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.

Source: The Pew Charitable Trusts, “CFPB Proposal for Payday and Other Small Loans: A survey of Americans,”

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.

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

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.


The War on Regulation: Endangering Society, but also Undermining Markets

The New York Times reports this Sunday, April 1 on the administration’s plans to roll back regulations on auto emissions of greenhouse gases and on fuel economy standards.

Ironically and disturbingly, the proposed rollback surpasses the request of auto industry executives. Just days before the announcement, Ford’s Chairman and the company’s CEO called in a blog post for “CO2 reductions consistent with the Paris Climate Accord.”

But Ford’s CEO also earlier asked the new administration to reopen a review of Obama-era rules targeted at greenhouse gas emissions and ambitious fuel economy standards because of the supposed danger to jobs. The new administration was all too happy to seize on another opportunity to undo progressive action of the Obama Administration.

The motives of the current administration go well beyond an anti-regulation philosophy; there seems to be a strong inclination, for example, to cater to every desire of the fossil fuel industry. The same is true for financial services. And there is also the appeal to political supporters of rejecting scientific expertise and of getting government (and the professional civil servants that supposedly comprise the “deep state”) “out of the way.”

Is government really “in the way”? Is regulation no more than a “cost” to industry? Is there a zero-sum relationship between regulation to promote health, safety and environmental quality, on the one hand, and business profitability, on the other?

The financial crisis of a decade ago, now wiped from memory by anti-regulation activists, tell us unequivocally, NO.

If there is a single lesson of the financial crisis, it is that poor regulation can create economic vulnerability that far exceeds in cost the potential burden of industry compliance with well-crafted regulation. Policy makers seemed to learn that lesson in the immediate aftermath of the crisis, but rapidly unlearned it in the partisan conflagration and assault on regulation that followed.

The result was the — unfortunately successful — “government is in the way” narrative.

In the 1990s, scholars Michael Porter and Claus van der Linde established that environmental regulation could in fact create incentives for innovation that would ultimately offset the costs of regulation.

Others have developed and gathered evidence for the “innovation offsets” argument ever since. In a 2014 Centre for European Policy Studies examination of much-criticized European Union regulation, Jacques Pelkmans and Andrea Renda found that EU regulation could accelerate the rate of innovation in industry, particularly when regulation was designed with flexibility and deployed with minimal bureaucratic burdens.

Regulations governing recycling of vehicles reaching the end of their useful lives, for example, stimulate advances in vehicle design that make dismantling of autos easier at the end of their useful lives. Such regulation also fosters advances in materials recovery and reuse technology.

Similarly, European Union ecodesign regulations create incentives for manufacturers to develop more energy efficiency appliances.

In the U.S., meanwhile, in addition to weakening numerous environmental regulations, the administration has during the past year weakened the Financial Consumer Protection Bureau established in the aftermath of the financial crisis. Congress also has moved toward easing other financial regulations put in place to forestall a repeat of the 2008-9 financial disaster.

Along with hostility toward immigrants, anti-regulation sentiment has been at the forefront of the Brexit movement. Ironically, in a recent major speech on the British approach to Brexit, Prime Minister Theresa May inadvertently revealed that industry values regulation for the market certainty it creates. While extolling the virtues of Britain being able to “make our own rules,” May let slip the stunning contradiction that exporters recognize that having uniform European regulatory standards lowers the transactions costs of doing business: “businesses who export to the EU tell us that it is strongly in their interest to have a single set of regulatory standards that mean they can sell into the UK and EU markets.”

In the initial post in this blog I referenced the magisterial work of Karl Polanyi, The Great Transformation. Polanyi taught us that there is no such thing as a “self-regulating” market. Humans can only prosper when there are reasonable rules bounding markets.

This is why factory owners began to push for regulations on child labor and other behaviors that would render competition limitlessly brutal in the early decades of the Industrial Revolution in the UK.

Claims that markets are best left in their “natural” state emanate from fundamental misunderstandings about the impact and value of regulation. Well-crafted regulation reduces externalities such as water, air and other forms of environmental pollution, and can reduce systemic financial risk.

Efforts to pare back regulation in the name of profitability rarely account for the (often large, but difficult to measure) benefits accruing from carefully crafted rules — in the case of greenhouse gases, the ultimate benefit of planetary survival.


Even beyond this obvious gain, markets cannot function effectively without good rules.

Simply put, society and economy alike will suffer from the bonfire of regulations.

