Politics and the Desert of the Real

I’m watching the aftermath of the second Trump – Clinton debate. It is useless to focus on details this morning. Merely focusing on work is already difficult.

Coming on the news of the first round of the Lithuanian election, where the “Peasants and Greens” party won the leading share of votes, or on the heels of the UK Conservative Party conference last week, in which Home Secretary Amber Rudd stated that all UK companies will have to draw up lists of foreign employees, there is only one conclusion we can draw:

The greatest danger we face today is the abysmal quality and ability of individual politicians, and of entire political parties and political systems.

The greatest threat we face—whether “we” are a small business in London or a university professor in Vilnius or a pensioner in Sacramento—is bad governance.

That bad governance is, in itself, the product of a number of factors, but at the root of it is bad political actors. As we have seen in Greece, no political system can withstand the impact of corrupt political actors.  

There is no longer a dominant national narrative, as there was in World War II (Allies vs Axis) or in the Cold War (West vs East). Bereft of an existentialist struggle, societies in the west have been free to collapse into what I can only describe as national narcissism.

As societies, we no longer know what we stand for, or what we stand against.

We cannot agree on what to pay for. Or how to pay for it.

We cannot agree on what standards to use to hold our elected politicians to account.

Perhaps the only thing we can agree on is that everyone has their own opinion. And on Facebook, everyone can say anything, even if it has nothing to do with the truth.

As a result, Bill Clinton’s “triangulation” today isn’t really a triangle: it is a multidimensional equation pandering to political micro-segments in the hopes of getting out the vote on election day.

It is based on distorted and divisive identity politics rather than any factual basis or systems analysis.

Technologically, using this “multidimensional triangulation” is possible. But in terms of governance? How do you govern on this basis, when it is impossible to get a majority to agree, let alone a quorum to agree?

If your entire system is based on divisive identity politics that is based on the absurd, how do 1 + 1 = 2? They don’t. They can’t.

So let’s take this reasoning to the next step:

a.    We live in an “always on” world where traditional broadcasters are declining and where most citizens interact far more on Facebook than on traditional media. There are few facts on Facebook. Only opinions.

b.    Political “selling” has, in the second Donald Trump – Hillary Clinton debate, reached new lows and established a new form of social acceptability. (Whether it has established these or simply mirrors a society where this is acceptable is open to debate).

c.     Any political campaign in any part of the world today requires money to run. Lots of money.

d.    Rather than a simple binary framework of choosing parties and platforms, every country is witnessing a total fragmentation into political slivers and niche parties, which have already been mentioned under the difficulty of triangulation.

So what happens next?

What I believe will happen next is a process of national decline, similar to the decline of the Roman Republic, and later the Roman Empire.

Consider the evidence:

·      The Senate in Rome (Republic) became a vehicle for hereditary politics and special interests. Congress in the United States, or the Greek Parliament, are becoming the same thing. How many members of Congress in the United States (or in Greece) have we elected because of a family name or a family dynasty in politics?

·      How many of us consider our elected representatives are able to actually make decisions, as opposed to (a) convey the decisions of special interests, or (b) “block reform”?

·      How much does it cost to get elected today? How much did it cost to get elected in Rome in 55 BC? How were campaigns financed, then and now?

·      Rome grew by leading its men out to war each spring. When the Italian peninsula was conquered, Rome expanded to Sicily, Carthage, Iberia, Gaul, Greece, Egypt … the entire civilized world. The process of military expansion became a dynamic engine. Successful generals (tribunes, consuls) came from the same patrician families that were already in the Senate or the equites class. Look at the United States today. Does anyone doubt the militarisation of foreign policy or large segments of the economy, when the largest element of the federal budget is military expenditure? Does anyone believe that in 2016, an American politician can choose not to “support” the military?

·      We are still looking for our man on a white horse. The Roman Republic fell to Julius Caesar because Caesar was a patrician, a successful general, and someone who “got things done”. We yearn for such militaristic, masculine figures in the west. How much of Donald Trump’s image is one of strength and competence, despite his many moral and business failures in the past? His bankruptcies? His absurd sideline businesses, like “Trump Steaks”? His three marriages?

·      One major reason Rome fell was because of debt. This debt was focused on farmers and tradesmen, who literally became slaves or, one step up, indentured serfs, tied to an economic and political master. It also had high public debt: the costs of raising and operating an army was prohibitive. It was politically impossible to tax the oligarchs (who were also members of Senate). So the tax base kept shrinking. This high debt enabled the patrician class to become even more dominant. Successive emperors then started debasing the currency, removing trust in the fundamental means of exchange in the empire’s economy. Together with the slave economy which was swelled by Roman military conquest, a society formed in which a few oligarchs owned most of the wealth and actual humans in Rome.

