Bill Whittle points the way to the future (H/t Mairi):
Showing posts with label decentralization. Show all posts
Showing posts with label decentralization. Show all posts
Tuesday, April 19, 2011
Tuesday, November 23, 2010
The Secession Party
The Secession Party
Mitchell Langbert, Ph.D.*
The United States of America has become too large and needs to be broken in two. As well, New York and other states that have an urban-rural split ought to be split. The nation has become too large to manage, as today’s Congress attests. This would be so even if ideological differences did not divide the nation and the states. The nation should be broken up into a red nation and a blue nation and New York should be broken up into upstate and downstate.
The Secession Party would aim to dissolve the union, undoing the work of Abraham Lincoln and reasserting the aims of the anti-Federalists, who opposed the scope and extent of federal power that came to pass under Washington.
When the United States was established in 1789, there were approximately four million Americans and 65 members of the House of Representatives. That is 60,000 Americans for every Representative. Today the nation’s population is 310 million and there are 435 members of the House of Representatives, 713,000 Americans for every Representative. Only special interests and financial donors have full access to Representatives. Increasing the number of Representatives would be administratively difficult because a House as representative as it was in 1789 would have 4,800 Representatives.
Historical Precedent
One nation in western history has been equal to the United States in terms of its power: Rome. By the late third century Emperor Diocletian established a rule of four, whereby two senior and two junior co-emperors oversaw a quarter of the Roman Empire each. He also began a shift of power from Rome to other cities. Ultimately, Byzantium, later named Constantinople, survived the western Roman Empire by nearly one thousand years. Diocletian could not have anticipated that quartering the Empire would allow part of it to survive. I claim that halving the United States into free and social democratic halves would allow the free half to survive as the social democratic half sinks into a dark age.
American Decentralization
The forces that encouraged Diocletian to think in terms of decentralization are at play here. Management theorists recognize that there are limits to rationality. The way to run a large firm is to break it into operating divisions. Likewise, the Founding Fathers or Federalists, including Alexander Hamilton and James Madison, believed that the federal government needed to be combined with decentralized states. Under the Constitution the states are responsible for much administration. Part of the reason is that the states are better able to represent their citizens. Large scale leads to complexity which makes management and representation difficult from the center. The federal government suffers from centralization without representation.
The Civil War began an assertion of federal power that has escalated past the point of diminishing returns. The Civil War’s cause, prevention of the expansion of the “slave power” was just. But a side effect of the Civil War was squelching of important aspects of states’ authority. It was not and is not clear that states do not have the right to secede or to nullify their participation in the union.
Progressivism a Form of Insanity
Recently, I had a discussion with an attorney who believes that regulation is desirable. I pointed out to him that workers’ compensation does not work. He agreed. I pointed out that the Employee Retirement Income Security Act of 1974 (ERISA) has not worked well. He did not know much about it, but he was willing to agree. I pointed out that the Sherman Anti-Trust Act, which was meant to limit monopoly, has had the effect of expanding the size and power of big business. I pointed out that the Federal Reserve Bank has massively subsidized the wealthy at the expense of the poor. I pointed out that Social Security turned out to be a wealth transfer vehicle from the 21st century’s workers to the 20th century’s retirees. He offered no meaningful counter-arguments, only to say that the sub-prime crisis was due to the repeal of the Glass-Steagall Act. But he could not explain how, after 75 years of securities regulation Wall Street is more destructive than it was in the 1920s.
Despite the long list of regulatory failures, the left-wing attorney believes that regulation must be increased. He suffers from a religious mania with which it is impossible to argue.
A recent study found that about two or three percent of government agencies are ever terminated. In contrast, 80 percent of businesses fail within their first five years. People who believe that government programs, no matter how destructive, cannot be terminated are incapable of rational discussion.
Since there is no common ground between those of us who believe in freedom and those who believe in socialism, there is no longer common ground required for a single nation. The United States was founded on a belief in freedom. But half the nation believes in the slavery of social democracy, in tyranny of the majority. The union is no longer tenable.
Large Scale Has Advantages
Large scale has advantages. These include the ability to support a strong military and to permit large scale economic activity. However, there are limits to these kinds of advantages, and there is no reason why independent units cannot permit large scale economic activity across borders.
The advantages of large scale have limits as do the advantages of small scale. There needs to be balance. But under the influence of New Deal Democrats and Rockefeller Republicans the nation has discarded the notion that small scale offers any advantages. When government employees are paid 40 percent more than private sector employees, it is just in the centralizers’ opinions. When private sector firms innovate, it is greed and must be regulated. No degree of centralization is sufficient for America’s big government mono-maniacs.
Party System Committed to Large Scale
Left-wing Democrats and the Rockefeller Republicans claim to hate each other. But both favor large scale. The Democrats have ritualized regulation. The Republicans have ritualized big business. The fact is that big business would not exist without big government, and vice-versa. Just as regulation has repeatedly failed even as the Democrats mindlessly chant its mantra, so has big business repeatedly failed as the Republicans chant its mantra.
Need for a Pro-Secession Party
The election of Barack H. Obama has proven that American democracy no longer functions. The nation is too large to represent its citizens. Smaller units are needed now. The two party system is too corrupt to permit the decentralizing impulse. A new, pro-secession movement needs to energize America.
*Mitchell Langbert is associate professor of business at Brooklyn College. He blogs at http://www.mitchell-langbert.blogspot.com/.
Friday, May 21, 2010
EU Can Learn from South Carolina
Ron Holland has another excellent blog on the Lew Rockwell site. Holland starts by noting:
"The state of South Carolina has been an independent republic and nation twice in history, first in March of 1776 and again in December of 1860. History here certainly shows how it is far easier to get into a political union than to get out again. In South Carolina, we have found that once in a voluntary union, the open door slams shut as political and monetary elites who benefit from this arrangement seldom give up their power to tax, inflate the currency, protect special interest monopoly rights and engage in mercantilism without fighting to retain their distant dictatorial controls."
Holland notes that just as the Civil War forced the South to be subjugated to the whims of the Federal Reserve Bank that was established 50 years later, so the European elite aims to force all of Europe to be subject to coercive, centralized banks and failed government institutions.
The solution to today's economic failures is DECENTRALIZATION, not centralization. Holland posts several wonderful quotes from Benjamin Franklin and Walter Williams. As he points out, the best run country in Europe, Switzerland, is a small country that itself is decentralized. Why aren't the Europeans emulating them instead of the failed federal government of the USA?
"The state of South Carolina has been an independent republic and nation twice in history, first in March of 1776 and again in December of 1860. History here certainly shows how it is far easier to get into a political union than to get out again. In South Carolina, we have found that once in a voluntary union, the open door slams shut as political and monetary elites who benefit from this arrangement seldom give up their power to tax, inflate the currency, protect special interest monopoly rights and engage in mercantilism without fighting to retain their distant dictatorial controls."
Holland notes that just as the Civil War forced the South to be subjugated to the whims of the Federal Reserve Bank that was established 50 years later, so the European elite aims to force all of Europe to be subject to coercive, centralized banks and failed government institutions.
The solution to today's economic failures is DECENTRALIZATION, not centralization. Holland posts several wonderful quotes from Benjamin Franklin and Walter Williams. As he points out, the best run country in Europe, Switzerland, is a small country that itself is decentralized. Why aren't the Europeans emulating them instead of the failed federal government of the USA?
Monday, March 22, 2010
I Am a Confederate Now
I am a Confederate now. I no longer believe in the union. I believe in the Tenth Amendment and the Articles of Confederation. My heroes now are not Abraham Lincoln and Ulysses S. Grant, but rather Andrew Jackson and John C. Calhoun.
Monday, November 2, 2009
Only A Divided House Will Stand
Mish's Global Economic Trend Analysis has a good discussion of Marc Faber's prediction of economic collapse in 2012. I don't think you can pinpoint it, and don't underestimate the United States. But the current American system is unsustainable and collapse is ahead. Whether the government counterfeiters can continue to make things work for another 20 or 30 years or maybe even longer, no one knows. It took the Roman Empire nearly three centuries following the death of the last of the five good emperors, Marcus Aurelius, to finally collapse. There was lots of corruption, inflation and coin clipping in the ensuing three centuries. However, the Roman system was somewhat more stable in that it did not depend on market coordination to the degree that the United States does. As the Federal Reserve Bank and the government have increasingly distorted market signals, ever worsening misallocation leads to more extreme abuses, which will in turn lead to shortages and crises. Information and resources move much more quickly now than 1500 years ago so comparisons are difficult to draw.
Americans a century from now will be much poorer than we were, not because of any resource shortage but because of the Federal Reserve Bank and the US government. In the nineteenth century Abraham Lincoln fought to preserve the union. He is remembered for abolishing slavery, but that was not his purpose. Rather, he aimed to prevent the southern states from exercising sovereignty. The Civil War was the beginning of Progressivism. The side-effects of the Civil War concerning slavery and race relations usually get the attention, but the Civil War's longer term effects are now being seen. For the manipulation of the federal government by organized special interests, the so-called military-industrial complex, which is first and foremost a financial complex, is a direct outcome of the assertion of centralized power that began in 1860.
The problem is how to save the United States. A centralized federal power facilitates special interest brokerage. If you review the ideas of Mancur Olson in "Rise and Decline of Nations", there are specific criteria for the effectiveness of economic lobbies. A centralized government reduces lobbying costs. Fifty states require fifty times the lobbying costs, likely more. Moreover, opposition interests can concentrate in a few states.
To save the United States, there will need to be radical decentralization. A framing of radical decentralization needs to begin with pragmatism and choice. In a nation that is failing, new ideas become imperative. The popular imagination can awakened by the hope that a renewed, smaller scale America can offer. The big-state liberalism of the twentieth century has devolved into a government-enforced wealth transfer to the incompetent rich. The system has failed and needs to be reinvented.
Americans a century from now will be much poorer than we were, not because of any resource shortage but because of the Federal Reserve Bank and the US government. In the nineteenth century Abraham Lincoln fought to preserve the union. He is remembered for abolishing slavery, but that was not his purpose. Rather, he aimed to prevent the southern states from exercising sovereignty. The Civil War was the beginning of Progressivism. The side-effects of the Civil War concerning slavery and race relations usually get the attention, but the Civil War's longer term effects are now being seen. For the manipulation of the federal government by organized special interests, the so-called military-industrial complex, which is first and foremost a financial complex, is a direct outcome of the assertion of centralized power that began in 1860.
The problem is how to save the United States. A centralized federal power facilitates special interest brokerage. If you review the ideas of Mancur Olson in "Rise and Decline of Nations", there are specific criteria for the effectiveness of economic lobbies. A centralized government reduces lobbying costs. Fifty states require fifty times the lobbying costs, likely more. Moreover, opposition interests can concentrate in a few states.
To save the United States, there will need to be radical decentralization. A framing of radical decentralization needs to begin with pragmatism and choice. In a nation that is failing, new ideas become imperative. The popular imagination can awakened by the hope that a renewed, smaller scale America can offer. The big-state liberalism of the twentieth century has devolved into a government-enforced wealth transfer to the incompetent rich. The system has failed and needs to be reinvented.
Sunday, August 2, 2009
The World Wide Web, Syndicalism and the New Market for News
The news is dead. There is no news because the amount of information exceeds the abilities of journalists. Paradigms, or applicable models of reality, change too rapidly for mass market reporters. The fundamental obstacle is that elite Americans, including journalists, have been educated in twentieth century modernism, which emphasizes the importance of scale to economic progress; the morality of displacement of violence to bureaucratic systems (as in socialists' belief that because socialist violence is the work of the state it is non-violent); and the inability of university-trained government experts to understand economic change. Thus, reporters are deferential toward advocates of scale, bureaucracy and rituals of expertise.
Most crucially, journalists cannot or refuse to grasp the causes of the chief phenomena that characterize today's world: inflation; declining real wages; transfer of wealth from productive to elite sectors such as in the "bailout"; and repeated financial and economic scandals such as Enron. Arguably the autism of the American news media is linked to its owners' economic interests, but such interests depend on the nexus of primitive twentieth century ideology with news.
The American news media lives in 1969.
This poses a problem for democratic government, which is impossible on a large scale without mass media. The way American government was re-organized in the early twentieth century coincided with Progressivism and modernism. A post-modern government needs to decentralize. This would reduce the cognitive burden on journalists as well as on government experts. It would imply state sovereignty. The commitment to traditionalism, that is, the ideology of economic conservatism, constrains this progression and should be jettisoned. Current institutions, which were libertarian in the 18th and early nineteenth centuries became increasingly non-libertarian beginning with the Dred Scott decision in the mid 19th decision as the federal government intruded upon the states. In turn, large scale industry could legitimately exploit economies of scale but also gain government subsidy. The gains from laissez-faire were so large that they overwhelmed even the corruption, waste and incompetence associated with the construction of the railroads, the development of large-scale commercial banking, oil company rights of way and Wall Street. But as subsidies to scale proceed, the scope of laissez-faire diminishes, and it is small enough today that innovation has stalled except in specialized technological areas.
Technology and political change go together. American democracy was a development of Medieval decentralization, and decentralization occurred because of the fall of Rome twelve hundred years earlier. Medieval decentralization led to innovation that eventually overcame the loss in economies of scale associated with the end of the Roman slave system. The medieval period was far more innovative than was Rome. By 1300 or so the economic growth from the three field crop system and other agricultural innovation had caused the western Europeans to exceed the economic level of Rome, and in turn led to the invention of the printing press and the discovery of America. As the economy led to increasing education and awareness of rights, kings began to displace local sovereigns in part by energizing the people against local tyranny. The increasing centralization and scale of society led to expansion of markets and economies of scale.
Thus, two forces coincided: the creation of monarchy in the late Middle Ages reflected the centralizing trend while the long pattern resulting from the fall of Rome reflected the decentralizing trend. The Founding Fathers, who were able to establish the United States in a "state of nature" observed the two patterns and arrived at the Federalist system, which involved a balance of scale and decentralization. But republican processes had to permit changing the balance, and subsequent patterns led to increasing centralization well past the point of diminishing returns.
By the late nineteenth century economies of scale still contributed to efficiency but also to claims for government subsidy. In the 1500s the Elizabethan Statutes of Artificers had limited monopoly and this led to limits on labor unions in America, but utilitarian claims as to the advantages of economies of scale led to direct subsidies to business, overcoming the common law. Indeed, privileges for large scale enterprise had been the theory of Mercantilists, Federalists and Whigs. Scale has both positives and negatives with respect to economic change. The positives tend to be shorter term and involve lower cost per unit. The negatives tend to be longer term and involve increased coordination and communication costs and limits on innovation. Subsidization of large scale has short term advantages but long term costs. In today's world communication costs have declined because of technology, but have not been eliminated. In fact, technology may in some ways increase the onus on communication and interpersonal skill. There is no known optimal size of a business that can be theoretically derived, but increasing scale is not by definition increasing efficiency. Rather, the optimal scale can be derived by empirical observation over decades, but where society is set up to subsidize large scale, empirical observation may involve circular logic. The larger the firm the greater the subsidization, so apparently the more efficient. Objective measures like the performance of real hourly wage suggests where the economy is going in general. Gross domestic product does not because it includes considerable waste and economic dislocation. Real hourly wage is the best indicator of how well Americans are faring. According to it, the American economy has not been faring well for nearly 40 years.
Technology affects economic change but also the intellectual process by which social debate occurs. Technological change has permitted increasing decentralization at limited or no scale costs. Newspapers were necessary because the cost of acquiring information could be spread over many readers. Today, the World Wide Web permits the dissemination across a billion readers without the need for a single source. The problem remains, though, as to divisibility, paying the source of information. Much information can be acquired by local citizens, possibly for free. The problem arises with respect to centralized political power and acquisition of difficult-to- obtain information, such as war news or news arising from monitoring of legislative processes. How, for instance, can the president provide information to the Web?
It would seem that basic citizenship skills need to be updated. Acquisition of information directly from government Websites (e.g., the White House Website) ought to be a form of good citizenship in a Web-dominated world. In turn, bloggers ought to begin to consider obtaining information from public source material. Pressure should be brought to bear on political office holders to hold open press conferences via the Web, open to the public, that is. Public Q&A ought to replace the press conference.
Obtaining on-the-spot news such as concerning crimes and earthquakes can be obtained by bloggers who live near events and can feed to centralized websites. People interested in crime news ought to be able to turn to specialized blogs that rely on independent, local sources. Reporters need not work for a single newspaper but rather could sell stories to pay-based websites. The model of employee-employer can be converted into one of subcontractor. This already exists with respect to the Paparazzi. Reporters who develop relationships with police officials can sell information to commercial websites and blogs. Pricing might facilitate blogger participation in various reporters' news services.
Organization theorists have long considered that market forces might cause the importance and scale of organizations to diminish. Movie companies, for instance, assemble a team of labor that collaborates on a specific film and then disperses. News could follow this model. Assemble a group to report on a specific topic and then disassemble it. Websites specialized in a given form of news, for instance, war news, could put together a team.
With respect to policy issues, it seems evident that newspapers and television news that cater to general audiences are incapable of understanding specialized issues sufficiently to know what is important. Rather, industry- and interest- based organizations are better at disseminating news to their constituents. For example, the National Rifle Association provides excellent updates on anti-Second Amendment legislative proposals. Likewise, organizations that specialize, such as Citizens Against Government Waste, English First, the Manhattan Institute, the Milton Friedman Foundation (which specializes in education issues) and the like can provide ongoing feeds concerning their issues. Reporters can contract with organizations to provide reporting services to their newsletters.
Syndicalism is the idea that government ought to reflect producer interests. Thus, a syndicalist congress would include representatives of farmers, manufacturing, service and similar kinds of interests. William Appleman Williams in his Contours of American History argues that this was the idea that the last Progressive, Herbert Hoover, advocated.