Why Public Investment in Job Training and Apprenticeships Would be Valuable – And Why This Won’t Happen

The “America first” steamroller moves on, now rolling over the global free trade system.

There are indeed workers in the U.S. that have been left behind by globalization, and who are suffering economically even as aggregate growth continues. Shouldn’t U.S. policy makers act to provide support for these workers?

Indeed, they should. In fact, the weakness of past efforts to do so – such as through the cumbersome and limited Trade Adjustment Assistance Program, help explain the current populism.

What’s wrong, then, with striking back at countries with whom the U.S. runs large trade deficits, to create fairer trade and bring back or at least save jobs?

Several things.

First, a focus on bilateral trade deficits is completely misguided. The U.S. runs bilateral deficits in goods trade with Cambodia, Kenya and Algeria (among many others). Is the U.S. “losing” to these countries? Is the U.S. economy harmed by the footwear imported from Cambodia? By the apparel and coffee entering the U.S. market from Kenya? By crude oil imported from Algeria? Or do consumers benefit from these goods, and are oil refiners able to profit from crude oil imports, just as other manufacturers profit from imports of intermediate goods to which they add value?

The U.S. of course runs much larger trade deficits with China and with Germany. More on this below.

Second, as is widely established, job losses in manufacturing have several sources; most studies attribute the largest share of manufacturing job losses to technological change. Protectionism will therefore do nothing to bring jobs back.

Third, protectionist measures enacted by the current administration have been undertaken unilaterally. This renders the U.S. hostile to the multilateral rules-based international system it was instrumental in setting up, and from which it has benefited disproportionately (if anything, the rules have been tilted heavily in favor of U.S. interests to the detriment of developing economies).

Fourth, there will undoubtedly be retaliation for U.S. protectionism. This brings us to China. Scholars of U.S.-China economic relations point out that the bilateral trade deficit between the U.S. and China is misleading.

As Yukon Huang of the Carnegie Endowment points out, with global supply chains so integrated, Chinese producers import semi-finished products from elsewhere in Asia and add a small of amount of value before exporting the finished product to the U.S. The entire value of the product shows up as an export to the U.S., amplifying the size of the U.S. trade deficit with China.

China’s violation of intellectual property rights and insistence that technology transfer accompany foreign investment is a genuine problem. However, knowledgeable accounts indicate that the matter is best addressed through engaging China, whose record in these areas is improving as its economy develops. Efforts to negotiate a bilateral investment treaty, for example, would be valuable to the U.S. economy. But such an endeavor would require diplomacy – as well as patience and resistance to populist instincts, two qualities absent at present from U.S. foreign economic policy.

Just as the noisy embrace of protectionism is a product of domestic politics in the U.S., pressures already are building for China’s government to enact strong retaliatory measures.

China’s retaliation will be targeted on such products as soybeans and aircraft, U.S. products for which China is the largest market. There will be concentrated economic pain in the U.S. Furthermore, as economists such as Mary Lovely of Syracuse University point out, the exchange of protectionist measures will have little net effect on the U.S. trade deficit with China.

One of many problems with “America first” is that America is not alone in the world.

So, returning to the workers who’ve been displaced by economic change, is there a better way to respond? This brings us to the case of Germany – and back then to the U.S. The U.S. runs a large trade deficit with Germany, too. Yet one overlooked German export to the U.S. is its apprenticeship system.

Apprenticeships are integrated into the German economy across economic sectors, with about one half million young Germans entering the apprenticeship system annually. One reflection of the success of the apprenticeship system is the extent to which quality manufacturing continues to thrive in Germany.



The system is a public-private partnership with small, medium and large enterprises offering apprenticeship slots and publicly-funded vocational schools offering formal training to accompany training in the workplace. Employers create standard training requirements for each sector.

While firms see the value in investing in workers, the German government embraces the collective gains that accrue from having a highly skilled and productive workforce.

Some German firms have set up apprenticeships in their U.S. locations with Siemens, for example, establishing apprenticeships at locations in North Carolina, Alabama, California and Georgia; BMW setting up an apprenticeship program at its plant in Spartanburg, South Carolina in which it provides paid part-time positions with workplace training and fully paid study toward an associate’s degree and the promise of a job at the end of the program; and the Georgia Technical College System entering into an apprenticeship partnership with the Bavarian Ministry of Education, Culture and Science.

