The State of Government Workers

By Mike Koetting April 4, 2019

The recent shutdown of the federal government got me thinking again about something that has been on and off my mind for about 20 years, the state of government workers.

I started thinking about this one day in a class I was teaching and it dawned on me that the students sitting in front of me had never been alive when attacking government wasn’t the predominate mode. They were raised in an era, as Ronald Reagan put it, not only was government not the answer, but it was the problem. While it is possible that they grew up in houses that offered a broader view, it is impossible to escape the society-wide attitude that, even at its best, there is something suspect about government. (My niece recounts a classmate at the Kennedy School saying in class: “Private industry is always more efficient than government. Everybody knows that.”)

The government shutdown got me thinking again about the longer-term problems of this attitude. This is the first of three posts on the topic of government workers and the broader society.

I was struck that, particularly for the first weeks of the shutdown, coverage of the shutdown focused almost exclusively on the hardships that it placed on federal workers, and, belatedly, the contractors who depend on the federal government. I understand the focus on the human suffering of the workers and their families. But, by the same token, I wanted the coverage to give equal focus to the fact that this was not simply the loss of income for federal workers, but it was also a loss to the American people because important jobs weren’t getting done.

As the shutdown dragged on, the media did start to get clearer about things that weren’t getting done. A partial list included Federal Aviation Inspectors, IRS services and reporting, processing of requests for agricultural subsidies, wildlife refuges, FDA inspections, EPA inspections,, immigration hearings, Homeland Security e-verify for employers, requests for HUD housing vouchers, data kept by US agencies—including reports used by businesses and investors, Federal Trade Commission services–including its consumer identify theft reporting system, certain services relevant to weather reports, the FEMA office that sells flood insurance, virtually all civil cases in federal courts delayed, National Transportation Safety Board review of fatal accidents, preparation and training for the coming wildfire season. In short, life as we know it would be difficult to proceed without the services of the federal government. And, remember, the above list is only what wasn’t happening because of furloughed federal employees….and does not include all kinds of government workers at state and local levels.  

So, maybe people will admit that the government work force serves important roles. At the same time, I am willing to guess that the preconceptions many people have about the government work force are inaccurate.

Take for instance size. Between 1970 and 2018, the federal non-military workforce has declined by about 2%, virtually all in the Post Office. The number of other, non-military, federal employees has been level. During that time, the US population has increased by 70%, Congressionally mandated rules and regulations almost doubled, and Federal spending increased exponentially. So, in one sense, the size of government isn’t growing, in fact is shrinking relative to what needs doing.

On the other hand, the size of the federal service has been kept stable by shifting a large amount of government work to contractors. The magnitude of this escaped my attention until the shut-down got me curious. Turns out, the contracted federal work force is about 80% larger than the civil service workforce.

Moreover, while it may come as a surprise to many, this contracting apparently makes government more expensive. It is true that average salaries among contractual workers are typically lower than federal salaries, sometimes much lower. [I will address the issue of government salaries in subsequent posts.] But, on balance, once overhead and other expenses, including returns to shareholders, are added in to contractors costs, best guesses are that contracted work is materially more expensive. One investigator recounts a series of head-to-head competitions run by the Bush administration:

These competitions were used…to test its theory that any job listed in the “Yellow Pages” phone directory can be done at lower cost by contract employees. Federal employees won 83 percent of the tests, suggesting that they could do the jobs for less when given the opportunity to build a most-efficient organization.

This large amount of outsourcing combines with other trends to raise some concerns about the future of the government workforce, particularly at the federal level.

To start with, it has changed the shape of the distribution of work done by career civil servants. More and more lower and mid-level jobs have been outsourced. This has resulted in the creation of a “top heavy” civil service—that is to say, a disproportionate share of its positions are upper mid-level and higher. That in itself is not necessarily problematic, but it is corresponding to another problem—the aging of the civil service.

A report by the Volker Alliance, a non-profit group established by Paul Volker and others to advance the effective management of government, suggests the federal government is edging toward what experts have described as a “retirement tsunami”–54% of all federal employees are aged greater than 45, as opposed 38% in the private sector. At the other end of the age spectrum, only 16% of all federal employees are under 35, as opposed to 40% in the private sector. At some point in the relatively near future, there will be a severe shortage of civil servants who have the experience to successfully manage the much larger number of contractors.

What will happen then? There will be pressure to use contractors to fill gaps because we don’t have enough people coming through the ranks to effectively manage. At some point having so much of the federal workforce working not as civil servants, but for companies that have at least somewhat different agendas becomes a problem. This, again according to the Volker Alliance:

…weakens the chain of command and produces government failures, such as the failure to connect the dots that led to the 9/11 attacks and the sluggish response to Hurricane Katrina. It also encourages the use of contract and grant employees to backfill vacated posts.

In short, the use of contracting has become so pervasive, the difficulty of getting an actual civil service job so great and the disincentives from the relentless pounding on government have gotten us to a point where more reliance on contracting can become self-fulfilling.

It is also the case that the privatization of large portions of the federal workforce has adverse consequences for the workers themselves. This is also true at state and local levels, although the diversity of approaches in these locales makes generalizations more risky. More in the next post.

