Sean King

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Knoxville, Tennessee, United States

Friday, August 1, 2008

Waive Goodbye to the Invisible Hand

Steven Pearlstein: Not so many years ago, respectable people seemed to agree where the world was headed. Communism had fallen to capitalism, and a particular strain of capitalism -- the entrepreneurial, market-driven capitalism found in the United States and Britain -- had proven itself superior to the more corporate and statist variety practiced in Japan and Western Europe. Free trade and the free flow of capital had lifted billions of people out of poverty, and further globalization seemed not only desirable but also inevitable. Here at home, there was talk of a permanent Republican majority dedicated to smaller government, lower taxes, freer trade and more deregulation.

It's always risky to call turns in history, but my guess is that this consensus is unraveling.


I sure hope not, and I really don't think so. There's no doubt that we are in for a period of comparatively minor increases in governmental regulation of markets, at least in name, but the idea that the consensus favoring entrepreneurial capitalism is unraveling, or even that "entrepreneurial capitalism" is the result of a political "consensus", seems like wishful thinking on Pearlstein's part.

Like most political pundits, Pearlstein makes the mistake of crediting governmental policy with too much of the good and the bad that any given society experiences. What he fails to grasp is that, over the long term, governments have very little impact on economic or cultural outcomes. The "entrepreneurial, market-driven capitalism found in the United States and Britain" is no longer found in just the United States and Britain, but is widely dispersed through the former Eastern Block countries, through Latin America, and through much of Asia, and it is undoubtedly on the march. But this has little to do with any government's policy.

Even the "statist" capitalist economies of Western Europe and Japan are are implementing entrepreneurial reforms as quickly as political will allows. But what Pearlstein and so many others fail to grasp is that these reforms FOLLOW societal change, they do NOT cause it. And societal change is driven these day, more than any other factor, by unstoppable advances in technology. In one way all governmental "reforms", whether they purport to result in more regulation or less, are just the politicians' way of seeking to appear continually relevant in a world where their relevance is constantly eroded by technology.

So, contrary to Pearlstein's prediction that the West is turning back toward a more controlled and regulated society, I predict that virtually all economies will be less well-regulated in 20 years than they are today, and the reason why has nothing (or little) to do with any consensus of politicians or voters and everything to do with the disorienting, subversive and decentralizing effect of the ever-accelerating technological revolution. Technology, by its very nature, subverts centralized authority, and that is why every totalitarian regime in history has sought, usually futiley, to keep technology from the masses.

To illustrate the point, consider that globalization (and all of its costs and benefits) is not the result of "capitalist" economic policies achieved by consensus(as much as right-wing Reaganites would like us to believe). Rather, entrepreneurial capitalism RESULTS FROM globalization, and globalization from technological advances that, as a practical matter, shrink the size of the world while expanding opportunities for cultural exchange--advances like email, fax machines, and the Worldwide Web. Without technology, globalization (which is just another word for decentralization) would be impossible, but with technology, it cannot be resisted. Try as it might, no government can indefinitely insulate it citizens from cell phones, wireless communications, cloud computing, GPS systems, the Internet, and many other technologies all of which, by their every nature, empower the masses and subvert the influence of any central authority.

No, in all but a very, very few places, the technology genie is out of the bag, and it is having, and will continue to have, a very predictable, decentralizing effect on every country's culture and economy. In an increasingly desperate attempt to stay relevant, some politicians may propose regulations intended to slow the growth of technology, and its resulting dislocation, but without the willingness and ability to adopt totalitarian methods reminiscent of the North Koreans, all such attempts will be both nominal and futile.

Pearlstein is right that we may have more regulations on the books in 20 years than today, but those regulations will be increasingly ineffective and irrelevant. Technology requires it.

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