Detroit Isn't Greece

Remember that movie from a few years ago, where a kid grew increasingly neurotic and agitated about government debt until a psychologist teased out his secret, "I see Greek people... they're everywhere... and they don't even know they're Greek!" Well, neither do I, but had they made that movie the child might have grow up to be Charles Lane.

I have three basic problems with people who are inclined to point to units of government and declare, "That's like Greece". First, those making the comparison often seem to have little understanding of the situation in Greece. Second, their comparisons are usually spurious. Third, the gist of their argument usually has nothing to do with Greece or the circumstances that led up to its economic crisis, and usually have a lot more to do with a desire to cut social spending or to attribute some form of blameworthiness to the ordinary people who have profited the least and suffered the most from the mistakes and misconduct of their governments. I'm not seeing Lane as an exception.¹

Greece's economic crisis did not emerge in a vacuum. If any nation in the Euro zone was not aware that Greece was playing games with its finances first to qualify for entry into the Euro and subsequently to nominally meet the limits on the size of its deficits, the ignorance would have to have been willful. Greece's governance was impaired by ineptitude, corruption, and a willingness to turn a blind eye to tax fraud. But the average Greek person was part of a culture that was more entrepreneurial than most - just oriented toward small, family-run businesses as opposed to the version we're used to - and on the whole they were paying a higher share of their income in taxes than a typical U.S. citizen. It's all too easy to shrug off the hardship they are experiencing, first from the economic collapse and second from austerity measures, while ignoring the fact that those who profited the most from the lead-up to the crisis are also typically those most insulated from its consequences.

A comparison between Greece and Detroit perhaps holds true in relation to the perceptions that lead to a mentality of austerity - a notion that the people are at best undeserving and at worst need to suffer. Never mind that most of them are trying to get through their lives under difficult circumstances. The City of Detroit has lost close to two thirds of its population since its peak. It's easy to look at Coleman Young, who chose to transform himself into a cartoon, and forget that he became mayor following a period of crisis and actually did good work during his first term. It's astonishing, how bad things became over his subsequent terms, or the culture of incompetence and entitlement that took over the City's government during his era.

It's easy to forget that when provided with the opportunity to do so, the people of Detroit made the very responsible choice of electing Dennis Archer as mayor - but (one might infer, when confronted with the entrenched corruption and incompetence left beyond by Young as well as the lack of resources and political capital necessary to effect a significant reform of the city and its government) he left office after one term and was succeeded by the young, charismatic,² and (alas) corrupt Kwame Kilpatrick. It's also easy to forget that Kilpatrick was succeeded by Dave Bing, who is much more in the model of Archer, but by some combination of timing, personality and opportunity, more willing to take on the entrenched interests that have impaired the city. As they say, at least in relation to trying to forestall the appointment of an emergency manager and possibly to keep the city out of bankruptcy, too little, too late.

It has been painfully obvious for decades that Detroit needed serious outside intervention. That did not occur for three reasons: first, few people were willing to pay the political price associated with the necessary reforms. Mayor Bing was able to propose consolidating neighborhoods and essentially shutting down the sparsely populated ares of the city because things had degenerated well past the point of sustainability - but the need for those measures were obvious more than twenty years ago. Second, change isn't cheap - and nobody wants to pay for it. For example, there are huge, slowly decaying buildings and structures in Detroit that remain in place, eyesores that stand in the way of brownfield redevelopment, because they're too expensive to remove and nobody in their right mind wants to develop land that sits next to a decaying hulk or contaminated land. The state is unwilling to divert that type of money into Detroit, and it's not even on the federal radar screen. Third, it's very easy to blame the people of Detroit for their own plight, even though things get far more complex when you start looking at individuals. Our nation's approach to its anachronistic large cities³ and the problems of the inner city is largely one of disinterest and neglect - and that's not likely to change as long as the nation, as a whole, perceives the residents of those areas as undeserving of help.

