The Passing Paradigm

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The latest much-ado-about-nothing crisis passed, with a result that should seem familiar. In 2008, Americans were told that if the TARP bill (a $787 billion taxpayer-funded welfare handout to large banking institutions) wasn’t passed, the stock market would crash and massive unemployment would follow. After an unsuccessful first attempt to pass the bill amid angry opposition from constituents, the bill passed on a second vote. Subsequently, there was a stock market crash followed by massive unemployment.

This time, our political-media cabal told us that if Congress was unable to pass a bill to raise the debt ceiling, the government would not be able to meet its short term obligations, including rolling over short term bonds with new debt. US debt would be downgraded from its AAA status, and a default would be imminent. After the melodrama, Congress passed the bill raising the debt ceiling. Standard and Poor’s subsequently downgraded US Treasury debt anyway, and deep down everyone knows that a default is coming as well, one way or another.

We are seeing the end of a paradigm. Thomas Kuhn argued in The Structure of Scientific Revolutions (1962) that anomalies eventually lead to revolutions in scientific paradigms. His argument holds equally true for political paradigms.

A paradigm is a framework within which a society bases its beliefs. For example, people at one time believed that the forces of nature were the work of a pantheon of gods. Sunlight came from one god, rain from another. The earth was a god, as was the moon. With nothing to disprove the premises of the paradigm, it persisted. People went on believing that sunlight and rain were the work of sunlight and rain gods because there was no compelling reason for them to believe otherwise.

However, within any paradigm there are anomalies. Anomalies are contradictions — phenomena that cannot be explained within the framework of the paradigm. People have a startling capacity to ignore or rationalize away these anomalies. While it may defy logic to continue to believe that rain comes from a rain god even after evaporation and condensation has been discovered and proven, people would rather ignore the anomalies and cling to the paradigm than face the fact that the paradigm is false.

There is at least one thing that will be quite obvious: centralized government is insane.

But once there are too many anomalies, the paradigm fails, and a new one must take its place. This new paradigm renders the old one absurd, even crazy. At some point in the future, people will look back on the political paradigm of the 20th and early 21st centuries. There is at least one thing that will be quite obvious to them: centralized government is insane.

Consider the premises upon which this present paradigm relies: all facets of society must be planned and managed by experts. The judgment of the experts trumps the rights or choices of any individual. The choices made by the experts will result in a more orderly society and greater happiness for the individuals who compose it. There will be better results from one small group of experts controlling everyone than multiple groups of experts controlling smaller subgroups of society.

Of course, libertarians reject every one of these assumptions on its face. A free society does not tolerate “planning” or “management” by anyone. All choices are left to the individual, as any attempt to plan or manage his affairs amounts to either violation of his liberty, looting of his property, or both. However, let’s assume that the first three assumptions of the present paradigm are valid and merely examine the last. Even that does not hold up to scrutiny.

Suppose an entrepreneur starts a business. At first, his market is local. He opens retail outlets that are overseen by store managers. The entrepreneur is the CEO of the company and manages the store managers. Even at this point, the CEO must trust day-to-day decisions to his managers. He has no time to make everyday decisions as he tries to expand his business. The managers do this for him and he concentrates on strategic goals.

His business is successful and soon he begins opening outlets outside of the original market. He now has a need for regional managers to manage the store managers. He manages the regional managers and leaves the details of how they operate within their regions to them.

The business continues to expand. With retail outlets in every state, there are now too many regions for the CEO to manage directly. The CEO appoints executive directors to manage larger regions, each composed of several smaller ones. There is an executive director for the West Coast, another for the Midwest, and another for the East Coast. Of course, the CEO has the assistance of his corporate vice presidents who manage sales, operations, human resources, and other company-wide functions from the corporate office.

Now, suppose that one day the CEO decides to fire the executive directors, the regional managers, and the store managers. He will now have the salespeople, stock clerks, and cashiers for thousands of retail outlets report directly to him and his corporate vice presidents. Would anyone view this decision as anything but insane?

As silly as this proposition sounds, this is a perfect analogy for how we have chosen to organize society for the past century. The paradigm rests on the assumption that every social problem can be better solved if the CEO and his corporate staff manage the cashiers and the salespeople directly. As in all failed paradigms, anomalies are piling up that refute its basic assumptions.

This paradigm assumes that centralized government can provide a comfortable retirement with medical benefits for average Americans, yet Social Security and Medicare are bankrupt. It assumes that a central bank can ensure full employment and a stable currency, yet the value of the dollar is plummeting and unemployment approaches record highs (especially when the same measuring stick is used as when the old records were set). It assumes that the national government’s military establishment can police the world, yet the most powerful military in history cannot even defeat guerrilla fighters in third-world nations. It assumes that the central government can win a war on drugs, yet drug use is higher than at any time in history. It assumes that experts in Washington can regulate commerce, medicine, and industry, yet we get Bernie Madoff, drug recalls, and massive oil spills.

