Let's Reason

My last two posts dealt with the devolution of liberalism to a system of unchecked economic power and individualism that account for both widespread inequality and the rise of all-powerful business oligarchs.  I would like now to offer some thoughts that address two questions: why society should and how it can start moving toward regaining its right and power to harness the influence of private interests over our present and future course.

The Whys can be found in these concerns:  Who has the right to control transformative technologies that allows us to tinker with nature, including the human body?  Who has the right to control outlets of speech and expression?  Who has the right to control our personal data?  Who has the right to control decisions of existential importance related to climate change and ecological risks?  And, finally, who has the right to control the political power that will determine the answers to these questions?

Liberalism withers when citizens feel that their fundamental rights slip away from their ownership.  That’s when people start to grow disillusioned about their status in the decision making and deliberative process that bears on their rights.  So, we have to ask “why are we in danger of losing our control over the above areas of concern?” Then, we can start thinking how we can reclaim our right to be in the table of decision making.

My first culprit for our diminishing voice is the growing control of oligopolistic and monopolistic firms by powerful individuals, who behave as oligarchs.  The second is the deficit of accountability and representation in corporate governance.  And the third is excessive accumulation of private wealth.  All three are interconnected and mutually reinforced, and all three are built on an abusive exercise of the right to property.  This, of course, is not necessarily an exhaustive list.

Despite the lofty ideal of perfect competition, left to themselves markets have the tendency to veer toward oligopolies and monopolies.  This after all is the secret dream of every entrepreneur.  Already in the 1930s, the famous economist Joan Robinson, had coined the term oligopolistic capitalism to describe the market system.  Case and Deaton (authors of Deaths of Despair and the Future of Capitalism) argue that monopolistic rents (that is, profits over what competition would allow) are at the heart of inordinate wealth creation and economic and social inequality.  With the tolerance and acquiescence of governments, critical business sectors (even in health care) have been left to devolve into oligopolies if not monopolies.  Thus, persistent inaction in anti-trust enforcement has removed the checks and balances of the market system.  Whatever limitations the markets have to function as external monitors of abusive corporate power these limitations are further reinforced by the hands-off policy of government authorities.

We also have insufficient checks and balances within corporations because of a deficit in accountability and representation in corporate boards.  Let’s start with the extraordinary power CEOs (at least in the US) have on the composition of their boards.  Separating the position of CEO from that of board chair would better align CEO power with responsibility and accountability.  The fact that American corporations are resistant to this change in governance is more indicative of the influence of CEOs and less of any evidence regarding the long-run performance of firms. 

There is also a deficit in stakeholder representation in corporate governance which can be addressed by expanding the diversity of stakeholders on boards.  We can start by introducing the voice of labor in the boardroom as it is in Germany, Austria and the Nordic countries.  This system of “co-determination” extends the principle of inclusivity in corporate decisions in which both capital and labor have vital stakes.  We can also reduce the influence of very large shareholders by scaling down their voting rights as the firm grows bigger or more consequential.  This can check the power of dominant shareholders and give voice to smaller shareholders who can check self-aggrandizing behavior. *  We can also require that beyond a given size a firm operate as a public corporation subject to the rules and regulations of capital market authorities, like the Securities and Exchange Commission in the US.  Regulatory scrutiny will add transparency and accountability in the running of businesses.

Finally, we need to curb the power of private wealth.  It is high time we moderated, even better reversed, the fast growth of private wealth of the last 40 years – a period during which wages have remained stagnant – by returning to the tradition of steep progressivity in tax rates this country had until the 1980s.  Many Americans are unaware or forget that after adopting an income tax with a maximum rate of 7% in 1913, the US quickly moved to tax very high incomes at rates as high as 94% in 1944.  Even in the 1970s the maximum rate was over 70%.  The worn- out argument that high marginal rates impede economic growth or innovation has scant evidence on its side.  Immense private wealth leads to wasteful conspicuous consumption (bad for the environment), exclusive control over critical sectors (bad for accountability) and inordinate influence over politics (bad for democracy). 

The present state of excessive private economic power and sense of entitlement regarding the accumulation and the deployment of wealth is because of the influence of a political and economic school of thought which, despite all reasonable evidence, is convinced that the sum-total of individual interests and actions converge toward ends that are socially desirable and good.  By further believing that the right to property confers only privileges but no social responsibilities, this view is willing to countenance to the encroachment of participatory and pluralistic decision making by private interests.  The truth is that property rights are constructs of law and political dynamics.  They are not self-ordained or free of constraints.  For example, the very capitalistic and economically successful Germany declares in its constitution that the legitimacy of the right to property is conditional on serving the public good.  Thus, we must disabuse ourselves of the idea that these rights have no social purpose to serve.

Today’s unimpeded accumulation of wealth and its unchecked deployment is the product of deliberate distortions of how markets ought to work for the benefit of all and how the interests of society ought to have a voice within a democratic and participatory order.  Restoring this order is all the more important for liberal states with market economies as they are being challenged by authoritarian, one party, states like China as to how effectively they deliver for all of their citizens. 

* Some of these proposals come from the book A Brief History of Equality by Thomas Piketty.  I would like to expand on the idea of diminishing shareholding rights as firm size or importance rises because of the widespread belief in the logic of the one share-one vote rule.  First, we already have different classes of shares that confer differential rights over the control and the profits of the firm.  For example, founders of new firms often issue to themselves B shares with enhanced voting rights in order to control critical firm decisions.  The market prices of different classes of shares reflect their relative power over control and cash flow, respectively.  Thus, reducing the control of shareholders by ceding some control to labor or reducing the voting power of large shareholdings as the firm grows bigger or more consequential are not ideas without similar precedent.

In the 1940s, the Swiss ethologist Rudolf Schenkel coined the term “alpha male” to describe the dominance of a single male in a colony of chimpanzees.  Later the term was extended to describe dominant males and, less frequently, females in human groups.  Chimpanzees happen to be our closest relatives in the animal kingdom.  So, isn’t it possible that we too share their predilection for the rule of one?

The reason I am writing about the alpha male is because we have started to see again the rise of super-dominant men both in politics and business.  I say again, because after a very long period of tyrants, kings, emperors, and dictators we had entered a period of more collective governance models.  So, I wonder whether the reemergence of the rule of one comes from the yearning of the subjects, the conditions of the times, or the force of the Ones.

