Let's Reason

As a general rule, democracies are in danger when part of a country’s populace grows uncompromisingly intolerant to certain ideas and the behavior that such ideas inspire among their believers.  Judged by that rule, America is currently at risk of going down this slippery road.  Closing in on free thought and speech, illiberal elements on the right and left are trying to shield their respective constituents from critiques of their ideas and actions.  They do this by retreating to their respective silos. 

This arrangement is hardly stable and durable.  As the common space for the exchange of ideas shrinks, intolerance grows, and one side will eventually attempt to silence the other by undemocratic means.  For some time now, the common space in this country has been retreating and the competing silos of ideas have hardened. 

For a country born with a constitution that placed the course of the country in the hands of its people and gave people the protection to influence this course through the free expression of thought, it is ironic and tragic we are at this point.  But it is also a mistake to believe that this fight for free thought is new.  To recall the battles for free thought in America, I returned to the book FREETHINKERS by Susan Jacoby. 

Since the days of the revolution, the ground for free thought has not been necessarily welcoming.  And yet courageous freethinkers rose to take on the banner of unpopular but worthy causes.  These were men and women like Thomas Paine (the defender of reason), Robert Green Ingersoll (the Great Agnostic), the suffragists Susan B. Anthony and Elizabeth Stanton, the liberal poet Walt Whitman, the Black abolitionist Frederick Douglas, and Clarence Darrow (the lawyer for the defense in the Scopes (monkey) trial.  These freethinkers defended the separation of church and state, spoke against slavery and for voting rights for women, and argued the case of science in society.  The intellectual battles of today still echo those causes though in their modern versions. 

We still try to reach the right balance of power between religious and secular rights, as the changing numbers of conservative and liberal justices on the Supreme Court keep making the wall of separation lower or higher; unquestionably lower these days.  Amendments to the constitution may have abolished slavery and given equal rights to Black Americans but the legacy of slaveholding still casts a shadow and taints the relationship between Americans of different skin color.  Women have earned the right to vote but they are still behind men in wages and career opportunities and are still exposed to intrusions to personal matters, especially those concerning reproductive decisions. 

Jacoby reminds us that the illiberal streak in America culture and society has waxed and waned as the country moved from the euphoria of independence to its confrontation with the scourge of slavery, the influx of immigrants, the rise of science, the civil emancipation of women, and the spread of socialism and communism.  During those periods of warring ideas, fear and intolerance emanated from religious quarters, nationalist circles, and moral puritans.  The results were bans of books and movies, laws against obscenity and blasphemy, and equating  atheists, agnostics, socialists and communists with lack of morals or patriotism.  If the period around the turn of 20^th century was (as Jacoby calls it) the Golden Age of free thought, the McCarthy period of the 1950s was the nadir of free thought in America.

Today’s battles are about reproductive rights, racial justice, sexual and gender orientation, the separation of church and state, immigrants, and social fairness in general.  One would think that all these issues ought to invite reasoned and informed conversations.  On the contrary, they have led to polarized positions, often defended by illiberal means.   

On the left, a visceral disdain of white supremacy, antisemitism, anti-abortion and anti-LGBTQ views has served as the “justification” for the rejection and expulsion of speech, sympathetic to these views, from university campuses.  Beyond that, student bodies have demanded the establishment of “safe” spaces (call them echo chambers) for the socialization of like-minded students, and for “trigger” warnings concerning any coursework material that may be deemed harmful to one’s worldview or self-identification.

Fortunately, after a period of ambivalence and inaction, university officials have started to stand up and put an end to these illiberal methods of quashing free speech and the unencumbered exchange of ideas on the natural venues of pluralism and truth seeking.  It is more common than not that the birth and death of free thought and open societies start and end in the hallow grounds of institutions of learning.  From the closing of Plato’s Academy to the closing of the Central European University in Orban’s Hungary, authoritarians have known this all too well.

On the right, the attack on free thought has taken, however, a turn towards methods that are even more illiberal and pernicious.  With Florida being the epicenter, Republican-controlled states have legislated (or are in the process of doing so) a slew of laws that aim at silencing voices and forms of expression that disagree with conservative notions of a righteous society or an acceptable national narrative.  Florida’s “Don’t Say Gay” law prohibits schools to discuss sexual and gender orientation topics all the way to the 12^th grade.  Under the guise of shielding students from divisive ideas and giving parents control over the education of their children, the law, in essence, allows minorities of parents (even a single parent) to impose on the rest of the community their standards on the content of education. 

The same state’s WOKE (Wrongs to Our Kids and Employees) Act outlaws the teaching of theories arguing for the presence of racism, sexism, and oppression in societies – in reality, a strawman since hardly such theories are taught in public schools.  In an egregious encroachment of academic freedom this same law also places restrictions on what can be taught in social sciences in Florida’s state universities.  Thankfully, this section is currently blocked by the courts.

The dissonance between ideology and practice is particularly acute in the case of conservative states.  How can one profess the efficiency of markets in sorting out preferences for material goods but deny the same efficiency to the marketplace of ideas?  And how can one oppose the encroachment of individual liberties by the state but engineer the intrusion of the state in the free exchange of ideas.

There is a big difference between private citizens (like students) fighting for space in the agora of ideas or parents competing for different educational materials in their schools and the state using its authority to impose its ideological partiality to what ideas can be debated and disseminated.  This is how free thought dies in theocratic or authoritarian states.

In his 2017, book Life 3.0 Max Tegmark wrote of the almost infinite achievements we could realize through AI but also of the great perils we faced, if and when AI-based machines reached a state of autonomy from human control.  Hardly six years later, we are starting to freak out from the latest advances of AI in one single area, that of producing human-like written language.

As you may have read, more than 1000 tech leaders and researchers sent out an open letter warning us of the profound risks unchecked development of AI poses to humanity and called for a moratorium so that we have time to contemplate about the potential consequences. *  In a very insightful OP-ED piece in the NYT, Yuval Harari and his co-authors laid out the risks of supplanting humans by AI technologies in the creation of language, culture, and civilization.  In another on line piece in the Times, the linguist Noam Chomsky and his co-authors ridiculed the idea that AI programs, like ChatGPT and Bard, are true substitutes of human language and expressed apprehension at the thought that a mechanical synthesis of already produced information devoid, though, of emotion and moral judgment could be confused with human language.  On the other side of the debate, there is no shortage of people who, full of excitement and anticipation, can’t wait to see what the future of AI will bring to humankind.