Syndicalism can be applied to news and other excessively centralized organizations. There is no reason, given today's technology, that a single organization ought to provide information about (a) the economy (b) hurricanes (c) war (d) terrorism (e) political debate (f) science and so on. The information burden is too great and this results in the debate becoming too stupid.
.
Most crucially, journalists cannot or refuse to grasp the causes of the chief phenomena that characterize today's world: inflation; declining real wages; transfer of wealth from productive to elite sectors such as in the "bailout"; and repeated financial and economic scandals such as Enron. Arguably the autism of the American news media is linked to its owners' economic interests, but such interests depend on the nexus of primitive twentieth century ideology with news.
The American news media lives in 1969.
This poses a problem for democratic government, which is impossible on a large scale without mass media. The way American government was re-organized in the early twentieth century coincided with Progressivism and modernism. A post-modern government needs to decentralize. This would reduce the cognitive burden on journalists as well as on government experts. It would imply state sovereignty. The commitment to traditionalism, that is, the ideology of economic conservatism, constrains this progression and should be jettisoned. Current institutions, which were libertarian in the 18th and early nineteenth centuries became increasingly non-libertarian beginning with the Dred Scott decision in the mid 19th decision as the federal government intruded upon the states. In turn, large scale industry could legitimately exploit economies of scale but also gain government subsidy. The gains from laissez-faire were so large that they overwhelmed even the corruption, waste and incompetence associated with the construction of the railroads, the development of large-scale commercial banking, oil company rights of way and Wall Street. But as subsidies to scale proceed, the scope of laissez-faire diminishes, and it is small enough today that innovation has stalled except in specialized technological areas.
Technology and political change go together. American democracy was a development of Medieval decentralization, and decentralization occurred because of the fall of Rome twelve hundred years earlier. Medieval decentralization led to innovation that eventually overcame the loss in economies of scale associated with the end of the Roman slave system. The medieval period was far more innovative than was Rome. By 1300 or so the economic growth from the three field crop system and other agricultural innovation had caused the western Europeans to exceed the economic level of Rome, and in turn led to the invention of the printing press and the discovery of America. As the economy led to increasing education and awareness of rights, kings began to displace local sovereigns in part by energizing the people against local tyranny. The increasing centralization and scale of society led to expansion of markets and economies of scale.
Thus, two forces coincided: the creation of monarchy in the late Middle Ages reflected the centralizing trend while the long pattern resulting from the fall of Rome reflected the decentralizing trend. The Founding Fathers, who were able to establish the United States in a "state of nature" observed the two patterns and arrived at the Federalist system, which involved a balance of scale and decentralization. But republican processes had to permit changing the balance, and subsequent patterns led to increasing centralization well past the point of diminishing returns.
By the late nineteenth century economies of scale still contributed to efficiency but also to claims for government subsidy. In the 1500s the Elizabethan Statutes of Artificers had limited monopoly and this led to limits on labor unions in America, but utilitarian claims as to the advantages of economies of scale led to direct subsidies to business, overcoming the common law. Indeed, privileges for large scale enterprise had been the theory of Mercantilists, Federalists and Whigs. Scale has both positives and negatives with respect to economic change. The positives tend to be shorter term and involve lower cost per unit. The negatives tend to be longer term and involve increased coordination and communication costs and limits on innovation. Subsidization of large scale has short term advantages but long term costs. In today's world communication costs have declined because of technology, but have not been eliminated. In fact, technology may in some ways increase the onus on communication and interpersonal skill. There is no known optimal size of a business that can be theoretically derived, but increasing scale is not by definition increasing efficiency. Rather, the optimal scale can be derived by empirical observation over decades, but where society is set up to subsidize large scale, empirical observation may involve circular logic. The larger the firm the greater the subsidization, so apparently the more efficient. Objective measures like the performance of real hourly wage suggests where the economy is going in general. Gross domestic product does not because it includes considerable waste and economic dislocation. Real hourly wage is the best indicator of how well Americans are faring. According to it, the American economy has not been faring well for nearly 40 years.
Technology affects economic change but also the intellectual process by which social debate occurs. Technological change has permitted increasing decentralization at limited or no scale costs. Newspapers were necessary because the cost of acquiring information could be spread over many readers. Today, the World Wide Web permits the dissemination across a billion readers without the need for a single source. The problem remains, though, as to divisibility, paying the source of information. Much information can be acquired by local citizens, possibly for free. The problem arises with respect to centralized political power and acquisition of difficult-to- obtain information, such as war news or news arising from monitoring of legislative processes. How, for instance, can the president provide information to the Web?
It would seem that basic citizenship skills need to be updated. Acquisition of information directly from government Websites (e.g., the White House Website) ought to be a form of good citizenship in a Web-dominated world. In turn, bloggers ought to begin to consider obtaining information from public source material. Pressure should be brought to bear on political office holders to hold open press conferences via the Web, open to the public, that is. Public Q&A ought to replace the press conference.
Obtaining on-the-spot news such as concerning crimes and earthquakes can be obtained by bloggers who live near events and can feed to centralized websites. People interested in crime news ought to be able to turn to specialized blogs that rely on independent, local sources. Reporters need not work for a single newspaper but rather could sell stories to pay-based websites. The model of employee-employer can be converted into one of subcontractor. This already exists with respect to the Paparazzi. Reporters who develop relationships with police officials can sell information to commercial websites and blogs. Pricing might facilitate blogger participation in various reporters' news services.
Organization theorists have long considered that market forces might cause the importance and scale of organizations to diminish. Movie companies, for instance, assemble a team of labor that collaborates on a specific film and then disperses. News could follow this model. Assemble a group to report on a specific topic and then disassemble it. Websites specialized in a given form of news, for instance, war news, could put together a team.
With respect to policy issues, it seems evident that newspapers and television news that cater to general audiences are incapable of understanding specialized issues sufficiently to know what is important. Rather, industry- and interest- based organizations are better at disseminating news to their constituents. For example, the National Rifle Association provides excellent updates on anti-Second Amendment legislative proposals. Likewise, organizations that specialize, such as Citizens Against Government Waste, English First, the Manhattan Institute, the Milton Friedman Foundation (which specializes in education issues) and the like can provide ongoing feeds concerning their issues. Reporters can contract with organizations to provide reporting services to their newsletters.
Syndicalism is the idea that government ought to reflect producer interests. Thus, a syndicalist congress would include representatives of farmers, manufacturing, service and similar kinds of interests. William Appleman Williams in his Contours of American History argues that this was the idea that the last Progressive, Herbert Hoover, advocated.
Syndicalism can be applied to news and other excessively centralized organizations. There is no reason, given today's technology, that a single organization ought to provide information about (a) the economy (b) hurricanes (c) war (d) terrorism (e) political debate (f) science and so on. The information burden is too great and this results in the debate becoming too stupid.
.
Sunday, June 14, 2009
Decentralization as the Remedy for Majority Faction
In the Federalist Number 10 James Madison made his famous argument that the size of the United States would limit the extent to which a majority or large minority could impose its will on a smaller minority. His theory was put to the test in 1798 with the passage of the Alien and Sedition Acts at the time of the presidency of John Adams.
The Federalists passed the Alien and Sedition Acts, according to Richard Hofstadter, under the assumption that criticism of the administration was criticism of the government and therefore traitorous. The Acts were passed during the XYZ affair, when French diplomats had attempted to extract payments from America and many Federalists thought that a war with France would be necessary. In contrast, the Democratic Republicans were very pro French because of the French Revolution. There had been a long standing debate between the Federalists, who were pro English, and Jefferson's Democratic Republicans, who were pro French. The Federalists hoped to wipe out the Jefferson faction by labeling them treasonous. The public was frenzied by the XYZ affair much as it was by 9/11 eight years ago. The Federalists argued that the Democratic Republicans were a faction and that their criticisms of federal policy was treasonous and against the public interest. In a sense, the Alien and Sedition Act has parallels to the Patriot Act.
The French recanted and a war was avoided, so the Alien and Sedition Acts did not work strategically as what Hofstadter calls the "High Federalists" had hoped. Richard Hofstadter writes (The Idea of a Party System, p. 106):
"Federalist leaders made no secret of their hope of destroying opposition. Hamilton predicted that many Republican leaders would be remembered by the people in the same odious light as the Tories. Robert Goodloe Harper of South Carolina, a leading advocate of the Sedition Act in the House, wanted to be sure that 'no traitors should be left in the country' to jeopardize its defense. He professed his desire to imitate the internal security policies that had been adopted in England, charged the opposition with being a conspiracy, a faction leagued with a foreign power...'
"The language of the Sedition Act was vague enough to make a man criminally liable for almost any criticism of the government or its leading officers or any effort to combine for such a purpose. It made it possible for the courts to punish opinion, arbitrarily defined as seditious or disloyal, even in the absence of any overt act...'By identifying their administration with the government and the government with the Constitution, the Federalists construed criticism of the administration as opposition to the government and an attempt to subvert the Constitution...
"...In all, at least seventeen verifiable indictments were brought in, fourteen under the Sedition Act and three under the common law. Started in the main in 1798 or 1799, most of the cases came to trial in the election year, 1800, when it was hoped to stifle campaign criticism."
The indictments included the major Democratic Republican newspapers in New York, Boston, Philadelphia and Richmond as well as four smaller papers.
"But the Sedition Act was not conceived in a spirit of realism and it was not efficacious. The opposition was no small or paltry minority. As measured by representation in Congress, it was already at least equal to the administration in numbers...More importantly perhaps even than this, the country was still thoroughly decentralized, politically and geographically. Government, at the ultimate test, rests on sufficient force, and it was force that would have to be called upon if resistance to the laws became overt. The Virginia and Kentucky resolutions threatened that resistance might indeed reach this point, and at a time when the federal army numbered only about 3,500 men stationed mainly at frontier garrisons as a precaution against Indians, Virginia alone could have easily mustered a militia of twice that number and was indeed planning a force of 5,000. Nothing short of a foreign war would have created the conditions essential to raising a democratic army large enough, as Hamilton put it in one of his brasher moments, to 'put Virginia to the test.'"
"And here the demand for an army ran up against two of the deepest American prejudices: the tight-fisted rural reaction to taxes, and the long-standing suspicion (fully shared at this point by President Adams) against a standing army..."
Presumably, Hofstadter was a loose-fisted urbanite. Note that Madison was right in this case, which under other circumstances could have meant an armed conflict between predominantly Republican states and the Federalist-dominated government. It was decentralized that preserved freedom.
The Federalists passed the Alien and Sedition Acts, according to Richard Hofstadter, under the assumption that criticism of the administration was criticism of the government and therefore traitorous. The Acts were passed during the XYZ affair, when French diplomats had attempted to extract payments from America and many Federalists thought that a war with France would be necessary. In contrast, the Democratic Republicans were very pro French because of the French Revolution. There had been a long standing debate between the Federalists, who were pro English, and Jefferson's Democratic Republicans, who were pro French. The Federalists hoped to wipe out the Jefferson faction by labeling them treasonous. The public was frenzied by the XYZ affair much as it was by 9/11 eight years ago. The Federalists argued that the Democratic Republicans were a faction and that their criticisms of federal policy was treasonous and against the public interest. In a sense, the Alien and Sedition Act has parallels to the Patriot Act.
The French recanted and a war was avoided, so the Alien and Sedition Acts did not work strategically as what Hofstadter calls the "High Federalists" had hoped. Richard Hofstadter writes (The Idea of a Party System, p. 106):
"Federalist leaders made no secret of their hope of destroying opposition. Hamilton predicted that many Republican leaders would be remembered by the people in the same odious light as the Tories. Robert Goodloe Harper of South Carolina, a leading advocate of the Sedition Act in the House, wanted to be sure that 'no traitors should be left in the country' to jeopardize its defense. He professed his desire to imitate the internal security policies that had been adopted in England, charged the opposition with being a conspiracy, a faction leagued with a foreign power...'
"The language of the Sedition Act was vague enough to make a man criminally liable for almost any criticism of the government or its leading officers or any effort to combine for such a purpose. It made it possible for the courts to punish opinion, arbitrarily defined as seditious or disloyal, even in the absence of any overt act...'By identifying their administration with the government and the government with the Constitution, the Federalists construed criticism of the administration as opposition to the government and an attempt to subvert the Constitution...
"...In all, at least seventeen verifiable indictments were brought in, fourteen under the Sedition Act and three under the common law. Started in the main in 1798 or 1799, most of the cases came to trial in the election year, 1800, when it was hoped to stifle campaign criticism."
The indictments included the major Democratic Republican newspapers in New York, Boston, Philadelphia and Richmond as well as four smaller papers.
"But the Sedition Act was not conceived in a spirit of realism and it was not efficacious. The opposition was no small or paltry minority. As measured by representation in Congress, it was already at least equal to the administration in numbers...More importantly perhaps even than this, the country was still thoroughly decentralized, politically and geographically. Government, at the ultimate test, rests on sufficient force, and it was force that would have to be called upon if resistance to the laws became overt. The Virginia and Kentucky resolutions threatened that resistance might indeed reach this point, and at a time when the federal army numbered only about 3,500 men stationed mainly at frontier garrisons as a precaution against Indians, Virginia alone could have easily mustered a militia of twice that number and was indeed planning a force of 5,000. Nothing short of a foreign war would have created the conditions essential to raising a democratic army large enough, as Hamilton put it in one of his brasher moments, to 'put Virginia to the test.'"
"And here the demand for an army ran up against two of the deepest American prejudices: the tight-fisted rural reaction to taxes, and the long-standing suspicion (fully shared at this point by President Adams) against a standing army..."
Presumably, Hofstadter was a loose-fisted urbanite. Note that Madison was right in this case, which under other circumstances could have meant an armed conflict between predominantly Republican states and the Federalist-dominated government. It was decentralized that preserved freedom.
Monday, June 8, 2009
De Jouvenal on State Sovereignty
Decentralization is a managerial tool that has proven to be essential to conglomerates and other large organizations. With respect to political entities, it is essential. The managerial state, by which I mean the state that has committed to managing the delivery of services, is governed by the same principles that govern any other organization. The reason for decentralization is the difficulty in understanding problems. The large size of the federal government renders decision making difficult. Smaller size better reflects preferences and tastes. Finding a set of policies that matches people's preferences is exponentially more difficult when larger numbers of people are involved.
De Jouvenal notes that leaders of democratic-authoritarian states, like the United States, dread decentralization. Note that he argues that democracies are by their own nature authoritarian because the unfettered "national will" dispenses with law and views any intermediary unit--the family, firms, unions, hospitals, churches--as subject to its control. The transition from monarchy to democracy changes the historic role of law from that of guide to action and protector of rights to that of expression of the will of power as reflected in the sovereign will of the monarch-turned-legislature. In the United States that transition occurred from 1860 to 1935 and may be called Progressivism.
De Jouvenal writes (p. 286, On Power):
"Every Power is sure to attack centrifugal tendencies. But the behaviour of democratic Power offers in this respect some peculiar features of a striking kind. It claims its mission to be that of liberating men from the constraints put on him by the old Power, which was the more or less direct descendant of conquest. But that did not stop the Convention from guillotining the Federalists, the English Parliament from wiping out, in some of the bloodiest repressions of history, the separatist nationalism in Ireland, or the government in Washington from launching a war such as Europe had never seen to crush the attempt of the Southern States to form themselves into a separate unity. Another instance would be the action of the Spanish Republic in 1934 in opposing by force the movement to Catalan independence.
"This hostility to the formation of smaller communities is inconsistent with the claim to have inaugurated government of the people by itself, for clearly a government answers more closely to that description in smaller communities than in large. Only in smaller communities can the citizens chose their rulers directly from men whom they know personally. Only in them can justification be found for the encomium pronounced by Montesquieu:
"'The people is well fitted to choose...The people knows well whether a man has often seen active service and what successes he has won: therefore it is well equipped to choose a general. It knows whether a judge attends to his duties; whether most people leave his court satisfied; whether or not he is corrupt; therein is knowledge sufficient for it to elect a praetor. It has been impressed by the magnificence or wealth of a certain citizen; this qualifies it to choose an aedile. These are all facts which make a public square a better informed place than the palace of a king.'
"A further requirement is that there should be a public square or its equivalent, and that the choice of administrators should take place at the municipal level.
"The desire to secure the fullest measure of popular sovereignty possible should logically lead to the same principles being followed in the formation of the higher authorities. At the provincial level the population is already too large and too scattered to be effectively assembled, so that each candidate for a place may be known personally to everyone. For that reason the choice and control of regional administrators should be the work of the representatives of the municipalities. And, for the same reason, the choice and control of national administrators should be the work of representatives of the region.
"A system of this kind would assuredly be best fitted to embody popular sovereignty, especially if the representatives were held in check by imperative mandates, and were liable at any moment to be recalled by their constituents, even as the representatives attending at the Dutch States-General could be recalled by their provinces and the representatives at the States-Regional by their townships.
"But the new men whom the popular voice has made masters of the imperium have never shown any inclination to a regime of that kind. It was distasteful to them, as the heirs of the monarchical authority, to fritter away their estate on subordinating themselves. On the contrary, strong in strength of a new legitimacy, their one aim was to increase it. Against the federalist conception Sieyes was their mouthpiece:
"'A general administration which, starting from a common centre, will reach uniformly to the remotest parts of the Empire--a body of laws which, though its elements are provided by the body of citizens, takes bodily form at as distant a level as that of the National Assembly, to whom alone it belongs to interpret the general wish, that wish which thereafter falls with all the weight of an irresistible force on those very wills which have joined in the formation of it.'"
