Commentary: Hawk or Dove? Nirvana or Real World? Our Choice

Dante must have had something very much like this in mind as he wrote. Ours is not a descent into hell of course, unless you are one of the unfortunate unemployed being cast aside as an unwanted statistic. No, ours is a descent into economic insanity. And you have a choice before you: abet that descent, or resist. I cannot do it for you.

Why am I in this odd mood?

Two things: a brief conversation with my friend Krishin, who pointed me to Robert Kaplan’s book “Warrior Politics”; and an op-ed piece in today’s Financial Times by Samuel Brittan, one of the more interesting writers in that newspaper. The two are connected only through my oddly contorted view of the world. So let me explain.

Part One:

To begin with, here’s the point of Brittan’s piece: there are two directions you can take in economic policy right now. The first is to build ramparts against a surge in inflation. The second is to bolster aggregate demand. The two are becoming more and more mutually exclusive. The former relies on restriction of money growth. The latter entails further expansion of money growth. These are generalizations, but they cover the ground. They are obviously in conflict.

Fiscal hawks, those who want to slash and burn social programs, cut spending, fire government workers, rebalance books, restrain debt, and – especially – curtail money growth, are those most motivated by protecting capital. They are disturbed that capital markets may be threatened by sovereign or local government debt problems. In order to prevent write-offs, and defaults of debt they thus seek to enforce contraction. Whether they call it that or not, contraction is the inevitable result of their approach. We would end up with smaller, but re-balanced economies. They argue that from these, now cleansed bases, we can spring forward again. Presumably taking care along the way not to threaten capital again.

New to the arsenal of the hawks is the global perspective. And here they may have a point.

Let me get at that point by describing the fiscal doves.

This second group focus on what is called the output gap. That is to say the shortfall between current activity, where GDP is now, and its potential, that is where GDP could be were the economy humming along. Within the US this gap is very large. It is costing us enormous amounts of lost wealth, and is the primary reason we have such lingering unemployment problems. If you think along these lines your aim is to protect labor and not capital. This is the inherent position of Keynesians.

Now back to that point the hawks are raising.

The problem is that at a global level there may well be no output gap. That is when we look across the economy worldwide the constraints against increasing wealth for workers comes more from limited supply than limited demand.

If this is the case, and it is by no means certain, then the US is stuck. Demand expansion here would run smack into those supply constraints and could, note the hesitancy, could simply end up fueling inflation. Since long term inflation entails the erosion of value for capital, the hawks are up in arms.

Thus the conflict.

Thus our choice.

Either we take up policy decisions that protect capital. Or we put in place policies that protect regular folk. The current environment is one where doing a bit of both is becoming more difficult.Why is this?

Part Two:

Because we have wandered very far from the middle of the road. We have constructed economies, especially here in the US that protect capital. So far have we wandered that to continue to protect capital can only come at the cost of imposing more loss on the workforce.

The relentless deregulation of the past three decades, and the incessant drumbeat of neo-liberal free market economic ideology, has skewed the rewards in the US economy more towards capital than at any time for at least seventy years. We have undertaken a massive exercise in social re-engineering to undo the effects of the era of state involvement. The tide has been running in favor of capital as a result. The more we push away government from the inner workings of the economy the more we cede that space to those with the cash to influence things. We cut back our ability to mitigate the effects of raw capitalism. We limit democracy, by backing it out of our economic affairs.

By so doing we interfere with the balance between capitalism and democracy. A balance that produced the extraordinary spurt in wealth the American middle class experienced in the 1950’s and 1960’s.

Those two decades now appear anomalous. Exceptions to the long term rule that there is an inherent conflict between capital and every day people. During those two decades, perhaps as a result of the trauma of World War II, the entire western world sought a more socially peaceful method of wealth creation and distribution. The idea being to rein in the centrifugal forces that had dominated the world prior to that and had ended with conflict, terror, mayhem, and the rise of authoritarian ideologies in places like Germany and the USSR.

Capitalism survived that trauma only by making peace with democracy and sharing the spoils.

Thus rapid productivity growth went both to profit and wages, not just one or the other.

This balance went adrift in the 1970’s and early 1980’s. Incipient globalization, complacency, a deep forgetting of the past, and hubris combined to allow more extreme ideological views to resurface. Pure visions of both politics and economics, the very causes of the disasters of yore, came back into play. Radical positions were carved out. The middle ground, the balance that had been so hard won, was gradually eroded as its advocates aged and left the field.

We returned to what Kaplan advocates. A more raw and harsh era of conflict. Primitive attitudes came back into fashion. A zero sum vision prevailed. Government was tarred as bad. Statism became a dirty word. Intervention became looked down upon. The fear of the “other” – immigrants, welfare mothers, racial or religious minorities, and so on – was used to carve away at the state.

In this context it is interesting to look through Kaplan’s heroes: Churchill; Livy; Hobbes and Malthus; Sun-Tzu and Thucydides; and Machiavelli. All chosen because of their acceptance, advocacy, or representation of simple and decidedly non-enlightenment values. This is a group that, combined, leads to a worldview based upon conflict within which stratagem, clarity of purpose, honor and virtue ring clear above any other impulse. It is a worldview of war. It is ancient Greek or Roman, not industrial or scientific. And above all not rational.

Which is why it fits well within our current crisis.

