Showing posts with label Liberal. Show all posts
Showing posts with label Liberal. Show all posts

Tuesday, February 3, 2009

Liberal Democracy

Liberal democracy has its benefits and it has its problems. One of the things the founders of the United States seemed to want to avoid was the creation of a democracy…instead they wanted to produce a republic. Why would this be the case?

A democracy, Webster’s tells us, is “rule of the majority.” A republic, Webster’s states, is “a government in which supreme power resides in a body of citizens entitled to vote and is exercised by elected officers and representatives responsible to the citizens and governing according to law.” In addition, a republic is “a government having a chief of state who is not a monarch.”

The difference in emphasis is dramatic…a democracy…the majority rules. In a republic…people govern who are representatives of the people…and are elected to use their own judgment. A democracy can also have an elected body, but the people serving in that government are expected to be conduits of the will of the people.

The founders and many other individuals of a “liberal” persuasion tended to shy away from the idea of a democracy because they equated democracy with a rule by the crowd or the mob. The thing that these people were concerned about is the tendency for the crowd to be moved by emotion and to swing first one way and then another. Representatives in a republic are responsible to bring with them their intelligence and experience and judgment…they are not expected to be swayed by the emotion of the moment or by this trend or that trend.

The problem that occurs when a republic becomes dominated by “public opinion” they begin to act more like a democracy. That is, they pay less attention to their own judgment and abdicate their responsibility to the “will of the moment.”

History has shown that incentives exist for politicians to extend the voting franchise whenever it is in their best interest to enlarge the number of people that are allowed to vote. We see this to be the case in England…Disraeli and Gladstone both increased the franchise to get them elected and serve their own purposes. We see that happening over-and-over again in the United States. The effort of the politicians is to play to the preferences of different “interest” groups and ride them into office and into power.

To discuss this in very modern terms, I refer once again to the recent work of Niall Ferguson, especially his latest book titled “The Ascent of Money.” There are two specific areas that I would like to focus on specifically in this post. The first area concerns how capitalism and, more specifically, the financial aspects of capitalism can create opportunities for politicians to build large constituencies that can help them attain office perhaps to the potential detriment of the health of the country. The second has to do with “housing” democracy, the idea that all…or at least the vast majority…of Americans should own their own home.

The first of these areas relates to the “bad press” that finance and financiers have gotten over time. Historically, finance and financiers have been depicted as parasites that prey on the “real” economic activities that are carried on by the rest of the society. Somehow these people attach themselves to what is really going on in an economy and “suck” the system for what it is worth. Essentially, what is being said about finance and financiers is that they are peripheral to the real work of the economy contributing little or nothing to the output produced real workers.

One of the things that Ferguson presents and stresses is that economic development requires that finance exist within an economy and without a financial system (private property and the rule of law) little enterprise, innovation, or expansion takes place. Finance brings resources, particularly financial resources, to where they can be the most productive in a society. Without this allocation function, societies tend to remain dormant…listless…poor.

With this said, Ferguson goes on to write that debtors have seldom felt well disposed toward creditors and the former has tended to outnumber the latter by a large amount. Because of this debtors have tended to get better coverage in the press and a wider audience for their complaints among intellectuals and people with particular political leanings. Politicians can count and are very aware that debtors outnumber creditors.

Furthermore, financial crises and scandals occur frequently enough to make finance appear to be a cause of poverty rather than prosperity, volatility rather than stability. That is, finance disrupts people’s lives…it seems to make things more difficult…it is identified with “cheats” and “frauds”. Again, the thing that seems to “stick” in people’s minds is the “bad stuff” and not the “good stuff” that comes from a well-functioning financial system.

There are two other factors that seem to permeate the image of the financier to “common” citizens. First, there are wide disparities in income and wealth distribution separating “financiers” from the rest of society. This doesn’t seem very democratic and fair…especially if these people are parasites. Second, for centuries, financial services have been disproportionately provided by members of ethnic or religious minorities who have been excluded from other important positions in the society.

