The Fourth Revolution – The Nordic Future

In the fourth and last installment of our review and commentary on The Fourth Revolution: The Global Race to Reinvent the State by Micklethwait and Wooldridge, we examine the authors’ contention that Sweden and the other Nordic nations represent the future for the West’s reinvigoration.

Before and After

For most of the twentieth century, Sweden embraced the Fabian ideal for their society. Marquis Childs called their social experiment the “middle way,” one between capitalism and communism. In the nineteen sixties, Sweden moved left as they broadened the meaning of equality in their society. They applied more government and higher taxes to every problem.

Then it ended. Their politicians did what most world leaders know they ought to do but fail because they lack courage. Sweden reduced their public spending in proportion to their GDP. The government required itself to produce a fiscal surplus over the economic cycle. Swedish politicians reinvented the state while reducing its size. They gave their nation’s pension system a sound foundation, they adopted education vouchers, and revamped their health care system.

Sweden focused on reducing waiting times for hospital procedures and on speeding patients through their stays, which also reduced the frequency of hospital communicated diseases. They published data such as operation success rates in health registries for patients and taxpayers to evaluate. And they charged minor fees similar to those that Lee Kuan Yew initiated in Singapore to discourage healthcare system abuse through elective services overconsumption. Swedish health care is now one of the most efficient in the world. Swedes live longer than most in the Western hemisphere and their health costs have decreased too.

Other Nordic countries have improved to a more limited extent. Yet, all four have triple A credit ratings and debt loads below the Eurozone mean. Their economic experiments seem successful. Indices show that they have superior social inclusion, competitiveness, and well-being.

And they’ve done this by serving the individual, employing fiscal responsibility, promoting choice, and encouraging competition. They’ve eschewed state expansion, pump priming, paternalism, and centralized planning. The Nordic countries have extended the market into the state instead of the opposite.

From There to Here

The Nordic countries show what is possible. They had to change because they ran out of money and continued to change because they found they could provide a better state for their citizens.

In 1991, Sweden plunged into their “black of night crisis.” The banking system seized up, foreign investors abandoned their confidence in the third way, and mortgage rates peaked briefly at 500 percent.

In the early 1980s, the people of Denmark faced a “potato crisis.” It was called this because they felt that potatoes might be all they’d be able to afford for their subsistence. Not only was there a cash shortage but the industries which financially supported government programs were strapped.

Now, countries in the West find themselves at or near the same crises. Western states have promised their peoples benefits beyond their ability to provide. The Nordics prove that the state can be brought under control and can be improved for the betterment of their peoples’ future.

But Big Government

History over the last two centuries seems to show that governments grow larger as they accumulate power and control. The Nordic countries provide a counterfactual: government can be contained while its performance and efficiency increases.

The authors pose the question: “How far can you take [the Nordic experiment]?” They argue that neither diminishing productivity returns in the service and government sectors [Baumol’s disease] nor society’s accelerated aging can prevent success. They claim technology is a solution to both problems.

Baumol stated that systems which boost manufacturing productivity are not applicable to the service sector (of which government is a part). The authors suggest that his disease is simply technological lag. As an example, educational efficiency once depended on increasing class sizes.

Now, with the internet, students with drive and grit can access materials from world-class educators. This sort of teaching is even extending into formal classrooms. Accredited degrees are increasingly available online. As a result, universities are having to reconsider the wisdom of administrative bloat and building monuments.

Technology is delayering management and making workers more productive, disseminating health care and school performance data so citizens can make informed choices, and, increasingly, bypassing government by putting power in citizens’ hands.

Law and order, a very labor intensive government function, is also an example. Instead of harsh sentences, increased warehousing, or even a decreasing cohort of young men, the authors maintain that crime prevention is what led to a decrease in crime worldwide starting in the mid 1990s (but varying across the globe). And this decrease has most to do with technology (e.g., CompStat, increased video surveillance, monitored alarms, etc.). Although community policing (directed by CompStat), a hands on solution, is also necessary.

