Google vs. China, and America vs. Itself

Google’s confrontation with China over the freedom of access to information may evoke feelings of both moral and commercial satisfaction for residents of the free market West: Google simultaneously stands in for our disdain for Chinese political repression and for that country’s shortsighted understanding of the economic value of free information flows.

Tom Friedman suggests that a Chinese internal struggle, between “Network China” and “Command China” defines this dispute and may indicate something about the future of that country.

However we may frame it, the conflict should evoke for us as much introspection as satisfaction: We, too, currently struggle themselves to come to terms with the concept of “economy as network”: “a world in which the focus of value creation is effective participation in knowledge flows, which are constantly being renewed.”

Those who stand at the margins of this transformation call forth libertarian slogans in order to evoke a feeling of defiant individualism. They do not understand the dynamic of an economic system that demands the nurturing of relationships and the renewal of knowledge and that suggests that individualism does not flourish in a social vacuum. The more pragmatic brand of economic individualism favored by Wall Street lost all credibility in late 2008, of course, when financiers acknowledged their own dependence on the broader American social network.

Misunderstandings about the changing nature of our economy clearly extend beyond the right-wing: Democrats evince characteristic eagerness to conflate moral and economic arguments as they address needed health and energy reform. They thereby demonstrate a lack of seriousness with regard to the limited role the American state can play in correcting an economy newly susceptible to international capital flows and increasing foreign competition: America must enhance its ability to compete internationally if it is to address its social challenges sustainably.

We, just like the Chinese, require a new relationship to government for 21st century success. The old metaphor of government as a command center, whether encouraged by old guard communist leaders or well-meaning American reformers, or whether opposed by libertarians, no longer suffices. Government at its best will act as a node that has the potential either to complement or to hinder the flourishing of both domestic and international relationships. Understanding this reality, rather than adhering to old nostrums, will give us the greater measure of moral and commercial clarity.

The Future of Our Political Parties

I predicted, after 9/11, that the political parties in the US would fundamentally reconstitute themselves. 9/11 demanded an acknowledgment of an interconnected world in which the political organization of other countries, as well as non-Americans’ perceptions of us, were to be of vital consequence.

Bush won the day because he was the only one to present a coherent argument for American engagement in a connected world: Namely, America must reshape the world in its own image.

Obama’s argument for pragmatic flexibility, paired with his symbolic internationalism, gave heft to vague calls made by John Kerry in 2004 for ‘multilateralism;’ working with, and learning from, the rest of the world was now an affirmative act of engagement rather than a retreat from American principles: We were to engage the world with a willingness to adapt. This argument, of course, resonated more strongly in the absence of the perception of immediate threats from terrorists.

The economic crisis of the past year, too, supported Obama’s argument for increased American flexibility: how could we claim to know what is best for the entire world when our cherished capitalist system was mired in such a quandary?

Finally, Obama’s careful management of the Iraq and Afghanistan conflicts, not in accord with the speedy withdrawals originally called for during the Democratic primaries, has robbed the Republican Party, even further, of a potentially affirmative, internationalist message: that of the United States bringing democracy to the world. The GOP’s impulse to take on the world reverts, accordingly, to a shallow xenophobia and isolationism.

Bush and Obama share (and the fact of their sharing anything is surely disturbing to many) a conviction that the world is increasingly intertwined. Each built a political persona based on that idea. All those who reject contending with this emerging reality are left to make increasingly ideological claims with little empirical backing and to entertain the least reality-based members of their political tribe. It is clear which party follows these patterns today.

If Obama leads the Democrats to a principled, if much more cautious and less violent, promotion of democracy around the world, and couples it with enhanced American flexibility on a range of other international issues, the Democrats will have stolen the center for a good time to come. Few constructive messages for the GOP will therefore remain and the party will accordingly continue to wither.

Why are there More Independents this Year?

Why did the numbers of independents surge this year? Because neither the Right nor the Left could provide satisfactory answers to the economic crisis: Capitalism, it seemed, could not be left to its own devices without resulting dramatic social repercussions. On the other hand, a nation bridled with great debt could not be depended on to spend its way out of crisis.

The Democrats are ignoring the debt crisis of the future by acting as if spending is the salve for all social wounds. The Republicans are ignoring the financial crisis of last year by blaming Obama for all government actions, including those initiated by Bush; instead, they choose to increase the shrillness of their rhetoric.

The economic crisis did demonstrate that government spending is sometimes necessary to ‘right the national ship.’ But our looming debt should remind us that such spending must be, in the vast majority of cases, a carefully considered economic investment.

The ideologies of the past must give way to a more pragmatic approach to spending and investment that acknowledges the tremendous, but not infinite, power of individualism to drive national growth.

Reasons to Worry

David Smick in the Washington Post:

Pity Barack Obama's economic advisers. The blogs are now demanding their scalps, and Treasury Secretary Tim Geithner and his colleagues face a nasty dilemma: There are no solutions to the banking crisis without extraordinary political and financial risks. Thus, they have adopted a three-pronged approach, delay, delay, delay, in the hope that somebody comes up with a breakthrough.

