Opinion

Edward Hadas

Sloth and the Big Honest State

By Edward Hadas
July 18, 2012

There is only one good, proven, way to organise a political economy in the modern world – and that’s via the Big Honest State. Right now, one key aspect of the BHS is under serious threat.

What is the BHS? As the name suggests, it is large. In quantity, the various organs of a BHS account for 30-60 percent of GDP. In quality, the state dominates education, health care, industrial policy and the financial system. The BHS is also trustworthy. Its official bureaucracies are expected to be, and mostly are, meritocratic and dedicated to the common good. A BHS, though, is far from the total government of fascists and communists. One of the defining facets of the BHS, indeed, is that it works alongside a vibrant non-state sector.

The basic BHS model has been adopted in all advanced economies and it is aspired to by most leaders in almost every developing country. Universal adoption is easy to explain: the BHS works well. It has delivered a reasonable mix of prosperity, protection and social support. It has proved remarkably sturdy. Since the Second World War, no BHS country has had collapsed into chaos, become impoverished or suffered fundamental social breakdown. The system is also popular with voters, even if many government-hating Americans hate to admit it.

However, the BHS is vulnerable to moral decay. It relies on professional integrity and hard work. Such virtues are easily lost, either through corruption or a more insidious failure of will. It is the latter, what old fashioned philosophers called spiritual sloth, that threatens the monetary side of the BHS. Until recently, the BHS was able to produce money which basically kept its value and a financial system which served the common good. If politicians and regulators don’t wake up fairly soon, these accomplishments could be lost.

There are four threats. The first is fiscal laxity. Politicians around the world have become blasé about deficits. To be fair, the record deficits have as yet done no obvious harm and the mechanism which can turn unbalanced government spending into high inflation is poorly understood. Nonetheless, the lack of concern is disturbing, and the willingness of many American politicians to drive the government to the edge of a fiscal cliff is positively alarming.

The second danger is monetary incompetence. Again, the economic effects of years of zero policy interest rates and haphazard bank subsidies are basically unknown. The theory is inadequate and the current experiment is unprecedented. However, after four years of extreme policy it is intellectually lazy to assume, as most central bankers seem to, that all will be well soon enough.

The third risk is only regional, but the region in question holds great practical and symbolic importance. The euro zone has the world’s second largest GDP, only 15 percent smaller than that of the United States, and it is the spiritual home of the BHS. If the politicians and central bankers there fail to keep the single currency together, global economic chaos would be hard to avoid.

Finally, the BHS model could be undermined by poor management of international economic relations. Trade imbalances are still large enough to create political tension, through shifts of employment, financial havoc, and the foolish investment of the funds created by surpluses. Then there are investors who move money in and out of countries at whim, distorting the economic landscape.

How dangerous are these interlocking threats to the BHS model? A collection of “should” statements supports an optimistic judgement. Politicians around the world should be able to manage their budgets back towards balance. Central bankers should be able to manage the return to normal interest rates. Euro zone leaders should manage to unify the rest of their BHS enough to support the single currency. With a little less intellectual laziness about the virtues of free trade, it should be possible to manage cross-border economic in a more responsible way.

In addition, even if developed countries wallow in financial decay, China, Brazil and other developing countries should continue to strive for something like a BHS model. If anything, they should learn from the failures of others. Indeed, everyone should be studying history and everyone should be trying to find ways to make the financial system as solid as the other parts of the BHS – although sloth also seems to be creeping into the management of health care and retirement expense.

Perhaps the best reason for confidence is the scale of the problem. In comparison to the wealth of most of the countries currently stuck in a financial quagmire, the losses involved in reconstituting a solid and sustainable financial system are modest. They should be manageable.

Unfortunately, there is a very persuasive reason for pessimism – a shortage of the virtue ready to oppose to the vice of sloth. None of these “should” statements can possibly come true unless there is far more political fortitude than has been seen for many years.

Comments
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The moral sloth in the political arena is heavily persuaded by moral decay in the financial world that, in the short term, thrives well in the chaos of many unknowns as the known 401K input is dependably flowing from the daily toiling of the 99%. With the Bank Modernization Acts of 1999 and 2000 removing the impediments of Glass-Steagal, rampant chicanery and short-term gains trampled moderate and reliable growth with a stampeded for the quick kill. Thank you Phil Gramm, Republican Senator from Texas.

