I was just reading Leo Strauss's magnificent Natural Right and History. Strauss is a first rate thinker, on a par with the great libertarians, yet I disagree with a large chunk of his perspective. I must say that the early chapter on Max Weber is of tremendous importance to the work I have been doing on business schools' teaching of justice as the core management competency and the Aristotelian and Nietzschean traditions in mangement theory. Strauss's arguments in favor of natural right and law are profound and explicate a core insight at which I arrived in my undergraduate years. That is, that the justification of ethics is inherent in the socio-biology of humanity. Natural right and natural law are socio-biological constructs. Conventionalism, the notion that ethics is arbitrary, can be disproved empirically. Strauss makes invaluable arguments along those lines. As well, Strauss outlines the very concept I have been thinking about and am working toward: the crucial importance of decentralization to the development of the virtuous and liberal state. I am glad I am reading Strauss now after I have outlined the project in my mind. Although the idea is my own independent of Strauss, Strauss must be given major credit for conceptualizing the project in 1953.
I do not agree with Strauss in a number of ways. Most important among these is his emphasis on human differentials with respect to the prospects of attaining virtue. Strauss's emphasis on this aspect of Plato and Aristotle leads to elitism which I do not share. This elitism is very much in the Progressive and Marxist traditions. I do not agree that there are people who have a special claim to virtue. Anyone who thinks so can try to fix their own plumbing or their own cars. Just because someone can go to Harvard does not make them more valuable than a plumber. When my pipes go, I care about a plumber, not a philosopher or a politician. Sorry, Ayn Rand. What I want is a virtuous plumber. And a virtuous plumber will not go home, drink a 12-pack of beer, and wash his hands of what has happened to the nation. Rather, America has declined because of the elitism inherent in Progressivism.
Coincidentally Jim Crum sent me Andrew Malcolm's LA Times article that suggests that America is indeed in serious moral decline due to the Progressive and socialist policies that the Democratic and Republican Parties advocate. The article finds that 41 Obama appointees have not paid their taxes. As well, federal employees in general owe a billion dollars in unpaid taxes, and 638 workers on capitol hill owe $9.3 million in unpaid taxes. As Treasury Secretary, who is in charge of collecting taxes, Obama appointee Timothy Geithner owes $43,000 in unpaid taxes. As well, within the department of homeland security "4,856 people owe $37,012,174."
Aristotle argued that the role of the city state is to educate moral citizens. Clearly American society has failed in this elementary task. The problem is not just with dysfunctional schools which systematically fail to teach the three 'rs along with basic morals; nor with the decaying family, harmed by the Wall Street economy that has destroyed job opportunities in general but especially for men and has fractured the family by forcing women to return to work at an early age. It is also due to the miasma of bad ethics that imbues the casino economy; the get-rich-quick psychology of Federal Reserve Bank-financed Wall Street speculation and the carry trade; the mentality that one gets rich by sucking at the tit of the state rather than working hard. All of this is nothing new. For decades the Progressive state structure has systematically rewarded fast-talking corporate types with smooth interpersonal but limited productive skills and penalized those who take legitimate risks. The Federal Reserve Bank churns out easy credit made available to speculators in stocks and real estate but the government taxes work (through the income tax) and thereby inhibits small scale capital accumulation, creating a bank-dominated economy that is inherently corrupt. All of this tends to manipulation of paper and cheating, at which Republicans like Rick Lazio as well as Democrats like Timothy Geithner excel.
A nation which allows cheats like Lazio and Geithner to attain high office has failed Aristotle's highest hope for the city state. The nation is failing morally and the fault is Progressivism. Moral failure will lead to collapse. The Founding Fathers knew Aristotle and they were aware of this point. So were the Mugwumps of the Gilded Age. Because of its fascist economy, the nation has foresaken its moral foundations.
Showing posts with label new progressivism. Show all posts
Showing posts with label new progressivism. Show all posts
Friday, September 10, 2010
Sunday, May 31, 2009
The Coming Crisis of Legitimacy in American Government
Legitimacy refers to a concurrence of belief. In American government and politics, political legitimacy has been associated with the Constitution. The traditional American value system, Lockean liberalism, requires a limited state, and the Constitution reflects that value. There has always been debate among Americans as to how limited the state ought to be. Traditionally, special interests, to include the wealthy, manufacturing and banking interests, favored government intervention to further their goals. The working class, while poor, favored greater limits on government intervention to permit their acquisition of wealth. In the early twentieth century to the 1930s the model was modified. A strong element of social democracy was introduced. American social democracy was reconciled to Lockean liberalism in an uneasy balance. A social minimum or floor was established, as reflected in Social Security and Aid to Families with Dependent Children. Standards of professionalism were established in a wide range of fields. For example, with respect to the workplace, laws concerning health and safety, retirement plans, discrimination, and overtime were established. Although the late nineteenth century doctrines of free contract were overturned, a wide latitude for contracting remained. The social democratic laws did not interfere with a wide range of economic activity. Taxes were kept moderately low, at least in comparison with Europe. Where taxes were high, as with respect to inheritance, numerous loopholes were created.
This system is unstable because there is no dividing line between the principles of Lockean liberalism on which the system is based and the system of social democracy that was superimposed on it. To achieve balance Americans needed to constantly reformulate the principles of Lockean liberalism and social democracy. But to reformulate the balance, Americans must understand Lockean liberalism and social democracy. Yet, many Americans never bought into the social democratic system, and many never bought into Lockean liberalism. From the beginning some Federalists rejected principles of limited government. Europeans who immigrated here by the 20th century were unfamiliar with Lockean liberalism. The education system kept their descendants in the dark. On the one hand, Locke is not part of the education of American students today. He is ignored in the curriculum, and the education schools shun him. Therefore, there is no avenue by which many Americans can learn the foundation of one half of the equation.
On the other hand, the scale is heavily weighted toward social democracy. But the American system of business, innovation and progress depends on Lockean liberalism. Socialism and social democracy are incapable of generating progress, and there has been no progress of substance made in socialist or state-dominated countries. Sweden, for instance, grants prizes in innovation to others but itself has been responsible for little in the past century. In Japan, the most famous principles of business, lean manufacturing and total quality management, were created by Toyota's Taiichi Ohno and by the American consultant Edward I. Deming. The government policies in Japan, subsidies to banks, infrastructure, bailouts, and centralized planning have failed.
The educational system has been particularly aggressive in its rejection of Lockean liberalism. But no system of rights is based on logical necessity. The German university, the prototype of the American educational system, claimed to derive the necessity of social democracy from historical forces. Yet in America historical forces tended toward laissez-faire. But the adherents of the German historical school, such as John R. Commons, claimed to derive the necessity of social democracy from historical forces anyway.
Likewise, conservatives claimed to derive the precariously balanced system of Progressivism from tradition. Yet, there was no Progressive tradition. Indeed, there is no American political tradition. American government was created from scratch by colonists in the 17th and 18th centuries. The Declaration of Independence was a logical assertion of Lockean liberalism, and the Constitution imposed a Federalist superstructure. None of these institutions were derived from ancient tradition as in tribal and Roman Europe, the Middle East or Asia.
American conservatism can have meaning only to those who believe that social democracy is the future. To counterpoise "conservatism" to social democracy is to start by stating that you aim to lose the argument. Thus, the American conservative movement failed.
There is no logical coherence to social democracy. Social democracy depends on the mystical assumption that one must obey the state. Yet there is no moral necessity of obedience to social democracy any more than there is a moral necessity of unlimited laissez-faire. As de Jouvenal points out, democracy is attended with increasing levels of state compulsion to enforce the increasingly aggressive dictates of the democratic state. De Tocqueville called this the tyranny of the majority. Social democracy depends on mystical assertions of a "general will" which directly parallels the monarchical "divine will" of Filmer. Social democracy claims a moral foundation based on the logical necessity of risk aversion or minimizing the maximum possible loss, but there is no such logical necessity. Lockeans believe that progress depends on risk, and history has substantiated this opinion. Minimizing maximum loss is the philosophy of tribal cave men, not of free republicans. Yet the cave man theory of government is the one to which social democrats adhere. If many Americans have adopted the minimizing-maximum-loss value system it is because they have never been given a chance to learn what the American philosophy is.
Thus, American higher education has replaced the moral superstructure of Lockean liberalism with the moral superstructure of social democracy. Neither has foundation in logic, but the effects of both can be tested. Germany first adopted social democracy in the 1880s. The century following the adoption of social democracy in Europe and Progressivism in America was the ugliest and bloodiest in Germany's and the world's history. America's adoption of Progressivism in the 1890s led to its foray into imperialism. The adoption of the Federal Reserve Bank in 1913 was followed by the Great Depression of the 1930s.
The progress that liberalism, England and the United States had generated in the 19th century continued to unfold fifty or sixty years into the twentieth century so that the 19th century innovations of television and radio waves provided for continued innovation. But the rapid, universal innovation levels of the 19th century ended. By the 1970s real wages were declining, a result uncharacteristic of any prior period of American history, and firms had decided that the way to profit was by moving plants into low labor cost regions rather than through innovation. Although the personal computer and Internet were notable exceptions, in broad swathes of American industry innovation stalled. Today, once-proud American firms like GM beg for public money. Yet, in the historical context it would seem that innovation should be ever increasing in pace because new ideas generate yet additional ideas. Creativity experts have long observed that innovation begets innovation. That is the process of brainstorming. Thus, the failure of innovation in America suggests not the failure of capitalism, but the failure of social democracy.
The educational system has thus generated a belief system that is empirically unfounded and is likely to disrupt and disappoint most Americans' expectations. The increasing level of taxation since 1950; the transfer of wealth to established businesses and the wealthy via the Federal Reserve Bank and the recent bailouts; the increasing levels of regulation; and the unquenchable expansion of state power to reflect every moral or ethical fantasy of America's elite (so long as the fantasies do not disrupt the investment holdings of the Ochs Sulzbergers, Warren Buffett or George Soros) will all disappoint Americans, who have been told to expect improvement in living standards even though they have not been told how to achieve such improvement or what the system of government and economy is that creates such improvement.
The belief system that the educational system inculcates is mystical in nature. It claims a universal morality of state action; and it holds that the changing and often whimsical beliefs of university professors and newspaper editors morally require blind adherence. It sets up silly "saviors" such as Franklin Roosevelt and Barack Obama, whose divine right to exercise power; deprive Americans of traditionally defined rights and property; and to be believed is rigidly proclaimed as moral. Just as late medieval Europeans believed in a divine right of kings, American social democrats believe in a divine right of state power and the cult of the presidential savior.
An essential part of social democrat mysticism is the replacement of God by the state. Thus, just as a religious Catholic might have a picture of a Saint in their home, social democrats have a picture of their Divine Savior-President Barack Obama in their homes. Just as blasphemous language is contemned by the religious, so is language disrespectful of Savior-Divine President Barack Obama contemned by social democrats.
Thus, the inculcation of blind moral obedience to the state by the Progresssive-Republicans and social democrat-Democrats leads to an inherent instability in the legitimacy of American government. This is seen most clearly in the US Supreme Court. Through a series of judicial decisions the Supreme Court has arrogated the power to legislate. This is not provided by the Constitution. With respect to Dred Scott, in the 1850s, the Supreme Court held that it had the power to regulate contracts. This incursion into state power increased through the 19th century. While cases like Brown v. Board of Education may have had morally laudable results, the arrogation of power by the Supreme Court lacks legitimacy. It is not provided in the Constitution. Many Americans do not believe that the Supreme Court ought to function like a moral dictator. And many Americans do not share the Supreme Court's value system. The Supreme Court cannot function as an overseer of the nation's morals because a sizable percentage of Americans do not share the Supreme Court's values.
The reason again speaks to the failure of America's educational system to educate Americans as to Lockean liberalism. As a result, although I do not question the intelligence and sophistication of the members of the Court, the Court's value system reflects in large part the social democratic training that the Justices received in American schools and universities. Their values are elitist and do not reflect justice as most Americans define it. The court has become increasingly illegitimate. The same is true of other American institutions. Congress's approval ratings are very low, but no one seems to be able to say why. The bailout was opposed by the majority of Americans, and there was no real reason for it save crackpot Keynesian arguments in elitist, pissant newspapers and television stations, but Congress went with the elitist newspapers and television stations.
