22 May 2012

Austerity and other forms of creative destruction

In the New York Times, the daily bible of centrism, Thomas Friedman envisions an era of austerity:

[W]e’re leaving an era of some 50 years’ duration in which to be a president, a governor, a mayor or a college president was, on balance, to give things away to people; and we’re entering an era — no one knows for how long — in which to be a president, a governor, a mayor or a college president will be, on balance, to take things away from people. 

Friedman goes on to argue that "we dare not cut without a plan," on the understanding that any plan must preserve, not cut, education, research and development. " I can lose weight quickly if I cut off both arms," he analogizes, "but it will surely reduce my job prospects" That's a nice sentiment, but by now Friedman takes the necessity of austerity so completely for granted that he need not explain in this particular column why the era of taking away is upon us. But as European politics proves, the austerity imperative isn't taken for granted universally. It has not been forgotten that many people have regarded the modern western-civ welfare state as unsustainable if not immoral for generations. The possibility has not been ruled out that arguments about sustainability only cover ideological hostility toward the welfare-regulatory state and provide the excuse, exacerbated by tax cutting in some places, for "starving the beast." The question pundits like Friedman can't ignore is whether austerity is forced on nations because they objectively can't sustain civilized social programs or because powerful people simply no longer want to pay for those programs.

After reading David Brooks's defense of Bain Capital and venture capital in general in the same newspaper it struck me that austerity in politics is no more than capitalists' beloved "creative destruction" in the public sphere.  Interestingly for thinkers perceived as rugged individualists, apologists for creative destruction usually justify it on the assumption that the needs of the many outweigh the needs of the few or the one. Giving private equity credit for needed reforms in American corporate practice, Brooks admits that "The process was brutal and involved streamlining and layoffs," but adds that "at the end of it, American businesses emerged leaner, quicker and more efficient." He argues that in spite (or because) of "a great deal of churn and creative destruction," the reign of private equity "does not, on net, lead to fewer jobs." Jobs may be lost in "old operations," but new jobs appear in "new, promising operations." Well and good, but unless the person whose "old operations" job is lost gets the new "promising" job, the process is brutal indeed. As Friedman notes, there are lots of job openings posted at a time of high unemployment, but many unemployed Americans lack the skill sets necessary for those jobs. While Friedman's ideal austerity program would maintain if not increase funding to train people in new skills, he's not exactly confident in politicians' commitment to that goal. What seems more likely is that hardcore austerity advocates see the people in general the way private equity regards troubled companies in Brooks's account -- as entities they'll try to "force ... to get better." Brooks explicitly looks forward to "continu[ing] this process of rigorous creative destruction" by "tak[ing] the transformation of the private sector and extend[ing] it to the public sector." Something may get lost in translation here. In the private sector, ideally, you might make services more efficient, but the idea isn't actually to reduce services. In the public sector, as Republicans have made clear, it may be a different story. Creative destruction in the private sector doesn't mean telling consumers to make do with less; in the public sector, forcing consumers to make do with less (i.e. "get better") is the actual animating idea of creative destruction in the name of austerity. What, then, is the public-sector equivalent of a layoff?

Someone like Brooks might argue that you can't expect the economy to operate without ever laying anyone off, and it's objectively unrealistic to expect that government can prevent economic adversity. It's easy to argue that people ought to be able to cope with adversity, or that adversity is a test of character that each of us will pass or fail on individual merit. Expect a lot of rhetoric about how our ancestors coped with tougher circumstances and how weak or spoiled are those who complain today. But there are two extremes to avoid when considering how people in society deal with adversity. One extreme is the paranoid assumption that all adversity is the product of some malignant will, a hostile conspiracy to degrade or destroy those outside the clique of the powerful. The other extreme is the complacency some people seem to insist upon that never questions the causes of adversity and simply deals with crises as they come. Between paranoia and complacency comes critical intelligence and the understanding that society is not nature, that austerity is not synonymous with adversity, that sometimes when shit happens it is somebody's fault -- and occasionally somebody's plan. Governments should neither promise immunity from adversity nor simply tell people to deal with it without asking questions anytime it comes. Governments are entitled to ask sacrifices from citizens, and there are times when governments might reasonably ask people to make do with less. But politics still determines who does the asking and the sacrificing to some extent, depending on the adversity. There's an alternative to Friedman's bleak scenario of administrators taking things away from people. It could be argued, after all, that all the things people were given over the last fifty years, from the Treaty of Detroit to the Great Society and beyond, were ephemeral substitutes for the one thing they should have had and can still have: power.   


Anonymous said...

So the common man will have to expect less government services and probably higher taxes. What will the upper echelons of the economic strata be sacrificing for the good of the nation? Will the politicians have to take a pay cut and less benefits? Will the wealthy be expected to pay higher taxes?

It seems it is always the working class who has to sacrifice for the "national interest", but never those at the top. And when this is pointed out, they start whining about "socialism" and "re-distribution" as if their wealth magically appeared in the first place.

To paraphrase a famous movie villain: "This planet needs an enema."

Samuel Wilson said...

The logic, to use that term loosely, is that "handouts" are draining the nation's treasury and that the rich don't need to sacrifice because they're not the ones getting handouts. The additional presumption is that Americans can do without those handouts if they try hard enough, so no sacrifice is required of anyone to keep the handouts going. As you note, to think this way requires people to ignore how things have been handed out to them, since they see only government redistribution as "handouts," and whether they've received more than they've given back to society. I'm sure such people will say they've given back much more if challenged, but it depends on how and what you calculate.

Anonymous said...

Handouts? As in the government handing out lower tax rates? As in the government handing out corporate welfare? The first thing the government should be cutting is all contracts with the private sector. Quit paying out billions of dollars/year to keep corporations tax-free and use that money to create jobs directly.

TiradeFaction said...

"Friedman goes on to argue that "we dare not cut without a plan," on the understanding that any plan must preserve, not cut, education, research and development. " I can lose weight quickly if I cut off both arms," he analogizes, "but it will surely reduce my job prospects"

Does this dude (Friedman, not "Samuel Wilson") seriously believe that such an approach will be taken just because *he* says so? If that's the case, what a seriously deluded ass. Just look at how much state governments are gutting their (formally) affordable higher education systems to "balance" their budgets, and we'll see "austerity" includes the things Friedman thinks are vital to our future as well.

Samuel Wilson said...

Crhymethinc: Lower tax rates aren't seen as a "handout" because the other side sees taxation itself as a handout the government coerces from people. Meanwhile, instead of creating a competing state-run industrial or service base you may as well confiscate and nationalize to avoid waste, but I can understand if that seems unlikely in the current political climate.

TF, Friedman's comments are a complaint rather than a demand. He know well that the GOP isn't going to do it right, while his conviction that Democrats won't do it enough leads him to wish for a third party. As far as I can tell he doesn't expect to give orders, but hoped that the people would give the orders using the "radical center" third party as their megaphone. But it should be obvious by now that most people who aren't Republicans or libertarians aren't interested in austerity in any form. That leaves Friedman with no constituency for his wise cuts except for think-tankers and talking heads like himself.

TiradeFaction said...

His "complaints" to me smack dab of a classic "I want my cake and eat it too" syndrome. He's got little grasp of reality if he thinks voters worldwide are giving their consent to "austerity". Then again, he's a self styled Technocrat, so the voters wishes be damned eh?

Samuel Wilson said...

Yeah, Friedman's the guy who thought Michael Bloomberg could sell the public on it all by getting into the presidential debates. He's right that there's a destructively intractable deadlock between the major parties, but that doesn't make "a plague on both your houses" an effective solution.