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    Public Money for Public Purpose

    By Dan Kervick on Wed, 01/04/2012 - 4:34pm |

    A new year is upon us.   And even before its first hour has been rung in, 2012 is already taking shape before us as a pivotal year in global politics.   We can all feel the awakening under way.   A revived longing for equality, shared prosperity and democratic solidarity is inspiring a vibrant new politics around the world.   This new activist spirit is quickened by the keen apprehension of young people on every continent that something is very, very wrong with the present economic and political order.   The rising generation, heirs to sick and damaged societies that have been unbalanced by decades of plutocratic rule and antisocial cupidity, have now begun to rouse themselves - and in the process they have rallied the moral outrage of their fellow citizens.

    In the face of so much hope and energy, cynicism falls increasingly mute.  The young occupiers of the public squares are giving new heart to all of those older, beleaguered reformers who worried that they might never see real change in their countries during their own lifetimes.   Young people almost everywhere – from the defiant street vendor Mohamed Boazizi in Tunisia to the indignados in Spain to the participants in the Occupy movement across the United States and elsewhere - are rejecting the destruction wrought on their societies by a debased system of economic predation, environmental recklessness, elite privilege, corporate fraud and sheer inhuman greed.   The youthful protestors are determined to restore democratic society and human decency, and redeem the dimming promise of their common future.  And they have set their sights on the global dictatorship of big money.  The 1%, once complacent in their impregnable fortresses of cash, can be heard to speak in worried tones of late.  They lean pensively from their tower windows, no longer quite so comfortably aloof, and hear the rebel footfalls down on the streets in the dark.

    Read the rest of the essay here.

    [This essay was published last week on the blogs New Economic Perspectives and Naked Capitalism, and appeared in six parts.   The essay can now be read in its entirety at New Economic Perspectives.  It is too long to reproduce here in its entirety, so I have just posted the first two paragraphs along with a link - Dan]

    Comments

    Dan, thanks for publishing the excerpt here. The first four parts were excellent, and I look forward to reading the last two when I have a moment.


    by Michael Wolraich on Wed, 01/04/2012 - 5:23pm

    The last two parts are the best parts, IMHO.


    by Dan Kervick on Wed, 01/04/2012 - 6:53pm

    It's a beautiful essay, Dan. Original, clearly written, ambitious, and provocative. As I mentioned somewhere else, it has provided me and I hope others with a novel and fertile framework for thinking about the intersection between politics and economics. I encourage everyone to take to the time to read it through.

    I read it as a broad visionary manifesto rather than a specific blueprint, so I don't think that it's appropriate to respond with practical concerns about the specifics. But I would like to raise one overarching concern.

    The essay reminds me in way of the romantic ideals of early modernists for perfecting humanity and society. That's one of the things that I like about it. In a world that offers nothing but vacuum between hard-bitten cynicism and airy-fairy utopianism, I welcome the pragmatic idealism that you present here.

    But it's also my chief concern. The fact that elitists have historically trumped up fears of plebeian anarchy does not mean that all criticisms of democracy are wrong or that all checks on democracy are plutocratic artifices. To give you one example, I think that democratically elected judges campaigning on how many men they've put to death or how many religious icons they've erected in their courtrooms tend to be inferior to appointed judges.

    Similarly, I think that we've lost our modernist ideals in part because of the past failures of public institutions. The democratically-elected government screws up all the time, and I think that we have ample reason not to trust it. To offer another example more germane to your essay, large public sector employment tends to promote corrupt, calcified, dysfunctional patronage systems in the long run. It has happened here and in countries around the world.

    That's not to say that we should shrink the public sector, but if we grow it, we should include protections to guard against the flaws that often accompany expansive governments. I would look to history and explore instances in which elements of your proposals have been implement to see what worked and what did not work.


    by Michael Wolraich on Thu, 01/05/2012 - 2:51pm

    The democratically-elected government screws up all the time, and I think that we have ample reason not to trust it. To offer another example more germane to your essay, large public sector employment tends to promote corrupt, calcified, dysfunctional patronage systems in the long run. It has happened here and in countries around the world.

