31 August 2018

Progress under Threat

It's more interesting to write about how to make future progress than how to protect past progress but we don't always have that choice.

Apparently this blog closes down in August. I have not written a single post all of this month. I feel so very French.

I've written a fair bit about Trump when I would much rather write about the next economy. That will continue because Trump is such a big threat to progress.

WHAT IS PROGRESS?
As I wrote The Fourth Economy, I realized that I needed a definition of progress that worked from 1300 to 2050 - the period the book covers.  Progress couldn't just be conquering more land or manufacturing more goods or processing more information. It had to be bigger than that. The simple definition I adopted is that progress is an increase in autonomy. Autonomy means that an individual directs her own life. Power over gives way to power to, and the pope or monarch's power over the individual gives way to the individual's power to choose or define her own beliefs and policies and life. More goods to choose from means more autonomy. More data to inform a decision means more autonomy. All economic progress falls under the category of increases in autonomy.

Autonomy is the destination of and the means to progress. A rich man has more options about what to do with his weekend than does the poor man. A rich man can afford more education and investment to give himself more options in the future. Autonomy now can translate into more autonomy later. And it is not just about cash in one's pocket. Someone living in a place that respects religious freedom has more choices about what to do with his Sunday morning or Friday evening than a person living in a theocracy. When we make progress, we have more freedom about how to define and live a life and generally become more able to do that as a result.

HOW HAVE WE MADE PROGRESS?
In the first economy from 1300 to 1700, the individual gained autonomy in the realm of religion. Religious freedom meant that the no one could dictate to the individual what beliefs they held. It also meant that given a community could not impose supernatural beliefs upon people, so public affairs had to rely on the testable claims that eventually gave birth to the Enlightenment. Science that could be replicated and votes that could be counted became the basis for public practice rather than revelation of the elites about what God intended for communities.

In the second economy from 1700 to 1900, the individual gained autonomy in the realm of politics. No longer a subject of the monarch, individuals became citizens whose votes and dialogue shaped the policies that in turn shaped them. 

In the third economy from 1900 to 2000, the individual gained autonomy in the realm of finance. By 2000, the individual had access to credit and investment markets that were largely reserved for elites in 1900. Not only did life expectancy increase from 47 to 77 in the US but so did the means to fund retirement in those advanced years, through social security, pensions, and 401(k)s. Additionally,  Keynesian policies and bank regulations subordinated individual banks to a central bank goal of low unemployment and inflation.

What do these shifts have in common? The institution in question - church, state, and bank - get defined as mere tools that can be - that should be - used by anyone. The church becomes a tool for the masses and each individual is free to use it or not as they wish (or even create their own church). The state becomes a tool for the citizenry and not the monarch. Bankers can - and rather spectacularly still do - pursue profits but within financial conditions that will be tweaked to keep inflation and unemployment within a certain range; banks and financial markets are meant to be tools for the masses, for the betterment of the whole economy and not just elite bankers.

This table captures one dimension of the Fourth Economy, this notion of institutions as tools.



And here's a really important point: you never make progress into the next economy by reversing the progress of the last. The first step of democracy is not to discard religious freedom; democracies build on religious freedom.

Given, that we have freedom of religion, democracy and Keynesian policies, we can now shift our focus to how we want to define the corporation.

Or so I thought.

THE CONVERSATION I THOUGHT WE WOULD BE HAVING
I thought that the 21st century would be a story of how we change the corporation to make it a tool for the average employee, the popularization of entrepreneurship resulting in - among other things - more employees using the corporation as a tool for creating wealth for other stakeholders and for themselves. Part of that vision is that within a corporation of, say, 100,000 employees there will about 1,000 employees so successful at creating wealth that they make the same as or more than the CEO. (This 1% number is roughly what we have in the US: about 1% of the population makes more than the $400,000 we pay our president. This is a sign that our nation-state is mature. As the corporation matures from a tool for the elites to a tool or the average employee, we should see a similar percentage of employees equal or beat their CEO's pay.) 

I thought that we'd be focused on how to transform the corporation in this century. I was wrong.

For now.

TRUMP AS A SPEED BUMP ON THE PATH TO PROGRESS
As it turns out, the transition to the fourth economy has hit snags. Rather than a debate within the West about how to transform the corporation, we've got a president who challenges freedom of the press (a first economy issue), makes voting harder (a second economy issue) and challenges the Fed and banking regulations (a third economy issue).

Trump regularly calls the press the enemy of the people and warns evangelicals that a vote against him is a vote against "your religion." He constantly spouts nonsense, showing a disregard for anything vaguely resembling the truth, which might be the biggest first amendment threat of all. (One huge reason for freedom of thought is to allow the advance of good theories that crowd out bad theories in the form of superstition and conspiracy theories.) The GOP - in control of every branch of government - seems intent on making voting harder, not easier. They seem convinced that too many people are voting and that democracy has gone too far. Additionally, they still seem at odds with the gains of FDR's time and are trying to reverse  financial regulations meant to make finance safer for common people. 