The end result of the increasing tyranny of social democracy and tyranny of elitist opinion over American values and rights is de-legitimacy of the US government. We live in a period of instability because Americans have refused to confront the failure of social democracy and Progressivism. They continue to accept that conservative insistence on Progressivism and elitist social democracy are the only two options. Yet, the economic policies that the nation has adopted will deprive Americans of the standard of living to which they have become accustomed. This failure will mark the end of the American state as we know it. If the nation were doing as well as it could, reflecting Lockean values to a large degree and striving to balance reason, tradition and innovation in public affairs, minor modifications would be possible. But the two Progressive/social democratic parties have followed an avenue that has led them to the side of a cliff. And the public is going to have to back up and push the two parties over the side.
This system is unstable because there is no dividing line between the principles of Lockean liberalism on which the system is based and the system of social democracy that was superimposed on it. To achieve balance Americans needed to constantly reformulate the principles of Lockean liberalism and social democracy. But to reformulate the balance, Americans must understand Lockean liberalism and social democracy. Yet, many Americans never bought into the social democratic system, and many never bought into Lockean liberalism. From the beginning some Federalists rejected principles of limited government. Europeans who immigrated here by the 20th century were unfamiliar with Lockean liberalism. The education system kept their descendants in the dark. On the one hand, Locke is not part of the education of American students today. He is ignored in the curriculum, and the education schools shun him. Therefore, there is no avenue by which many Americans can learn the foundation of one half of the equation.
On the other hand, the scale is heavily weighted toward social democracy. But the American system of business, innovation and progress depends on Lockean liberalism. Socialism and social democracy are incapable of generating progress, and there has been no progress of substance made in socialist or state-dominated countries. Sweden, for instance, grants prizes in innovation to others but itself has been responsible for little in the past century. In Japan, the most famous principles of business, lean manufacturing and total quality management, were created by Toyota's Taiichi Ohno and by the American consultant Edward I. Deming. The government policies in Japan, subsidies to banks, infrastructure, bailouts, and centralized planning have failed.
The educational system has been particularly aggressive in its rejection of Lockean liberalism. But no system of rights is based on logical necessity. The German university, the prototype of the American educational system, claimed to derive the necessity of social democracy from historical forces. Yet in America historical forces tended toward laissez-faire. But the adherents of the German historical school, such as John R. Commons, claimed to derive the necessity of social democracy from historical forces anyway.
Likewise, conservatives claimed to derive the precariously balanced system of Progressivism from tradition. Yet, there was no Progressive tradition. Indeed, there is no American political tradition. American government was created from scratch by colonists in the 17th and 18th centuries. The Declaration of Independence was a logical assertion of Lockean liberalism, and the Constitution imposed a Federalist superstructure. None of these institutions were derived from ancient tradition as in tribal and Roman Europe, the Middle East or Asia.
American conservatism can have meaning only to those who believe that social democracy is the future. To counterpoise "conservatism" to social democracy is to start by stating that you aim to lose the argument. Thus, the American conservative movement failed.
There is no logical coherence to social democracy. Social democracy depends on the mystical assumption that one must obey the state. Yet there is no moral necessity of obedience to social democracy any more than there is a moral necessity of unlimited laissez-faire. As de Jouvenal points out, democracy is attended with increasing levels of state compulsion to enforce the increasingly aggressive dictates of the democratic state. De Tocqueville called this the tyranny of the majority. Social democracy depends on mystical assertions of a "general will" which directly parallels the monarchical "divine will" of Filmer. Social democracy claims a moral foundation based on the logical necessity of risk aversion or minimizing the maximum possible loss, but there is no such logical necessity. Lockeans believe that progress depends on risk, and history has substantiated this opinion. Minimizing maximum loss is the philosophy of tribal cave men, not of free republicans. Yet the cave man theory of government is the one to which social democrats adhere. If many Americans have adopted the minimizing-maximum-loss value system it is because they have never been given a chance to learn what the American philosophy is.
Thus, American higher education has replaced the moral superstructure of Lockean liberalism with the moral superstructure of social democracy. Neither has foundation in logic, but the effects of both can be tested. Germany first adopted social democracy in the 1880s. The century following the adoption of social democracy in Europe and Progressivism in America was the ugliest and bloodiest in Germany's and the world's history. America's adoption of Progressivism in the 1890s led to its foray into imperialism. The adoption of the Federal Reserve Bank in 1913 was followed by the Great Depression of the 1930s.
The progress that liberalism, England and the United States had generated in the 19th century continued to unfold fifty or sixty years into the twentieth century so that the 19th century innovations of television and radio waves provided for continued innovation. But the rapid, universal innovation levels of the 19th century ended. By the 1970s real wages were declining, a result uncharacteristic of any prior period of American history, and firms had decided that the way to profit was by moving plants into low labor cost regions rather than through innovation. Although the personal computer and Internet were notable exceptions, in broad swathes of American industry innovation stalled. Today, once-proud American firms like GM beg for public money. Yet, in the historical context it would seem that innovation should be ever increasing in pace because new ideas generate yet additional ideas. Creativity experts have long observed that innovation begets innovation. That is the process of brainstorming. Thus, the failure of innovation in America suggests not the failure of capitalism, but the failure of social democracy.
The educational system has thus generated a belief system that is empirically unfounded and is likely to disrupt and disappoint most Americans' expectations. The increasing level of taxation since 1950; the transfer of wealth to established businesses and the wealthy via the Federal Reserve Bank and the recent bailouts; the increasing levels of regulation; and the unquenchable expansion of state power to reflect every moral or ethical fantasy of America's elite (so long as the fantasies do not disrupt the investment holdings of the Ochs Sulzbergers, Warren Buffett or George Soros) will all disappoint Americans, who have been told to expect improvement in living standards even though they have not been told how to achieve such improvement or what the system of government and economy is that creates such improvement.
The belief system that the educational system inculcates is mystical in nature. It claims a universal morality of state action; and it holds that the changing and often whimsical beliefs of university professors and newspaper editors morally require blind adherence. It sets up silly "saviors" such as Franklin Roosevelt and Barack Obama, whose divine right to exercise power; deprive Americans of traditionally defined rights and property; and to be believed is rigidly proclaimed as moral. Just as late medieval Europeans believed in a divine right of kings, American social democrats believe in a divine right of state power and the cult of the presidential savior.
An essential part of social democrat mysticism is the replacement of God by the state. Thus, just as a religious Catholic might have a picture of a Saint in their home, social democrats have a picture of their Divine Savior-President Barack Obama in their homes. Just as blasphemous language is contemned by the religious, so is language disrespectful of Savior-Divine President Barack Obama contemned by social democrats.
Thus, the inculcation of blind moral obedience to the state by the Progresssive-Republicans and social democrat-Democrats leads to an inherent instability in the legitimacy of American government. This is seen most clearly in the US Supreme Court. Through a series of judicial decisions the Supreme Court has arrogated the power to legislate. This is not provided by the Constitution. With respect to Dred Scott, in the 1850s, the Supreme Court held that it had the power to regulate contracts. This incursion into state power increased through the 19th century. While cases like Brown v. Board of Education may have had morally laudable results, the arrogation of power by the Supreme Court lacks legitimacy. It is not provided in the Constitution. Many Americans do not believe that the Supreme Court ought to function like a moral dictator. And many Americans do not share the Supreme Court's value system. The Supreme Court cannot function as an overseer of the nation's morals because a sizable percentage of Americans do not share the Supreme Court's values.
The reason again speaks to the failure of America's educational system to educate Americans as to Lockean liberalism. As a result, although I do not question the intelligence and sophistication of the members of the Court, the Court's value system reflects in large part the social democratic training that the Justices received in American schools and universities. Their values are elitist and do not reflect justice as most Americans define it. The court has become increasingly illegitimate. The same is true of other American institutions. Congress's approval ratings are very low, but no one seems to be able to say why. The bailout was opposed by the majority of Americans, and there was no real reason for it save crackpot Keynesian arguments in elitist, pissant newspapers and television stations, but Congress went with the elitist newspapers and television stations.
The end result of the increasing tyranny of social democracy and tyranny of elitist opinion over American values and rights is de-legitimacy of the US government. We live in a period of instability because Americans have refused to confront the failure of social democracy and Progressivism. They continue to accept that conservative insistence on Progressivism and elitist social democracy are the only two options. Yet, the economic policies that the nation has adopted will deprive Americans of the standard of living to which they have become accustomed. This failure will mark the end of the American state as we know it. If the nation were doing as well as it could, reflecting Lockean values to a large degree and striving to balance reason, tradition and innovation in public affairs, minor modifications would be possible. But the two Progressive/social democratic parties have followed an avenue that has led them to the side of a cliff. And the public is going to have to back up and push the two parties over the side.
Saturday, December 27, 2008
Caroline Kennedy and the Progressive Hoax
"Progressivism" is the idea that government can "solve problems" that politicians, academic "experts" and "the media" identify. But what if these sources lack the ability to identify problems much less solve them? One would expect that those who claim that government can identify and solve "problems" would insist on political leaders who are competent to do so. Problem solving is hard work. If they do not require competence among their political leadership, why might they believe that government can solve problems?
Recently, "Progressives" claimed that Sarah Palin "lacks experience" and therefore is incapable of solving problems or representing the nation in the manner that "Progressives" require. At the same time, Barack Obama revealed ignorance of the most elementary aspects of foreign affairs. For instance, he was unaware that returning Jerusalem to Israel would cause resentment among the Arabs. This kind of whimsical picking and choosing, i.e., the people we don't like must have experience but the people we like need not, suggests that there no serious problems that "Progressives" have any ability to solve, and there is no problem solving. "Progressivism" is a hoax.
New York is one of the most "Progressive" states, a failed state that demonstrates the cruelty and viciousness of big government. New York's economy has been dismal for decades. Led by "Progressives" like Michael Bloomberg, Mario Cuomo, Nelson Rockefeller and George Pataki, New York City and State have failed to prepare for a Wall Street slowdown. Now that it is occurring, college-trained professionals are seeking work at the Bread Alone Bakery in Boiceville, NY. Mayor Bloomberg, himself an experienced trader, has served nearly two terms yet was not willing to take the most modest political risks necessary to attract alternative industries to the state and city. Doing so would have involved cutting massive waste in City Hall, cutting taxes, and reducing regulation.
Tonight Yahoo! features Larry Neumeister's AP release that quotes Kennedy:
"She said two events shaped her decision to ask Gov. David Paterson 11 days ago to consider her for the position if Sen. Hillary Rodham Clinton is confirmed as secretary of state: the Sept. 11 terrorist attacks and her work for Barack Obama's presidential campaign."
If Kennedy were interested in public service and "Progressives" were interested in solving problems, they would have Kennedy serve as a staff analyst in the Senate or the State Assembly, and let her run for state senate office thereafter. After five or six years at the state or congressional level, she might be ready for a senate run.
But since "Progressives" don't solve problems and cannot identify them, the singularly inexperienced and unprepared Kennedy is hailed by the "Progressive" left.
Recently, "Progressives" claimed that Sarah Palin "lacks experience" and therefore is incapable of solving problems or representing the nation in the manner that "Progressives" require. At the same time, Barack Obama revealed ignorance of the most elementary aspects of foreign affairs. For instance, he was unaware that returning Jerusalem to Israel would cause resentment among the Arabs. This kind of whimsical picking and choosing, i.e., the people we don't like must have experience but the people we like need not, suggests that there no serious problems that "Progressives" have any ability to solve, and there is no problem solving. "Progressivism" is a hoax.
New York is one of the most "Progressive" states, a failed state that demonstrates the cruelty and viciousness of big government. New York's economy has been dismal for decades. Led by "Progressives" like Michael Bloomberg, Mario Cuomo, Nelson Rockefeller and George Pataki, New York City and State have failed to prepare for a Wall Street slowdown. Now that it is occurring, college-trained professionals are seeking work at the Bread Alone Bakery in Boiceville, NY. Mayor Bloomberg, himself an experienced trader, has served nearly two terms yet was not willing to take the most modest political risks necessary to attract alternative industries to the state and city. Doing so would have involved cutting massive waste in City Hall, cutting taxes, and reducing regulation.
