David Brooks has an interesting perspective on American politics and public policy. A New York Times Op-Ed columnist, his viewpoint can be described as moderately conservative (a vanishing breed in contemporary American politics). His commentary is informed by a humanities and social sciences perspective that is rare among political analysts today. I earlier blogged about his criticism of the current American meritocracy. I want to talk today about two of his recent columns that provide an interesting perspective on what’s wrong with our political thinking. While he doesn’t provide specific solutions, he talks about some failings among both parties, along with how we need to change our thinking about what we want government to do. As we enter the election year 2012, in which Americans will choose between the same tired and failed alternatives, it’s important to think about our political problems in a different way, as Brooks does.
His first article entitled The Two Moons, is named after Samuel Lubell’s concept of a “political solar system.” Lubell, writing in the 1950’s, proposed the idea that at any moment there’s a Sun Party (the majority party) and a Moon Party (the minority party). The Sun Party drives the agenda, and the Moon Party (which shines by reflecting the Sun’s rays) opposes the Sun Party. During the New Deal, the Democrats were the Sun Party. During the Reagan Revolution, the Republicans were. Between 1996 and 2004, the two parties were tied. This was a transition time, in which from historical experience a Sun Party usually emerges. But no Sun Party emerged. No party was able to take the lead; they both are now Moon Parties. Both Republicans and Democrats have record low approval ratings. “Neither party has been able to rally the country behind its vision of government.”
Having two simultaneous minority parties leads to strange outcomes. Both parties embrace minority mentalities. Democrats feel oppressed by big business and big finance, while Republicans feel oppressed by big government and the big liberal establishment (the media, academics, judges, artists, Hollywood, etc.). Neither side wants to compromise, feeling that the outside world, and especially members of the opposing party, are hostile. They instinctively protect their special interests (labor unions, the poor, the old, and minorities for Democrats; the rich, big business, big finance, and evangelicals for Republicans), and refuse to engage or try to convert outsiders. Neither party engages in serious internal debates, and moderates are no longer welcome.
The Two Moon era is volatile. Voters reject one party, then two years later reject the other party. That happened in the 2008 and 2010 elections, which had a historically large shift from Democrat to Republican. Usually, minority parties suffer a string of election defeats, promoting modernization and revision. The Republicans’ defeats in 2006 and 2008 did help promote internal change via the Tea Party. But rather than owning up to the failures of their neoconservative ideology, and moving more to the center, Tea Party Republicans pushed the party to an extreme libertarian agenda. The Republicans’ 2010 victory encouraged them to act like a Sun Party, trying to force their Tea Party agenda, but were stymied by the fact that they were not a true majority party, and that Democrats controlled the Senate and Presidency. The Democrats’ defeat in 2010, along with subsequent Republican intransigence, is making the Democrats become more extreme. Even if they win big in 2012, however, they do not have the broad-based support to become a Sun Party.
How will the Two Moon era become resolved? Brooks suggests either a third party or a crisis. A third party faces enormous obstacles in the American political context, as discussed in this article. A third-party presidential run has always lost, but sometimes (e.g. Teddy Roosevelt in 1912, or Ross Perot in 1992) can spoil an election. Even in the unlikely event that a third-party candidate can win the election, he’ll have to govern with a Congress in which almost all members are Republicans or Democrats. For a third party to make fundamental changes in government, it needs to control both the executive and legislative branch, which the American political system makes virtually impossible.
This leaves a crisis as a way to break the Two Moon deadlock. It’s possible that a financial panic and/or war will force some major political change. Exactly how the events will unfold and what the responses will be are impossible to determine, but the American political system will have to undergo a radical (and painful) transformation for the Two Moon deadlock to become resolved.