 As I have written in other posts, innovation and technology have been both a boon and a bane for humanity.  One thing we can say with certainty is that our innovative prowess has not lived up to its most hyped promises.  Leisure from work is still a luxury, the pace of life has become more maddening, poverty and sickness are pervasive, and the geometrically increasing complexity of human life consumes ever greater amounts of energy and natural resources that threaten the climate and the survival of other species.  So how do we then approach the promise and threat of AI? 

First, I think that we are past the point of losing autonomy to machines.  Our lives are already so embedded in the world of machines, that I am not sure we can call ourselves masters.  Let’s try to imagine a life without the tech world with which we have surrounded our lives and I bet shivers will come down everybody’s spine.  We already live in a symbiotic world of humans and machines.  They may be our creations but we can’t do without them.  That means we have long ago surrendered our autonomy to our many Frankensteins. 

Second, questions as to how AI will affect the economy, jobs, politics, and education, though important, are in my opinion second order questions.  The questions we ought to be asking as we evaluate the promises and risks of AI are these:  Will AI be safe for the climate?  Will AI be safe for the biodiversity of species?  And most importantly, will AI be safe for the essence of human nature?  Though a livable climate and an ecosystem with biodiversity are extremely important, the most consequential question we need to contemplate about and ultimately answer is “what do we want our future as humans to be like?” 

My first concern here is the impact of the AI world on our evolution as a species.  Living within an environment of humanoid physical robots and brains will be unlike the environment we have encountered thus far.  How will our cognitive and emotional make up respond and adapt to this new environment?  Reason and emotions have evolved to foster cooperation between humans as a means of improving our chances for survival.  Will this cooperation and sociality in general erode when human beings start to rely on cooperation with AI creatures?  Think, for example, of  children raised by AI nannies.  Do we have any scientific or otherwise reliable method to make predictions about such and other questions of similar relevance to our future as authentic humans rather than hybrids of humans and machines?

The expressed voices of skepticism and alarm about the effects of AI suggest that we need to develop the tools to check and control advancements in AI that have the potential to put us at an existential risk.  To come up with some plan of response we can look at how we coped with two other life-transformative developments.  Namely, the development of nuclear physics and genetic engineering. 

Nuclear physics gave us the promise of plentiful and clean atomic energy but also the potential to destroy human life.  In the 1960’s and 1970’s the activism of the still young baby boomers of the world along with the logic of safe containment resulted in treaties among the nuclear powers that established limits to the development and quantity of nuclear weapons.  And proliferation of atomic energy plants has been checked in many countries through local public resistance. 

Genetic engineering has also presented us with deep moral questions regarding the possibility of molding human life in ways we have deemed to belong to the exclusive realm of nature and God.  Since 1971 researchers and academics working in genetics have initiated several self-imposed moratoria that have halted further applications of genetic engineering.  They have also drafted rules of safe conduct in research to minimize unintended consequences. *

Regulating and checking the development of AI though is not going to be as easily achieved.  Unlike nuclear power which was mostly developed in state-funded national labs or genetics that was developed in academic labs, AI development is backed by for-profit mega-firms (Google, Microsoft, Meta, and others) that have strong incentives to monetize their inventions.  Another difficulty is that the immediate effect of AI advances is increased convenience in carrying out a variety of tasks and this numbs our urgency to think about the ultimate consequences down the road.  Nor do I sense a widespread interest within the public at large that would mobilize activists to demand a governance model of checks and balances on AI.  And yet, the risks and dangers are real and call for action.  So, we do need to mobilize governments, AI innovators as well as the public on an international scale to find the right path forward.

In the end, it comes down to drawing a line between the freedom to develop new knowledge driven by our human curiosity and the necessity to apply it wisely for the good of humanity.

*The recent letter on AI echoes the pronouncement on standards and limits in genetics research of the 1975 Asilomar Conference in California.  An informative account of how research and applications in genetic engineering have been contained within some bounds can be found in Matthew Cobb’s book AS GODS – A Moral History of the Genetic Age

“There we go again” were the words that came out of a lot of mouths when SVB (Silicon Valley Bank) failed on March 9.  We thought that after the 2008 financial crisis the Dodd-Frank Act of 2010 would have ushered in a more stable banking environment.  Closer supervision and more onerous resolution of bank failures for shareholders and uninsured deposits were expected to instill more discipline in banking.  The SVB case exposed the limits of these expectations. 

The seemingly ad hoc way the regulators chose to avert another financial debacle exposed the fragility of the regulatory architecture.  It also brought to the fore the sense that we may have a selective approach to supervision and resolution.   As Daniel Tarullo, a former Fed governor, said “… concerns about moral hazard, and concerns about who the system is protecting, are front and center again.” 

Despite statements to the contrary, the SVB case was a bailout and bailouts have winners and losers.  In this case, the answer to “who the system is protecting” is wealthy millionaire depositors and the Silicon Valley tech companies whose uninsured deposits were granted full protection.  Along with these firms, their employees, among the best paid in the American workforce, also became the indirect beneficiaries of the bailout.

The question is why the Fed opted for a bailout instead of a bail-in that the Dodd-Frank Act  allows in such cases.  In a bail-in uninsured deposits are converted into equity, thus bearing the ultimate consequences of risk taking.  The Eurozone was an early user of the bail-in mechanism  when Cyprus suffered a banking collapse during the Euro debt crisis and has adopted bail-ins as a resolution mechanism.

Bail-ins and deposit insurance up to a reasonable level are tools to limit the moral hazard problem in banking operations.  Exposing large depositors to the risk of substantial losses and  converting their deposits into equity has a dual purpose.  It aims at compelling large depositors to monitor a bank’s risk and signal their disapproval by withdrawing deposits.  It also aims at making shareholders more cautious with respect to pursuing profits at high risk by exposing them to losses on their equity positions once uninsured deposits turn into equity. 

In the case of SVB, we had a failure of bank supervision before the collapse and of selective rescue afterward.  It seems that SVB’s regulatory supervisors were remiss in making sure SVB would act and reverse cited lapses the regulatory examiners had identified prior to its failure.  And then following its failure, SVB and its privileged depositors were offered a resolution with disregard to the moral hazard problem.  What good is any regulatory framework if the checks on reckless profit seeking are undermined by limiting losses on shareholders and large depositors?

Interestingly, both supporters and critics of bank regulation are now proposing that deposit protection cover millions of dollars or even become unlimited.  There are two issues here that merit consideration.  First, raising or eliminating the limit of insurance for deposits relieves both large (and mostly wealthy) depositors as well as bank shareholders from careful and costly risk assessment and monitoring.  Second, with less skin in the game, both large depositors and bank shareholders (especially the latter) can potentially become a lot less careful with risk taking.  Protecting us from bank failures then will fall more on the shoulders of regulators and their capacity to resist powerful interests and less on the market’s assessment of risks and rewards.  So welcome to socialized banking.  Not in the sense the state takes control of the banks but in the sense that bank shareholders and wealthy depositors reap extra profits in good days and share their losses with us on bad days.  

