The Presumptuousness of Urban Blue America

I had to post this article because it is just too much on the money. There is an historical equilibrium between rural, suburban, and urban life-style preferences in this country – there is no long-term trend in either direction. Our politics mostly reflect that – not the red-blue, sub-cultural civil war nonsense propagated by most of the media.

But for me the truly amusing irony of the self-righteousness of urban blue liberalism is that it turns traditional Marxism on its head. Urban sophisticates who empathize with Bernie/Warren-style socialism now claim that the rural periphery is exploiting the good will of the urban core. “We create all the wealth! We attract all the educated elites! We work and subsidize the ignorant bumpkins!”

This is the exact opposite of how Marx and the neo-Marxists claimed that the capitalist core was exploiting the workers and consumers who lived on the periphery of the capitalist market economy. Today’s neo-Marxist liberal urban sophisticates now claim the opposite to justify their deserved political dominance. Certainly one can see that their presumptuousness is akin to blaming the European colonies for the burdens of their European colonists! Workers of the World, Unite! Well, they have and voted for Trump. Rich.
Now what?

Of course, Marx and the new unwitting anti-Marxists are both half right and half wrong. Periphery and core are co-dependent in a free market economy: imagine Silicon Valley without its Internet users across the 50 states. What is necessary is that the market be free, open, and competitive so that coercive power does NOT determine distributive outcomes. Because humans are power-hungry, that, admittedly, is a persistent challenge.

Outside the Bubble

The Arrogance of Blue America

If you want to see the worst impacts of blue policies, go to those red regions—like upstate New York or inland California—in states they control.

Joel Kotkin

04.29.17 10:00 PM ET

In the wake of the Trumpocalypse, many in the deepest blue cores have turned on those parts of America that supported the president’s election, developing oikophobia—an irrational fear of their fellow citizens.

The rage against red America is so strong that The New York Time’s predictably progressive Nick Kristoff says his calls to understand red voters were “my most unpopular idea.” The essential logic—as laid out in a particularly acerbic piece in The New Republic—is that Trump’s America is not only socially deplorable, but economically moronic as well. The kind-hearted blue staters have sent their industries to the abodes of the unwashed, and taken in their poor, only to see them end up “more bitter, white, and alt-right than ever.”

The red states, by electing Trump, seem to have lost any claim on usually wide-ranging progressive empathy. Frank Rich, theater critic turned pundit, turns up his nose at what he calls “hillbilly chic.” Another leftist author suggests that working-class support for Brexit and Trump means it is time “to dissolve” the “more than 150-year-old alliance between the industrial working class and what one might call the intellectual-cultural Left.”

The fondest hope among the blue bourgeoise lies with the demographic eclipse of their red-state foes. Some clearly hope that the less-educated “dying white America,“ already suffering shorter lifespans, in part due to alcoholism and opioid abuse, is destined to fade from the scene. Then the blue lords can take over a country with which they can identify without embarrassment.

Marie Antoinette Economics

In seeking to tame their political inferiors, the blue bourgeoisie are closer to the Marie Antoinette school of political economy than any traditional notion of progressivism. They might seek to give the unwashed red masses “cake” in the form of free health care and welfare, but they don’t offer more than a future status as serfs of the cognitive aristocracy. The blue bourgeoisie, notes urban analyst Aaron Renn, are primary beneficiaries of “the decoupling of success in America.” In blue America, he notes, the top tiers “no longer need the overall prosperity of the country to personally do well. They can become enriched as a small, albeit sizable, minority.”

Some on the left recognize the hypocrisy of progressives’ abandoning the toiling masses. “Blue state secession is no better an idea than Confederate secession was,” observes one progressive journalist. “The Confederates wanted to draw themselves into a cocoon so they could enslave and exploit people. The blue state secessionists want to draw themselves into a cocoon so they can ignore the exploited people of America.”

Ironically, many of the most exploited people reside in blue states and cities. Both segregation and impoverishment has worsened during the decades-long urban “comeback,” as even longtime urban enthusiast Richard Florida now notes. Chicago, with its soaring crime rates and middle class out-migration, amidst a wave of elite corporate relocations, epitomizes the increasingly unequal tenor of blue societies.

In contrast the most egalitarian places, like Utah, tend to be largely Trump-friendly. Among the 10 states (and D.C.) with the most income inequality, seven supported Clinton in 2016, while seven of the 10 most equal states supported Trump.

If you want to see worst impacts of blue policies, go to those red regions—like upstate New York—controlled by the blue bourgeoise. Backwaters like these tend to be treated at best as a recreational colony that otherwise can depopulate, deindustrialize, and in general fall apart. In California, much of the poorer interior is being left to rot by policies imposed by a Bay Area regime hostile to suburban development, industrial growth, and large scale agriculture. Policies that boost energy prices 50 percent above neighboring states are more deeply felt in regions that compete with Texas or Arizona and are also far more dependent on air conditioning than affluent, temperate San Francisco or Malibu. Six of the 10 highest unemployment rates among the country’s metropolitan areas are in the state’s interior.

Basic Errors in Geography

The blue bourgeoisie’s self-celebration rests on multiple misunderstandings of geography, demography, and economics. To be sure, the deep blue cites are vitally important but it’s increasingly red states, and regions, that provide critical opportunities for upward mobility for middle- and working-class families.

The dominant blue narrative rests on the idea that the 10 largest metropolitan economies represents over one-third of the national GDP. Yet this hardly proves the superiority of Manhattan-like density; the other nine largest metropolitan economies are, notes demographer Wendell Cox, slightly more suburban than the national major metropolitan area average, with 86 percent of their residents inhabiting suburban and exurban areas.

In some of our most dynamic urban regions, such as Phoenix, virtually no part of the region can be made to fit into a Manhattan-, Brooklyn-, or even San Francisco-style definition of urbanity. Since 2010 more than 80 percent of all new jobs in our 53 leading metropolitan regions have been in suburban locations. The San Jose area, the epicenter of the “new economy,” may be congested but it is not traditionally urban—most people there live in single-family houses, and barely 5 percent of commuters take transit. Want to find dense urbanity in San Jose? You’ll miss it if you drive for more than 10 minutes.

Urban Innovation

The argument made by the blue bourgeoisie is simple: Dense core cities, and what goes on there, is infinitely more important, and consequential, than the activities centered in the dumber suburbs and small towns. Yet even in the ultra-blue Bay Area, the suburban Valley’s tech and STEM worker population per capita is twice that of San Francisco. In southern California, suburban Orange County has over 30 percent more STEM workers per capita than far more urban Los Angeles.

And it’s not just California. Seattle’s suburban Bellevue and Redmond are home to substantial IT operations, including the large Microsoft headquarters facility. Much of Portland’s Silicon Forest is located in suburban Washington County. Indeed a recent Forbes study found that the fastest-growing areas for technology jobs outside the Bay Area are all cities without much of an urban core: Charlotte, Raleigh Durham, Dallas-Fort Worth, Phoenix, and Detroit. In contrast most traditionally urban cities such as New York and Chicago have middling tech scenes, with far fewer STEM and tech workers per capita than the national average.

The blue bourgeois tend to see the activities that take place largely in the red states—for example manufacturing and energy—as backward sectors. Yet manufacturers employ most of the nation’s scientists and engineers. Regions in Trump states associated with manufacturing as well as fossil fuels—Houston, Dallas-Fort Worth, Detroit, Salt Lake—enjoy among the heaviest concentrations of STEM workers and engineers in the country, far above New York, Chicago, or Los Angeles.

Besides supplying the bulk of the food, energy, and manufactured goods consumed in blue America, these industries are among the country’s most productive, and still offer better paying options for blue-collar workers. Unlike a monopoly like Microsoft or Google, which can mint money by commanding market share, these sectors face strong domestic and foreign competition. From 1997-2012, labor productivity growth in manufacturing—3.3 percent per year—was a third higher than productivity growth in the private economy overall.

For its part, the innovative American energy sector has essentially changed the balance of power globally, overcoming decades of dependence on such countries as Saudi Arabia, Russia, and Venezuela. Agriculture—almost all food, including in California, is grown in red-oriented areas—continues to outperform competitors around the world.

Exports? In 2015, the U.S. exported $2.23 trillion worth of goods and services combined. Of the total, only $716.4 billion, or about a third, consisted of services. In contrast, manufactured goods accounted for 50 percent of all exports. Intellectual property payments, like royalties to Silicon Valley tech companies and entrepreneurs, amounted to $126.5 billion—just 18 percent of service exports and less than 6 percent of total exports of goods and services combined, barely even with agriculture.

Migration and the American Future

The blue bourgeoisie love to say “everyone” is moving back to the city; a meme amplified by the concentration of media in fewer places and the related collapse of local journalism. Yet in reality, except for a brief period right after the 2008 housing crash, people have continued to move away from dense areas.

