THE PERILS AND PITFALLS OF PROGRESS AND PROSPERITY

“The younger generation has it too good!” is the refrain of every flustered parent trying to instill a sense of appreciation into a spoiled child. Socrates was one of the first to issue this lament. Having both heard and used the admonition, I can appreciate it from both sides of the bullhorn. As hackneyed as the phrase may be, within lies a significant truth. It may not be true that every single generation has lived better than the generation which preceded it; there are setbacks: barbarian invasions, Dark Ages, bubonic plague, civil war, and the vast array of natural disasters which Mother Nature visits upon us with great regularity. But in the main, for the past three centuries in the West there has been an astounding and steady increase in what we can loosely call progress and prosperity.

As an impoverished undergrad living in a south Bronx slum, I was well nigh flummoxed when a history professor informed our class that the poor of today (1971) enjoy benefits that the rich of yesteryear could hardly have imagined. He went on to enumerate: electricity; clean water; indoor plumbing; artificial heating and cooling; radio and TV; rapid transportation on land, water, and sky; freedom from a plethora of diseases at one time common and often fatal. His list seemed interminable. And all that before laptops, iPods, and the Internet. The roaches and rats didn’t disappear from my apartment, but I viewed my “poverty” in a different light from that point on. So, when students, politicians, crusaders of various ilks, and NGO types urge us to return to the ways of our forefathers, to recapture a simpler way of life, to jettison the trappings of our materialistic modern culture, I feel like asking them which disease they want returned, how deep should we dig our own crapper, or how far did they walk to attend that conference where they could pontificate on the virtues of the simple life.

The rapid progress and increased prosperity in the West is undeniable; we can leave the debate on spiritual progress (whatever that might mean) for the theology class or the bar. But certain questions about progress and prosperity need to be asked and possibly answered. First, is not rapid progress and increased prosperity the historical norm? Second, if it is the norm, what’s the problem and what’s the point of this essay?

The norm. It’s hard to ignore the fact that over the centuries of man’s recorded history (since ca. 3000 BC) there has been a steady stream of invention, innovation, and material progress. Slowly one improvement builds upon another. The operative word is “slowly.” The odd thing about modern innovation and change is its rapidity. Despite differences in weaponry, Thothmoses III (15th c. BC) and Andrew Jackson both had to move their troops the same ways: by foot, on the backs of beasts, or with sail- or oar-propelled boats. Half a century after the War of 1812, the railroad and steamboat were in use. A century after the same war, warriors were in the air, under the sea, and racing across the land in machines powered by internal combustion engines. In Jackson’s day doctors were still bleeding their patients; now doctors are on the verge of predicting the medical future of a child in utero.

Sometimes even slow progress was not the norm. A widely repeated and fairly reliable story about the construction of the Flavian Amphitheater (the Colosseum) illustrates the point. Vespasian (reg. 69-79) shanghaied a lot of the bread and circus crowd of Rome to do the grunt work of hauling material around for the building of the Colosseum. It is said that an army engineer came to Vespasian with an invention that could do the work of a dozen men. Vespasian, eager to see the machine, asked for a demonstration. Said machine met the engineer’s boast - and Vespasian promptly had it destroyed. He argued that the machine would have put thousands out of work. As astounding as Roman aqueducts, baths, and bridges are, Roman engineering innovation was severely hamstrung and retarded by Rome’s reliance on slavery. The Romans knew the mechanics behind and even devised wind and water mills, but slaves were a cheaper source of energy. Hence, these inventions went nowhere until slaves became scarce in Europe in the Middle Ages. Many speculate that the ancient Egyptians probably also understood all the principles behind levers, fulcrums, pulleys, and transmission of power; but men and beasts being plentiful, these principles were never applied in their brilliant architectural projects.

In these cases progress was intentionally retarded because of the preferability of full employment on the cheap. The examples of Rome and Egypt actually indicate a deep understanding of the full consequences of progress and prosperity. Technological innovation has a number of easily discernable consequences. It often improves the quality of a product. It drives the cost of a product down. But since innovation improves production efficiency, it can, thereby, reduce the number of people needed to do a job. Since the Middle Ages, innovations in agriculture have made it possible to do more on the farm with fewer people. The surplus unemployed rural labor fled to the cities. Since the late 1700s (the beginning of the Industrial Revolution) innovations in manufacturing have made it possible to produce more in the factory with fewer people. Those laid off have to find jobs elsewhere. The complaint of the unions is that once a manufacturing job is lost, the unemployed end up in the service industries.

