Monday, July 23, 2018

How American Economics is Ruining Your Life

Why America Collapsed Instead of Joining the Modern World
Umair Haque
“Hey, everyone! I have a great idea! Let’s replace public libraries with…Amazon!” Cue thousands of mocking, ridiculing, and outraged replies. LOL. Have you ever heard a more tragically foolish idea? But wait.

The really jaw-dropping part isn’t what was said — it’s who said it. The man making the statement above is…the head of an economics department at a major university. What the…? Do you see how weird and funny and terrible this is? It’s like if a doctor told you to go out and smoke more. If an engineer told you to build a Golden Gate Bridge out of Styrofoam. If a stylist said to dress like Donald Trump. The oracle has become the nitwit. But why? What does it tell us?

American economics is a dismal failure — so much so that it’s not an understatement by now to say it’s one of history’s great failed ideologies, like Soviet Communism. Not because I say so — but simply because the evidence more or less irrefutably proves it. Americans live uniquely terrible lives. Short, nasty, brutish, lonely, mean, unhappy. How much so? Life expectancy is higher in Chile, for example. It’s almost impossible to overstate just how uniquely bad American life is — school shootings, medical bankruptcies, young people trying to crowdfund insulin, skyrocketing suicide rates, opioid epidemics, one year olds on trial. These things don’t happen anywhere else in the world, really. Not even poor countries. And yet Americans live uniquely wretched and ruined lives not because the hand of fate fell — but largely because American economics destined them to. How so?

Consider a tiny fact. You’ll never, ever, ever once hear an American school of economics suggest that a society should have more of any of the following: Hospitals, schools, universities, parks, libraries, safety nets, pensions, retirements, incomes, assets. Don’t you think that’s a little odd? I do. After all, those are precisely the things that elevate our quality of life the most. I’ve never once heard an American economist of any renown calling for an American NHS, BBC, French pensions system, free German college — let alone the awesome Scandinavian idea of paying people to get an education, which we’ll return to. Have you? In fact, aren’t they always suggesting privatizing everything in sight, so that societies have less of all those things? Don’t you think that’s well, weird and tragic? Something like medieval doctors calling for blood-letting?

(Sure — they might call for them in the guise of “stimulus.” “Freshwater” economists, to be precise. But that’s as a response, as a reaction, to economic difficulties. It doesn’t change the fact that they won’t recommend better public goods, as we often say, a priori, something that is good in and of itself, prior to circumstances, as a cause, not as an effect. See how weird it is?)

Now, what’s the result? Well, the result is a society without those very public goods — no American BBC, National Health Service, and so on. So the basics of life, healthcare, finance, education, transportation, and so on — are in chronic shortage which means everyone must compete bitterly for them. These good are attached to jobs; they aren’t rights. And that means life has become something like a brutal, omnipresent contest for existence. Every man for himself — every person against every person — for what? For the basics of a decent life. There aren’t enough of them because economists say there shouldn’t be.

It’s obvious to say that American economists have been proven badly, fatally wrong. Laughably so — like the engineer recommending the styrofoam bridge. The world doesn’t listen to them, and is much better off for it. Europeans live vastly better lives — longer, happier, richer, closer — precisely because they don’t have American economists teaching them foolish, mistaken, lessons. So they didn’t end up with societies strip-mined of the basics of decent lives, but societies rich in them. Think about it. If Britain had listened to American economists, it never would have had a BBC, or NHS. If Germany had, it never would’ve had free education and a working retirement system. See how funny — and how tragic — it is?

Which brings us back to the question: why is American economics something like the 21st century’s most explosively, spectacularly failed set of ideas? Why will American economists choose Amazon (LOL) over public libraries? It sounds like a tiny example — but it contains in it the whole story.

When you think about a “civilized” place, what do you think of? Public goods. Paris, New York, London: subways, museums, art galleries, avenues, squares, hospitals, libraries. So to have public goods is the defining act of this thing we call “civilization” — and it’s always been true. The Romans weren’t civilized because they made war on half the world — but because they built aqueducts and forums and Senates. Do you see the link?

