Further notes on ‘The Culture of Divide’

Roeland Decorte & Albert Beardow. Read 'The Culture of Divide' here.

FROM THE EDITORS: As suggested by a few readers, it is perhaps necessary to clear up a few things from the previous article on the futility of the left-right dichotomy and the rise of a new international political elite. It is important to stress that this ‘new order’, as manifested in the centralization and concentration of political power by a select few in office, is not the result of some 'grand conspiracy' hatched by the powerful to obtain world-domination, rather it is only the result of human nature itself.

It is almost an innate quality of every political being that he or she grabs every opportunity to further personal power and influence. When we allow a select group of individuals free reign over political and economic issues we should thus not be surprised that such abuses arise. The fault lies only with us, as more often than not we allow these abuses to pass by unnoticed.

United States Capitol (photo: ingfbruno)

It is also true that many of those enhancing their own power are convinced they are helping the people as a whole, whether through the popular political belief that the people cannot decide for themselves and need guidance, or, as sadly seems most often the case today, out of a wishful thinking, emboldened by vested-interest economists, that spending massive amounts of money on popular projects not only increases their own popularity but also benefits the economy as a whole for future generations, rather than – as is the sad reality – impoverishing them.

Too many don't seem capable of appreciating that, like was said of the British Empire, this institutional takeover has actually happened in "a fit of absence of mind". Yet, as we know that almost all top-down plans fail, it should be no surprise that even the imposition of top-down control on the economy and populace will have arisen not out of some top-down conspiracy, but from the aggregate of semi-conscious, individual harmful decisions that our political institutions were not robust to.

The idea that this is not the result of our human missteps but rather some kind of grand conspiracy is dangerous indeed. Firstly, it suggests that a top-down conspiracy must be fought with alternative top-down measures, more iatrogenic regulations, or the idea that a simple solution like wealth confiscation or simply changing the people in power (electing a different president, say) will be enough to stop this malaise. Instead this will at best do nothing, at worst make the institutions even less robust to errors. Secondly, it tends to categorise people into "conspirators" and those who do not partake, or the "1%" versus the "99%" (or indeed, "left" versus "right"), ignoring the irregularities in such superficial notions, and thus unfairly penalising or accusing groups who are not guilty. This leads to further division and mistrust, only deepening the culture of divide.

There are of course some people who do actively hold the people in contempt and deliberately work against them, and their effects on the system as a whole are probably scalable, but this still misses the main point. Ask most government regulators, bureaucrats, subsidised CEOs, or economics professors whether he believes in a simple, robust, ethically sound approach, and he will say yes - and genuinely believe it. He will only fail to apply it to his own craft - the temptation to self-serve, both materially and intellectually, is too great. Paradigmatic is the CEO of AIG who, under criticism for his huge bonuses, quoted "Atlas Shrugged" to argue that business leaders were unappreciated. He failed to remember that the villains in "Atlas Shrugged" were CEOs getting government bail-outs.

Houses of Parliament, UK

Many individual regulators also believe that they are helping the economy becoming more ethical by introducing a whole series of limitations on businesses and their dealings, though – as seen in the video in the article below – many of the most powerful and famous amongst them are themselves backed by vested interest groups or on the board of some business benefiting from the regulations. Those regulators that are free of vested interests, however, and who really want to protect the economy and the population as a whole, often fail to see that by creating more complex regulations they are only exacerbating the problem. While the large businesses with their political clout and armies of lawyers will unavoidably find some way to game the system, such complex regulation only makes it more difficult for smaller businesses to rise and compete with the already established giants, thus preventing the rise of diversity and impoverishing the market as a whole. Increased regulation also serves to put more power in the hands of the regulator (i.e. the government), in which the regulator without political incentives and vested interests is, as we have seen, very much the exception. In other words, they are only paving the path for more excesses.

As said in the article below: ‘Though their intentions are commendable, the thought that any political organ – something which exists only to support certain political interests – could ever objectively govern the economy in the interest of all, is sadly vain hope. Only if every single individual were directly represented in government, would the government realistically protect every individual’s interests in economic policy. This is not possible through any sort of indirect representation, or financial committee. It is, however, exactly what defines the free market.’

