Hi Everyone,
Edition #5 of my bi-weekly newsletter will be an amalgamation of tidbits from articles, research papers, books, YouTube videos, and podcasts that the Internet Algorithms have guided me to discover over the past couple of weeks. Read along as I attempt to tie together obscure topics with even more obscure theories, conveyed through commentary that is more or less stolen from random people — all of whom are much smarter than me.
In this edition, I am going to write about how we fetishize experts and credentials and how it often comes back to bite us.
Americans do not trust the government. But what is more significant, and often overlooked, is that people in government likely trust Americans a lot less. What this speaks to is the ongoing war between technocracy and populism, in which technocracy is winning while the country as a whole suffers.
Technocracy is defined as a system of governance in which the decision-makers are appointed on the basis of their expertise in a given area of responsibility, whereas populism can be described as the public’s outrage at the elites who are appointed in a technocracy (think Donald Trump’s election). The rise of technocracy in America is reflected across the increasingly ‘scientific’ approach to policymaking and the consolidation of power within the executive and judicial branch as well as the private sector. The technocrats making the decisions to address (or deliberately ignore) our most prominent problems are often the faceless swaths of Ivy Leaguers, PhDs, technical experts, and elite industry leaders who populate the executive branch agencies, undemocratic institutions such as the Federal Reserve, and C-Suite positions in corporations.
In simpler terms, the dichotomy between technocracy and populism can be described in a question I pose to you: who do you want making decisions in government — the smartest group of people or the group of people that most accurately represents the American population? Under the current status quo, the former has already been chosen for you by a smarter, much more qualified group of people. Funny how that works.
For the past five decades, we have observed a massive concentration of wealth, and consequently power, moving into fewer and fewer people’s hands. Many people cite corruption that causes politicians to represent special interests and elites rather than their constituencies. While this is fair, what is often ignored is that our politicians seem to not know any better than to put their blind faith in technocrats, despite the fact that trusting these people fails time and time again.
Look no further than this past week, in which Congress struggled to pass a $600 stimulus check to people who are starving. Interestingly, President Trump had no qualms about a stimulus check. In fact, Trump reportedly advocated for a check that was at least $1,200 and possibly as big as $2,000. But just as they did in his trade war with China or his efforts to build a border wall, his aides and advisors stepped in, for better or worse, to talk him out of his instincts. Instincts that, whether you like Trump or not, bested the gangs of economists that they hire over at the Federal Reserve in predicting whether the economy was going to overheat. What ultimately prevented Donald Trump from becoming the transformative president that people believed he would be, was a class of technocrats within his personnel, which he tried replacing again and again, who were enforcing the status quo. A class of technocrats similar to those who intervened in President Obama’s administration as well. Looking back honestly on Trump he was not much different than his predecessors. I would go as far as saying that, especially in respect to concentrating wealth and power, Trump was not much more destructive than Obama was. Sorry.
Thanks Obama.
In Trump’s response to the Coronavirus pandemic, the CARES act along with the Federal Reserve’s monetary policies did a helluva job in concentrating more wealth among elites, however, it was nowhere close to the motherload of overt economic destruction that was Obama’s response to the Great Recession.
Among my generation, there are seemingly two lines of opinion on President Obama. One is that he was the best thing ever and the other is that he was the worst thing ever because of all of the war crimes he committed. Yet, what is often neglected is his utter failure to avoid worsening economic inequality in his response to the Great Recession. Every time someone discusses topics such as wealth inequality, it should be followed by ‘Thanks Obama.’
On the surface level, Obama’s recovery was a moral hazard at best because it was centered around purchasing banks’ toxic assets and making financiers whole while offering no comparable bailout for the millions of homeowners who were drowning in debt. At its worst, Obama’s recovery reshaped society as we know it, contributing horrifically to the concentration of wealth and power, the racial wealth gap, declines in economic mobility, and the decimation of many middle and low-income communities. During the Financial Crisis, middle-class families were seven times more exposed to the housing bubble’s collapse than the wealthiest 1%, whose net worth was way more dependent on financial assets, the value of which the Treasury Department and the Federal Reserve prioritized over homeownership. Certain demographics were hit harder by the government’s inaction with respect to saving homeowners because of the predatory lending practices that burdened black communities, in particular, with horrible mortgages. As a result, the net worth of African-American households fell 64.2% between 2004 and 2010, exacerbating the racial wealth gap that existed beforehand. On an aggregate scale, the net worth of the top 7% increased 28% while the bottom 93% decreased 4%, two years into Obama’s ‘recovery.’ One-third of the 9.3 million American families who lost their properties after the housing bubble collapse, will never own homes again, yet most of the Obama administration’s actions revolved around saving finance. To me, it is funny when people claim that Trump’s burgeoning economy is really the result of the great things that Obama did, because, frankly, Obama’s economic recovery is something to be ashamed of. Depressingly, his response to the Great Recession was not even the only way in which Obama moved more power and wealth into the hands of fewer and fewer people, but I will keep my peace for now.
