The Split in America

Timothy Egan begins his Sunday Opinion column in the New York Times, “The Party of Yesterday”, http://www.nytimes.com/2008/10/26/opinion/26egan.html?scp=3&sq=timothy%20egan&st=cse, with the following description of the “nation’s brainiest cities…cities with the highest percentage of college graduates”: “These are vibrant, prosperous places where a knowledge economy and cool things to do after hours attract people from all over the country. Among the top 10 only two of those metro areas—Raleigh, N. C., and Lexington, Ky.—voted Republican in the 2004 presidential election.”

He continues, “This year, all 10 are likely to go Democratic. What’s more, with Colorado, New Hampshire and Virginia now trending blue, Republicans stand to lose the nation’s 10 best-educated states as well.” Going further he states that “Brainy cities have low divorce rates, low crime, high job creation, ethnic diversity and creative capitalism…They grow good people in smart cities.”

Although I don’t disagree with the conclusion that Egan reaches, that Republicans “blow off the smart cities” and the smart states which makes them “The Party of Yesterday”, I believe that there is a deeper cause behind this bifurcation. It seems to me that this separation is something that is being experienced worldwide and is connected with the spread of information.

Historically, we have seen that information spreads and its spread cannot be stopped. Nations and organizations and cultures can slow down the spread for a while but in the end the spread of information overcomes even the most restrictive of societies. The development of movable type allowed for the printing and dissemination of books and pamphlets to audiences never before reached and this resulted in societal upheavals like the Reformation, the Enlightenment, and Post-Modernity. As this and further innovations that allowed people to compare viewpoints and data that were kept isolated before, science grew and prospered along with many other fields of applied science and intellectual investigation. The Information Age is bringing the world to an even greater integration of thought as the spread of information reaches more and more corners of the globe.

Of course, this is not looked on favorably by many. The spread of information threatens ways of thinking, lifestyles, and people in power. The spread of information is disruptive and often brings with it an upheaval of ordinary life. The spread of information forces change!

Those in power that are threatened by the changes sense the danger of the “new” information and attempt to constrain its spread while at the same time engage in the defensive maneuver of requiring a stricter adherence to the “old” way of doing things. In this response there can be no openness to debate or dialogue for the leaders in power believe that they cannot give in an inch to different ways of thinking.

Beyond the leaders that are threatened by the “new” information, different people respond to this threat in different ways. Whereas some people welcome the change, even thrive on the “new”, others in various ways are wary of anything that is different or are just overwhelmed by the wave of the “new”. In one instance it is costly to change one’s life and thinking to accommodate the new information. In another instance the situation can be described as one of information overload: the new information is like “white noise” to people…they are inundated with too much information and are unable to process it. In either case, as well as others like it, many people resist what is happening because it alters what they know and are comfortable with.

This environment is making a major contribution to the separation that Egan describes in his column. Whereas he claims that the separation is occurring as the “brainy” areas of the country are divided from other areas of the country, I believe that the bifurcation is being exacerbated by the division between those that are receptive to the spread of information in the modern world and those that want to hold on to the old knowledge and the old ways of thinking.

The foundational “base” of the Republican Party is constructed more and more from just those that want to hold onto the “old way of thinking” and are resistant to the spread of information that is making the modern world such a dynamic place to live in. The objections that are being raised relate to the diversity of culture and of different cultures, the new discoveries in the biological and physical sciences, the innovations relating to information technology and the global application of this knowledge, the openness to alternative goals and objectives in the world, and the possibility that all worldviews, including theirs, could be fallible.

With the emergence of the modern Republican Party in the late 1960s, it became the common wisdom of the party that a candidate attempting to gain the nomination for President had to move to the right end of the political spectrum to get nominated. Once nominated, the candidate could then move toward the center in order to be elected. Early on, through the 1980s, the Republican Party had a sizeable portfolio of policies and programs that were sufficiently attractive to independents and other swing voters to attract them to vote for its presidential candidate. However, the Party had exhausted their portfolio of policies and programs by the late 1980s and into the 1990s.

Therefore, something new had to be tried. A young Karl Rove was able to resolve this dilemma. In the two Bush (43) elections, the Republican candidate for President stayed to the right in order to cement the base of the party. However, since the party had little or nothing to offer those in the center of the political spectrum Rove resorted to fear tactics in order to obtain the votes of the independents and the swing voters. In the age of 9/11 and the war on terrorism, the strategy proved to be successful!

A similar strategy has been followed in the current run for the presidency. John McCain was supposedly an independent, a maverick that appealed to those in the center. What he didn’t have was an appeal to the foundational “base” of the Republican Party. The campaign strategists filled this gap in a very satisfactory fashion, to their way of thinking, by getting Sarah Palin nominated for the office of Vice President. The problem with the strategy was that Sarah Palin was not acceptable to the swing vote and the election started to slip away from the campaign. McCain’s “maverickism” could not hold the center. In desperation, the managers of the effort moved to the old standby of the previous two campaigns…demonize the opposing candidate and scare the independent voter into voting for McCain.

Not only did the strategy not work, it exposed the intellectual emptiness of the Republican Party. It exposed the Party as being the party that was resistant to the future. It exposed the Party as being an organization that was not only resistant to the spread of information but as the party that wanted to constrain thought and hold onto old prejudices. It exposed the Party as being reactionary.

