“Disruption” Imperils the U.S. at Home and Abroad

Many of us have watched in horror during the past week as the current U.S. administration has attempted to bully our allies on trade. The drama culminated in the U.S. executive repudiating the G7 communiqué issued on June 9 with a contrived attack on the Canadian Prime Minister.

The confrontation and bravado is for domestic political show. The approach makes no sense as foreign economic policy, only as domestic political mobilization. For the first time in memory, the United States has a “President of his base” rather than a President of the United States.

The disruption to valued domestic institutions and critical international relationships appears to be considerably effective with “the base.” As numerous media accounts suggest, supporters of the administration approve of disruption because the current occupant of the White House “is not a normal politician” and “says what he believes.” The substance of behavior, no matter how offensive, misguided and destructive, does not matter.

While supporters of the administration in the farming sector express reservations about the aggressive use of tariffs, recent accounts of voters in politically decisive districts reveal that some advocates of disruption believe the tariffs and threats of more to come are “necessary” to protect America.

But protect the United States from what, exactly?

Let’s start with the U.S. trade deficit. It is, in fact, enormous, typically running in the range of $50 billion per month. Ironically, though, trade deficits have fallen in recent months, largely due to an acceleration of U.S. exports in a growing global economy.

Global economic growth –- best nurtured through stability rather than disruption — is one of the surest ways to trim the trade deficit.

Trade deficits with individual countries – bilateral deficits – do not tell us a great deal, and a bilateral deficit with a country is certainly not a “loss.”

The U.S. ran a $318 million trade deficit with Bolivia in 2016. Are we “losing” to Bolivia, a country with a GDP per capita of $3100, about 1/19th that of the U.S.? U.S. producers import from Bolivia precious metals, gems and mineral ores, obviously inputs to higher value added production that enriches U.S. companies that import these goods.

Overall, the U.S. consistently runs a trade deficit precisely because the dollar is the world’s reserve currency. The dollar is the most widely used currency for transactions around the globe, and it is the currency most widely held in reserves of central banks around the world, comprising something like 63% of all global reserves.

This means demand for the dollar remains high, bolstering its “price” – i.e., the value of the dollar. Put differently, the value of the dollar is higher than it would be were the dollar not the global reserve currency. The consequence is that U.S. goods are more costly on global markets than they would otherwise be; the flip side of this is that imported goods are cheaper in the U.S. than they would be were the dollar not the principal global reserve currency.

Americans maintain a higher standard of living because of the global role of the dollar.

Were the dollar to decline as a global reserve currency, its value would fall relative to other major currencies. The U.S. trade deficit would as a consequence diminish.

Would we be better off?

Well, to begin with, with less demand for dollars, the U.S. would have to pay higher rates of interest to induce investors to purchase U.S. government debt. With the rising deficits ahead due to the slashing of corporate taxes in December 2017, a considerably larger share of U.S. spending would have to be directed toward paying interest on our debt.

Additionally, our standard of living would be lower due to the higher cost of imported goods.

Perhaps, then, it does not make much sense to focus so exclusively on the size of the trade deficit?

What about our G-7 allies? Supporters of the current administration point to high EU tariffs on U.S. products; the 10% tariff on U.S. autos gets a lot of attention, since the U.S. imposes a tariff of only 2.5% on auto imports from Europe. There are Canadian tariffs on U.S. milk, without which Canadian dairy farmers would be swept aside by a river of U.S. milk.

Nonetheless, Canada imports a much larger share of its total dairy product consumption than does the U.S. (which restricts imports), and the U.S. runs a large overall surplus in dairy trade with Canada.

Canada is also, by far, the leading market for U.S. exports; last year U.S. businesses sold $341 billion of goods and services to Canada.

Canada is also the second-largest source of foreign direct investment in the U.S.

At least three additional points are worth noting in response to claims that tariffs are necessary to protect the country. First, according to World Bank calculations based on U.N. Conference on Trade and Development data, the average level of tariffs between the U.S. and our European allies on traded goods is less than 2% on each side, among the lowest in the world among major economies (with the exception of Canada, which has an average applied tariff rate of about 0.8%).

Collectively, the G-7 countries purchase approximately 1/3 of all U.S. goods and services.

Second, while there are some goods for which European tariffs on U.S. goods are higher than U.S. tariffs on European goods, there are also many products for which the reverse is true.

Finally, while the U.S. runs a large trade deficit with its European Union partners, those partners in turn send a vast flow of investment into the U.S. EU investments in the U.S. total more than $2.7 trillion; U.S. firms hold about $2.3 trillion in investments in the EU. EU investment in the U.S. is eight times the size of EU investments in China and India combined.

The six countries of the G-7 just shunned by the current occupant of the White House account for a larger share of foreign direct investment in the U.S. than the rest of the world combined. Furthermore, these investments contribute enormously to U.S. exports.

Perhaps a policy of disrupting this relationship is not in the interest of the U.S.?

If the administration were genuinely interested in lowering trade barriers rather than engaging in a brawl over trade, diplomacy and steady negotiation would make sense. This could include resuming talks on a Transatlantic Trade and Investment Partnership, a focus of negotiations from 2013 to 2016.

As conveyed by the U.S. Trade Representative during the negotiations, “The Transatlantic Trade and Investment Partnership (T-TIP) is an ambitious, comprehensive, and high-standard trade and investment agreement being negotiated between the United States and the European Union (EU). T-TIP will help unlock opportunity for American families, workers, businesses, farmers and ranchers through increased access to European markets for Made-in-America goods and services.”

But the current administration abandoned TTIP upon entering office.

Careful diplomacy is inconsistent with a policy of bluster and “disruption” designed to appeal to the 40% or so who think the current administration is doing a superb job of putting “America first.”

Support for disruption is especially frightening because disruption drains policy of content. For supporters, it doesn’t matter what the current administration does, only that it is done loudly, that it trample on existing norms and structures, and that it be done in the name of “America first.”

