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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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The rich grow richer while the poor grow poorerBLIND FAITH The gap between rich and poor is now the widest in US history. This is disturbing, for if history is any guide we have unwittingly placed ourselves in grave danger. Over the last millennium Europe has witnessed long cycles of widening and narrowing economic disparity. In each cycle, once the gap between the rich and the rest widened beyond a certain point, it presaged decline and disaster for all of society, the rich as well as the poor. Could we be seeing the first tremors of a new cycle, the outliers of the next menacing storm? In recent decades, many US citizens have come under increasing financial pressure. Since the 1970s, our number of working poor has increased sharply. Nearly all of our much-vaunted newly-created wealth has gone to the richest. Law enforcement has been unable to cope with burgeoning drug use at all levels of society. Television and radio casually air sexually explicit programs that would have been rejected in disgust by previous generations. Sexually transmitted diseases have become pandemic. (The number of people in the U.S. infected with genital herpes now stands at 45 million and is increasing at the rate of 1 million per year.) These developments have fed a widespread perception of irresponsibility and increasing licentiousness. Children today spend more time than ever in front of television sets or video games. They spend less with books, peers or parents. Where are they learning their values? What are the values they are learning? The alienation of large groups of people has led to private militias and to an increase in violence that has become pervasive. With 60,000 incidents of workplace violence per year, “going postal” is part of our vocabulary. “Road rage” is another new expression and a measure of increasing violence by “normal” people. Since 1980 our prison population has increased five-fold. These developments have exacerbated a polarization between a new evangelical Christian revival and those who are distrustful of religious dogmatism but have no solutions to the very real problems the evangelicals are addressing. Could these trends be harbingers of something more ominous, a more violent fracturing of society? For a country that has prided itself on its resourcefulness, the inability to address such problems suggests something deeper at work. There is something, powerful but insidious, that blinds us to the causes of these problems and undermines our ability to respond. That something is a set of beliefs, comparable to religious beliefs in earlier ages, about the nature of economies and societies. These beliefs imply the impropriety of government intervention either in social contexts (libertarianism) or in economic affairs (laissez faire). The faithful unquestioningly embrace the credo that the doctrine of nonintervention has generated our most venerated institutions: our democracy, the best possible political system; and our free market economy, the best possible economic system. But despite our devotion to the dogmas that libertarianism and free market economics are the foundation of all that we cherish most deeply, they have failed us and are responsible for our present malaise. The pieties of libertarianism and free markets sound pretty, but they cannot withstand even a cursory inspection. Libertarianism does not support democracy; taken to an extreme, it entails the law of the jungle. If government never interferes, we could all get away with murder. Alternatively, if the libertarian position is not to be taken to an extreme, where should it stop? What is the difference between no government and minimal government? Attempts to justify libertarianism, even a less than extreme position, have failed. Laissez faire, or free market economics, characterized by minimal or no government intervention, has a history that is long but undistinguished. Just as the negative effects of a high fever do not certify the health benefits of the opposite extreme, hypothermia, the dismal failure of communism, seeking complete government control of the economy, does not certify the economic benefits of the opposite extreme, total economic non-intervention. It may seem odd, given the parabolic arc of our financial markets and the swelling chorus of paeans to free market economics, but despite the important role of the market, purer free market economies have consistently underperformed well-focused mixed economies. In the latter part of the nineteenth century the mixed economies of Meiji Japan and Bismarck’s Germany clearly outperformed the free market economies of Britain and France. Our own economy grew faster when we abandoned the laissez faire of the 1920s and early 1930s for the proto-socialist policies of Franklin D. Roosevelt. It has become increasingly sluggish as we have moved back to a purer free market. Data of the past few decades show that our GNP and productivity growth have lagged those of our trading partners, who have mixed economies characterized by moderate government intervention. The persistently mediocre track record of laissez faire casts doubt on the claim that an economy free from government interference invariably maximizes the wealth of society. In fact, there are sound reasons the pure free market must underperform well-focused mixed economies. But despite laissez faire’s mediocre track record and despite powerful arguments that it cannot possibly provide what it promises, the notion of the unqualified benefit of the free market has become deeply embedded