Forgotten People

 Marx is noted for his identification of the lumpenproletariat, the outcasts of society, consisting mainly of the homeless, the long-term unemployed and criminals. But Marx, like many others, thinks mostly of the group, not the people in it.  “Call me Ishmael”, the narrator of Moby Dick begins, and its epilogue starts with a quote from Job, “And I alone am escaped to tell thee.”  He no longer has a name, for he is an orphan on the open sea. That is the fate of outcasts, and that is possibly their greatest loss.  They count only as statistics, not as individuals.  According to a recent report by Fareed Zakaria, there are 46 million of them in America today.

Zakaria notes that the growing concern about income inequality focuses mostly on the flattening of income for the middle class, a good and proper concern, but that to grow the middle class as a factor able to change society requires doing something to improve the lot of the forgotten poor.  That is in fact the most potent way to begin raising the fortunes of the middle class and improving our economy.  .  They must be enabled to become members of the middle class, individuals we know and name as friends, and neighbors about whom we care.

Rand Paul was shedding crocodile tears when he said he was voting against continuing aid to the long-term unemployed because he did not want to encourage growth of a culture of accepted permanent unemployment.  I suppose it’s his own small contribution to solving the obesity problem.  As a consequence of his and other conservative votes, 1.3 million people have just lost the benefits that keep them afloat in very rough seas.  While short-term unemployment is falling, long-term unemployment is higher than it has ever been at the end of a strong recession.  He should have been, but wasn’t, ashamed, for in his role as senator he should know that a large factor in that long-term unemployment is corporate dumping of older, more expensive workers for younger workers willing to work cheaper with less use of corporate health benefits.  They will find no other employment at anywhere close to their former income and skill level.  Yet 80 percent of corporations no longer provide defined pension benefits.  The 401(k) retired workers must eventually rely on will be totally inadequate to their needs; the average size of a baby-boomer retirement account is projected to be $100,000, nowhere near enough to sustain a comfortable retirement.  The Institute for Retirement Security estimates that for Americans aged 55 to 64, the average household is $113,000 short of what will be needed for retirement. Collectively, all workers face a shortfall of at least $6.8 trillion.  But unemployed or minimum wage workers do not save the money needed for retirement.  We face a future of countless numbers of the elderly poor as baby-boomers are “retired” by their former employers.  Many will become homeless.  The upper limit of the “working age” population is being unilaterally lowered by corporations anxious to reap profits as older workers are removed from their rolls.  To the corporations, the health care, housing and feeding of their former workers have become externalities; there are no more guarantees of watches and golden years at retirement. 

The farther down the socioeconomic ladder you go, the more severe becomes the problem.  The University of California Berkeley Labor Center and University of Illinois released a study in October that said 52% of families of fast food workers receive assistance from a public program like Medicaid, food stamps, the Earned Income Tax Credit or Temporary Assistance for Needy Families.  Wal-Mart puts out donation baskets to solicit donations for its workers, while simultaneously fighting tooth-and-nail against raising the minimum wage many of them work at.  Other corporations fight equally hard for tax breaks at the expense of governmental care of the poor.  Responsible treatment of employees is becoming an externality, the easily forgotten concern of others, and we are busily growing a new American lumpenproletariat.  Such forgotten workers do not save for a better future; their personal tragedies are permanent. The sad thing is that we are no longer naming them as our friends and associates; they are becoming statistics.

The problem is not just an American one.  World-wide, there's a race going on between declining working age populations and increasing productivity through automation and robotization.  At the same time as aging populations are providing fewer young workers, automation and robotics are lowering the demand for them.  A new balance must be achieved.  Done right, it can lead to positive gains for people; done wrong, we create a new global lumpenproletariat.  China, for example, is facing a future where a declining population of younger workers will no longer be able to sustain China’s current role as factory for the world, and it must retool itself for a different sort of polity and economy.  They have begun doing that with their recent changes in their one-child policy and with their shift toward internal consumption rather than exports.  But what must not be forgotten is the fate of the displaced.   Many emerging nations will be facing revolutions of rising expectations as the jobs and prosperity their people looked forward to begin to fade away.

Countries will deal with the issue in a variety of ways.  In America we must deal with it in a culture of corporate capitalism, in which corporations generally consider former employees as externalities to be the responsibility of others, combined with a Protestant Ethic which undervalues the worth of the unemployed as people and an empathy gap induced by a mythology of frontier individualism.  We overvalue work and undervalue workers.  We have a lot to overcome in treating the issue seriously.

Many concerted actions are required.  The idea being floated about is a good one to reinstate long-term unemployment benefits as re-employment benefits that include funding for training in new occupations.  Raising the minimum wage is needed.  Incentives to reintroduce defined pension systems are needed.  A national health care system is necessary more than ever.  Job creation through stimulating introduction of new technologies is urgent.   The idea I’ve suggested before might work, of setting up ways for workers to invest in operations such as pension funds that lease robotics to small businesses, and thereby reap their own benefit from the robots that may replace them.  The $6.8 trillion shortfall I've mentioned cannot be met by either government or the private sector working alone.  We are all in it together.  In short, a retooling of the economy is needed with the explicit goal of providing for those displaced by the new productivity gains with part of the profits of those gains.

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The greatest need however is to remember not just the statistics, but the people included in them.  Before 1950, 50 percent of the elderly lived in poverty, often alone, forgotten, with no one left to call them by name.  We, and they, are better than that.  But we are turning again toward the same kind of situation.  It is becoming one of the defining challenges of the 21^st century, and we must meet it with grace.   

Avoiding Unforeseen Consequences

The most dreaded word for a patient facing surgery is perhaps “Oops!”  It could signal something terribly unforeseen by the surgeon, from slicing an artery to discovering he had just removed the wrong kidney.  Fortunately, that is why surgeons spend hours rehearsing procedures in advance and studying just what to do in the event of an oops! situation, so bad consequences are rare.  We know the charm of the oops stage of a toddler’s development, but the charm comes with careful supervision by parents, so it, too, doesn’t usually turn out bad.

Unfortunately, public policy, domestic and foreign, is loaded with oops situations, and they often produce really rotten results.  And there are no watching parents to prevent the pain.  Take for example the current scene in Ukraine, where an almost done agreement with the EU was aborted in favor of a $15 billion offer from Russia to become cozier with them.  That is a major setback in the EU’s long-term foreign policy of creating a bigger buffer against incursion by Russia into EU affairs, a geopolitical goal obviously not considered by the framers of austerity policy.  For that foreign policy blunder can be seen, with hindsight, as a direct result of the EU domestic austerity policy, which also produced at the other end of Europe the rise of neo-Nazi groups in Greece.  The policy confined itself only to the needs of the bankers and the markets, and even there, did not do a decent job.  The less robust the EU economy, the more tempting became Russian offers, and the more likely the rise of rabid extremists in Greece.  And that less-robust-than-need-be EU economy undoubtedly affects the closeted negotiations going on between the EU and America over a cross-Atlantic trade treaty.  The economists who sought to nurse the EU through a bad stretch on a diet of gruel and cold water had forgotten, or never realized that foreign and domestic policy are inextricably mingled these days.  The old days when one could argue whether Metternich even had a domestic policy other than keeping the masses at home quiet while he maneuvered abroad are long gone; as are the times when China’s foreign policy was nonexistent in its quest to keep its internal affairs stable.