The U.S. government could embrace the opportunity to encourage and expand such programs. The Obama Administration modestly expanded funding for apprenticeships in 2015 and 2016.

But do not expect public investment in American workers under the current administration. Such investments are an alternative to protectionism, but also to the angry populism and pursuit of political division that animate the current occupant of the White House.

American Democracy on Slow Boil

Last week I promised a post about investments in job training and apprenticeships as an alternative to protectionism, with plans to draw on the example of Germany. With apologies for delaying that post, this past week’s political events compel me to address the fraught state of American democracy.

bring-to-boil.jpgThe catalyst for this shift was my experience listening to news on my drive home from work this Wednesday evening.

Acutely aware of the disastrous state of American politics, the tenor of an NPR segment clarified for me the urgency of addressing the danger at hand. NPR does a commendable job of pursuing political neutrality in a media environment rife with partisan outlets catering to motivated audiences in a deeply divided polity. But is “political neutrality” appropriate in the face of a sustained assault on democratic institutions? Is it “politically neutral” to treat abnormal politics as a version of normality?

In this instance, the “Week in Politics” segment of All Things Considered was reporting on the relentless staff changes in the administration and the rumors of more to come.

The show has increasingly inclined toward playing clips of the current occupant of the White House and his Press Secretary, allowing those voices to speak for themselves. Fair enough.

But informed listeners know with certainty that in hearing these clips they are listening to falsehoods. What happens next on the show – the response to lies — is therefore of great consequence.

After airing a statement from the Press Secretary that was entirely and obviously evasive in response to a direct question, host Ari Shapiro, a skilled professional whom I admire, asked the guest, Mary Katharine Ham, senior writer at The Federalist, the following: “Mary Katharine, how do you think this turmoil affects President Trump’s agenda?”

The response: “Look; the Trump White House does operate differently just as the Trump Organization operates differently. This is how he likes to manage, and I’m not sure it’s that effective.”

There are two fundamental and worrisome problems raised by this exchange. First, the question Shapiro asks implies that the prime victim of the White House pandemonium is its own policy agenda.

Shouldn’t we instead be asking about the consequences of bedlam for American governance, democracy and institutions? By many accounts, in fact, chaos IS the agenda of this administration.

Second, the response from Mary Katharine Ham – not surprising given The Federalist’s libertarian political leanings – treats mayhem as a legitimate management style, albeit one of questionable effectiveness. Boston Herald reporter Kimberly Atkins added of the chaotic management of the White House occupant, “it is how he enjoys it. I think he is fine with this setup even if the people around him are kind of flailing in this chaos.”

We know that executive appointees serve “at the pleasure of the president;” here we have a perversion of this theme in which the executive branch is for the pleasure of the president.

As for the “Week in Politics” program, in pursuing this discussion, NPR becomes a participant in our national reality show, a sort of Talking Dead of the American political scene; a chatty show about the show. The challenge to democratic institutions is urgent, and we need something more from NPR.

In this instance the program, as with much (certainly not all) of the contemporary media, inadvertently participates in the degradation of American democracy by analyzing the disasters of the current administration from within its internal logic. Once we step into this logic, “It’s what the president likes” and “It’s what he said he would do” become viable analyses of behavior that imposes tremendous damage on national unity, policy coherence and the global standing of the United States.

Only by stepping outside the administration’s aberrant logic can we foster the political accountability required for a thriving democratic society.

In a 2017 article in the journal Political Science Quarterlyauthors Kathleen Hall Jamieson and Doron Taussig offer an analysis of the “rhetorical signature” of the current occupant of the White House. They find that this style includes “seeming spontaneity laced with Manichean, evidence-flouting, accountability-dodging, and institution-disdaining claims.”

Additionally, the signature “dismisses uncongenial evidence from institutionalized custodians of knowledge” and “rejects conventional standards of accountability.” Finally, the rhetorical signature “questions the integrity of democratic institutions, some of which” (electoral system, courts, the media) “can hold a president accountable for abuse of power or misuse of evidence . . .”

If we normalize these rhetorical and management styles, we subvert democratic accountability and institutional integrity.

As Yale historian Tim Snyder reminds us in On Tyrannyhis caution to contemporary democracies from the lessons of history, “Institutions do not protect themselves. They fall one after another unless each is defended from the beginning.”

Many citizens who are deeply critical of the current administration – and worried about the direction of the American polity – await the November 2018 Congressional elections and express hope that this will be the moment to put American democracy back on course. Is this patience in awaiting the electoral means to check an administration with accelerating authoritarian tendencies an indicator of the strength of American democracy –or of its fragility?