Centrists: Chill Out

By Mike Koetting March 20, 2019

Inevitably, people are starting to talk about 2020.

Prickly City by Scott Stantis

Many people I know—which is to say older people who will under absolutely no circumstances vote for Trump—are worrying that the Democrats are tending too far left. My advice: “Chill out!’ And It’s not just that this is all ridiculously far-way—although it is. Unless the Democrats lose their collective mind, I am not worried by this.

I consider myself progressive, but more of a gradualist. I supported Clinton over Sanders. I have many concerns about the policies proposed by those further to the left. But so what? As economist Brad DeLong points out (in a fabulous Vox interview by Zack Beauchamp, strongly recommended): “The baton rightly passes to our colleagues on our left. We are still here, but it is not our time to lead.”

I think there are two issues in play, how someone would govern and whether they could be elected.

Governing

From a governance standpoint, there really isn’t much place for centrists in today’s political landscape. Centrist proposals require someone to compromise with. But there’s no one there. As DeLong, who describes himself as a “Rubin Democrat,” puts it:

There is no allegiance to truth or anything other than the fact Republican leaders have decided on scorched earth, and other Republicans will back them to the hilt. Today, there’s literally nobody on the right between those frantically accommodating Donald Trump, on the one hand, and us on the other.

David Atkins, in The American Prospect is even blunter. He argues that the problems facing America—particularly the environment and income maldistribution—are so serious that we are simply kidding ourselves to pretend that we could ever achieve what is in fact necessary by waiting for Republican compromises. Atkins argues that centrist arguments about what is “realistic” are irrelevant, because their ideas of what is “realistic” are not commensurate with the size of the problems:

Any “solution” that would realistically get the vote of even a single Republican senator wouldn’t come close to doing what the moment actually requires.

These analyses strike me as accurate. Democratic centrism has become a form of negotiating with ourselves for compromises that will never come. We saw this in the Affordable Care Act. The ACA had been the Republican plan for the previous 20 years. But they were unwilling to put a single vote on it and have spent the last nine years relentlessly attacking it…on what basis it is not even a little clear.

While voters may understand this dynamic, maybe this argument won’t sway voters who long for the idea of unity and compromise. So we need to consider: do more or less progressive candidates change the odds of getting a Democratic administration? Hard to say. But at this point I think more progressive candidates are more likely to increase the odds of winning.

Winning

In one dimension, America is now split into three camps, those who will back Trump no matter what, those who will oppose Trump no matter what, and those whose opinions fluctuate. On another dimension, it is split into three groups—those who will definitely vote, those who definitely won’t vote, and those who might or might not. I don’t know how many people will end up in each cell (and I’m sure it’s a moment-to-moment thing).

But there are several things I am confident about. Barring any really surprising turn, the election will be decided by the cells of the below table in pink. Actually, it will be decided by the areas in pink in a small number of states—Michigan, Wisconsin, Pennsylvania, Florida, Georgia, Arizona and maybe one or two other states. The remaining states are largely a foregone conclusion—unless one candidate is a complete runaway, which seems like an unlikely guess at this point.

The results in these key states will depend heavily on turn-out among minority populations and young people. It will also depend on the extent to which white voters abandon their respective group trends—anti-Trump for college educated voters and pro-Trump for those without college educations.

I believe if Democrats in these key states can turn-out minority and young voters and take even a splinter out of the non-college educated whites, it will be more than enough to offset any possible loss among college-educated whites who might be worried about more progressive approaches. While polls differ somewhat, Morning Consult shows Wisconsin, Michigan and Pennsylvania with substantial disapproval for Trump among registered voters and Florida, Georgia and Arizona as essentially toss-ups. So Democrats have good starting spots in these states.

While even less scientific than polling data, it seems to me that positions further to the left are more likely to attract the voters that Democrats need than more careful centrist proposals. “Medicare for all” is something people can rally around. Incremental improvement of the ACA doesn’t sound to me like something that increases voter turn-out or woos non-college educated whites struggling to cover their health costs. Nor do I expect they will they will say: “Yeah. That would be a good idea but we’re worried about the long run fiscal impact.”

Winning and Governing

What are the centrist arguments against more progressive positions? The first is that it will cost votes from undecided voters. Maybe. But, as I argued above, I think that will be more than offset by the other votes it frees. Remember the electorate is getting younger and more diverse. If young people and minorities vote anywhere near their weight in key states, the Democrats win the presidency.

Well, you might say, that’s fine. But what happens when it’s impossible to deliver on those promises? Or what happens if, worse yet, we try to fully deliver on all those promises.

I concede there are some risks there. I believe those risks are less than the risks of Donald Trump getting re-elected, but I also believe that in their own right they are modest risks. Should Democrats take control of the Presidency and the Senate, and keeps the House, there is enough diversity within the party to keep things sane and it’s not as if progressive aims are themselves antithetical to general Democratic sentiment The biggest issues are that they would be too divisive in the rest of the country or that they would break the budget.

It is true that it is hard to get major change adopted if half the country is opposed. But, hard or not, that often seems to be the only way to move forward. From Civil Rights to Reproductive Rights, the changes didn’t happen because everyone in the country believed, but because we made institutional changes that changed people’s attitudes.

