the politics of economics

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“Across American life, we had refined a set of extraordinary tools – for building wealth, firing bullets, and circulating information – that were so powerful, they altered not just the arrangement of American politics, but also the chemistry of it.”

Evan Osnos

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“Capitalism is reckless of the health or length of life of the laborer, unless under compulsion from society.”

Karl Marx

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“No one will emerge as a winner in a trade war. Some people blame economic globalization for what has gone wrong in our world. It is true that economic globalization has created new problems, but this is no justification to write off economic globalization all together.”

Chinese President Xi Jinping

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Politicians are infamous for dumbing complex economic issues down to one simplistic soundbite often using whatever convenient, single, data point to make their point. The reality is that economics, and economies, are complex, ambiguous, with no clear, easy, actions/solutions; none of which slow politicians from wielding the politics of economics to attempt to sway public opinion in their favor. And while I have no love of politicians or politics, I would be remiss if I didn’t point out they are stuck in a system of which they have few choices, but to play the narrative game this way if they seek any success. What I mean by that is there is only one logical solution when success is defined solely by economic growth (which has a halo effect of perception of personal success/wealth). A politician is forced to choose between the technological/business solution, which is the only reasonable one for career success, and any other solutions. The ‘other solutions’, while infinitely more likely to contribute to long term economic and social progress, offer abstractness in the present and dubious short term ‘economic successes’ which offer only danger to personal political success. The harsh truth, today, is that no politician has any real choice, but to chase economic success no matter how hollow the ’success’ may actually be for a healthy society. Oddly, this chase simultaneously decreases the power and role of politicians (maybe not politics) as it is recognized any real advance comes thru business/technology – so responsibility is shifted from humans to machines, data & technology – and, yet, increases their power thru narratives. Suffice it to say the inevitable choice every politician makes is between democracy/society and business/economics, hence, the politics of economics because that is where their self interest resides.

Which leads me to the truly insane situation the politics of economics puts us in.

Any sane person recognizes the government cannot be solely responsible for economic success nor is the market truly a mechanism of the pursuit of self-interest in which the interests of society will be served well. For example, Noah Smith has noted several times transforming the U.S. economy in order to more effectively compete with China and Russia will involve industrial policy. There’s a very basic economic reason for this. The industrial structure the free market will tend to produce, if left to its own devices, does not take national interests into account – it produces not what the market needs, but what profits the business. Thus, if we want to have an economy that’s optimized not just for consumption, but for the good of a nation/society, government has to play a role with economic interests. The slippery solutions they must craft reside somewhere within what Adam Smith suggested in the Theory of Moral Sentiments in that however how selfish soever man may seem to be supposed there are evidently some principles in our nature which interests us in the fortunes of others. Economic interests need to take a more rounded view of human behavior which acknowledges the coexistence of both the self-interested and altruistic sides of human nature. To be clear. Humans are neither inherently altruistic or selfish, they are what research people call conditional cooperators and altruistic punishers. I believe this is called “reciprocity” and defined as ‘a predisposition to cooperate with others and to punish even at personal cost, if necessary, those who violate the norms of this cooperation even when it is obvious the personal cost will never be recouped.’ I would argue this is the true invisible hand, not the market, in that there is no rationality other than ‘the structure of the system will define behaviors’. I say that because one cannot blame individuals for most failures, but rather the system itself. Yet. We tend to highlight the accountability of ‘the individual’ in some unhealthy ways within economic narratives. I say unhealthy because, well, as Hanzi Freinacht has suggested the entire idea of individual or collective is outdated in today’s world. And in the Cluetrain Manifesto they suggested “I am parts of you, you are parts of me, and the whole is a malleable mix of parts of all of us – even those we interact with outside the internal system within the business.” I imagine my point here is that business and our little personal circles of existence are simply a system within a system, or of the system, and people are systems in and of themselves and true self-interest really doesn’t exist because no one ‘self’ can exist without the whole. That’s today’s world no matter what the politics of economics may suggest.

Which leads me to economic support in government is inextricably linked to how it is viewed in the public’s eye.

Ordinary people, the public, tend to have certain biases particularly when it comes to government and the role of government in economics. Those on the left tend to be more altruistic and when things don’t go well, they see it as true as greed and self-interest. Those on the right tend to see welfare programs as ineffectual and a waste of their taxes because people become lazy nor have self-reliant/self-interest mindsets. However, the truth, as pointed out earlier, of how we accept economic policies gets driven by reciprocity. Strong reciprocity norms tend to encourage people to categorize the disadvantaged into the deserving and the undeserving and programs that reflect this distinction tend to enjoy broad support. Programs that run counter to these norms, even if it’s just by perception, and benefit perceived undeserving people tend to be controversial. The easiest example of this is welfare programs that give benefits with no requirements such as work or training. My point here is that politicians exploit our biases within the politics of economics. The truth is most people are not lazy, requirements tend to exclude some people who really could use the system and the most people who abuse economic policies are actually not the ones who need the programs.

