The American Interest
The Middle East & Beyond
Published on October 9, 2012
What’s Wrong, and How to Fix It, Part 1: Introduction, and Globalization/Automation

Editor’s Note: Following is the first in a series of posts analyzing the sources of American political dysfunction and proposing a programmatic response to those problems.

Some months ago my colleague here at The American Interest, Walter Russell Mead, wrote a series of intellectually high-end blog posts analyzing the collapse of what he called the “blue model” of American (really Western) governance. With a small editorial helping hand, Walter brought together his blog-based analysis in “The Once and Future Liberalism”, an essay published in our March/April 2012 issue. It deftly used an understanding of the past, fashioned by charting the conceptual migration of the word “liberalism” over two and a half centuries, to show the way toward a reinvention of governance that would keep at center stage the fundamental liberal precepts of the American project.

His effort did not please everyone. A few objected feebly to Walter’s analysis, some by noting that the blue model still works in a few places…Denmark, say. But more prevalent was disappointment that he was insufficiently explicit about the programmatic innovations that could get us to a bright neo-liberal future. I, for one, did not blame Walter for not solving the policy puzzle down to its last dotted “i” and crossed “t”. It’s not fair to expect one person to be both seer and wonk. Walter stood on the mountaintop, gathered the past masterfully in his arms and pointed the way forward. It’s too much to ask that he serve as a government travel agent, as well.

Around the same time Frank Fukuyama, writing in Foreign Affairs, threw down the gauntlet to his readers, urging some unnamed someone to lock him or herself in a garret and sketch out a programmatic roadmap for exiting the present morass.1 Here is part of what TAI’s editorial board chairman said (more later):

Imagine, for a moment, an obscure scribbler today in a garret somewhere trying to outline an ideology of the future that could provide a realistic path toward a world with healthy middle-class societies and robust democracies. What would that ideology look like?

I don’t have a garret handy but I do qualify as obscure, so I have taken up Frank’s challenge here, using my two colleagues’ basic analysis as a general platform upon which to approach the programmatic level. I first restate the analytical piece in what I believe is an original syncretic manner (footnoting liberally as I go, mainly from my own magazine, to express debts to others), and then get down to specifics. I end with a short coda on the foreign policy/national security implications of what has gone before. Both the analysis and programmatics here, each of which takes up close to exactly half of this series of posts, are ultimately mine alone, however.

What’s Wrong

Strong views on the sources of contemporary American political dysfunction certainly exist, but just as certainly there is no consensus as to which view is correct—and clearly, one cannot readily remedy a problem unless one has first figured out what it is. This is obviously no easy task, or it would already have been done to consensual satisfaction. Why has this been so hard? There are several reasons, but a key one is epistemological: It’s not obvious what we need to know.

In other words, we have a levels-of-analysis problem, and we need a Goldilocks Solution for it. Some fixes are too superficial: Just repair the campaign finance system and all will be well, some say. Or just persuade politicians to be less partisan and more civil and most of our problems will go away. They won’t (be more civil or go away), and the fact that we cannot achieve even these modest objectives points to something deeper having gone awry. But we dare not dig too deep lest we confront the old turtles-standing-on-turtles-all-the-way-down problem. Since everything is caused by something else more foundational, and since causal arrows often point both or many ways, it is hardly obvious that a deeper analysis, lying somewhere in the recesses of culture, say, will best repay practically minded effort.

Not that deeper searches cannot be rewarding. Plenty of real interest has been said, for example, about changes in the self-image and behavior of American elites; about changing values, like thrift, in explaining the profligacy of recent times; about changes in the nature of American religiosity as a way to account for the decay of intergenerational responsibility and, with it, a decline in personal and institutional planning. When connected firmly to real social history, the truths that emerge from such analyses are not flimsy. But at the same time they are not especially helpful truths because they can rarely be specific enough to pack direct policy relevance.

Most intriguing to me among such deeper subjects is technological change’s usually inadvertent but significant effects on social and political realities over time.2 But specifying the effects of technological change—their tendency recently to advantage females over males, for example—is difficult, disputed and also probably beyond reasonable proof.

I suspect, for example, that recent widespread commercial applications of information technology extend broader long-term trends toward the individuation of American society.3 The gossamer stuff from which the American dream has been spun is all about maximizing individual freedom, and about giving substance to that freedom by maximizing individual efficacy. Individuals in cybernetically advanced America today are autonomously powerful as never before, with worlds of information, education, training, products, social exchange and means of expression at their fingertips. But they are also apparently lonelier, less happy and more anxious as the interpersonal glue that ratifies our corner of humanity as a social species dissolves. (What these technologies are literally doing to our brains is another subject, though hardly a trivial one.)

