Monthly Archives: September 2010

Nice, Quick Smack down of Anti-Teachers Union Movie

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From Dana Goldstein in the Nation:

Here’s what you see in Waiting for Superman, the new documentary that celebrates the charter school movement while blaming teachers unions for much of what ails American education: working- and middle-class parents desperate to get their charming, healthy, well-behaved children into successful public charter schools.

Here’s what you don’t see: the four out of five charters that are no better, on average, than traditional neighborhood public schools (and are sometimes much worse); charter school teachers, like those at the Green Dot schools in Los Angeles, who are unionized and like it that way; and noncharter neighborhood public schools, like PS 83 in East Harlem and the George Hall Elementary School in Mobile, Alabama, that are nationally recognized for successfully educating poor children.

You don’t see teen moms, households without an adult English speaker or headed by a drug addict, or any of the millions of children who never have a chance to enter a charter school lottery (or get help with their homework or a nice breakfast) because adults simply aren’t engaged in their education. These children, of course, are often the ones who are most difficult to educate, and the ones neighborhood public schools can’t turn away.

You also don’t learn that in the Finnish education system, much cited in the film as the best in the world, teachers are—gasp!—unionized and granted tenure, and families benefit from a cradle-to-grave social welfare system that includes universal daycare, preschool and healthcare, all of which are proven to help children achieve better results at school.

In other words, Waiting for Superman is a moving but vastly oversimplified brief on American educational inequality. Nevertheless, it has been greeted by rapturous reviews.

Not that I don’t have problems with some of the practices of some teacher union locals — most of which I’ve learned from great teachers who are also union activists (who need unions to protect them and their commitment to their kids from butt head administrators and school boards) — but blaming teacher unions as the main reason why we have schools is just a cop-out and an excuse to attack unions. As Dana says, if the unionized Finn teachers can give a first rate education, unions aren’t the problem.

Conservatives Tell Conservatives to Stop Lying about Government

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The brouhaha over Arthur Brooks’ book happened back in July, but given just how crazy right-wing rhetoric is getting coming up to the election, I thought it’d be worth reprinting a few quotes.

From Cato vice president Brink Lindsey‘s semifamous smack down, which in part led to his departure/purging from Cato a few weeks ago:

Plenty of European countries have markets about as free as those in the land of the free. Look at the ratings provided by the annual Economic Freedom of the World report, co-published by the Cato Institute. On four broad categories of economic freedom — legal structure and security of property rights; access to sound money; freedom to trade internationally; and regulation –. the United States was slightly “freer” than Sweden, the United Kingdom, Austria, Finland, and Switzerland. Meanwhile, Ireland, the Netherlands and, by a wide margin, Denmark were found to have freer markets. Note that the two highest scorers have two of the biggest welfare states in the world — which just goes to show that blurring issues of regulation and redistribution, as Brooks tries to do, leads to intellectual confusion.

So much for American exceptionalism in actual policy results. Meanwhile, how market-friendly is American public opinion? Not very, according to economist Bryan Caplan. In his book The Myth of the Rational Voter, Caplan documents the existence of strong and widespread anti-market biases in the American electorate — in other words, sharp divergences between public opinion and the accepted view among most economists. Thus, ordinary voters are more likely to say a price increase was caused by intentional gouging rather than the interaction of supply and demand; they are more likely to blame problems in the economy on companies downsizing or “shipping jobs overseas”; and they tend to underestimate recent economic gains and express more pessimism about the future. On the other hand, the better educated are more likely to think like economists and see such changes as unavoidable. So it looks like Brooks actually gets things backward here: From a free-market perspective, the dreaded intellectual upper class is more solution than problem.

Financial Times correspondent Clive Crook:

Progressives and conservatives alike call the United States a “free-market economy”: both sides have an interest in perpetuating this delusion. The idea is ridiculous – as ridiculous as calling Europe’s economies “socialist”. Continue reading →

Creating An Innovative, Just Economy

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Commenting on a dustup between conservatives over AEI president Arthur Brooks book, The Battle, Economist correspondent W. W. writes:

I strongly favour the culture of dynamism and innovation that thrives when markets are left relatively unfettered, but it is a straightforward mistake to confuse questions of economic freedom and entrepreneurial dynamism with questions about the size of the redistributive state.