Indeed the most recent estimates suggest that last year was the best for suburban areas since the Great Recession. In 2012, the suburbs attracted barely 150,000 more people than core cities but in 2016 the suburban advantage was 556,000. Just 10 of the nation’s 53 largest metropolitan regions (including San Francisco, Boston, and Washington) saw their core counties gain more people than their suburbs and exurbs.

Overall, people are definitively not moving to the most preferred places for cosmopolitan scribblers. Last year, all 10 of the top gainers in domestic migration were Sun Belt cities. The list was topped by Austin, a blue dot in its core county, surrounded by a rapidly growing, largely red Texas sea, followed by Tampa-St. Petersburg, Orlando, and Jacksonville in Florida, Charlotte and Raleigh in North Carolina, Las Vegas, Phoenix, and San Antonio.

Overall, domestic migration trends affirm Trump-friendly locales. In 2016, states that supported Trump gained a net of 400,000 domestic migrants from states that supported Clinton. This includes a somewhat unnoticed resurgence of migration to smaller cities, areas often friendly to Trump and the GOP. Domestic migration has accelerated to cities between with populations between half a million and a million people, while it’s been negative among those with populations over a million. The biggest out-migration now takes place in Los Angeles, Chicago, and New York.

Of course, for the blue cognoscenti, there’s only one explanation for such moves: Those people are losers and idiots. This is part of the new blue snobbery: Bad people, including the poor, are moving out to benighted places like Texas but the talented are flocking in. Yet, like so many comfortable assertions, this one does not stand scrutiny. It’s the middle class, particularly in their childbearing years, who, according to IRS data, are moving out of states like California and into ones like Texas. Since 2000, the Golden State has seen a net outflow of $36 billion dollars from migrants.

Millennials are widely hailed as the generation that will never abandon the deep blue city, but as they reach their thirties, they appear to be following their parents to the suburbs and exurbs, smaller cities, and the Sun Belt. This assures us that the next generation of Americans are far more likely to be raised in Salt Lake City, Atlanta, the four large Texas metropolitan areas, or in suburbs, than in the bluest metropolitan areas like New York, Seattle, or San Francisco—where the number of school-age children trends well below the national average.

This shift is being driven in large part by unsustainable housing costs. In the Bay Area, techies are increasingly looking for jobs outside the tech hub and some companies are even offering cash bonuses to those willing to leave. A recent poll indicated that 46 percent of millennials in the San Francisco Bay Area want to leave. The numbers of the “best and brightest” have been growing mostly in lower-cost regions such as Austin, Orlando, Houston, Nashville, and Charlotte.

Quality of Life: The Eye of the Beholder

Ultimately, in life as well as politics, people make choices of where to live based on economic realities. This may not apply entirely to the blue bourgeoisie, living at the top of the economic food chain or by dint of being the spawn of the wealthy. But for most Americans aspiring to a decent standard of living—most critically, the acquisition of decent living space—the expensive blue city simply is not practicable.

Indeed, when the cost of living is taken into consideration, most blue areas, except for San Jose/Silicon Valley, where high salaries track the prohibitive cost of living, provide a lower standard of living. People in Houston, Dallas, Austin, Atlanta, and Detroit actually made more on their paychecks than those in New York, San Francisco, or Boston. Deep-blue Los Angeles ranked near the bottom among the largest metropolitan areas.

These mundanities suggest that the battlegrounds for the future will not be of the blue bourgeoisie’s choosing but in suburbs, particularly around the booming periphery of major cities in red states. Many are politically contestable, often the last big “purple” areas in an increasingly polarized country. In few of these kinds of areas do you see 80 to 90 percent progressive or conservative electorates; many split their votes and a respectable number went for Trump and the GOP. If the blue bourgeoisie want to wage war in these places, they need to not attack the suburban lifestyles clearly preferred by the clear majority.

Blue America can certainly win the day if this administration continues to falter, proving all the relentless aspersions of its omnipresent critics. But even if Trump fails to bring home the bacon to his supporters, the progressives cannot succeed until they recognize that most Americans cannot, and often do not want to, live the blue bourgeoisie’s preferred lifestyle.

It’s time for progressives to leave their bastions and bubbles, and understand the country that they are determined to rule.

The New Old World Order

I cite this article because it is quite insightful of the failed political culture in the modern democratic West and particularly the failures of US party elites. It also exposes the larger historical forces at work that suggest the road forward may be rather rocky.

For me this 2016 moment resonates with historical analogies such as the Savonarolan episode in Renaissance Florence that I wrote about in The City of Man, the dissolution of the Weimar Republic in 1930s Germany, and the Iranian Fundamentalist Revolution in 1979. We haven’t reached those precipices yet, but all arrows point in that direction unless we come to grips with our current failures of both modern liberalism and neo-conservatism.

Donald Trump Does Have Ideas—and We’d Better Pay Attention to Them

The post-1989 world order is unraveling. Here are 6 ideas Trump has to replace it.

Politico, September 15, 2016

Ideas really don’t come along that often. Already in 1840, Alexis de Tocqueville observed that in America, “ideas are a sort of mental dust,” that float about us but seldom cohere or hold our attention. For ideas to take hold, they need to be comprehensive and organizing; they need to order people’s experience of themselves and of their world. In 20th-century America, there were only a few ideas: the Progressivism of Wilson; Roosevelt’s New Deal; the Containment Doctrine of Truman; Johnson’s War on Poverty; Reagan’s audacious claim that the Cold War could be won; and finally, the post-1989 order rooted in “globalization” and “identity politics,” which seems to be unraveling before our

Yes, Donald Trump is implicated in that unraveling, cavalierly undermining decades worth of social and political certainties with his rapid-fire Twitter account and persona that only the borough of Queens can produce. But so is Bernie Sanders. And so is Brexit. And so are the growing rumblings in Europe, which are all the more dangerous because there is no exit strategy if the European Union proves unsustainable. It is not so much that there are no new ideas for us to consider in 2016; it is more that the old ones are being taken apart without a clear understanding of what comes next. 2016 is the year of mental dust, where notions that stand apart from the post-1989 order don’t fully cohere. The 2016 election will be the first—but not last—test of whether they can.
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If you listen closely to Trump, you’ll hear a direct repudiation of the system of globalization and identity politics that has defined the world order since the Cold War. There are, in fact, six specific ideas that he has either blurted out or thinly buried in his rhetoric: (1) borders matter; (2) immigration policy matters; (3) national interests, not so-called universal interests, matter; (4) entrepreneurship matters; (5) decentralization matters; (6) PC speech—without which identity politics is inconceivable—must be repudiated.

These six ideas together point to an end to the unstable experiment with supra- and sub-national sovereignty that many of our elites have guided us toward, siren-like, since 1989. That is what the Trump campaign, ghastly though it may at times be, leads us toward: A future where states matter. A future where people are citizens, working together toward (bourgeois) improvement of their lot. His ideas do not yet fully cohere. They are a bit too much like mental dust that has yet to come together. But they can come together. And Trump is the first American candidate to bring some coherence to them, however raucous his formulations have been.


(Blog Note: It’s Not about Trump.)

Most of the commentary about Trump has treated him as if he is a one-off, as someone who has emerged because of the peculiar coincidence of his larger-than-life self-absorption and the advent of social media platforms that encourage it. When the world becomes a theater for soliloquy and self-aggrandizement, what else are we to expect?
But the Trump-as-one-off argument begins to fall apart when we think about what else happened in politics this year. First of all, Trump is not alone. If he alone had emerged—if there were no Bernie Sanders, no Brexit, no crisis in the EU—it would be justifiable to pay attention only to his peculiarities and to the oddities of the moment. But with these other uprisings occurring this year, it’s harder to dismiss Trump as a historical quirk.

Furthermore, if he had been just a one-off, surely the Republican Party would have been able to contain him, even co-opt him for its own purposes. After all, doesn’t the party decide? The Republican Party is not a one, however, it is a many. William F. Buckley Jr. and others invented the cultural conservatism portion of the party in the 1950s, with the turn to the traditionalism of Edmund Burke; the other big portion of the party adheres to the free-market conservatism of Friedrich Hayek. The third leg of the Republican Party stool, added during the Reagan years, includes evangelical Christians and Roman Catholics of the sort who were still unsure of the implications of Vatican II. To Burke and Hayek, then, add the names John Calvin and Aristotle/Thomas Aquinas. Anyone who really reads these figures knows that the tension between them is palpable. For a time, the three GOP factions were able to form an alliance against Communism abroad and against Progressivism at home. But after the Cold War ended, Communism withered and the culture wars were lost, there has been very little to keep the partnership together. And if it hadn’t been Trump, sooner or later someone else was going to come along and reveal the Republican Party’s inner fault lines. Trump alone might have been the catalyst, but the different factions of the GOP who quickly split over him were more than happy to oblige.