Ultimately, if everyone believes in robust and ethical actions, but are self-serving and fragile in their own, then the whole system will be fragile and self-serving, without any conscious guidance. The important point it to stop these misdeeds at the source, not counter their effects with some other fragile self-serving top-down solution. Take power away from bureaucrats. Keep regulation simple so that it can't be abused. Let companies fail. Don't subsidise them so they are too big in the first place. Pay heed to the assumptions and vested interests of academic economic models, and their openness to error, rather than just the results of such models. Do not leverage to the point that economies need to be "managed" simply in order to pay down the debt. And don't give those who have shown themselves to be arrogant and self-serving more power and rewards!

The Culture of Divide

Roeland Decorte.

‘Clowns to the Left, jokers to the Right.’

Through centuries of vague characterization, deliberate misrepresentation and  manipulation of our innate tendency to consider the world through an ‘us’ versus ‘them’ narrative, society in the West has become heavily dichotomized.  Indeed, we are living in a time when political divisions, enmities and feuds are no longer limited to localities or individuals, but carry on, throughout time, from one generation to the next, bringing with them a premade set of ideals, hopes and beliefs, as well as vilification of the other side. In this post I will briefly argue why the use of terms such as ‘left’ and ‘right’-wing, as well as most terms like ‘progressive’ or ‘conservative’, are not only futile in reasoned political debate but actually actively harmful and obstructive.

The History

In the early days of the French revolution, the “Assemblée nationale” – the transitional government – was divided into those in favour of the revolution, and those in support of the old monarchy. The revolutionaries sat to the left, whereas those in support of the old order were seated on the right. Though during the days of executions and arrests the right side was often abandoned, the seating arrangement survived in later governmental structures. In the successors of the Assemblée, the so-called ‘innovators’ were nearly always seated on the left side and the so-called ‘defenders of the constitution and faith’ on the right.

The Assemblée nationale

The idea of a ‘left-right’ division fitted well into the storm of political ideals overtaking Europe in the late 18^th and 19^th century after the French Revolution. The notion of a world-wide class struggle between the people as a whole and its ‘higher orders’ grew exponentially. And indeed, in those days there were actual entrenched political classes: the aristocracy still dominated the political landscape of Europe and the population as a whole had very little say in government. Following the seating arrangement of the French parliament, the term ‘left-wing’ became known as ‘progressive’ – consisting mainly out of ‘commons’ – whereas ‘right-wing’ became known as ‘conservative’ – consisting mainly of the aristocracy.

Road to Nowhere

Whatever original usefulness these terms might have had for the characterization of different sides during the French revolution, as well during the subsequent European struggle against the aristocracy, I need not point out to anyone familiar with the current political landscape that the terms have long since lost their meaning. With the disappearance of an actual aristocracy with political power, the terms are now used in a myriad of different ways, with a myriad of different – often contradictory – meanings. In our current representative democracies, not one major party proposes a reinstatement of aristocratic rule (though some propose bureaucratic, or ‘technocratic’ rule) and all sides – at least nominally but hopefully also genuinely – believe in the right of the people to govern their own affairs.

The ‘right-wing’ as it existed during the French revolution, therefore, no longer exists. Nor does, in fact, the French revolutionary left, as it was a mixed bag of what later would become defined as liberalism (meant in the original interpretation, not the new American one), socialism and centrism. Indeed, both the current ‘left’ and ‘right’ were born from what was ‘liberal’ opposition to traditional aristocratic rule. Really, what we now see as the difference between left- and right-wing politics is a split following the division in the mid-19^th century between capitalist and anti-capitalist movements. The fact that this is where the real modern division gets its first inception is best illustrated by the fact that ‘classical liberalism’ is deemed to be right-wing, whereas  ‘social liberalism’ is deemed to be left-wing.

Inauguration of the Statue of Liberty

It is a fact that is not often pointed out, but worth remembering, that both left- and right-wing movements, despite disagreement on how to run the economy, thus stem from a common plight. Indeed, modern conservatism, very often anti-statist and anti-government, has very little in common with oligarchic 'conservative' factions of 19^th century Europe, yet still uses its obsolete name.

Divide et Impera

Of course one could argue that the terms have evolved with time, and though none of the original premises hold true, the populace generally understands what is meant by ‘left’ and ‘right’-wing by observing political practice. As we will see below, however, this does not seem to be the case at all.