De Jouvenal notes that leaders of democratic-authoritarian states, like the United States, dread decentralization. Note that he argues that democracies are by their own nature authoritarian because the unfettered "national will" dispenses with law and views any intermediary unit--the family, firms, unions, hospitals, churches--as subject to its control. The transition from monarchy to democracy changes the historic role of law from that of guide to action and protector of rights to that of expression of the will of power as reflected in the sovereign will of the monarch-turned-legislature. In the United States that transition occurred from 1860 to 1935 and may be called Progressivism.
De Jouvenal writes (p. 286, On Power):
"Every Power is sure to attack centrifugal tendencies. But the behaviour of democratic Power offers in this respect some peculiar features of a striking kind. It claims its mission to be that of liberating men from the constraints put on him by the old Power, which was the more or less direct descendant of conquest. But that did not stop the Convention from guillotining the Federalists, the English Parliament from wiping out, in some of the bloodiest repressions of history, the separatist nationalism in Ireland, or the government in Washington from launching a war such as Europe had never seen to crush the attempt of the Southern States to form themselves into a separate unity. Another instance would be the action of the Spanish Republic in 1934 in opposing by force the movement to Catalan independence.
"This hostility to the formation of smaller communities is inconsistent with the claim to have inaugurated government of the people by itself, for clearly a government answers more closely to that description in smaller communities than in large. Only in smaller communities can the citizens chose their rulers directly from men whom they know personally. Only in them can justification be found for the encomium pronounced by Montesquieu:
"'The people is well fitted to choose...The people knows well whether a man has often seen active service and what successes he has won: therefore it is well equipped to choose a general. It knows whether a judge attends to his duties; whether most people leave his court satisfied; whether or not he is corrupt; therein is knowledge sufficient for it to elect a praetor. It has been impressed by the magnificence or wealth of a certain citizen; this qualifies it to choose an aedile. These are all facts which make a public square a better informed place than the palace of a king.'
"A further requirement is that there should be a public square or its equivalent, and that the choice of administrators should take place at the municipal level.
"The desire to secure the fullest measure of popular sovereignty possible should logically lead to the same principles being followed in the formation of the higher authorities. At the provincial level the population is already too large and too scattered to be effectively assembled, so that each candidate for a place may be known personally to everyone. For that reason the choice and control of regional administrators should be the work of the representatives of the municipalities. And, for the same reason, the choice and control of national administrators should be the work of representatives of the region.
"A system of this kind would assuredly be best fitted to embody popular sovereignty, especially if the representatives were held in check by imperative mandates, and were liable at any moment to be recalled by their constituents, even as the representatives attending at the Dutch States-General could be recalled by their provinces and the representatives at the States-Regional by their townships.
"But the new men whom the popular voice has made masters of the imperium have never shown any inclination to a regime of that kind. It was distasteful to them, as the heirs of the monarchical authority, to fritter away their estate on subordinating themselves. On the contrary, strong in strength of a new legitimacy, their one aim was to increase it. Against the federalist conception Sieyes was their mouthpiece:
"'A general administration which, starting from a common centre, will reach uniformly to the remotest parts of the Empire--a body of laws which, though its elements are provided by the body of citizens, takes bodily form at as distant a level as that of the National Assembly, to whom alone it belongs to interpret the general wish, that wish which thereafter falls with all the weight of an irresistible force on those very wills which have joined in the formation of it.'"
Thursday, June 4, 2009
De Jouvenal on the Public Loss Function
The notion of a loss function is the basis of total quality management. Quality losses appear when the realization of an output deviates from its target qualities. For instance, if a nail is supposed to be 6 inches long, and it comes off the conveyer belt measuring 6.0000001 inches, the .0000001 is a loss. Total quality management is a process of reducing the loss by investigating deviations that are more than three standard deviations from the target.
De Jouvenal argues that Power, the governing elite, derives historically from conquest. In European history this took the form of the conquest of the Roman territories and Rome itself by the Franks, Goths, Angles, and other Barbarians. In China this took the form of the unification of China by the Duke of Zhou and Qin Shi Huang's reunification following the warring states period. Qin, by the way, buried China's scholars alive, a fate I have dreaded after seeing the movie The Vanishing.
The monarch or leader of the conquering tribe exploits the conquered population rather than kill them. The invention of slavery reduced the amount of killing because the conquerers learned to make use of the conquered economically. The king realizes that the nobility, the leaders of his army, pose a threat to his power. Over time, perhaps multi-generationally, the king realizes that by taking the side of the conquered against the nobility he can reduce the power of the nobility and enhance his own power. This happened in England in the 1500s. The establishment of the Chinese Civil Service was within roughly two centuries of the Qin Shi Huang's reunification of China. In America, the Progressives, representatives of big business, realized that they could work with populist and socialist movements by saying that they were against the trusts, and in doing so bring regulations that attacked the rising entrepreneurs and benefited big business to bear. Thus, the king creates a bureaucracy or civil service that aims to provide social benefits in order to unite the people against the nobility. This occurred in modified form in the United States. Abraham Lincoln had enhanced federal power in the 1860s, and Progressivism appeared within 40 years.
Ultimately the people realize that the king can be replaced with the popular sovereignty or national will, which of course are non-existent imaginings. The king is deposed and democracy replaces the monarchy. The unlimited definition of democracy, in turn, leads to tyranny. Thus, the French Revolution led to killings by Jacobins, Robespierre and the Committee of Public Safety; the democratic revolution of Sun Yat Sen led to the tyranny of Mao Tse Tung; and the overthrow of the Czar led to the Bolshevik Revolution.
In America De Jouvenal's model does not apply exactly because there was no monarch. Also, Rousseau's unlimited theory of democracy did not take hold. Rather, Lockean liberalism limits the power of democracy. Hence, the tyrannies and suffocating power of government that took hold in backward Europe and Asia did not occur here. However, America's elite, jealous of the wonderful triumphs in Europe, aimed to introduce Rousseauean unlimited democracy here. Just two decades before the ascension of both Hitler and Stalin, Herbert Croly, Walter Weyl and Theodore Roosevelt argued for Progressivism. Croly's book glorifies the state and is very much in the tradition of German historicism, as was Progressivism in general.
The notion of a loss function is that the action of a producer can be improved by reducing losses. Many will argue with the claim that unlimited democracy leads to tyranny. However, whether you believe that unlimited democracy leads to social justice and benefits society, or whether you believe that limited government is better at achieving those ends, the question needs to be asked what the method of achieving each citizen's best interests can be. In other words, even if unlimited democracy and the state apparatus can advantage society, the question needs to be asked what method of execution or production will work best. It is unlikely that the centralized state by which Progressives hoped to emulate European Christian Socialism and social democracy (and itself was but an extension of monarchy, according to De Juvenal) is best at meeting public needs even if the state is better at meeting public needs than are private firms. The reason is bounded rationality.
Bounded rationality was discussed by March and Simon with respect to organizations in their book Organizations. Walter Lippmann discussed the idea with respect to public opinion in his book Public Opinion. Ludwig von Mises discussed it with respect to centralized economic planning. And De Jouvenal discusses it with respect to the ability of the state to achieve the objective of the common good.
Naturally, he mocks the idea that Power (as he defines it, the elite that governs society) has the common good in mind. This is the assumption of all advocates of big government, socialism, Progressivism, social democracy and the like. The notion that people seek power out of altruistic ends is laughable. We see this today with the naive news broadcasters, like CNN's Jack Cafferty, who offer prayers to Saint Barack Obama and his colleague, Lou Dobbs, whose head touches the floor seven times whenever Saint Barack's name is mentioned. But De Jouvenal grants this assumption.
He notes:
"But as soon Power is conceived as being exclusively the agent of the common good, it must form a clear picture for itself of what this common good is. While Power was eogist, the vital necessity under which it lay of reaching every day a daily accommodation with society, itself sufficed to form in it pictures of public requirements which, though confused, were born of actual contacts. But as soon as Power, under the spur of altruism, has a vision of the entire community and what medicine it needs, the inadequacy of human intelligence to such a task appears in its fullness. What the judgment pronounces then shows itself a blinder guide than what the senses indicate--to put it another way, touch is superior to vision.
"It is a noteworthy fact that all the greatest political mistakes stem from defective appraisals of the common good--mistakes from which egoism, had it been called into consultation, would have warned Power off." (On Power, p. 137).
In organizational theory, it is well established that one of the cures for cognitive limits on rationality is decentralization or divisionalization of organizations. Thus, one way to address the problem of the social loss function that government creates is to reduce the scope of governance. In other words, to download responsibility to the states.
American government anticipated this idea in the form of Federalism. However, the tendency over the past two centuries has been to reduce the power of the states and increase the monarchical power of the federal government. The reason for this is, as De Jouvenal points out, the economic, political and egoistic interests of the ruling elite--the politicians in Washington, the Justices of the Supreme Court, the academics who cater to them and receive significant jobs and consulting contracts, and the military industrial complex.
The monarchical process thus results in one rather odd effect: that a key finding of the social sciences, that information is difficult to procure; that rationality is limited; and that experimentation is the best way to learn; is scoffed at by judges, economists and academicians, whose economic interests take precedence over their interest in pursuing justice or the truth.
De Jouvenal argues that Power, the governing elite, derives historically from conquest. In European history this took the form of the conquest of the Roman territories and Rome itself by the Franks, Goths, Angles, and other Barbarians. In China this took the form of the unification of China by the Duke of Zhou and Qin Shi Huang's reunification following the warring states period. Qin, by the way, buried China's scholars alive, a fate I have dreaded after seeing the movie The Vanishing.
The monarch or leader of the conquering tribe exploits the conquered population rather than kill them. The invention of slavery reduced the amount of killing because the conquerers learned to make use of the conquered economically. The king realizes that the nobility, the leaders of his army, pose a threat to his power. Over time, perhaps multi-generationally, the king realizes that by taking the side of the conquered against the nobility he can reduce the power of the nobility and enhance his own power. This happened in England in the 1500s. The establishment of the Chinese Civil Service was within roughly two centuries of the Qin Shi Huang's reunification of China. In America, the Progressives, representatives of big business, realized that they could work with populist and socialist movements by saying that they were against the trusts, and in doing so bring regulations that attacked the rising entrepreneurs and benefited big business to bear. Thus, the king creates a bureaucracy or civil service that aims to provide social benefits in order to unite the people against the nobility. This occurred in modified form in the United States. Abraham Lincoln had enhanced federal power in the 1860s, and Progressivism appeared within 40 years.
Ultimately the people realize that the king can be replaced with the popular sovereignty or national will, which of course are non-existent imaginings. The king is deposed and democracy replaces the monarchy. The unlimited definition of democracy, in turn, leads to tyranny. Thus, the French Revolution led to killings by Jacobins, Robespierre and the Committee of Public Safety; the democratic revolution of Sun Yat Sen led to the tyranny of Mao Tse Tung; and the overthrow of the Czar led to the Bolshevik Revolution.
In America De Jouvenal's model does not apply exactly because there was no monarch. Also, Rousseau's unlimited theory of democracy did not take hold. Rather, Lockean liberalism limits the power of democracy. Hence, the tyrannies and suffocating power of government that took hold in backward Europe and Asia did not occur here. However, America's elite, jealous of the wonderful triumphs in Europe, aimed to introduce Rousseauean unlimited democracy here. Just two decades before the ascension of both Hitler and Stalin, Herbert Croly, Walter Weyl and Theodore Roosevelt argued for Progressivism. Croly's book glorifies the state and is very much in the tradition of German historicism, as was Progressivism in general.
The notion of a loss function is that the action of a producer can be improved by reducing losses. Many will argue with the claim that unlimited democracy leads to tyranny. However, whether you believe that unlimited democracy leads to social justice and benefits society, or whether you believe that limited government is better at achieving those ends, the question needs to be asked what the method of achieving each citizen's best interests can be. In other words, even if unlimited democracy and the state apparatus can advantage society, the question needs to be asked what method of execution or production will work best. It is unlikely that the centralized state by which Progressives hoped to emulate European Christian Socialism and social democracy (and itself was but an extension of monarchy, according to De Juvenal) is best at meeting public needs even if the state is better at meeting public needs than are private firms. The reason is bounded rationality.
Bounded rationality was discussed by March and Simon with respect to organizations in their book Organizations. Walter Lippmann discussed the idea with respect to public opinion in his book Public Opinion. Ludwig von Mises discussed it with respect to centralized economic planning. And De Jouvenal discusses it with respect to the ability of the state to achieve the objective of the common good.
Naturally, he mocks the idea that Power (as he defines it, the elite that governs society) has the common good in mind. This is the assumption of all advocates of big government, socialism, Progressivism, social democracy and the like. The notion that people seek power out of altruistic ends is laughable. We see this today with the naive news broadcasters, like CNN's Jack Cafferty, who offer prayers to Saint Barack Obama and his colleague, Lou Dobbs, whose head touches the floor seven times whenever Saint Barack's name is mentioned. But De Jouvenal grants this assumption.
He notes:
"But as soon Power is conceived as being exclusively the agent of the common good, it must form a clear picture for itself of what this common good is. While Power was eogist, the vital necessity under which it lay of reaching every day a daily accommodation with society, itself sufficed to form in it pictures of public requirements which, though confused, were born of actual contacts. But as soon as Power, under the spur of altruism, has a vision of the entire community and what medicine it needs, the inadequacy of human intelligence to such a task appears in its fullness. What the judgment pronounces then shows itself a blinder guide than what the senses indicate--to put it another way, touch is superior to vision.
"It is a noteworthy fact that all the greatest political mistakes stem from defective appraisals of the common good--mistakes from which egoism, had it been called into consultation, would have warned Power off." (On Power, p. 137).
In organizational theory, it is well established that one of the cures for cognitive limits on rationality is decentralization or divisionalization of organizations. Thus, one way to address the problem of the social loss function that government creates is to reduce the scope of governance. In other words, to download responsibility to the states.
American government anticipated this idea in the form of Federalism. However, the tendency over the past two centuries has been to reduce the power of the states and increase the monarchical power of the federal government. The reason for this is, as De Jouvenal points out, the economic, political and egoistic interests of the ruling elite--the politicians in Washington, the Justices of the Supreme Court, the academics who cater to them and receive significant jobs and consulting contracts, and the military industrial complex.
The monarchical process thus results in one rather odd effect: that a key finding of the social sciences, that information is difficult to procure; that rationality is limited; and that experimentation is the best way to learn; is scoffed at by judges, economists and academicians, whose economic interests take precedence over their interest in pursuing justice or the truth.
Friday, April 10, 2009
The Unity Philosophy Failed Because Laissez Faire Succeeded
In the US, the notion that there needs to be a strong central state began with the Federalist Papers. The Federalists left a considerable degree of decentralized authority with the states, but from the beginning there was ambiguity as to how decentralized decision making ought to be. Centalization was re enforced with the Civil War, which further strengthened the federal government and opened the door to Progressivism. The Progressives were not necessarily centralizers. However, the key federal legislation that came from Progressivism, the Hepburn Act, the Federal Trade Commission, the federal income tax and the Federal Reserve Bank as well as imperialist ventures like the Spanish American War were all centralizing. On the other hand, much of the Progressive legislation, such as Workers' Compensation, housing codes and wage and hours laws respecting women and children proceeded at the state level. The New Deal served as a centralizing force on Progressivism, and may be viewed as the culmination of 160 years of Hamiltonian federalism.
The centralizing trend came about because of conflicts about morals and economic opportunism. As Charles Beard and other Progressives argued, much of the motive for the federal Constitution was economic gain to domestic manufacturers, which Hamilton wholeheartedly supported as did Madison and Jefferson to a lesser degree. But abolitionism and then concern about trusts led to moralizing about the economy. Until the post-bellum era Protestantism had been associated with local community as in John Winthrop's City on a Hill. The states were separate religious communities and did not aim to impose their religious-based moralities on other states. But slavery posed a national moral problem, as did the central bank. Thus Calvinist morality took on a national scope. The notion that the nation was a moral community took hold. Among the advocates of this notion were the late nineteenth century Mugwumps, who were among the first media-based national moral movements. The Mugwumps were mostly Protestant, although there were a few Catholics and Jews among their ranks as well (there were few Jews in America in the 1870s but there was a handful of notable Jewish Mugwumps, such as Simon Sterne). The Mugwumps were not necessarily religious, but they had been religiously trained and applied the morality of their education to the economic problems facing America, for instance, the corruption associated with the railroads, the Greenback inflation and most of all the need for a civil service to counteract the urban corruption of the political boss system. Although the Mugwumps were laissez faire in ideology they were very much the precursor to the Progressives in that they focused on national issues and saw national solutions in terms of the need to rationalize government.
The trend toward centralization thus came out of the Civil War and was re enforced by one outcome of Progressivism: the intensification of Jim Crow laws, especially in the South. As the results of Jim Crow became evident in the early twentieth century, the need to counteract it took hold in a reincarnation of the Civil War in terms of the Civil Rights movement. As well, the Roosevelt administration saw economic problems as resolvable at the federal level. Thus, Social Security, labor law, wage and hour laws, securities regulation, agricultural regulation and public works took hold in the public mind.
This was occurring precisely as it became evident to managers in America's large industrial firms that centralization does not work. This was noted by Alfred Chandler in his book "Strategy and Structure", especially with respect to Alfred Sloan. Sloan modeled General Motors after the federal government, downloading responsibility to the automotive and other manufacturing divisions just before Roosevelt saw fit to centralize decision making in Washington.
As it turned out, Sloan was right, although subsequent generations of General Motors executives dropped the ball. As General Motors re-centralized it failed to be able to compete with innovations of the much smaller Toyota Automotive in the 1950s. These innovations were known as lean manufacturing. As well, Toyota was able to adopt the ideas of Edward I. Deming.
