Hannah Arendt Center for Politics and Humanities
1Nov/130

Canard of Decline

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The secret of American exceptionalism may very well be the uniquely American susceptibility to narratives of decline. From the American defeat in Vietnam and the Soviet launch of Sputnik to the quagmire in Afghanistan and the current financial crisis, naysayers proclaim the end of the American century. And yet the prophecies of decline are nearly always, in a uniquely American spirit, followed by calls for rejuvenation. Americans are neither pessimists nor optimists. Instead, they are darkened by despair and fired by hope.

hope

Decline, writes Josef Joffe in a recent essay in The American Interest, “is as American as apple pie. “ The tales of decline that populate American cultural myths have many morals, but one common shared theme: Renewal.

“Decline Time in America” is never just a disinterested tally of trends and numbers. It is not about truth, but about consequences—as in any morality tale. Declinism tells a story to shape belief and change behavior; it is a narrative that is impervious to empirical validation, whose purpose is to bring comforting coherence to the flow of events. The universal technique of mythic morality tales is dramatization and hyperbole. Since good news is no news, bad news is best in the marketplace of ideas. The winning vendor is not Pollyanna but Henny Penny, also known as Chicken Little, who always sees the sky falling. But why does alarmism work so well, be it on the pulpit or on the hustings—whatever the inconvenient facts?

Joffe, the editor of the German weekly Die Zeit, writes from the lofty perch of an all-knowing cultural critic. Declinism is, when looked at from above, little more than a marketing pitch:

Since biblical times, prophets have never gone to town on rosy oratory, and politicos only rarely. Fire and brimstone are usually the best USP, “unique selling proposition” in marketing-speak.

The origins of modern declinism, pace Joffe, are found in “the serial massacre that was World War I,” the rapacious carnage that revealed “the evil face of technology triumphant.” WWI deflated the enlightenment optimism in reason and science, showing instead the destructive impact of those very same progressive ideals.

The knowledge that raised the Eiffel Tower also birthed the machine gun, allowing one man to mow down a hundred without having to slow down for reloading. Nineteenth-century chemistry revolutionized industry, churning out those blessings from petroleum to plastics and pharmacology that made the modern world. But the same labs also invented poison gas. The hand that delivered good also enabled evil. Worse, freedom’s march was not only stopped but reversed. Democracy was flattened by the utopia-seeking totalitarians of the 20th century. Their utopia was the universe of the gulag and the death camp. Their road to salvation led to a war that claimed 55 million lives and then to a Cold War that imperiled hundreds of millions more.

America, the land of progress in Joffe’s telling, now exists in a productive tension with the anti-scientific tale of the “death of progress.”

“Technology and plenty, the critics of the Enlightenment argued, would not liberate the common man, but enslave him in the prison of “false consciousness” built by the ruling elites. The new despair of the former torchbearers of progress may well be the reason that declinism flourishes on both Left and Right. This new ideological kinship alone does not by itself explain any of the five waves of American declinism, but it has certainly broadened its appeal over time.

Joffe stands above both extremes of the declinism pendulum. Instead of embracing or rejecting the tale of decline, he names decline and its redemptive flipside the driving force of American exceptionalism. Myths of decline are necessary in order to fuel the exceptional calls for sacrifice, work, and innovation that have for centuries turned the tide of American elections and American culture.

[D]awn always follows doom—as when Kennedy called out in his Inaugural Address: “Let the word go forth that the torch has been passed to a new generation of Americans.” Gone was the Soviet bear who had grown to monstrous size in the 1950s. And so again twenty years later. At the end of Ronald Reagan’s first term, his fabled campaign commercial exulted: “It’s morning again in America. And under the leadership of President Reagan, our country is prouder and stronger and better.” In the fourth year of Barack Obama’s first term, America was “back”, and again on top. Collapse was yesterday; today is resurrection. This miraculous turnaround might explain why declinism usually blossoms at the end of an administration—and wilts quickly after the next victory.

Over and over the handwriting that showed that decline was on the wall was, in truth, “a call to arms that galvanized the nation.”