in our mythology. Apologists have exulted in claims that glorify free market mythology at the expense of reality, and also at the expense of society. Free market principles, even though they have failed in economics, have been eagerly applied to sectors ranging from politics to education, where they have contributed to societal dysfunction. One politically popular myth, that free market economics and government non-intervention provide the basis for true democracy, flies in the face of history. The first democrats, the classical Athenians, had a word for the ideal free marketer, the homo economicus, working for his own economic gain but unconcerned with the community. It was not particularly complimentary, the ancestor of our word “idiot.” Pericles expressed the sentiment underlying this: “We regard the citizen who takes no part in these [public] duties not as unambitious but as useless…” We have ignored the ramifications of this as we remodeled our pantheon. We have replaced the notion of public-spirited citizens interested in the common weal, a vital part of democratic thought from ancient Athens to our founding fathers, by the invisible hand of the free market. This promises to maximize benefit for society, if only we will be idiots. In so far as it fails to value disinterested public spirit, free market doctrine only pretends to cherish democracy. Let the people concentrate on their economic gain while their leaders rule in any manner they choose. The Peoples’ Republic of China instituted free market reforms to sustain its autocratic political regime. Augusto Pinochet brutally repressed even mild political dissent while pursuing free market economic policies in Chile. The reality of our own political power structure is that despite the primacy of our financial markets and our contemporary rituals of democracy, powerful corporations, unions and special interest groups fund political campaigns and exact repayment in the form of enormous influence on legislation. Our government is responsive primarily to these organizations, rather than to citizens. This resembles the corporatism of Mussolini’s Italy more closely than any historic democracy. We are blind to the connection between corporatism and the lack of public interest in politics and in the common good. In our enthusiasm for the dogma that any government interference is necessarily bad, we forget it was government action that ended child labor. It was government action that outlawed slavery, despite its profitability. It was government action that ended the Great Depression, after years of failure of non intervention. It was government action that curbed the most virulent expressions of racism, that provided an education for the great majority, that created a large stable middle class. The free market did not achieve any of these goods, and there is no indication that it ever would have done so. This is not meant to imply that everything government does is beneficial. But to start from the faith that everything government does is necessarily harmful not only disregards history; it sacrifices the ability, and even the interest, to distinguish between the beneficial and the harmful. Just as the value of government needs to be assessed independent of dogma, the value of the free market has to be gauged in the real world. Free markets provide incentives for innovation. They enforce pragmatism at the expense of ideology. They fit production to needs and desires of consumers and they lower the price of goods. But free markets can also cause problems. Some of these stem from the pre-eminence of the short term. This endangers long-term prosperity. Independently, free markets encourage an extreme concentration of wealth that has historically destroyed the fabric of society and led to a lower standard of living for everyone. Government intervention may be our only defense against the natural economic forces that lead to such a concentration of wealth. But the prevailing libertarian/laissez faire credo, even though it may be held by intelligent and well-meaning individuals, blinds us to both the danger and the potential for any response that is not generated by the free market itself. Our beliefs, despite the sincerity with which we hold them, lead us astray. One reason we remain so tightly bound to laissez faire is that we lack a better economic theory. Historically, no widely accepted theory, no matter how badly it has failed, has been replaced until a better theory was found. This book suggests an alternative — nonlinear thermodynamics, the most general physical theory that applies to complex open systems. Simply, economies are complex open systems. Nonlinear thermodynamics applies to such systems. Classical physics, the model for classical economics, does not. Nonlinear thermodynamics, for which Ilya Prigogine won the Nobel Prize in chemistry, explains phenomena in complex open systems of thermodynamics, chemistry and biology. Economies are complex open systems whose mathematical description and behavior resemble the nonlinear description and behavior of thermodynamic, chemical and biological systems. This suggests that economics may be understood from a nonlinear perspective. Such an understanding would support a very different economic paradigm. The most important difference between laissez faire and nonlinear economics is that laissez faire assures us of a stable and benign economic equilibrium. Should an economy be temporarily displaced from equilibrium, natural economic forces will restore that wealth-maximizing equilibrium. By contrast, nonlinear economics shows that the equilibrium may be unstable. If a system is displaced sufficiently far from equilibrium, natural