Posted by TIREDINPHILLY | Report as abusive
 

Politicians and academics do not as a rule limit their actions to those things that have been proven to work in same spot. For the most part they are ideological ignorance experience when it suits and seek the welfare of their followers at the expense of the whole. That is big undoing BHS.

Example free trade has been trade by high wage nations in the past with de-industrialization as the result (Victorian England). Hitler did the opposite with export subsidies and control of overseas credit. Germany experienced rapid development prior to WWII as a result. True he used it for making a big defense industry not high living standards.

Free higher education is taking a budget hit since has too few supporters. Obviously that is where skills and equal opportunity grows.

Posted by SamuelReich | Report as abusive
 

Government is a cesspool. In politics, lying, cheating and stealing the public’s money are accepted tools of the trade. Government attacts ethically bankrupt ne’er do wells like fresh road kill attracts vultures. In the developed world, there are few nations that will ever recover from the debt they have amassed since WWII, including the US. Big government is a failure. We are on the precipice of a world economic crisis that will make those who remember the great depression wish they hadn’t lived so long.

Posted by gordo53 | Report as abusive
 

“We, the people” need to demand a national debate to move toward majority consensus as to what sort of society America’s resources can sustainably support. We then need to prioritize our progress towards achieving such common goals. America can afford anything it NEEDS. No country in the history of the world has ever been able to afford anything it WANTS.

Our politicians have figured out that by consistently pitting one group of citizens against another they have an excuse for each why nothing is ever resolved. “We, the people” must see through their subterfuge and demand that they lead Americans forward towards a national consensus as to what America is to be.

Without such consensus there is no finite limit to the expansion in size and power of our federal government. Without such consensus there is no limit to the percentage of national revenue related taxes must increasingly claim.

Tax revenue is the crack cocaine of every politician and every party. To increase government revenue before making government show us they can efficiently and effectively utilize the mind boggling amount they already shovel out day after day, week after week, month after month and year after year is to try to extinguish an out-of-control fire with gasoline.

Our politicians have forgotten how to prioritize because with endless increases in the national debt, they have come to believe if they spend it “we, the people” must come up with the money. It is time taxpayers reacquaint them with the word “NO!”.

Good first steps would be to eliminate the separation of their world with ours. Their salaries should be the median salary of the country, with similar health coverage and retirement benefits. That way, if they want to improve their lives, they must do so by improving overall numbers from which the median salary is derived.

Posted by OneOfTheSheep | Report as abusive
 

The US Constitution was written to address pervasive government corruption. Nothing has changed.

Posted by mulholland | Report as abusive
 

@mulholland,

The U.S. Constitution was written to bring into existence a system of government “of the people, by the people, for the people”. It did that.

Unfortunately the U.S. Constitution does not change basic “human nature”. “We, the people” must be more willing to WORK together for the common good. Thousands of years of recorded history have produced great changes but little wisdom.

Posted by OneOfTheSheep | Report as abusive
 

Poor Edward, where do I start?

First, you are one scary fellow with that head full of mush.

“BHS”, no BDS, Big equals Dishonest, sorry to disappoint your fantasy here. Strike 1

“Proven, Modern World” Strikes 2 and 3, not proven and soon to create a post modern world of Orwellian proportions. Oh but maybe your right the BHS won’t take credit where credit’s due for that outcome since they are not honest.

“account for 30-60 percent of GDP” You meant taking credit dishonestly for this quantity, not accounting for it, that is unless it is truly a BDH in which all accounting is false. Hey, just like your BHSs have been all along, you really must pay attention.

“The BHS is also trustworthy.” Surely you must be joking, are you not a student of history?

In summation there has never been a BHS and the type of fantasy that one could exist is how the likes of Stalin, Hitler etc. come to power where citizens use the rose colored glasses this author is wearing. He truly does a disfavor to his fellow man. Remember there is nothing more deadly in human history than Big Governments with good intentions. (Don’t BHSs that kill millions get a pass if their intentions were good? Sorry, No.)

Your argument may make sense in a parallel universe where Governments are to adults what Santa Claus is to children. Or is that this universe?

Posted by JP007 | Report as abusive
 

“Trade imbalances are still large enough to create political tension, through shifts of employment, financial havoc, and the foolish investment of the funds created by surpluses.” ……. “With a little less intellectual laziness about the virtues of free trade, it should be possible to manage cross-border economic in a more responsible way.”