About budget issues, for at least the last 50 years, Democrats have shown themselves infinitely more responsible than Republicans. Odds are good that these issues can get sorted out. I don’t see any likelihood that progressive ideas would be get adopted without thorough vetting. As DeLong says:

…We argue with them, to the extent that their policies are going to be wrong and destructive, but also accept that there is no political path to a coalition built from the Rubin-center out. Instead, we accommodate ourselves to those on our left.

One other consideration: In order for Democrats to do any of the things that need doing, they must retake the Senate. Positions with regard to Senate races, as with House races in the last midterm, will need to be considerably more nuanced to local conditions. In many places the arguments that will win Senate seats will be much closer to the center. All the better. That will still take Senate seats away from Republicans and it will help keep Democrats more balanced than Republicans have been.

In sum, I am not worried about Democrats nominating someone “too far to the left”. I am worried about not winning. Our concerns must be around supporting whoever gets nominated. And if that is someone more progressive than I would choose, that’s probably better than okay.

Gun Violence: No Single Answer

By Mike Koetting March 1, 2019

I recently attended a summit of groups working on reducing gun violence in Illinois. Much of what was said underlined that we know ways to reduce gun violence without unduly limiting civil liberties. The problem is that, as a society, we are not willing to do what it takes. The majority of society, and certainly most readers of this blog, disagree that the loss of thousands of extra lives a year is an acceptable price to pay for relatively uncontrolled access to guns. But they haven’t yet expressed this belief so strongly that politicians feel no choice but to change their calculations. That may be coming, but it is not here yet.

In any event, that is old news and this blog will focus on a few other things from this meeting.

The first is kind of obvious, but I hadn’t really organized my thoughts before. Gun deaths have three relatively distinct etiologies.

  • First, criminal activity. This is both the classic “bad guy with a gun” scenario and the kind of perverted, intra-criminal mayhem that is all too common in Chicago.
  • Second, mass murders. Of course these perpetrators are “criminals” in the legal sense. But their motivations are much more complicated, and usually scrambled.
  • Finally, far larger than the first two in number of victims, are the shootings that involve individuals or small groups, such as domestic violence and accidental shootings. Suicides are a special case accounting for more than 60% of victims.

While these are not iron-clad distinctions, the larger principle is that each form of gun violence requires different strategies to combat. Much of the discussion—both in favor and opposed to regulation of guns—blurs these differences.

For instance, controlling automatic weapons and high capacity magazines won’t have much impact on the bulk of gun deaths. But it has the potential to reduce mass murders and the lethality of criminal activity. Rigorous background checks, on the other hand, will probably slow down would-be mass murders, but are unlikely to slow criminal activity given the policy incoherence among states and the number of guns already in circulation.

This is not to say any one of these issues is more important or less deserving of our attention. We need to work on all. But it is to say:

  • There is no “one size fits all” solution so…
  • We need to tailor our rhetoric to that fact because….
  • We want to avoid arguments where gun-rights advocates attack one measure we are proposing by showing how it is not likely to significantly impact all gun violence.

Thinking about the issue in this dissected way helped focus me on the importance of dealing with criminals and guns. For me, this is unfamiliar territory. Typically I am more concerned about the people who are in jail and shouldn’t be there, than the people who should be in jail and aren’t. (I am not at all sure jail is the right place for all these people; but roaming the streets armed to the teeth certainly isn’t the right place either.) It appears about 16% of all homicides in the country involve gang members, a number surely higher in Illinois and hugely higher in Chicago.

This, in turn, got me to pay more attention to two representatives from Cook County State’s Attorney’s office who were talking about what it took to prosecute gang members.

After their presentation, I asked them what were the most important practical steps that would support their work. They were prosecutors, so I shouldn’t be surprised that prevention was not at the top of their list. But what was at the top of their list was:

  • Better data and information exchange capabilities
  • More community trust

They said for the most part they knew who were the worst lawbreakers. The problem was actually convicting them. To do that, they needed to be able to get timely data and people willing to give tips and testify.

One can imagine solving the problem of getting better data. The prosecutors needed something like real-time access to information the police had. They said waiting for a week, or more, for a copy of a hard-to read report from the police was a major handicap. (I got validation this was a real problem two weeks later when the exact issue—inability to get timely information between the police and the DA–was a sub-plot element on CBS’ Blue Bloods, the New York City family/police procedural.)

Fixing this is not easy. But neither is it impossible. It is roughly analogous to the electronic medical records that I have worked on the past. It is expensive–not so much for the software itself, but for the costs of actually implementing. Effective implementation must include a very large amount for training, which is inevitably the first thing the budget-cutters want to reduce. Note that training also encompasses actually selling the people who will have to use it on why the new system is in their best interest. The truth is, no one likes change and no matter how good the new system, it has to have buy-in.

Gaining more community trust is another matter. The community at large obviously benefits from reducing the homicide rate, and the attendant fear. In fact, there are regular complaints that the police don’t do an adequate job of protecting people in minority communities. On the other hand, the community is sometimes reluctant to work with the police to get offenders off the street—even though they may be known. The result is a vicious circle where the community blames the police for not doing their job but the police blame the community for not contributing what they should.

