wirespeed

the hypothetical maximum data transmission rate of a telecommunications medium

Reflections on an Unconscious Civilization

Posted by dlandgren on 2008-11-23

As I continue my quest to find well-written articles explaining the current world situation, I came across Mike Whitney’s article This Is Not A Normal Recession: Moving on to Plan B.

It offers a pretty clear synthesis of the situation that allowed the current state of affairs to come to pass. This is complemented quite well by the Bailout and the New “Lost Generation”. Both of these articles lay the blame at the feet of the managers, the technocrats, the so-called élite.

The articles are not without their flaws. Whitney’s article trots out the tired meme, that “anyone with a pulse” could get a loan (on par with the “next shoe to drop” cliché). Also, in the first part of the article he blames the increasingly lax banking standards:

[…] the banks were merely the mortgage originators, they didn’t believe their own money was at risk, so they gradually lowered lending standards and issued millions of loans to unqualified applicants who had no job, no collateral and a bad credit history.

But now that the credit markets have seized up, he then goes on to say:

The banks are not to blame. There is a generalized contraction of credit in the non-bank financial system where structured finance has blown up and taken half of Wall Street with it.

That may be so, but you can’t have it both ways. The banks were all too happy pass off their mortgages to third parties and didn’t care to find out what became of them. They didn’t say no.

The Lost Generation story gives a good explanation of how management (of the MBA type) brought about the decline in US manufacturing, but finishes the article with a wishy-washy “Americans are worse than broke, they are discouraged.” Well, that’s all right then. For a moment I thought they might be angry. Elsewhere in the article is the following passage:

Since the advent of “Scientific Management” [from the] Harvard Business School, we have grown a generation of managers disinterested in the actual process of making products. Management and workers meet at the PERT charts and seldom anywhere else. Over time, the quality of American manufactured products began to decline. “Made in America” began to lose some of its luster as other nations began to manufacture products superior in quality.

This in particular reminded me of John Ralston Saul’s 1995 essay, The Unconscious Civilization. In 1995, just to provide a little context, Microsoft released Windows 95 (obviously), Ebay was founded, the USA abandoned the 55 mph speed limit and the Dow broke through the 4000 point mark and went on to crack the 5000 mark as well. And now 13 years later, the bets are on as to whether it will go racing past in the other direction before the end of the year.

I think that many of the problems affecting Western economies are a result of the managerial practices that came out of higher education in the United States after World War II.

I dug out my copy of The Unconscious Civilization and began to reread it last night. Saul understood the problems we faced (and continue to face), and articulated the issue as follows:

There is a general sense that our civilization is in a long-term crisis. […] It doesn’t resemble a 1929-style depression, but then depressions have always been different, one from the other. Ours has been softened and evened out thanks to the life preservers gradually put in place by society after 1929 in order to give us time to manoeuver and act should such a disaster repeat itself. It did, in 1973. Now, given our inability over the past two decades to deal with an unbreakable chain of unemployment, debt, inflation and no real growth, we have drifted farther and farther out into a cold, unfriendly, confusing sea. The new certitude of those in positions of authority — those out of the water — is that the certain answer is to cut away the life preservers.

This might be called a childlike act. Or one of unconsciousness so profound as to constitute stupidity.

He might have been talking about Wall Street bonuses when he wrote:

Many are surprised that this management elite continues to expand and prosper at a time when society as a whole is clearly blocked by a long-term economic crisis. There is no reason to be surprised. The reaction of sophisticated elites, when confronted by their own failure to lead society, is almost invariably the same. They set about building a wall between themselves and reality by creating an artificial sense of well-being on the inside.

On the decline of state investment in education:

[…] the reality is that throughout the West — not just in the United States — we are slipping away from [the] simple principle of high-quality public education. And, in doing so, we are further undermining democracy.

Why is this happening? Theoretically because of money shortages. But there is no shortage of funds for those areas of higher education which attract the corporatist elites. Indeed, as money is siphoned off from the public-school level to the favoured areas of higher education, so the quality of public education drops and more parents opt for private schools. In removing their children they also remove any real commitment to the system and accentuate the shift.

[…]

Interestingly enough, the evidence indicates that producing the best educated elite in the world doesn’t actually help a country. The two nations in the West — Britain and the United States — also have the most persistent and widespread social and economic problems.

Singling out the Chicago School of Economics, he asks:

How is it then that we have fallen into taking seriously someone like Milton Friedman who walks about equating, in a silly, indeed in an immature manner, democracy with capitalism?

and more generally

What are we to make of these managers, who have had almost absolute control of Western business for some 30 years, the last 22 of which have been marred by general crisis? Dud they play a role in bringing on the economic blockage? They certainly have failed to produce an economic recovery.

This leads to the following explanation of the great flaw in the push for privatisation at the end of the twentieth century :

The privatization theory is that the economy is being held down by too much government involvment. Sell the public companies and so invigorate the economy. However, an economy has many parts to it. There is the solid, conservative side that provides goods and services. But, by its very nature, it cannot provide much leadership towards new growth activity. Then there is the riskier, faster moving side, where new investment, new ideas, new energetic leaders combine to build the future economy.

Most of the government-owned industries belong on the conservative side, either by the very nature of what they produce — essential services like electricity or water — or because decades have already been spent fully developing the capacities of that domain. So the effect of the privatization movement is to take perfectly good private-sector risk capital and invest it in the non-risk side of the economy.

It’s somewhat depressing that in the intervening period not much has changed, and the text remains as relevant today as it did in 1995. To be honest, the narrative is a little erratic, and the lack of an index makes it difficult to find things. He has recently published a new book, which with a bit of luck will be better organised.

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