·      Now look at national debt and wealth inequality in the United States. Does anyone doubt that there is a problem when the top 20% of households in the United States own 84% of national wealth? Does anyone doubt that having total public debt well north of 140% of GDP is a problem? Does anyone doubt that working at minimum wage is a form of wage slavery?

What can we predict will happen?

Unless some form of miracle occurs (and I can’t see many cases on the horizon), we can expect that:

a.    Our societies are switching from an inclusive to an exclusive basis. We now target foreigners or the “different” as a source of blame. Expect demagoguery and xenophobia to increase.

b.    Our citizens appear less able and less inclined to analyse and to separate root cause from effect; cause from symptom. We are also less willing to pay. Ideals are good for everyone. Ideals backed by tax payments are bad.

c.     Our politicians appear to have no sense of prioritization or means-tested planning. Nearly every OECD country I know of needs an urgent, economic turn-around plan to deal with declining competitiveness, demographic change and national debt. I see almost no such serious initiatives in place, or even the awareness that these are needed.

d.    A savings culture has been replaced by a consumption culture. Consume now … for whatever reason.

e.     We seek authoritative competence, but we are unwilling to pay for it even if we did elect it. The west is full of politicians peddling the illusion of competence, all evidence to the contrary: Marine Le Pen, Donald Trump, Vladimir Putin.

f.      Others seek nostalgic competence. The election of the “Party of Law and Justice” in Poland is a case in point. Appealing to elder, conservative religious voters was at the heart of its electoral strategy. The question remains whether critical legal and policy decisions can be made in 2016 on the basis of such implied values.

g.    One unit of debt is rendering less and less value. Conversely, the interest paid on debt will soon become the leading budget line. And, absurdly, debt has never been more available. And creditworthy companies and households are probably at their least available (at least in standard credit rating terms).

I’m going to close this post with two observations. The first is that:

The greatest danger we face today is the abysmal quality and ability of individual politicians or entire political parties and political systems.

The second is that

There are very few ethical response options open to individuals or companies within this system.

If you choose ethics, you knowingly put incompetent liars (politicians) who are increasingly desperate for cash in charge of your existence.

Remember: there are no penalties for electoral demagoguery in modern politics.

And I will close with two questions that I have been addressing since late 2009, which the Greek election took place that sparked my interest in government, debt, competitiveness and politics that is the focus of this blog.

1. Has universal suffrage become a form of collective social and economic suicide?

2. What must an ethical actor do to ensure financial and operational survival in the world we are becoming?

Harsh questions, and I almost apologise for asking them.

But I find myself asking these questions nearly every day. I wonder if anyone has an answer.

© Philip Ammerman, 2016

Donald Trump photo courtesy of Reddit

Hillary Clinton and the Optics of Decline

Hillary Clinton. Photo (c) Politico, AP Images

In terms of optics, the past few days have signaled a downturn for Hillary Clinton’s campaign. This downturn reflects many of the symptoms of the political class. And unfortunately, it signals yet another reason why the United States faces incredible challenges in the near future.

Clinton’s Basket of Deplorables

At a campaign fundraiser on Friday, 9 September, she made the following comment (quote from CNN):

"To just be grossly generalistic, you can put half of Trump supporters into what I call the basket of deplorables," Clinton said. "Right? Racist, sexist, homophobic, xenophobic, Islamaphobic, you name it."

She added: "And unfortunately, there are people like that and he has lifted them up. He has given voice to their websites that used to only have 11,000 people, now have 11 million. He tweets and retweets offensive, hateful, mean-spirited rhetoric."

However true this may be (or appear to be), it is an unfortunate thing to say. Right up there with Mitt Romny’s 47% comment. Also made at a fundraising speech. 

It is important to remember that Trump and his surrogates have been encouraging supporters to “lock her up” and, in some cases, to execute her. I haven’t seen an equivalent apology from Donald Trump about this, even though the chants take place at his rallies, at his prompting.

The next event came yesterday, at a 9/11 memorial service. Attempting to enter her van, she appeared to stumble and fall. This will lend further credence to Republican attacks on her that she has an undiagnosed illness and is not fit for office.

The last thing a presidential candidate should do is appear weak. The second-to-last-thing a candidate should to is insult the voters of the other side.