Still, Detroit has its bright spots. If Lane ever actually makes it to the city, he may want to check out Greektown.
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1. For example, Lane waxes poetic about the union-busting powers granted to Detroit's emergency manager then complains, "German chancellor Angela Merkel could only wish for such quasi-dictatorial power over her Greek clients", seemingly unaware that Germany has been a driving force behind the failed austerity measures that have been imposed upon Greece to the extreme detriment of ordinary people; he argues "Greece’s state-owned money pits include a railroad and ports. The political class in Detroit saw fit to own water works and parking garages", as if it's unusual for a municipality to own a water utility or parking structure and as if the comparison between that type of service and owning seaports and railroads has any validity, and in ignorance of the fact that Detroit's water utility produces high quality water and sells its services to other area communities; he suggests that Detroit's pension obligations are somehow analogous to the cause of Greece's economic crisis, never mind that pensions had nothing to do with Greece's crisis and the relative size of Detroit's pension obligations to its tax revenue is far more a creature of its collapsed tax base than of the fact that city employees receive pensions.

2. I did not personally find Kilpatrick to be appealing - I would label his style and swagger as appalling - but I can't deny that many others thought he was charming and liked his bravado.

3. Many cities that were once important, even crucial, hubs for trade are now largely irrelevant. Many of the industries that were once consolidated in major cities have shifted to other states, and even to other nations, with little to take their place. Detroit has lost 60% of its population, leaving behind a tax base insufficient to support its infrastructure, but without enough jobs or opportunities for the people who remain behind. As huge numbers of capable workers have left the city, a disproportionate number of those left behind have marginal jobs skills, physical or mental illness, drug addiction, or some combination thereof - with a predictable effect on the community, its schools, and its attractiveness to employers.

David Brooks on the Work Ethic

I had intended to follow up my post, David Brooks vs. The Facts, by challenging his assertion that "nations like Germany and the U.S." are rich because we share "values, habits and [a] social contract upon which the entire prosperity of the West is based", to be distinguished from the European nations presently in crisis, but a flood of others have already done the job. I will grant that it's true, you will find commonalities between western democracies, but as those others have pointed out, when Brooks attacks nations like Greece and Italy and praises Germany he ignores Germany's higher social spending, lower average annual hours worked, high government spending, and embrace of social democracy.

Brooks states a basic philosophy that most people would describe as fair:

People who work hard and play by the rules should have a fair shot at prosperity. Money should go to people on the basis of merit and enterprise. Self-control should be rewarded while laziness and self-indulgence should not. Community institutions should nurture responsibility and fairness.

He's also correct that you can undermine that ethos, one of the obvious lessons we can draw from the communist experiment. But I think he's being both parochial and incorrect when he argues that there exists some form of Northern European / North American work ethic that simply doesn't exist in the rest of the world. I also think he misunderstands the genesis of the work ethic and what sustains it.

Let's start with Brooks' observations about the supposed decline of work ethic, something he believes is a new phenomenon,

Right now, this ethos is being undermined from all directions. People see lobbyists diverting money on the basis of connections; they see traders making millions off of short-term manipulations; they see governments stealing money from future generations to reward current voters.

Does Brooks believe that lobbyists are new? That historically they have not diverted money "on the basis of connections"? Such a belief would seem to be completely at odds with history. As for "traders making millions off of short-term manipulations", since when is that new? When we transitioned from Jimmy Carter telling us to tighten our belts to Ronald Reagan's ushering in the era of "Greed is Good", we witnessed the Savings and Loan debacle, insider trading scandals, and plenty of evidence of crony capitalism. Brooks' notion that workers have suddenly become lazy because "they see governments stealing money from future generations to reward current voters" seems absurd.

Although it's true that Medicare costs more than one would have anticipated when the system was created, and as it turns out Social Security is on the whole a good deal for most lower- and middle-earning workers (and not such a bad deal for workers who want some level of affordable disability insurance), does Brooks truly see that the nation's living up to its promises to workers who have paid into those systems over the course of their working lives constitutes "theft"? And if he does, why the praise for social democracies like "Germany and the Netherlands" that "steal" even more money to ensure that retirees avoid poverty and citizens have access to quality healthcare? It's simply not the case that the work ethic has materially changed since the housing bubble burst, or that it is weakened by offering workers the promise of eventual retirement or access to medical care.

Further, in speaking of nations that "have lived within their means, undertaken painful reforms, enhanced their competitiveness and reinforced good values," he explicitly omits mention of the United States. That's fair, given that by Brooks' measure we do not appear to have done any of those things. Yet there we are, in Brooks' mind, sitting at the top of the heap of exceptional nations due to our work ethic. What gives?

As with "kids these days" editorials, people have been writing about the decline of the work ethic pretty much since the time it was first conceptualized. Brooks seems to be asserting two contradictory thoughts - first, that the U.S. has a remarkable work ethic as compared to the rest of the world, and second that it is newly threatened by the scandals of the past six years.

