The American Experience versus Nationalism

The American Experience versus Nationalism:

A reply to Rich Lowry and Liah Greenfeld 

Economics (and Politics this time) Without The B.S.**: 

[**  Double entendre intended.]

Rich Lowry and Liah Green feld had a discussion on American Nationalism for the NPR program 'On Point'.

https://www.wbur.org/onpoint/2019/11/05/rich-lowry-the-case-for-nationalism


This is my reply:

This discussion by Rich Lowry and Liah Greenfeld is disheartening; neither gets to the core component in explaining what has driven human development, DEMOCRACY, simply defined as the ability of people to govern themselves.  Democracy has not been sustained by nationalism, or even American Nationalism; it is the American Experience that has sustained the democratic urge of people, both in this nation as well as around the world.  But these are not American values, in the sense that only Americans can promote them, these are universal values that anyone can aspire to.

So let’s review the historical record to set the argument.  The largest geographic empire on Earth was the Mongol Empire (of many nations) of Genghis Khan/Kublai Khan; but the one that had the greatest influence on us [so far] is the Roman Empire (also of many nations) because it was that system that emphasized universals that we still acknowledge today and has been the underpinnings of the Western Culture which has predominated over other cultures.  When the Roman Empire collapsed those universals were carried in the institution of the Catholic Church.  When the Catholic Church emerged from the Middle Ages with a fractured Europe which stopped the advance of the Islamic influence and Mongol Empire, was faced with the Protestant Reformation following the Renaissance, and latter developments in the Enlightenment, Age of Reason, Return to Nature; this thread in history can be characterized as the advance of humanism to the very present.  However, there is a distinct marker in this advance of humanism, DEMOCRACY!

Why does the advance of humanism from the Renaissance stall after several generations and is followed by short bursts of energy followed again by more repression over several more generations?  It is because – as noted by Kenneth Clark in his ‘Civilization’ series in the late 1960s – there was no weight to this movement because the benefits only served a select few in society.  It will take the impulse toward democratic governance to sustain the benefits that come from the humanistic movement.

It is the American Revolution which stands out in this advance of humanism.  For people to succeed in governing themselves there must be a system of governance that promotes the general welfare and must have some sense of fairness that all who are subject to that governance are willing participants in the system.  We must recall however that the American Revolution was immediately followed by the French Revolution in Europe that was also promoting democratic rule.  But the influence of the French Revolution has had difficulty in promoting democratic values throughout the 19^th Century and even well into the 20^th Century; unlike the influence of the American Revolution which has met challenges like Manifest Destiny, the American Civil War, Industrialization, the Great Depression, World War II somewhat successfully.  Why the American Revolution and not the French Revolution in Europe for advancing the case for democracy?

The value system embedded in the American Revolution is an inclusive one; but, it did not start out that way, and you can even say we have been dealing with this inclusiveness or the lack of it ever since.  Who gets included; who gets left out?  While the American Way has not had the difficulty in succeeding like the French Revolution in Europe, the American Experience has been characterized by a continual re-examination of its values through the various generations with a renewal of liberty as articulated by President Lincoln in his Gettysburg Address.

At the core of our American Experience are:

(1)           the conflicting values as expressed in the Declaration of Independence, especially individual liberty and equality as played out in the commons;

(2)           the fragmented political structure of our federal system (national government, state, and local and regional government bodies) with representative government characterized by checks and balances throughout that structure;

(3)           an economic system of free enterprise that promotes and rewards individual initiative and creativeness in providing the wants and needs in a society, and can concentrate economic power with its resultant influence in the political sphere;  

(4)           and a process of governing that includes civic engagement of the people which constantly requires the building and shifting of coalitions to interface with that representative governing structure;

(5)           all to coalesce with the Will of the People somehow being expressed so that progress can thrive. 

In short, unlike the European view of democracy that comes from the influence and spread of the French Revolution, that looks at democracy by holding people to high ideals, the American Experience is a dynamic system not a static system that is constantly re-evaluating our values to fit contemporary circumstances so that what results are practical solutions although they may be imperfect and subject to change at another time.  Our bedrock foundation is in the process, not some ideal view of society; life is in the living, in the journey; the process of life is about change.  Our American Way is about adapting to change.

