Monday, May 17, 2010


Ross Douthat has a very interesting essay today about the ever-increasing degree of central control in our economy. Problems that seem to have been caused, at least in part, by the consolidation of power are solved by further consolidation:
From Washington to Athens, the economic crisis is producing consolidation rather than revolution, the entrenchment of authority rather than its diffusion, and the concentration of power in the hands of the same elite that presided over the disasters in the first place.

Consider the European situation. For a week after Greece’s fiscal meltdown began, all the talk was about the weakness of the European Union, the folly of its too-rapid expansion, and the failure of the Continent’s governing class to anticipate the crisis.

But then the E.U. acted, bailing out Greece to the tune of nearly a trillion dollars, and dictating economic terms to Athens that resemble “the kind of thing a surrendering field marshal signs in a railway car in the forest at the end of a bloody war,” in the words of the Washington Post columnist Anne Applebaum. If the bailout succeeds, the E.U.’s authority over its member states will be dramatically enhanced — and a crisis created by hasty, elite-driven integration will have led, inexorably, to further integration and a more powerful elite.

The latest Wall Street crisis was created by the intersection of the US housing market, long subsidized by the government, and a handful of merchant banks that had grown so big and so interconnected that the failure of any one might wreck the economy. The solution? Give more power to government officials who in most cases are the same people who ran the banks when they massively overextended themselves:

This is the perverse logic of meritocracy. Once a system grows sufficiently complex, it doesn’t matter how badly our best and brightest foul things up. Every crisis increases their authority, because they seem to be the only ones who understand the system well enough to fix it.
The massive size of our key institutions bothers a lot of people, from Tea Party conservatives to eco-leftists who long to live "off the grid."

But what is the alternative? I think about these matters all the time, and I could explain much better than the average Tea Partier how the system of globalized finance, crony capitalism, and big government acts to shore up elite interests. Unlike them, I can see that their "solutions" -- tax cuts, term limits, reducing regulation -- would only make our problems worse. Congressmen with no experienced are not more independent of the system; on the contrary, they lack the knowledge to stand up to bureaucrats and lobbyists. Cutting taxes only makes the rich richer, while simultaneously increasing government borrowing, which makes merchant bankers richer and more powerful still. Reducing regulation mostly helps those companies big and rich enough to seize the opportunities presented.

As our technology grows more sophisticated, as the economy gets steadily more global, the power of giant international companies and equally giant banks grows ever greater. When the internet was new, some people thought it would lead to a more decentralized economy, but obviously this hasn't happened. True, thousands of small businesses thrive by selling on Ebay and writing apps for iPhones, but they work on terms dictated by the giant firms that dominate those sectors of the economy. If a serious rival emerges from the horde of small fry, one of the big companies simply buys it; Apple, Microsoft and Google all keep tens of billions of dollars in cash on hand for just this purpose. And if we don't want to be the serfs of giant companies and banks, we need a government big and powerful enough to stand up to them. This was part of the logic of the European Union. European countries were simply not big enough markets to be able to influence the international economy on their own, so rather than sit back and accept standards for things like property rights law or cell phone signaling set in the US, Japan, or China, they banded together to get a voice.

What can we do?
  • Insist, every chance we get, that our governments use their power on behalf of ordinary people rather than on behalf of big corporations or themselves. It is up to us to make our representatives really represent us, and vote out the ones who side with big companies or entrenched bureaucratic interests.
  • Solve problems ourselves. Government regulations are passed in response to problems, many of which are created by our own foolishness. The more energy we use, the more we need regulations to control how it is produced and distributed. The more lawsuits we file, the bigger the court system has to be. The more control we demand over what our neighbors do, the more regulations there will be. The louder we yell for the government to do everything for us, the bigger it gets.
  • Vote with your wallet. If you like locally owned businesses, patronize them; if you like organic food, buy it.
  • And if all else fails, enjoy the modern world for the wonders it offers instead of obsessing about how much richer somebody else is than you.


Anonymous said...

"Insist, every chance we get, that our governments use their power on behalf of ordinary people rather than on behalf of big corporations or themselves."

Part of what causes big government, of course, is that "ordinary people" often don't like what other "ordinary people" do, and often with good reason. And if the one group of ordinary people tries to solve what the other group is doing, you get riots, feuds, and factionalism.

And I confess I like a lot of what big institutions do for me. I love it that, for my physical security, I can call a group of people who will help me because it's their job. I don't have to have met them and befriended them, I don't have to give them presents and show them "respect." I also love it that, most anywhere in the country, if I can find an establishment with certain recognized symbols (golden arches, etc.), I can expect to go in there and acquire food with relative courtesy, even though the people there won't know me. If you've ever tried to get food in a French village, you know how different the situation can be.

Hyperlocal, patronage-based traditional societies are fun to read and think about. But I wouldn't want to live in one.

John said...

Nor I. But I think there is a danger that enormous institutions could grow (have grown) completely indifferent to what people want, and we need to use the levers we have to prevent that.