Dead Ideas

A review and overview of The Tyranny of Dead Ideas, by Matt Miller:

As with any writing about economic and political policy, the author's beliefs and values influence his interpretation of history and the conclusions he draws about the current situation. I'm sure a large part of the reason I enjoyed this book so much is that I'm coming from a very similar place as Miller and he confirms my thinking much more often than he challenges it (why I noticed the book in the first place and decided to read it, I'm sure). Still, I think it's a well-written book that may not challenge my thinking but does challenge many of the assumptions behind our current public policy debates.

He calls these "Dead Ideas": The Kids Will Earn More Than We Do, Free Trade Is "Good" (No Matter How Many People Get Hurt), Your Company Should Take Care of You, Taxes Hurt the Economy (and They're Always Too High), Schools Are a Local Matter, and Money Follows Merit. I might call some of them American Myths, as they exercise powerful control over our identities and discourse regardless of their relation to facts and reality. Miller has a chapter for each idea where he explains their origins and how they either made sense in their historical contexts or, at least, were logical products of history, then goes on to show how they are now more harmful than relevant and their time has come.

And, as with most everything, the analysis and criticism is clearer and more complete than the constructive solutions, but the book does have a part two describing what Miller sees as the necessary and inevitable way forward. I think he's a little unrealistic about the resistance that will impede these "destined ideas," but they play well as counterparts to the problems of the dead ones.

For the intrigued, more details about the ideas and a few selected--thought not necessarily fully representative--quotes:

Our entire political and economic culture remains trapped in obsolete ways of thinking, leaving public discussion of these questions surreally disconnected from reality. . . .

Breaking free of it will force us to face up to two pivotal economic trends. The first is the end of an extraordinary era of U.S. dominance in the global economy. The second is the emergence of inequality as the preeminent issue of the twenty first century.

Dead Ideas

The Kids Will Earn More Than We Do: In which we learn that the downward mobility for millions is a new fact of American life, forcing us to think in new ways about "progress" in order to thrive.

Our equation of economic weakness or vulnerability with worthlessness helped retard the development of social protections that spread across Europe more than a hundred years ago. The need for a collective response in the face of larger economic forces has always been minimized and scorned in the individualist United States.

Free Trade Is "Good" (No Matter How Many People Get Hurt): In which we discover that economists have been secretly playing politics and hyping the case for trade in order to help poor people around the world, even if it means misery at home.

We treat trade and technology differently, in other words, because we fear the foreigner more than we fear the geek. If we were rational, of course, we'd find the geek much scarier: far more of our economy's disruptive change comes from innovative technologies than from trade.

Your Company Should Take Care of You: In which we find that an employer-based benefits system designed to beat back communism is now strangling business and stranding workers in an age of global competition.

This idea has become so ingrained in our collective psyche . . . It runs as follows: if people need to reach beyond family to achieve a measure of security against life's major risks (such as ill health of poverty in old age), they should look to their employer, not their country, for support.
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He saw, or at least rationalized, his creation of business-centered health and pension programs as an interim step. If corporations became saddled with soaring benefit costs, he reasoned, they would join "shoulder to shoulder" with labor to demand that the federal government relieve them of this burden. . . . a major miscalculation. Health and pension costs weren't nearly as high as they are today, and the financial pain Reuther thought these benefits would inflict never emerged.

Taxes Hurt the Economy (and They're Always Too High): In which it becomes apparent that taxes are going up in the next decade no matter who is in power, and that the economy will be just fine.

As people grew more affluent, he reasoned, they'd want more of what only government could provide--a strong military, public order, good schools, and assorted welfare benefits, services that private citizens would have trouble arranging for on their own. As a result of these desires, Wagner predicted, the development of an industrial economy would be accompanied by an increased share of public expenditure in gross national product. This simple insight, known as Wagner's Law to economists today, explains much that we've observed in the century or so since. Industrial nations have much higher taxes, measured as a percentage of their economy, than do poorer nations, and similarly they have higher spending on health care, schools, pensions, police, and so forth.
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This idea ["Taxes Hurt the Economy and They're Always Too High"], which in various forms has recurred throughout human history, is born in the self-interest of the small number of people who typically control most of the resources in a society, because, given the choice, they would prefer to avoid sharing those resources with others.
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An impossibly brief (and therefore highly selective) review of Everything You Need to Know About U.S. Tax History yields three important lessons. First, the arguments over taxes never change. Second, the economy has grown larger and more productive even as government spending and taxes have risen. Third, it generally takes a war or other national crisis to bring significant changes in the way we tax ourselves.

Schools Are a Local Matter: In which we find that America's unique obsession with local control and funding of education is sinking us morally and economically.

The property tax, now a chief source of inequity, was then considered the fairest way to pay for education. Property was the main form of wealth; rich and poor people did not live in separate taxing communities. "Thus the wealthy paid more than the middle class and the poor paid nothing," says the historian Jeff Mirel, "yet all got access to the same public service--public schools."
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How does local control damage American education? Let us catalogue the ways: shocking financial inequality . . . no good information on how children are doing . . . no R&D . . . union dominance . . . school board incompetence and dysfunction.
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Chester Finn, the former Reagan official, writes that school boards today "resemble a dysfunctional family comprised of three unlovable types: aspiring politicians for whom this is a stepping-stone to a higher office, former school system employees with a score to settle, and single-minded advocates of diverse dubious causes who yearn to use the public schools to impose their particular hang-ups on all the kids in town."