I find it hard to believe that W. W., a conservative whose writings I enjoy and respect, really believes that “innovation… thrives when markets are left relatively unfettered.” Dynamism I could see an argument for, even if I don’t buy it. But innovation?

Take the biggest innovation of the last 20 years: the Internet. It’s hard to argue the Net was a result of unfettered markets when Uncle Sam funded and nurtured it. And we don’t have to wonder if a “relatively unfettered” market also could have created the Net. All you need to do is look at the track record of CompuServe, AOL, and other competitors to the Net — they did everything they could to create closed systems whose spirit was contrary to the essence of the Net.

Or what about finance? It’s a moot point; no way could you call the world of finance “relatively unfettered.” If it was — if we got rid of deposit insurance, the Federal Reserve, and any implicit agreement that we would bail out big banks and Wall Street when they threatened to push the economy off a cliff — it would certainly produce innovation. But would anyone want to live with the innovation it created?

Or how about healthcare? Again, it’s hard to make an argument about innovation based on a market that’s “relatively unfettered” given how amazingly fettered the healthcare market is. Of course, if you think our current drug patent monopolies are part of a relatively unfettered market, you could argue that the truly ingenious ways drug companies manage to bribe doctors, pollute medical information, sucker consumers, and otherwise jack up the cost of healthcare while producing new drugs which usually aren’t better than anything on the market is very innovative. But this isn’t the kind of innovation I’m rooting for.

This isn’t to say that markets don’t create innovation — they do. But it’s hard to see how you can argue that relatively unfettered markets are the main source of it.

So if a “relatively unfettered” market isn’t the way to nurture a pro-innovation economy, what is? In the next few posts, I’m going to sketch out a draft of my answer.

Interesting Perspective on GM Bailout From the Man Who Ran It

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Steven Rattner, who oversaw the GM bailout, just published Overhaul, his account of what happened. The New Republic’s Jonathan Cohn has an interesting interview with him. A few of the highlights:

On why the bailout was necessary: I’d missed this during the initial coverage of the GM bailout. Even though I don’t like GM, I was in favor of bailing out because having it go bankrupt and falling apart while the economy was falling off the cliff would’ve been a disaster for working people in Michigan and elsewhere. But it turns out there was a more straightforward reason: effectively, GM couldn’t go bankrupt, it could only go out of business.

By early 2009, a lot of people were saying we should just let GM go under. That’s what happens in capitalism: Companies fail. So why rescue them?

SR: Companies do fail all the time and in a normal economic and financial environment there is a mechanism for dealing with failing companies. They go through a bankruptcy process so there is private capital available to finance them in bankruptcy, called DIP financing, and then they eventually emerge restructured. In some cases they get liquidated if they’re simply, not viable, but most major companies that go through bankruptcy emerge and continue to function.

But late 2008 and early 2009, private capital markets were frozen, so there was no private capital available to finance GM in a bankruptcy. And without DIP financing, GM would have simply run out of money, closed its doors, and filed a bankruptcy petition that quickly turned into a liquidation. It would have put out of work all of its people, all of its dealers and employees—or most of them—along with many of its supplier jobs. It would have rippled through the auto sector and it’s quite possible, if not likely, that Ford and Chrysler would have been forced to shut down, too, because of the supplier problems. So this was an extraordinary problem, of a magnitude that I’ve never seen in my lifetime. I think it was appropriate for the government to step in.

On whether unions were the reason for GM’s failure:

Continue reading →

Power, Values, and the Economy

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I think a critical piece of a framework for talking about the economy is being able to bypass the “government vs. market” muddle that traps a lot of folks. After reading Markos’ posts on being a Libertarian Democrat I thought I might’ve found a way — by using power as a focus. A little work on it and it became clear that this approach isn’t going to work. But I think there’s something useful here, so here’s a quick dump of what I came up with.

