Thursday, June 25, 2015

The Fourth Revolution by John Micklethwait and Adrian Wooldridge

Since I do judge books by their covers, I almost didn't read The Fourth Revolution by John Micklethwait and Adrian Wooldridge. For some reason, the cover turned me off. But, I'm glad I did. 

I think I heard this book advertised some time ago as a "third way" and an innovative attempt to revolutionize our current government. It was that to some extent. It was interesting and introduced me to people and ideas I had not previously considered.

They wrote the book because they believe, "The main political challenge of the next decade will be fixing government." The irony is that as government has grown ever larger to satisfy ever growing demands, it increasingly invites the voters ire for working so badly. We, ourselves, have created an over-inflated and over-burdened government in desperate need of reform. In fact, they state, "At the moment, democracy sometimes looks as if it were digging its own grave."

Why "The Fourth Revolution?" What were the first three? They believe it began with Hobbes and his ideas about Nation States in Leviathan. This paved the way for John Stuart Mill and the Liberal State, which began with the Glorious Revolution and was perfected in the American Revolution. Followed by Beatrice Webb with the creation of the Welfare State, and the "enforced minimum for a civilized life". Milton Friedman and those influenced by him like Ronald Reagan and Margaret Thatcher constitute an unfinished half revolution. Each sought to answer the question, "What is the state for?"The ever-growing state was first challenged in Europe by economists like Ludwig von MIses and his pupil Friedrich Hayek. Freidman brought these ideas to America, believing, "there was a direct correlation between government intervention and national decline." Seeing societal breakdown, neoconservatives began to make the case that, "Far from knowing best what the poor needed, bureaucrats and experts often got it spectacularly wrong." While this group won the argument, they did not win the reality, the leviathan did not wither, hence the designation as a "half-revolution."

They point to California as the perfect analogy to all that is wrong with current government. California has, according to their count, engaged in seven deadly sins and one virtue. Sin number 1: it is out of date. "The last time it got a full makeover was in 1879." Its second sin is acquiescing to Baumol's disease - the idea that government cannot take advantage of technological innovation to become more efficient and productive because its realm lies in labor-intensive areas. Its third sin involves Olson's Law which states that it is far easier for a special interest group to get and maintain power than it is for a group opposed to that interest. Fourth is the overactive state which invariable leads to more taxation. "California is constantly inventing new ways of raising taxes and then new ways of letting favored groups off those taxes." The fifth is the use of fuzzy math used to lie about numbers and use numbers to lie. The sixth sin is the cascading of spending towards the relatively well-off middle class. Finally, there is the hyper-partisanship as both parties veered further to the right and the left. Who's to blame for all of this? Us. "Democracy is being disfigured by unrealistic expectations and contradictory demands." Yep, it's what the Founders feared: too much democracy. California's one virtue? It might be slowly beginning to change.

So what is the alternative? They point to Asia, specifically Singapore's Lee Kuan Yew, as having much to teach the West. He ruled in Singapore from 1959 to his recent death. Now his son rules. He originally favored a welfare state but moved to the right by the 70's and became a great Anglophile. He then took his country on the opposite path of the rest of the world. Rather than increasing democracy and the welfare state, he ran an autocratic, stingy government. It has worked rather well. Other countries in Asia have implemented similar programs, believing that the West does not have all the answers and a strong government is necessary to compete in the global economy. 

Downplaying democracy sounds heretical to our Western ears, yet as Lee says, "The exuberance of democracy leads to undisciplined and disorderly conditions." [See: California] He has also kept the state very small, consuming less than 3.3% GDP. He eschewed the welfare state, and gave the citizens the opportunity to provide for themselves. They pay 20% of their income, and employers contribute another 15.5%, to the Central Provident Fund. They can withdraw this account for welfare, housing, pensions, health care and education. Imagine that! You can fund your life with your own money if you are forced to save! A small safety net helps those unable to self-fund. 

There are also other components of the Asian Alternative. They discuss the mixed record of state-sponsored capitalism, which is not a new idea in America. Alexander Hamilton proposed it from the beginning to help the fledgling nation. In addition, countries like China operate as strict meritocracies. These "educated mandarins" can address systemic problems politicians can't or won't touch. This has freed them from the "short-termerism" that has infected Western democracies. Although the ideas may not all work, the authors give Asia credit for trying and not remaining sclerotic like the West. 

The Nordic countries also provide a place to look for solutions for one simple reason: they ran out of cash before we did. Bankruptcy focuses the mind and so they have been able to implement reforms unthinkable in the rest of the Western world. "The Nordic countries provide strong evidence... that it is possible to contain government while improving its performance." One reason is that they have used technology to their advantage in ways we could learn from.  

We in the West have made four terrible assumptions that made sense 60 years ago, but no longer do. The first is that everything must be done "in-house." The second is to centralize decision making. The third is to make uniformity the rule. The fourth is to view change with horror - everything is bureaucratized and nothing is done "for the first time." Each of these assumptions must be challenged, and that is starting to happen. Bring back an old idea - liberty. This is becoming the spirit of the age and politicians would do well to listen. The glutenous state must be relegated to the dust bin. 

The three areas they suggest we start with are: "selling things the state has no business owning by reviving privatization...;second, cutting the subsidies that flow to the rich and well connected...; and third, reforming entitlements to make sure that they are targeted to people who need them and sustainable in the long term."

All good ideas. But how? This is the problem. Americans have no stomach for these kind of changes. Not yet anyhow. 

Overall, the book was good at defining the problem. OK at describing a small number of countries that have worked on the problems. It offered very little as far as actual solutions right here in America. At this point "The Fourth Revolution" seems a bit grandiose of a title. 

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