Tough Love for America from a Fan and Critic

September 26, 2009 at 2:02 pm (By Amba)

It isn’t likely that a lot of red-blooded Americans will graciously accept criticism from someone named Kishore Mahbubani. And you can accuse him here and there of succumbing to a “groupthink” of his own — on the Palestinians, for instance, or on climate change.  These points of valid disagreement will cause some minds to close and throw out his entire argument.  But that would be a pity, because there’s a baby in that there bathwater.  Just a taste:

When Americans are asked to identify what makes them proudest of their society, they inevitably point to its democratic character. And there can be no doubt that America has the most successful democracy in the world. Yet it may also have some of the most corrupt governance in the world. The reason more Americans are not aware of this is that most of the corruption is ­legal. [Quoting Obama, ironically:] ““These days, almost every congressional district is drawn by the ruling party with ­computer-­driven precision to ensure that a clear majority of Democrats or Republicans reside within its borders. Indeed, it’s not a stretch to say that most voters no longer choose their representatives; instead, representatives choose their voters.”

The net effect of this corruption is that American governmental institutions and processes are now designed to protect special interests rather than public interests. As the financial crisis has revealed with startling clarity, regulatory agencies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission have been captured by the industries they are supposed to regulate.

*   *   *

Americans believe [that on 9/11] they were innocent victims of an evil attack by Osama bin Laden and Al Qaeda. And there can be no doubt that the victims of 9/11 were innocent. Yet Americans tend to forget the fact that Osama bin Laden and Al Qaeda were essentially created by U.S. policies. In short, a force launched by the United States came back to bite ­it.During the Cold War, the United States was looking for a powerful weapon to destabilize the Soviet Union. It found it when it created a ­pan-­Islamic force of mujahideen fighters, drawn from countries as diverse as Algeria and Indonesia, to roll back the Soviet invasion of Afghanistan after 1979. For a time, American interests and the interests of the Islamic world converged, and the fighters drove the Soviets out and contributed to the collapse of the Soviet Union. At the same time, however, America also awakened the sleeping dragon of Islamic ­solidarity.

Yet when the Cold War end­ed, America thoughtlessly disengaged from Af­ghan­istan and the powerful Islamic forces it had supported there.

*     *     *

Looking back at the origins of the current financial crisis, it is amazing that American society accepted the incredible assumptions of economic gurus such as Alan Greenspan and Robert Rubin that unregulated financial markets would naturally deliver economic growth and serve the public good [and that] the financial players would regulate ­themselves.This is manifest nonsense. The goal of these financial professionals was always to enhance their personal wealth, not to serve the public interest. So why was Greenspan’s nonsense accepted by American society? The simple and amazing answer is that most Americans assumed that their country has a rich and vibrant “marketplace of ideas” in which all ideas are challenged. [… T]he belief that American society allows every idea to be challenged has led Americans to assume that every idea is challenged. They have failed to notice when their minds have been enveloped in groupthink.

*     *     *

[M]any of those who have grown wealthy in the past few decades have added little of real economic value to society. Instead, they have created “financial weapons of mass destruction,” and now they continue to expect rich bonuses even after they delivered staggering losses. Their behavior demonstrates a remarkable decline of American values and, more important, the deterioration of the implicit social contract between the wealthy and the rest of society.

*     *     *

At the moment of their country’s greatest economic vulnerability in many decades, few Americans dare to speak the truth and say that the United States cannot retreat from globalization. Both the American people and the world would be worse off. However, as globalization and global capitalism create new forces of “creative destruction,” America will have to restructure its economy and society in order to compete. It will need to confront its enormously wasteful and inefficient health care policies and the deteriorating standards of its public education system. It must finally confront its economic failures as well, and stop rewarding them. If General Motors, Chrysler, and Ford cannot compete, it will be futile to protect them. They, too, have failed because they could not conceive of ­failure.

Finally, that is the whole point of Mahbubani’s article in the Wilson Quarterly:  “failure occurs when you do not conceive of ­failure.”  And:

America, I wrote in 2005 in Beyond the Age of Innocence: Rebuilding Trust Between America and the World, “has done more good for the rest of the world than any other society.” If the United States fails, the world will suffer ­too.

