On Rebooting America
by Gary North: Budget
Deadlock in Washington
is my favorite Establishment analyst, because he is an historian
who understands a lot about free markets. He writes for the literati.
He starred in a PBS series that was worth viewing, and another is
scheduled in 2012. He teaches at Harvard University and the Harvard
He thinks America
is running an empire, and he thinks it will not survive much longer.
As with all empires, it is going to run out of wealth to support
it. So, when he wrote a
piece for the Daily Beast, Newsweek, I read it.
He used the
metaphor of computing to describe what has been good with the West
and what is no longer good. He says the West has had six "killer
apps." These are: competition, the scientific revolution, the rule
of law and representative government, modern medicine, the consumer
society, the work ethic. All of this is true, but are these features
fundamental? Are they, in the words of Karl Marx, more substructure
or superstructure? I think the latter.
He avoids the
crucial questions: (1) Why the West? (2) Why beginning in 1800?
Why not earlier?
He uses the
metaphor of the computer. But this analogy is strained. Why? Because
we can date the invention of the computer: the war years, 1943-45.
We know who did it: Mauchly, Eckert, and Von Neumann. We know their
motivation. We know the applications.
We do not know
exactly how or why Ferguson's six killer apps came into existence.
We do not know how they came together around 1800 to create a new
civilization. Why not earlier? We do not know what social, ethical,
and religious forces undergirded the six. They are not autonomous.
They were not designed by men. Computers were.
He says that
the USA and the West are no longer the centers of these six features.
yourself: who's got the work ethic now? The average South Korean
works about 39 percent more hours per week than the average American.
The school year in South Korea is 220 days long, compared with 180
days here. And you don't have to spend too long at any major U.S.
university to know which students really drive themselves: the Asians
But why is there this difference? What ideas or traditions led to
this? Why was Korea in 1945 not much more productive than sub-Sahara
Africa? Also, what led to the decline of the work ethic in the USA?
Or was there a major decline? I did not spend more than 180 days
in high school in the late 1950s.
me television did it. Television was as addictive in 1960 as it
taxes? The top income tax brackets are lower today than in 1960,
thanks to Kennedy (70%) and Reagan (28%). They went back up a little
under Clinton, but nothing like Eisenhower's era (91%).
taxes are up. Inflation prior to 2007 was up. Look also at the increase
in regulations. These have hampered the American economy. But Americans
still work hard. If they were taxed less, they would work harder,
but to think that a taxation policy change would radically re-shape
people's use of leisure time is naive. Good habits are easier to
break than re-learn.
can re-program a computer. No one can reprogram a society. Those
who try are first called revolutionaries, then tyrants, and finally
of the consumer society as a killer app, and so it is. It is a good
thing for people to have more options. That is what liberty is all
about. It is also what economic growth is all about. The two are
linked at the hip.
How do people
get more choices? By being better served by producers and by serving
other customers. Producers save and organize and bear enormous uncertainties
in search of profit. They cannot earn a profit in a free society
in any way other than by serving consumers, meaning customers. The
customer is king.
It is not that
we live in a consumer society. It is that we live in a customer
society. We have the legal freedom to consume. We also have a legal
right to save. We can make investments today that we hope will bring
us even more wealth in the future.
who is future-oriented chooses to consume less than he produces.
This is the key to economic growth. People defer consumption for
the sake of future consumption.
But some people
save in order to produce. They live to produce. Their self-esteem
is based on their production. They want to leave a legacy. They
do not work mainly to eat. They eat mainly to work.
society places economic authority in the hands of those who produce
and those who are the heirs or beneficiaries of producers. Production
creates its own consumption at some market-clearing price.
is great, but the big gains in life expectancy came before 1912.
People were richer. They bought screens for their windows and screen
doors. Water treatment in cities got better after 1860. In rural
areas, it was usually good. Most people lived on farms.
RULE OF LAW
This is disheartening
rule of law? For a real eye-opener, take a look at the latest World
Economic Forum (WEF) Executive Opinion Survey. On no fewer than
15 of 16 different issues relating to property rights and governance,
the United States fares worse than Hong Kong. Indeed, the U.S. makes
the global top 20 in only one area: investor protection. On every
other count, its reputation is shockingly bad. The U.S. ranks 86th
in the world for the costs imposed on business by organized crime,
50th for public trust in the ethics of politicians, 42nd for various
forms of bribery, and 40th for standards of auditing and financial
Here, we are
retrogressing. As Western civil governments get more intrusive,
the rule of law declines. Who can keep up with 70,000 pages of the
Federal Register each year? Only armies of costly lawyers.
in regulation is relentless. The law books are vastly thicker today
than in 1960. So are rules and regulation books, where bureaucrats
interpret and apply the laws of Congress.