Tonight Yahoo! features Larry Neumeister's AP release that quotes Kennedy:
"She said two events shaped her decision to ask Gov. David Paterson 11 days ago to consider her for the position if Sen. Hillary Rodham Clinton is confirmed as secretary of state: the Sept. 11 terrorist attacks and her work for Barack Obama's presidential campaign."
If Kennedy were interested in public service and "Progressives" were interested in solving problems, they would have Kennedy serve as a staff analyst in the Senate or the State Assembly, and let her run for state senate office thereafter. After five or six years at the state or congressional level, she might be ready for a senate run.
But since "Progressives" don't solve problems and cannot identify them, the singularly inexperienced and unprepared Kennedy is hailed by the "Progressive" left.
Thursday, October 2, 2008
19th Century Innovation in David Ames Wells's Recent Economic Changes
David Ames Wells, a 19th century engineer and economist, was chairman of the national revenue commission under President Abraham Lincoln and special commissioner of the revenue under President Andrew Johnson. Wells became an advocate of reduced tariffs and hard money. He opposed free silver. He opposed income taxes. In 1871 he argued in Local Taxation that New York State was losing business to other states because of excessive taxation. His view of the late 19th century deflation was that depression was due to "overproduction". In his book Recent Economic Changes, published in 1889, he argues that unemployment is due to improvement in technology. This was true short term but not long because labor rotated into services. On page 64 he mentions that "fifty years ago the railroad and the locomotive were practically unknown". "The ocean steam marine dates from 1838." "Electricity had then hardly got beyond the stage of an elegant amusement." He adds:
"The following is a further partial list of the inventions, discoveries and applications whose initial point of 'being' is not only more recent than the half-century, but whose fuller or larger development in a majority of instances is also referable to a much more recent date:
The mechanical reapers, mowing and seeding machines
The steam plow and other labor-saving agricultural devices
The Bessemer process and steel rail (1857)
The submarine and trans-oceanic telegraph cables
Photography and all its adjuncts
Electrotype
The steam hammer, repeating and breech loading fire arms and rifled and steel cannon
gun-cotton and dynamite
the industrial use of India-rubber
The steam excavator
The sewing machine
The practical use of the electric light
The application of dynamic electricity as a motor for industry
The steam fire-engine
The telephone, microphone, spectroscope and the process of spectral analysis
The polariscope
The compound steam-engine
The centrifugal process of refining sugar
The rotary printing press
Hydraulic lifts, cranes and elevators
The regenerative furnace
Iron and steel ships
Pressed glass
Wire rope
Petroleum and its derivatives, and analine dyes
The industrial use of metal nickel
Cotton-seed oil
Artificial butter
Stearine candles
Natural Gas
Cheap postage
The postage stamp
How have we doing in the past hundred years? Keep in mind that television and radio were conceptualized by Nikola Tesla, a 19th century inventor who decided not to focus on them. Had he, they could have both been operational by 1910.
How does the 20th century, the century of "Progressivism" compare to the 19th, the century of laissez-faire in terms of real progress? Of course, the twentieth century invented the atom bomb, nuclear power, nuclear submarines, the analog and digital computer, the Internet, "buy and hold" strategy of mutual fund investment and Warren Buffett's stock investment strategy tips (yes, we have made major progress under Progressivism). But overall, it would seem that the age of Progressivism has been one of slow progress.
"The following is a further partial list of the inventions, discoveries and applications whose initial point of 'being' is not only more recent than the half-century, but whose fuller or larger development in a majority of instances is also referable to a much more recent date:
The mechanical reapers, mowing and seeding machines
The steam plow and other labor-saving agricultural devices
The Bessemer process and steel rail (1857)
The submarine and trans-oceanic telegraph cables
Photography and all its adjuncts
Electrotype
The steam hammer, repeating and breech loading fire arms and rifled and steel cannon
gun-cotton and dynamite
the industrial use of India-rubber
The steam excavator
The sewing machine
The practical use of the electric light
The application of dynamic electricity as a motor for industry
The steam fire-engine
The telephone, microphone, spectroscope and the process of spectral analysis
The polariscope
The compound steam-engine
The centrifugal process of refining sugar
The rotary printing press
Hydraulic lifts, cranes and elevators
The regenerative furnace
Iron and steel ships
Pressed glass
Wire rope
Petroleum and its derivatives, and analine dyes
The industrial use of metal nickel
Cotton-seed oil
Artificial butter
Stearine candles
Natural Gas
Cheap postage
The postage stamp
How have we doing in the past hundred years? Keep in mind that television and radio were conceptualized by Nikola Tesla, a 19th century inventor who decided not to focus on them. Had he, they could have both been operational by 1910.
How does the 20th century, the century of "Progressivism" compare to the 19th, the century of laissez-faire in terms of real progress? Of course, the twentieth century invented the atom bomb, nuclear power, nuclear submarines, the analog and digital computer, the Internet, "buy and hold" strategy of mutual fund investment and Warren Buffett's stock investment strategy tips (yes, we have made major progress under Progressivism). But overall, it would seem that the age of Progressivism has been one of slow progress.
Monday, August 4, 2008
The Progressives' Sleight of Hand
In the nineteenth century, "progress" meant technological and economic progress. Whig economists like Henry Carey believed in progress and were optimistic as opposed to the pessimism of Malthus and the Manchester school. However, by "progress" Carey meant technological and economic progress. He did not see politics as important. The idea that progress ought to occur through the political system was introduced in the late nineteenth century in several ways. First, the Mugwumps argued that rationalization of public administration through Civil Service laws meant progress. Populists argued that large scale industry must be broken up by government edict. Americans such as Henry Carter Adams, Richard T. Ely and John R. Commons, educated in Germany began to argue for social democratic intervention. Thus, the Progressives identified progress with governmental reform. Which is more important: breakthrough technologies and better management methods that increase wealth, or government policies that rationalize government operations and redistribute wealth? The Progressives seem to not have realized that there was a trade off. In particular, the policies that implement redistribution and regulation forestall entrepreneurship because their costs rest most heavily on small business entrepreneurs. The result is that the Progressives adopted an anti-progressive attitude toward technological and market progress, which was carried forward through the New Deal. The twentieth century saw a slowing of technological progress because of monetary, regulatory and redistributive reforms of the Progressive and New Deal era.
Tuesday, July 29, 2008
Herbert Clark Hoover on Twentieth Century Human Resource Management
In most standard treatments of twentieth century history such as Louis Hartz's Liberal Tradition in America Herbert Hoover is painted as a conservative advocate of laissez-faire who caused the Great Depression through indifference and inaction. He is contrasted with Franklin Roosevelt who is painted as a true social democrat and harbinger of socialist progress. In New History of Leviathan Murray Rothbard does a good job of debunking this nonsensical mythology. Hoover was very much a Progressive in the early twentieth century sense, and his policies anticipated much of the substance of the New Deal. One of the sources that Rothbard cites is the reprinting of a speech that Hoover gave in November 1920 to the Federated American Enginnering Societies in the American Federationist, the journal of the American Federation of Labor (January 1921 issue, volume XXVIII, pp. 35-40).
What is remarkable about Hoover's speech is not just his warmth toward organized labor and his fulsome expression of favor toward regulation of industry and collective bargaining but also the degree to which he anticipated flexible labor relationships that characterized late twentieth century Japanese and US factories. Hoover advocates competency-based pay, cooperation between labor and management guided by collective bargaining, employee involvement in problem solving, flexible work hours to adjust for business downturns, hours of labor that vary with trades and government restructuring of labor markets to facilitate job search among seasonal workers. This last concept was being touted as innovative by labor economists of the 1990s, seventy years after Hoover discussed it. Along with the flexible work practices, Hoover advocated collective bargaining and regulation of industry. He was not an advocate of laissez-faire. One must wonder about the historians who would claim so given easily available evidence such as this speech. Allow me to quote from part of the speech:
"Among the greatest of the problems before our country -and in fact before the world- are those growing out of industrial development....The congestion of population is producing subnormal conditions of life. The intermittency of employment due to bad coordination of industry...The aggregation of great wealth with its power of economic domination, present social, economic ills which we are constantly struggling to remedy...Our mass of regulation of public utilities and of many other types of industry...is a monument to our efforts to limit economic domination...A profound development in our economic system apart from control of capital and service during the last score of years has been the great growth and consolidation of voluntary local and national associations. These associations represent great economic groups of common purpose...And to me, one question of the successful development of our economic system rests upon whether we develop the aspects of these great national associations towards coordination with each other in the solution of national economic problems or whether they grow into groups for more violent conflict...There are certain areas of conflict of interest but there is between these groups a far greater area for common interest...
"...In the question of industrial conflict resulting in lockout and strike one mitigating measure has been agreed upon in principle by all sections of the community. That is collective bargaining...
"There lies at the heart of all these questions the great human conception that this is a community working for the benefit of its human members, not for the benefit of its machines or to aggrandize individuals..."
Among the steps that Hoover advocated to encourage community of interests were hours of labor varying with trades; improvement of labor exchanges; flexible hours to adjust for business downturns; competency- or pay-for-knowledge-based wages with wage structures graded for skill; cooperation between labor and management; employee involvement in problem solving; and the use of the closed shop to encourage greater worker efficiency. The Japanese have done much along the lines of the last point with their "enterprise unions", but Hoover was not saying "company unions" or "representation plans". He used the phrase "closed shop", an approach that was illegalized under the Taft Hartley Act as granting excessive power to labor.
It is also of special interest that Hoover emphasized the role of factions or special interest groups. His hope that they would cooperate never really materialized, although as Rothbard shows during World War I and as Radosh shows during the early period of the New Deal, fascist-like regulation of the economy through governmentally-mandated cartels were attempted.
What is remarkable about Hoover's speech is not just his warmth toward organized labor and his fulsome expression of favor toward regulation of industry and collective bargaining but also the degree to which he anticipated flexible labor relationships that characterized late twentieth century Japanese and US factories. Hoover advocates competency-based pay, cooperation between labor and management guided by collective bargaining, employee involvement in problem solving, flexible work hours to adjust for business downturns, hours of labor that vary with trades and government restructuring of labor markets to facilitate job search among seasonal workers. This last concept was being touted as innovative by labor economists of the 1990s, seventy years after Hoover discussed it. Along with the flexible work practices, Hoover advocated collective bargaining and regulation of industry. He was not an advocate of laissez-faire. One must wonder about the historians who would claim so given easily available evidence such as this speech. Allow me to quote from part of the speech:
"Among the greatest of the problems before our country -and in fact before the world- are those growing out of industrial development....The congestion of population is producing subnormal conditions of life. The intermittency of employment due to bad coordination of industry...The aggregation of great wealth with its power of economic domination, present social, economic ills which we are constantly struggling to remedy...Our mass of regulation of public utilities and of many other types of industry...is a monument to our efforts to limit economic domination...A profound development in our economic system apart from control of capital and service during the last score of years has been the great growth and consolidation of voluntary local and national associations. These associations represent great economic groups of common purpose...And to me, one question of the successful development of our economic system rests upon whether we develop the aspects of these great national associations towards coordination with each other in the solution of national economic problems or whether they grow into groups for more violent conflict...There are certain areas of conflict of interest but there is between these groups a far greater area for common interest...
"...In the question of industrial conflict resulting in lockout and strike one mitigating measure has been agreed upon in principle by all sections of the community. That is collective bargaining...
"There lies at the heart of all these questions the great human conception that this is a community working for the benefit of its human members, not for the benefit of its machines or to aggrandize individuals..."
Among the steps that Hoover advocated to encourage community of interests were hours of labor varying with trades; improvement of labor exchanges; flexible hours to adjust for business downturns; competency- or pay-for-knowledge-based wages with wage structures graded for skill; cooperation between labor and management; employee involvement in problem solving; and the use of the closed shop to encourage greater worker efficiency. The Japanese have done much along the lines of the last point with their "enterprise unions", but Hoover was not saying "company unions" or "representation plans". He used the phrase "closed shop", an approach that was illegalized under the Taft Hartley Act as granting excessive power to labor.
It is also of special interest that Hoover emphasized the role of factions or special interest groups. His hope that they would cooperate never really materialized, although as Rothbard shows during World War I and as Radosh shows during the early period of the New Deal, fascist-like regulation of the economy through governmentally-mandated cartels were attempted.