This is the problem America has to face going forward. In past years we saw this problem as one we faced externally in a world. Now, we see it as also a problem we have to face internally. For whatever cause, people everywhere resist the spread of information. People fight wars to keep information from spreading. It is not a new battle, but one that has been rejuvenated as those impacted have become desperate as they feel the world they know slipping away.

History shows that the resisters never win…but they can put up an inconvenient and troublesome fight. Those that support the spread of information ultimately win the battle by example…by showing others that, as Egan implies, they are good people living in a good place with room for all to join them.

Where McCain and the Republican Party now stand

This election has been a long road for me. Even though I left the Republican Party in the 1992 election, as the nominating season got underway in 2007 I was hopeful that there was at least one Republican candidate I could count on…possibly even two. I regretfully have to state…the Republican Party has definitely left me behind. I have never been so disappointed in people…Mitt Romney and John McCain in particular.

Last year as the political campaigns got under way I must admit to being particularly taken by Mitt Romney, former Governor of Massachusetts. I grew up in Michigan and was a big fan of Romney’s father…George Romney…and his mother…Lenore. I got the opportunity to work with George Romney in Washington, D. C. when he was the Secretary of Housing and Urban Development. I had and have a great deal of respect for the elder Romney and believe that he always had his heart and mind in the right place.

I thought Mitt would be like his father and his life story indicated that this might be true. He went from one success to another, Bain & Company and Bain Capital, the Winter Olympics, and his term as governor of Massachusetts. He seemed open minded and responsive to situations with strong moral character. He seemed to be a lot like his father. Thus, I supported him financially, as well as emotionally.

And, then he began his campaign. I could not have been more disappointed as I heard him in the early stages of the campaign…especially in Iowa. He seemed to be a different person, perhaps because he did not believe what he was saying…or perhaps because he had accepted views that he was just learning. Whatever, he was nothing like the strong pragmatic individual I had seen earlier, a person who had a firm moral structure within him. In addition, he was nothing like his father!

Let me digress here for a minute. In the last quarter of the twentieth century one of the major beliefs held within the Republican Party was that a person who wanted to receive the nomination to run for President at the head of the Republican Party had to move sharply toward the political right in the primaries before moving back to the center of the political spectrum for the general election.

Romney did this to an extreme. In Iowa, he didn’t sound anything like the person who had been Governor of Massachusetts. And then there was the Michael Hucklebee threat. Not only did Romney feel that he needed to move to the political right, because of Hucklebee, he believed he had to sound like a Christian fundamentalist! Adding to this was the fact that Romney, being a member of the Church of Jesus Christ of Latter Day Saints, being a Mormon, was a member of a religious body that was greatly distrusted by many of the evangelical Christians he was trying to attract. He even claimed Jesus Christ as his personal Lord and Savior and gave a ‘defining’ speech to lay out his religious beliefs. Romney sounded more and more like he really didn’t have any fundamental personal beliefs!

Romney lost the Iowa caucuses.

Worse than that…because of his pandering in Iowa he lost New Hampshire! At one time, Romney was well ahead of his competitors in New Hampshire. He was from neighboring Massachusetts and people in New Hampshire knew of him and liked him because of what he had done in Massachusetts.

And, at one time John McCain trailed Romney in New Hampshire polls by double digits and this was amazing because people in New Hampshire had always really liked McCain. But, McCain was basically ‘out-of-the-race’ because of his poor organization and the strained financial condition of his campaign. It seemed as McCain’s last try for the Presidency was dead on arrival.
Romney gave McCain his life back. Because of his pandering in Iowa, the people of New Hampshire turned against Romney. McCain re-organized and won the primary. McCain was back in business although still weak.

But, the other Republican candidates went on to self-destruct. Romney became less and less credible. Rudolph Giuliani followed a dreadful strategy which focused on Florida. And, in the end, the only one left standing was John McCain…the winner by default. A winner who was not trusted by the right-wing side of the Republican Party…who, at best, was received less-than-warmly by the evangelical Christian Right. McCain became the nominee of the Republican Party with only limited enthusiasm from the base of the party.

In order to explain the rest of this story let me just state up front that I believe that John McCain is one of the worst organizers I have ever seen at this high a level of ambition. The unfolding tale of his campaign is one of continual decisions that were questionable at their best and disastrous at their worst. But, the saddest part of this whole saga is that John McCain lost his direction and, in the process, lost his honor.

It seems to me that early on his campaign decided two things. First, McCain’s campaign managers believed that John McCain was loved by the center of the political spectrum for being a maverick and an independent thinker and the center would stay with him…especially if he were running against an extreme liberal. Second, his managers believed that it was important to command and energize the right side of the Republican Party, the side that was so lukewarm to McCain. The answer, they believed, was the choice of candidate for vice president…that person had to be someone of the political right that also appealed to the evangelical base. Furthermore, it would not hurt if that person were a woman…given that Hilary Clinton was not in the race anymore.

However, two things happened. First, the choice of the candidate for Vice President did fire up the right side of the Republican Party and its religious base, but, in so doing this individual over shadowed the candidate for President and dominated the news. Even worse, the vice presidential candidate seemed to drive away the independents and the people of the center that was the natural constituency of McCain, himself.

Here is where McCain’s political handlers hit the panic button. The choice of a vice presidential candidate held the political base of the Republican Party; but McCain was not supposed to lose his base in the process. Only half the plan was working.