But make no mistake, there are costs. Last week I wrote about the cost to domestic institutions, rule of law and democracy.

There are also costs of disruption to politically and economically important international relationships that can prove especially valuable for coordinating responses to international turmoil or crises.

Disrupting these relationships may just hasten the decline of American economic dominance and the role of the dollar — reducing the trade deficit, and our standard of living – after all.

 

Perspectives on American Democracy: Why We Should Worry

This past week the U.S. found itself isolated and received a stinging rebuke from our closest economic allies for unilaterally imposing tariffs on the insultingly flimsy grounds that the measure was necessary for U.S. national security.

The collective perspective of these otherwise friendly countries is a useful mirror that should (but likely will not) stir introspection regarding U.S. trade policies.

We can take a similar approach to assessing the state of democracy in the U.S. What do objective indicators, as well as views from the media in allied countries, tell us about our democratic trajectory?

Let’s start with objective indicators.

Freedom House is a highly respected and independent organization that works to promote democracy and to defend human rights, and which has been in existence for more than 75 years. Freedom House produces an annual report on Freedom in the World.

The 2018 report, assessing freedom for 195 countries on a carefully-crafted 100-point scale measuring the status of political rights and civil liberties in the previous year, downgrades the score for the U.S. from 89 in 2016 to 86 in 2017. The score was 92 as recently as 2014, and the 3-point decline from 2016 to 2017 is alarmingly steep.

FitW9_820px_United_States_Trajectory-cropped.pngAs the report indicates, “The past year brought further, faster erosion of America’s own democratic standards than at any other time in memory, damaging its international credibility as a champion of good governance and human rights.”

With any further slippage in 2018, the US will be as close in its freedom score to the highest ranking “partly free” country, Albania, as to the highest ranking “free” countries, Finland, Norway and Sweden.

To put this in perspective, while remaining in the “free” category, the U.S. now ranks markedly lower than countries at a similarly high level of economic development and comes closest in overall score to poorer former communist regimes that are now inside the European Union (though ranking lower than some of these countries, such as the Czech Republic and Slovakia).

COUNTRY/COUNTRIES

Freedom Score

Finland, Norway, Sweden

100

Canada

99

Australia

98

Germany, UK, Spain, Estonia

94

Czech Republic, Slovenia

93

France

90

Italy, Slovakia

89

Croatia, US

86

Poland

85

Romania

84

The largest decline in the score for democracy in the U.S. was in the realm of political rights, which includes ratings for the electoral process, the functioning of government, and political pluralism and participation. There were downgrades in the first two of these categories. Lower scores in the “functioning of government” category followed from these questions: Are safeguards against official corruption strong and effective? Does the government operate with openness and transparency? 

The report asserts of the U.S.: “in 2017 its core institutions were attacked by an administration that rejects established norms of ethical conduct across many fields of activity.”

The assessment continues: “The president’s behavior stems in part from a frustration with the country’s democratic checks and balances, including the independent courts, a coequal legislative branch, the free press, and an active civil society. These institutions remained fairly resilient in 2017, but the administration’s statements and actions could ultimately leave them weakened, with serious consequences for the health of U.S. democracy and America’s role in the world.”

Moving outside the U.S. to perspectives from friendly foreign territories, the Economist Intelligence Unit in its annual ranking of countries on democratic values recorded its second consecutive year of the United States falling below the threshold for a fully democratic society.

Scoring 7.98 out of 10, the United States ranks 21st globally – below 20 “fully democratic” societies — and is now categorized as a “flawed democracy.”

In the fall of 2015, German President Johannes Gauck, expressing admiration for American democracy on a visit to the Liberty Bell and Independence Hall in Philadelphia coinciding with 25 years of German unification, labelled these “holy sites of democracy.”

Two years later, the prominent journalist Jakob Augstein asked in the German news weekly Der Spiegel, “When will (American democracy) reach the point of no return?” (Wann ist der Punkt ohne Wiederkehr erreicht?)

Just yesterday, the British newspaper The Guardian featured an account of the erosion of democratic norms in the U.S.

The article focuses on the onslaught of attacks on institutions and rule of law. The piece quotes an American legal scholar, Eric Posner, who warns: “when you look at other countries that have slid into authoritarianism, what has happened is that the leaders of those countries have proceeded incrementally   . . . And you could slide into an authoritarian regime without a real crisis ever taking place, and I think that’s what people should be focusing on.”

Posner’s assessment echoes that of American political scientists Steven Levitsky and Daniel Ziblatt, who in their recent book, How Democracies Die, establish that while democracies have in the past fallen to violent overthrow, democracies also have and can be undermined by elected leaders. The current incumbent of the White House has launched a dangerous assault on the “referees” of democracy, resembling actions of past authoritarians that have at first imperceptibly and then more visibly undermined other democratic regimes.

Those in the “America First” camp may wish to dismiss – and may even disdain – views of foreigners and foreign press, no matter how favorably inclined toward the U.S. these sources may be more generally.

But just as dismissing allied views of U.S. trade policy without deep introspection is a mistake, disregarding the growing swell of indicators and voices warning of democratic erosion misses the point. These observations tell us that American democracy has eroded.

Objective indicators show us that attitudes toward governing institutions already became negative in the U.S. prior to this administration, with citizens considering government overbearing, wasteful, intrusive and ineffective. This leaves the American electorate and political system vulnerable to a campaign portraying government as actively working to undermine policies of an elected government, as I wrote about last week: https://mitchellpsmith.com/2018/05/27/progressives-the-right-and-the-dangerous-purge-of-the-deep-state/

This move is the stuff of authoritarianism.

A process of democratic erosion is underway in the United States. How far will it go, and when do we reach a point where the damage is irreversible?