As American industry found that decentralization was necessary to competent management, the federal government became more insistent on centralization. Part of this was due to intensification of the Civil Rights struggle in the 1960s, but part was due to the egos and greed of politicians and academics who oversaw federal policy. Thus, plans like Medicaid and Medicare which could have been experimentally adopted at the state levels, with the best results revealed, were thrown into existence in a slipshod manner at the federal level without the pragmatic advantage of state-based experimentation. Policies concerning health care, social security, pension regulation, health and safety regulation, auto safety, pollution and most of all monetary policy were adopted at the federal level, typically with poor to mediocre results.
The failure of the Great Society Programs; the mismanagement of social security; the crippling effects on inner city blacks of urban renewal and labor laws; the instability due to monetary policy under Richard M. Nixon and the early years of the Carter administration might have given the centralizers pause. But it did not.
Unwilling or unable to grasp the reasons why centralization does not work, they continue to push for dramatic, centralized solutions to America's problems. The result: the sub-prime crisis; the series of bubbles that occurred in the 1990s and 2000's; declining real hourly wages; a failing social security system (or a social security that fails to provide an adequate retirement benefit despite 14% annual contributions by workers and their employers); and declining career opportunities for young people.
Despite these and other failures, the "progressives" continue to agitate for the same failed, centralized approach. This should be called the "pathology of centralization".
The centralizing trend came about because of conflicts about morals and economic opportunism. As Charles Beard and other Progressives argued, much of the motive for the federal Constitution was economic gain to domestic manufacturers, which Hamilton wholeheartedly supported as did Madison and Jefferson to a lesser degree. But abolitionism and then concern about trusts led to moralizing about the economy. Until the post-bellum era Protestantism had been associated with local community as in John Winthrop's City on a Hill. The states were separate religious communities and did not aim to impose their religious-based moralities on other states. But slavery posed a national moral problem, as did the central bank. Thus Calvinist morality took on a national scope. The notion that the nation was a moral community took hold. Among the advocates of this notion were the late nineteenth century Mugwumps, who were among the first media-based national moral movements. The Mugwumps were mostly Protestant, although there were a few Catholics and Jews among their ranks as well (there were few Jews in America in the 1870s but there was a handful of notable Jewish Mugwumps, such as Simon Sterne). The Mugwumps were not necessarily religious, but they had been religiously trained and applied the morality of their education to the economic problems facing America, for instance, the corruption associated with the railroads, the Greenback inflation and most of all the need for a civil service to counteract the urban corruption of the political boss system. Although the Mugwumps were laissez faire in ideology they were very much the precursor to the Progressives in that they focused on national issues and saw national solutions in terms of the need to rationalize government.
The trend toward centralization thus came out of the Civil War and was re enforced by one outcome of Progressivism: the intensification of Jim Crow laws, especially in the South. As the results of Jim Crow became evident in the early twentieth century, the need to counteract it took hold in a reincarnation of the Civil War in terms of the Civil Rights movement. As well, the Roosevelt administration saw economic problems as resolvable at the federal level. Thus, Social Security, labor law, wage and hour laws, securities regulation, agricultural regulation and public works took hold in the public mind.
This was occurring precisely as it became evident to managers in America's large industrial firms that centralization does not work. This was noted by Alfred Chandler in his book "Strategy and Structure", especially with respect to Alfred Sloan. Sloan modeled General Motors after the federal government, downloading responsibility to the automotive and other manufacturing divisions just before Roosevelt saw fit to centralize decision making in Washington.
As it turned out, Sloan was right, although subsequent generations of General Motors executives dropped the ball. As General Motors re-centralized it failed to be able to compete with innovations of the much smaller Toyota Automotive in the 1950s. These innovations were known as lean manufacturing. As well, Toyota was able to adopt the ideas of Edward I. Deming.
As American industry found that decentralization was necessary to competent management, the federal government became more insistent on centralization. Part of this was due to intensification of the Civil Rights struggle in the 1960s, but part was due to the egos and greed of politicians and academics who oversaw federal policy. Thus, plans like Medicaid and Medicare which could have been experimentally adopted at the state levels, with the best results revealed, were thrown into existence in a slipshod manner at the federal level without the pragmatic advantage of state-based experimentation. Policies concerning health care, social security, pension regulation, health and safety regulation, auto safety, pollution and most of all monetary policy were adopted at the federal level, typically with poor to mediocre results.
The failure of the Great Society Programs; the mismanagement of social security; the crippling effects on inner city blacks of urban renewal and labor laws; the instability due to monetary policy under Richard M. Nixon and the early years of the Carter administration might have given the centralizers pause. But it did not.
Unwilling or unable to grasp the reasons why centralization does not work, they continue to push for dramatic, centralized solutions to America's problems. The result: the sub-prime crisis; the series of bubbles that occurred in the 1990s and 2000's; declining real hourly wages; a failing social security system (or a social security that fails to provide an adequate retirement benefit despite 14% annual contributions by workers and their employers); and declining career opportunities for young people.
Despite these and other failures, the "progressives" continue to agitate for the same failed, centralized approach. This should be called the "pathology of centralization".
Wednesday, February 18, 2009
Federalist's Argument for Union
John Jay, Federalist No. 5:
"Should the people of America divide themselves into three or four nations, would not...jealousies arise? Instead of their being 'joined in affection and free from all apprehension of different interests," envy and jealousy would soon extinguish confidence and affection, and the partial interests of each confederacy, instead of the general interests of all America, would be the only objects of their policy and pursuits. Hence, like most other bordering nations, they would always be involved in dispute and war, or live in the constant apprehension of them...
"The most sanguine advocates of three or four confederacies cannot reasonably suppose that they would long remain exactly on an equal footing in point of strength...Independent of those local circumstances which tend to beget and increase power in one part and to impede its progress in another, we must advert to the effects of that superior policy and good management which would probably distinguish the government of one above the rest, and by which their relative equality in strength and consideration would be destroyed. For it cannot be presumed that the same degree of sound policy, prudence and foresight would uniformly be observed by each of these confederacies for a long succession of years..."
But might this not argue indeed for separate confederacies? Jay assumes that management is the product of good fortune. But Sir Arnold Toynbee, a century and a half later, argued that mimesis or imitation is the hallmark of a rising civilization. Might not independent confederacies permit experimentation and learning which would potentially be imitated by the other confederacies? Management is a process of learning, and learning is possible through experimentation. The decentralization of decision processes permits learning. So the decentralization of federal power permits innovation that would not exist in a centralized federal structure.
Jay feared that less successful confederacies would fear more successful ones. Might not they decide to imitate the more successful ones instead?
In the Federalist Number Six, Hamilton argued that separate federations would likely lead to conflict and war:
"Has it not...invariably been found that momentary passions, and immediate interests, have a more active and imperious control over human conduct than general or remote considerations of policy, utility or justice? Has republics in practice been less addicted to war than monarchies?...Are there not aversions, predilections, rivalships and desires of unjust acquisitions that affect nations as well as kings?...There have been almost as many popular as royal wars...it has from long observation of progress of society become a sort of axiom in politics that vicinity, or nearness of situation, constitutes nations natural enemies..."
But decentralization need not mean de-federalization. The states can remain in unity, as a single nation, but choose separate policies voluntary. The enmity of proximity can be induced by forced collaboration and participation in programs whose values many members of society do not share. The forcible extraction of assent to programs that only a portion of the population favors can give rise to the same resentment as that which neighboring states feel toward each other. The unity of a federal republic need not mean the unity of choice of consumption or or ideal.
Hamilton makes a similar claim in Federalist number 7:
"Competitions of commerce would be another fruitful source of contention. The States less favourably circumstanced would be desirous of escaping from the disadvantages of local situation and of sharing in the advantages of of their more fortunate neighbors. Each State, or separate confederacy, would pursue a system of commercial policy peculiar to itself. This would occasion distinctions, preferences and exclusions, which would beget discontent. The habits of intercourse, on the basis of equal privileges to which we have been accustomed since the earliest settlement of the country would give a keener edge to those causes of discontent than they would naturally have independent of this circumstance. The spirit of enterprise, which characterizes the commercial part of America, has left no occasion of displaying itself unimproved. It is not at all probable that this unbridled spirit would pay much respect to those regulations of trade by which particular States might endeavor to secure exclusive benefits to their own citizens."
Hamilton's concerns need not materialize in a hyper-federalized America. In Hamilton's time, geographic differences were of great importance. Modern management methods and technological advances had not yet made the importance of process and strategy so evident as they are today. Better economic success can be imitated, especially by flexible firms that are young. It is the centralization of American buisness, its scale, that has engendered the inability to imitate Japanese processes. The misallocation of credit toward failed, large firms has prevented the formation of smaller, more nimble automobile firms.
Hamilton also argues that "the public debt of the Union would be a further cause of collision between the separate states." But hyper-federalization need not involve repudiation of debt or individually-based federal taxation. This system has been instituted and need not be repudiated until the debts have been satisfied on the basis on which they have been incurred.
"Should the people of America divide themselves into three or four nations, would not...jealousies arise? Instead of their being 'joined in affection and free from all apprehension of different interests," envy and jealousy would soon extinguish confidence and affection, and the partial interests of each confederacy, instead of the general interests of all America, would be the only objects of their policy and pursuits. Hence, like most other bordering nations, they would always be involved in dispute and war, or live in the constant apprehension of them...
"The most sanguine advocates of three or four confederacies cannot reasonably suppose that they would long remain exactly on an equal footing in point of strength...Independent of those local circumstances which tend to beget and increase power in one part and to impede its progress in another, we must advert to the effects of that superior policy and good management which would probably distinguish the government of one above the rest, and by which their relative equality in strength and consideration would be destroyed. For it cannot be presumed that the same degree of sound policy, prudence and foresight would uniformly be observed by each of these confederacies for a long succession of years..."
But might this not argue indeed for separate confederacies? Jay assumes that management is the product of good fortune. But Sir Arnold Toynbee, a century and a half later, argued that mimesis or imitation is the hallmark of a rising civilization. Might not independent confederacies permit experimentation and learning which would potentially be imitated by the other confederacies? Management is a process of learning, and learning is possible through experimentation. The decentralization of decision processes permits learning. So the decentralization of federal power permits innovation that would not exist in a centralized federal structure.
Jay feared that less successful confederacies would fear more successful ones. Might not they decide to imitate the more successful ones instead?
In the Federalist Number Six, Hamilton argued that separate federations would likely lead to conflict and war:
"Has it not...invariably been found that momentary passions, and immediate interests, have a more active and imperious control over human conduct than general or remote considerations of policy, utility or justice? Has republics in practice been less addicted to war than monarchies?...Are there not aversions, predilections, rivalships and desires of unjust acquisitions that affect nations as well as kings?...There have been almost as many popular as royal wars...it has from long observation of progress of society become a sort of axiom in politics that vicinity, or nearness of situation, constitutes nations natural enemies..."
But decentralization need not mean de-federalization. The states can remain in unity, as a single nation, but choose separate policies voluntary. The enmity of proximity can be induced by forced collaboration and participation in programs whose values many members of society do not share. The forcible extraction of assent to programs that only a portion of the population favors can give rise to the same resentment as that which neighboring states feel toward each other. The unity of a federal republic need not mean the unity of choice of consumption or or ideal.
Hamilton makes a similar claim in Federalist number 7:
"Competitions of commerce would be another fruitful source of contention. The States less favourably circumstanced would be desirous of escaping from the disadvantages of local situation and of sharing in the advantages of of their more fortunate neighbors. Each State, or separate confederacy, would pursue a system of commercial policy peculiar to itself. This would occasion distinctions, preferences and exclusions, which would beget discontent. The habits of intercourse, on the basis of equal privileges to which we have been accustomed since the earliest settlement of the country would give a keener edge to those causes of discontent than they would naturally have independent of this circumstance. The spirit of enterprise, which characterizes the commercial part of America, has left no occasion of displaying itself unimproved. It is not at all probable that this unbridled spirit would pay much respect to those regulations of trade by which particular States might endeavor to secure exclusive benefits to their own citizens."
Hamilton's concerns need not materialize in a hyper-federalized America. In Hamilton's time, geographic differences were of great importance. Modern management methods and technological advances had not yet made the importance of process and strategy so evident as they are today. Better economic success can be imitated, especially by flexible firms that are young. It is the centralization of American buisness, its scale, that has engendered the inability to imitate Japanese processes. The misallocation of credit toward failed, large firms has prevented the formation of smaller, more nimble automobile firms.
Hamilton also argues that "the public debt of the Union would be a further cause of collision between the separate states." But hyper-federalization need not involve repudiation of debt or individually-based federal taxation. This system has been instituted and need not be repudiated until the debts have been satisfied on the basis on which they have been incurred.
Tuesday, February 17, 2009
Jan Tinbergen on Decentralization
Jan Tinbergen was a Dutch economist who won the Nobel prize in economics. His brother, Nikolaas, won the Nobel Prize in physiology or medicine. Tinbergen was a mathematically oriented economist who wrote from a Keynesian perspective. In 1954 he wrote a monograph "Centralization and Decentralization in Economic Policy"* in which he outlines structural equations that might be useful in studying the effects of decentralization on social welfare. He defines "conformity" as the conformity of policy makers' assumptions to the real world. In the chapter on centralized economic policy he notes the importance of trial and error to policy making. He is talking about quantitative policy goals such as income and price levels (p. 16):
"Conformity will hardly ever exactly be realised in practice, if only because of our imperfect knowledge of the structural constants or because of changes in such 'constants'. This circumstance makes it necessary and more or less usual for policy-makers to follow a trial-and-error policy method. They will try a certain value of their instrument and observe the result. Dependent on this result they will adjust the instrument variable. In view of this practice it is sometimes doubted whether it is any use to make econometric estimates for the values of the instrument variables. The answer is that although it is possible by trial and error to find the correct values, this method nevertheless implies some waste...social utility is usually unfavourably influenced by the frequency of changes in political instrument values."
The problem of uncovering the correct policy course becomes even more severe in the case of qualitative policies:
"In the case of qualitative changes all we can do, as a rule, is just to calculate the outcome for the alternative cases and to compare them...the problem of comparing alternative forms of organisation of economic life constitutes the problem par excellence of economic science; its real raison d'etre."
Tinbergen notes that:
"If in particular a higher degree of centralization would have been possible and would have led to target variable values with a higher utility, the reason of the discrepancy may be said to be the very fact of decentralization. In the case of non-conformity it is by wrong insight into or knowledge of the objective equations that wrong instrument variables are chosen. Simple though this phenomenon and its remedy may seem, it is not so simple in practice. One reason is that exact knowledge on the mechanism of an economy does not exist and that there can, therefore, only be question of better or worse approximations. Another reason is that even experts in this field are not unanimous and that it will be very difficult, then, for non-experts to be. Even if there is unanimity among experts in some cases, it is not easy to convince the rank and file of large organizations of this expert opinion."
Although economies of scale make centralization more efficient (p. 59):
"(I)t is in the nature of centralization that it will be more costly as soon as purely technical economies of scale are out of the question. It generally requires a bigger administrative machinery and, before all, more interference with private freedom,"
and (p. 62):
"any application of an instrument in a centralized way will imply higher disutilities, or will lower utility more than will the same application in a decentralized situation would. There is, therefore, a general tendency in a centralized situation to make less use of all the instruments, which will be the stronger the higher the disutilities are."
However, in decentralized situations policies which help other units are used to a lesser degree than they would be in a centralized situation so if there are positive overflows, the decentralized approach may not be as good.
Where all the units have similar or identical perceptions of their own social welfare then centralized regimes are to be preferred. Moreover, where policy instruments conflict among the goals of subunits or where a policy would help all the subunits if applied across the board, then a centralized approach is better.
But instruments which do not affect other decentralized units are better applied at a decentralized level (p. 74):
"In plain language, the cost and trouble will be diminished, without changing the situation any further...Each decentralization means reduction of costs and disutility generally."
Thus, where each unit's social welfare is similar to the others, policies which are neutral or do not affect the other units are best pursued on a decentralized basis and policies that can have an across the board positive effect are best pursued on a centralized basis (such as general price levels).
It is difficult to know which policies have positive overflows. Many policies have negative effects. Economists of the 1940s believed that the Fed was an instrument for positive results. Today, even the Keynesian descendants of this group does not deny that Fed oversight of the banking system has resulted in endemic catastrophes and miscalculations leading to the need for a trillion dollar welfare infusion from the public.
Polices which have outright negative effects, which I would argue that the Fed and the American banking system has, are better implemented on a decentralized basis because the groupthink, ideological commitment to central banking and massive errors that policy makers commit can be limited to local units that have preferred to take such risks.
*J. Tinbergen, "Centralization and Decentralization in Economic Policy". Amsterdam: North-Holland Publishing Company, 1954.
"Conformity will hardly ever exactly be realised in practice, if only because of our imperfect knowledge of the structural constants or because of changes in such 'constants'. This circumstance makes it necessary and more or less usual for policy-makers to follow a trial-and-error policy method. They will try a certain value of their instrument and observe the result. Dependent on this result they will adjust the instrument variable. In view of this practice it is sometimes doubted whether it is any use to make econometric estimates for the values of the instrument variables. The answer is that although it is possible by trial and error to find the correct values, this method nevertheless implies some waste...social utility is usually unfavourably influenced by the frequency of changes in political instrument values."
The problem of uncovering the correct policy course becomes even more severe in the case of qualitative policies:
"In the case of qualitative changes all we can do, as a rule, is just to calculate the outcome for the alternative cases and to compare them...the problem of comparing alternative forms of organisation of economic life constitutes the problem par excellence of economic science; its real raison d'etre."