I have no difficulty imagining reasons why the community doesn’t trust the police. Some are obvious—such persistent racism and fear the police can’t protect against retaliation. Some less obvious. But I suspect a lot people will be hurt by gun violence while we wait to resolve all the issues involved. We need some way to cut through the Gordian Knot.

Perhaps those who study this issue more closely have expertise-based ideas. But in my naïve view, it seems a truly community-based approach is necessary, something like Community Policing on steroids. It will require police to work with community leaders to define basic strategies for preventing violence. Note that in this case “communities” must refer to specific community neighborhoods.

Earlier in this century, many police departments centrally adopted a “broken windows” approach that entailed the police addressing all forms of disorder, however minor. Whether or not this approach worked at reducing crime, it’s likely that it came at the expense of reduced citizen satisfaction and damage to the community perceptions of the legitimacy of the police. One of the first advocates of “broken window” policy, George Kelling, has been forthright in acknowledging its problems. While he says there may be some value, it can’t be applied in a formulistic way. it’s imperative, he says, that

…in order to determine how to police a community, residents should identify their top concerns, and police should — assuming those issues are legitimate — patrol accordingly.

It is difficult for big city police departments to allow these kinds of determination at the community level. Police departments are bureaucracies and seek centralization. Even the logistics of allowing individual neighborhoods to develop their own priorities will be challenging, let alone implementing them. But I am guessing something like this is essential if there is going to be a functioning relationship that can develop sufficient community trust to get cooperation in getting the worst offenders off the street.

I would never suggest this should replace multi-faceted efforts to enact and enforce laws that provide common-sense regulation of guns. But, as long as the citizens of Missouri, Wisconsin and Indiana are unwilling to even consider those issues, we in Illinois—and no doubt many of you in other similar states—need a strategy to reduce the terror that stalks too many big city neighborhoods. Failure to figure out a way of reducing the violence is in itself a form of discrimination.

Environertia

By Mike Koetting February 14, 2019

Five weeks ago there was another scientific study that said the condition of the ocean was even worse than imagined and that, really, we better start thinking about what we are going to do—really.

One of my recent posts was about more speculative societal risk. Environmental risks are relatively immediate and are potentially existential. But, while a large percentage of Americans recognize it’s a problem, the political momentum to address the issue is not remotely commensurate with the degree of societal risk. How can this be?

First, most people think that while this is serious, it won’t really affect them. To some important degree this is true. Most of the consequences are in future generations. Or far away. Or both. Voters seem to be more concerned with things in their more immediate sphere, even if rational analysis shows that the magnitude of the risk utterly swamps many immediate issues. And to be fair, it’s a lot harder to worry about the next generation when you’re worrying about your own basic needs.

A large number of people, and perhaps a growing number, particularly young people, are worried about this issue. Still, we are far short of a critical mass to get this issue the focus that it absolutely demands. Frankly, I’m a bit surprised that young people aren’t closer to rioting in the street. I understand the range of problems they face in regular life, but do they not understand the degree of peril in which we have placed their future?

Second, there is the sense that whatever is required will require sacrifice. Discussion of sacrifice by policy tends to render citizens deaf and politicians mute. In World War Two, at least by common lore, people were willing to accept material societal sacrifice because there was a sense the country was in it together. For a variety of reasons, the prevailing sentiment in today’s population seems to be if I’m sacrificing, someone else is benefiting from my sacrifice. And people get grumpy when they feel forced to sacrifice for someone who isn’t. Some of this is comprehensible–for instance, loggers who believe their living is being undercut when they can’t log to protect some species that they don’t even know. But some of this is simply the perception that environmental preservation will require some unwanted changes. I am daily aghast at the level of waste I’m involved in creating; I could surely do with less. But it’s very hard to change habits when you believe it is spitting up-wind unless there is a broad national commitment. Which is manifestly missing.

There are those who claim that emergency efficiency can be achieved without giving up anything. I am sure there are ideas that can make the extent of the sacrifice feel much smaller. The substantial amount of unnoticed energy efficiency that the society has experienced in the last 35 years is an example. We need to be looking for even more opportunities. Nevertheless, I think it’s Pollyannaish to think we can do everything that needs doing in the time frame it needs doing without making some material changes in our life styles, even if the pain is less than the bleakest doomsayers predict.

We need to develop ways of uniting the country around the need for some sacrifice.

Third, various industries, particularly the fossil fuel industry, have deliberately undercut public debate.

You know who’s tougher than all your little superheroes? The fossil fuel industry.

This has been sabotage in two stages. In the first, oil companies systematically created doubts on the validity of climate science, just as tobacco companies fogged the debate on the health effects of cancer. We have clear evidence that as early as the mid-80’s oil scientists predicted the same global warming that models are still predicting. But the companies they worked for undertook a specific campaign to raise doubts. I am often accused of being cynical, but even I was surprised at the change in public opinion achieved by throwing sand. A Washington Post article summarizes:

In the early 1990s, polls showed that about 80 percent of Americans were aware of climate change and accepted that something must be done about it, an opinion that crossed party lines. By 2008, Gallup found a marked partisan divide on climate change. By 2010, the American public’s belief in climate change hit an all-time low of 48 percent, despite the fact that those 20 years saw increased research, improved climate models and several climate change predictions coming true.

