IDEAS

Part II Part I
In the first part of this review, I explained how, Mr. Matt Miller, the author of a brand new book: “The Tyranny of Dead Ideas” tries to repudiate the six massively popular ideas which are considered the pillars of capitalism and offers his own alternative proposals he believes are tailor made to the needs and the requirements of global time.

5. Public schools are a local matter? Where does this idea come from? To answer this question, the author argues that one of the benefits of globalization is that competition among nations has extended beyond business and economic matters. Just like in healthcare, the U.S. is ranked low when it comes to the outcome of its education system. “The United States spends nearly more than any other affluent nation on schools, yet out of twenty-nine developed countries participating in a 2003 assessment, Americans ranked twenty fourth in math, twenty fourth in problem solving, eighteenth in science, and fifteenth in reading.” The historical support for local schools, the author argues, is based on the fact that people who migrated to the United States in earlier centuries disliked centralized authority. They believed that the local ecclesiastically controlled schools were the only channels through which their religious beliefs could be transferred to their kids successfully. In addition, the huge geographic size of this country, the lack of modern inexpensive communication systems, and the necessity to pay closer attention to local educational needs made decentralization more meaningful. According to Mr. Miller, people who migrated to the U.S. were mostly those who sought to escape the restrictions imposed by centralized government so the idea of local schools made sense at that time. People wanted their kids to be educated in ways they thought were appropriate to support or to promote their own ideology. In other words, a local school was an effective way to indoctrinate the kids.

The local system was not perfect but according to the author “crafting a politically acceptable federal role to offset the shortcomings of local control was not necessarily a pipe dream.” In addition, given the fact that only 9% of schools’ funding came from the federal government, it was obvious that schools needed to be controlled by local authority and not the federal government.

How does local control hurt education? asks Mr. Miller. He offers a few explanations. First, there exists financial inequality; richer communities can spend more money per pupil resulting in better educated students. Therefore, the income gap has led to an education gap. Second, there is no reliable information about students’ achievement since different states have their own definition of “proficiency standards.” He believes: “Lack of simple standardized process to evaluate how all children are progressing is enormously anachronistic.” Third, research and development programs are inadequate. There are 15,000 local school districts in the United States. Because they are less than optimal scale, some districts operate at less than minimum cost per student. Smaller class sizes also contribute to higher cost per student. Small size may also impede the ability of these districts to afford state-of-the-art educational technology. In other words, the benefits of economies of scale may not fully materialize. The author does not, however, offer more specifics about the benefits of a national education system or deeper federal government involvement. Fourth, the dominance of unions creates a mismatch of powers and resulting restrictions on school boards. And, finally, incompetent school board members who are under the influence of special interest groups pose another difficulty. The author believes: “In the unfolding era of unprecedented global competition, millions of poorly prepared children will pay the price”

6. There is a cause and effect link between economic success and your aptitude. In addition, economic status connotes moral and social merit. The American nation, Mr. Miller seems to suggest, is moving toward a dangerous social duality because of a skewed reward system. He predicts a class war between “lower upper class” and those who are getting “ultra rich” undeservingly by harvesting the fruits of capitalism. He explains: “The widening chasm between rich and poor threatens our democracy. Ultras are not simply reaping the rewards of the free market, but are benefiting from a rigged compensation system in the boardrooms and on Wall Street that are likely to reward mediocrity as success.” He further explains how in the old days a person did not have much choice but to accept the established societal norms that, much like sacred institutions, were unchallengeable; they dictated every aspect of your life including what kind of profession you would enter. Therefore, “if you didn’t end up at the top, it didn’t say anything about you personally, it was God’s will; you will get your reward in the next life.” Now in modern times, even if you have a decent job like many other ordinary people, and your friends hold high ranking positions in big corporations with six figure salaries, that means that there is something wrong with you for not being able to catch up to them, and climb the economic ladder up to the highest rung. The current economic crisis has proven the unfairness of corporate compensation, and how the link between CEO compensation and performance is nothing but a myth. Many of these CEOs were rewarded handsomely by boards of directors despite their dismal performance. The average annual compensation of a CEO in the United States is at least 36 times larger then the average earnings of an ordinary employee who works for his company. The author believes that growing public awareness of such an unfair income distribution scheme in this country “is potentially explosive,” implying that revolt against it is probable. In this country, the sad realization that having a good college education and working hard no longer matter when it comes to earning income and respect may eventually lead to pessimism and loss of faith in the fairness of the free market system.

The passion for hard work and material progress is instilled into American way of thinking. The idea that you can climb up the ladder of success as high as you want given that you put your mind to it. He explains how the periodical booms in US economy such as the one that last from 1945 to 1970 after World War II, were not totally the magic outcomes of the market forces but result the results of other factors as well including; lack of foreign competition, strong demand for manufacturing products because families devastated by war had enormous appetite for everything, the infrastructures of the US that were not damaged or destroyed by the war, the restraints on profiteering, the can-do spirit, and the so called “keep up with Joneses” attitudes. However, the prosperity created three problematic ways of thinking according to Mr. Miller:

First, the idea that your success depends only on your own efforts. If you are not materially successful in America, there is a something wrong with you. Such individualistic way of thinking resulted in a sense of apathy toward less fortunate - because their fate was their fault - and the disregard for a need for collective response in the case of disasters. The mentality that you can take care of yourself and you don’t need the society to take care of you.

