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.
We’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?