The subsequent efforts of the McCain team represented a desperate effort to re-capture the center. And, how was this to be done? Demonize the Democratic candidate so that the center of the political spectrum would once again return to its preferred candidate…John McCain. This is the only way one can explain all the efforts the campaign to target Obama as a friend of terrorists, a socialist, a tax-and-spend liberal.

The problem was that the efforts to demonize the Democratic candidate didn’t work. In fact, if anything these efforts had the opposite effect and John McCain was now seen as a person who sold out to his right leaning handlers and had given up his honor and his dignity. He was not what we thought he was.

The right hand side of the Republican Party has come to dominate not only the primary season of the Party but also the Party in the general election. Unfortunately, it has swallowed up two men, who, in the past, seemed to be decent and capable individuals. It will continue to do this unless the Party loses badly in this election. But, more on this in another post.

What is Possible in the next Four (Eight) years?

“What to do about a country that isn’t prepared to participate adequately in its own rescue?” Robert Rubin, writing about the Russia of 1998 in his book “In An Uncertain World”.

All of the candidates for President of the United States are out talking with the people and describing to them the policies and programs they would like to enact if they are elected this November. The basic question that follows this ‘dance’ is, “What are the chances that this person, if elected President, would be able to carry through and implement these policies and programs?”

Right now, my answer to this question is “Little or none!” Until the current financial dislocation resolves itself and the new administration really gets serious about the strength of the United States dollar, the hands of the new President will be tied in terms of enacting new programs and policies. The situation is similar to the one faced by Bill Clinton when he became President in 1992. The Republicans had had control of the White House for twenty of the previous twenty-four years and so Democrats were very anxious to get back into the White House and enact some programs and policies that were more consistent with their way of thinking. However, this was not to be.

Fortunately, for the United States, President Clinton listened to Bob Rubin who advised him that the Federal Budget had to be brought under control and then kept under control. The reason being, Rubin argued, was that any whiff of fiscal irresponsibility on the part of the Democratic administration would be jumped upon by the international financial markets and the dollar would suffer the consequences. New programs and policies would have to be limited while the administration brought their fiscal budget into balance.

The result of this was eight years of almost continuous prosperity and growth for the United States economy and strength for the value of the dollar. Granted that the Clinton administration had received the gift of a tax increase on the part of the George H. W. Bush administration, a gift that helped propel Clinton into the White House, but this gift set the stage for the eight good years that followed. [Clinton DID return a gift to Bush 43 reciprocating the gift that had been given him by Bush 41: the form of the gift was a balanced federal budget and, in general, a very robust economy. Bush 43 has not been so generous to the President that will follow him.] But, prudent fiscal discipline and management also made a major contributed to this period of growth and prosperity.

In one sense, however, the new President that will follow Bush 43 is in a similar situation to the one faced by Clinton. The dollar has been declining for about six years. The environment created by the Bush administration over the past seven years is one that includes a lack of discipline and prudence with respect to risk management and has left financial markets and institutions in disarray. One of the first items on the agenda of the new President will be to restore confidence in the United States government and the United States financial system. This agenda item will affect all else that the President does.

What about the war in Iraq? Well, no new President may be able to take the United States out of Iraq in the near term. However, anything that is done there…and in Afghanistan… is going to be severely limited by what can be done within the budget constraints that will need to be honored.

What about health care…universal or not? Again, budget constraints may not allow anything of consequence to be enacted.

What about….? Same story…

Well, if this is the case, how long must the budget constraints be imposed? It took President
Clinton almost his whole term to bring the Federal budget under control. And, what is very important along the way…the new administration must not only show its intent to bring the budget under control, everything it does must reinforce the image that it is moving in this direction. The international financial markets will not just respond positively to talk or weak actions on the part of the new leaders. ‘Tweaking’ won’t do it. The crucial thing here is the confidence the world has that the new President and the leaders within the new administration are firmly committed to successfully pursuing such a policy. This confidence is hard to come by and if it is abused at all, the confidence will go away and be just that much harder to re-establish.

The candidates for the Presidency must be very careful on this. They have at least two audiences. The first is, of course, the American public. These candidates must convince the electorate that they are capable of being the President and will bring to that office a vision that the American people can buy into. Second, however, the candidates are being closely scrutinized by the world community. In the past eight years, the Bush administration has followed a relatively unilateral economic policy (as well as a relatively unilateral foreign policy). This world community is trying to determine just how much these candidates, as a President, will play by the rules of the international financial markets. This is what will make it so hard on the candidates to conduct an honest, yet positive campaign into the fall.

What these two audiences want to hear are in many instances contradictory. The American public wants to know what the candidates would like to enact if they are elected President. The international financial community wants to know whether or not the new President will bring discipline and responsibility to the creation and management of economic policy. If I am right about the concern over the undisciplined fiscal and monetary policy of the United States government, this will mean that the American public will not get what it wants…at least for an extended period of time.

I just hope that the next President of the United States will surround him- or herself with advisors of the caliber and independence of Robert Rubin. Then I hope that this President will have the wisdom to listen to their arguments and then act in the best interest of all Americans. There are many times when pragmatism should win over ideology…this is one of them!

Establishing Discipline: Over Fundamentals or Over Ideology

The United States is facing a very difficult situation currently due to the economic policies the Bush Administration has followed over the past seven years or so. To begin with, the Bush Administration came into office with the Federal budget in surplus and with the Federal Reserve following a relatively disciplined monetary policy. In a sense, the fiscal and monetary house of the United States government was in order.