Please follow the blog and associated news on my new Twitter account: @mpsmithblog: https://twitter.com/search?src=typd&q=%40mpsmithblog&lang=en

 

 

 

Progressives, the Right and the Dangerous Purge of “the Deep State”

While out walking my dog yesterday I had a revealing political exchange with a neighbor.

The conversation began with a polite discussion of the neighborhood; the neighbor generously volunteers to keep up maintenance in the community to save the homeowner’s association money on repairs. As we discussed various concerns about the neighborhood people had brought to his attention, his reference to “the liberals” came up; I self-identified as such. That’s when things got interesting.

In response to my confession, the first thing my neighbor asked was how much I knew about Stalin and the number of deaths for which he bore responsibility. Taken aback, I probed the source of the question. Knowledge about Stalin was his litmus test for liberals – and evidence of their denial of atrocities on the political left.

University students, apparently, are kept from knowledge of the horrors of Stalinism by professors who sweep this history under the rug as a means of sanitizing the political left.  I responded that this was not only entirely untrue, but that his association of progressives with Stalinism was severely misguided.

I chose not to take the discussion in this direction, but the obvious irony is that the political right is at this moment engaged in a campaign to “purge” the “deep state” in our federal government – a project with clear Stalinist overtones.

What is this project about?  What are its objectives and its consequences?

The New Yorker recently published an insightful account of the shameful “deep state” campaign.

The project amounts to a decision to go after civil servants who were important to developing Obama-era policies that the new administration finds objectionable. The New Yorker focuses on a loyal, talented young woman who was targeted due to her value in negotiating the nuclear deal with Iran and extracting the best possible terms for the U.S.

Of course, the record of the federal civil service is one of faithfully executing policies of successive administrations regardless of their politics. There can be obstruction and foot-dragging, but civil servants also are bound by a code of ethics that illuminates by contrast the disgraceful behavior of the current cabinet oligarchy.

The New Yorker points out how the Nixon administration systematically sought to marginalize civil servants it saw as a threat to that lawless administration’s political control.

The infamous “Malek Manual” was the guiding document for that project. This was an 80-page memo associated with a business executive brought into the Nixon Administration as a loyalist to1526960943.jpeg be assigned to political tasks in various agencies.

The manual establishes a system for classifying civil servants on a K, O, L, or N basis — for “Keep,” “Out,” “Let’s Watch,” and “Neuter.” The very project is reflective of an administration with no more regard for the rule of law than the current administration.

The manual rehearses in detail civil service rules of appointment and laments the difficulty of removal and adverse action against civil servants.

The objective is to identify means to circumvent these rules.

As the manual states on p. 72: “there are several techniques which can be designed, carefully, to skirt around the adverse action proceedings.” These include the “frontal assault” involving a frank announcement that the individual “is no longer wanted” and can leave either under favorable conditions immediately or be forced out under humiliating conditions later on.

“There should be no witnesses in the room” for the frontal assault.

Then there is the “special assistant technique” of assigning a “family man” who does not want to travel to duties involving extensive travel in order to force a resignation. The report actually contains this passage: “Until his wife threatens him with divorce unless he quits, you have him out of town and out of the way.”

But even this odious document refers in its conclusion to political costs that will ensue: “There is no question that the effective activities of a political personnel office will invoke a one-shot furor in the hostile press and Congress.” The costs would nonetheless be worth the benefits because of the necessity of establishing “political control.”

That political control, the document arrogantly concludes, “is the difference between ruling and reigning.”

Still, the document was to be kept confidential and there could be no links to the president.

What differs now is the brazenness of the purge and the very public way in which the process is portrayed as a virtuous assault on forces seeking to undermine a legitimately elected political authority.

In fact, while the Nixon era politicization of the civil service relied on secrecy, the “deep state” purge depends on its public nature.

In short, the current occupant of the Oval Office is attempting to turn the world inside out by weaving a story of victimization at the hands of federal institutions – from the intelligence agencies to the Justice Department to the Obama loyalists seeded throughout the federal bureaucracy.

This narrative has gained momentum on Fox and other right-wing media, and has reverberated on the official English-language Russian news station, RT.

If American citizens like my neighbor buy into the “deep state” purge, American democracy is on very treacherous ground indeed. As reported recently by the Washington Post, that is precisely what is happening as increasing numbers of Republicans (now a substantial majority) express opposition to the Mueller probe.

The objective, of course, is to undermine the legitimacy of Mueller’s findings in advance so that it will be possible to continue to wage political war on the findings as a buttress to the legal assault, which may well fail.

But democracy can not function without effective institutions whose legitimacy is widely embraced by citizens. The American political system will bear the costs of this institutional wreckage for years to come.

 

 

 

 

 

Subordinating the Public Good to Private Profit: The Abuses of the Department of Education Under DeVos

It is one of the many ironies of contemporary American politics: On the one hand, portions of the Republican Party attack the nation’s leading public institutions of higher education. On the other, the federal government withdraws scrutiny from for-profit colleges, some of which do nothing more than exploit vulnerable populations of students.

Like so much Republican Party propaganda, the campaign against American universities, which have contributed enormously and in multiple ways to U.S. global leadership in the decades since World War II, has been effective. The consequences have been popular discourses ranging from the insistence that universities smother free speech to the more fundamental claim that college may just not be “worth it.”

One consequence of this assault on not-for-profit higher education institutions is to make for-profit colleges look less unattractive in comparison – a development in synch with the current administration’s elevation of activities that generate private profit over investments in the public good.

The Department of Education under Betsy DeVos has embarked on a systematic deconstruction of efforts to investigate and punish fraudulent activity at for-profit colleges. Why, in a capitalist economy, would we wish to encourage and abet fraud?

Last week it became public that DeVos has appointed as the head of one of the Department’s teams that had been investigating fraudulent activity at for-profit institutions a Dean from one of the largest colleges formerly under scrutiny.