Friday, May 2, 2008
Herbert Hoover as the Pardigmatic Progressive-liberal
Most people who have not read a biography of Herbert Hoover do not know that he was among the most assertive of the Progressives, and in many ways his ideas set the tone for much of progressive-liberalism in the eight decades that have ensued since his election to president. When he ran for president in 1928 almost all progressives supported him, including social worker Jane Addams, Ida Tarbell, Herbert Croly, Walter Lippmann, Franklin Roosevelt (before Hoover declared himself a Republican), and many progressive magazine and newspaper editors of the time. Hoover's ideas were quintessentially progressive: an elitist, he proclaimed his belief in democracy. He believed that firms should be motivated by social responsibility and individual interest. He argued for voluntary national planning and that progress depends on the establishment of trade associations that establish voluntary ethical codes. He believed strongly in efficiency and the importance of cooperation and associations. He advocated expansion of public works. He believed in tariffs and protectionism. Hoover's biographer Joan Hoff Wilson notes (p. 69)*:
"Where the classical economists like Adam Smith had argued for uncontrolled competition between independent economic units guided only by the invisible hand of supply and demand, he talked about voluntary national economic planning arising from cooperation between business interests and government. The aim was to eliminate waste through greater production efficiency, lowering prices, raising wages and controlling business cycles. Instead of negative government action in time of depression, he advocated the expansion of public works, avoidance of wage cuts, increased rather than decreased production--measures which would expand rather than contract purchasing power....'We are passing' he told the United States Chamber of Commerce in 1924, 'from a period of extreme individualistic action into a period of associational activities.'"
What made Hoover the prototypical Progressive-liberal was his belief (1) that rational planning guided by the state rather than markets can best solve problems and (2) that the state's role includes the positive inculcation of moral belief. In particular, Hoover pioneered the use of mass propaganda, not only as Warren G. Harding used it in campaigns, but as part of his political strategy. In 1920, Hoover became a moderate advocate of collective bargaining. Hoover believed that workplace conflict was an engineering problem. He was a supporter of scientific management, which was linked to the Progressive movement. Quoting Wilson (p. 56):
"The socioeconomic system [Hoover's ideas] represented could not accurately be described by such words as progressivism, laissez faire capitalism, communism, statism, socialism, corporatism, guildism or syndicalism. The absolute laws of progress that he believed in required a new and superior synthesis that he simply called the American system. What he had in mind was a pragmatic utopianism that defied standard economic and political classifications and was, in truth, progressive in the broadest sense--it was forward looking. Perhaps it could best be characterized as an informal brand of liberal corporatism.
"...idealism could be balanced with self-interest and technological innovation to counter the equally enervating system of state socialism or monopoly capitalism..."
(p. 59)"...Hoover hoped to change values at the grass-roots level by propagating an ideology of cooperative individualism and playing down materialism. Massive education and propaganda campaigns could transform traditional attitudes about private property and profit into a new sense of social responsibility..."
Hoover's elitism came from his background as an engineer who had achieved dramatic success in international mining. He seems to have believed that engineering principles could be applied to reforming society.
Now, what was the outcome of Hoover's presidential administration? What was the result of his elitist belief of his ability to outhink markets and to be able to reform society according to his values (which were very nice, by the way).
The result was the Great Depression. The result of the Depression was the New Deal (which Hoover opposed because he found it too statist). Thus we see the end result of Progressivism. Increasing coercion, government programs that stall progress, and inflation that supports wealthy speculators at the expense of productive workers.
Progressivism begins as an assertion of value superiority by an elite. The value superiority is moral or expresses a belief in democracy, as does Peter Levine. Government action (e.g., Wilson's establishment of the Fed in 1913) is taken to encourage the belief. Smart people (Hoover was very bright) are selected to implement the vision. But they blunder. The blunders are blamed on the people, on freedom and on markets. In turn, coercive statist violence attacks democracy and freedom further, institutionalizing Progressive-liberal neuroticism.
*Joan Hoff Wilson, Herbert Hoover, Forgotten Progressive. Prospect Heights, Ill.: Waveland Press, 1992 (Original Publication: 1975).
"Where the classical economists like Adam Smith had argued for uncontrolled competition between independent economic units guided only by the invisible hand of supply and demand, he talked about voluntary national economic planning arising from cooperation between business interests and government. The aim was to eliminate waste through greater production efficiency, lowering prices, raising wages and controlling business cycles. Instead of negative government action in time of depression, he advocated the expansion of public works, avoidance of wage cuts, increased rather than decreased production--measures which would expand rather than contract purchasing power....'We are passing' he told the United States Chamber of Commerce in 1924, 'from a period of extreme individualistic action into a period of associational activities.'"
What made Hoover the prototypical Progressive-liberal was his belief (1) that rational planning guided by the state rather than markets can best solve problems and (2) that the state's role includes the positive inculcation of moral belief. In particular, Hoover pioneered the use of mass propaganda, not only as Warren G. Harding used it in campaigns, but as part of his political strategy. In 1920, Hoover became a moderate advocate of collective bargaining. Hoover believed that workplace conflict was an engineering problem. He was a supporter of scientific management, which was linked to the Progressive movement. Quoting Wilson (p. 56):
"The socioeconomic system [Hoover's ideas] represented could not accurately be described by such words as progressivism, laissez faire capitalism, communism, statism, socialism, corporatism, guildism or syndicalism. The absolute laws of progress that he believed in required a new and superior synthesis that he simply called the American system. What he had in mind was a pragmatic utopianism that defied standard economic and political classifications and was, in truth, progressive in the broadest sense--it was forward looking. Perhaps it could best be characterized as an informal brand of liberal corporatism.
"...idealism could be balanced with self-interest and technological innovation to counter the equally enervating system of state socialism or monopoly capitalism..."
(p. 59)"...Hoover hoped to change values at the grass-roots level by propagating an ideology of cooperative individualism and playing down materialism. Massive education and propaganda campaigns could transform traditional attitudes about private property and profit into a new sense of social responsibility..."
Hoover's elitism came from his background as an engineer who had achieved dramatic success in international mining. He seems to have believed that engineering principles could be applied to reforming society.
Now, what was the outcome of Hoover's presidential administration? What was the result of his elitist belief of his ability to outhink markets and to be able to reform society according to his values (which were very nice, by the way).
The result was the Great Depression. The result of the Depression was the New Deal (which Hoover opposed because he found it too statist). Thus we see the end result of Progressivism. Increasing coercion, government programs that stall progress, and inflation that supports wealthy speculators at the expense of productive workers.
Progressivism begins as an assertion of value superiority by an elite. The value superiority is moral or expresses a belief in democracy, as does Peter Levine. Government action (e.g., Wilson's establishment of the Fed in 1913) is taken to encourage the belief. Smart people (Hoover was very bright) are selected to implement the vision. But they blunder. The blunders are blamed on the people, on freedom and on markets. In turn, coercive statist violence attacks democracy and freedom further, institutionalizing Progressive-liberal neuroticism.
*Joan Hoff Wilson, Herbert Hoover, Forgotten Progressive. Prospect Heights, Ill.: Waveland Press, 1992 (Original Publication: 1975).
Saturday, March 15, 2008
Progressivism and Globalization
In passing the Federal Trade Commission and Clayton Acts, which supplemented the Sherman Anti-Trust Act and the Interstate Commerce Commission, Congress established a system of federal regulation of business. The rationale for federal regulation as opposed to laissez faire competition was self contradictory. The chief argument was one that primarily served capitalists' interests: over-production and the need for liquidity in credit markets (which was accomplished via the Federal Reserve Bank and ultimately the abolition of the gold standard in 1933). However, the chief concern in the public mind was unreasonable restraints of trade, "bad trusts", who harmed the public via monopoly restrictions on prices. Note the contradiction: big business constitutes monopoly power which restrains production to raise prices; but the chief problem according to Progressive advocates of regulation of business was overproduction and too-low prices.
The Progressives also argued that a central government power was necessary to eliminate harmful competition or irrational decision making among some big businesses. But the Progressive argument begged the question. If managers of big businesses might be irrational, why might not officials of the Federal Trade Commission or Interstate Commerce Commision also be irrational, greedy, power hungry or unreasonable? Was Theodore Roosevelt necessarily more rational or moral than John D. Rockefeller? What would have made him so, a halo? Would he have made a better manager of oil companies than John D. Rockefeller was? What evidence was there that government bureaucrats or experts were more rational or effect at managing large concerns, or could contribute meaningfully to the management of the firms?
In today's world, a century after the Progressive era, firms are no longer national in extent, purpose and often allegiance. They are global. Competition is global. There is no agency to supervise the global firms. Toyota, Mercedes and GM all compete without the benefit of government guidance. Yet there is no monopoly power and there is no overproduction. These were imaginary problems claimed by primitive ideologues with little knowledge of how economies work.
The model of management that the Progressives advocated that experts in government agencies can provide management help to large firms is woefully out of date. The chief knowledge of importance to business is, as Hayek pointed out, on the spot. It is specific knowledge concerning production and quality improvement processes. It is not abstract or theoretical and it is not found in business schools or economics departments.
Taiichi Ohno's model of lean manufacturing and continuous production, like Hayek's concept of on-the-spot-information, suggests that the modernist view of expertise as generalizable knowledge is inappropriate to the post-modern world. Knowledge evolves from production processes, which dictate process improvements through specific constraints and requirements that differ from firm-to-firm. The idea that an expert with a Ph.D. can tell firms what processes to use or how to improve quality is as antiquated as the idea that government inspectors are necessary to ensure good quality meat.
The phenomena of big business was striking to the popular mind of the late nineteenth century. The spectacular rise of large firms such as Standard Oil, which were protected by high tariffs and likely would not have grown to the extent that they did without the tariffs impressed people who grew up toward the end of the era of the horse and buggy . The rise of large firms, and the tariffs and other government support for their rise, led to public concerns about monopoly, excessive power and unreasonable competition. But the public fear of large corporations did not reflect an understanding of their vulnerability to creative destruction. The owners themselves were afraid at the time and repeatedly complained about lack of profit, overcompetition and destructive competition. But this was very much in the public interest. Nothing should make the public happier than a capitalist who makes no money because prices are drive down by competition. But the public was unable to disect the pro-capitalist gist of the Progressive argument.
The left of the late nineteenth century, like the left today, is a pro-centralization movement, and therefore it is closely aligned with, despite its hatred of, big business Republicanism. The Progressives favored large scale firms managed by government bureaucracy because they believed that the highest development of industry had occurred in the early twentieth century. The spectacular growth of the large firms seemed to them the pinnacle of human economic achievement. They could not, as we cannot, envision future management and technological developments. To them, the oil mining technology of Standard Oil and the Ford assembly line were humanity's ultimate triumphs. These advances were important, but are primitive by today's standards.
In order to achieve these breakthroughs, capitalist free market competition was essential to innovation. Without "overproduction" cost saving technology would not have been the subject of creative thought. Without economic stress capitalists would not have supported the invention of new products that created competitive advantage (in 1980s lingo). But the Progressives could not see that the advance of capitalism was a dynamic process and the technology of the 20th century by the standards of the 24th century (assuming that progressivism does not prevail) will seem even more backward and primitive than the technology of the 16th century seems to us today.
Ray Kurzweil has argued that technology advances at ever quicker rates. Kurzweil's argument depends in part on Moore's law, which does not seem to be materializing now and assumes a rate of advance that is quicker than past and recent rates by orders of magnitude. One need not buy into Kurzweil's singularity argument to believe that future advance will be quicker than past advance. Technological advance depends on interaction and creativity. Informationi technology has increased the rate of interaction, so the rate of advance has been increasing. But much of the advance has been in information technology. Therefore, we can expect escalating rates of advance. This has occurred despite attacks on the flow of information. Much of the twentieth century world was darkened by dictatorship: communism covered China and Russia and a corrupt socialism dominated India. National socialism dominated the world's political systems, and progressive regulatory systems, income taxation and inflationary Federal Reserve policies that allocate credit away from innovative firms toward financial firms hammered at progress in the United States. Despite the Progressive assault on human progress, except for the period of high tariffs, depression and war from the late 1920s through the 1950s, the twentieth century still saw progress, although not at the rate that could have been, and perhaps slower than the late 19th century rate, which saw less circulation of information for less intervention.
