Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

16 January 2011

The Forgetful Inventor, Whom Others Are Passing By

[For brief comment on the continuing political fallout of the Tucson mayhem, click here.]

How stupid do you have to be to invent something better than what came before and then not use it fully? How dumb do you have to be to let others take what you’ve discovered and build an industry, a society, or a new world without you? These are questions that every American should ask himself or herself every day, on rising and on going to sleep.

Nuclear Power.
Take nuclear power, for example. With lots of help from immigrant foreign scientists, we Americans invented it. We built humanity’s first nuclear reactor under a stadium at the University of Chicago in 1942. That’s 69 years ago, nearly three quarters of a century.

Now look at us today. Here, as of 2009, are the percentages of national electric power produced in nuclear reactors in a few key countries of interest (from this source):

CountryNuclear Share of Electricity (percent)
United States20.2

(There are also other countries that surpass us, but this list reveals the full flavor of our ignominy.)

Regulated Capitalism. We Americans didn’t invent capitalism. It was alive and well in ancient Rome. A Scot named Adam Smith first developed the theory of free markets and their “autopilot” operation in a book nicknamed the Wealth of Nations. Oddly enough, that book was first published in 1776—a date familiar to most Americans. Maybe that’s why we took to capitalism like ducks to water.

But capitalism in its raw form was and is an imperfect system. Dickensian England was a paradigm of industrial capitalism but a bit far from paradise. It was heavily polluted and vastly unequal. It had legendary London “fogs,” which miraculously disappeared with industrial effluent control, and which we now call “smog.” It had great masses of underclasses living in hideous industrial squalor, so that “gentlemen” and “ladies” could attend their elite clubs and dispense their occasional charity to children working long hours, seven days a week, in smoky, sooty, dangerous and disease-spawning mines and factories.

The terrible inequality and inequity of unfettered industrial capitalism nearly brought our own experiment in democracy to an end. In the early and mid-twentieth century about half the world tried an entirely different system based on state ownership of the means of production and a “command” economy run by political bureaucrats. Many of our working people and their leaders flirted with that system. After the world’s greatest armed conflict, another threatened to arise, this time between practitioners of this new system and capitalism.

Eventually, capitalism won. But in the meantime, we had invented an entirely new system, one between the extremes. It was called regulated capitalism, or a “mixed” economy.

We understood the power of self-interest and economic liberty in fostering industrial progress. But we also understood the danger of a powerful capitalist engine running amok without any kind of control. So we adopted laws limiting child labor, protecting workers’ rights to organize and strike, and preventing excesses of gambling, swindling and coercion by banks and other financial institutions. And, although we didn’t invent antitrust law (the British did), we advanced it to a new level, making sure that our law protected competition itself from subversion by powerful capitalists.

Even some leading capitalists themselves got into the spirit. Henry Ford discovered not only the assembly line, with its remarkable industrial efficiencies. He also discovered that, by paying workers a living wage, he could help them afford the marvels they built. That discovery created a whole new consumer society, something the world had never seen.

The apex of regulated capitalism came in the two decades after World War II. With its aid—and while “fighting” a worrisome, attention-distracting and very expensive Cold War—we rebuilt Europe and Japan and constructed the most prosperous, egalitarian, strong and happy society in human history. It was based on regulated capitalism, with free markets and free trade managed and guided by an enlightened government and kept open to newcomers with antitrust law.

So, with help and ideas from lots of others, we invented the strongest and most effective economic system in human history. And it worked.

But look at us now. We can’t even remember our own language. Our (private) organs of propaganda redefine words for us in ridiculous ways. They apply the word “socialism” to a society rapidly regressing towards Dickensian England. Europeans from the last century on both sides of the issue—for and against—would respond to this doublespeak with a derisive belly laugh. They knew what socialism really means because they fought (and many of them died) for and against it. They knew it means ownership and control of the means of production by the state, with capitalism and free markets dormant or nonexistent.

Of course no American with access to serious power has ever proposed such a system, and probably none ever will. We are a practical people, and socialism in its pure form just doesn’t work.

But while our right wing is busy redefining socialism to include a system backsliding into laissez faire capitalism, other nations are stealing our invention of regulated capitalism and running away with it.

What do you think China is? Don’t be fooled by its title, the “People’s Republic of China,” or the incongruous name of its single governing party. Those names are historical anomalies, perhaps tributes to the great leader (and later tyrant), Mao, who unified modern China and freed it from foreign domination.

Today China is no more Communist than is Texas. Its capitalistic businesses are so unfettered that they can kill children by putting melamine in milk and building schools that collapse in earthquakes, with very little pushback. (We’re no saints, either. We let our rogue bankers destroy our own and most of the world’s economy, with nary a slap on the wrist so far. Instead, we gave them bailouts and bonuses. But that’s another story.)

