Abstract and Keywords
This chapter considers some policy changes that are needed for the culture of contentment, to save and protect, to prevent suffering and further unpleasant consequence, to enhance the general feeling of security in well-being. It first discusses the nature of the modern industrial economy and how it can enhance long-run security before explaining how the culture of contentment has shaped the accepted attitude toward the state. In particular, it examines areas where the government's performance is approved, such as the armed services; where the state's adequacy is assumed, for example, in the conduct of foreign policy; or where state action is held to be deeply inadequate and seriously counterproductive. The chapter also emphasizes the need for macroeconomic regulation through the public budget, not through monetary policy, and proposes other measures relating to military power and the underclass.
Books of this genre are expected to have a happy ending. With awareness of what is wrong, the corrective forces of democracy are set in motion. And perhaps they would be now were they in a full democracy—one that embraced the interests and votes of all the citizens. Those now outside the contented majority would rally, or, more precisely, could be rallied, to their own interest and therewith to the larger and safer public interest. Alas, however, we speak here of a democracy of those with the least sense of urgency to correct what is wrong, the best insulation through short-run comfort from what could go wrong.
There is special occasion here for sadness—for a sad ending —for what is needed to save and protect, to ensure against suffering and further unpleasant consequence, is not in any way obscure. Nor would the resulting action be disagreeable. There would be a challenge to the present mood of contentment with its angry resentment of any intrusion, but, in the longer run, the general feeling of security in well-being would be deepened. Basic to this greater long-run security is the nature of the modern industrial economy.
In the decades since World War II in the United States, in Western Europe and Japan, and elsewhere in the countries on the Pacific Rim, the modern economy with its admixture of market incentives and public intervention has shown phenomenal strength. Nor can it be supposed that this reflects the uniquely wise guidance of those charged with its governance. The marvel (p.136) of the modern mixed economy is its potential internal strength and its resulting ability, on frequent occasion, to surmount the inadequacy, error, indifference or grave ignorance of those assumed to be responsible for its performance.
But not entirely. As the case of the American economy reveals, if negligent or perverse policy is powerful enough, the result can be visibly adverse. So it has been in these last years. But this does not mean that there is anything especially subtle about what would be required for remedy—for improvement. Further invasion of short-run contentment is inevitable; the nature of that invasion and of the remedy that would result is supremely evident. Economists regularly invoke the subtle, even incomprehensible, to imply or demonstrate a deeper competence and wisdom or to cover a grave difficulty that conveniently defies corrective action. No one should be misled.
The central requirement cannot be escaped: almost every action that would remedy and reassure involves the relationship between the citizen and the state. In the Communist world in the long years before collapse all concessions to the market were resisted as concessions to capitalism; they were, to remind, inconsistent with the accepted principles of socialism. It was, however, almost certainly by such concessions, especially in the diverse world of consumer goods and services and agriculture—economic activity beyond the reach and competence of the command system—that Communism cum socialism might have been saved. In a perverse way, the same is now true of modern capitalism. Although intervention by the state on a wide and varied front once saved capitalism, there is now a resistance to the state action that is necessary to ensure an economically successful and socially tranquil future. The dialectic of the modern capitalist, or more precisely the modern mixed, economy all but exclusively involves the role of government. In the dialectic this is extensively ideological; in everyday (p.137) manifestation it is highly pragmatic. And, to repeat, no subtlety conceals the needed attitude and action.
But on nothing has the culture of contentment been so successful as in shaping the accepted attitude toward the state. In some areas already emphasized—the armed services, the procurement of highly technical weaponry—the state’s performance is, to be sure, approved. In the conduct of foreign policy, real and rhetorical, the provision of Social Security and the rescue of failing financial institutions, its adequacy is assumed. Where, however, regulation to forestall the socially damaging or self-destructive tendencies of the system or to rescue the poor is involved, state action is held to be deeply inadequate and seriously counterproductive. The public servants thus employed are thought to be bureaucratic, feckless, incompetent, on occasion self-seeking or corrupt and certainly ineffective. And there is, alas, the possibility that such inadequacy follows, in some measure, from this conditioned attitude. If public servants are widely publicized as inept and incompetent, so, quite possibly, some of them become. The people who serve well are those who are hailed for serving well. This being as it may be, the first need in correcting the current situation is to agree that the state’s performance is equally eminent and necessary, whether it is for the contented or for the excluded. The present distinctions as to public competence all too obviously serve the purposes of short-run escape.
The required change in policy begins with the overall or macroeconomic performance of the economy. That the economy needs public guidance is wholly agreed; this is the legacy of the great revolution wrought by John Maynard Keynes. No longer can economic stability, growth, employment and the prevention of inflation be left to God and laissez faire. But the required regulation is now all but exclusively accomplished by the (p.138) manipulation of interest rates to control the flow of demand coming from business investment and consumer borrowing. Lower interest rates enhance production and employment; higher rates prevent inflation.
The inescapable need is that macroeconomic regulation now be exercised in substantial measure through the public budget, not through monetary policy as at present, for this is deeply damaging to longer-run investment and industrial performance. When inflation threatens, the primary curb should not be on borrowing for productive investment but on private consumption by means of taxation and, where not socially damaging, deferred public expenditure. Investment and resulting gains in industrial productivity would not thus be put at risk in the interests of price stability. This was fully accepted in the years of American economic eminence following World War II;1 nothing now runs more sharply against the comfortable commitment against tax increases. Or against the rentier reward from high interest rates.