Tinbergen notes that:
"If in particular a higher degree of centralization would have been possible and would have led to target variable values with a higher utility, the reason of the discrepancy may be said to be the very fact of decentralization. In the case of non-conformity it is by wrong insight into or knowledge of the objective equations that wrong instrument variables are chosen. Simple though this phenomenon and its remedy may seem, it is not so simple in practice. One reason is that exact knowledge on the mechanism of an economy does not exist and that there can, therefore, only be question of better or worse approximations. Another reason is that even experts in this field are not unanimous and that it will be very difficult, then, for non-experts to be. Even if there is unanimity among experts in some cases, it is not easy to convince the rank and file of large organizations of this expert opinion."
Although economies of scale make centralization more efficient (p. 59):
"(I)t is in the nature of centralization that it will be more costly as soon as purely technical economies of scale are out of the question. It generally requires a bigger administrative machinery and, before all, more interference with private freedom,"
and (p. 62):
"any application of an instrument in a centralized way will imply higher disutilities, or will lower utility more than will the same application in a decentralized situation would. There is, therefore, a general tendency in a centralized situation to make less use of all the instruments, which will be the stronger the higher the disutilities are."
However, in decentralized situations policies which help other units are used to a lesser degree than they would be in a centralized situation so if there are positive overflows, the decentralized approach may not be as good.
Where all the units have similar or identical perceptions of their own social welfare then centralized regimes are to be preferred. Moreover, where policy instruments conflict among the goals of subunits or where a policy would help all the subunits if applied across the board, then a centralized approach is better.
But instruments which do not affect other decentralized units are better applied at a decentralized level (p. 74):
"In plain language, the cost and trouble will be diminished, without changing the situation any further...Each decentralization means reduction of costs and disutility generally."
Thus, where each unit's social welfare is similar to the others, policies which are neutral or do not affect the other units are best pursued on a decentralized basis and policies that can have an across the board positive effect are best pursued on a centralized basis (such as general price levels).
It is difficult to know which policies have positive overflows. Many policies have negative effects. Economists of the 1940s believed that the Fed was an instrument for positive results. Today, even the Keynesian descendants of this group does not deny that Fed oversight of the banking system has resulted in endemic catastrophes and miscalculations leading to the need for a trillion dollar welfare infusion from the public.
Polices which have outright negative effects, which I would argue that the Fed and the American banking system has, are better implemented on a decentralized basis because the groupthink, ideological commitment to central banking and massive errors that policy makers commit can be limited to local units that have preferred to take such risks.
*J. Tinbergen, "Centralization and Decentralization in Economic Policy". Amsterdam: North-Holland Publishing Company, 1954.
Wednesday, February 4, 2009
Decentralization, Banking and the Two Party System
The American party system has changed four times, and three of the changes were linked to money and banking. Moreover, three of the changes were linked to the issue of decentralization and states' rights. The current tremors surrounding monetary policy and the Federal Reserve Bank coincide with increasing questioning of why the Democrats and Republicans have failed to question the subsidization of investment and commercial banks and the recent Federal Reserve Bank inflation of the monetary base. One key difference between the current crisis in the American party system and past crises is the absence of a competent press or media. These were central to political debate in America until the 1930s. However, the transition from passive to active electronic media has reinvented, downsized and in a sense traditionalized the press from the centralized mainstream media that was prevalent in the 1950s to websites and blogs that are reminiscent of early newspapers.
The changes in the American party system were as follows. First, the establishment of the Federalist and Democratic Republican parties in response to Alexander Hamilton's advocacy of the First Bank and federal subsidies to manufacturing. Second, the split between the National Republicans and the Democratic Republicans, which became the split between the Whigs and the Democrats in 1836 specifically in response to Andrew Jackson's removal of federal assets from the Second Bank and his veto of the Second Bank. Note that decentralization played a role both in the Federalist-Democratic division in the 1790s and the Whig-Democratic division of 1836. Both the Federalists and the Whigs were elitist centralizers and the Democrats were decentralizers, pale copiers of the earlier anti-Federalists.
The third party formation was of course in the 1850s, the formation of the Republican Party, the centralizing party that inherited Whig elitism but reformulated its ideology to combine (a) surface advocacy of laissez faire, in imitation of Jackson with (b) the traditional Whig advocacy of centralization. The Civil War was fought not over banking but slavery. It was here that the centralization issue came to the fore.
The fourth party formation occurred in 1896, when William Jennings Bryan reinvented the Democratic Party as the party of inflation and free silver. Many of the subsequent centralizing ideas of Franklin D. Roosevelt were included in Bryan's philosophy. In 1896 the debate between centralizers and decentralizers died. Although the southern Democrats continued to advocate decentralization, the majority of the two major parties became committed to reform on a centralized basis.
This transformation was reinforced in the 1930s, when Roosevelt accelerated the Democrats' insistence on centralization.
Of the four changes, only the establishment of the Republican Party did not involve banking. However, the Republicans' insistence on intensification of centralization, not only concerning the Union but also the National Banking Act, led to establishment of the Federal Reserve Bank five decades later.
The development of American politics, then, has been toward centralization. But in management, business, economics and political theory, centralization was increasingly shown to be an inferior solution during the past eight decades.
One of the pivotal moments in American politics was Andrew Jackson's formulation of the Democratic Party. Until then, parties barely existed in America. Jackson identified the special interest of privilege linked to paper money and held that the formation of an organized party of common Americans was necessary to forestall privilege and banking interests. He was not certain that the average American was capable of withstanding the onslaught of paper money advocacy and privilege associated with central banking. The power of Jackson's vision was great, and the powerful party organization of the nineteenth century and the public's commitment to sound money permitted survival of the Jacksonian system for nearly eight decades.
However, the ideas of Fabian socialism, Bismarck's social democracy and Progressivism provided American elites with new ammunition that the Jacksonian model could not contemplate. These included the use of pretense of supporting the common man in the name of elite privilege as a tool to wrest control of banking and money in favor of economic elites. This was accomplished in the context of modest reform in areas such as workers' compensation and then in the 1930s minimum wages and social security, all with dubious value to the average American.
Nor was Jacksonian democracy itself free of special interest characteristics. There have been wrinkles and overlap in all of the American party formulations. The Jacksonian Democrats were cruel racists. Jackson oversaw the Trail of Tears march and the insistent American racism traces its resonance to Jacksonian Democracy. Jacksonian Democracy itself was a form of special interest formulation, of the common white male identifying himself as superior to blacks and native Americans.
As Louis Hartz correctly points out, the brilliance of the Whigs was the use of the Lockean imagery in the interest of mercantilist philosophy. This has been the artifice of the Republicans since the Civil War. But all of American party ideologies have been self-contradictory, and the Republican is as well. Jackson claimed to be a democrat, yet he forestalled South Carolinian nullification. He claim to be for states' rights, yet he created rigid national party organization.
Today, the Republicans claim to be for free markets yet institute socialism. Much like the Democratic Republicans in 1836, the Republicans are at the breaking point.
The changes in the American party system were as follows. First, the establishment of the Federalist and Democratic Republican parties in response to Alexander Hamilton's advocacy of the First Bank and federal subsidies to manufacturing. Second, the split between the National Republicans and the Democratic Republicans, which became the split between the Whigs and the Democrats in 1836 specifically in response to Andrew Jackson's removal of federal assets from the Second Bank and his veto of the Second Bank. Note that decentralization played a role both in the Federalist-Democratic division in the 1790s and the Whig-Democratic division of 1836. Both the Federalists and the Whigs were elitist centralizers and the Democrats were decentralizers, pale copiers of the earlier anti-Federalists.
The third party formation was of course in the 1850s, the formation of the Republican Party, the centralizing party that inherited Whig elitism but reformulated its ideology to combine (a) surface advocacy of laissez faire, in imitation of Jackson with (b) the traditional Whig advocacy of centralization. The Civil War was fought not over banking but slavery. It was here that the centralization issue came to the fore.
The fourth party formation occurred in 1896, when William Jennings Bryan reinvented the Democratic Party as the party of inflation and free silver. Many of the subsequent centralizing ideas of Franklin D. Roosevelt were included in Bryan's philosophy. In 1896 the debate between centralizers and decentralizers died. Although the southern Democrats continued to advocate decentralization, the majority of the two major parties became committed to reform on a centralized basis.
This transformation was reinforced in the 1930s, when Roosevelt accelerated the Democrats' insistence on centralization.
Of the four changes, only the establishment of the Republican Party did not involve banking. However, the Republicans' insistence on intensification of centralization, not only concerning the Union but also the National Banking Act, led to establishment of the Federal Reserve Bank five decades later.
The development of American politics, then, has been toward centralization. But in management, business, economics and political theory, centralization was increasingly shown to be an inferior solution during the past eight decades.
One of the pivotal moments in American politics was Andrew Jackson's formulation of the Democratic Party. Until then, parties barely existed in America. Jackson identified the special interest of privilege linked to paper money and held that the formation of an organized party of common Americans was necessary to forestall privilege and banking interests. He was not certain that the average American was capable of withstanding the onslaught of paper money advocacy and privilege associated with central banking. The power of Jackson's vision was great, and the powerful party organization of the nineteenth century and the public's commitment to sound money permitted survival of the Jacksonian system for nearly eight decades.
However, the ideas of Fabian socialism, Bismarck's social democracy and Progressivism provided American elites with new ammunition that the Jacksonian model could not contemplate. These included the use of pretense of supporting the common man in the name of elite privilege as a tool to wrest control of banking and money in favor of economic elites. This was accomplished in the context of modest reform in areas such as workers' compensation and then in the 1930s minimum wages and social security, all with dubious value to the average American.
Nor was Jacksonian democracy itself free of special interest characteristics. There have been wrinkles and overlap in all of the American party formulations. The Jacksonian Democrats were cruel racists. Jackson oversaw the Trail of Tears march and the insistent American racism traces its resonance to Jacksonian Democracy. Jacksonian Democracy itself was a form of special interest formulation, of the common white male identifying himself as superior to blacks and native Americans.
As Louis Hartz correctly points out, the brilliance of the Whigs was the use of the Lockean imagery in the interest of mercantilist philosophy. This has been the artifice of the Republicans since the Civil War. But all of American party ideologies have been self-contradictory, and the Republican is as well. Jackson claimed to be a democrat, yet he forestalled South Carolinian nullification. He claim to be for states' rights, yet he created rigid national party organization.
Today, the Republicans claim to be for free markets yet institute socialism. Much like the Democratic Republicans in 1836, the Republicans are at the breaking point.
Monday, January 26, 2009
Rationality and Decentralization in Montesquieu's Spirit of Laws
In his famous article "The Nature of the Firm", Ronald Coase claimed that firms exist because they are cost minimizing. It is cheaper to coordinate a set of economic processes using methods available to business concerns than on the market. Coase thus suggests that marginal costs of organization will tend to be equated to the returns from organization. In general, the larger the firm the greater the costs of organization. Transactions involved in maintaining complex or large organizations are more costly than transactions involved in maintaining smaller ones. Firms grow to an optimal size given the costs and benefits to scale. Economies of scale refer to declining unit costs because of increasing sized firms' increasing ability to spread overhead over a large number of units. But increasing organization costs, also due to increasing size, may outweigh the costs per unit.
Anticipating Coase by more than two centuries and relying on comparative historical analysis, Charles de Secondat, Baron de Montestquieu, makes a parallel claim about the benefits of scale in the design of republics. Montesquieu writes that the optimal size of republics is small, because large scale republics permit large fortunes, which in turn create immoderate demands by interest groups. The competition of special interests leads to an overemphasis on private concerns and an underemphasis on the public good:
"In an extensive republic the public good is sacrificed to a thousand private views; it is subordinate to exceptions, and depends on accidents. In a small one, the interest of the public is more obvious, better understood, and more within the reach of every citizen; abuses have less extent, and of course are less protected."*
Montesquieu gives as an example the Greek republics, which were small city states. Montesquieu also notes that there are advantages to great as opposed to petty states. Thus, he is arguing for a balance, or optimization, of benefits as opposed to costs. In Book IX Montesquieu notes that small republics may be destroyed by foreign invasions and large repulics are destroyed by "internal imperfections". But, argues Montesquieu "confederate republics" have the advantages of a republic together with the external force of a monarchical government. "Hence it proceeds that Holland, Germany and the Swiss cantons are considered in Europe as perpetual republics." The many states balance power. Insurrections in one state can be quelled by others. But confederacies must consist entirely of republics (this was integrated into the Constitution). I would add that confederacies permit intelligent management of information while permitting economies of scale with respect to defense and economic markets.
Of course, there are many other factors relevant to the nature of government. In writing about the geographical differences between Europe and Asia**, Montesquieu notes that geographical differences facilitate the "slavery" of Asia and identifies large scale with despotism:
"In Asia they have always had great empires; in Europe these could never subsist. Asia has larger plains; it is cut out into much more extensive divisions by mountains and seas; and as it lies more to the south, its springs are more easily dried up...Power in Asia ought, then, to be always despotic: for if their slavery was not severe they would make a division inconsistent with the nature of the country."
In the 1960s and 1970s, Mancur Olson and George Stigler argued that ease of organization of interest groups and the economic benefit per participant due to successful lobbying lead to success or failure of specific groups in economic competition. For a long time physicians formed a successful lobby because they shared common training, common values and attended conferences of the American Medical Association. Geographic advantages would certainly be among the kinds of advantages different interests might enjoy. Geography, argued Montesquieu in 1748, contributes to the nature of political organization, and large geographic scope is most consistent with despotism.
A school of historians, to include William Appleman Williams, Gabriel Kolko, Martin Sklar and James Weinstein, has identified Progressivism, which appeared following the advance of big business and the closing of the American frontier, as a pro-big business ideology; that Progressivism was the ideology of big business even though it was packaged as "liberal" and served to preempt socialism (and end laissez-faire capitalism). Montesquieu did not anticipate Progressivism, but he did anticipate that as nations grow in scope they are more likely to be dominated by economic special interests and that the domination is likely to be authoritarian in nature, which is the claim that Kolko-Williams school makes about Progressivism.
Montesequieu also anticipated the ideas of David Riesmann in his famous book The Lonely Crowd. In Book XIX Montesquieu discusses "Laws in relation to the principles which form the general spirit, the morals and customs of a nation".*** He notes that factors like climate, attitudes toward tyranny, religion, laws, morals and other factors influence "the spirit of mankind". He argues that nations ought to pass laws that fit their temperaments. In a puritanical nation with good character "no one ought to restrain their manners by laws, unless he would lay a constraint on their virtues." For instance, laws that reduce luxury or restrain women might cause the nation to "lose that peculiar taste which would be the source of the wealth of the nation, and that politeness which would render the country frequented by strangers." Thus, it is difficult to be rational with respect to law, and it is easiest to fit the temperament of the populace in designing law. Law should be avoided:
"Let them but leave us as we are, said a gentleman of a nation which had a very great resemblance to that we have been describing, and nature will repair whatever is amiss..our indiscretions joined to our good nature would make the laws which should constrain our sociability not at all proper for us."
If laws are necessary, they should build on existing patterns
One of the key attributes (Book XIX, section 8) is "effects of a sociable temper". This is analogous to Riesmann's other-directedness. Montesequieu writes:
"The more communicative a people are the more easily they change their habits, because each is in a greater degree a spectacle to the other, and the singularities of individuals are better observed. The climate which influences one nation to take pleasure in being communicative, makes it also delight in change, and that which makes it delight in change forms its taste.
"...the desire of pleasing others more than ourselves gives rise to fashions. This fashion is a subject of importance; by encouraging a trifling turn of mind, it continually increases the branches of its commerce."
Riesmann notes that the commercial centers are characterized by other-directedness while rural America is still inner- and tradition-directed. Likewise, David McClelland finds in his book Achieving Society that high achievers couple other-directedness with need for achievement. But McClelland was writing after America's greatest achievements were complete. The inner-directeds' achievements were in building a great nation, the other-directedness in consumption and mass communication. Other-directedness, as in Athens and likely Rome, are associated with decline after the inner-directeds have built their vision.
Montesquieu anticipated 20th century arguments such as Walter Lippmann's claim that the public is incapable of rational democratic decision; Mancur Olson's and George Stigler's claim that in a democracy special interest groups tend to organize along economic contours and extract rents from the public; and James March and Herbert Simon's claim that boundaries on rationality inhibit firms from thinking strategically or clearly.
Montesquieu notes the link between commerce and communication.++ It is likely that other-directedness is most advantageous where coordination is more important, i.e., in large firms and in interpersonally driven-tasks involving diplomacy or sales.
He adds:
"The effects of commerce is riches; the consequences of riches, luxury; and that of luxury the perfection of the arts. We find that the arts were carried to great perfection in the time of Semiramis; which is a sufficient indication that a considerable commerce
This is seen in his claim that the necessities of state and those of the taxpayers need to be balanced in assaying taxes, but that few politicians have "the wisdom and prudence" to limit tax levels.+ The wisdom required in a very large state is greater than the wisdom required in a small one. Much as Coase argued that there are limits to economies of scale, so Montesquieu argued, 220 years before Coase, that there are limits to the advantages of the scale of nations.
*Montesquieu, The Spirit of Laws. New York Prometheus Books, 2002. Translation originally published in New York by the Colonial Press, 1900, p. 120.
**Ibid., Book XVII, section 6, p. 269.
***Ibid., p. 292
+Ibid., p. 207
++Ibid., p. 334.
