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Horatio Alger is Dead, America Has a New Class Structure, and it’s Not Your Fault

horatio alger

January 23, 2020

The member of the month at the gym where I work out is a guy who looks like he’s in his early 20’s. One of the “get to know me” questions asks “Who motivates you the most?” His answer: “My dad, who taught me that hard work can give you anything, as long as you can dedicate time and effort.”

The answer is predictably, utterly American. “Hard work can give you anything” — yes of course, everybody knows that. Parents tell it to their kids, and the kids believe it. America is the Land of Opportunity; it gives you every chance for success, and now it’s up to you. “Anything you want” is yours for the taking – and if you don’t take it, that’s your problem, not America’s.

Except it’s not true, and we know that, too. We know that you can work really, really hard and dedicate lots and lots of time and effort (and money), and still not get what you want.

Why do we keep saying and believing something that isn’t true? Why don’t we admit that things don’t actually work that way? Because that would be un-American. So instead we elevate the boast: America doesn’t just offer opportunity, it gives everybody equal opportunity — like Teddy Roosevelt said:

“I know perfectly well that men in a race run at unequal rates of speed.
I don’t want the prize given to the man who is not fast enough to win it on his merits, but I want them to start fair.”

Equal opportunity means everybody starts together. No, not everybody wins, but still… no matter who you are or where you’re from, everybody has the same odds. None of that landed gentry/inherited wealth class system here.

Except that’s not true either, and we know that, too.

But we love the equal opportunity myth. We love the feeling of personal power – agency, self-efficacy – it gives us. It’s been grooved into our American neural circuits since the beginning:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the .pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.”[1]

We’re all equals here in America, divinely ordained to pursue the good life. That’s our creed, and we – “the governed” — declare that we believe it.

Even if it’s not true.

Equal opportunity is a foundational American cultural belief. Cultural myths are sacred – they’re afforded a special status that makes them off limits to examination. And national Founding Myths get the highest hands-off status there is.

Never mind that the Sacred doesn’t seem to mind being doubted – it’s the people who believe something is sacred you have to watch out for. And never mind that history and hindsight have a way of eventually outing cultural myths – exposing them as belief systems, not absolute truths. But it’s too late by the time history has its say: the fraud is perpetrated in the meantime, and attempts to expose it are shunned and punished as disloyal, unpatriotic, treasonous.

If we can’t out the myth, what do we do instead? We blame ourselves. If we don’t get “anything you want,” then we confess that we didn’t work hard enough, didn’t “dedicate the time and effort,” or maybe we did all that but in the wrong way or at the wrong time. Guilt, shame, embarrassment, frustration, depression… we take them all on as personal failings, in the name of preserving the myth.

You may have seen the Indeed commercial. (Go ahead, click it – it’s only 30 seconds.)

Indeed advert

It brilliantly taps the emotional power of the equal opportunity myth.

“With no choice but to move back home after college, they thought he’d be a little more motivated to find a job.”

The kid is glued to his phone, and it’s driving his parents crazy. He’s obviously a slacker, a freeloader. Household tensions mount. The phone dings at the dinner table. Dad snatches it up.

“Turns out, they were right.”

He’s using it to find a job! Faith and family harmony restored! That’s our hard-working boy!

Heartwarming, but still untrue.

But What About the Strong Job Numbers?

Yes, unemployment is low. But consider this analysis of those numbers[2], just out this month:

“Each month, the Bureau of Labor Statistics releases its Employment Situation report (better known as the ‘jobs report’) to outline the latest state of the nation’s economy. And with it, of late, have been plenty of positive headlines—with unemployment hovering around 3.5%, a decade of job growth, and recent upticks in wages, the report’s numbers have mostly been good news.

“But those numbers don’t tell the whole story. Are these jobs any good? How much do they pay? Do workers make enough to live on?

“Here, the story is less rosy.

“In a recent analysis, we found that 53 million workers ages 18 to 64—or 44% of all workers—earn barely enough to live on. Their median earnings are $10.22 per hour, and about $18,000 per year. These low-wage workers are concentrated in a relatively small number of occupations, including retail sales, cooks, food and beverage servers, janitors and housekeepers, personal care and service workers (such as child care workers and patient care assistants), and various administrative positions.

“Just how concerning are these figures? Some will say that not all low-wage workers are in dire economic straits or reliant on their earnings to support themselves, and that’s true. But as the following data points show, it would be a mistake to assume that most low-wage workers are young people just getting started, or students, or secondary earners, or otherwise financially secure:

      • Two-thirds (64%) of low-wage workers are in their prime working years of 25 to 54.
      • More than half (57%) work full-time year-round, the customary schedule for employment intended to provide financial security.
      • About half (51%) are primary earners or contribute substantially to family living expenses.
      • Thirty-seven percent have children. Of this group, 23% live below the federal poverty line.
      • Less than half (45%) of low-wage workers ages 18 to 24 are in school or already have a college degree.

“These statistics tell an important story: Millions of hardworking American adults struggle to eke out a living and support their families on very low wages.”

When the kid got a text at the dinner table, it was about one of these jobs. Mom and Dad better get used to the idea that he’ll be around for awhile. Even if he gets that job, it won’t offer benefits, could end at any moment, and won’t pay him enough to be self-sustaining. That’s not how Mom and Dad were raised or how things went for them, but that’s how the economy works nowadays.

Economics Begets Social Structure

The even bigger issue is that the equal opportunity myth has become a social norm: uber-competitive free market economics controls the collective American mindset about how adult life works, to the point that it’s become a nationalist doctrine.

The Chicago School of Economics – the Vatican of free marketism — believed so ardently in its on doctrines that its instructional approach took on the dynamics of fundamentalist indoctrination:

“Frank Knight, one of the founders of Chicago School economics, thought professors should ‘inculcate’ in their students the belief that economic belief is ‘a sacred feature of the system,’ not a debatable hypothesis.’”[3]

Free market ideology preaches that capitalism promotes both economic and social opportunity. It has had the past four decades to prove that claim, and has failed as spectacularly as Soviet-style communism failed to benefit the workers it was supposed to redeem. Instead, free market ideology has given America what it wasn’t ever supposed to have: a stratified socio-economic class system that skews rewards to the top 10% and leaves the rest in the grip of the dismal statistics listed above.

But we don’t see that – or if we do, we don’t say anything about it, we just keep reciting the “trickle down” mantra. Member of the month and his Dad and the parents in the Indeed commercial and most Americans still believe the myth. Ironically the ones who see through it are the top 10% members who got in before they closed the gates. Meanwhile, the lower 90% — the decimated middle class, the new poor, the hard-working wage-earners – keep blaming themselves.

Even though it’s not their fault. If the kid in the commercial can’t find a job to support himself, it’s not his fault.

“I can’t pay my bills, afford a house, a car, a family. I can’t afford healthcare, I have no savings. Retirement is a joke. I don’t know how I’ll ever pay off my student loans. I live paycheck to paycheck. I’m poor. But it’s not my fault.”

Try saying that to Dad at the dinner table.

But unlike “anything you want,” “it’s not your fault” is true: current economic policy and its companion social norms do not deliver equal opportunity. Horatio Alger is dead, but the equal opportunity myth lives on life support as we teach it to our children and elect politicians who perpetuate it, while all of us ignore the data.