Closer to home, the Washington Post today reports the growing restiveness of the contracting community and the displeasure of the U.S. Chamber of Commerce, a major business lobbying force, that the Bureau of Indian Affairs is making only small partial payments to Indian tribes of reimbursements owed them for schools and social services. The Supreme Court has twice ruled that the reimbursements are legitimate and should be paid.  The BIA says it lacks the funding to do so because of the sequester, Congress’s austerity policy, and is paying all it can with the funds allocated to it.  But the tribal obligations are not just grants that can be changed at a Congressional whim.  The tribes have the status of nations, with whom there are treaty obligations, and they are not buying the BIA argument.  The business community is concerned that the BIA argument, if replicated elsewhere in government, could have serious ramifications for doing business throughout the government.  Once again, Oops!

The EU bankers and economists who framed the European austerity policy seem never to have considered seriously that markets operate within a framework of geopolitical considerations, and the American Congress seems never to have thought about it at all.  One problem is that economics does not operate in a vacuum; it is embedded always in a society that has far more to consider than just clearing a market.  Ignoring those external considerations is a hazard which produces “unforeseen” consequences.  They were not unforeseeable if thought had been applied.  The European problem comes about from “trained incompetence”, otherwise known as “if your only tool is a hammer, the whole world looks like a nail.”  It is a failure occasioned by reliance on outdated economic theory and curable by bringing European bankers into a 21^st century world.

The American problem runs deeper.  To become a professional diplomat requires passing one of the most difficult exams in the world, the Foreign Service Entrance Exam, just as becoming a surgeon requires years of medical school and advanced training.  Both sets of requirements are appropriate, for the actions and decisions undertaken when entering those fields are dangerous and have serious consequences.  Yet an American could be elected to Congress while not even qualified to graduate from high school.  Age and citizenship are the only requirements.  A member of Congress can make assertions about the Constitution without ever having read it and vote on budgets which seriously affect the lives of millions without ever having read them.  He or she can cast votes drastically affecting American foreign policy without half the understanding of the issue possessed by a Foreign Service intern.  That is a relic of bygone days when decisions had nowhere near the complexity they do now.  It has always been an American maxim that “experts should be on tap, not on top.”  But at least enough expertise to recognize the seriousness of the issues voted on enough to explore them with experts before voting is desperately needed.  One of the characteristics of the “Tea Party” mentality has been its contempt for the “inside-the-beltway gobbledygook” of knowledgeable experts, and its effects show more and more each day.  A big reason for that are the gerrymandered districts which produce candidates qualified only by how loud they shout the part line.

We make oops moments in surgery relatively rare by demanding the surgeons be properly trained and follow exacting procedures in preparation.  Not to do so would constitute malpractice.  Wouldn’t it be wonderful if we could rely on the professionalism of our congressmen the way we rely on our surgeons?  In the American system, the only way to do that is at the ballot box.

Foolish Consistency

I will never forget Daisy.

At the time I was a young trainee in a Social Security office in a moderately large city in the Southwest.  Daisy was a veteran claims representative, her graying hair, exquisite manners and charming Carolina drawl placing her back in the Old South and almost masking the lively mind behind those alert blue eyes.  Daisy had a unique role in the office.  When derelicts (and there were many of them) came to the office, Daisy was always called to interview them and resolve their problems. 

The derelicts were not easy to work with.  Stumbling in only half-sober, reeking with unwashed clothes, used alcohol and vomit, they often were almost incoherent in their complaints, forgetful of the facts and willing to invent any story that would resupply their drinking money.  Frequently their smell was so stupefying that desks were pushed together to permit interviewing at a distance far enough to prevent gagging. That often involved interviews conducted in a semi-shout.  Daisy interviewed them not from being drafted, but by her own choice. 

Daisy was angelic in her interviewing.  Compassionate, patient, struggling to understand and resolve the problems that had brought them there, she provided those derelicts a caring presence that their mother would have had difficulty matching.  Watching her in action, one knew one was witnessing someone who truly identified with and cared for the troubled people she was there to help, an enlightened person signaling a new future for the old South.

Nothing could have been further from the truth.  In casual conversation back in the employee lunchroom, Daisy’s language and opinions were those of a genteel redneck.  Frequently employing the n-word to describe her mostly African-American clients, she made it clear that she viewed them as little more than incompetent children, incapable of any intelligent action in their own behalf.  Her opinions on the social issues surrounding her clients were those of her slave-holding grandparents.  Yet it was clear watching her in action, that her solicitude for their wellbeing went far beyond the limits dictated by her upbringing and professed views.  In short, Daisy’s actions and her beliefs were inconsistent in major ways.

I thought of Daisy recently when I remembered a “daily aphorism” in the local paper:  “Don’t judge a man by his opinions, but by what his opinions have made him. — G.C. Lichtenberg”.

My first reaction was puzzlement followed by disagreement.  Are not people the sum of their opinions?  How can we distinguish between the man and the opinions he holds?  Right action and right view go hand in hand.  Then I remembered Daisy.

As human beings faced with complex choices we favor consistency.  Consistency has many strengths.  A presumption of consistency enables us to infer many effects and relationships from certain knowledge of only a few.  Presuming consistency eases our moral choices by enabling us to see our enemies as all bad, our friends as all good.  No one looks for good in Hitler or evil in Ghandi.  Even Emerson, proud excoriater of consistency as “the hobgoblin of little minds”, was nonplused when Thoreau accused him of inconsistency for not joining him in prison for civil disobedience. 

Inconsistency confuses us.  It violates our deepest moral sense.  Good people should do good things consistently; evil flows from evil consistently. Justice is based on the search for results consistent with causes.  In some ways consistency constitutes our deepest value.  An inconsistent universe is one based on whimsy, not Justice, on unfathomable fragmentation, not rational wholeness.  We cannot understand an inconsistency that violates our sense of wholeness, our belief in an underlying unity of Being.  Belief in an underlying Consistency knits together our science (the quest for “a general unified theory”) and our theology (God as the ground of all Being).

It is in our theology that the “consistency imperative” gets us in the most trouble.  Consistency requires that God be all Good or else senselessly arbitrary – a construct we find repugnant.  To be not only Good, but Perfect in every way is the measure of a monotheist’s God.  By definition God is the best of everything, and anything less cannot be worshipped.

The ancients faced no such problem.  Odin had one eye, Hephaestus limped, Zeus was a cruel philanderer, Loki a trickster, Apollo the Patron of thieves.  Even Jahweh as a tribal God was subject to jealous rages that He later regretted.   Jahweh once threatened to kill Abraham, even though he had already identified him as father to countless peoples.

Mark Twain remarked that Wagner’s music was much better than it sounded.  He may have been right as well as funny.  Perhaps that’s why I celebrate people like Daisy, whose actions are much better than their words, however inconsistent they may be.  And why I appreciate people like John Boehner, who finally got upset enough to be inconsistent and seek compromise.  He may revert to foolishly consistent obstructionism, but for awhile at least he was wisely inconsistent with his principles.  Sometimes, consistency is the foolish course.  Keep up the good work, John.

