Saturday, August 29, 2015

Lost in Reagan's Revolution: Trust

I've just finished a wonderful book by Eric Beinhocker called The Origin of Wealth: The Radical Remaking of Economics and What it Means for Business and Society.

Generally I'm extremely skeptical of claims about reinventing economics; the usual practitioners of this art are cranks, charlatans, hucksters, or simply people who are ignorant of the field's history. But Beinhocker is a distinguished exception, and if you have any interest in economics you should read his book. I'll probably discuss it more in future posts.

But today I want to focus on something that is sort of peripheral to the book's main theme, yet has important implications for American politics. And that is the question, long pondered by social scientists, of why some countries prosper, while others devolve in a downward spiral of poverty and hopelessness.

There are lots of proposed answers to this puzzle, most of them ideological in some way. If you're a religious zealot, you'll assert confidently that Country A failed because it had the wrong religion. If you're a free-market fundamentalist, the reason for Country B's failure is of course too much government meddling. There are even a few non-ideological explanations, such as Country C succeeding thanks to its rich natural resources, or geography that protects it from invaders.

But this question has by now been studied pretty thoroughly, and none of these explanations will do. As just one example, there are resource-poor countries that do quite well (Japan, South Korea), and resource-rich countries that are disasters (much of Africa).

One explanation that keeps popping up, though is culture. There are plenty of definitions of the word, but Beinhocker's captures a key point: culture is an emergent characteristic of a group of [people] and is determined by [their] rules of behavior (or norms) for acting in their social environment and for interacting with each other.

A word about this notion of "emergent" behavior. It's a popular theme in the study of complex systems (Beinhocker calls his new framework "Complexity Economics"). It means, among other things, that if you take a bunch of "agents", each guided by simple rules, and set them to interacting with each other, amazingly complex and unexpected things can appear, seemingly out of nowhere. The huge, intricate mounds built by termites aren't designed by termite architects laboring in offices, and their construction isn't supervised by termite foremen wearing tiny hardhats. They simply emerge out of the billions of interactions between the millions of insects in the colony. No individual termite knows the whole scheme, or has a plan for executing it, but the collective "hive mind" gets the job done.

Similarly, a society's culture isn't pre-planned: it just emerges from the many interactions between its people, each guided by their personal norms and the norms of the culture as a whole. And there's a feedback loop at work: culture is shaped by norms, and norms in turn are influenced by culture.

So the key question is: what kind of cultural norms tend to produce a successful country? A strong work ethic, for sure. A habit of saving for, and investing in, the future. And one of the most critical: simple trust in the people and institutions of the society. Independent of other factors, a society of suspicious, uncooperative people is marked for failure.

And that's where Reagan and his fellow travelers have really blown it: by mounting a richly-funded campaign—still in full swing—to destroy Americans' trust in government, higher education, science, the media—even in facts, logic and reason—conservatives have made it harder and harder to unite the citizenry to tackle our problems. And long-term, this is a recipe for failure as a country.

As Beinhocker notes, the Right's embrace of free-market fundamentalism leads naturally to this position. Culture doesn't have much of a role in Traditional Economics, because people are presumed to be perfectly rational, totally self-interested agents, each seeking to independently maximize their personal gain. All relationships are economic ones—what can I get from you, and what do I have to do to get it?

It's well established that real humans aren't like this, but conservatives cling to these assumptions because they provide justification for their anti-tax, anti-regulation ideology. Corollaries of this "Rational Man" hypothesis include (a) government intervention can't do anything but screw up the perfection of the marketplace, and (b) greed is good. And culture is an afterthought. Who needs trust if you can simply go to the market for whatever you need?

Starting with Reagan's famous line that "The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help" and right up to today, conservatives have been hard at work tearing down one of the main pillars of America's success: the fact that we could once trust each other enough to join together to do great and difficult things. Now we can't agree to fix a bridge that's falling down because OMG! it must be a boondoggle. And we'll have to reduce our personal consumption a bit to pay for it—screw that! We've been thoroughly indoctrinated in the politics of distrust.

Is anything to be done? Probably not without some seriously coordinated effort. Daniel Patrick Moynihan laid it out: The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself. Beinhocker's own prescription for rebuilding our "social capital" includes measures like:

  • campaigns to increase social involvement of citizens 
  • educational programs to build norms of trust in the next generation
  • encouraging people to interact with their neighbors (in part by reversing the suburban sprawl that has isolated people in their homes and cars and consumed their free time with long commutes)
  • promoting voting and political involvement

As far as I can tell, these are not top-priority items on the Republican agenda.

Donald Trump wants to "make America great again". He could start by repudiating the culture of mistrust and selfishness that is a direct outcome of Ronald Reagan's sorry "revolution".


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