Why are public goods the beating heart of civilization? On one level, you might think, “well, they’re a way for people to pool their resources, and create things no one alone can enjoy.” I can’t afford a whole library. I can’t afford a whole park in the middle of a city. I can’t afford a hospital. But together, we all can — and then we all have the right to use them, too. Simple — and in a way, beautiful. But that’s only the beginning of the story of public goods and civilization — the very story that American economists never seemed to learn.

I have a working healthcare system — a public one. What happens next? Well, I’m healthy. Physically, and mentally, too — I don’t live my life in constant fear and pressure and despair of getting sick. So I’m a happier person. My relationships are better because I’m a happier person. Because my healthcare isn’t tied to a “job”, I can go out and start that business, go get that degree, go write that novel. Maybe I discover a cure for a great disease. Maybe I invent something grand and noble. Maybe I write a novel that teaches people a great moral lesson. What’s happened in my tiny example — which is overstretched, to be sure? A chain reaction of better lives. Me, my family, my community, society, democracy. Ignited by one public good — healthcare.

Now. In economic terms, we’d say that public goods have “positive externalities”. That is, they have hidden benefits, which are difficult to see at the outset, even to count. But that’s precisely why they are so desirable. Think of the public library. We don’t know which kid, spending all his afternoons there, because he’s different, will be tomorrow’s Einstein, Hawking, Jobs, or Malala. The hidden benefits are uncountable, in a very real sense.

American economics preaches the very opposite of all the above. Whenever something has positive externalities, those very hidden and uncounted benefits should be “internalized”, it says — owned. And so you go very naturally from public libraries to Amazon. Amazon “internalizes” the “positive externality” so that “investors” can get their return — or else things are “unproductive”. But then we need corporations with shareholders to divide up the profits — voila, Amazon, instead of that public library. Hence, everything’s privatized — and nothing’s public. Only capitalism is allowed — ever. Remember the medieval doctors and the bloodletting? Exactly.

Only none of that’s true. Just because I don’t know who tomorrow’s Jonas Salk will be, doesn’t mean that I don’t benefit from a polio vaccine. Just because I don’t know who tomorrow’s Einstein will be, doesn’t mean I don’t benefit from a theory of relativity. And just because I don’t “capture”, financially, the benefits of your use of a public healthcare system — you’re happier, you have better relationships, you’re more creative, fearless, and wise — doesn’t mean that I don’t receive them. Sure I do. I benefit from the things that you create in indirect ways. That great novel you write helps stabilize the democracy I live in. That disease you cure might save the life of the person I love. And so on.

So public goods, through positive externalities, vastly amplify a society’s potential quality of life. They do that by elevating the human potential of everyone in it. Why do we charge people hundreds of thousands in America for an education? Wouldn’t we all be better off if it were simply free? It is in Germany. In parts of Scandinavia, you’re paid to get an education. That’s the fairest deal of all — because that knowledge and creativity and intellect will go on to benefit everyone. So why not pay you for something that will benefit everyone, forever? Do you see how obvious all this is — and how much more the bizarre that American economists don’t seem capable of getting it?

We should want everyone to go the doctor regularly. Get a good education. Have a retirement. Read books. Go to the museum. That is when everyone else benefits most, too — from having intelligent, humane, wise, courageous people around them. What benefits do we all have when everyone realizes themselves in that way? We sustain democracy. We keep on generating breakthroughs. We don’t succumb to authoritarians. We are gentle people, living happy and meaningful lives — not barbarians trying to mow each other down, to outdo the next person, because there isn’t enough healthcare to go around. Do you see the link?

When you think about it, all that’s just another way to say “civilization”, isn’t it? And the weird, sad, gruesome tragedy is that American economists denied that people should be civilized. And so here America is. Something like the rich world’s first failed state — the one that, even though it grew rich, never really invested in civilizing itself. And that is how America never modernized. it collapsed instead.


July 2018

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