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Heads of state in mid-19th C understood the nature of national debt better than current ones September 14, 2011

Posted by larry in economics.
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Some members of our social elites are among the most dangerous people in the world. Not in the way a Ted Bundy is or a Joseph Stalin might be, but in a more subtle way. They are dangerous in that they can destroy the lives of people indirectly and from a great distance. They are isolated from their communities and hold bizarre beliefs about what goes on in parts of the social network of which they have little or no experience. They have, for instance, no idea how the economic system works, other than how it works for them. This was not always so.

“The public debt on the first day of July last, as appears by the books of the treasury, amounted to $1,740,690,489.49.  Probably, should the war continue for another year, that amount may be increased by not far from five hundred millions.  Held as it is for the most part, by our own people, it has become a substantial branch of national, though private, property.  For obvious reasons, the more nearly this property can be distributed among all the people the better. …  The great advantage of citizens being creditors as well as debtors, with relation to the public debt, is obvious.  Men can readily perceive that they cannot be much oppressed by a debt which they owe to themselves.”
— Abraham Lincoln, 1864 Annual Message to Congress

Coming on to Kennedy, which is not all that long ago.

“The myth persists that Federal deficits create inflation and budget surpluses prevent it. …  Obviously deficits are sometimes dangerous – and so are surpluses.  But honest assessment plainly requires a more sophisticated view that the old and automatic cliché that deficits automatically bring inflation. …  What we need is not labels and clichés but more basic discussion of the sophisticated and technical questions involved in keeping a great economic machine moing ahead.”
— Jack Kennedy, 1962

Now let us look at Kotlikoff who has recently been in the news.

“… [I]f there is no change in the net taxes paid by current generations, future generations will have to pay net taxes equal to 71% of their lifetime incomes.”
— Lawrence Kotlikoff, Harvard Business Review, May-June 1993

It would appear that we have gone downhill intellectually since 1864, though Kennedy suggests that the downhill trend hasn’t been steady but punctuated by hills and troughs and that we are presently in a rather deep trough of intellectual sloth and incompetence. Roosevelt himself wasn’t always sure of what he thought or of what he should do.  But that may be excusable because it could be argued that we knew less in his time. That excuse won’t wash this time.

It is a disgrace that Lincoln had a better understanding of how the economic system worked than do the incompetent ding-a-lings and their hangers-on that populate Congress and some other governments today.  The usual trade-off argument that is often trotted out that government heads have to compromise has no explantory value, as Lincoln was subject to similar contraints.

One difference between Lincoln’s time and today is the perspectives of the social elites.  The elites in Lincoln’s time, while self-interested, also felt that they owed something to the society in which they lived and which had offered them such opportunities.  Christopher Lasch, in his last book, The Revolt of the Elites and the Betrayal of Democracy, persuasively argues that present day elites are so isolated from the communities in which they live and from which they obtain their sustenance and privileges that they feel no social obligation whatsoever to their respective communities.  Effectively, this turns them into sociopaths.

Robert Hare, one of the leading experts on psychopathy, defines “psychopathy” and “sociopathy”as follows:

      Psychopathy:  No conscience and incapable of empathy, guilt, or loyalty to anyone but themselves;

      Sociopathy:  Not a formal psychiatric condition;  actions viewed as anti-social and criminal by society at large but not within their own socio-cultural group.

A psychopath exhibits no remorse or guilt or empathy in any situation or with any other person than him or herself, and sometimes not even then.  I would modify Hare’s definition of “sociopathy” as consisting of psychopathic behavior that is restricted to particular social roles or social situations the actor finds him- or herself in.  Under this modification, sociopathy becomes a limiting case of psychopathy.  This modification does not conflict with Hare’s definition but it carries the same emotional punch as the central term, psychopathy, does, as the terms refer to virtually the same behavior.  Sociopathy becomes a restricted kind of psychopathy.

The behavior that Lasch describes as being exhibited by the social elites seems to differ not at all from that of a psychopath.  Hence, the conclusion that a reader is tempted to conclude, though Lasch doesn’t, is that many member of the elite are psychopathic.  Certainly, some members of the Western banking community exhibit behavior consistent with psychopathic character traits, though these may be only situationally determined.  The situational influence of role behavior is something that is beyond my scope here, but it is a factor which may bring about psychopathic behavior in a person who might in other circumstances act and feel quite differently.  They are not true psychopaths, who are psychopathic no matter what situation they are in or what social role they are carrying out.  Nevertheless, partly as a consequence of their social and cultural isolation from the larger social network, and because they are basically intelligent, though not necessarily well educated in a broad sense, they are able to act psychopathically and to have such acts affect others in a quite negative fashion.

In a fundamental sense, their very isolation makes certain members of our current elites some of the most dangerous people in the world.  They can effectively destroy large swaths of the world around them while remaining unaffected themselves.  At least in the short run.  But as Keynes once aptly wrote, in the long run, we are all dead.

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Comments»

1. DMO - September 21, 2011

Good post. Just a minor point: “The elites in Lincoln’s time, while self-interested, also felt that they owed something to the society in which they lived and which had offered them such opportunities.” True – but maybe because their society was smaller and less complex than ours – they were better able to distinguish between self interest and enlightened self interest: If I foul my patch – life will become less pleasant for me, and for my offspring. Many of our present sociopathic oligarchs cannot easily make such a distinction. Plus the rewards for greed are now so great as to be able to create a foul-free patch for themselves and their proximate descendants?

Larry - September 21, 2011

A reasonable point. A modification I would suggest is that while they may think they can create a foul-free patch, so damaging and grotesque has this sort of thing become that isolation is now near impossible (except for the very short term), except perhaps for Krugman’s top .01% – http://krugman.blogs.nytimes.com/2011/09/20/taxes-and-the-wealthy/. That said, you may well be right that partly because they are motivated not to see the negative consequences of what they do, the environment assists them in being able to avoid seeing it.


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