I am in favor
of going back to 1960 in most areas of administrative law, the laws
enforced by bureaucracies. The areas where there has been improvement,
such as civil rights, are dwarfed by the dark shadow of the Patriot
He does not
exactly predict that the West will turn into Greece. Possibly we
can avoid the following, but maybe not. He puts question marks at
the end of each sentence.
upsurge in civil unrest and crime, as happened in the 1970s? A loss
of faith on the part of investors and a sudden Greek-style leap
in government borrowing costs? How about a spike of violence in
the Middle East, from Iraq to Afghanistan, as insurgents capitalize
on our troop withdrawals? Or a paralyzing cyberattack from the rising
Asian superpower we complacently underrate?
is that we could turn into Greece. There is no immunity. The same
bad policies could easily produce similar results.
there anything we can do to prevent such disasters? Social scientist
Charles Murray calls for a "civic great awakening" a return
to the original values of the American republic. He's got a point.
Far more than in Europe, most Americans remain instinctively loyal
to the killer applications of Western ascendancy, from competition
all the way through to the work ethic. They know the country has
the right software. They just can't understand why it's running
so damn slowly.
There is a
problem with this analysis. What evidence is there that any civic
awakening in America ever occurred apart from a religious awakening?
Civic awakenings are not autonomous. I know about the First Great
Awakening (1720-60). I know of the Second Great Awakening (1801-1840).
I even know of the Third Great Awakening (1858).
There is another
major problem: all three led to major political changes: centralized
politics in the wake of major wars.
disruptions of 1965-70 led to greater centralization, and not just
in the United States.
we need to do is to delete the viruses that have crept into our
system: the anticompetitive quasi monopolies that blight everything
from banking to public education; the politically correct pseudosciences
and soft subjects that deflect good students away from hard science;
the lobbyists who subvert the rule of law for the sake of the special
interests they represent to say nothing of our crazily dysfunctional
system of health care, our overleveraged personal finances, and
our newfound unemployment ethic.
who are "we," and how will "we" accomplish this?
I know how:
cut their budgets. Let the free market sort out winners and losers.
After all, this is the consumer/customer society. But the teachers
in the tax-funded schools will resist any such move.
Do most Americans
have a "newfound unemployment ethic"? I doubt it. Getting a job
and keeping it has been basic to the American way of life throughout
What we have
are government regulations everywhere. We have a kind of blind,
deranged central economic planning by administrative law. We have
what Ludwig von Mises sixty-five years ago called "planned
refuse to accept that Western civilization is like some hopeless
old version of Microsoft DOS, doomed to freeze, then crash. I still
cling to the hope that the United States is the Mac to Europe's
PC, and that if one part of the West can successfully update and
reboot itself, it's America.
But the lesson
of history is clear. Voters and politicians alike dare not postpone
the big reboot. Decline is not so gradual that our biggest problems
can simply be left to the next administration, or the one after
If what we
are risking is not decline but downright collapse, then the time
frame maybe even tighter than one election cycle.
He speaks of
collapse rather than decline. I prefer to speak of decline. The
division of labor still operates. The profit and loss system still
operates. Where these two social institutions operate, people are
given fair warning of trouble lying ahead.
of the free market by administrative law, monetary inflation, and
taxes is increasing in some areas of life. It is not increasing
in others. Where we need factories to produce, the various American
governments are indeed a threat to our productivity and therefore
our consumption. But where digits are concerned, the free market
is in the saddle.
I believe that
freedom of communication is far more important than low taxes. The
former can produce the latter if the defenders of liberty make their
ability of people to circumvent the Establishment media today is
unprecedented in man's history. The World Wide Web is bringing down
governments. It is decreasing the cost of exposing bad science and
bad government. It aids price competition.
In short, the
Web offers more choices: of ideas, goods, and services. This is
central to the changes that are going on today in the realm of ideas.
We should not discount these too heavily.
I do not think
this is the USSR in 1991. The United States is not a tyranny on
that scale. It is far richer. Its people are connected digitally.
The government can run, it can't hide.
I have no doubt
that the transition costs from the Keynesian welfare-warfare state
will be high. But I don't think a collapse is likely. There is a
free market. There is a private communications system.
I look at the
U.S. Postal Service and see the future of the Federal government.
"I have seen the future, and it is mostly junk mail."
will be attempts by the present Establishments to resist these changes.
But the reality of the digits. They are getting more influential,
and the Establishments control the older institutions that are threatened
by cheap communications.
a time, yes. Comparative decline, Asia vs. the West. Yes. Transition
costs, yes. Trapped voting groups that relied too heavily on government
promises, surely. But a collapse is unlikely. The movement is toward
freer markets. The freer the market, the less likely a collapse.
Profit and loss signals enable us to adjust.
For those who
don't adjust in time, or don't adjust enough, there is bad news
ahead. The blind men who are passing laws are a threat. So are the
petty tyrants who enforce these laws.
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 20-volume series, An
Economic Commentary on the Bible.
2011 Gary North
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