The point of this is that people that have or can have negative feelings about finance and those people that work in financial institutions. These negative feelings can be played upon by those that can gain from obtaining support from these large numbers of people. That is, politicians and others can play on the emotions of the discontented, the dislocated, and the disenfranchised. In this way they can play down or tarnish the image of the good that comes from the financial system.

The other topic I wanted to emphasize is what has been titled “housing” democracy…the concept that all…or, at least, most…Americans should own their own home. This move started in the 1930s as laws and institutions were created to make it easier for people to own their own home. This effort increased after the close of World War II and gathered speed in the 1960s with the “Great Society” and did not slow down into the Nixon years.

I remember working on something called a mortgage backed security during the time I was in the Washington, D. C. in the 1971-72 period. The rationale, as least the one I heard, for this effort was to help get Republicans re-elected to Congress as well as to bring more Republicans into government. How could this happen? Well, if we could get thrift institutions, the primary organizations that originated mortgages, to package their mortgages and sell them to other financial institutions, like insurance companies and pension funds that purchased long term assets, then the thrift institutions could go out and originate more mortgages. More people could own their own homes…and since the Republicans created this process…the voters would reward them by electing or re-electing them to public office.

During the rest of the century this idea was not lost on either Republicans or Democrats. Basically, this effort became a part of the American dream…the creation of everyone owning their own home. So, financial innovation built on financial innovation…and these innovations were constantly celebrated. As a consequence, mortgage-related securities are the most prominent financial asset in the world in terms of outstanding amounts. And, this promotion of “housing” democracy has brought us to the brink of financial collapse…or worse. But, it reportedly got a lot of happy homeowners to vote.

If these politicians have pushed America…and other countries…into more and more of a democratic mode…the question is…has this been helpful? Has this made things better off or worse off? Another question follows…if this process of “democratization” has actually taken place and has not been the most beneficial approach to the health and welfare of the country…what can be done to counteract it? This last point will be discussed in my next post.

Tuesday, January 27, 2009

A Modern Liberal and Free-Market Capitalism

Milton Friedman always claimed that he was a liberal…but, that he was a “classical” liberal. By that he meant that in terms of economics and liberty he was more like a liberal in the 18th century and the early 19th century. Liberalism shifted on him…or as Ronald Reagan said about the Democratic Party…he didn’t leave the Democratic Party…the Democratic Party left him. Friedman felt the say way about the policies and programs proposed by 20th century…and early 21st century liberals.

I am in this dilemma as well. I tried to lay out my position in my last essay, posted o January 24. In that post I claimed that I was an Information Libertarian. This meant that on the side of the cultural wars and civil rights I tend to come down with the modern Liberal…I am for openness, transparency, and liberty. However, on the side of capitalism and the role of government in the economy, I tend to come down on the side of free-market capitalism and minimal government intrusion into economic affairs. My liberalism…as it were…is split…right down the middle.

Liberalism, as Friedman argued, used to include free-market capitalism as one of its components. What happened? Why did free-market capitalism move from support on the left of the political spectrum and land on the right? Good questions.

Currently, I am reading the book titled “The Ascent of Money” by Niall Ferguson. In the Introduction to his book Ferguson makes several observations about how the world looks at finance and financiers that carry some relevance for the questions asked in the previous paragraph.

Ferguson writes: “Throughout the history of Western civilization, there has been a recurrent hostility to finance and financiers, rooted in the idea that those who make their living from lending money are somehow parasitical on the ‘real’ economic activities of agriculture and manufacturing.” He cites three causes of these attitudes:
• Debtors have tended to outnumber creditors and the form have seldom felt very well disposed towards the latter;
• Financial crises and scandals occur frequently enough to make finance appear to be a cause of poverty rather than prosperity, volatility rather that stability;
• For centuries, financial services in countries all over the world were disproportionately provided by member of ethnic or religious minorities, who had been excluded from land ownership or public office.
Furthermore, in terms of business, in general, there have been wide disparities in income distribution and this can be highlighted by the earnings of corporate executives in recent history and the increases they kept receiving over the years, far exceed what individual workers receive, the including small increases that they have received in recent years.