Bill McKibben calls it “predatory delay.”

The second stage of the sabotage was massive expenditures to link the issue to raw partisan politics. Republicans became the voice of climate skepticism, even as the data became clearer and clearer. But, as happens to some liars, they are now so deep into those alliances there is no face-saving way out. Now they are trading their face-saving for the future of planet.

While the specific tactic of trying to create false uncertainty is no longer being practiced, I think the hangover of this campaign is still with us. It keeps a large segment of the population from feeling any urgency about the issue. That, combined with dividing the population on a purely partisan basis, makes this issue secondary to almost all but a handful of voters. Unfortunately, as virtually the entire scientific community is trying to tell us, we are desperately running out of time.

One of the problems is that the media drips out various reports on a regular basis but each one is like a separate alarm ringing. To a large segment of the population, one report sounds like the other and they all get put into a mental bin of “things too big to worry about.” Big oil managed to confuse the issue for three decades. Now it’s time for the rest of the society to develop a coherent message of danger and hope, and coordinate among the groups working on the issues. Not easy. But I think essential.

Fourth, I think there is a tremendous will to assume “They’ll figure out something.” Here again, there is surely some truth. As the situation gets more and more dire, new technologies will arise, indeed many have already. Some of these will be embraced quickly. Others will become snared in the fact that, while they would make societal-wide improvements, they reduce profits for specific groups–who resist fiercely. I am not sure what is the total of amount of “environmental savings” that could be realized if we started an aggressive program of making opportunistic changes. But it is essential to begin. In addition to actual environmental gains, it will help reduce the sense of helplessness, which is itself a serious threat.

However, a “they’ll figure out something” strategy can not be seen as an excuse for just doing what we’ve always done and expecting some solution to appear magically. Whatever ideas that are part of these yet unspecified solutions are still going to require considerable investment and thoughtful setting of priorities. New technologies will need to be surrounded by new attitudes that start from the premise this is not business as usual, but is a race against the global clock. It is abysmally clear that the current government—particularly the Republicans, but in truth the entire national government—is not close to sufficient commitment to this issue.

In short, there are powerful reasons why people are not sufficiently invested in saving the environment. But there are things to be done. Many of the things that got us here are themselves wonderful accomplishments. Others are the result of unscrupulous capitalism. Now we need to harness global inventiveness to get us out of this mess. But the inventiveness we need is less around the technological innovations. They are essential, but they are more likely to come. The inventiveness we most need is around how to shake off the societal and political shackles that are keeping us from giving the problems the attention they desperately deserve. I also think those concerned about this issue need to find ways to empower the children to lead us. It’s their future on the line.

China versus the Shutdown

By Mike Koetting February 4, 2019

What does China have to do with the shutdown?  Not much. But it helps put the shutdown in perspective.

The day before the partial government shutdown, the Dow Jones average stood at 22,445. The day before the shutdown unexpectedly ended, it closed at 24,576, a gain of about 9.5% in a little over a month. How could the Market gain that much when most of the American government was shut-down with who knows what damage to the American economy?

I certainly don’t know the whole answer, but to the extent the people who write on the financial news pages know the answer, there seems to be one over-riding issue:  How are tariff negotiations going with China? When there was good news about the discussions, the Market jumped; when bad rumors were in the ascendency, the Market tanked. (If you don’t believe me, simply Google “China negotiations and stock market”  For a tiny sample of up, see Fox Business news on January 18; for down, see a January 2 Reuters story.)

Look, I know this is hardly rigorous analysis and I know Market-watchers specialize in after the fact explanations that make the most insane jumps/falls look at least plausible. So I won’t fight this point to the death in a detailed way. But I won’t give up the general argument: at this point in American history, the Dow Jones cares more about China than the shutdown of the American government.

If you think about that, it makes sense. The Chinese population is more than 4 times that of the U.S. When China was dirt poor and technologically nowhere, raw population didn’t make that much difference. But that’s no longer the case. Although the standard of living in China is still lower than the U.S., it is growing and it has plenty of room to grow further. Twenty years ago, China’s economy was maybe 40% the size of the U.S.’s. Today it is probably at parity with the U.S. Even as its growth is slowing, China is still growing much faster than the U.S. Moreover, the Boston Consulting Group is projecting that Chinese consumption will grow at 9% annually through 2020.

As for technology, there is no argument that China now has a robust technology sector and the focused resources to ensure continued gains for some time. About being the first nation to land a lunar probe on the dark side of the moon, the head of the Chinese space program said “….this mission has helped our country make the leap from following to leading.” By itself, that would probably be an exaggeration. (Just ask Russia how far you can build a whole economy on a space program.) But in the context of a much more pervasive technology build-up across many sectors, even if a chunk of it is stolen, it is inescapable that China is now a worthy technological competitor.

In short, if you’re a corporation, you can’t see your future without China.

Note, the point I’m making here is not that China is any particular threat to the US. It may well be; it is certainly not a friendly country and has some very serious human rights problems. But that is not today’s post. Today’s post is focusing only on the implications of the fact that in the American stock market, it appears there was greater concern with the state of economic relations with China than the functionality (or lack of functionality) of the American government.

Implication 1:  Money has no country.

