A couple of months ago one of the economics blogs I follow opened up a sounding board for its readers to answer the question: What’s the most important problem the US faces? There were some interesting opinions, but the most remarkable thing I noticed was the variety of topics that people brought up. Debt, unemployment, technological change, war, the erosion of manufacturing, climate change, ideological narrow-mindedness — these were among the many explanations for what’s wrong with America right now.
My view on this is that nearly every major problem the US faces right now can be traced back to a single phenomenon: coordination failures. “Coordination failures” is a term used by economists and political scientists (known by many other labels) that simply means that it’s relatively hard for large numbers of people, each with a relatively small stake in a decision, to coordinate into one political voice; while it’s relatively easy for a small groups of people, each with a relatively large stake in a decision, to coordinate into a political voice. The result is that the outcome of important decisions are often skewed towards the interests of the few, even though that outcome is not the optimal one in terms of maximizing the well-being of all the stakeholders.
Usually this story takes the form of a well-organized and deep-pocketed industry group lobbying Washington lawmakers to vote one particular way on a key issue, even though it might be against the interests of the country as a whole. One common example is environmentally destructive industries that would be severely limited by apparently common-sense legislation to limit their practices, and which, seeing the writing on the wall, scramble to block that legislation. The result is, for instance, the hilarious and somewhat sad charade of our former Secretary of Homeland Security touring the country on behalf of the natural gas industry to convince us it’s OK to blow up mountains.
This problem is not new. I was blown away when I recently saw Eisenhower’s famous presidential farewell address, oddly dedicated to what he coined the “military industrial complex” (for a great documentary on this, watch Eugene Jarecki’s Why We Fight). It was a somber warning of a potentially devastating coordination failure: Specifically, that the giant American war machine created out of nothing to defeat fascism would now exert its political might so that America might keep fighting, and thus it might keep building. That the warnings of an American president and one of the greatest military men in our history would be futile in stopping the military industrial complex from spinning out of control over the next half-century is evidence of the power of coordination failures.
But I also do subscribe to the notion that this problem is getting worse. I just started reading an excellent book called Winner Take all Politics by Jacob Hacker and Paul Pierson, which makes the case that the growing inequality that we’ve experienced in this country over the past three decades is mostly a result of the successful political influence of the super-wealthy. Starting in the 1970s, the authors argue, industry groups learned new ways of organizing and exerting influence in Washington, resulting not only in a handful of landmark legislative victories for business over labor, but the successful rigging of the game in terms of liberalized rules for corporate contributions to the political process. I highly recommend this book to anyone who wants to understand how coordination failures — essentially the tyranny of well-funded minorities over the majority — are ruining American policymaking, not just in the context of income inequality but in general.
How do we fight such a scourge? I must confess, I get a nauseating feeling of hopelessness when I think of how daunting a challenge we have in front of us. The 2008 banking crisis is a prime example. In the 1990s, the banking industry lobbied heavily and successfully earned a range of victories for deregulation that ultimately allowed over-sized and over-leveraged banks (as well as non-banks) to engage in the risky bets that brought the financial system to a near-apocalypse. In my opinion the real outrage is not the crisis itself, which we are still feeling today in the form of high unemployment and crippling government debt. Rather, it is that roughly three years later, the rules for big banks are essentially unchanged. After all, why would they? Not only has the industry pumped so much money into the coffers of both political parties — by some estimates there are now five banking lobbyists in Washington for every member of Congress — but it has also engaged in a massive and hugely successful public relations campaign, masquerading as a grassroots movement on the part of the very people it stands to disenfranchise, vilifying any sort of new regulation on banking behavior as socialist and job-destroying.
I am saddened by the conviction held among other genuinely concerned people that this problem has a political solution. A common belief is that all we need is for the self-interested political efforts of the masses to counterbalance the self-interested political efforts of the industry lobby groups. Try as you may, but the sad truth is that even in the internet age, large, diffuse majorities simply can not organize like small, acutely-interested, better-funded minorities. So we end up trying to organize concerned citizens and gather pools of small donations into yet another political interest group, to battle the interest groups that we don’t like. Which is kind of like Robin Hood and his Merry Men taking on a tank with their bows and arrows.
The real solution, rather, is to eliminate the very air that coordination failures breathe, which is the atmosphere of selfishness and lack of concern for others. In a different type of ethical environment — one in which people have a sense of detachment, love, selflessness, justice, and civic duty — could a company’s executive ever embrace a practice, whatever its legality, that might destroy more value for others than it might create for his own firm? How could a lobbyist ever in good conscience promote a legislative decision that she knows is not in the interests of all people? How could a politician ever accept a political contribution in order to improve his chances of reelection, knowing he is obligated to vote for something he knows will be destructive?
Such a society is not accomplished through some magical fiat from above. It is the result of hard work on the part of regular human beings, over the centuries, in the form of prayer gatherings, youth groups, and community service projects. It is through the tireless promotion of moral dignity and the notion that we are in fact noble and spiritually-upright beings worth of a noble and spiritually-upright society. This is Baha’u’llah’s vision of a true “heaven on earth”. Maybe I won’t be able to witness the fruits of my efforts — for that matter, maybe my kids or grandkids won’t, either — but at least I can lay a single brick of the foundation before my time is done.