The Antiplanner rarely comments on geopolitics, but the conflict in Georgia provokes some broader-than-usual thoughts. This war, and the coinciding Olympics, suggests that we have spent the last seven years worrying about the wrong dangers in the world. While we concentrated on so-called Islamofascists, the real danger facing America and democracy was somewhere else.
Published in 1987, Paul Kennedy’s The Rise and Fall of Great Powers makes it clear that, to be a great military power, you first have to be a great economic power. More specifically, you have to be able to build wealth. Kennedy points out that Britain was a superpower in the nineteenth century, and its economy grew throughout the century. But because some other countries were able to grow a little bit faster, by the mid-twentieth century Britain was relatively unimportant.
I don’t think it is particularly essential that the United States be the only superpower in the world. But it is important that we be able to defend the values we care about — freedom and democracy — from those inside or outside our country who might want to take them from us.
The fall of the soviet empire proved to many that socialist countries can never be a long-term threat to capitalist countries. The reason is simple: socialism cannot build wealth because it doesn’t respect property rights and fails to reward individual achievement. You can propagandize people about collective values all you want, but in the end you won’t get their cooperation unless you allow them to get individually wealthy.
The same is true, for different reasons, of most countries in the Middle East. Whether President Bush is right or not when he says, “they hate us because we are free” (and I am pretty certain he is not), Muslim nations were never much of a threat to us. Whatever qualities it once had, Islam — at least as practiced in most of Arabia and Persia — is not able to build wealth. Even if Muslim countries make billions selling us oil, if they can’t figure out how to multiply those billions into even more billions, they will never be great powers.
Since 1991, it has seemed clear to me that the next big conflict in the world will be between capitalist democracies and capitalist authoritarian countries. The archetypal authoritarian capitalist nation is Singapore. Though nominally a democracy, Singapore severely restricts freedom of speech and freedom of the press, and its government regulates every aspect of people’s lives. For example, it has banned chewing gum ever since vandals stuck their gum in the door sensors of its rapid transit trains.
As a city-state of less than 5 million people, Singapore is not likely to be much of a threat to the U.S. But China borrowed much from Singapore as it rebuilt its economy under Deng Xiaoping. So the stage is set to answer the question: is democracy essential to build wealth? Or, worse, is it an impediment to building wealth?
Let’s get out of the way the idea, most recently put forth by David Brooks, that Asians are somehow wired differently — more collectively and less individualistically — than westerners. A blogger named Mark Liberman examines Brooks’ evidence and shows that Brooks (and some of the people he cites) completely misinterpreted the evidence. People are people, and most of them prefer freedom over regimentation.
But that doesn’t mean they will get it. I’ve heard people suggest that, as the Chinese get wealthier, they will naturally demand more freedom and democracy. I am not convinced that is true.
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As someone once said, “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury.” The U.S. had enough checks and balances in its constitution to prevent this from happening for more than a century. But, as documented in the recent Cato book, Dirty Dozen, those checks and balances have broken down, and so we routinely vote ourselves largesse like “universal healthcare” and toys like light rail.
Don’t get me wrong. Light rail will not be the death of America. But the attitude behind light rail — that we can and should spend billions on every feel-good project that comes along without evaluating its cost effectiveness — may very well be the death of the democracy and freedom we cherish.
The elephants in the room, compared to which light rail is a gnat, are social security and its cousin medicare. A recent report projects that social security will run out of money by 2040 and medicare by 2018. But that’s a lie, as it assumes that all the surplus money that baby boomers have been paying into these funds will be available when they retire. In fact, Congress “borrowed” all of that money to find its deficit spending (like light rail).
By 2010 or 2011, medicare revenues will begin to fall short of expenses, and by 2017, so will social security’s. Then Congress will have to choose between increasing taxes, cutting benefits, further expanding the national debt (assuming anyone would loan money to an essentially bankrupt nation), or eliminating just about every other governmental function.
The war in Iraq is a lot more costly than light rail, but is far cheaper than our social security-medicare obligations. Richard Fisher, president of the Dallas Federal Reserve Bank, estimates the unfunded liability of social security and medicare total to nearly $100 trillion — not billion — dollars.
“This situation is of your own creation,” says Fisher. “When you berate your representatives or senators or presidents for the mess we are in, you are really berating yourself. You elect them. You are the ones who let them get away with burdening your children and grandchildren rather than yourselves with the bill for your entitlement programs.”
Everyone in Washington knows this, but they don’t do anything about it because the breakdown is in the comfortably far off future — anything more than two years away is too far away for elected officials to worry about — while voters who would resent any efforts to fix social security and medicare are in the here and now.
In short, capitalism builds wealth, but democracy pisses it away. If we can’t get back on track to our pre-New Deal checks and balances, we will never be able to compete with the Chinese or any other authoritarian nation that adopts capitalist tools such as private property rights.