The economy has become more global and competition is no longer "managed" (like a child who believes he is a policeman, so Theodore Roosevelt believed he could manage the economy) yet overproduction is not a problem, nor is unfair competition.
The Progressives also argued that a central government power was necessary to eliminate harmful competition or irrational decision making among some big businesses. But the Progressive argument begged the question. If managers of big businesses might be irrational, why might not officials of the Federal Trade Commission or Interstate Commerce Commision also be irrational, greedy, power hungry or unreasonable? Was Theodore Roosevelt necessarily more rational or moral than John D. Rockefeller? What would have made him so, a halo? Would he have made a better manager of oil companies than John D. Rockefeller was? What evidence was there that government bureaucrats or experts were more rational or effect at managing large concerns, or could contribute meaningfully to the management of the firms?
In today's world, a century after the Progressive era, firms are no longer national in extent, purpose and often allegiance. They are global. Competition is global. There is no agency to supervise the global firms. Toyota, Mercedes and GM all compete without the benefit of government guidance. Yet there is no monopoly power and there is no overproduction. These were imaginary problems claimed by primitive ideologues with little knowledge of how economies work.
The model of management that the Progressives advocated that experts in government agencies can provide management help to large firms is woefully out of date. The chief knowledge of importance to business is, as Hayek pointed out, on the spot. It is specific knowledge concerning production and quality improvement processes. It is not abstract or theoretical and it is not found in business schools or economics departments.
Taiichi Ohno's model of lean manufacturing and continuous production, like Hayek's concept of on-the-spot-information, suggests that the modernist view of expertise as generalizable knowledge is inappropriate to the post-modern world. Knowledge evolves from production processes, which dictate process improvements through specific constraints and requirements that differ from firm-to-firm. The idea that an expert with a Ph.D. can tell firms what processes to use or how to improve quality is as antiquated as the idea that government inspectors are necessary to ensure good quality meat.
The phenomena of big business was striking to the popular mind of the late nineteenth century. The spectacular rise of large firms such as Standard Oil, which were protected by high tariffs and likely would not have grown to the extent that they did without the tariffs impressed people who grew up toward the end of the era of the horse and buggy . The rise of large firms, and the tariffs and other government support for their rise, led to public concerns about monopoly, excessive power and unreasonable competition. But the public fear of large corporations did not reflect an understanding of their vulnerability to creative destruction. The owners themselves were afraid at the time and repeatedly complained about lack of profit, overcompetition and destructive competition. But this was very much in the public interest. Nothing should make the public happier than a capitalist who makes no money because prices are drive down by competition. But the public was unable to disect the pro-capitalist gist of the Progressive argument.
The left of the late nineteenth century, like the left today, is a pro-centralization movement, and therefore it is closely aligned with, despite its hatred of, big business Republicanism. The Progressives favored large scale firms managed by government bureaucracy because they believed that the highest development of industry had occurred in the early twentieth century. The spectacular growth of the large firms seemed to them the pinnacle of human economic achievement. They could not, as we cannot, envision future management and technological developments. To them, the oil mining technology of Standard Oil and the Ford assembly line were humanity's ultimate triumphs. These advances were important, but are primitive by today's standards.
In order to achieve these breakthroughs, capitalist free market competition was essential to innovation. Without "overproduction" cost saving technology would not have been the subject of creative thought. Without economic stress capitalists would not have supported the invention of new products that created competitive advantage (in 1980s lingo). But the Progressives could not see that the advance of capitalism was a dynamic process and the technology of the 20th century by the standards of the 24th century (assuming that progressivism does not prevail) will seem even more backward and primitive than the technology of the 16th century seems to us today.
Ray Kurzweil has argued that technology advances at ever quicker rates. Kurzweil's argument depends in part on Moore's law, which does not seem to be materializing now and assumes a rate of advance that is quicker than past and recent rates by orders of magnitude. One need not buy into Kurzweil's singularity argument to believe that future advance will be quicker than past advance. Technological advance depends on interaction and creativity. Informationi technology has increased the rate of interaction, so the rate of advance has been increasing. But much of the advance has been in information technology. Therefore, we can expect escalating rates of advance. This has occurred despite attacks on the flow of information. Much of the twentieth century world was darkened by dictatorship: communism covered China and Russia and a corrupt socialism dominated India. National socialism dominated the world's political systems, and progressive regulatory systems, income taxation and inflationary Federal Reserve policies that allocate credit away from innovative firms toward financial firms hammered at progress in the United States. Despite the Progressive assault on human progress, except for the period of high tariffs, depression and war from the late 1920s through the 1950s, the twentieth century still saw progress, although not at the rate that could have been, and perhaps slower than the late 19th century rate, which saw less circulation of information for less intervention.
The economy has become more global and competition is no longer "managed" (like a child who believes he is a policeman, so Theodore Roosevelt believed he could manage the economy) yet overproduction is not a problem, nor is unfair competition.
Thursday, March 13, 2008
Failure of Progressivism
Writing in the tradition of John Dewey's progressivism, Peter Levine and others have argued that deliberation and democracy are key values and that society ought to be reformed to reinvigorate public participation and deliberation. Liberals now call themselves progressives and continue to argue for enhancement of the public sphere at the expense of the private sphere; increased government involvement in the economy; and a reinvention of policies that, over the past century, have failed. But Progressivism has failed and will continue to fail because its commitment to big government ignores the conditions for good decision making in a large economy and in the kind of large organizations that progressivism subsidizes.
In order to function, economies and institutions need to make best use of information. Such information is available through price fluctuations and on-the-spot shifts in demand. To make best use of informational change, economic decision makers must be local and/or flexible. Some patterns may be global, but even there continuous improvement is necessary to an efficient organization, and the ability to continously and at times radically improve is necessary to an efficient economy.
To be local, organizations must be decentralized. To be decentralized, they must be small actors who are profit oriented; or be decntralized large organizations. Institutions at the macro-economic level are too large and centralized to be able to make use of local information, as Friedrich Hayek has argued. Thus, to make best use of information in the economy, economic actors must be small, privately owned organizations with local knowledge or be able to emulate such organizations. For large governmental institutions to work they must emulate small organizations anyway, and there is no reason to characterize them as governmental institutions. To the extent that they are government institutions they will not function effectively.
There is a second reason for the failure of progressivism. In order to manage systems, feedback is necessary and reform of policy must be continuous. This is important in both the individual organization and the larger economy as well for two reasons. First, organizations need to maintain stability. If, for instance, prices rise, then the organization must be able to promptly adjust purchasing policies, pricing strategy and a host of similar variables in order to stabilize themselves with respect to the rising price. Second, in order to improve their products organization must be able to continuously change. This requires motive and ability to continuously improve organizational information systems. Such continuous improvement is impossible in a democratic setting. Democratic processes are global and require mass deliberation. Nor are such improvement processes possible via expert commissions. Experts are not privy to what the quality expert EI Deming called the "profound knowledge" of workers intimately involved in a production system. Moreover, the knowledge base that is required changes constantly because of shifting conditions.
Neither of these requirements hold with respect to deliberative democracy and so is precluded by progressivism. Deliberative processes are untimely; cannot integrate local information; are rigid; are unable to be revised because of the costliness of the deliberative process; are subject to opportunistic manipulation by self-interested parties and insiders; do not reflect a unitary profit motive; and often are subject to a range of contradictory motives.
Because of these limitations progressivism is necessarily at odds with progress. Progress requires innovation, which in turn is conditional upon incentives, a clear goal, a focus on improvement (continuous as well as radical), flexibility with respect to decision making and experimentation conditioned upon flexibility and unforeseen results and outcomes.
Thus, progressive-liberalism is inherently anti-progress. Its very name is self-contradictory.
In order to function, economies and institutions need to make best use of information. Such information is available through price fluctuations and on-the-spot shifts in demand. To make best use of informational change, economic decision makers must be local and/or flexible. Some patterns may be global, but even there continuous improvement is necessary to an efficient organization, and the ability to continously and at times radically improve is necessary to an efficient economy.
To be local, organizations must be decentralized. To be decentralized, they must be small actors who are profit oriented; or be decntralized large organizations. Institutions at the macro-economic level are too large and centralized to be able to make use of local information, as Friedrich Hayek has argued. Thus, to make best use of information in the economy, economic actors must be small, privately owned organizations with local knowledge or be able to emulate such organizations. For large governmental institutions to work they must emulate small organizations anyway, and there is no reason to characterize them as governmental institutions. To the extent that they are government institutions they will not function effectively.
There is a second reason for the failure of progressivism. In order to manage systems, feedback is necessary and reform of policy must be continuous. This is important in both the individual organization and the larger economy as well for two reasons. First, organizations need to maintain stability. If, for instance, prices rise, then the organization must be able to promptly adjust purchasing policies, pricing strategy and a host of similar variables in order to stabilize themselves with respect to the rising price. Second, in order to improve their products organization must be able to continuously change. This requires motive and ability to continuously improve organizational information systems. Such continuous improvement is impossible in a democratic setting. Democratic processes are global and require mass deliberation. Nor are such improvement processes possible via expert commissions. Experts are not privy to what the quality expert EI Deming called the "profound knowledge" of workers intimately involved in a production system. Moreover, the knowledge base that is required changes constantly because of shifting conditions.
Neither of these requirements hold with respect to deliberative democracy and so is precluded by progressivism. Deliberative processes are untimely; cannot integrate local information; are rigid; are unable to be revised because of the costliness of the deliberative process; are subject to opportunistic manipulation by self-interested parties and insiders; do not reflect a unitary profit motive; and often are subject to a range of contradictory motives.
Because of these limitations progressivism is necessarily at odds with progress. Progress requires innovation, which in turn is conditional upon incentives, a clear goal, a focus on improvement (continuous as well as radical), flexibility with respect to decision making and experimentation conditioned upon flexibility and unforeseen results and outcomes.
Thus, progressive-liberalism is inherently anti-progress. Its very name is self-contradictory.
Wednesday, February 13, 2008
Review of Nancy Cohen's Reconstruction of American Liberalism 1865-1914
Nancy Cohen. The Reconstruction of American Liberalism 1865-1914. Chapel Hill: University of North Carolina Press, 2002, 318 pages.
Nancy Cohen's Reconstruction of American Liberalism 1865-1914 is a history book that reads like a detective novel. The book deserves a wider audience than that of academic historians. As a layman, I was riveted, in part because the book has important policy implications but also because of Cohen's brilliant scholarship and rich depiction of a wide range of 19th and early 20th century social thinkers. Libertarians and conservatives as well as progressive-liberals will find much of interest.
The libertarian implication arises from the lack of empirical support for the views of the Gilded and Progressive Age social philosophers that Cohen describes beyond a few government case studies. In particular, the underlying assumption of theorists from EL Godkin to Herbert Croly that large size was necessary for modern production, efficiency and consumerism was taken for granted both by those who favored more socialistic reforms and by those who favored market oriented approaches. As well, the model of efficiency based on expertise and professionalism was, as McFarland has pointed out, partly due to the Mugwumps' professional interest (the Mugwumps were often lawyers and academics). But in both cases, the emphasis on scale and the emphasis on civil service systems, the policies that the Gilded Age theoreticians advocated, were primitive from today's management standpoint.
At the same time, the most important progress that was made during the Gilded Age came from developments that most historians have omitted, specifically from individual or small-scale inventors such as Alexander Graham Bell, Thomas Edison, Nikola Tesla and the discoverers of kerosene, who functioned at the margin of society.
Thus, Professor Cohen's excellent review of the Gilded Age reformers suggests (in part by omission) that the Gilded and Progressive Age reformers may have inadvertently staunched the source of innovation and progress that was the most valuable development of the period through emphasis on rationalization, large scale, professional interests and corporate interests at the expense of spontaneity and flexibility. For instance, postbellum subsidies to large business included land grants to the railroads, high tariffs and incipient regulation of industry such as the creation of the Federal Reserve Bank in 1913, which facilitated allocation of credit to large banks and industry at the expense of small inventors.