The twentieth century had no small supply of them.  Hitler, Mussolini, Stalin, Franco, Salazar, Sukarno, Marcos, and Mao, along with a collection of Latin American and African dictators, became masters of the fate of their people.  This century, the rule of one has reemerged in Putin and Xi Jinping (as well as a few others of lesser import).  There are interesting differences and commonalities.  Rules of one that took the world to war have mostly come from the far right: think Nazi Germany, Fascist Italy, and Imperial Japan; today it is Putin’s Russia.  Most of them rule after they have seized the levers of state power.  But some also manage to capture the loyalty of a large segment of their fellow citizens; think of Hitler, Mussolini, Mao, Putin, Xi Jinping. 

In the United States political leaders have either willingly refrained from pursuing the rule of one – George Washington being the primary example – or the constitutional checks and balances have proved to be quite effective in curbing such ambitions among politicians.  The striking exception is Donald Trump.  His rule over the Republican Party comes from the force of his appeal to the base of the party which is strong enough to help him enforce his rule by destroying the electoral success of his rivals in the party.  This is a cautionary note regarding the vulnerability of democracy to the appeal of the rule of one.

The rule of one has been though a lot more pervasive in the world of American business.  The Gilded Age got its name from the riches and business power of business tycoons who made their fortunes in oil, steel, railroads and finance and were named robber barons.  Their rule over the economy eventually waned after the passage of anti-trust legislation and under the political weight of the Progressive movement.  Extremely high marginal tax rates, in excess of 90% in the war and post-war years, further arrested the growth of their wealth and along with it their political power. 

In the post-war period, the baton of alpha business males was passed on to the CEOs of large conglomerates.  What comes to mind includes, Chrysler’s Lee Iacocca, General Electric’s Jack Welch, and Disney’s Michael Eisner.  That was the era of managerialism and corporate “empire building.” No matter though how big their personalities were, the power of these executives was circumscribed by their corporate boards and the capital markets, especially the stock market, that passed judgment on their performance.

Now, though, we have a different type of rule of one in business.  The new Ones are founders of firms over which they have uncontestable control that makes them practically unanswerable to their stakeholders.  So, they can act on a personal whim with great latitude, very much so as in the era of the robber barons.  Thanks to very bullish market conditions they have also amassed mythical amounts of wealth in the form of shareholdings.

Like the old robber barons, the riches of the new Ones come from a combination of innovative practices and technologies and anti-competitive tactics.   Mostly unchecked by anti-trust legal challenges, they have been able to absorb any competitor that threatens their dominance in their markets.  By effectively depriving consumers alternative outlets to shop they create ecosystems of captured clienteles.  When we look at the rise of the earlier robber barons and the recent Ones, we see that it happens when business opportunities and technologies are in an inflection point.  The Ones rise by capturing new markets and technology before society and the state have had the time to place any rules and standards.   

Thus, the Ones are in a position to preemptively shape our future before we, as a society, have a chance to decide it.  Their hold on markets and technology can have a decisive influence on speech and expression, on social and political discourse, surveillance rights, and the end uses of other transformative innovations.  Here we are not talking only about the dominance of technocracy on our civic, social and personal lives.  We are talking about who controls technocracy.  The highly entrenched rule of one forecloses any collective deliberative process through boards, regulatory oversight, or social input.  It’s like placing our faith in the sense of self-moderation and self-regulation of single individuals. *

What stands behind the power and the potential scope of the power of the Ones is the unfettered faith in the resilience of competitive markets and unrestrained exercise of private property rights that Francis Fukuyama criticizes in the book I cited in my last blogpost.  What we seem to miss is that Adam Smith’s faith in free private markets and John Locke’s elevation of property rights can eventually crash against the unbound ambitions of entrepreneurs to whom competitive markets are unnecessary obstacles toward gaining business dominance and property rights are the ticket to self-aggrandizement.    

In Russia and China, we saw the rise of business tycoons whom we call oligarchs.  These oligarchs operate in a symbiotic relationship and at the pleasure of an authoritarian strongman or a single party.  Western democracies are supposed to serve social contracts according to which the private interest is bound up by societal and national interests.  Why are we then willing to place the future of our social contract in the hands of our own oligarchs?

*On this point, it is informative to know how Elon Musk, the most prominent example of the rule of one, thinks.  According to The Economist, Mr. Musk “paints stewards of fair play – regulators and boards – as pettifogging enemies of progress.”  And he refers to S.E.C. (the Securities and Exchange Commission) officials as “those bastards.”  

When it comes to liberalism and its offspring, democracy, we can say that two things are true: First, some form of liberalism and democracy is more widespread now than for most part of the last century; and second, both are currently challenged and even in decline.  The doubts about liberalism as an organizing principle of societies has given way to an open rebellion against its principles. 

Classical liberalism emerged gradually after the Protestant Reformation and found its full intellectual articulation in the Enlightenment.  It was a movement that purported to unshackle people from ecclesiastical authority and dogma, to liberate people from the oppression of absolute monarchy, and establish reason and science as the drivers of human choices and actions.  It espoused three foundational principles: individualism, egalitarianism, and universalism. 

In his new book Liberalism and Its Discontents, Francis Fukuyama writes that despite its liberating intentions, liberalism has not always lived up to its principles.  By accepting colonialism and slavery it violated its egalitarian principle.  By imposing Western European moral, social and economic standards on non-European societies it turned its universalism into an instrument of erasing other cultures.  And by failing to apply checks to extreme individualism, it has led to the modern excesses in wealth creation and selfishness.

So, we have come to a point, that the forces classical liberalism unleashed are spilling dissatisfaction on both sides of the political spectrum, the right and the left.  Conservatives, with their stronger sense of nationalism and cultural traditions, is pushing back on the liberal ideals of universalism which supports tolerance toward diversity.  Working class people on the right are also resenting a liberal international economic order that undermines the economic and social well-being of local communities.  And they have also grown distrustful of government authorities and elites as the complexity of governing modern states has opened a wider information and transparency gap between those in the know and those outside the centers of power and knowledge.  This distrust feeds into notions of alternative facts and rejection of science.