A lot of the issues I’ve been blogging about can be organized into four ways of thinking about power:

Checks, Balances, and Centers of Power: Dig below the “I want small government” rhetoric and you’ll find most folks don’t have a philosophical opposition to big government — especially if it comes in the form of Medicare. But they don’t like getting stepped on or feeling like they’re just a pawn in a game powerful people are planning. They may mention government first — not surprising given the last two decades of relentless right wing ideological attacks. But ultimately they don’t really care whether the boot stomping them is the DMV or their health insurance company.

If we want to ensure everyone gets a say, we need to create checks and balances against any concentrated power. This approach gives us a way of talking matter-of-factly about the central role concentrated power plays in the economy. And it easily incorporates smaller but still important forms of power, like the problems Smart Growth advocates have run into with NIMBYists.

Individual Power vs. Community Power: the differences, trade-offs, and interdependencies between shaping your own destiny and shaping our destiny. For example:

  • The contradictory, mixed feelings many people have around individual versus community power — where “don’t tell me what to do” collides with how tightly interdependent we are, as seen most recently with the spate of conservative, freedom loving communities banning bicycling because they drive some motorists crazy.
  • As our population ages — by 2030 one in five Americans will be over the age of 65 — what does “freedom” mean when someone is dependent on caretakers? And what are our mutual obligations to those caretakers?
  • The difference between strategies based on individual actions — ” ponying up” — versus mobilizing a community.

 
Types of Power : when most folks — even some liberal policy folks — talk about government, they mostly talk about “regulations,” by which they mean the power to ban or require certain actions. But that’s only one way to use power — and a fairly blunt way at that. This approach could help us talk about the range of ways in which we can use power.

  • How can we try to change the economy while still allowing for flexibility, individuality, decentralization, and creativity?
  • When should we use a decentralized vs. centralized approach?
  • How do we avoid a framework that traps us in just one approach, such as nudging?
  • Where do we want to use the power to say yes versus the power to say no?
  • Where is coercion appropriate and where isn’t it? In other words, does it make sense to ban/require behavior versus stacking the odds in favor of the good guys or creating new markets?

 
Power & Values vs. Reality: As I wrote in my critique of Krugman and cap-and-trade:

If you’ve ever heard someone preach the joys of a market-based solution, odds are at some point they’ve said, government regulations/bureaucrats can’t be smarter than the market — the economy’s just too complicated. But as we saw last week, creating a market-based solution runs smack into the same problem.

In short the principle, We Aren’t As Smart As We Think We Are — that we often don’t know what strategies will actually work in the real world or even what’s possible. It’s also a way to talk about managing the tricky balance of dreaming big while getting real.
 

Conclusion: After playing with this piece for a couple of days, I’ve decided that using power as a focus doesn’t work. It’s hard to talk about power without treating power as a negative. Even reframing it — e.g., having the power to shape your own destiny or our having the power to shape our community’s destiny — doesn’t do the trick. But it might be a step in the right direction.

Libertarian Democrats' Mixed Feelings Towards Government

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In 2006, Markos of Daily Kos wrote two pieces in which he argued he was a “Libertarian Democrat.” While Markos is clearly a player in the game of politics, I think his posts nicely capture the jumbled mixture of complex, contradictory feelings a lot of “sane people” have towards government. So if I’m going to find a position with which to have a dialogue, this seems like a good place to start.

What does it mean to be a Libertarian Democrat? Libertarian Democrats, Markos argues, start from a core principle: maximizing individual freedom.

The key here isn’t universal liberty from government intrusion, but policies that maximize individual freedom, and who can protect those individual freedoms best from those who would infringe.

So a “free” market needs rules (“regulation”) in order to function. And such rules should be welcome so long as they are designed to enhance and protect our personal liberties.

