The horizon is not so far as we can see, but as far as we can imagine

The Simplest Rule of System Stability & How Breaking It Destroyed Post-War Liberalism

There’s a few rules if you want your system, whether it’s a club, corporation, religion, country or civilization to be stable.

The most important however is that you must not give power to those who want to change your system.

Simple enough.

Now, New Deal/Post-war Liberalism did a few things right. One of them was high marginal tax rates and another was high estate taxes (though not high enough.)

But the new Deal made a devil’s deal: it allowed large corporations to exist. This wasn’t, actually, FDR’s first choice, but he was having trouble fixing the Great Depression, and this is where the solution set wound up.

You may have a 93% marginal tax rate, but the people who control corporations use the corporation as their waldo: it does for them what they want. So the corporations had vast amounts of money and power, and they were the ones who spent vigorously, for example, on endowing chairs in business schools and economic faculties and creating conservative think tanks and buying politicians and so forth. This stuff mattered: Milton Friedman, the economist, is the godfather of neoliberalism.

It’s control of money which matters for power. If I’ve sworn a vow of perpetual poverty, but I run a religion or corporation which controls billions obviously I’ve got the power of money, even if I live in a cell, which I may not, given that the corporation or religion may be paying my living expenses.

The rich and powerful who controlled most of America’s corporations hated FDR and the New Deal. They called him “that man” and they worked endlessly against him. In personal combat they were generally defeated. He did cut a deal with them, but overall he won most of his battles and they could only drag their heels: his personal power and popularity was immense.

But once he was gone, they could work to undermine everything he had built, and they did. It didn’t even take them that long: under the first Congress after FDR, for example, supervisors and foremen lost the right to join unions, which was a hammer blow. (Truman interposed his veto, it was over-ridden.)

Bretton Woods ended in 71, Reagan was elected and the rest is history. Elon Musk is talking about getting rid of the NLRB (National Labor Relations Board) by attacking its constitutionality, and with so many Republicans on the Supreme Court, who knows, it might happen.

If you want your system to last, you can’t let those who hate it have power.

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Clear Talk About History’s Sweep


The Failure of Balance Of Power In the New Deal


  1. bruce wilder

    The New Deal created a balanced system of countervailing power on variations of the theory that the political power of citizens working together could oppose and balance the power of the wealthy and business corporations. Labor unions. Public utility regulation. Savings & Loans and credit unions and local banks to oppose the money center giants. Farmers’ cooperatives. A complex system of agricultural supports to limit the power of food processors. Antitrust. Securities and financial markets regulation.

    Yes, the rich kept fighting their corner.

    When ordinary people had it good by the 1960s, they stopped caring. Or maybe their children never started caring, having never experienced the worst oppressions the wealthy could dole out. Friedman’s message was a simple, deceptive one: the economy ran itself. Government was irrelevant, the problem not a solution. Consumers had sovereignty over business in “the market”. The New Deal as political project ran out of steam as politicians stopped thinking that “fighting for” the common man, the general welfare, the public interest was a genuine vocation or a vote-getter. The rhetoric continued to be used by Democrats to the turn of the century, but the meaning had drained away with emergence of left neoliberalism in Carter’s Administration.

    Friedman had an apparently persuasive theory of the case that he made align with people’s desires and illusions.

    The institutional base of the liberal classes eroded away. The intellectual basis faded rapidly. FDR’s agricultural policy was one the most successful industrial policies ever enacted. I have never encountered a reputable economist, even a supposed specialist in agriculture, who could even outline its main features. Most take the Chicago line that it was all smoke and mirrors, an illusionist’s trick — that the tremendous shift in resources and growth in productivity was “a natural” emergence that would happen anyway despite gov’t policy. Nixon subverted the whole scheme, helping to make the whole population sick and fat. Nothing to see here. Pay no attention to the man behind the curtain.

    The disastrous deregulation of banking and finance was a far more public spectacle than the dismantling of agriculture, but it has never provoked any sustained political movement in favor of even the simplest reforms, let alone a theory of financial reform. Watching “It’s a Wonderful Life” at Thanksgiving is as close as most come to the intellectual outlook of the New Deal.

    I have heard it as the theory of 500. Societies of more than 500 or so require institutions of collective government to prevent the worst sort dominating everyone else and the worst usually manage to subvert government to their own ends any way, making the state an agent of oppression. FDR managed to pull together a wildly disparate coalition to create a government that succeeded for a time in constraining the worst impulses of the wealthiest and the business corporations.