* * *
Brooks’ second article is entitled Midlife Crisis Economics. Brooks criticizes the Obama’s administration’s historical accuracy. When the administration first came to power in 2009, it compared the current situation to the 1930’s, and promoted a second New Deal. Obamacare was a product of this thinking, a successor of ambitious social legislation like Social Security. The problem is that the public’s perception of government has radically changed since the New Deal. “Today, Americans are more likely to fear government than be reassured by it.”
The Obama Administration then switched historical analogies from the New Deal to the progressive era at the beginning of the 20th century (e.g. Obama’s “Roosevelt Speech” in Kansas). There are some similarities between today and a century ago. “Then, as now, we are seeing great concentrations of wealth, especially at the top.” But the differences outweigh the similarities. The economy was much different back then, a vibrant jobs machine at the height of the industrial era. The information age we live in today is not a jobs machine. The industrial decline and elimination of jobs due to outsourcing/offshoring/automation was taking place well before the current recession. Factories that used to employ 1000 workers can now produce more products while employing fewer than 100 workers.
Inequality, while due partially to government policy, has a structural economic component that would be difficult to reverse (short of communism). Inequality is growing in all developed countries, including ones (e.g. Sweden and Germany) that have much more generous welfare states.
Brooks succinctly summarizes the essential differences between today and a century ago: “In the progressive era, the economy was in its adolescence and the task was to control it. Today the economy is middle-aged; the task is to rejuvenate it.” A century ago there were few or no government agencies, institutions, or regulations to protect workers, the sick, the disabled, the old, children, minorities, etc. Today, we have more than enough government; the challenge is to make government more effective. We need to reform existing programs to make them deliver more services at less cost.
Brooks also talks about the moral differences between today and the progressive era. The beginning of the twentieth century was still a time of Victorian culture, with its strict moral code. Individuals and the government taking on debt that they had no hope of repaying would have been considered sinful. Illegitimacy and divorce were culturally prohibited and very rare.
These moral differences have major practical consequences. It’s obvious today what harm the contemporary embracing of public and private debt has caused our economy. Subprime and other risky mortgages led directly to the 2008 financial crisis and subsequent recession. Deficit financing that the American federal government has been doing routinely for decades has led to a buildup of unsustainable debt, and is preventing the government from responding in an appropriate way to the magnitude of the current crisis. The fact that 40% of American children are born out of wedlock leads to a number of social and mental health problems that were unknown a century ago. These problems, including crime, juvenile delinquency, drug abuse, dangerous neighborhoods, failed schools, etc., forces the government to intervene in family life and child upbringing, and spend billions of dollars that it otherwise would not have had to spend.
My favorite quote from this article is the following: “One hundred years ago, we had libertarian economics but conservative values. Today we have oligarchic economics and libertarian moral values — a bad combination.” It’s important to understand that the last (and only) time that libertarian economics was ever practiced, during the late nineteenth and early twentieth centuries in America, Britain, and (to a lesser extent) in other Western European countries, was a time of strict conservative Victorian morality. There is no historical example of a combination of libertarian economics and libertarian morality. There is no contemporary example of libertarian economics. Contemporary countries with strong, rapidly growing, export-oriented economies, e.g. China, are anything but libertarian.
Ron Paul’s fans need to understand that they are advocating an experimental system, something never before tried. They also need to understand that the rise of American government deficit spending, regulation, waste, inefficiency, and all the other things they complain about occurred during a time of increasing libertarian morality. It was the 1960’s embrace of individual social liberty, of personal and sexual freedom from authority, of licentiousness, that represented a cultural revolution, something unique in history. The trend for increasing individual social freedom and autonomy has only increased since the 1960’s. During that period, government deficit spending, regulation, litigation, interference with the economy, waste, fraud, and incompetence has also increased. The two are clearly correlated; it’s impossible to prove whether libertarian morality caused the explosion of government spending and regulation.
