Seven Bad Ideas by Jeff Madrick

Comprehensive. Explains 7 of the biggest ideas underlying the dominant economic model of the world, then demolishes them. One by one, each is shown to be based on false assumptions and a complete lack of evidence.

Ties everything together by showing how policy shaped by these ideas has damaged the world economy.

Three of the many things I learned:

  • The modern concept of using defense contracts to spur industrial innovation was invented in the US, in the 1800s.
  • For Adam Smith, prosperity came from increased productivity (usually from a better division of labor), not from the Invisible Hand, which was a guide to where to invest, not the engine of growth itself.
  • Multiple Acts of Congress (notably the Humphrey-Hawkins Act of 1978) direct the Federal Reserve system to pursue policies of full employment and low inflation. For the past thirty years, the employment mandate has been ignored.

Owning Our Future by Marjorie Kelly

Uneven. The company profiles are interesting, if sometimes sparse on details, and present views into a more democratic form of corporation.

They’re constantly broken up by vague premonitions of disaster, though, a new kind of Malthusian faith that we’re stretching the Earth to its limits.

No evidence is marshaled in support of this belief, and the effect is to weaken the author’s otherwise well-made argument: that the current way of organizing corporations is not the only way, and some of the alternatives are better.

Despite the hand-wavy references to mysticism and quantum physics, I learned:

  • The John Lewis Partnership in the UK is its largest department store chain, and is entirely employee-owned, with an elected employees’ council that governs the company alongside the Board of Directors
  • The Bank of North Dakota is state-owned (!), the only one in the US
  • Elinor Ostrom won the Nobel Prize in Economics for her work proving that the “tragedy of the commons” is not inevitable, and can be avoided while preserving the commons as community property.

Religious Tolerance in the Constitution

Conservatives who want to make hay about the religion (or lack thereof) of the President or members of Congress should re-read the Constitution. Toleration of other religions was so important the Founders included it in the original text. Article VI, paragraph 3 says: “…no religious Test shall ever be required as a Qualification to any Office or public Trust under the United States.”

This was a huge step at the time, a deliberate slap in the face of the laws of Great Britain, which barred office holders (and the king!) from being Catholic.

If the Founders intended us to be a Christian nation, they had their chance. They could easily have written a requirement that anyone elected to the government be a Christian, just as they required them to be a certain age, and required the President to have been born a US citizen. The fact that they not only didn’t require it, but specifically forbade any such requirement, means they deliberately built religious toleration into the foundation of the new country.

CEOs and Surplus Value

CEOs in larger companies make more not necessarily because they’re better than the people running smaller companies, but because there’s more excess value being made by their employees for them to soak up.

The elimination of middle management in the 80s and 90s didn’t result in higher wages for employees because upper management ensured the excess funds went straight to their pockets.

Maybe if we capped the size of companies at 250 employees we wouldn’t need to cap executive salaries?

Another way of looking at it: things that are common but essential to life, like bread, are cheap. Luxuries, like sports cars and CEOs, are expensive. We can’t do without the bread. We can get by just fine without the CEO.

Companies succeed not because of their CEOs, but in spite of them. If we apply the 80/20 rule to CEOs, then most companies have to be run by bad managers. So how do they survive? It’s because their employees are not crap, and care about their jobs (they’re actually under threat) and drag the company kicking and screaming into profitability.

We can see this in action in companies that have removed management: Valve, Github, etc. All power passes back into the hands of the workers, who are highly paid. With large salaries and a lot of autonomy, they produce incredible products.

Company management, like government, succeeds best when it creates the infrastructure necessary for employees (a company’s citizens) to do well, then gets out of the way.

The Role of Government

Politicians that talk about their plan to grow the economy make me angry. It’s not the government’s place to grow the economy. That’s for businesses, founded and run by citizens and responding to the market, to do.

It’s the government’s job to help its citizens live the best lives they can. One method – among many – they can use to accomplish this goal is to set the foundation for growth, by investing in infrastructure, education, and a social safety net. But these things don’t grow the economy by themselves. You can build all the bridges you want, but if no one needs drives on it, it’s not going to contribute to the economy.

I know, I know: but what about the jobs created in building that bridge? A temporary bump, at best. Much better if they build a bridge, and then need to build gas stations and apartment blocks on the other side because of business picking up on both ends. Bridges to nowhere don’t help anyone except the owner of the construction company pocketing the profits.