Another Merry Christmas to George!

It’s time once again to wish George Will a Merry Christmas and a strong glass of syllabub.  I was worrying about him.  He’s become so shrill lately that I thought increasing loneliness was beginning to bother him.  In his recent diatribe against raising the minimum wage he even resorted to self contradiction, actually indicating a preference for the government transfer payments he has reviled so frequently, in the form of tax credits to the poor. Perhaps, I thought, since Marley’s, err, Milton Friedman’s, death, he begins to hear the soft clanking of chains.  But bah, humbug, the dead no longer contribute to profits, so why should he be bothered by that?  Watch out, George, the closer one gets to that bottom line, the louder the clanking.  But on reflection I realized that the wealthy pay little in taxes anyway, so tax credits to the poor merely constitute a silly act of generosity by the moderately poor toward those worse off than they are.  Let them eat their cake together. 

Besides, he seems to have been joined lately by a junior partner, Robert Samuelson.  Samuelson is still junior in his thinking and style, not yet displaying the philosophical grandeur of libertarianism or the tricks of specious argument regularly demonstrated by George.  He simply sticks to practicalities like his perceived impossibility of combating the budget deficits he abhors by actually raising taxes on the rich.  His is yet a simple argument compared to George’s elegant complexities, so easily confused by what Stephen Colbert refers to as “the liberal bias of reality.”  George is never bothered by reality.  But I’m sure Samuelson will learn.  For example, today’s headline is that Cisco is spending $15 billion on buying back its own stock to increase profits for its executives and shareholders, more than 2½ times what it spends on research and development and more than its annual profits, while at the same time laying off 4000 workers.  Such tactics simply add to lowering demand, thereby creating a vicious cycle of lower demand leading to lower profits which must be shared by fewer people to maintain their current wealth leading to more buybacks, making them hard to defend by simple logic. But at least, thanks to the kindness of Senator Paul’s concern for the wellbeing of the unemployed, Samuelson won’t have to worry about the budget impact of paying long term benefits to those laid off. Such liberally biased reality simply lies beyond the reaches of Samuelson’s arguments, requiring George’s grand libertarian indifference; a few arguments ad hominem, like this one, might help, too.

Perhaps, on second thought, I should wish strong syllabub for the whole firm of Friedman, Will and Samuelson, though it would be a stretch for Friedman.  But that syllabub should be drunk quickly.  The Ghost of Christmas Present is beginning to look more and more like Christmas Future each day, at least for the poor.  Merry Christmas, George!

Controlling Violence

I run the risk of over psychologizing an already sad situation, but here goes.  The Greeks had a word for it, the Dionysia, the Romans, Saturnalia, the Germans, October Fest.   In Latin countries, it’s Carnival, in New Orleans, Mardi Gras.  In just about all orderly societies, under the sponsorships of differing gods, mythic histories, whatever, we have an annual celebration of unbounded spontaneity, venting the spleen, “the world turned upside down.”  It enables the society to live at relative peace with itself the rest of the year.  Some societies do it in subtler forms.  One of the foundation papers in social anthropology is about such a role for cockfighting in Borneo.  In South Africa, Mandela used soccer to help turn a nation around.  The Greeks wrote their tragedies to provide Catharsis; in addition to Saturnalia, the Romans used “bread and circuses.”  They are all ways of finding socially acceptable ways for venting and dissipating the violent streak in all of us that comes from our animal past.

I see in the papers and on TV about yet another shooting in a high school, about 91 children age 10 or under killed in 2012, 37 of them by family members, about random killing and tire slashing and beatings of total strangers, and ask Why?  Part of the answer of course is our clinging on to the frontier mythology of keeping weapons handy to fight off a dangerous world.  But Australia and Canada have had equally recent wild histories and discarded them for modern life.  We have to explain why we cling to our own wild history so desperately that we create our own modern libertarian mythology and are willing to sacrifice children to do so.  Part of the answer is racial strife, our inability to adapt to each other, a third generation punishment for the sin of slavery.  But that does not explain white teenagers in mostly white high schools shooting each other.  Part of the answer is the totally out-of-hand commercial exploitation and glorification of violence by our media, from video game makers to professional sports; we have our own gladiators and circuses, violence made easy.  One excuse is that now there are just so many of us that bad things are bound to happen, but that does not explain why our per capita violence rate is so much higher than elsewhere, including in countries with far higher populations or higher population densities than ours.

Part of the answer may be found in W.H. Auden’s poem about grey citizens living grey lives, and that may speak to the deeper issues.  We pile inequalities onto inequalities, more and more deeply stratifying our society into lives of grey drudgery and frustration that lead to what sociologists call anomie, a sense of alienation. We are busy creating an underclass of grey drudges by our rapidly falling social mobility.  But we are not worker ants, and, forced to live like ones, we grow angry and frustrated.  Left with no vent, sometimes people snap.  At all levels of society, we teach and provide our children no other outlets to their frustrations but violent ones, and when they act out that violence we are shocked.

It has become obvious that gun control is desperately needed, and that gun control by itself is not enough.  The conditions that lead to the anger and frustration being acted out violently must be addressed. Income inequality and low social mobility must be tackled by redistribution of wealth through the tax system.  Unemployment must be eased both through extended unemployment benefits and through jobs creation promoted by government.  Education must be reformed to enable people to live out their dreams through their own skills.  Our health systems need better ways of recognizing and treating the emotionally ill.  The media needs, on moral grounds if for no other reason, to shift its focus away from killer winner take all competition.  No one thing can make the violence go away.  Together many things can.  We owe it to our children.

Family Virtues

One of the problems in economics these days is that economists have forgotten, or never learned, the original meaning of economics.  I found out years ago that you can’t really grasp what a science is actually about simply by analyzing its equations.  I got that partly from reading the essays of Einstein, who described equations as merely the shorthand footnotes at the bottom of the page for the flow of the ideas expressed in the main discourse.  Imagine expressing travel, like a leisurely drive through scenic byways followed by a jet flight from Washington to Paris, as d = rt, and thinking that fully described it.  Einstein wrote that forgetting that fact contributes to the practice of teaching a science or mathematics backward, so that its conclusions are reached only by putting together the equations, instead of having the equations flow from the ideas.  It’s easier to teach that backward way, but leads to students unable to understand how science really progresses.  He added that he knew the truths of General Relativity for ten years before he could express them mathematically in equations. 

It was Aristotle who first coined “economics”, meaning the management of a family or a household for the good of the whole.  By that is meant the relationships, productive and otherwise, between all its members. It used to include things we’d likely include under other disciplines, but now it’s limited to things expressible by that big dollar sign.  Some things to remember: households are fluid, not static; babies are born and old folks die; relatives move in and out; proportional compositions change as sometimes it’s mainly adults and other times lots of kids and then grandparents move in. And nowadays, kids move back in.   Garrison Keillor described home as “the place that when you have to go there, they have to accept you.”  Through it all, it has to be managed so that under changing compositions everyone still gets fed and clothed and sheltered.  Sometimes that means times are hard all around, other times that affluence and enjoyment reigns; i.e., just as composition is not static, total household income is fluid also.  In other words, it’s a lot like society at large.  It’s not by accident we call our country our homeland.  In America, the Constitution prohibits exile, which in a way is more home-like than home itself.