David Ignatius in the Post:

We're still in the Neville Chamberlain phase when it comes to the economic crisis. The government is talking about sacrifice and solutions, but it hasn't yet made the tough decisions that will put the economy back together.

Letter to NYT: A Theoretical Basis for Moderate Political Thought

Dear Editor:

David Brooks (“A Moderate Manifesto,” 3/3/09) offers an appealing vision of a capitalism aware of its social underpinnings, and of a humanism aware of the decentralization required for economic growth. He could go further by explaining the global context that justifies his thinking.

Increasing global competition belies the idea that government can desist from making the social investments necessary to build new generations of engineers, entrepreneurs, and technicians. It also, however, reminds us of the perils of chasing capital away from our shores. The central challenge that faces us today is that of balancing these two aims.

Many Democrats and Republicans prefer to live in a simpler world in which, respectively, state action is the fundamental palliative, or the fundamental poison. The requisite wake-up call can come from a cold-eyed gaze at the growing power of international markets. A depression might make us do just that.


Sincerely,
Barak Epstein

Letter to WSJ: Protectionism, Globalization, and the Recession

To Whom It May Concern:

New economic realities demand new agreements and regulatory regimes and Jeffrey E. Garten (“The Dangers of Turning Inward, 3/1/09) is correct to identify the source of our current economic woes in an unbalanced global financial system that included an Asian savings glut, distorted currency exchange rates and, consequently, as we know well, inflated asset prices in developed countries.

Professor Garten proposes some lucid solutions to these problems but cannot do much to identify the political force that will call for careful international regulation and social investment. This is no fault of his own. Republican nativist and Democratic labor protectionist sentiment are well-entrenched and a sufficient reorganization of international institutions would necessitate compromises in national sovereignty that neither political party could support.

Garten hopes that “short-lived recession” would teach the body politic enough about the new global order to make possible needed reforms. Count me among those who think that the learning curve will be too steep for that.

Sincerely,
Barak Epstein

International, International, International

The most fundamental aspect of the current crisis is its international nature. Essentially, huge seas of capital are sloshing around the world and creating great instability in the process. Trust in financial markets is hurt by the general instability and the particular abuses.

Carefully designed international regulations could increase transparency and accountability without squelching capital movement dramatically. The problem is that, when one country imposes such controls, capital can move to another country with great speed. International coordination is clearly desirable. Unfortunately, there is not enough trust for that either.

Robert Samuelson identifies the three layers of the crisis (consumer, finance, and international trade) that must be solved simultaneously. The current US government responses focus on the first two problems. On the third, there is little intelligent government response. In fact, we are likely to see increased protectionism, such as through the "Buy America" steel provision in the recent stimulus package.

The Obama interest in infrastructure development is a good first step towards addressing the need to be internationally competitive but we will not have addressed the challenges, and opportunities, of our economic moment until we look more seriously at international financial and economic structures.

Community Organizing in Government

Obama's background as a community organizer is showing itself in his governing style. Today, for instance, (1) I received an e-mail from the Obama camp with a video responding to the prolific community discussion on health care found on the change.gov website. The e-mail talked about the importance of transparency and engagement and still refers to Obama, at times, as "Barack." Very heimish (warm, friendly). (2) Additionally, Obama took the opportunity of his meeting today with the National Governor's Association to ask for their feedback about how to spend stimulus money:

The meeting with the governors was "unprecedented," said Gov. Edward Rendell (D) of Pennsylvania, in that it was the first time a transition team for an incoming administration reached out to state governors to ask their help in crafting a national agenda. Forty-three of 50 states are facing serious deficits.

It looks like we have our first "information age" president.

The Nation-State and Global Integration

A few questions about strains on the power and efficacy of the nation-state:

(a) Does the global financial crisis call for international management of, say, currency exchange rates?

(b) Do globalization and the near-global triumph of capitalism undermine the greatest incentive (namely, international competition, respectively, among capitalist powers and between capitalist and non-capitalist powers) for leading capitalists to attend to the well-being of those who are not succeeding?

(c) Do global warming and other environmental strains demand an internationally-coordinated response that cannot entirely be managed by one nation-state?

My answer to all of these questions is 'yes' and points to the growing importance of international cooperation to solve many of our most pressing problems. I am not arguing that states are not strong. Neither am I am arguing necessarily for inter-governmental cooperation to solve these problems (although, such will sometimes be vital). Rather, I am arguing that a global perspective is becoming of greater importance. In due time, I believe that such a perspective will become the dominant paradigm, superseding the nation-state paradigm.

It is no coincidence that this pattern of integration presents itself as we find ourselves in a world in which everyone can be lifted out of poverty and in which universal education can be imagined. These goals can be achieved because (a) the global economy is sufficiently integrated to distribute basic goods, services, and skills to those in need of them, (b) globalization and the near-triumph of capitalism have led to a global economy in which human capital is of ever-greater economic value, and (c) environmental challenges force us to focus on how we can develop wealth without solely relying on materials. The best answers to this question are the development of technology and of human capital.

An Ironic Aspect of the Economic Crisis

One of the perceived causes of the crisis is that Americans do not save enough. Interestingly, many stimulus packages are designed to work only if Americans spend the money that they save.