What role does government play in maximizing freedom? First, create opportunity where the market doesn’t, because “without opportunity, there is no freedom.”

A Libertarian Dem believes that true liberty requires freedom of movement — we need roads and public transportation to give people freedom to travel wherever they might want…. A Libertarian Dem understands that no one enjoys true liberty if they constantly fear for their lives, so strong crime and poverty prevention programs can create a safe environment for the pursuit of happiness. A Libertarian Dem gets that no one is truly free if they fear for their health, so social net programs are important to allow individuals to continue to live happily into their old age. Same with health care. And so on.

Second, check the power of corporations.

But unlike the liberal Democrats of old times (now all but extinct), the Libertarian Dem doesn’t believe government is the solution for everything. But it sure as heck is effective in checking the power of corporations….

A Libertarian Dem believes that we should have the freedom to enjoy the outdoor without getting poisoned; that corporate polluters infringe on our rights and should be checked. A Libertarian Dem believes that people should have the freedom to make a living without being unduly exploited by employers.

My first reaction to Markos’ definition of a Libertarian Democrat: for someone who calls themselves a Libertarian, that’s an awful lot of government! Even plain vanilla Libertarians believe in some government, but Markos’ definition seems a lot closer to European-style Social Democracy than to anything most folks would call Libertarianism.

Then again, scratch below the surface of what many people who call themselves “Libertarian” and you’ll find a ton of government. So perhaps Markos is just making explicit what a lot of self defined “Libertarians” really think.

And even Markos soft pedals how much government he actually wants. Take the way he talks about Silicon Valley:

My libertarian tendencies have always found a welcome home in the Silicon Valley culture (and in all of the nation’s great technology centers). It is a place where hard work and good ideas trump pedigree…

But there are other reasons why this outpost of libertarianism works. The government has put in an infrastructure to support the region including, among many other things, roads, the Internet, government research grants, and the most important ingredient of all: education, from the lowliest kindergarten to the highest post-doc program.

He does mention that the government created the Internet, but it’s in passing, like roads. But building the Internet isn’t like building roads. The government essentially created a market from whole cloth. If it hadn’t, we’d be stuck in a tangle of oligopolies — e.g., Compuserv, AOL — that wouldn’t have produced a fraction of the innovation, creativity, and wealth the Internet did.

Given the enormous role Markos wants the government to have, it’s unclear what role he thinks the government should play. For example, throughout his both pieces he argues that government shouldn’t be the “first solution,” but it’s hard to tell what that means in practice.

Of course, this also means that government isn’t always the solution to the nation’s problems. There are times when business-government partnerships can be extremely effective (such as job retraining efforts for displaced workers). There are times when government really should butt out (like a great deal of small-business regulation). Our first proposed solution to a problem facing our nation shouldn’t be more regulation, more government programs, more bureaucracy.

This from a man who last year warned Obama during the healthcare debate that he’d better not cave on the public option:

We’re not talking what we really wanted – we really wanted single payer – so we already compromised from our position. I think the public option at this point is sort of our Waterloo, This is where we stand and fight.

This statement is particularly striking because unlike, say, urban mass transit, there are plenty of examples in healthcare of first-rate systems — e.g., the Netherlands — where the market effectively plays a much bigger role than Markos is calling for.

The other interesting thing about Markos’ argument that “the government shouldn’t be the first solution” is that he doesn’t directly talk about another alternative to government power — unions, environmentalists, and community groups. It’s not that he isn’t in favor of them. Markos has often come out in favor of strengthening unions, for example. But they aren’t an explicit part of his model.

Am I saying Markos is foolish for believing in the tangled mess he calls Libertarian Democrats? Not at all. I chose his posts because I have a huge amount of respect for him and for what he’s accomplished. His description of what it means to be a Libertarian Democrat is a good summary of the very mixed feelings a lot of folks on our side have about the proper role of government and corporations in the economy. I think it’s a sign that we don’t have an effective framework for talking about the economy that captures the complex, nuanced, sometimes contradictory feelings many of us have.