Diatribes of Jay

This blog has essays on public policy. It shuns ideology and applies facts, logic and math to social problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear.

25 January 2017

How The Economist is Killing its Children


[For some popular recent posts, click on the links below: In the past, I’ve recommended the British weekly The Economist as a supplement and an antidote to our generally declining print media, including our three “national” newspapers (NYT, Washington Post, and WSJ). For educated people who want important news with some preliminary analysis, in the English language, well written and nicely summarized, I can’t think of a better single source. I subscribe to it myself.

The Economist has four advantages over American newspapers, including our best. First, it’s a weekly. That means its writers and editors have time and the incentive to put things in perspective. Apart from its often “cutesy” covers and its occasionally irreverent and snarky headlines, its writers try to keep their heads. Its editorial selection of things to report is worlds apart from “if it bleeds, it leads.” It is virtually devoid of the breathlessness and sensationalism that infect almost all American media. And its coverage (of the entire world, both politics and business) is encyclopedic compared to that of our ever-skinnier American weeklies (Time and its competition).

The Economist’s second advantage derives from its name. The great economist John Maynard Keynes once dubbed economics a “dismal science.” But it’s grown and developed much since his day. Unlike politics, with its traditional, often arational ideologies—which true believers of all stripes treat like religions—economics is now a real science. It has observational, theoretical, and recently experimental branches. Digital computers and “big data” have accelerated its growth and potential as a science dramatically. Even Keynes might upgrade his evaluation today.

In purporting to offer news from an economist’s perspective, The Economist is the first (and so far the only) news medium in human history to report human affairs to a general audience from a scientific perspective. That means, among other things, trying to minimize unproven assumptions, maximize verifiable facts, and use rigorous mathematics and mathematical logic to connect facts with conclusions and theory.

The Economist does not always succeed in doing so. It’s failures are the main subject of this post. But so far it’s the only internationally respected medium for policymakers and the general public that even tries.

Its third advantage derives from its second. You will find more graphs, charts and even the occasional equation in The Economist than in any other general news medium. You will also find more writing by authors with a bit of training in math and economics. Not only does that mean you’ll get the occasional brilliant summary and analysis of leading-edge quantitative academic research. It also means you’ll get analysis filtered through folk more at home with numbers than the liberal-arts majors who write for most newspapers. The latter, it seems, wouldn’t recognize a correlation coefficient or differential equation if it hit them in the head.

In the twenty-first century, all of our joys and discontents—from air travel to iPhones and nuclear weapons— depend on scientists and engineers who can “do math.” So having “news” reported by people who sometimes can’t seem to do arithmetic is, to say the least, infelicitous. The Economist avoids this pitfall better than most print media.

Finally, unlike most American newspapers today, The Economist appears to have live copy editors. You will find its language, spelling, grammar, organization and style more correct and consistent (albeit naturally with a British flair) than those of our American rags. Even the best of our Yankee rags appears to have replaced copy editors permanently (and prematurely) with spell-checkers and other inadequate software. For us, it’s all about the bottom line, not quality.

But I’m not writing today to sing The Economist’s praises. I’ve already done that. Today I write to sound the tocsin against an egregious error in The Economist’s “scientific method.” In the context of our perilous times, and with The Economist’s well-deserved influence on policy makers worldwide, this error threatens immense harm to our species. In the long run, it could kill The Economist’s “children”—today’s advanced industrial democracies, including the EU.

The error is easy to state. It’s a common pitfall of scientists everywhere. The Economist’s editorial staff and many of its writers have fallen so in love with an all-encompassing, abstract theory that they increasingly ignore or downplay events and facts that contradict it. Instead of modifying the theory, expressing well-deserved skepticism, or looking more closely at the facts, they scold anyone who doubts the theory or appears to ignore it.

The theory, too, is easy to state, although it has many names. The Economist calls it the “liberal international order,” the “liberal economic order,” or “liberal democracy.” But it’s an old, old thing. We used to call it “laissez faire capitalism,” before it helped cause the Great Depression and the Great Recession. It holds simply that we will all be collectively better off if we impose the least possible restraint upon the formation, action and freedom of business.

Let me say right away that this theory is not entirely false. It has a great deal of truth in it. The abject failures of Communism in Russia and China support it. So do today’s collapse of Venezuela’s command economy and the decline of Russia’s state/crony capitalism.

As I have written at least twice (see 1 and 2), the rise of business corporations has freed economic productivity from the politics and intrigue of monarchy and (today) self-seeking democratic pols. Together with science and technology, it has brought our species out of an economic dark age. As The Economist itself has noted, the free transfer of technology, capital and industries from developed democracies to developing countries has, in a mere generation, lifted nearly a billion people out of extreme property.

