The Politics of Ingratitude

Revised, 1/17

Pope Benedict, in his recent encyclical, spoke of the Principle of Gratuitousness in the economy, a principle that strikes both economist and businessman alike as paradoxical at best, and nonsense at worst. I have in other places written on this principle, but here I would like to address its opposite: the politics of ingratitude.

I think a good starting place for such a discussion is the signs that were carried in the Tea Party Protests, “No Socialized Medicine—Hands Off Medicare.” Now, we could pass this off as mere ignorance and it is hardly news that some people are confused about the nature of socialism and about just what Medicare is. However, I heard the eminent Catholic intellectual, Michael Novak, say exactly the same thing last April in a public debate. Novak stated his opposition to socialized medicine and affirmed his support for Medicare, stating that he could not afford the medicines for his wife without it. Mr. Novak is, I suspect, well compensated by the American Enterprise Institute for his services. Still, I am willing to believe his claim that he needed public help to defray his private expenses. But I am perplexed by his apparent claim that his age alone justifies this subsidy. Surely he must know that there are folks younger than he is whose wives and children need similar help, and several of them might not make as much as he does. When the leaders speak nonsense, you can hardly blame the followers for repeating it.

This attitude of “socialism for me and capitalism for thee” is widespread. I am a member of the Real Estate profession, and I reckon that 99.79% of my colleagues are ardent believers in the “free market.” They also demand that the government support the housing market. Indeed, few markets are as government-dependent as is the housing market, and Realtors divide their free time into complaining about government interference and demanding more government support. I have never given a dime to the Realtor's PAC, because I have never seen it take a single action in the public interest. But the sad fact of the matter is that we live in a Republic of PACs, and in our form of “democracy,” one must pay to play. Recently, our PAC and its allies not only got the $8,000 tax subsidy for first time buyers passed—and then extended—we got a new subsidy of $6,500 for “move-up” buyers, based on the principle, I suppose, that bigger is always better, and getting someone else to pay for bigger is best of all.

This attitude is, I believe, most characteristic of my generation. I was born in 1947, the year that the Full Employment Act was passed, the law that enshrines Keynesianism as the official policy of the United States Government and the Federal Reserve System. Indeed, the bill only recognized what had already been a fact since 1933: the government had taken responsibility for the management of the economy. I am not a Keynesian, but I am grateful for those who were. The plain fact of the matter is that the only workable capitalism is Keynesian capitalism. Capitalism before the war was a hit and miss affair, with the misses almost as frequent as the hits. The economy was in recession 40% of the time; calamity was normal.

My parent's generation survived the Great War and the “Great Misery,” as the French Canadians call the depression. They wanted their children to escape these evils. And we did. Indeed, there was never in our history—and possibly not in the history of the world—such a long period of peace combined with so great a prosperity. True, we had some wars, but they were remote. And since the Vietnam war, we have delegated a small part of the population to fight them and have nominated our grandchildren to pay for them. We display yellow ribbons to show our “support” of the troops, but would scream blue-bloody murder if we are taxed to pay them. Nothing, not even war, should interfere with our relentless pursuit of “more.”

Here is the great secret of my generation: What our parents gave us as a gift we have received as an entitlement. No one is grateful for an entitlement. Indeed, everyone is resentful that it is not larger. Worse, we are resentful of everybody else's entitlements because they compete with our own. Politics became a matter of getting as large a share of the pie as you can, while giving as little as you can get away with. We ended up resentful on both sides: we are resentful about how little we get (no matter how much it is) and resentful about how much we have to pay (no matter how little it is).

Which brings us back to Michael Novak and the tea-baggers. Government medical care for all must inevitably involve some cutbacks in Medicare for the retired. And that is not acceptable. We've got ours, and we will not share. No way. No how. The opponents of socialism are too busy protecting their own entitlements to even see them as socialism. It makes for a politics of pressure groups, a Republic of the PACs. There can be no common good, only goods spread around to a particular coalition, with costs spread to losers, if possible, or better yet, to the next generations; after all, what have they done for us lately?

Keynesianism feeds this politics of ingratitude; it is its economic component. It is not that it is a bad economic theory. It is a very good one, at least in the context of capitalism. Since the essence of capitalism is the gathering of large piles of capital, it depends on depressing wages. Hence, it always has difficulty in reliably generating enough purchasing power to clear the markets. Somewhere it needs a big spender, and government is the only force capable of fulfilling this role. But its failures are both political and moral. Keynes wanted the government to freely borrow and spend in bad times, and than tax and repay the loans in good times. But the building up of debts is politically easier than tearing them down, and Republicans especially have been more than willing to adopt the first part, but not the second. Hence, we have the paradox that the most “conservative” governments are also the most Keynesian, applying the stimulus of debt even when it was not needed.