A very in-depth study conducted over the course of multiple years by the London School of Economics as part of the official British Election Studies found that, when asked to place themselves on the left-right scale, just over 18% of voters did not know what ‘left-wing’ meant. Of the remaining 82%, each gave roughly two answers. From all of these answers only 59 per cent could be said to ‘correspond unambiguously with even a broad-based conception of what political scientists mean by ‘left’ (that is, answers which said that ‘left’ meant in favour of working-class, poor, ordinary working person or against the middle class, the rich or business; answers which associated the left with Communism, Marxism, socialism, the Labour Party, or against Conservatism, fascism, etc.)’ [Heath and Lalljee 1996: 98].

The study also noted that ‘among the most common answers (given 45 times) were ones which defined the left as people who are extreme, dogmatic or militant but without any mention of the content of their extremism’ [Heath and Lalljee 1996: 99] – a fact, I would argue, clearly illustrative of the divisive nature of the left-right divide. On what was meant by ‘right-wing’ politics, there was again just under 20% of respondents that did not know the answer. The remainder gave about 1.2 answers per person, of which only 58% corresponded closely to the political scientist’s concept’ [Ibid].

This political confusion is fundamental to why the status-quo, maintained mainly by power-hungry self-styled 'centrists', holds such sway. Misunderstanding and mischaracterization from both sides, as well as party-political divisions, have kept power out of the hands of the people as a whole and into the hands of those few who, above all, desire political office. We are living in the age of the establishment, witnessing the attempts, through ever-growing national, supra-national and global governments, to create a new kind of ‘elite’. Indeed, while the ‘protectors of the people’ (as both sides like to characterize themselves) are busy in-fighting, we see the birth of a new political aristocracy in Brussels, London, Washington and elsewhere.

Methods define the Results

The motto of this establishment – often consisting of self-styled ‘technocrats’ – is simple: ‘people cannot think for themselves, therefore we must decide what is best for them.’ This, they say, is proven by data such as the study quoted above: people do not know what they want, or what is the best way to go about to achieve it.

Indeed, much previous research done in the line of the paper above (most notably Butler and Stokes' seminal work) seemingly observed the general population to be perpetually fickle in its allegiances and beliefs – often displaying little to no knowledge of the issues, voting based on arbitrary notions such as who their family 'always voted for’ or which politician's personality they liked. These studies then often ended by noting that the only conclusion one could draw was to ‘interpret the fluidity of the public’s view as an indication of the limited degree to which attitudes are formed towards even the best-know policy issues.’ [Butler and Stokes 1974:281] Such sentiments remained dominant amongst political scientist for decades, and were very convenient for those in favour of more centralization and less direct popular involvement.

The paper quoted above, however, [Heath and Lalljee 1996] explored the possibility that the problem actually was not the intelligence or involvement of the general populace but rather the models used to map political preference. Their paper was not the first paper to identify problems with the two-dimensional mapping of political opinions [see Luttbeg and Gant 1985; Himmelweit et al. 1985; Heath 1986a; Fleishman 1988]. In their research, however, they did not only inquire into the flaws of the model, but also demonstrated that, when using different models, people in fact appear consistent in their beliefs and ideals, as well as heavily involved in political issues.

Rather than using the one axis left-right identification, they offered another, that of authoritarian vs. libertarian. But most notably, they chose to ask people about specific political beliefs rather than just party-political issues or current affairs. This is crucial, as it serves to briefly break through the bonds of the partycratic politics dominating our modern representative democracies, and tap right into the personal beliefs and hopes of the individuals.

The study asked the interviewees for their opinions on things like big business, freedom of speech, tradition and the legal system. and then asked the same group the same question again one year later. Subsequently they used these specific issues to predict how the interviewees would vote in particular elections.

Unsurprisingly, this model yielded a stunning consistency in political beliefs and hopes, noting that ‘political attitudes are not random and unstable, neither are they constrained along a single left-right dimension, instead they are structured within a value framework involving dimensions of both left-right and libertarian-authoritarian beliefs and possibly several others. When measured suitably these values appear to form consistent, stable and consequential elements of British political culture.’ [Heath and Lalljee 1996: 109]

Indeed, the general uneasiness of the population in placing itself on the political scale, as well as their fickleness in supporting and opposing different parties and groups, is not a result of any supposedly inherent lack of knowledge, but rather of the unyielding and contradictory categorizations they are forced into.