Horatio Alger is Dead

There’s no more enduring version of the upward mobility ideal than the rags-to-riches story codified into the American Dream by Horatio Alger, Jr. during the Gilded Age of Andrew Mellon, John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, and the rest of the 19th Century Robber Barons. If they can do it, so can the rest of us, given enough vision, determination, hard work, and moral virtue — that was Alger’s message. Except it never worked that way, especially for the Robber Barons – opportunists aided by collusion and chronyism carried out in the absence of the antitrust and securities laws that would be enacted under the New Deal after history revealed the fraud.[4]

But never mind that — according to Roughrider Teddy and politicians like him, government’s job is to guarantee equal opportunity for all, then get out of the way and let the race to riches begin. Thanks to our devotion to that philosophy, a fair start has become is a thing of the past — so says Richard V. Reeves in his book Dream Hoarders.

Reeves begins by confessing that his disenchantment over the demise of the Horatio Alger ideal will no doubt seem disingenuous because he didn’t grow up American and is now a member of the economic elite himself:

“As a Brookings senior fellow and a resident of an affluent neighborhood in Montgomery County, Maryland, just outside of DC, I am, after all, writing about my own class.

“I am British by birth, but I have lived in the United States since 2012 and became a citizen in late 2016. (Also, I was born on the Fourth of July.) There are lots of reasons I have made America my home. But one of them is the American ideal of opportunity. I always hated the walls created by social class distinctions in the United Kingdom. The American ideal of a classless society is, to me, a deeply attractive one. It has been disheartening to learn that the class structure of my new homeland is, if anything, more rigid than the one I left behind and especially so at the top.

“My new country was founded on anti-hereditary principles. But while the inheritance of titles or positions remains forbidden, the persistence of class status across generations in the United States is very strong. Too strong, in fact, for a society that prides itself on social mobility.”

Reeves also wrote a Brookings Institute monograph called Saving Horatio Alger: Equality, Opportunity, and the American Dream, in which he said the following:

“Vivid stories of those who overcome the obstacles of poverty to achieve success are all the more impressive because they are so much the exceptions to the rule. Contrary to the Horatio Alger myth, social mobility rates in the United States are lower than in most of Europe. There are forces at work in America now — forces related not just to income and wealth but also to family structure and education – that put the country at risk of creating an ossified, self-perpetuating class structure, with disastrous implications for opportunity and, by extension, for the very idea of America.

“The moral claim that each individual has the right to succeed is implicit in our ‘creed,’ the Declaration of Independence, when it proclaims ‘All men are created equal.’

“There is a simple formula here — equality plus independence adds up to the promise of upward mobility — which creates an appealing image: the nation’s social, political, and economic landscape as a vast, level playing field upon which all individuals can exercise their freedom to succeed.

“Many countries support the idea of meritocracy, but only in America is equality of opportunity a virtual national religion, reconciling individual liberty — the freedom to get ahead and “make something of yourself” — with societal equality. It is a philosophy of egalitarian individualism. The measure of American equality is not the income gap between the poor and the rich, but the chance to trade places.

“The problem is not that the United States is failing to live up to European egalitarian principles, which use income as a measure of equality. It is that America is failing to live up to American egalitarian principles, measured by the promise of equal opportunity for all, the idea that every child born into poverty can rise to the top.”

There’s a lot of data to back up what Reeves is saying. See, e.g., this study from Stanford, which included these findings:

“Parents often expect that their kids will have a good shot at making more money than they ever did…. But young people entering the workforce today are far less likely to earn more than their parents when compared to children born two generations before them, according to a new study by Stanford researchers.”

The New American Meritocracy

Along with Richard Reeves, philosopher Matthew Stewart and entrepreneur Steven Brill cite the same economic and related social data to support their conclusion that the new meritocrat socio-economic class has barred the way for the rest of us. I’ll let Matthew Stewart speak for the others[5]:

“I’ve joined a new aristocracy now, even if we still call ourselves meritocratic winners. To be sure, there is a lot to admire about my new group, which I’ll call—for reasons you’ll soon see—the 9.9 percent. We’ve dropped the old dress codes, put our faith in facts, and are (somewhat) more varied in skin tone and ethnicity. People like me, who have waning memories of life in an earlier ruling caste, are the exception, not the rule.

“By any sociological or financial measure, it’s good to be us. It’s even better to be our kids. In our health, family life, friendship networks, and level of education, not to mention money, we are crushing the competition below.

“The meritocratic class has mastered the old trick of consolidating wealth and passing privilege along at the expense of other people’s children. We are not innocent bystanders to the growing concentration of wealth in our time. We are the principal accomplices in a process that is slowly strangling the economy, destabilizing American politics, and eroding democracy. Our delusions of merit now prevent us from recognizing the nature of the problem that our emergence as a class represents. We tend to think that the victims of our success are just the people excluded from the club. But history shows quite clearly that, in the kind of game we’re playing, everybody loses badly in the end.

“So what kind of characters are we, the 9.9 percent? We are mostly not like those flamboyant political manipulators from the 0.1 percent. We’re a well-behaved, flannel-suited crowd of lawyers, doctors, dentists, mid-level investment bankers, M.B.A.s with opaque job titles, and assorted other professionals—the kind of people you might invite to dinner. In fact, we’re so self-effacing, we deny our own existence. We keep insisting that we’re ‘middle class.’

“One of the hazards of life in the 9.9 percent is that our necks get stuck in the upward position. We gaze upon the 0.1 percent with a mixture of awe, envy, and eagerness to obey. As a consequence, we are missing the other big story of our time. We have left the 90 percent in the dust—and we’ve been quietly tossing down roadblocks behind us to make sure that they never catch up.”

Two Stories, One Man

In a remarkable display of self-awareness and historical-cultural insight, Stanford professor David Labaree admits that his own upward mobility story can be told two ways — one that illustrates the myth and one that doesn’t, depending on your point of view.[6]

“Occupants of the American meritocracy are accustomed to telling stirring stories about their lives. The standard one is a comforting tale about grit in the face of adversity – overcoming obstacles, honing skills, working hard – which then inevitably affords entry to the Promised Land. Once you have established yourself in the upper reaches of the occupational pyramid, this story of virtue rewarded rolls easily off the tongue. It makes you feel good (I got what I deserved) and it reassures others (the system really works).

“But you can also tell a different story, which is more about luck than pluck, and whose driving forces are less your own skill and motivation, and more the happy circumstances you emerged from and the accommodating structure you traversed. As an example, here I’ll tell my own story about my career negotiating the hierarchy in the highly stratified system of higher education in the United States. I ended up in a cushy job as a professor at Stanford University.

“Is there a moral to be drawn from these two stories of life in the meritocracy? The most obvious one is that this life is not fair. The fix is in. Children of parents who have already succeeded in the meritocracy have a big advantage over other children whose parents have not. They know how the game is played, and they have the cultural capital, the connections and the money to increase their children’s chances for success in this game.

“In fact, the only thing that’s less fair than the meritocracy is the system it displaced, in which people’s futures were determined strictly by the lottery of birth. Lords begat lords, and peasants begat peasants. In contrast, the meritocracy is sufficiently open that some children of the lower classes can prove themselves in school and win a place higher up the scale.

“The probability of doing so is markedly lower than the chances of success enjoyed by the offspring of the credentialed elite, but the possibility of upward mobility is nonetheless real. And this possibility is part of what motivates privileged parents to work so frantically to pull every string and milk every opportunity for their children.”

