SPENDING AND SAVING

 

In a perhaps tortured posting, “Is That a Bubbling Noise?,”[1] this blogger attempted to present an overall view of economic motivations as they relate to downward trends in a national economy.  Brave readers can look up that effort (use the URL in the citation) and work their way through that text.  This current posting will simplify things by making a related point.

          That earlier effort relied on the work of Richard Posner[2] as does this one.  Here, he, in turn, relies on John Maynard Keynes.  Citing that economist’s book, The General Theory, Posner points out that there are two economic options people have when they act economically.  They can consume or they can save.  For most such actions, that means people spend or save their money.

          Further, Keynes identifies motivations or concerns for each option.  In terms of consuming, a person might seek enjoyment, generosity, shortsightedness, ostentation, extravagance, and/or they might simply miscalculate.  As for saving, there is a desire or concern for precaution, calculation, independence, foresight, improvement, enterprise, independence, and/or pride or avarice.  Surely, readers have at one time, or another, felt each of these motivations or inclinations.  

They can reflect or recall how they behaved at such times.  If money was involved, did they consume or did they save?  Ideally, when should one consume (which this blogger will call spend or spending) and when should one save?  Perhaps if one generalizes and thinks aggregately, the question becomes:  when should people spend and when should they save?  Well, Posner states, for the good of the economy, they should save in times of prosperity – the good times – and spend during times of recession – the bad times. 

Spending during times of recession helps by increasing economic activity.  Saving during times of prosperity helps put at bay inflationary forces.  But that’s not how they behave.  By placing oneself in one or the other condition, minimal reflection tells one why counter behaviors prevail. 

During good times, people are apt to have secure employment, enjoy higher levels of confidence, and more apt to see little risk in indulging or satisfying material or experiential desires.  Of course, the opposite exists during the bad times when confidence is likely to be challenged and risks are augmented, at least psychologically if not in reality.

While the actual economics of these trends and their cyclical character can be quite complex for civics students in secondary schools, this broad explanation of spending and saving can be readily understood so that they can at least appreciate the counterintuitive nature of these factors. 

And included in those factors is that their individual behavior will not tip the national scale one way or another; they are just one among hundreds of millions of people.  This is important because students need to consider how people, not individuals, decide these questions and decide what their behaviors will be.

It also introduces the need for governmental interference with how the economy will behave.  How?  By governments providing counter incentives – e.g., by manipulating interest rates so that people spend less in inflationary times and spend more in recessionary times.  But in doing so, government policy defies pure laissez faire economics or small government politics.  Posner, who in the past was considered a conservative (small government advocate), questions maintaining limited government responses to economic challenges. 

He writes, for example, in response to such economic nightmares as the 2008 recession (which he calls a depression) the following:

 

And it was a failure of government and of the economics profession rather than of business, as business foresight is rationally truncated …

            In sum, rational maximization by businessmen and consumers, all pursuing their self-interest more or less intelligently within a framework of property and contract rights, can set the stage for an economic catastrophe.  There is no need to bring cognitive quirks, emotional forces, or character flaws into the causal analysis.  This is important both in simplifying analysis and in avoiding a search, likely to be futile, for means by which government can alter the mentality or character of businessmen and consumers.[3]

 

And these realities further spelled the doom of how Americans viewed governance and politics.  Up until the Great Depression of the 1930s, the parochial/traditional federalist view dominated in how Americans understood those concerns.  In the minds of most Americans, America was a rural, agricultural society.

Then, after the depression, came World War II with huge central government expenditures which brought an end to the depression and undermined how Americans had understood their government and the politics it practiced.   More specifically, that war brought to an end the unrealistic notion that America was a society of small, local communities. 

It became obvious that any such view was doomed.  Parochial/traditional construct over-relied on local governance to meet the governmental and the economic needs of the population and almost overnight it was considered old- fashioned and inadequate.  Its basic tenets were developed during the colonial period and held up relatively strongly regarding the nation’s economic realities until the Great Depression. 