The fact that is neatly glossed over in this complaint is that we have come to equate “service industry” with “burger flipper.” “Service industry” includes burger flippers, but also all restaurant personnel, teachers, doctors, lawyers, actors, athletes, computer techs, massage therapists, et al. ad infinitum. As I type this article on a laptop, I wonder what happened to all the workers employed in typewriter factories, as well as the makers of white-out and typewriter ribbons, and the typewriter repairmen and salesmen. Should the computer revolution have been stalled to protect these jobs? Should any new industry be shackled for the benefit of an old technology? Few wish to return to typewriters or long hand, for that matter. But in these waves of “creative destruction” of capitalism (Joseph A. Schumpeter, Capitalism, Socialism and Democracy), there are some that get washed up and stranded. What to do with them?

It is easier to say what not to do with them. Do not make them wards of the state. The most damaging thing to do to someone who is physically or mentally capable of employment is to create a scenario in which that person survives as an infantile dependent. Rome’s “bread and circuses” nurtured a massive dependency class unable to care for itself. Many of our modern welfare programs are equally corrosive (Star Parker, Uncle Sam’s Plantation). Perhaps the CCT (Conditional Cash-Transfer) programs so popular in Latin America are the answer. CCT programs pay only upon verification that parents are sending their children to school, visiting the clinic, working, and so forth. Unconditional dole pay-outs, however, have a way of rotting the spirit.

Such a spiritual rot has a way of spreading throughout the body politic. In ancient Rome it was not only the “on-the-dole” crowd that grew apathetic. By the fifth century AD Germans were being enlisted in the Roman legions to defend the Empire (against other Germans and Huns), the Romans themselves having lost interest in soldiering. And the imperial government came to make many decisions that were formerly regarded as being personal matters: certain trades were made hereditary; the ability to pick up and move was restricted; levels were set for prices and wages; and, finally, certain religious beliefs were declared heretic (and the appropriate punishments set). The Romans traded in their liberty for personal security – the imperial government now took care of them in exchange. An Empire of infantile dependents?

Quo vadis, America? Since Otto von Bismarck created the benefits state to “take the wind out of the socialists’ sails,” the West has seen a steady increase in state care matched by a steady decrease in individual responsibility. Every election cycle here in the USA we are guaranteed more and more “rights” like affordable housing, college education, job training, and universal health care, all at no cost; we are promised cleaner and cheaper energy and free wifi; cities, states, and homeowners are all bailed out. When one hears in a public forum citizens whining to the President of the United States that they want a new kitchen or a job with better benefits or equal-to-wage unemployment compensation, you know it’s time to re-write JFK’s “ask not” admonition: “ask not what you can do to help yourself, ask the government for free stuff.”

It’s hard to imagine what went through the minds of the last generation of the dependency class in ancient Rome, when there was no more army to defend them, no more imperial government to provide them with free bread and circuses, no one to maintain their aqueducts and bath houses, no one to remove the filth and litter from their streets and sewers. A denarius for those thoughts!

CHARITY, JOBS CREATION AND STIMULUS PACKAGES, ROMAN STYLE: PART II

The task of government is to govern. Its fundamental duties are: to defend its citizens, to adjudicate cases amongst its citizens, to represent its citizens in dealings with foreign entities. In a democracy, the citizens determine who are its enemies, what its laws and rights are to be, with whom they want to deal. To protect a venue for our pursuit of happiness is nice, but historically rare. A government requires money to function. In a democracy the citizens determine how they wish to tax themselves. In non-democratic regimes professional politicians make these decisions for the citizens. When a government moves beyond its basic responsibilities, it does so at its own peril – or that of its citizens. That is not to say that governments should not venture into other fields when appropriate. The transcontinental railroad here in the USA would not have been possible, at the time, without federal assistance. Likewise, for better or worse, the splitting of the atom. Or the moon landing. Or the freeing of the slaves. But there are certain activities where governments have traditionally fielded dismal records. One of them is “running the economy.”

