Monday, April 16, 2018

A market for democracy

When the Women’s March was being organized for the day after Trump’s inauguration, I was happy to see a statement of opposition to the new regime, and I was glad to see my wife joining some friends in going to D.C. to add their voices to that statement, but I didn’t expect anything larger to come from it. I’d seen demonstrations come and go without having any noticeable effect.

I’m glad I was wrong.

The women organizing the march had no intention of letting it be an end in itself, some sort of cathartic yawp after which everyone would go home self-satisfied.

The organizers, and the participants, and the supporters from a distance have all succeeded in making the March an energizing beginning, not an end. And you can see the results in voter registration, voter turnout in special elections, and record numbers of candidates, particularly women candidates.

A week later, when Trump announced his first attempt at a travel ban, I was heartened to see the rapid and vociferous response at airports around the country.

The march and the airport protests were visible signs of a public that had been roused from a political torpor.

But it’s the registering, and voting, and running for office that matters in the long run.

And the question is, how do we keep people energized for those activities over time?

Protesting at airports is necessary when the government is undermining the Constitution, but in the long run it’s not viable to spend your whole life preventing damage to society by running out into the street every week, or even every few months.

The point of a democratic republic is to choose people to run public affairs competently and more or less in line with the will of the majority, within the limits of the constitution.

There’s a tricky paradox here, related to some basic insights of economics.

While it’s nice to be able to do a range of things for yourself, it’s inefficient for everyone to be self-sufficient, growing all their own food, sewing all their own clothes, building their own house, and so on. In any economy, from central planning to a market-based system, everyone potentially benefits from being part of a larger system with a division of labor and exchange of the resulting output.

And the same principle applies to the management of public affairs. It’s inefficient for everyone to be equally involved in running the government. A doctor should be able to spend most of her time treating patients, and a logger should be able to spend most of his time cutting trees. Neither of them should have to take on a second job running the government—that’s what our elected officials and hired bureaucrats are for.

But we can’t take this principle too far, or we get low voter turnout, an ill-informed public, and a plurality of citizens waking up on November 9th to a dystopian reality in which an incurious, incompetent businessman with dictatorial longings has just been elected to the presidency.

The other day, going through my notes from my January course, “Life after communism,” I found the remark:
People didn’t realize that democracy isn’t just a gift, but something you have to work for, fight for.
The context was a constitution-writing exercise that we did in Budapest with Hungarian law students. My co-leader, Prof. Amy Forster Rothbart, created a scenario of a fictitious country that has recently shed communist rule. The students were assigned to different parts of the terrain that a constitution might be expected to cover, and they had to come up with provisions to deal with things like freedom of speech, handling of state property, and accountability for actions taken under the old regime.

I don’t know if the line in my notes is something someone else said, or if it was my own thought triggered by the discussion around me, but it gets at the heart of the democratic-republic problem I described above, and it also reminded me of one of my beefs with Marxism.

Marx had some interesting insights, but he got a lot of things wrong, and a big one was seeing wealth as something static, rather than dynamic.

He saw himself as the Newton of the social world, discovering the iron laws that moved societies just as predictably as gravity steered the planets. And social movement was from the “primitive communism” of hunter-gatherer societies, through the hierarchical world of the feudal order, to the bourgeois capitalism of his own time and then, inevitably, on through socialism to the paradise of communism.

He was, in a way, a star-struck admirer of capitalism, because he saw that it had produced wealth far beyond anything that came before, but he also hated it for the inequities he saw it creating. Now that capitalism had unlocked this wealth, the productive-but-evil system itself could be dispensed with and the wealth shared out fairly in a communist utopia.

And Marx’s fundamental blind spot is contained in this idea, because the wealth produced under capitalism is inseparable from the market system itself.

Marx focused on the ways that markets drive people to find better ways of doing things, like the steam engine, or the factory system that was growing up around him in the 19th century.

And the emotional center of his case was the market’s unstoppable tendency to extract as much as possible from the working masses while paying them as little as possible.

But he doesn’t seem to have understood the market as an information-processing machine, as Friedrich von Hayek would come to describe it in the mid-20th century.

Once the market was completely replaced by the apparatus of central planning, the vital source of information revealed in market prices was also eliminated, and the eventual result was the long-term stagnation of the communist economies.

When the task at hand was to turn Russia’s agricultural economy into the Soviet Union’s industrialized one, central planning was able to apply the technological recipes available and command the labor and physical resources needed to get the job done, even if the job was done in a somewhat crude fashion.

But once that was accomplished, part of the challenge was to continue innovating, and not just in one highly favored sector (military technology), but across the whole economy. Another part of the challenge was to get work done efficiently, with sufficient labor and materials directed at necessary work and being used well.

If your factory is making cars nobody wants, you can either change what you’re making, or the market will force you out of business.

If your business is operating with twice as many people as are really necessary to get the job done, the market puts pressure on you to be less wasteful with people’s time.

If you’re using antiquated, inefficient technology, the market “encourages” you to get up to speed.

The centrally planned economies routinely failed in these ways, over-emphasizing heavy industry, neglecting consumer goods, falling behind technologically, and encouraging hoarding of labor and physical inputs. (An excellent treatment of the interlocking mechanism of these pathologies is János Kornai, The Socialist System.)

The wealth produced by capitalism was not a gift that had been created once and then was ours forever more. It had to be recreated, year after year. Markets were part of the toolkit that kept that wealth-generating machine in reasonable working order.

(The 20th century developed the regulatory state, which was another important part of the toolkit, keeping the market from destroying itself.)

In just the same way, democracy must be constantly created by the involvement of the citizenry, and it takes continual work.

In 1988-89, first in Poland and Hungary, then in the rest of the Soviet satellites of eastern central Europe, people came out into the streets to demand political freedom. Unlike 1953 in East Berlin, 1956 in Hungary, or 1968 in Czechoslovakia, the Soviets under Gorbachev’s leadership didn’t intervene. And unlike Poland in 1981, the local governments’ attempts to hold onto power were unsuccessful.

But since that ecstatic escape from dictatorial rule, people have drifted away from political involvement.

The parliamentary elections last fall had 61% voter participation, which looks good from an American perspective, where 60% is good in a presidential year, and 42% is high in a year when we’re “merely” electing the entire House of Representatives and one third of the Senate.

And the presidential election this January had 62% for the first round and 66.6% for the second.

But the president in the Czech system of government is considerably less important than the parliament, so the lower turnout for the more important election is a troubling sign.

And the current levels, while better than ours, are a real drop from the 76% level of 1996, when democracy was still relatively fresh here.

The election of Trump was a shock to American political culture, and the response has been a heartening increase in people’s active political engagement.

But how do we sustain that?

For the economy, as long as you have a market, you have a structure that is automatically pushing people to be innovative and efficient.

Is there any analogous structure that can automatically nudge us toward involvement with the political life of our society? And do that without requiring each of us to have a second job as a political junky?

How do we square the circle of a democratic republic, where you need to be involved enough to then be able to go back to your day job?

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