On the left, the dissatisfaction with classical liberalism has several sources.  One is the tremendous inequality in wealth and incomes between a tiny slice of the population and all others.  Here the accused culprit is neoliberal economic policies with their sacrosanct reliance on property rights and unfettered economic freedom.  Another discontent comes from the leftist critique that liberalism with its belief that individuals are autonomous agents of their interests fails to see that many individuals are in reality constrained by the weaker rights or lack thereof of the group they belong to, whether defined by race, faith, ethnicity, gender or sexual orientation.  Therefore, according to this critique, what matters is not just the affirmation of individual rights but rather of group rights.*  That’s how the left in its fight for equal rights for marginalized individuals is driven to identity politics and the closing of its mind to opposing voices.  (On this point, Fukuyama hastens to add that white identity politics has actually presaged identity politics regarding other groups.)

As these discontents harden, each side has come to believe that the prevalence of the other side cannot be reversed through the democratic process and, hence, it represents an existential threat to the defeated side.  Thus, politics becomes a zero-sum game that renders victory a goal by all means.  Thus, distrust in the intentions of the opposing side leads to doubting democracy itself.

Fukuyama offers several possible ways to restore liberalism.  These include: checks on abuses emanating from absolute property rights; submitting economic behavior to the checks of worthy social ends; safeguarding individual rights regardless of group identity; reconciling nationalism with universalism; and above all exercising the virtue of moderation in order to avoid the excesses of selfishness.

In light of these thoughtful suggestions, we have to ask whether liberalism has the capacity for self-correction.  Liberalism is a lofty ideal but the facts on the ground are determined by the relative power of competing groups.  Liberal societies have always struggled to live under the principles of liberalism and have oscillated between social progressivism and unfettered individualism.  As Fukuyama points out, absent in the principles of liberalism is the pursuit of the common good.  That leaves liberal societies with the hope that individuals are rational enough to behave in ways that do no harm to collective aspirations and purposes.  But as Fukuyama himself admits individual rationality is a misguided assumption questioned by modern behavioral science.

I am afraid that embedded in liberalism are the seeds of its multiple crises.  By prioritizing individual self-reliance liberalism set the conditions for impersonal markets based on trust which were good for the market economy but undermined social bonds.  By elevating property rights to sacrosanct status, it checked the arbitrary expropriation of property by authoritarian states but it exposed societies to the whims of property and capital owners.  By placing its faith on science liberalism ushered in waves of innovations which, despite enormous benefits, they nonetheless destabilized the old structures and often put ordinary folks at a disadvantage as to how to navigate modernity.

At its birth, liberalism was shaped by the then prevailing historical circumstances.  Its emphasis on individual freedom and rights was a progressive reaction to the power of oppressive institutions.  Without, however, an effective restraining principle, it was inevitable that individual freedom would lead to excesses.  Manifestations of these excesses are the unrestrained pursuit of wealth and the reigning of, what Fukuyama calls, the sovereign self.

Now, however, we face different circumstances.  Powered by science and technical innovations, humanity has bent nature in many ways to satisfy its ever-growing needs.  Under the force of human intervention, our planet’s environment and climate are pushed dangerously close to the point of unsustainability.  At the same time, our failure to address economic and social fairness undermines the well-being of large swaths of humankind and raises the danger of social upheaval.

For the moment, liberalism remains the best of the alternatives we have available.  To survive, though, liberalism must again adapt to the circumstances humanity faces now.  If moderation is the means to this end, as Fukuyama proposes, then liberalism must balance its faith in individualism with the care for the common good.

*This is what started in Europe as the Critical Theory of liberalism and is narrowly presented as critical race theory in America.

I continue to write about the climate challenge we face because despite the flood of articles about it we do not seem to have a thorough understanding of the enormity of the problem.  As a result of this incomplete understanding, we become captives of political pronouncements, often culminating in treaties long in promises and short in commitments, and, even worse, with little mention of what it will really take to fight climate degradation.

When it comes to the climate challenge the crucial question is this: “Can humanity realize its aspirations within the safe boundaries of our biosphere?”  This quote comes from the book How The World Really Works by Vaclav Smil, Distinguished Professor Emeritus at the University of Manitoba.*  This book makes it plainly and painfully clear how much our modern world has come to depend on the use of fossil fuels and why, consequently, it will take a gigantic effort to decarbonize.  Smil is not an advocate of the continued use of hydrocarbons.  Actually, quite the opposite.  He believes though that any serious response has to start with a clear understanding of our dependence on carbons.  Only then we, ordinary citizens and politicians, can plot a realistic path out of it. 

According to Smil, the first thing we need to understand is that our modern world has been built on four pillars: ammonia, cement, steel and plastics.  Each one of them is critically embedded in a wide range of dimensions of modern civilization and consumes enormous amounts of energy that so far has been provided by fossil fuels.  For example, the production of ammonia, a critical component of fertilizers, requires hydrogen which comes from natural gas – a fossil fuel.  Thanks to ammonia-based fertilizers we have been able to feed 4 more billion of humans who might not have otherwise existed.  The Green Revolution of the 1960s became possible thanks to the widespread use of fertilizers, irrigation, mechanization, and crop protection, all of them built on the use of fossil fuels.  The tremendous efficiencies achieved in the production of food made possible the reallocation of 90% of US agricultural workers to the production of other goods and services that define modern life.  When we account for the nutritional gap in underdeveloped countries and their need to increase food production, we start to understand the additional amounts of energy required.

Cement and steel are two other important pillars of modern life.  Steel, especially, is important in the construction of means of transportation – cars, trains, airplanes and ships – that keep the world moving and have made globalization possible.  But both cement and steel are based on production methods that consume lots of fossil fuel energy.  Finally, plastics have become one of the most ubiquitous materials. From shopping bags, to construction, to a myriad of gadgets, and even medical instruments, it is very difficult to think of a world without plastics.  And their damage to the environment is double.  Not only they come from fossil fuels but, even worse, they litter the environment for centuries.

Our dependence in hydrocarbons is a modern development.  Until the early 1700s, almost all the energy came from the sun, the wind, burning biomass, and human and animal muscle power.  By 1850, fossil fuels still provided only 7% of all fuel energy.  But by 1950, fossil fuels supplied 75% of primary energy.  Today, the average inhabitant of the Earth can consume up to 700 times the energy available at the beginning of the 19^th century.  