Second, a sense of “entitlement”, we were so consumed by the post-war prosperity that we thought that our economic progress was never-ending. We thought that the US was immune to the economic problems that other nations were struggling with. For example, it never occurred to our automobile manufacturers that fuel efficiency was indeed an important issue because price of gasoline was so low back then. Good economic condition of that era created a common attitude that things always work on their own without a need for government involvement.

Third, the development of a dangerous idea, known as moral hazard, that we can live beyond our means and somehow can get away with it. In other words, we can gamble our future for the sake of current gratification, the mentality that has survived even to the present day and has even spread to government that has been operating persistently on huge deficit for decades. The inability to solve our debt problem logically, has forced us to resort to the crafty strategies some of which have further immersed many of us into financial over-commitments and debt-related problems such as and the ensuing massive default. This has further contributed to the widening economic inequality since the poor people do not enjoy equal access to loans and credit.

The reoccurring argument of this book is its focal theme: whether we like it or not, the US economy has been changed structurally mostly due to uncontrollable factors including the irrepressible forces of globalization. Therefore, our approach in dealing with the basic economic issues must also change. Surely, we cannot ignore them, they are always with us, but our approach to dealing with these matters must be amended. He is suggesting that what we need is neither capitalism nor socialism but a workable system, a blend of both. The system that reflects the realities of current global environment. We need a revised version of capitalism that combines the economic growth with social justice that is so important in 21st century, the two are not incompatible. Accordingly, in the second part of his book, the author presents his visionary ideas he calls “tomorrow’s destined ideas” the ones he believe should replace the old ones:

* Only government can save business

* Only business can save liberalism

* Only higher taxes can save the economy

* Only the (lower) upper class can save us from inequality

* Only better living can save sagging paychecks

* Only a dose of “nationalization” can save local schools

* And finally, only lessons from abroad can save American ideas

He argues that good economic condition after WWII created this mentality of taking things for granted which seemed reasonable when the US economy was dominant in the world indisputably. Now, those “good old days” are almost over, we need to say good bye to the dead ideas and inject fresh thoughts into the system.

One of the key reasons for the US economic dominance after WWII was mainly the existence of US-installed dictatorial regimes in many third world countries rich in terms of natural resources. These governments served as an instrument of US exploitation of local natural resources like crude oil. The US companies, particularly the multinational firms, were the primary beneficiaries of economic dominance which allowed them to have cheap access to vital resources including energy. Thus, they could afford subsidizing employees’ healthcare and pensions and pay higher wages. However, they can no longer play what the author calls the role of “quasi government”. Furthermore, the easy acquisition of wealth bred the mentality that things always come easily. Now, the time for that kind of thinking is gone. The new world paradigm has already emerged exist with the establishment of a benevolent government in many third world countries. They have erected protective walls to safeguard their national resources including the nationalization plan. In the age of interconnectedness, the global inequality has been exposed so vividly by mass media and has sparked an uprising, a sense of resentment “The 5.6 billion people who don’t live in the West deeply resent the presumption that 900 million westerners should be calling the global shots politically and economically” the author declares.

One question that one can legitimately ask is; if these so called Dead Ideas have been the main impetus to the US economic slump why they last? He believes that various interest groups adhere to these ideas because they have a strong stake in their continuation. Many of them lose their jobs if these ideas are abandoned. He compare the common tendency to stick with the dead ideas to the reflexes formed in people’s early childhood “that control their behavior decades later”. We may be inherently resistant to change especially if we are not certain about its outcome, so we continue with the same old things and succumb to the business-as-usual mentality just “Like your sister who can’t see that her deadbeat husband is really no good for her”.

Mr. Miler is not shy to disclose his distrust of capitalism throughout his book. He says “There is something deeply hypocritical about devotees of free market who profess to adore laissez fair outcomes 364 days a year, except on the day where they run to government to save them from their disastrous bets”. Business people should give up their role as providers of social services and leave that task to government and “scrap their reflexive allegiance to a misguided antigovernment creed”

Despite his assertion that current crisis “means end of capitalism”, the depth of the current crisis and its implications, I believe, are overblown. Capitalism survived the Great Depression which was much more perverse than current crisis and it will definitely survive this turmoil too. Free enterprise system is supposed to go through roller coaster rides one in a long while. It is known to be inherently unstable. In good time, it works reasonably well if left to its own devices, it is during the bad that we need the external force of government to jump-start the economy.

Theoretically speaking, the market is a self-regulating mechanism. As long as things are satisfactory, we don’t want government to disturb or to derail the forces of the market. We should let them make the necessary adjustments on their own even though the ultimate fine-tuning may occasionally take a long time. We may need deeper government involvement only in extreme cases when things are really gloomy. As the saying goes, if it is not broken, don’t fix it. If you are not constipated, why would you want to take a laxative? I quipped once in response to my neighbor’s soliciting my advice. The government is like your dad, you need him for emergencies like a liquidity shortage, a loss of job, a car breakdown, unexpected expanses, or when you are evicted from your apartment!

Historically, more economic problems, especially in lesser developed countries, have been traced to inappropriate or capricious economic policies implemented by uninformed or ill-intentioned politicians, than to anything else. I believe, thus, that government policies are necessary when there is an identifiable market failure and only if the result of inaction is more catastrophic than the outcome of government policy. Understandably, we need government involvement especially in form of regulations and supervisions to safeguard the consumers' as well the producers’ interests, and to create an environment that is conducive to healthy competition and economic progress. A market without government involvement is like a lawn mower without a bag. It works. However, it will mess up your lawn. The government is much more respected as a supervisor and a promoter of free market than as a controller or the operator of it.