There is another reason why the Republican Party could not contain Trump, a perhaps deeper reason. Michael Oakeshott, an under-read political thinker in the mid-20th century, remarked in his exquisite essay, “Rationalism in Politics,” that one of the more pathological notions of our age is that political life can be understood in terms of “principles” that must be applied to circumstances. Politics-as-engineering, if you will. Republicans themselves succumbed to this notion, and members of the rank and file have noticed. Republicans stood for “the principles of the constitution,” for “the principles of the free market,” etc. The problem with standing for principles is that it allows you to remain unsullied by the political fray, to stand back and wait until yet another presidential election cycle when “our principles” can perhaps be applied. And if we lose, it’s OK, because we still have “our principles.” What Trump has been able to seize upon is growing dissatisfaction with this endless deferral, the sociological arrangement for which looks like comfortable Inside-the-Beltway Republicans defending “principles” and rank-and-file Republicans far from Washington-Babylon watching in horror and disgust.

Any number of commentators (and prominent Republican Party members) have said that Trump is an anti-ideas candidate. If we are serious about understanding our political moment, we have to be very clear about what this can mean. It can mean Trump’s administration will involve the-politics-of-will, so to speak; that the only thing that will matter in government will be what Trump demands. Or, it can mean that Trump is not a candidate who believes in “principles” at all. This is probably the more accurate usage. This doesn’t necessarily mean that he is unprincipled; it means rather that he doesn’t believe that yet another policy paper based on conservative “principles” is going to save either America or the Republican Party. In Democracy in America, Tocqueville was clear that the spirit of democracy is not made possible by great ideas (and certainly not by policy papers), but rather by practical, hands-on experience with self-governance. Ralph Waldo Emerson’s mystical musings in his essay, “Experience,” corroborate this. American democracy will not be rejuvenated by yet another policy paper from the Inside-the-Beltway gang. What I am not saying here is that Trump has the wisdom of an Oakeshott, a Tocqueville or an Emerson. What I am saying is that Trump is that quintessentially American figure, hated by intellectuals on both sides of the aisle and on the other side of the Atlantic, who doesn’t start with a “plan,” but rather gets himself in the thick of things and then moves outward to a workable idea—not a “principled” one—that can address the problem at hand, but which goes no further. That’s what American businessmen and women do. (And, if popular culture is a reliable guide to America, it is what Han Solo always does in Star Wars movies.) We would do well not to forget that the only school of philosophy developed in America has been Pragmatism. This second meaning of being an anti-ideas candidate is consonant with it.

If, as some have said, Trump’s only idea is, “I can solve it,” then we are in real trouble. The difficulty, of course, is that in this new, Trumpean moment when politics is unabashed rhetoric, it is very difficult to discern the direction a Trump administration will take us. Will he be the tyrant some fear, or the pragmatist that is needed?

It’s not unreasonable to think the latter. This is because, against the backdrop of post-1989 ideas, the Trump campaign does indeed have a nascent coherence. “Globalization” and “identity politics” are a remarkable configuration of ideas, which have sustained America, and much of the rest of the world, since 1989. With a historical eye—dating back to the formal acceptance of the state-system with the treaty of Westphalia in 1648—we see what is so remarkable about this configuration: It presumes that sovereignty rests not with the state, but with supra-national organizations—NAFTA, WTO, the U.N., the EU, the IMF, etc.—and with subnational sovereign sites that we name with the term “identity.” So inscribed in our post-1989 vernacular is the idea of “identity” that we can scarcely imagine ourselves without reference to our racial, gender, ethnic, national, religious and/or tribal “identity.” Once, we aspired to be citizens who abided by the rule of law prescribed within a territory; now we have sovereign “identities,” and wander aimlessly in a world without borders, with our gadgets in hand to distract us, and our polemics in mind to repudiate the disbelievers.

What, exactly, is the flaw with this remarkable post-1989 configuration of ideas? When you start thinking in terms of management by global elites at the trans-state level and homeless selves at the substate level that seek, but never really find, comfort in their “identities,” the consequences are significant: Slow growth rates (propped up by debt-financing) and isolated citizens who lose interest in building a world together. Then of course, there’s the rampant crony-capitalism that arises when, in the name of eliminating “global risk” and providing various forms of “security,” the collusion between ever-growing state bureaucracies and behemoth global corporations creates a permanent class of winners and losers. Hence, the huge disparities of wealth we see in the world today.

The post-1989 order of things fails to recognize that the state matters, and engaged citizens matter. The state is the largest possible unit of organization that allows for the political liberty and economic improvement of its citizens, in the long term. This arrangement entails competition, risk, success and failure. But it does lead to growth, citizen-involvement, and if not a full measure of happiness, then at least the satisfactions that competence and merit matter.

Trump, then, with his promise of a future in which the integrity of the state matters, and where citizens identify with the state because they have a stake in it rather than with identity-driven subgroups, proposes a satisfying alternative.

This is also why it would be a big mistake to underestimate Trump and the ideas he represents during this election. In the pages of the current issue of POLITICO Magazine, one author writes: “The Trump phenomenon is about cultural resentment, anger and most of all Trump. It’s primal-scream politics, a middle finger pointed at The Other, a nostalgia for a man-cave America where white dudes didn’t have to be so politically correct.”
I have no doubt that right now, somewhere in America (outside the Beltway), there are self-congratulatory men, probably white, huddled together in some smoky man-cave, with “Make America Great Again” placards on their John-Deere-tractor-mowed lawns.
But do not mistake the part for the whole. What is going on is that “globalization-and-identity-politics-speak” is being boldly challenged. Inside the Beltway, along the Atlantic and Pacific coasts, there is scarcely any evidence of this challenge. There are people in those places who will vote for Trump, but they dare not say it, for fear of ostracism. They think that identity politics has gone too far, or that if it hasn’t yet gone too far, there is no principled place where it must stop. They believe that the state can’t be our only large-scale political unit, but they see that on the post-1989 model, there will, finally, be no place for the state. Out beyond this hermetically sealed bicoastal consensus, there are Trump placards everywhere, not because citizens are racists or homophobes or some other vermin that needs to be eradicated, but because there is little evidence in their own lives that this vast post-1989 experiment with “globalization” and identity politics has done them much good.

The opposition to the post-1989 order is not just happening here in America; it is happening nearly everywhere. The Brexit vote stunned only those who believe in their bones that the very arc of history ends with “globalization” and identity politics.
The worry is that this powerful, growing disaffection with the status quo—both within Europe and elsewhere—will devolve into nefarious nationalism based on race, ethnicity or religion. To combat this, we are going to have to find constructive ways to build a new set of ideas around a very old set of ideas about sovereignty—namely, that the state and the citizens inside it matter. If we don’t find a way to base nationalism on a healthy understanding of what a liberal state is and what it does and expects from citizens to make it work well, dark nationalism, based on blood and religion, will prevail—again.
Nothing lasts forever. Is that not the mantra of the left? Why, then, would the ideas of globalization and identity politics not share the fate of all ideas that have their day then get tossed into the dust-bin of history?

Of course, when new ideas take hold, old institutional arrangements face upheaval or implosion. There is no post-election scenario in which the Republican Party as we knew it prior to Trump remains intact. The Republicans who vote for Hillary Clinton will not be forgotten by those who think Trump is the one chance Republicans have to stop “globalization-and-identity-politics-speak” cold in its tracks. And neither will Inside-the-Beltway Republicans forget those in their party who are about to pull the lever for Trump. One can say that Trump has revealed what can be called The Aristotle Problem in the Republican Party. Almost every cultural conservative with whom I have spoken recently loves Aristotle and hates Trump. That is because on Aristotelian grounds, Trump lacks character, moderation, propriety and magnanimity. He is, as they put it, “unfit to serve.” The sublime paradox is that Republican heirs of Aristotle refuse to vote for Trump, but will vote for Clinton and her politically left-ish ideas that, while very much adopted to the American political landscape, trace their roots to Marx and to Nietzsche. Amazingly, cultural conservatives who have long blamed Marx and Nietzsche (and German philosophy as a whole) for the decay of the modern world would now rather not vote for an American who expressly opposes Marx and Nietzsche’s ideas! In the battle between Athens, Berlin and, well, the borough of Queens, they prefer Athens first, Berlin second and Queens not at all. The Aristotle Problem shows why these two groups—the #NeverTrumpers and the current Republicans who will vote for Trump—will never be reconciled.

There are, then, two developments we are likely to see going forward. First, cultural conservatives will seriously consider a political “Benedict Option,” dropping out of the Republican Party and forming a like-minded Book Group, unconcerned with winning elections and very concerned with maintaining their “principles.” Their fidelity is to Aristotle rather than to winning the battle for the political soul of America. The economic conservatives, meanwhile, will be urged to stay within the party—provided they focus on the problem of increasing the wealth of citizens within the state.