There are two arguments that circulate in reference to the SVB debacle that appear to me to be incompatible.  One is that the SVB failure was a one bank’s failure due to mismanagement and failed supervision.  The other is that we had to act decisively and quickly to avert a bank panic.  If it were the first, then no special treatment should have been extended to this bank and its clients.  If it were the second, then regulators signaled that even isolated bank failures are enough to spread public fear and uncertainty. 

I believe the second concern is more valid.  And this argument exposes the fragility and limited reassuring power of regulation in the face of fear.  Fear is one of the strongest human emotions.  It’s what tells us to take flight whether from a shadow that jumps in front of us or from a sudden banking incident.  Behind fear is the human difficulty to handle threats and uncertainty.  Fear triggers reflexive reaction before we have the time to process any available information or collect new information.  

Now add to the rapid reaction to fear the speed with which information spreads and how fast money can be moved around, both made possible thanks to digital technology.  So, we can have a reality in which negative information, valid or not, spreads like a brush fire, it ignites fear, which rapidly, and before our reasoning has time to process facts, triggers money movements that may deplete a banks’ deposits.  The question then is: Is our approach to safeguarding the stability of banking and financial markets designed so that it can deal with human psychology and modern technology?  I am not sure.  We still cling to the model of the rational homo economicus and we are enthralled by the boundless possibilities of modern technology and thus we tend to ignore their destabilizing effects.

Given the fragility of trust and the potency of human fear, we should err on the side of prudent and responsible banking that protects the economic welfare of society.  Laws and regulations should reward responsible banking practices and not the pursuit of profits and executive remuneration through irresponsible risk seeking.  In a capitalist economy, entrepreneurial rewards are justified by risk taking.  When these risks are, however, spread across society when they become reality, then what is the meaning of entrepreneurship?  

More broadly, we need to be honest about our understanding of the effects of moral hazard.  By that I refer to the pervasive notion that the adoption of social support programs (anti-poverty measures, child support, publicly-supported health care, student debt relief and so on) erode the incentive to work, while believing, at the same time, that the risk of moral hazard is impervious to assisting or rescuing businesses by using public funds. 

In case you missed it,right now, there is a war going on between institutional investors who engage in ESG-based investing on one side and Republican-controlled states and the Congress on the other.  Legislatures, attorneys general, and treasurers in about half of the US states (almost all controlled by Republicans) have turned against asset management firms that choose to invest in firms that comply with ESG principles.   At the state level fund managers are accused for dereliction of their fiduciary duty to generate the best returns possible for the pension plans they manage in the name of state employees.  They are also accused for being motivated by political agendas in favor of climate and social justice related causes.

Congress also passed a Republican-sponsored bill that prevents the enactment of a Labor Department rule that would allow but not oblige pension plan managers to adopt ESG criteria in their investing.  The basic argument behind the bill is the same concern that fund managers will be motivated by their political views on climate and social issues. 

But let’s start with some definitions.   ESG stands for environmental, social, and (corporate) governance responsibility.  Environmental encompasses concerns about the climate, the ecosystem and clean air and water.  Social refers to corporate practices that impact the firm’s communities and issues of diversity (race, sex, gender, religion, ethnicity), equity (pay, opportunities, rights and obligations) and inclusion.  Governance means corporations have sound rules for the delegation of power and accountability as well as for fair and full disclosure of information that is relevant to the firm’s stakeholders.

Governance was the first of the three that appeared as part of responsible business management more than 30 years ago.  As public awareness grew about matters of social justice and environmental sustainability, the S and the E found their way into the acronym.  In recent years the S and E also got an extra impetus as individual corporate leaders and collective bodies, like the Business Roundtable, expanded the responsibility of the corporation beyond shareholder value maximization to also include the interests of other stakeholders, including the environment and the society.  All, good stuff you would think.  So does the market.  Based on numbers published by the accounting firm PwC , it is estimated that a total of $18 trillion are invested globally in firms that follow ESG principles. 

Now, let’s look into the concerns regarding ESG investing.  First, do ESG-based investments leave money on the table?  I will start with the G(overnance).  Numerous studies have shown that firms with superior corporate governance standards trade at higher stock prices all else equal. Studies have also shown that the rigorous corporate governance standards adopted and enforced by the SEC (Securities and Exchange Commission) and US stock exchanges account for the popularity of US capital markets as hubs of securities trading and for the value premium enjoyed by shares of firms listed and traded on US exchanges.

Reason also suggest that adopting principles of social responsibility that open-up opportunities for hiring the best from the pool of workers irrespective of demographic characteristics and creating working conditions that respect everybody ought to boost morale, loyalty, and productivity – all good for a better valuation of the firm.  Generating good will with the surrounding communities where a firm operates should also be a positive thing for the firm.

Finally investing in environmentally responsible operations has upfront costs but it can also generate savings and lower the cost of adjusting to future environmental laws.  It can also signal to investors that the firm has a sophisticated and up to speed management team that can handle not only environmental challenges but also other aspects of business.  Ultimately though theorizing must be subject to empirical verification.  So, let’s look at the evidence.

We have a rich roster of studies that compare the returns produced by ESG-based investments to those produced by other firms.  In general, studies originating from business organizations report superior return performance for ESG-based investments.  Academic studies (presumably better designed) also offer no evidence of inferior performance for investments structured by ESG criteria.  Therefore, it seems that there is no empirical basis for the concern that ESG-based investments harm the financial interests of their beneficiaries.  Consequently, if such investments are at worst return-neutral and at best profitable then the argument that they harbor hidden political agendas becomes irrelevant.  After all, whereas investment performance is observable and measurable, intentions behind investments are not.

Nonetheless, there is a public policy issue that raises a troubling question about the anti-ESG stance.  Markets are supposed to enable us to express our choices with regard to a range of personal preferences and priorities.  This way the market can impact the conduct and viability of firms with respect to quality of products as well as business practices and operations that bear on society and the environment.  It is only when the market fails in its monitoring and disciplining mission that the state intervenes to restore it through laws and regulations.  It seems to me then that the anti-ESG stance – almost all of it originating within conservatives, who are the primary advocates of free markets – signifies an unreasonable dissonance.  To exclude ESG principles from the range of priorities the market has to sort out is an admission of lack of trust in the market by its very advocates.  Stifling the market that way is also the kind of value-destroying regulation for which conservatives always accuse liberals.  Even worse, it is a sort of censuring investors with respect to their right to express their priorities in relation to environmental and social issues.

