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Restructuring, Revisited

How is that economic recovery going?  It may not feel like much, given that it’s progressing far more slowly and cautiously than after any other postwar recession.  One of the themes we’ve been discussing for over four years is that given that the downturn was of a different kind, the upswing will be different as well.  The term offered was “restructuring”, meaning that the economy we’re evolving towards is going to be very different from the one that spent the 2000s sputtering and failing.  That takes time and effort.

The term is starting to catch on outside of Barataria as investors find opportunity in the new industries that are going to grow and prosper in this new world.  That’s great progress.  But as we’ve noted many times, the real restructuring takes a broader social, political, and legal reformation and agreement that has been woefully slow to develop.  Enter Niall Ferguson, a Harvard History Prof and conservative bad boy to offer some new ways of looking at the growing malaise in the developed world in his forthcoming book, “The Great Degeneration: How Institutions Decay and Economies Die.”  His points are worth discussing, especially on the left, because they offer some new perspective and potentially more fruitful debates than we’ve been having so far.

foundationWe’ve written about Ferguson before and the unabashed pro-Western bias that makes him a conservative icon of a kind.  His most recent homophobic off-the-cuff remarks on JM Keynes will only cement that reputation, so it’s hard to imagine the left ever embracing what he has to say.  But his arguments definitely cut to the heart of what restructuring means and why it is critical if we are going to break through to an era of higher economic growth.

Ferguson’s argument makes sense on the surface – institutions have been failing us in the developed world for some time and are largely rotten at the core.  But he focuses on four key breakdowns that threaten our ability to ever generate economic growth in the future:

•    Breakdown of the contract between generations.
•    Excess regulation
•    Rule of lawyers
•    Decline of civil society

The first is somewhat obvious – our debt is crippling the livelihood of our children and obligating them to pay for our excess rather than follow their dreams.  But it also includes our inability to get past our petty politics and craft the world that they can live in.  Excess regulation may not seem like the problem of our day, but spotty enforcement and increasing complexity of regulation makes it much harder for entrepreneurs to compete on a level playing field and participate in a truly open society.  That brings us to the rule of lawyers, rather than the rule of law, where nearly all regulation is worked out on a situation basis that favors the wealthy who can hire the best lawyers.  Finally, the breakdown of civic institutions that do good work in the world has led to a tattered civic contract between society today.

There may be more critical barriers to restructuring, but what matters here is that a strong argument that the social and political contracts governing us today are broken – and this is a major barrier to seeing us through to a more healthy society and economy.  There’s plenty of room in each of these for a left-right debate of a kind, too.

What matters most is that this could be the basis for an alterative perspective which breaks us out of the poisonous and unproductive politics we have today.  It’s not necessarily complete by any measure, especially given that it does not provide specific recommendation as to how to proceed forward and out of the problems of today.  But it focuses on underlying issues that are the driving force of key problems we see in front of us such as rising inequality and lack of opportunity for the young.

Where should we go with this?  The debate is finally, many years into this restructuring, starting to be engaged.  Those of us who often disagree with Ferguson on specifics should at least acknowledge his desire to confront more fundamental issues and engage in a healthier debate than we have been having so far.  A good dollop of immediate fixes that at least work us towards organizing these problems would be helpful, too.

Recovery?  That’s an event that happens after a downturn, something we simply wait for and enjoy when it comes.  Restructuring is a process, far more active and gut-wrenching, which takes actual work and commitment.  The more we avoid it the longer it’s going to take and the less satisfactory the results will be.  It’s been four years so far – how is that waiting going for you?

16 thoughts on “Restructuring, Revisited

  1. I appreciate what you’re doing here and Ferguson sounds like an interesting guy, but you’ll have to boil this down to something much simpler if its ever going to take off.

    • I agree with that. I’m just happy that the conversation appears to finally be going strong. Perhaps the talk about investment opportunities in restructuring is going to be more fruitful?