Robert Samuelson, writing in the Washington Post, seems to have forgotten, or never learned, that.  He disavows any connection of home with national economics as not fitting the equations of economics.  He unilaterally declares a class war between young and old, stating that care for the elderly deprives the young.  He cites in support of his view the fact that the proportion of elderly has grown significantly, forgetting he's comparing it to the baby-boom era when there were surpluses of children and massive school construction was the norm. He remarks that many elderly are now self-supporting anyway, meaning it’s no longer the case that 50 percent of the elderly live in poverty.  He’s impervious to Michael Gerson’s admonition that responsible capitalism requires virtues that it does not produce, in this case sharing for the common good.  Beyond that, he seems to forget the fluidity of composition that society exhibits.  At times elders dominate; at other times, as during the baby boom era, children do.  Times change.  And he has forgotten that whatever the income currently available, families share it.

Ways of doing so are the government transfer payments he detests.  He begins to rival George Will in his libertarian indifference. I’d like to think Samuelson is an isolated case, but in today’s Post, Charles Lane and Harry Holder, former chief economist in the Labor Department, both beat upon raising the minimum wage to at least the poverty level as unwise.  Holder worries that increasing the minimum wage might cause a loss of jobs among the young, forgetting the responsibility of government to stimulate the economy to create jobs through promoting new technologies.  Lane and Holder further illustrate the dangers of leaving economics to economists.  They become so enamored of the beauty and power of their equations that they forget the dynamism and powers of the society behind them.

We all need to keep in mind that rich and poor, old and young, and all those in between, are in this together.  It’s time to discard the old class warfare chants.  Anyway, as Warren Buffett noted, that war is over and the rich have won.  It’s time to focus again on that virtue of sharing.  That’s how you manage families.

Into the Future, Gradually

A plethora of reports is coming out these days on climate change and its impacts, as floods of research data become available.  They come from groups like the American National Research Council (made up of members of the National Academy of Science, a distinguished group indeed) and a variety of international groups, including the U.N (some not yet officially released).  While the details differ, they share common conclusions about major changes underway on ocean, air and land.  The terms of art now seem to be amelioration versus adaptation (significant changes are now inevitable, so prevention no longer shows up), tipping points (not point), a variability of consequences depending on the part of the world you live in, and incremental versus all-out responses.  While the details increase in complexity, the big picture becomes ever more clear and simple.

The reports now downplay, but do not totally rule out, likelihoods of major changes from shutting off ocean currents or from methane bubbles, but raise the likelihood of large dead ocean areas from acidification and oxygen deprivation killing off entire species of sea life, and large releases of carbon into the atmosphere, which might in turn create a vicious cycle of hotter and hotter temperatures from decaying vegetation and forest fires.  Deserts will experience enlargement as drought increases (it’s happening in China now), while low-lying coastal areas and high latitudes will drown.  Crop yields in some parts of the world will severely decline while increasing elsewhere, but overall there’s a significant likelihood of devastating impacts on the hungry of the world as yields drop sharply below increasing demand.

Multiple tipping points, when large changes happen suddenly, are possible on both land and sea.  Sea levels can sharply rise while a vicious carbon cycle begins in the atmosphere.  The danger appears to increase when temperature rise exceeds 2 degrees Celsius, a point we seem approaching with some certainty now.  And environmental change can trigger political and social conflict.  The 21^st century may become the age of water wars and revolution.  At the least, there will be major migrations and frictions arising from the differing ways climate will behave in various parts of the world.

In the face of all this, what’s one to do?  Political resistance remains strong from the “Don’t blame my SUV” crowd and the pace, though not direction, of change is still uncertain.  The popular response from the scientific community seems to be to propose incremental responses as the data gets worse and worse.  That’s probably the most practical approach politically, and saves scientists from egg on their faces as the pace of particular changes varies from what was predicted.  But it seems to me like an adoption in advance of a “too little, too late” philosophy, which brings inherent major risks.

The incremental approach, while comfortable to the cautious, raises alarming prospects of always staying behind nature.  Building 6 foot sea walls when 10 foot walls are eventually going to be needed simply delays inevitable catastrophe.  Attempting to clean coal instead of eliminating its use altogether does the same. Limiting your actions to only those on which everyone can agree is a recipe for disaster.  And the approach ignores the argument that an all-out effort to manage climate change is actually good for the economy the naysayers are so worried about.  Worrying about economic damage is the province mostly of entrenched interests who resist any sort of change at all.  New technologies, new materials, new infrastructure, new jobs are all the natural consequences of tackling new sorts of environmental issues.  The bolder the better is the watchword needed.  It’s time to stop seeing crises and start seeing opportunities.

Sustainable Markets

A 2010 book by Robert Reich, Aftershock: The Next Economy and America's Future, does a nice job of describing the direct causes of the “Great Recession” in terms of income inequality’s effect on reducing demand.  Reich, the former Secretary of Labor in the Clinton Administration provides a neat analysis, and I agree with most of it.  He’s “singing my song” in describing how we have forgotten the lessons of Henry Ford, that a prosperous business must have prosperous customers and the best start for that is to pay your own employees well.  Demand for your goods implies an ability to pay for them, and paying everyone else minimum wages while you invest your profits, thereby yourself reducing demand, does not do the job.  Markets thereby operate at reduced efficiency, and a vicious cycle of unprofitability leading to further belt-tightening begins.  The market itself becomes unsustainable.  He goes on to warn of the political revolution of resentment that is building in this country because of the careless ways in which the one percent are treating the lives of others.  But an analysis like his, an economic one that speaks mostly in terms of supply and demand curves, does not cover some of the fundamentals of life “outside the market.”

Suppose you are driving on the Washington D.C. beltway with a sick kid, trying to get him to the hospital.  Just a poor minimum wage worker, like thousands of others, you feel you don’t have the money to move over into the express lane, available only by paying a substantial toll, so you’re just trying to get by the miserable traffic jam that’s always there in the regular lanes, hoping your kid won’t get much sicker in the meanwhile.  A lane over, a Mafia Godfather, fresh from bumping off one of his counterparts, is celebrating by heading for the casino to throw around the big money he just got from a drug deal; impatient with the jam, he shifts over to the express lane and proceeds smoothly on his way; cost is not even a thought.  Though it’s a somewhat silly caricature of beltway traffic, the ethical issues are obvious, but they don’t count.  The beltway market, for that’s what is, does not deal with ethics, only with supply and demand and who has the money to purchase its goods.  The market does not make any choices either between present or future generations.  Or does it?  The fact that future generations cannot “vote” by purchasing or abstaining from purchasing means automatically that the market does not directly consider their needs.  There are no discounts for sick infants.  Nor can the market consider its own future.  It is only a mechanism for exchange of goods; if it is to be run into the ground by its own success or by its failure to adapt to change, that is beyond its choice.  It is an interesting contradiction that General Accounting Principles require individual businesses to act as though they are continuing entities but laissez faire capitalism, in which the invisible hand of the market heals all wounds, contains no bandages for the market’s own injuries.