That dissolution, in turn, has subtly undermined social authority of all kinds and, perhaps, flattened the bell curve of moral conformity to a point that standard constraints against extreme views and behaviors are eroded—hence, one at least has to wonder, episodes like Buskerud, Norway, and Aurora, Colorado.

I suspect a Goethe moment at hand: We have got what we wished for as a youthful civilization, and now that we’re older we’re not sure what to do with a society made up of Protean individuals, or even why we wanted it in the first place. But I can’t prove any of this, nor can those with a different interpretation of cybernetics’ broad impact on society prove their intuitions. That’s no way, therefore, to design an approach to reform real-world governance issues. We clearly need more appropriately sited evaluations of the problem, not too superficial and not too deep—and these, it seems to me, generally fall into three groupings.

The first of these we can call globalization/automation for short, the second political/institutional and the third corruption/plutocracy. With all due respect to many writers, these groupings are not mutually exclusive; certain insights from each ramify through the other two. I see these three classes of explanation as analytically distinct, but as forming in practice one great mess of a problem. Vast outpourings of words have been deployed to discuss these subjects over the past several years, and I have no interest, even if I had the energy, in repeating even a fraction of them. But a review of the essence of the arguments is necessary, I think, to anchor the programmatic suggestions I make. So here goes, with an emphasis on more neglected points and, as suggested, a syncretic bias aiming to relate the three groupings of explanation to one another.

Globalization/Automation

As to globalization/automation, the basic argument is clear enough. The accelerated post-Cold War lowering of barriers to the free movement of capital and information means that national boundaries are now much less a limiting factor on where manufacturing and servicing operations can be sited. As a consequence, labor pools can no longer be defined as readily within geographically circumscribed areas. As corporations have become more adept at coordinating production, assembly, marketing and servicing processes across different locations, low-cost wage pools far more readily underbid higher-cost ones. This means, in turn, that, all else equal, products enjoying low-wage cost inputs can outsell others so long as the degree of advantage trumps transportation and other connectivity costs.

One result of this change is that global trade balances have shifted dramatically. Another is that trade and manufacturing labor unions in wealthy countries have lost ground as the share of manufacturing in these economies has declined relative to countries without effective labor union movements. It is hard to prove, but most likely corporate America knew exactly what it was doing in this regard when it embraced China as a production platform. And it has succeeded: The power of organized labor (and I am talking about labor that actually makes something, not the paper-pushing chair dwellers of AFSCME and other such faux unions) has been emasculated. It is easy to demonstrate this at a time of falling wage levels for union work, and it is one of the saddest hallmarks of the past quarter center that the international division of the AFL-CIO, once the proud throne of Lane Kirkland and others, has been so pathetically led and so completely ineffective.4

At the same time, technological advance has enabled an accelerated substitution of capital for labor, increasingly automating virtually any job based on routine procedure. Together, the automation of many fixed-routine jobs and the dissolution of traditional labor-pool boundaries have hollowed out labor markets for semi- and low-skilled jobs in wealthier countries like the United States. Over time this has led to growing inequality as returns to capital have far outdistanced returns to labor in an environment that rewards high technology and symbol-manipulation capabilities over more traditional labor categories.

Most economists and many others have interpreted the general trajectory of both globalization and automation in positive terms. Greater competition across national boundaries stimulates greater efficiency and hence higher productivity, they generally argue. In time, the growth of middle classes in heretofore poor or middling economies will enable more people to buy ever more products, and increasingly high value-added ones, from wealthier ones. The implication is that economies like that of the United States, even with a very large domestic market, will become more export oriented as globalization spreads and deepens.5

As for automation, old jobs will disappear but new and better ones will arise—as long as the education system keeps up with demand. This has been the history of technological progress for several centuries now, after all. Thoughtful observers have been making fun of populist panic over supposed unemployment-generating machines for a long time.6 By increasing productivity per unit of energy input, technology makes everyone richer, and the aggregate demand that flows from increased affluence creates the salaries of those holding these new and better jobs. Meanwhile, in a market system, light but predictable government regulation and corporate philanthropy help to bound and recycle business profits to keep the social peace underlying a growing but unequally benefacting economy from getting too far out of kilter.