Politicizing the Market

When did purchasing something become a political act? Most especially, when did it become the primary means of political action for us? People that would never go to a protest or write their Congresswoman would die before buying a real fur coat, and always check their labels to see if their clothes were made with slave labor.

Not that I think we shouldn’t be responsible with our purchases. I just wonder if we’ve lost something, some focus, in turning our attention so much to the impact we have on the market. It’s as if we stopped believing we could affect political change, and decided the easiest way to change the world was to buy organic. It’s worked – we can buy organic everywhere now – but at the same time a lot of issues, like women’s rights, single-payer health care, child care, our crumbling infrastructure and buckling educational systems, have stalled, many not having moved at all in the last 30 years.

How did this happen?

Historical Correlation Fallacy

X happened, and then Y, so Z policy was effective is a common way for writers building a narrative to gloss over the fact that the two things linked may not actually have a causal relationship.

For example, X slew Y, becoming king is pretty clear: the killing of the old king allowed the new king to take his place. But consider “X brought peace to the realm by lowering taxes, negotiating with his barons, and concluding several alliances with his neighbors.”

It sounds straightforward. But can we be sure that the king’s policies were the direct cause of peace? Maybe the weather was good for several years, raising crop yields and giving everyone enough that they didn’t have to fight for resources. Maybe the king was lucky in getting a generation of barons who were more inclined to bend the knee than take control. Maybe the king’s neighbors were busy fighting civil wars, and too preoccupied with internal matters to seek outside enemies. Maybe all three things happened, and if any one of them had been missing, the kingdom would have been plunged into chaos.

Especially when reading condensed histories, we have to be aware of the perspective of the author, and what sort of point they might be making, even unconsciously, with the way they frame the story.

The Persecution Fallacy

Seems everyone wants to claim persecution of some sort as a way of bolstering their case. We’ve arrived at a point where we know enough about our recent history to see people – artists, scientists, political activists – that were persecuted in their time, but were right, and have now been vindicated. So we want to represent ourselves as being like those people: just as determined, just as persecuted, and just as right.

We’ll do it to gain sympathy for our cause, even when the persecution itself is completely made up.

I’ve seen Protestant Christians in the US adopt this tactic several times. They make themselves out to be the lone voices in the wilderness, when in reality over 80% of Americans believe in God, it mentions God on our money, and the Presidential Oath of Office is usually taken on a Bible. Not exactly a tigers-in-the-colosseum level of persecution.

I see anti-GMO activists take this stance when talking about Monsanto and other big corporations. These corporations are big, and mean, and use their lawyers to push people around, so obviously GMOs must be bad. Unfortunately, it doesn’t work that way. There’s no scientific evidence that GMOs cause health issues. And really, if we had to give up GMOs, we’d have to drop most of our diet, seeing as domestication itself – of wheat, of cattle, of even friggin apple trees – is a way of modifying an organism’s genetic makeup. Being the little guy in this case doesn’t make them right. It just makes them little.

Finally, I see people that want better treatment for women in the workplace, or to increase the number of women in the sciences, that point to the vitriol from their opponents as support for their position. It’s as if they say, “Look at how mad we make people. We couldn’t make people that mad without being right, could we?”

Well, yes, you can. That’s not to say that I don’t agree with most of these people: I think women should be able to choose their career freely, without fear of harassment or hazing or running into a glass ceiling. But it’s not the anger that that stance can generate that makes it right. It’s right because respect is right, because we respect human beings and give them certain rights as part of that respect, and because women, as human beings, deserve that respect and those rights.

In the end, the Persecution Fallacy is another form of the ad hominem fallacy. It just operates in reverse: these people think badly of me and try to shut me up, therefore I must be a persecuted genius, therefore I’m right.

Unfortunately, while persecution is real and suppression of speech is real (and wrong), it doesn’t make the position of the person being persecuted correct. It just makes it harder to judge it impartially.

Star Trek and Multiculturalism

I’ve been re-watching Star Trek: TNG (yes, Picard is My Captain). Yesterday I came to the fourth season episode “Half a Life.” The basic premise is that Deanna’s mother falls in love with an alien scientist, an alien that comes from a culture that believes everyone should kill themselves on their 60th birthday. Naturally, the scientist is only days away from turning 60, and Lwaxana tries to convince him to defy his culture and live. The rest of the episode plays out this conflict: between the scientist’s desire to continue his work, his desire to stay with Lwaxana, and his desire to honor his upbringing and his home.