Yet this is what is happening on a daily basis in this electoral campaign. It frames the terms of the debate. It establishes perception, which may be far removed from any facts.

Elections are Perception. They Distort Reality. Then they Define It.

Events like this begin to frame a larger narrative. It’s clear that the political class in most western countries today has several common features:

·       Elections are fought on perception, not fact;

·       Average voters appear to suspend any form of critical thinking or historical memory, and accept political lies;

·       The political class apparently feels empowered to say one thing in smaller, campaign fundraising events, and another thing in public;

·       I have yet to see any politician or political party offer a comprehensive policy analysis and means-tested solution to the very real problems of flagging productivity, declining competitiveness, demographic decline, fiscal distortion and other critical issues.

Unfortunately, this trend has now spread to the largest economy in the world (in real terms). It has long been there, but the Trump-Clinton election marks a watershed of political failure that will define the new normal for generations to come. 

United States Exceptionalism

The United States is, once again, an exception. But not in a positive way. In many respects, it appears to be a frontrunner of political and economic decline among developed nations. It is not unique in this.

The public debt situation in the United States is deliberately concealed, with Federal debt reported, with very real and tangible debts of key governmental organisations (Fannie Mae / Freddie Mac), state and local government and mandatory unfunded liabilities (Medicare, Medicaid, Social Security) on the books, but not reported in a consolidated format. This is a widely-known and accepted fiction, which cannot continue without high and unsustainable costs.

Federal spending is only being kept low through artificially low interest rates (ZIRP), which reduce interest expenditure, and through non-consolidation of total public debt.

In fiscal year 2015, the US Federal government spent $ 402 billion in interest. In FY 2016, October – August, it has already spent $ 413 billion.

This high interest expenditure takes place in an era of low interest rates, with FY 2016 year-to-date effective interest rates at 2.237% (in August 2016), lower than the 2.337% YTD figure from 2015.

If anyone is still wondering why the Fed is delaying raising interest rates, this is probably the answer.

Federal budgeting is a disaster, with billions of dollars in expenditure unaccounted for, and trillions recorded by accounting stopgaps.

Economic inequality is now at historic levels. 90% of US households earned $ 33,068 or less per year in 2014. Most working families on minimum wage (or even 50-75% above minimum wage) are essentially wage slaves, unable to meet basic demands.

The Affordable Healthcare Act has removed any semblance of price discipline on suppliers through collective bargaining—due mainly to Republican and Democratic resistance to a single payer system. US basic healthcare remains among the most expensive in the world, for some of the poorest health outcomes on record. The very fiscal prudence that Republicans espouse for the private sector is ignored in the public sector, mainly due to lobbying. The pernicious effects of this are all too obvious.

The US is possibly the only country where key law enforcement (sheriffs) and justice officials (judges) are elected this widely. Where they must collect campaign contributions to win an election. And where they must then sit in a regulatory or enforcement position on the very people who paid to elect them.

US GDP and employment figures are distorted (favourably) by 2-3 key sectors. These distortions extend into tax revenue and policy. A further distortion is seen in the role of the US dollar as a global currency, and in US Treasuries as a reserve of value.

US political campaign finance is a recipe for undue influence and corruption. This is possibly the one area that Republicans and Democrats agree on. Yet this is the one area where neither side can afford to yield in what amounts to a financial arms race.

There is a general political inability to craft sustainable and rational policy responses to key sectors such as public finance, the overall financial sector, electoral reform (at state and federal levels), justice, gun control and registration, healthcare spending, education, manufacturing and trade policy, and immigration. In the absence of meaningful reform, costs rise and competitiveness declines.

Informed observers must look beyond the latest scandalous comment made by Trump or Clinton, to the abject politicization of elected officials and electoral systems from the local level all the way up to the Presidency.

They must look beyond the latest unicorn listing or the next $ 500 billion enterprise valuation to the vast number of companies that fail in the United States every year. Not just in the tech sector—in every sector.

The United States has some of the most unique strengths and advantages in the world. It has made incredible contributions in every sector. It is the oldest functioning, continuous democracy and remains a country where innovation and entrepreneurship thrive despite increasingly expensive mandatory costs and distortions: primarily healthcare and legal.

Unfortunately, none of these positive attributes appear to be reflected in the political system. And politics is, arguably, destroying them.

I am hoping, perhaps against all hope, that the political system will miraculously find a way to stop the decline. But I see few indications of this, and certainly none that are ticking away as fast as the consolidated debt clock.