If one credits this analysis, then rising inequality in the United States—assuming for a moment that this inequality is properly interpreted (it usually isn’t, of which more to come)—is temporary, just as past episodes of increasingly concentrated wealth at the top have been temporary. Economic historians point out that increases in inequality during times of rapid technology-driven economic growth are normal: So it was in the first Gilded Age, so it was in the 1920s, and so it is again today. Not only will inequality even out again in due course, just as before, but America as a nation will most likely come out ahead of the pack for a host of reasons.7

So, argue some, nothing fundamental is out of whack. If we have problems, their source resides elsewhere. This is therefore no time to tamper with the structural realities of the American political economy. In this view, we just need to once again focus on investing in the future—in education, particularly appropriate education; in science and technology, research and development; and in infrastructure—instead of throwing great wads of money at present consumption. That’s what’s wrong, and it’s no big deal. What would really be wrong is if, in a panic, we set out to fix things that aren’t broken.

There is, however, another way to look at all this that is not so cheery or acquiescent. Creative destruction, as Schumpeter famously called the competitive churn of market economics, is all well and good within the national borders of a country. Without it, a nation stultifies and falls behind. You want an omelet? You know what happens to the eggs. Everyone cannot be a winner in a competitive world, even if society as a whole comes out ahead for all its trouble.

But as Schumpeter himself understood, for competition to benefit a society it has to be socially assimilable at the margin. Just as too intense a surge of power can burn up a motor instead of making it run well, so too can too much churn, too fast, erode the underlying institutions and attitudes a vibrant economy needs to stay healthy. Just where the tipping point is has always been a matter of opinion and temperament. There have always been romantics sad to see old ways pass from the scene. We have plenty of romantics in America today who want to slow down what has become a truly galloping churning process so that communities can adapt to change, if they can adapt at all, with less social disturbance and pain. Some who stress the cultural costs of the churn fervently hate what they see as the homogenized mediocrity that corporate America brings to small (and not-so-small) towns across the country, where the slash-and-burn business models of a Wal-Mart, a Target and a plague of franchised fast-food joints grind every craftsman-based and one-of-a-kind family business to dust. That’s not creative destruction that advances efficiency and produces better mousetraps; that’s just plain destruction that crushes real creativity beneath millions of tons of imported junk made by millions of exploited workers.

Even if one is prepared the bite one’s lip about this domestically, the process of creative destruction does not translate well across borders. If, for example, some large and ambitious developing countries manipulate their currency to tilt globalization in their favor, then the losers are less outcompeted than swindled. There cannot be much doubt that this is precisely what China has been up to since it reduced the value of its currency roughly 60 percent by fiat in the 1992–94 period. The results, which did not take long to emerge, were stunning. The U.S. trade deficit with this mercantilist China had tripled by 2000, aided by the fact that U.S. tariffs on Chinese goods average 2.5 percent while Chinese tariffs on U.S. good average 25 percent. The Clinton Administration (the same people who gave us the disastrous Financial Services Modernization Act of 1999, of which more anon) not only did nothing about this, but in 1999 it granted China most-favored nation status, which it then made permanent in 2000.

The pace of U.S. manufacturing jobs, as well as investment, heading to China then really accelerated. According to the Bureau of Labor Statistics, as 2000 began, about 17.1 million Americans had manufacturing sector jobs. By July 2011, that number had dropped to 11.7 million.  In just a little more than a decade. (You can push your jaw back up now.) The result is that there are now more than twice as many Americans (about 22.5 million) who work for the city, county, state or Federal government as work in manufacturing. Government is a transactional cost; it produces nothing anyone can eat, drive, use for shelter, or anything else. So why is anyone surprised that private-sector median wages have stagnated? It’s a wonder they have not plummeted more than they have. And why is anyone surprised that the government share of GDP in the economy and all its attendant costs (of which also more to come) have skyrocketed?

There are national security implications in all of this, of course, but even short of that, creative destruction in an era of globalization affects whole domestic policy domains such as immigration, long the neuralgic third rail of American politics. Once a middling-sized and discrete issue, immigration today is vastly more salient and complex politically because it aligns with opposing views on globalization. Those who would shield American communities from too much churn, too quickly, generally oppose liberal immigration policies and want to expel undocumented residents; corporate interests, on the other hand, like mobile labor pools and porous borders because they translate into a huge competitive advantage for them.

Arguments over immigration often take refuge in theories about economic history, at least implicitly. Throughout most of the 19th century the United States was a relatively high-tariff country, and yet it did very well economically. At the same time, it was also a high-immigration country. Which of these facts trumps the other in explaining America’s buoyant 19th-century growth? Similarly, a broad-canvas infant industry argument in support of those protectionist policies helps explain their success in retrospect, but there are plenty of people today who don’t understand what’s wrong with protectionism in a fully mature economy if it supports good jobs for Americans, stability for the communities in which they live, and tempers inequality to boot. How is that not a description of success?