I am reminded of John McCain's comments from a few years ago, suggesting that Americans are too lazy to perform hard physical labor, and wouldn't spend a season picking lettuce even at $50 per hour. If a willingness to pick lettuce or work in sweatshop conditions for wages that are a small fraction of that $50, it would see that Americans have nothing on the poor of the world - China has no shortage of workers willing to toil in factories for long hours under unpleasant conditions, Southeast Asia is full of factories producing consumer goods in what can reasonably be called sweatshop conditions, and we use thousands of Mexicans, both legally and illegally in the U.S., to harvest crops, clean houses, cut lawns, or work in the building trades. You could draw a comparison to the working poor of the industrial revolution, who also worked ridiculous hours in horrible conditions for meager pay. The commonality, of course, is not "habits, values and social capital" or a delusion held by the workers that their jobs will lead to "a fair shot at prosperity" - it's their lack of better alternatives, and fear of what will happen if they lose their meager remuneration.

Even though by historic standards, taxes are low, without presenting any evidence to support his claim Brooks contends that people are put off working by the notion that the government is "stealing" their money to support unworthy others. Can Brooks name one person who has "Gone Galt" due to the fact that our nation hasn't completely eliminated its comparatively meager social safety net, or because seniors get Social Security and Medicare? One person who has so much as slacked off at work over outrage over lobbying in Washington? When the Tea Partiers rose up against the financial industry bailout, did they quit their jobs? What am I missing?

The real lesson from financial crises is that, at the pit of the crisis, you do what you have to do. You bail out the banks. You bail out the weak European governments. But, at the same time, you lock in policies that reinforce the fundamental link between effort and reward. And, as soon as the crisis passes, you move to repair the legitimacy of the system.

Let's relate that suggestion to the U.S. - what did we do after the financial industry bailout to "reinforce the fundamental link between effort and reward" or "repair the legitimacy of the system"? The steps the government took would seemingly fall under Brooks' conception of "stealing money from future generations", with a huge reward going to a privileged special interest, well represented by lobbyists, as opposed to "current voters". But no, it's not stealing to take hundreds of billions of taxpayer dollars from future generations in order to ensure that bankers never miss a bonus - that's "necessary". But if you promise somebody approaching retirement, who has paid into Social Security and Medicare for their entire career, that you will fulfill the promise that it will be there when they retire, Brooks apparently sees an act of "theft". (Does Brooks endorse any financial industry reforms that will make that industry less of a lottery, help ensure that there won't be additional crises and tie pay to actual performance?)

Although taking away the social safety net, job security, decent wages, and the other factors that helped our nation develop its middle class may in fact be effective at creating a population desperate enough to take any work at any wage, it would seem to move us much more toward the ethos of China or Cambodia than that of Germany. The retort, "But we'll still have the Horatio Alger myth", seems like small solace.

What Governments Can and Cannot Do

I recognize that it's difficult for a lot of editorial columnists to come up with ideas for their biweekly columns, and that it's anything but unusual to see a weak idea inflated to @800 words by nothing more than hot air, but you would think at some point their employer might say, "Look, if that's the best you can do maybe you should only be writing one column a week, or one a month."

But enough of that. Let's move on to a completely unrelated subject, David Brooks' thoughts on the "power of government". David Brooks opens by telling us that the government of Israel periodically appoints committees to revise public school curricula, that most of the committees don't do their jobs, and the few who belatedly complete their work may find that the government doesn't care about their proposals. To me, that suggests a government that's interested in looking like it's doing something about a problem, real or perceived, but doesn't actually care about taking action. You can find plenty of comparable examples from U.S. school districts and universities. For that matter, you can find similar examples in the form of reports and analyses from inside private businesses. The lesson Brooks draws?

Most people overrate their own abilities and exaggerate their capacity to shape the future. That’s fine. Optimistic people rise in this world. The problem comes when these optimists don’t look at themselves objectively from the outside.

To me, oddly enough, that sounds a lot like a personality profile for a typical nationally syndicated columnist.