If there is a really good reason to scrutinize ESG-based business practices it has to do with how reliably the ESG scores firms receive correspond to actual compliance with ESG principles.  A recent joint study by Columbia University and the London School of Economics found that firms with higher ESG scores had no better compliance than firms with low ESG scores.  To address the issue, the SEC is in the process of drafting rules that will require that firms disclose their ESG policies and initiatives.  As with public auditing firms, we need credible agencies for the assignment of ESG scores.

Raising investor confidence in the reliability of ESG scores is much more important than interfering with ESG-based investing and restricting investor freedom.

This post is a natural segue to the previous posts on how human life continually grows in complexity and how this imposes the need to adjust to its consequences.  I could have chosen words like “innovation” or “change” in the title, but I don’t think we can have progress without either of them.   After all, human history is nothing but a persistent pathbreaking adventure of innovations in survival, culture, knowledge, and technology which we collectively call progress.  

Progress though is more than innovation or change.  It also and primarily means betterment, which inserts a value judgment.  We are so much taken by the force of progress that we judge people, societies, and civilizations by the progress they make in the course of their existence.  Thus, we are indoctrinated with the obligation to make progress.  And we rarely pause to think that progress as innovation and change has consequences and that these consequences do not translate to betterment for everybody, including other species and our ecosystem.  More importantly, we fail to see that progress may not be managed in a democratic way and, hence, it can open up a divide between those who seek it and those who resist it.  It all comes down to how we understand “betterment.”

So, let’s first recognize that not everybody has rushed to embrace progress in our human history.  For example, hunter-gatherers were still roaming Central Europe a few thousand years after the emergence of agriculture.  Was this due to slow diffusion of farming or refusal to adopt it?  Hunter-gatherers have survived to our day in various remote parts of the planet and not because they are ignorant of the existence of modern societies.  The Amish in the United States have refused to adopt progress and integrate into modern life.  Workers, called Luddites, opposed technological progress that threatened their jobs in the early 19^th century.  To all these groups, what was proposed as progress did not necessarily entail betterment.

This past January (2023) David Brooks and Bret Stephens had an interesting exchange in an Opinion piece of the New York Times.  Brooks: “In society after society, highly educated professionals have formed a Brahmin class. . . . This class dominates the media, the academy, Hollywood, tech and corporations.  Many people on the middle and bottom have risen up to say, we don’t want to be ruled by those guys.  To hell with their economic, cultural and political power.  We ‘ll vote for anybody who can smash their machine.”  Stephens:  “… The class/partisan divide is between people whose business is the production and distribution of words – academics, journalists, civil servants, lawyers, intellectuals – and people whose business is the production and distribution of things – manufacturers, drivers, contractors, distributors and so on.  The first group makes the rules of the administrative state.  The latter lives under the weight of those rules … “

In that exchange, Brooks identified the class that mostly drives progress not only as inventors but also as proselytizers.  Going a step further, Stephens associated pretty much the same group with shaping and running the modern administrative state.   Here, we have a link between progress and its political ramifications.

Progress in science and knowledge has been the handmaid of state administrations since cities appeared in Mesopotamia and soon after in Egypt.  Cities brought new organization of labor, legal and enforcement systems, the need to manage farming and irrigation, keep inventory and money accounts, and set up defense systems.  That’s why we still consider cities to be incubators of progress. 

The path has remained quite straightforward.  New ideas, new knowledge and new technologies increase the complexity of human life.  They also trigger adaptive mechanisms that alter human behavior and social life.  More complexity means new risks and perils to navigate, new needs for law and order, new regulations, and, inadvertently, new restrictions in individual freedom. 

This process brings forth two forces that become sources of friction in the path of progress.  One is epistemological, meaning how well we understand and appreciate new knowledge and innovations and their impact on our world.   Unless all citizens are sufficiently educated or otherwise capable to understand the implications of innovations and change, a gap opens between those who know and those who don’t or don’t care to learn.  The other source of friction is how reliance on the advice of experts alters the relationship between citizens and the state. 

State administrations ancient and modern rely on experts who have the knowledge to inform governments as they deal with higher degrees of complexity.  Thus, the administrative state dictates the extent and severity of the mediation between what individuals want to do and what or how they are allowed to do it.  That’s where, progress and politics intersect.  We saw that on a global scale during the pandemic when states thought it responsible to enact unprecedented restrictions and mandates.  Significant portions of people refused to comply.  Part of the non-compliance was due to the epistemological gap and part was due to resistance against the stretch of the administrative state.

Societies and states are ruled by political groups invested in specific paths of progress, and, thus, they have every interest to push the path of progress they favor.  This means citizens must adapt to the skills and ways of life a particular path of progress implies.  Over the last 40 years, this path in the developed world has been: innovate, accept automation, go global, retool and go where the jobs are.  Either you jumped on this bandwagon or you were left behind.  How well, though, is this message heeded?  In the 38 advanced economies of the OECD, the average percentage of the population ages 25 to 64 with a college degree was 39% in 2020.  In the US, it was 50%.  That means the majority of the working age populations of the most advanced countries lack the academic and technical skills to successfully navigate the current path of progress.  In the US, in particular, there is a significant deficit of workers with the requisite skills to be part of the new technology sectors that are the flagships of progress. 

Why is this?  Is it because the state has failed to provide the motivation, incentives and means so that more young people choose to advance their knowledge and skills?  Or is it because significant segments of the population here and around the world are not so eager to embrace progress as defined by what we now call elites?  In the US, blue color workers resent their college-educated fellow citizens, what they stand for, and more importantly their notion of what progress is, just as David Brooks has argued.

It is difficult to imagine a human race not aspiring to innovation, change, and the desire to make progress, whatever the latter means.  That being the case, growing complexity will expand the knowledge gap and the administrative hand of the state.  Societies and states already face a political problem that will become more and more serious.  It has to do with the question:  Of the possible paths of progress which one do we choose and how do we make this decision? 

* Here I use the term administrative state not in its current dark meaning favored by some very conservative quarters.  I rather use it in the meaning of Dwight Waldo who coined it in his dissertation published in 1948.  Waldo viewed the administrative state to comprise the bureaucracies and agencies dedicated to public service.