Ferguson goes on to say that one of the real paradoxes of the ‘liberal’ or ‘radical’ prescription for the elimination of the use of money is that one of the major constraints on economic development and growth is the LACK of financial institutions, the absence of banks…not the presence of them. And, this not only applies to nations, or regions, but also to neighborhoods and areas within cities. That is, for economic development to take place there must be some kind financial services present or development is not going to happen or be constricted.

However, Ferguson also says that “If the financial system has a defect, it is that it reflects and magnifies what we human beings are like.” For example, behavioral finance has shown that “money amplifies our tendency to overreact.” Also, the financially knowledgeable can use their talents and skills to multiply opportunity whereas those that are not can be severely hurt. Financial presence can accelerate mobility…both upward and downward. “The rewards for ‘getting it’ have never been so immense. And, the penalties for financial ignorance have never been so stiff.”

What Ferguson seems to be saying is that the presence of free-market capitalism and modern financial institutions and markets are like financial leverage…they can magnify both positive results and negative results. The way this seems to work is that ‘the few’ get very great benefits from capitalism whereas the ‘many’ end up with only meager results. That is the distribution of benefits is very skewed with smaller numbers at the top with a substantial number at the bottom.

The thing that doesn’t get mentioned as much is that, on average, countries that are democratic, capitalistic, with a great amount of liberty have much higher living standards than do countries that don’t offer these things to their citizens. The income distributions may be very skewed and unequal in the former countries but even those that are nearer the bottom are much better off than many of the citizens in these other countries. This doesn’t make the skewed income distribution right…but the fact that there are higher living standards relative to those in other countries is relevant.

The point is free-market capitalism can create wealth, it can create inequalities in income distribution, and since the inequalities can be quite substantial and magnified. Given these results, people can focus on the issue of fairness, not only of relative results at one particular time but also over time in terms of economic fluctuations. Thus, criticism can be leveled at financial capitalism because of these outcomes and because the people further down the pyramid outnumber the people at the top, discussions and debates about the validity of capitalism can be dominated or, at least, forcefully engaged in.

I would like to make three points in response to this. First, there does need to be oversight and regulation existing side-by-side in a capitalistic system…it cannot just be an open, do-as-you-will environment. This would include greater openness and transparency within the business and financial system. The capitalistic system can run better. Second, there does have to be safety nets, insurance programs, education, financial institutions to serve poor areas and other forms of help to reduce some of the risks and extreme results that can come about in free-market capitalism.

Finally, the government must not be too active in attempting to fine-tune the economy. The government can set up incentive systems that drive people and businesses to take excessive risks and make unwise decisions. The most recent eight years is a case-in-point. Through its monetary and fiscal policies the Bush43 administration created an environment that incented executives to take on more and more risk, to assume higher and higher leverage, and to bring new and untested innovations into the market place. The financial…and economic…system became more and more fragile. The collapse came. And, who got the majority of the blame…the executives running these institutions…those running the government escaped without the fingers being pointed at them at all…or, very little.

What I would like to emphasize is that small, entrepreneurial businesses provide most of the dynamism of a free-market capitalistic system, most of the new jobs created, large amounts of wealth that is relatively well distributed, and it adds substantially to the upward mobility in a country. This system thrives on information, trying new things, gathering more new information, innovating, learning, and growing. This part of the system…even the modern liberals like. It is the big, set-in-their-ways organizations, who create much of the unhappiness and the inequality.

I, of course, like this breed of entrepreneurs that exists below the horizon covered by the large, clumsy behemoth. It is also consistent with my support of liberty in the culture wars and civil rights. It is also consistent with support of the “new” in art and literature and music and life style. It is consistent with what being an Information Libertarian is all about…at least, I believe it is.

