Do-nothing leaders

Being back in the US, I have had a chance to reacquaint myself with American politics — and to be reminded of why I find the American political class so disappointing. The problem isn't just the failure to act; it's a failure to find new conceptual categories for the problems of the twenty-first century. US leaders, in the broad sense, including media elites, have an unfortunate tendency to assume that once the US sheds itself of its Iraq problem (and its Bush problem), it will once again be able to wield power and influence around the world.

The world and the US have changed, however. The unipolar moment is over, if it even existed in the first place. The post-industrialization of the US will continue apace. The democratization of information worldwide will also continue, undermining US military power. As the US is learning, it's harder to use power in a more complex mediaspace that undermines the ability of large organizations to control the information that reaches publics, raising the costs of the use of force. Even as it continues to bolster its military power, the US, beset with economic difficulties, is finding it increasingly difficult to get what it wants globally. (Stratfor's George Friedman addresses the shallowness of the US foreign policy debate in this post at his blog.)

The US political elite, however, is not the only group of leaders fiddling while Rome burns.

Indeed, the G8, struggling to remain relevant in a rapidly changing global environment, is a monument to the collective failures of the leaders of the developed countries.

Tokyo is no exception — Japan's political class might be the world leader in ineffectual leadership. Tahara Soichiro, grand old man of Japanese journalism, calls attention to the government's failures in a short article in the March issue of Liberal Time. His particular grievance is the government's failure to deal effectively with the deepening global economic crisis and its impact on the Japanese economy. His ire is directed at the leaders of both parties, and he actually calls for the dissolution of both the LDP and DPJ — and points to the nascent Sentaku movement as a possible solution to the failures of the Japanese political class.

I think he's unfairly critical of Prime Minister Fukuda. Mr. Fukuda might be of an older generation and might have been ineffectual since taking office, but his keen understanding of the problems facing Japan is unique not just among Japanese politicians, but among G8 politicians more generally. The problem is not individual leaders, but a policymaking process that is a relic of better times, when the greatest task for senior politicians was distributing pork and plum posts to supporters. Indeed, if the Japanese political system was up to the challenge, the rearguard action by the Zoku giin on the temporary gasoline tax would be easily dismissed and the discussion would have from the first focused on how best to use the tax revenue. It is unclear, however, whether the government will accede to the opposition's demand for the end to the road construction earmark.

Changing the system will entail more than just replacing one group of leaders with another. Change must be comprehensive: political, administrative, economic. It is on this point that Mr. Tahara falters. He speculates about which leaders will be capable of doing what must be done — he cites Nakagawa Shoichi in particular (an assessment I don't share) — rather than considering the institutional obstacles to change.

Are we all social democrats now?

I could not help asking that question — paraphrasing Richard Nixon's famous pronouncement — read a pair of articles that look at how post-industrial global capitalism is evolving, and how publics, especially in the US and other mature democracies, are responding to the emergent order.

In Foreign Affairs, Kenneth Scheve and Matthew Slaughter, noting the rise of protectionism in the US, call for a "New Deal" for the post-industrial age (hat tip: Arts and Letters Daily). The basis for their argument is quite simple:

...Policy is becoming more protectionist because the public is becoming more protectionist, and the public is becoming more protectionist because incomes are stagnating or falling. The integration of the world economy has boosted productivity and wealth creation in the United States and much of the rest of the world. But within many countries, and certainly within the United States, the benefits of this integration have been unevenly distributed -- and this fact is increasingly being recognized. Individuals are asking themselves, "Is globalization good for me?" and, in a growing number of cases, arriving at the conclusion that it is not.

They point in particular to falling incomes for every category of education except for holders of PhDs and professional degrees, and the corresponding feeling of economic insecurity that they argue jeopardizes the sustainability of the new capitalist order. Accordingly, they criticize the inadequate response of public officials to this sense of insecurity — the failure of governments to explain the virtues of the new age while simultaneously initiating policies that will ease the fears of anxious publics and try to provide individuals with the tools to compete.

Meanwhile, in the FT Martin Wolf lays out how the "permanent revolution" that is capitalism is transforming industrial capitalism into something else (he calls it, perhaps channeling Rudolf Hilferding, global financial capitalism, but that strikes me as too limited a term, because the impact of the decoupling of wealth creation from the production of tangible goods is and will continue to be wide reaching, throughout societies). Wolf is definitely worth reading, because he outlines the extent of the transformation underway, the extraordinary changes that have left publics scared and governments overwhelmed. The benefits, as Wolf notes, are substantial, but if they are to be preserved and expanded governments need to act to disarm public opposition and build a new regulatory framework, in the same manner that countries developed a regulatory framework for the industrial age.

As Harvard's Dani Rodrik notes in a comment on Wolf's analysis, "The problem, at its root, is the incompatibility between global finance and fragmentation of political sovereignty at the national level. Domestic finance could be tamed in the previous century through national institutions (regulation, legislation, central banks, and so on). Global finance, to work well and safely, requires institutions similarly global in scope. The chance that these global institutions can be created is, well, nil—at least in our time."

Based on the thinking of elected officials in not only the US, but also in Japan and Europe, I must share Rodrik's skepticism. It seems that few officials quite realize the extent of the change underway. They remain stuck in the industrial age, content to jury rig old institutions rather than imagine new post-industrial institutions. As such, public opposition, in the form of protectionism, will undoubtedly continue to grow. What I am curious about is how that opposition will metastasize into more formal opposition, reminiscent of the late nineteenth century's Grangers and Populists. In fact, I am amazed that John Edwards seems to be the only candidate actively trying to tap into growing fear and resentment.

So the question is whether the heralds of "global financial capitalism" — to whom state intervention is largely anathema — will be flexible enough to embrace some form of social protection as a way to disarm and undermine more potent opposition to the post-industrial order.