That failure to consider its own need for survival, its sustainability, has begun to dawn on some observant CEOs.  An interesting article in the Atlantic Monthly reports that some CEOs have recognized that society itself furnishes a “license to trade”, a legitimization of business practices, that is revocable, and that license is getting frayed by the current excesses of the market.  To appreciate that, think of two extremes:  first, the social and legal prohibitions on sale of body parts.  In pure laissez faire capitalism, if you want to sell your kidney for food to feed your children, feel free to do so; there’s a market for it.  But it is prohibited.  Second, the corner lemonade stands run by neighborhood children in the summertime.  The stands probably violate all sorts of zoning, child labor and health laws.  But if some grumpy neighbor were to object, almost certainly the laws would simply be modified to accommodate the stands; society approves of them.   Society “licenses” certain things and bars others, for reasons outside the market. The CEOs are banding their companies together in different non-market ways, such as mutual assistance in disasters, like pioneer “family” to make life happier and easier and more ethical for all.   They recognize that if the market itself becomes unethical, society will intrude to enforce its rules through increased regulation.

But the CEOs’ concerns speak to only the market’s ethical wounds.  Future generations still have no “vote”, and the market still resists change more than it accommodates to it.  The basic market model envisions businesses seeking immediate profits in a stable environment.  The goal of the market is the production of products beneficial to society.  That was the culture in which Adam Smith’s The Wealth of Nations was embedded. But the 21^st century is presenting climate change, globalization and rapid technology change as givens in a new environment which current markets cannot effectively manage.  With immediate profits as the accepted goal, only new technologies, such as cell phones, where there is no entrenchment are able to rapidly “arrive.”  Governmental basic research and development, green technology, businesses oriented to taking long term advantage by battling climate change and long term projects like infrastructure upgrade, which require cooperative action between markets and government, must battle for their existence with the entrenched industries and their lobbyists. 

A fundamental problem is that focus on immediate profit, which promotes avoidance of dealing with externalities.  Producing products for the benefit of society, a given for Adam Smith, is no longer necessarily the goal.   The libertarian doctrine that corporations must focus entirely on maximizing profit to shareholders, popular since the 1980s, combined with the focus on executive bonuses based on short term results, results in eliminating the brakes on excesses, emphasizes financial manipulation over production and minimizes the corporation’s contribution to sustaining the society in which it is embedded.

Just as we have begun focusing on sustainable agriculture, we must begin focusing on a sustainable business environment.  Our market model is broken.  Changing accounting rules to discourage focus on bonuses based on short term profits, as advocated by some economists, is a start.  But business models must also give more credit for dealing with “externalities.”  In other countries, businesses join with government in cooperative long-term projects to develop new industries, but that is not popular here because of a bias against long-term budget commitments and outdated fears of “socialism”; organized “industrial planning” by government needs promotion.  More Business tax credits are needed which would profit businesses long term by encouraging research and long-term development. That lemonade stand could increase its business long term by investing in a shade against the sun to increase the enjoyment of its customers.  It is only fair that America invest in infrastructure and green technology for the long-term benefit of its citizens; our competitors, China, Germany and the rest, are doing it already.

Thanksgiving Gumbo

I just finished off a batch of turkey gumbo I made the other day; it was great! Turkey dark meat, particularly if it’s smoked, goes wonderfully with andouille sausage.   In New Orleans, turkey gumbo is a traditional way of using the leftover turkey from Thanksgiving, but I just couldn’t wait.  It takes about half a day to prepare, but it’s a labor of love.  Well prepared turkey with the fixings, as they say in the South, followed by pumpkin pie is one of my favorite meals.  Not all would agree with that choice.  Calvin Trillin, who wrote beautiful essays, not about food, but about eating, felt that turkey at Thanksgiving was an insult to Columbus, who would have much preferred spaghetti carbonara.  That’s what Trillin served at Thanksgiving at his house.  But then, he was from Kansas City, so gumbo was not the kind of leftover he could look forward to.

Ben Franklin would have had deeper problems.  He believed the turkey, not the eagle, should be honored as the national emblem of the U.S.  He regarded eagles as carrion birds found everywhere while turkeys were truly native to America.  And a wild turkey, the only kind Franklin knew, is one smart bird.  Of course, it’s hard to eat the bird you’re honoring, and turkeys are delicious. It might be even harder these days declaring your national emblem to be a turkey.  But the turkey on a platter, not a flagstaff, goes back a long way in America, to that first Pilgrim Thanksgiving.  At that point, the Pilgrims might have been hungry enough to gnaw on the flagstaff, too, but the Indians rescued them with lots of fixings as well.

That, though, was part of an elaborate scam being run by the Indians, according to an article in Smithsonian magazine.  It seems that those “ignorant savages” were in fact quite sophisticated about Europeans.  They had been familiar for years with French and Spanish traders and trappers up and down the coast. They were at the time having tense relations with a larger tribe further north, and wanted the Pilgrims with their muskets to be an ally against their enemies. That friendly ambassador, Squanto, had actually travelled to Europe.  Taken there as a captive slave by the Spanish, who weren’t big on being friends, he had escaped to France, later returning to America as a cabin boy.  While in France, he had learned from peasants the trick he showed the Pilgrims about planting beans and corn in hillocks with a fish for fertilizer.  So that First Thanksgiving was, from the Indian point of view, sort of like taking a potential client to an expense account restaurant – generous and friendly, but with some further discussions in mind.

That doesn’t take away from the wonder of the Thanksgiving myth.  C.S. Lewis observed that when a myth is realized in real life, that just makes it better, accentuating the mythic truths. Think of Santa Claus, based on the story of Nicholas of Cusa, who left money anonymously to families so poor they were thinking of selling their daughters, or Robert the Bruce, who had failed five times but was encouraged to continue on to victory over the English by seeing a spider fail five times to spin a web, but succeed on the sixth try, or of Johnny Appleseed, who in real life was a land speculator determined to make properties more attractive for later sale by planting orchards but who in the process covered the countryside with blossoming apple trees.  Motivation isn’t everything.  The Indians at that first Thanksgiving may have had ulterior motives, but together with the Pilgrims, they created a myth of kindness and acceptance of newcomers that has blessed the history of America.  We often forget, as in the current immigration debate, but it’s there to remind us that we too were once “strangers in a strange land.”

Over the years, I’ve concluded that an important part of the art of becoming a decent human being is how we select the myths we honor and those we ignore.  Myths that build speak to our hopes and help us grow; those that are mean and destructive call out our fears and demean us.  The myth of the lone lawman destroying a nest of bad guys once was useful to impart courage and a sense of active justice on a dangerous frontier; nowadays, it leads to gun shows, and to solitary gunmen killing with no reason.  The conservative myth of Obama not being qualified because of being born in Kenya or the liberal myth that George W. Bush made some decisions because he had a “post-alcoholic syndrome” simply make their believers smaller people.  But the myth of that first Thanksgiving is a great one, bringing out the best in us.

Happy Thanksgiving!  Have some more turkey.