So why did Obama handle the recovery so terrifyingly? Some may say he was corrupt and bought off by Wall Street, while Obama himself would probably answer something about people demanding too much of him. But I believe that he merely did not know any better. He let CitiGroup choose his cabinet, for example, because he saw no other way to overcome the financial crisis, besides consulting those who knew the financial sector the best — meaning those who started the crisis in the first place. Now obviously there were other ways that didn’t involve economists who helped create the whole crisis such as Larry Summers, but because of Obama’s famously rigid worldview, he could not see a way other than consulting the technocrats who contributed to the crisis in the first place. And nor could Presidents Trump or Bush or Clinton, who all picked from the same crop of Ivy League-educated Economics PhDs, lawyers, and bankers to consult them, partly because of the issues I discussed in my last letter, but also because when a technocrat fails at their job, they either fail upward or become replaced by an identically thinking technocrat.
Technocrats Mess Stuff Up
Larry Summers is an interesting character to focus on because he embodies the most prominent failures of the American technocracy. Lately, he has been running around Bloomberg and CNBC advocating for massive public investment and progressive fiscal policies almost as if to make up for his past shortfalls, most notably relating to the Great Recession. In a story told brilliantly by journalist Matt Taibbi, Harvard PhD and Deputy Treasury Secretary Larry Summers, along with Fed Chairman Alan Greenspan and Treasury Sec. Robert Rubin, shut down Head of Commodity Futures Trading Commission Brooksley Born’s efforts to regulate derivatives such as Collateralized Debt Obligations and credit default swaps — the very frequent trading of which led directly to the Financial Crisis. Brooksley Born would resign from her role on June 1, 1999, and the rest is history.
Another incident with Summers occurred in 2005 during an annual meeting of central bankers, where former Reserve Bank of India Governor Raghuram Rajan presented a paper about the growing risks within the financial system, indirectly criticizing the policies that Summers, who was present in the audience, was a key player in enacting. Summers responded by launching fierce attacks against Rajan, just as he did against Born six years before. Rajan’s critiques would become accurate, of course, while Summers was overwhelmingly wrong. Despite this, Summers still found his way into the Obama White House, and the planning of the economic recovery to a crisis his ignorance helped create.
Both of these incidents illuminate the issue within economics itself and the overreliance on economists within every administration. This is not to say economics is not important as a research field, as it serves a great purpose in understanding how societies work. But economics is not the scientific method of policymaking it claims to be, in spite of how mathematical it has become. It is instead often one’s word against the other, with no one knowing who is actually right until the event they are speculating about actually happens. Every single economics book or research paper I have read has a myriad of critiques from other economists filled with jargon no one except their own club of economists can understand, which often leads me conclusion-less. Believing one over the other merely becomes believing the economic prediction you want to believe. While empirical economic research is surely beneficial in identifying historical trends and policies that do or do not work, it is no certainty that it can be accurately extrapolated to future events.
Within economics, there is also a prominent establishment that holds quite a narrow spectrum of perspectives on how policymaking works. Challenges to topics where there is a powerful consensus, such as free trade, have not been taken seriously until the Trump administration with his selection of Peter Navarro as trade advisor, for which he was still made fun of. Rarely are the more heterodox schools of economics given any consideration or even a voice among the circles of powerful economists. Even when they are, they are met with sharp rebuke and pressure to conform, which is no surprise considering the history of the tyranny of one or two voices within policymaking institutions such as the Federal Reserve Open Market Committee.
The case of Larry Summers highlights how the tyranny of one or two voices can sink an entire country but also how long it takes economists to understand wrongdoing. It took until now for Larry Summers to begin seeing some of the downfalls of his tenure in powerful positions. The pride that the field of economics takes in being a branch of applied mathematics often bites them in the arse. The general consensus around the ‘China Shock,’ for example, was only established recently, after years of public outcry against the millions of jobs that were being offshored to China and economists such as Alan Greenspan’s diminishing this problem. The iconic economist John Maynard Keynes once said ‘When the facts change, I change my mind,’ but sometimes the facts take too long to change in the eyes of economists, which results in political shifts, such as Trump’s election, preceding economic policy paradigm shifts, which seem distant at the point we are at right now.
In fact, the last policy paradigm shift dates back to the 1970s within the classrooms of the University of Chicago, which not coincidentally occurred with the rise of the American technocracy we have today. (Yes, I am aware that in each of my past three newsletters I have made reference to this ‘neoliberal revolution’ and I will unapologetically continue to do so.) Interestingly this intellectual revolution/paradigm shift took place before the political shift that was the blowout election of Ronald Reagan, which may or may not indicate something about how the next successful policy paradigm shift could occur. Since this last shift, I would argue we have had similar groups of technocrats operating under the figureheads of different presidents, who despite their apparent desires to shake up the status quo, consistently fail to do so.