In order to resolve our crisis and establish long term health we need to recognize the extent of the gulf we opened up when we made the choice to privilege capital at the expense of labor. This requires us to rein in capital. But in ways that are understood: capitalism is the machine that has produced the relative cornucopia we enjoy. It encourages innovation. It has opened up opportunity for billions of us to attain standards of living our ancestors could only dream of. And it is opening up that opportunity for billions more as we speak.

But at enormous social and environmental cost. And those costs will only escalate if we refuse to temper capitalism by injecting more democracy. If we stay unbalanced.

Part Three:

But returning to a balance is difficult in the face of well articulated extreme views. We must be careful. Well meaning people can drift towards extreme positions.

For instance, we must be leery of Malthusian arguments that there are hard and fast resource constraints that require us to abandon growth. Or that sustainability necessarily means harsh re-allocations between groups, nations, or classes. I find that a profoundly disillusioned view. But it conforms well with the rise of authoritarian or utopian thinking. Every time we have been faced with what appears to be insurmountable problems a new strain of authoritarianism has arisen. Whether it be in ancient times when the collapse of Rome led contemporary thinkers to construct rigid and otherworldly solutions to humanity’s plight. Or whether it be in the early stages of industrialization when the huge social dislocations swept vast numbers of people from farms into cities. These are simply two instances of when the intellectual response was an appeal to utopia. One religious, the other political. Neither human. Neither balanced.

Along the way the more civil route has always existed. One we need, in my opinion, to return to. Tolerance instead of monotheism. Social democracy instead of either communism or capitalism. But is very difficult to stand between warring groups of people certain that their path is then one true path.

Within economics we have both contributed to the problem through the endless attempt of some to discover nirvana within the market place. That effort provided the ideological underpinning for the unbalancing I mentioned above. It gave credence to an extreme view of society. Indeed it led Margaret Thatcher to deny the very existence of society. That radical, preposterous, and extreme claim came from the mouth of a purported conservative. It represents the ultimate expression of the methodological individualism central to orthodox economics. The only way to a market based nirvana is to expunge all thoughts and traces of collective effort. There can be no society, because to allow such would be to acknowledge its presence as an agent in our environment. It would be to allow its properties to exist outside those of its members. The state could act for our benefit. And that would sully the utopian libertarian dream. And it is, to pick up my recent theme, why orthodox economics admits no of cooperative activity like the modern business firm.

Part Four:

So when I look out on current discussions of austerity and debt reduction, I interpret them through this long view. My opposition to the utopia represented within orthodox economics is informed by its deeply offensive, anti-social, and ultimately authoritarian ancestry. There is a straight line running back from modern economic orthodoxy, through Marx, through St. Augustine to Plato. All are visionaries. All paint glorious and alluring end points. All preach perfection here on earth. And all are utterly unattainable.

Karl Popper tore apart the Platonic legacy. He revealed its inevitable descent into authoritarian terror. He taught us that the existence of uncertainty and the flaws of humanity are such that any utopia requires enforcement. Through the Inquisition. Through Leninism. Through corporatism and the destruction of our environment. There is a circle wherein libertarianism meets dictatorship. Where totalitarian authority merges with complete individualism. They are both heirs to the abomination of Plato.

So, I find it deeply ironic that libertarian advocates of free markets fail to recognize the self limiting destruction within their visions. By playing the innocent and advocating nirvana, albeit theoretically, they placed a weapon in the hands of lesser people who had a more self serving goal. When economists argue that an efficient outcome is thus a morally acceptable outcome, they are playing with fire. They should know such. They should desist.

Look at it this way: as the two sides rage. As the hawks and doves rant. Those of us who have to walk the path each side is mapping out ahead need to keep a clear eye on its social cost. Because we bear that cost. Is that road leading us closer to, or away from, a balanced and harmonious future? Is it constructed from utopian and thus authoritarian ideals? Or is it infused with humanity and thus tinged with doubt?

Evolution teaches us that efficiency is an illusion. That redundancy is a clever trick to have up one’s sleeve. Why? Because one never knows what lies ahead. Dinosaurs were supremely efficient. They are also extinct. Humans are the ultimate all purpose, but not too good at anything, animals.

The problem with utopians thinkers is that they are certain about the future. They claim to know. Their profound certainty means they are morally equipped to bludgeon the rest of us until we arrive at that future – whether here on earth or in the imaginary after life.

This is why I am not an orthodox economist nor a fiscal hawk. To be one presumes that we know the problem definitively, and know the consequences of inaction. We don’t on both counts. What we do know with some assurance is the toll that our unbalanced economies have had on everyday folks.

I have rambled across a lot of territory simply to remind us all that we should not sacrifice the now based upon some vague notion of the future. We need to make a choice in policy. That choice should take into account the debris from the crisis and not assume it will go away of its own accord. We broke it. We have to fix it.

Thomas Carlyle once said:

“Let us, instead of gazing wildly into the obscure distance, look calmly around us, for a little, on the perplexed scene where stand.”

Yes let’s do that. Let’s take stock of the damage. Let’s help those in need right now. Let’s reach out to the unemployed and help them. Let’s not abandon anyone for the sake of austerity, debt, or any other fashionable aspect of a vision that might never arrive. Deal with today first.

So take a deep breath. Get rid of those utopian visions. And walk smartly, harmoniously, and purposefully, into the now.

It’s the only human thing to do. It’s the only choice that helps us all.