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By Paolo von Schirach
April 28, 2012
WASHINGTON – The interview on the Charlie Rose show broadcast on PBS (US Public Television Stations) and Bloomberg TV sounded intriguing. The two authors, Nick Hanauer and Eric Liu were there to discuss their new book “The Gardens of Democracy, A new American story of citizenship, the economy and the role of Government“. I found the two authors to be sincerely committed to an effort at making democratic capitalism truly democratic.
The trust factor
They fear that an economically polarized society is a more divided society in which there are fewer and fewer positive interactions and less trust among groups. And I believe that they are spot on when they argue that success is based on cooperation among different groups and individuals within them. And cooperation is certainly based on genuine trust. So, arguably low levels of trust yield little cooperation and therefore not much success. Improve trust and you will have greater success. I fully agree.
Not an engine
Where I am a bit lost is in their attempt to offer new definitions as to what are the true dynamics that make things happen. They argue that we are prisoners of old fashioned, mechanistic, linear notions of how society works and how the economy works. This is not an engine, and not clock work, they maintain. This is a complex system with lots of interdependencies that do not fit well within a mechanistic description that assumes hierarchies of relevance. Case in point, they say, it is absolutely not true that rich people with money deserve to be viewed as more important because they are investors/entrepreneurs and thus jobs creators.
No, they say, the real economic engine is the consumer, because without consumers buying things there would be no business activity. Here I pause and scratch my head. They had just finished saying that the hierarchical system that we believed to be true is a fallacy. And what do they do? They simply propose a different hierarchy, with the consumer at the center of things.
There should be no hierarchies
But the real point is the one I thought they wanted to make at the beginning. Society and the economy work through complex interdependencies. And so, by definition, there are no true hierachies –old or new. I fully agree that without consumers there would be no markets for corporations. But it is also true that without innovators capable of bringing new things to the consumers we would still live in caves, possibly eating raw meat and wild berries.
Innovators and consumers
Societies can advance because of innovators who, in our capitalistic system, are motivated also, (even though not entirely), by the prospect of making money. Not everybody is an innovator. Do we recognize and give value to innovators? I believe we should, if we want to have more of them. Of course the innovators/entrepreneurs need consumers. But consumers in turn need innovators in order to obtain products that enhance the quality of their lives. Indoor plumbing, central heating and washing machines do not exist in nature. Someone needed to invent them, perfect them and bring them to market.
The difficulty is of course is in striking a proper balance between producers and consumers. From this perspective, I fully agree with the authors when they talk about trust as the basis for cooperation and cooperation as the basis for success. This is a central theme articulated by them that warrants deep reflection.
A garden is not an ecosystem
On a different note, I found other definitions to be confusing. Hanauer and Liu argue that the economy is not a machine but an ecosystem of complex relationships. And then they proceed to ask: ”Which ecosystem do you want? A jungle, or a garden?” But, wait a minute. This is a totally inappropriate comparison. A “jungle” exists in nature and it is a self-sustaining and self-regulating ecosystem. A “garden” is man made, so much so that, as the authors state, it requires human agents in the shape of gardeners. Therefore, a garden is not an ecosystem.
So, in practice, the two authors deny the validity of their assumptions. They started by stating that the economy is a complex system which by definition should have no higher or lower parts and then they tell us which one is true higher part. And then they call a man made construct an ecosystem, while it cannot be because it it is premised on a human plan.
Indeed, depending on the inclinations of the gardeners, you can have a variety of different gardens: Italian, English, Japanese and what not. You can have a lot of trees, a lot of shrubs, a lot of flowers, etc. (Note: I often refer to an innovative economic environment as an “ecosystem”. But I do not use the term literally, only as a metaphor that illustrates the notion of complex interdependencies that establish some kind of productive balance in certain, hard to replicate, circumstances).
Authors have their predilections
Just by evaluating how they discussed their work, I sense that the authors, while well intentioned, have their own agenda, as clearly revealed by the use of the garden analogy. A garden presumes a plan, based on some predilections. If I allow these two authors to be in charge of the garden where I live, it is almost certain that they will create a garden to their liking, and not necessarily to mine.
Let’s be frank and admit ignorance
And here is where we should go back to what I believe to be their basic point, a point that, if truly shared as a basis for analysis, can actually bring people together. Society and the economy are complex systems made out of interdepedent parts. If we were truly honest, we should admit that we just do not know exactly how these parts work at any given time, let alone how they interact under different conditions and levels of stress. The extraordinary diversity of opinions among economists illustrates that most of the time we are just guessing, mostly groping in the dark.
So, what do we do? Well, let’s start with some humility. Let’s admit that we know very little about how to maximize economic efficiency with benefits going to the largest numbers of participants. Let’s observe the interactions among the elements, trying to better understand them, with the objective of proposing incremental improvements that –incidentally– may or may not be appropriate. Exchanging one model for another, on the basis of an implicit assumption whereby ”My model is better than yours” is not a good start.
Who’s in charge of the garden?
As for the garden metaphor: watch out, for it may be far less benign and poetic than it looks. The garden assumes a superior intelligence, the gardener, and helpless objects, the plants. They will be placed in that space according to the will, taste and judgment of the gardener. I have the uncomfortable feeling that in the construct imagined by the authors I may be one of those plants and that they fancy themselves as the capable gardeners. And I do not like the idea of being an object.