Saturday, December 31, 2016

The Wrecking Ball of Innovation

I have a copy of When Facts Change, a collection of Tony Judt's essays assembled by his widow and published in 2015. I'm not reading it straight through and will probably read only a few of them. I've just finished an essay that first appeared in the New York Review of Books in 2007. It is a review of Robert Reich's book, Supercapitalism of that year. This essay, besides serving as a reminder of how powerful a writer Judt was, is still relevant to the current political situation in the U.S., as it specifically examines the economic myopia of Reich, who was the first secretary of labor under Bill Clinton, and, by association, represents the prevailing Democratic economic viewpoint that continues up to the present in the policies of Barack Obama.

Judt isn't critical of Reich's description of the wealth gap, which has since then received far greater publicity, thanks to Thomas Piketty, but finds his complacent acquiescence to economic forces unacceptable. Reich takes it as given that we live in an economically competitive world, that the super-rich are not at fault and that the primary national goal is productivity growth. In Judt's view, the sweeping economic model adopted by Clinton distorted an earlier model in which the state was seen as responsible for all of its citizens regardless of economic factors. Under Clinton, privatization picked up steam and the existing welfare system was replaced with one that treated the poor as economic entities and accordingly made their benefits contingent upon their attempt to become gainfully employed. On these changes, Judt says:

The real impact of privatization, like welfare reform, deregulation, the technological revolution, and indeed globalization itself, has been to reduce the role of the state in the affairs of its citizens: to get the state "off our backs" and "out of our lives" – a common objective of economic "reformers" everywhere – and make public policy, in Robert Reich's approving words, "business friendly." 

He goes on to say:

If modern democracies are to survive the shock of Reich's "supercapitalism," they need to be bound by something more than the pursuit of private economic advantage, particularly when the latter accrues to ever fewer beneficiaries: the idea of a society held together by pecuniary interests alone is, in Mill's words, "essentially repugnant." A civilized society requires more than self-interest, whether deluded or enlightened, for its shared narrative of purpose....

In the early years of the French Revolution the Marquis de Condorcet was dismayed at the prospect of commercial society that was opening before him (as it is opening before us): the idea that "liberty will be no more, in the eyes of an avid nation, than a necessary condition for the security of financial operations." We ought to share his revulsion.

Judt describes the negative consequences of Reich's policy views that were already evident in 2007, before the Great Recession, before Brexit and before the election of Donald Trump:

Fear is reemerging as an active ingredient of political life in Western democracies. Fear of terrorism, of course; but also, and perhaps more insidiously, fear of the uncontrollable speed of change, fear of the loss of employment, fear of losing ground to others in an increasingly unequal distribution of resources, fear of losing control of the circumstances and routines of one's daily life. And, perhaps above all, fear that it is not just we who can no longer shape our lives but that those in authority have lost control as well, to forces beyond their reach.

The essay concludes as follows:

We may find that a healthy democracy, far from being threatened by the regulatory state, actually depends upon it: that in a world increasingly polarized between insecure individuals and unregulated global forces, the legitimate authority of the democratic state may be the best kind of intermediate institution we can devise. What, after all, is the alternative? Our contemporary cult of untrammeled economic freedom, combined with a heightened sense of fear and insecurity, is leading to reduced social provision and minimal economic regulation; but these are accompanied by ever-extending governmental oversight of communication, movement and opinion. "Chinese" capitalism, as it were, Western-style. Is this what we want?

Because the essay predates Obama's election in 2008, it is easy to see that not much has changed under eight years of a Democratic administration; thus my criticisms of Obama hold. As an observer, I am not aware of any significant move that Obama may have made to distance himself from Reich's policy views, which currently seem embedded in the party and would have continued under Hillary Clinton had she been elected. Judt's views are far closer to those of Bernie Sanders, whom I supported in the Democratic primary.

While I completely agree with Judt that the modification of political thought to accommodate economic thought over the last few decades has set the world on a dangerous path, he has hardly provided a blueprint for change. He writes of democracy in the abstract when it ultimately depends on the votes, not only of educated, informed voters, but of the less-educated and uninformed who have recently brought us Brexit and Donald Trump. In a way it is unfortunate that Judt chose history over economics, because there is no one that I know of who might have made a better economic case, had he the appropriate credentials. The economists with whom I'm familiar, including Thomas Piketty, do not seem to grasp the urgent conditions described by Judt, perhaps because their training has been narrow and they have too much faith in their profession.

If calling for greater regulation, etc., isn't feasible and even then doesn't fully encapsulate the issues at hand, the limiting factor may be human cognition. Thus, I am skeptical of the ability of a Tony Judt or a Bernie Sanders to work out an actual detailed solution to the problems caused by global economic competition. Although Judt's heart was in the right place, his view of social democracy seems outdated and sentimental to me. The best hope is that we will end up with a highly regulated society wherein AI plays a larger role than it does at present, at the exclusion of mere mortals, who tend to be incompetent, corrupt or both when faced with such daunting tasks. That is hardly what Tony Judt or Bernie Sanders had in mind, but I find it a little more realistic and perhaps less ominous than they would have you believe.

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