The other development, barely talked about, is very interesting and already underway, inside the Trump campaign. It involves the effort to convince Americans as a whole that they are not well-served by thinking of themselves as members of different “identity groups” who are owed a debt that—surprise!—Very White Progressives on the left will pay them if they loyally vote for the Democratic Party. The Maginot Line the Democratic Party has drawn purports to include on its side, African-Americans, Hispanics, gays, Muslims and women. (Thus, the lack of embarrassment, really, about the “basket of deplorables” reference to Trump supporters.) To its credit, the Democratic Party has made the convincing case, really since the Progressive Era in the early part of the 20th century, that the strong state is needed to rearrange the economy and society, so that citizens may have justice. Those who vote for the Democratic Party today are not just offered government program assistance, they are offered political protections and encouragements for social arrangements of one sort or another that might not otherwise emerge.

But where does this use of political power to rearrange the economy and society end? Continue using political power in the service of “identity politics” to reshape the economy and society and eventually both of them will become so enfeebled that they no longer work at all. The result will not be greater liberty for the oppressed, it will be the tyranny of the state over all. Trump does have sympathies for a strong state; but correctly or incorrectly, he has managed to convince his supporters that a more independent economy and society matters. In such an arrangement, citizens see their first support as the institutions of society (the family, religion, civic associations), their second support as a relatively free market, and their third support as the state, whose real job is to defend the country from foreign threats. Under these arrangements, citizens do not look upward to the state to confirm, fortify and support their “identities.” Rather, they look outward to their neighbor, who they must trust to build a world together. Only when the spell of identity politics is broken can this older, properly liberal, understanding take hold. That is why Trump is suggesting to these so-called identity groups that there is an alternative to the post-1989 worldview that Clinton and the Democratic Party are still pushing.

Now that Trump has disrupted the Republican Party beyond repair, the success of the future Republican Party will hang on whether Americans come to see themselves as American citizens before they see themselves as bearers of this or that “identity.” The Very White Progressives who run the Democratic Party have an abiding interest in the latter narrative, because holding on to support of entire identity groups helps them win elections. But I do not think it can be successful much longer, in part because it is predicated on the continual growth of government, which only the debt-financing can support. Our debt-financed binge is over, or it will be soon. The canary in the coal mine—now starting to sing—is the African-American community, which has, as a whole, been betrayed by a Democratic Party that promises through government largesse that its burden shall be eased. Over the past half-century nothing has been further from the truth, especially in high-density inner-city regions. While it receives little media attention, there are African-Americans who are dubious about the arrangement by which the Democratic Party expects them to abide. A simultaneously serious and humorous example of this is the long train of videos posted on YouTube by “Diamond and Silk.” To be sure, the current polls show that Trump has abysmal ratings among minorities. If he wins the election, he will have to succeed in convincing them that he offers an alternative to permanent government assistance and identity politics consciousness-raising that, in the end, does them little good; and that through the alternative he offers there is a hope of assimilation into the middle class. A tall order, to be sure.

These observations are not to be confused as a ringing endorsement for a Republican Party that does not yet exist, and perhaps never will exist. But they are warning, of sorts, about impending changes that cannot be laughed off. The Republicans have at least been given a gift, in the disruption caused by Trump. The old alliances within it were held together by a geopolitical fact-on-the-ground that no longer exists: the Cold War. Now long behind us, a new geopolitical moment, where states once again matter, demands new alliances and new ideas. With the defeat of Bernie Sanders in the primaries, Democrats have been denied their gift, and will lumber on, this 2016, with “globalization-and-identity-politics-speak,” hoping to defend the world order that is predicated on it. If Sanders had won, the Democrats would have put down their identity politics narrative and returned to claims about “class” and class consciousness; they would have put down the banner of Nietzsche and taken up the banner of Marx, again. And that would have been interesting! Alas, here we are, with, on the one hand, tired old post-1989 ideas in the Democratic Party searching for one more chance to prove that they remain vibrant and adequate to the problems at hand; and on the other, seemingly strange, ideas that swirl around us like mental dust waiting to coalesce.


Red-faced or Blue-blooded: Exploding the Myths of American Party Politics

States apart copy

I’m reprinting this here because in the ten years I’ve been studying and researching this political dysfunction, it only gets worse. And I rarely read or hear any rational analysis – only one-sided arguments. The media has really misguided America because they write narratives and don’t study hard data.

Red-faced or Blue-blooded: Exploding the Myths of American Party Politics

In recent years American politics has become highly polarized, making democratic governance less amenable to compromise and more gridlocked. After a generation of conflict and heightened partisanship during the Obama presidency, as we careen from budget battles to periodic government shutdowns, we seem no closer to bridging the gap. One reason for this impasse stems from a misunderstanding of our politics driven by a popular media narrative that perpetuates cultural stereotypes, political myths, and partisan hyperbole.

The narrative appears to have emerged during the 2000 and 2004 presidential elections, when the media colored the states red and blue in their visual props in order to better represent the Electoral College races. This was actually instructive because there was an obvious clustering of red states and blue states: blue in the Northeast, along the coasts and the Great Lakes regions; red in the south and throughout most of the Midwest. The media explanations for such clustering focused on exit poll survey data that was based on voter identities and preferences, including race, ethnicity, gender, age, church attendance, etc. And therein lies the problem: analysis based on identity is going to come up with identity-based answers, yet the very fact that the pattern is geographic (red and blue states) means that a spatial factor has to be at work.

Urban vs. Rural

Of course, media pundits had a ready answer for the geographic state pattern: red states in the South represented a racial bias while those in the Midwest demonstrated a fundamentalist Christian bias. Thenceforth, the narrative of party polarization in American politics settled on the cultural and personal attributes of voters, claiming that party affiliations and voting patterns were being driven by race, gender, ethnicity, religious belief, and lifestyle preferences, such as the type of car one drove or the music one listened to. Closer inspection of the hard data, however, exposes the fallacy of this narrative.

If one looks at a more accurate map that breaks down voting patterns into smaller units, of counties or Congressional districts, a more nuanced geographic pattern reveals itself. Blue voters are shown to be concentrated in urban areas, while red voters dominate rural areas. The suburbs represent the swing voters or the purplish middle ground, with inner suburbs voting more blue and outer exurbs more red.

The advantage of county voting data is that we can compare it with county census data on race, ethnicity, age, gender, income, household formation, population, etc. Comparative statistical analysis then shows which of these factors most accurately explains voting patterns. What we find is that the most significant factors are the population density of the community and the number of married households vs. female heads of household. All other factors turn out to be relatively insignificant, including, surprisingly, race.

One might ask, “How can that be? We know that there’s a racial divide where blacks predominantly vote Democratic and whites vote Republican.” (Actually, that’s only half true; whites are much more evenly split.) Certainly race had an impact on the 2008 election, but the novelty of voting for the first non-white president was less of a motivating factor in 2012. Exit polls do show that black voters vote Democratic by overwhelming margins, but the fact that they live in urban areas and have a high correlation with Female Heads of Household (.8 in the 2000 census) means that these two other factors trump their racial identity.

If we take black voters out of the analysis completely, and thus remove any racial bias, we find the same results are even stronger among the non-black population: urbanites mostly vote blue, rural residents mostly red, while suburbanites are mixed. Married households lean red and single households lean blue.

There is a self-selection process that reinforces these results because single voters tend to live in large cities and married couples choose to move out of the city into suburban and rural communities in order to raise families. These two factors—population density and family formation—help explain the majority of these red-blue voting patterns. (We’ll address a third factor when we get to ideology and religion.)

Rural–urban splits in American politics are nothing new and are driven by a natural divergence of economic interests. The first regional party divide was between Hamiltonian Federalists (cities in the North and East) and Jeffersonian Democrats (farming interests across the South and near West). The next battle, over the Second National Bank of the U.S, pitted Jacksonian Democrats against the Whigs. Then, of course, we had the Civil War between North and South over slavery and tariffs. This was followed by another split over banking as McKinley Republicans fought against the Bryan Democrats over gold and silver-backed money. (The 1896 Electoral College map looks almost identical to that of 2004, but with reversed colors: the South and Midwest favored the Democrats, while the Northeast and coasts went Republican.)

Parties and Media

This begs the next question: “Why do certain regions now vote Democrat or Republican so consistently instead of mixing their ideological preferences?” The fixed pattern is an outgrowth of the two party platforms that were set in the 1950s and 60s, when Democrats began to appeal to urban voters with Great Society social programs and identity-group politics, while Republicans targeted rural and suburban voters with lower taxes and family-oriented policies. Consider the fact that the South was once solidly Democrat and is now solidly Republican. The agrarian South has been consistently traditional and conservative; it’s the parties that have flipped, not the voters. The parties have organized their platforms and campaigns to appeal to constituencies based on geography. And by pursuing these electoral strategies, the parties have become ideologically more pure, reinforcing the natural policy divide.