The problem is not the theory’s truth (or falsity), but its generality. It’s not a scientifically testable hypothesis. It’s far too general and subject to interpretation to qualify. Are widely-respected laws protecting worker safety, the air we breathe, the water we drink and (maybe soon) the climate in which we evolved exceptions that prove the rule? Or are they somehow disproofs of the theory? No real scientist would ever propose an hypothesis so broad, one which cannot reasonably be tested by observation or experiment.

And then there are the inconvenient facts. In a mere generation, policies based on this “maximum freedom for business,” have soured the lives of the one-third of America that works with its hands. As a result, this cohort of America voted overwhelmingly for the least experienced president in American history. A similar thing happened in Britain. There, those who work with their hands and used to have good jobs turned the Brexit referendum into an unexpected rout for the theory. They now threaten to wreck the EU.

And that’s still not all. A recent Oxfam report estimates that 62 individuals, all by themselves, own as much wealth as half the human race, or about 3.5 billion people. That makes each of those individuals wealthier and more powerful, by far, than Genghis Khan, Ivan the Terrible, Henry VIII, or Louis XIV.

These are facts. Even among proponents of the theory, few would say these facts are heartwarming or represent human progress. Didn’t John Stuart Mill (and others) begin the Enlightenment by focusing on the “greatest good for the greatest number”?

Neither automation nor lack of education is to blame. There are many still many delicate things requiring human perception or judgment that must be done in manufacturing which no robot yet devised can do.

I’ve visited Tesla’s former “Nummi” factory in Fremont, California, one of the most advanced automobile factories in America. Without violating the nondisclosure agreement that Tesla made me sign, I can report that there are more people working there than robots. Although robots, in theory, can each perform the work of several people, there was no “skeleton crew” in this factory. On the contrary, the assembly lines were fully manned.

The same is true in China and Mexico. All the Chinese workers at Foxconn turning out iPads and iPhones by the millions are not robots. And insofar as concerns health care—one of fastest growing industries—it will be a long time, if ever, before a robot can insert a catheter harmlessly in a senior’s wizened vein, reliably call a Code Blue, or help an immobilized or sedated patient to defecate cleanly, let alone comfort a patient as a human being.

There are tens of millions of jobs that still need unskilled or semiskilled workers to do them. But, at least in manufacturing, they are now mostly in China, Mexico, Vietnam and (for clothing) Bangladesh. This massive transfer of respectable jobs is not a result of the intrinsic nature of the work or the characteristics or education of those who do it. It is the result of conscious and deliberate business decisions made by our plutocrats, in part to enrich themselves.

The generous transfer of these good jobs from advanced democracies to developing countries was what raised the near-billion out of abject poverty. But the biggest rewards of that generous move went to the advanced-democracy plutocrats who arranged it. Those who work with their hands just lost jobs, communities, marriages, sometimes their homes, or even (by drug overdose or suicide) their lives.

So automation and education are red herrings. They are long-term issues, to be sure. We Yanks may be falling behind the rest of the world in both.

But our plutocrats didn’t move 60,000 factories abroad in order to install robots in them, or because Chinese or Mexican peasants were more educated than our native unskilled or semi-skilled workers. They moved them because workers in developing countries would work for less pay and complain less than comparable developed-democracy workers about their working conditions and their environment.

So our plutocrats who managed this industrial exodus could sell things for less, both abroad and here at home. Consequently, they could undercut their competition, build huge foreign businesses selling foreign-made goods back into our US market, enrich themselves obscenely, and become the 0.1% of today. The outcome in Britain was much the same, although most of the resulting 0.1% there were bankers, not industrialists.

Engineering this mass exodus of jobs built Oxfam’s pyramid, in which 62 people match the wealth of 3.5 billion. It created what is likely the most economically lopsided global society in human history. And those who did this social engineering, including many not-especially-enlightened bankers, got rewarded by ending up right at the pyramid’s pinnacle.

How all this “proves” the effectiveness, let alone the beneficence, of the “liberal economic order’s” main rule (“don’t meddle with business!”) is hard to see. I leave to the reader to judge which was the more powerful motivation for this transformation: (1) bringing poor foreign peasants out of poverty, (2) making better products, or (3) enriching the plutocrats who made the decisions.

When your theory is in doubt, look more closely at facts. Make further observations and experiments. That’s what real scientists do. Even dismal economic scientists should do likewise. Slowly, haltingly, The Economist appears to be starting to do so, at least at its non-scolding, non-editorial level.

The clearest indication I have read is a short article cryptically entitled “Chairman president: Corporatism’s long history in America,” in The Economist’s issue of December 10-16, 2016. It reports the facts of American presidents’ various attempts to keep good jobs onshore and to build, save or mold American business.

As it turns out, almost every American president did something of the kind. Many attempted to nurture nascent industries. For example, the first transcontinental railroads got sweetheart deals on land and the “loan” of federal eminent domain to clear inconvenient private ownership. The fossil fuel industries got similar sweetheart land deals, plus subsidies in the form of “depletion allowances” that continue to this day.