Anticipating Coase by more than two centuries and relying on comparative historical analysis, Charles de Secondat, Baron de Montestquieu, makes a parallel claim about the benefits of scale in the design of republics. Montesquieu writes that the optimal size of republics is small, because large scale republics permit large fortunes, which in turn create immoderate demands by interest groups. The competition of special interests leads to an overemphasis on private concerns and an underemphasis on the public good:
"In an extensive republic the public good is sacrificed to a thousand private views; it is subordinate to exceptions, and depends on accidents. In a small one, the interest of the public is more obvious, better understood, and more within the reach of every citizen; abuses have less extent, and of course are less protected."*
Montesquieu gives as an example the Greek republics, which were small city states. Montesquieu also notes that there are advantages to great as opposed to petty states. Thus, he is arguing for a balance, or optimization, of benefits as opposed to costs. In Book IX Montesquieu notes that small republics may be destroyed by foreign invasions and large repulics are destroyed by "internal imperfections". But, argues Montesquieu "confederate republics" have the advantages of a republic together with the external force of a monarchical government. "Hence it proceeds that Holland, Germany and the Swiss cantons are considered in Europe as perpetual republics." The many states balance power. Insurrections in one state can be quelled by others. But confederacies must consist entirely of republics (this was integrated into the Constitution). I would add that confederacies permit intelligent management of information while permitting economies of scale with respect to defense and economic markets.
Of course, there are many other factors relevant to the nature of government. In writing about the geographical differences between Europe and Asia**, Montesquieu notes that geographical differences facilitate the "slavery" of Asia and identifies large scale with despotism:
"In Asia they have always had great empires; in Europe these could never subsist. Asia has larger plains; it is cut out into much more extensive divisions by mountains and seas; and as it lies more to the south, its springs are more easily dried up...Power in Asia ought, then, to be always despotic: for if their slavery was not severe they would make a division inconsistent with the nature of the country."
In the 1960s and 1970s, Mancur Olson and George Stigler argued that ease of organization of interest groups and the economic benefit per participant due to successful lobbying lead to success or failure of specific groups in economic competition. For a long time physicians formed a successful lobby because they shared common training, common values and attended conferences of the American Medical Association. Geographic advantages would certainly be among the kinds of advantages different interests might enjoy. Geography, argued Montesquieu in 1748, contributes to the nature of political organization, and large geographic scope is most consistent with despotism.
A school of historians, to include William Appleman Williams, Gabriel Kolko, Martin Sklar and James Weinstein, has identified Progressivism, which appeared following the advance of big business and the closing of the American frontier, as a pro-big business ideology; that Progressivism was the ideology of big business even though it was packaged as "liberal" and served to preempt socialism (and end laissez-faire capitalism). Montesquieu did not anticipate Progressivism, but he did anticipate that as nations grow in scope they are more likely to be dominated by economic special interests and that the domination is likely to be authoritarian in nature, which is the claim that Kolko-Williams school makes about Progressivism.
Montesequieu also anticipated the ideas of David Riesmann in his famous book The Lonely Crowd. In Book XIX Montesquieu discusses "Laws in relation to the principles which form the general spirit, the morals and customs of a nation".*** He notes that factors like climate, attitudes toward tyranny, religion, laws, morals and other factors influence "the spirit of mankind". He argues that nations ought to pass laws that fit their temperaments. In a puritanical nation with good character "no one ought to restrain their manners by laws, unless he would lay a constraint on their virtues." For instance, laws that reduce luxury or restrain women might cause the nation to "lose that peculiar taste which would be the source of the wealth of the nation, and that politeness which would render the country frequented by strangers." Thus, it is difficult to be rational with respect to law, and it is easiest to fit the temperament of the populace in designing law. Law should be avoided:
"Let them but leave us as we are, said a gentleman of a nation which had a very great resemblance to that we have been describing, and nature will repair whatever is amiss..our indiscretions joined to our good nature would make the laws which should constrain our sociability not at all proper for us."
If laws are necessary, they should build on existing patterns
One of the key attributes (Book XIX, section 8) is "effects of a sociable temper". This is analogous to Riesmann's other-directedness. Montesequieu writes:
"The more communicative a people are the more easily they change their habits, because each is in a greater degree a spectacle to the other, and the singularities of individuals are better observed. The climate which influences one nation to take pleasure in being communicative, makes it also delight in change, and that which makes it delight in change forms its taste.
"...the desire of pleasing others more than ourselves gives rise to fashions. This fashion is a subject of importance; by encouraging a trifling turn of mind, it continually increases the branches of its commerce."
Riesmann notes that the commercial centers are characterized by other-directedness while rural America is still inner- and tradition-directed. Likewise, David McClelland finds in his book Achieving Society that high achievers couple other-directedness with need for achievement. But McClelland was writing after America's greatest achievements were complete. The inner-directeds' achievements were in building a great nation, the other-directedness in consumption and mass communication. Other-directedness, as in Athens and likely Rome, are associated with decline after the inner-directeds have built their vision.
Montesquieu anticipated 20th century arguments such as Walter Lippmann's claim that the public is incapable of rational democratic decision; Mancur Olson's and George Stigler's claim that in a democracy special interest groups tend to organize along economic contours and extract rents from the public; and James March and Herbert Simon's claim that boundaries on rationality inhibit firms from thinking strategically or clearly.
Montesquieu notes the link between commerce and communication.++ It is likely that other-directedness is most advantageous where coordination is more important, i.e., in large firms and in interpersonally driven-tasks involving diplomacy or sales.
He adds:
"The effects of commerce is riches; the consequences of riches, luxury; and that of luxury the perfection of the arts. We find that the arts were carried to great perfection in the time of Semiramis; which is a sufficient indication that a considerable commerce
This is seen in his claim that the necessities of state and those of the taxpayers need to be balanced in assaying taxes, but that few politicians have "the wisdom and prudence" to limit tax levels.+ The wisdom required in a very large state is greater than the wisdom required in a small one. Much as Coase argued that there are limits to economies of scale, so Montesquieu argued, 220 years before Coase, that there are limits to the advantages of the scale of nations.
*Montesquieu, The Spirit of Laws. New York Prometheus Books, 2002. Translation originally published in New York by the Colonial Press, 1900, p. 120.
**Ibid., Book XVII, section 6, p. 269.
***Ibid., p. 292
+Ibid., p. 207
++Ibid., p. 334.
Tuesday, January 20, 2009
Glamour and Barack Obama in David Riesmann's Lonely Crowd
Riesmann (e.g., p. 188) emphasizes the role of the media in creating other-directedness. The inner-directed carry production-related values into politics, the other-directed carry consumption-related values into politics. For the other-directed:
"Politics is to be appraised in terms of consumer preferences. Politicians are people--and the more glamorous the better. Moreover, in imitation of the marketplace, politics becomes a sphere in which the manner and mood of doing things is quite as important as what is done...The mass media of communication are perhaps the most important channels between the other-directed actors on the stage of politics and their audience. The media criticize the actors and the show generally, and both directly and indirectly train the audience in techniques of political consumership."
Riesmann describes what we now call "mainstream media" (I call it pissant propaganda) as "training" its other-directed audience:
"they include the whole range of contemporary popular culture from comic books to television. They dominate the use of leisure in all American classes except at the very top and perhaps also at the very bottom; and their influence is very great in creating the styles of response compatible with other-direction."
Riesmann notes that first,
1. "Popular culture is a tutor in consumption, it teaches the other-directed man to consume politics and to regard politics and political information and attitudes as consumer goods."
and second,
2. "The media have a stake in tolerance...This attitude of the audience leads to an emphasis not on what the media say in terms of content but on the sincerity of the presentation."
Thus, Riesmann argues, politics becomes an artifact of consumption. "The mass media act as a kind of barker for the political show. These have discovered one sovereign remedy, glamour, to combat the danger of indifference and apathy...glamour in politics, whether as charisma--packaging of the leader--or as the hopped-up treatment of events by the mass media, substitutes for the types of self-interest that governed the inner-directed. In general: wherever we see glamour in the object of attention, we must suspect a basic apathy in the spectator...the wider the electorate...the more glamour tends to displace issues or old fashioned considerations of patronage."
Riesmann argues that because of mass media's need for stable demand for their product (p. 191) they have to appeal to an other-directed audience. The reason is that the indignant (inner-directed) audience is too inflexible and likely to resist moral or intellectual shifts. He interprets this as "intolerance". However, it is also likely that sponsors may object to tendentious political positions on which inner-directed audiences might insist. The market-driven characteristic of advertisers lends itself to an other-directed audience. Hence, inner directeds are systematically excluded from the mainstream media's audience.
The mass media puts more emphasis on news and politics than market demand justifies. Part of the reason is that the other-directed "looks to the mass media for guidance in his design for living and hierarchy of values. He is led to assume that other people must rate politics as the mass media themselves do...The media...could be viewed as a conspiracy to disguise the extent of political indifference."
The mass media do not cater to inner directeds outside of the news (p. 201):
"This gnawing deficit of acceptable mass media would perhaps be less troublesome to the moralizer if the world in which he lived still appeared to be inner directed, to be governed by an invisible hand. But his own experience of life is often disappointing; he is deprived of a feeling of competence and place. Neither his character nor his work is rewarded. In that situation he tends to turn on both--for he is vulnerable to lack of worldly comprehension even more perhaps than to lack of worldly success . In a last desperate effort to turn the country back on its inner-directed course in order to make it habitable for him, he is ready to join a political movement whose basic drive is indignation. A world that refuses him a place--a world that bombards him with messages that make him feel inadequate--may not appear to him worth saving, though his destructiveness may be rationalized by various ideologies."
Riesmann adds:
"The moralizers and inside-dopesters taken together are probably a majority among the better-educated, but surely a minority of the whole population. However, the inside-dopester has little to offer to the indifferents in the way of psychic dividends: his very knowledge leads him to be aware of how little can be accomplished in politics and how fantastic it is to hope to 'get rid of politics'."
The coverage of Barack Obama combined moralizing with glamour. The media aimed to appeal to the indifferents, bringing tradition-directed as well as inner-directed indifferents to Obama through moralizing as well as glamour.
The Republicans since 1980 succeeded through moralizing. Riesmann states that this is a likely outcome. The reason is that other-directeds enjoy moralizing because it amounts to sublimation. They cannot express indignation themselves, so they often enjoy it when they see others do it. A candidate who combines glamour with sincerity is the very candidate that Riesmann would argue is likely to succeed. The media gave this gift to Obama, the appearance of sincerity coupled with glamorous appeal. Note that John McCain was sincere but lacked glamour, a point which many announcers such as CNN's Jack Cafferty hammered home.
The media did not conform to Riesmann's hypothesis of "tolerance" in the recent election. They completely jettisoned the conserative indignation in favor of a "progressive" indignation concerning George Bush conservatism. This failure of tolerance would seem to have been self-destructive for the mass media. Their audience of inner directed conservatives is likely to wilt in the next few years.
One reason might be the advent of the Internet. The power of the mass media is on the wane. Riesmann argues that they did not have much influence anyway. Televsion exacerbated the trends that Riesmann identified, which is probably why the book became so popular in the 1950s.
The centralization of media that occurred with radio and television has been in steady reversal, first because of cable television and now because of the Internet. The mass media may be in the process of losing its broad tolerance because of competition from the Internet. Fox, CNN and MSNBC are little more than glorified blogs. Hence, they more openly take sides than in prior decades because they need to stake out a market segment. They are no longer so important as sources of opinion and news. The New York Times's decline is similarly symptomatic of decentralization in media. This decentralization has important implications for public opinion. The nation is likely to become more fragmented because the large population and size need to be reconciled with increasingly fragmented opinion. In a society where the largest television station does not command five percent of the audience and there is little reason for the liberal ideological uniformity that has characterized the mass media in recent years, it would seem that America may have trouble continuing to function as a single nation.
"Politics is to be appraised in terms of consumer preferences. Politicians are people--and the more glamorous the better. Moreover, in imitation of the marketplace, politics becomes a sphere in which the manner and mood of doing things is quite as important as what is done...The mass media of communication are perhaps the most important channels between the other-directed actors on the stage of politics and their audience. The media criticize the actors and the show generally, and both directly and indirectly train the audience in techniques of political consumership."
Riesmann describes what we now call "mainstream media" (I call it pissant propaganda) as "training" its other-directed audience:
"they include the whole range of contemporary popular culture from comic books to television. They dominate the use of leisure in all American classes except at the very top and perhaps also at the very bottom; and their influence is very great in creating the styles of response compatible with other-direction."
Riesmann notes that first,
1. "Popular culture is a tutor in consumption, it teaches the other-directed man to consume politics and to regard politics and political information and attitudes as consumer goods."
and second,
2. "The media have a stake in tolerance...This attitude of the audience leads to an emphasis not on what the media say in terms of content but on the sincerity of the presentation."
Thus, Riesmann argues, politics becomes an artifact of consumption. "The mass media act as a kind of barker for the political show. These have discovered one sovereign remedy, glamour, to combat the danger of indifference and apathy...glamour in politics, whether as charisma--packaging of the leader--or as the hopped-up treatment of events by the mass media, substitutes for the types of self-interest that governed the inner-directed. In general: wherever we see glamour in the object of attention, we must suspect a basic apathy in the spectator...the wider the electorate...the more glamour tends to displace issues or old fashioned considerations of patronage."
Riesmann argues that because of mass media's need for stable demand for their product (p. 191) they have to appeal to an other-directed audience. The reason is that the indignant (inner-directed) audience is too inflexible and likely to resist moral or intellectual shifts. He interprets this as "intolerance". However, it is also likely that sponsors may object to tendentious political positions on which inner-directed audiences might insist. The market-driven characteristic of advertisers lends itself to an other-directed audience. Hence, inner directeds are systematically excluded from the mainstream media's audience.
The mass media puts more emphasis on news and politics than market demand justifies. Part of the reason is that the other-directed "looks to the mass media for guidance in his design for living and hierarchy of values. He is led to assume that other people must rate politics as the mass media themselves do...The media...could be viewed as a conspiracy to disguise the extent of political indifference."
The mass media do not cater to inner directeds outside of the news (p. 201):
"This gnawing deficit of acceptable mass media would perhaps be less troublesome to the moralizer if the world in which he lived still appeared to be inner directed, to be governed by an invisible hand. But his own experience of life is often disappointing; he is deprived of a feeling of competence and place. Neither his character nor his work is rewarded. In that situation he tends to turn on both--for he is vulnerable to lack of worldly comprehension even more perhaps than to lack of worldly success . In a last desperate effort to turn the country back on its inner-directed course in order to make it habitable for him, he is ready to join a political movement whose basic drive is indignation. A world that refuses him a place--a world that bombards him with messages that make him feel inadequate--may not appear to him worth saving, though his destructiveness may be rationalized by various ideologies."
Riesmann adds:
"The moralizers and inside-dopesters taken together are probably a majority among the better-educated, but surely a minority of the whole population. However, the inside-dopester has little to offer to the indifferents in the way of psychic dividends: his very knowledge leads him to be aware of how little can be accomplished in politics and how fantastic it is to hope to 'get rid of politics'."
The coverage of Barack Obama combined moralizing with glamour. The media aimed to appeal to the indifferents, bringing tradition-directed as well as inner-directed indifferents to Obama through moralizing as well as glamour.
The Republicans since 1980 succeeded through moralizing. Riesmann states that this is a likely outcome. The reason is that other-directeds enjoy moralizing because it amounts to sublimation. They cannot express indignation themselves, so they often enjoy it when they see others do it. A candidate who combines glamour with sincerity is the very candidate that Riesmann would argue is likely to succeed. The media gave this gift to Obama, the appearance of sincerity coupled with glamorous appeal. Note that John McCain was sincere but lacked glamour, a point which many announcers such as CNN's Jack Cafferty hammered home.
The media did not conform to Riesmann's hypothesis of "tolerance" in the recent election. They completely jettisoned the conserative indignation in favor of a "progressive" indignation concerning George Bush conservatism. This failure of tolerance would seem to have been self-destructive for the mass media. Their audience of inner directed conservatives is likely to wilt in the next few years.
One reason might be the advent of the Internet. The power of the mass media is on the wane. Riesmann argues that they did not have much influence anyway. Televsion exacerbated the trends that Riesmann identified, which is probably why the book became so popular in the 1950s.
The centralization of media that occurred with radio and television has been in steady reversal, first because of cable television and now because of the Internet. The mass media may be in the process of losing its broad tolerance because of competition from the Internet. Fox, CNN and MSNBC are little more than glorified blogs. Hence, they more openly take sides than in prior decades because they need to stake out a market segment. They are no longer so important as sources of opinion and news. The New York Times's decline is similarly symptomatic of decentralization in media. This decentralization has important implications for public opinion. The nation is likely to become more fragmented because the large population and size need to be reconciled with increasingly fragmented opinion. In a society where the largest television station does not command five percent of the audience and there is little reason for the liberal ideological uniformity that has characterized the mass media in recent years, it would seem that America may have trouble continuing to function as a single nation.
Monday, August 18, 2008
Hamilton on the Limits of Decentralization
Federalism has always meant a partnership among the states and between the states and the federal government. Just as there are certain public goods that are indivisible so that individuals cannot purchase them and so devolve upon government, so there are federal goods that the states cannot divide and pay for individually and so must devolve upon the federal government. Defense and foreign policy are indivisible not only among individuals but also among the states. In an economy with an enhanced level of decentralization as existed in the late 18th and 19th centuries it is beneficial for defense and foreign policy to be handled by the federal government. In the Federalist Papers No. 25 Hamilton wrote this:
"It happens that some States, from local situation, are more directly exposed. New York is of this class. Upon the plan of separate provisions (of defense), New York would have to sustain the whole weight of the establishments requisite to her immediate safety, and to the mediate or ultimate protection of her neighbors. This would neither be equitable as it respected New York, nor safe as it respected the other States. Various inconveniences would attend such a system. The States, to whose lot it might fall to support the necessary establishments, would be as little able as willing for a considerable time to come to bear the burden of competent provisions. The security of all would thus be subjected to the parsimony, improvidence or inability of a part. If the resources of such part becoming more abundant and extensive, its provisions should be proportionally enlarged, the other States would quickly take the alarm at seeing the whole military force of the Union in the hands of two or three of its members...Reasons have been already given to induce a supposition that the State governments will too naturally be prone to a rivalship with that of the Union, the foundation of which will be the love of power; and that in any contest between the federal head and one of its members, the people will be most apt to unite with their local government..."