Our current alternative to energy from fossil fuels is electrical power.  But despite all the efforts, electricity supplies only 18% of final global energy.  Moreover, the production of electrical power still relies on fossil fuels, in addition to renewable energy sources.  Reducing further and appreciably the quantity of fossil fuels we use for transportation, heating, and in manufacturing requires enormous additions of electric power that would have to be produced by renewable energy sources.  And here the irony is that many of the parts used in the production of renewable energy equipment, like wind turbines, themselves consume fossil fuels.  Since the climate conference in Kyoto in 1997 and 23 such conferences later, by 2019 our global reliance on fossil fuels had declined only from 84% to 78%.

Climate scientists tell us that we need to limit the warming of the atmosphere to 1.5 – 2 C⁰ above its preindustrial level by 2050.  This does not imply full decarbonization but rather removing the excess carbon by natural or technical means.  Already though the present trajectory points to surpassing this limit as a result of disagreements concerning the respective obligations of countries.  Developing nations, including the two behemoths, China and India, as well countries in the Global South (South East Asia, Africa and South America) are still trying to catch up with the living standards of the Western world.  Hence, reducing global reliance on fossil fuels rests more on the transformation of the economies and life styles of the developed world where, however, political divisions make such transformation exceedingly difficult. **

Without a global accord as to how we can adjust to living patterns that can be sustained by a much lower reliance on carbons, we continue to be victims of the law of inertia, that is, we continue to extend our dependence on fossil fuels.  But as our dependence on carbons grows so does the magnitude of the challenge and the effort of extricating ourselves from them.

The difficulty of making the right adjustments sooner than later is also compounded by the fact that the actions (and their associated costs) to control the gases (primarily carbon dioxide and methane) that warm the atmosphere will not yield appreciable results within our lifetime.  Therefore, these actions represent an investment one or more generations have to make for the benefit of future generations.  This long gestation horizon of the benefits of climate rehabilitation is another hurdle we have to overcome.

Finally, according to Smil, our wishful thinking that digitalization and Artificial Intelligence solutions are going to provide an easy way out of our climate challenge is just that, a wish not backed up by any credible evidence of materializing any time soon.

So, we come to realize two things.  First, the continued unchecked use of fossil fuels poses an existential threat to life as we know it.  At the same time a high degree of decarbonization can put serious limits to the use and consumption of materials critical to our modern way of life.  Thus, we need to manage our climate problem from both the supply and demand side of energy. 

*Professor Smil has written over forty books on the environment, population change, food production, and technical innovation among others.  He has the distinction to have had more books reviewed in the leading scientific journal Nature than any other living scientist. 

**In early 2020, the carbon emissions per inhabitant per year were about 20 tons in the US, 10 tons in Europe, and more than 5 tons in China.

Unless we see the lives of people within societies as a zero-sum game, we must admit that generating beneficial outcomes that spread over as many as possible members of a society ought to be a desired condition.  As social animals, humans thrive when they live in societies where they can learn from each other.  It should not be a surprise then, that a recent study has confirmed that opportunities to interact with the right people can be the difference between moving up socially (in economic terms) or being stuck into the class one is born.

In two articles published in Nature, Harvard professor Raj Chetty and his co-authors present strong evidence that what matters for social mobility is not just friendships but interactions and connectedness with socially better-situated people who can serve as role models and sources of advice on how to be admitted to better schools, apply for jobs, and network.   Thus, socially disadvantaged young people who live in what the authors call opportunity cities are more likely to become successful adults and move up the socioeconomic ladder.  On the other side, are places where such opportunities for cross-class interactions are lacking.  These are places also beset with high rates of poverty and inequality, poor schools and single-parent households.

Overall, opportunity places allow lower income people to build social capital, that is, connections, friendships and civic engagement.  Chetty et al., however, find that only cross-class connections are what matters for future success.  Importantly, the link between cross-class economic connectedness and social mobility remains strong even in the presence of lower-quality schools, racial segregation, poverty and inequality.

The authors find that what endows a place with opportunities for cross-class connectedness is exposure and low degree of “friendship” bias.  Conditions of exposure afford lower-class individuals more opportunities to interact with upper-class persons.  Such settings can be work venues, social clubs, recreational activities, places of worship and the like.  The problem is, however, that even when exposure opportunities are present, the “friendship” bias may keep cross-class interactions limited since people like to associate with members of their own circle.

The power of interactions with the “right” people had been shown even before the latest Chetty et al. research.  A study from 2018 had found that poor children who had moved to places where they could interact with successful people were more likely to succeed (in terms of earnings) than children stuck in places without such cross-class interactions.

As with most empirical studies of social issues, the findings of Chetty et al. can lead to different views regarding what is cause and what is effect.  For example, John Tamny of the libertarian advocacy group FreedomWorks writes in the RealClearMarkets that people choose the social environments that are desirable and advantageous to them.  Therefore, the chances for social success and mobility are naturally greater for the members of a social group (or class) that includes successful individuals.  This interpretation views interactions with those one deems advantageous as something of a commodity that can be “purchased” in the market of social clusters.  But can we really choose our preferred social groups?

It seems to me that this ability and freedom is compromised the same way some markets remain inaccessible because of frictions and barriers to entry.  In the market for social groups the common name of these frictions and barriers is structural segregation.  Segregation by race, gender, wealth, ethnicity or religion is a global phenomenon.  It has the purpose and eventually the effect of keeping “different” people separated.  We can trace a lot of the present-day social and political conflicts that afflict our world to these types of structural segregation and absence of conversation across the aisle.

Because the Chetty et al. study refers to the US, let’s focus on the phenomenon of segregation in this country.  Without ignoring other types of segregation, the most pervasive segregation in the US is that of the racial type.  Let’s remember that school segregation ended in 1954 thanks to a Supreme Court decision.  But that triggered a flight of white families to neighborhoods or suburbs where the chances of cross-class interactions, at least at the school level, would be minimal.  Even before school segregation was constitutionally ended, the rules of home financing worked against desegregation.  Thus, the 1930 Federal Housing Administration restricted the ability of black families to buy homes in socially desirable (mostly white) areas – a restriction lifted almost 40 years later by the Fair Housing Act. 

The sad story of physical and social segregation in this country is that instead of having improved it has worsened.  And, as odd as it may sound, cities in the Northeast, like Boston and New York, long considered liberal bastions, are among the most segregated large urban centers in the country.  Zoning laws that restrict affordable multi-unit housing continue to be the most effective barrier that keeps lower-income black and white people from joining upward mobile residential areas.  But as it is usual in such cases, barriers related to the housing market keep more black than white families out of affluent residential places.  For example, black households with middle-class incomes are more likely to reside in poor neighborhoods than white households in the same income bracket.  Another sign of deterioration is that segregation of households by income had become worse between 1970 and 2009.   That means affluent and poorer households were, respectively, more likely to live in residential places with households from the same economic class than in economically mixed places. 

