Last week Detroit’s pending bankruptcy was in the news. In the last sixty years, Detroit has gone from being one of the richest cities in the world to one of the poorest in the United States. I read a pull-no-punches article from Forbes blogger Louis Woodhill, The Big Lie That Drove Detroit Into Bankruptcy Was Liberalism Itself, which makes some compelling points, I think. In short, Woodhill notes that unions use monopoly power to drive up wages, which ends up destroying the ability of heavily-unionized industries to compete in global markets. Defined-benefit pensions inevitably become under-funded, because they rely on exact assumptions about a future that is inherently unpredictable. General Motors’ reported earnings were essentially false, because the company was not funding its contractual pension and health-care obligations. And one of the central consequences of the Great Society, what Woodhill calls the “no-parent family”, has wrecked the social fabric of most inner cities.
You may agree or disagree with Woodhill’s analysis, but it is hard to fault its form of argument. This thing happened, it had this direct consequence, and now we are here. He paints an understandable picture of Detroit in historic context, with its crime, corruption, falling incomes, and broken families. One may disagree with his particular attribution of cause and effect, as I do in several respects, but he does clearly attach action to consequence.
Next, I read a post from Paul Krugman of The New York Times, titled Detroit the New Greece. Krugman is worried folks will draw the wrong lesson from Detroit, just as they have from Greece, observing that, “Now, the truth was that Greece was a very special case, holding few if any lessons for wider economic policy — and even in Greece, budget deficits were only one piece of the problem.”
Krugman goes on to disassemble the conventional explanations for Detroit’s dissolution. There isn’t actually a public pensions funding crisis, since nationwide such benefits are only underfunded by $1 trillion; as Krugman says, “Not a big deal.” And bad municipal government in Detroit was not the cause of the bankruptcy, either. So what was the cause of Detroit’s descent from dominant, wealthy city to bankrupt post-apocalyptic chaos? “Market forces.”
Who knew? And exactly why did these market forces not similarly compromise the public finances of New York, Phoenix, Tokyo or Shanghai? Is Detroit uniquely market-sensitive? Krugman makes a vague comment about buggy whips, ignoring the fact that automobiles, Detroit’s stock-in-trade, are the dominant mode of transportation for an ever-growing share of the world’s population.
Krugman has long argued that Greece spending money it didn’t possess wasn’t really a problem. The fact that it had borrowed large sums of Euros it could not repay was not the problem either. The problem was the failure of Greece’s lenders to maintain the flow of unserviceable loans once the Great Recession hit. (Indeed, Krugman believes Greek spending should have gone up, not down.)
In Krugman’s world, the problems of Greece and Detroit were not caused by the behaviors of the people who lived there, nor by the governments that ran that country and that city, nor by the policies pursued by those governments. Both entities are somehow the victim of vague, exogenous forces. Maybe Germans. Maybe Harvard economists. Maybe technological change.
The most interesting thing about any Krugman column is the comments, most of which reliably touch on one of two themes (many reference both):
- Krugman is the smartest and most honest guy on the planet, a rare voice of reason at a time when Faux News and the Koch brothers dominate public discourse.
- Everything wrong with the world is the fault of Republicans, who are more evil than they are stupid, or vice versa.
Reading the comments after last week’s Detroit blog, I learned that the problems of Detroit, a city run for generations by unions and African-American politicians, were actually caused by (wait for it), Republicans. This is the sort of obvious nonsense you can believe only if you are smart and highly-educated. Anyone who lives in a cause-and-effect world must find it baffling.
After a valiant effort in recent years to claw my way back to the political center, I find myself trending more and more conservative again. A large part of what drives me away from contemporary liberalism is its denial of agency — its belief that action does not have identifiable consequence, and that people are not responsible for what they do.