Furthermore, we came late to realize that to preserve our democratic values they must be the basis of our national security strategy as we engage the rest of the world.  This is not globalism; this is pursuing our self-interest, an enlightened self-interest that we spread internationally by way of alliances with like-minded allies.  We engage the rest of the world not because we think we are better than others but because our economic system tells us that promoting the general welfare involves us in engaging the rest of the world in the allocation of resources, scarce resources, in the most efficient and productive manner to secure the very best for all who participate in this sort of behavior.

Following the 1960s we have failed to promote higher rates of economic growth; higher rates of economic growth gave us the vitality our nation needs to address new issues of social justice, that greater vitality in our economic sector gives us greater vitality in our political sphere to address issues that should be part of our public policy agenda. Instead we have settled in for maintaining the status quo with growth, but much lower rates of growth and therefore less vitality in our economy and our society.  We emerged from World War II by putting ourselves on the world stage for the first time as the world leader.  That world back then, and still today, needed [still needs] democratic leadership to promote peace and economic betterment.  To make change we need to invigorate vitality, economically and politically.  Our lower rates of economic growth are not enough to overcome the built-in inertia of the status quo to make the necessary changes for remaking the world order into a more peaceful and democratic way of living.  Our national self-interest is vested in our ability to make those changes.

The study of history is influenced by the social movements that affect people at any particular time.  So in our history, the role of the individual in a society and the role of government in that society, the expansion of the American nation westward and the conflict of cultures between a native inhabited people and new settlers, slavery and civil rights struggle, the industrialization of the American economy from a rural/agrarian economy along with labor/management issues in a corporate setting, immigration, the participation of women in society to include politics, are all topics , among others, that get discussed and can be influenced by the particular generation that deals with these issues.  The American experience is a unique experience in the historical context.  The fundamental principle of our nation’s founding was that people could govern themselves.  We are not the oldest democracy; and, we are not the only republic that was ever created.  But our founders did create a system for governing with the consent of the governed while respecting dissenting opinions – a constitutional, democratic, republican form of government.

An understanding of American history does not come naturally.  It takes effort.  Our diversity can pull us apart.  We have had a historical common thread as one nation, with its faults, but never-the-less with progress shown.  For the most part, the American people through history have not been won over by an idealistic notion of existence.  Americans, for the most part, have been a practical people who have fumbled their way forward, sometimes making mistakes, but ever trying to right the way and do a practical justice for their forebearers and progeny.

The Gold Standard: Or just because the lubricant can seize the engine doesn’t mean that it drives the engine

The Gold Standard

 (and Monetary Policy in general):

Or just because the lubricant can seize the engine doesn’t mean that it drives the engine

Economics Without The B.S.**: 

[**  Double entendre intended.]

I must respond to a recent James Grant op-ed in the Wall Street Journal [https://www.wsj.com/articles/the-fed-could-use-a-golden-rule-11562885485?mod=e2two] this past week where he is using President Trump’s appointment of Judy Shelton to the Federal Reserve Board, who is an advocate of returning to the Gold Standard, as an opportunity to criticize the capriciousness of our monetary policy since Nixon decoupled gold from the dollar and internationally we have allowed currency values to float against each other on a daily basis.  The esteemed Mr. Grant, like many monetarists, has the economic engine confused with the lubricant needed to keep it operating; overlooking just who/what is doing the driving and is responsible for performance.  While money is a necessary resource it is not the key determinant in the performance of an economy providing for society’s needs.  So let me take off my Carhartts and exchange my Red Wings for something lighter and more comfortable as I attempt to diagnose Mr. Grant’s thesis and enlighten him on the nature of a work effort, which after all is what we are talking about when we discuss economics, the allocation of [scarce] resources in an efficient and productive way to accomplish work.