Yes, that was true to lesser degrees as the years progressed, and the economy became more and more national and then global.  Surely, the events of the Great Depression and even of World War II made that obvious.  In its end, it became not only dysfunctional but dangerous vis-à-vis the nation’s ability to survive or maintain its health. 

Today, that view is totally inadequate and what took its place, the natural rights view, falls short as the Posner quote indicates.  The natural rights approach lends itself to laissez faire thinking, limiting the role of government to basically police powers.  Posner, by just looking at the basic behaviors of spending and saving, demonstrates how inadequate natural rights thinking is.  While that view has not prevented an active governmental role in the economy, it has undermined that role’s legitimacy.

So, that leaves the American people with a challenge.  How can they retain (in some cases reestablish) the cooperative, collaborative, and communal qualities of federalism, but adopt a view that realistically accommodates the economic world that exists today?  This blog’s proposal is for the nation to adopt what it calls liberated federalism.  The blog’s purpose has, to date, been to offer an overall rationale that supports that construct.  And that will continue to be its aim.

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[1] Robert Gutierrez, “Is that a Bubbling Noise?,” a posting, Gravitas:  A Voice for Civics, a blog, September 24, 2019, accessed January 6, 2024, URL: https://gravitascivics.blogspot.com/2019_09_22_archive.html.

[2] Richard A. Posner, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression (Cambridge, MA:  Harvard University Press, 2009).

[3] Ibid., 111-112.

LIBERALISM’S LACK OF EXPLICITEDNESS?

 

Adam Gopnik offers an insightful description and explanation of the origins of liberalism – tracing that origin to the 1860s and the contributions of John Stuart Mill and Harriet Taylor[1] (see previous posting, “Romantic Liberalism” [2]).  Through his review, Gopnik establishes that essential to liberal thought and speech (their critical words), they go beyond “liberty” and “democracy” and include “humanity,” “reform,” “self-realization,” “pluralism,” and “autonomy.” 

These terms reflect the establishment or the strengthening of a self-selected community with its governance – the creation of which is not accidental but due to reflected action.  That describes a federated arrangement in which a people come together and establish, by common consent, the polity that will govern them. 

And in addition, that polity will govern with a sense of shared purpose, that being “eliminating cruelty and sadism and needless suffering from the world.”[3]  But how specific are these ideas that one associates with liberalism or how well are they combined to show one the way to a better society? 

Here, Gopnik takes a bit of a turn in his explanation and feels it necessary to describe the role that town centers played through the centuries in how liberalized life became possible.  More than merely being symbols for this view or belief of common folk having a say in governance, town centers or the Italian piazza played a central role through the centuries.  It is not by accident that these centers became targets of such authoritarian powers all the way back to the times of the ancient Persians and Spartans. 

These centers often served as markets as they provided the practical reason for townspeople to gather, but they functioned beyond providing provisions.  They became centers for sharing concerns and voicing demands and wishes.  They also provided face-to-face contacts among the townspeople where empathy could develop and strengthen.  In terms of Western democratic tradition, the Greek agora played that important role.

More currently, a good deal of liberalism, as a thought-out construct, can be traced to the Enlightenment of the seventeenth century, but its definitive character, according to Gopnik, seems to have been established in the 1859-1872 period and he gives a good deal of credit to Mill’s contribution, On Liberty (along with Charles Darwin’s Origin of the Species).  Historically, along with these written sources, there were also the historical events of the American Civil War and the establishment in France of the Third Republic.

Gopnik explains:  “Darwin’s was a new articulation of the history of life and humanity’s place within it, implicit but obvious, and Mill’s was the articulation of a new understanding about the nature of authority and the individual’s claims against it.”[4]  And given the events of the mid to late 1800s, people were more apt to reconsider the culturally determined place that average people should take in the political landscape. 

The North winning the American Civil War with its emancipation of slaves prodded democratization beyond American borders.  It encouraged it in Britain, for example.  It reenergized democratic forces in France.  And it threatened authoritarian voices in Germany under the leadership of Otto Von Bismarck while enhancing the socialist message of Karl Marx.