I hope you’re saying that the trade imbalances that have brought the global economy to the brink are the result of “intellectual laziness” among economists who put blind trust in free trade without every questioning why the results are so destructive. For that is exactly what lies at the heart of all of economic problems. The biggest question that intellectually lazy economists should be asking about trade imbalances is why, almost without exception, badly overpopulated nations either exist in abject poverty or they are heavily dependent on exports of manufactured goods (primarily to the U.S.) to sustain a state of prosperity.

Pete Murphy
Author, “Five Short Blasts”

Posted by Pete_Murphy | Report as abusive
 

I agree with your BHS concept Mr. Hadas and the conceptual validity of the four threats you identify and somewhat validate. I’m one of the many rational, cognitive adults, that like you, gained knowledge by varied & increasingly complex work experiences and responsibilities to structural stakeholders and others involved in leading or managing ‘the processes’ required in accomplishing ‘X’ Organizational outcome demands outside organizational thinking and knowledge, PLUS the ability to recognize that your opinion about how or what ‘something’ should be, is NOT HOW or WHAT IT IS. I agree enough with your four threats to accept them. However, to the best of my knowledge and observation the root cause of the approaching cataclysmic BHS failure is hardwired in Homo Sap DNA; throughout history the downfall of every civilization or culture stems from our human inability to separate our opinion of ‘whatever’ from what observable and verifiable facts prove of ‘it’ and make rational decisions beyond the multitudes of immediate self benefit or gratification.
Unfortunately, that inability or simply refusing to think, to Forrest Gump ‘it through life, or just pin-ball it, the homo-erectus bit; leave off the sapiens surname. Politicians don’t evolve, reform their behaviors or quit taking bribes unless they are held individually responsible & accountable to all the voters in their districts and those voters start thinking beyond their self interests.

I’ll tentatively grant that the term ‘moral decay’ is retrospectively observable and possibly quantifiable by the lack thereof, but frankly Sir, if our global society implodes/falls apart, who’ll be left that cares?

Posted by JBltn | Report as abusive
 

The biggest reason for the failure of the BHS model is the loss of the “H” or honesty. Corruption. Big means “powerful” and powerful means the ability to steal and defraud. Whenever you have the ability to steal, you will attract thieves, hundreds of thousands of them. And they attack bureaucracy with unending energy until they seize control. Then the “H” is gone and all that is left is power and corruption.

The model fails due to inadequate defense against corruption, not due to “private” turpitude. In spite of centuries of evidence that centralized corruption of powerful institutions brings about the fall of most governments, Statists keep pointing the finger at their victims. The State is good. It is the People who are bad. Balderdash!

Posted by usagadfly | Report as abusive
 

Mr Hadas may be thinking of Plato’s Republic.

I am an amateur student of history and I have come to the conclusion that morality, or good behavior on the part of a state’s leaders and citizens doesn’t have as much to do with their stability and survival as their ability to master the complexity of the problems they face.

I am convinced that both the Roman Empire, the Old Regime of France or, more recently, dynastic China, met their eventual collapse or replacement because the entire social structure, knowledge base and even the religious and social attitudes of the country were not adequate for the times and the changes that surrounded them. But I think the final nail in their coffins is change to social conditions or attitudes that make the citizens of those countries very impatient and dissatisfied with the status quo no matter how hard the governments of those countries work to try to please and carry on.

And even the attempts by those old powers to restructure their governments and societies and to make reforms lead to further erosion of respect for the empire or the kingdom. The worst enemy of a good example is a better one. But a younger or stronger example without the qualities or virtues of the older systems can be just as devastating.

The old regimes value their ways of life and the lean and hungry challengers have nothing but their wits and cunning and can be fueled by desperation and the confidence that arises from inexperience. They can function without the inhibitions and without the niceties and moral qualms of the more advanced “civilization”. The Roman world collapsed through shear obsolescence and exhaustion. The same could be said for Old France and even Tsarist Russia.

It may be more a matter of evolution and not a matter of working harder. In fact working harder may be a sign – like some kinds of heart disease – that the patient is mortally ill.

The meek don’t just inherit the earth. They have a terrible tendency to tear down the better and more difficult attainments of civilizations and to substitute their own frequently very restricted ways of life and thought in their stead.

Posted by paintcan | Report as abusive
 

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