Basically, the new administration decided to go it alone. That is, it would conduct its economic policy independently of the rest of the world. This was not inconsistent with what the administration was doing in other areas, such as foreign policy. Its first major economic policy action was to construct and then get Congress to pass a substantial tax cut. This, of course, would throw the Federal budget into a deficit, but, the feeling was that this tax cut would stimulate the economy and create sufficient revenues in the future to reduce the deficit and make it manageable. Also, there was some talk about slowing down the growth, or even eliminating some expenditure programs and this would further help to eliminate the deficit. The tax bill was passed.

In devising its fiscal plans, the administration did not anticipate the events of September 11, 2001 and its aftermath. Not only did these events precipitate a ‘war of terror’, they also resulted in one war in Afghanistan and another in Iraq. The expenditure side of the budget grew very rapidly. Furthermore, all three ‘wars’ left open a future commitment to an unpaid bill that was enormous. Occurring at about the same time all this was happening, the Federal Reserve was setting its operating target for the Federal Funds rate at 2% or below for a period of over 3 years. Given the rate of inflation during this time, this meant that the real rate of interest on these short term loans was negative.

The value of the United States dollar began to drop in 2002. World markets were concerned about how the Bush Administration was acting independently of the rest of the world and that they were not playing by the ‘rules’ of international finance. The most basic rule of international finance is that one country cannot ‘inflate’ its economy for its own purposes without a consequent decline in the value of its own currency in foreign exchange markets. This is just a fundamental result of how markets work. But, in the past, the United States being as big and powerful as it was, could get away from acting independently of these rules. This is no longer the case.

As the value of the dollar declined in foreign exchange markets, the Bush Administration gave lip service to the fact that the dollar was falling in value, but did nothing about it. As a consequence, the dollar continued to decline, falling by about 7% a year against the Euro between 2001 and 2007. It also fell by over 5.5% per year against the British Pound. The day of reckoning has finally appeared.

Historically, all countries that once had significant economic and financial positions in the world, except the United States, faced a transition from being able to act relatively independently of the rest of the world and having to abide by the workings of international markets. As countries moved from the former position of relative independence to disciplined cooperation, they went through a period of learning. During this period, the country in question would find that as it attempted to act independently of world markets through the creation of budget deficits that were eventually monetized by its central bank, ‘international bankers,’ an ambiguous and anonymous clandestine group of money managers, would start selling their currency until the drop in value became significant enough that the government had to back off its fiscal and monetary policies and establish a sound and disciplined program going forward.

The United States now seems to be in this transition position. The world has changed and it is no longer the world power it used to be. Yes, it is still powerful and important but due to globalization and the reliance of the world on oil it is not as important as it once was. As a consequence, the rest of the world is now showing the United States that it must join the club, it must humble itself enough to be realize that it must work with others and not just act as it wishes.

This is the background of the point I would like to make about the working of governments. The Bush Administration constructed its economic policy on the basis of an ideology. This ideology came from the presidential administration of Ronald Reagan. It is founded upon the premise that it is always good to cut taxes. In the past, this premise was presented along with the idea that programs should be cut as well in order to maintain fiscal discipline and reduce the size of the government. However, this latter component fell to the wayside when the proponents of ‘small government’ found that it was not practical or feasible to cut programs from the budget. Thus, only the first part of the ideology remained. Cutting taxes is good!

‘Conservatives’ and the Bush Administration stuck to the ideology. It brought in people to work in the administration that were loyal to the ideology. And, they enacted their tax cut and everybody was happy…on the ‘conservative’ side of the aisle. Discipline was rampant, but the discipline was to enforce adherence to the ideology regardless of the consequences of the impact of its execution. Furthermore, we see this imposed discipline carrying through to the campaign to become the Republican nominee for President in the 2008 election. Candidates went through unbelievable loops to sound convincing that they would continue the Reagan policy of cutting taxes if they were elected President. All seemed intent on becoming the next Ronald Reagan and they fought over who was the most representative of the Reagan tradition.

The problem is that the times have changed. The fundamentals are different now than they were 15 years ago let alone 28 years ago. The United States is not in the position it once was and must respond to the new fundamentals. The market imposes discipline upon those that operate within the market system. There is now enough wealth and power held outside the United States so that the United States must respond to this discipline and impose the discipline upon itself. This is all a part of being just one among many. One must pay attention to the wishes and needs of others. Within such an environment one must conform to the rules and become a good citizen.

This insight applies more than just to the ‘most powerful nation in the world.’ It also applies to those who hold power locally or regionally. Yes, the United States has been arrogant in attempting to impose its will on the world, but others have also been arrogant in attempting to impose their will on their ‘limited’ worlds. The attempt to impose an ‘ideology’ on others and the discipline that is applied to establish or maintain an ‘ideology’ on others is doomed to failure over the longer run. The problem is that the attempt to enforce the ‘ideology’ in the short run can have many dire consequences. The ‘ideology’ of the Bush Administration was related to tax cuts. The ‘ideology’ of others relates to ‘political correctness.’ The ‘ideology’ of others relates to Islamic fundamentalism. And, we can go on, if needed, to identify many more ‘ideologies’ that are alive in the world today.