That is not to say that the government does not have a definitive role in the economy; it does: producing sound money, protecting valid contracts, adjudicating disputes, regulating economic activity across political boundaries, to name a few. Venturing further afield often invites disaster. For example, when the Roman government attempted to stop inflation with the Edict of Wages and Prices (301 AD), it brought an already exhausted economy to its knees.

Another economic activity into which governments have historically dipped their fingers is job creation. Aside from altruistic concerns for its citizens, government is usually motivated to job creation by one of three deeper desires: to stimulate the economy to create more tax revenue; to keep people occupied and not politically volatile; or to keep people fed and not hungry and even more volatile.

Governments have only three ways of stimulating job creation. Two are quick and easy, with glamorous short-term results but disastrous long-term consequences. The third is slow and hard, but ultimately more productive.

The easiest way for a government to create jobs is to hire people to do government jobs. Since governments need people to man the posts, this sounds like a no-brainer. There are, however, certain hazards. One is that government bureaucracies have a tendency to grow beyond healthy limits; they metastasize into bloated creatures devouring every coin in the people’s pockets. The pages of the history of ancient Rome are littered with the futile attempts of emperors to subdue this beast. Likewise, the history of twentieth century America. And since governments rarely are able to produce wealth on their own, they must acquire it elsewhere to feed the beast. Short of stealing it in war from its neighbors, that leaves taxing its citizens. So, for each job created in the government, money must be taken from one citizen to pay another. Up to a certain point this is necessary. But the creation of superfluous jobs makes the government akin to the town in which everyone is a barber and they all cut one another’s hair - and no progress is made.

Another traditional way to create jobs is to dream up “make-work” jobs, to devise something for the people to do and get paid for, so they can eat and stay off the streets. Historically, this is another favorite. The pyramids of Egypt were perhaps the most colossal of all make-works projects. To keep the people occupied during Nile flood time, the pharaohs, it is believed, hired the sweating hordes to build the monuments. In similar fashion the emperor Vespasian (reg. 69-79) attempted to get some of the mob of Rome off their collective gluteus maximus to construct the Colosseum. And the beautiful temples and theaters of the Greeks across the Mediterranean were, for the most part, government financed. FDR employed some 8 million over the life of the WPA doing everything from archaeology to bridge building, photography, painting, sculpture, and parks creation. Untold numbers must have been employed in public works projects over the ages and were paid and fed. We today have certainly enjoyed the aesthetic benefits of these ancient and modern projects. But others had to pay the price.

There are other problems with government make-work projects, besides the matter of paying one citizen out of the pocket of another. Many of these projects have been, throughout history, low skill jobs. Granted, low skill jobs are always going to be necessary in every society, but many of the public works projects of the past offered no opportunity for skills acquisition. It was more desirable to get many employed rather than a few trained. The men Vespasian employed out of the Roman mob for the shovel-ready job of Colosseum construction were not architects, masons, or sculptors; they were grunt laborers, who were not about to be trained and admitted into the stoneworker or mason unions. Moreover, the necessity of employing and keeping employed low skilled labor severely retarded any progress in Roman technology and engineering (a subject for my next blog post).

Another problem of the public works project is the down-stream cost of maintenance. Great, the temple is built! But the temple doesn’t maintain itself. Money is going to have to be found for its upkeep and repair. So, let our government build a new school in some impoverished community and create a number of short term jobs there (grunt labor?). When the school is built and staffed, who is going to pay the teachers and staff or fund the buildings’ maintenance? Unless wealth is created in that community with non-government, non-make-work jobs, tax money from outside the community will have to be diverted there.

That brings us to the last way a government can stimulate job creation: to clear the way for private firms and individuals to do the job. This is the most difficult, with no spectacular short-term headlines but with sounder long-term results. A case is often made for government funding of research and development - our atom splitting, again. But like the Roman bread dole, government grants often become a way of life for scholars and scientists. The results can actually stultify progress in some cases. Either the research results produced for the government must conform to what is politically fashionable at the moment (global warming comes to mind), or the “solution” is postponed to keep the funds flowing.

Another possibility is for the government simply to alleviate what hinders job creation most: taxes. What of the old dictum, “businesses do not pay taxes?” Well, they don’t. But they do pass the tax on to the consumers in the form of higher prices. The higher something costs, the fewer of them will be purchased; the fewer purchased, the fewer workers needed to produce them.

