Arnold Kling  

Francis Fukuyama Wants a New Ideology

Rothbard on Stigler and Friedm... Patent Trolls...

He writes,

Politically, the new ideology would need to reassert the supremacy of democratic politics over economics and legitimate anew government as an expression of the public interest. But the agenda it put forward to protect middle-class life could not simply rely on the existing mechanisms of the welfare state. The ideology would need to somehow redesign the public sector, freeing it from its dependence on existing stakeholders and using new, technology-empowered approaches to delivering services. It would have to argue forthrightly for more redistribution and present a realistic route to ending interest groups' domination of politics.

I recommend the article (which may be gated). He is saying that neither the left nor the right has a solution for growing inequality and the stagnating middle class. Let us consider some possibilities.

1. Maybe the middle class is not going to stagnate. Both Tyler Cowen and Eric Brynjolfsson have it wrong. We are all in a pessimistic mood now, but once the economy picks up, upward mobility will resume.

2. Many people are slipping downward relative to the top, but their attitude is "We're all right, Jack." People are able to satisfy their main consumer needs, and they don't really want a Great Redistributor to come and steal from the rich people to give them a few more dollars.

3. Ultimately, the people will fall for a demagogue. We will have our own Hugo Chavez.

4. The center will recover. Government will become more competent, and this competence will improve the well-being of the middle class.

5. Democracy will fail gracefully. We will head toward a "thousands nations" world of competitive government. People will not worry about their status relative to the richest individuals in the West. They will just try to find the most congenial community in which to live.

I think that (3) and (4) are the least likely.

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CATEGORIES: Political Economy

COMMENTS (10 to date)
Glen Smith writes:

I'd say that #3 is among the most likely.

joeftansey writes:

6. Society will give up on the middle class.

The days of getting paid $45,000/year to push paper around are numbered.

mike shupp writes:

#5 looks likely.

Thing is, stuff's going to play out. There'll be ups and downs, but China and India are going to be richer in comparative terms than they are today, perhaps much richer. Africa and South America are probably going to gain in comparative terms. It seems inevitable that the USA and Europe will lose ground, relative to the rest of the world, even if they continue to lead in GNP per capita figures. By mid-century, the relative decline of the US is likely to be blatant. Likely, this is going to have political repercusions, probably not in terms of Republican-Democratic squabbles, but in younger-vs-older divisions. (Let's note this is a HAPPY outcome - people around the world will be getting richer, and maybe even prosperous.)

Likely we're headed into a period of major military retrenchment. The people who run the US are going to be much less willing to jump into future conflicts; the people who vote in elections will be less willing to embrace politicians who advocate more military action; and our erstwhile friends and allies will be reluctant to support US military action. That's in the near term -- the next 40 years, say. After say 2050, China and India (and maybe even Europe) are going to have their own ideas of how peace and order are to structured in the world; they'll be throwing their own weight around militarily. They probably won't welcome US initiatives, and the US may find it hard to do much more than make speeches. Think of Europe's military ineffectiveness during the last couple of decades -- that's apt to be our future. And it's apt to show up in our politics.

Chris Koresko writes:

This is a bit of a rant, so please feel free to disregard or post a scathing reply – I won't be offended.

Fukuyama's article reads like a collection of misconceptions and half-truths. He argument is founded on several big ones (bits from his article in the upper level of the hierarchy, my comments in the lower level):

Fukuyama: Median incomes in the United States have been stagnating in real terms since the 1970s.... In 1974, the top one percent of families took home nine percent of GDP; by 2007, that share had increased to 23.5 percent.

Russ Roberts' EconTalk podcast guests have had a lot to say on this topic. Short version: the much -ballyhooed income stagnation is mostly a reflection of changes in the distribution of types and sizes of “families”; within each type, the per-capita income has grown apace.

Fukuyama: The global financial crisis that began in 2008 and the ongoing crisis of the euro are both products of the model of lightly regulated financial capitalism...

The financial industry is lightly regulated? “Badly regulated” might be a better description, given the increase in the number of regulations that have been imposed over the last few decades. And wasn't the Euro crisis was caused mostly by huge government budget deficits and the tight coupling between very different national economies? (Yes, the Irish banks might be consistent with Fukuyama's story.)

Fukuyama: The regulatory state seeks to protect ordinary people from financial speculators.

This one's a head-scratcher. The regulatory state is very much in bed with the big financial firms. Mr. Fukuyama might want to look at where the President's $1B campaign warchest for 2012 is expected to come from.

Fukuyama: Every great advance for Silicon Valley likely means a loss of low-skill jobs elsewhere in the economy, a trend that is unlikely to end anytime soon.

Every great advance in productivity has displaced workers, but our economy has not suffered a monotonically increasing unemployment rate. It's possible that information tech will be different, but it doesn't strike me as a good bet.

Fukuyama: ...Although the Tea Party is anti-elitist in its rhetoric, its members vote for conservative politicians who serve the interests of precisely those financiers and corporate elites they claim to despise.

Is Mr. Fukuyama really under the impression that the driving forces behind the mortgage borrower bailouts, TARP, the GM and Chrysler bailouts, the 2009 stimulus, etc., were conservatives?

