Fiscal politics=sociological design

(on the word design)

Fiscal political negotiations are at heart a showdown over who gets to ‘design’ the structure of the US economy and how. The word design has none of the baggage of ‘central planning,’ which is associated with Soviet communism, inefficiency, and, ultimately, failure. In contrast, design is a word associated with the cutting-edge of the engineering, intellectual-property based modern economy. And it resonates beyond Silicon Valley. Design is very much at the center of advanced capitalism — from management theory to the policies of the Federal Reserve.

And this includes the government budget. When we talk about “taxing” and “spending,” we actually ought to stop ourselves from thinking it’s a debate about smaller or bigger government. One way or another, the need to design society will result in a “big” government action that will significantly shape the US economy for decades to come. In an economy like ours, there is no such thing as “small government.” The Bush tax cuts, for example, were a massive government intervention, with consequences near and far.

Indeed, the US govt is the country’s largest single economic actor — the largest employer, the largest investor, the largest spender. The Tea Party gives voice to anti-govt feelings, but presents no idea how to actually change the fact of the government’s central importance to today’s actually functioning capitalist economy. The fiscal standoff is about understanding this point. That we do, like it or not, collectively design the structures of the US economy. We do not collectively dictate the details, but we do design the parameters within which individual creative entrepreneurship will or will not blossom, in the form of economically motivated human behavior.

(The economic crisis as database)

But of course, the US historically does not ‘centrally plan’ its economic activities. Socialized knowledge is that the failed Soviets did that. But this ingrained fact of economic liberty has taken on a fuzziness as capitalism has actually advanced during the past few decades, including since the collapse of the Soviet Union.

Take, for example, the recent financial crisis. Consider, in particular, the powers demonstrated by the Fed to dictate growth, temper growth, react to slumps, and provide a bottom for slumps. This is large government.

There is no doubt the widely experienced financial crisis damaged the legitimacy of fundamentalist “market”-based economic frameworks. First, it is the case, post-crisis, that the US is more likely to have government interventionist policies. Three examples are stimulus, healthcare reform, and the expiration of the Bush tax cuts on wealth above $400,000.

Second, and more important, we have new economic data. The history-making database of 1989 — i.e. the fall of the Soviet Union, socializing the knowledge that government intrusion into the economy by definition is “bad” for economic freedom and prosperity — has now been followed, in the shape of a financial crisis aflicting highly leveraged Western economies, by a fresh new database. This newer database — sometimes known or derided as the “bailout” — showed incontrovertibly the dependence upon government institutions shared by the most established US capitalist organizations.

Derision is not necessary. What we have seen is unfortunate. I am no more “for” the bailouts than anyone else. But at some point there is no meaning to being “against” government. Advanced capitalism has shown “small government” to be empirically untenable: historically non-existent. Smarter, more responsible government, on the other hand, is still theoretically possible.

Which is why the GOP should seek to transcend its conservative-movement roots, taking heed that “small-government” knowledge is now growing as outdated as communist knowledge once became, and still remains.

This entry was posted in 2007-2012, advanced capitalism, economic recovery, macro-economics, politics, the database, The End of the GOP, the great contraction, the great contraction 2007-2012. Bookmark the permalink.

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