Back to the Georgian conflict (about which our leaders have not been exactly honest), the good news is that Russia is not yet a truly capitalist nation. So, for the time being, we don’t have much to fear from it. China seems to be content, for now, growing and building wealth, but how long will that last?
In any case, the danger may not be that China will make war on us, but that our own leaders will give up any semblance of freedom and democracy we now have in order to compete — and given their track record, they will probably jettison the wrong freedoms. We need to rebuild our economy and fix our government, if only to show the rest of the world that freedom and democracy are compatible with building wealth and a stable society. If you care about freedom, you need to care about fiscal responsibility.
Antiplanner: In any case, the danger may not be that China will make war on us, but that our own leaders will give up any semblance of freedom and democracy we now have in order to compete  and given their track record, they will probably jettison the wrong freedoms.
JK: I argue that there is a greater short term danger. That of the Al Gore’s climate zombies forcing us to cut carbon by making it too expensive for the low income and a major burden for the middle class. (Of corse Al will continue wasting energy and spewing CO2 from his gas guzzling jet as he travels to another $200,000 speaking engagement. But it is all OK because he buys carbon indulgences from himself.)
As we make energy and travel more expensive, our economy will go into a deep recession, with no recovery in sight as long as energy is too expensive. Of course the zombies are too stupid to realize that travel and energy are vital parts of prosperity. (Admittedly some of them see this and look forward to the destruction of industrialized civilization – without admitting that killing millions of people is the natural fallout of that scenario. Shades of the great leap forward and other grandiose restructuring of societies from Stalin to Castro. All got millions killed and all still have their apologists right here in the progressive movement.)
We even had one local Democrat operative sponsered blog carry an entry by a zombie suggesting that we should consider re-education camps for non-believers. http://www.blueoregon.com/2007/11/its-time-for-a.html
Thanks
JK
Everyone in Washington knows this, but they don’t do anything about it because the breakdown is in the comfortably far off future  anything more than two years away is too far away for elected officials to worry about  while voters who would resent any efforts to fix social security and medicare are in the here and now.
Sounds like democracy doesn’t work.
I agree with the Antiplanner regarding the notion of wealth. But I disagree that market will somehow create it of its own devising. Our market has created a culture that invests in entertainment. That the price of a high def television or laptop has come within the range of the lower class but the price of gasoline has increased 100% in just a few years is telling: we have invested, as consumers, in the former. Our infrastructure has been left to decay. The public discourse rarely involves talk of capital improvement. Our nation invests less and less each year in our own automobile industry, while Microsoft and Apple continue to expand. The dollars we spend create this.In fact, it seems that it is the market, and a lack of planning and protectionist policy, that has delivered us to a point where we think we can sit before our laptops transmitting ones and zeroes around the world and somehow that will fill the silo at the end of the season. I fail to see how benevolent neglect and a laissez-faire culture will produce from America a transformed ethic that inspires us to produce and save.
Lets not loose hope, perhaps we can fund Social Security and Medicare through gasoline taxes. A mere 1c additional tax per nano-liter ought to do it. 🙂
China and Singapore certainly prove that democracy is hardly a prerequisite for capitalism.
The Antiplanner writes:
Socialism cannot build wealth because it doesn’t respect property rights and fails to reward individual achievement.
But what he fails to note is that when the market is allowed to operate freely, we tend to support enterprises that are fairly frivolous: entertainment and the like. As a nation, we do not invest in capital improvement. Our decaying infrastructure is the proof. We have invested in laptops and high def televisions, accompanied by an ever-increasing supply of insipid and unproductive content. A growth driven by our ever-increasing demand for it.
Now perhaps one might argue, like Gillespie over at Reason, that following the latest tabloid marriage and surfing internet pornography for hours is a social good because it satisfies human desires unmet elsewhere by the market – but that does not make it productive. It does not add to our productivity. It is not education (which would improve the mental element of human capital); it is not exercise (which would improve the physical element of human capital); and it is certainly not productive, for it produces nothing. And yet that is the market, unfettered. Video games and fanzine blogs.Wealth as a nation comes from production and saving. Our market, moderately free and indulgent, has hardly conditioned our nation with those behaviors. Are we to believe that if we promote the self-interested individual even more, that he will suddenly wake up one morning with a fierce desire to change his ways?
It is interesting that the graphic on Paul Kennedy’s 1987 book implies that Japan would be the next great power. That sure seemed to be the case in 1987 if one extrapolated in time the then meteoric rise of Japan. However, it has not happened. As if Japan stumbled on a glass ceiling on its route to overtake the west. In a few words, I think that is the glass ceiling of its more collectivist culture (admittedly less collectivist nowadays than in the past). Aside from a few fortuitous developments, collectivism cannot support the massive innovation that is necessary to ascend to great power status.