Wednesday, March 12, 2008

The Purpose of Government--2

In the post of March 5, 2008, I took a look at a definition of the purpose of government attributed to the economist John Maynard Keynes. I focused on this definition because the work of Keynes has been the backbone and rationale for many of the programs and policies of the ‘Liberal’ intellectual in the latter half of the twentieth century, spilling over into the twenty-first century. His biographer, Robert Skidelsky presented the definition in this way: “The purpose of government is to secure the contentment of the people as constrained by the principle of equity.” (John Maynard Keynes, Volume 2, The Economist as Savior, 1920-1837 published by Viking Adult in 1994, page 62.) Skidelsky goes on to explain that by ‘contentment’ Keynes meant ‘physical calm’ and ‘material comfort.’ He also states that ‘equity’ can be defined as “the absence in law or policy of ‘artificial’ discrimination in regards to individuals or to classes.”

Last week I wrote about the first part of this statement of purpose, the securing of “the contentment of the people” as an objective of government. I argued that this concerned itself with outcomes and not processes. I further stated that the Hamiltonian approach to government focuses more on processes rather than outcomes because in a world of incomplete information one does not always succeed in obtaining the outcomes one wants. By focusing upon processes, the government helps to create the systems of a society (the rules and regulations of the society) and also helps the members of the society to obtain the skills and knowledge necessary to operate successfully within such these systems.

This week, I would like to discuss the second part of the definition, the part that deals with “the principle of equity.” Keynes was particularly concerned with this element because of his connection with the Bloomsbury group of artists and intellectuals who were, socially and culturally, on the fringe of English society at the beginning of the twentieth century. This group included individuals like Virginia Woolf, Vanessa Bell, Duncan Grant, E. M. Forster, Lytton Strachey, as well as Keynes, himself. It is apparent in Skidelsky’s biography of Keynes that Keynes was very concerned with protecting this group because of their ‘advanced’ ideas on such things as feminism, pacifism, and sexuality.

Historically, in the nineteenth century, as well as in the twentieth century, Europe and Great Britain were experiencing movements in society that resulted in the formation of more and more ‘little societies’ like the Bloomsbury group. Historians have linked these individuals and groups together within the framework of what is called “Modernism”, a movement they contend succeeded the Enlightenment and which served as the forerunner of “Post-Modernism.” To me, the Enlightenment and Modernism were a part of one whole and just represented an extension of how human beings, once they took on an attitude of skepticism towards authority and once they started exploring things inductively, began to extend knowledge and behavior in many different directions.

This development, I believe, can be related to the spread of information which really began in earnest following the evolution of printing that occurred in the fifteenth century. And, this spread of information continues today at an ever accelerating pace, leading to almost continuous change within the world as well as almost continuous resistance in some areas, the middle east for example. New information is threatening and causes change. Some individuals that receive new information, in whatever form, end up, sooner or later, comparing this new information with the old information generated by the models and schema currently used to solve problems and make decisions. If the new information conflicts with the old information, the seemingly natural thing for a person to do is to try and find out why the difference exists and then modify their models or schema so as to be able to make better predictions in order to solve more difficult problems or make better decisions.

New information is threatening in the sense that the modified models and schema may not be consistent with the assumptions behind the existing models and schema. These conflicts can be observed in religion, politics, culture, and other areas of society that have established belief systems. These existing systems maintain themselves through indoctrination, training, repression, power, and other forms of control and reductionism. Every society, organization, or group exerts such efforts in order to maintain the coherence and stability of their society, organization, or group. Some, however, have processes by which change can be accommodated from within, such as by means of a democratic process. Others require revolution to achieve change, but there are all grades of means between these two extremes.

