Triumph of the Swamp

Perhaps one of the most irresponsible bills in US economic history has just been passed. Eventually we will all suffer for it.

To understand about this bill, let us start with some diagnosis about the needs and priorities of the US economy. This has to start with the living standards of what in the US is called the middle class (the working class in the UK). It is astonishing that in an age of unrivalled human progress, in technology, communications, medicine and everything else, the median earner in the US is no better off than they were thirty years ago. There has been growth in that time, but almost all of it has flowed to those at the top, leaving everyone else behind.

So the first priority of any economic bill has to be redistribution. This is not to punish the wealthy, but to reward everyone else. We have already seen the consequence of not doing this: it leads to despair, jealousy and bitterness, and that shows up at the ballot box in populism. So now we have a populist administration, but they have not rewarded those who voted for it, but punished them even further. After populism is demonstrated as a failure, what comes next may be more violent, or just possibly an extreme version of socialism.

Inequality of outcome is bad, but inequality of opportunity is worse, because that entrenches inequality across generations. So the second priority of any economic measure has to be to improve public services, especially education, but also health, transport, infrastructure and social safety nets, all of which are far worse in the US than in any other developed country. Some targeted spending to improve education in deprived areas and to help places where historical employers have moved out would be a high priority.

But we also know that the public services are inadequate today, but will collapse in the future due to demographic changes, unless radical new funding solutions are found. Part of this has to involve reducing entitlements, for example raising retirement and Medicare eligibility from 65 towards 70. But another part has to be allocating more money. We already start to see what happens when a generation reared on debt and inadequate pension provision starts to age. An article in Time last month looked at families stuck with huge end-of-life costs of their parents – this problem will accelerate quickly. There will also be a growing need for a universal basic income or similar scheme as traditional jobs continue to vanish.

This is one reason why the deficit matters. Borrowing can be acceptable policy when the currency is a reserve currency and when it has a purpose. But growing the deficit at a time when the economy is already booming and with such obvious unfunded future needs is just reckless. A priority at this point should be to reduce the deficit, to allow for a transition to a more affordable regime.

As far as business is concerned, it is sound policy to reduce the corporation tax rate, although more should have been done to eliminate allowances and the rate cut did not need to be so drastic. But, as far as priorities are concerned, two things that corporate America does not lack just now are profits and cash. PE ratios are at cyclical highs already, and firms have not responded by investing but by share buy backs and dividend growth. The evidence that a further infusion will have a different result is slim. The real priority for corporate policy must be to encourage competition. Sadly, every step taken so far will only entrench incumbents further. And the steps towards deregulation will only make a future crisis more likely – one that will be tougher to deal with once the deficit has grown.

The tax bill that just passed served precisely the opposite of all these priorities. Why did they do it? The Republican Party is not short of smart economists or deficit hawks. Their motivation is simple – greed and power. As wealthy people, they will benefit personally. More important, so will all their donors, who represent their future tickets to any hope retained power. And of course the party and the president needed to pass some major legislation to create any sort of message for that donor money to promote. It is a triumph for the swamp – the same swamp that we were told would be drained.

They might just get away with this shameless looting, at least in the elections of 2018 and even 2020. The Republicans learnt from the mistake of the Democrats in 2009, when they hoped that Obamacare would become popular once people felt the benefits. In practice, these came too slowly, so this tax bill makes sure that benefits to individuals are front-loaded, to add to the feel-good factor from the spurt of growth that any stimulus induces. They care less that most of these gains will expire in a few years, because by then elections will be fought over other matters. No matter too, they hope, that the personal gains will probably be inflated away or lost through some other unintended consequence from the bill – perhaps the voters can be distracted into blaming immigrants or other outsiders.

This bill is the latest application of the principle that started around 1980, that I call the Great Wrong Turning. My favourite analogy for that would be a city with a dominant historic firm. That firm would provide most employment in the town, and follow classic business principles of long-term value maximisation. It would understand that this would include offering decent wages, an emphasis on training by involvement in local schools, and also reinvesting in research and development to maintain competitiveness.