Thinking of subsequent events, the Civil War and 9/11 for instance, Hamilton's vision was accurate, not just about federalism but about New York as well.
"It happens that some States, from local situation, are more directly exposed. New York is of this class. Upon the plan of separate provisions (of defense), New York would have to sustain the whole weight of the establishments requisite to her immediate safety, and to the mediate or ultimate protection of her neighbors. This would neither be equitable as it respected New York, nor safe as it respected the other States. Various inconveniences would attend such a system. The States, to whose lot it might fall to support the necessary establishments, would be as little able as willing for a considerable time to come to bear the burden of competent provisions. The security of all would thus be subjected to the parsimony, improvidence or inability of a part. If the resources of such part becoming more abundant and extensive, its provisions should be proportionally enlarged, the other States would quickly take the alarm at seeing the whole military force of the Union in the hands of two or three of its members...Reasons have been already given to induce a supposition that the State governments will too naturally be prone to a rivalship with that of the Union, the foundation of which will be the love of power; and that in any contest between the federal head and one of its members, the people will be most apt to unite with their local government..."
Thinking of subsequent events, the Civil War and 9/11 for instance, Hamilton's vision was accurate, not just about federalism but about New York as well.
Monday, June 30, 2008
The Federalist 14 and Decentralizaton
In the Federalist 14, Madison argues that while direct democracy is possible only in a small country, a republic can cover a larger geographic area. Based on the transportation available in the 1780s, he shows that a federal republican form of government is possible since the delegates can travel the distance required. He adds that:
"It is to be remembered that the federal government is not to be charged with the whole power of making and administering laws. Its jurisdiction is limited to certain enumerated objects, which concern all the members of the republic, but which are not to be attained by the separate provisions of any. The subordinate governments, which can extend their care to all those other objects which can be separately provided for, will retain their due authority and activity. Were it proposed by the plan of the convention to abolish the governments of the particular States, its adversaries would have some ground for their objection; though it would not be difficult to show that if they were abolished the general government would be compelled by the principle of self-preservation to reinstate them in their proposed jurisdiction."
Madison's recognition of the principle of decentralization anticipated the evolution of large scale corporate enterprise in the twentieth century. In his classic book Strategy and Structure, Alfred Chandler argues that big business evolved from the functional into the decentralized form in the twentieth century in response to strategic shifts, notably the concentration of industry and the formation of conglomerates. The reason the decentralized form was necessary was that the informational demands and transactions costs of a large organization inhibit intelligent processing. Madison anticipated this development in the 18th century.
The information demands of government are greater than the informational demands of private industry. The flexibility required is greater and the scope of the market is greater, which implies the need for greater diversity of strategy. Yet, the modernist or progressive approach to organizing government has been to centralize decision making authority. This runs counter to the insight not only of Madison but of practical business strategists who have learned that efficiency as well as responsive, flexible strategy depend on integration of small scale with large scale and the loose coupling of federal and local units.
"It is to be remembered that the federal government is not to be charged with the whole power of making and administering laws. Its jurisdiction is limited to certain enumerated objects, which concern all the members of the republic, but which are not to be attained by the separate provisions of any. The subordinate governments, which can extend their care to all those other objects which can be separately provided for, will retain their due authority and activity. Were it proposed by the plan of the convention to abolish the governments of the particular States, its adversaries would have some ground for their objection; though it would not be difficult to show that if they were abolished the general government would be compelled by the principle of self-preservation to reinstate them in their proposed jurisdiction."
Madison's recognition of the principle of decentralization anticipated the evolution of large scale corporate enterprise in the twentieth century. In his classic book Strategy and Structure, Alfred Chandler argues that big business evolved from the functional into the decentralized form in the twentieth century in response to strategic shifts, notably the concentration of industry and the formation of conglomerates. The reason the decentralized form was necessary was that the informational demands and transactions costs of a large organization inhibit intelligent processing. Madison anticipated this development in the 18th century.
The information demands of government are greater than the informational demands of private industry. The flexibility required is greater and the scope of the market is greater, which implies the need for greater diversity of strategy. Yet, the modernist or progressive approach to organizing government has been to centralize decision making authority. This runs counter to the insight not only of Madison but of practical business strategists who have learned that efficiency as well as responsive, flexible strategy depend on integration of small scale with large scale and the loose coupling of federal and local units.
Monday, June 16, 2008
Publius on Localization of America
Let's do a thought experiment. Let's say the federal government agreed to download most of its responsibilities, such as social security, taxation, education (oh, I thought that was a state responsibility), medical care for the elderly, regulation of labor and industry and similar responsibilities onto the states. The states would have the power to reform or discard any or all of the progressive, New Deal and Great Society bureaucracies.
Continuing the thought experiment, under such a localization policy, some states might opt for greater freedom of enterprise and laissez faire. Other states might opt for subsidization of business, a central bank like the Fed, and eminent domain to subsidize real estate developers. Still other states might opt for governmental redistribution of wealth to enable the poor to contribute productively. It is likely that one of these models would be most successful. Would the successful states incur the unsuccessful states' wrath?
In the Federalist Papers number five (by Jay) and six and seven (by Hamilton) Publius, the pseudonym for Jay, Hamilton and Madison, addresses this question. Publius's argument is that decentralization will create animosity among the states or local confederacies of states. In Number 5, Publius (Jay) argues that "they ...would in no other sense be neighbors as they would be borderers." In turn, border conflicts and hatreds leading to war would evolve.
In Number Seven Publius (Hamilton) argues that:
Competition of commerce would be another fruitful source of contention. The States less favorably circumstanced would be desirous of escaping from the disadvantages of local situation, and of sharing in the advantages of their more fortunate neighbors. Each State, or separate confederacy, would pursue a system of commercial policy peculiar to itself."
States, muses Hamilton, might pass laws that justifiably benefit their own citizens, but in so doing incur the wrath of other states whose citizens are not benefited. An example might be tariffs set by coastal states like New York that expense inland states like Ohio. The result might be civil war.
The Constitution resolved the danger of warfare among the states. A decentralized system that relies on a federal government to resolve conflicts concerning interstate commerce, to set tariffs and conduct foreign policy, would be in keeping with the Constitution and permit improvement and modernization of decision making. A nation united by comparable values need not have but one bureaucracy.
It is likely that the most successful states, which I would guess would be the ones that adopted laissez faire policies, would incur the wrath of other states. But the magnificence of decentralization is that the wrath could be converted into productive action. States could learn from other states through mimesis. Thus, better and more productive methodologies would lead not to hatred and warfare, but rather to the spreading of ideas throughout the republic. Publius Wealth is not the result of resource endowment, but rather of human capital and technology. Greater diversity of experimentation from decentralization will reap benefits that far exceed the costs of multiple bureaucracies.
Continuing the thought experiment, under such a localization policy, some states might opt for greater freedom of enterprise and laissez faire. Other states might opt for subsidization of business, a central bank like the Fed, and eminent domain to subsidize real estate developers. Still other states might opt for governmental redistribution of wealth to enable the poor to contribute productively. It is likely that one of these models would be most successful. Would the successful states incur the unsuccessful states' wrath?
In the Federalist Papers number five (by Jay) and six and seven (by Hamilton) Publius, the pseudonym for Jay, Hamilton and Madison, addresses this question. Publius's argument is that decentralization will create animosity among the states or local confederacies of states. In Number 5, Publius (Jay) argues that "they ...would in no other sense be neighbors as they would be borderers." In turn, border conflicts and hatreds leading to war would evolve.
In Number Seven Publius (Hamilton) argues that:
Competition of commerce would be another fruitful source of contention. The States less favorably circumstanced would be desirous of escaping from the disadvantages of local situation, and of sharing in the advantages of their more fortunate neighbors. Each State, or separate confederacy, would pursue a system of commercial policy peculiar to itself."
States, muses Hamilton, might pass laws that justifiably benefit their own citizens, but in so doing incur the wrath of other states whose citizens are not benefited. An example might be tariffs set by coastal states like New York that expense inland states like Ohio. The result might be civil war.
The Constitution resolved the danger of warfare among the states. A decentralized system that relies on a federal government to resolve conflicts concerning interstate commerce, to set tariffs and conduct foreign policy, would be in keeping with the Constitution and permit improvement and modernization of decision making. A nation united by comparable values need not have but one bureaucracy.
It is likely that the most successful states, which I would guess would be the ones that adopted laissez faire policies, would incur the wrath of other states. But the magnificence of decentralization is that the wrath could be converted into productive action. States could learn from other states through mimesis. Thus, better and more productive methodologies would lead not to hatred and warfare, but rather to the spreading of ideas throughout the republic. Publius Wealth is not the result of resource endowment, but rather of human capital and technology. Greater diversity of experimentation from decentralization will reap benefits that far exceed the costs of multiple bureaucracies.
Wednesday, April 30, 2008
Woodrow Wilson's Constitutional Government in the United States
Woodrow Wilson. Constitutional Government in the United States. New Brunswick, NJ: Transaction Publishers, 2004. (Original published 1908). 236 pages.
Woodrow Wilson's Constitutional Government in the United States is a great treatise. Wilson had been a fine political science professor before becoming president of Princeton, governor of New Jersey and then president of the United States. Wilson was a Democrat, but he shared some views with the Mugwumps, the Republicans who supported Democratic candidate Grover Cleveland in 1884. Wilson closely read Walter Bagehot and he supported the gold standard in the late nineteenth century. In 1896 he bolted the Democratic Party to support the National Democratic candidate John Palmer. As a proponent of sound money, that year of William Jennings Bryan's "cross of gold speech" Wilson opposed Bryan's free silver candidacy. The National Democrats were libertarian in orientation and favored not only reduced tariffs and the gold standard, but limited government as well. The first year of his presidency Wilson established the income tax and the Federal Reserve Bank, but these laws were not so statist as they sound. Many Mugwumps (who were largely free market and pro-gold) supported the Federal Reserve Bank because they thought it would be better to have an expert agency regulating the currency than to have Congress creating greenbacks. The gold standard that was in place in 1913 and for nearly two decades thereafter limited the Fed's ability to expand the monetary base and create the kind of inflation that we have had since the 1930s and especially since Richard M. Nixon's presidency, which Wilson would have opposed. Likewise, the income tax was an unknown concept in 1913, and he could not have anticipated its extension. Until 1913 federal tax revenue was raised chiefly by tariffs, and Wilson repealed most of the tariffs in the same law that established the income tax. Moreover, the income tax applied to about one percent of the population in 1913. He could not have foreseen the degree to which subsequent administrations extended it.
Wilson had begun to identify himself as a "progressive" during his tenure as New Jersey governor, but his reforms were not especially interventionist or statist in nature. He introduced primary elections, which were an affront to the preexisting boss system. He also established a workers' compensation law, but workers' compensation is as much a realignment of common law liability principles as an employee benefit or regulatory program. His progressivism was conservative.
Wilson's writing is more articulate and subtle than Herbert Croly's or Theodore Roosevelt's, and his ideas are more refined and sophisticated than either's. In contrast to Roosevelt, who was a Republican predecessor to the New Deal Democrats, Wilson's ideas were informed by Burke as well as Bagehot. He not only believed in preserving existing institutions, but also retained a suspicion of big government as well as big business. He was a progressive in that he advocates, in Constitutional Government in the United States, a Darwinian as opposed to what he calls a Newtonian theory of government. That is, he believed that the federal government needed to be reformed to enable some changes. This idea may not have been wrong in principle but it was wrong, in my view, in terms of fundamental errors Wilson made in failing to anticipate the results of the reforms he made as president. However, subsequent generations of conservatives as well as progressive-liberals rely on Wilson's ideas about government. It would be better to throw out government altogether, but unless you've joined the Libertarian Party you probably owe a debt to Wilson's thinking.
Wilson's writing is somewhat flowery but it is eloquent and clear. The book can be read in one or two sittings yet it packs a considerable punch. It contains many beautiful theoretical insights about government. It is probably among the best of the Progressive works on government, and if any one work of the Progressive era might be said to shine a flattering light on the Progressive movement, this is it. The trouble, of course, is that the folks calling themselves "progressives" today are not Wilsonian progressives and have little if any interest in Bagehot, Burke or Wilson.
The United States is fortunate that Wilson and not Roosevelt won in 1912, although Wilson's best efforts were subsequently overturned by his fellow Democrat, Franklin D. Roosevelt, in the 1930s. It is evident that the roots of the Democratic Party's rejection of freedom begins with Roosevelt. The New Deal was an ahistorical response to exigencies and circumstances that occurred in the early 1930s and had absolutely nothing to do with Wilson's ideas. Wilson was not a predecessor of Franklin D. Roosevelt. The one president who can claim that title was Theodore Roosevelt, a Republican.
Wilson argues that there are four stages of evolution of government. In stage one government is the master of the people. In stage two government is no longer master by force but remains master because of superior sagacity. In stage three the leaders of the people confront mastery and agitate to control it. In stage four the people's leaders become the government. The American constitutional government is an example of stage four, but Wilson prefers the British parliamentary system to the American separation of powers, which he believes to be a more primitive model. Wilson admires Hamilton, whom he feels was more comfortable with giving government power than with the system of checks and balances which inhibits government action and leads to the party system, which in his view is associated with corruption and failure of democracy. The party system and bossism was necessitated by American constitutional government because the division of powers made it impossible for the different branches to coordinate their thinking without some integrative device. In management theory this idea is called differentiation and integration, and it was first articulated in the 1960s by Lawrence and Lorsch. Wilson noticed the differentiation and integration problem with respect to the federal government in the first decade of the twentieth century, fifty years before Lawrence and Lorsch.
Wilson believed that there are crucial regional and social differences among Americans that lead to the need for decentralization. He writes (p. 49-51):
"our state governments are likely to become, not less, but more vital units in our system as the natural scope and limits of their powers are more clearly and permanently established...
"...Not only are the separate and independent powers of the states based upon real economic and social differences between section and section of an enormous country, differences which necessitate adaptations of law and of administrative policy such as only local authorities acting in real independence can intelligently effect; but the states are our great and permanent contribution to constitutional development. I call them a great contribution because they have given to the understandings upon which constitutional government is based an intimacy and detail, an adjustment to local circumstances, a national diversity, an immediate adaptation to the variety of the people themselves, such as a little country may perhaps dispense with but a great continent cannot...They have been an incomparable means of sensitive adjustment between popular thought and governmental method, and may yet afford the world itself the model of federation and liberty it may be in God's providence come to work...
"Constitutional government can exist only where there is actual community of interest and of purpose, and cannot, if it be also self-government, express the life of any body of people that does not consititue a veritable community. Are the United States a community? In some things, yes; in most things, no. How impossible it is to generalize about the United States!"
In his discussion of the presidential branch of the American constitutional system, Wilson emphasizes the Darwinian nature of government. Our government was founded by Whigs who, in his view, followed a Newtonian model. Rather, he argues (p. 57), "living political consitutions must be Darwinian in structure and in practice". The nature of the presidency depends on the individual occupying it, in Wilson's view. Although the Whig model is Newtonian, it is elastic. The Whigs who wrote the constitution may have believed that the president was only a legal executive, executing policy and applying the law. Instead, Wilson argues, the president had become "the leader of his party and the guide of the nation in political purpose, and therefore in legal action." The president must embody "the character and purpose (the public) wishes it to have". The president may still function as an executive, but he was becoming "more and more a political and less and less an executive officer" (p. 67). He is the leader of his party. "No one else represents the people as a whole, exercising a national choice; and inasmuch his strictly executive duties are in fact subordinated, so far at any rate as all detail is concerned, the President represents not so much the party's governing efficiency as its controlling ideals and principles" (p. 68).
The chapters on the House of Representatives, the Senate and the Supreme Court are all insightful and brilliant. He argues for an evolutionary view of the Court's role (p. 158-68):
"Expanded and adapted by interpretation the powers granted in the Constitution must be; but the manner and the motive of their expansion involve the integrity, and therefore, the performance, of our entire system of government...if they had interpreted the Constitution in its strict letter, as some proposed, and not in its spirit, like the charter of a business corporation and not like the charter of a living government, the vehicle of a nation's life, it would have proved a strait- jacket, a means not of liberty and development but of mere restriction and embarrassment. I have spoken of the statesmanship of control expected of our courts; but there is also the statesmanship of adaptation characteristic of all great systems of law since the days of the Roman praetor; and there can be no doubt that we have been singular among the nations in looking to the courts for that double function of statesmanship, for the means of growth as well as for the restraint of ordered method."
For me, a professor of management, the most intriguing chapter is the penultimate one on "the states and the federal government". Wilson writes that (p. 173):
"It is clear enough that the general commercial interests, the general financial interests, the general economic interests of the country were meant to be brought under the regulation of the federal government, which should act for all; and it is equally clear that what are the general commercial interests, what the general financial interests, what the general economic interests of the country is a question of fact, to be determined by circumstances which change under our very eyes, and that, case by case, we are inevitably drawn on to include under the established definitions of the law matters new and unforeseen, which seem in their magnitude to give to the powers of Congress a sweep and vigor certainly never conceived possible by earlier generations of statesmen, sometimes even almost revolutionary even in our own eyes...
"Almost every great internal crisis in our affairs has turned upon the question of state and federal rights. To take but two instances, it was the central subject-matter of the great controversy over tariff legislation which led to attempted nullification and of the still greater controversy over the extension of slavery which led to the war between the States...