Progress does not scuttle the old; progress builds on it. Multi-cellular creatures don't throw away single cells as outdated; they use them as building blocks. A democracy does not get rid of freedom of religion, it builds on it. There is no scenario in which we move forward by robbing people's freedom of thought (that shows up in freedom of religion, speech, assembly, religion and press) or even erode it. There is no scenario in which we move forward by giving fewer people in a community the power to define and choose the options that defines policies.; a better community will not have less democracy.  And there is no scenario in which progress will mean having less capital - or fewer people directing capital - to fund R-n-D, retirements, hiring and consumption. Progress will build on all that, not bulldoze it. 

And yet we have a president who regularly attacks the press, the Fed, and even religion.

I had thought that at this point I would be mostly exploring ways to make the corporation a tool, how to transform work in a way that made employees more entrepreneurial, gave them more power to use the corporation to create their own lifestyles and wealth rather than be treated as tools for that corporation. This seems relevant as a means to address issues of stagnating wages and wealth and income inequality. That conversation seems to be on hold.

I did not anticipate the fact that I'd have to feel alarm at the prospect of the progress of the first three economies being reversed. I never thought that we'd have a president so casually attack the press or feel so little compunction about things like imposing a Muslim ban. But as long as the gains of the first three economies are dismissed, we are at threat for a reversal that can quickly cost us. Without the first three economies to build on, the fourth becomes precarious, probably even moot. As long as we have President Trump, I will write about him.

THE GOOD NEWS
The good news is that such disruptions to progress, such reversals, are common. Transitions into new economies are rough.

I still feel optimistic and intend to soon write a post on the inevitability of progress. The bad news is that over the course of history that plays out across four economies, a "short-term" blip can last a decade - or even generation.  If successful, Trump's attacks on freedom of religion, democracy, and our central bank will be costly.  For this reason the blog will continue to discuss the threat of Trump more than I would like.

It seems so very silly and unnecessary to re-litigate cases for democracy or freedom of religion or Keynesian policies that have already been so brilliantly argued through the history of the West and yet ....

Sometimes you are able to make progress. And sometimes you just do well just to protect what you already have. I'm looking forward to the time when we can again shift our focus to making progress into what we can't know rather than protecting what past generations have already proven.

1 comment:

Jason Brunson said...

Ron, a good & thought provoking post but I have to wonder if things are as problematic as you are saying?

Since hearing it I have thought you idea that corporations would become less "power over" and more "power to" as a very good idea. I also think we are seeing this happen, maybe not as fast as you or I would have thought but it is happening.

What are the companies rising to dominate huge sectors of the economy?
Platforms.

Google, Facebook, Amazon, etc. are all platforms that people can leverage to create wealth & income. We may not be to your 1% threshold yet but I think we are headed in the right direction.

Also, look at what Google did when they became Alphabet. They basically transformed into a holding company. We are seeing other huge businesses do much the same thing, buyout smaller businesses as a core growth strategy. This is not your idea at the individual level but it is close. These big companies are slowly becoming glorified holding companies with a portfolio of Brands they hold & manage.

So I don't think you should doubt your theory, it is just that you may have the details of how it is playing out wrong. It is not necessarily workers in a corporation becoming pseudo-entrepreneurs and getting rich (although I bet that comes eventually through company owned business accelerators) but it is actual entrepreneurs building businesses via corporate platforms & getting income rich through the cashflow from those businesses or selling out and getting cash rich from the exit.

This still fits your theory and is happening.

I do agree that it seems to be being slowed down and old arguments resurfacing but I think trying to lay that at the foot of Trump is a bit of an ideological move on your part. Here's why:

- First, lots of things are getting "re-debated" for goodness sake we have people arguing that the earth is flat. So I don't think the things you high-lighted are anything special, it is just some of the things being talked about in this great "re-debate" we seem to be having thanks to the internet.

- Questioning the press is not a Trump thing, it has been happening for a long time now, Trump is more a result than cause. Plus, if you are willing to look past the rhetoric which presidents actual policies were more anti-press Trump or Obama? I mean just to choose the first link I got from Google https://www.washingtonpost.com/lifestyle/style/shocked-by-the-trump-aggression-against-reporters-and-sources-the-blueprint-was-made-by-obama/2018/06/08/c0b84d88-6b06-11e8-9e38-24e693b38637_story.html if one looks at actions actually taken Obama is worse than Trump in many ways (although Trump has only been around a year & a half so he could still beat Obama) but even if you disagree trying to blame Trump's rhetoric targeting media sources that openly hate him without acknowledging how much of this problem predates Trump is disingenuous at best.

- As far as making voting harder goes I am interested in what you mean? The main things I have heard is about requiring some ID to vote at the federal level. This is not really going backwards in any meaningful sense. Is there more?

- And all I'll say about "Keynesian policies" is that everything you mention revolves around dispersing power until you talk about Keynesianism & the Fed those are both tools to centralize power. You might think they represent our best options but looking to alter them may very well come from a place you should be supporting at a philosophical level even if you disagree on the specific way Trump & co are going about it.

Now I'll add the mandatory boiler plate that I am not a Trump fan, but I think it is important to point out that if you are not pointing to all the ways the Obama administration acted as a roadblock to the kind of progress you are talking about then attacking Trump is mostly just political Tribalism.