Pause for a moment and wonder, as I did, why would the new meritocrats write books and articles like these? Is it a case of Thriver (Survivor) Guilt? Maybe, but I think it’s because they’re dismayed that their success signals the end of the American equal opportunity ideology. You don’t trample on something sacred. They didn’t mean to. They’re sorry. But now that they have, maybe it wasn’t so sacred after all.

The new socio-economic class system was never supposed to happen in America. We weren’t supposed to be like the Old World our founders left behind. But now we are, although most of us don’t seem to know it, and only a few brave souls will admit it. Meanwhile the Horatio Alger mansions are all sold out, and the gate to the community is locked and guarded. That kind of thing just doesn’t happen in America.

Until it did.

[1] The Declaration of Independence.

[2] Low Employment Isn’t Worth Much if the Jobs Barely Pay, The Brookings Institute, Jan. 8, 2020.

[3] The Shock Doctrine: The Rise of Disaster Capitalism, Naomi Klein (2017).

[4] The best source I’ve found for the American history we never learned is Americana: A 400-Year History of American Capitalism, Bhu Srinivasan (2017).

[5] Matthew Stewart is the author of numerous books and a recent article for The Atlantic called The 9.9 Percent is the New American Meritocracy. Steven Brill is the founder of The American Lawyer and Court TV, and is the author of the book Tailspin: The People and Forces Behind America’s Fifty-Year Fall–and Those Fighting to Reverse It and also the writer of a Time Magazine feature called How Baby Boomers Broke America. The quoted text is from Stewart’s Atlantic article.

[6] Pluck Versus Luck, Aeon Magazine (Dec. 4. 2019) –“Meritocracy emphasises the power of the individual to overcome obstacles, but the real story is quite a different one.”

School’s Out, What’s Next?

Mini bua

In November 2016, one of my daughters and I shared an espresso and a big life conversation at the Minibus Café in Gangnam, Seoul. (Yes, as in Gangnam Style.) At one point, I told her someone in her generation ought to go to grad school (probably in London, I guessed) and develop an economic model to make sense of the new economy and its new paradigm job market.

“Maybe you should,” she replied.

So I did, but minus grad school, London. and the economic model. Instead, “maybe you should” became the ultimate autodidactic independent study, touching nearly all academic disciplines. By now, three years later, I’ve gotten the college education I was too clueless to get when I was there. (I was definitely a case for “college is wasted on the young.”) The learning got personal, too – it explained my own economic and work history in surprising ways that put to rest several career ghosts,

All that, from studying economics and jobs! Who would have thought?!

I started reading and researching in January 2017, and started blogging half a year later. Each post was a 750-1,000 word paper due every week, quoting experts and citing sources. I had no intention of becoming an economist, and did my best to dodge political polarizing. I just wanted to understand the world my kids were growing up in (the same world I was growing old in). Jobs and careers and surviving in the “real world” weren’t the same — I knew that much; I wanted to know more.

Today’s post is #128. Even that many hasn’t emptied my research files. Plus, I’d seen over and over how much economic conversation relies on long-held ideas that don’t work anymore. To move on, we need to challenge our cherished but outdated beliefs and institutions. So I started another blog whose goal is to do that in areas other than economics.

I decided early on to keep studying economics and jobs only until I stopped uncovering new topics – kind of like when Bono said U2 would stop making albums when they became irrelevant. Last summer, I thought I was close to that point, but things kept coming up … until the past two “Reckoning” posts, when I thought surely this is it, surely school’s finally out.

But now I’m not so sure.

All told, I’ve been blogging for nearly nine years on a series of topics that usually last 1-3 years. A couple were collected into books (free to download here, or available from Amazon for a price here and here). But another cut and paste job from this blog didn’t feel right. Blog posts are about the topic du jour, which is great for learning and keeping up, but lacks continuity. Meanwhile, as I’ve been researching this series, I’ve developed a fondness for “long reads” – articles 3-4 times longer than the ones I’ve been writing. They invite both writer and reader to slow down, be more thorough.

I’ve therefore decided to keep my promise and stop blogging – both here and in my other blog – and instead write longer, less frequent, more developed articles. In this forum, I’ll go back, organize past material thematically, update the research, find out what the authors I quoted have to say now, find new people with new things to say, and generally follow new rabbit trails as I’ve done before.

School’s out, but I’m not done learning.

That’s what’s next for 2020. Thanks for reading, following, and sharing.

Click the image below, have a listen, and remember what it’s like to be a kid on June 1st.

Alice Cooper

Out for summer, out ‘til fall,
We might not go back at all

School’s Out, Alice Cooper

Reckoning With Competitive Capitalism [2]

President Kennedy address at Yale

 “President John F. Kennedy explained to Yale’s graduating class of 1962 that ‘the great enemy of the truth is very often not the lie — deliberate, contrived, and dishonest —  but the myth — persistent, persuasive, and unrealistic. Too often we hold fast to the clichés of our forebears…. We enjoy the comfort of opinion without the discomfort of thought.’”

The Founding Myth, by Andrew L. Seidel (2019)

Adverse outcomes often aren’t the result of dishonesty, fraud, or conspiracy; it’s just that things don’t go as projected. The trick is to notice and make adjustments, but often we don’t, especially when the expected outcome has become a cultural myth. In that case, belief makes us blind, conviction replaces vigilance, and contrary data avoids analysis, until one day we find ourselves living in a distressing new normal and wonder how we got here. Often, it takes a crisis to wake us up.

We’ve seen this dynamic before when economic policy morphed into socio-economic ideology. Communism began with an intent to champion the working man but became brutal and imperialistic; the Cold War was “normal” until one day the wall came crashing down and the Soviet Union and its progeny were thrown at the mercy of  capitalism, their ideological rival. The American Industrial Revolution begun by the Robber Barons roared through the 20’s but then crashed into the Great Depression; the era of legal monopolies, unregulated stock speculation, and vast economic inequality was recast into the social programs of the New Deal.

And now we’re seeing the cycle again:  post-Cold War free market capitalism blazed through the past three decades, morphed into its current hyper-competitive version, but now its unfulfilled promise of universal prosperity is becoming too obvious to ignore and there are signs its day of reckoning may not be far off, if not already at hand. That, at least, is the message of a Time Magazine cover story on economic reckoning that ran last month. It begins this way:

“History is the story of conditions that long seem reasonable until they begin to seem ridiculous. So it is with America’s present manic hyper-capitalism.

 “Until recently, it seemed normal that a technological revolution that began with promises of leveled playing fields had culminated in an age of platform monopolies. Normal that businesspeople should try to make as much money as possible by paying as little as possible in taxes and wages, then donate a fraction of the spoils to PR-friendly social causes. Normal that economic security for most Americans was becoming a relic of the past.,,. Normal that bankers could shatter the world economy with their speculating, and that they would be among the few to be made whole after the crisis.”

How the Elites Lost Their Grip: in 2019, America’s 1% behaved badly and helped bring about a reckoning with capitalism, Time Magazine , Dec. 2-9, 2019.[1]

These aspects of “normal” weren’t intended, but they are how things turned out. Along the way, various individuals and movements were vigilant enough to have seen the trends. but their attempts at dissent fell on deaf ears on both sides of the political aisle.[2]

“For years, there have been voices trying to denormalize this state. There were protests in Seattle in 1999, there was Occupy in 2011, there was the DSA [Democratic Socialists of America], there was the World Social Forum to rival the World Economic Forum, there was, eternally, Bernie Sanders saying the exact stuff he is still saying today, there were civic groups trying to organize workers and poor communities, there were outcasts in Silicon Valley warning that Mark Zuckerberg wasn’t really about human connection. But America was in the grips of the ideological consensus… Hyper-capitalism was the intellectual stadium in which the country played.”