We know that there have been efforts by the current administration to limit democratic participation, such as the recently disbanded electoral commission headed by Kansas Secretary of State Kris Kobach, which began from the premise that the U.S. electoral system is plagued by voter fraud.

Although faced with numerous legal challenges and harboring claims that have not stood up well to scrutiny in a recent federal court hearing of a challenge to a 2013 Kansas proof of citizenship voting law, the work of the commission may well be picked up by other components of the current administration, such as the Department of Homeland Security.

American democracy is on slow boil; the result may be democratic evaporation.

Raising the alarm in On Tyranny, Tim Snyder points out that Russians who voted in 1990 “did not think that this would be the last free and fair election in their country’s history, which (thus far) it has been. Any election can be the last . . . ”

Indeed, asserting that “it can’t happen here,” Snyder warns regarding the failing of democracy, “is the first step toward disaster.”

The Folly of Brexit Reveals the Folly of “America First”

I have written in past weeks about the ways in which the current U.S. administration is investing in societal division as a political strategy.

Aluminum and steel tariffs are a prime example, for tariffs unleash a zero-sum dynamic both within U.S. society and between the U.S. and its global partners. This stands in contrast to the sort of positive-sum process potentially generated by investment in job training and apprenticeships.  This will be the subject of next week’s post.

But first, I want to consider a prior point about deep divisions in contemporary society and the paths by which capitalist democracies can – and should not — navigate these tensions. Recent analyses of divisions in capitalist democracies emphasize the tension between those who’ve gained most and those who’ve been hurt by the advance of globalization.

There is substantial evidence for this cleavage in the U.S. as well as in the UK, where characteristics of those supporting a British exit from the European Union — who tend to be older, less educated and more opposed to immigration and multiculturalism than those who voted to remain in the EU — overlap in significant ways with supporters of the current occupant of the White House.

The “country name first” response to globalization (as in “America first” or “Britain first”), while politically expedient, is both socially divisive and ultimately damaging to national prosperity. Exit from the EU has taken the UK down such a path, and the contradictions of Brexit become more evident over time as the British government struggles to control the damage.

British Prime Minister Theresa May gave a major policy speech last week outlining Britain’s conception of its future economic relationship with the European Union. What the speech ironically revealed is that British exit – much like the implementation of tariffs in the U.S. – is a narrow political project that can only bring damage to the national economy and the country’s place in the world.

In her speech, Theresa May valiantly endeavored to reconcile a “people’s exit” with a prosperous and globally engaged future for the UK. Unfortunately, the speech revealed all too starkly that these ends are entirely irreconcilable.


Image result for BRexit take back control images

May began her speech with a nod to populism: the entire project is about the British people, not the “privileged few.” The implication, of course, is that European integration is an elite project whose benefits accrue to a narrow element of society.


There are elements of truth to this claim. The tragedy is that British policy makers, rather than tackling issues of inequality, have pursued a path of division and destruction in exit from the EU. Without doubt, the country will be considerably worse off following exit, and of course poorer, more vulnerable segments of the population will bear the costs of reduced economic opportunity and sharply reduced fiscal resources.

The same is unquestionably true in the U.S., where an “America first” policy course can only redound to the detriment of the very people those who hew this path cynically claim to defend.


What also became evident in Theresa May’s “Mansion House” speech is the deep contradiction between the UK’s struggle to extricate itself from the EU with minimal economic damage and the objective of a post-exit UK that is “modern, open, outward-looking, tolerant . . .”

May advances proposals that commit the UK to essentially identical regulations to the EU in order to minimize barriers between the British and EU markets – while maintaining the fiction that the UK will nonetheless be sovereign in devising its own regulatory environment.

At one point that should embarrass the politicians responsible for Brexit, the Prime Minister notes that “businesses who export to the EU tell us that it is strongly in their interest to have a single set of regulatory standards that mean they can sell into the UK and EU markets.” This statement of a reality well understood by proponents of integration unwittingly gives the lie to longstanding propaganda that “barmy Brussels bureaucrats” are responsible for excessive EU regulation imposed on UK markets.

The unfolding process of British exit from the EU illuminates the folly of a hollow strategy of “taking back control” in a globalized world more clearly each day. The folly and danger of “America First” grows equally more apparent.