What I am more interested in is the discipline that is necessary to be aware of and respond to the ‘fundamentals’ that exist in the world. I am not a post modernist. I do not believe that any worldview works and it is just a matter of who is in power. In the case of the economic policy of the United States and the decline in the value of the dollar…markets do work, some better than others, but, they do work. As a consequence, people, governments, and other organizations must operate within the boundaries and limits of being in a world with other people, governments and other organizations. This takes discipline, but it is a discipline that responds to and operates within the ‘fundamentals’ of the world. Some things, some models, some worldviews do work better than others. We must discipline ourselves to achieve the goals and objectives that are dear to us but we must do this in concert with the way the world works.

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.

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.

More on Hamiltonian Government

Governments face three problems that place limitation on what they can do. First, governments have a problem with incentives. The intention behind many government programs and policies tend to be good and praiseworthy. Most of the people that work for a government are honorable and well-meaning individuals. The problem is aligning objectives with incentives so as to achieve and continue to achieve the goals that the programs or policies are attempting to achieve. Appropriate incentives are often difficult to set anywhere, but in government, where there are so many things that people want to accomplish, incentives are not always clearly defined or clearly understood. It is easy in the business world to say that the goal of a business is to maximize shareholder wealth. It is not so easy to define such specific goals in the world of government. Furthermore, objectives may change over time. Many agencies set up by the government, say, to regulate an industry, often become advocates for the industry over time.

Second, governments don’t come close to having all of the information they need in order to resolve the problems that the proponents of government would like them to solve. Friedrich Hayek pointed this fact out many years ago. For example, a large amount of the information needed to execute a government program or policy is ‘local’ information and is present only in the dispersed locations of those affected. Gathering information is costly and the costs of obtaining more and more information are generally not linear. Thus, to get the appropriate information to a centralized location so that a decision can be made, return the decision to the local authorities and then execute the decision at the local level is both expensive and time consuming.

Third, governments are less and less able to keep up with the speed at which the world is changing. Today, even businesses have trouble keeping up with the pace at which change is taking place. The problem is right there from the start of a program or a policy. Programs and policies never seem to be developed in anticipation of something happening. Most politicians don’t want to go out on a limb and introduce legislation for a problem that doesn’t exist. First of all, no one else will be interested in the legislation because it is not a pressing need and in the second place, there are too many other things a politician has to respond to that tend to grab his/her attention. The response in the U. S. Congress to the problems in housing is a case in point. The problem has occurred. Congress is trying to respond to the pain.

The difficulty with this is that by the time the programs or policies are enacted, staffed and execution attempted, the world has moved on. Governments, both bureaucrats and politicians, are, in a real sense, always fighting the last war. And, with events occurring within shorter and shorter time intervals, this difficulty is going to get worse not better.

The conclusion one reaches from considering these three factors is that governments have difficulties getting people to do the things they want done, don’t usually have the information they need to make the decisions that need to be made, and tend to be behind the curve in terms of executing and administering the programs or policies it does put into place. Any one of these difficulties can reduce the effectiveness of a program or a policy. If all three of them are working the hopes for the successful delivery of a program or policy can only be wishful thinking. If this is a realistic description of the environment that a government works within then the programs and policies that the government does enact and administer should take these factors into account.

Let’s discuss these issues a little further. In terms of information, I believe that the government should encourage and support the spread of information throughout a society. And, improving the flow of information should be a goal of the government itself. That is, a government should encourage as much openness and transparency of its operations as possible. It is interesting and important to me that someone like former Treasury Secretary Robert Rubin in his book “In an Uncertain World: Tough Choices from Wall Street to Washington” argued very strongly for openness and transparency in his efforts to resolve important issues that impacted not only his Treasury Department, but the whole of the U. S. Government, foreign governments, and the world. In an uncertain world, restricting or limiting information is not helpful and we should err on the side of too much information rather than too little. I will say more on this in another post.

Government programs and policies affecting the private sector should be aimed at setting up and achieving process; not outcomes. What I mean by this is that a government should set up the rules of the game and then oversee the maintenance of this process. Establishing and maintaining private property and the rule of law are major components of a government that wants to support a free and open capitalistic society. What is important here is that the government facilitates the operation of the society, it does not dictate the results of the society. Incentives can then be established relative to the creation and establishment of the process and not toward specific output goals and objectives. This is important in an uncertain world.

Finally, government programs and policies must transcend the need to be real time orientated. The problems and difficulties of a society should be attacked by the problem solving and decision making capabilities of those within the society itself. Not only are the individuals directly impacted by these problems and difficulties immediately involved with what is going on, they are the first line of defense in the society to resolve them in a timely fashion. What the government needs to create are programs and policies that provide the people and organizations within the society with the tools and information sources they need in order to operate as efficiently and effectively as possible. It is the private sector that must adjust to changing situations, not the government.

In terms of this last point, one cannot say enough about governmental programs and policies that support education and the education system in the society. Not only does a first-class education system provide positive externalities within a society like a highly educated and networked work force, it also creates problem solving skills and the ability to find information and use information in the best ways possible. The support of programs and policies for a superior education system transcends the ‘real time’ problem faced by those programs and policies of a government aimed at responding to a current crisis. The educational system will help to create individuals and organizations that are present and capable, and have the tools to handle these situations in a smoother, timelier, and more incremental way.