The moral failures are even more telling. Keynes recognized, as most economists did not, that the economy was dependent upon distributive justice. But Keynes refused to confront the failure of justice within economics itself. Instead, he made it a political question, he made it into re-distributive justice. The economy would operate under the capitalist rules and produce its imbalances, which the political authorities would then tax and re-distribute. In this way, he saved capitalism from—and for—the capitalists.

Take a program like Social Security. Now it is obvious that the young must support the old; this is but the natural law. In ages past, old age security meant either having a lot of money or having a lot of children. And since few people had money, most people had children, if they could. But the resources of the family were shared, which encouraged a sense of gratitude between the generations. But with the Social Security and Medicares systems, the relationship between the generations is mediated by the government, and the pension becomes an entitlement. One can argue the economics either way, but the social consequences are devastating. It is no longer necessary to have children to ensure one's security in old age, so long as other people are doing so. In fact, the winners in the social security lottery are those who had no children, and so spared themselves the trouble and expense, but rely on others to have children to pay the taxes that are necessary to support them.

Things will come to a head pretty quickly. In 2011, the first wave of the baby boom will hit 66, full Social Security retirement and Medicare age. But there is no money in the system to pay these pensions, only IOUs than can only be redeemed by raising taxes, or by yet more borrowing. Will there be enough of an economy to tax? Will there be enough borrowing capacity to finance it? I doubt it.

My generation has always been about resentment. In the 60's, it was resentment of the war, which actually had some basis, but also of “old people” in general. “Never trust anyone over 35,” was a popular slogan, one which we validated by becoming untrustworthy when we reached that age. Or at least becoming Republicans, which is much the same thing. Ronald Reagan learned to play the politics of ingratitude better than most, telling those who were taxed the least that they were taxed the most, and promising to tax them not at all. And it would all be financed by reducing “waste, fraud, and abuse”; no actual government programs would have to end, no possible constituency would be embarrassed or deprived. Government grew, revenues shrank, and we proved, at least to the sharp mind of Dick Cheney, that “deficits don't matter.”

But they do. And more than the fiscal deficits, the moral deficits matter, and we have burned through all our capital in both areas. Keynesianism will fall because capitalism will fall; the fates of both are bound up with each other. But the men of my generation should at least have the honesty to lament its passing, to recognize the gifts we have been given, and to realize, too late perhaps, that the only way to keep a gift is to pass it on. We failed to pass on the gift to our children—indeed we had few children to pass it to—and so we will lose it all. Ingratitude is like that.

The economy certainly depends on a rational market rooted in fair exchanges. But while this is a necessary condition, it is not a sufficient one. Beneath the exchanges there must be a spirit of the gift, an on-going lagniappe, something over and above the exchange. Of course, the government has a role in all this, and in certain cases it must intervene. But such interventions cannot replace the normal human relationships upon which a healthy society is built. Keynes, with the best of intentions and the most logical of proofs, corrupts these relationships; the “conservatives” adaptations of Keynes both corrupts his theory and removes any effective opposition.

Tom Brokaw called my parent's generation “The Greatest.” I don't know if that is true, but I think I know which generation gets the title of the worst. We cultivated resentment and passed it on to our children. Only this time, they will have real cause for resentment, and real debts to resent.

14 comments:

Mr. Piccolo,  Sunday, January 17, 2010 at 11:49:00 AM CST  

Another excellent post, Prof. Medaille.

I think the United States is suffering from a deep lack of solidarity. People don’t see that cooperation between different parts of society is ultimately better for the whole. We are an atomized people with an atomic view of society, if we can even say such a thing as “society” or the “common good” can exist under utilitarian individualism. Individuals are just utility-maximizing atoms that happen to collide and unite with each other when they feel it suits their self-interest (maximizing their utility). Moreover, we easily separate and destroy these bonds between each other when it suits our self-interest as well. Harm done to social organizations like the family, or neighborhoods, or towns matter little because ultimately those institutions don’t have any real existence outside of their ability to facilitate individual utility maximization, and when quaint notions like family unity and solidarity get in the way of individual utility maximization, those institutions are to be relentlessly destroyed. All in all, a very sad picture, I am not sure how such a society can continue like this without becoming very sick.

Stu Sunday, January 17, 2010 at 6:49:00 PM CST  

Mr. Piccolo,

I would say we are robbing ourselves of the opportunity to allow the grace of God to work within us, simple charity.

Sad indeed.

Athanasius Sunday, January 17, 2010 at 9:37:00 PM CST  

I don't know if that is true, but I think I know which generation gets the title of the worst.

Well, it shouldn't. With respect to the sacrifices between the depression and war certainly, however in totality they determined they were not going to deny their children anything, and refused to hand on their cultural patrimony with respect to virtue, temperance, and sacrifice. Hence they begot the worst generation.