Yet China differs from us in one vital respect. Its government is much, much stronger than ours and therefore better able to regulate and guide private industry. With that strength it can direct massive amounts of money, effort and research into electric cars and windmills. And it can dampen the fervor of automobile mania, with all its risks of energy dependence, economic stagnation from rising oil prices, pollution and global warming, as easily as turning a dial on the governor for an accelerating engine.

Regulated capitalism is not socialism. It’s capitalism with strong government leadership, management and (at times) restraint, to protect the people, the economy and free markets themselves from capitalists’ excesses. Regulation also can keep capitalism from rushing down blind allies, such as building an entire industrial infrastructure on a form of energy in short supply and with rapidly diminishing global reserves.

Don’t be fooled by labels like “socialism” with shifting definitions. In substance, China is likely the most perfect example of regulated capitalism in the world today. It has taken the system discovered by our own Franklin Roosevelt and his “brain trust” and perfected it under an authoritarian, one-party government.

That government may leave a lot to be desired in the field of human rights and “democracy.” But economically it is perpetrating yet another theft of our American intellectual property—perhaps the most important bit of all.

* * *

There are many other respects, large and small, in which we Americans have become the forgetful inventor. All in all, they add up to an interesting and (for us) depressing phenomenon.

Unless war between major powers, catastrophic effects of global warming, or nuclear terrorism intervenes, the world as a whole appears headed for a global economic Golden Age, with or without us. That’s the meaning of global adoption of free markets, free trade, and capitalism, in various forms, as a common economic system. That’s the meaning of the surge of global investment in the “BRIC” countries (Brazil, Russia, India and China) and other less rapidly developing nations. That’s the meaning of the sudden rise of previously “unimportant” nations in wealth and stature.

As I’ve argued before, there is an irony to all this. The systemic structure that is responsible for all this inconceivably rapid global progress is largely an invention of the Brits and us. Yet we, like the Brits, are lagging behind because we seem to have forgotten our own best inventions.

From time to time, I’ll be bringing up other half-forgotten inventions in new posts. But these two are enough for now. Their simplicity in concept and their vital importance illustrate the general principle. How stupid can you be to invent something superior and important and then not even use it, letting others pass you by?

The McCain/Obama Rapprochement

I sense from my sitemeter that many readers have been scanning this blog for comment on the political fallout of the Tucson massacre. I haven’t posted on that topic because there’s not much to say.

The President gave a beautiful, moving, and pitch-perfect speech in Tucson this week. His grumpy erstwhile rival John McCain responded in kind, with the grace of his noble 2008 concession. These two events reminded us, respectively, why Obama is President and why we once admired a great-hearted patriot named John McCain, who seems to have disappeared since the general-election campaign of 2008 began.

This bipartisan show of nobility and statesmanship is heart warming. But let’s not get carried away. We always knew that the President can make a great speech. (His first book alone convinced me that, if he hadn’t gotten into politics, he might eventually have earned a Nobel Prize for literature.) Most of us hoped and trusted that some day the McCain we once knew and loved would overcome the “win at all costs” Dr. Jekyll that sold his presidential campaign to the ad-men, slime mongers and a clever female grifter.

But we need deeds, not words. We need problems solved. For us, the most important among them is energy. Oil prices are rising in accordance with the basic laws of supply and demand. They aren’t going to stop until: (1) global transportation switches to another source of power than the internal combustion engine, or (2) another global depression reduces demand. We Americans (and our friends the Canadians) will take the worst economic hit (we in an already reeling economy) because we depend on oil the most.

At the same time, practical evidence of global warming is becoming overwhelming. Did anyone besides me notice the large number of freak weather events this winter? We had Utah/Colorado-like powdered snow piling up in huge drifts in the streets of New York City. We had freak snowstorms in Europe and the Southeastern U.S., which shut down Heathrow and Atlanta, two of busiest airports in the world. We had unprecedented heat waves in South America, during their summer, and now unprecedented floods in northeast Australia, after a huge drought and a plague of orange dust last year.

Weather is not the same as climate. Instability in weather—along with an increase in the ferocity and number of freak weather events like these—is precisely what the theory of global warming predicts. Practical confirmation of that theory no longer depends on the steady melting of glaciers, the Arctic Ice Cap and the Antarctic ice sheets. It’s assaulting us and our global economy almost every month.

We are now on the rising part of the exponential growth curve of climatic catastrophe. It’s not just polar bears and undersea species who are threatened. It’s now us. Did anyone besides me notice the sharp rise in basic food commodity prices caused by all this freak weather?

The time for talking is long past. If we continue to fight each other we will all lose, first we Americans (because our economy is so fragile) and then the larger “we”, our human species. So while the McCain/Obama rapprochement offers a ray of hope in a very dark period, we need much more if we are even to hold our own as a nation, let alone prosper along with the rest of the world.

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