This brings us back to two major issues of modern society: change and the ability to meet change. A highly educated and networked society is going to be causing change to take place. Learning takes place by absorbing new information, relating that information to what is already known, and then using this relationship to solve more complex problems and make better decisions. But, solving more complex problems and making better decisions moves the society along: it creates change. The ability to meet change comes from the same process. People must not be afraid of new information. It is the fear of the new, fear of new information that creates a resistance to change. A highly educated and networked society learn that new information, if smoothly incorporated into the society’s base of knowledge, is not a threat. The change that accompanies the spread of new information should be viewed as an opportunity, not an enemy.

The Role of Government

What role should government play in a society? The Libertarian right away says that the role of government in a free society should be minimal and limited to just those things that the private sector cannot do for itself. The socialist, on the other hand, argues that property and the distribution of wealth should be controlled by a central organization within the society, one such organization being a governmental body.

I argue that each of these extremes is a child of academic/intellectual mental gymnastics and promise very little to us in the way of practical application. Neither works when tried! A purely unfettered capitalistic market system can result in behavior that many would say is uncivil and unfair. Incentives are the hallmark of a capitalist system (see “Feakonomics” by Leavitt and Dubner) but, in unregulated markets there are strong incentives to cheat as well as to perform morally. Libertarians tend to cover this problem by saying that a free society does have to have a basic moral system (where does it come from…religion?), private property, the rule of law, and an infrastructure (roads and police protection?).

Can a socialist society succeed? It seems that the history of the last twenty years provides many examples of socialistic societies that have left their people impoverished, uneducated, and backward in terms of the advancements of the modern world. Those still defending socialist systems contend that these experiments really were not ‘pure’ and hence are not representative of what could be achieved in a ‘real’ socialist society. They argue that these societies had individuals that worked against “the people” and this tended to derail the honest attempts to bring the socialist ideal into practice. Of course, those societies, which included Russia, China…and Cuba, attempted to severely repress the ‘disruptive elements’ and these efforts resulted in large scale imprisonments and executions.

In reality, governments exist and they are going to exist. But, these governments are not going to be small and minimal relative to the society as a whole, and they cannot attempt to exercise control over major areas of the lives of people that make up the society. It was argued in the post of February 13 that a society needs to achieve an appropriate ‘balance’ between competing ends. Liberty needs to be a major part of a society, but, liberty also needs to be tempered by behavior that creates positive externalities for society as a whole.

Externalities arise when individuals or organizations are positively or negatively affected by the decisions of other individuals or organizations, but the party causing the externality does not receive a benefit, in the case of positive externalities, or bear a cost, in the case of negative externalities. An educational system can create a positive externality for a society because having an educated workforce tends to benefit the society as a whole and not just the individuals that are educated. The basic example of a negative externality is the organization that creates pollution that affects other parts of the environment.

David Brooks, a columnist for the New York Times, has suggested that we need to assume a more Hamiltonian (after the first Secretary of the Treasury, Alexander Hamilton) approach to what the government does. He defines a Hamiltonian policy as one that supports free market capitalism but helps the people get the tools that they need to compete in it. These policies can include the rights and privileges associated with private property, the rule of law, and the security and protection to conduct business and enjoy life as well as a well functioning financial system, the encouragement of enterprise, and education. These policies can also include unemployment insurance, a more universal health insurance and other programs that can help people in transitional or disruptive situations.
For a representative sample of his writing in this area see the following articles: http://select.nytimes.com/2007/06/08/opinion/08brooks.html; http://www.nytimes.com/2007/10/12/opinion/12brooks.html; and http://www.nytimes.com/2008/02/15/opinion/15brooks.html.

Where do I come out on this? Let’s go back to basic assumptions. The Libertarian begins with the assumption, coming from the Enlightenment, that human beings were originally ‘free’ and ‘at liberty.’ Since this was the natural state of the human being, society should be set up to provide the members of a society with as much freedom as possible. The Socialist contends that positions of power exist within a society and unless the powerful are controlled by a benevolent body excessive poverty and inequality will result in that society. These assumptions, in one way or another, are foundational to the different approaches to defining the role of government within a society.

I believe that neither of these assumptions are a realistic foundation for the determination of the role of government in society. My basic assumption about human beings is that humans are problem solvers. All life, to some extent, is composed of problem solvers, but the human species represents the highest development of this talent. The evolution of this skill to its current level has allowed humans to far outstrip the capabilities of any other species that we know of. And what is the goal of human problem solving? It is to allow humans to make better and better decisions and solve more and more difficult problems.

Since individual humans are limited in their ability to solve problems, they found that they can augment their individual problem solving skills by organizing. Families, groups, communities, and governments are ways that humans organize to make better decisions and solve more difficult problems. People are different…they bring different skills and knowledge to the table. Organization succeeds by combining the specialized skills and knowledge of diverse people so as to leverage their differences in order to achieve more than just what the individual can do. Organizing people that are all exactly alike in their skills and knowledge gains little or nothing in terms of the ability to solve problems. Thus, my basic assumption is that human beings are problem solvers and this is based on biological science, not utopian thinking.

The government, therefore, is just another organization set up to help humans make better decisions and solve more difficult problems. But, for a government to work effectively it must access the different skills and knowledge and diversity that exists within a society...all of the society. Since the government represents all of a society, the members of the society have a vested interest in the decisions that the government makes. Thus, to fully access what people bring to the society, the government must be open and transparent to the individuals that make up the society and must allow for debate, discussion, and dialogue on all the issues confronting the government. Modern society and the spread of information have made this more and more necessary. Every day we see that governments that don’t recognize this fact face severe problems and tend to be on the defensive!