Recent Red-Blue patterns have become hardened for two additional reasons that stem from party and media incentives. First, both parties benefit from a polarization myth based on identity. Why? Because if voters identify strongly as either Republican or Democrat, liberal or conservative, their votes are virtually guaranteed and party candidates don’t need to spend campaign funds trying to win them over. This is why presidential candidates don’t bother to campaign in solidly red or blue states, but focus all their energies on swing states. (More pernicious is the fact that national Democrat candidates can pay lip service to the minority vote and suffer no real consequence, while Republicans have chosen to essentially write off minority voters.)

The second reason that Red-Blue patterns have come to be reinforced lies with the media. Mainstream media is centered in metropolitan areas and must appeal to these audiences or go out of business. Their reporters live in the same urban communities where they work, so their worldview is largely colored according to urban interests. These facts do not necessarily imply a deliberate political bias, but since mainstream media’s audiences have been heavily politicized (liberals read the big city papers and watch the three major urban networks), its coverage of politics has tended to exhibit a strong leftward, or urban, bias. As a consequence, alternative media has expanded to meet the preferences of non-urban audiences with a rightward bias. These media biases reinforce polarization in a vicious feedback cycle as people only tune in to the news that confirms their political views. For these two reasons—party and media incentives—we can’t expect that political polarization will be reduced by either of these institutions.

We need to understand that voting patterns are correlated with lifestyles because geography is also associated with lifestyle choices. But lifestyle choices do not determine political identities. This is an important insight that many of our national politicians consistently misread. We saw it when Barack Obama claimed that small town folks “cling to guns or religion” because they are “bitter” about their economic “frustrations.” On the Republican side, we witnessed a similar gaffe when Mitt Romney claimed that the 47% of Americans who “don’t pay income taxes…[and] were dependent on government” would always vote for the party promising them more benefits paid for by taxes on someone else. Both of these statements are gross caricatures of our political culture.

Religion and Ideology

This brings us to the last issue that colors our political divide: the thorny question of religious faith and practice. The proxy for religious faith, which is difficult to measure, is frequency of church attendance. Residents of red states go to church more frequently than residents of blue states. Thus, churchgoers are generally thought to represent the ideological Religious Right that votes Republican. This view concludes that religious faith is politically opposed to secularism.

This is not quite accurate, however, and contributes to yet another misreading of our politics and religion. Churches provide different functions within rural and urban communities. In rural areas the church is a communal meeting place where people gather for social purposes as well as to observe their faith. In an urban secular environment, this social need is more likely to be met by reading the Sunday paper at Starbucks.

What frequent church attendance does do is create an organizational structure for political messaging, wherein large numbers of voters can be reached efficiently and effectively. In this sense, churches have played the same role for the Right as industrial unions have played for the Left. Republican political strategists have taken full advantage of the growing evangelical movement as Democrats have suffered the decline of unionization. It is a mistake for the secular Left to confound religious attendance with conservative orthodoxy and attack political opponents for their faith instead of their politics. Religious belief is highly pluralistic in America, meaning there are many faiths and denominations that disagree on almost all aspects of religious doctrine and political preference. Attacking people of religious faith merely unites them in defense of that faith, even when they may not agree on much else.

The most salient split for our politics lies in the ideological differences between orthodox and unorthodox belief. This applies not only to religious belief, but to the secular world as well. Another way to put this is that in our society we have secular fundamentalism as well as religious fundamentalism, and they both influence our ideological preferences. Fundamentalism is defined as strict adherence to orthodox doctrines. We might categorize fundamentalists politically as one-issue voters. So, on the Right, we have cultural conservatives, evangelicals, pro-life, creationist, pro-family groups, while on the Left, we have environmentalists, liberation theologians, pro-choice feminists, and same-sex marriage advocates. Moderates of all stripes are those who occupy the middle ground of our politics. Politically, the focus on ideology becomes too complex to really draw any hard conclusions. For instance, where are the conservationists? Do they side with environmentalists or with traditional naturalists? And where are the libertarians?

The ideological divide has often been characterized as a split between traditionalists and modernists, but I don’t think such a classification fits American politics very well. Instead, I would suggest a different label to describe the majority of Americans who are neither conservative, liberal, nor radical.; They are “tolerant traditionalists,” rooted in the past but willing to embrace change at their own pace. They are bound by faith but amenable to reason. They are not really polarized on the big issues, but they do have different political and policy preferences based on geography, family formation, and ideology. These differences need to be negotiated through democratic politics with the goal of reaching acceptable compromises and creating a more coherent political society—much more cohesive and functional than we have witnessed in recent years.

The real picture: Between 2000 and 2012 not much has changed, only gotten worse…


2004 Election by Congressional District

PurpleAmerica2000small PurpleAmericaVanderbei Election2008 Election2012

Maps are by Robert J. Vanderbei and can be found here.

Liberty, Politics, and Justice…


…a delicate mix.

As readers well know, this blog focuses primarily on economic policy and monetary issues, but policies are not made in a political vacuum. The legacy of the post-60s period in American politics has been distilled down to momentous Supreme Court decisions, which have become the tail that wags the dog of our collective lives. But politicizing court decisions is not really the way “rule by the people” (democracy) was meant to work. No wonder our democracy has become so dysfunctional: as we raise irreconcilable issues such as race, abortion, and sexual preference to the level of national politics, we become divided by emotions or distracted by ‘bread and circuses.’ Meanwhile, the political class runs the government in their own narrow interests. We the citizens become the losers by our own design. Whether winning or losing in this judicial lottery, nobody should be real content with the present state of affairs.

From the WSJ:

Our Rights, Not the Court’s

There’s no good reason to give the justices the last word on race, abortion and gay marriage


Reacting to this past week’s Supreme Court decisions, a conservative law-school colleague told me, “Law matters in the Supreme Court from October to May, not so much in June.” Politics takes over in June, and the Supreme Court becomes a super-legislature, deciding by majority vote what our constitutional rights are.

“Deciding” is the right verb. In June, no serious observer of the Court can think that the justices are just “calling balls and strikes” or interpreting the Constitution’s words or telling us what most people understood the words to mean when they were placed in the Constitution.

But if the justices are deciding rather than interpreting, why should they be the ones to decide, substituting their decisions for ours? The usual explanation is that we can trust them to do the right thing—and we can’t trust ourselves.

After all, some of us think that affirmative action promotes constitutional rights; others think that it violates them. Some of us think that the Voting Rights Act promotes, well, voting rights; others think that it violates the structural principles that make our government worth having.

We usually use our legislatures as the forum in which to discuss and resolve such differences. We call that “politics,” and for lots of issues (tax rates, spending programs, declaring war), we think that politics, with majority rule, works well enough.

So why don’t we use these same institutions for hot-button constitutional issues like abortion rights, gun rights and affirmative action? In these cases, we let nine other people decide, by majority vote, what they think our rights are. That majority vote then becomes “constitutional law.” The great puzzle is, why do we let them get away with it?

Consider the Supreme Court’s decisions this past week. Conservatives liked the rulings upholding property rights, limiting affirmative action and striking down a key element of the Voting Rights Act. Liberals liked the decisions striking down the federal Defense of Marriage Act and allowing California to have gay marriage. Only a few people, though, think that this mixed bag of results should lead us to rethink the whole system. But it should.

What justifies giving the Court the last word on our constitutional rights?

The most common answer is to say that legislatures don’t do a good job of protecting minority interests. Liberals think that Congress messed up in enacting the Defense of Marriage Act, failing to protect the interests of gays and lesbians. Conservatives think that it messed up in re-enacting the Voting Rights Act, failing to protect the sovereign equality of states. And so on down the line.

But the Voting Rights Act shows that Congress sometimes does protect racial minorities. And though gays and lesbians are clearly a minority in the country, the rapid spread of legislative recognition of gay marriage shows that some legislatures can protect their interests too.

Another common view is that, though conservatives and liberals like some decisions and dislike others, they all hope that the justices will get it right eventually—becoming conservative or liberal across the board. Everything will be fine, they think, if only the justices get their heads straight about the Constitution.

But there is no reason to think this is going to happen. Maybe if we get a long run of conservative or liberal presidents, enough new justices will be appointed to make the Court consistently conservative or liberal. That happened with the Warren Court, for example. But the Court didn’t become consistently conservative even with Republican presidents appointing every justice from 1968 to 1994.

A third perspective is purely strategic. Pick your favorite policy outcomes, and then do a complicated calculation. For each issue, ask, “How likely is it that I will win in the legislature and have the courts uphold my victory? How likely is it that I will win in the legislature only to have the courts snatch my victory away? How likely is it that I will lose in the legislature but get the courts to give me what I want?” Then weight each issue according to its importance to you. Finally, add everything up. If, on balance, you get more of the policies that you like from letting the courts oversee the legislature, you should be for judicial review. Otherwise, you should oppose it.