The average American consumes about 11,000 watts of electric power a day in order to enjoy the usual amenities of everyday life. Of these, only about 90 watts of energy (or 2,000 calories) are needed for an average human body to keep going each day.  This means that all this excess energy consumption is the result of 10,000 years that took us from the introduction of farming to our current modern life.  Most of this energy demand has been generated the last two centuries after the dawn of the Industrial Revolution.  Of course, demand has to be matched by supply which has primarily come from hydrocarbons and increasingly now from renewables.

The industrial revolution marked a significant jump in energy consumption as well as prolific waves of new wants and needs that require energy to be sustained.  The industrial revolution also accelerated the urbanization of human populations as large waves of rural people migrated to cities where the factories and major commercial activities were located.  As a result of this urbanization process, 80% of the global population now lives in cities. 

So, an important question emerges: how does energy demand scale with city size?  That is, how energy demand grows as city population increases, and what causes this energy demand.  These are some of the questions Geoffrey West, a theoretical physicist at the Santa Fe Institute, answers in his book SCALE: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies.  I wrote out the whole title to convey the broad scope of the scaling phenomenon that West attempts to present to us.

Before he tackles the energy demand and supply of cities, West establishes the scaling laws that govern biological organisms, like mammals.  Thus, for example, the metabolic rate (energy needed to keep an organism going) grows at a slower rate relative to body size.  That means, an animal with double the size of another animal needs less energy to charge its cells.  In formal language, the metabolic rate scales (grows) sub-linearly with body size. Cities resemble biological organisms because they are conglomerations of people who need energy and thus have to create supply mechanisms for the energy to flow around, as blood does in a body. West has found that the infrastructure (roads, gas stations, electric, gas and water lines) of cities around the world grows by about 85% when city population doubles.  That means physical infrastructure scales (grows) sub-linearly with city size.  But in contrast to biological organisms, cities require more and more energy as they grow bigger, meaning that their energy needs (the metabolic rate) of cities grows super-linearly with city size.

West explains that the energy demands of cities come from the socioeconomic activity of a city.  Examples of socioeconomic metrics are wages, the GDP, innovations (given by number of patents), and number of professional people.  Measured by these metrics, socioeconomic activity expands 15% faster than city populations, that is in a super-linear fashion.  This is possible because cities produce more social capital that engenders more interactions, more ideas, and more output.  Unfortunately, some negative metrics, like crime and diseases, also rise faster than urban populations.  The super-linear scaling of socioeconomic activity with city size implies that energy needs also more than double each time city population doubles and that explains the tremendous energy consumption of the last two centuries.

As I alluded in a previous post, human activities get progressively greater in volume and complexity requiring more energy to sustain them.   More formally, West argues that unbounded or open-ended growth of socioeconomic activity eventually leads to what futurists call singularity.  That is, the point of time our energy demand overtakes our energy supply, thus, creating an energy deficit that leads to the collapse of the system.  The only way to avoid a singularity is to generate new supplies of energy or alternatively shift to another way of life.  That is, either way, we need to reestablish a balance between energy demand and energy supply.  This is how we have avoided a collapse of human life (or civilization) up until now.  We have done it with continuous innovations that either result in more efficient use of energy or the extraction of more energy out of its various sources.   Fertilizers, for example, produced great efficiencies in food production to meet the needs of fast-growing populations around the globe. 

There is, however, another bigger catch according to West.  Over time, socioeconomic activity grows in a super-exponential manner that brings the energy deficit (or singularity) faster and faster upon us.  This requires that the pace of innovation quickens as we move from one possible singularity to the next.  It’s like switching from one fast lane to a faster one to stay ahead of the singularity that is chasing us.  Another way to put it is to say that the time interval between pathbreaking innovations has to be shorter and shorter.  The question then is: can we do this and if yes what gives?

A recent article in the New York Times had the title What Happened to All of Science’s Big Breakthroughs?  The sub-title was even more worrisome: “There has been a steady drop in disruptive feats since 1945, according to new research.”  The fact is we have moved quickly from the computer to the internet and now to Artificial Intelligence.  Can we though sustain this pace of technological innovations and even more importantly accelerate it?  I think an honest answer is: we simply do not know.

A corollary question we need to consider is whether our human nature is wired to adjust to new patterns of life at an ever-faster rate within a lifetime.  Our current state of maladjustment to just one new reality, that of social media, is a clear warning of the looming dangers.   But AI enthusiasts tell us not to despair.  The reason is they rely on another singularity that may be a solution to our problem.  That’s when our bodies and brains will be augmented by genetic alteration, nanotechnology, and AI to become hybrid cyborgs no longer bound by the constraints of biology and I would add of the limitations of human psychology.  That will be the emergence of a new species, the Transhuman. 

Of course, there is another path that can slow down the growth of the socioeconomic Behemoth.   This is the adjustment to a slower pace of life, the slower creation of new wants, adopting the moderation of satisficing in place of the hyperbolic maximizing.  The current state of the world suggests though that the proverbial horse of unstoppable growth may already be out of the barn.

I recently found myself in Austin, Texas, and so I decided to visit the Presidential Library and Museum in memory of the 36^th President of the United States, Lyndon Baines Johnson.  To the members of my generation, Lyndon Johnson is still remembered (often disapprovingly) for his prosecution of the Vietnam war.  Indeed, opposition to the war forced Johnson to drop out of a run for a second full term, yielding instead the baton to his vice-president Hubert Humphrey.

It is unfortunate that the Vietnam war often overshadows Johnson’s domestic achievements.  This record, all part of the War on Poverty and the Great Society more generally, is arguably second only to Franklin Delano Roosevelt’s New Deal.  The breathtaking scope of the Great Society aimed at removing racial injustice at the ballot box and civic life, relieving older and poor Americans from the want for healthy and dignified lives, and lifting the fortunes of underprivileged Americans through expanded opportunities in education, housing and jobs.   

Johnson’s domestic agenda can be appreciated only by taking a longer view on American history.  That means to recount the abrupt end of the Reconstruction Era and the gradual demise of voting and other human rights of Black Americans despite the 13, 14 and 15 Amendments that had enshrined them in the Constitution.  It was after all only in 1954 that Brown v. Board of Education had ended segregation laws, but racial discrimination in the exercise of voting and civil rights was still around.  It was against this reality and with an inspirational push from Martin Luther King and mass demonstrations of Black and White Americans, that Johnson succeeded in passing the Civil Rights and Voting Rights Acts of 1964 and 1965, respectively.  That’s why it is often stated that America became a full democracy only after the passage of those two acts.  “It is wrong-deadly wrong-to deny any of your fellow Americans the right to vote in this country.”  That’s how Johnson put it at the time.  Regrettably, his words are still relevant to this day. 