Technology is even reducing costs in the military. By replacing soldiers, sailors, marines, coast guard and air men with automated hardware and software systems, lifecycle costs such as salaries, healthcare, and pensions are decreased. Operations, maintenance, and personnel costs are an overwhelming proportion of total cost of military systems when compared with initial development and procurement costs.

Technology, in the authors’ view, is taking out costs while increasing efficiency in many, if not all, public sector activities.

But Greying Demography

The authors’ ask: “won’t any gains from treating Baumol’s disease be wiped out by demography?” They note that the Nordics have changed the basis for their retirement systems from totally defined benefits to partially defined contributions. Swedes put some of their pension money into private plans. The government indexes the retirement age to life expectancy and decreases pensions during economic declines.

Delaying retirement increases worker payments into the system, reduces outlays, and enhances economic productivity of older workers through entrepreneurial activity and skills transfer. And Sweden made these improvements with cross party consensus: the “people’s home” survives only if finances are handled competently.

A Call to Action

There are many ways to improve the state that increase benefits to citizens while decreasing the cost of (and frustration with) government. While the Left argues cutting government will hurt the poor and the Right cries that expanded welfare will collapse the economy, the authors assert that it’s not a zero sum proposition.

Nineteenth century Victorian liberals went after “Old Corruption” in its various forms. Subsidies for the wealthy and middle classes at the expense of the poor are easy to correct via means testing, flat taxes, and repealing funds for government agencies that provide unfair aid where it is not needed (e.g., if I own suitable land that I have no intention of cultivating, should I be paid for not growing tomatoes or some other crop?). It only takes the will to do it.

Rather than take away from the poor, remedying this one situation actually helps the poor. Entitlement programs on which they depend will not run out if we fix who pays in, for how long, up to how much, and who gets to collect and when. There are many other substantive instances of waste, fraud, and abuse that we’re spending trillions on (i.e., not just shrimp on treadmill studies). Fixing these will make the country run more efficiently, benefit those who really need benefits, and increase citizens confidence in government.

Just as Sweden updated their “middle way,” using capitalist competition to efficiently provide socialist services successfully, the United States, Great Britain, and other Western states can shrink government, improve their economies, and restore confidence in Democracy (or the Republic, in our case) while providing the safety nets they’ve promised to those who need them for as long as they need them.

Halfhearted efforts rooted in selective interests just won’t do. We have serious problems to solve, and we need serious people to solve them.

RSA Replay: The Fourth Revolution

The Fourth Revolution – Review and Commentary

The book by former Economist Editor in Chief John Micklethwait and Management Editor Adrian Wooldridge: The Fourth Revolution: The Global Race to Reinvent the State contends that states in the West must complete the revolution started by Reagan and Thatcher and become smaller, more efficient systems that provide greater individual liberty.

In 1814, during the first revolutionary period, John Adams said: “Democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.” He also said: “It is vain to say that democracy is less vain, less proud, less selfish, less ambitious, or less avaricious than autocracy or monarchy…” The authors of The Fourth Revolution contend that the secret of good governance lies in checking human desires, not letting them run free.

America’s founding fathers also worried that democracy would crush individual liberty. The majority would use pressure and regulation to press the minority into conformity. The authors say few examine these issues now. In the vacuum, voters regard the practice of democracy as corrupt and inefficient. And yet they won’t question the theory. Their contempt delegitimizes government and turns setbacks into crises.

Democracy is overloaded with obligations, overburdened with unfulfillable expectations, and distorted by special interests. The population’s dependency forces government to continuously expand. During the second revolution, nineteenth century liberals in Great Britain reformed both the state’s machinery and its form of representation. The authors suggest today’s politicians should trim the state and renew democracy.

The rise of the Beijing consensus’s top down modernization and meritocratic governmental institutions makes the west’s democratic alternative seem regressive. America demonstrates too many of democracy’s vices and Europe too few of its virtues.

America’s checks and balances, though successful in the past in preventing the tyranny of the majority, has been subverted to become a political tool that decreases efficiency, compromise, and justice. America’s gerrymandering voting districts entrench special interests, extremism, and mediocre representation for a lifetime. America’s lobbying by special interests awash in money begs the question of graft and favoritism.