    It has failed in large part because the many could not remain even minimally organized or informed, free to even a small degree from cheap manipulation of impulse and prejudice.

  2. Purple Library Guy

    And this is the fundamental problem with social democracy in general. While they’re in power they can make a nice system, but since it’s predicated on allowing people who want to trash that system to still control most of the wealth, it will inevitably die fairly soon.
    I’m just finishing up reading Ed Broadbent’s book “Seeking Social Democracy”, and I found myself impressed by his decency, his erudition, some of his takes on practical politics . . . he was a good man, a very good man. But, he didn’t really grapple with this fundamental issue which in my opinion dooms his project.

  3. Curt Kastens

    This post raises the issue of the ultimate catch 22. It is widely believed that a system that can not change is a system that will ultimately fail disastouriously. I am sure that we have all heard that recognition of problems caused by inflexible systems is why the US Constitution allows for change. Of course a system that allows change can evolve, for better or worse. If a governing system is designed for change on what basis could one exlude those who demand to change the system?
    When one studies capitalism, or free markets, one can come to understand that there are flaws with the system that explain why it does not work. When one studies socialism one can come to understand tht there are flaws in the system that explain why it does not work. When one studies democracy one can understand that there are flaws with the concept that explains why it will not work. When one studies theorcracy or any other kind of authoritarianism one can understand that there are flaws with the concept that explain why it does not work.
    Yet no institutional system can be created that does not rely on these flawed concepts.
    One can try to create a hybrid system that uses the best of each and avoids the worst of each but what are the chances that a hybrid system is going to get the formula just right? Not only that if it is just for today what is the chance that it will be just right for the people and conditions 25 years from now let alone 250 years from now?
    I like to summarize the problem like this. The exsistance of government institutions that make it impossible for a group of people to subvert or overthrow the government will cause big problems for the people who live under that system. It may even cause problems for everyone on the planet. On the other hand the existence of government institutions that are to easily subverted or overthrown will cause big problems for the people who live under that system. It may even cause problems for everyone on the planet.
    To this we can add what studies in game theory have explained to us about the advantages that special interest groups have over those who are supporting the idea of the general welfare. The explination is that those who oppose special interests have a lot to lose when they lose. And on top of that those who oppose special intersts gain little themselves when they are victorious. Special interst groups on the otherhand make a killiing when they subvert the general welfare of society. Therefore special interests have an evolutionary advantage over the general welfare. But special interests do not have an evolutionary advantage over other special interests. Though some special interests will be more powerful than others.
    When one understands this it is clear that there is little reason to believe that humans will somehow muddle through. To muddle through would require the intellegent participation of a lot of intellegent fanantics. But fanatics are seldom reasonable.
    Where on earth can one find a politcally organized group of intellegenct reasonable political fanatics? My guess is that the number of such people on the planet can be counted with my fingers and they are spread all around the world. Not much chance that they will be able to combine for any kind of decisive influence then is there?
    Occassional acts of sabotage against the deep state seem to be the best that can be hoped for from this limited group of people.

  4. Curt Kastens

    Perhaps a better way to word the proposition about who can not be allowed in to power would be those who reject the goals rather than the institutional means of those who have power.
    If a group of people are untied by specific goals have achieved power then those not in leadership positions can judge to what extent those that are in leadership positions are actually working towards those goals. If someone finds that the leaders are not acting in good faith to achieve those goals then anyone in any position is justified in taking measures to remove them from power.
    What is implicit or perhaps explicit in this arguement is that the ends justify the means.

  5. Daniel Lynch

    I live in one of the reddest counties of one of the reddest states. Most of the local officials are anti-government libertarians who do not believe in government. I often say “there ought to be a rule that people who don’t believe in government, shouldn’t be allowed to be in government!”

    Since they are not actually interested in using government to do good, these anti-government politicians use their positions to help themselves and their friends. That’s it. Now, there is usually some corruption in any government, but in say, Huey Long’s Louisiana, Huey Long did good things that made people willing to tolerate the corruption. Here we just get the corruption without any of the good things.

    As for why we don’t vote them out 1) they often run unopposed because the state is so beet red that the situation is hopeless 2) the opposition party, such as it still exists, is only marginally better, and only on a few issues, and they run out-of-touch candidates (Democrats have become the party of the affluent professional-managerial class) 3) there is no strong national or even state leader helping local politicians, To the contrary, Carter, Clinton, Obama, and now Biden have been a liability for local Democrats.

    Yet my now beet red state voted for FDR & LBJ, back when Democrats actually did things that tangibly helped people.

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