I think that this is an entirely sensible way of deciding whether you like judicial review or not. But I don’t think anyone actually goes through the calculation, which is maddeningly complicated.

A final perspective would be to resign yourself to the status quo, take your victories when they come and live to fight another day when you lose.

This might make sense, at least if you’re not completely annihilated on the battlefield. The Court usually does leave paths open to renewing the fight in ordinary political arenas. Voting rights advocates can try to get Congress to enact a new coverage formula. Defenders of the traditional family can try to get Congress to enact more precisely targeted restrictions on benefits for people in gay marriages. But why should they have to bother? They won these battles once, and the only reason they have to re-fight them is that five justices thought they were wrong about who had what constitutional rights.

Some scholars say that all of this is no big deal because, if we put aside some short, anomalous periods, the Supreme Court never gets too far out of line with the national majority. But if this is true, what’s the point of judicial review? To police those states that depart from national views? To cleanse the statute books of antiquated laws that no longer have majority support?

Maybe. But note that this is not what happened in last week’s decisions. The Voting Rights Act was re-enacted in 2006, the Defense of Marriage Act was adopted in 1996, and affirmative action has lots of supporters today.

If judicial review is a problem, what can we do about it? I’m fond of a Canadian innovation that Judge Robert Bork also found interesting: Let the justices strike down statutes they think are unconstitutional and give their explanations. Then let Congress respond. If a congressional majority agrees with the Court, the decision stands. But if a majority thinks that the Court got it wrong, Congress can override the decision.

I, for one, would welcome a chance to engage in constitutional politics. My own policy views are so eccentric that I can’t count on any justice to reflect them consistently. I’d rather take my chances trying to persuade my fellow citizens and representatives to agree with me.

Why Ideology Matters in American Politics


Political polls in recent years have shown how little citizens approve of U.S. politics, with Congress receiving an approval rating as low as 16%, while the president’s approval-disapproval differential shows a 16-point deficit (41% strongly disapproving vs. 25% strongly approving). Most would agree this reflects a general dissatisfaction with national politics in America.

Ideology has taken the brunt of the blame for this, with the label ‘ideologue’ tossed around like a pejorative. But this would be a popular misconception promoted by the media, as are most of our political myths these days. Ideology is not really the problem, and may be the best solution to our partisan dysfunction.

Ideology, as promoted in the 21st century, is different than that of the 20,th which was defined by the clash of “isms”: principally liberalism vs. fascism, socialism, and communism. There have been other variants of lesser appeal, such as nationalism, collectivism, racism, and linguistic or ethnocentrism. With the collapse of the Soviet Union and the liberalization of China, ideological conflict has been decided in favor of liberalism, as manifested through democratic capitalism founded on the moral principles of liberty, equality, and justice.

Political parties use ideology to define themselves under the broadest of terms, but in America our ideologies have always been variations of liberalism. Those other “isms” of the far left and far right have never gained a foothold on our shores. After defeating the more malign extreme ideologies overseas in two world wars, our political parties at home split hairs over progressivism vs. conservatism, as defined by the economic class interests of capital vs. labor.

Sometime around 1968 our two major political parties began to redefine their “ideological identities” to fit those of their targeted voters. In effect, the question of moral principles became liberty, equality and justice: Yes, but for whom? The Democrats focused their efforts on minorities, unionists, feminists, and gays with policies such as affirmative action, welfare, collective bargaining for public unions, women’s and gay rights, while the Republicans focused on religious groups, finance, and business with culture wars, tax cuts, and deregulation.

This has created serious problems for the governance of a pluralist democracy based on constitutional principles. For example, our country’s past was cleaved by racial conflict, inciting a civil war and deeply affecting our politics to this day, a full century and a half later. (Many today mistakenly blame the history of racism for the political divisions we see now between the “red” region of the South and the periphery vs. the “blue” regions of the north and Pacific coast.) The true lesson of the transformation of the South is that the ideology of racism was defeated not by the grievances of the oppressed, but by the moral power of liberty, equality, and justice. White European Americans could not deny the moral justice of emancipation, liberty, and equal rights, as stated in the Constitution, but unrealized for almost two centuries.

Unfortunately, the problem we have today is that we have reverted to this “Southernization” of national politics that pits immutable identities against each other. A political party based on an ideology of identity is little different from one based on skin color. The result has been the fractionalization of national politics into a civil war of self-identified Democrats vs. self-identified Republicans. There is no route to negotiation and compromise under these terms – it’s a zero-sum game of win or lose. This is the nature of elections, but it cannot and has not yielded good governance. In a nutshell, this is why we can’t stand our politics.

Instead, we must return to the true nature of ideology based on ideas rather than identities. These ideas are present in our politics, but, when engaged, quickly revert to imposed identities. Our political discourse should not focus on rich or poor, black, white or brown, straight or gay, but on the moral principles that guide citizens in their personal and social behavior. These moral principles include liberty, equality, security, solidarity, justice, charity, civic responsibility and accountability—not for whom, but for all. Liberal Democrats and conservative Republicans differ in their emphases on these moral principles, but the larger point is that different ideas can converge on these principles over how society should be governed and ultimately how we govern ourselves. The continuum we need to negotiate travels from libertarianism at one end to statism at the other.

Electoral politics in a democracy is about dividing and conquering the opposition, but ultimately democracy is defined as “government by the people, for the people,” not “by the party, for the party,” or “by the elites, for the elites.” It’s time to redefine our politics according to moral ideology based on first principles. It would be helpful to push public discourse in that direction.

A Short Word on Gun Control

Quoted from “Obama’s Colossal Politics” by Daniel Henninger. Full article here.

The Brady Law remains in force, but the Assault Weapons Ban expired in 2004. That year, the government formed a panel of specialists at the National Research Council to assess the effects of these gun-control efforts. Its conclusion was that gun-control was a whimper. It said the data on guns and violence “are too weak to support unambiguous conclusions or strong policy statements.”

What they said next is even more pertinent: “Drawing causal inferences is always complicated and, in the behavioral and social sciences, fraught with uncertainty.” Let’s rephrase that. When serious scientists try to solve a problem, they ask, What works? When Washington takes on a problem, it says, Why not?

Let’s just say that we have lots of science to help us out on solving this problem of violence in society. Let’s use it.

The Future of History

Can Liberal Democracy Survive the Decline of the Middle Class?

Stagnating wages and growing inequality will soon threaten the stability of contemporary liberal democracies and dethrone democratic ideology as it is now understood. What is needed is a new populist ideology that offers a realistic path to healthy middle-class societies and robust democracies.

By Francis Fukuyama

Thought-provoking essay by Fukuyama, author of The End of History and the Last Man, published in Foreign Affairs journal. Link back here.

This essay is now a year old, but I’ll comment because ideas about “the future of history ” are not really time-sensitive. I’d agree with Mr. Fukuyama’s analysis of the failure of ideology at both ends of the spectrum. In particular, he is correct that:

  1. The Left is intellectually bankrupt, with state corporatism, postmodernism, and social welfare statism all running into their inevitable limitations, intellectually and economically.
  2. The Right has succeeded temporarily due to the failures of the Left combined with a simple return to pro-growth market-driven economic policies. But with imbalances created by globalization and technology, these policies are limited in effectiveness, with neoclassical growth policy merely perpetuating and amplifying the business cycle. Efforts to avoid the consequences of downturns have led to the explosion of public debt as the new policy norm.
  3. Inequality is being driven primarily by technology and globalization, which are symbiotic. Just take a look at the progression of baseball salaries. A world market driven by technology with increasing returns to scale has created a Winner-Take-All market-driven society, leading to economic imbalances and concentrations of power that have rendered existing paradigms ineffective and promoted political cronyism. Capital has enjoyed an increase in market power relative to labor.
  4. The answer to Mr. Fukuyama’s question “Can Liberal Democracy Survive the Decline of the Middle Class” is probably “No.” The adage is correct: “No bourgeois, no democracy.” The irony of the Obama administration’s state corporatism redux is its antipathy to the bourgeois—small business and entrepreneurs—with policies that reward big business, big labor, and big government and conflict with the aspirations of free people under free markets.

In closing his essay, Mr. Fukuyama suggests the need for a new ideology to deal with these failures but is less definitive on its features. In considering the trends cited above and the choices we must make, I think it helpful to first identify the true ideological differences between the Left and Right. The trade-off comes between freedom or security, meaning a society that enhances individual autonomy and the range of choices for its citizens versus a society that tries to insure their physical and economic security. The state cannot effectively deliver both. For example, the promise of universal entitlements means nobody gets to opt out, so it constrains the alternatives that free citizens might choose. Given the entitlement crises, it’s questionable whether the state can deliver true economic security at all.