This may be so even as many of the Progressive-era reforms, especially under Roosevelt, aimed to control "bad trusts" and were not targeted at small business. By establishing regulatory rules and the Federal Reserve Bank the Gilded Age reformers, Mugwumps and Progressives created high fixed costs and inflation which may have deterred innovation and facilitated allocation of credit to the largest and not the most innovative firms.
Virtually all business historians assume that scale was essential to economic development, an assumption that the Gilded Age dogmatists themselves held. It is impossible to prove a counter-factual, but perhaps the pervasive Gilded Age assumption was just a failure of imagination. Today, large firms do not out-perform smaller ones as Google, for instance, demonstrates vis-a-vis Microsoft. Firms like General Motors limp along for decades, aided by Federal Reserve and protectionist policies, while nimble small firms develop new ideas such as the personal computer and the Internet but we never hear of many of them because they are prevented from adopting ideas by rigid credit markets (technology is an exception).
Was it necessary for large scale modernism to replace producerism in the ante-bellum period? I'm not as sure of that as business historians are. If big business had been necessary, prices would have been sufficient to reap profits sufficient to buy land or rights of way and to function without subsidies. But there were subsidies aplenty, often won through corruption. Common sense suggests that, were scale essential, then market performance would have eliminated the need for subsidies. But the problems of the Gilded Age, the corruption, the Jay Goulds and Jim Fisks, the political bosses, the tariffs, all revolved around the inability of large organizations and government to produce value without help from government. Perhaps the Gilded Age should be called the Age of Gilded Corporate Welfare.
Moreover, Cohen argues that today's big business liberalism had been shaped by Gilded Age intellectuals "who had little direct involvement in corporate enterprise". Many of the arguments of the Gilded Age intellectuals were dogmatic. None of the theorists had any grasp of key concepts that we understand today such as Schumpeterian creative destruction, the use of knowledge in free markets and the Hayekian importance of price. Thus, the shaping of today's corporatist system was largely based on dogmatic philosophical debates, none of which were well grounded in theory or evidence. As Cohen points out, a crucial theory like marginalism was not invented until the late nineteenth century at the earliest.
The implications for the modern corporatist state may be that it was an atavistic attempt to reassert medieval tribal relations at the expense of more innovative individualist approaches which existed in embryo in antebellum America. The designers of the corporatist state did not understand the importance of business life cycles, to include bankruptcy, and the importance of environment to stimulation of innovation. Many of them understood the role of credit in creating business cycles, but the widespread belief that, as DA Wells put it, "overproduction" was the cause of the depressions of the 1870s, 1880s and 1890s is evidence of the primitive knowledge base on which corporate reform through big government was based.
The book also has important implications for conservatives. There is little question, after reading Cohen's work, that conservatism and liberalism were created at the same time in reaction to the same phenomena, namely, the expansion of markets and scope of industrial firms. Conservatism does not reassert the values of an earlier age any more than liberalism does. The very terms "conservatism" and "liberalism" are utter misnomers. President Theodore Roosevelt's reaction to large scale enterprise was to expand government control to a greater degree. President William H. Taft's reaction was to limit government control. Roosevelt called Taft a reactionary. But both approaches were developed at the same time in reaction to the same phenomenon. As it turns out, Taft's approach is the more progressive because it permits a greater degree of flexibility and allows a greater likelihood of corporate death. Government programs rarely die, hence Roosevelt, who would have put utilities and other large concerns under government control, had ideas that would have lead to a more conservative approach than Taft did. Advocates of flexible social arrangements have been bamboozled into allowing their position to be called conservatism.
Cohen begins her brilliant and fascinating discussion by pointing out (p. 5) that Gilded Age liberals were in large part analyzing the defeat of producers' movements and the rise of corporate capitalism. The liberalism that the Gilded Age reformers devised was very close to the Progressivism of Herbert Croly and Walter Lippmann. Today's progressive-liberalism was the result of Gilded Age theory. The Gilded Age debate, argues Cohen (p. 6) involved a "triangular struggle for power between liberals, conservatives and socialists." Part of the debate involved a struggle between the Mugwumps or earlier independent Republicans such as EL Godkin and a post 1890 group led by Richard T. Ely that aimed to introduce the views of the German historical school into public policy. The Mugwumps, who were relatively conservative, stopped the socialists and leftists from succeeding. At the end of the 19th century, the marginalism of John Bates Clark, who had been a leftist but became a corporatist, argued for a regulated corporate economy and consumerism. Subsequent Progressive reforms did not significantly modify Clark's corporatist model.
Cohen argues (p. 29) that the "producerist" philosophy of free labor held that "economic independence, gained through ownership of real property or the possession of a skill that could provide a solid competence and independence was a precondition of true freedom." But "other Northerners, particularly those directing and financing the new industrial economy" emphasized freedom of contract.
The Civil War enhanced workers' claims and contributed to labor organizing. Radical Republicans felt uncomfortable with the labor movement, to include the eight-hour day movement in Massachusetts (p. 35). The conflict that the Radical Republicans experienced between the old free labor ideology and their defense of capital from the demands of the eight-hour and other labor movements led to their abandonment of the "producerism" of Andrew Jackson's day.
Cohen goes on to discuss the evolution of EL Godkin's attitude toward the labor movement. At first, Godkin argued that although workers had the right to contract, they labored under unequal bargaining power. "Unions acted as collective evaluators of the individual worker's interest and, in doing so, served as the main actors in the last phase of the emancipation of workers into the regime of contract" (p. 49). Later, though, Godkin was to oppose trade unions (p. 50). As workers demonstrated an interest in radicalism, Godkin became less supportive of unions (p. 57). Ultimately (p. 59), "Damning Mill, the intellectual idol of his youth (who had become a socialist late in life), he instead scrapped the greatest happiness principle and consecrated individual liberty as the one, supreme object in politics." This contrasts with John Dewey, who, a few decades later, consecrated democracy as the supreme object.
The problem that organized labor posed to the independent Republicans matched the problem that the emancipated slaves posed.
Part of the problem in the Mugwumps' eyes was that (p. 86) large scale capitalism "unsettled the moral order, in which property anchored individual selfhood and individual proprietors" Thus, in Cohen's view, consumerism replaced individualism as the basis for liberalism.
Thus, David Ames Wells (p. 88), 1860s commissioner of revenue and civil service advocate, argued for "a vibrant export trade" and against greenback inflation. "Wells...worried about the eclipse of the moral order of propietary capitalism. In condemning the spirit of trading and speculation and praising the spirit of production, Wells drew on the ideal conception of the self-directed, autonomous property owner" In general, Cohen's arguments about Wells are fascinating. I think Wells's ideas are applicable to the Federal Reserve policies of today. In fact, our post-modern world is very susceptible to Wells's arguments about speculation versus production. This is a fascinating section of the book. But Cohen is too pessimistic when she writes that "no nation has ever achieved the industrial development Wells desired and at the same time preserved 'thousands of little separate industries.'" Arguably that situation exists today.
Another really interesting point that Cohen makes is that the modern corporation as it is currently legally constituted did not get established until 1890 or so (p. 96). The corporation is not a product of laissez faire capitalism. It is a legal construction of relatively recent origin.
One of Cohen's chief themes, along with the relationship between consolidation of industry, producerism and labor relations, is the relationship among democracy, efficiency and consumerism. Charles Francis Adams, a railroad executive, argued that regulation by legislatures harmed the public and brought "community and corporation into conflict". Adams argued for "state-supported economic development and that required a rational form of state regulation." In Adams's view, regulation should be shifted from legislatures to expert administrations that would understand the limits of regulation and how to enhance rather than interfere with efficiency. Adams (p. 130) was for industry consolidation coupled with government ownership of some business, what Cohen calls "mixed ownership". Today this plan sounds hopelessly naive. As he learned that rational administrative solutions were indeed a naive plan, Adams switched to a laissez faire orientation (p. 131).
In chapter 4 Cohen argues that the late 19th century theorists', such as William Dean Howells's (pp. 110-112) emphasis on rationalization was often anti-democratic (I would add that it never resulted in much efficiency either.) It is undoubtedly true that the legislatures were incompetent at administrating regulatory systems and were corrupt, but there was little real evidence that experts would be any better at it, but this is what the postwar Radicals claimed. At the same time, though, the Mugwumps like George W. Curtis (editor of Harper's Weekly Magazine) opposed Greenback inflation on the grounds that it was "debt repudiation" (p. 115). Was this for moral reasons or was it because they were debt holders? Maybe a little of both. There are few today with such moral scruples, though. The rule today is inflate and if the bond holders and wage earners are harmed, well too bad because Lord Keynes and Jim Cramer say it is ok.
Cohen argues (p. 121) that historians overrate the limited government aspect of the Gilded Age reform movement as well as the "Liberal Republican" movement. Rather, she argues that it was the goal of administrative rationality that characterized most of the reform movement and that the inability to win support for the administrative vision "turned many to a more extreme classical liberal vision". This makes sense. It is likely the case that if they were acting in good faith they would have found that government reform, civil service, administrative rationalization and the like failed anyway, so they would have ultimately gone the route of laissez faire. The liberals focused mainly on local corruption and political bosses, but also maladministration of the national economy.
One example of the Gilded Age reformers' emphasis on rationality was the commission that New York's Governor Samuel Tilden appointed in 1875. The commission, which included EL Godkin and Simon Sterne, recommended that only taxpayers be allowed to vote and (I'd have to check this because the paragraph is a bit unclear) that the city be turned into a corporation. Too bad the ideas weren't adopted. I wonder if you could buy stock in New York City or Los Angeles if the cities wouldn't be better run by corporate boards than by voters. When I graduated from college a century later New York City was midway through a massive economic decline due to maladministration and excessive wages.
Cohen disapproves of the anti-democratic aspects of the Gilded Age reformers' emphasis on rationality. I would argue that the belief in rationality was a chimera. There is no such thing as rationality in government because incentives to respond to the environment are missing. Government mostly serves elites and its own organizational needs. If the Mugwumps were acting in good faith they would have been disappointed with the results of government reform, and many were and so turned to laissez faire. Cohen attributes this to the popularity of collective action and socialist ideology among the working class.
According to Cohen (p. 148) William Graham Sumner, a Yale professor in the 1870s, was a popularizer of laissez faire capitalism in the Gilded Age who aimed to "exterminate" socialism. State action amounted to malevalent anti-civil libertarianism. Sumner and other Mugwumps opposed rights for women and minorities. He was a social Darwinist. He couched his arguments in the social science of the day. Cohen argues that Sumner's writings were derivative of other thinkers, such as Spencer and Godkin. Likewise, David A. Wells (p. 185) advocated the gold standard, free trade and laissez faire. But Cohen also emphasizes that Wells believed in "economic consolidation and corporate administered markets".
Henry Carter Adams was one of the first American economists to adopt the German historical school paradigm that became foundations to the ideas of John R. Commons and other Progressives. Adams attended Johns Hopkins University, where he earned the university's "first doctorate in the social sciences" (p. 157). He then went on to study at the University of Berlin. The German historical school (p. 157) argued that economies were the products of particular histories so there is no governmental policy inevitably dictated abstract economic laws. They rejected laissez faire and strongly supported statism (one wonders whether this rejection contributed to the rise of the Nazi-Sozi Party 54 years later). It is somewhat puzzling, though, why if history and culture determine the appropriate policy, Adams did not conclude that given US history and culture a limited government approach would be most appropriate. If the German historical school really thought that history ought to determine policy (and not statism under all circumstances), why did he argue for reforms that overlooked American history? The German historical school philosophy seems extremely conservative to me. Some of the professors were, according to Cohen "right wing Bismarckians" but others were "left wing socialists". This suggests that the difference between the two is one of tone. Both German nationalism and German socialism were conservative in their objectives (namely the reassertion of tribal European social relations) but radical in method and led to the tragedies of national socialism in Germany and Russia. The German historical school's emphasis on statism ought deserves credit for more than Henry Carter Adams's apostasy from the independent reformers.
Adams adopted the socialism of his German professors. He became (p. 159) the leader of the "ethical" economics movement in America (p. 159). These were American academics sent to Germany who came back advocating the German historical school's ideas, to include socialism. EL Godkin had thought that universities would produce "sober" social scientists who could help manage the laissez faire economy. Instead, the ethical economists turned out to be socialists. John Bates Clark was among them.