If you point out that the law of comparative advantage dooms the citizens of protected economies to a lower level of prosperity as a price for this stability, they may return your comment with a question or two: Exactly what do you mean by prosperity? Do you mean the mass ability to buy imported plastic and electronic junk that no one needs in the first place? And prosperity at what cost to the losers? How much inequality should we be willing to tolerate for this method of supposedly making the nation more affluent? What these critics are saying, in more temperate academic language like that of the Legatum Institute’s Prosperity Index, is that measuring aggregate demand at the level of the economy as a whole is not a very useful or even an acceptable metric of genuine national prosperity.

Protectionist arguments, well made and otherwise, used to be the province of the trade union movement, but as that movement has weakened, similar arguments have been taken up from new quarters. Thus we arrive at what may be called the “green” or crunchy side of American politics, a point of view that questions the sovereignty of economic criteria as the basis of all national decisions.

There are left-of-center and right-of-center crunchies (the latter having been dubbed crunchy cons by Rod Dreher8). Both flavors go well with standard environmentalist fare. When some argue, as Robert Reich has recently done, that the economy suffers from too little aggregate demand from the besieged middle class, crunchies assert that the logic of hyper-consumption puts us on a treadmill that is ultimately incompatible with the carrying capacity of the environment.9 Globalization has sharply accelerated this kind of logic around the world, crunchies argue. No one denies the ability of sound macroeconomic policies in an open international economic order to pull huge numbers of people from abject poverty, as indeed they have done. But we now see dramatic transformations of consumer behavior over very short periods in places like China, Korea and India, not to speak of Saudi Arabia, Kazakhstan and now even Mongolia. As restraints against profligacy in hoary cultures crumble like so many stale oatmeal cookies, a good many nouveau-riche have been left asking themselves, in effect, “Now what? What does having all this stuff mean, anyway?” (They don’t know any more than we do.)

To a true crunchy, as opposed to a standard-issue trade unionist, our core problem lies in a wholesale displacement of human values, in which all things are measured in economic terms. This diagnosis does not see what happened in the fall of 2008 as a source but as a symptom of a more deeply rooted problem. Note, too, some ancillary evidence for this view in the fact that the data points, which make headlines and guide high-powered decisions on a regular basis these days, did not even exist a century ago. Back in 1874 no one worried about the unemployment figures for the last quarter of 1873, because there weren’t any, in what was then an only semi-monetarized economy. No one worried about the ebb and flow of the American and a dozen other stock market indices, or what the dollar was worth on a given day or week relative to other currencies, for the same reason.

It is a truth of human nature that we of the promiscuously associational brain tend to be influenced unwittingly by the terminology we inherit.10 And it is equally true that we tend to focus on those facets of life we can grab onto through the vehicle of information, and a lot of people ascribe more concreteness to quantitative information than they do to words. As Nietzsche once wrote, presumably before he went mad, “Were it not for the constant counterfeiting of the world by means of numbers, men could not live.” Our materialist obsession owes much, though no one can calculate how much, to the illusory concreteness of the data that now envelop us. To paraphrase Churchill, we have shaped our house of data, and now it is shaping us.

Further, just how much sense does it make after all, a crunchy will ask, for our leaders to tell us both that we need to save money, because we are too much in debt, and that we need to spend money to create aggregate demand sufficient for national economic well-being? Isn’t it a telltale sign of lunacy to advise people to do two diametrically opposed things at the same time?

From this point of view, globalization and automation may be great for business and especially for transnational business, and they’re fine for big stockholders in such businesses and the politicians they rent for various and sundry purposes (see the upcoming post on corruption/plutocracy). But they’re not such a great deal for ordinary people in wealthy countries or ultimately for most people in the world as a whole. We Americans, anyway, are busy hyper-consuming ourselves to oblivion, spinning away from our founding virtues as we go a-whoring in our era’s functional equivalent of Babylon. Next thing we’ll be offering our children up to Moloch because there’s a three-for-one-sale at the local altar. No wonder we can’t get a grip anymore, say the crunchies; the sudden advent of a supersonic version of global capitalism has driven us crazy. That’s what’s wrong.

Notes:

1“The Future of History”, Foreign Affairs (January/February 2012).