Earlier in history, societies tended to be more homogeneous in their makeup. Thus, they did not face the threat of alternative world views as much as we do in the modern world. If alternative world views did arise, the individuals involved were either disposed of or, if innocuous, were ignored. However, as information began to spread more rapidly and the number of alternative world views grew, societies began to experience the presence of a real threat. This movement really accelerated during the period referred to as the Reformation and became even more prevalent during the Enlightenment. In the Reformation we saw many religious sects develop and this resulted in a massive, violent at times, change in society. In the Enlightenment, more and more was challenged and, of especial importance, Copernicus, Galileo, Francis Bacon and others developed the methodology and process of science.

Modernism, it seems to me, is just an extension of the inductive method applied to other areas of human interest, like those we would call the humanities, areas like art, literature, music, and architecture. What differentiates these areas from the areas discussed earlier? It is not the methodology of approach or the process of investigation. To me it is that the subject matter under review is much more complex and is much less capable of being isolated through experiment or reductive study. Whereas in science, the models or schema used can be the result of a reductive exercise that isolates the process being studied, allows it to be studied through tightly controlled experiment, and then presented in a formal, many times a mathematical, way. The models and schema used in art, literature, and so forth, often come in the form of stories and narratives, fables, proverbs, folk lore, and so forth. This is because of the complexity of the situations being studied, that is the process being studied cannot be reduced to just a few important variables, and because the models and schema cannot be tested by means of tightly controlled experiments which result in a rejection or confirmation of the proposition being examined. Dealing with human issues is a more difficult thing to do and is subject to much more questioning and debate.

Peter Gay, in his most recent work “Modernism: The Lure of Heresy” writes that “The creative individual was little regarded until the age of the Enlightenment.” But, the emphasis on the work of the individual grew and “The claim of being first and alone in the field became a central feature in the competitive modernist enterprise, which conjured up the figure of the inventive spirit who neither wants nor needs ancestors or company…” (pages 42-43) The Bloomsbury group evolved out of this new, modern attitude.

But, Keynes feared for his friends. Bloomsbury was different and it was not only threatening to the existing social structure, it directly challenged it. Keynes was concerned that Bloomsbury, and other similar movements, would be subject to ‘artificial discrimination’ because of their beliefs and living arrangements. Thus, he argued that a government should not create laws or policies that would be harmful to such groups. Of course, these groups should not harm the ‘physical calm’ or ‘material comfort’ of others, but he would argue strenuously that those, like the Bloomsbury group, would do no such thing.

The Hamiltonian approach to government, I believe, should be a strong advocate of this constraint on government. The spread of information is going to take place on an even larger scale in the future. Likewise, new groups and sects are going to evolve out of this spread in a similar way. A society that places a high premium on innovation and change in science and technology is going to have to accept the pressure for innovation and change in other areas of the society. These other individuals and groups should not be subject to ‘artificial discrimination.’ They are all responding to the same incentives.

Wednesday, March 5, 2008

The Purpose of Government

Recently, I have been reading the magnificent biography of John Maynard Keynes written, in three volumes, by Robert J. A. Skidelsky. In both Volume 1 and Volume 2 of the trilogy, Skidelsky spends some time discussing how Keynes viewed the purpose of government and related his concept back to an essay that Keynes had written on Edmund Burke. This, of course, is very interesting in itself because Keynes is seen as one of the founding fathers of the ‘Liberal’ approach to how government can be used to maneuver the macro-economy and Burke is one of the reigning gods in the ‘Conservative’ pantheon of revelation. What I would like to start off discussing, however, is not the relationship between Keynes and Burke, but the purpose for government that Keynes supports intellectually.