Citizenship Fraud

An old boss of mine used to comment that a primary task of auditors was to find bruises and turn them into cancers.  He could have substituted “the press corps” for “auditors” in that statement and been more correct.  I’ve been reluctant to join the vultures, mostly politicians or wearing press badges, picking at the carcass of Obamacare.com, but sometimes the urge to speak truth just can’t be set aside.  President Obama himself is being accused by some who should know better of fraudulent misrepresentation of the legislation, which is completely aside from the real issues involved.   For political reporters, accusations of misrepresented legislation are much easier copy to write than analyses of inept implementation, but accusations should be left to the politicians.  And second, I’m tired of hearing apologies from the White House for the wrong things, which serve mightily to assist the press in their muddling. 

As a matter of personal history, I’ve been in on a number of mad scrambles to make computer systems work in accordance with legislative deadlines, so I know the territory.  That you’ve mostly never heard of them simply testifies to the fact they were accomplished on or before schedule; you only heard about the legislation, which is how things are supposed to work.  But the important fact was that whether or not the systems were ready on schedule would not have affected whether the legislation was good policy or not. A lot were decent policy, but one effort I coordinated, elimination of the Social Security minimum benefit during the Reagan Administration, I personally thought was lousy as policy; we got it ready on schedule anyway.  Again, that’s how things are supposed to work.

The Obamacare.com implementation has been inept, mostly because some mid level bureaucrats were not knowledgeable about how to set up complex implementations on tight time frames (using 47 contracting firms is ridiculous!) and other upper level bureaucrats were lax about monitoring or interpreting the impediments to upward flows of information in their organizations.  And the White House suffered the common second term propensity to think that, just because the upper level bureaucrats are “our guys”, everything is going to work out fine. But the real issues there also include an outdated and ineffective organizational structure that contributes to mismanagement and contracting policies that have veered so far in the direction of promoting competition that efficient operations are verging on impossible, and those issues have mostly gone untouched.  And both structural and contracting policy issues are the product of congressional emphases over several administrations on reducing the number of employees counted in the budget; government is reduced in name only by use of contractors as for-profit agents, actually raising costs, to perform tasks far more effectively managed as an internal operation.  So there’s enough blame to spread everywhere.  Apologies are due, but they should be coming from all directions.

Meanwhile though, just the White House keeps apologizing.  President Obama accepts blame for having said ObamaCare “would not force anyone to change their doctor” when that, in fact, is absolutely correct.  For it to be incorrect is to include in ObamaCare the vast array of insurance companies which have steadfastly fought against government regulation of their premium rates and it is to hold ObamaCare responsible for the high prices charged by, again unregulated, medical service, prescription and equipment providers.  It is correct only in the sense that poor people who have been captive to the insurance-in-name-only companies are now being charged rates they cannot afford for real coverage, by the insurance companies and not the government.  Many of these, though not all, are people struggling at or near the poverty level who feel unable to afford better coverage than the pitiful amount they have received up to now. 

What has happened is that the insurance companies have been forced to cancel super-cheap semi-fraudulent policies that did not even cover the cost of going to a hospital.  Irresponsible individuals not poor, who have been purchasing them expecting they’ll never be used or that they will in an emergency rely on public hospital emergency rooms at public expense, are facing the need to pay a higher premium, and rightly so; they have, whether willing to admit it or not, been perpetrating a genteel fraud on their fellow citizens.  The government itself is not forcing anyone to change their provider of choice.  They are bringing a spotlight to bear on the seediest part of the health insurance industry, and that is one of the better features of the legislation.   Upgrading standards of what constitutes adequate health coverage has been a goal from the beginning, and eliminating this practice is a vital part of that upgrade.  For that, thanks, not apologies, are in order.

A valid policy issue is how better to handle the issue of transitioning individuals to adequate coverage.  The fundamental problem is how to care for those who are ill strictly, as at present, on a for-profit basis.  Other nations with health systems rated far better than ours have achieved good health care by insisting it be on a not-for-profit basis.  As I’ve noted before, extending ObamaCare to a Medicare-like system with a flat premium rate for all would be a major step forward in that direction.

I call it a fraud on other citizens when you knowingly pass on to them costs for which you rightly are responsible and deny basic needs to others simply to increase your own prosperity.  The real need for apology  is by the wealthy, individuals and businesses, who expect the fellow citizens who work for them to live in or near poverty, while at the same time the employer prospers by paying wages below the poverty level and fights against the very health coverage they shed crocodile tears about, passing on its costs to others.  A case in point is the current situation where Wal-Mart fights tooth-and-nail against increasing the minimum wage up to the poverty level while at the same time providing baskets for public donations to help its employees in need.  Being a good citizen of either community or country should not include preying on the poverty of others.

Paying, Now or Later

 

One reason for moving cautiously in an antiques shop is the little sign that says “If you break it, you’ve bought it.”  Antiques are fragile and not cheap.  That sign is possibly not enforceable in a court, but it’s at least a solid reminder of moral responsibility and the costs thereof.  We’re also having similar reminders this week of much larger responsibilities: the super typhoon in the Philippines and the climate discussions in Warsaw both are demonstrating the hideous costs of continuing climate neglect. The typhoon reports so far have focused on the human toll – thousands dead and lives destroyed as villages and livelihoods are wiped out. Pitifully poor efforts are underway to bury the dead and rescue the suffering, but that is only the beginning.  The focus will eventually shift to recovering the Philippine economy, and that massive effort will be with us for years.  And the question will remain: was the typhoon simply an unpredictable freak of nature, or the consequence of our careless handling of the climate?  If the latter, who should pay, and how?

In Warsaw, a key issue being discussed at the Climate Conference is how the developed world will make good on a prior pledge to “mobilize” $100 billion by 2020 to help developing nations cope with the effects of climate change and reduce greenhouse gas emissions.   Developing nations are beginning to realize and declare that $100 billion will not begin to cover the bills they will face from rising sea levels and climate disasters.  And governments of developed nations, the U.S. included, are saying there’s no more in their pockets to contribute.  And both may be right.  The chart above, from Scientific American, shows the projected increase in costs from severe weather in the U.S., on a county by county basis, between now and 2050 resulting from a combination of climate change effects and population growth.  The chart could be replicated on a nation by nation basis worldwide with even greater extremes.  As you can see, most areas will be spending two to six times as much on disaster relief as they have in the past.  Neglecting climate doesn’t come cheap.

There’s an auto-repair ad on TV that goes “Pay me now, or pay me later.”  It’s a reminder that deferring a fix that’s needed for something broken won’t make the cost go away; it may just make it worse.  And our climate is definitely showing signs of being broken.  The $100 billion fund was previously negotiated under the assumption that action would be taken to limit world temperature rise to 2 degrees Celsius, and the UN Environmental Program reported last week that limit on rising temperatures is not going to be met.  I haven’t seen any chart yet that shows the added costs per degree of temperature rise, but the numbers will be big. 

Do we start raising the money now, by way of such things as the fund being discussed in Warsaw, or would we be doing better by putting money into disaster prevention?  That chart shown above indicates enormous efforts either way.  Governments starved for funds by the austerity preached by corporate interests just looking for increased profits through tax breaks will not be able to afford the efforts required.  In Warsaw they’re discussing how to “leverage” government funding through incentives to businesses to get involved.  However Warsaw and beyond turn out, immediate major work on infrastructure is required, as well as preventive steps like a carbon tax. Let’s change that name to climate tax and use that as part of the funding mechanism. Infrastructure development has long lead times, and the time to start is now.  Typhoon Yolanda, as they’re calling it in the Philippines, was a lot like a tornado three hundred miles wide.  Imagine that barreling in on the east coast, like Sandy.  In another twenty years, the imagining may not be that hard.  Stepping back from coastal areas endangered by rising sea levels, as some have proposed, may not be even close to a solution.