It could easily have been a throwaway episode, but for me it showcases what I loved about Star Trek. The conflict here works on several levels: we have the romance angle, the fear of growing old and becoming a burden on others, and the conflict between saving a life (the scientist’s) and honoring the Prime Directive. All the main characters react to that conflict in keeping with their natures: Picard stays out of it, Lwaxana fights against what she sees as a barbaric custom, and the scientist is torn between custom and his desire to live.

And the third conflict points directly to a problem American liberalism was facing in the 90s, and continues to face today: multiculturalism. The idea that people should be free to practice their own cultural traditions is an honorable one, but where do you draw the line? Where does honoring someone’s culture become dishonoring (or refusing to fight for) my own?

In the 90s, these questions came up over the conflict in Bosnia, female genital mutilation in Africa, and our relationship with China. We knew genocide was happening in the Balkans, but did that give us the right to go in guns blazing? We believed female circumcision to be wrong, but did that mean we should pressure other governments to stamp it out? And we knew human rights were being stamped on in China, but did that mean we should stop trading with them?

Domestically, it played out over civil rights – for women, for minorities, for gays and lesbians. With so many intolerant people in the world, using hateful language, discriminating against others, and claiming it was their right to do so, how much of it should we allow? How much intolerance should we be tolerant of?

Star Trek’s answer, with the Prime Directive, seems to be: all of it. At least in terms of foreign policy, the Prime Directive would tell us to butt out.

At one point in the “Half a Life” episode, one of the aliens from the euthanasia culture says “How dare you insult me and my beliefs?” When I first saw the episode, the line and its sentiment really resonated with me. Who was I to make fun of someone else’s culture?

Re-watching it today, the line seems ridiculous. How could anyone expect to be free from criticism? What kind of culture would we have, if no one could poke fun at someone else’s beliefs? And in this particular case, what sort of liberals would we be, claiming to speak for human dignity and freedom, if we didn’t speak out against a culture that asked its members to commit suicide?

Hobby Lobby Ruling Undermines Pluralism

The Hobby Lobby ruling didn’t make sense to me for several reasons. One thing that really bothered me was the way they asserted they could apply the religious exemption law to the corporation: they started out asserting that corporations are persons, then shifted to saying the rights of persons are protected by protecting the rights of the people employed by corporations, then shifted to saying the shareholders would be burdened by the penalties if they didn’t comply with the healthcare law.

It felt very slippery, and didn’t seem to hang together. Then it dawned on me: what they’re saying is that shareholders should be allowed to practice their religion through the corporation. Which sounds good at first glance, and is certainly not unconstitutional. But I don’t believe it’s a good principle for a liberal society.

Think of a Muslim-held company that decides to force its employees to pray while facing toward Mecca five times a day, or a Rastafarian company that expects employees to smoke ganja. Or worse, a company owned by Jehovah’s Witnesses that refuses to pay for health coverage that includes my kid’s vaccines, or my blood transfusion during an emergency surgery, or my mother’s kidney transplant. According to the logic behind the Hobby Lobby ruling, this would just be the owners practicing their religion through the corporation. Never mind that they would be pushing their religion onto their employees.

I don’t think anyone should have the power to force a religious practice on someone else – not my teachers, not my city council, and certainly not my boss.

I shouldn’t need to worry about my employer’s religion when applying for a job, anymore than they should have to worry about mine. When you enter the public sphere, you check your religious baggage at the door. It may be uncomfortable, you may not like it, but it’s necessary in a multi-ethnic, multi-religious society like ours.

If you don’t check your religion at the door, you can end up with Christian businesses and Muslim businesses and Atheist businesses, everything split along sectarian lines, like in Iraq. That’s not the kind of society I want to have.

In the past, our laws have been used to avoid precisely that kind of sectarian society. When Amish employers sued to be exempt from taking their employees’ Social Security payments out of their wages, they lost, because you can’t exercise your religion through a corporate body. When shop owners in the South sued to be exempt from Fair Hiring laws, they lost, because when you enter the public sphere, you agree to be bound by the laws of that sphere.

By going against that precedent, the Hobby Lobby ruling undermines one of the core principles of our pluralistic society. I can only hope it gets overturned as soon as possible.