This indicates a bit of diversion and, as such, reveals a lack of a pointed message.  That would be a message with a definite plan for a perceived future that would put into effect the favored democratic governance.  Instead, what emerged was an idealistic vision based on broad democratic principles.  In turn, this allowed these varied reactions just mentioned and reflected its lack of rulemaking or definitive direction. 

Gopnik writes:  “It tends to hold implicit and explicit ideas about community, reform, violence, sexual roles, and more.  Liberalism … is an attempt to realize liberty, not merely to invoke it or make it the subject of an incantation.”[5]  In the opinion of this blogger, this reflects a looseness in definition or theoretical rigor.  And this lack of definitiveness plagues liberal advocates to this day. 

It allows for such offshoots as those mentioned above or for the natural rights view that disdains any social or legal restraints on human behavior on just about any level of social concern – from laws to norms to habits.  As this blog has repeatedly claimed, this last view took dominance in the US in the years following World War II and has grown in its influence ever since.

With that transition, the general sense of duty and obligation of citizenship – which was described in the last posting and is part and parcel of Mill and Taylor’s promotion of liberalism – has eroded.  In its stead, a contractual – quid pro quo – view has taken hold and dismissed a compact-al – partnership – view that had been dominant in the US from America’s colonial period to the mid-twentieth century.

And this blogger believes that that transition has been highly instrumental in generating the increasingly polarized politics that the nation is currently experiencing.  Surely the argument of this posting could be more solid in its reasoning, but it is offered as an interpretation.  That is, liberalism as experienced today has become radicalized.

Whether liberalism, in its essence, has gone through various forms from its inception, readers have a good dose of latitude to judge.  As for this blogger, he would like to see a re-establishment of Mill and Taylor’s apparent bias toward federated ideals and away from radical liberalism.

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[1] Adam Gopnik, A Thousand Small Sanities:  The Moral Adventures of Liberalism (New York, NY:  Basic, 2019).  The factual claims of this posting are based on the information this source provides.

[2] Robert Gutierrez, “Romantic Liberalism,” a posting, Gravitas:  A Voice for Civics, a blog, accessed January 3, 2024, URL:  https://gravitascivics.blogspot.com/2023_01_24_archive.html.

[3] Gopnik, A Thousand Small Sanities, 14.

[4] Ibid., 14.

[5] Ibid., 17.  Emphasis added.

ROMANTIC LIBERALISM

 

This blog introduced to its readers the work of Adam Gopnik back in January 2020.[1]  His book, A Thousand Small Sanities,[2] gives, early in its text, a history lesson of how “liberalism,” as a political form of thinking, got started.  He traces the roles that John Stuart Mill and his intimate partner, Harriet Taylor, played.  Skipping their adulterous relationship, their interchange in terms of basic political discourse led to a more formal construct about what political speech and behavior should be and became known as liberalism.

          More specifically, along with a strong stand against slavery back in the 1860s, they also advanced ideals such as claiming the equality between the sexes, i.e., that women were entitled to equal standing in society – including the right to vote.  While racial emancipation was a more accepted ideal at that time, this couple were among the initial advocates for women’s rights and for extending to them the franchise.  And before one ascribes to them the title of extremists or radicals of their time or of some ideology, Gopnik claims they were centrists.

          Gopnik shares the following:

 

What they were was realists – radicals of the real, determined to live in the world even as they altered it.  Not reluctant realists, but romantic realists.  They were shocked and delighted at how quickly women and men began to meet and organize on the theme of women’s emancipation, but they accepted that progress would be slow and uncertain and sometimes backward facing.  They did more than accept this necessity.  They rejoiced in it because they understood that without a process of public argument and debate, of social action moved from below, the ground of women’s emancipation would never be fully owned by women nor accepted, even grudgingly, by men.[3]

 

And how does this concern relate to federation theory, the topic of this blog?  It helps explain how the national – in this case, the British – partnership truly expanded as this newer stream of argument, liberalism, took hold among change agents of those years.

            Perhaps, as Gopnik suggests, their personal romance played a functional role in their thinking over the issue of emancipation and extending the franchise.  They introduced, on a more conscious level, the romantic element of how fellow citizens should, according to their view, engender a more useful mode of thinking and feeling. 