De Vos has appointed other officials from for-profit institutions to senior positions in the Department of Education – displaying the blatant disdain for rule of law and the public good repeatedly demonstrated by this administration.

This week, the New York Times reported on the frustrations of New Jersey’s Attorney General as the Department of Education withdraws its cooperation on efforts to punish fraudulent activities exploiting students at for-profit colleges in that state.

The scope of federal support for for-profit colleges is not new, and has been a problem in our system of higher education for years. In 2010, a Government Accountability Office (GAO) report documented the explosion in enrollment at for-profit colleges, which were the beneficiaries of $4 billion in Pell Grants and $20 billion in federal loans provided by the Department of Education in 2009.

In 2008-9, for profit institutions received 23% of the $105 billion total in federal grant and loan funding to higher education. Furthermore, for-profit colleges garner a large share of their funding from the federal government; in 2014-15, 30% of 1838 for-profit institutions received more than 80% of their funds from federal financial aid.

These institutions do enroll a disproportionate share of financially needy students; nonetheless, a model in which institutional existence is based on pulling in students and their federal loan money should at the very least face tough public scrutiny to ensure students are well-served. In the event they are not, the model comprises a grossly ironic federal subsidization of the for-profit system.For-Profit-College-List-4.png

The GAO report focused on 15 for-profit institutions, identifying fraudulent activities at 4 of these, and deceptive practices (including misleading information about graduation rates, accreditation, program costs and earnings potential) at all 15. While there are undoubtedly some honest for-profit institutions, the GAO report establishes that deception is the prevailing business model.

The Obama Administration drafted regulations to address these issues, citing the high debt to earnings ratio of student borrowers at for-profits as well as their high loan default rate – 11.9%, nearly double the 6.2% rate at public colleges.

Federal regulations drafted in 2010-11 established debt to earnings limits, adjusted based on program-completion and job placement rates.

According to the Sunlight Foundation, when the Obama Administration began pursuing regulations to address the high level of student loan defaults at for-profit colleges, the industry responded by tripling its funds spent on lobbying to more than $7.5 million. Lobbying activity intensified in 2011, focused on contact with officials in the then-Democratic administration. Reporting from the time refers to the industry’s “aggressive efforts, even by Washington standards.” As a Penn State education professor who studied the process concluded, “the industry did largely what it set out to do.”  “The Department of Education,” he added, “really bent to the lobbying push.”

With the new administration, subordination of the public good to private profit, and the misallocation of federal resources, have become far more egregious.

In recent weeks I’ve written about the evisceration of the Consumer Financial Protection Bureau; policy making there, at the Department of Education, the Environmental Protection Agency, etc. reveal a very clear pattern: industry personnel are being ushered into the federal government not for their business expertise, but so that they may systematically restructure federal regulation in the service of private profit and at the expense of American citizens.

Other than those who are profiting from predatory financial and marketing practices, which Americans are served by these policies?

No citizen, regardless of political inclination, has an interest in supporting this massive fleecing of the American people and the resources of the federal government at the hands of a colossally corrupt administration. The damage is spreading; Americans of all political persuasions should be alarmed.

Why Democracy Will Not Save Us From the Globalization Divide

Those of us interested in trying to understand the deep political divide that has emerged in the U.S., the UK and other capitalist democracies trace the gulf to citizens’ starkly contrasting experiences of globalization.

The prescient and prolific Harvard political economist Dani Rodrik suggests we’ve entered an era of hyperglobalization, in which globalization has become an end in itself that drives policy choices and constraints rather than serving as a means to prosperity.

Rodrik argues that negotiation of international trade agreements has been captured by lobbyists, with gains accruing narrowly to powerful transnational businesses such as financial institutions and pharmaceutical companies.

As a consequence, he points out, we are witnessing an “insurrection against business and political elites” by workers bypassed by the gains of globalization.

In his work, Rodrik considers two ways of reining in hyperglobalization: intensified global economic governance or greater reliance on domestic economic control.

Rodrik makes the case for the latter. His argument rests on two premises: any effort to derive global standards would encroach on and deny the norms and preferences of varying societies; and inclusion, transparency and accountability of policy making do not operate effectively at a global level. The excesses of globalization are very real, and must be balanced by greater national autonomy if we are to avoid still deepener societal fissures and to begin healing the enormous societal divide between those thriving in a globalized world and those who are struggling.

Fair points.

But there’s a problem. The argument for enhanced national autonomy implicitly assumes that democratic accountability functions well at a national level. Is this true? Is this so in the contemporary U.S.? Is it true in a UK mired in a divisive and debilitating process of exiting the European Union?

Can we assume that the policies pursued by the U.S. government are any more the “will” of the American people than international trade or other agreements reached between negotiators in closed processes?

British exit from the European Union was indeed the result of a popular referendum. But the ill-advised referendum itself was a result of political maneuvering by governing elites who sought to avoid the costs of political leadership. (Put differently, it makes a great deal of democratic sense to hold a referendum on whether to build a new water treatment plant across town. Does it make equal sense to hand over to the public a decision on something with such far-reaching, multifarious and irreversible consequences for the national welfare as membership in the European Union? No. Doing so was, therefore, a gross abdication of political leadership.)

Is domestic policy making any more accountable and any less subject to control by powerful and wealthy elites than the international agreements about which Rodrik so insightfully voices skepticism? Did the American people demand steel and aluminum tariffs? Have we asked the administration to gut the Consumer Financial Protection Bureau?

Did the public clamor for the U.S. federal government to abandon the Obama-era Clean Power Plan and to withdraw from a Paris Climate Agreement based on voluntary national contributions?  Did advocates of ordinary taxpayers have more than marginal input into the recent tax bill?

More directly to the point, do ANY of these policies serve the interests of those who have been left out of the gains from globalization? Or, in contrast, are these policies simply political tools to reward and retain rich and powerful political supporters, while simultaneously mobilizing a political “base”?