The Great Society was though more than restoring political and human rights to all.  It also aimed at fighting poverty, extending the safety net, and expanding opportunities.  All these initiatives would inevitably push the role of the state beyond the boundaries set by FDR’s New Deal.  This was not, however, something the opposing forces were willing to accept.  FDR’s New Deal had been inspired by the theories of John Maynard Keynes.  After Keynes’s death, other scholars and public figures, like John Kenneth Galbraith, had picked up the Keynesian torch and tried to keep it burning.  At the same time conservative and moneyed interests were staging their counterattack on multiple fronts through think tanks, like the National Economic Council, and print outlets, like William Buckley’s National Review.  Programs associated with the New Deal were branded as collectivist and socialists, and even an above-board president like Dwight Eisenhower was accused to be a Communist agent (by the founder of the John Birch Society).  Furthermore, academics who taught or wrote books on Keynesian economics were attacked for spreading unamerican ideas and were often closed out of academic positions.   (In other words, wars about ideas and politics resorting to what we now call cancelling and disinformation is nothing new in America.)

So, the Great Society was conceived and designed at a historical juncture that would coincide with the end of the period the political scientist Robert Putnam has called the Upswing (i.e., the upward trend of progressive ideas).  Despite the turning winds, the Great Society came to life with an astounding long list of laws, programs, and institutions.   Besides the most well-known, like the Voting Rights and Civil Rights Acts, and Medicare, Medicaid, and Head Start, a lot of other programs intended to rectify problems plaguing cities, rural areas, and poor Americans, improve labor laws, promote the arts and culture, and protect the environment.  To promote civic engagement, several programs relied on the mobilization of citizens.  These programs included the Job Corps to help young people acquire marketable skills; the National Teacher Corps to improve teaching; and the Volunteers in Service to America (VISTA) to enlist socially conscious young Americans to help poor neighborhoods. 

In a commencement speech at the University of Michigan in 1964, Lyndon Johnson, called his program the Great Society and explained why it was significant.  In his words, the goals of the Great Society were to improve the human condition of Americans and elevate American civilization; promote inclusivity in the fruits of the economy; and put a stop to the erosion of values in community life that breeds loneliness, boredom and indifference.  Despite the progress we have made since then, many of these problems are to a lesser or greater degree still around us.

As I walked through the library, I started to realize the message of the Great Society to us.  It was undoubtedly a lesson in the role of government faced with serious realities both in the foreign and domestic fronts.  At the foreign front, the US was in contest with the Soviet Union and China to win the hearts and minds of the newly independent countries, all of them emerging from colonialism.  The US could ill afford an internal deficit in democracy and economic inclusivity and equity while fighting in Vietnam in the name of democracy and capitalism.  Today, we are in a similar contest with China and other authoritarian governments.  The best way to convince other countries that liberal democracies can stand and prosper is for us to set the example.  We are currently struggling to do so.

In the domestic front, the plight of Black Americans and the disrespect of their voting and civil rights had reached the boiling point.  It was time for the federal government to restore these rights by effective means of enforcement.  At the same time, the Keynesian underpinnings of the Great Society echoed the idealism of Keynes himself who believed that economic prosperity ought to be a tool for a society to battle scarcity and enable its members to enjoy the amenities of the good life.  The Great Society was aimed toward those ends. 

The legacy of the Great Society is still debated as to whether it delivered on its promises.  To its critics the record is mixed; but in light of all that has since happened a clear verdict is almost impossible.  What we need to acknowledge, however, is that the Johnson administration had the political courage to identify what ailed America and felt compelled to act in the way only governments can act to address longstanding, entrenched and big problems.  Today, problems in the economic, social, and environmental fronts along with their dire consequences are still with us.   Johnson believed that the government of the strongest and biggest economy had to think big and be at the forefront of the effort to solve the big problems of the day in spite of all the voices to the contrary.  Conviction to this principle, not its complete success, is what makes the Great Society a remarkable achievement in the art of governing.

Today, progressive movements face a similar challenge: to summon the inspiration and resolve to lead societies to the politics of problem solving for the betterment of humankind.

Note: More on the politics of that era and about the Great Society can be found in The Price of Peace by Zachary Carter.  

It was three years ago that I wrote a post recounting the major events that had occurred during the first twenty years of the twentieth and nineteenth centuries and remarked how lucky we had been the first part of this century to live in relative peace and astonishing progress.  So why not be optimistic about the rest of this century?  But then things happened to show that reflecting about the past and extrapolating into the future may be a pleasing mental occupation but it’s full of risks for disappointment. 

What happened reminded us that we have not yet transcended our basic nature that makes us behave like an ordinary species alternating between great and awful behavior.  What happened was the outbreak of the pandemic and the demonstration of heroism by care givers, from ambulance drivers to nurses and doctors who risked their health and lives to take care of the pandemic victims.  That was us in our best behavior.  And then before we had managed to extricate ourselves from the scourge of covid, the Russian invasion of Ukraine came with all its carnage and barbarity.  That was the worst in us.

Human history is full of moments of greatness and exaltation but also moments of brutality and despair.  And yet in our endless search for a meaning based on hope and purpose we have built a grandiose pedestal for our species.  We have woven a triumphalist narrative that tries hard to separate us from all other creatures and bring us closer to the divine.  Thus, we have endowed ourselves with rational minds and immortal souls, despite the fact that our rationality is being tripped by our emotions and cognitive biases all the time and our immortal souls are humbled and tempted by residing in our mortal bodies.   

This grandiose sense we have about ourselves can be useful as a stepping stone of inspiration for great pursuits but it can also set us up for disappointment.  If we expect so much of ourselves as moral agents or doers and transformers of nature it is because we prefer to ignore our limitations than to heed them.  And yet, in moments of wise self-reflection we have created myths like those of Icarus and the Tower of Babel as a warning against the dangers of hubris.

It is, of course, a fact that thanks to our more sophisticated brains and the development of language we acquired the ability to organize social relationships and networks that accelerated learning, built skills, and fostered innovation.  But if we think deeper, our human evolution is a process of laying one layer of complexity on top of another.  Peel back all the layers, and you find that the end goal is to meet basic needs we share with other creatures.  Take shelter as an example.  Beavers build a damn and make a lodge.  Thousands of ants get together and build elaborate anthills.  A cave or hut would be enough for hunter-gatherers.  We modern humans go to the bank, take a mortgage, use lawyers, hire a contractor and then movers bring our stuff to the house we have built or bought.  Thus, to meet our housing needs we depend on banking systems, legal systems, construction systems, moving systems.  As I said layers of complexity.  But here is the funny thing.  I am not aware that animals or hunter/gatherers have homelessness.  But we do!