And what one might at first blush consider contradictory, if one’s views of others is based on some level of love, how one views them “jives” with liberty.  That is, it simultaneously beckons people to be themselves but also to be concerned with and to take care of how one is seen by others.  Moreover, this leads to a very essential dispositive stance in a federated arrangement of a partnership; that is, to be disposed to compromise. 

“Compromise is not a sign of the collapse of one’s moral conscience.  It is a sign of its strength, for there is nothing more necessary to a moral conscience than a recognition that other people have one, too.”[4]  It’s a sense which ties legitimate disagreements beyond the competing interests under debate.  And in that, one can envision a sense of liberty removed from the natural rights – “I can do what I want as long as I don’t deprive others of the same right” – view. 

For as with this more federated view, one is removed from this unattached individualism that the natural rights view promotes.  How?  It is tied to a view of liberty that acknowledges the obligations and duties true love demands.  Yes, this sense of limitation is not mandated by law, but by emotional ties, that loving relationships entail.

Gopnik leaves his readers with an analogy that this blogger wants to share, for it is a bit unexpected.  That is:

 

Most political visions are unicorns, perfect imaginary creatures we chase and will never find.  Liberalism is a rhinoceros.  It’s hard to love.  It’s funny to look at.  It isn’t pretty but it’s a completely successful animal.  A rhino can overturn an SUV and – go to YouTube – run it right over, horn out.[5]

 

And with that comparison, this posting sets up the next one; it will look at some of the implications from Mill and Taylor’s thoughts.

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[1] Robert Gutierrez, “Turn Left,” a posting, Gravitas:  A Voice for Civics, a blog, accessed December 30, 2023, URL:  https://gravitascivics.blogspot.com/2020_01_19_archive.html.

[2] Adam Gopnik, A Thousand Small Sanities:  The Moral Adventures of Liberalism (New York, NY:  Basic, 2019).

[3] Ibid., 11.

[4] Ibid., 12.

[5] Ibid., 13.

JAPAN: A CASE STUDY

If the unending stream of immigrants from countries south of the border, from Central and South America, is mainly caused by economic reasons – where people are seeking better material lives – then what can be done about it?  The last posting suggested a program of investing in those countries with the attempt to turn those economies around.  The aim would be to modernize those economies and to demotivate their people from migrating to the United States.

            That posting suggested that a view of the history of Japan might give one insights into what a traditional country should do since that nation was traditional – in the 1800s – and today is a vibrant industrial/postindustrial nation.  Relying on the reporting of David Landes,[1] this review has established that the Japanese cultural character played a central role.

That is, they enjoyed strong domestic institutions such as family and community life which led to a sense of self-confidence.  In turn, that confidence made it non-threatening for them to seek information and contacts with the world’s industrial nations of that time.  With that information they were instructed about what to do and not do on their path toward modernization.

          And so, they did.  Here are some of the steps they initiated:

 

·       Hiring experts and technicians from industrial nations

·       Sent Japanese agents to industrial nations – in Europe and America – to garner whatever they could from their eyewitness experiences

·       Conducted extensive comparative analysis of the information and insights they acquired

·       Extended their research to military information – first heavily relying on the French model and then, after the Franco-Prussian War (1870-1871), the German model

·       Abandonment of feudalist form of governance (the rule of local lords) and adoption of a central form of governance

·       Adopted British style trade policies as modeled on the Navigation Acts in England that in earlier phases of industrialization instituted protective policies that were only lightened after their industry was soundly established

·       When their industry was established, again like Britain, instituted a more laissez-faire model

·       Under the leadership of Okubo Toshimichi, instilled a more disciplined, hardworking orientation to work and development – opting for a German orientation

·       And by utilizing comparative advantage opportunities, began efforts with light industrial products, small scale efforts such as cotton mills, wooden waterwheels, coal mining

 

All of these elements or steps led from small production to big production over long periods of developmental processes. Landes summarizes these processes as follows:

 

But the long haul to parity needed not so much money as people – people of imagination and initiative, people who understood economies of scale, who knew not only production methods and machinery but also organization and what we now call software.  The capital would follow and grow.