I was, on the one hand, pleased at the news last week, that President Obama is establishing a climate change work group to plan a course of action.  On the other hand, I’ve seen a lot of “plans to plan” in my time, often used only as a ploy to deflect criticism, and we no longer have time for such maneuvers.  What to do about climate change needs to be a number one issue leading up to the next election, and thereafter.  There's no longer time for Congress to be arguing about silly things when the house is starting to collapse about our ears. Deferring that fix is no longer an option.

Separating How's and Why's

I just got through rereading Matthew Arnold’s 1862 book-length essay,  Culture and Anarchy, this time fortunately in a well-edited and concise version provided by the Great Books Foundation.  It’s a wonderful gem for the ideas it contains and a tedious bore for the lengthy Victorian language in which they’re embedded.  Arnold is more generally known as a poet (he taught poetry at Oxford and his “Dover Beach” at least used to be required reading in any literature class).  But his late 19^th century democratizing reform of the English school system and his great essay properly put him on the reading list for social history courses; that was where I first encountered him. 

The culture he writes about is not the culture of paintings and music and how to dress properly for a ball, nor anthropology’s modern definition of culture as a communication system, but about the search for perfection, “seeing things as they are” and virtuous action.  He dubs the whole thing “sweetness and light” and says that is what we should be educating for, because that is what holds society together.  It is, for example, “seeing things as they are” which enables us to recognize the common traits and foibles we share with others opposed to us and completely unlike us and to work together with them.  And, like his contemporary John Stuart Mill, he believes that Liberty is meaningless unless it produces responsible action.  It is the interaction between the search for perfection and virtuous living that prevents society from descending into an “anything goes” anarchy on the one hand or an intolerable conformancy on the other.  And the greatest enemy of sweetness and light is what he calls our immersion in the “machinery” of living.  For that immersion distracts us from asking “why” and focuses us only on “how to.”  Nowadays we would call that “machinery” technology.

It all sounds very abstract and Victorian until you read the newspapers and journals and cartoons.  For example, in the Washington Post David Ignatius writes about how at NSA, intelligence specialists were so consumed with what they could do with advanced technology to collect “metadata” that they went about collecting everything, without regard to why or why not it was needed.  Meanwhile, in a Scientific American review, Craig Venter, of human genome fame, is quoted as saying he doesn’t worry about the misuse of technology, but about the possible lack of use of it.  And in a recent New Yorker cartoon, young people dressed as a wedding party are standing around in front of a priest; each of them is intently reading his/her iphone, and the bride is glancing up and saying “oh yeah, I do.”  We treat Liberty as meaning our right to carry assault rifles and to pollute our air and streams.  We don’t ask why all those rounds are needed in a city park, or why increased profit should come at the expense of dirty air.  We see “the way things are” only as meaning millions starve for the benefit of a few.

Venter is charging ahead in pursuit of “digital life”, with the goal of eventually transferring whole people to the Internet.  He thinks the whole of life is reducible to “DNA machines” and “protein robots.”  His immediate “why” is obvious: to secure a personal immortality with some fame and fortune along the way.  That’s fascinating, given that “machines” or “robots” are not generally interested in that sort of thing.  His internet should be dubbed “Venter’s Ark.”  No more worry about climate or arthritis if you are just a cloud of electrons floating about in the ether.  Of course, propagating the species after a major system crash becomes problematic, or what is foregone in the life of an electron cloud, as well as what is happening to the billions of people who are not transferred to the Internet.  Or what to do on a dreary day a million years from now.  Or why immortality is desirable in the first place.

The NSA intelligence analysts have the excuse of an overriding concern with preventing terrorism.  That bumps into a national concern with preserving privacy.  At the start of the Snowden escapade, my view of the conflicting priorities was that so long as responsible governance required use of metadata, responsible citizenship required making it available.  But the NSA scenes described by Ignatius don’t constitute responsible governance.  They depict analysts caught up in the pleasures of technical accomplishment, the “how’s”, to the point of forgetting to ask the “why’s.”  The “why” of preventing terrorism becomes an excuse for figuring out how to do an even more advanced analysis.  They’re like that wedding party with the iphones; they have no clue about why they are there in the first place, or the significance of the consequences.

I’m no Neo Luddite.  I spent a career introducing new technology, and am proud of it.  But having an answer to the “why” was always important.  I always tried to avoid solutions in search of a problem.  I’ve turned down more than one technical proposal on those grounds.  That reluctance to over employ technology just for the fun of it is what I see less and less of these days.  We’re caught on the carousel of innovation, flying faster and faster, each trying to grab a new golden ring, approaching the “anything goes” anarchy of which Arnold warned.  Meanwhile, our education systems are avoiding teaching the importance of “virtuous action” as too controversial in a multicultural society.  “Values” education is no longer a goal in our schools, and it should be.  It’s time to reclaim the tools we use to separate what’s really important from the trash. 

Reforming the New Mercantilism

Strategists these days are muttering that a “great rebalancing” is underway in economic relations between nations.  The piper has shown up to collect his wages for the enormous trade surpluses and deficits that major countries have developed over the past few decades.  We have been living through a resurgence of the Mercantilist economic theory popular in Europe during the 16^th to 18^th century age of exploration, when the world was neatly divided into advanced producers of finished goods and colonies which must accept what they are provided.  The object was, like dragons, to collect the biggest possible hoard of gold bullion.  But this is no longer a world of colonial powers forcing the purchase of high-priced tea on reluctant Bostonians.  Reliance mostly on exports to drive a national economy, the defining characteristic of Mercantile Theory, assumes you can hold wages low in your own country and keep import tariffs high in order to pull in from elsewhere the money to keep you running.  Your business profits require your own continuing national austerity in order to sell affordable products to others. 

China has learned that its reliance on exports must now take account of its own domestic consumption needs, as Chinese workers whose low wages have supported cheap exports demand more goods and more pay to buy them with at home. China’s trade surplus, at 10 percent of GDP in 2007, has quietly shrunk to 2.5 percent in 2013.  The U.S. has steadily begun seeking ways to reduce its trade surpluses, both by refusing European austerity to combat recession, and as a natural consequence of American workers with less cash to purchase the foreign imports now grown costlier, and as a secretive process to facilitate more exports of American products through new trade treaties both with Europe and with Asia.  The only country that hasn’t yet got the message seems to be Germany.

Germany has been puttering along the last few years fiercely defending its own austerity policies and demanding the same austerity from its EU partners.  Its focus remains on exports, and its prescription to countries like Greece or Spain is that they should just tighten their belts and export more olive oil.  The Washington Post reports that German trade surpluses amount to over 7 percent of GDP so far in 2013, and the 2012 German current account surplus was larger than that of China.  The Post reports that a new U.S. Treasury report criticizes Germany for the way its anemic growth in domestic consumption harms its EU partners.  While its exports are booming, Germany maintains its domestic pressures to curb demand, and that in turn damages the inter-related economies of other European countries.  Southern European countries maintain their 25 percent and up unemployment rates, and Ireland’s unemployment has grown from 5 percent to over 13 percent.  Merkel sets her jaw and calls any change absurd.  As Europe’s German-enforced austerity deflates the whole of their economy, every one eats less, including Germans, while German banks and corporations build bullion hoards as though bullion was edible.  It’s not.