Stephen Sunday, January 17, 2010 at 10:16:00 PM CST  

At last, a distributist critique of Keynesianism! At last all powerful master ...

Anonymous,  Monday, January 18, 2010 at 9:18:00 AM CST  

Sir,
please reconsider your labeling 'tea-partiers' with the word 'tea-baggers' (the first sentence of the 7th paragraph of this blogpost as of jan. 18th.) This is a sexual insult. To learn more, see this link:
http://www.mrc.org/press/2009/press20090416.asp

Regardless of whether you decide to change the mentioned word or not, please delete this anonymous comment. That particular word is one of things I'd like to unlearn if it were possible, but since I already know the definition, I prefer to see it as rarely as possible. No need to participate in subtle ridiculing by the mass media. (If the insult was intended, you don't need to change the word just because of me, I'm only an occasional reader of this blog and neither keeping nor changing that expression is going to make me visit the blog either less or more frequently than now - that is, randomly once every two or three months. But it may be useful for you and for those of your readers who happen to read this comment before it's deleted to learn the definition in slang.)

Chris Campbell Tuesday, January 19, 2010 at 8:00:00 AM CST  

Novak is for medicare, but against national healthcare? Um..ok......is medicare not a Govt run health system that we are all forced to pay for? is is Medicaid, various different state programs,etc.....so, he is both for and against govt run systems...or, only those that benefit him!.

Double minded in all his ways...

Septeus7,  Tuesday, January 19, 2010 at 8:55:00 PM CST  

Quote from John: "Government medical care for all must inevitably involve some cutbacks in Medicare for the retired."

I completely disagree with the idea that cutbacks in care are required for the provision of medical care to greater numbers of peopled.

Do we spend too much on medicare? On some parts of the program we certainly do but greatest amount the cost in not "dollars-to-care" (which have already been cut) but rather “dollars-to-subsidy” and "dollars-to-administration."
Cutting the dollars to care will do nothing to cut costs and will in fact increase cost as has been proven in England where’s NICE’s cost cutting and rationing has been put into practice and cost of healthcare continues to rise.

The reason cutting dollars-to-care results in higher cost is that most economists who think cut backs in government spending and tax breaks will result in smaller more efficient government misunderstand the paradox of cost and value.

The more valuable something is the lower its cost and vice visa for example water is the most valuable substance on earth generally it is very inexpensive.

But if we were the opposite the case then it would be tragic and that is so called cost-cutting does to medical care.

If you cut the amount of money going to provide medical services in a sector where you have declining economy generally and your general physical capacity to provide care is also declining then you make medical care more rare and thus more costly but are same time there is less available to certain members of the population thus the value of the care is reduced.

The value of medicine is in its practice not its denial and therefore any system that seeks to deny care to section of the population will simply the destroy its value for the population essentially resulting a Nazi like program where spending is cut and cut and cut and people are directly killed if deemed too costly for the state.

The reason we need to change the current health care system which was based on the HMO model of cost cutting for profits is not because it’s too expensive but because it provides too little care.

So further reducing the amount care given should not be the object because you can provide care for young people and maintain and even improve care for the retired.

Progress in medical care is possible. It was done under the Hill-Burton system where medical care increase for everyone and costs went down because entire diseases where eliminated.

You don’t have to deny one care to order to increase your physical ability to provide care. You have to systematically direct the credit/money of the system towards training doctors, nurses, techs, building hospitals and equipment and finding cures.

In Japan, medical MRI cost was high much like the US but rather trying to contain costs they spent more money subsidizing industry to produce low cost machines and a result of spend more money the cost of a MRI is about 100 dollars where in the US it costs thousands.

Think about the parable of the Good Samaritan. Both the Levite and Priest had good economic reasons to the wounded man in the street because helping him would cost them and so their idea of cost cutting was to leave the man on the street whereas the Samaritan treated the man at his economic expense and Christ asked to do as the Samaritan did and not cut corners.

If the elderly need medical care then we should provide it not because it is easy or inexpensive but because they are our neighbors and Christ require it of us and that idea applies to public spending just as much as it does to private.

So I’ve joined the Tea-Party folks in saying “keep your govmint hands off em' old folk’s medicare” and denying humanitarian care to one group of population does nothing to treat any other group and it is unconstitutional to target particular groups for denial of care.

John Médaille Tuesday, January 19, 2010 at 9:43:00 PM CST  

Sept, I absolutely agree with your very perceptive comments, especially on the value/price distinction, one that is lost on most economists. And yes, subsidizing the supply lowers costs. In other words, you have to break the monopoly pricing. And yes, the current methods subsidize demand without addressing the supply questions, which can only lead to disaster.

I was speaking in the context of the current system, but my own solution, which I previously outlined at http://distributism.blogspot.com/2009/04/chapter-xvii-distributism-and-health.html addresses both supply and demand.