ADDENDUM: Another blog commenter on this article highlights a part of it that I didn’t:  our broad tendency to “demonize taxes” yet continue to expect entitlements, which forces us into deficit and debt.  This commentator, Fr. Ted, notes acerbically that “Entitlement thinking is found not just in those favoring a welfare state” — something I have oft thought but ne’er so concisely expressed.

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15 Comments

  1. Randy said,

    I don’t object to the commentary, but the phrase, unregulated financial markets is, quite simply, untrue. Some of the biggest failures, or near-failures, in the last year, were theoretically heavily-regulated (AIG, Citibank, Fannie Mae, Freddie Mac, and Lehamnn to name but a few) by the government. As for, The goal of these financial professionals was always to enhance their personal wealth, not to serve the public interest., it seems to be that that is precisely the goal of a private enterprise. Serving the public interest is a by-product, not a goal, of wealth creation.

  2. wj said,

    Mr. Mahbubani somehow misses the obvious difficulty with his analysis of the financial industry. There is a critical difference between “unregulated” (which the financial industry is certainly not) and “regulated by agencies captured by those supposedly regulated” (which, arguably, the financial industry is). With a captured regulator, those regulated gain both a defense against complaints from their customers (“we followed all applicable regulations”) and a defense against competition (because the regulator can make it extremely difficult for anyone with a different approach to break in to the industry).

  3. amba12 said,

    Good points, both.

    As Paul Volcker pointed out, however, there was one crucial piece of deregulation that probably contributed more than any other to the financial crisis, and that was the dismantling of Glass-Steagall.

  4. amba12 said,

    Randy, in regard to your good observation that serving the public interest is a byproduct of self-interest (pure Adam Smith that!), there is something new about the elaborate financial derivatives market. It has been detached from substance in a way that goes even beyond what we’ve seen in “bubbles” for centuries. When it’s no longer necessary to create something of real value to create wealth — and this is something that computers have enabled, I think — then wealth for wealth’s sake can be pursued to a degree never before imaginable. It’s as if the engine of greed got uncoupled from the train.

  5. Randy said,

    I understand what you are saying, but I don’t see much serious effort to actually reining in of the financial derivatives market. I’m reminded of that outfit in Texas earlier this year that sold insurance on some mortgage-backed securities that a bank expected to default. After the bank paid the hefty premium, they, and a number of others, made repeated bets with others that the defaults would occur. Unbeknownst to them, the insurer was buying the loans at a discount and paid them all off. Howls of outrage ensued as the losses were now many multiples of the original sum. IMHO, this is an example of greed being “uncoupled from the train.” At one time, one needed a legitimate insurable interest to make such bets.

  6. Randy said,

    WRT the taxes and entitlement comment: While Americans do like to complain about taxes, the truth is our tax levels are, on average, within the average range of most economically-developed countries. We may appear lower or higher depending on which particular tax is highlighted or ignored when doing the comparison.

    When people hear the word, “entitlements,” they usually think of welfare, food stamps, and other programs for the poor. Some will grudgingly grant that both Social Security and Medicare are massive entitlements. Few will recognize that such tax preference items found on Schedule A, such as the mortgage interest and property tax deduction are also entitlements.

  7. Rod said,

    “These days, almost every congressional district is drawn by the ruling party with ­computer-­driven precision to ensure that a clear majority of Democrats or Republicans reside within its borders. Indeed, it’s not a stretch to say that most voters no longer choose their representatives; instead, representatives choose their voters.”

    I think this quote goes to the heart of the problem. Less than 10% of congressional seats are “in play” in any election year. Not only is nearly every congressional reapportionment drawn to ensure safe districts; so are most state legislative districts. Most congressmen are safe, so long as they hew to their own party line and satisfy the big contributors. Meanwhile, some congressional districts have been created with bizarre shapes. The U.S. Supreme Court has been reluctant to intervene in all but the most extreme cases. How can we throw the rascals out when the rascals write the rules that elect the rulemakers?

    Curiously, the fact that Senators must run at large in their states makes the Senate a somewhat less polarized body than the House. If there was one thing I could change in our system, it would be our methods of apportionment. Since Congress will never impose a competitive system on itself, it would probably take a constitutional amendment. Don’t hold your breath. It’s not a very sexy issue to voters.

  8. realpc said,

    As others noted, he is wrong to blame the financial crisis on lack of regulation. It’s just that the regulation isn’t perfect, and it can’t ever be. I have a feeling he’s a “leftist” because they always seem to think things should, and can, be regulated and controlled.