When Warren Harding was elected president in 1920, he inherited a crippling recession from Woodrow Wilson that easily could have morphed into a depression (some historians think it already was). Harding slashed business taxes and reined in federal spending to howls of protest and recrimination (R.K. Murray, The Harding Era). By the mid-twenties (he died in 1923) unemployment was at an estimated 1.8%, the national debt was being paid off, and the GNP was on the rise. Harding is not hailed as a great depression fighter because he never let one happen. FDR’s policies, however, may well have prolonged and exacerbated the depression he inherited (Amity Shlaes, The Forgotten Man). Harding and FDR provide a stark contrast to the role of government towards job creation.

So, why do politicians opt for the quick, flashy short-term fix and not the long-term solution? An easy answer might be because of an ignorance of economics and history. But there is a more fundamental reason. A political decision, by its very nature, is designed to enable the politician to hold on to power; politicians must be seen by their constituents to be doing something now! Politicians are not answerable to the constituents of a later generation. Most telling in this regard is that FDR knew perfectly well that his Social Security scheme would be broke by 1980. Personally, he felt bad about strapping the citizenry of the 80s with a colossal debt. But the more cynical of those around him noted that none of them were going to be around in 1980.

CHARITY, JOBS CREATION AND STIMULUS PACKAGES, ROMAN STYLE: PART I

The phrase “Christian charity” rolls off a westerner’s tongue with such facility that the two words are pronounced as if they were one, and the two concepts treated as if they were synonymous. We are apt to forget that charity has been a fairly universal religious and secular dictum, even amongst the ancient pagans. The Latin caritas (from which our charity derives) implied for the ancient Romans an esteem, care, regard, or empathetic feeling towards another that was quite distinct from that emotion loosely defined as love (amor). The caritas one felt towards one’s family obviously manifested itself differently from the caritas one felt towards one’s neighbors and strangers. It is the latter that here concerns us.

The Roman patron-client relationship we discussed in an earlier posting was not, of course, entirely a charitable affair. A definite quid pro quo was involved; the client, indebted to his patron for the patron’s largesse, was expected to advance the patron’s agenda in the social and political arenas. The Romans also practiced a “disinterested charity,” benevolence bestowed without the expectation of recompense: giving to beggars, for example. But they also practiced something between the two, what we might call “symbiotic charity.” The guilds and associations (collegia) into which the Romans grouped themselves along occupational, religious, ethnic, educational, or neighborhood lines generally maintained funds into which members of the association paid. Members could tap into the fund in hard times: sudden unemployment, injury, eviction, to bury the dead. How well this system worked, we don’t know; our ancient sources provide us no information.

We do, however, have a clearer idea of what transpired when the Roman government got into the charity business. Rome had both urban and rural charity programs for her poor. Had the programs simply failed and been abandoned, that would have been one thing. But even unsuccessful government programs rarely are jettisoned. The urban and rural dole programs did not alleviate poverty; they perpetuated and exacerbated it. Living off the dole became a way of life for generations. The urban dole also created a monstrous urban dependency class (the mob) that helped suck the life out of the Roman economy. An objection might be raised, “only the heard-hearted speak of economics, when the good-hearted speak of charity.” But decisions to allocate charity do have economic consequences.

An economic decision is fundamentally how one allocates limited resources that can have other uses (the definition is derived from Thomas Sowell, Basic Economics). Those resources can be money, time, energy, people, clean water, food, lumber, anything. The basic ideas are simple. First, we do not have infinite supplies of anything. Second, we must decide how to use these human, animal, mineral, and financial limited resources. Third, when we allocate these limited resources to one thing, generally speaking they cannot be used for another. Fourth, the more abundant a limited resource, the more carelessly we tend to treat it.

Disinterested, unrecompensed charity certainly has an important place: in natural disasters, to the terminally ill, to the permanently and totally disabled, during social catastrophes. All societies have had their asylums, lazzaretti, and emergency relief funds. Even the deranged Nero proved human enough during the Great Fire of 64 AD to break open the coffers of Rome to house and feed the victims of the fire. But when exceptional charity becomes routine maintenance, that society has taken the first step on the proverbial slippery slope. Let’s see what happened to Rome when she institutionalized charity.