2When I invoke “technology” as an explanatory factor, I do so not as a New Age Technik fantasist or in a monocausal mode, but within the sober framework of the sociology of science. I am at pains to say this as protection against accusations of bullshit-flinging, since that profitable sport has become so popular of late. See Evgeny Morozov, “The Naked and the TED”, The New Republic, August 2, 2012.

3For an excellent example, having to do with the early 20th-century technology of musical reproduction, see Giles Slade, “Electric Company: Machines as Social Prostheses”, The American Interest (September/October 2010).

4See Phil Fishman, “Democracy, Union Made”, The American Interest (September/October 2007).

5See Tyler Cowen, “What Export-Oriented American Means”, The American Interest (May/June 2012).

6A justly famous example is the brilliant satirical 1845 work by Frederic Bastiat called “The Candlemakers’ Petition.”

7See Cowen, “What Export Oriented America Means” and Daniel Gross, Better, Stronger, Faster: The Myth of American Decline (Free Press, 2012).

8Dreher, Crunchy Cons: How Birkenstocked Burkeans, Gun-Loving Organic Gardeners, Evangelical Free-Range Farmers, Hip Homeschooling Mamas, Right-Wing Nature Lovers, and Their Diverse Tribe of Countercultural Conservatives Plan to Save America (or At Least the Republican Party)(Crown Forum, 2006).

9Robert Reich, Aftershock: The Next Economy and America’s Future (Knopf, 2010).

10For a persuasive and political-economy relevant argument to that effect, see Eric Liu and Nick Hanauer, The Gardens of Democracy (Sasquatch, 2012).

  • Anthony

    “It’s not obvious what we need to know” – American political dysfunction and programmatic innovations. Are we actually faced with consequences of global-technology driven change whereby politico/economic structures are perhaps misaligned (WRM intimates we are in transition)?

    Many observers of economic and societal history have posited that technological innovation comes in bursts followed by periods in which change and its implications is worked out; your essay infers such a working out – globalization/automation, political/institutional, and corruption/plutocracy utilize as themes towards a programmatic roadmap within this American project. I look forward to both analysis and programmatics (“The dogmas of the quiet past, are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew….” – Abraham Lincoln).

    • Adam Garfinkle

      Thanks. Great Lincoln quote: Do you know the source, please?

      • Anthony

        You are welcome. “The collected Works of Abraham Lincoln (Roy Basler, ed., 1953).

  • ebola131

    I enjoy the read but the really simple is ignored.
    Without ethics and morals, a society cannot endure.
    The Founders recognized this crucial requirement and built the Republic on that foundation.
    The secular model is unsustainable…they will ultimately eat each other.
    Evidence our current administration; valid laws are ignored, protected by the corrupt DoJ, and the Founders built no mechanism to resist a corrupt administration.
    liable

  • Jim.

    Some observations-

    - Destruction of traditional institutions is aided and abetted by the attempts of Liberal elite (im)moralists to inflict radically new mores that are utterly foreign to not only the vast majority of the (non-European) world, but also to our own cultures prior to about 50 years ago.

    If Leftists want to ask why people have lost touch with self-control, “common courtesy”, and “common sense”, they need to look to themselves for the cause. We don’t have a “functional equivalent” of Babylon (and even Moloch, with Roe v Wade), we have similarities that line up with shocking precision.

    - Small, unique businesses seem to be fairly healthy in the big, sprawling, million-plus resident suburban / urban city where I live, and in the towns surrounding. The midrange and lower-end strip malls are full of them.

    Where they do less well (unless they’re truly high-end boutique) is in the areas where rents are particularly high.

    If commercial property prices (and thus rents) were allowed to crash, small and unique businesses would probably prosper quite nicely.

    - You talk about America’s prosperity in the 19th century and you say nothing about the frontier?

    See http://en.wikipedia.org/wiki/The_Significance_of_the_Frontier_in_American_History . Full texts are available as links.

    - “We need to save money, because we are too much in debt, and that we need to spend money to create aggregate demand sufficient for national economic well-being”

    People who have debts should save, and people who have money should buy. Our balance of trade with China shows that it is the Chinese who should do the buying, and Americans who should do the saving.

    Add to this a government policy of exporting labor unionism to low-wage countries, along with creative solutions to the carrying capacity problem (if nothing else, please consider there’s more to this universe than just the Earth) and you have a path out of the current darkness.

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  • Calvin Harris

    It sure would be nice if our presidential candidates evinced even the slightest understanding of the issues set out in Mr. Garfinkel’s piece. I would dearly love to know the candidates’ views on these topics. Discussion of all else is nibbling around the edges.