The Dangerous Assumption that Economic Status Equals Merit

During the past few weeks I have examined and critiqued recent U.S. government policies of maldistributed tax cuts and proposed limits on food stamp benefits. 

Income inequality word cloud concept

These policy changes, I have argued, emerge from the fundamental — and deeply flawed — assumption that economic stratification is based on merit.

Advocates of much greater tax cuts for the wealthy insist higher taxes “punish” success and destroy incentives for hard work and wealth creation; programs like SNAP that provide marginal assistance for the poor discourage effort among the able-bodied.

What does the evidence tell us about economic stratification and merit?

A positive relationship between economic standing and merit – the belief that someone born into any circumstances can succeed economically through striving and cunning — is supposedly the bedrock of American social cohesion. During the past decade doubt about this relationship has risen sharply, especially among the young.

A majority of Americans now expect the next generation to be worse off, though such pessimism is shared by other wealthy democracies.

Deepening inequality, along with this fraying of belief in American social mobility, helps explain the divisive and chaotic politics recently unleashed in the U.S. and in other societies like the UK, where a deep social divide continues to fuel bitterness over British exit from the European Union.

Studies of intergenerational income mobility typically place the United States low in international comparison. Along with the UK, in the U.S. the correlation between parental income and the income position of the next generation is quite high.

The U.S. position contrasts with a group of high mobility wealthy countries (Canada, Finland, Norway, Denmark), and those in a middle group (Germany, France).

Conservative analysts typically dismiss these findings. Among other things, they argue that comparing dynamics between income categories – typically measured in slices each containing one-fifth of earners, or “quintiles” – is a poor measure of mobility. Instead, we should focus on absolute mobility, the trend of income within each quintile. In other words, the relevant question is whether people are becoming better off in an absolute sense rather than relative to others. Conservative commentators tend to portray this as “a more complete opportunity story”.

In fact, such a measure represents the lowest possible threshold for any concept of mobility — ultimately it is not really a measure of mobility at all – so it is hardly a “more complete” story, only a more convenient one.

Let’s nonetheless give the benefit of the doubt to this perspective and examine claims made by proponents of a focus on “absolute mobility.” The conservative social welfare theorist Neil Gilbert objects that attention to upward social mobility neglects the point that this is simultaneously a demand for downward social mobility, since a movement of some earners into a higher income quintile means others must move out.  However, unless we assume the existing distribution is a product of pure merit, this displacement of high earners by those with greater merit is precisely what we should want to see.

Citing a definitive 2014 study by Harvard and Berkeley economists as well as analysts from the U.S. Treasury Department, Gilbert notes that “the findings showed no decline in the rate of social mobility among children born in the U.S. over the last 40 years.” Ironically, while this is technically accurate, the authors of the study themselves emphasize an entirely different point: the absence of a change in intergenerational mobility between income quintiles, coupled with substantial increases in the degree of inequality between quintiles, amplifies the consequences of a low level of income mobility between generations. (Or, as the authors put it, the “birth lottery” effect increases.)

Furthermore, like other conservative social theorists, Gilbert engages in slight-of-hand with the implications of the findings: while admitting that the odds of someone born into the bottom fifth of the income distribution making it into the top fifth, at less than 9%, are low, he underscores that the range of income has grown in the United States. This means the distance the lower income person must travel to reach the top quintile has increased, and is greater for the U.S. than for most other societies. Precisely.

Related to this point, and damning for the entire “absolute mobility” argument generally, this graph from the U.S. Census Bureau reveals dramatically that income gains have accrued much more rapidly at the top of the distribution than toward the middle or the bottom:


But how much do we really know about the extent to which the income distribution reflects effort and merit? A recent academic study of intergenerational income mobility in the U.S., UK and Sweden published in the journal Social Forces addresses this question.

The study reveals that parental income determines about 60% of the income status of the next generation in the U.S. The figure for the UK is 55%, and for Sweden 33%. The authors of the study seek to identify the extent to which merit contributes (or doesn’t) to the intergenerational reproduction of economic status. To do so, they use measures of educational attainment and performance on cognitive tests to control for education level and cognitive ability.

The authors find that for the U.S., nearly three-fifths (57%) of the rate at which inequality is reproduced cannot be explained by educational attainment and cognitive ability. Put differently, even at constant levels of educational attainment, the accident of birth is a powerful predictor of where one winds up in the income distribution.

Policies that implicitly embrace a direct correlation between wealth and merit, then, seem gravely misguided.