Meritocracy and Technocracy — Two Flawed Concepts that Go Hand in Hand
Inside the classrooms of the University of Chicago, was the uniquely influential neoliberal character of Aaron Director who not only believed in big business and deregulation but also embraced forms of governance that concentrated decision-making power among elites, as opposed to democracy. Aaron Director, a professor at the University of Chicago’s law school, contributed to revolutionizing antitrust law and shaped it into how it still is today through his studies, the students he taught, who would go on to fill powerful seats in government, and by establishing the entirely new field of ‘Law and Economics.’ His courses were compared by students and scholars to religious indoctrination because of his ability to easily convert people to his ‘antitrust doctrine,’ which was a combination of his resentment of democracy and belief in technocracy, and encouragement of monopolization and lax antitrust enforcement.
Director’s legal theories directly reinforced his social beliefs when applied in American politics, particularly during the Reagan administration. The structures of power within governance have barely changed since, not only politically, where we have not had any especially transformative presidential administrations since Reagan, but also culturally. Director’s belief in a full-fledged technocracy was backed by his confidence that America was a meritocracy and that the elite class would be deserving of the levers that wield power, while the rest would be too stupid. It’s fine to think this as thinkers going all the way back to Plato and Aristotle also do, however, there is a debate to be had about whether a meritocracy exists in the first place.
When I think of meritocracy, I think of those civil service examinations in Ancient China that we learned about in high school World History, which decided who would be inducted into China’s complex network of bureaucrats. Meritocracy is not the same in America, as it is heavily plagued by low rates of economic mobility and severe wealth inequality that infringes on equality of opportunity for everyone. The analogy is often drawn that the American meritocracy is a foot race in which ten percent of the runners get a head start. Nothing perhaps is more representative of the flaws in the American meritocracy as our fetishization of credentialism.
Everyone from Jeffrey Epstein to The West Wing to Asian parents have fetishes for the prestige surrounding universities and their college degrees despite them being some of the most crony and unmeritocratic institutions out there. First, they pride themselves on turning away as many students as they possibly can, then they boast about the generosity in the aid they offer, which is given away to so few students because their admissions standards make it close to impossible for too many low-income students to be admitted. The worst crime is that there is a proportion of students at every top school who get in by straight-up cheating (my school included) and a large proportion who get in through legacy admissions, which to me is legalized cheating. Indicated by the current state of affairs at these universities, which have mostly become completely online, no longer is college about the intellectual experiences one can come across as much as it is a line on your resume that gets you past an automated resume screening. An Ivy League college degree, for example, will get you a foot in the door nearly anywhere because of the cultural machine surrounding these institutions that consumes everyone. And the fact that they end up in the most powerful positions in the country is symbolic of how out of touch the technocratic class is, just as how out of touch the typical Dalton School-educated, son of a northeast hedge fund manager, future Goldman Sachs analyst Ivy League attendee is.
Now, to be clear, I am not saying that if we fix college admissions standards, which currently disproportionately favor more affluent students, technocratic governance will be okay. I am calling to reestablish a government that is truthfully representative of our population. This does not mean, by the way, installing an LGBTQ former McKinsey Consultant as the Transportation Secretary or an African-American BlackRock adviser as Deputy Treasury Secretary. It means representing the backgrounds from which Americans come from, such as those without college degrees or work experience in coastal cities. 96% of Congress have at least one college degree, whereas only 35% of the US population have a college degree. And look at where it has gotten us.
The prevalence of technocracy that has ruled Washington for the past five decades has consistently failed, is hinged upon a mythical meritocracy, and does not adequately represent Americans. We need to restore democracy within the very structures of our government. While unfettered executive power wielded by Ivy Leaguers might be appealing to some in the short term, having no name Koch-funded policy administrators, who only I would have the time to search for on Linkedin, quietly rejecting and enacting regulations within the Office of Information and Regulatory Affairs, is existentially destructive in the long-term. Leaving all economic decisions to be primarily influenced by Economics PhDs at the National Economic Council or the Council of Economic Advisers (why are there even two), who have had a poor track record, is destructive in the long-term. Delegating legislating to Supreme Court Justices who pride themselves on writing textualism-inspired decisions that hold legislation by the Courts in contempt, is destructive in the long-term.
Congress, the most democratic structure of our government, is where change should take place, yet it is stifled by preexisting power structures and raging partisanship. However, there is hope for bipartisanship, in relationships such as Senators Josh Hawley and Bernie Sanders, who both advocated for stimulus checks this past month, and alliances amongst anti-foreign interventionists and anti-monopoly advocates across the congressional aisle. How to replace the destructive technocracy I have described, is a question we should all be asking ourselves. While I recognize that this newsletter doesn’t detail possible resolutions to the issue I raise, I hope it is clear that technocracy is no longer the answer.