Segregation by race or income limits the opportunities of exposure that Chetty et al. identified as one of the two conditions that facilitate upward mobility.  When poor and underserved people, regardless of race, lack opportunities to observe the habits and ways of successful people they have less chances to form aspirations for upward mobility.  I would argue that having a window to the upper rugs of the social ladder is the first condition to stimulate any desire to climb it.  Having the chances for interaction and connectedness comes most often only after exposure to successful people has been possible and habitual.

So, now that we have the empirical evidence as to what contributes to social mobility and fulfilling one’s potential, our challenge is to create the conditions that will make this possible.

It is common for humans to pay more attention to bad than good things.  Being attentive to dangerous situations or negative news protects us from harmful risks.  But not paying enough attention to good things has its own risk of depriving us from useful information on which we can capitalize to achieve more progress. 

Case in point is an international survey from 2016 reported by Max Roser who runs the site Our World in Data.  Surveyed about the state of the world, only 10% of Swedes, 6% of Americans and 4% of Germans had a positive opinion.  Even after accounting for the usual pitfalls of surveys, that’s a remarkable discrepancy between public perception and the actual state of the world.  (You may recall that I had covered this tendency to miss the positive in an earlier blogpost based on the book Factfulness.)

So, I thought it would be a useful exercise to remind myself and others of what good things have happened or are under way, so that we can feel a bit better about ourselves despite our current miseries and discontents.  I will end the post by explaining why, in my opinion, attention to these good developments gives us a springboard for further progress.

Let’s start with global good news.  In 2021 the percentage of people around the world experiencing extreme poverty (living on less than $1.90 per day) was 9.2% compared to 75% in 1950.  In 2021, eighty-six percent of the world population was literate with women closing the gap with men.  Instead, back in 1930, only one third of the world population could read and write.  Measured by child mortality, the rate was 27 per 1000 children in 2020 compared to 200 children in 1950.  Despite some slippage toward authoritarianism during the past ten years, democracy, even with flaws, is the political system of the majority of countries in the 21^st century, appreciably higher than the number of democratic countries in the 20^th century.  Although fertility rates (especially in rich countries) have dropped the world population has doubled the last 100 years thanks to advances in health care that have helped extend life expectancy. 

These good global developments mean that as a species we are becoming more educated, healthier, less in the grip of the want for food and shelter, and importantly more tolerant to the rights of others as institutions of governance come under greater control of the people.

The above information reflects mostly the mega trends taking place on a global scale.  We also have significant current developments that exemplify our good side notwithstanding other darker events.  The primary piece of evidence in this connection is the global response to the covid-19 pandemic and the war in Ukraine.

The last two and a half years the world has come together to provide a collective response against the devastating health and economic dangers unleashed by the pandemic.  Thus, the world summoned its scientists to design and produce vaccines against the virus in record time.  National governments used their fiscal powers to shield their populations and industries from economic ruin and hardship and rich nations extended their assistance (no matter how inadequate some would claim) to poor nations.

Moody’s Analytics has estimated that the response to the pandemic came to about $9 trillion worldwide.  Obviously, the richest countries dedicated much higher sums to help their citizens than poorer nations.  Thus, the US government allocated 25% of its GDP to fight the pandemic while the European Union countries threw $1 trillion to the same cause.  According to the International Monetary Fund, the fiscal response to the pandemic was indeed worldwide.  And an OECD study found that states and official donors contributed $179 billion to developing nations, a record amount (on an annual basis). 

The war in Ukraine and the resultant crisis in the energy markets presented additional opportunities to governments to display their care for their hard-pressed citizens.  The EU has earmarked $350 billion for aid to households and industries while the UK plans to spend $172 billion to fight economic hardship due to rising inflation.

This vast global operation of fiscal largess has no doubt received a lot of criticism by orthodox economists (because of the fear of inflation) and conservative policy experts (because of aversion against governments doing too much).  From the left, the criticism refers to the one-off nature of most of these measures which fail to address the structural causes of insufficient economic resilience. 

What matters though is that current and past fiscal measures to fight poverty have improved the lives of millions of people.  In the US alone there has been a sustained downward trend in child poverty, which by 2019 had declined by 44% since the early 1990s and dropped further thanks to fiscal measures during the pandemic years.  Overall, the number of Americans living in poverty in 2021 was 25.6 million down from 50 million in 2011! 

The important implications of how governments around the world reacted to the pandemic and the war in Ukraine have to do with what they tell us about attitudes toward solidarity and the role of government.  It is extremely important, for example, that the assistance programs were undertaken by both conservative and liberal governments.  In the face of acute crises, governments reacted in a humane and altruistic manner.  They put aside ideological and policy principles to ensure that no one was left behind (a hyperbole perhaps but it captures the spirit).  To paraphrase Warren Buffett’s reaction to the government’s response to the 2008 financial crisis “You first need to put the fire out and then worry how to rearrange the furniture.”

These government responses are important in another respect.  They demonstrated that governments do matter.  In times of acute crises, it is only organized governments that stand between human sustainability and ruin.  Furthermore, and I think this is even more important, our worldwide response to these crises showed that we have the moral and practical wisdom to act on behalf of our collective common good instead of acting selfishly.  It is in such moments our scope of “We” expands to include more of “Them.”

Our world is still a messy and hard place for many of our fellow men and women.  But hardships caused by illness, illiteracy and oppression are affecting fewer and fewer of us.  That along with our expanding social consciousness give us hope we can become a better species or at least not a worse one.

It seems that humanity is still in the phase of being consumed by inter-country squabbles that distract us from addressing our common and serious challenges.  That’s why it is useful to occasionally look at the bigger picture. 

In a recent article in the New York Times, Ezra Klein worries that many adults are reluctant to have children because of the threats their offsprings will face due to climate change and overall environmental degradation.  He makes the case for parenthood by reminding us that not much into the distant past the majority of people lived in poverty and disease and their offsprings had limited potential for a better future.  Thus, in comparison, we have a better world in which we can bring children.  The problem with this thought is that two centuries ago we had little idea what the advent of the industrial age and the resultant intensified exploitation of natural resources would eventually do to climate and the ecosystem.   Now we do know that without changes in human behavior the future, science tells us, is bleak. 