forces may take it even further. This process is not necessarily benign. Historically, it has led to disaster. The instability of local equilibrium is common, and not only in chemistry and biology. In economics differences in wealth, once they reach a certain point, naturally tend to increase. In the struggle for additional wealth, pre-existing wealth has an advantage that is often decisive. The wealthy can outbid the nonwealthy for valuable information, for political influence, for the skills and technologies necessary to acquire additional wealth, dominating the most favorable technologies, products, and markets. The rich grow richer while the poor grow poorer. This can be a dangerous destabilizing process. Throughout history it has repeatedly led to increasing violence and a decline in security and standards of living for all. Intervention may be necessary to maintain proximity to equilibrium and to prevent natural forces from destabilizing the economy. This has ramifications for government. Laissez faire is prone to systematic malfunction. It has not maximized wealth. In principle it is incapable of maximizing wealth. It increases economic differences to the point that these jeopardize the stability of society and the welfare and security of everyone. There are circumstances in which government intervention may be appropriate, even vital. For this reason the doctrine of absolute non-interference, so glibly dispensed by free marketers, is pernicious. It leaves us vulnerable to the destabilization that can be wreaked by natural economic forces. Nonlinear economics would be an improvement. In addition to incorporating a more appropriate physical model and supporting a more flexible approach to the role of government, such an alternative would fit the personal and social values that have characterized civilized societies since ancient Athens and Confucius. For there are conditions in which the components of nonlinear systems are mutually interdependent. A nonlinear model with mutually interdependent components, while it is compatible with free markets, would support a traditional democratic view of citizens concerned with the common good. It would explain interactions among citizens with a focus on community and responsibility. It would counterbalance the centrifugal notions of libertine freedom and mutual independence that foster an each-person-out-for-himself mentality that dominates modern thought. It would provide a more viable foundation for society. In the spirit of such a foundation, humanism provides a promising platform from which to address societal problems. Although humanism does not pretend to present an alternative to religion, it does address spiritual values and it is compatible with religious teachings while avoiding dogmatism and narrow sectarianism. It stresses the value and dignity of human life and is sensitive to quality of life. It calls attention to our relationship to each other and emphasizes our responsibility to take action not only to improve our own lives, but to enable others to do the same. It takes seriously our role as stewards of the environment. While humanism is compatible with most religions, it is not compatible with laissez faire. This is because laissez faire implies that commitment to others, to society and to the environment is unnecessary, even pointless. So long as each person works to maximize his own immediate economic advantage, free market forces will insure the greatest benefit for society. Integrity, discipline, far-sighted action to achieve meaningful long-term goals add nothing. No wonder the popularity of laissez faire has corroded our traditional values. While the consequences of this corrosion are long term, that does not make them less noxious. If we fail to stem the corrosion we face an unpleasant period of economic stagnation, social decay, and increasing violence. To those who would regard this book as alarmist, I would respond that it is irresponsible to shout: “Stay the course!” when you see breakers on the coral reefs dead ahead. Our country has shown great resourcefulness in times of crisis. The surest way to cause grievous damage is to anaesthetize the public so that it does not notice a developing crisis until it is too late. Yet we are now blithely meandering down a path fraught with peril, heedless of the warning signs. Evolutionary pressures have selected for a propensity to react to sudden changes in our environment. But we ignore gradual changes, including those produced by flaws in our political and economic institutions. Because of the time lag before effects become manifest, we misinterpret weaknesses as strengths. We are like a man who walks with a cane — where every day a prankster shaves one millimeter off the bottom of his cane — and so we are convinced we are growing taller. We are not growing taller, and the sooner we confront reality the less painful will be the consequences. While this book focuses on the U.S., we have become subjects of worldwide emulation. The implications of this book do not stop at our borders, but extend to a large and growing portion of the world. Because we are comfortable materially, it is easy to avoid examining our fundamental beliefs. This is perilous. As Goethe claimed (Wilhelm Meister): “We fear nothing more than reason; we ought to fear stupidity if we understood what is really frightful; but reason is too uncomfortable, it must be brushed aside; whereas stupidity is merely fatal, and that can be tolerated.” A similar sentiment is echoed by W. H. Auden: Those who will not reason Perish in the act; Those who will not act Perish for that reason. |
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