Fukuyama: The new ideology would need to reassert the supremacy of democratic politics over economics and legitimate anew government as an expression of the public interest.

I'm not sure what he means here, but it sounds like a call for more government intervention in the private economy, justified by the claim that a majority of the voters have approved it.

Fukuyama: It is not possible to get to that point, however, without providing a serious and sustained critique of much of the edifice of modern neoclassical economics, beginning with fundamental assumptions such as the sovereignty of individual preferences...

The “sovereignty of individual preferences” sounds like a nice definition of what I'd call “liberty”.

Fukuyama: This critique would have to note that people’s incomes do not necessarily represent their true contributions to society.

Certainly true in a highly regulated economy where there are plenty of opportunities for rent-seeking; probably less true otherwise.

Fukuyama: The natural distribution of talents is not necessarily fair...

Is government to regulate that, then?

Fukuyama: ...individuals are not sovereign entities but beings heavily shaped by their surrounding societies.

`Man is the product of his environment', eh? But as Bryan Caplan likes to point out, genetics seems to play a dominant role in the broad shape of our individual character, with environmental effects being very much secondary.

Fukuyama: Elites in all societies use their superior access to the political system to protect their interests, absent a countervailing democratic mobilization to rectify the situation. American elites are no exception to the rule.

But how exactly is this “countervailing democratic mobilization” not simply going to lead to the replacement of one set of elites by another, potentially worse one? Past experience has not produced a lot of encouraging examples.

Fukuyama: That mobilization will not happen, however, as long as the middle classes of the developed world remain enthralled by the narrative of the past generation: that their interests will be best served by ever-freer markets and smaller states. The alternative narrative is out there, waiting to be born.

Let's hope it doesn't happen. Or at least that, if it does, then less than 50 million people are killed by it. That'd make it no more than half as destructive as the previous leftist narrative.

Thanks for putting up with this. I hope you or someone else reading it has found it worthwhile.

Merry Christmas to all!

mike shupp writes:

A couple more factors. A substantial number of US citizens really don't like Hispanics in general, Mexicans in particular, and Hispanics are constantly growing in numbers with our borders. This is very defintely a conservative-liberal dispute, and I don't see any happy resolution. Think of the effort necessary to integrate southern schools in the 1950's and 60s, with FBI men and marshalls and Federalized troops here and there -- then multiply the manpower by twenty and stretch the time period by several decades.

Another conservative-liberal dispute concerns global warming. I don't think liberals have the stomach for running rough shod over conservatives here, but I don't think the rest of the world is going to be so quiet. By 2050 or so, other countries will be arguing that they are paying big bucks to avoid AGW and other environmental threats, that the US is not paying a fair share, and that trade agreements and other pacts the US is seeking will not be possible until the US plays by the same rules as them. Conservatives will be obligated to agree, but they will not like this.

Maybe it's just the times, maybe it's the bad economy, maybe this maybe that. But there are a lot of very unhappy people in the country, people who actually are holding down jobs and keeping up their mortgages and who don't worry about health costs, and who think things would just be hunky-dorry if the lousy left wing Obama-loving dissidents would just shut up or leave the country. If this is how America's winners are reacting now, imagine their attitude and their behavior after 30-40 years of what's going to seem much like losing.

James writes:

I would have thought a position like "I've got some conclusions. I just need someone to come up with a system of ideas to support them." would be too embarassing to express openly.

Silly me.

mike shupp writes:


Enlightenment has come to me, not by reason alone but fortuitously, as if a gift from God. I see the world differently now, and better. Help me, my friends and brethren, to find words to express sensations and thoughts and aspirations that have never before this been expressed in words, to find metaphors and catch phrases and methods of teaching that will bring this new learning to both the foolish and the wise. Ye without enlightenment and hope, give me strength and wisdom and the language that I might bring to you enlightenment and hope.

Would it be embarassing to make THAT statement?

And since it's December 25, Merry Christmas.

Floccina writes:

Or in time growth in China and India will slow and the world will get closer to an equilibrium. The number of people available for absorption into the developed world economy will be reduced and the wages of the less skilled will start to rise relative to the rich.

Tom writes:

Chris K, thanks for the excellent rebuttal!

One quibble, "Is Mr. Fukuyama really under the impression that the driving forces behind the mortgage borrower bailouts, TARP, the GM and Chrysler bailouts, the 2009 stimulus, etc., were conservatives?"

The primary driving force was indeed the conservatives. We're fed up of driving up the deficit.

Mike Shupp: In 2050 those nations are going to glad nobody went along with the AGW farce. Who would have though the climate changes? They'll be amazed that some people actually once believed that it doesn't.

mike shupp writes:


Oddly enough, just a day or so I read an article on US Navy planning for a world circa 2050 in which the arctic waters were basically all ice free. Because of the global warming you think is so farcical.

Funny isn't it? Half the US government, the folks you and I elect to run the government and decide on policy, have the firm notion that AGW is just a myth and that the US will do absolutely nothing to prevent it. And another half, run by unelected technocrats and civil servants and military personnel who don't answer to the voters, is operating on the assumption that AGW is inevitable and that the US has to be prepared to operate in a very different world regardless of what the voters think.

I'll bet you call that Democracy. But then, I guess you're a conservative.

Happy holidays.

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