As mentioned at the start: the US is a frontrunner, but it is not unique. The same trends are clear in nearly every other industrialised democracy in the world today.

The question is not why the metaphorical train wreck will happen. The question is when.

© Philip Ammerman, 2016

Chris Hedge: Empire of Illusion

I came across Chris Hedge’s Empire of Illusion: the end of Literacy and the Triumph of Spectacle (2009) by chance some days ago. Although written nearly 8 years ago, some of his findings illustrate why Donald Trump is such as success. 

Functional illiteracy in North America is epidemic. There are 7 million illiterate Americans. Another 27 million are unable to read well enough to complete a job application, and 30 million can’t read a simple sentence. There are some 50 million who read at a fourth- or fifth-grade level. Nearly a third of the nation’s population is illiterate or barely literate–a figure that is growing by more than 2 million per year. A third of high school graduates never read another book for the rest of their lives, and neither do 42 percent of college graduates. In 2007, 80 percent of the families in the United States did not buy or read a book. 

...

Television, a medium built around the skillful manipulation of images, ones that can overpower reality, is our primary form of mass communication. A television is turned on for six hours and forty-seven minutes a day in the average household. The average American daily watches more than four hours of television. That amounts to twenty-eight hours a week, or two months of uninterrupted television-watching a year. That same person will have spent nine years in front of a television by the time he or she is sixty. Television speaks in a language of familiar, comforting cliches and exciting images. Its format, from reality shows to sit-coms, is predictable. It provides a mass, virtual experience that colors the way many people speak and interact with one another. It creates a false sense of intimacy with our elite—celebrity actors, newspeople, politicians, business tycoons and sports stars. And everything and everyone that television transmits is validated and enhanced by the medium.

...

The worse reality becomes, the less a beleaguered population wants to hear about it, and the more it distracts itself with a squalid pseudo-events of celebrity breakdowns, gossip and trivia. These are the debauched revels of a dying civilization. The most ominous cultural divide lies between those who chase after these manufactured illusions, and those who are able to puncture the illusion and confront reality. More than the divides of race, class, or gender, more than rural or urban, believer or unbeliever, red state or blue state, our culture has been carved up into radically distinct, unbridgeable and antagonistic entities that no longer speak the same language and cannot communicate. This is the divide between a literate, marginalized minority and those who have been consumed by an illiterate mass culture. 

Some of his conclusions are questionable. But his analysis is largely correct, and since 2008 things have only gotten worse. 

(c) Philip Ammerman, 2016

Martin Wolf on the Elites in US Elections

One conversation I have been having more and more frequently these days is whether the US political system, having been so decisively broken, can ever be put together again. 

The role of money in politics; the revolving door between the administration and the private sector; the obviously wasteful public spending policies; the real lack of basic common sense; the distortions introduced by shibboleths such as gun control = independence or government = bad; the highly sophisticated voter targetting techniques; the willingness of political operatives to do "whatever it takes" to distort a message or an opponent; the very obvious disconnect between political rhetoric and reality: all these are factors that suggest to me that the American Republic is quickly becoming an Empire in the same way the Roman Republic transitioned first to a "national security / political effectiveness" empire, then into a simple hereditary empire. 

On this subject, Martin Wolf had an absolutely brilliant article in the Financial Times today on the role of elites in the US election. Failing elites are to blame for unleashing Donald Trump - 17 April 2016. 

A very quick extract: 

In addition, elites on both sides promoted economic changes that ended up destroying trust in their competence and probity. In this, the financial crisis and consequent bailouts were decisive.

Yet by then the middle classes had suffered decades of real income stagnation and relative income decline. Globalisation has brought huge benefits to many of the world’s poor. But there were significant domestic losers. Today, the latter believe that those who run the economy and polity impoverish, exploit and despise them.

Even Republican elites have become their enemy and Mr Trump has become their saviour. It is no surprise that he is a billionaire. Caesar, aristocratic leader of the popular party, brought forth “Caesarism”, the rule of the charismatic strongman that Mr Trump wants to be.

A healthy republic does not require equality, far from it. But it does require a degree of mutual sympathy. Sudden wealth from new activities — conquest in ancient Rome, banking in medieval Florence — can corrode social bonds. If civic virtue vanishes, a republic becomes ripe for destruction.

Well worth the read. 

It is very obvious that the rise of Donald Trump is only the latest manifestation in a long and sorry history of political action over the past 20 years. Even if he will be defeated (and I cannot claim to support the Democratic alternative), the tactics he has left behind will live on. 

(c) Philip Ammerman, 2016