I think the same holds true for China, however, because of its size, China only needs to ascend to a per capita productivity that is only half of the west’s to become a formidable power.
The broad word “democracy†is often used narrowly to imply a package of: democracy + capitalism + individual freedom. President Bush’s portrayal of the Iraq war as an effort to spread democracy to the middle east has reinforced this notion. It is not simply an attempt to spread democracy but an attempt to spread Western Capitalism.
Authoritarian regimes cannot compete and are most likely on a path to extinction. Democracy as in simply the “rule of the majority†can be more or less taken for granted in the developed world nowadays. But there is a new frontier in the debate, since democracy alone guarantees neither capitalism nor individual freedom. For example, Iran is essentially a democracy. A democracy populated by a collectivist minded majority that wants all individuals subject to the confines of Islamic Law. A democracy where many aspects of life are ruled by the opinions of the majority as embodied by Islamic Law and elects Ahdimenajad to implement its goals.
So, perhaps the next prosperity competition will not be between Authoritarian Capitalist societies and capitalist Democracies. It will be between Democracies that give priority to Individual Freedom and Alternative Choices and thus have checks and balances to protect them v.s. Authoritarian Democracies which stifle alternatives and incentives by demanding that the one and only way forward, on any issue, is the one and only way approved by the majority. That is essentially central planning by majoritarian rule; the uniform application of the collective will on as many aspects of individual life as possible.
A “there ought to be a law†public mentality is the main enemy of prosperity in a modern democracy and, in my view, this will be the differentiating factor in determining prosperity going forward.
AP:†Even if Muslim countries make billions selling us oil, if they can’t figure out how to multiply those billions into even more billions, they will never be great powers.â€Â
True, but there’s a new twist: Great power is no longer a prerequisite to being able to wreak havoc in the world.
In spite of all the popular Malthusian catastrophes predicted for mankind by environmentalists and others that want to spring us into collective action, I bet that WMDs, nuclear weapons in particular, remain the fundamental threat to human existence.
In the euphoria that most of us (but apparently not all of us) experienced after the end of communism, we seem to have forgotten that the threat of catastrophic consequences to humanity from nuclear weapons both in terms of probability as well as magnitude continues to dwarf the threat from other popular worries, such as say, global warming.
I hope I’m wrong but if you had to bet what will be a more likely major catastrophe for our descendants what would you bet? Global Warming or Nuclear Weapons? I would personally place a 30:1 bet on the latter.
That being said, seems to me that crusades to spread democracy and /or western capitalism to other parts of the world are futile attempts and, even if successful, it is dubious that they will have any effect on the overall nuclear threat.
t g,
Private investors are more than willing to invest in infrastructure as long as the government does not provide unfair (tax subsidized) competition. Take a look at the skyscrapers in any major downtown. They represent billions of dollars of investments and they are built to last for generations.
During the Progressive era, our federal, state, and local governments took it upon themselves to provide what you call infrastructure — highways, water, sewer, etc. They said they could do it better than the market. But politicians are more interested in cutting ribbons than funding maintenance, which is why our public infrastructure is having problems.
At the same time, it is worth noting that infrastructure problems are exaggerated by interest groups seeking a share of pork. This is a predictable outcome of government ownership: the money goes to the most powerful, not where it is needed.
sorry about the double post…don’t know what happened there…
It is my understanding that the market creatively invented the bundling of mortages so that the risk of subprimes could be passed off to future unwitting investors. The market had the opportunity to invest in infrastructure (houses) but chose to minimize its exposure for the quicker profit.
But I didn’t mean to limit my post to just infrastructure, AP. I meant to include private investment in manufacturing, that is, those investments that will increase our productivity. It seems to me that as a culture (on the demand side) we have thrown money, when given the chance, at nonproductive industries, and allowed our productive industries to move elsewhere.
It is also my understanding, that private investment in infrastructure historically in this country was in fact protected from competition by local governments that selectively issued charters. On which note, here in Arizona, from my reading of the state constitution, local jurisdictions are given the right to compete in any “industrial effort.” And why not? If a city council could run a profitable business of renting apartments to lower income families and reduce my tax burden – why shouldn’t they?
(By the way, Randall, that was a nice couple of lines the NYTimes gave you yesterday.)
It seems to me that as a culture (on the demand side) we have thrown money, when given the chance, at nonproductive industries, and allowed our productive industries to move elsewhere.
No, more to the point we have allowed capital to move to the lowest labor cost. That is how it works. Or conversely, we have allowed our society to want higher wages to enjoy a higher standard of living, instead of wanting to continue to have low wages.
At any rate, in my mind if we continue to allow the dumbing down of public discourse and allow our populace to lack critical thinking skills, then the waning democracy will continue its downward trajectory.
