Still an Optimist? The BIG Picture

Rational optimism is not faith-based, but reality-based.

One of recent history’s great positive trends is the spread of democratic governance. Sure, there have been setbacks, human affairs are never linear, but the big picture has been increasing popular sovereignty. It’s a good thing. It would be good, in the abstract, even if it did not enhance quality of life; and some might say it doesn’t. But they forget that living in an open society, where one’s voice can be heard, and rule of law protects against arbitrary oppression, is itself important to quality of life. And I believe such a society is also ultimately better for material prosperity.

That latter claim might be challenged right now. Some would point to inequality. But just see what kind of equality dictatorship produces. However, democracy has run into a big glitch, with varying but related versions in the U.S. and Europe.

It’s the problem of liberalism.* It began, quite simply, when government started giving out money. Once on that slippery slope, there were powerful accelerators, and very weak brakes. People have found the cupboard is unlocked. Politicians have found it’s much easier to say yes than no; effectively, buying votes with money not their own. In addition, their votes are bought by every interest wanting something from government.

Those wants are usually bad for others; but no one is harmed in anywhere near the degree that the special interest benefits; so the special interest fights hard, and nobody else has sufficient motivation to fight back.

The acceleration heightened when tax-and-spend began to be supplanted by borrow-and-spend — anesthetizing taxpayers who seemingly didn’t even have to pay for the profligacy.

The upshots are playing out now — in the U.S., with our huge tax-versus-spending conflict, and in Europe, where they can no longer keep the bread and circuses going with borrowed money because lenders don’t want to be the stuckees (as lenders to Greece have already become).

Demographics will worsen it. In the developed world, population growth isn’t the problem, it’s population shrinkage (in most countries) and ageing (everywhere). The old model worked as long as there were plenty of productive workers to support non-workers. But, with declining birthrates and rising longevity, that ratio is souring.

Lenders realize this; it aggravates Europe’s debt crisis. America will follow if something drastic isn’t done about the looming gap between revenues from economic output and exploding Social Security and Medicare payouts. Voters seem clueless that unless they accept big retrenchments, the hit will be even bigger in the end. And no politician has the guts to bell this cat.

Boosting economic growth would help. It was strong growth in the postwar period that also helped make the old model work. But U.S. growth will lag, for some time, because 1) we’re still climbing out of a deep debt hole (which, nationally, is actually set to get deeper); 2) the housing bust/mortgage/foreclosure problem is not being solved; 3) high unemployment is becoming structural because too many people are simply no longer equipped to do the jobs needed; and 4) the looming future fiscal black hole, combined with political paralysis, makes for overall lousy economic weather.

Europe’s growth is crippled by the mentioned demographic crunch; the dire debt situation, which is forcing growth-killing fiscal austerity; plus sclerotic bureaucratized societies where red tape impedes starting and running businesses, and “social protections” for workers make it difficult and costly to fire them, so businesses are squeamish about hiring. And Europe’s voters are no more prescient about these things than U.S. voters; its politicians no more brave.

In their recent book, That Used To Be Us, Thomas Friedman and Michael Mandelbaum identify America’s challenges: the already mentioned fiscal imbalance; education; infrastructure; immigration reform; globalization; energy and climate change. For each area the authors have worthy prescriptions. But overshadowing them all is the issue of political dysfunction; and the role of politically powerful entrenched interests (e.g., education: the teachers’ unions). Our problems may indeed be solvable, which is why Friedman calls himself an optimist; yet realism makes me doubt we can summon the will to do any of the things he calls for.

The failure of the “supercommittee” is only the latest evidence; politicians cannot be expected to cut spending or raise taxes when voters won’t accept either. As David Brooks points out, the two parties are actually too weak to be brave. And even where voters do actually back reform, they can be bulldozed by implacable special interests like those teachers. So the U.S., too, seems to be getting sclerotic, with systems hardened in concrete, impervious to real change.

A really muscular and gutsy leader might conceivably be able to break through all this. But that’s practically a fantasy. (Obama is a wet noodle.) Meantime, we can already see, pretty much, the contents of the modern equivalent of Gibbons’s Decline and Fall of the Roman Empire.**

(photo by Tajuddin)

So: wherefore my optimism? I am an optimist about humankind. I believe that human beings are far more good than bad, and that we are continuously getting better. That is the point of civilization: to civilize us: and, little by little, it’s working. And what we have done, in creating that civilization, rising up out of lives “nasty, brutish, and short,” is a stupendous achievement. The sources of that achievement – the human will for betterment, and the creativity to find the means for it – have not failed. Thus economic progress ultimately depends not on government but on human beings and their efforts to improve their lives. They will succeed in spite of governments.***

In the context of that really big picture, everything I’ve written about here is a mere blip. I remain confident that the great sweep of human history continues to be upward.

* “Liberalism” in its American, not classical, meaning. (Europe uses different language, e.g. “social democracy.”)

** Diocletian was a muscular and gutsy leader, who succeeded in reversing some of Rome’s pathologies; but only for a while.

*** Economic activity is exempt from the scleroticism of other institutions. That is the great virtue of the capitalist free market that so many demonize. Unlike in the realm of government and politics, business is acutely sensitive to changing exigencies, and consequently the business landscape is constantly in flux – just look at the rapid evolution in entertainment media. This is what economist Joseph Schumpeter famously called “creative destruction.”

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