    Thank you for so concisely summarizing my own concerns with Dan's new religion, so I don't hafta get into it. smiley I will only add that I think that some parts of Dan's religion sort of clash with American culture, going all the way back to Tocqueville's observations. And that if he see signs of that situation finally changing, he might find many contrarian voices in Alexandra Pelosi's 2011 HBO documentary, Citizen USA: A 50-State Road Trip


    by artappraiser on Thu, 01/05/2012 - 4:05pm

    And yet when we had those old patronage systems in the past, we had a more secure and prosperous society, in which we did a better job distributing the fruits of our labor equitably.  We also had more leisure, as a single breadwinner could comfortably support a whole family, and could count on the enforcement of workplace rules that prevented his boss from demanding unlimited amounts of work.   Now we have a bunch of unhealthy, stressed and emotionally isolated folks, with massive gobs of our national output concentrated at the top.

    So I have no general cure to suggest for the general problem of patronage and interest blocs.  But the blocs in the private sector that hoard wealth and reduce everyone else to indebtedness and servitude are no picnic either.


    by Dan Kervick on Thu, 01/05/2012 - 9:22pm

    That's simply false. The late 19th century, when the patronage system thrived, was miserable for most Americans--sweatshops, dangerous working conditions, child labor, environmental degradation, toxic food, subsistence agriculture, catastrophic economic cycles AND a growing income gap. As for workplace rules, there were none.

    I didn't express my concern in order to validate our current model. The question is what we'd really be exchanging it for. I worry that what you propose may have unintended consequences. I don't say that to reject your proposal but as a challenge. What have the closest models been historically? Have they worked well? Why or why not? These are really important questions, not to be airily dismissed with rose-colored nostalgia for the good ol' days when a man worked a fair day for a fair day's pay and knew not the sting of emotional stress.


    by Michael Wolraich on Thu, 01/05/2012 - 11:38pm

    But when Dan talks about the good ol days does he mean as old as the 19th century. The mid 20th century "Last Hurrah" period of-certainly corrupt- city bosses might  be described as  democracy with a  ( corrupt)human face. 


    by Flavius on Fri, 01/06/2012 - 12:29am

    I agree.  I think Dan was talking about the rise of public-sector unions and big-city patronage post-WWII, not Tammany Hall.


    by Ethanator on Fri, 01/06/2012 - 10:08am

    I thought you were talking about the 50's and 60's.


    by Dan Kervick on Fri, 01/06/2012 - 7:05am

    There wasn't much of a patronage system then, and I don't think that the public sector was any larger in the 50s and 60s then it is now. I'm not sure that it was larger during the Gilded Age either, but I do know that public sector jobs (including municipal, state, and federal) were used as campaign tools. The local political bosses would hand out jobs to their lieutenants and so on down the line.

    Contemporary patronage systems include India and Greece, both of which have large public sectors and dysfunctional governments.

    Now I'm not saying that expanding the public sector will necessarily create a new Gilded Age spoils system. I offered it as an example of one of the ways that democratic government can go very far awry. We have a wealth of history to guide us from making the same errors that various modernist visionaries made a century ago. We should use it.


    by Michael Wolraich on Fri, 01/06/2012 - 8:39am

    There's a great section in Harpo Marx's autobiography--Harpo Speaks--where he's talking to his grandfather who "had a friend" and therefore was connected to the New York City "machine." This must have been in the aughts.

    Seems, because of his connections, Mr. Marx would get picked up by horse and carriage on election day, handed a nice cigar, and taken downtown to vote...several times during the day!

    One evening, he was reflecting on this in his native German with his grandson and shook his head in sincere wonder at it all: "Adolph, this [meaning America] is a real democracy!"
    Ah, to be back in those days when Jews--anyone, really--could be named Adoph!

    Anyway...

    In terms of all the drawbacks and problems we've had at certain times in our history, don't we have to ask what the causes were? IOW, did we have sweatshops because government was too big? Did we have corruption because government was too big?

