Pur Autre Vie

I'm not wrong, I'm just an asshole

Sunday, May 15, 2016

What We Should Fear

In general, conservative fears of "creeping socialism" are overblown.  They are also often hypocritical, since conservatives opportunistically argue that liberal policies threaten Medicare, etc.  I'm just laying down a marker to observe that the phantom that conservatives attack in the United States is a reality elsewhere.  Generally, though, it's not a reality in the most redistributive countries, such as the Scandinavian countries, Germany, and the Netherlands.  Instead, what you might call left-wing overreach is at its worst in much more dysfunctional, less developed countries.  For instance, today there is a story in the New York Times that highlights what a basket case Venezuela has become.  I might add India's system of affirmative action to the list.  Or Brazil's pension system.  Or Zimbabwe's well-known economic train wreck.

Since the left wing in the United States generally doesn't take Venezuela, India, Brazil, or Zimbabwe as its model, these examples have limited relevance for us.  We can (somewhat) safely move toward Dutch levels of taxation and social spending without taking a detour through a Venezuelan hellhole.  But it's worth bearing in mind that things can go down a very bad path, and so leftists should have a basic understanding of the toxic dynamics that can develop and an explanation for why their plans won't be subject to those dynamics.  (This is not to say that the burden of proof is on leftists.  Given that the U.S. is much more similar to northern Europe than to Venezuela, I would say the burden of proof is on conservatives if they want to make the comparison.  My point is simply that leftists shouldn't hide behind the burden of proof, they should actively consider the issue.)

To some extent, the countries I've listed all simply faced challenges that social-democratic northern Europeans didn't.  (Then again, ex ante, our legacy of chattel slavery would seem to make us vulnerable to the same pathologies.  These sorts of historical explanations are clearly right but they don't necessarily give us much guidance going forward.)  But I think the northern Europeans also benefited from strong social/political norms that kept them on the straight and narrow.  I don't imagine that Dutch workers are permitted to retire in their mid-40s with a full pension (see the story on Brazilian pensions that I linked to above), because that would be crazy.  If the left-wing Dutch parties demanded it, they would be pilloried as irresponsible and unreasonable.  By contrast, you can see how Brazil, having adopted an overly-generous pension system, doesn't have the political wherewithal to end it:  it has created a huge constituency of pension recipients (or people who anticipate becoming pension recipients soon) who are understandably reluctant to give up their rights.  To adopt a rational pension system in Brazil would require making a lot of people poorer than they are in the status quo.  The Netherlands doesn't have that problem (or at least, not on remotely the same scale relative to its GDP) because it never went down that road in the first place.  But why didn't it?  Why are the Dutch so much more responsible (despite having, by the way, a very generous social safety net)?  That is the question.

There is a...  field?  sub-field?  of academic thought called public choice theory that essentially amounts to a cynical "we're all Brazil" way of thinking about things.  In other words, the theory highlights the danger of majoritarianism + redistribution, precisely because you can come up with models where everything goes to shit very quickly in such a system, in more or less the way Brazil's pension system has turned into a sick joke.  It's clear, though, that this approach misses something important, because it can't explain the highly successful redistributive democracies that we observe in the world.  But so my point is, the challenge is to figure out where public choice theory (or at least, the cynical, anti-redistribution thread of it) has traction and where it doesn't.  Over what domain should we apply it, and over what domain should we disregard it (or heavily qualify it)?

So anyway that's the thing we should try to figure out.  I don't have any suggestions, though.  Or rather, I have very vague suggestions.  One, which I pretty earnestly believe, is that in general it's better to tax and spend than to impose more direct controls on the economy (for instance price controls).  But that's a general observation that doesn't necessarily translate to specific policies without a lot more work.  I think a minimum wage is not a terrible idea, for instance, even though I question whether a national $15 minimum wage would be a good idea.  And I think public ownership of parks is good.  Maybe I just have strong status quo bias in this area.

We should also try to maintain our standards of open political discourse, which are an important bulwark against idiocy.  For instance, we probably shouldn't use securities laws to silence our political opponents.  (I think Levine's breakdown is basically right.  Citing contradictory statements to shame your opponents is good.  Using securities laws to silence them is bad.)

More broadly, I think it's important to maintain the integrity of our political process, even if it means foregoing political advantage in the short term.  In other words, I think it's better to behave well and bash your opponents when they don't than to behave poorly and cite your opponent's behavior to justify it.  Standards must be maintained.

But I admit, these prescriptions, besides being really vague, are mostly just speculation on my part.  I can't cite any reason, beyond basic intuition, that they will help us avoid a Venezuelan fate.  I might just be expressing my own taste for (mostly) above-board politics.  (And there are few things I admire more than the hardball politics that LBJ used to cram the Civil Rights Act and the Voting Rights Act through Congress.  So where does that leave me?)  The same goes for my belief that Trump would set us off down a very bad path in this as in so many other areas.  Maybe I'm just expressing my distaste for Trump.