Sadly, we cannot – at least at present — rely on domestic democratic accountability to ensure the “sane” globalization Rodrik justifiably calls for. Rodrik is an astute student of economic incentives. At present, political incentives encourage exploitation and exacerbation of societal divisions. These divisions carve a path to political power.

No doubt, the dynamics of globalization deepen the economic and social divide. But our political leadership is dedicated to exploiting this divide, not to healing it.

Without democratic renewal, domestic politics will remain part of the problem.

The Great Perceptual Rift

As the perversions of contemporary governance in the United States accumulate, the perceptual divide in society deepens.

We witness daily the lies of the current administration and levels of corruption that we have not seen for many decades. As this takes place, one portion of American society recoils in disgust, lamenting assaults on the rule of law, separation of powers and fundamental human decency and the failure of those with institutional levers of power to use them to achieve accountability.

Meanwhile, another group of American citizens grows increasingly angry with what they perceive to be a coordinated effort to delegitimize an administration that simply refuses to adhere to conventional norms imposed by elites, and takes delight in this refusal.

This dynamic is not unique to the United States. In the UK, evidence mounts that Britain’s exit from the European Union will be economically damaging, that the British government is faring poorly in negotiations over the terms of exit and that the promises of the loudest champions of a British exit were entirely hollow.

Yet the roughly even divide in British society about the desirability of leaving the European Union persists.

So how do we explain these great rifts in the realm of human perception, and what are the consequences?

Social psychology yields substantial insight. The literature identifies two different types of motives undergirding attitudes. Some beliefs result from a desire to arrive at the best conclusion warranted by the evidence at hand – an accuracy motive.  However, other attitudes and beliefs are central to an individual’s sense of identity or self-worth, and therefore defense of those beliefs has psychological utility.

While the first set of beliefs may be revised in response to additional information, the latter will prove resistant to revision, and the individual’s response to contrary evidence or counteragument will be to adopt strategies that intensify their convictions.

As experimental evidence suggests, when individual attitudes follow from a quest for accuracy, individuals will make evidence-based claims, and may respond to challenges by citing additional evidence or by seeking to establish the superior value of their body of evidence. Such claims, though, will be vulnerable to contradictory evidence, and the individuals can revise their views without incurring high psychological costs.

When attitudes are central to identity, individuals will be less willing to leave their views vulnerable to falsification.  Accordingly, the likely response to evidence-based challenges is to justify the position in unfalsifiable terms. As authors Frieson, Campbell and Kay argue, “people will shift their reported reasons for a political stance to be more unfalsifiable . . . because this unfalsifiability allows them to maintain their stated stance even when the facts appear to contradict it.”

The consequences are damaging to society in two fundamental ways. First, when society is deeply divided on fundamental interpretations of political behavior, political leaders are not held accountable for their actions. Democracy itself is endangered.

Second, when there is no shared grounding in objective reality, it becomes impossible to have genuine policy debates. Debates about taxes, healthcare, education, climate change are stunted in two ways: (1) there is no shared understanding of the nature of the problem we confront; and (2) political leaders have incentives to mobilize supporters around their preferred conceptions of reality rather than around particular policy programs. To give an obvious example, the national debate about climate change focuses at least in part on alleged motives and biases of the scientific and academic community warning of the dangers of climate change rather than on the appropriate mix of government-led and market-based solutions or the most promising avenues for the application of technology.

Given the proliferation of media sources and the attendant ability of individuals to select information from outlets that confirm and reinforce their biases, we seem to have reached an equilibrium characterized by a self-perpetuating societal chasm.

Is there a way out?

I offer three potential paths. First, a dramatic break. This would entail something like an indictment of the current occupant of the White House for obstruction of justice, with an avalanche of evidence that renders it untenable for Congress to continue to enable the administration’s abuses. The challenge to world views of all but the most ardent supporters would be so fundamental that perhaps at least some would be willing to countenance an alternative version of reality.

A second path would involve the emergence of new national leadership – perhaps in the 2020 presidential election – dedicated to diminishing the societal divide. One question is whether, in a climate of deep division, such leadership can even emerge. All incentives at present are for strategies of mobilization around competing realities.

The third path requires that a critical mass of citizens engage sufficiently on a daily basis to draw the polity back toward reason in the interest of democracy, inclusion and decency. There are indicators afoot of such political activism and efforts in educational institutions, for example, to teach students to more carefully assess the validity of information sources.

But can any of these paths serve to bridge the divide?

I don’t know.

I invite readers to engage this question by commenting on this post. Do you believe there is a way out of the great societal rift? If so, what does it look like?

Payday Lending Empowered by Executive Corruption

Predatory economic practices continue to expand in the American economy. Payday lending is perhaps the most egregious example.

Why do we permit such practices? The arguments for practices such as payday lending are twofold. First, defenders of the industry suggest payday lending firms fill a market niche. Those who cannot qualify for conventional loans from banks need access to credit; payday lending provides this service. Second, freedom of choice and individual responsibility. Individual consumers, that is, should have choices, and should be permitted scope for responsibility for their financial decisions.

So where’s the problem?

Let’s start with the second justification: choice. Those who avail themselves of such loans typically face desperate situations that skew their choices. The car has just broken down. Borrow money on a short-term basis to cover the cost of the repair, knowing the terms are painful, or fail to show up for work and lose one’s source of future income? With an unexpected reduction in shifts at work and a consequently smaller paycheck, there is not quite enough money to pay the rent. Borrow on a short-term basis to fill the shortfall, or let the rent go and face the risk of eviction and homelessness?  Among others, David Shipler documented precisely such cases in his 2005 book, The Working Poor and Barabara Ehrenreich revealed such dynamics in her 2001 work Nickel and Dimed: On (Not) Getting By in America.