            The Japanese determined to go beyond consumer goods.  If they were to have a modern economy, they had to master the heavy work:  to build machines and engines, ships and locomotives, railroads and ports and shipyards.  The government played a critical role here, financing reconnaissance abroad, bringing in foreign experts, building installations, and subsidizing commercial ventures.  But more important were the talent and determination of Japanese patriots, ready to change careers in the national cause, and the quality of Japanese workers, especially artisans, with skills honed and attitudes shaped by close teamwork and supervision in craft shops.[2]

 

Landes characterizes all this as the Japanese version of Weber’s Protestant ethic.  That would be their form of a culturally based human capital foundation.

          Given the initial question – can Latin countries south of the American border develop viable, modern economies? – does the Japanese example answer or help answer that question?  The opinion here is that it does not or does not very much but does give one insight as to what is involved.  For one thing, no one is arguing that those Latin countries become industrial powerhouses, but that they become viable economies capable of providing employment and opportunities for the bulk of their populations.

            With that more modest aim, the blogger believes the Japanese example can offer some insight.  And to begin with is a recognition that culture indeed does matter and that those in charge of any policy changes in this field need to be sensitive and knowledgeable about the cultural factors involved. 

The path to the ideal, whatever that is, will be complex and involved.  As with the Japanese, having the productive motives that the Japanese exhibited, the necessary capital will follow.  And a bit of advice: the efforts should begin with those who took it upon themselves to make the trip to the US – they have demonstrated gumption, bravery, and energy to improve their conditions.  These are qualities a nation can exploit – even hold as essential – in any attempt to improve their economic standing.

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[1] David Landes, “Culture Makes Almost All the Difference,” in Culture Matters:  How Values Shape Human Progress, eds. Lawrence E. Harrison and Samuel P. Huntington (New York, NY:  Basic Books), 2-13.  Factual claims of this posting based on this source.

[2] Ibid., 9-10. 

FOCUSING ON THE WHO OR WHAT

 

Some time ago this blog visited the contribution of David Landes[1] in a very influential reader, Culture Matters, edited by two giants in the study of human affairs, Lawrence E. Harrison, and Samuel P. Huntington.  This collection of articles had at the time of its publishing, 2000, a good deal of influence among the academics of that time.  For example, Landes’ article, “Culture Makes Almost All the Difference,”[2] begins by asking a very insightful question.

          It asks:  when a problem pops up, does one inquire into “what went wrong” or “who did this to us”?  The latter question seems to be what one’s emotions push to the fore, while the former is a more reasoned concern.  Eventually, both questions are important in not only fixing what’s wrong but also devising strategies that might prevent a recurrence of whatever the problem is.

          In line with Landes’ writing, today the nation is confronted with a problem that takes up a lot of concern among the nation’s news sources in their reporting.  That is the influx of immigrants through the southern border.  In the realm of blame, a lot of that reporting comments on the politics:  is the President to blame due to a lack of harshness – closing the border to these immigrants – or is it due to the opposition party’s reluctance to meaningfully address the problem in Congress? 

Neither of these options looks at why this immigration is taking place – it is treated simply as a given.  This blogger finally heard, in passing, a commentator on TV suggest that perhaps a program of extensive investment into the economies of the nations of origin – from where these immigrants come – could address the problem and supply a solution.  Of course, this is not a quick or easy fix; it presupposes many factors being lined up and working in productive ways.  To begin with, one can question the viability of moving in this direction.

But the first step is asking why this immigration is going on with the intent of addressing the causes in a way that is true and accurate.  This posting does not make an argument for this investment plan – it doesn’t argue against it either – but addresses what all is involved with such an approach.  And with that concern, Landes provides a historical case in which a traditional society did cross the line from being a traditional and agriculturally based economy to one in which it became a leading industrial and post-industrial nation, that being Japan.

