07 March 2013

Democracy Collides w/ Complex Systems

Alan Watts reports in The Book, that in 1752 the British government reformed the calendar, changing the day that was to have been 2 September into 14 September. As a result, many people imagined that 11 days had been taken off of their lives and they stormed Westminster, loudly protesting this theft of days.

Curiously, TARP - the troubled asset relief program initiated by Bush and his Treasury Secretary Paulson and continued by Obama and his Treasury Secretary Geithner - is vilified by the right and the left. Tea Party members and Occupy Wall Street Protesters decry it as abuse of government, collusion between cronies in DC and on Wall Street, a massive subsidy to banks, etc., etc., etc. It's hard to think of a government program more roundly criticized by folks on both sides of America's wide ideological divide. 52% of Americans thought it was the wrong thing to do, as reported in a poll from early 2012.

It's also hard to think of a government program that more clearly paid a return of $25 billion to taxpayers. Essentially, the government bought troubled assets when no one else could, propping up their prices. What were these assets? It's simplest to think of them as stock in companies that were threatened with bankruptcy as the financial system began to collapse in 2008 / 2009. (The assets were more varied than that but were - in many cases - essentially shares in insurance companies like AIG and banks.) This did two things. One, it put a floor under falling asset prices, helping to stem a wave that could have rippled throughout the financial system, causing greater damage. Two, when the economy recovered and those troubled assets recovered in price, it allowed the government to make money when it sold them back.

Not only do very few Americans realize that all of the TARP amount has been paid back (the financial system had a line of credit of $700 billion but never came close to using that much), but few realize that the American taxpayer made $25 billion on the amount committed.

The problem is, many Americans still think that support for a financial system and Keynesian policies to create a floor under a bust are bad things. Like the British confused about the calendar, they don't really know what happened but they are quite certain they don't like it. They're protesting.

And this raises the question again of how to make a democracy work when people are suspicious of experts but don't understand the systems their votes influence.

It seems to me one more reason that we need to get really aggressive and really creative about teaching systems thinking and systems dynamics to our polity. Thomas Jefferson believed that education was essential to democracy. As our modern world is more defined by complex systems, that education has to include an understanding of systems.

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