Right, Left, and Imperialism-4

October 18, 2003

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We arrived at Kathmandu on Solano Avenue in Berkeley, quite possibly the best restaurant in the entire East Bay (this episode is fictional. The restaurant is not.) I was pretty wired on the thick, sweet cardamom tea. Andre was wondering about the odd juxtaposition of right-left views that he had noticed not only in the USA, but also in some of the EU member states.

ANDRE: And then there's Pim Fortuyn, the ex-Marxist...

ME: Yes, it's true that a lot of what is regarded as "liberal" by Western societies is really just administrative efficiency. Humans prefer living in societies with good public services, even if their proclivities are right-wing. People on the right, though, are usually more likely to be chauvinistic in the way the costs and benefits are arranged; people on the left are more likely to feel costs generally are excessive, while benefits are insufficient.

ANDRE: I can see problems with both attitudes. The right is going to demand taxes, for instance, which are too low to pay for anything, while they'll never be satisfied with their share of the benefits. Whereas the left is going to insist on really big payoffs to the public which the technology can't supply.

ME: Exactly. And the right will typically respond to their side of the dilemma by breaking off their own state or community from the rest. For example, in Oakland you have this rich enclave called Piedmont, where the tax base is higher but they've managed to leave behind the social problems of capitalism.

ANDRE: Excuse me but I think you weren't very honest to our 'conservative' American friend. You said you weren't either...

ME: No, no, I only mean that the social problems in Oakland are a result of our capitalism. Tell me, is Belgium capitalist?

ANDRE: Yes, of course. And we don't have anything like the social problems you have.

ME: But the social problems of Mexico, are they related to American capitalism?

ANDRE: Obviously.

ME: And you don't think there's any correlation between the evolution of the American economy and the concurrent development of the northern European economy?

ANDRE: Well, I think I see what you are getting at. What you call capitalism is a giant integrated system, and somehow America fell into a set of roles more like a Third World country...

ME: Somewhat, yes...Or rather, a giant first world economy with enclaves of the third world here and there. And while the EU has the Mediterranean Sea in between, we have a freeway, or the Hudson River.

ANDRE: I see your point, but...Hmmm. I think it is sort of a detail.

ME: Well, you know, in a given year it probably is. Except that there's the path that a society takes to development. Step by step, it chooses the most obviously rewarding next step. That makes a world of difference over a few centuries, depending on what are the menus of technologies. It sure makes in difference in the career trajectories of individuals.

ANDRE: Well, it's fallen to me to keep you on the subject. You are a man fighting a desperate rearguard action against the temptation to digress, aren't you? Anyway, I see your point about the attitude toward social payoffs that distinguishes between right and left. But why do you think the EU and the USA diverged so much, ideologically? Australia and New Zealand hasn't so much, and even Canada...

ME: Ah, thank you Andre! That's why I'm picking up the check for dinner. Yes, the USA was quite unusual in not developing an industrial policy. In nations that developed, there was always some massive state strategy for kickstarting the industrial sector...

ANDRE: Which didn't always work...

ME: Yes, but in nations like Meiji Japan or Wilhelmine Germany there was a strategy of managing the formation of industrial capital—usually through the form of cartels or outright monopolies. You do as I tell you, I give you a cookie.

ANDRE: No thanks, I'm full. You know, some reader is going to rail at you about Hong Kong or South Korea.

ME: Yes, I got to read their five-year plans. About them; the plans themselves are very big and complex.

ANDRE: North Korea's?

ME: No, South Korea's. North Korea has Seven-year plans. Taiwan and Thailand have six-year plans. And the development of the Taiwanese semiconductor industry was almost entirely a state enterprise. I'm not advocating a sudden shift to a centrally planned economy here—it would never happen anyway—but the point is, one way or another Germany, Belgium, France, Piedmont-Sardinia, Denmark, Taiwan and Singapore all had massive state sector intervention in order to create industrial combines and then turned them loose—all the while protecting the home market. The UK was special because it was ahead of everyone else, and the USA had a program of public works.

ANDRE: And tariffs!

ME: Yes! The McKinley Tariff was an average of 48%!

ANDRE: Ha!

ME: But this isn't what it sounds like. Sweden or Germany had to compete like individual corporations—on the world market. It wouldn't have worked if they were closed autarkies. So the US could not do that either—we had unstable monopolies, but decades of antitrust activity; the concept of a combination in restraint of trade has been a crime and regarded as sinister for over a century. Whereas in the nations of Europe, cartels could make contracts to fix prices that were legally binding. Firms in Europe were revenue-maximizing and assured of a fairly reliable stream of capital—from their government or their monopoly rents, if not from the capital markets. Because of this, managers in western Europe were not normally superstars, but bureaucrats. And because there were competitive product markets, quality was relatively high.

ANDRE: It sounds so cozy.

ME: Whereas capital markets in the USA tended to be more adversarial. I would venture to say that, by 1960 or so, product markets in North America were less competitive than those of Europe, although that's actually quite ambiguous. There are other reasons why Europeans would tend to strive harder for quality, such as higher costs and the depressed domestic demand which imperfect competition causes. But my point is, European firms had a secure balance of reciprocal need and responsibility to their state—and to their society.

ANDRE: Generally speaking I guess I would have to agree.

ME: So American executives were a class of celebrity warriors—they had the ideological outlook of Achilles or Ajax Telemon, practically fomenting fascist coups on their posh villas. Their self-regard is cosmic, and they are constantly succeeding at actually corrupting our democratic process as part of rent-seeking behavior.

ANDRE: To be fair, we have corruption in Belgium too. But yes, I guess invading another country to plunder its oil rents has got to be the record.

ME: So I think with the collapse of anti-trust and the appearance of monopoly power, the interests of middle managers and the secondary economy in the USA has become the most repulsive sort of economic nationalism. And the balance of power has suddenly swung in favor of these, rather than an armed standoff of the post-War era.

ANDRE: And in Europe it hasn't.

ME: And in Europe it hasn't. Don't forget your coat.