The dole started as an attempt to subsidize the price of grain for the poor of Rome in the second century BC. By the first century BC free bread was being distributed to over 300,000 people in the city. By the second century AD emperors were routinely distributing gifts of meat, olive oil, and sometimes cash to the citizens. Additionally, there were, of course, the free games. Hence, our bread and circuses. The effect of having created such a massive urban dependency class was twofold.

The most devastating effect was on the dole recipients themselves. Certainly not all 300,000 were end-of-the-line, terminal charity cases. Most were probably victims of moral hazard, to borrow a sixteenth-century phrase from the insurance industry. The idea behind the concept of moral hazard is that when there is insurance, people tend towards riskier behavior. The insurance here is the dole; the risky behavior, idleness. The dole recipients became permanent wards of the state, unable to fend for themselves.

As debilitating as the dole was on its recipients, the creation of the dole had a rippling effect far beyond the urban dependency class. The grain that came to Rome (and other large cities) was a limited resource. But the actual grain itself was only one resource that had to be allocated to the mob; many other limited resources were diverted to this venture in state charity. Entire provinces were given over to raising grain for the dependency class of the city of Rome. The annual harvest of Egypt could supply the imperial city for less than half a year. That meant that the farmers in Egypt on the imperial estates were kept in conditions little better than slavery, just so Rome could be fed. This required hordes of estate managers to keep the farmers in line. The Egypt-to-Rome shipping lanes had to be secured and protected. Two full Roman army legions were permanently stationed in Egypt and northern Africa just to assure the continuity of the grain supply to Rome. That meant that they couldn’t be deployed to defend the frontiers. Farming in Italy was crippled by the artificial prices the state paid for its grain. To maintain the farmers, shippers, and soldiers, and to subsidize the grain, money was necessary. The citizens throughout the Empire were taxed for the mob’s sustenance.

The emperors were fully aware of the staggering human and financial resources being drained away in this endeavor. And they realized full well that many on the dole were perfectly capable of some rudimentary employment to earn their keep. So they tried their hand at stimulating the Roman economy by creating jobs for these people, “shovel-ready jobs,” in fact. That was their mistake. A government does little when the government itself provides the actual job; its does much more when it enables its citizens to create the jobs. But that is a concept that politicians have had a hard time getting their arms around, then and now. Stay tuned for the next posting.

HURRICANE KATRINA, PROFESSOR TYLER, AND BREAD AND CIRCUSES: PART II

While the United States of America was in the process of being born, Professor Tyler is said to have penned the oft-quoted dictum (here loosely paraphrased and heavily edited) about democracies failing due to loose fiscal policy and it members devolving from courageous rebels who fought to be free, to apathetic citizens concerned chiefly with the satisfaction of their material wants, to dependent wards of the state kept subdued by subsidized bread and circuses and cheap benefits. Ultimately, Tyler maintained, such wards of the state, unable to fend for themselves, slide back into a condition of enslavement. (See the ending of the previous posting for the exact quotation.)

So, who was this prescient Professor Tyler and whence his observation? If the truth be told, precious little is known about the man. Most curious is that his surname was probably Tytler and not Tyler, although he is more often referred to by the latter. Alexander James Tytler / Tyler, by general consensus, was a Scottish lawyer and who graced our planet from 1747 until 1813. His one known publication is Essay on the Principles of Translation (1790). Alas, the quotation about democracy can nowhere be found in Essay. Some claim it came from another of his works on the history of the democracy of ancient Athens. And certainly the bit about the people voting for the candidate who promises them the most from the public treasury describes the situation in the last days of the Athenian experiment. But if our esteemed professor ever authored such a book, no one has yet discovered it. Nonetheless, since World War II English-speaking politicians and pundits have been enthusiastically quoting the man.

Let’s not quibble over the authorship of the quotation. Whether it was Professor Tyler or Tytler or Dr. Oudeis is beside the point; many believe that what he said rings true. And it well appears to be the observation of a man who had studied both ancient Athens and Rome and was probably following the unfolding events of the French Revolution. He might also have been casting an eye across the Atlantic at the infant USA.