This policy worked for our fictional firm until the 1970’s, by when things had skewed too far away from profits and in favour of workers. The workers often went on strike and started hoarding benefits that harmed the ability of the firm to compete. An adjustment was necessary. But, around 1980, instead of the fine-tuning needed, the owners lurched into an opposite direction. They started taking more and more out of the business in dividends and senior remuneration. The owning family became rich, but somehow came to need more and more to satisfy their desires for fancy apartments and holidays and schooling for their kids. Meanwhile training, pension provision, R&D and re-investment were all starved.

Any business school student would identify this strategy as milking the business, and correctly predict its long-term demise. Yet this is precisely the strategy that the US has followed since 1980, and most of the world has copied it to some degree. The initial rebalance in 1981 had some justification, but doubling down in 1986, 2001 and again now is little more than looting, and dooms the economy to spiral downwards. The most ironic part is that each claim for growth from implementing the strategy becomes less credible, because the very people who generate growth by spending as consumers are the ones who have been progressively starved.

I believe that there will come a time soon when a consensus will see this so-called small government policy for what it is. Indeed, like so many of Trump’s extreme policies, this one might ultimately benefit humanity by creating a momentum for a decisive change in direction. Sadly there will be damage along the way, to individuals and the overall economy, both in the US and globally.

And there is a further risk; that when the change finally comes, it will not be smooth and thoughtful but brutal and driven by revenge. We could all end up in a Chinese type model. We could end up in a protectionist world of stalled progress. Or we could end up at war. The swamp should celebrate quickly, for they will not have much to celebrate when the reckoning comes.   

Celebrating peak divorce

The Economist published one of its strong social surveys a couple of weeks ago on the subject of marriage. It was, as always, very insightful. And it was also uplifting. Humanity is making progress, often despite roadblocks imposed by religions and my generations of politicians.

Perhaps the most positive takeaway for me was the revelation that divorce in the developed world peaked about twenty years ago and has been declining since, even though divorce is more freely available than ever and carries less stigma than before. The trend is especially strong among more educated people. Since divorce inevitably leads to feelings of shame and challenges for children, this is a wonderful cause for celebration, and worthy of trying to understand its root causes.

The answer lies, I think, in the many cultural changes in society came about over time, during the second half of the twentieth century. Go back to 1950. Most people went to Church and heard strict lectures about marriage being a commitment for life in front of God. They also heard that sex belonged only in marriage and that children born out of wedlock were somehow sinners and inferior human beings.

Parents and grand parents added to the social drumbeat. Familial shame would come from any family member “living in sin”. The purpose of girls was to marry and have babies, and any unmarried girl over thirty was “on the shelf”. Girls were told to protect their virginity at all costs, while boys were advised to discretely “sow their oats”. Couples met at staged managed events like community dances, where parents could cast an eye over proceedings and social classes were segregated.

In the developed world, all of this had changed completely by 2000, outside of the most religious enclaves. And, with all respect to my fellow churchgoers who interpret scripture differently, thank God for that. But these changes, and others, crept in at different speeds. And one consequence was a temporary increase in divorce.

Perhaps the first key trend was the involvement of women in the workforce and greater emancipation in female education. A generation grew up with expectations beyond marriage, and the opportunity to pursue more dreams. This reduced the impact and control of parents, and led youngsters to fall in love, and also married people to fall into affairs and to question imperfect marriages.

So during this stage, many couples had still married young, to partners they barely knew and had not slept with, but then experienced the flaws in this model and the temptations of escaping from it. It is no surprise that many of these marriages collapsed. Divorce was becoming more widely available, and, while still socially damaging, was chosen by more and more couples.

By the 1990’s, a third or more marriages were ending in divorce. Traditionalists cited this statistic as likely to rise further, and cause to roll back the societal changes and double down on expectations about marriage being for life.

But this story has a happy ending. For other trends were feeding in to solve many of the challenges from the first set of changes. Most important, couples started living with each other for a time before commitment. Availability of contraception was crucial to this change. Also, more people in their twenties of both genders were pursuing education and career and living away from the influence of parents.

Not surprisingly, couples given a proper chance to get to know each other made better decisions about marriage. Compatibility came with maturity and the time for a relationship to move beyond infatuation. Two other less positive trends contributed as well. Housing became more expensive, and weddings became more expensive too.

All this led to marriages happening later, but becoming more robust. Divorce rates started to go down, and have been falling ever since. Even better, surveys suggest that this generation is less tolerant of affairs and less tempted by them.