    And he is very wrong to deny that America was an innocent victim on 911. We know that we helped bin Laden fight the Soviet Union. Why is the fact that he turned on us our fault?

    But I agree with him that the bailouts were a bad idea. Rewarding tremendous failure is a silly idea, and is neither conservative or progressive.

  9. wj said,

    As Rod says, all those “safe” districts are a big part of the problem. But the situation is not totally beyond repair.

    California (via the much-reviled Initiative process) is going to have our legislative districts drawn by an independent commission next time. Not, this time, the Congressional districts however. Still, if that works out well — and working less well than our current legislature would be difficult — I can see how it might get spread to the Congressional districts in the future. And California is big enough that, if it works well, I could see at least some other states taking the same route. Be interesting to see how it works out.

  10. PatHMV said,

    Well, despite all those “safe” districts, one party currently controls 58% of the House and 60% of the Senate, a substantial swing from just 8 years ago, even 4 years ago. It’s not like the House and the Senate are immune from change based on shifting political concerns by the people. And there’s nothing inherently wrong with “safe” districts, anyway. If every district were a homogeneous microcosm, statistically identical to all teh others, then a party might win 51% of the national popular vote in an election, but 100% of the relevant seats. Of course, that extreme an example would be unlikely, given the geographic differences in voting patterns, but even an amplification of 51% of the national vote into control of, say, 80% of the seats could be very destabilizing.

    Look at the current situation with health care. The Democrats have tried to use their sweep of the House, Senate, and White House last year to enact very major changes in a large segment of the economy. There’s substantial popular opposition to many of those changes (exactly how much depends on which poll you read, and the results of each poll vary largely due to the wording of the questions they ask); they’re not necessarily the sort of changes which should be enacted based on a possibly temporary result of a single election. If each party has, say, 30% of the seats in the House as a truly “safe” seat, then the most any given election can swing control of the House is 70-30, and in reality, closer to 60-40 (the current situation).

    In other words, I think we have bigger problems to fix than redistricting (given current interpretations of the Voting Rights Act, urban areas are going to inevitably result in a number of “safe” Democratic districts, since African-Americans vote Democratic so consistently, and the law requires the state to do the best it can to have the same percentage of majority-black districts as it has percentage of black voters). I’d rather see term limits or something.

    Actually, what I want to see right now is a constitutional amendment to create a 3rd house of Congress… a very large body, maybe several thousand people, with no individual staffs, which meets only once or twice a year, and the sole power of which is to create rules of procedure for the other 2 houses of Congress.

  11. rodjean said,

    Pat: It is true that we occasionally change parties in control of the House and Senate, but allow me to make two observations.

    First, 58% Democrats in the House came in the middle of a “perfect storm” year for Republicans, including widespread weariness over the status of two wars, both longer than WW II, a stock market crash, paralyzed financial markets, housing prices in free fall, and spiking unemployment.
    Add to that a Presidential race in which the Republican candidate was elderly and did not connect well with his party, and a Democratic candidate who energized his base. If ever in recent memory the Republicans were set up for a brutal defeat, 2008 was it. So, how many House seats did the Republicans lose? Twenty-four out of 435 – less than a 5% swing.

    I think the maximum swing potential swing in the House is about 86 seats, 43 on either side of a majority. That means each part’s bottom is about 40%, and the Republicans (39 short of a majority) are close to theirs. Of course, not all 90 of those seats are in play in any given election. Only a handful of the 233 Democratic seats at the beginning of that election cycle were at risk, and all 24 Republican seats that were lost, plus probably another 10 that were held, were really at risk. But, even if you accept the idea that all 86 (or, call it 90) seats are always up for grabs, that means 80% of Americans are casting their ballots in safe congressional districts.

    Second, the fact that 80% of Democrats and 80% of Republicans are in safe districts skews politics in certain ways. If you are a Democrat from a safe district, you are virtually assured winning the general election. Barring being caught in a scandal, you have only two things to fear: a well funded primary challenge from the left in your own party, or a cut-off of funds from major contributors. As long as you hew to the party line on the vast majority of issues, you are untouchable. I believe this has contributed to the increasing polarization of both parties, which brings me to your observation about the health care deadlock. It is telling that the Democrats can’t get any Republicans to support proposed bills. There really is a consensus that something is wrong with how health care is delivered. There are steps supported by each party which could improve the system, but there is no way to reach across the aisle. Despite their numbers, the Democrats can’t even come up with a bill that isn’t too liberal for the American public. The Republicans are caught in their own ideological straightjacket.