Note that Brooks said that we have “oligarchic economics” in America today, not “socialist economics.” The distinction is important. It implies that libertarian ideas did in fact influence not only social and cultural life, but also the economy. Instead of moving toward the libertarian ideal of limited government, however, we moved toward a corrupt, oligarchic form of government, one in which the rich and powerful use a bloated government to become more rich and powerful. The most egregious example is explosion in growth of the financial sector, which occurred after libertarian-inspired deregulation. The investment banks won the freedom to gamble on risky mortgage-based securities, a gamble that led to the 2008 crisis. Unlike in a truly free market, they felt secure enough to make these gambles knowing that the government would bail them out.
As usual, Brooks has no specific solutions to the problems he talks about. “The job is to restore old disciplines, strip away decaying structures and reform the welfare state. The country needs a productive midlife crisis.” I’d agree with that, but how is it going to happen? How can we reform an oligarchic government while maintaining libertarian moral values? How can people from different socioeconomic status, intelligence, race, age, ethnicity, culture, sexual orientation, political beliefs, religious beliefs, etc. come together and agree on anything, when libertarian morality tells them to pursue their own self interest no matter the social cost? Will they be willing to make sacrifices for the common good, whether it take the form of accepting fewer government benefits, more taxation, or a combination of the two? I doubt it. My view is that the “productive midlife crisis” our country needs must include a serious re-evaluation of the permissive morality that has been dominant since the 1960’s.
Showing posts with label Regulation. Show all posts
Showing posts with label Regulation. Show all posts
Saturday, December 31, 2011
Wednesday, May 4, 2011
How Greed and Ideology are Endangering America’s Financial and Mental Health
I just watched the excellent documentary Inside Job about the financial crisis. Its main point is that the 2008 crisis and subsequent Great Recession were a consequence of deregulation of the financial sector. This deregulation (primarily in the United States, but also in other countries like Iceland and Ireland) led to an explosion of trading in risky investments like CDO’s, that in turn led to the housing bubble and crash. The tragic thing about this crash is that if we had kept the regulations in place that came about after the 1929 crash and Great Depression, we would never have had the recent crisis. Protections such as separation of savings and investment banks, restrictions on leverage, and enforcement by the SEC and other regulatory agencies of securities and fraud laws were stripped away in recent decades. Also, the financial services industry created new exotic “financial weapons of mass destruction” and successfully lobbied to keep them unregulated.
How did this unstable and risky situation develop? Inside Job argues that a combination of greed and free market ideology led to the housing bubble and bust. The greed came about from the enormous profits generated by the deregulated post-1980 financial services industry. This money flowed to traders in the form of multi-million dollar bonuses, to politicians in the form of lobbying and campaign contributions, and to academic economists in the form of consulting fees. The free market ideology, promoted by right-wing think tanks, politicians, and academic economists, provided a rationalization for the government to deregulate the financial services industry. This ideology argued that allowing an unfettered financial services industry to generate incredible amounts of wealth, and to make riskier and riskier investments, was good for the economy. This attitude is best summarized by Gordon Gekko’s memorable line in the first Wall Street movie: "Greed, for lack of a better word, is good."
While the free market ideology is seductive, and I admit that I was once an enthusiastic follower, it clearly failed as a rationale for financial services deregulation. While it’s easy to blame the government for everything bad that happens, and the government did promote home ownership for people who should have been renting, the leaders of the Wall Street investment banks were the main culprits. They knowingly and deliberately invested their client’s savings in risky mortgage securities, sometimes while simultaneously betting against the securities (i.e. betting that their own clients would lose money). It was Wall Street money that bid up housing prices, that promoted subprime mortgages, that paid the ratings agencies to give ridiculously high ratings to what was basically junk, and that led to the worst financial crash and recession since World War II. Some foreign banks also were to blame, as they did the same thing that the Wall Street banks did. Ireland and Iceland are two egregious examples of investment banks destroying their economies. The executives in charge of the investment banks got greedy, and even after their companies lost billions and needed to be bailed out, they got to keep their multi-million dollar bonuses and salary. The most disgusting thing is that not one of them has been prosecuted (in the U.S.) for fraud or securities violations.