  2. I certainly agree there has to be some thought on debate on the underlying issues. Ferguson’s comments on gay people, as I understand them, amount to the ridiculous conclusion that gays, because they don’t have children, aren’t concerned about future generations. I admit, that I read that on gawker.com, so there may be some bias in their reporting. However, I question a historian’s analysis of what are the underlying causes of our economic malaise given his rather simple, ignorant comment on homosexuals. Indeed, the four general areas you mention, I believe are already being thought about. Maybe not in truly productive way, but isn’t the breakdown between generations and the resulting debt you mention really what’s being discussed to justify the sequester and austerity measures? In terms of excess regulation, haven’t de-regulated the financial industry to the point of near collapse? Haven’t we opened up our markets? In terms of the rule of lawyers, hasn’t the Supreme Court been the most pro-business court to date and severely restricted the reach of class action suits (see today’s NYT)? I suppose the decline of civil society is something to try and address, but aren’t the intolerant, homophobic comments from Ferguson indicative of that problem?

    I guess I tired of experts like Ferguson dispensing general platitudes about what has to happen. I think that masks the problem . For example, is it really excess regulation? Or is it just not the right regulations? I think we need to be more sophisticated in our analysis of what needs to be done, and I would expect something more from a Harvard professor.

    • On regulation, Ferguson is indeed against complex regulation, wrong regulation, and especially uneven enforcement – that is his point. As for lawyers, Ferguson makes the same point you do. I think he’s far too hawkish on austerity myself and have made that point very clearly in previous posts.
      As for his ridiculous homophobic comment, it was terrible and he said so himself pretty much immediately (which is what I linked to).
      My point remains that someone, finally, is talking about a complete social, political, and legal restructuring. My ideal person to do it? No, I don’t think so. But I don’t know of anyone else who is attempting to address all of these issues simultaneously as symptoms of a general rot at our core – which I do believe that it is.
      There is a lot of room to disagree with his conclusions, but conservatives who argue from his perspective are far more productive than the usual nonsense we spend time arguing. I think it’s vital that we on the left engage that debate and promote it. Besides, I think we’ll ultimately win most of these points, too.

  3. Does Ferguson use the term “restructuring” ever? I don’t recall it. I see where you are at as a concept and it has been a long time that you have been talking this up. But this seems like something different than what you said in the past, correct me if I’m wrong?

    • No, I don’t think he does use “restructuring” directly. But he is talking about rebuilding the institutions that make the system work, which is the same thing in my book.
      His take is different from mine, yes. In the links back you can see that I started by talking about structural unemployment and moved on to regulatory structures that are outdated, etc. But they are all roughly the same thing in the sense that they are part of a “New Deal” that is essential. And yes, I tend to focus more on immediate policy matters as part of that (given that we are in a crisis).
      I’m looking for any progress towards an understanding of the long view, and I found some. I fully expect flak from my fellow lefties, especially given what a flawed personality Niall Ferguson is. But I have never cared about personalities, etc, and only care about ideas – and how they make their way through the various forms of media present today. I hope this type of thinking catches on.

  4. Ferguson is a very good writer, I have read 2 of his books on WWI and the British Empire. The way I see it is we are locked. I drive in the northern suburbs and I see the crumbling roads and the lack of good alternatives. I don’t have the answer as this will take such a big shift.

    • I like Ferguson’s approach, but he does seem to slap his books together. Makes me think I should be doing the same. 🙂
      My biggest problem with him is that he doesn’t seem to provide a way out. Granted, that is the hard part and it takes a lot of politics to get us to that point, so it’s not fair to ask him to solve everything. But he does provide only a different way of looking at things.
      I do want the left to engage this kind of debate. He is a true “conservative”, taking the long view. It seems far more refreshing to me than the expediency of neo-cons (are there any left?) and tea party types.

  5. You are all over the map politically lately! I guess I don’t have a problem with that but I am starting to feel whiplash. This kind of stuff is going to take a lot more if you are going to sell it. It is far too esoteric and academic. I think you have done a better job on restructuring than this guy has. If your point is that other people are talking about it too that’s great but I don’t see this getting anywhere as it is here.

    • Fair enough, but I am still hoping for productive, engaged conservatives. Perhaps I should be getting the message out harder among the left – for us it’s easier to talk about a “New Deal”.

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