In his recently released and acclaimed work, Evicted: Poverty and Profit in the American City, Matthew Desmond writes that “Most of the 12 million Americans who take out high-interest payday loans do not do so to buy luxury items or cover unexpected expenses but to pay the rent or gas bill, buy food, or meet other regular expenses. Payday loans are but one of many financial techniques . . . specifically designed to pull money from the pockets of the poor.”

The point is that living at the margins of subsistence alters the decision-making environment; for the poor, such choices are rational. As economists describe this, liquidity constraints affect intertemporal choices — that is, when money is very scarce, decision-making is more heavily weighted toward navigating the present.

The problem with arguments based blandly on individual responsibility is that they implicitly assume we all face the same temporal tradeoffs. (In other words, if I delay gratification and invest now, I’ll have more in the future. Sure, if you have the security of circumstances to comfortably move through the present. If not, the premise is fundamentally misguided.)

Turning to the first case for the existence of short-term lending secured by the borrower’s next paycheck, the implication is that the practice should be regulated because of the gross imbalance between the desperation of the borrower and the profit motive of the lender.

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Source: The Pew Charitable Trusts, “CFPB Proposal for Payday and Other Small Loans: A survey of Americans,” http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2015/07/cfpb-proposal-for-payday-and-other-small-loans

The balanced solution, then, is to subject payday lending to reasonable regulation. Lenders can fill the market niche and earn a profit, without ruining the lives of people who live on the financial margins and who are readily tipped into despair. Organizations like the Center for Responsible Lending, which points out that the average payday loan carries an effective interest rate of 391% have been advocating for regulation for well over a decade.

Along the way, they have faced opposition from those who elevate “individual choice” to sacred status in complete abstraction of the conditions under which choices are made – such as this vapid assessment from the libertarian Mises Institute: “On the margin, it is the borrower and lender who are most fit to decide the appropriateness of any transaction—not the Center for Responsible Lending, or a congressman.”

But here’s where the story becomes truly disturbing. In the wake of the 2008-9 financial crisis and the numerous abuses by financial services firms revealed in the aftermath of the crisis, the U.S. Congress created the Consumer Financial Protection Bureau.

The CFPB was designed with an intense focus on consumer protection, and following the political battle to confirm its first director during the Obama Administration, it did just that. The Bureau brought cases and imposed fines on financial firms for racial discrimination in lending and for deceptive practices. The Bureau pursued abuses that ultimately returned $12 billion to 28 million consumers.

With the arrival of a new administration, the focus shifted dramatically. As with virtually all executive agencies from the State Department to the Department of Labor to the Department of the Interior to the Department of Education to Housing and Urban Development to the Environmental Protection Agency, directors were put in place with the mission of deconstructing the agency and giving free rein to private actors to take every advantage of the nation’s resources and profit making opportunities created by public sector withdrawal.

Demonstrating utter disdain for the Consumer Financial Protection Bureau, the administration appointed a director who already has a full-time job as Director of the Office of Management and Budget. In his spare time, Mick Mulvaney is systematically dismantling the CFPB, dropping open investigations of financial services firms –including at least one case in which a federal judge has already found the firm guilty of engaging in deceptive practices, and which was awaiting the penalty phase of its case — and actively urging Congress to “cripple” the agency he nominally leads.

Mr. Mulvaney suspended new regulation regulating payday lending scheduled to go into effect in January of this year. And here’s where the disturbing becomes truly grotesque.

As a member of Congress from South Carolina, Mulvaney accepted campaign contributions from the payday lending industry. Bad, but entirely consistent with the level of influence-purchasing that is by now deeply institutionalized in the U.S. Congress. About two weeks ago, at its annual convention, the payday lending industry celebrated Mulvaney’s decision to suspend new regulations.

Where did the convention take place? In the Miama area, at the Trump National Doral Golf Club. A few protestors gathered outside the event, but in the daily chaos and ethical sinkhole of the current administration, relatively few took notice. They took little notice, that is, that the occupant of the White House appointed someone to dismantle regulation of an industry that then acted to put money directly in the pocket of the White House occupant. How can this be?

Those on the political right may wish to defend an anti-regulatory leaning on ideological grounds. Fine. We can respectfully disagree. But why is there not universal outrage in the face of such naked corruption?

The absence of popular outrage demonstrates a couple of sad realities. The institutions responsible for oversight of the ethics of the executive branch are weak, depending for their effectiveness on the executive having a sense of duty and a sense of shame.

Additionally, corruption and profiteering have become normalized in the current administration; the more regularly it occurs, the less we notice.

The Troubling Question of Democracy in the West

The cover of the latest issue of the German news weekly Der Spiegel shows a background of a US president setting the world ablaze. In the foreground, a hesitant German Chancellor Merkel stands back-to-back with a confident French President Macron holding a fire extinguisher labeled “I love Europe.”

“Who will save the West?” asks the headline — the issue is about freedom and democracy. Macron needs Germany’s help, yet the Chancellor, laments Der Spiegel, is ceding the field to Macron.

SP_2018_17_Digitaltitel_600.jpgThe English-language international issue notes that “The U.S. is no longer leading the West, neither morally, economically, on foreign policy or militarily.”

The need to ask who will save democracy in the West is itself a sad statement. But the question is indeed relevant. A Turkey once close to docking at the harbor of democracy and rule of law has drifted into authoritarian seas. A Hungary and a Poland firmly anchored in the democratic harbor and embedded in the rule of law represented by the European Union have each come unmoored, and have drifted from the harbor.

As these alarming developments proceed, where are the global beacons of democracy?

The notion of the U.S. as such a beacon is of course flawed; no doubt, there has always been a great deal of hypocrisy underlying the notion of the U.S. as the world’s beacon of democracy. But the symbolic dimension matters nonetheless, if only as a cautionary note to those seeking to spread illiberalism and as a rallying point for those working for government accountability, responsiveness and rule of law.