The Science of filling pots with no bottom

One way of dealing with the left-right difficulties has been to create political spectrum maps: various graphs – sometimes simple, sometimes complicated – provide a series of different parameters. Indeed, the study by Heath and Lalljee used, as mentioned above, an ‘authoritarian’ vs. ‘libertarian’ graph. ‘Left’ and ‘right’ is purely seen as an economic issue, whereas social and idealistic preferences are mapped differently. This is similar to the so-called ‘political compass’ (illustrated above), which is now used widely – especially on the internet – to ascertain political stances.

Danaids

The problem with such multi-axis models (and there are a lot of them!) is that they are all, like the Danaids in Greek mythology, trying to fill a jar with no bottom. Even when defining left and right on purely economic terms, we encounter many problems. Though it has often been noted that the extreme left and extreme right, both authoritarian and statist, have much in common [Eysenck 1981,McClosky and Chong 1985], many parties which are generally considered to be right-wing (for example the most ‘extreme’ right-wing party in my native Belgium) favour interventionist economic measures. Equally, many ‘right wing’ parties, such as the Tories in the UK, have scores of Keynesian or state-interventionists among their ranks. While in theory such a graph – identifying individuals or parties as one of either ‘authoritarian or libertarian’ and ‘left or right’ – would work, the words ‘left-wing’ and ‘right-wing’ are simply not used like this  in practice, and therefore these graphs, which purportedly are to be a simplification of political reality, prove more often to be wrong than right.

Furthermore, the old idea of ‘conservative’ vs. ‘progressive’, which is still widely used in the characterization of right vs. left wing, also becomes useless if understood in economic terms like the graph above – even contradictory. Whereas most economic policy today is Keynesian (we’re all Keynesians now!), those who are generally labelled ‘fiscally conservative’ are the ones who want to radically change, limit and decrease government involvement in fiscal matters, whereas those who are generally characterized as ‘progressive’ want to ‘conserve’ and further current economic models, arguing for maintained belief in Keynesian socio-economic systems as well as resistance to new impulses of austerity, as prompted by the world-wide financial crisis.

Opposed Allies

Indeed, a quick look at one of the main issues that currently dominates Western political debate, namely how to combat the financial crisis and failing economies of the West, again reveals the futility, but also straight-out harmfulness, of such a left-right divide. The left- and right-wing narratives seem, at first sight, strongly opposed: while the former largely blames the crisis on the extravagances and moral corruption of the banks, bankers and large multinationals, the latter consider high tax-burden and mismanaged social policies as the main culprits. The solutions proffered are also radically different: one side wants to heavily regulate the banking sector (carrying slogans saying ‘Capitalism has Failed!’) the other proposes lower taxes and cutting social expenditure.

Indeed, it has come to this: the left considers the left-right divide as one of big business and rich elites versus the masses (the so-called 99%), whereas the right considers the right-left divide as one of big government and political elites versus the masses. Both sides, believing they are defending the masses – as their ‘liberal’ roots necessitate – are attacking different symptoms of the same disease. Yet the supposed political divide stops them from recognizing this. The disease is this: big business CEOs do not belong in government positions, and government officials do not belong on the governing boards of banks. Both sides recognize this, however one side blames the government, the other the bankers. But above all ... they blame each other.

View the difference

To illustrate this, and to end this brief foray in some of our oldest political terms, I have picked two videos – one from a left-wing background, one from a right-wing background – which talk about the financial crisis. First, quite a famous documentary, generally identified as ‘left-wing’, called ‘Inside Job’. In this documentary, though speckled with typical ‘capitalism has failed’ and ‘the free market doesn’t work’ narratives, the film-makers' research led them to the problem that so many of the people responsible for the crisis were paid by, backed by, or even working for, the government. A large part of the documentary is spent pointing out that many of the very same bankers which can be held responsible for the crisis now occupy high positions in government.

A brief promotional clip can be found here, though the full documentary is of course copyrighted (go and watch it!):

The second clip, by commentator and businessman Peter Schiff , shows Peter Schiff attending the Occupy Wall Street protests when they were still in full swing, carrying a sign reading ‘I am the one percent, let’s talk’. Though both sides disagree on who exactly is the instigator of the financial troubles, near the end of the video (if you only watch two minutes, watch this) both sides seem to agree on the problem, and invite each other to join their ranks. Strikingly, it ends by many of the Occupy movement expressing that they do not think capitalism is the problem.

