Hands-off

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I heard Niall Ferguson speaking the other day, talking about Keynes and Paul Krugman.  He said that Keynes is basically correct about how to fix a “shocked” economy if that economy is largely a closed system, like most economies were when Keynes was writing on the subject.  That is, injecting government money into closed economies can work to power things up, but in today’s world most of the money a government puts in “leaks” out of the country and into other countries because of the global economy.  Thus almost all that money does not go to the places it was intended to help. 

The biggest difference between what Obama’s team (which is loaded with students of Keynes) did and what others believe should have been done (Ron Paul for instance) is not an argument over whether more money in the economy will help the economy, but an argument over who better spends that money–the government or the people.  The Keynesians say that tax breaks given to the people will not help, because in bad economic times, people will only save the money.  Anti-Keynesians remind us that the government is a notoriously bad spender and that centralized spending is very inefficient.  

So again, this comes down to the biggest differences between the Soviet Union and America:  Centralized government vs. decentralized.  And to comment on that, I do believe that the world has advanced in the past century at an incredible pace primarily because of decentralization.  A military example:  One of the biggest lessons taken from the German army of WWII was that NCOs and operational commanders should be given great flexibility in how they carry out their missions and orders.  People generally believe that because Germany was a totalitarian regime (though the German people were more free than most people imagine), that its commanders and squad leaders must have been micro managed.  The opposite was true.  Wehrmacht leadership had more freedom and flexibility than its American army counterpart.  The results were a 50% better kill ratio than Allied troops. 

Corporations in America are adopting decentralized schema, too.   Books like, The Starfish and the Spider advocate “leaderless: organizations.  In most cases, this is a bit too far. I’m not advocating decentralization in extreme or in all cases.  For instance, try running a household full of children by committee, or running an Army rifle platoon by democratic vote.  Some things must be directed to achieve certain goals.  But, the more educated, capable and honest is a group of people, the more decentralization works.  A Special Forces team resembles an egalitarian sports team more than a military unit.  SF members are a special breed, chosen not only for their combat capabilities, but for their integrity and maturity. 

So it appears that the war is still on.  Why, I’m not sure.  All countries that have decentralized ie democracies, have far surpassed all those that still cling to centralized control.  Centralized control measurably decreases productivity, creativity, and freedom.  And yet it’s too difficult for the socialist dreamers to give up their dream in the face of reality.  When it comes to the American people, they are the most capable people in the history of the world.  This is not Haiti or Afghanistan. 

The people of the United States have earned and deserve a hands-off government.

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6 thoughts on “Hands-off

    Royce said:
    July 20, 2011 at 5:42 pm

    As a pioneer in virtual organizations, I agree with you in principle but with some notes. In managing virtual organizations which are more or less decentralized the classic management techniques of supervision simply don’t work. Managing a decenralized and dispersed organization requires great deal of courage in the leader and a high level of confidence in the staff. The management is by objective leaving details to the person responsible for accomplishment. The leader cannot dictate the whens and hows the staff is to accomplish the objective just the result and the end date.

    The points about Keynes are well taken. As an economic philosophy his no longer works and as a professional manager i can assure you that I will seek the lowest cost supplies and labor for the quality I desire or can accept. So I agree that any stimulus money pumped into the economy could easily move offshore before the ink is dry and offering private industry incentives won’t necessarily translate into domestic jobs although it would increase tax revenues.

    WTP said:
    July 24, 2011 at 2:44 pm

    “Why, I’m not sure. All countries that have decentralized ie democracies, have far surpassed all those that still cling to centralized control. Centralized control measurably decreases productivity, creativity, and freedom. ”

    Yet, here’s the rub: “But, the more educated, capable and honest is a group of people, the more decentralization works. ”

    Perhaps central planning does work better for societies in which the people are less educated, less honest, less capable. And perhaps this is the appeal of socialism. The less capable one is, the less productive, the less honest, the more one views the rest of society in a similar manner. And from what I can see, the part of western society that has these weaker attributes is growing faster than the stronger. Once you pass a certain tipping point, centralized planning works…until one or enough of the weak manages to finagle themselves into the position or committee responsible for running things. Ultimately, centralized planning fails. But it does have its successes over the short term. Think what you will of the Soviet Union, but they did move from a feudal society to putting the first satellite into space in a span of about 40 years. Of course it was pretty much downhill 20 years after that.

    Da Cuckoo said:
    August 29, 2011 at 4:28 am

    WTP – I think you’ve hit it dead on. I remember suffering through Keynes back in grad school – the main takeway was using Government to Prime the Pump. But it’s all based on a very specific set of reasons the pump needs priming. Additionally, one could take the money even borrow it (assuming for a second, we take Keynes argument to be correct prima facie). Now let’s say we borrowed a trillion and dumped all of it into Space, Computer and medical research. Under scenario 2, we took it and gave it all ot the least productive of society (knowing that poor people spend more than wealthier counterparts). In either case, we have $1 trillion more in circulation. Scenario 2 might even have better effects in the very short run. But there’s no comparing what would come of both scenarios. The argument is framed over Keynes vs Non-Keynes, but that’s a political agenda. That’s b/c, in the spirit of Chomsky’s manufactured consent (I can’t believe I’m citing Chomsky but even a broken clock is right twice a day) – the whole discussion is framed in “should the govt spend or shouldn’t it” what’s ignored is what we’re spending it on. This particular team is all about spending it on the stupidest, most worthless crap you could spend it on. I’m actually shocked they didn’t bring back Midnight basketball as crime reduction. It was supposed to go to infrasctructure (which would have been a good middle ground) but it was debt that won’t earn the return we’re paying for it. At least with space program and computer type stuff, we’d have possibly gotten a higher return. And I realize that sounds like I’m advocating government sticking its nose into space travel – I’m not – but if govt is going to effectively control a monopoly on space travel – then I’d rather see it spent there then spent on the idiotic stuff we’ve been funding with it.

    magus71 responded:
    August 29, 2011 at 6:06 pm

    Bill, great post. Thanks.

    Actually, in my mind, there’s a time and a place for almost everything. A space program is probably better off being run centrally by the government since the chances of immediate market returns are slim. I think private investors usually look for more immediate returns.

    Government spending in the sciences seems to be the way to go. Once breakthroughs are achieved, the private industry can run with production and competitive tweaking.

    WTP said:
    August 30, 2011 at 1:07 am

    Well, gentlemen…I hate to tell you this buuuut…

    It was my work in the space program that did the most to discourage the Keynesian leanings I acquired in college. The waste was pathetic. Crony capitalism all the way. And being a government contract, it was almost impossible to fire anyone. In my less than 5 years there, I worked with 5 times the number of alcoholics than I have encountered in the workplace in my last 20 or so years. I’m talking about people drunk at work. Two of those guys I knew of were, in my opinion, not even functioning alcoholics.

    I happened to be on a fishing trip this weekend and struck up a conversation with a German gentleman who turned out to be a retired German F4 fighter pilot. We compared notes on government spending on combat aircraft (Germany) and the US Space Shuttle. So many similarities. Especially in the over use of classifying information/projects that don’t need to be classified, simply for the purpose of fattening defense contracts. But that’s a whole other story…

    I do think the government does have a role to play. But the best approach would be similar to the British government’s longitude prize back in the 18th century.

    WTP said:
    October 3, 2011 at 5:38 pm

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