While the light may have been mottled in the past, the U.S. beacon now grows ever dimmer.  This is a result both of failures to denounce authoritarianism abroad and a willingness to encroach on democracy and rule of law at home when politically useful.

The US Congress has been silent on the spread of authoritarian, because it is understood that any critique of tactics in Poland or Hungary is an implicit critique of the current occupant of the Oval Office. The authoritarian tendencies of our own presidency have muted U.S. advocacy for press freedom and rule of law around the world. Without that voice, authoritarians are empowered, given license.

Furthermore, members of the U.S. Congress have willingly taken part in the administration’s effort to eliminate checks on executive authority – through leaks, for example, and other warnings of the administration’s efforts to undermine science- or evidence-based policy.

Some members of Congress have championed an assault on the “deep state” (an Erdoganesque construct) comprised of FBI and Justice Department officials — who in reality are intent on imposing rule of law on an executive resentful of legal limits.

In contrast to these shameful betrayals of democracy and rule of law, the European Parliament has at least taken the symbolic steps of passing resolutions condemning violations of rule of law in Hungary and in Poland.

In the case of Hungary, the European Parliament’s resolution cites commitments of EU member state governments made in the Treaty on European Union, the Charter of Fundamental Rights of the EU, and the Universal Declaration of Human Rights.

Referencing violations of rights of asylum seekers, attacks on civil society organizations and on media pluralism, assaults on freedom of organization and of expression and overt engagement in propaganda campaigns regarding immigration, the European Parliament “Regrets that the developments in Hungary have led to a serious deterioration of the rule of law, democracy and fundamental rights over the past few years.”

Similarly, in a November 2017 resolution the European Parliament condemns numerous actions of the Polish government “risking the systematic undermining of fundamental human rights, democratic checks and balances and the rule of law.”

Furthermore, in December 2017, the European Commission invoked Article 7 of the Treaty on European Union, which calls for the national governments to act where there is a “clear risk of a serious breach of the rule of law”

Justifying its action, the European Commission explained that it “is taking action to protect the rule of law in Europe. Judicial reforms in Poland mean that the country’s judiciary is now under the political control of the ruling majority.”

The Commission continues: “A breach of the rule of law in one Member State has an effect on all Member States and the Union as a whole. First, because the independence of the judiciary – free from undue political interference – is a value that reflects the concept of European democracy we have built up together, heeding the lessons of the past.”

Meanwhile, as Poland grew more isolated within the EU, a July 2017 visit from the U.S. executive sent a contrary message.

Rather than taking the opportunity to diplomatically caution the Polish government regarding violations of rule of law, the current occupant of the White House instead, while on the soil of a government that has displayed growing authoritarian tendencies and engaged in violations of press freedoms, gleefully reiterated attacks on the U.S. media to which we have grown so accustomed at home.

It is indeed sad that the question of who will save the West must be asked at all. It is sadder still that the United States is no longer part of the answer.

The Road Back to Democracy

In his newest book, the Road to Unfreedom, the distinguished historian and leading public intellectual, Timothy Snyder, traces the erosion of democracy from Russia, across Europe to the United States.

While there are of course consequential differences across these cases, there also are common dynamics at work, and strategic borrowing of tactics by those who wish to weaken democratic institutions. These tactics include sowing distrust in the media through creation of false stories and denial of facts, as well as the use of narratives of national victimization to mobilize domestic constituencies and to redefine parameters of global engagement and disengagement.

In his lucent lecture at the University of Oklahoma, Snyder began from the concept of freedom itself. How do we conceptualize freedom?  What is it that we are in danger of losing as we traverse the path from freedom to unfreedom?

At the core of Snyder’s conceptualization of freedom is the notion that we are not free if we cannot imagine alternatives. The notion that the present order is as it must be and will remain has historically been a mechanism through which oppressors have extended domination over the oppressed at little cost.

Resistance does not occur when the oppressed accept the existing order as inevitable – whether because the existing order should be, or because it is as it must be given the overwhelming apparatus undergirding the existing hierarchy.

Professor Snyder’s conceptualization emerges from scholarship deeply immersed in the history of Eastern and East Central Europe.

Unknown.jpegIn his famous 1978 essay, The Power of the Powerless, the Czech playwright Vaclav Havel addressed the way in which the communist dictatorship “lived within a lie” and how, by conforming to the regime’s lies, individuals “fulfill the system,” creating what he called an “auto-totality,” a self-dominating system of oppression.

This notion of domination through an inability to imagine alternatives has broad applicability. In his ingenious essay about colonial rule, Marrakech, George Orwell perceives the role of ideological domination in the maintenance of colonialism; the Senegalese infantry column he observes operates on behalf of France because the soldiers have been taught to internalize their inferiority. (Though Orwell insightfully recognizes this mechanism of domination is bound to crumble, and that the soldiers will eventually turn their guns on their colonial “masters.”)

In his wonderful 1982 book about the dominance of mining companies in Appalachia’s Clear Fork Valley from the late 19th century to the 1970s, Power and Powerlessness, political sociologist John Gaventa documents how the local mining companies control economic resources, the flow and presentation of information in the local press, and the institutions of power, from the courthouse to the police to the city council. The first line of defense of the company’s domination, though, is the miners’ internalized sense of the inevitability of the existing hierarchy. They cannot imagine alternatives.

Lest we shrug off the relevance of this concept for the contemporary United States, Vaclav Havel saw forty years ago that consumer society made us vulnerable to an auto-totality as well, even if one perpetuated through more stealthy methods than communist regimes: “It would appear that the traditional parliamentary democracies can offer no fundamental opposition to the automatism of technological civilization and the industrial-consumer society, for they, too, are being dragged helplessly along by it. People are manipulated in ways that are infinitely more subtle and refined than the brutal methods used in the post-totalitarian societies.”

Havel’s proposal for breaking down the auto-totality was the act of “living within the truth.” Acknowledging truth was the precondition for political action to overcome oppression, beginning by casting off the internalized inevitability of the existing system. Living within the truth, wrote Havel, “is . . . an attempt to regain control over one’s own sense of responsibility.”