Skidelsky reduces ideas of Keynes to this general statement: “The purpose of government is to secure the contentment of the people as constrained by the principle of equity.” (John Maynard Keynes, Volume 2, The Economist as Savior, 1920-1837 published by Viking Adult in 1994, page 62.) Skidelsky goes on to explain that by ‘contentment’ Keynes meant ‘physical calm’ and ‘material comfort.’ He also defines that ‘equity’ can be defined as “the absence in law or policy of ‘artificial’ discrimination in regards to individuals or to classes.” (page 62)

In other words, the purpose of government is to provide an environment in which individuals can achieve ‘good states of mind’ where one is allowed to achieve whatever ‘good state’ that he or she seeks. This is consistent with the philosophical atmosphere that Keynes was a part of coming from the work of G. E. Moore at Cambridge University (who wrote Principia Ethica (1903; revised edition, Cambridge University Press, 1993) and the Bloomsbury set of intellectuals (Virginia Woolf, Duncan Grant, E. M. Forster, Lytton Strachey and others) located in London. What Keynes was proposing was that everyone should be sufficiently well off and free of economic worries so that they could live the life they wanted, regardless of what others thought of that life.

Keynes, of course, is well known for his efforts to see that societies, especially ones like Great Britain, could attain the ‘physical calm’ and ‘material comfort’ needed for the achievement of such a goal. He was specifically interested in the ‘equity’ issue because his friends in Bloomsbury represented a leading avant garde community that exhibited advanced modern attitudes towards such things as feminism, pacifism, and sexuality. The Bloomsbury group, itself, was relatively well off as far as wealth was concerned and was also assisted over time by the financial support of Keynes; so that the first component of the ‘purpose of government’ was not a concern of theirs. However, Keynes recognized that the condition of ‘material comfort’ and ‘physical calm’ was necessary for the group to pursue its desired lifestyle. Thus, if others were to attain ‘good states of mind’ it was necessary for them to also experience ‘material comfort’ and ‘physical calm’. Hence, government needed to do something to achieve this end.

There was another matter that was important to Keynes in the 1920s and 1930s that fit into his definition of the ‘purpose of government.’ He was very concerned that if many in the country did not experience ‘physical calm’ and ‘material comfort’ they would revolt against the existing democratic governments that supported economic systems that were basically capitalistic in nature. Of course, there was the immediate experience of the Russian Revolution. This worry, however, permeated the Paris Peace talks that followed the Great War and carried over into the 1920s and beyond as real concern was expressed that the ‘masses’ might rise up if they were in a depressed state economically. Thus, a strong, vibrant economy was necessary, it was felt, in order that people could be free to follow the own path to achieving ‘good states of mind.’ The concern here related to the potential breakdown of the capitalistic system.

It is important to address this concept of ‘the purpose of government’ from the Hamiltonian point of view that we have been discussing in previous weeks. One cannot argue from the Hamiltonian standpoint that the goals set out by Keynes are undesirable. We cannot argue that ‘physical calm’ and ‘material comfort’ are good things and are good things for everyone in a society. Also, one cannot argue that there should not be discrimination about the choice of lifestyles, let alone discrimination based on race or any other physical distinction between people.

What one can disagree with this stated purpose from the Hamiltonian point of view is the ability of government to directly achieve specific outcomes. The problem, as I see it, is that this purpose is concerned with outcomes and not processes, a distinction that has been discussed in previous weeks. Outcomes are all fine and good, we argued in the last post, but it is next to impossible for a government to obtain the information necessary to create programs that will achieve the outcomes desired; it is next to impossible to create an incentive system that will accomplish such goal; and it is next to impossible to implement and then execute such programs and policies in a timely manner. In other words, attempting to achieve specific outcomes is a very, very hard thing to do.

It is difficult enough for people to achieve the results that they set out to reach and if they focus only on current specific outcomes they can easily despair. If it is that hard for an individual to achieve what they set out to do, just think how much harder it is for a government to achieve specific outcomes. Furthermore, setting up programs and policies to gain specific ends can become counterproductive in that the programs and policies create other outcomes that are not helpful. And, once programs and policies have been created they are almost never eliminated so that they eventually come to serve other purposes. This is why it is argued that individuals, as well as organizations and governments, should focus on setting up processes that can succeed over time and that provide the tools needed to succeed.