This is unlikely a newsflash to most of us, but we are not used to seeing it played out with such stark clarity. I am not sure this would have been possible in a previous world, before money was so rampantly unshackled from any social infrastructure. The argument has traditionally been that if a country taxes its most important business leaders too much, those leaders would leave and take their money with them. Maybe the converse is also true: if a country doesn’t tax its business leaders enough, they won’t have any allegiance. Or maybe it’s just that monied people have always been this greedy and it is only when economies become sufficiently fluid and governments stop controlling wealth accumulation that they are really empowered to act on it. So whether it’s cause or symptom, the willingness of investors to go wherever the money is biggest has never been greater.

There is a related issue. The rise of investor capitalism. Few corporations today have “owners” in the historic sense. We might think of Bill Gates as in some sense “owning” Microsoft. But, of course, he doesn’t. In fact, he owns less than 2 percent. The rest is owned by lots and lots of other people, most of whom have no real stake in the company, only its rate of return. In fact, many of those “owners” don’t even know they have some minute fraction of Microsoft “ownership” because they “own” it via index funds or through participation in pension programs, some of which use investment decisions determined simply by computer algorithms.  Perhaps, if asked, these people as individuals would say, “Yeah, we care about how the firms in which we invest make their money.” But there is no practical connection between any fleeting thought they might have about such things and how the market responds. The market, including the corporate CEOs whose compensation is determined by stock prices, don’t really care much beyond immediate earnings. And the earning opportunities, or threats, are apparently, very large in China.

Implication 2:  America is no longer the center of the universe.

Noah Smith, a Bloomberg Opinion columnist, points out this could change the structure of the world’s businesses. China may become

…the leading beneficiary of what economists call agglomeration effects. Agglomeration refers to the tendency of businesses to cluster together in the same region, because one company’s workers are another’s customers.… Agglomeration can bring big benefits to whatever region has the densest concentration of economic activity.

This may also change how we experience life as consumers. We’re used to being the market around which everything orbited. We expect a full slate of products designed specifically to American tastes. But increasingly, considerations will be given to how things play in China.

Karl Gerth, a history professor at U of C-San Diego who  has been studying Chinese consumerism, says:

For a long time, what’s popular in America often becomes popular in the rest of the globe. If, however, multinationals are getting most of their growth out of the Chinese market, then they’ll be orienting their R&D more towards Chinese consumers. That taste will be at the cutting edge, or dictate what tastes become like in other parts of the world.

Of course, things won’t change overnight. America still has a large and vibrant economy and will continue to strongly influence what is available to consumers. At least in the recent past, Chinese consumers have been focused on what seemed “American”. But there is evidence that fascination is fading and, as China becomes more assured of its own place, and as corporations become ever more concerned about how they are perceived in China, it is inevitable there will be changes.

Conclusion

The recent government shutdown was awful. It did all kinds of damage to all kinds of people, not least the damage to the idea that the elected government was capable of actually solving problems. But, while not a direct consequence of the shutdown, the circumstances illuminated with increasing clarity what has been going on for years: America can no longer assume it is at the center of the relevant universe. The relevant universe has expanded and we are no longer at the center, at least not alone at the center.

We will probably need a new national psyche. Too bad there are no therapists for countries.

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Addendum – Shout Out for Wikipedia

Wikipedia celebrated it’s 18th birthday on January 15. I use it three or four times a week. It’s a really uplifting example of how borderless cooperation can make the world better. It also demonstrates how to use the Internet to actual bring people together as opposed to apart. If you think of it, you might send them a few bucks for their birthday.

Risk

By Mike Koetting January 17, 2019

A few months back, while reading the book Fly Girls, about early women aviators, I was struck by how insanely dangerous early airplanes were. They fell out of the sky quite regularly and a remarkable percentage of the early aviators died in crashes. It got me wondering, anachronistically, how the development of airplanes would happen in today’s more risk-averse world. I found that same sentiment in a complaint voiced by a Silicon Valley developer that achieving self-driving cars was being impeded by the unwillingness of society to tolerate the trial and error necessary to make autonomous vehicles a functioning reality. This is a fair comment, although it doesn’t address that the early fliers almost exclusively killed themselves; when autonomous vehicles run amok, it is unsuspecting bystanders who bear the brunt. Nevertheless, this raises the broader issue of how much risk (and for whom) is society willing to incur for technological progress.

My last post recalled an observation by Donald Michael (The Unprepared Society, 1968) that technology had increased the interconnectivity of people in hitherto unimaginable ways. His specific example was that 150 years ago there could be no black outs in major cities because someone would have had to collect all the kerosene lanterns. He had a second, related, observation in the same book that has also stuck with me over the years. He pointed out that in statistical terms, the average outcome of any uncertain event is determined by multiplying the probability of a thing happening by the magnitude of the consequence. Thus, he asserted, if an event had a large enough consequence—say the ocean rising 100 feet—even if the probability was very small, the expected value could be large because the consequence was huge.

When you combine increasing density and interconnectedness, this question of risk from new technology becomes critical. In additional to the environment, where the risk is already off the chart, two areas that trouble me are genetics and Artificial Intelligence (AI). To be clear: both have tremendous promise to do good and I am suspect of knee-jerk opposition to advances in those areas. (For instance, I think much of the discussion about Genetically Modified Food is simply hysteria. We’ve been playing around with plant breeding since the beginning of time. This simply speeds up the process.)