The idea of taking responsibility leads us back to Timothy Snyder’s core premise.

The value of Snyder’s work is so enormous because it simultaneously richly reveals historical developments, identifies and illuminates larger historical and transnational patterns at work, AND points toward a means of reclaiming the present. That pathway involves a “politics of responsibility” and a reimagining of the possibility of alternatives.

Havel wrote that “In a democracy, human beings may enjoy many personal freedoms and securities that are unknown to us, but in the end they do them no good, for they too are ultimately victims of the same automatism, and are incapable of defending their concerns about their own identity or preventing their superficialization or transcending concerns about their own personal survival to become proud and responsible members of the polis, making a genuine contribution to the creation of its destiny.”

Vaclav Havel called in “The Power of the Powerless” for citizens of the Czech Republic to “break through the crust of lies” and begin “living in the truth.” Fifteen years later, Havel was president of the Czech Republic. Agency matters.

Like Havel, Snyder calls upon us to contribute to the creation of our political destiny. No doubt, American democracy is under threat – perhaps not as overtly as democracy in Poland or Hungary today, and perhaps resting on stronger institutional foundations than democracies in those countries. But under threat nonetheless.

In our contemporary globalized environment, some Americans have been lulled by what Snyder calls a “politics of inevitability” – the notion that globalization represents a unidirectional march of the market economy, with attendant consequences for the distribution of wealth and power. We are simply along for the ride.

An alternative that has emerged in response identifies enemies within and without as the source of the perceived ills of globalization, and dangerously seeks to remove democratic constraints on the exercise of power in the service of defeating those enemies – the program, in other words, of “American First,” with its direct lineage to the America First Committee founded in 1940 to avoid letting “the Jewish race” drag the United States into World War II.

We seem to be confronted with unpalatable alternatives. We can be passive receptors of the forces of globalization, accepting as inevitable a deepening of economic inequalities and a loss of national policy autonomy. Alternatively, we face a looming authoritarianism that wages war on countervailing sources of power and criticism of the chief executive and empowers an oligarchy in the name of national “greatness.”

But we do not have to live either future.

We have to imagine alternatives.

Doing so involves reclaiming political responsibility by living the truth, supporting credible journalism, limiting our own vulnerability to manipulation via the internet and working to build civic networks.

Such efforts, undertaken by enough of us, can lead us back toward more robust democratic institutions and norms, enabling the country to once again have real debates over policy alternatives to address problems of economic, social, gender and racial inequality.

Students, Teachers and Democratic Accountability

This past week the Governor of Oklahoma and several state legislators pronounced that “you can’t spend what you don’t have” in response to the state’s teacher walkout, about to enter its second week.

As it turns out, the state budget is not chiseled in stone and handed down from on high; it is the product of the actions of the legislators themselves.

The real problem is that legislators are unwilling to raise the resources required to fund education adequately in Oklahoma and several other Republican-governed states, including Kansas, West Virginia, Kentucky and Arizona.

Adequate funding would require that legislators abandon their persistent and pernicious “small government” mantra, and that they place the needs of the people of the state above those of their wealthy corporate donors.

Across the United States, spending per pupil on primary and secondary education is not low by international standards. The U.S. comes out above average in spending per student, and slightly below the OECD average in terms of effort – that is, spending relative to GDP.

The U.S. spends about $11,400 per pupil on public education. Ultimately, the problem for public education in the U.S. is the unevenness of spending across states (as well as across localities within states).

While New York spends $21,200 per student, Utah spends less than $6600. Arizona comes in at $7489 and Oklahoma at $8082. Oklahoma’s spending per pupil is about $1000 less than Slovenia, a European country with GDP per capita not quite half that of Oklahoma.

After a decade of reduced funding for education, lopping off nearly a quarter of funding to education in real terms according to the Oklahoma Policy Institute, Oklahoma legislators in late March passed a $447 million revenue package to fund significant raises for teachers, support staff and state employees.

The Governor and legislators celebrated, considering their work done. Even though they’d fallen far short of the requests of the teachers to also reverse the massive cuts to school funding – so evident in large class sizes, crumbling textbooks and shortages of teachers and supplies alike — they called for teachers to express gratitude.

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Literature textbooks in use at Heavener High School in Heavener, OK, eastern Oklahoma close to the Arkansas border. Photo provided by Sarah Jane Scarberry to pbs.org.

Three elements of the revenue package are especially noteworthy.

First, this was the first tax increase passed by the Oklahoma state legislature in 28 years, the result of a 1992 referendum requiring three-fourths of the legislature to support a tax increase.

Second, the measure disregarded some major potential sources of revenue, such as the personal income tax, which has a top rate that has been cut repeatedly in recent years, and the capital gains tax deduction, which legislators so far contend is “off the table.”

Third, the revenue package materialized after the preparation of a mass teacher walkout. Only the pressure of the walkout produced results that the legislature had staunchly resisted for years.

Oklahoma legislators now express frustration that the teachers have not responded with expressions of gratitude and a return to the classroom. In addition to the Governor, who condescendingly referred to teachers as teenagers wanting a better car, other legislators have voiced visible displeasure with teachers for their persistence in showing up at the state capital in large numbers on behalf of their cause.

Legislators and the Governor also have resorted to the insulting and now reflexive tactic of claiming (with zero evidence) that protestors are paid agitators.

Why this reaction? Frequently reelected without little or no opposition, these legislators are uncomfortable with the concept of democratic accountability.

Though it may make legislators in Oklahoma, West Virginia, Kentucky and Arizona uncomfortable, democratic accountability is on the rise. The courageous Marjorie Stoneman Douglas High School students who started the March for Our Lives movement have given new life to accountability.

Teachers have been empowered by students, and state legislators best take heed.