Hundreds of years ago, the prevailing medical science paradigm assumed that illnesses were caused by “bad humors” in the blood. Operating with that assumption, doctors practiced the now-discredited procedure known as “bleeding.” They would cut open a patient’s vein in an attempt to bleed out the bad humors. As we now know, this treatment often killed the patient. Most rational people today view the practice of bleeding as nothing short of lunacy.

Ironically, this is a perfect analogy for the paradigm of centralized government. The very act of a small group of experts attempting to manage all of society drains its lifeblood. It is the uncoerced decisions of millions of individuals that create all the blessings of civilized society. It is the attempt by a small group of people to override those decisions that is killing society before our very eyes. Someday, people will look back on our foolishness and laugh as we do now at the misguided physicians who bled their patients to death. The present paradigm is dying. The revolution has begun.



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Comments

Jon Harrison

Umm, Social Security is bankrupt? I've always thought that bankrupt entities, by definition, could no longer make full payment on their obligations. Yet the checks are still going out, and will be, long after you and I are gone. True, at some point it will only be able to pay 75 or 80 per cent of the promised benefit, but that can be rectified by cutting benefits, raising taxes, or a combination of the two. In either case, it doesn't amount to bankruptcy.

Now, if the U.S. government repudiates or defaults on its debt, then bankruptcy becomes a fact. But U.S. government debt will, at worst, be "restructured" in order to prevent a global economic catastrophe. And in that case Social Security payments will continue to be made, though again benefits may be cut.

It's a fundamental error to equate a social program with a business enterprise or a family's finances. We can, as a political act, terminate Social Security. But don't hold your breath on that. In fact, the checks will continue to go out far into the future. Short of national bankruptcy, Social Security will be around a lot longer than anybody reading this page.

Chris Eddy

Perhaps bankrupt is the wrong term to use related to the state of the Social Security and Medicare programs. But, all of my life I've been hearing concern that these programs will basically collapse at some point in my lifetime and will be unable to provide the promised benefit.

The problem with both programs is that we can't simply wish them away. We've all been forced to pay into the program, and it's only reasonable to expect some sort of return on our "investment".

Instead of attacking the programs to discredit their effectiveness (I don't think anyone would argue that either program "works"), a more beneficial conversation would address how to get out from under both programs in a way that is reasonable and fair for the people who have paid into the programs, and those who have become reliant on the programs for their well being.

As Jon Harrison points out, neither program will be dismantled, and the checks will go out for many years to come. That is, unless, a more realistic approach is presented that will be palatible for the voters. No voter will say "Sure, scap the programs and, while you're at it, you don't even have to pay me back all the money you've taken from me for the past 30 years.". But, if we give people the choice between receiving a worthless Social Security Check (which is what it will be by the time I retire) or an overhaul of the program that might include some type of combination of lower benefits, higher taxes, or refund of investment, you may have a little more success in eventually getting the country out of the medicine and retirement business.

Mr. Bobo

The reason Social Security is still solvent is because Congress, for 2010 and 2011, appropriated general revenue from income taxes, tariffs, and other Federal taxes to the Social Security Trust Fund.
Yes, I know this is temporary in the sense that as the economy improves, there will be a couple more years when money is taken out of the SS trust fund and used for other Federal spending (as had been the case before 2010), but in the long term, it's cash negative, just as it is right now, only more so.
And yes, Social Security will probably be around for decades, but it's also true that those born after 1945 can expect a major reduction in what they receive, compared to what they would get under current law. And those under about 50 or 55 will probably never collect. Just how quickly Social Security benefits get scaled back depends on who gets elected.

Art Thomas

The restructuring you speak of is called monetizing the debt.If the federal govt cannot find enough buyers to rollover the present debt and fund future govt. spending, the Fed. Reserve will likely print dollars i.e. monetize the debt.

That's inflation; each dollar loses purchasing power and the price of goods go up. Inflation is an insidious tax that especially harms lower and middle income people; a tax the politicians have been able to get away with. But now more people understand this corrupt monetary policy.

Raising direct taxes won't cut it either. A successful tax on the rich will curtail private investment, job creation and savings. It will impede the restoration of a free and flourishing economy.

True, the govt. won't go bankrupt. It will destroy the dollar. All those social security checks won't be worth the paper they're printed on.

Remember the German hyperinflation of 1923 and the many countries in our time esp. Mozambique.

Rodney C.

I second the idea that I think Jon puts forth, that we should be careful regarding use of the concept "bankruptcy". Our society has allowed no less than the abuse of "bankruptcy" in the private sector, as a form of stealing. Now cities want in on the act. Next will be state governments. What do you think the recent bailouts were all about?

As I have it thought out thus far, I don't think "bankruptcy" should apply to government - only the private sector. One thing that I think has always driven our country's debt habits is that people are planning to eventually just go "bankrupt"- stupidly not realizing what that would mean for a country.

So I think that a disordered concept of bankruptcy has played a role in bringing us to where we are today.

Thanks

Rodney C.

In my last transmission I forgot one thing - Bankruptcy shouldn't apply to BANKS either! It sounds crazy, I know, but think about it. They say they'll hold your money for you and just use it for a while. But they get greedy and lose it?

Thanks

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