Until advances in medicine and health care cut drastically infant mortality, high birth rates were the only defense against ending up without children.  Reducing infant mortality and extending the human life far beyond what was natural back then also increased the human footprint on the planet with all its adverse consequences for the environment.  Klein does not ignore the challenges but he takes hope from the accelerated replacement of fossil fuels by renewable sources of energy.  And he is emphatic on the need to start educating school-age children about the climate and the environmental threats we face.

In a very hopeful development, despite all the political divisions in Washington, Congress is poised to enact the Recovering America’s Wildlife Act.  This will be the greatest pro-nonhuman species law since the Endangered Species Act passed during the Nixon administration.  This is definite progress as we come to realize that humans and other species co-habitate this planet, and that humans, thanks to our superior intellect, are, so to speak, the planet’s designated custodians.

The third piece that I found inspirational is The Green Imperative a book written by Victor Papanek in the mid-1990s, as the urgency to act on the environment was starting to gather steam.  Papanek was a renowned designer who dedicated his career to promoting smart and eco-friendly products and solutions.  From packaging to the manufacturing process and all the way to the end product, Papanek believed that we should prefer options that wasted as little of the irreplaceable resources we take from the environment.  Most importantly, for Papanek the design and making of products and structures came with an ethical obligation to do good for the environment.

Making the changes that are necessary to protect the planet’s ecosystem requires that we have some sense of the factors that impact the environment.  In that connection, I have come up with a simple multi-factor model that seems, in my non-expert’s opinion, to capture the dimensions of our problem.  According to this simple model, the human impact on the environment can be explained by focusing on four factors and their multiplicative relationship:

Human Population times Volume of Human Needs and Wants times Volume of Matter Used times Energy Spent.

I doubt that we can control or reduce our negative impact on the environment if we continue to increase any of these factors without taking offsetting actions in the others.  To achieve this, we must be cognizant of the influence of religion, politics, economic structure, biology, and technology.  For example, population is influenced by nationalist and religious ideas.  But policies favoring population growth must be balanced by policies that allow the other three factors to reduce the harm of human population growth on the environment.

Economic systems and structures that see no problem with the infinite growth of needs and wants, that is, insatiable consumerism, also face the same problem.  Firm competition that puts no limits in the acquisition of advantages by using designs and usage of materials that are appealing but hurt the environment is also counter to a strategy of environmental sustainability.  Finally, unrestricted energy use from all sources of power generation while we allow the other three factors to grow is also a dead-end from an environmental standpoint.

The above approach of capturing the human impact on the environment demonstrates that we have to perform a very delicate balancing act among competing ideas and beliefs as well as pragmatic realities.  To get on an environment-friendly trajectory, it is important we come to accept as our common goal the sustainability and even betterment of the natural environment.  Our big challenge is to not only accept that goal but also to adjust human activity to serve this goal.  This is no different from the use of goals to guide political, economic, business and a whole lot of other areas of human life.  Even religions use goals (like the salvation of the soul) to guide human behavior.

Programmatically (that is, as a program of action) to achieve environmental goals, it may not be necessary all countries act the same way on all the factors that affect the human impact on the environment.  What is of importance is we all, individually and collectively, aim for the same goal of doing no harm to planet earth, i.e., its environment and its species.

To do this, we need to rely on constructive behavior on an individual and national scale.  Just like religious and secular beliefs shape individual behavior from a moral standpoint, the same can be done for ideas that aim to be environment-friendly.  That’s where the education of the public, and especially of young people, becomes important, since it is knowledge about and empathy for our planet and all its species that can guide each one of us toward planet-friendly lifestyles. 

This is not a project of a few countries alone.  We need cooperation across nations.  The magnitude of the environmental project is enormous, both in terms of the risks it holds for humans and our obligation toward the other species.  That’s why I think our current inter-country squabbles seem to be trivial compared to the big project we all face.

To apply what Benjamin Franklin said about the dangers of discord among the American rebels, we can also say “We must hang together, or most assuredly, we shall all hang separately.”

One of the surprising developments of the last few years is that the volume of global trade has continued to rise, reaching a record of $28.5 trillion in 2021, despite the pandemic’s grip on the global population.  The outlook is more uncertain for 2022 in the wake of the West’s embargo on Russian exports and imports in retaliation for the invasion of Ukraine. 

There is, however, another area of concern regarding the future of the global economic order and trade, and this is none other than the growing antagonism between the US and China.   To see the dangers of this antagonism we need to take a detour into past history.

In a new book Blood and Ruins: The Last Imperial War, 1931-1945 historian Richard Overy casts a new light on the meaning of World War II, a meaning that differs depending whose perspective one considers.  Overy writes that for the western nations and the Soviet Union the war against the Axis of Germany, Italy and Japan was for freedom and the defeat of dehumanizing fascism.  But for the many countries still under colonialism or foreign occupation (like China) the war was predominantly between established and aspiring colonial powers.  That is, between the colonial nations of Europe and the US on one side and Germany, Italy and Japan, which were either stripped of their colonies after World War I or were left out of the colonial game, like Japan.

According to Overy, the WW II actually started in 1931 when Japan invaded Manchuria, and then moved on to invade China and claim significant parts of Southeast Asia.  Japan’s goal of this belated colonial expansion was to expand its sphere of economic influence.  In a like-minded calculation, Hitler and Mussolini launched their wars in search of “living space.”  This appetite for economic space can be explained by the fact that the 1930s started with the Allies controlling colonial lands 15 times that controlled by the Axis countries.  Colonies proved to be of particular importance during the Great Depression when protectionism limited access to raw materials through free trade. 

In Overy’s book, America’s belated entry into the WW II was triggered when it became clear what was at stake for the US (as well as Great Britain) in terms of economic advantages in the Pacific basin.  Japan’s attack on Pearl Harbor was only the opening salvo.  On the next day, Dec. 8, 1941, Japan attacked US possessions in Guam, the Philippines, Midway, and Wake Island and British possessions in Malaysia, Singapore, and Hong Kong.  This coordinated attack was the clearest sign that Japan was intent on claiming for itself Pacific space that was vital to its economic aspirations.

Now we can move forward to our time and use Overy’s historical account to try to understand the risks for global trade and peace. 