The Economist even credits President Herbert Hoover with pressuring Henry Ford to grant his pathbreaking unilateral raise in autoworkers’ pay. That increase, as I have outlined, virtually created our modern Yankee consumer society. It raised workers’ pay high enough to let them afford the cars they made, as well as many other things. It started a race toward the top quite different from the today’s race to the bottom. Today, manufacturing by foreign peasants leads to cheap products at Wal Mart. But the low prices only partially compensate for laid-off American manufacturing workers’ loss of pay, and not at all for their loss of promising futures and self-respect.

The point of The Economist’s recital of presidential intervention in markets appears to be that it’s common but nearly always fails to work or causes unintended consequences. The tone is relentlessly negative, even where (as in Hoover’s and Ford’s case) the outcome was unambiguously positive. The story repeatedly uses the loaded term “meddling” to describe executive intervention in business or the marketplace.

This is not science. It’s not even the “dismal” science of economics. It’s political or economic ideology, more like religion than science. It’s the same sort of faith, unsupported by facts or clear observation, that led Alan Greenspan to declare that broken markets always fix themselves—a faith he later publicly recanted.

In its previous story in the same issue (“Dealing with Donald: Donald Trump’s trade bluster,” page 26-27), The Economist mentions Trump’s proposal to impose a “tax of 35% on firms that fired employees, built a factory in another country and then tried to sell their products back across the border.” (The Economist’s words.)

The story never analyzes how such a “tax” (really, a selective tariff) might work out. But in the very next paragraph, it discusses the weakness of checks and balances that might prevent Trump from imposing such a solution. It therefore leaves the reader with the impression that The Economist thinks such a prospective, threatening tax or tariff would be as destructive as a Smoot-Hawley-type tariff on current imports—which both the Economist and I think would be a disaster. This is not just religion; it’s incomplete and misleading analysis.

And so it goes. Unfortunately, The Economist’s abandonment of Science and Reason in its analysis of current discontents hurts us Yanks much more than it does fellow Brits.

There are three reasons for this. First, unlike us Yanks with our malapportioned Senate, our badly-gerrymandered House districts, our Senate filibusters and “holds,” and (last but far from least) our Electoral College, the Brits have a pure and well-functioning parliamentary democracy. They don’t have to digest the bitter fruit of a long-ago structural compromise with a long-vanished slave-holding Southern aristocracy (which occasionally seems to rise, zombie style, in the likes of Mitch McConnell and Jeff Sessions). The problem of devising smart and effective government intervention is far more acute here than in Britain because we Yanks have a structurally deficient democracy and an ideologically deadlocked legislature.

As if to prove this point, consider a second: our respective chief executives. After their revolt of neglected workers, the Brits have Theresa May as prime minister. She’s an experienced, sober, well-respected pol. She is also a female—a member of our species’ practical, less theoretical gender—just like the president we Yanks would have had but for our Electoral College. In contrast, we have Donald Trump—a man utterly devoid of public experience but who also seems, despite all his faults, devoid of strong ideology.

Finally, non-college-educated folk who work with their hands amount collectively to about one-third of our US population. That’s about the same as our Southerners, although there’s of course some overlap.

To an economist, these folks may seem just inefficient factors of labor. But to a politician, they are a large enough group of citizens to threaten societal destabilization and strife if left to rot. One cannot dismiss them as mere apostates to the “correct” economic religion, at least not if one hopes to maintain a coherent and well-functioning democracy. The current position of Teresa May, the gloating of Nigel Farage and Boris Johnson, and the presidency of Donald Trump all attest to this reality.

What we are witnessing is the destabilization of the world’s most powerful democracy (ours), the world’s oldest modern democracy (the Brits’) and possibly the world’s most ambitious example of federalism, the EU. We need solutions that work, not scolding for apostasy against an unproven and unprovable theory.

Trump has proposed one novel solution in his 35% prospective “tax” on imports from factories newly moved abroad. I think that plan might work to keep good jobs at home and is worth a try. May has proposed a quick and clean Brexit, without letting on whether her proposal is just an initial bargaining position or a desired end result. Either approach might work if well handled. The Economist and other policy analysts should take these proposals seriously, analyze them in depth, and make serious recommendations.

If they don’t think any of these proposals will work, they should say so and say why. Then they should propose alternatives. They should not let unproven and unprovable religious zeal (“don’t meddle with business!”) substitute for serious analysis and the scientific method.

This is not a time to sit back and grumble like an old codger about religious heresy or apostasy. It calls for clear thinking and creative solutions. The fact of millions of innocent workers being left behind is real. May, Farage, Johnson and Trump are real. The prospect of the end of the Enlightenment in the US and Europe is real.

All these things call for an open mind, as if by real scientists or engineers. They do not call for the type of reflexive ideology that one might expect from Mitch McConnell, Paul Ryan or Archie Bunker. The Economist’s history of clear thinking and international prestige leads us to expect so much more. And we all—Yanks and Brits alike—desperately require more.

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