Clark began as a socialist but he couldn't shake his individualistic outlook. He argued that true socialism involved social organization rather than individual ownership(p. 161). That sounds like Progressivism, but Clark wrote it in 1879. As part of this ethical economics movement, Cohen points out that Richard T. Ely, whom she regards as a less important thinker than Adams or Clark, founded the American Economics Association. Ely suffered from the fact that his pro-labor book Labor Movement in America appeared at the time of the Haymarket riot in 1886, and Ely barely held on to his job at Johns Hopkins and Henry Carter Adams was fired from Cornell but wound up at the University of Michigan when he recanted his radicalism. In the 1880s (p. 230) Carter worked for the Interstate Commerce Commission and continued to advocate government intervention in labor relations. He also advocated business school education post 1896 (p. 231). Adams was concerned that corporations could not be moral and so social morality would deviate from economic behavior under a corporatist system.
Clark on the other hand was the theoretical progenitor of marginalism and neoclassical economics. He would seem to be the most important of all of the thinkers of that period but not the most relevant to the establishment of liberalism. Clark's ideas were more conservative. He argued that the marginalist principle applied even to large firms and large blocks of labor.
In the final chapter Cohen makes clear how the ideas of the Gilded Age social thinkers was carried forward by Progressive politicians like President Roosevelt, Taft, and Wilson and writers like Herbert Croly and Walter Lippmann. Much of Progressivism came out of the Mugwumps' emphasis on rationality and government reform.
Overall, this is an absolutely mind blowing book and I heartily recommend it. Thank you, Professor Cohen.
Nancy Cohen's Reconstruction of American Liberalism 1865-1914 is a history book that reads like a detective novel. The book deserves a wider audience than that of academic historians. As a layman, I was riveted, in part because the book has important policy implications but also because of Cohen's brilliant scholarship and rich depiction of a wide range of 19th and early 20th century social thinkers. Libertarians and conservatives as well as progressive-liberals will find much of interest.
The libertarian implication arises from the lack of empirical support for the views of the Gilded and Progressive Age social philosophers that Cohen describes beyond a few government case studies. In particular, the underlying assumption of theorists from EL Godkin to Herbert Croly that large size was necessary for modern production, efficiency and consumerism was taken for granted both by those who favored more socialistic reforms and by those who favored market oriented approaches. As well, the model of efficiency based on expertise and professionalism was, as McFarland has pointed out, partly due to the Mugwumps' professional interest (the Mugwumps were often lawyers and academics). But in both cases, the emphasis on scale and the emphasis on civil service systems, the policies that the Gilded Age theoreticians advocated, were primitive from today's management standpoint.
At the same time, the most important progress that was made during the Gilded Age came from developments that most historians have omitted, specifically from individual or small-scale inventors such as Alexander Graham Bell, Thomas Edison, Nikola Tesla and the discoverers of kerosene, who functioned at the margin of society.
Thus, Professor Cohen's excellent review of the Gilded Age reformers suggests (in part by omission) that the Gilded and Progressive Age reformers may have inadvertently staunched the source of innovation and progress that was the most valuable development of the period through emphasis on rationalization, large scale, professional interests and corporate interests at the expense of spontaneity and flexibility. For instance, postbellum subsidies to large business included land grants to the railroads, high tariffs and incipient regulation of industry such as the creation of the Federal Reserve Bank in 1913, which facilitated allocation of credit to large banks and industry at the expense of small inventors.
This may be so even as many of the Progressive-era reforms, especially under Roosevelt, aimed to control "bad trusts" and were not targeted at small business. By establishing regulatory rules and the Federal Reserve Bank the Gilded Age reformers, Mugwumps and Progressives created high fixed costs and inflation which may have deterred innovation and facilitated allocation of credit to the largest and not the most innovative firms.
Virtually all business historians assume that scale was essential to economic development, an assumption that the Gilded Age dogmatists themselves held. It is impossible to prove a counter-factual, but perhaps the pervasive Gilded Age assumption was just a failure of imagination. Today, large firms do not out-perform smaller ones as Google, for instance, demonstrates vis-a-vis Microsoft. Firms like General Motors limp along for decades, aided by Federal Reserve and protectionist policies, while nimble small firms develop new ideas such as the personal computer and the Internet but we never hear of many of them because they are prevented from adopting ideas by rigid credit markets (technology is an exception).
Was it necessary for large scale modernism to replace producerism in the ante-bellum period? I'm not as sure of that as business historians are. If big business had been necessary, prices would have been sufficient to reap profits sufficient to buy land or rights of way and to function without subsidies. But there were subsidies aplenty, often won through corruption. Common sense suggests that, were scale essential, then market performance would have eliminated the need for subsidies. But the problems of the Gilded Age, the corruption, the Jay Goulds and Jim Fisks, the political bosses, the tariffs, all revolved around the inability of large organizations and government to produce value without help from government. Perhaps the Gilded Age should be called the Age of Gilded Corporate Welfare.
Moreover, Cohen argues that today's big business liberalism had been shaped by Gilded Age intellectuals "who had little direct involvement in corporate enterprise". Many of the arguments of the Gilded Age intellectuals were dogmatic. None of the theorists had any grasp of key concepts that we understand today such as Schumpeterian creative destruction, the use of knowledge in free markets and the Hayekian importance of price. Thus, the shaping of today's corporatist system was largely based on dogmatic philosophical debates, none of which were well grounded in theory or evidence. As Cohen points out, a crucial theory like marginalism was not invented until the late nineteenth century at the earliest.
The implications for the modern corporatist state may be that it was an atavistic attempt to reassert medieval tribal relations at the expense of more innovative individualist approaches which existed in embryo in antebellum America. The designers of the corporatist state did not understand the importance of business life cycles, to include bankruptcy, and the importance of environment to stimulation of innovation. Many of them understood the role of credit in creating business cycles, but the widespread belief that, as DA Wells put it, "overproduction" was the cause of the depressions of the 1870s, 1880s and 1890s is evidence of the primitive knowledge base on which corporate reform through big government was based.
The book also has important implications for conservatives. There is little question, after reading Cohen's work, that conservatism and liberalism were created at the same time in reaction to the same phenomena, namely, the expansion of markets and scope of industrial firms. Conservatism does not reassert the values of an earlier age any more than liberalism does. The very terms "conservatism" and "liberalism" are utter misnomers. President Theodore Roosevelt's reaction to large scale enterprise was to expand government control to a greater degree. President William H. Taft's reaction was to limit government control. Roosevelt called Taft a reactionary. But both approaches were developed at the same time in reaction to the same phenomenon. As it turns out, Taft's approach is the more progressive because it permits a greater degree of flexibility and allows a greater likelihood of corporate death. Government programs rarely die, hence Roosevelt, who would have put utilities and other large concerns under government control, had ideas that would have lead to a more conservative approach than Taft did. Advocates of flexible social arrangements have been bamboozled into allowing their position to be called conservatism.
Cohen begins her brilliant and fascinating discussion by pointing out (p. 5) that Gilded Age liberals were in large part analyzing the defeat of producers' movements and the rise of corporate capitalism. The liberalism that the Gilded Age reformers devised was very close to the Progressivism of Herbert Croly and Walter Lippmann. Today's progressive-liberalism was the result of Gilded Age theory. The Gilded Age debate, argues Cohen (p. 6) involved a "triangular struggle for power between liberals, conservatives and socialists." Part of the debate involved a struggle between the Mugwumps or earlier independent Republicans such as EL Godkin and a post 1890 group led by Richard T. Ely that aimed to introduce the views of the German historical school into public policy. The Mugwumps, who were relatively conservative, stopped the socialists and leftists from succeeding. At the end of the 19th century, the marginalism of John Bates Clark, who had been a leftist but became a corporatist, argued for a regulated corporate economy and consumerism. Subsequent Progressive reforms did not significantly modify Clark's corporatist model.
Cohen argues (p. 29) that the "producerist" philosophy of free labor held that "economic independence, gained through ownership of real property or the possession of a skill that could provide a solid competence and independence was a precondition of true freedom." But "other Northerners, particularly those directing and financing the new industrial economy" emphasized freedom of contract.
The Civil War enhanced workers' claims and contributed to labor organizing. Radical Republicans felt uncomfortable with the labor movement, to include the eight-hour day movement in Massachusetts (p. 35). The conflict that the Radical Republicans experienced between the old free labor ideology and their defense of capital from the demands of the eight-hour and other labor movements led to their abandonment of the "producerism" of Andrew Jackson's day.
Cohen goes on to discuss the evolution of EL Godkin's attitude toward the labor movement. At first, Godkin argued that although workers had the right to contract, they labored under unequal bargaining power. "Unions acted as collective evaluators of the individual worker's interest and, in doing so, served as the main actors in the last phase of the emancipation of workers into the regime of contract" (p. 49). Later, though, Godkin was to oppose trade unions (p. 50). As workers demonstrated an interest in radicalism, Godkin became less supportive of unions (p. 57). Ultimately (p. 59), "Damning Mill, the intellectual idol of his youth (who had become a socialist late in life), he instead scrapped the greatest happiness principle and consecrated individual liberty as the one, supreme object in politics." This contrasts with John Dewey, who, a few decades later, consecrated democracy as the supreme object.
The problem that organized labor posed to the independent Republicans matched the problem that the emancipated slaves posed.
Part of the problem in the Mugwumps' eyes was that (p. 86) large scale capitalism "unsettled the moral order, in which property anchored individual selfhood and individual proprietors" Thus, in Cohen's view, consumerism replaced individualism as the basis for liberalism.
Thus, David Ames Wells (p. 88), 1860s commissioner of revenue and civil service advocate, argued for "a vibrant export trade" and against greenback inflation. "Wells...worried about the eclipse of the moral order of propietary capitalism. In condemning the spirit of trading and speculation and praising the spirit of production, Wells drew on the ideal conception of the self-directed, autonomous property owner" In general, Cohen's arguments about Wells are fascinating. I think Wells's ideas are applicable to the Federal Reserve policies of today. In fact, our post-modern world is very susceptible to Wells's arguments about speculation versus production. This is a fascinating section of the book. But Cohen is too pessimistic when she writes that "no nation has ever achieved the industrial development Wells desired and at the same time preserved 'thousands of little separate industries.'" Arguably that situation exists today.
Another really interesting point that Cohen makes is that the modern corporation as it is currently legally constituted did not get established until 1890 or so (p. 96). The corporation is not a product of laissez faire capitalism. It is a legal construction of relatively recent origin.
One of Cohen's chief themes, along with the relationship between consolidation of industry, producerism and labor relations, is the relationship among democracy, efficiency and consumerism. Charles Francis Adams, a railroad executive, argued that regulation by legislatures harmed the public and brought "community and corporation into conflict". Adams argued for "state-supported economic development and that required a rational form of state regulation." In Adams's view, regulation should be shifted from legislatures to expert administrations that would understand the limits of regulation and how to enhance rather than interfere with efficiency. Adams (p. 130) was for industry consolidation coupled with government ownership of some business, what Cohen calls "mixed ownership". Today this plan sounds hopelessly naive. As he learned that rational administrative solutions were indeed a naive plan, Adams switched to a laissez faire orientation (p. 131).
In chapter 4 Cohen argues that the late 19th century theorists', such as William Dean Howells's (pp. 110-112) emphasis on rationalization was often anti-democratic (I would add that it never resulted in much efficiency either.) It is undoubtedly true that the legislatures were incompetent at administrating regulatory systems and were corrupt, but there was little real evidence that experts would be any better at it, but this is what the postwar Radicals claimed. At the same time, though, the Mugwumps like George W. Curtis (editor of Harper's Weekly Magazine) opposed Greenback inflation on the grounds that it was "debt repudiation" (p. 115). Was this for moral reasons or was it because they were debt holders? Maybe a little of both. There are few today with such moral scruples, though. The rule today is inflate and if the bond holders and wage earners are harmed, well too bad because Lord Keynes and Jim Cramer say it is ok.
Cohen argues (p. 121) that historians overrate the limited government aspect of the Gilded Age reform movement as well as the "Liberal Republican" movement. Rather, she argues that it was the goal of administrative rationality that characterized most of the reform movement and that the inability to win support for the administrative vision "turned many to a more extreme classical liberal vision". This makes sense. It is likely the case that if they were acting in good faith they would have found that government reform, civil service, administrative rationalization and the like failed anyway, so they would have ultimately gone the route of laissez faire. The liberals focused mainly on local corruption and political bosses, but also maladministration of the national economy.