Which leads me to Peter Drucker ‘s “No More Salvation by Society” (from 1989 book “The New Realities”).

Drucker reflects on how businesses, governments <and politics> were shifting their focus from delivering ‘an everlasting society which achieves both social perfection and individual perfection’ to seeking ‘economic salvation.’ He clearly believed that businesses, and managers, have a responsibility to Society by creating ‘better people’: better as in values, moral compass and, in general, ‘do the right thing’ attitudes and behavior. The issue, to him, was that beginning in maybe the 1970’s functioning society changed direction — from societal priorities to economic priorities.  In other words, we shifted from a society being driven by social power <values based> to a society driven by purchasing power. People did not make this decision on their own, in fact this big shift was driven by politics (and politicians) which began integrating economic promise into their platforms thereby replacing social betterment (or salvation by society) as a governmental platform. Ultimately, the ‘politics of economics’ holy grail became “increasing the purchasing power.”

This is a big issue and has implications in the business management world (later Drucker addressed further implications in “Management as Social Function and Liberal Art”). The real point is that this politics of economics arose when politicians decided economics should be noticed beyond kitchen table discussions. This mattered because when an economy’s role as part of the social fabric of society isn’t truly understood, politicians never really had the power to wield in their self-interest. So as businesses sought to exert more influence over ‘labor’ at the dawn of industrialization the Will of the Institution crossed self-interest paths with the Desire of the Politician and the politics of economics became the dominion of business & politician “experts.” Now. Any sane person looking at today’s society will conclude these experts have failed us miserably by hollowing out any social morality or dignity. Fundamentally these policy decision makers experts have evolved into pseudo-logic bullies empty of any moral compass as they lean in on ‘economics’. When attacked for this hollowness they stubbornly defend using simplistic selective vanity metrics of economics conflating them with social value creation. It was John Ralston Saul who suggested we have become “a vast, incomprehensible, direction less machine, run by process-minded experts whose cult of scientific management is bereft of both sense and morality” where civilians then end up dwelling in a world of illusion. Politicians use this world of illusion to manipulate people by seeking out asymmetrical moments <a never-ending supply in a complex economy> to make some simplistic point. Consequently, this encourages people to choose the least difficult paths/situations of the least resistance. They do so not because they are lazy or any dubious reason beyond the fact the politicians have poisoned our minds to such an extent wherein any desire beyond ‘a sustainable life’ just doesn’t seem worth the effort. I would be remiss if I didn’t point out these political techniques actually limits potential/possibilities and actually create a Gordian Knot of policies which mutually reinforce each other creating a general entropy. The politics of economics creates a reinforcing system which naturally limits potential. Ponder that.

Which leads me to: what should we do?

“Every profound innovation is based on an inward-bound journey.”

W. Brian Arthur

We begin by looking inward – as in ‘us.’ Our hope rests on the fact ordinary people are often able to take a broader view on pragmatic realities of a community then one taken by experts. This may sound counterintuitive but this is a thought consistent with strategy & execution, i.e., where the rubber hits the road. This may also sound counterintuitive because ordinary people are typically the ones who tend to feel most powerless. But everyone does not need to act, but rather simply support the small groups of people who have already started.  I would also add I believe leaders should respond to the forces shaping society. Instead of highlighting simplistic metrics supporting the view du jour we should be seeking to acknowledge social trends within the economics and respond to them, not just the economics, to help shape the world we desire. I also believe either politicians/business leaders choose to do this or the inevitable forces of disruption, driven by ordinary people, will dictate an evolution of their thinking. It was Otto Scharmer who suggested this will demand a disconnect of finance from the real economy, ecology, institutions, consumerism, governance, and ownership and address the three basic divides – 1) the ecological divide, 2) the social divide, 3) the spiritual-cultural divide – which actually shape the economic world. Society, ordinary people, with the aid of experts, must demand mechanisms of choice which apply common sense, experienced knowledge, public interest and morality with the intent to develop economic solutions and frameworks that withstand the whipsaw of shifting political winds.

All that said.

We should all be wary of the politics of economics game being played by the politicians.

** source for several words, thoughts and phrasing: Volataire’s Bastards, John Ralston Saul