Thus hyper-competitive, hyper-privatized, hyper-monetized capitalism became the cultural standard of the American Way as politicians and the public transferred their faith in Post-WWII neoliberal capitalism, which did indeed “float all boats,”  to the new Post-Cold War capitalism, which was supposed to have the same effect but didn’t. Instead of universal prosperity and opportunity, the new capitalism relegated the Public to the left behind, economic precarity and job insecurity took over the workplace, healthcare and other employment benefits were left up to consumers, upward mobility through higher education became the lifelong debtor of a newly nationalized student loan industry, incomprehensible wealth was increasingly concentrated in an incomprehensibly tiny percentage of capitalists, a new meritocratic social class arose… we’ve heard commentators recite the same litany of outcomes time and again in these blog posts.

But the days of complacency are over, the Time article declares:  the year 2019 brought us a wakeup call in the form of the one percenters “behaving badly” in such things as Amazon’s failed expansion in NYC, the college admissions scandal, and Facebook’s $5 Billion FTC fine.

“In response to these scandals and outrages, many in the business world declared themselves newly interested in reform. The most prominent and heralded instance this past year was a statement by the Business Roundtable, an umbrella organization whose members are the chief executives of many of America’s largest companies. For decades, the roundtable has clung to a particular interpretation of the purpose of a business—that it is solely to make money for shareholders. With its new statement, issued in August, the roundtable updated its view.”[3]

“It was inspiring, limited stuff,” the Time article says of these developments, but “what it really revealed was how hard it will be for the old-guard capitalists to change at all.” As JFK told the Yale Class of ’62, allegiance to cultural myths dies hard and, all evidence to the contrary, free market capitalism’s ideological lynchpin remains in place:  what Reaganomics called “trickle down” — the belief that free market capitalism is win-win, that’s what’s good for the elites will be good for the commons.[4]

“If a single cultural idea has upheld the disproportionate power of [capitalism’s winners], it has been the idea of the “win-win.” They could get rich and then “give back” to you: win-win. They could run a fund that made them sizable returns and offered you social returns too: win-win. They could sell sugary drinks to children in schools and work on public-private partnerships to improve children’s health: win-win. They could build cutthroat technology monopolies and get credit for serving to connect humanity and foster community: win-win.

“As this seductive idea fizzles out, it raises the possibility that this age of capital, in which money was the ultimate organizing principle of American life, could actually end.

“The choice facing Americans is whether we want to be a society organized around money’s thirsts, a playground for the whims of billionaires, or whether we wish to be a democracy. The second Gilded Age will end at some point. The question is what comes next.”

Just how that question will be answered remains to be seen.

[1] All quotes in this post are all taken from this article.

[2] Left and right are polarized on various social issues, but beginning with the Clinton administration have been united in their economic free market ideology.

[3] We’ve previously looked at the Business Roundtable’s “Statement of the Purpose of a Corporation” that promotes “an economy that serves all Americans.”

[4] See “Winners Take All” – a combative short video thank debunks the trickle down theory.

Reckoning With Competitive Capitalism

“There exists an obvious fact that seems utterly moral:
namely, that a man is always prey to his truths”

Albert Camus, The Myth of Sisyphus and Other Essays (1955)

I wrote a post about 2½ years ago (Aug. 31, 2017) with the same title as this one. It referred to University of Connecticut law professor James Kwak’s book Economism, which warns against “the pernicious influence of economism in contemporary society.” Prof. Kwak defines “economism” as “a distorted worldview based on a misleading caricature of economic knowledge,” and makes the case that free market ideology is guilty of it:

“The competitive market model can be a powerful tool, but it is only starting point in illuminating complex real-world issues, not the final word. In the real world, many other factors complicate the picture, sometimes beyond recognition.”

As we’ve seen, free market economic theory is based on the assumption of a “pure” capitalist state. Prof. Kwak calls for a new approach that meets the complex challenges of real life:

“Real change will not be achieved by mastering the details of marginal costs and marginal benefits, but by constructing a new, controlling narrative about how the world works.”

“Reckoning” means “a narrative account” and “a settling of accounts,” as in “Day of reckoning.”[1] A reckoning on economic policy therefore begins with an examination of  whether the prevailing ideology actually delivers what it theoretically promises. Honest reckoning is hard, because the neural circuits of our brains are predisposed to maintain status quo and resist change to both individual and cultural belief systems. The difficulty is amplified when fundamentalist ideology is at play, because  reckoning threatens historical cultural mythology, which is tantamount to sacrilege.

 “History is powerful. George Santayana’s warning that ‘those who cannot remember the past are condemned to repeat it’ rings true because the past influences the present.

“Unfortunately, history’s power does not depend on its accuracy:  A widely believed historical lie can have as much impact as a historical truth.

“President John F. Kennedy explained to Yale’s graduating class of 1962 that ‘the great enemy of the truth is very often not the lie — deliberate, contrived, and dishonest —  but the myth — persistent, persuasive, and unrealistic. Too often we hold fast to the clichés of our forebears…. We enjoy the comfort of opinion without the discomfort of thought.’”

The Founding Myth, by Andrew L. Seidel (2019)

Change that breaks with predominant ideologies and historical cultural myths requires more than individual changes of opinion:  it needs shifts in cultural belief and practice, and a willingness to learn from history. The odd are stacked against it, for reasons Pulitzer prize winning war correspondent Chris Hedges describes in War is a Force That Gives Us Meaning (2014):

“Every society, ethnic group or religion nurtures certain myths, often centered around the creation of the nation or the movement itself. These myths lie unseen beneath the surface, waiting for the moment to rise ascendant, to define and glorify followers or member in times of crisis. National myths are largely benign in times of peace…. They do not pose a major challenge to real historical study or a studied tolerance of others in peacetime.

“But national myths ignite a collective amnesia in war. They give past generations a nobility and greatness they never possessed…. They are stoked by the entertainment industry, in school lessons, stories, and quasi-historical ballads, preached in mosques, or championed in absurd historical dramas that are always wildly popular during war.

“Almost every group, and especially every nation, has such myths. These myths are the kindling nationalists use to light a conflict.

“Archeology, folklore, and the search for what is defined as authenticity are the tools used by nationalists to assail others and promote themselves. They dress it up as history, but it is myth.

“Real historical inquiry, in the process, is corrupted, assaulted, and often destroyed. Facts become interchangeable as opinions. Those facts that are inconvenient are discarded or denied. The obvious inconsistencies are ignored by those intoxicated with a newly found sense of national pride, and the exciting prospect of war.”

All of this makes the Business Roundtable’s Statement on the Purpose of a Corporation and the World Economic Forum’s Davos Manifesto (we looked at them last time) all the more remarkable, since they defy four decades of the prevailing economic myth that “The [sole] social responsibility of business is to increase its profits.”