We can justifiably object to Tyler’s allotted time span for a democracy (disputable, at least), and we can argue the course of his democratic devolution (convoluted, at best), but the fact remains: Tyler’s quotation has received the benefit of being a piece of inherited wisdom simply because it has been quoted so often. That, in itself, relieves us of the task of actually having to think about it. But let’s argue the pros and cons of Tyler’s ideas just for forensic purposes.

Tyler gave democracies 200 years; we’re pushing 225 here in America. Have we beaten the odds? “Yes!” we joyously congratulate ourselves, “we have not only survived, but far from apathetic and dependent, we’re on the cusp of creating a perfect society and saving the planet to boot!” “ ‘Apathetic’ and ‘dependent’ are hardly adjectives that can be applied to the American public,” our devilish Objectionist continues, “after all, we are the workaholic, cowboy capitalists that so much of the world despises.”

Let’s circle the wagons and exclude our foreign friends from this conversation, and be bluntly honest amongst ourselves. The time is ripe for the most despised of intellectual activities – introspection.

Have Americans grown politically apathetic? Only one piece of evidence needs be introduced to sustain the accusation: voting turnout. From the mid-nineteenth century on, the turnout for presidential elections routinely ran in the 60%-80% range; admirable, given the exigencies of transportation and communication. Not so in the twentieth century. We bottomed out in the 1996 Clinton-Dole-Perot contest when only 49% of those of voting age bothered with the process. Things have improved slightly since then. But the much ballyhooed avalanche of a turnout for 2008 proved to be only slightly more than 2004. Compared to the 70% plus rate in Iraq (under fire and threat in time of war), that’s embarrassing. Our local paper here (San Antonio) reported that in off-year elections, sometimes less than 5% of the electorate turns out, even when important budgetary matters are at stake. We are only talking about a commitment of less than a few hours a year, and our transportation and communication problems are hardly as grim as those of eras past. We do fare rather better, however, than the Romans of the last days of the Republic, who blatantly sold themselves and their votes to their patrons. We must, of course, gloss over the days of Tammany Hall and the like.

Have Americans grown dependent? Although we cannot be accused of somnambulating through life in a cradle-to-grave welfare state, it is undeniable that the state now takes care of increasingly more of our private concerns and personal needs. A quick amble through the pages of American history brings this trend to the surface.

When Congress, in 1794, voted $15,000 for refugee relief, James Madison objected, “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.” In 1854 President Pierce vetoed a bill providing funds for the mentally ill, claiming that the Constitution does not authorize public charity. And when President Cleveland vetoed an 1887 Congressional appropriation for aid to distressed farmers, he justified his veto by citing the fact that the Constitution does not warrant relief for individual suffering and that it is not the task of the government to support the people. Such presidential thwarts of Congressional attempts at charity were common until FDR. Then, in one fell swoop, the president took the lead in proposals to alleviate the plight of the citizens. Now it’s a neck-to-neck race between our presidents and our congressmen.

We currently have so many government programs alleviating so many plights in so many ways of so many constituents that the programs, like Satan, are legion. As late as 1960 JFK could still admonish us not to ask what our country could do for us but we could do for our country. Even in the 2008 election JFK’s admonition surfaced with great regularity. What was amazing was that as our politicians intoned said admonition, everyone kept a straight face, as we were promised more federal aid and guaranteed more “rights.”

“But we are now,” our Devil’s Advocate might point out, “a more charitable nation!” And on the surface, we certainly appear so. But a closer self-examination gives lie to the self-congratulations. First, we are, after all, awarding ourselves this largesse from the public treasury. It is not as if we were giving it to some disinterested third party. Second, we are not paying for it. Our massive debt is being floated down to later generations who will pay it. We have printed money, placed IOUs in various funds, asked foreigners to finance our debt, and run deficits blithely believing that someday someone will pay our tab.

Might we, after all, be sliding from apathy into dependence? Have we already made that trade against which Benjamin Franklin warned us: freedom for security? Have we, like the bread and circus crowd of old, sold our most basic freedom, personal responsibility, to the politicians who promise us freedom from insecurity? Yea or nay, but the question remains, if the state is not to care for the least fortunate amongst us, then who shall? Next time, “Charity, Jobs Creation, and Stimulus Packages, Roman Style.”