One example of the Gilded Age reformers' emphasis on rationality was the commission that New York's Governor Samuel Tilden appointed in 1875. The commission, which included EL Godkin and Simon Sterne, recommended that only taxpayers be allowed to vote and (I'd have to check this because the paragraph is a bit unclear) that the city be turned into a corporation. Too bad the ideas weren't adopted. I wonder if you could buy stock in New York City or Los Angeles if the cities wouldn't be better run by corporate boards than by voters. When I graduated from college a century later New York City was midway through a massive economic decline due to maladministration and excessive wages.
Cohen disapproves of the anti-democratic aspects of the Gilded Age reformers' emphasis on rationality. I would argue that the belief in rationality was a chimera. There is no such thing as rationality in government because incentives to respond to the environment are missing. Government mostly serves elites and its own organizational needs. If the Mugwumps were acting in good faith they would have been disappointed with the results of government reform, and many were and so turned to laissez faire. Cohen attributes this to the popularity of collective action and socialist ideology among the working class.
According to Cohen (p. 148) William Graham Sumner, a Yale professor in the 1870s, was a popularizer of laissez faire capitalism in the Gilded Age who aimed to "exterminate" socialism. State action amounted to malevalent anti-civil libertarianism. Sumner and other Mugwumps opposed rights for women and minorities. He was a social Darwinist. He couched his arguments in the social science of the day. Cohen argues that Sumner's writings were derivative of other thinkers, such as Spencer and Godkin. Likewise, David A. Wells (p. 185) advocated the gold standard, free trade and laissez faire. But Cohen also emphasizes that Wells believed in "economic consolidation and corporate administered markets".
Henry Carter Adams was one of the first American economists to adopt the German historical school paradigm that became foundations to the ideas of John R. Commons and other Progressives. Adams attended Johns Hopkins University, where he earned the university's "first doctorate in the social sciences" (p. 157). He then went on to study at the University of Berlin. The German historical school (p. 157) argued that economies were the products of particular histories so there is no governmental policy inevitably dictated abstract economic laws. They rejected laissez faire and strongly supported statism (one wonders whether this rejection contributed to the rise of the Nazi-Sozi Party 54 years later). It is somewhat puzzling, though, why if history and culture determine the appropriate policy, Adams did not conclude that given US history and culture a limited government approach would be most appropriate. If the German historical school really thought that history ought to determine policy (and not statism under all circumstances), why did he argue for reforms that overlooked American history? The German historical school philosophy seems extremely conservative to me. Some of the professors were, according to Cohen "right wing Bismarckians" but others were "left wing socialists". This suggests that the difference between the two is one of tone. Both German nationalism and German socialism were conservative in their objectives (namely the reassertion of tribal European social relations) but radical in method and led to the tragedies of national socialism in Germany and Russia. The German historical school's emphasis on statism ought deserves credit for more than Henry Carter Adams's apostasy from the independent reformers.
Adams adopted the socialism of his German professors. He became (p. 159) the leader of the "ethical" economics movement in America (p. 159). These were American academics sent to Germany who came back advocating the German historical school's ideas, to include socialism. EL Godkin had thought that universities would produce "sober" social scientists who could help manage the laissez faire economy. Instead, the ethical economists turned out to be socialists. John Bates Clark was among them.
Clark began as a socialist but he couldn't shake his individualistic outlook. He argued that true socialism involved social organization rather than individual ownership(p. 161). That sounds like Progressivism, but Clark wrote it in 1879. As part of this ethical economics movement, Cohen points out that Richard T. Ely, whom she regards as a less important thinker than Adams or Clark, founded the American Economics Association. Ely suffered from the fact that his pro-labor book Labor Movement in America appeared at the time of the Haymarket riot in 1886, and Ely barely held on to his job at Johns Hopkins and Henry Carter Adams was fired from Cornell but wound up at the University of Michigan when he recanted his radicalism. In the 1880s (p. 230) Carter worked for the Interstate Commerce Commission and continued to advocate government intervention in labor relations. He also advocated business school education post 1896 (p. 231). Adams was concerned that corporations could not be moral and so social morality would deviate from economic behavior under a corporatist system.
Clark on the other hand was the theoretical progenitor of marginalism and neoclassical economics. He would seem to be the most important of all of the thinkers of that period but not the most relevant to the establishment of liberalism. Clark's ideas were more conservative. He argued that the marginalist principle applied even to large firms and large blocks of labor.
In the final chapter Cohen makes clear how the ideas of the Gilded Age social thinkers was carried forward by Progressive politicians like President Roosevelt, Taft, and Wilson and writers like Herbert Croly and Walter Lippmann. Much of Progressivism came out of the Mugwumps' emphasis on rationality and government reform.
Overall, this is an absolutely mind blowing book and I heartily recommend it. Thank you, Professor Cohen.
Saturday, January 26, 2008
Why Do US Citizens Vote?
The US Census Bureau published a study in 2000 tracking voting behavior in non-presidential election years from 1966 to 1998. The percentage of the population voting was:
1966...55.4%
1970...54.6
1974...44.7
1978...45.9
1982...48.5
1986...46.9
1990...45.0
1994...45.0
1998...41.9
Whites voted more than Blacks, but in 1998 the difference was only 43.3% versus 39.6%. In the highest year of voting, 1966, 57.0% of Whites and 41.7% of Blacks voted. A greater percentage of Blacks than Hispanics and Asians vote.
There is a non-linear correlation between age and voting. The data show four age categories. The peak age for voting in every year is 45 to 64. Above 65, voting turns down by a few percent because of health factors. However, those over 65 are two to three times more likely to vote than those 18 to 24. Voting increases with age until age 65.
In 1998, a slightly higher percentage of females was registered and voted (44.9 percent versus 45.7 percent).
That year, there was a direct correlation between family income and voting. 25.4% of people with family incomes below $5,000 voted, 44.2% of people with incomes from $25,000 to $35,000 voted, 59.6% of people with incomes over $75,000 voted, etc. Also consistent with the income correlation, 51.4% of homeowners voted, while 28.4% of renters voted. People who lived in the same place for at least five years had the highest voting rate, 57.9%, and there was a linear correlation between length of residence and voting. Only 21.3% of the people who lived in their residence for less than one month had voted (presumably they could have voted elsewhere).
The Census Bureau concludes that "people with more education, higher incomes, and employment are more likely to vote":
"In 1998, citizens who had bachelor’s degrees were nearly twice as likely (58 percent)to report that they voted as those who had not completed high school (30 percent). At each level of educational attainment from high school completion and above, voting rates increase significantly. People with bachelor’s and advanced degrees made up 31 percent for those who reported voting in the election, compared with just 10 percent for those who did not graduate from high school. The greater the income of an individual, the higher the propensity to vote. Over 50 percent of citizens living in families whose total income was $50,000 or more reported voting in the election, compared with less than 28 percent of those with a family income of under $10,000. All together, about one-half of those living in families who voted in the November 1998 election had family incomes over $50,000."
This suggests why the Democrats, who favor the more affluent workers and homeowners, have triumphed. The poor simply do not vote, and so inflationist Federal Reserve Bank policies that hurt low-wage workers are simply not debated. For whites, 32.2% of those with under a ninth grade education voted (the percentage for Blacks with less than a ninth grade education was 41.4%), while 70.2% of Whites with advanced degrees voted.
In an opinion survey, the census bureau asks non-voters why they did not vote. 34.9% of voters say that they are too busy, 12.7% say that they are not interested, 11.1% say that they are disabled or ill, 5.5% say that they don't like the candidates, 8.3% say that they are out of town, and 5.3% say that they forgot.
No wonder Ph.D. holders like Peter Levine, Ronald Hayduk and Kevin Mattson favor the "new progressivism" and "deliberative democracy". A more interventionist system would serve their specific interests well, because the political vote weights the opinions of the highly educated much more heavily than does the economic vote. Although the economic vote favors the wealthy over the educated to a greater degree than does the political vote, the political arena is the one where the highly educated professional has the greatest opportunity to wrest benefits from the public. In the end, deliberative democracy is just another special interest pleading. 40.2% of those over 65 say that they were ill or disabled, which explains the higher rate for that age group's not voting. The percentage saying that they are not interested declines by about one third for education, from 15.3% for those without a high school diploma to 10.3% of those with a college degree. 5.7% of those without a high school diploma said that they did not like the candidates while 4.5% of those with a college degree said that they did not like the candidates. 37.6% of college grads said that they were too busy while 21.5% of high school dropouts said that they were too busy.
1966...55.4%
1970...54.6
1974...44.7
1978...45.9
1982...48.5
1986...46.9
1990...45.0
1994...45.0
1998...41.9
Whites voted more than Blacks, but in 1998 the difference was only 43.3% versus 39.6%. In the highest year of voting, 1966, 57.0% of Whites and 41.7% of Blacks voted. A greater percentage of Blacks than Hispanics and Asians vote.
There is a non-linear correlation between age and voting. The data show four age categories. The peak age for voting in every year is 45 to 64. Above 65, voting turns down by a few percent because of health factors. However, those over 65 are two to three times more likely to vote than those 18 to 24. Voting increases with age until age 65.
In 1998, a slightly higher percentage of females was registered and voted (44.9 percent versus 45.7 percent).
That year, there was a direct correlation between family income and voting. 25.4% of people with family incomes below $5,000 voted, 44.2% of people with incomes from $25,000 to $35,000 voted, 59.6% of people with incomes over $75,000 voted, etc. Also consistent with the income correlation, 51.4% of homeowners voted, while 28.4% of renters voted. People who lived in the same place for at least five years had the highest voting rate, 57.9%, and there was a linear correlation between length of residence and voting. Only 21.3% of the people who lived in their residence for less than one month had voted (presumably they could have voted elsewhere).
The Census Bureau concludes that "people with more education, higher incomes, and employment are more likely to vote":
"In 1998, citizens who had bachelor’s degrees were nearly twice as likely (58 percent)to report that they voted as those who had not completed high school (30 percent). At each level of educational attainment from high school completion and above, voting rates increase significantly. People with bachelor’s and advanced degrees made up 31 percent for those who reported voting in the election, compared with just 10 percent for those who did not graduate from high school. The greater the income of an individual, the higher the propensity to vote. Over 50 percent of citizens living in families whose total income was $50,000 or more reported voting in the election, compared with less than 28 percent of those with a family income of under $10,000. All together, about one-half of those living in families who voted in the November 1998 election had family incomes over $50,000."
This suggests why the Democrats, who favor the more affluent workers and homeowners, have triumphed. The poor simply do not vote, and so inflationist Federal Reserve Bank policies that hurt low-wage workers are simply not debated. For whites, 32.2% of those with under a ninth grade education voted (the percentage for Blacks with less than a ninth grade education was 41.4%), while 70.2% of Whites with advanced degrees voted.
In an opinion survey, the census bureau asks non-voters why they did not vote. 34.9% of voters say that they are too busy, 12.7% say that they are not interested, 11.1% say that they are disabled or ill, 5.5% say that they don't like the candidates, 8.3% say that they are out of town, and 5.3% say that they forgot.
No wonder Ph.D. holders like Peter Levine, Ronald Hayduk and Kevin Mattson favor the "new progressivism" and "deliberative democracy". A more interventionist system would serve their specific interests well, because the political vote weights the opinions of the highly educated much more heavily than does the economic vote. Although the economic vote favors the wealthy over the educated to a greater degree than does the political vote, the political arena is the one where the highly educated professional has the greatest opportunity to wrest benefits from the public. In the end, deliberative democracy is just another special interest pleading. 40.2% of those over 65 say that they were ill or disabled, which explains the higher rate for that age group's not voting. The percentage saying that they are not interested declines by about one third for education, from 15.3% for those without a high school diploma to 10.3% of those with a college degree. 5.7% of those without a high school diploma said that they did not like the candidates while 4.5% of those with a college degree said that they did not like the candidates. 37.6% of college grads said that they were too busy while 21.5% of high school dropouts said that they were too busy.
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