What does this have to do with the idea proposed by Brooks that emphasizes Hamiltonian policies for government? To me, Hamiltonian programs and policies create positive externalities that can be achieved through governmental organization: these cannot be obtained through private means. For example, some situations or issues exist in which there are conflicting interests that can only be resolved by bringing together the different members of the society. Here negotiations, rules and regulations and laws are important. Positive externalities are gained by reaching a balance that everyone can work with. There are some situations or issues in which everyone has an interest and can be solved by creating programs or institutions that benefit both individuals and society. Here positive externalities can be achieved by the creation of an educational system, an interstate highway system, unemployment insurance and so forth. Thus, we are looking for government to find ways, policies and programs, that allow human beings to do what they do best…solve problems. More on this next week!

Politics as the Art of Maintaining 'Balance'

Democracy is a system that achieves and maintains balance in a society as well or better than any other system around. By achieving balance I mean that a democracy is able to take all the competing ends that exist within a society and craft a solution that weighs as well as possible all of these ends. And, a democracy can maintain some form of balance over time at least as well as any other system of governance. Now, this doesn’t mean that it always gets the balance ‘spot on’ or that the balance doesn’t change over time, requiring a modification. All that is meant here is that it seems to be the ‘best’ of the imperfect systems that are available to us.

An example can be found in the tradeoff between personal liberty and security that was brought into focus in the United States after the 9/11 tragedy in 2001. Before the events of that day, the United States had achieved and maintained one ‘balance’ of these two items, but after the attack the ‘balance’ moved more toward the goal of achieving security and protection from terrorism and away from personal liberty. In all probability, exactly where this ‘balance’ resides in five years (or in ten years) will be someplace different than it is today.

The crucial element in all of this is that where a society decides to be at any one time changes and the society must be able to adapt as smoothly as possible when these changes are required. Nothing stands still and nothing creates more problems for a society than being ‘locked’ into a certain tradeoff when, in fact, the people desire another tradeoff. But, science changes, technology changes, the composition of a society changes in many ways, in terms of gender, ethnicity, religion, age, and so forth. For example, the advent of cars changed things as did the introduction of television, contraceptives, and stem cell research. These changes affect a lot of different people in a lot of different ways and adjustments must be made, compromises accepted, and relationships maintained for society to go on. And, one could argue that incremental changes are better than discrete jumps.

On the surface, however, a society never really seems to move incrementally. For one, major changes seem to take place in response to specific historical events. The balance of the role government played in the United States was significantly changed during and after the Great Depression. The Second World War cemented these changes or continued the movement toward more governmental involvement in the society. The Cold War had its impact on the location of the ‘balance.’

Another reason why changes seem to be made in leaps is that the people, as a whole, tend to be somewhat conservative in nature. Once a certain balance is achieved, there seems to be a certain reluctance to change what has seemingly worked over time. Only when an imbalance arises and becomes particularly acute does it seem that people move onto a new balance that may be at some distance from where the previous balance had been located.

Yet, there is still a lot of change in the balance of society that does take place incrementally. These are the changes that do not gain so much publicity or that do not raise the emotions of people to the level that other issues do. These kinds of changes add up over time and lead one to reflect, from time-to-time, on the question of ‘How did we get here?’ And, many of these changes are not so much ideologically driven as they just happen to make things work better.

Then there are the efforts that are ideologically driven. In recent years, as the political parties in the United States have become more polarized, these attempts to move the ‘balance’ that exists in different areas to a new location, seem to have gained more prominence in what candidates for office seem to offer. Not only do these candidates promise to change the tradeoffs that exist in certain areas, they promise to do it immediately upon entering office. In a real sense, the timing of these changes are driven by the election cycle in that the candidates believe that they only have about 100 days in which to make major adjustments. After this ‘honeymoon’ period, the politicians move out of the ‘grace’ period the electorate has given them and all chance to innovate is gone. The philosophy is to present all of your major changes early on and then administer the ‘new balance’ in the remaining time that you are in office.

I have two concerns with this attitude toward governance. First, those that are elected tend to take their election as a ‘mandate.’ Even if they have only won with, say, 51% of the votes, they declare that they have a mandate for change. The people have told them that they are to make major changes in where the tradeoffs in the existing ‘balance’ of things are located. So, we the people, see a new President take office and then we observe a frenzied effort to put the new ‘balance’ into place. Then in four or eight years we see another new President do the same thing, attempting to return to the previous ‘balance’.

The second concern I have relates to the ‘game playing’ that is connected with this type of behavior. For example, consider the efforts of a new President to change particular ‘balances’ in society. If this President can move things far enough to change ‘balances’ so as to actually create ‘imbalances’, then even though when this administration goes out of office, the next new administration will have to work out these ‘imbalances’ and not be able to inject a lot of its priorities. If the same party can be continuously in office for an extended period of time, these ‘imbalances’ can even be allowed to grow and this creates tremendous problems for any new President that wants to ‘change directions.’ For a good review of some of the constraints that exist in the current situation see the editorial of David Brooks, “When Reality Bites”: (http://www.nytimes.com/2008/02/12/opinion/12brooks.html?hp).