    Or were other, largely unrelated causes at work?

    Offhand, it seems to me that it was government that solved some of these problems, e.g., working conditions at the Triangle Shirtwaist Factory, or child labor, and even the problems with the smoke-filled rooms of the party machines.


    by Peter Schwartz on Fri, 01/06/2012 - 2:05pm

    I wasn't suggesting that the patronage system caused the economic ills. They were caused by unregulated industry abuses. My reference to those was just because of my miscommunication with Dan about whether things were better in the old days.

    I originally offered the patronage example to challenge Dan's confidence that democratic government would employ expanded powers judiciously. The patronage system caused political paralysis and corruption, which kept the government from dealing effectively with the problems of the era. The government did ultimately self-correct the but only after decades of the misery finally catalyzed a reform movement.

    To be clear, if we were to expand the government's powers and remove checks on its authority as Dan has proposed, we should think about alternative constraints that could become necessary rather than trusting that a democratically elected government will use its powers wisely.


    by Michael Wolraich on Fri, 01/06/2012 - 5:52pm

    Sounds like you weren't a resident of New York City in the 1980's, otherwise you would use that example by now.

    I won't go into the particulars of moving here from the Midwest in 82, all I will say is that "dysfunctional big government" is too polite, a horror for any citizen without a lot of money or power is more like it. You feared, really feared having to have anything to do with that machine. You didn't complain, you lived with the hassles and the horror show, the high taxation rates (taxes on everything, everywhere! taxes that it was impossible to know about but they could fine you to death for if you hadn't paid them if they decided they wanted to get you) which got you a filthy, potholed, falling apart city, you lived with not just disrespect but the constant unfair abuse by government employees, who really felt they were better than citizens, you lived with fear for your own safety, and you didn't dare complain to anyone in government or it would just get worse.

    Pick a topic, any topic: sanitation (not just rats but burned out cars on major streets and highways for months on end) schools, parks, streets, toll collection, infrastructure, welfare, homeless, crime, sewers, rent regulation, subways, business regulation, social services, ability to just get someone, anyone in city government to just answer a frigging phone--all terribly dysfunctional and corrupt, all employing lots of people with decent salaries accomplishing worse than nothing but rather, seeming to make things worse and worse, and with major attitude towards citizens. Unless you "knew" somebody, though it was definitely a fun place to visit, but you wouldn't want to have to cope with living there as a middle class person or below, then the horror show of trying to get through daily life began.

    It's an inconvenient subject rarely raised in the blogosphere: an overwhelmingly Democratic city of 8 million has not elected a Democrat for mayor for 5 terms now. Yes, the memories of the machine unleashed, without a counterweight in charge, are that bad.

    It's easy for me to reign in my anger now as a homeowner when dealing with things like uppity & nasty city sewer guys trying to blame homeowners' plumbing for the floods in our basements, so the problem causing it won't go on the record.  All I have to do is remember the nightmare of the city tow pound in Donald Manes' day, where you were never sure whether you might have to offer sexual favors to get your car back, that's if you didn't get mugged for all the cash everyone knew you had to bring to the filthy, scary bullet-scarred dimly-lit "office," and if your car hadn't already been stripped while in the tow pound. And don't try to challenge why you were towed! You wouldn't get out of that hellish parking court without more fines than you went in with. One judge left me for an hour looking for records, came back and said, well I see we got your check on record, but the somebody that cashed it wasn't us, so you still have to pay the late fines!

    P.S.. My dad was a civil servant back for the city I came from. He worked in Personnel and Labor Negotiation. That city ran okay back then, at least compared to the NY I moved to; it doesn't happen to anymore. He had very little respect for most of the people he worked with back then, and really suffered at his job which he did not leave for our benefit; we heard him rant to my mom about the politics being played and how unfair it all was nearly every night, how corrupt the system was, how people who schmoozed instead of getting work done got rewarded, sometimes he was so upset he'd meet secretly with reporters, yeah one of those anonymice.  BTW, he was a liberal Democrat, and they were mostly Democrats. And yeah, he is still enjoying his pension, but he did suffer 40 years for it.