What we call progress is actually a process of increasing complexity that opens up a greater distance – in terms of what we have to do – between a need and how to meet it.  With each layer of complexity, the opportunities and likelihood for friction, crime and war multiply.  And, of course, each layer of complexity requires more natural resources and further impacts the climate and the ecosystem.  Most layers of complexity breed new layers just like in an evolutionary process.  We thought, for example, we had solved lots of problems by inventing digital technology.  Now, though, we spend trillions world-wide to defend against cyber-crime which will cost us $10.5 trillion by 2025!  Of course, barring an apocalyptic disaster, there is no way going back by unravelling the complexity of human life.  All we can do is manage it. 

It is in myths our ancestors betrayed their ambivalence and fear about progress and tried to warn us but without success.  Thus, Pandora was admonished not to open the box, presumably given to her by Zeus.  Adam and Eve were also told by God not to eat from the Tree of Knowledge.  Nonetheless, curiosity led Pandora to open the box and desire to learn made Adam and Eve to eat from the Tree of Knowledge.  It is indeed curiosity and learning that breed and sustain progress which adds to the complexity of human life and everything that comes with it.

So here we stand as the species that not only has a consciousness about itself and its surrounding environment but also about the impact of its actions on the planet it occupies with the rest of life.  It is out of this consciousness of our impact that we now feel responsibility and guilt.  Our impact has grown so consequential that scientists have started to call the last century, even the last 10,000 years, as the Anthropocene period of planet Earth.  There is though another demarcation we can draw in our human history; the one that separates natural intelligence from artificial intelligence.  We are the first generations to live in this new era of intelligence.  

If our natural intelligence gave us some pause about the reach of our capabilities, artificial intelligence has kicked the doors of infinite possibilities open and has pushed us closer to full dependence on science and technology to solve our problems.  But this has come at a cost.  It has blunted our willingness to find solutions through the power and wisdom of self-restraint, moderation and thoughtful calculation of how to harness technology and science to serve the human condition and that of our planet.  Indeed, technological progress often runs ahead of our capacity to first adjust ourselves to its consequences.  It’s like indulging in unhealthy life styles because we rely on medicines to keep us healthy. 

Our preference to go down the technology road is reflected in the shift of our educational systems from the study of humanities to the study of STEM disciplines.  Cultivating the human character to reflect and act with temperance and wisdom has given ground to cultivating the mind to heal our problems only with science and technology. 

It is not surprising then that our reliance on technological solutions has reached the point that we consciously envision the prospect to colonize other planets to save our species instead of saving this one, our own, planet.  Let’s think about that.

Disclaimer:  This essay has not been composed by ChatGPT.

This is the time of the year we find our mailboxes full of pleas from charities and nonprofit organizations asking us to give to their causes.  And many of us open our checkbooks or use our credit cards to send money to strangers whom we trust to spend it as promised. 

If you think about it, the whole thing appears to be counterintuitive.  First, we part with our money; then we do something that helps strangers; and finally, we show trust to people about whom we know next to nothing.  How does this happen?  It happens because altruism and cooperation (and the trust that goes with it) are part of our nature and what makes us successful as a species.  Feeling good by doing good is a condition embedded in our nature.  There is plenty of related evidence to support it.  A good example is an experiment in which the participants were given various amounts of money and were told to keep it or share it with others.  No other factor mattered more for contentment than the act of sharing the money with others.  The interesting thing about natural altruism is that it doesn’t have to be reciprocal.  That’s why we are willing to help strangers when most likely there is no chance of reciprocity.

So, we give in various ways.  We volunteer to build houses for Habitat for Humanity (as former president Jimmy Carter did) or to mentor underprivileged youths for Big Brother and Big Sister, or work in soup kitchens or food banks or other community projects.  Or we choose the easy way out and give money.  I looked it up and found that by the percentage of the population that gives to philanthropy, Indonesia is at the top with over 80% of its people doing some giving.  But as percentage of the GDP no country comes close to the rate of giving by Americans. 

Some ethicists argue that for giving to be truly moral it ought to be purely altruistic and expect nothing in return.  This call for high-minded righteousness is though unnecessary.  At least for evolution and natural selection, all that matters is that altruism and cooperation work for a species even with some impurity of selflessness, like gaining social status.  After all, even religions reserve a place in heaven (not a small incentive) for the Good Samaritans among us.   

This is the kind of giving that happens at its most basic and human level.  But then we also have the mega-giving from corporations, foundations and wealthy people.  And here things get more complicated and deserve a debate.  Although on a first level all giving benefits somebody or some cause, it matters how it is done.  It matters from an ethical point of view and from a public policy perspective. 

First, from a public policy standpoint, giving can be entangled with public policy toward solving social needs and how government chooses to support private giving.  Here is an example of a public policy choice.  A British organization for homeless people found that for each pound spent on alleviating homelessness there was a total social return on investment of 4.37 pounds.  But then couldn’t we reap this benefit through public spending?  That is, when we observe a lot of giving, especially through organized philanthropy, this could be evidence a state does not do its part to fund some worthy causes.  This may explain why international data show a negative correlation between public spending and giving.  States like Finland, France and Norway with higher percentage of GDP dedicated to public spending rank lower in giving by citizens. 

We also have the question of whether government should subsidize philanthropy, usually done through tax breaks.  Interestingly, the robber-barons of the Gilded Age gave most of their wealth away before tax deductibility of donations was introduced in 1917.   Today, tax breaks for giving are part of the tools set for tax avoidance.  So, Robert Reich, a professor and author on labor and inequality raises the question “why should governments subsidize philanthropy by the rich?”  One could claim that all giving is good and thus deserves public support.  But social priorities may diverge from those big donors choose to support.  Thus, if we want to promote education, should tax subsidies be used for gifts to Ivy League universities or for funding community colleges?  Or if we want to promote culture, should tax dollars be used for splendid renovations of opera houses instead of supporting arts classes and cultural experiences in underprivilege areas?  High public profile philanthropy is also a means to earn reputation and status and thus stand apart.  Should public funds (that is, tax subsidies) abate this pursuit?  None of these questions aims at giving itself; they rather question as to what the proper role of government ought to be.