Global trade, like its domestic counterpart, requires free flow of goods and fair competition.    Ever since China joined the international economy, a long- standing complaint from its trading partners is the restrictions placed on foreign firms doing business in China and its other anti-competitive tactics, especially in the area of intellectual property rights.    

No less important though is the problem with international supply chains which can fall victims to national interests in critical periods, like a pandemic.  If a trading party cannot depend on the other party’s willingness to trade certain products, then international commerce will retreat within national border.  The US is already engaged in a broad examination of its vulnerabilities to international supply chains, especially those that involve China. 

A related and often underappreciated risk to free global trade is the formation of trading agreements and blocks that confer privileged, if not exclusive, economic ties with countries rich in resources.  When a country gains a lock on rare and valuable resources available in another country, that posits a risk to those denied access.  This is the modern version of old colonialism as a method to create economic advantages.  In a sign of progress, the modern version relies on diplomacy rather than gunboats and armies.  At least for now.

China, having supplanted Japan as the preeminent power in the Southeast Pacific, has proven very efficient in spreading its influence across the island nations that dot an enormous area of this ocean.  China is doing this by building infrastructure projects, providing training, and support for overall development.  This is the same approach China has adopted in building economic ties with countries in Africa, Latin America, and even Europe.  Without any military involvement, China has been able to build a constellation of trading partners and acquire influence across the globe.

What about the US?  As several commentators have written, American efforts and results in countering China’s growing economic influence are falling behind and are hamstrung by our own domestic problems.  First, American influence abroad is being understood first and foremost as the projection of military might demonstrated by over 700 military bases in 80 countries.  But while the American navy continues to challenge China’s ambitions in the South China Sea, it is China’s trade volume and investments that keep growing around the Pacific.

The populist backlash in the American heartland against globalization has also frozen American foreign policy out of the pursuit of forming trading partnerships in Asia.  Without a clear plan as to how to protect workers from global competition, American administrations are reluctant to enter cross-border trade agreements.  Thus, after the scuttling of the Trans-Pacific Partnership by the Trump administration, its resurrection as the Indo-Pacific Economic Framework is mostly a document of aspirations than actionable steps.

Having access to international trade is of vital importance to all nations.  It can be accomplished through cooperation and fair dealing or through hostile actions.  The present danger for peace and the global economic order is that China overreaches in its strategy of expanding its economic influence and the US relies more on military power than diplomacy. 

There is currently a sense that economic globalization has not brought the benefits of peace (with Russia) and democratization (of China) the West expected.  There is, however, a greater risk in the absence of open and fair trade across nations, and that is recreating the nationalist feelings of resentment that ignited the WW II.

Less than a thirty-minute drive from my home in Long Island there is a place called Sagamore Hill.  That’s where Theodore (Teddy) Roosevelt, the 26^th president of the US, built his home and died in 1919.  I have visited the place several times, but in a recent visit I spent more time reading the exhibit labels in the small museum that commemorates the illustrious life and career of TR.  One of them caught my eye.  It read:

“The Progressives’ campaign platform supported votes for women, old age and unemployment insurance, social security, the abolition of child labor and the regulation of industry.  Roosevelt believed these reforms would achieve “industrial justice” and balance the average citizens’ needs with those of corporations.”

In a way, Roosevelt was an accidental president.  Mistrusted by his fellow New York State Republicans, he was coaxed out of his governor’s job to run as the Vice-Presidential candidate of the Republican nominee William McKinley.  McKinley won the election of 1900 but was shot and died in September 1901.  That’s how Roosevelt became president.  He won reelection in 1904 and despite his popularity he sat out the election in 1908 in favor of his chosen successor William Howard Taft.  Finding Taft’s policies short in progressive causes, Roosevelt formed his Progressive Party, known as the Bull Moose Party, and challenged the Republicans under Taft in the 1912 election.  Although the Democrat Woodrow Wilson won the election, Roosevelt’s party outvoted Taft by a considerable margin.  That’s right.  A whole lot of Republicans sided with Progressivism than main stream Republicanism in that election.

By 1900, Progressive sentiments had started to sip out of the Democratic Party and influence the political philosophy of many Republicans.  Teddy Roosevelt was the most notable of these Republicans.  His seven years in office were critical for the Progressive agenda not only for the reforms he managed to enact but also and most importantly for the influence his progressive ideas had on both parties, thus, setting the stage for important subsequent reforms all the way to Franklin Delano Roosevelt’s New Deal and Lyndon Johnson’s Great Society.

Roosevelt’s political philosophy can be found in a series of articles he wrote for The Outlook in which he defended what he called “the great movement of our day, the progressive nationalist movement against special privilege, and in favor of an honest and efficient political and industrial justice”.  Roosevelt understood that democracy had to work for the average citizen and to this effect he argued for the priority of labor over capital interests, the control of corporate power and the protection of the less fortunate members of society.  He believed that the country belongs to the people, and its resources, its business, its laws, its institutions should be utilized, maintained, or altered in whatever manner would best promote the general interest.  He and other Progressives of his day were imbued with an egalitarian and communitarian ethos in the pursuit of the common good.

Roosevelt’s administration brought to life the Interstate Commerce Commission, the Meat Inspection Act to humanize work in the meat packing industry, the Pure Food and Drug Act to protect consumers, and the United States Forest Service.  With the creation of national parks, bird reserves, game preserves and national forests he protected the natural environment in an area covering 230 million acres.  He actively prosecuted antitrust cases, while his advocacy for labor unions, a federal income tax, and an eight-hour work day bore legislative fruits in subsequent administrations.  All in all, Teddy Roosevelt wanted to reform laissez-faire capitalism and make it kinder and more responsive to workers and the country’s interests.

Equally remarkable was TR’s balance of his devout religious feelings with his public views.  In 1907, reacting to the emblazonment of money with the motto “In God We Trust,” he wrote, “It seems to me eminently unwise to cheapen such a motto by use on coins, just as it would be to cheapen it by use on postage stamps, or in advertisements.” 

The force of the Progressive ideas was such that during the years following TR’s presidency major reforms were voted with remarkable bipartisan support.  Even, FDR’s New Deal, ferociously resisted at first by conservative Republicans and business interests, was adopted as a matter of acceptable political sense by Republican presidential aspirants, like Thomas Dewey, and Republican Presidents, like Dwight Eisenhower and Richard Nixon.