When an ideology fails in the real world, people who believe in it have two options. One is to accept reality, and stop believing in the ideology. The other is to continue believing in the ideology, and abandon reality. Most Democrats, who in the past (especially in the Clinton administration) joined with Republicans in eagerly stripping away financial services regulation, realized after the crash that they made a grave error. When they were in charge of Congress, they passed the Dodd-Frank bill to improve regulation of Wall Street. These regulations, while inadequate, were better than doing nothing. These regulations are now law, but as Paul Krugman writes in an article, they are in danger of not being enforced. The reason for this is that Republicans have chosen to keep their free market ideology, while abandoning reality. Republicans are now in charge of the House, and Republicans don’t believe in regulation in any form. Since they control the funds, Republicans can prevent the SEC and other agencies from doing any regulating and investigating. Wall Street will then be free to create more bubbles and more crises.
Why do people continue believing in an ideology when it has clearly failed? To answer this, consider the historical example of Communism. Within a few years after the 1917 Bolshevik revolution, it was clear that Communism was failing in its ability to provide goods and services that people wanted. That’s when the scapegoating started. It wasn’t Communism’s fault, it was the fault of the capitalists (or the kulaks, or the imperialists, or the fascists, etc.). That scapegoating continued for decades, until finally no one believed the ideology any more, and all that was left was greed and corruption.
In the case of Republicans, the scapegoat is the government. Wall Street didn’t do anything wrong, it was government intervention in the economy that caused the crash and recession. The fact that the financial services companies made many risky investments and bad decisions, not just in the U.S. but also overseas, is also a result of U.S. government intervention. If the government hadn’t provided guarantees and bailouts, the companies wouldn’t have made these risky investments.
In the context of a mixed economy, with an internationally-linked market, the government needs to regulate the financial markets. If Republicans get their way, and repeal or refuse to enforce the new regulations, another crash will happen. We’ll then be in the same situation in which the choice will be government bailouts or a second Great Depression. Blaming the government for all our problems is similar to the Communists blaming the capitalists for all their problems. The free market ideology has failed the reality test vis-à-vis financial regulation, and continuing to adhere to it is a sign of either delusion or greed. Regarding the latter motive, Wall Street continues to utilize its vast wealth to lobby politicians to weaken and gut regulations.
Now let me turn to mental health and psychiatry. While watching Inside Job, I was struck with the parallels between the financial services industry and the psychiatric-pharmaceutical industry. While the free market ideology is used by the financial services industry to justify deregulation, the chemical imbalance ideology is used by psychiatists to justify their prescribing drugs to patients. The chemical imbalance ideology states that schizophrenia is caused by too much of the neurotransmitter dopamine, and that depression is caused by too little serotonin. These imbalances can be treated by antipsychotic and antidepressant drugs, respectively. Patients who take their drugs restore balance in their brains, become symptom free, and function better than patients who are unwilling or unable to take drugs.
This chemical imbalance ideology doesn’t fit the facts. As Robert Whitaker describes in his book Anatomy of an Epidemic (which I reviewed in a previous blog post), after many millions of dollars of research money, and enormous time and effort spent, this theory remains unverified. Scientists haven’t made much progress in understanding the cause or pathophysiology of mental illness. Diagnosis is still based on symptoms due to a lack of any reliable or valid lab tests. Drugs that seem to help patients in the short term, have a much more problematic long-term outcome. As newer drugs began to be prescribed more frequently, patients seemed to function worse than they ever did before, many of them becoming permanently disabled and unable to work.
