Thursday, March 20, 2008

Groupthink and Rigidity of the Statist-Liberal Consensus

Progressivism led to a consensus that the state is necessary to manage the economy. Republicans like William Howard Taft emphasized the free market to a greater degree than did Democrats like Woodrow Wilson, but both political parties have been committed to a state managed big business system. Unfortunately, the system has not performed well. The subsidies that the state has provided the financial sector have been squandered on excessive salaries and incompetent management. When the financial firms prove to have been ineptly run so that they near bankruptcy, the public bails them out further despite years of mismanagement, poor decision making and excessive salaries. Income transfers from the public to state-supported managers, to include CEOs in the corporate manufacturing and service as well as in the financial sector, have resulted in increasing income inequality even as firms are not managed competitively by global standards. Despite the failures of the Progressive model, few observers question its merits. In particular, the peculiar argument that society should evolve, so that the adoption of the Progressive model was appropriate in 1910 and is also appropriate today begs the question: why is the Progressive model appropriate today if society evolves? And why are academics, politicians and businessmen so defensive about the Progressive model given its repeated failure, its tired history and its antiquated assumptions about the importance of scale, mass production and stability?

Part of the obsessive commitment to the Progressive model results from the liberal groupthink that was necessary to its foundation. Progressivism was first and foremost a mode of transfer of wealth from the general public to corporate interests. It accomplished this by reducing competition and establishing preferred access to credit by large business. Smaller business may have been accomodated to a degree, but the most important source of business innovation, entrepreneurial start-ups, are missing from the Progressive model. The result was a decline in American competitiveness during the twentieth century. The major business innovations after 1940 were Japanese, not American.

Liberal groupthink plays a key role in defending progressivism. Liberalism establishes a hierarchy of media that is imitative, much as in many mid-century industries firms followed a price leader or followed pattern collective bargaining in their industries, in media there is a unitary point of view that reflects the opinions of liberal leadership. Such opinions are costly to believe if you are an investor. They are costly for society to follow. They have destroyed New York City. They have caused the loss of competitiveness in American industry. But the comfort that liberal groupthink provides to its acolytes provides a critical bond, much as religious belief does.

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