Ideologues of the Right are strongly biased toward freedom, while those of the Left prioritize security in the form of social solidarity. But any new ideology will have to optimize the opportunities for both freedom and security, as both fulfill our emotional human needs to find meaning in our lives. We need to hope for the extraordinary that lies outside the boundaries of the norm, and we need to manage our fears of failure, uncertainty, and loss in order to venture out of our comfort zones.

There is a workable ideology, and it lies right under our noses. Economic markets and political democracy can deliver both freedom and security if we can think outside the dominant political and economic paradigms. To start, the policy challenges we face can best be classified as distributional. Income and wealth inequality, hunger, pollution, educational access, etc., are all distributional failures – our sciences have taught us how to maximize the production of goods, but not how to distribute them to insure market sustainability. Nature has solved this problem with its delicate balance, but man still struggles with skewed social outcomes. But there is a natural logic to the distributional effects of economic and political markets. To achieve sustainability and stability, policy must harness this logic rather than oppose it.

Finance and economics adheres to the ironclad law of risk and return to determine the natural distribution of returns. Those who assume the risks reap the rewards or the losses. Violating this law disrupts the risk-taking, wealth-creating activity on which a free society depends. Political cronyism that favors clients of the state, or tax and redistribution that is politically motivated, contradict the law of risk and return. To illustrate, one can consider the insidious immorality of “heads we win, tails you lose” as a stark example of the violation of natural distributive justice.

To fulfill this promise of a new ideology, we will need to pursue policies that promote the decentralization and diversification of power, both political and economic. (This need not impede the scale of enterprise.) In a capitalist society, the ownership and control of capital is key to participation in the system. The predominant focus on labor, an input cost to the production process, is misguided. Wage labor should be seen as a low risk, low return strategy whereby the worker sells his labor for a pre-determined wage, while the risk of business failure is assumed by the owners as residual claimants to profits. In a globalized world with an oversupply of labor and mobile capital, the relative shares of production strongly favor capital. The owners/managers of enterprises that outsource production increase their incomes, while those who rely solely on labor incomes suffer. The solution is not to restrict productive activity by punishing outsourcing, but to broaden ownership participation in capitalist enterprise.

Policywise, it is a mistake to superimpose capital and labor on citizens. Labor and capital should not be conceptualized as workers and capitalists, these are merely productive factors, like land and equipment. Any one of us can enjoy the returns to any of these factors through ownership and control. The ownership of free labor is obvious, but the ownership and control of capital is more determinant of the final distribution of returns. As the enterprise grows, owners receive greater returns, but workers get the pre-determined wage (plus a small bonus?). Stock options on equity capital is the cause of outsized management compensation where CEO pay is 400 times that of the average worker.

Now comes the kicker: The accumulation of capital also allows for the greater diversification of risk across different asset classes. For example, my labor is concentrated in my person, while my capital is diversified across the world economy. This helps diversify my risk of loss, while also enhancing my potential returns. The broad distribution of the ownership and control of productive assets is the only way to achieve the individual and social objective of freedom and economic security.

As Fukuyama explains, the main hurdle to any new ideological paradigm is political because the existing concentrations of power are self-reinforcing. We will not get policies that reinforce the bourgeois without grassroots mobilization for change. We need reforms of capital markets, corporate governance, the tax code, entitlements, public spending, campaign finance, electoral rules, etc. but existing power bases will vigorously defend the status quo. The only way to dislodge concentrations of power, short of a revolution, is through the power of numbers. Those who oppose change know this very well and expend most of their political energies on divide-and-conquer strategies that target ideological identities. Thus, the Tea Party and Occupy Wall Street were pitted against each other, even though they had compatible interests. Breaking out of this pattern at the grassroots level will take seemingly impossible effort, but the alternative will be recurrent crises and failure.

Making Sense of Washington Politics

A quote from an essay by Charles Kelser, editor of the Claremont Review of Books, (link):

If the bankruptcy of the entitlement programs were handled just the right way, with world-class cynicism and opportunism, in an emergency demanding quick, painful action lest Grandma descend into an irreversible diabetic coma, then liberalism might succeed in maneuvering America into a Scandinavia-style überwelfare state, fueled by massive and regressive taxes cheerfully accepted by the citizenry.

One might conclude from the last presidential election that a slim majority of Americans voted for Obama’s vision of this European-style social welfare state. If that’s the case, the puzzle to ponder is: since we already have Scandanavian-style überwelfare states in the world that are open to immigration, why aren’t people clamoring to emigrate to these societies? And why are their birth rates so dangerously low?

But, as we grapple with our future in Washington, the following essay explains why we’re getting almost nowhere fast here in the USA. We’ll need to choose and there doesn’t seem to be a win-win compromise.

From the National Review Online:

Bargaining and Its Limits

Simply (and surely somewhat too simply) put, the Democrats want more money so that the entitlement system doesn’t have to be reformed, while the Republicans want to reform the entitlement system so that the government doesn’t have to take more of the country’s money or take up even more of the economy.

The seemingly endless series of budget showdowns that have characterized the last two years has a lot of people frustrated, and understandably so. But I think it’s a mistake to attribute that pattern to a failure to seriously bargain, as many critics suggest. It is in fact the only plausible outcome of bargaining given our increasingly problematic fiscal situation. A lasting bargain — a middle-ground deal that provides a solution that endures for many years, of the sort reached in the 80s and 90s — is not really going to be possible in this situation. And the frustration about this has to do with a failure to grasp just what our situation is, and just how different the goals of the two parties are at this point.

It is true, as the self-declared sober moderates among the talking heads remind us, that there is a kind of middle ground between what the two parties are asking for. That instinct is in fact where the so-called “Bowles proposal” that John Boehner offered the president on Monday came from. At a November 1, 2011, hearing of the supercommittee (you can find the transcript archived here, the text quoted below starts on page 50), Erskine Bowles asked for some time to present an idea. Here’s what he said:

Chairman HENSARLING: I would note, prior to Senator Simpson’s departure, he did mention, Mr. Bowles, that you had something you might want to present. Without objection, I would certainly yield you a couple of minutes if I understand you have something else you wish to present to this committee.

Mr. BOWLES: I can do it very quickly. I tried to think, if I were sitting in your shoes or I was the go-between as I was in what became the Simpson-Bowles plan, if it was possible for you all to get to the $3.9 trillion deficit reduction, given where your positions are today, and I think it is, I think you can get this done, and I will just go through briefly the arithmetic. And, again, you have got to flesh out the policies, but if you look at where I understand the two sides now stand, and this is from just listening, which is what you have got to do if you are the guy in the middle, you know, the proposals for discretionary spending, and these are all above what the $900 billion and the 400 that was in the continuing resolution, so this is in addition to the $1.3 trillion worth of spending cuts that have already been done, but you all are between $250 and $400 billion of additional cuts on discretionary. So I assumed that we could reach a compromise of an additional $300 billion on discretionary spending cuts. On health care you are somewhere between $500 and $750 billion of additional health care cuts. I assumed that we could get to $600 billion, and I got there by increases in the eligibility age for Medicare that I discussed with Senator Kerry when he was talking to me. That is about $100 billion. That would take you from the 500 where the Democrats are to $600 billion, and it happens to come not on the provider side, which I think would kind of balance that out. On other mandatory cuts, you are somewhere between 250 and 400, so I settled on 300 there, and we had enough cuts in our plan to get you to 300 on the other mandatory. Interest will obviously just fall out at approximately $400 billion, the savings there. You agreed actually on CPI in your two plans of approximately $200 billion. The total of that is $1.8 billion. That left me a little short. That gets me to revenue. And on revenue I took the number that the Speaker of the House, I had read had actually agreed to, and I was able to generate $800 billion through revenue from the Speaker’s recommendation, and if you did that without dynamic scoring.

Those figures are of course precisely what the House Republicans offered the White House yesterday. And as we see here, they were arrived at by a plain and charming method that ought to greatly please the old Washington hands who miss the old Washington in which, we are endlessly told, serious men with rosy cheeks and names like “Tip” would confer over adult beverages, tell some old Irish jokes, and split their differences down the middle. Those were the days. Well fine. Yesterday’s offer would seem to be the House Republicans’ way of saying to these arbiters of seriousness: “There you go, down the middle and indiscriminate, now you surely can’t complain.”

Whether it’s wise for one side in a negotiation to make an offer that splits the two sides’ differences down the middle is a question for more experienced negotiators. What strikes me about it is that it’s basically a way to get past this particular showdown and into the next one, which, because it is likely to revolve around the debt ceiling, may be better structured to result in some modest spending reductions or (very modest) entitlement reforms.

Over and over, the two parties basically try to position themselves in ways that will let them get nearer their versions of deficit politics in the next showdown. What result are all “middle ground” agreements that avert immediate catastrophe by setting up further decision points to come. They are not “grand bargain” agreements that set us on a sustainable course toward fiscal sanity. And there is a reason for that: Broadly understood, the two parties’ goals are not exactly about the budget but about the nature of the government we have, and now that we have entered the lean years of the welfare state they are not quite commensurate.