DS
Dan,That software developers are earning starting salaries twenty percent greater than a civil engineer suggests that our buying habits are distributing capital to the higher wage scale…And there is little evidence that any general populace ever possessed even a fair amount of critical thinking skills. In fact, at the turn of the century, men like Mencken and Twain publicly spoke out against democracy. Precisely because it was so evident the populace shouldn’t have such power. Who now speaks so openly? Limbaugh?
The Antiplanner:
Private investors are more than willing to invest in infrastructure as long as the government does not provide unfair (tax subsidized) competition.
The Antiplanner again turns a blind eye to historical facts that don’t fit the script.
I remind everyone that all through the 19th Century, the U.S. government played a major role in infrastructure development, starting with post roads, the Erie Canal and others in the 1820’s and 1830’s, and of course the railroads. Throughout history gummit has played a role in this most basic of gummit functions.
The Roman world’s economy would not have grown as large or extensive as it was or lasted as long as it did if the Roman gummit hadn’t gone to great efforts to build Roman roads and ports, let alone provide long and stable peaceful times thanks to the centuries-long might of Roman military power.
(Of course, I suppose one could consider the Roman Republic to be the “private property” of the patricians, and the Roman Empire to be the private property of the Emperors, but I doubt Randal would want to define the “private sector” to extend that far out…)
msetty,
Private investors built many things during the 19th century. Sure, states built the Erie Canal and many others — almost all of which (after Erie) proved to be failures, suggesting that private investors would have been right not to invest.
The federal government subsidized the Union Pacific and Northern Pacific railroads, both of which subsequently went bankrupt, suggesting that private investors would have been right not to invest. On the other hand, the Great Northern Railway was built without any subsidies and never came close to bankruptcy.
If the government gets out of the way, private investors will build what the people need.
Dan,That software developers are earning starting salaries twenty percent greater than a civil engineer suggests that our buying habits are distributing capital to the higher wage scale…And there is little evidence that any general populace ever possessed even a fair amount of critical thinking skills.
Our money, t g, flowing into Wal-Mart for cheap manufactured cr*p also suggests we consume manufactured products as well (perhaps validating your second italicized sentence).
The point being that your italicized concern in 13 and my previous paragraph indicate that there are jobs to be had out there still. Our rural economies struggle to find the ag jobs that have gone away, in addition to the manufacturing jobs that our economy hasn’t replaced for the non-critical thinkers out there. I suggest that these ag jobs will be coming back as the era of cheap crude ends, as modern industrial ag is dependent upon cheap crude.
DS
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The pernicious idea that capitalism=freedom and democracy ought to be put out of its misery permanently, as this essay succinctly points out:
http://www.dailykos.com/story/2008/8/17/93317/9283/716/567805.
JK, Do you really believe it was Al Gore and his Zombies that convinced oil producer nations to stop giving away their national treasure and start selling it at a price the market is willing to pay?
Has it never occurred to you that Americans might not be dumber than European. As AP has frequently pointed out, high energy prices in Europe haven’t stopped Europe from experiencing the same VMT growth rate as America. The logical response to higher gas prices is to drive less car rather than drive less miles.
Here’s a frightening thought. If American’s hadn’t squander so much of their wealth travelling maybe the feds wouldn’t have needed to raid the Medicare and Social Security funds.
Don’t worry, JK, Americans are such profligate wasters of energy that reducing carbon emissions by one-quarter will cost less than the energy needed to emit those carbon molecules.
Good link, Mike Setty. Thank you.
DS
If any thing the USA and the USSR have a lot in common. Though when the USA falls, it will be harder and faster.
NP & UP did have fiscal problems, James Hill bought the NP later on. Also UP had it’s beginings during the civil war as a means to secure California in the Union thus the name “Union Pacific”, though this was pretty much a one shot deal using grants.
Still when comparing this to the hyper socialism of the highway system that we have today, these look quite small.
“Our nation invests less and less each year in our own automobile industry,”
The auto industry in America is arguably as healthy as it ever has been. The 3 based big auto companies based in America haven’t been doing so well. That shouldn’t be surprising considering how old and large they are (or were?). There have been plenty of new plants built in Tennessee, Georgia, South Carolina, Mississippi and other places.
Maybe there are things about South Korea, Taiwan and Japan that I’m overlooking but I fail to see why we should assume China wouldn’t end up like either of them which have more freedoms than Singapore. Granted it took South Korea and Taiwan awhile to get there. But as quickly as things have changed in China, what’s to say that in another 10-20 years they won’t be well on their way?
Late here, but what made Great Northern so economically viable was that road-bed was built over path of least resistance, rather detouring and zig zaging through property of land speculators who had greased the palms of government officials.
“The essence of Democracy,” a Supreme Court justice once famously said, “is that if the people are willing to go to hell in a hand-basket, you’ve got to stand back and let ’em.”