To make a comparison between south of the border nations, from Central and South America, and Japan of the 1800s, one needs to go through several different stages.  The first stage is to compare the global landscape Japan faced with the one that exists today.  Very profound differences exist between that world of nearly two centuries ago and contemporary times.  At the earlier time, there were the beginnings of what today one calls dependency relationships and what some consider to be the post dependency era.

Simplified, dependency relationships divided lesser developed countries (LDCs) among the developed countries in which a given developed country controlled the export/import markets for a set of LDCs.  An LDC would be limited to which countries it could export its mostly agricultural/natural resources products and from whom it could import industrial products.  This would be to the benefit of both the upper classes of each type of nation.  The rich of the poor countries were/are equally rich as those of the developed countries.

Some argue today that due to advanced countries not limiting themselves to “their” LDCs, the whole system has been compromised.  Others think this is overstated.  Here is what a Global South article determined to be the case on this question:

 

In today’s realm, dependency thoughts are still useful in analyzing the widening inequalities between the poor and rich countries, or in analysing the divisions within a developed or a developing country context. Our societies are vastly divided, and dependent relations exist within our own social facbric [sic].[3]

 

Whatever the situation is today, one can suppose that there are vested interests that benefit from what is and they enjoy significant political power or influential status.  So, the first challenge would be to address this imbalance of power and financial resources.

          And here, this blogger believes Karl Marx had a point, not in terms of justice – although one can see injustice being an element of this arrangement – but from a practical point of view.  Treat people with disregard, especially if there is any experience of better times, and they will seek reciprocity.  They will believe they have the right to seek revenge.  Can one see this in operation?

          This blogger believes one can.  And one does see it in the politics of today here in the US.  The Global South article comments on this practical reality:

 

In other words, the financial crisis of 2008 showed the inefficiency of the global capitalist system and questioned the strengths of the new liberal economic philosophy in contributing to economic equality. Aaccording to [James] Petras & [Henry] Veltmeyer … capitalism in the form of new liberal globalisation provides very poor model for changing society in the direction of social equality, participatory democratic decision making and human welfare.[4]

 

And it is this aspect that motivates this posting.  Before one looks at any historical example to address contemporary conditions, one needs to consider how social/economic/political landscapes of the compared nations are one to the other.

          Another factor is how comparing nations addresses basic, relevant social elements or resources.  If the aim is to transform a nation from an agriculturally based economy to an industrial one, certain infrastructure assets need to be in place or developed before any such effort begins.  And in this, Landes describes how advantaged Japan was before they began the transition.

          Landes reports:

 

            The Japanese went about modernization with characteristic intensity and system.  They were ready for it – by virtue of a tradition (recollection) of effective government, by their high levels of literacy, by their tight family structure, by their work ethic and self-discipline, by their sense of national identity and inherent superiority.

            That was the heart of it:  The Japanese knew they were superior, and because they knew it, they were able to recognize the superiorities of others.[5]

 

And that overview sets up this blog to address the steps Japan took to make Japan the modern, developed nation one observes and admires today.  It wasn’t a smooth development – World War II didn’t help – but one can safely determine that nation has made the transition.  The next posting will trace a number of the broad strategies Japan employed in that process.

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[1] Robert Gutierrez, “Is It Better to Ask Who or What?,” Gravitas:  A Voice for Civics, September 30, 2019, URL:  https://gravitascivics.blogspot.com/2019_09_15_archive.html.

[2] David Landes, “Culture Makes Almost All the Difference,” in Culture Matters:  How Values Shape Human Progress, eds. Lawrence E. Harrison and Samuel P. Huntington (New York, NY:  Basic Books), 2-13.

[3] “Is Dependency Theory Still Relevant Today?  A Perspective from the Global South,”  Global South:  Development Magazine, November 18, 2020, accessed December 23, 2023, URL:  https://www.gsdmagazine.org/is-dependency-theory-still-relevant-today-a-perspective-from-the-global-south/#:~:text=In%20today's%20realm%2C%20dependency%20thoughts,within%20our%20own%20social%20facbric.  British spelling.

[4] Ibid.

[5] Landes, “Culture Makes Almost All the Difference,” in Culture Matters, 8.