Just as the free market true believers identify the government as an all-encompassing scapegoat, the chemical imbalance true believers come up with their own scapegoat: the disease. The reason why juvenile bipolar disorder prevalence skyrocketed, why so many children were being diagnosed and treated with drugs, and becoming permanently disabled, wasn’t due to drugs they were being prescribed. It was due to something else in the environment causing a psychiatric epidemic. It’s almost comical reading Whitaker’s description of how bipolar disorder was “discovered” in children. Before psychiatric drugs were widely used, children never got bipolar disorder. The fact that stimulant and antidepressant drugs induce manic episodes, and that many more children were taking stimulants and antidepressants than ever before, was conveniently ignored. Since many children taking antidepressant drugs became bipolar, some researchers argued that the drugs were an effective diagnostic tool, unmasking the bipolar disorder that was hidden underneath. Diagnostic boundaries for juvenile bipolar disorder were expanded to include irritable and antisocial children, and these children were given drug cocktails that led to functional impairment and serious physical and mental side effects.
Another similarity between the financial services industry and the psychiatric-pharmaceutical industry is greed. When the ideology has cracks, fill in the gaps with cash. Just as academic economists receive thousands of dollars from the financial services industry in consulting fees, academic psychiatrists receive thousands of dollars from the pharmaceutical industry. This money provides an incentive for economists to spout free-market/deregulation dogma, and psychiatrists to promote drugs.
This ideology-greed connection becomes self-perpetuating. Academic economists promote deregulation and free markets, which leads to more profits for Wall Street, which means more consulting fees, which means more economists promote deregulation, etc. Academic psychiatrists promote the chemical imbalance theory and drug treatments, which means more profits for the pharmaceutical industry, which means more consulting fees for the psychiatrists, which means more psychiatrists promote drugs, etc.
What can be done to emerge from these vicious circles of greed and failed ideology? Reform from within isn’t an option. Both the financial services and psychiatric-pharmaceutical industries are too hopelessly corrupt to reform or regulate themselves. The only institution powerful enough to take on the economic and ideological might of these two industries is the federal government. But the government is itself corrupted by Wall Street and Big Pharma money. The government must be spurred into action by grassroots advocacy groups.
Any advocacy group needs to have a clear, specific goal in mind. The American Tea Party had a vague goal of opposing big government and bailouts. It has now been hijacked by libertarian/free market extremists.
The group that takes on Wall Street should have these goals: Phase 1 should be to pressure the government to fully fund all the regulatory agencies involved in enforcing Dodd-Frank. In addition, the government should prosecute bank and financial executives who committed fraud and securities violations during the housing boom and bust. Phase 2 should be to make even more ambitious reforms to curb the power, influence, and money of the financial services industry.
The group that takes on Big Pharma should begin with pressuring for congressional hearings. Robert Whitaker and other people who criticize the psychiatric-pharmaceutical industry should be allowed to speak, along with academic psychiatrists, drug company representatives, and parents and patients. If it turns out that there’s not enough evidence to demonstrate that drugs do long-term good (the burden of proof is on the pro-drug people to show that they work), then Phase 2 should be a major overhaul of psychiatric drug regulation. This can include banning drug advertising, banning off-label prescribing, banning prescribing the drugs to children, and extending clinical trials to several years (from the current 6 weeks).
How did this unstable and risky situation develop? Inside Job argues that a combination of greed and free market ideology led to the housing bubble and bust. The greed came about from the enormous profits generated by the deregulated post-1980 financial services industry. This money flowed to traders in the form of multi-million dollar bonuses, to politicians in the form of lobbying and campaign contributions, and to academic economists in the form of consulting fees. The free market ideology, promoted by right-wing think tanks, politicians, and academic economists, provided a rationalization for the government to deregulate the financial services industry. This ideology argued that allowing an unfettered financial services industry to generate incredible amounts of wealth, and to make riskier and riskier investments, was good for the economy. This attitude is best summarized by Gordon Gekko’s memorable line in the first Wall Street movie: "Greed, for lack of a better word, is good."