Europe, in an effort to stifle popular passions that caused two world wars, has sacrificed national sovereignty to technocratic governmental, financial, and trade bodies and, in the process, are vivifying national populist movements.

Economic inequality is putting western democracy to the test. Quoting Louis Brandeis, “we can have a democratic society or we can have great concentrated wealth in the hands of a few. We cannot have both.” In the era of financial crisis with less to go around and a bloated but inefficient welfare state, the West must stop democracy’s decay or risk their people’s ire.

The authors call for limited government that constrains itself through self-denying ordinances. In the process, three government dangers must be overcome: liberty encroaching expansion, surrender to special interests, and making unfulfillable promises.

As remedies, the authors propose balanced budgets over the economic cycle, fully funded and means tested entitlements tied to life expectancy, and sunset clauses for laws and regulations. Handing some economic power to technocrats and independent commissions and pushing decisions to the states and cities are ways to limit centralized power.

Micklethwait and Wooldridge say that the cost of inaction is high—unreformed, the welfare state will collapse under oppressive debt. The opportunity is great—the rewards to states that revive democracy and reduce the burden of the state will sprint ahead of its peers economically and in life satisfaction. History will be on the side of the nations that promote individual liberty.

We in the West are polarized politically. Our leaders pander to special interests instead of providing for the common good. How much longer can we mortgage our children’s future to pay for our pensions and health care? We are getting less benefit from and paying more for our educational system. We’re transferring tax revenues to the middle classes and crony capitalists in agriculture, defense, finance, etc. at the expense of caring for the truly poor.

The world is looking to the East as the model for economic advances and a better life at the expense of individual liberties. We in the West must become serious about reforming our systems or be left behind in the rubbish heap of history. Some western states, provinces, and cities are becoming more efficient through experimentation. There are lots of ideas to try, if only we were willing to start.

In the coming weeks we’ll cover how Beatrice and Sidney Webb laid the foundations for the welfare state in the third revolution, how Lee Kuan Yew created the Asian Consensus, and how the Nordic states point the way to the future.

The Fourth Revolution: The Global Race to Reinvent the State

The State and End State by Bernhardt Writer

A while back we reviewed Kenneth Minogue’s book: Alien Powers – The Pure Theory of Ideology. In it, he contends that Western civilization is in the throes of a conflict over a right understanding of the human condition. So, how does it all turn out in the end were ideology to win?

Politics and Democracy

Ideology masquerades as a political movement, but it is determined to destroy the circumstances underpinning politics. It draws out our moral instincts while it denies the possibility of morality. It affirms freedom while striving for a community in which only one right act will be possible for each circumstance. Ideology attacks inequality but seeks to destroy the individual human capable of achieving equality in a meaningful sense. It champions real democracy but advocates unanimity that makes democracy superfluous. Ideology’s practitioners use criticism to attack opponents while claiming their own truths are incontrovertible.

Ideology portrays deficiencies of the human condition (i.e., personal sin) as structural flaws of an oppressive system. It must methodically destroy the political ideas and values that the system represents. These ideas and values merely hide the system’s ulterior interests. Ideology can only be satisfied by a perfect democracy which is, by definition, unattainable. It is ideologically absurd to let those deluded by the system’s structural faults to select leaders when the people (i.e., the vanguard) leading the way to the perfect community, alone, have the necessary knowledge.

Ideology and the State

States provide liberty by instituting legal rights. Individuals within the state exercise these rights as responsible agents of choice. The result is a world both unpredictable and uncontrollable because what people will do with their rights is unknowable until they decide and act.

Karl Marx, however, said that rights separated person from person (i.e., alienated them one from another). His ideal society would possess liberty without rights. Those in his transformed society would no longer mistrust or have disagreements of right and wrong. There would be complete harmony in which no one would need to exercise rights. In fact, there would no longer be individuals capable of exercising rights in such a perfect harmonious community.