     


    by artappraiser on Fri, 01/06/2012 - 7:32pm

    For the sake of argument, don't we have to distinguish between good government and bad government?

    Don't we also have to decide whether government--perhaps when a municipality gets to a certain size--NECESSARILY becomes bad and corrupt or whether it can be made good and reformed?


    by Peter Schwartz on Sat, 01/07/2012 - 6:42pm

    Actually, I think your argument is with Dan. Read the whole set of his essays. He wants "public" (government) control of a whole lot more things than it has control of now or ever did. He wants it a lot bigger and a lot more powerful. Seems like he is willing to bet that the results will be good, certainly it's clear he thinks it will better than what we have now.


    by artappraiser on Sat, 01/07/2012 - 8:22pm

    Yes, I haven't read all four.

    I didn't really get at my point well above.

    Here's what I mean: In discussions with conservatives, I find it often comes down to arguments about private vs. public. Which does a better job? For example...

    Private enterprise is, they claim, more efficient, provides better service, and doesn't bleed red ink. If it doesn't do those things, then it goes out of business.

    Public organizations tend to be inefficient, provide bad service, and bleed red ink all the time, which the taxpayer has to pay for. And there seems to be no penalty for poor performance.

    I agree there are those differences between the two types of structures.

    But I also think there are other considerations:

    • There are special incentives for private companies to be well-run. They go out of business otherwise. But those incentives very often don't do the trick. IOW, a LOT of private firms go out of business or limp along.

    • At the same time, other kinds of incentives for doing a good job, other than making profit, getting a raise, or not getting fired exist within the public sector. Serving the public. Improving the community. Helping people who aren't getting helped otherwise. These goals CAN and DO motivate people to do a good job. I read the other day, how this young bureaucrat improved the efficiency of her office's data management systems by 90%.

    • When I first moved to D.C., the DMV was a nightmare. And, actually, DMVs are a favorite target of conservatives--that and the Post Office. But...people complained and, at a certain point, the DMV made DRAMATIC improvements in how they were run and the service they provided. It was startling the changes they made.

    And when I moved to Arlington, just across the river, I saw how well a government could be run. It was like night and day.

    • My point is that it's possible to run public sector organizations well...and poorly. The DMV doesn't go out of business when it's run poorly, but that negative incentive isn't required for dedicated civil servants to recognize a need and institute major reforms.

    • Private companies are often more efficient because they aren't democratic institutions. Their leaders don't have a wide constituency they answer to. The private v public comparison is an apples to oranges comparison. Yes, some business principles can be adopted to improve public agencies, but they are fundamentally different animals. Public agencies serve the PUBLIC which is, by definition, big, broad, and diverse. It's constituted by people who disagree fundamentally about what should be done, why, how and where.

    • Private companies have, relatively speaking, narrow aims. Principally, they need to make a profit. And they get to make a profit providing a clearly defined set of products and services. Public organizations have much broader portfolios and constituencies. And they don't have the P&L as a clear yardstick.

    • Private firms get to pick and choose the challenges they tackle. If they make a profit, it's often because they've lopped off unprofitable lines. Public institutions are there to fill needs--needs the public wants filled--even if they aren't profitable. FEDEX vs the Post Office is a good example of this. We are committed to universal service, even where it doesn't pay to deliver. FEDEX is under no such obligation and actually relies on the USPS in regions where it isn't profitable for them to go.

    • Lastly, the public sphere gives the public the power and opportunity to say, "We want to see X happen" when, for whatever reason, the market isn't meeting that need. The public doesn't have to wait around for an entrepreneur to fill the need. Conservatives will often tell me that if a need really exists, some smart entrepreneur will come along to fill it. Not so. Only if it's profitable to fill that need will an entrepreneur move in. But just because a need isn't profitable to meet doesn't mean it isn't an important need worth filling.

    So here's my point: Public and private organizations are different animals. They face different challenges. They serve different purposes. They necessarily operate differently. They both can run well and poorly and there's knowledge we have about running both kinds of organizations well and poorly.

