on growth and democracy

Where every man is a sharer in the direction of his ward-republic, or of some of the higher ones, and feels that he is a participator in the government of affairs, not merely at an election one day in the year but every day; when there shall not be a man in the State who will not be a member of some one of its councils, great or small, he will let the heart be torn out of his body sooner than his power be wrested from him by a Caesar or a Bonaparte. ...As Cato, then, concluded every speech with the words,"Carthago delenda est," so do I every opinion with the injunction, "divide the counties into wards.
-- Thomas Jefferson

Robert Zoellick has a piece in the FT that is so wrong headed it should be read. Mr. Zoellick personifies the American apparatchik of the past several decades. He comes from the Republican side with a resume that includes stints in James Baker's Treasury, Fannie Mae, Goldman Sachs, Enron, Project for a New American Century(neo-con advocates for the Iraq occupation), staff of George W. Bush's White House, and now head of the World Bank. Mr. Zoellick represents a status quo that is desperately trying to continue us down a path of failure. Mr. Zoellick's argues we need to continue down this path, and unfortunately everything that has been done to this point in reaction to the global financial/economic crisis has been exactly that. However, it is imperative we begin moving in a new direction.

Mr. Zoellick writes:

Riots, debts and the creeping fear of a looming Lost Decade – no wonder there is pessimism in Europe. But what we are seeing is not just “financial crisis, part two”; it is “sustainable growth challenge, part one”. The difference has implications for policy. Get the diagnosis wrong and the wrong treatment will follow.

So far, the world has focused on fiscal contraction and debt, but these are only half the story. The world and Europe also need a return to robust growth. Without it the fiscal adjustments will be more painful and the politics more unmanageable.

"Robust growth", there lies the problem. Mr. Zoellick then goes to point out that growth has been greater in developing countries over the past several decades than in the developed world, which is correct. He writes:

Financial crises can spur reform. Last year as developed economies focused on Keynesian changes in demand, Asia-Pacific economies were advancing reforms – especially in services – to generate higher growth. As developed economies focused on financial regulation and a broader reregulatory movement, Asians were considering how deregulation might foster innovation and jobs.

You could write volumes picking this apart, but I'll take two things. The developed and developing world face different challenges. The developing world is moving from agrarian societies to industrial societies. Growth by definition will be stronger there. They need to build up infrastructure including energy, transportation, industry, sewage, housing, etc. These are all capital intensive and score well on our traditional industrial growth measures. In the developed world most of this was already accomplished over the past century, many of these systems require simple maintenance, which by definition leads to less extensive growth.

In the second sentence on deregulation, Mr. Zoellick exemplifies the intellectual dishonesty so prevalent amongst our apparatchiks. Mr. Zoellick advocated and participated in the great deregulation of the American financial sector that led to many of the great problems we currently face. Most significantly, it was the deregulatory financailization of the American economy that was the primary factor in the deindustrializaiton of America, leading to the great global financial crisis we find ourselves. Mr. Zoellick ignores this and with a sleight of hand tries to convince that the weak regulatory measures taken to this point in response to a failed deregulated financial system are now part of the problem.

He concludes:

There is a broader lesson: in 2008, the crisis was US-led; in 2010, it is European. For both the US and Europe, it is developing countries that point to the way ahead. It is time we took note.

Where he is right the crisis was US led, yet, he refuses to acknowledge it was caused by the very policies he advocated and implemented for several decades, and his solution is simply nonsensical. The idea the developed US can mimic the developing world is a big a nonstarter as the idea the developing world can mimic the European and more importantly the US development models. There's plenty of reasons why the latter is not possible, but the most important and essential one is this model was based on cheap oil, and there is no more cheap oil.

It wouldn't be so bad if Mr. Zoellick simply represented failure, but he represents the failure of entrenched power in our mega-corporations and centralized governments. They continue to push thinking and actions detrimental to both the United States and the rest of the world. We in the United States are going to have understand growth will be no magic elixir to get us out of our problems, in fact, we don't need it. What we need is a reformation of our political economy. A reformation that understands the industrial model must now be transcended, just as agrarian society was transcended by the industrial revolution. Many of the values, institutions, and ways of industrial society need to be evolved, most importantly the idea of industrial growth.

We have a classical decadence of our political system, in that the things which made us great have been discarded or twisted. The most important being the dis-empowerment of the citizenry. We need a renaissance of this republic, a bringing forth and recognition of the values of being citizen. To do that we must reform power, bringing it out of the hands of the apparatchiks and back to the citizenry. We have tremendous wealth in this country that is being wasted. We don't need more growth, more stuff, we need to redesign much of our established infrastructure. We need to move from the growth economy to the design economy. We don't need more jobs, we need to cut the work week and devolve and involve decision making. We need fewer consumers and more citizens.