Behind this long history of nightmares of degeneration and dreams of rebirth is Joffe’s ultimate question: Are the current worries about the death of the American century simply the latest in the American cycle of gloom and glee? Or is it possible that the American dream is, finally, used up? In other words, is it true that, since “at “some point, everything comes to an end,” this may be the end for America? Might it be that, as many in Europe now argue, “The United States is a confused and fearful country in 2010.” Is it true that the US is a “hate-filled country” in unavoidable decline?

Joffe is skeptical. Here is his one part of his answer:

Will they be proven right in the case of America? Not likely. For heuristic purposes, look at some numbers. At the pinnacle of British power (1870), the country’s GDP was separated from that of its rivals by mere percentages. The United States dwarfs the Rest, even China, by multiples—be it in terms of GDP, nuclear weapons, defense spending, projection forces, R&D outlays or patent applications. Seventeen of the world’s top universities are American; this is where tomorrow’s intellectual capital is being produced. America’s share of global GDP has held steady for forty years, while Europe’s, Japan’s and Russia’s have shrunk. And China’s miraculous growth is slipping, echoing the fates of the earlier Asian dragons (Japan, South Korea, Taiwan) that provided the economic model: high savings, low consumption, “exports first.” China is facing a disastrous demography; the United States, rejuvenated by steady immigration, will be the youngest country of the industrial world (after India).

In short, if America is to decline it will be because America refuses to stay true to its tradition of innovation and reinvention.

As convincing as Joffe is, the present danger that America’s current malaise will persist comes less from economics or from politics than from the extinguishing of the nation’s moral fire. And in this regard, essays such as Joffe’s are symptoms of the problem America faces. Joffe writes from above and specifically from the position of the social scientist. He looks down on America and American history and identifies trends. He cites figures. And he argues that in spite of the worry, all is generally ok. Inequality? Not to worry, it has been worse. Democratic sclerosis? Fret not; think back to the 1880s. Soul-destroying partisanship? Have you read the newspapers of the late 18th century? In short, our problems are nothing new under the sun. Keep it in perspective. There is painfully little urgency in such essays. Indeed, they trade above all in a defense of the status quo.

There is reason to worry though, and much to worry about. Joffe may himself have seen one such worry if he had lingered longer on an essay he cites briefly, but does not discuss. In 1954, Hannah Arendt published “Europe and America: Dream and Nightmare” in Commentary Magazine. In that essay—originally given as part of a series of talks at Princeton University on the relationship between Europe and America—she asked: “WHAT IMAGE DOES Europe have of America?”

Her answer is that Europe has never seen America as an exotic land like the South Sea Islands. Instead, there are two conflicting images of America that matter for Europeans. Politically, America names the very European dream of political liberty. In this sense, America is less the new world than the embodiment of the old world, the land in which European dreams of equality and liberty are made manifest. The political nearness of Europe and America explains their kinship.

European anti-Americanism, however, is lodged in a second myth about American, the economic image of America as the land of plenty. This European image of America’s stupendous wealth may or may not be borne out in reality, but it is a fantasy that drives European opinion:

America, it is true, has been the “land of plenty” almost since the beginning of its history, and the relative well-being of all her inhabitants deeply impressed even early travelers. … It is also true that the feeling was always present that the difference between the two continents was greater than national differences in Europe itself even if the actual figures did not bear this out. Still, at some moment—presumably after America emerged from her long isolation and became once more a central preoccupation of Europe after the First World War—this difference between Europe and America changed its meaning and became qualitative instead of quantitative. It was no longer a question of better, but of altogether different conditions, of a nature which makes understanding well nigh impossible. Like an invisible but very real Chinese wall, the wealth of the United States separates it from all other countries of the globe, just as it separates the individual American tourist from the inhabitants of the countries he visits.

Arendt’s interest in this “Chinese wall” that separates Europe from America is that it lies behind the anti-Americanism of European liberals, even as it inspires the poor. “As a result,” of this myth, Arendt writes, “sympathy for America today can be found, generally speaking, among those people whom Europeans call “reactionary,” whereas an anti-American posture is one of the best ways to prove oneself a liberal.” The same can largely be said today.

The danger in such European anti-Americanism is not only that it will fire a European nationalism, but also that it will  cast European nationalism as an ideological opposition to American wealth. “Anti-Americanism, its negative emptiness notwithstanding, threatens to become the content of a European movement.” In other words, European nationalism threatens to assume on a negative ideological tone.