Quis custodiet ipsos custodes?

Indeed, to briefly voice my personal opinion, ‘Inside Job’, though brilliant in bringing to the fore some of the problems in our current system, sadly, because of the party-political façades and the dichotomy described above, falls into the exact same pitfall which has led to those responsible for the crisis being in government. Seeing the negative effects the regulators have had on our economy, the documentary pushes for more regulation and more ‘oversight’. Though their intentions are commendable, the thought that any political organ – something which exists only to support certain political interests – could ever objectively govern the economy in the interest of all, is sadly vain hope.

Only if every single individual were directly represented in government, would the government realistically protect every individual’s interests in economic policy. This is not possible through any sort of indirect representation, or financial committee. It is, however, exactly what defines the free market: every single individual’s choices and preferences having a direct input, and it is the collective – made up of millions and millions of individuals – that decides which businesses are prospering and which aren’t. Not some bureaucrat with vested interests. As long as we make sure human rights and dignity are maintained and enforced across the board, the free market is the most egalitarian way of organizing the economy possible. As said in the video above by the Occupy protester, no monopoly can ever rise without government interference (also said by Hayek[1944] p. 48 onwards). Many have been conditioned to hate the free market. In this way, when government involvement fails, the establishment can claim it was because there was too little of it (leading to situations where those that failed the banks subsequently sat in government). The free market is, however, the fairest tool we have to organize our economy: too bad it has never been tried.

Come Together, Right Now

Taking a step back now from personal opinion, let us get to the point: the only reason those groups of the population that identify themselves as variously left- and right-wing are seemingly at opposite sides of the debate on the financial crisis, is because of the façade meticulously built up by those in power over the past centuries. Though different groups may disagree on the way the crisis started, all recognize what the problem is. Yet rather than attacking the problem, we limit ourselves to attacking each other. What is more, the current debate on the economy is just one of a myriad of issues where similar circumstances hold. It is time to leave antagonizing speech and characterizations behind, as well as void terms that do not even describe our real hopes and dreams, and for once start conversing clearly and straightforwardly with each other. Only then, will democracy truly thrive.

Freedom, Fairness, and Regulation

Albert Beardow.

In everyday speech and even in the media, the concepts of free trade, free markets and light regulation are often used interchangeably, with little appreciation for the key differences between them. Both their supporters and detractors see them as part of a laissez-faire package grounded solely in the unwavering principle of individual freedom. Yet the rationales for these concepts as the basis for economic life are quite distinct, and need not draw only on a moral belief in human freedom, but empirical observations and broader notions of fairness and equality before the law.

Free Trade

Free trade is the notion that international trade should be allowed without tariffs or restrictions – or taken in the broadest sense, that trade should be permitted between humans on the same terms regardless of their membership of different nations or any other groups.

Canary Wharf Skyline (photo by David Iliff)

The early advocates of free trade - Adam Smith and David Ricardo prominent among them – tended to argue primarily in terms of its empirical results – comparative advantage and fostering competitiveness. Whilst this is doubtless a significant (though oft disputed) part of the rationale behind free trade, I will not shy from saying that for me it is the moral argument that is most important.

There are two primary ways in which restrictions on free trade violate ethical notions of human freedom and dignity. The first is to subordinate the will of the individual to that of the “community”, membership of which is rarely chosen but bestowed through the serendipity of birth. In spite of what many opposed to free trade say, it is impossible to “force” free trade on a person – rather the opposite, that force can only be used to deny a person the right to free trade. This is perhaps not so much of a problem for those “collectivists” who treat collectives as bodies with superior moral standing to individuals.

Most collectivists (at least in the West) are less inclined to dispose of the moral concept of human equality. Yet restrictions on free trade do exactly that, for the “community” in question is not mankind as a whole, but rather the nation. Given that nations have been for the most part arbitrarily defined through the whims of history, mostly by kings and conquerors long dead, it is difficult to see how these can be given an independent moral standing. If members of a different (perhaps poorer) nation are denied the same rights in their relationship with you as those within your own nation, in what way can it be said that all humans have an equal standing in terms of social justice? Some humans are then clearly more equal than others. One need only observe how quickly protectionist rhetoric introduces the notion of “them” as opposed to “us” to see how the rights and desires of others are soon devalued.