In a time of economic recession such as that of the early 1990s, there is a strong case not only for low interest rates but also for increased public expenditure, especially on roads, bridges, airports and other civic needs, and on unemployment compensation and welfare payments, all to employ or protect the unemployed and those otherwise adversely affected.
But there is here a conflict with the tenets of the age of contentment: it is not the comfortable who would thus be aided. And lurking also is the eventual tax effect. During the 1980s, the burgeoning years of contentment, there was the large continuing deficit in the federal budget. Though a topic for voluble discourse, it was less of a threat to the contented than the (p.139) taxes that would have reduced it. In the ensuing recession a deliberate addition to the deficit, a benefit primarily for those outside the community of contentment and one which might later renew the call for higher levies on those inside, was strongly resisted.
The controlling role of taxation continues. The only effective design for diminishing the income inequality inherent in capitalism is the progressive income tax. Nothing in the age of contentment has contributed so strongly to income inequality as the reduction of taxes on the rich; nothing, as has been said, so contributes to social tranquillity as some screams of anguish from the very affluent. That taxes should now be used to reduce inequality is, however, clearly outside the realm of comfortable thought. Here the collision between wise social action and the culture of contentment is most apparent.
Government action is also inescapable as regards the deeply inherent and self-destructive tendencies of the economic system. The dismal consequences, not least for those involved, of the great speculative (and frequently larcenous) activity of the 1980s are wonderfully evident. These could have been averted by timely and responsible regulatory action. Had the speculative excesses of the savings and loan associations and also the commercial banks been prevented by scrupulous regulation—something that was both possible and practical—there would have been no need for the subsequent enormous and infinitely more costly intervention to bail those institutions out. Michael Milken, the architect of the junk-bond explosion, could have been far more inexpensively restrained by earlier regulation than by later charges of criminal action. He would thus also have been spared the varied discomforts and indignities of a minimum-security gaol.
The mergers and acquisitions mania of the 1980s could have been halted in its early stages by legislation requiring hearings (p.140) and a waiting period to assess the virtue of any large substitution of debt for equity—the universal feature of corporate raiding, other mergers and leveraged buyouts. For numerous corporations the restraining effect of debt and interest payments on investment and productivity and the many noted bankruptcies would thus have been avoided at small cost.
The present and devastated position of the socially assisted underclass has been identified as the most serious social problem of the time, as it is also the greatest threat to long-run peace and civility.
Life in the great cities in general could be improved, and only will be improved, by public action—by better schools with better-paid teachers, by strong, well-financed welfare services, by counseling on drug addiction, by employment training, by public investment in the housing that in no industrial country is provided for the poor by private enterprise, by adequately supported health care, recreational facilities, libraries and police. The question once again, much accommodating rhetoric to the contrary, is not what can be done but what will be paid.
The case of education calls for a special word. Its importance is recognized; that educational shortcomings have weakened the American economic position is widely discussed. There has been much talk of educational reform; President George Bush has sought to have himself called the Education President; absent only has been the willingness to appropriate and spend public funds, especially those on the schools in the central cities. Without this willingness no significant educational improvement can be expected. Here there is the predictable bar to effective action when the overriding issues of public cost and possible taxation are encountered.2
(p.141) Finally, there is the autonomous military power. Its now-vast claim on public funds—and taxation—and its further claim on scarce capital and manpower have been adequately noted, as has its contribution to economic decline in the United States as compared with Germany and Japan, which have not been so burdened. Following the collapse of Communism and the end of the Cold War, there seemed, for a moment, hope of change in this area. There was, as earlier indicated, brief reference to a peace dividend—not a capital saving from a major reduction in military expenditure but a dividend.
Not recognized, however, are the two vital factors already mentioned. The autonomous power of the military establishment is substantially independent of the existence of an enemy; its power is self-sustaining. And, in any case, a relatively minor enemy such as Saddam Hussein or even Manuel Noriega is wholly serviceable. With the war in the Gulf mention of a peace dividend largely disappeared. The resources now going to the military establishment, those devoted to such dubious weaponry as Star Wars and the Stealth bomber, would, if available, work a minor revolution in education and be a source of salvation and tranquillity in the central cities. But no one should doubt the formidable opposition of the autonomous military power as it stands in the way.
In an earlier chapter I raised the possibility that, in the future, near or far, a candidate for the American presidency will emerge who is committed to the human needs and remedies briefly just mentioned. And perhaps, if the electorate is enlarged to include the economically and socially now-disenfranchised, he or she will succeed and bring along a favoring majority in the Congress. As I said before, the prospect is not bright.
(p.142) In the past, writers, on taking pen, have assumed that from the power of their talented prose must proceed the remedial action. No one would be more delighted than I were there similar hope from the present offering. Alas, however, there is not. Perhaps as a slight, not wholly inconsequential service, it can be said that we have here had the chance to see and in some small measure to understand the present discontent and dissonance and the not inconsiderable likelihood of an eventual shock to the contentment that is the cause.
(1) Lyndon Johnson was sharply criticized in the 1960s for a delay in raising taxes to meet the cost of the Vietnam war, and this delay was much cited as a cause of the later inflation.
(2) There is error, as ever, in undue generalization as to the quality of American education. In better-situated suburbs it can be excellent. And the universities, in particular the publicly financed state universities in which, in the main, the offspring of the contented are enrolled, are, not surprisingly, the best in the world.