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

21 January 2010

“I’ve Got Mine, Jack!”: The American Recipe for Dystopia

Faithful readers of this blog may wonder why it has been silent for nearly two weeks. The answer is simple. Like a bystander watching a gruesome car accident happen right in front of him, in seeming slow motion, I’ve been mesmerized. On Tuesday the crash finally came, putting an unknown Republican state senator named Scott Brown in the seat that Ted Kennedy held for nearly half a century. That election not only failed to remedy dysfunction and gridlock in Congress; it enhanced it.

To be sure, the sky is not falling any more than it was two weeks ago. Democrats’ so-called “filibuster-proof majority” was always a myth concocted by the right-wing propaganda machine for the purpose of blaming dystopia on Democrats.

Anyone who has followed the painful limp of health-insurance reform knows that real Democrats have no filibuster-proof majority because those who call themselves Democrats cannot agree among themselves. Moderates have fled the Republican party almost entirely. Those who claim that mantle, as Susan Collins and Olympia Snowe occasionally do, invariably vote with their party when the chips are down. In contrast, the Democrats have a number of so-called “Blue Dogs,” who vote with the Republicans on key issues in an apparent effort to keep their seats without regard to the nation’s welfare.

In other words, the Democrats’ “big-tent” party has more dissension inside it than the opposition. Big surprise. As a result, its nominal “filibuster-proof majority” is in practice an illusion. If it were more, we would have had real health-insurance reform, with a public option, at least by last fall.

Now reality has sunk in. There never was a filibuster-proof majority. Our nation is divided. The Democratic party is divided.

So in a time of crisis and increasingly rapid global change, our nation will continue to drift and decline as the branch of government that most determines our response to long-term challenges continues to do nothing. Despite all the hope of the President’s election and all the competence and energy of his team, the stagnation, paralysis, and neglect of our fundamental national values that characterized Dubya’s tenure in office likely will continue, except to the extent that the President can make change through executive action alone.

Before we can hope to alter this abysmal state of affairs, we must know what caused it. I can see only two causes. First, Fox News and rest of the right-wing propaganda machine have convinced a substantial majority of independent voters that the President and the Democrats are responsible for our nation’s current sorry state. Never mind that this view beggars memory, intelligence, knowledge of history, and common sense. Popular views don’t have to make sense; they just have to be held by enough people. That’s why propaganda like Fox News’ is still an attractive enterprise, though Goebbels and Stalin are long dead. If you can get enough people to buy deeply into a false ideology, you can rule in your own interest almost as securely as if you were king.

But the second reason for our sorry state, although equally likely, is far more profound. Scott Brown’s well-executed campaign had a single theme that probably insured his victory. Massachusetts already has universal (or near-universal) health care, under state law. The people of Massachusetts apparently like it. So Brown argued to his fellow citizens, in effect: “We’ve got ours. Why should we pay for the rest of the nation to have what we have, especially when the bloated bill that a divided Congress produced may have unintended consequences like short-term increases in premiums.”

Why is this reason so profound? Because it goes to the heart of our democracy. If citizens in a democracy vote on the basis of their own short-term interests, with no thought for the general welfare, let alone the long term, can society advance? Brown’s campaign may have furnished the final practical proof that our rampant individualism, which so troubled Alexis De Tocqueville nearly two centuries ago, is indeed the Achilles heel of our democracy. In Tom Friedman’s “flat world” of ever-closer communication and ever-closer global economic interdependence, a national credo of “I’ve got mine!” is hardly a recipe for success.

Economists have understood this point for about seven decades. In 1937, an economist named Ronald Coase published a paper in which he reasoned that private bargaining by individuals can reduce so-called “external” costs regardless of how property rights are distributed. But, as he recognized, this theory only works as long as “transaction costs” are negligible.

“External costs” are ones external to the marketplace. They include things like poor health care, pollution, decaying infrastructure, etc. That is, they are the major impediments to the “good life” in our modern globalized society. “Transaction costs” are things that make “bargaining” among large numbers of people difficult or impossible, like our continuing gridlock in Congress.

Coase understood that only when transaction costs are small can a system of private bargaining based on individualism and individual rights work to control external costs. Otherwise, everyone will increase those costs in pursuing his or her own self-interest, just as we have done with health care and did with pollution before we tried regulation and discovered cap and trade. This key insight into the relationship between external costs and bargaining costs is known as “Coase’s Theorem.” In 1991, Coase won the Nobel Prize in economics, in part for its discovery.

A corollary of Coase’s Theorem—that external costs are hard to address when there is gridlock—may ring the death knell for our society. For according to media analysis, many independents voted for Scott Brown because they wanted to increase transaction costs and make it hard for Congress to do anything. They so distrusted our entire political system as to blame our present sorry state equally on Democrats and Republicans, despite the fact that the latter have governed us for all but a fraction of the last forty years.

Coase’s Theorem is a just modern, analytically sophisticated twist on an ancient theme: the tension between the desires of individuals and the needs of society. That theme goes back at least to the Bible, from which that wonderful verse in Handel’s Messiah comes: “Oh we like sheep, have gone astray-ay-ay-ay . . . every one to his own way.” De Toqueville mused upon the same theme in 1835, in his famous book “Democracy in America.”

At that time, the world was just emerging from an era in which kings (occasionally queens), emperors and other monarchs and despots ruled. When they ruled wisely and in the public interest, their societies flourished. When they ruled stupidly or in their own selfish interest, their societies languished or decayed. De Tocqueville wondered how replacing a monarch with rule by the whole people would work when all of them went their own ways.

No one has ever answered that question satisfactorily. The short history of our own nation—especially recent history—suggests that our brand of democracy may mutate into a form of “soft” oligarchy. A class of wealthier, better-educated and less public-spirited people may perpetuate their own advantage by convincing the rest that their supremacy gives the rest better opportunities for the future. The only notable progress that we seem to have made since the Gilded Age is that the dominant social class is no longer so heavily based on race.

Today’s Supreme Court ruling allowing both corporations and unions (guess which have more money!) to spend more freely on political “speech” will only entrench that oligarchy. Whether our government will still resemble a democracy in fifty years is anyone’s guess.

As for the gridlock in Congress, it will continue and increase. Both Congress and our Supreme Court continue to be deeply divided. So for the foreseeable future, our representative “democracy” will continue to degenerate into another form of “soft” oligarchy, in which a vanishing breed of “moderates” and “centrists” like the two female senators from Maine, Ben Nelson (D., Neb.) and Justice Anthony Kennedy fix our fate.

God help us if these oligarchs-by-default are not both smart and wise. We are in a race with “hard” oligarchs—the technocrats of modern China. They seem far smarter than our average politician, let alone John Boehner. So at the moment, our prospects for winning are not particularly encouraging.


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