    Finally, my solution would be to give states a choice from a set of algorithms which they could apply to redistricting. They would be race neutral, so nobody could complain if the application of the algorithm did not result in a member of a minority group getting elected in any particular delegation. Sure, this would result in some safe districts for either party, just not as many.

  12. jaed said,

    I’m sure this article as well as the post here provide all kinds of fodder for good discussion, but I was stopped dead by the first sentence:

    “It isn’t likely that a lot of red-blooded Americans will graciously accept criticism from someone named Kishore Mahbubani.”

    What the HELL is that supposed to mean, may I ask? Those awful ungracious Americans can’t accept criticism? Or is this an accusation of racism? (I confess I don’t immediately recognize what ethnicity this author’s name is associated with, but I don’t assume on reading it that the author cannot be American himself.) Or is it only certain – “red-blooded” – Americans who are being accused here? Is there blog history that I’m missing, and that would provide some context?

    Because not having been here for a while, and finding this at the top of the second post I read, frankly makes me want to flee in disgust. A remark like this at the head of a post poisons everything that follows with the assumption of bad faith.

  13. amba12 said,

    I don’t know how many conservatives you read, Jaed, but I’m kind of making fun of the America-first strain of them. Is “nativist” the right word? Admittedly that’s not a well-defined group, but there are plenty of people I read all the time who object to the new cosmopolitan, global vision of America that came into power with President Obama. They made fun of his name and I expect that they would be disinclined to take seriously a critic of America with a name as non-Anglo-Saxon as Mahbubani. A French name would have gotten as much mockery. They see Obama & co. as politcally-correctly bending over backwards to kowtow (an anatomical contradiction in terms) to anyone who is not traditionally American.

    For the record, I’ve said many times that I’m a cosmopolitan myself (I love Kwame Anthony Appiah’s book Cosmopolitanism), which is one of the reasons I’m often so critical of Obama: he’s one of my own. (I’m also from Hyde Park, Chicago, so make that a twofer.) One expects more and better of one’s own.

  14. PatHMV said,

    Rodjean… I don’t think that under the current state of the law the algorithms could be truly “race neutral” and survive legal attack, unless the result were to create the same number of majority-black seats as there are now. Granted, because of legal counter-attacks to the worst, most twisted gerry-mandered majority-black districts, there are fewer of those now, and they are more geographically compact; but I don’t know whether they are guaranteed to arise from any algorithms that might be implemented.

    I maintain that a much bigger part of the problem with increasing polarization (which I don’t think is actually nearly as big a problem as many people do) has been campaign finance “reform.” Before, if you wanted big money for your run, you had to appease the party bosses, mostly. The party bosses, being at the top heap of large coalitions, had to maintain a certain amount of moderation. For example, on the Democrats’ side, the bosses had to moderate the competing views of unions, feminists, and poor minorities. Since those views could be fairly opposed to one another at times, candidates had to work a bit harder not to offend any of them, so none of them would red-flag their names at party HQ.

    But today? Help from the party comes with significant legal strings. “Hard money” is limited, and “soft money” from the party can’t be coordinated with the local campaign. To succeed, you need to be SEEN. You need to attract attention (or have your opponent do so, in a bad way). People do not generally reach into their pocket, take out their hard-earned dollars, and give them to a guy who’s kind of quiet, who doesn’t talk about the world ending tomorrow. So to raise money today, you’ve got to make some noise. Look at how much money both Joe Wilson and his opponent have raised in the past 2 weeks. With campaign finance reform, we’ve traded old-fashioned corruption for increased partisan extremism.

  15. Brett J said,

    Good food for thought from Mahbubani. (Though by the same reasoning in your first line, arguably those same red-blood Americans wouldn’t accept criticism from an Obama. His name _is_ easier to pronounce, though)… Funny you use the terminology, I used the same ‘red-blooded’ in this blog post: http://bit.ly/kxin0 – Aptly, also regarding a wise, capitalism-critiquing quote.

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