Brooks attempts to relate the lessons of failed high school curriculum committees to the world in general:

The planning fallacy is failing to think realistically about where you fit in the distribution of people like you.... Over the past three years, the United States has been committing the planning fallacy on stilts. The world economy has been slammed by a financial crisis. Countries that are afflicted with these crises typically experience several years of high unemployment. They go deep into debt to end the stagnation, but the turnaround takes a while

So, according to David Brooks, history dictates that the government should engage in a lot of stimulus spending to ease the country through its financial problems, worry about how to lower unemployment and misery, not to worry too much about deficit spending during the time of crisis, and that eventually the country will pull through. Reading that alone, you might think he's finally started to read Paul Krugman's columns. But, alas, agree or disagree, that's the last coherent thought in his editorial.

The Democrats, besotted by the myth that the New Deal ended the Great Depression, have consistently overestimated their ability to turn the economy around. They regard the Greek crackup as a freakish, unlucky break, even though this sort of thing is a typical feature of a financial crisis.

Brooks just got through telling us that part of the history of this type of crisis is that countries will "go deep into debt to end the stagnation". Apparently he now believes that can be done without actually spending any money? In one paragraph he embraces the "myth" and in almost the next attacks the Democratic Party for agreeing with him?

More than that, other than hyperbole, what does Greece have to do with the economic problems of the U.S. economy. You don't have to look at Greece's situation for very long to see significant differences between their crisis and ours. Their government overextended itself to the point that it cannot service its debt. Our government has done what Brooks suggests to be the right thing by going "into debt to end the stagnation", but to the extent that we have a deficit crisis it's a crisis of will - a significant faction of the Democratic party and the overwhelming majority of Republicans won't raise taxes to pay our nation's bills. We could go a long way toward fiscal sanity simply by ending the Bush Tax cuts - the ones that were scheduled by the Republican Party to expire. The Republican Party won't let that happen, because the richest Americans (who are doing very well, thank you very much) would experience a modest tax increase.

As for the Democratic Party's supposed overestimation of its "ability to turn the economy around", it's only the Democrats who have embraced the notion that the government can quickly and easily fix an economic catastrophe? Then, pray tell, which of the candidates for the Republican nomination is singing a different tune and telling us, "No, don't blame Obama or the Democrats - the government is pretty powerless and we just have to wait this thing out"? Which past Republican President has shrugged off economic growth and argued, "It's just the business cycle - I don't deserve any credit"?

Republicans, who should know better, also have an inflated sense of the power of government. In the presidential debates, Rick Perry, Mitt Romney and Jon Huntsman argue about which one oversaw the most job creation during his term as governor, as if governors have an immediate and definable impact on employers’ hiring decisions.

In other words, Brooks is looking at equivalent rhetoric from politicians, "Everything good that happens from the day I'm sworn into office is my accomplishment, everything bad is the other party's fault," and imagining (or pretending) that it reflects deep and meaningful differences between the parties.

Brooks' attempt at a takeaway is that wise politicians should

...make the distinction between discrete good and systemic good. When you are in the grip of a big, complex mess, you have the power to do discrete good [such as paving roads or hiring teachers] but probably not systemic good [transforming the whole situation]....

[Their] discrete goods might contribute to an overall turnaround, but that turnaround will be beyond your comprehension and control. 

But when the crisis is large enough it can only be solved through large-scale government intervention. If Brooks dismisses the New Deal as contributing to the end of the Great Depression, perhaps he noticed the contribution of WWII? A huge government response to a huge problem. Similarly, whether or not you believe that the U.S. government bailout of the financial or auto industries was a good idea, Brooks' example of Greece is one in which but for a huge intervention by Eurozone nations, Greece would likely have already defaulted on its debt.

If Brooks is taking a big picture view, perhaps he's thinking, "Yes, and the suffering may have been a lot worse in the short-term, but five, ten, twenty years down the line the world won't look much different," he has a point. But that is not an argument that, when faced with unprecedented crises, a government cannot effect a systemic good. Would Brooks have allowed Greece to default? Would Brooks have allowed Ford and G.M. to go into liquidation? Would he have sat on the sidelines and watched as the world's largest banking institutions and insurance companies went into receivership? Does he believe that the outcome, or level of suffering, would be the same no matter which path the involved governments chose?

Brooks closes with the assertion,

Over the past decades, Americans have developed an absurd view of the power of government. Many voters seem to think that government has the power to protect them from the consequences of their sins. Then they get angry and cynical when it turns out that it can’t.

What does that claim have to do with anything that preceded it? (I would love to hear Brooks share a few examples, as it's usually his party of choice that's keen on regulating human behavior.)