Money Follows Merit: In which we see that the educated class's belief in economic meritocracy is being shattered by the rise of the undeserving rich.

In Britain and the United States, these new impulses combined with Charles Darwin's theories to yield the ugly (but for rich people quite gratifying) philosophy of Social Darwinism, which held that life's economic race was simply another contest in which the fittest survived. For the winners--especially the self-made tycoons of America's Gilded Age--this philosophy was a double boon: it conferred a welcome sense of superiority even as it absolved the rich from any sense of obligation to aid the poor, since charity or government assistance would only sustain these sorry souls beyond the early demise ordained by their natural inferiority.

Destined Ideas

It's also important to note that I'm not trying to persuade you that these approaches represent the course we should take. I'm arguing that this is basically what's in the cards, that these new habits of mind are going to come to prevail as our Dead Ideas give way under the pressure of events.

Only Government Can Save Business

I mean salvation in two ways: both from the crippling costs of the central and antiquated role that business plays in America's welfare state, and from the reputational hit business will continue to suffer if it keeps nibbling away at the problem by shifting costs to workers or shrugging off these costs altogether.

Only Business Can Save Liberalism

A number of commonsense goals liberals have long pursued will finally get traction when business decides in the coming years to get behind them. Once business starts playing this farsighted role, it will have an easier time getting credit for its other social contributions that are often taken for granted.

Only Higher Taxes Can Save the Economy (and the Planet)

Today federal spending is about 20 percent of GDP. (That's down from 22 percent under Presidents Ronald Reagan and George H. W. Bush, by the way, so all the talk about George W. Bush having been a "big government conservative" was demonstrably a hoax.)
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Either way, and even with aggressive spending trims, taxes are going up. And here's the surprise: in Washington, this is common knowledge! Newt Gingrich has told me as much, as have senior House Republican leaders. So, as we saw earlier, did two of John McCain's top economic advisers. They'll tell me, but they won't tell you. Why? Because the tax issue is seen as so potent in elections that both Republicans and Democrats (for reasons of offense and defense respectively) feel they have to choose between full disclosure and winning. Put this way, candor doesn't stand a chance.
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The leading candidate for a consumption tax is the so-called value added tax, or VAT, which is used by twenty-nine other advanced industrial countries. Why are we the great exception? The former Treasury secretary Lawrence Summers says that there is no enthusiasm for it because liberals view the VAT as regressive and conservatives see it as a huge money machine. We'll get a VAT, Summers quips, when liberals realize it is a huge money machine and conservatives realize it is regressive!
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Today consumption taxes at all levels in the United States account for only 8.5 percent of revenue, compared to 30 percent in other industrial nations.

Only the (Lower) Upper Class Can Save Us from Inequality

Luck is a shorthand term for those things that shape our lives that are entirely outside our control. In one sense it refers to the pre-birth lottery . . . In another sense, "luck" refers to things like natural disasters, events that befall people that their actions and behavior can't affect. . . . Lower Uppers have been largely blind to the role of luck because it has been drilled into them, from their earliest successes jumping through the hoops of the American meritocracy, that they weren't "lucky" at all. They were "smart." They were "good." They were "hard-working." Now that their second-tier status is awakening them to the fragility of "merit" as the source of their self-esteem and as the basis for where they "deserve" to stand in society, Lower Uppers will start seeing luck's hand elsewhere.

Only Better Living Can Save Sagging Paychecks

It may be small comfort for those feeling squeezed, but it's true: most of humanity would be thrilled to trade places with America's "struggling middle class."
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It is often observed that the average American or European today lives better than royalty did a century or so ago--in terms of life span, general health, medical care, food, drink, transportation, communications, and even shelter.
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The economic challenges ahead will spark a renaissance of interest in these less material sources of meaning and happiness . . . Europe emphasizes "community relationships over individual autonomy, cultural diversity over assimilation, quality of life over accumulation of wealth, sustainable development over unlimited material growth," and "deep play over unrelenting toil."

Only a Dose of "Nationalization" Can Save Local Schools

The usual explanation for why national standards haven't been established in the United States is because the right hate "national" and the left hates "standards."
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International studies have found the same thing: individual public schools in the United States have less autonomy than nationally directed schools in France. Research across forty-six countries . . . has shown that having a clear set of external standards to be judged by, combined with real discretion at the school level in how to get there, turns out to be the most effective way to fun a school system, and the most satisfying for educators and parents.

Only Lessons from Abroad Can Save American Ideals

When great American companies think about improving their performance, they benchmark their operations against the best in the world. That's how they refine their standards of excellence and find new ideas to adapt. But in America's public conversation this commonsense approach is often trumped by mindless snobbery.
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Most other nations actually have a strategy for what they're trying to accomplish for their economy and for their people that leaders across business, labor, government, and civic society can articulate. That's just not the case in America; we're the epitome of having not strategy at all.

Today we find ourselves in a similar position, in which the actual direction the country is bound to take is outside the permissible boundaries of public discussion. The trick for those aspiring leadership at such moments is to square the charades they must resort to in order to win power with the integrity to do what's right once they have it.