Recognizing that about bullion was in a way Adam Smith’s greatest contribution in his Wealth of Nations. It ended the old Mercantilism by teaching that economics is not just a manual of procedures for accumulating bullion. It is, at its best, a description of how people satisfy each other’s material needs by cooperative activity.  Smith turned the focus to the economy as the collective activities of people, but that got lost through the easy manipulation of his market concept.  Banks and corporations acquire bullion (or derivatives or mortgages) in order to sit on them like dragons and to brag about it in their annual reports.  People produce and sell goods and services in order to be able to eat and to feed their families.  It is the increasing dominance of corporations in shaping our policies that has caused our shift of focus away from that back to the new Mercantilism.

Perhaps China can lead the way on this subject.  As a very ancient culture that has seen a lot, China seems to recognize that the fundamental goal of government is to satisfy the needs of people.  Its historical focus has always been inward on maintaining its own stability.  Driving up exports while the people pinch pennies does not accomplish that.  Corporations produce profits, but it is people who riot in the streets.  China has recognized that and is moving away from its single minded emphasis on exports.  Its own historical culture may make Germany a slow learner, but the U.S. should also know through its historical experience that “we the people” is what economic policy is about.  We have entered a period where major moves are afoot to create free trade treaties with both the EU and with Asian nations.  The early signs are that they are secretive and dominated mainly by corporate interests.  That may, if not held in check, result in agreements with built in deflators of U.S.  jobs and wages, in favor of accumulating the profits of international corporations.  We don’t want to import the German disease in the name of reform.  We need more early visibility and discussion of what is being negotiated and possibly more early congressional inspection of it.  It might be a good time to ask your congressional representatives what they know about the negotiations.  Trade policy is too important a topic to be left to corporate lobbyists.

Equality and Its Discontents

The most complex issues can be hidden in the simplest of statements.  We cherish the Declaration of Independence for its ringing proclamation that “all men are created equal.”  Did that include women and slaves? Not for a very long time.  Did that mean just equal in opportunity?  Did that mean only equal before the law, or include all aspects of living, from education to health care to income?  We’re still working that out.  Two items in the news today are a CNN series on the continuing issue of income inequality and a furor over whether the Affordable Care Act will require some people to lose or change their current health insurance.  It so happens they’re different faces of the same coin.

We’ve had this preference in American society that all the good things in life be the result of hard work.  It goes back much further than Jefferson, to the Protestant Ethic, John Locke’s Labor Theory of Value, the Jamestown colony’s “if you don’t work, you don’t eat”, and on past Aristotle to cave man days when the success of the clan required hard effort from everyone.  Exploring and taming the  new continent of America required that kind of ethic.  Other societies had not always gone that route.  In other parts of the world and in Europe through medieval times, economic success was based on land and other forms of inherited wealth, and the measure of an aristocrat was how well he used his extensive leisure. In such societies massive income inequality is the norm. If you’re bright but still a peasant, that’s just the way things are.  But when a person’s economic success is based principally on his/her labor, and everyone feels they work equally hard, relative income equality becomes a key ingredient in the glue that holds society together. That’s why even fiscal conservative Herbert Hoover promised “a chicken in every pot.”  You worked, so you’re entitled to eat as much as the next guy.  Nowadays, that’s not always the case. 

Some of us, including corporations and a part, but not all, of the one percent, have found a way, as Buddhists might say, “off the wheel.”  The source of their wealth is no longer their direct labor, but the income derived, through the manipulations of skilled technicians, from financial instruments.  Derivatives have replaced landed estates.  A man’s investment bank is his castle.  The problem, as Aristotle long ago pointed out, is that such manipulations do not produce goods and services that provide jobs or food (or health care) to others.  Instead, they siphon away investments from the activities that do.  Creating jobs is no longer the priority, nor is rewarding skilled labor.  A consequence of that is the re-emergence of income inequality, just as it had existed in the landed wealth based societies of yesteryear.  But in a society that is based on the premise that your labor is the key to success, including your access to health care, disproportionate access to the necessaries of life is intolerable.

One way policy wonks analyze legislation is in terms of equity, the extent to which a law equally benefits or harms groups in similar circumstances. Horizontal equity requires, for example, equal treatment of all people of a same income level or over age 65.  Vertical equity requires fair treatment across socioeconomic classes or age groups.  That’s what the big arguments about redistributing income are about.  Transitional equity requires that when a law is enacted, people not be unduly harmed simply by its process of implementation.  For example, when SSA, to save money, began mailing monthly benefit checks throughout the month rather than just on the 3^rd, deciding how to handle the first month of the change for the people who had been getting a check on the 3^rd but now might get it on the 15^th was a major transitional equity issue.  The problem is that the various equity considerations work against each other, and must be balanced.  The wider the population served by the legislation, the tougher the vertical and transitional issues are.  That’s why, for example, when Social Security was first enacted, farm workers were excluded.  And of course there’s politics, which brings in a whole other bunch of considerations.

The ACA furor is about the fact that some people may face loss of an existing health insurance policy because the standards for health insurance set by the law require better coverage by the insurance company, and the insurance company decides to charge significantly more for that improved coverage. Their coverage of course was poor because their low pay could not cover better coverage under the existing system.  But improved coverage is a major goal of the legislation.  The problem exists because vertical equity requires providing the same quality of health care whether you’re earning $15,000 or $150,000.  But horizontal equity requires as broad a population covered as is possible, and not everyone’s income covers the same medical care in our existing system.  And transitional equity says no one should be unduly damaged in the process of improving coverage.  And politics says it’s a bitterly factional issue where no agreement is possible.  It looks like an unsolvable problem until you realize the general problem already had a solution, and shouldn’t exist in the first place.

The existing solution, obviously, is Medicare.  Medicare Parts A and B cover all those over 65 eligible under Social Security for a flat monthly fee within reach of all.  While it’s based on prior work which was paid vastly different wages, its costs are spread equally over the whole population.  Extending it to all ages solves the vertical and horizontal equity problems at one fell swoop.  It would also invest the attention of the whole country in solving the medical cost containment problems we face.  The remaining equity problems are health care for those not employed, the transitional impacts on the insurance industry and the factional politics.  The same problems were faced and dealt with at the enactment of the original Medicare legislation.  If our politicians are sufficiently grown up to lead, they can solve them now.

The underlying issue is the reliance we place on good health solely as a reward for labor, when we are unwilling to reward the laborer adequately enough for him/her to afford it.  That’s why it comes back to that income inequality issue again.  We think of income inequality as a purely economic issue, when in fact it influences every part of our lives.  Everything from our health to our education to the transportation we take is better or worse because of it.  Other places like Scandinavia have tackled the issue and are better off for it.  International rankings say not only their health care but their general happiness is better than ours for their having done so.  We started this country off by declaring the equality of all.  It’s time we looked past our factions toward a common vision of what that means.