"The principle of the division of powers between state and federal governments is a very simple one when stated in its most general terms. It is that the legislatures of the States shall have control of all the general subject-matter of law, of private rights of every kind, of local interests and of everything that directly concerns their people as communities, and that Congress shall have control only of such matters as concern the peace and commerce of the country as a whole." (p. 175)
"Which parts of the many sided processes of the nation's economic development shall be left to the regulation of the States, which parts shall be given over to the federal government? I do not propound this as a mere question of choice, a mere question of statesmanship, but also as a question, a very fundamental question, of constitutional law...
"...The war between the States established at least this principle, that the federal government is, through its courts, the final judge of its own power...Its power is to 'regulate commerce between the States,' and the attempts now made during every session of Congress to carry the implications of that power beyond the utmost boundaries of reasonable and honest inference show that the only limits likely to be observed by politicians are those set by the good sense and conservative temper of the country...
"The proposed federal legislation with regard to the regulation of child labor affords a striking example. If the power to regulate commerce between the States can be stretched to include the regulation o flabor in mills and factories, it can be made to embrace every particular of the industrial organization and action of the country. The only limitations Congress would observe, should the Supreme Court assent to such obviously absurd extravagances of interpretation, would be the limitations of opinion and circumstance...
"...Uniform regulation of the economic conditions of a vast territory and a various people like the United States would be mischievous if not impossible. The statesmanship which really attempts it is premature and unwise. Undoubtedly the recent economic development of the country, particularly the development of the last two decades, has obliterated many boundaries, made many interests national and common, which until our own day were separate and local....
"The United States are not a single, homogeneous community. In spite of a certain superficial sameness which seems to impart to Americans a common type and point of view, they still contain communities at almost every stage of development, illustrating in their social and economic structure almost every modern variety of interest and prejudice, following occupations of every kind, in climates of every sort that the temperate zone affords. This variety of fact and condition, these substantial economic and social contrasts, do not in all cases follow state lines. They are often contrasts between region and region rather than between State and State...
(p. 182)"We are too apt to think that our American political system is distinguished by its central structure, by its President and Congress and courts, which the Constitution of the Union set up. As a matter of fact, it is distinguished by its local structure, by the extreme vitality of its parts. It would be an impossibility without its division of powers...America...has come to maturity by the stimulation of no central force or guidance, but by an abounding self-helping, self-sufficing energy in its parts, which severally brought themselves into existence and added themselves to the Union...Communities develop not by external but by internal forces. Else they do not live at all. Our commonwealths have not come into existence by invitation, like plants in a tended garden; they have sprung up of themselves, irrepressible, a sturdy, spontaneous product of the nature of men nurturing in free air.
"It is this spontaneity and variety, this independent and irrepressible life of its communities, that has given our system its extraordinary elasticity...The distribution of the chief powers of government among the States is the localization and specialization of Constitutional understandings; and this elastic adaptation of constitutional processes to the various and changing conditions of a new country and a vast area has been the real cause of our political success.
(p. 186)"No two states act alike. Manufacturers and carriers who serve commerce in many States find it impossible to obey the laws of all, and teh enforcement of the laws of the States
As I have previously blogged, what intrigues me most about Wilson is his emphasis on the potential for states' rights as a biological evolution out of what in his view was the mechanistic federal system. Sadly, his ideas were ignored by the subsequent Republican administrations, which were conservative (i.e., Harding and Coolidge) and conservative-progressive (Hoover). Roosevelt's reforms made government too rigid to adopt Wilsonian progressivism with respect to decentralization. Subsequently, conflicts concerning civil rights made it impossible and inappropriate to give weight to his ideas (as my friend Norma Segal has pointed out, Wilson's upbringing was very much pro-Confederacy and Wilson stands accused of racism (see Jonah Goldberg's article in the Christian Science Monitor.
Wilson's emphasis on the importance of evolution of government puts him in the same category as the other progressives, but today's conservatives have largely adopted the progressivism that Wilson pioneered. The ideological differences between Taft and Wilson versus today's "conservatives" are non-existent. Wilson had at least the familiarly with Burke as any conservative of today and was enamored of Burke. He repeats Burkean ideas throughout this book. Today's conservatives are progressives, not conservatives in the 19th century sense. Today's libertarians are much closer to that. For instance, today's conservatives have adopted a Keynesian monetary stance. No 19th century conservative, including Wilson, would have supported abolition of the gold standard. Keynesian economic ideas, which were advocated throughout the 19th century, were crackpot to 19th century conservatives. Today's conservatives have backed Keynesian presidents since Richard M. Nixon in 1971. This is not progress. It is stupidity.
Wilson's emphasis on state's rights has important implications for today's political milieu. We have forgotten his insights and Wilson scholars do not emphasize them. But similar kinds of ideas are well known in the management field
Woodrow Wilson's Constitutional Government in the United States is a great treatise. Wilson had been a fine political science professor before becoming president of Princeton, governor of New Jersey and then president of the United States. Wilson was a Democrat, but he shared some views with the Mugwumps, the Republicans who supported Democratic candidate Grover Cleveland in 1884. Wilson closely read Walter Bagehot and he supported the gold standard in the late nineteenth century. In 1896 he bolted the Democratic Party to support the National Democratic candidate John Palmer. As a proponent of sound money, that year of William Jennings Bryan's "cross of gold speech" Wilson opposed Bryan's free silver candidacy. The National Democrats were libertarian in orientation and favored not only reduced tariffs and the gold standard, but limited government as well. The first year of his presidency Wilson established the income tax and the Federal Reserve Bank, but these laws were not so statist as they sound. Many Mugwumps (who were largely free market and pro-gold) supported the Federal Reserve Bank because they thought it would be better to have an expert agency regulating the currency than to have Congress creating greenbacks. The gold standard that was in place in 1913 and for nearly two decades thereafter limited the Fed's ability to expand the monetary base and create the kind of inflation that we have had since the 1930s and especially since Richard M. Nixon's presidency, which Wilson would have opposed. Likewise, the income tax was an unknown concept in 1913, and he could not have anticipated its extension. Until 1913 federal tax revenue was raised chiefly by tariffs, and Wilson repealed most of the tariffs in the same law that established the income tax. Moreover, the income tax applied to about one percent of the population in 1913. He could not have foreseen the degree to which subsequent administrations extended it.
Wilson had begun to identify himself as a "progressive" during his tenure as New Jersey governor, but his reforms were not especially interventionist or statist in nature. He introduced primary elections, which were an affront to the preexisting boss system. He also established a workers' compensation law, but workers' compensation is as much a realignment of common law liability principles as an employee benefit or regulatory program. His progressivism was conservative.
Wilson's writing is more articulate and subtle than Herbert Croly's or Theodore Roosevelt's, and his ideas are more refined and sophisticated than either's. In contrast to Roosevelt, who was a Republican predecessor to the New Deal Democrats, Wilson's ideas were informed by Burke as well as Bagehot. He not only believed in preserving existing institutions, but also retained a suspicion of big government as well as big business. He was a progressive in that he advocates, in Constitutional Government in the United States, a Darwinian as opposed to what he calls a Newtonian theory of government. That is, he believed that the federal government needed to be reformed to enable some changes. This idea may not have been wrong in principle but it was wrong, in my view, in terms of fundamental errors Wilson made in failing to anticipate the results of the reforms he made as president. However, subsequent generations of conservatives as well as progressive-liberals rely on Wilson's ideas about government. It would be better to throw out government altogether, but unless you've joined the Libertarian Party you probably owe a debt to Wilson's thinking.
Wilson's writing is somewhat flowery but it is eloquent and clear. The book can be read in one or two sittings yet it packs a considerable punch. It contains many beautiful theoretical insights about government. It is probably among the best of the Progressive works on government, and if any one work of the Progressive era might be said to shine a flattering light on the Progressive movement, this is it. The trouble, of course, is that the folks calling themselves "progressives" today are not Wilsonian progressives and have little if any interest in Bagehot, Burke or Wilson.
The United States is fortunate that Wilson and not Roosevelt won in 1912, although Wilson's best efforts were subsequently overturned by his fellow Democrat, Franklin D. Roosevelt, in the 1930s. It is evident that the roots of the Democratic Party's rejection of freedom begins with Roosevelt. The New Deal was an ahistorical response to exigencies and circumstances that occurred in the early 1930s and had absolutely nothing to do with Wilson's ideas. Wilson was not a predecessor of Franklin D. Roosevelt. The one president who can claim that title was Theodore Roosevelt, a Republican.
Wilson argues that there are four stages of evolution of government. In stage one government is the master of the people. In stage two government is no longer master by force but remains master because of superior sagacity. In stage three the leaders of the people confront mastery and agitate to control it. In stage four the people's leaders become the government. The American constitutional government is an example of stage four, but Wilson prefers the British parliamentary system to the American separation of powers, which he believes to be a more primitive model. Wilson admires Hamilton, whom he feels was more comfortable with giving government power than with the system of checks and balances which inhibits government action and leads to the party system, which in his view is associated with corruption and failure of democracy. The party system and bossism was necessitated by American constitutional government because the division of powers made it impossible for the different branches to coordinate their thinking without some integrative device. In management theory this idea is called differentiation and integration, and it was first articulated in the 1960s by Lawrence and Lorsch. Wilson noticed the differentiation and integration problem with respect to the federal government in the first decade of the twentieth century, fifty years before Lawrence and Lorsch.
Wilson believed that there are crucial regional and social differences among Americans that lead to the need for decentralization. He writes (p. 49-51):
"our state governments are likely to become, not less, but more vital units in our system as the natural scope and limits of their powers are more clearly and permanently established...
"...Not only are the separate and independent powers of the states based upon real economic and social differences between section and section of an enormous country, differences which necessitate adaptations of law and of administrative policy such as only local authorities acting in real independence can intelligently effect; but the states are our great and permanent contribution to constitutional development. I call them a great contribution because they have given to the understandings upon which constitutional government is based an intimacy and detail, an adjustment to local circumstances, a national diversity, an immediate adaptation to the variety of the people themselves, such as a little country may perhaps dispense with but a great continent cannot...They have been an incomparable means of sensitive adjustment between popular thought and governmental method, and may yet afford the world itself the model of federation and liberty it may be in God's providence come to work...
"Constitutional government can exist only where there is actual community of interest and of purpose, and cannot, if it be also self-government, express the life of any body of people that does not consititue a veritable community. Are the United States a community? In some things, yes; in most things, no. How impossible it is to generalize about the United States!"
In his discussion of the presidential branch of the American constitutional system, Wilson emphasizes the Darwinian nature of government. Our government was founded by Whigs who, in his view, followed a Newtonian model. Rather, he argues (p. 57), "living political consitutions must be Darwinian in structure and in practice". The nature of the presidency depends on the individual occupying it, in Wilson's view. Although the Whig model is Newtonian, it is elastic. The Whigs who wrote the constitution may have believed that the president was only a legal executive, executing policy and applying the law. Instead, Wilson argues, the president had become "the leader of his party and the guide of the nation in political purpose, and therefore in legal action." The president must embody "the character and purpose (the public) wishes it to have". The president may still function as an executive, but he was becoming "more and more a political and less and less an executive officer" (p. 67). He is the leader of his party. "No one else represents the people as a whole, exercising a national choice; and inasmuch his strictly executive duties are in fact subordinated, so far at any rate as all detail is concerned, the President represents not so much the party's governing efficiency as its controlling ideals and principles" (p. 68).
The chapters on the House of Representatives, the Senate and the Supreme Court are all insightful and brilliant. He argues for an evolutionary view of the Court's role (p. 158-68):
"Expanded and adapted by interpretation the powers granted in the Constitution must be; but the manner and the motive of their expansion involve the integrity, and therefore, the performance, of our entire system of government...if they had interpreted the Constitution in its strict letter, as some proposed, and not in its spirit, like the charter of a business corporation and not like the charter of a living government, the vehicle of a nation's life, it would have proved a strait- jacket, a means not of liberty and development but of mere restriction and embarrassment. I have spoken of the statesmanship of control expected of our courts; but there is also the statesmanship of adaptation characteristic of all great systems of law since the days of the Roman praetor; and there can be no doubt that we have been singular among the nations in looking to the courts for that double function of statesmanship, for the means of growth as well as for the restraint of ordered method."
For me, a professor of management, the most intriguing chapter is the penultimate one on "the states and the federal government". Wilson writes that (p. 173):
"It is clear enough that the general commercial interests, the general financial interests, the general economic interests of the country were meant to be brought under the regulation of the federal government, which should act for all; and it is equally clear that what are the general commercial interests, what the general financial interests, what the general economic interests of the country is a question of fact, to be determined by circumstances which change under our very eyes, and that, case by case, we are inevitably drawn on to include under the established definitions of the law matters new and unforeseen, which seem in their magnitude to give to the powers of Congress a sweep and vigor certainly never conceived possible by earlier generations of statesmen, sometimes even almost revolutionary even in our own eyes...
"Almost every great internal crisis in our affairs has turned upon the question of state and federal rights. To take but two instances, it was the central subject-matter of the great controversy over tariff legislation which led to attempted nullification and of the still greater controversy over the extension of slavery which led to the war between the States...
"The principle of the division of powers between state and federal governments is a very simple one when stated in its most general terms. It is that the legislatures of the States shall have control of all the general subject-matter of law, of private rights of every kind, of local interests and of everything that directly concerns their people as communities, and that Congress shall have control only of such matters as concern the peace and commerce of the country as a whole." (p. 175)
"Which parts of the many sided processes of the nation's economic development shall be left to the regulation of the States, which parts shall be given over to the federal government? I do not propound this as a mere question of choice, a mere question of statesmanship, but also as a question, a very fundamental question, of constitutional law...
"...The war between the States established at least this principle, that the federal government is, through its courts, the final judge of its own power...Its power is to 'regulate commerce between the States,' and the attempts now made during every session of Congress to carry the implications of that power beyond the utmost boundaries of reasonable and honest inference show that the only limits likely to be observed by politicians are those set by the good sense and conservative temper of the country...
"The proposed federal legislation with regard to the regulation of child labor affords a striking example. If the power to regulate commerce between the States can be stretched to include the regulation o flabor in mills and factories, it can be made to embrace every particular of the industrial organization and action of the country. The only limitations Congress would observe, should the Supreme Court assent to such obviously absurd extravagances of interpretation, would be the limitations of opinion and circumstance...
"...Uniform regulation of the economic conditions of a vast territory and a various people like the United States would be mischievous if not impossible. The statesmanship which really attempts it is premature and unwise. Undoubtedly the recent economic development of the country, particularly the development of the last two decades, has obliterated many boundaries, made many interests national and common, which until our own day were separate and local....
"The United States are not a single, homogeneous community. In spite of a certain superficial sameness which seems to impart to Americans a common type and point of view, they still contain communities at almost every stage of development, illustrating in their social and economic structure almost every modern variety of interest and prejudice, following occupations of every kind, in climates of every sort that the temperate zone affords. This variety of fact and condition, these substantial economic and social contrasts, do not in all cases follow state lines. They are often contrasts between region and region rather than between State and State...
(p. 182)"We are too apt to think that our American political system is distinguished by its central structure, by its President and Congress and courts, which the Constitution of the Union set up. As a matter of fact, it is distinguished by its local structure, by the extreme vitality of its parts. It would be an impossibility without its division of powers...America...has come to maturity by the stimulation of no central force or guidance, but by an abounding self-helping, self-sufficing energy in its parts, which severally brought themselves into existence and added themselves to the Union...Communities develop not by external but by internal forces. Else they do not live at all. Our commonwealths have not come into existence by invitation, like plants in a tended garden; they have sprung up of themselves, irrepressible, a sturdy, spontaneous product of the nature of men nurturing in free air.
"It is this spontaneity and variety, this independent and irrepressible life of its communities, that has given our system its extraordinary elasticity...The distribution of the chief powers of government among the States is the localization and specialization of Constitutional understandings; and this elastic adaptation of constitutional processes to the various and changing conditions of a new country and a vast area has been the real cause of our political success.
(p. 186)"No two states act alike. Manufacturers and carriers who serve commerce in many States find it impossible to obey the laws of all, and teh enforcement of the laws of the States
As I have previously blogged, what intrigues me most about Wilson is his emphasis on the potential for states' rights as a biological evolution out of what in his view was the mechanistic federal system. Sadly, his ideas were ignored by the subsequent Republican administrations, which were conservative (i.e., Harding and Coolidge) and conservative-progressive (Hoover). Roosevelt's reforms made government too rigid to adopt Wilsonian progressivism with respect to decentralization. Subsequently, conflicts concerning civil rights made it impossible and inappropriate to give weight to his ideas (as my friend Norma Segal has pointed out, Wilson's upbringing was very much pro-Confederacy and Wilson stands accused of racism (see Jonah Goldberg's article in the Christian Science Monitor.
Wilson's emphasis on the importance of evolution of government puts him in the same category as the other progressives, but today's conservatives have largely adopted the progressivism that Wilson pioneered. The ideological differences between Taft and Wilson versus today's "conservatives" are non-existent. Wilson had at least the familiarly with Burke as any conservative of today and was enamored of Burke. He repeats Burkean ideas throughout this book. Today's conservatives are progressives, not conservatives in the 19th century sense. Today's libertarians are much closer to that. For instance, today's conservatives have adopted a Keynesian monetary stance. No 19th century conservative, including Wilson, would have supported abolition of the gold standard. Keynesian economic ideas, which were advocated throughout the 19th century, were crackpot to 19th century conservatives. Today's conservatives have backed Keynesian presidents since Richard M. Nixon in 1971. This is not progress. It is stupidity.
Wilson's emphasis on state's rights has important implications for today's political milieu. We have forgotten his insights and Wilson scholars do not emphasize them. But similar kinds of ideas are well known in the management field
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