That Europe will understand itself primarily in opposition to America as a land of wealth impacts America too, insofar as European opposition hardens Americans in their own mythic sense of themselves as a land of unfettered economic freedom and unlimited wealth. European anti-Americanism thus fosters the kind of free market ideology so rampant in America today.

What is more, when Europe and America emphasize their ideological opposition on an economic level, they deemphasize their political kinship as lands of freedom.

Myths of American decline serve a purpose on both sides of the Atlantic.

doom

In Europe, they help justify Europe’s social democratic welfare states, as well as their highly bureaucratized regulatory state. In America, they underlie attacks on regulation and calls to limit and shrink government. These are all important issues that should be thought and debated with an eye to reality. The danger is that the European emancipation and American exceptionalism threatens to elevate ideology over reality, hardening positions that need rather to be open for innovation.

Joffe’s essay on the Canard of Decline is a welcome spur to rethinking the gloom and the glee of our present moment. It is your weekend read.

-RB

19Feb/130

Avoiding the Catch-22

The NY Times Editorial page takes aim at online education on Monday. It turns out that studies show that more students in online classes drop out of classes, more fail, and fewer graduate. This is not surprising. But one might ask so what? Online courses are proliferating and will continue to do so because they are less expensive. For some students, they may even be better. But for high-risk students, the track record is poor. Here is the Times editorial board’s conclusion:

A five-year study, issued in 2011, tracked 51,000 students enrolled in Washington State community and technical colleges. It found that those who took higher proportions of online courses were less likely to earn degrees or transfer to four-year colleges. The reasons for such failures are well known. Many students, for example, show up at college (or junior college) unprepared to learn, unable to manage time and having failed to master basics like math and English.

Lacking confidence as well as competence, these students need engagement with their teachers to feel comfortable and to succeed. What they often get online is estrangement from the instructor who rarely can get to know them directly. Colleges need to improve online courses before they deploy them widely. Moreover, schools with high numbers of students needing remedial education should consider requiring at least some students to demonstrate success in traditional classes before allowing them to take online courses.

The Times’ solution is based on a common lament, that young people are caught in a double bind, what Joseph Stiglitz recently described as a Catch-22:

Without a college education, they are condemned to a life of poor prospects; with a college education, they may be condemned to a lifetime of living at the brink. And increasingly even a college degree isn’t enough; one needs either a graduate degree or a series of (often unpaid) internships. Those at the top have the connections and social capital to get those opportunities. Those in the middle and bottom don’t. The point is that no one makes it on his or her own. And those at the top get more help from their families than do those lower down on the ladder. Government should help to level the playing field.

Stiglitz, like the NY Times editorial board, worries that the current higher educational system is poorly suited to addressing questions of class. Both are right.  College education is too expensive for most poor and even many middle class Americans. This is especially true since many people spend much of their time (and money) in college taking remedial courses where they learn little of extra value. And when these at-risk students do attend college, they too often emerge with life-altering debt rather than a transformative education.

What both the Times and Stiglitz want is to change the system of college and how we subsidize it. I leave aside the argument over whether government subsidies for higher education are the right answer. That becomes a question of how much money we want to pay as a percentage of our GDP.

But what does seem strange is that we continue to see our colleges as the problem here. As the Times rightly sees, the problem is that students arrive at college unprepared.

Our overburdened public colleges must spend a fortune on remedial education for students. And then we charge students for this remedial education, which frequently fails, leaving them with debt and nothing else.

Whereas colleges cost students money, high school education is typically free. The first line of attack on inequality through education should be reforming and improving high schools. Yet no one speaks about that. President Obama’s education initiatives focus on early pre-school education and community college. High Schools are left out. But if we could divert the huge resources currently spent on remedial college education to high schools, maybe college wouldn’t be so necessary. And maybe those who attended college might then be ready to work at a college level.

-RB

To read more on the idea of shifting funds from college to high school education, click here. To read more from the Hannah Arendt Center blog about online education, click here  and here.

8Aug/121

The Fecundity of the Unexpected

Readers of the Hannah Arendt Center blog are well acquainted with the pension train wreck that is heading our way.  It is not only public union pensions but also those corporate pensions that still guarantee defined benefits that are radically underfunded. And what hides the immensity of the problem is continued unrealistic assumptions about long-term future returns.