On the other hand, a recent administrative order imposing work requirements on food stamps recipients offers an equally remarkable example of myth-driven policy-making. According to ABC News (Dec. 4, 2019), proponents say the move will “restore the dignity of work to a sizable segment of our population” — clearly a nod to the cultural myth that anybody with enough gumption (and enough education, funded by the newly nationalized student loan industry) can work their way out of poverty, and if they don’t, it’s their own fault. As we’ve seen, data to support this way of thinking has long been absent, but the myth prevails, and never mind that “all the rule change does is strip people from accessing the benefit,” that the food stamp program “is intended to address hunger and not compel people to work,” and that “those affected are impoverished, tend to live in rural areas, often face mental health issues and disabilities.”

Economism was published on January 10, 2017, just shy of three years ago as I write this. Today’s “Reckoning” post was inspired by a Time Magazine cover story last month:  How the Elites Lost Their Grip: in 2019, America’s 1% behaved badly and helped bring about a reckoning with capitalism, Time Magazine (Dec. 2-9, 2019). We’ll look at what it says about economic reckoning next time.

[1] Etymology Online.

Stakeholder Capitalism

“The social responsibility of business is to increase its profits.”

Milton Friedman

Milton Friedman’s free market capitalism has prevailed since post-WWII neoliberalism played out in the 70’s, but there are recent signs that its ideological lock on economic policy may be waning — in part because of social responsibility initiatives gaining traction among its most ardent supporters.

 “What kind of capitalism do we want?” asks Klaus Schwab,  founder and chair of the World Economic Forum (WEF), “That may be the defining question of our era. If we want to sustain our economic system for future generations, we must answer it correctly.”

“Generally speaking, we have three models to choose from.

“The first is shareholder capitalism, embraced by most Western corporations, which holds that a corporation’s primary goal should be to maximise its profits.

The second model is state capitalism, which entrusts the government with setting the direction of the economy, and has risen to prominence in many emerging markets, not least China.

“The third option has the most to recommend it. Stakeholder capitalism positions private corporations as trustees of society, and is the best response to today’s social and environmental problems.

“Shareholder capitalism first gained ground in the United States in the 1970s, and expanded its influence globally in the following decades. During its heyday, hundreds of millions of people prospered as profit-seeking companies unlocked new markets and created new jobs.

“But that wasn’t the whole story. Advocates of shareholder capitalism had neglected the fact that a publicly listed corporation is not just a profit-seeking entity but also a social organism. Together with pressures to boost short-term results, the single-minded focus on profits caused shareholder capitalism to become increasingly disconnected from the real economy. Many realise this form of capitalism is no longer sustainable.”

Economic System We Select Defines Our Future. Mail & Guardian (Dec. 6, 2019)

“Stakeholder capitalism” relies on “corporations as trustees of society” to restore the Public’s place in economic policy. It’s not a new idea, but the WEF has set the tone for its reconsideration under the terms of a Davos Manifesto issued ahead of its upcoming annual January conclave of heads of nation-states and corporation nation-states in Davos, Switzerland. Some of the “Western corporations” that will be in attendance have already signaled a willingness to consider making the shift. Schwab continues:

“Now others are finally coming to the ‘stakeholder’ table. The US Business Roundtable, the country’s most influential business lobby group, announced this year that it would formally embrace stakeholder capitalism. And investing that considers its effects is rising to prominence as more investors look for ways to link environmental and societal benefits to financial returns.”

This is from the Business Roundtable’s website:

Statement on the Purpose of a Corporation

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.

Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.

While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.

Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.

Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.

Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.

Here’s the Statement as a Pdf

The Davos Manifesto and BRT Statement contemplate massive change in a world where “A company can have the right principles on paper but, at times, lose sight of what serving multiple stakeholders really means.” Is the Business Roundtable Statement Just Empty Rhetoric? Harvard Business Review (August 30, 2019). The article provides an excellence survey of thorny issues, as does Shareholder Value Is No Longer Everything, Top C.E.O.s Say, New York Times (August 19, 2019), which begins by noting the radical departure the Statement makes from Milton Friedman’s free market capitalism.

“[The BRT Statement] was an explicit rebuke of the notion that the role of the corporation is to maximize profits at all costs — the philosophy that has held sway on Wall Street and in the boardroom for 50 years. Milton Friedman, the University of Chicago economist who is the doctrine’s most revered figure, famously wrote in The New York Times in 1970 that ‘the social responsibility of business is to increase its profits.’”

Stakeholder capitalism is fraught with challenges, but its consideration appears to be a necessary first step in a reckoning on the big picture impact of current capitalism.

“Ray Dalio, the billionaire co-chairman of the investment firm Bridgewater Associates, warned in April that America faced a ‘national emergency’ in capitalism’s failure to benefit more people, and he pronounced the American Dream lost.”

How the Elites Lost Their Grip: in 2019 — America’s 1% behaved badly  and helped bring about a reckoning with capitalism, Time Magazine (Dec. 2-9, 2019).

We’ll look more at that reckoning next time.

Ideologies at War

Discourse:  Formal and orderly
 and usually extended expression of thought on a subject.

Merriam-Webster

I finally figured out why there’s no discourse in economics. Or anywhere else, for that matter.

I started researching and writing about economics and the workplace three years ago. Right away, I noticed the topic was as polarized as everything else these days. I confess, I was surprised — I was a newbie, idealistic about my new course of study. I figured everybody would want to talk about it. But the pros? No. They talked past each other, nobody convincing anybody of anything they didn’t already believe.

And now I know why.

At first, I thought the divisions — right vs. left, capitalism vs. socialism, conservative vs. progressive, free market vs. Keynesian intervention, etc.  — were the result of opinions logically and studiously debated. Three years later, I can see it’s not so — those opposing positions are rationalizations after the fact, justifying prior beliefs grounded in ideology. When a topic — any topic — is dominated by competing ideologies, a fundamentalist dynamic takes over. Fundamentalism has no place for “formal and orderly and usually extended expression of thought.” Instead, it stifles discussion, damns doubt, brutalizes dissent. If you’re not with us, you’re against us — so choose sides, and the other side can talk to the hand.

We’ve seen, for example, how the Mont Pelerin Society and the Chicago School of Economics pursued their capitalist free market beliefs with fundamentalist zeal, and how the Democratic Socialists of America party has responded in kind. This, and other similar ideological standoffs have banished discourse from the field of economics.

The Berlin Wall fell because Soviet communism failed as a fundamentalist belief, leaving American capitalism the winner of the Cold War. Since then, political leadership in the U.S. and the U.K. has supercharged capitalism into its current hyper- competitive, hyper-privatized form, to the point that free market ideology has become not just economic policy but a cultural norm, and supporting it has become a patriotic duty.

Now in its fourth decade, the post-Cold War model of capitalism has failed in the same way Soviet communism failed before it:  it has neglected and alienated the “Public” — the res publica, the things that belong to the people, the things that assure citizens the basics of life and health, satisfying work, opportunity for educational, social, and economic betterment, and the sense of meaning, purpose, and well-being those things engender.

Fundamentalist ideologies wage war, and win at all costs. When free market economics became a fundamentalist ideology, it went to war. One of my daughters recently gave me a book published in 2007, at the height (depth?) of the Great Recession. The copyright date made me inclined to dismiss it as outdated. Now, as I read it, I wonder, how it is that we never knew these things, and most of us still don’t? This is from the book blurb:

“In this groundbreaking alternative history of the most dominant ideology of our time, Milton Friedman’s free-market economic revolution, Naomi Klein challenges the popular myth of this movement’s peaceful global victory. From Chile in 1973 to Iraq today, Klein shows how Friedman and his followers have repeatedly harnessed terrible shocks and violence to implement their radical policies.”