Still, we would be kidding ourselves if we didn’t acknowledge that the risks involved in these endeavors include consequences that are unfathomable.

Experimenting with genetics may, in some respects, be less immediately dangerous because so much of it happens in academic laboratories with relatively strict protocols and reasonable communal ethics around risk mitigation. But the truth is that only the tiniest portion of the population has considered in any thoughtful way where the science is taking us.

In the recent years, scientists have developed the ability to mess around with genetic structures in ways that were the stuff of science fiction as recently as a decade or so ago. An NIH primer on gene-editing says:

Most of the changes introduced with genome editing are limited to somatic cells, which are cells other than egg and sperm cells. These changes affect only certain tissues and are not passed from one generation to the next. However, changes made to genes in egg or sperm cells (germline cells) or in the genes of an embryo could be passed to future generations. Germline cell and embryo genome editing bring up a number of ethical challenges.

That puts it modestly. We have no idea what could happen if we start changing germline cells. A fascinating article in The Harvard Magazine reviewed the issue of whether we should try to use gene-editing to eliminate malaria. All the scientists interviewed underlined what a scourge malaria was, particularly in the under-developed world. And they all exuded relatively high degrees of confidence that science was at (or very close to) a point where a major attempt could be mounted. But they all also admitted a large degree of uncertainty about whether they should. Among other things, they conceded that even if successful, there might be unforeseen consequences. For instance, we don’t know what other species might fill that biological niche. Additionally, there was the possibility of failure—or, more likely, only partial success—which would raise a different set of concerns. Consequently, all the scientists in this article emphasized the need for world-wide public engagement. One of them said:

There’s tremendous humanitarian need for a lot of these applications…but the limiting factor may not be the time required for us to build a [genetic modification] in the laboratory. It may be the time required for society to decide whether or not it should be used.

While these particular scientists seemed relatively sanguine with the possibility that society could somehow say “No—this line of inquiry is simply too dangerous,” we should all be thinking about whether saying no is even possible. In the last decade the ability to do gene-editing has become relatively accessible in scientific settings, creating the real possibility somebody will try to use it in a not well controlled way.

The problems with AI are of a different sort. Less likely to create a species wide catastrophe, but certainly big enough to be enormously disruptive to society. There are very specific problems, such as the ability of AI to create so called “deep fakes” that make it almost impossible to tell if a video is real or edited or the ability to use facial recognition for truly big brother kinds of control, as China is actively doing. We simply have no social mechanisms to deal with these. Worse yet, there is a small army of entrepreneurs churning out ideas and applications at a furious pace. The only appropriate image is the Sorcerer’s Apprentice.

There is also the incorporation of big data and AI algorithms developing rules hidden in all aspects of life. Think of the slightly annoying way that WORD can “spell-check” your sentence into nonsense. Now imagine what happens if rules like those are put on steroids and applied in every aspect of life.  Cathy O’Neil, a mathematician, has written a cleverly titled book, Weapons of Math Destruction, that shows these application of data are creeping into virtually all aspects of life. And there are a plethora of suggestions to wire them further into our day to day life. O’Neil sees this as severely problematic because they are opaque (the people using them often do not know how they actually work); they are invisible (you often don’t know when they are being applied to you); they are unregulated (it’s not even clear how they could be regulated); and they have a deep potential to not only reinforce, but to accelerate, the status quo because they don’t ask what should be the case but only what does the current data predict

Hany Farid, a Dartmouth College computer science professor, worries about the impact of letting Silicon Valley launch one thing or another with little sense of the consequence:

If a biologist said, ‘Here’s a really cool virus; let’s see what happens when the public gets their hands on it,’ that would not be acceptable. And yet it’s what Silicon Valley does all the time….We have to understand the harm and slow down on how we deploy technology like this.

The idea of slowing down technology is not part of the Western psyche under any circumstance. The problem is made worse by unwillingness to regulate capital and the inability of government to concentrate on really important issues. Congress has shown itself incapable of understanding, yet alone regulating, computer technology. (Part of this problems stems from Congress eliminating its Office of Technology Assessment under Newt Gingrich—leaving it without appropriate staff on these critical issues. Congress is apparently not interested in addressing even this minimal fix.)

In a sane world, governments and other entities would be making the risks inherent in this technological progress front and center. The issues that are being raised are not marginal issues. Unless we find a way to rationalize the cancer-like growth of technology, we are likely to find our species is too smart by half.

Density & Interconnection

By Mike Koetting January 9, 2019

Just before the election, a crew delivering cabinets to our next door neighbor sheared off a sprinkler head in the hall. It responded as sprinklers are designed to do. Fifteen units were affected and total damage will be between one quarter and one half million dollars. We spent a lot of the next two months living in hotels, dealing with insurance, and working with and around demolition and construction crews.

It got me thinking about the ways our society had changed over the years. As folks have moved closer and closer to each other, stacked on top of each other in our case, much of our daily lives are interconnected in qualitatively different ways from our ancestors. Population density and technology are locked in a symbiotic relationship— technology thrives on density and density breeds technology. The result intertwines people in ways never previously imagined.