The general lesson is to be patient while major trends are playing out. Key indicators, such as divorce, may initially trend in the wrong direction, but if trends work themselves through and society finds fixes for flaws in the new models, things can work themselves out.

The Economist pointed out that the positive trends about divorce, teenage pregnancy and lone parenthood, were strongest among those with higher education, but that other groups were making progress too. More concerning, the trends in marriage were leading people to marry more within their own social class, entrenching inequality of wealth and opportunity. The logical policy response to this would be to promote universal education and to limit opportunities to hoard wealth (for example via estate taxes and removing tax advantages for private education).

Typically, The Economist survey did not restrict itself to the developed world. Long sections looked at India and China. In India, the article concluded that the same traditions that had hampered social progress in the developed world were even stronger in India, but saw encouraging signs that these were breaking down quickly.

In China, most interesting was an effect of the gender imbalance caused by the availability of selective abortion and the one-child policy. In China, dowries work in reverse, with the groom’s family paying the family of the bride. In some parts, girls seen as good prospects have become so scarce that the going rate for such dowries had exploded upwards. The article concluded that families that resisted the urge to abort daughters were having the last laugh. I would also add that this may be another example of showing the patience to allow trends to work through fully. The market should send the signal to the next generation that girls are as worthy as boys.

After reading the survey, I was left wondering what the next major trends would be for marriage, and how 2070 might look compared with 2020. One clue was offered. Civil partnerships came into being as a compromise made available to gay couples before marriage became legal for them. But now several couples, gay and straight, are choosing a civil partnership in preference to a marriage, as something with less ceremony and without its religious overtones.

Building on this, I wonder if this could be a route to challenging the next taboo of marriage, that it is an agreement for life. We make few other commitments for life – imagine for example if we committed to a career or profession for life, with no way out? Business partnerships form and dissolve easily. True, parenthood is a lifetime commitment, but society has found ways for people to be good parents outside marriage, and for kids to be protected. I would argue that our own kids actually benefit from having four parents instead of two.

So how about the concept of marriage, or civil partnership, as a renewable contract? Upcoming renewals would allow couples to review what was working and what not, and create an improved renewal or a sensible dissolution. A lower initial commitment would be less intimidating. Divorce could be further destigmatised, and people released from unhappy bonds. Separation followed by later reconciliation on a stronger basis would also become more common.

I would offer five, ten and twenty year options. The shorter option would be preferred for younger couples and those who had not lived together a long time. A ten-year option would suit a couple that had lived together a long time and were ready for kids. The longer option would suit those already together a long time. A typical path could be a five, then two tens, then twenties.

I should point out that a lifetime commitment suits me personally very well – at my age twenty years and life don’t seem all that different, which is fine by me and would be for most of us with plenty of life experience. But I think my idea has merit for most. There would be uproar in the church – but if we took too much notice of that, we would still be living with the norms of the 1950’s. I am pleased that my own children don’t have those burdens.     

Sex and Power

Another day, another allegation, another reputation ruined. The dam certainly seems to have burst. Time magazine gave its person of the year award to the brave women who burst that dam, and I heartily approve.

Every time a new story breaks, it creates a mixture of emotions in me. I feel for the victims and admiration for those speaking out. My disdain for the perpetrators is strong as well. But then in some of the stories a part of me wonders if society, that is all of us, has been guilty in setting up this ugly drama. And then I wonder how best we can dismantle the norms that created this mess, without too many unintended consequences.

Perhaps I am not qualified to opine on this subject, by virtue of being a man, indeed a heterosexual man from the generation of many of the perpetrators who also had some power during his career. I’ll risk it. And, just like Jonathan Friedland writing about this in the Guardian Weekly, I’ll start by making clear that there are no excuses. This is not merely boys being boys or women egging them on or prior societal norms being exposed. This is usually disgusting abuse of power for which there is no excuse. The more this abused is exposed and punished the better. And, even more, the sooner we can make this abuse less likely in the future the better as well.

I don’t have skeletons myself, I’m relieved to say, perhaps as much to do with happenstance as any moral virtue. But it is interesting to look deep into the eyes of male middle-aged newsreaders as they announce the demise of another erstwhile colleague. Do I see trepidation sometimes?