The Shock Doctrine:  The Rise of Disaster Capitalism, Naomi Klein (2007)

Pulitzer Prize winning journalist Chris Hedges wrote about the cultural dynamics of war in War is a Force That Gives Us Meaning (2014). As you read the following, substitute your ideology of choice — political, economic, religious, etc. — in place of war as armed conflict:

“War, in times of malaise and desperation, is a potent distraction.

“The cultivation of victimhood is essential fodder for any conflict. It is studiously crafted by the state. All cultural life is directed to broadcast the injustices carried out against us.

“The goal of such nationalistic rhetoric is to invoke pity for one’s own. The goal is to show the community that what they hold sacred is under threat. The enemy, we are told, seeks to destroy religious and cultural life, the very identity of the group or state.

“Patriotism, often a thinly veiled form of collective self-worship, celebrates our goodness, our ideals, our mercy and bemoans the perfidiousness of those who hate us.

“War makes the world understandable, a black and white tableau of them and us. It suspends thought, especially self-critical thought.

“Most of us willingly accept war as long as we can fold it into a belief system that paints the ensuring suffering as necessary for a higher good, for human beings seeks not only happiness but also meaning. And tragically war is sometimes the most powerful way in human society to achieve meaning.

“Before conflicts begin, the first people silenced — often with violence — are [those who] question the state’s lust and need for war. These dissidents are the most dangerous. Such voices are rarely heeded.

“Once we sign on for war’s crusade, once we see ourselves on the side of the angels, once we embrace a theological or ideological belief system that defines itself as the embodiment of goodness and light, it is only a matter of how we will carry out murder.”

Thus the Public has been “murdered” by economic policy as carried out under the current model of capitalism.

When the Public dies, so does public discourse.

It takes moral strength to dissent. The Business Roundtable recently took a step in that direction. According to its website, “Business Roundtable is an association of chief executive officers of America’s leading companies working to promote a thriving U.S. economy and expanded opportunity for all Americans through sound public policy.”

We’ll look at what the CEOs have to say next time.

Belief in the Free Market

Mammon

1909 painting The Worship of Mammon by Evelyn De Morgan.
https://en.wikipedia.org/wiki/Mammon

We saw last time that Milton Friedman and his colleagues at the Chicago School of Economics promoted the free market with fundamentalist zeal — an approach to economics that Joseph Stiglitz said was based on “religious belief.” Turns out that using religious-sounding language to talk about believing in capitalism isn’t as farfetched as it sounds on first hearing.

In the history of ideas, the “Disenchantment” refers to the idea that the Enlightenment ushered in an era when scientific knowledge would displace religious and philosophical belief. Reason, rationality, and objectivity would make the world less magical, spiritual, and subjective, and therefore “disenchanted.” You don’t need to know much history to know the Disenchantment never really played out — at least, certainly not in America.

“Each of us is on a spectrum somewhere between the poles of rational and irrational. We all have hunches we can’t prove and superstitions that make no sense. What’s problematic is going overboard—letting the subjective entirely override the objective; thinking and acting as if opinions and feelings are just as true as facts. The American experiment, the original embodiment of the great Enlightenment idea of intellectual freedom, whereby every individual is welcome to believe anything she wishes, has metastasized out of control. In America nowadays, those more exciting parts of the Enlightenment idea have swamped the sober, rational, empirical parts. Little by little for centuries, then more and more and faster and faster during the past half century, we Americans have given ourselves over to all kinds of magical thinking, anything-goes relativism, and belief in fanciful explanation—small and large fantasies that console or thrill or terrify us. And most of us haven’t realized how far-reaching our strange new normal has become.

“Why are we like this?

“The short answer is because we’re Americans—because being American means we can believe anything we want; that our beliefs are equal or superior to anyone else’s, experts be damned.

“America was created by true believers and passionate dreamers, and by hucksters and their suckers, which made America successful—but also by a people uniquely susceptible to fantasy, as epitomized by everything from Salem’s hunting witches to Joseph Smith’s creating Mormonism, from P. T. Barnum to speaking in tongues, from Hollywood to Scientology to conspiracy theories, from Walt Disney to Billy Graham to Ronald Reagan to Oprah Winfrey to Trump. In other words: Mix epic individualism with extreme religion; mix show business with everything else; let all that ferment for a few centuries; then run it through the anything-goes ’60s and the internet age. The result is the America we inhabit today, with reality and fantasy weirdly and dangerously blurred and commingled.”

Fantasyland:  How American Went Haywire, a 500-Year History, Kurt Andersen (2017)[1]

Villanova professor Eugene McCarraher makes the case that capitalism stepped up to fill the belief void created by Disenchantment enthusiasts, and became the new world religion.

Mammon book“Perhaps the grandest tale of capitalist modernity is entitled ‘The Disenchantment of the World’. Crystallised in the work of Max Weber but eloquently anticipated by Karl Marx, the story goes something like this: before the advent of capitalism, people believed that the world was enchanted, pervaded by mysterious, incalculable forces that ruled and animated the cosmos. Gods, spirits and other supernatural beings infused the material world, anchoring the most sublime and ultimate values in the ontological architecture of the Universe.

“In premodern Europe, Catholic Christianity epitomised enchantment in its sacramental cosmology and rituals, in which matter could serve as a conduit or mediator of God’s immeasurable grace. But as Calvinism, science and especially capitalism eroded this sacramental worldview, matter became nothing more than dumb, inert and manipulable stuff, disenchanted raw material open to the discovery of scientists, the mastery of technicians, and the exploitation of merchants and industrialists.

“Discredited in the course of enlightenment, the enchanted cosmos either withered into historical oblivion or went into the exile of private belief in liberal democracies…. With slight variations, ‘The Disenchantment of the World’ is the orthodox account of the birth and denouement of modernity, certified not only by secular intellectuals but by the religious intelligentsia as well.”

Mammon:  Far from representing rationality and logic, capitalism is modernity’s most beguiling and dangerous form of enchantment, Aeon Magazine (Oct. 22, 2019)

Prof. McCarraher develops his ideas further in his book The Enchantments of Mammon: How Capitalism Became the Religion of Modernity (2019). This is from the Amazon book blurb:

“If socialists and Wall Street bankers can agree on anything, it is the extreme rationalism of capital. At least since Max Weber, capitalism has been understood as part of the “disenchantment” of the world, stripping material objects and social relations of their mystery and sacredness. Ignoring the motive force of the spirit, capitalism rejects the awe-inspiring divine for the economics of supply and demand.

“Eugene McCarraher challenges this conventional view. Capitalism, he argues, is full of sacrament, whether or not it is acknowledged. Capitalist enchantment first flowered in the fields and factories of England and was brought to America by Puritans and evangelicals whose doctrine made ample room for industry and profit. Later, the corporation was mystically animated with human personhood, to preside over the Fordist endeavor to build a heavenly city of mechanized production and communion. By the twenty-first century, capitalism has become thoroughly enchanted by the neoliberal deification of ‘the market.’”

Economic theories — capitalism, Marxism, socialism — are ideologies:  they’re based on ideas that can’t be proven scientifically; they require belief. The reason thinkers like Kurt Andersen and Eugene McCarraher both use the term “dangerous” in connection with economic belief is because of the fundamentalist dynamics that invariably accompany ideological belief, secular or otherwise. We’ll look at that next time.

