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August 3, 2014
David Warsh, Proprietor


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Reinterpreting the Revolution

When he was eighteen, before entering college, John Micklethwait toured the US for a year with a friend, traveling on Greyhound buses. When they arrived in San Francisco, they spent a memorable evening with expat British businessman Antony Fisher, founder of London’s Institute of Economic Affairs, and his downstairs neighbor, Milton Friedman. They talked about the possibilities now that Margaret Thatcher had been elected prime minister and Ronald Reagan president of the United States. The conversation made a deep impression on Mickelthwait. Then it was back to Magdalen College, Oxford, and an eventual career in journalism.

Today his companion is a major general, but Micklethwait commands many more battalions as editor-in-chief, since 2006, of The Economist. His new book is The Fourth Revolution: The Global Race to Reinvent the State, written with longtime collaborator Adrian Wooldridge, management editor of the magazine. They argue that the West should complete the revolution of the ’80s that Friedman started.

It won’t be easy, the authors acknowledge. Both the welfare state and democracy itself must be reined in, the former by redefining and reducing expectations of it; the latter by consensually imposing a series of self-denying limits: global budget caps, monetary targets, earmarked taxes, co-payments, borrowing ceilings, sunset provisions and the like.

The successful construction and adoption of such a fiscal constitution would amount to a “fourth revolution” in the nature of government in the West, they say.  Previous revolutions they associate with three philosophers who at intervals wrote influentially on the role of the state. This catechism, a familiar device from their magazine, is designed to buttress the case for what they hope will happen next.

Thus Thomas Hobbes described the fundamental purpose of the nation-state as the creation of law and order, thus the overwhelming force necessary to maintain  the nation-state known ever since, at least to Hobbesians, as “Leviathan.” John Stuart Mill, who lived in a more prosperous time, imagined the state as a kind of “night watchman,” dedicated to free trade, social rights (of women in particular),  and education.   And Fabian Society socialist Beatrice Webb conjured a ”welfatre state” in the twentieth century in which government influence extended into every sphere of production and consumption.

The authors are then off on a round of breathless reporting: to California, which they say illustrates everything that is wrong with modern democratic government, until, miraculously, under Gov. Jerry Brown, the state begins to straighten itself out; to Singapore, to see Lee Kuan Yew, founding father of  a new model of national development, adopted by China, “that is in many ways leaner and more efficient than the decadent Western model”; to Sweden, where a wave of privatizations has reduced government spending in twenty years from 67 percent of GDP to 49 percent.

Along the way, we meet many of the usual suspects. Clayton Christensen, of the Harvard Business School, is “perhaps the world’s most respected writer on innovation,” who thinks the public sector will be upset by what he calls “mutants,” new organisms that may spin out from unexpected directions. (Their esteem is not  universally shared.) Peter Theil, a prominent venture capitalist, laments that technology has so far failed to change the public sector. Devi Shetty, an entrepreneur, “whom American surgeons may one day remember the same way that American engineers think of Kiichiro Toyoda,” has a production line of forty cardiologists who perform 600 operations a week in Bangalore.

There is a peroration:

The Fourth Revolution is about many things. It is about harnessing the power of technology to provide better services. It is about finding clever ideas from every corner of the world. It is about getting rid of outdated labor practices. But at its heart it is about reviving the power of two great liberal ideas.  It is about reviving the spirit of liberty by putting more emphasis on individual rights and less on social rights. And it is about reviving the spirit of democracy by lightening the burden of the state.

One indication that history may not be tending in this direction is that the subject of climate change comes up nowhere in the book.  This is odd because the weekly Economist does such a good job of reporting on the growing scientific consensus that global warming is becoming a serious problem.

Another contraindication is to be found in the authors’ proposal to “leapfrog over the muddle of Obamacare,” borrowing equally from “Old Europe and New Asia.” Why not combine a European-style single-payer health care system, featuring an independent medical board to evaluate the cost-effectiveness of medicines, devices and procedures, with means tests and a Singapore-style stream of earmarked taxes pay for it.  That might strike Tea Party fundamentalists as socialism, they write, but in fact it is precisely the kind of transparency-inducing global cap they advocate in other connections, including Social Security.

It is not fair to place so much weight, as the authors do, on Milton Friedman’s shoulders. The Chicago economist, who was 94 when he died, in 2006, was a deeply consequential 20th century figure whose role is not yet well understood. He may be fruitfully compared to John Maynard Keynes. Both men were authors of clarion wake-up calls. Keynes argued that government had a role in stabilization policy that it must not shirk; Friedman, that there are many economic ways to address a problem (including, presumably, the threat of global warming). Neither man was much concerned in his day with the finer points of economic analysis,  but each commanded the attention and, ultimately, the agreement of his age.   Other theorists, notably James Buchanan and Friedrich Hayek, have been more concerned with the idea of fiscal constitution.

At one point in their roundup, the authors quote Michael Bloomberg, the billionaire financial analytics entrepreneur who served three successful terms as mayor of New York City before returning to civilian life.  Among other things,he oversees Bloomberg BusinessWeek, which he bought while he was mayor. Running a city is different from running a business, Bloomberg says.

People are motivated by different things and you face a much more intrusive press.  You cannot pay good staff a lot of money…. In business you experiment and you back the projects that win. The healthy bits get the money, and the unhealthy bits wither. In government the unhealthy bits get all the attention because they have the fiercest defenders.

Doubtless so.  But that doesn’t mean that governmental processes are not being improved, mainly along the lines advocated by Micklethwait and Wooldridge.  Perhaps it is familiarity with the details that makes Bloomberg BusinessWeek so consistently interesting when it arrives along with The Economist each week.  Hardly a week passes that I don’t compare the one to the other. In coverage of the Fourth Revolution, most weeks I think that the Americans are getting ahead.

.                                   xxx

A fourteen-page article, “The Biden Agenda: Reckoning with Ukraine and Iraq, and keeping an eye on 2016,” by Evan Osnos, in the July 28 issue of The New Yorker, signals the vice-president’s willingness to contest the Democratic presidential nomination with former Secretary of State Hillary Rodham Clinton. For both the politician and the journalist it is an impressive outing (Osnos, recently returned from China, is author of Age of Ambition: Chasing Fortune, Truth and Fraith in the New China). The article would seem to promise a spirited campaign.

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3 Comments

  1. dilbert dogbert wrote:

    MMMMMMM “It is about getting rid of outdated labor practices.”
    Like having a fixed number of hours of work at a fixed location and a fixed rate of pay? I seem to read that businesses are moving to an on demand labor model. No fixed hours of work. No fixed place of work. No fixed rate of pay. Sounds like a wonderful new world.
    I have a one word description for books like this: Balderdash!!!
    These two gents started at the top in life and never looked down. Wonderful!

    Monday, August 4, 2014 at 8:05 pm | Permalink

  2. dilbert dogbert wrote:

    Here is a link adding data:

    http://macroblog.typepad.com/macroblog/2014/08/whats-driving-the-part-time-labor-market-results-from-an-atlanta-fed-survey.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2FRUQt+%28macroblog%29

    Found in comments at Calculated Risk

    Thursday, August 7, 2014 at 4:50 pm | Permalink

  3. Eric Smith wrote:

    The writings of Micklethwaite and quite a few other economic and political thinkers should have their own section in the library called “Theories for Others to Live By.”

    Friday, August 8, 2014 at 11:34 pm | Permalink

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