Free Market

If free trade deals with the question of “who”, then the free market deals with the “how”. The core notion of the free market is that prices and the distribution of goods should be set by supply and demand, and not by fiat.

There is, of course, considerable debate over the definition of the term, with many contending that a free market means freedom solely from government interference, and that a free market is equivalent to laissez-faire. However, I would tend to agree with the British classical economists from Smith onwards, who argued that it does not matter whose fiat dictates prices – and as such, monopolistic or monopsonistic markets cannot be characterised as truly free. For supply and demand to work in determining price, competition on both sides is vital, and thus a free market entails both a competitive system and the open access to markets that facilitates this.

Afghan market

It is worth elaborating briefly on the difference between moral and empiricist arguments for human freedom. Perhaps the best example is the question of paternalism - whether society should be ordered and planned by experts who know the best ways for us to live. The moralist might oppose this on the grounds that such an expert would be denying us our right to exercise our freedom as individuals. The empiricist would oppose this on the grounds that no such experts exist.

Moral arguments in favour of human freedom are less convincing if used on their own to justify free markets. Even the most ardent libertarians would deny, for example, that it were a morally just situation if a man dying of thirst freely gave up his life’s savings in exchange for water from a monopolist provider. The crucial argument supporting the free market is empiricist in nature, and relates directly to the competitive system, and its building of what Hayek called “spontaneous order”.

Freely set prices are important because they incorporate all the various pieces of disperse knowledge that different actors in an economy have – knowledge that no expert alone could possibly have access to. These prices then guide resources to be allocated in desirable ways for society – to overcome shortages, improve quality, and identify new demands. The beauty of a free market system is its ability to spontaneously deal with the very complexity that socialists believe makes planning desirable, but which makes planning ultimately hopeless.

Regulation

A free market need not be totally absent from regulation to remain free. It is hard to argue that a well thought out regulation to protect workers’ or consumers’ safety, for example, would on its own distort the method by which prices are set. The damage done by regulations instead arises primarily from two sources: inhibited innovation due to precautionary restrictions, and the costs of excessive complexity.

Economies grow through a process of trial and error, through the success and failure of new business ideas, scientific endeavours and technological breakthroughs. It is in the realm of the untried and untested that the greatest prospects for growth are to be found. It should therefore follow naturally that regulations which prevent (or at least delay) new endeavours are a deterrent to progress. There is, of course, a more profound debate to be had here about the extent to which society wants to risk the uncertainties and possible dangers that come with new developments (which I will write about in more detail in a future post). Needless to say, of course, that societies which opt for a stationary state always fail to satisfy underlying desires for prosperity and opportunity, and are thus on the road to decline.

Lange's 'Migrant Mother', symbol of the Great Depression

Yet it is perhaps the second problem of regulation that is more insidious. Simply put, the cumulative effects of regulations are very different from the addition of their individual costs and benefits. The benefits of multiple regulations can often overlap, with diminishing returns for each added layer of complexity. The cumulative costs, on the other hand, generally exceed the sum of the individual costs, both from the additional need to sort through the vast body of laws to identify which ones are in fact relevant, and due to the far greater share of resources that must be put to work in complying with official directives

The most damaging aspect of this complexity is that its effects are not equally spread – the huge budgets and compliance departments of large and powerful corporations are well equipped to deal with these burdens. Not so the small business or aspiring entrepreneur. By adding an additional hurdle to entry, large companies reap the benefits of less competition (and I am here not even mentioning the hand they have in writing these regulations). Yet the biggest beneficiaries are, of course, the lawyers, accountants and bureaucrats who thrive on complexity.

Rather than arguing blindly over a false dichotomy between regulation and de-regulation, I would like to see more discussion about the fairness of regulations. Though President Obama recently talked about the need for fairer regulations, in asking only whether regulations benefit the rich over the poor he misses the crucial point. We should instead be asking whether they favour any special interests at all over the community as a whole. For the reasons above, fairness and simplicity go hand-in-hand – and rather than simply asking whether regulations favour the poor or the rich, we should recognise that an excessive number of regulations ultimately only favours the powerful.