[1] The book is another case of American history as we never learned it. For the shorter version, see this Atlantic article.

Economic Fundamentalism

We saw last time that the goal of Chicago School free market economics was to promote “noncontaminated capitalism,” which in turn would generate societal economic utopia:

“The market, left to its own devices, would create just the right number of products at precisely the right prices, produced by workers at just the right wages to buy those products — an Eden of plentiful employment, boundless creativity and zero inflation.”

The Shock Doctrine:  The Rise of Disaster Capitalism, Naomi Klein (2017)

To the School’s free market advocates, these ideas were pure science:

“The starting premise is that the free market is a perfect scientific system, one in which individuals, acting on their own self-interested desires, create the maximum benefits for all. If follows ineluctably that if something is wrong with a free-market economy — high inflation or soaring unemployment — it has to be because the market is not truly free.”

The Shock Doctrine

Scientific method requires that theories be falsifiable:  you have to be able to objectively prove them wrong.

“The philosopher Karl Popper argued that what distinguishes a scientific theory from pseudoscience and pure metaphysics is the possibility that it might be falsified on exposure to empirical data. In other words, a theory is scientific if it has the potential to be proved wrong.”

But Is It Science? Aeon Magazine, Oct. 7, 2019.

But how do you prove an economic theory based on “uncontaminated capitalism” in an economically contaminated world?

“The challenge for Friedman and his colleagues was not to prove that a real work market could live up to their rapturous imaginings…. Friedman could not point to any living economy that proved if all ‘distortions’ were stripped away, what would be left would be a society in perfect health and bounteous, since no country in the world met the criteria for perfect laissez-faire. Unable to test their theories in central banks and ministries of trade, Friedman and his colleagues had to settle for elaborate and ingenious mathematical equations and computer models.”

The Shock Doctrine

Mathematical equations and computer models aren’t the same as empirical data collected in the real (“contaminated”) world. If falsifiability is what separates scientific knowledge from belief-based ideology, then Friedman’s free market theory is the latter. Some scientists are worried that this spin on scientific theorizing has become too prevalent nowadays:

 “In our post-truth age of casual lies, fake news and alternative facts, society is under extraordinary pressure from those pushing potentially dangerous antiscientific propaganda – ranging from climate-change denial to the anti-vaxxer movement to homeopathic medicines. I, for one, prefer a science that is rational and based on evidence, a science that is concerned with theories and empirical facts, a science that promotes the search for truth, no matter how transient or contingent. I prefer a science that does not readily admit theories so vague and slippery that empirical tests are either impossible or they mean absolutely nothing at all…. For me at least, there has to be a difference between science and pseudoscience; between science and pure metaphysics, or just plain ordinary bullshit.”

But Is It Science?

The Chicago School believed so ardently in the free market theory that its instructional approach took on the dynamics of belief-based indoctrination:

“Frank Knight, one of the founders of Chicago School economics, thought professors should ‘inculcate’ in their students the belief that economic belief is ‘a sacred feature of the system,’ not a debatable hypothesis.’”

The Shock Doctrine

This dynamic applies to every ideology that can’t be falsified — verified empirically. The ideology then becomes a fundamentalist belief system:

“Like all fundamentalist faiths, Chicago School economics is, for its true believers a closed loop. The Chicago solution is always the same:  a stricter and more complete application of the fundamentals.:

The Shock Doctrine

Journalist Chris Hedges describes the dynamics of “secular fundamentalism” in I Don’t Believe in Atheists. (The book’s title is too clever for its own good — a later version adds the subtitle “The Dangerous Rise of the Secular Fundamentalist.”)

“Fundamentalism is a mind-set. The iconography and language it employs can be either religious or secular or both, but because it dismisses all alternative viewpoints as inferior and unworthy of consideration it is anti-thought. This is part of its attraction. It fills a human desire for self-importance, for hope and the dream of finally attaining paradise. It creates a binary world of absolutes, of good and evil. It provides a comforting emotional certitude. It is used to elevate our cultural, social, and economic systems above others…. The core belief systems of these secular and religious antagonists are identical.”

Thus we have Nobel prize-winning economist Milton Friedman famously saying, “Underlying most arguments against the free market is a lack of belief in freedom itself” — a statement entirely in keeping with the Mont Pelerin  Society’s idealistic Statement of Aims, which we looked at last time.

And thus we also have Nobel prize-winning economist Joseph Stiglitz countering with his thoughts about economics in a contaminated (“pathological”) world:

“The advocates of free markets in all their versions say that crises are rare events, though they have been happening with increasing frequency as we change the rules to reflect beliefs in perfect markets. I would argue that economists, like doctors, have much to learn from pathology. We see more clearly in these unusual events how the economy really functions. In the aftermath of the Great Depression, a peculiar doctrine came to be accepted, the so-called ‘neoclassical synthesis.’ It argued that once markets were restored to full employment, neoclassical principles would apply. The economy would be efficient. We should be clear: this was not a theorem but a religious belief.”

As we also saw last time, historical socialism and communism join free market capitalism in their fundamentalist zeal. In fact, some think that economics in general has become today’s dominant cultural form of belief-based thinking. More on that next time.

The Free Market and the New Socialism

Mont Perlerin

The historic Mont Pelerin castle/hotel.

In 1947, economists  Friedrich HayekFrank KnightKarl PopperLudwig von MisesGeorge Stigler and Milton Friedman convened the Mont Pelerin Society in a castle/hotel overlooking Lake Geneva, with the express intent of displacing the Keynesian economic model that prescribed government intervention and spending to pull America out of the Great Depression and install the New Deal. The Society’s founding Statement of Aims is forcefully idealistic:

“The central values of civilization are in danger.  Over large stretches of the Earth’s surface the essential conditions of human dignity and freedom have already disappeared.  In others they are under constant menace from the development of current tendencies of policy.  The position of the individual and the voluntary group are progressively undermined by extensions of arbitrary power.  Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own.”

The Statement goes on to carefully position the Society’s purpose as fostering intellectual inquiry, not the advancement of a new economic “orthodoxy.” In time, however, Milton Friedman did precisely that, championing capitalist free market economics through the Chicago School of Economics.

“The core of [the school’s teaching on the free market] was that the economic forces of supply, demand, inflation and unemployment were like the forces of nature, fixed and unchanging. In the truly free market imagined in Chicago classes and texts, these forces existed in perfect equilibrium, supply communicating with demand the way the moon pulls the tides

“Just as ecosystems self-regulate, keeping themselves in balance, the market, left to its own devices, would create just the right number of products at precisely the right prices, produced by workers at just the right wages to buy those products — an Eden of plentiful employment, boundless creativity and zero inflation.

“For this reason, Chicagoans did not see Marxism as their true enemy. The real source of the trouble was to be found in the ideas of Keynesians in the United States, the social democrats in Europe, and developmentalists in what was then called the Third World. These were believers not in a utopia but in a mixed economy, to Chicago eyes an ugly hodgepodge of capitalism for the manufacture and distribution of consumer products, socialism in education, state ownership for essentials like water service, and all kinds of law designed to temper the extremes of capitalism.

“The Chicagoans declared war  of those mix-and-match economists. What they wanted was not a revolutions exactly but a capitalists Reformation:  a return to uncontaminated capitalism.”