The Democrats want to raise revenue and the Republicans want to reform entitlements. Those goals would seem to be easily reconciled — just do some of each, or even lots of each. But it only seems that way because we don’t often think about why the parties want these things. Simply (and surely somewhat too simply) put, the Democrats want more money so that the entitlement system doesn’t have to be reformed, while the Republicans want to reform the entitlement system so that the government doesn’t have to take more of the country’s money or take up even more of the economy. That means that doing some of each, let alone lots of each, doesn’t give both parties what they want, it gives both parties what they are desperately trying to avoid.

For the Democrats, the policy imperative now is the consolidation and defense of the liberal welfare state, and especially its defense from the consequences of its own fiscal collapse. With Obamacare enacted, they are basically done building. They might dream of expanding the reach of one program or another, expanding the tentacles a bit or consolidating some, but their social-democratic edifice has all its major parts. The trouble is that we can’t afford to keep them all, or at least in the form and structure that the left insists those parts must have. The foundation is falling out from beneath the building just as they have finished construction. That means that liberal political power must now be used to raise money to buy the liberal welfare state more time, and it must be used to hold off efforts to change the structure of the entitlement programs. Liberals understand that if they can’t raise taxes now, with the most liberal president they are likely to get holding a position as strong as he’s likely to have, then they aren’t likely to be able to do it at all, and therefore to save the welfare state from itself. They must get as much as they possibly can in this round, and they must resist significant entitlement reforms, which would make the whole exercise largely pointless.

For the Republicans, the policy imperative is to reform our governing institutions through ideas that use the market economy (rather than fighting it) and therefore allow for major savings and for enabling free and responsible choices while protecting the vulnerable. This would enable us to avert both an explosion of the government’s size and role in American life and an explosion of debt that puts prosperity out of reach in the coming years — and indeed to roll both back. They seek to offer a vision of effective but limited government beyond the welfare state.

The great and important choice between these two options is not going to be made in the next few weeks, of course. It won’t be settled in this particular showdown, or in this particular year. But eventually, albeit gradually, over the course of several election cycles, it is going to need to be settled. And given the fiscal constraints we now face, there isn’t all that much of a middle ground. To chase the accelerating costs of the liberal welfare state with taxes is going to take a different way of thinking about government in America; to transform the welfare state into a series of (relatively) efficient and market friendly 21st-century safety-net institutions is going to take a different way of thinking about government too. Middle-ground solutions can put off the need to decide, but they cannot make it go away. And until we take some meaningful step in one direction or another, we’re going to continue to muddle through showdowns at the edges of cliffs.

The sort of thinking on display in that quote from Erskine Bowles above has its place. Muddling through is a very useful and important art. And it’s important to see that the frustrating showdowns we keep going through are a function of the practice of that art, not of a failure to practice it. But important though it is, its fruits can no longer be grand, and when it comes to our fiscal dilemma it is not going to work forever.

Friedman on Freedom


Good quote by Milton Friedman:

Freedom is a rare and delicate plant. Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom. Even though the men who wield this power initially be of good will and even though they be not corrupted by the power they exercise, the power will both attract and form men of a different stamp.

Review of “Unequal Democracy: The Political Economy of the New Gilded Age”

I gave this book 4 stars, but I would have given it 3 1/2 if that was an option…

This is a well-researched examination of the politics of inequality. Unfortunately it fails to analyze  the economics of inequality, with the result that Bartels’ findings are based on some false premises and misperceptions.

The most serious error is to define and measure economic inequality solely in terms of income, when, in actuality, wealth is causing most of the divergence in incomes through the ownership of financial capital. Take a look at the income graphs: incomes converge during market crashes and recessions and diverge during market booms, so inequality is largely determined by the value of financial assets. Mr. Bartels uses the terms “haves” and “have-nots” extensively, but never stops to answer the obvious question: have what? What they have is capital: financial capital, human capital, and social capital. In this sense, growing inequality is one price of capitalist success. But instead of categorizing people as rich, poor, or middle class according to income data, Bartels should be looking at what determines those incomes and how those factors have changed over the past 30 years.

The rise of what Bartels terms the “New Gilded Age” can be attributed to two main events, a historical trend, and a technological revolution. The two events are Nixon’s repudiation of the gold redemption Bretton Woods dollar standard in 1971 and Paul Volcker’s appointment by Carter to break the back of inflation with tight monetary policy. The historical trend is the continuing globalization of trade and manufacturing that started in the early 1970s, while the technological revolution is that taking place in communications and information. Each of these changes has helped tip the balance of power between capital and labor, with the result that the returns to capital far outstrip returns to labor over the relevant time period. I question whether anyone really wants to accept the trade-offs to reverse this. Those trade-offs might include slower growth, less opportunity, less job creation, shrinking incomes, lower asset prices, higher inflation, dollar devaluation, and probably a declining population. Our emerging trading partners want no part of such trade-offs – they will take capitalist success wherever they can, so that’s the world we find ourselves competing in.

Though Bartels misses these fundamental economic truths about our current state of the world, he does identify the true political danger, which is that all this capital wealth has taken control over the democratic political process. This means the “haves” are now running policy and in so doing are defying economic realities (like market crashes) with policies that perpetuate market crises (like easy Fed policy and bailouts). But it is vitally important that we get our policy analysis correct, because Bartels’ interpretation leads him to conclude that the balance can be reinstated by electing more Democrats to office. Nothing could be more misguided. It doesn’t matter which Republocrats gain office, policies will continue to favor capital. Why? Simply put, because it’s a CAPITALIST system and success is defined in those terms. This has been proven clearly with the Clinton-Bush-Obama consistency in financial policy. Same old, same old.

Unfortunately, Bartels misses all this as he focuses on the politics of inequality and the dysfunctional political system. Let’s take his two main cases that demand explanation: the estate tax repeal and higher minimum wages. The public favors repeal of the estate tax and a minimum wage that keeps pace with wage incomes, but both populist preferences fail. Bartels tries, but really can’t explain why. Could it be that both estate tax repeal and lower minimum wages favor economic growth and capital accumulation? Do the non-wealthy recognize that in this free market system, accumulated capital is everything and thus from their personal perspective it’s wrong for the government to tax inheritances, of anybody? And don’t policies that allow the real value of the minimum wage to decline favor growth objectives by keeping wages low and employment higher or even stable? Aren’t national policies biased to favor higher GDP, lower unemployment, and lower inflation? Bartels identifies how party elites override populist preferences, but both of these preferences would be more readily embraced if the party elites better understood the economic realities of the system they seek to manage. In these cases, Democratic elites (by stopping estate tax repeal) seem more out of step with reality than Republican elites (by stopping minimum wage hikes), though Bartels wrongly assumes the opposite.

The real problem with our current politics is not taxes, misinformation, or voter ignorance. It’s that neither party is identifying the true causes of our democratic malaise and proposing solutions. Liberal elites tout redistribution through taxing and spending, but Western democracies adopting this strategy are in dire financial straits. This will not change, because political redistribution is counter-intuitive in a market economy where success in measured in profits and labor is a cost. The world has now largely accepted how markets create wealth, so there’s no going back (Marxist socialism is dead). On the other hand, conservatives tout market outcomes, but fail to account for how the accepted rules of the game tilt the outcomes in favor of the already successful, to the detriment of those struggling to become successful. Neither party is proposing to change their stripes. And why should they? Elites benefit to no end by perpetuating the status quo that favors their elite status. Liberals are saying to voters, “You NEED US to survive,” while conservatives are saying, “Just let us all enjoy our riches and someday you will too.” Is it any wonder why we have voter revolts?

The key to breaking out of this degenerative cycle is to open up the capitalist production process through the broad ownership of capital. This is not redistribution: ALL capital is earned through successful risk-taking, so every citizen of a free society must participate in successful risk-taking in order to share in the returns. (This is preferred practice in technology companies and why wealth is widely dispersed by Apple, Google and Microsoft.) On the portfolio side, we have extensive markets for managing risk, which enables us to take on prudent risks in hope of gaining higher returns. There is no magic here, but this is the only way to manage globalized world markets where capital is mobile and labor is not – where profits accumulate as capital and labor costs are minimized. Education is important to the extent that it creates opportunity to build human capital, which is also put at risk to earn a positive return.

The democratic political system will thrive when we empower the have-nots by promoting policies that guarantee their economic independence through participation in capitalism. The liberal stance favoring redistribution cannot succeed because it presupposes the have-nots’ perpetual dependence on political largesse. We already know that politics will favor the policies that yield economic success and wealth creation above all else. Thus, the promise of capitalism and freedom is not to be found in labor, union or otherwise; it’s to be found in widespread, accumulated capital. We need political leaders and scholars like Bartels to rise up and bring this message to the masses. It hasn’t happened yet and I’m not holding my breath.