Anyway blah blah blah, I hate myself, the world is terrible.


Blogger Zed said...

I think this has something to do with whether politics is conceptualized as group conflict or as ideological conflict. My sense is that in the contemporary first world there is a norm that acceptable political discourse is framed ideologically. This means that policies have to be sold as "good for (almost) everyone" and this meaningfully constrains what policies are on the table. By contrast, if politics is unconstrained group conflict then it is natural for the winning group to grab as much as it can, without much concern for the general good. (I've argued elsewhere that US politics is too ideological but evidently there are dangers to going too far in the opposite direction.)

My instinct is that the US is somewhere between northern Europe and the third world along the "group conflict" dimension, which might mean that welfare-state programs are more dangerous here than there. A good example is Medicare, which probably should be trimmed and rationalized in some ways but cannot because that'd hurt some large influential subset of incumbent medical providers and retirees. As to the narrow selfishness of the elderly vote, it seems fairly plausible that if the demographic characteristics of retirees and schoolchildren were not so starkly different, the politics would play out somewhat differently...

12:50 PM  
Blogger Grobstein said...

I certainly think the group conflict story is a partial explanation, and northern European politics famously benefits from a solidarity that is boosted by ethnic homogeneity. Presumably group conflict is less salient when you are inclined to think of everyone as one group.

But I think the difference between the United States and the "basket cases" is not being correctly identified. I think the US avoids a lot of crises simply because it is rich and growing. Interest groups can be bought off -- sometimes with great largess -- without scuttling the boat, because there's so much to go around. Similarly, huge mistakes can be swallowed and forgotten.

Consider US military and security spending, which is at least half a trillion dollars a year, much of it paid to contractors. This spending is subject to very little budgetary or market discipline. If it was in any other country it would be obvious that it was perverted -- hundreds of millions of dollars are spent on projects that never finish, there is a revolving door between government and industry, etc. Because it's here we don't see it that way. But more importantly, because it's here, that $600+bn yearly outlay isn't enough to provoke a fiscal crisis. We have a high GDP and a large tax base so we can afford it. Health care spending seems similar -- another hole into which we shovel a huge amount of money, to little overall reward, but which is not a "crisis" because we can in some sense afford it.

So arguably it is our size and wealth that is the relevant difference, not the health of our political culture. A healthy political culture would avoid spending the money this way at all; we are insulated to some extent from our politics by our wealth.

The US still does pretty well on corruption / good government measures, I think, so it is likely that the Brazil pension crisis is wilder than any equivalent we have. But we have our own pension crises and , public employment bureaucracies, etc.

One model of governance is having to say "No" to people. If the pie is large and growing, you can say "Yes" instead -- but it may turn out that you are postponing the political costs.

(Note that I am not arguing that our government is generous -- for many important things, it is distinctly ungenerous. It says "No" to many, for the worse. But in some ways it is profligate.)

5:48 PM  
Blogger Grobstein said...

I'm not really sure what to take from the Brazil story, btw. Obviously some people are getting ridiculous windfall benefits, as the anecdotes in the Times story illustrate. It apparently eliminates incentives to work for some older (but still completely capable) civil servants. It is prima facie a pretty donked up system.

But it's not like the cases of Venezuela or Zimbabwe at all. Those cases look like societies destroyed by bad policies, and the contrast with the United States is clear. The Brazil story is more like, some people get benefits which are probably harmful and bad for society. The circus framing is unlike what you would see in a story about the US, but the substantive contrast is less powerful. We have some donked up systems as well.

Btw, if Brazil is supposed to be a story about people getting away with something because of socialism, you can easily find such stories from the Nordic democracies as well. In fact I think the Times has run stories like that. You know, "When he turned 29, Bjaern decided he didn't want to work anymore. ..."

8:55 PM  
Blogger Zed said...

I think rent-seeking/reg. capture can be an important aspect of corruption although it is not well captured by the standard indices. (Obviously one of the reasons there is more of this in the US than elsewhere is the rents are bigger.)

I see James's point as having two parts: 1. stickiness of unsustainable legacy policies, 2. ex ante awfulness of legacy policies -- e.g. an effective retirement age of 45. I want to shelve (1) b'se it is not actually a puzzle. My claim is just that group conflict is a contributor to 2, because norms forcing people to pretend that policies are universally good can act as a (weak) curb on the worst kinds of explicit plunder. (So can people feeling uncomfortable about stealing from others, which is likelier when group conflict is weak.)

Certainly size and wealth allow a system to tolerate a larger amount of rentseeking. I think the absence of wealth also makes various forms of dodgy rent-seeking and benefiting from the govt. seem less unethical. Even if Brazilian pensions are absurd in some sense they do not actually guarantee opulence, so it seems as if people would be less ashamed of fighting to keep theirs than in a richer country.

9:04 PM  

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