While the free market ideology is seductive, and I admit that I was once an enthusiastic follower, it clearly failed as a rationale for financial services deregulation. While it’s easy to blame the government for everything bad that happens, and the government did promote home ownership for people who should have been renting, the leaders of the Wall Street investment banks were the main culprits. They knowingly and deliberately invested their client’s savings in risky mortgage securities, sometimes while simultaneously betting against the securities (i.e. betting that their own clients would lose money). It was Wall Street money that bid up housing prices, that promoted subprime mortgages, that paid the ratings agencies to give ridiculously high ratings to what was basically junk, and that led to the worst financial crash and recession since World War II. Some foreign banks also were to blame, as they did the same thing that the Wall Street banks did. Ireland and Iceland are two egregious examples of investment banks destroying their economies. The executives in charge of the investment banks got greedy, and even after their companies lost billions and needed to be bailed out, they got to keep their multi-million dollar bonuses and salary. The most disgusting thing is that not one of them has been prosecuted (in the U.S.) for fraud or securities violations.
When an ideology fails in the real world, people who believe in it have two options. One is to accept reality, and stop believing in the ideology. The other is to continue believing in the ideology, and abandon reality. Most Democrats, who in the past (especially in the Clinton administration) joined with Republicans in eagerly stripping away financial services regulation, realized after the crash that they made a grave error. When they were in charge of Congress, they passed the Dodd-Frank bill to improve regulation of Wall Street. These regulations, while inadequate, were better than doing nothing. These regulations are now law, but as Paul Krugman writes in an article, they are in danger of not being enforced. The reason for this is that Republicans have chosen to keep their free market ideology, while abandoning reality. Republicans are now in charge of the House, and Republicans don’t believe in regulation in any form. Since they control the funds, Republicans can prevent the SEC and other agencies from doing any regulating and investigating. Wall Street will then be free to create more bubbles and more crises.
Why do people continue believing in an ideology when it has clearly failed? To answer this, consider the historical example of Communism. Within a few years after the 1917 Bolshevik revolution, it was clear that Communism was failing in its ability to provide goods and services that people wanted. That’s when the scapegoating started. It wasn’t Communism’s fault, it was the fault of the capitalists (or the kulaks, or the imperialists, or the fascists, etc.). That scapegoating continued for decades, until finally no one believed the ideology any more, and all that was left was greed and corruption.
In the case of Republicans, the scapegoat is the government. Wall Street didn’t do anything wrong, it was government intervention in the economy that caused the crash and recession. The fact that the financial services companies made many risky investments and bad decisions, not just in the U.S. but also overseas, is also a result of U.S. government intervention. If the government hadn’t provided guarantees and bailouts, the companies wouldn’t have made these risky investments.
In the context of a mixed economy, with an internationally-linked market, the government needs to regulate the financial markets. If Republicans get their way, and repeal or refuse to enforce the new regulations, another crash will happen. We’ll then be in the same situation in which the choice will be government bailouts or a second Great Depression. Blaming the government for all our problems is similar to the Communists blaming the capitalists for all their problems. The free market ideology has failed the reality test vis-à-vis financial regulation, and continuing to adhere to it is a sign of either delusion or greed. Regarding the latter motive, Wall Street continues to utilize its vast wealth to lobby politicians to weaken and gut regulations.
Now let me turn to mental health and psychiatry. While watching Inside Job, I was struck with the parallels between the financial services industry and the psychiatric-pharmaceutical industry. While the free market ideology is used by the financial services industry to justify deregulation, the chemical imbalance ideology is used by psychiatists to justify their prescribing drugs to patients. The chemical imbalance ideology states that schizophrenia is caused by too much of the neurotransmitter dopamine, and that depression is caused by too little serotonin. These imbalances can be treated by antipsychotic and antidepressant drugs, respectively. Patients who take their drugs restore balance in their brains, become symptom free, and function better than patients who are unwilling or unable to take drugs.