As was reported recently, Maryland—to take just one example—continues to assume a 7.75% annual return on its public pensions, which is even higher than the 6.6% 100 year historical average on stock returns.

While there is blame to go around—including feckless politicians and Wall Street hucksterism—the root of the problem may be a general unwillingness on all sides to realize that the last 100 years may have been an aberration. This is the argument that legendary investor Bill Gross makes in a report he sent to PIMCO clients this week.

Gross takes aim at the oft-repeated "truth" that over time stocks will return a real return of 6.6%. He argues that the returns over the last century were predicated on a Ponzi scheme, giving extra returns to shareholders at the expense of laborers (declining real wages) and government (declining real taxes). As those trends reach their limits, it is inevitable, Gross writes, that real returns must decline as well:

The legitimate question that market analysts, government forecasters and pension consultants should answer is how that 6.6% real return can possibly be duplicated in the future given today’s initial conditions which historically have never been more favorable for corporate profits. If labor and indeed government must demand some recompense for the four decade’s long downward tilting teeter-totter of wealth creation, and if GDP growth itself is slowing significantly due to deleveraging in a New Normal economy, then how can stocks appreciate at 6.6% real? They cannot, absent a productivity miracle that resembles Apple’s wizardry.

And it is not only stocks that will suffer. With treasuries yielding 2.55% (less than inflation), it is increasingly unlikely that long term bonds will provide meaningful returns.  The sad result:

Together then, a presumed 2% return for bonds and an historically low percentage nominal return for stocks – call it 4%, when combined in a diversified portfolio produce a nominal return of 3% and an expected inflation adjusted return near zero. The Siegel constant of 6.6% real appreciation, therefore, is an historical freak, a mutation likely never to be seen again as far as we mortals are concerned.

The consequence of these reduced expectations for public and private pension funds (and also for retirees with 401k plans that assume healthy investment returns) are dire. Simply put, throughout society, we are living beyond our means. We are in denial and continuing to make unrealistic investment assumptions. Gross draws the inevitable lesson for pension plans:

Private pension funds, government budgets and household savings balances have in many cases been predicated and justified on the basis of 7–8% minimum asset appreciation annually. One of the country’s largest state pension funds for instance recently assumed that its diversified portfolio would appreciate at a real rate of 4.75%. Assuming a goodly portion of that is in bonds yielding at 1–2% real, then stocks must do some very heavy lifting at 7–8% after adjusting for inflation. That is unlikely. If/when that does not happen, then the economy’s wheels start spinning like a two-wheel-drive sedan on a sandy beach. Instead of thrusting forward, spending patterns flatline or reverse; instead of thriving, a growing number of households and corporations experience a haircut of wealth and/or default; instead of returning to old norms, economies begin to resemble the lost decades of Japan.

We should applaud Gross for saying what many of us suspect: that the efforts of technocrats who populate pension plans to predict future returns is unpredictable at best and more likely subject to rosy biases. And yet even Gross then goes on to assume the tone of an all-knowing sage, something that seems de rigueur for public commentators today. We will solve the problem, Gross assures us, by turning to inflation.

Maybe Gross is right. But whatever the future holds, we must first confront the fact that as things now stand, we face a collective reduction in our wealth. How we respond to the reality of that threat will define the United States in coming generations. Either we can continue to insist that we are a wealthy nation and go on spending and living as if nothing had changed, or we can adjust our expectations downward.

Or we can somehow seek to unleash new forces of wealth creation that would generate the kind of economic growth and social and economic change that will lead to unexpected transformations in who we are.

We should neither take Bill Gross' prognostications as prophecy nor deny the reality he describes. Gross offers merely a hypothesis about the future, something far different from a fact. We do not have an adequate understanding of human nature and human economy to predict the GDP for this year, let alone for 2030. Human spontaneity, chance, and freedom mean that predictions of the future are simply calculations based upon the assumption that such and such will happen if men act rationally and nothing unexpected happens. In such cases it is helpful to recall Pierre-Joseph Proudhon's remark (loved by Hannah Arendt) that "the fecundity of the unexpected far exceeds the statesman's prudence."

Read more from Bill Gross here. You can also read more on Pensions as Ponzi schemes here and here.

-RB

*This post originally appeared yesterday on Via Media.