Ideology says states foster citizens’ independent actions, the soil in which oppression thrives. Oppression can only be prevented by destroying the state itself. Ideologies use “one party states” to destroy any remaining independence in a society enthralled to the ideology.

A capitalistic society provides laws under which the citizenry orders their life choices and actions. Under an ideology’s social order, everyone is occupied with transforming society. Nothing prevents citizens in a modern state from creating communes, collective farms, or cooperatives. However, it is both criminal and regressive for those in an ideological state to set up a business or practice unsanctioned religion.

States provide rules according to which citizens choose how to satisfy their interests. The mistake ideological governments make is to decide between interests. By determining interests, ideologies show that their social criticism is aimed, not at the centralized state, but the private interests of citizens and associations that compose the state.

Impediment to Revolution

What stands in the way of ideology’s revolutionary conquest is transcendent religion. Minogue says that someone is not fit for revolution who, like Adam Smith, believes:

“A wise man never complains of the destiny of Providence, nor thinks the universe in confusion when he is out-of-order.”

Marx observed that engaging the wretched to carry out insurrection will never happen if they are lost in religious fantasies.

Perfect Community and the Individual

In an integrated community of individuals, each one is the proprietor of their own desires and the adjudicator of their own thoughts. Ideology sees this as the cause for aggression, greed, selfishness, and violence because some desire more than they have or want what others possess. Ideology rejects the possibility of personal responsibility and self-control as the foundation of relationships within a functioning society.

Should humans live as free agents making individual choices or as a collective species with no individuation in so-called perfection? Ideology says perfect community is not only desirable, but the only form possible (all other forms being ones of oppression).

Would these humans in perfect community have self-awareness and the ability to choose to cooperate? Ideology says that as long as they have real choice then their actions no longer depend on correct human consciousness but on contingent human will. In short: no. A community that freely chooses to cooperate could choose not to do so at some point in the future. If that were to happen, then the ideological terminus (perfect community) could itself be overthrown.

To give a sense of the import of such a transformation, Marx says:

When the laborer co-operates systematically with others, he strips off the fetters of his individuality, and develops the capabilities of his species…The present generation resembles the Jews whom Moses led through the wilderness. It must not only conquer a new world, it must also perish in order to make room for people who will be equal to a new world.

Further, Minogue says that in true community:

Each of us will be drops of water in a clear pond. We shall live at the level of the universal, sloughing off that involvement in particular passions and particular points of view which is the very definition of our present entrapment. There will be no self to be denied or subjected. Particular character and situation would have no reality in themselves.

Ideology’s Results

Ideology’s direct contribution to society is to set worker against capitalist, Black against White, men against women, etc. No one can doubt ideology has gotten results by calling out grave instances of oppression; but, in the process, it has multiplied pointless, diffuse antagonisms that have weakened the fabric of Western society and culture.

True community may be a thing of wonder. However, the resolution of strife between essences and existence leaves no one to contemplate that beauty since they both must be “resolved.” The so-called alienated human being is abolished.

This means that ideology, carried to its terminus (and there is no other purpose), poses an existential threat to the West. Declaring Western civilization rotten to the core, ideology does away with the possibility of the individual human life in exchange for a myth of pure species. This is the equivalent of a suicide pact.

May Day Poster

Russian 1st of May poster, Soviet, Public Domain in the US

Minogue’s book is available (in part) on Google Books. As an example of the pervasive influence of ideology, the National Association of Scholars has recently addressed the sustainability movement as an ideology encroaching on academic freedom.

“Sustainability” is a key idea on college campuses in the United States and the rest of the Western world. To the unsuspecting, sustainability is just a new name for environmentalism. But the word really marks out a new and larger ideological territory in which curtailing economic, political, and intellectual liberty is the price that must be paid now to ensure the welfare of future generations. [Emphasis mine]

The movement is just another example of special interests seeking to “throw off oppression” using coercion and, if that fails, barbarity in a quest for supremacy.

As I’ve said before, I agree with Orwell’s assessment of his novel Nineteen Eighty Four: “The moral to be drawn from this dangerous nightmare situation is a simple one: Don’t let it happen. It depends on you.