I wonder if some sort of amnesty would help in this situation, because it is likely to go on a long time and maybe cause more pain than is necessary. By amnesty I am not suggesting letting anybody off. I am thinking more like the various truth and reconciliation processes that have been successful around the world recently, most notably in South Africa after apartheid.

Following that template, there must be some distinction depending on the level of the crime. Underage abuse and rape are always intolerable. But groping or unwelcome propositioning could be treated differently. If coming clean about such things would bring a consequence of, say, suspension from work for five years and the requirement to pay a proportion of wealth to relevant causes, but also carry some legal and publicity safeguards, perhaps men would start to come forward, rather than face the lottery of waiting to see if any victim would accuse them.

I am simply trying to lance the boil here. This solution could create some funding (for people other than lawyers), spare some victims from tough choices, and help everyone to move on. Of course, those who did not come forward but were later called out would rightly face even tougher censure than today, having missed the chance to confess.

There are two more potentially positive consequences. One is about cleaning house. There are other reasons that it is time for my generation to get out of public life. The next group will do a much better job than us. And the other is about creating clear standards and clear red lines between groups that accept these standards and those that flout them. In the short term in the US, democrats will lose some members and maybe even a few seats. In the longer run, the party equivocating about the likes of Roy Moore and even Donald Trump will be exposed for what it is and punished at the ballot box.

Returning to societal remedies, there have been various articles penned that point towards solutions. At its heart this is about the attitude of society towards sex, and about power. Levers to improve must address one or the other.

The PBS Newshour has provided excellent conversations about sex abuse ever since the Weinstein story broke, no doubt with editorial input from Judy Woodruff. The commentators have tended to focus on the power side of the equation. Many think it starts in mundane places. If minimum wage staff in restaurants had more security, then their bosses would find it harder to bully them. If those same people were not so dependent on tips, they would have less need to compromise their own standards of flirtation. I find this a powerful argument; perhaps the best of all for killing the ridiculous tip culture in the US.

The Netherlands is my example for this aspect. Customer service in Holland can be terrible; more often it is minimal, with little extra offered. The reason is cultural. Service people do not consider themselves subservient to a customer or a boss; they are merely providing a service for a fee to an equal. They have rights, and, more important, they have pride. This can take some pleasure from various experiences, but I find that a good trade off. Emulating that culture would help the rest of the world, and reduce the sexual abuse of the powerful.

Then there is the sex dimension. This can be even harder. I read an article arguing for legalisation of sex work. By the same token, more readily available pornography is probably a good thing. Men have sex drives. Give us ways to satisfy them without disrespecting others – even those men who are socially limited. There is still a lot of historical rubbish in how we are trained to think of sex. As an example, let us redefine someone what a sex pervert is. If it someone who enjoys looking at breasts, then not many of us would not qualify.

Tougher are jobs where sex appeal is part of the package. I watch ESPN. Most shows have an older male anchor, and a female one who is young, wears heels and short skirts, and who often seems to have a camera angle favoured for ogling. The reality is that viewing figures would go down if that changed. But while it persists, the executives will recruit those willing to flirt, and some will be tempted to flirt themselves, and some of the women will feel they have to respond to keep their job.

Partly, the problems will solve themselves, but we have to keep pushing the accelerator. The coming generation has far healthier attitudes to gender, sex and power. The current furore will act as a great deterrent. And slowly more women will be in the power positions, and more men will choose to call out bad behaviour.

The there is what my daughter calls the game. Men must initiate. Women must be coy. Women have often evolved to be aroused by the fun of teasing, and the prospect of submission to power. Men are aroused by a tough conquest. It is how we are, and without it we risk losing our fertility, but the game is fraught with risks and potentially ugly consequences. Should we change some of the rules? Sexual freedom, some role rebalancing and looser forms of commitment might help, as can more honesty about current realities.

And maybe we need to rethink some norms. Consent can be at sixteen in most cases, but maybe twenty-one or higher where there is a power or age imbalance.

There are many ways forward, and despite the negative influences of churches and my generation of leaders, forward we will go. It can’t be quick enough, for every day creates new victims, especially considering the developing world. But Time is right. Those brave women have given fresh impetus to a necessary process.