What Mr. Grant gets right is that gold is the international standard of value for money; it sits at the apex of the hierarchy of money – gold, paper money of a sovereign, bank notes, credit instruments, etc.  What he gets wrong, along with other gold bugs, is that gold has no intrinsic value in and of itself.  It’s value is determined by its use and what it represents, which has been since the Napoleonic era the primary country backing the gold reserves of the world – the British pound sterling through the 19^th Century up to World War I and the U.S. dollar after World War II, with the world in a bit of uncertainty during the interregnum of the 1920s and 1930s.  In other words, gold is no more than a sycophant to the best performing economy in the world as perceived by others.  Using gold, or any other form of money, is just an artificial value representation of work.  Aside from money’s use for payments, it provides the float system, the grease if you will, necessary for intermediaries to make markets between those that have money to lend and those that need money to operate.

The other point that Mr. Grant gets right, but he is critical of the point, is when he says, “Gold-standard central banking concerned itself with the present. Millennial central bankers dare to take a view of the future.”  Money is found in human societies when they become civilized, no longer living like the rest of the animals; but living in groups, exchanging goods and services, and having some concept of a future existence.  Interest rates fundamentally represent the concept of a future and the value and costs associated with that future compared with the present.

Mr. Grant yearns for a return to the gold standard and laissez-faire; but, since World War II as the U.S. has emerged on the international scene in an activist role to spread its values of democratic liberalism and enlightened self-interest primarily through its economic and diplomatic activity backed by a strong military presence, the world has become more democratic, trade has replaced colonialism, and economic growth has fostered a faster pace of human betterment than any prior historic period in the same amount of time – even bettering the 34 year period of 1880 to 1914 of Arthur I. Bloomfield’s reference by Mr. Grant with a period twice that during Messrs. Bloomfield’s and Grant’s (and my) lifetimes 1947 to 2018, 70 years with a Real GDP per capita (factoring out inflation and the effects of population) 37% better, 1.93% per year versus 1.41%; the 34 year period 1947 to 1981 with 2.14% was more than 50% better; and the 15 year post-Sputnik period 1958 to 1973 was almost double the growth rate at 2.74%.

During this period policy makers have become more adept at gauging the rate of international progress while maintaining moderate growth without the wild swings in the business cycle that characterized the 19^th Century.

Mr. Grant expresses concern about the vagaries of human decision making, but a call back to the days of laissez-faire does not eliminate or lessen the consequences of human error, especially in a world order so interconnected in a way not envisioned in prior eras.  It is the use of credit that characterizes our economy today.  The gold standard was a rigid system for managing a modern economy.  What we need and have is the ability to expand and contract credit in relation to the rate of growth.  We haven’t eliminated the vagaries of the human dimension, but we have managed to provide better management of the national and international system.

If there is to be a criticism today it would be in how we manage the trade off between economic growth versus economic stability.  I think a premium has been placed on stability while sacrificing growth, probably because policy makers realize the lead role the U.S. plays internationally where monetary policy set by our Federal Reserve causes others internationally to react to it.  But here in the U.S. that slower growth rate has led to a less dynamic society which has bred growing income inequality which has had negative effects in our political arena.  Where Mr. Grant advocates for the supposed consistency that comes from the gold standard, I advocate for more dynamism in our economic policies which also provides much needed vitality to our political system.  This very point was made this past week in another op-ed but in the New York Times by historian Lizabeth Cohen [https://www.nytimes.com/2019/07/10/opinion/affordable-housing.html] recalling the days of a more active federal government role for fiscal policy in achieving public policy objectives where relying on the private sector has been lackluster.

Money does not drive economic growth, people do.  It is the work effort of people that determines output.  If you have three businesses, identical in every way – building layout, number of employees, making the same product or service, etc. – and you fund each of them to their needs; you will not get the same performance for each of them, one will be better than another.  Money is a stop/go decision; it is not the determinant of performance level.  Monetary policy is a blunt instrument; whereas fiscal policy, especially investment, can be tailored and targeted to a specific goal.  It is money coupled with human effort that determines our economic output; and, that is why the public sector coupled with the private sector have produced the greatest broad-based growth during the post-Sputnik period to the early 1970s and even beyond.  And that is why the standard of living in the Free World pulled away from communist systems during this period which eventually led to the collapse of communism in Europe.