January 17, 2013

WALTER RUSSELL MEAD: WHAT COMES AFTER THE BLUE MODEL?

Briefly, the idea is that after World War II America was organized around a group of heavily regulated monopoly and semi-monopoly companies. AT&T was the only telephone company; there were three big networks, three big car companies and so on. There was very little foreign competition, and these companies were able to offer stable, lifetime employment to most of their workers. The workforce was heavily unionized, and the earnings of the big companies were divided between shareholders, managers, workers and government in a predictable way. An intellectual and administrative class of planners, social scientists and managers ran the big institutions and administered the government.

Several forces came together to break up this system. Foreign competition, first from rebuilding Germany and Japan after World War II and then from low wage newly industrializing countries around the world, eroded the market position of companies like the Big Three auto manufacturers. The rise of offshore banking eroded the tight financial controls of the postwar era. Growing consumer impatience with the high prices and poor quality offered by monopoly companies like the telephone monopoly led to political pressure to deregulate and introduce more competition. Technological change, especially in information processing and communications, led to disruptive changes that shifted the advantage to nimble and lean companies and left the bureaucratic, slow moving giants of the Blue Age behind. American society became increasingly individualistic, with both the left and the right rebelling against the authority of experts and bureaucrats.

As a result, the old way of doing things doesn’t work anymore. Some of the changes—like the multiplication of gadgets and rise of the internet—are widely considered to be wonderful things. Others, like the rise of instability in financial markets, the polarization of incomes and the consequences of the collapse in manufacturing employment for blue collar employment and wages, are much less popular. But the reality is that there is no going back to blue; Humpty Dumpty has fallen off the wall and he can’t be patched up. The question is what do we do now.

Obama’s answer is more of the same, only bigger. I don’t think that will work. Something that can’t go on forever, won’t.