This is not a new thought. In 1970, I was totally arrested by a passage in a book by Donald Michael called The Unprepared Society. He asserted that the 1965 blackout in New York City (at the time, the biggest in the city’s history) could not have happened 100 years before–because someone would have had to steal all the kerosene lamps in the city! But once there was an interconnected electrical grid, faults got magnified by being projected throughout the entire system.

But for an idea that has been around at least 50 years, its impact has been scant. People do not seem to grasp this fundamental shift in the way society operates. The gap is particularly acute in the US, where the ethic of the rugged individual and the wide-open spaces has not adjusted to the fact that we live increasingly close to each other and are inextricably more bound into our neighbors’ lives than ever before in human history. And the future suggests only more of the same.

In a very broad sense, the scope of this impact is beginning to dawn on people, say at the level of realizing that in the US, or indeed most parts of the developed world, economic growth is almost exclusively in metropolitan areas. Rural areas are left behind as rural population has declined as a share of overall population and, recently, absolutely.

The change in economic importance is even more striking. In 2000, Al Gore won 22% of the counties, but they accounted for 54% of the economy. In 2016, Hilary Clinton won only 15% of the counties, but they accounted for 64% of the economy.

A recent New York Times article described the issue most succinctly:

This is the inescapable reality of agglomeration, one of the most powerful forces shaping the American economy over the last three decades. Innovative companies choose to locate where other successful, innovative companies are. That’s where they can find lots of highly skilled workers. The more densely packed these pools of talent are, the more workers can learn from each other and the more productive they become. 

I note this in this context less because of what it says about the economy but to underline the forces increasing density—and why we need to understand how density and technology are changing the fabric of life. The tolerance for fault decreases (the worse thing that would have happened in an unsprinklered building would be a small gouge in the wall) and the spread of the impact increases (15 units).

These trends aren’t going to reverse. We aren’t going back to a spread-out, agrarian society and technology isn’t going to abate, at least not short of some catastrophe we’d just as soon not contemplate. Moreover, I pretty much like the ability to pay my bills by computer, to fly to California in an afternoon, and to be able to choose from multiple cultural offerings in Chicago any day of the week. Or consider the miracle of fresh water on demand, something we basically take for granted. The story of Flint has been correctly understood as a story of racism and venal politics. But it is also a reminder of how things we take as a basic, fundamental part of how we live are dependent on a web of interconnected phenomena, no one of which can ultimately be taken for granted. In short, we need to learn to live with this hitherto un-invented, hyper-connected society.

I am not entirely sure what helps us address these concerns. Maybe some of you have better thoughts to share. But a couple things do come to mind.

First, as a society we need to acknowledge that we live in a qualitatively different world than previous generations. Getting the admission, of course, is trivial. Politicians regularly use the rhetoric of changing times. But few are willing to tackle the profundity of the implications. (And some would even lead us in a collective fantasy that some halcyon past can be recovered by wishing it so.) Instead, we need to think more systematically about the web of connections that are part of density and technology that have the capacity to un-end everyday life. It would be helpful to make a real cultural commitment to a way of life that is specifically not “rugged individual” and “wide-open spaces”. Whether these were ever what they are remembered to be is a fair question. (See, for instance, Nancy Isenberg’s White Trash: The 400-Year History of Class in America.) But accurate or not, it is time to relegate these memes to our history. We need to collectively embrace the fact that we are densely connected by a web of technology that is much bigger than any of us. Eyes must be on the future not the past, real or pretend. And the future is dense and unbelievably connected.

Second, we need a way to call a truce in the war between urban and rural. This is much more complicated than splitting the country into the city and countryside. As Colin Woodard and others have pointed out, these are complicated by sectoral cultural histories and other local factors. But, underneath these important nuances, three generalities remain:

  • Population is moving from less dense to more dense
  • Rural areas are losing economic vitality—and it makes them grumpy
  • The historic structure of American government over-represents the rural areas

I don’t see much that can be done about the first and the last, so we need to find ways of making life better for rural folks. Again, this isn’t easy—particularly given the direction of the economy. But if we don’t, the differences will continue to keep the country from thinking more clearly about how to address the problems of urban density.

Finally, more broadly, we must proactively incorporate the reality of density and interconnectivity into virtually all our policies. There are the obvious examples—gun ownership makes less sense in a crowded city than on the frontier–for instance. But there are countless other ways that we are just starting to think about. Michael Lewis’ sobering article in Vanity Fair details, among other things, the fragility of our electricity grid—and the lack of coherent oversight. Think for just a moment about our dependence on electricity. At every turn in our daily life, we’re totally wired into the grid. But that is in no way reflected in the reality of our government policies. When Donald Michael talked about the impact of the electrical grid on the connectivity, I don’t think he had any idea exactly how unprepared society was—and is—to deal with these consequences.

We must find ways to see policy issues not in isolation from one another, but as part of a web of densely connected policies and technological interfaces. Society is now evolving more in the shape of man than through the historic forces of natural selection. We are more closely packed, have more powerful technology and are a much greater risk to one another–and the species. These bring mostly good things, but we must keep an eye on the risks.