown tired of it.  Some of you have become more defensive of the guild.  Others are, perhaps, less certain of your knowledge.  Still others have become somewhat cynical.  

Economics needs a re-branding to free it to start over.  You can do that.  You really can.

There is urgency to the re-boot because the economy is so central to our collective wellbeing.  And economics ought to be so so useful to society and not a plaything for an over protective guild.  It ought to be offering up solutions and insight into the pressing matters that we face instead of being a caricature of itself.  

Markets and transactions within them are but small parts of economies, so markets are not the be-all and end-all of economics.  

And there are these collectives called firms doing all sorts of planning and coordination.

Tell me again: why do they exist?

And what on earth do they do?

And just how will the flood of information alter them?

Oh, and is the economy just a giant information processor?

I once called it a “system of thought”.  But that got me nowhere.  

One more question.  The really big one: growth.  Why?  How?  Where? When? Will it last?  Can it last?  What happens when it stops?  Does no more growth imply too few degrees of freedom for the wealthy to tolerate democracy any longer?  Are we simply avoiding the question because the answer gets messy?  How, then does economics sit with politics?  As an adjunct?  An equal?  Or is it the same thing expressed in a different language?

Do I really need to end with my favorite Coase quote?  Yes.  Here goes:

“Economists have no subject matter.  What has been developed is an approach divorced (or which can be divorced) from subject matter.”

Economics is a subject without subject matter?”  That should make it easy to start over!  Find something real to talk about.

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