    Yes, when the public sector goes bad, it really stinks because people are trapped within its tentacles. But that isn't a defect of the public sphere; it is inherent in serving the public democratically. Everyone benefits when things go well; everyone suffers when things go badly. And change happens more slowly and perhaps less perfectly and with more rules and red tape because a lot of people's needs and views have to be addressed. At Bain Capital, all Romney had to say was, "Make it so," and it was so.

     

     

     


    by Peter Schwartz on Sat, 01/07/2012 - 11:24pm

    I didn't get to the city until 2000, so I missed that golden era.

    One would think that government would work better on smaller scales, but I think that it's very often worse at the local level. Even in the Gilded Age, Tammany Hall was more corrupt than New York state, which was more corrupt than Washington. I'm not sure how that affects Dan's proposal, but it's an interesting phenomenon.


    by Michael Wolraich on Sun, 01/08/2012 - 8:24pm

    To be clear, if we were to expand the government's powers and remove checks on its authority as Dan has proposed, we should think about alternative constraints that could become necessary rather than trusting that a democratically elected government will use its powers wisely.

    I don't think anyone could wisely disagree with this.

    I guess your example of the Gilded Age got me a bit bolloxed up because, the political machines notwithstanding, government was surely much smaller back then.

    Most of the things conservatives think of as "big government" didn't exist back then, including the income tax, almost all the regulatory bodies, minimum wage laws, etc.

    Maybe local government was more powerful and the federal government was less powerful.

    Or maybe the problem was that government, all around, was smaller, but also far less democratic. It was much more corrupt with power, even if it was less power than government has today, concentrated in fewer hands.

    Even though we wail about a lack of transparency, we certainly have much more transparency, by many orders of magnitude, than we did back then.

     


    by Peter Schwartz on Sat, 01/07/2012 - 6:39pm

    Thinking more about it, I'm not sure that there is a correlation between size and corruption. If anything, it may be the opposite--see my response to Art above. And the federal government was certainly much smaller in the Gilded Age.

    I guess what really concerned me was Dan's faith in the government administration of a massive jobs program. Patronage systems are built on distribution of government jobs, and if you're not careful, the system can go very awry. The federal government managed to finally break the grip of patronage by implementing civil service exams at the end of the 19th century, but there are still modern parallels in the various government contracts and subsidies.

    I don't know a lot about the WPA. I think it worked relatively smoothly, though I wonder how it would have gone if it had lasted longer and become entrenched.


    by Michael Wolraich on Sun, 01/08/2012 - 8:36pm

    Funny, as I was thinking it through, it occurred to me that there was/is probably more corruption at the local level than at the higher levels. Probably because you get into a situation where people know each other and you have the equivalent of cliques, long- time friendships and vendettas. So I think you're right about that.

    I shouldn't comment any more until I read Dan's articles, however-:)


    by Peter Schwartz on Mon, 01/09/2012 - 11:47am

    http://www.nytimes.com/2012/01/10/opinion/brooks-where-are-the-liberals.html?_r=1&hp

    Though I truly hate this guy and the opening is disingenuous, self-serving horseshit, and I wouldn't dream of speaking your names in the same breath, I do think Brooks' argument dovetails with what you're saying...in a way.

    To some degree, the anti-liberal, anti-government propaganda has been effective...

    To some degree, the starving the beast strategy has worked...

    To some degree, liberals have ignored the art of good government...

    And to some degree, perhaps, we haven't spent enough time instituting the controls and safeguards you seem to be arguing for...


    by Peter Schwartz on Tue, 01/10/2012 - 9:28pm

    "Republican venality unintentionally reinforces the conservative argument that government is corrupt. Democratic venality undermines the Democratic argument that Washington can be trusted to do good."


    by Peter Schwartz on Tue, 01/10/2012 - 9:32pm

    I hit your link, great site by the way.

    I would also like to take the opportunity to thank you.

    When you are done send the complete set of essays to every dem in Congress!


    by Richard Day on Wed, 01/04/2012 - 5:48pm

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