Tuesday, March 3, 2020

The ballistic System of Governance is dying, long live the guided System

On February 17, 2020, Daron Acemoglu wrote an article under the title: “Social Democracy Beats Democratic Socialism,” and had it printed in the online publication, Project Syndicate.

Ten days later, on February 27, 2020, Nicholas Vrousalis responded to that article with one of his own, which came under the title: “Social democracy needs democratic socialism,” and the subtitle: “If Swedish-style democracy is the cure to the ills of American capitalism, as some US liberals maintain, then socialism is its only possible liberal and democratic outcome.” It was printed in the online publication, Open Democracy.

By the time you've read both articles, you'll be left with the same kind of feeling as if you had listened to a pair of grownups, vehemently arguing if this was a case of six of one, or half a dozen of the other.

Human beings have been experimenting with politico-economic systems for thousands of years, and whereas some systems have worked better than others, not one has delivered justice for all the stakeholders, so as to maintain social tranquility while delivering continued growth of the economy, and guaranteeing the advancement of society. But why is it that all those experiments failed?

To answer that question, we must first acknowledge that the subject is too complex to be explained solely with the use of the language of politics or economics. We must use the language of metaphors instead. In fact, one metaphor alone will not be enough to unpack the subject, but three will do an adequate job.

Consequently, imagine a pilotless airplane that's attempting to fly towards a stationary nirvana with a strong wind blowing it from side to side. Now, imagine a train that's traveling on fixed rail-tracks towards a nirvana that shifts its position from place to place. And finally imagine a car that's traveling on a highway whose end is connected to nirvana. And so, as nirvana shifts position from place to place, the highway swerves in tandem with it to remain connected.

Here, nirvana represents the politico-economic system that is expected to deliver justice and equity to all the stakeholders while also delivering a growing economy. The system shifts from place to place because it depends on the unpredictable human nature––that which is known as the animal spirit. The wind that blows the plane from side to side are external factors such as climate conditions, new inventions, violent social occurrences, and so on––all of which influence the economy.

Throughout history, every attempt to devise the “perfect” politico-economic system, has relied on the idea of launching the economy in a direction that points to where nirvana is situated. But even if nirvana remained stationary, the winds of change blowing the airplane from side to side, will prevent it from getting there. In addition, reality being that nirvana itself keeps shifting position due to the natural and human factors that act on it, even the train will not get there, given that it can only travel on fixed tracks, whereas nirvana is constantly changing positions.

In effect then, the only way to get to the nirvana of a politico-economic system that's as perfect as can be, is to use a car that's driven on a highway connected to nirvana. This means that the driver or drivers of the car must be awake and alert all the time. He, she or they will maintain the car on the highway as it bends and swerves, and will get to nirvana despite the external factors that will be acting on the car.

I call the use of the plane or the train the “ballistic method” because, once they are launched into a given direction, they tend to stay on it unless external factors push them in one direction or another. And I call the use of the car, the “guided method” because a crew will drive it and guide it to its destination.

Anyone that stops for a moment and thinks outside the box, will have no trouble seeing that science and technology in the fields of computing and communication, have advanced enough to make it possible to “drive” the economy as easily as to drive a car. What's required is the hourly input into a computer of such data as the price of commodities, the hiring and layoff of workers, the sales of consumer items, the credit card borrowings, the stock market and all the other components that make up the economic indicators.

An algorithm will analyze the numbers and provide the team that's driving the economy with options on what tools to use, and how to use them so as to keep the economy stable and efficient while also maintaining a high level of employment. As to the team that's in the drivers' seats, it will be composed of one member from the central bank, one from treasury, one from labor, one from the business community, one from the executive branch and one from the legislative branch.

Like a crew that is piloting a massive car called “economy” on a highway that is by no means a straight line, the drivers will use the tools at hand –– fiscal, monetary, regulation, acquisition, mergers, tradeoff, friendly persuasion, warning and so on –– to maintain the car on the highway, thus achieve the desired outcome at the end of every quarter and every year.

The time has come to recognize that a system which may work under today's conditions, may not work tomorrow under different conditions. Once we accept this premise, we'll accept the notion that any system we devise today, and in the future, will have to avoid being rigid, but be as flexible as it can be made.