An incomplete series of thoughts beginning with a couple of paragraphs suggesting something with grander aspirations – which of course may be realised some day – but not in this blog post. Still I’m heading overseas now, and I’m not sure how the aspirations can be realised, so it’s a good time to pull the plug, sit on the plane and play “The bomb in the baby carriage” (something I always do) as the monster takes to the sky. These are the days of miracle and wonder.
Alexis de Tocqueville sought a mentor in political economy and sent a copy of the first volume of his Democracy in America to British political economist Nassau William Senior. Admiring the work, Senior nevertheless cavilled at Tocqueville’s suggestion that America was more egalitarian than England where, in law and in social experience “the welfare of the poor has often been sacrificed to that of the rich, and the rights of the greater number to the privileges of the few”. Senior argued that workers were better paid in England than elsewhere to which Tocqueville responded:
it seems to me that you give to the expression the good [le bien] of the poor a restricted meaning that I did not give to it: you translate it by the word wealth, which applies in particular to riches. I had wished to speak, myself, of all the things that can concur in the well-being of life: consideration, political rights, ease of obtaining justice, pleasures of the mind, and a thousand other things that contribute indirectly to happiness. I believe, until I have proof to the contrary, that in England the rich have little by little drawn to themselves all the advantages that the state of society furnishes to men.
In many ways Tocqueville’s comments anatomise some of the key benefits of America being a relatively young country. So long as social institutions were functioning tolerably – as they were in the US and Australia – things went along pretty swimmingly. Some of the most important are just the microeconomics of being a young country where the plenitude of resources leads to seemingly limitless expansion with labour scarcity underpinning a relatively egalitarian economy which itself underpins an egalitarian culture. Self-help author Mark Manson explains some of the microeconomics of being a young country in this fine bit of DIY economics.
Thomas Piketty has given us much food for thought on the way in which he argues the future will play out as our economy ages as income inequality works its way into even deeper levels of wealth inequality returning us to an age in which power returns to the rentier. For a country with our egalitarian traditions, we seem to have optimised at least two of our major institutions to smooth the path to Piketty’s dystopian vision. While our tax and social welfare system is one of the most redistributive in the world, our wealth management and education systems lead the world in their inequity. Thus our superannuation system contains around two trillion dollars of Australian wealth subject to (mostly) flat and very low taxation. And in schools, Australia is preeminent in moving quite rapidly towards greater educational inequity with good educations increasingly depending on the wisdom with which students choose parents who are willing and able to send them to private schools.
But Tocqueville was also talking about all those other ‘non-economic’ aspects of life that seemed to work out so much better in a young country.
Mancur Olson proposed the idea of ‘institutional sclerosis’ explained by Wikipedia thus:
The accumulation of vested interests and rent-seekers ultimately slows the ability of a government to reform, adapt, and secure perfectly competitive markets thanks to a related phenomenon studied by Olson: the collective action problem. This sclerosis saps an economy’s dynamism and lowers growth rates. In liberal democracies with young institutions, by contrast, competition remains perfect and natural economic dynamism and creative destruction ensue, generating high growth.
But there are other kinds of decay associated with age. Where incentives are not perfectly aligned with the best possible outcome (which is to say if there are market failures – even quite small ones) competition may amplify them – often subtly, insidiously and profoundly – over the passage of a fair amount of time.
As we evolved on the African Savannah our bodies gave us lots of feedback about what, when and how much to eat and drink. Healthy food tasted good and unhealthy food – like long dead meat – disgusted us. But as we learned to isolate and refine the substances that pleased us, those same tastes began to betray us. It turned out that the relentless optimisation around giving us what we want – salt, fat, sugar – is literally poisoning us.
I think something similar is happening much more widely within our culture. As fast food is to ordinary food, so porn is to sexuality, memes are to culture and to our capacity to concentrate, linkbait is to our curiosity, modern auto-tuned formulaic pop is to popular music of a few generations back. Professional sport is also often optimised to the point where it loses interest.
Another area in which this has happened to disastrous effect is in democracy. It seems to me that electoral democracy perpetrated as it must be through the linkbaited terrain of mainstream and social media is in dire straights and I think there is much to be gained by trying to disrupt this state of affairs. My preference is for deliberative democracy. But many disruptions could help precisely because, in disrupting business as usual, they reset institutions.
An example was the Accord established by the Hawke/Keating Government in 1983 which lasted as a powerful force in policy making for the best part of a decade.
As I argued a while back comparing Hawke’s and Howard’s approach to governing, the Accord’s disruption of Parliamentary business-as-usual enabled the newly formed social partners to be at their best – to behave in the spirit of the enterprise they were engaged in. (I suspect most members of parliament would like to engage in the spirit of democratic deliberation, but they can’t because, over a long period of time, the game has been optimised by the players and it turns out the incentives to do so are trumped by other imperatives. As I argued:
Critics could say – did say – that Hawke’s corporatism was undemocratic; that the right venue for such deal making was not behind closed doors, but within Parliament under public scrutiny.
[However] at a time when the executive so dominates Parliament, when political debate is so rarely permitted to rise above the relentless infotainment values of the media, one can argue that Hawke’s centrist corporatism enriched our deliberative democracy. Although invitations to the table were at the grace and favour of the government, the conversation once there was a genuine search for solutions, something that has become increasingly rare within the stage-managed public theatre of Parliament and party political combat. And once established within the Accord framework, politically difficult policy objectives like wage restraint were then sold to constituencies by the Accord partners.
But the Accord was better when it was young. As I commented in the piece just quoted:
as its period in power lengthened, the bureaucracy’s proximity to senior politicians ensured that its influence grew at the cost of others. … But it’s in the nature of such agencies to promote strong orthodoxies which can blindside them and those they advise. By the end of the ALPs reign, economic reform had become formulaic and it had become all too easy for the defenders of the formula to mistake those arguing for new developments of those policies as their opponents.
Finally, to illustrate this idea of making things new again (at a bit of a stretch – I warned you at the head of this post), I give you this story of two people connecting.
Would that it were a sign for renewal in the year ahead.
When I saw those faces, I just felt I was back there again, the passionate faces of the first demonstrators at Berkeley, so committed, many of them Jewish. I felt I was back there. The way that Jewish intellectuals of that time had such a political astuteness and such a pragmatism. Then you see it happen in that movie, you see things starting to go wrong. You see it suddenly being taken over by a kind of [jives back and forth, popping fingers] white middle-class gameplaying. It turns into People’s Park, it turns into, like, “Oh let’s just provoke the university into a response. Let’s play this game—let’s, like, spit on the pigs—let’s tip over these cars—let’s ravage this lower- middle-class neighborhood.” That’s when it was lost.
Idealism is fine. Then you must find the practical politics to embody and to sustain your idealism. And that’s where we failed. I’m saying that we must bring back the idealism of the Sixties and find the practical politics for it today and stop tripping off in Cloud Cuckoo-Land, where you have all these ideas—”Yes! Racial equality! Yes! Feminism! Yes!” Ideals without any sense of the practical realities to put those things into action. So that’s what I think we’re looking for now. We want a return of idealism but with a profound sense of political realism.