Life is uncertain and an individual or an organization is not going to succeed in every instance. That is why the focus on specific outcomes is not that productive. In baseball, a good hitter will get a hit in 1 out of every 3 times at bat. Or, that batter does not get a hit 2 times out of every three at bats. If we focus on the times the hitter does not get a hit, things look pretty bad. Yet if this person has developed a process, a technique that allows him, on average, to get a hit 1 out of 3 at bats, that person is going to be one of the better hitters in baseball. One is not locked into outcomes when one focuses on processes.

Governmental policies and programs that initiate processes can be leveraged by individuals and organizations to achieve desirable outcomes far beyond the scope and scale of what the government can achieve by itself. In terms of education, the government can support the creation and maintenance of an educational system that results in tremendous positive externalities throughout the society. In this way, the government is helping its citizens attain the tools that are of great benefit to individuals as well as to the society. In terms of capital markets, the government can provide the rules by which capital markets can work and the policing of these markets to oversee ‘fair play’ within the operation of the markets. In terms of a banking system, again the government can provide the rules by which the banking system operates; regulate the system to minimize the amount of abuse taking place; and then support a check clearing system and central banking facilities to support the efficient functioning of the banks.

In all these cases, the government is focusing more on enhancing the infrastructure of the society rather than on achieving specific outcomes. Yes, outcomes are going to vary over time, but even the existing infrastructure should be aimed at smoothing the variation in the outcomes and not offsetting them. Nothing is being said here about the size of government. In a modern, well-functioning capitalistic society, it is my feeling that a fairly sizeable government will be necessary. What is crucial, however, is not the size that the government achieves, but the role the government plays in letting the society determine itself. To me, Keynes was idealistic and not realistic about what a government could do.

Wednesday, February 6, 2008

Conservative and Liberal...Liberal and Conservative

These words are really meaningless to me except in the sense that they represent the titles that we place on people. We say, “You are a Conservative!” But, what does that mean? I am just labeling someone much as I name something a “Hummer.” “You are a Hummer.” What does that mean? Calling someone a Liberal now means something different than calling someone a Liberal in the 1950s or calling someone a Liberal in the 1910s. And you hear people call themselves “Classical Liberals.” It is a name with varied meanings and when you start modifying the label you know that the title has lost any specific meaning.

A conservative person, to me, is someone that either tends to hold on to what is, or, is someone that doesn’t like to take risks. Conversely, a liberal person is one that is open to many different ideas or is more willing to take risks than is a ‘conservative person’. But, a conservative person or a liberal person is not a platform or a dogma or an ideology. When we move these terms into the realm of titles everything becomes confusing.

I have worked with a lot of people in the world of Information Technology, both in teaching at a major university and in working with young entrepreneurs that are attempting to develop the next “big” thing. In this area, people have gotten away from the terms conservative and liberal and use such terms as adaptive and innovative. These terms possess similar meanings, but get away from some of the baggage of the other terms. A person that is conservative seems to be holding onto the past whereas a person that is adaptive knows that change must take place but wants the change to be slower, moving only when there is real justification for the change. A person that is liberal seems to be open to many different possibilities whereas a person that is innovative is someone that attempts to put a new idea into practice. From this we can see that with this terminology it is easier to discuss a continuum of behavioral tendencies running from adaptive to innovative than to just speak of the two extremes. Thus, it is better to say that individuals are more adaptive than others, or, less innovative. It is not appropriate to say that individuals are either adaptive or they are innovative.

Clayton Christensen, who has written a great deal on technological innovation, has distinguished between innovations that are sustaining and innovations that are disruptive. Here the idea is that all change is innovative in nature. However, a sustaining innovation is one that tends to improve the performance of what exists. It can be ‘discontinuous or radical in nature’ or just ‘incremental’, but, the key factor is that sustaining innovation is change that remains within the existing paradigm. A disruptive innovation, on the other hand, is one that changes how things are done rather than just improves them. A disruptive innovation is a change that introduces a different paradigm. Within this framework it can also be seen that one innovation might be more sustaining than another innovation…or more disruptive. We have once again gotten away from the extremes and have established a continuum.