All that started to change in the 1970s.  First, Southern Democratic Senators revolted against the reaffirmation of voting and civil rights for Black Americans.  They undermined the Democratic social agenda and then effectively switched to the Republican Party.  Second, the economic model of equitable sharing of economic gains between capital and labor started to shift toward the winners take all mentality where profit maximization was pitted against labor compensation.

Third, conservative thinking started to view government as a burden that had to be reined in.  Government’s purpose was no longer to ensure fairness and unity but rather sit back and let self-reliance and individualism play out.  Adult and child poverty, drug abuse, suicides of despair, crime-infested neighborhoods, job losses to globalization, and social decay became acceptable collateral damage to the working of unfettered capitalism. 

To be sure the notions of self-reliance and gritty individualism play very well with a considerable portion of the population.  It is also fair to say that they are conflated with racial stereotypes that suggest that it is mostly minorities that benefit from an activist government.  This belief is exemplified in the refusal of conservative states with sizable minorities of color to expand Medicaid to provide health insurance under the Affordable Care Act. 

This brief historical perspective shows that Progressive movements have been viewed with as much suspicion and resistance in the past as they are now.  But the historical record shows that it was the Progressive reforms and their focus on the common good that turned the 20^th century into America’s century.  And as for its feared radicalism, TR’s words are still relevant:

“Fundamentally it is the radical liberal with whom I sympathize. He is at least working toward the end for which I think we should all of us strive; and when he adds sanity in moderation to courage and enthusiasm for high ideals he develops into the kind of statesman whom alone I can wholeheartedly support.”

It is shocking that here in America we have reached the point to ask this kind of question.  But the signs are all around us.  Bending and corrupting basic democratic rules is actively sought and reaction to it remains muted by those whose party harbors these anti-democratic forces. 

Accepting the election results followed by the peaceful transfer of power is supposed to be the defining tradition of US democracy. Though this tradition was preemptively questioned, it did survive the 2016 presidential election.  But its reversal was openly attempted after the 2020 election and it is actively pursued in anticipation of the 2024 presidential election. 

In another sign of the corrosion of faith in democracy, the Conservative Political Action Conference chose Hungary, an only-in-name democracy, as its venue for this year.  So, the message is clear.  A significant segment of Americans not only do they want to control the election results as a way to seize power, they also wish to do that in order to impose the type of illiberal democracy that suits their political and personal choices.

So, what accounts for this recent slide toward authoritarian attitudes and actions?  Is it the emergence of new political and economic realities that never before tested American resolve to preserve democracy, or an erosion of our inner faith in democracy?  Let’s look at some of the proposed explanations held responsible as undermining our commitment to democracy.

One is economic anxiety and displacement caused by the elimination of well-paying jobs and the decay of social and civic life that comes to the affected communities.  That, we are told, has generated a strong resentment against the established political order which is held responsible for the abandonment of working class and rural Americans.   

Another more invidious reason is what is promoted as the “replacement” fear propagated on broadcast news outlets, like Fox News, and online social and news media.  The development of a multi-ethnic and multi-cultural society has apparently reached the point that makes “old” white Americans unsure of the future of their culture and power sharing.  (As an aside, let me say that if there is any group of Americans that were truly replaced these are the indigenous Americans!)

Another fear is that of the presumed loss of religious freedom.  Christians, especially, feel that their freedoms are somehow under attack.  This, of course, originates from the belief that despite its secular Constitution America is fundamentally a Christian nation.  Nothing, therefore, short of aligning the nation’s laws with Christian dogma would satisfy the adherents of this national narrative.

Finally, the last foil for staunch conservatives is the rise of liberal thought and culture.  Galvanized by the attention-catching slogans of woke and cancel movements, conservatives have come to believe that liberals are about to capture the nation’s soul and drive it to hell.

The difficulty I have with all these explanations as drivers of the political movement toward authoritarian tendencies and solutions is that they do not describe entirely new experiences in the history of this country.

Americans have suffered economic hardship through the Great Depression and workers have lived under worse conditions when labor regulations, health insurance and unemployment benefits were absent.  Nor have Americans been sealed better from the booms and busts of the economy in the past than now.   And yet through out those moments of financial hardship, Americans did not lose their faith in democracy.

The replacement or augmentation of the American population with fresh immigrants has been around since the founding of America.  Yes, every new wave of immigrants, whether from Christian Europe or other continents, has been viewed suspiciously and met with hostility by the population-in-place.  But, again, those generations of earlier Americans did not abandon democracy to protect their own interests.  When it came to granting equal rights to Black people, America even paid the price of a civil war to achieve a more inclusive democracy.

Religious freedoms are not less today than in the past.  If anything, religious rights have found a receptive ear in the courts all the way to the Supreme Court.  This court’s conservative majority guarantees that religious rights will keep expanding even beyond the point the Constitutional separation of church and state permits in the minds of many Americans.  Thus, fears concerning  religious freedoms is overblown and not consistent with recent experience.

What about the case of liberals?  Liberals like any other group engage in the marketplace of ideas no more than the think tanks funded by conservatives.  The bias against certain topics of speech and speakers is nothing new in America.  Over time content and speakers have been excluded for offending the sensitivities of the right or the left.  Besides, liberal thought has done more than conservative thought to expose the plight of working-class Americans as a result of economic inequity and the scant attention to their living conditions. 

So, the point I am trying to make is that the above conditions have been around before and yet they did not lead previous generations of Americans to abandon democracy.  Therefore, something else must account for the current drive toward anti-democratic means.

Democracy is a governance system that promises to be a win-win arrangement for all participants over the long-run.  For this to work, we trust that the rules of expressing our political choices and the transfer of power are fair and durable.  For people to lose that faith in democracy, they must truly feel an existential threat so that they no longer consider democracy to be a win-win arrangement.

I cannot think of any more potent force in generating feelings of existential fear other than the influence of social media and the emotionally charged information flowing across the internet.  We know that this is behind the rise of teen anxiety and suicides.  It is not an implausible leap of reason to argue that this is working the same way among adults when it comes to our emotional reaction to the unrelenting barrage of information on political, social, cultural and economic opinions splashed on the web.  

This means that similar experiences generate a greater emotional load because we are given much less space to engage in reasoned reflection as we come under the pressure of emotional stimuli.  Which raises the question: “Will democracy survive the public square of the web?”  And “What is our personal responsibility?”