The ethics of giving concerns the legitimacy of the means that make it possible.  Anand Giridharadas, a critic of philanthropy that derives from corporate wealth, argues that it is in essence an ex-post rectification (albeit insufficient) of social problems caused by subpar wages, degradation of the environment, and the off-shoring of business operations.  Sometimes the funds used for giving may be derived from within the corporation.  That’s the case of CEOs who use corporate funds for high profile philanthropy that primarily burnishes their own reputation. This type of moral hazard problem, that is, doing philanthropy with someone else’s money, was after all behind Milton Friedman’s admonition that the CEO’s (or the firm’s) job is to maximize profits and then let its owners spend it according to their wishes.  And then we have the case of Sam Bankman-Fried who wanted to do good with his clients’ money.

The young owner of the bankrupt cryptocurrency exchange FTX has presented himself as an idealistic apostle of effective altruism.  I read that effective altruism is a movement spread by some philosophy professors which is premised on the use of reason and data to address long-term problems that will benefit many more people in the future than the just eight billion now alive.  To that end, effective altruism advises Its adherents to pursue lucrative careers that generate lots of wealth in order to fund these long-term causes.  In the Bankman-Fried case though, the dedication to this mission led to means that proved terribly damaging to his present clients. 

So, when we look at the net value of giving to society, we better look at it as part of the whole picture.  I would think that this evaluation should take into consideration the social return of giving as well as the tax revenues lost plus any negative externalities (side effects) caused in the accumulation of the resources that fund the giving. 

All in all, giving, as a natural expression of altruism, is part of the good side of our nature.  Nonetheless, as with so many other aspects of human behavior, it can raise questions, and sometimes its pursuit can cause more harm than good.  But for now, let’s give to the causes that inspire us and make us feel good.    Happy Holidays!

There is a well-known tendency for the people of a country to overemphasize the wrongs inflicted on them by other countries and to underemphasize the wrongs they have inflicted on other people.  Without any self-examination and introspection such gaps feed narratives that prevent nations from coming to some sort of mutual understanding and reconciliation.  This also applies on a broader sense in the way the modern West looks at its relationships to the rest of the world.

Why do I say that?  Because in the on-going war of Russia against Ukraine, the West found, to its chagrin, there is not much love, or rather solidarity, left between it and most of the other countries.  I checked the numbers and found that only about a sixth of the U.N. member countries support the West’s sanctions on Russia.  And then we have Saudi Arabia, a country heavily dependent on US military protection, which had no problem to side with Russia in agreeing to limit oil production and thus keep oil prices higher than otherwise.      

How should westerners react to this reality?  Well, I would suggest, with a good dose of introspection.   We can do so, as I did, by recalling the troubled history of the relationship of the West to the Global South (Latin America, Africa, South Asia).  I got some help in this exercise from being in the middle of reading Thomas Piketty’s book A Brief History of Equality, a book I cited in my last blogpost.  It is useful to recall that history so we can understand what explains the reluctance even opposition of many countries to the idea of siding with the West against its modern adversaries.

Of course, it all starts with the great explorations of the fourteen and fifteen centuries.  Native people were subjugated, their cultures and religions were eviscerated, and their treasures were taken to the royal courts of European emperors and kings.  It is a painful irony that after inflicting this civilizational annihilation, Europeans brought the artifacts of those nations to be stored in European museums for safekeeping on behalf of humanity.  All that destruction was justified on the European belief that Western government, culture and religion were superior and thus imposing them over other people was a gift to humanity’s advancement.  It is sad how many crimes are the offspring of such beliefs of a superior calling.

A few centuries later, colonialism turbocharged by capitalism intensified the exploitation of the Global South by the West many times over.   The noble version of the rise of capitalism finds its birth in the legal protection of property rights in England, the protestant ethic, the technological advances that raised the productivity of labor, and the magic of market economics.  However, the success of capitalism, at least in its opening stages, was due to the large-scale extraction of raw materials from colonies, to large scale deforestation and burning of coal, and the exploitation of cheap labor either through slavery or very low wages, most of them found in the conquered lands.

Using their military superiority, European colonial powers coerced their colonies to accept onerous trade terms and economic conditions that further sapped their self-sufficiency and economic well-being.  For example, India’s and China’s combined share of the global cotton industry was 53% in 1800; that had dropped to just 5% by 1900!  It was, after all, the unfavorable trade terms imposed by England on its American colonies that gave the impetus for the birth of the United States.  Thus, the economic dominance of the colonial European powers was not exactly the outcome of market economics but rather the result of a coercive capturing of markets by eliminating competition – a paradigm we now see repeated by big multinational corporations.

All along, the West has played the same game in its goal to capture and maintain economic dominance.  First, it develops its competitive advantages through restrictive trade practices and then it enshrines liberal and open-border commercial and financial policies through international treaties like, GATT and its successor the WTO (World Trade Organization).  But we also see the reverse strategy when Western industries fear losing business to powerful rivals, like China.  Thus, the West has taken steps to practically close its markets to next generation Chinese digital technologies and the US has even resorted to legislating an industrial policy to promote innovation and investments in semiconductors and other advanced technologies.

Beyond trade, in what Piketty describes as neocolonialism, the West has found additional ways to keep its influence on the global economy.  The important development in this regard was the successful infusion of the World Bank and the International Monetary Fund with the neoliberal principles of the Washington Consensus in the mid-1980s.  Thus, the prescriptions to needy nations have been fiscal restraint, opening up their economies to foreign trade, deregulating their industries, and accepting the free flow of capital. 

Piketty’s data show the negative consequences of these prescriptions.  First, capital outflows from developing countries to the West have outpaced the incoming economic aid.  Second, the developing world continues to be a source of cheap labor as in the good old days.  Ironically, this has also undermined the interests of the working classes in Western countries, and, hence, their political and social instability.  Third, the demand for fiscal restraint has kept tax revenues low, thus, hindering the developing countries’ ability to provide social services to stimulate human development.  Contrary-wise Western countries continue to rely on large enough tax revenues, which, besides securing strong military capabilities, support an extensive safety net and human development effort.

This record has more than historical significance.  First, this record should impart some modesty in the West’s boast about the superiority of its political and economic institutions, when both have a record that is found wanting in their treatment of fellow humans.  Second, it illuminates the current problems the West faces in multiple fronts, including migration and climate change.  Very low incomes and insecurity continue to put masses of people from developing countries on the road to migration to the West.  Africa’s population is expected to double by 2100.  Think of the waves of migration if economic inequalities across the planet are not successfully addressed.  Developing countries are also left with little help from the West, despite promises, to fend off for themselves the disasters inflicted on them by extreme weather phenomena. 

In short, exporting democratic institutions and promoting world collaboration to fight the dangers from climate change, poverty, and pandemics will remain crucial challenges for the West unless and until the rest of the world comes to see the West as an honest and supportive partner.