There are times when the imbalances leave an irreconcilable dilemma as is the current situation with respect to economic policy. At present it appears as if the American economy is going into a recession. To lessen the severity of recession the government can execute a combination of monetary and fiscal actions. In early 2008 we see the Federal Reserve lowering the target interest rate it uses to conduct monetary policy and the Bush Administration and Congress creating a fiscal stimulus package. The Federal Reserve has had to lower its interest rate target because of dislocations in the financial markets. The fiscal stimulus package resulted from the game playing of the President and Congress, both of whom could not do ‘nothing’ in fear of facing massive criticism in upcoming elections. The dilemma is that these policies are exactly the opposite needed in order to stop the decline in the value of the dollar which has been declining for over five years. The decline in the value of the dollar can be attributed to the deficits created by the tax cuts enacted early-on by the Bush Administration and low interest rate policy followed for two years by the Greenspan led Federal Reserve.

Is this ‘game playing’ a direct result of the electoral process resulting from a democratic form of government? Perhaps this indicates that some ‘balance’ needs to be achieved between the game playing that goes on within a government and the electoral process and the ‘balance’ that is needed within a society in order to function efficiently and effectively.

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.

Comparing the Idealist and the Realists

I was just reading the book, John Maynard Keynes and International Relations: Economic Paths to War and Peace by Donald Markwell (Oxford University Press: 2006) and came to a section titled Idealism. Markwell had been discussing the Peace Conference held in Paris after World War I, the peace conference from which Keynes resigned his position in protest and wrote a scathing book entitled The Economic Consequences of the Peace that reported what had gone on at the conference, described the roles of the leaders of the conference and projected the consequences of the peace treaty that resulted from the conference. In the section just mentioned, Markwell contrasts Keynes’s ‘idealistic’ approach to the ‘realistic’ approach followed by the French leader Clemenceau. This contrast struck me as relevant for what is going on in the United States today.

Markwell defines “the realist or Carthaginian approach” as one that “saw man as ‘congenitally ordained to prey upon his fellows’” with the result being that history was “a perpetual prize-fight.” (Page 109) “The idealist or Keynesian approach saw ‘humanity and (European) civilisation struggling towards a new order.’” (Page 109) Along with this, Markwell states, there were two conflicting conceptions of justice: one stating that the righting of wrongs was ‘the essence of justice’; and the other urging that “nations are not authorised…to visit on the children of their enemies the misdoings of parents or of rulers”.

Within the context of the aftermath of World War I, the realist was “committed wholly to the interests of his nation” and, since the conflict between nations would not change, “a Carthagian peace was inevitable.” (Page 110) No alternative was possible and no thought could be given to the future…only the past. Keynes, we are told, argued that this plan would be impoverishing and would continually need to be enforced,

Within a ‘realist’ view of the world there is little in the way of hope or of improvement or of advancement. There is no place for ideas, for innovation, for bringing people together. There was no place for peace and justice free of retribution.

It seems to me that this contrast can be applied today to the political situation in the United States and it applies to a war…the cultural war that has been going on for the past forty years or so. It is young and old again, as in the sixties, but now those from the sixties are the old ones. And, the young ones are tired of their battles.

The ‘realists’ from the sixties contend that they represent a list of ‘victims’ and there are those that are ‘congenitally ordained’ to prey on them: that this situation is one of ‘a perpetual prize-fight.’ To these ‘realists’ justice is a matter of righting wrongs and of setting things straight. Therefore, the trenches are the only place to be! There is no alternative and there is no future…only the past.

But to this I agree with Keynes: this is impoverishing, not only because it continually keeps us ‘at war’ but because it does not free us up to work in any other direction. We are imprisoned!
And, what of the ‘idealists’? The ‘idealists’ argue that we need to move to a new order and a new sense of justice. We need to move beyond the trenches and get on with life. We need to contemplate a ‘new order’. We can never achieve retribution for the sins of our fathers and mothers; we can never gain full satisfaction for the wrongs that have been done in the past. We need to use our ideas and our hopes as fuel to conceive of a different paradigm. We need to put the ‘war’ behind us!

It is impossible for me to move on, however, without stating, again, that politics is a matter of balance. Almost every situation we experience has, at least, two parties that have conflicting programs aimed at resolving the problems embedded within the situation. Politics is a matter of achieving balance between the competing solutions so that the parties involved can go forward and co-exist in some form so that life can go on. The important thing to realize is that this balance can change from time-to-time as people and situations change. Thus, looking at the current political situation in the United States I would argue that the balance between the ‘realists’ and the ‘idealists’ needs to be changed and moved toward the end of the spectrum occupied by the ‘idealists.’

What this means at the present time is that we do not forget history. We do not forget the problems in American society that were identified in the fifties and sixties and of the efforts that were made to resolve them. We cannot dismiss what happened. But, we can move to a different level. We can go beyond the ‘prize-fight’ mentality and work toward a ‘new order’, an order we define as ‘us’ and not an order defined as ‘us versus them.’

What is this society going to be like? What are the programs and policies that are going to get us there? I don’t think anyone exactly knows that at this time. But, I think attitudes are changing and that they need to change further. We need to reset the balance between the ‘realist or Carthagian’ view of the world where the assumption is that every one preys upon his or her fellows and the ‘idealist’ view of the world that “references ‘hopes’ and ‘expectations’ for a ‘new age.’” (Markwell, page 110)

The ‘idealist’ may be called impractical or a dreamer, but being willing to seek new answers is the only way that human beings and the societies they construct can realistically solve new and more complex problems. And, solving problems is what humans do best!