The Shock Doctrine:  The Rise of Disaster Capitalism, Naomi Klein (2017)

Compare that vision to that of the Democratic Socialists of America we met last time, whose Constitution unreservedly advances their own counter-orthodoxy:

“We are socialists because we reject an economic order based on private profit, alienated labor, gross inequalities of wealth and power, discrimination based on race, sex, sexual orientation, gender expression, disability status, age, religion, and national origin, and brutality and violence in defense of the status quo. We are socialists because we share a vision of a humane social order based on popular control of resources and production, economic planning, equitable distribution, feminism, racial equality and non-oppressive relationships. We are socialists because we are developing a concrete strategy for achieving that vision, for building a majority movement that will make democratic socialism a reality in America. “

Thus the free market and socialism champions have planted their flags at the poles of the economic ideological spectrum. In between, however, are those whose perspective and goals are more immediate and  pragmatic, such as greater economic equality, improved public access to healthcare (see endnote below[1]) and education unencumbered with government-financed debt.

“Socialism historically has been associated with the concept of public or collective ownership of property and natural resources and has long been associated with Marxism and communism. In 1949, with the Chinese Communists just having taken control of China, and with the Communist Soviet Union creating fear of an aggressive effort to spread their ideology around the globe, Americans’ view of the term embraced the classic elements bound up in these types of movements.

“Now, almost 70 years later, Americans’ views of socialism have broadened. While many still view socialism as government control of the economy, as modified communism and as embodying restrictions on freedoms in several ways, an increased percentage see it as representing equality and government provision of benefits.”

The Meaning of “Socialism” to Americans Today, Gallup Polling Matters (Oct. 4, 2018)

Meanwhile, Millennials’ interest in this more temperate version of socialism is increasingly putting their free market elders in an awkward position:

“Perhaps the most significant thing about the rise of millennial socialism in the US is that it is forcing conservatives to articulate what exactly is so bad about a more equal system – often with results that are beyond parody.

“A writer for the ultra-conservative website the Daily Caller, for example, recently attended an Ocasio-Cortez rally and reported, completely straight-faced: “I saw something truly terrifying. I saw just how easy it would be … as a parent, to accept the idea that my children deserve healthcare and education.

“Kids deserving healthcare, imagine that! It’s a slippery slope, it really is.”

Socialism Is No Longer A Dirty Word In The US – And That’s Scary For Some, The Guardian (July 29, 2018)

What is going on, that a parent would say something like that? Digging deeper reveals a dynamic at work that is more powerful than a generation gap, polarized ideologies, or campaign issues such as healthcare. We’ll look into that next time.

[1] For those leaning toward socialism’s new version, the leading issue is healthcare. See also these Gallup survey results announced November 12, 2019:  “More than 13% of American adults — or about 34 million people — report knowing of at least one friend or family member in the past five years who died after not receiving needed medical treatment because they were unable to pay for it… Dovetailing with these results is a rising percentage of adults who report not having had enough money in the past 12 months to ‘pay for needed medicine or drugs that a doctor prescribed’ to them. This percentage has increased significantly, from 18.9% in January 2019 to 22.9% in September. In all, the 22.9% represents about 58 million adults.”

Just Say the Word

sussudio

I feel so good if I just say the word
Su-Sussudio
Just say the word, oh-oh
Su-Sussudio

Sussudio
Phil Collins

The crowd is hostile, but the tune is catchy — it wins them over. (Go ahead, watch the video — soooo 80’s. We’ll wait.)

Fast forward 34 years to a new tune:  “Su-su… socialism.” Just say the word, and it’s an instant failure to communicate. The Millennials get up and dance. Their parents think about re-writing their wills.

I found all the sources for this week’s post by Googling “when did socialism become a bad word?” This article[1] has that title, and gives two answers. The first is the word’s historical definition:

“Merriam Webster defines it thusly:

“any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

“a) a system of society or group living in which there is no private property b): a system or condition of society in which the means of production are owned and controlled by the state

“a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done.”

The second answer is also historical:  to the older generation, socialism means the Cold War, the Commies, and the other nasty stuff in this  video. (It’s short — again, we’ll wait if you want to take a moment to watch it.)

Socialism video

“Socialism” sets off alarm bells for those who lived through all that:

“For a generation with no memory of bomb shelter drills or sledgehammers smashing the Berlin Wall to pieces, the sad reality of life under socialist rule has been forgotten, and the lessons of the Cold War have been relegated to the ‘ash heap of history’ alongside communism. Instead, the concept of socialism has often been confused with liberalism. Socialism seems like a fine idea that means a more social equitable society for everyone—free health care and free education for starters.

“Socialism is not roads, welfare, and free education. Socialism has always had a more ominous goal and shares close historical and ideological connections with more reviled terms: Marxism and communism. Karl Marx took socialism to what he viewed as its natural conclusion: The ‘abolition of private property.’”

How Did America Forget What ‘Socialist’ Means?  Politico Magazine (March 22, 2016)

But the new version of socialism isn’t about state-owned means of production,[2] the abolition of private property, or a Communist revival:

“For conservatives and libertarians, the news that millennials are embracing socialism is frightening. They shouldn’t fear, because the United States is not going to nationalize the economy any time soon. That’s because the word “socialism” doesn’t mean what our newfound socialists use it to mean.

“To people who don’t like it, socialism means ‘state control over the means of production.’ Turn to your nearest dictionary and you’ll find something like that. But it means something different to the people who use the term as a positive thing. Your coworker’s son who wants to take America in a socialist direction? He simply wants more government.”

Millennials Use The Word ‘Socialism’ — And May Not Know What It Means, The Hill (Oct. 27. 2019

If it’s true that the hypothetical “coworker’s son” wants “more government,” then what for? Among other things, to support the republic — the res publica, the commonwealth — as we saw last time. I.e., the new socialism is in fact about things like “roads, welfare, and free education.” Finding a seat for those topics at the economic policy-making table is apparently a catchy idea:

 “Socialism is no longer a dirty word in the US, certainly not among millennials, anyway, who face a far grimmer economic future than previous generations. It isn’t surprising that a number of recent polls show millennials are increasingly drawn to socialism and wary of capitalism.

“The popularisation of what has been termed by some as ‘millennial socialism’ in the US arguably began with the Occupy Wall Street movement in 2011. Bernie Sanders’ presidential campaign gave it further momentum, and Ocasio-Cortez’s recent win added more fuel to the fire.

“You can see this trajectory reflected in the membership of the Democratic Socialists of America (DSA). Founded in 1982, it had about 6,000 members for most of its history. Shortly after the 2016 election, the organisation saw a boom in membership, reaching 11,000 paying members in December 2016. Since Trump took power, interest in the DSA has grown exponentially. A spokesman said it hit 47,000 members last week, and has ‘seen the fastest growth in our history following the win of Ocasio-Cortez.’”

Socialism Is No Longer A Dirty Word In The US – And That’s Scary For Some, The Guardian (July 29, 2018)

Catchy, but will it win over the hostile crowd? Aside from associations with the dictionary definition and Cold War history, “millennial socialism” is up against a more systemic, more powerful obstacle:  deeply entrenched cultural faith in the capitalist free market . We’ll look more at that next time.

[1]When did socialism become a bad word?Kimberly Bulletin (Apr. 5, 2019)

[2] Never mind that the student loan business has been nationalized, as we saw previously.