Why do we need to move away from the liberal/conservative labels? We need to move beyond the liberal/conservative labels because they are very, very misleading. For example, to say that someone is conservative may be something entirely different than to call someone Conservative. And, this is true of the distinction between liberal and Liberal. Why?

For one thing, I don’t believe that most of today’s Conservatives are conservative! In many cases, I find that leading conservatives are more innovative than they are adaptive and that many of the programs that they are presenting or are promoting tend to be more disruptive than they are sustaining. The same thing can be said of Liberals and the programs that they are presenting and promoting.

An example comes to mind. In the early history of the United States, Washington’s first term in office, we see the break occurring between Alexander Hamilton and his supporters and Thomas Jefferson and James Madison and their supporters. The former group was labeled Federalists while the latter group, who later became the Democratic-Republican Party, was originally called the Anti-Federalists. The rivalry between the two parties became rancorous and bitter. The difference was not, in my mind, between conservatives and liberals, but was between different pictures of the world that were more innovative than adaptive and were more disruptive than they were sustaining. This is why the divisions between the two parties were so great.

In the early stages of the battle, Jefferson and Madison attempted to link the Federalists with England and with monarchy. Since the Federalists were attempting to create a stronger central government that overcame the difficulties experienced in the original confederation of states, it seemed a natural defense of the more decentralized confederation to accuse the Federalists of wanting to return to the English model of government and even to create a monarchy. Hence, the Federalists were conservatives as opposed to the more liberal Anti-Federalists. Since a war had recently been fought for independence, these were fighting words…and so the battle was engaged. Emotions ran high.

The Federalists, however, were not conservative…they did not really want to return to the English model. As Benjamin Franklin said, something new had been created. But, there were two visions of what this ‘new’ should be. The Federalists saw a world that included finance and manufacturing and trade (international as well as domestic) and in such a world they believed that there needed to be more power lodged in a centralized, national government because there were just some things that a loose confederation of states could not handle. The Anti-Federalists saw a world of farmers and small businesses that were free and independent of these less civil pursuits. They believed that a more decentralized government would better serve the people. Thus, there was a battle of two world-views.

I believe that the same type of situation exists today. I don’t believe that either the Conservatives or the Liberals want to keep the existing structure. The United States is going through a period of transition and there exists (at least) two world-views as to what the future should look like, and it is not the America now in existence or the America of the past. In this sense, what the Conservatives and the Liberals want, in their own way, is innovative and disruptive in nature. The Conservatives do not want to conserve and the Liberals are not liberal in the sense of being ‘open-minded’ about what should take place. They both have a vision and their visions diverge rather than converge…hence the rancor and bitterness of some of the debate.

Where does this leave us? If we take the earlier experience as a guide we can conclude that this division will not be resolved soon. In my interpretation of past events, the Federalists had an immediate victory and a relatively strong, centralized government was formed, much to the benefit of the United States. However, the Democratic-Republican Party controlled the Presidency and the Congress for a lengthy period of time beginning in 1800 and won many battles in the 19th century. We still, as a nation, from time-to-time, long for the idyllic America, the one composed of small farms and small businesses. The heritage of this past still lingers with us. Yet, one can argue that the United States that evolved is really more ‘Hamiltonian’ (see New York Times columnist David Brooks) than it is anything else.

If this is the case and the conflicting world-views continue to do battle we must adjust our mindsets and perceive the situation as it is and not as a battle to conserve or liberate the country, but as one in which there are (at least) two perceptions of how the government should be structured. I, personally, don’t have any suggestions at the moment as to what these world-views should be called. All I know for sure is that they should not be called Conservative and Liberal.