Chris Campbell Thursday, January 21, 2010 at 12:55:00 PM CST  

I have no problems breaking up monopolies, very Distributist, but the answer too is to return to a sound monetary system to begin with instead of massive debt with phony money...most then could afford their own care and the rest would be more easily aided by private charity and family, friends and the church......socialism costs and runs up debt, whether it is "national healthcare', "obamacare' or the myriad of Medicaid, Medicare,etc..

must return to real money system ultimately instead of pruning the weeds of libertarian anarcy or socialism.Sept, you are right..the cost of Govt run anything is far higher and less effective then private entities

Mark Sampson Friday, January 22, 2010 at 10:57:00 AM CST  

An excellent post - honest, thoughtful, and intellectual - a rare combination. There is much that should be said in response to this insightful commentary. I will limit myself to reflecting on how you have appropriated Benedict's notion of 'gift'. As you have suggested, the significance of the principle of gratuitousness is that it calls into question some of our deeply held commitments. Charles Taylor, in 'A Secular Age', refers to the significance of the influence of Adam Smith and John Locke on modern moral sensibilities. The result of Locke and Smith's ideas was that self-love came to be equated with social benefit. This contributed to a huge anthropological shift and the emergence of the modern self. You are perhaps too hard on your generation - this has been happening for some time. Novak's comments seem to epitomize the paradoxical and concerning results of this anthropological shift. You are certainly right in suggesting that the notion of 'gift' is important in this regard. It challenges the anthropology of capitalism (and modernity). If self-love equals social benefit then 'gift' is a socially disruptive category!

Cheers!
Mark Sampson
www.capitalismproject.org

Viking Monday, January 25, 2010 at 1:23:00 AM CST  

Septeus, John, I'm not sure I understand your point here. Yes, subsidies will lower costs - unless you count the costs of the subsidies. But it does seem to me that you have to count them to be honest and rational.

It's true that costs go down with greater supply, but to interpret this as lowering aggregate expense is to confuse per unit cost with overall cost. That is, a good with rather low price elasticity may see a 90% reduction in cost with a hundred-fold supply increase - but that's still 10 times as much total, isn't it?

As to the inverse relationship between value and price you two postulate, I'm not sure that's valid. The example of water being so cheap while being the most valuable substance on Earth (my vote would go to oxygen actually, and that's free) doesn't strike me as particularly sound. Water is also the most abundant compound we have here, and the trick is simply to make it potable. And a farmer in an arid region can pay heaps for the necessary irrigation.

But when one talks of medical care, it is required that we make a key distinction. To wit, that value varies enormously from case to case. That is, medications and surgeries of various kinds are of no real value to those not suffering from the conditions they remedy. But to those suffering from said conditions, they are as precious as life itself, which indeed they preserve for a little while at least.

Lastly, you mention breaking monopoly to save on costs. I presume this is at least partly a call for the end of patents as we now know them. And here, I will admit that this would reduce costs. But only so much, as the benefits to the inventing individual or firm would still have to be substantial enough to make it worthwhile for their launching the necessary R&D. Other cost reductions are likely to be even less impressive, in my estimate.

Viking

Dave,  Friday, February 5, 2010 at 1:47:00 PM CST  

Keynes wanted the government to freely borrow and spend in bad times, and than tax and repay the loans in good times.

Yes - but borrow to spend on public investment, with increased consumption following as a side effect. Isn't that what you yourself say, John, about the difference between borrowing to consume and borrowing to invest?

This is evidently what the Japanese did, investing in MRI scanners, which as Lonergan puts it "accelerates" production, lowers costs and thus increased consumption where that was useful (both healthwise and in the Utilitarian sense of increasing the happiness of the greatest number").

But Keynes refused to confront the failure of justice within economics itself.

Refused? If I don't know how to go about doing something, is it fair to say I refused to do it? Keynes had a practical problem, he know how government and capitalism worked, and he did what he could with the type of experience available to him. I'm glad see you expressing gratitude for that at least.

Okay, his answer wasn't the best one, but to build justice into the system a different understanding of government and money seems to be necessary. Indeed, Copernican revolutions in both, with Subsidiarity leaving central governments proposing and local governments disposing, while regular incomes should be guaranteed but recognised as a measure of our indebtedness to society rather than of our value. (Increasing that should be prized and motivated by socially agreed prizes for actual achievement, whether that be in the local flower show or in leading the nation wisely).

John Médaille Friday, February 5, 2010 at 1:56:00 PM CST  

Dave, Keynes preferred public investment, but would accept anything, even burying old bottles filled with banknotes in landfills, and then selling off the "mining rights" (his example.)

I don't know if there is a functional difference between "refused to confront" and "didn't know how to confront" the problem. But okay, maybe that's a better way to state it.

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