This chemical imbalance ideology doesn’t fit the facts. As Robert Whitaker describes in his book Anatomy of an Epidemic (which I reviewed in a previous blog post), after many millions of dollars of research money, and enormous time and effort spent, this theory remains unverified. Scientists haven’t made much progress in understanding the cause or pathophysiology of mental illness. Diagnosis is still based on symptoms due to a lack of any reliable or valid lab tests. Drugs that seem to help patients in the short term, have a much more problematic long-term outcome. As newer drugs began to be prescribed more frequently, patients seemed to function worse than they ever did before, many of them becoming permanently disabled and unable to work.
Just as the free market true believers identify the government as an all-encompassing scapegoat, the chemical imbalance true believers come up with their own scapegoat: the disease. The reason why juvenile bipolar disorder prevalence skyrocketed, why so many children were being diagnosed and treated with drugs, and becoming permanently disabled, wasn’t due to drugs they were being prescribed. It was due to something else in the environment causing a psychiatric epidemic. It’s almost comical reading Whitaker’s description of how bipolar disorder was “discovered” in children. Before psychiatric drugs were widely used, children never got bipolar disorder. The fact that stimulant and antidepressant drugs induce manic episodes, and that many more children were taking stimulants and antidepressants than ever before, was conveniently ignored. Since many children taking antidepressant drugs became bipolar, some researchers argued that the drugs were an effective diagnostic tool, unmasking the bipolar disorder that was hidden underneath. Diagnostic boundaries for juvenile bipolar disorder were expanded to include irritable and antisocial children, and these children were given drug cocktails that led to functional impairment and serious physical and mental side effects.
Another similarity between the financial services industry and the psychiatric-pharmaceutical industry is greed. When the ideology has cracks, fill in the gaps with cash. Just as academic economists receive thousands of dollars from the financial services industry in consulting fees, academic psychiatrists receive thousands of dollars from the pharmaceutical industry. This money provides an incentive for economists to spout free-market/deregulation dogma, and psychiatrists to promote drugs.
This ideology-greed connection becomes self-perpetuating. Academic economists promote deregulation and free markets, which leads to more profits for Wall Street, which means more consulting fees, which means more economists promote deregulation, etc. Academic psychiatrists promote the chemical imbalance theory and drug treatments, which means more profits for the pharmaceutical industry, which means more consulting fees for the psychiatrists, which means more psychiatrists promote drugs, etc.
What can be done to emerge from these vicious circles of greed and failed ideology? Reform from within isn’t an option. Both the financial services and psychiatric-pharmaceutical industries are too hopelessly corrupt to reform or regulate themselves. The only institution powerful enough to take on the economic and ideological might of these two industries is the federal government. But the government is itself corrupted by Wall Street and Big Pharma money. The government must be spurred into action by grassroots advocacy groups.
Any advocacy group needs to have a clear, specific goal in mind. The American Tea Party had a vague goal of opposing big government and bailouts. It has now been hijacked by libertarian/free market extremists.
The group that takes on Wall Street should have these goals: Phase 1 should be to pressure the government to fully fund all the regulatory agencies involved in enforcing Dodd-Frank. In addition, the government should prosecute bank and financial executives who committed fraud and securities violations during the housing boom and bust. Phase 2 should be to make even more ambitious reforms to curb the power, influence, and money of the financial services industry.
The group that takes on Big Pharma should begin with pressuring for congressional hearings. Robert Whitaker and other people who criticize the psychiatric-pharmaceutical industry should be allowed to speak, along with academic psychiatrists, drug company representatives, and parents and patients. If it turns out that there’s not enough evidence to demonstrate that drugs do long-term good (the burden of proof is on the pro-drug people to show that they work), then Phase 2 should be a major overhaul of psychiatric drug regulation. This can include banning drug advertising, banning off-label prescribing, banning prescribing the drugs to children, and extending clinical trials to several years (from the current 6 weeks).
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Sunday, January 9, 2011
How Did “The Land of the Free and the Home of the Brave” Become the Land of Lawyers and the Home of Bureaucrats? A Review of “Life Without Lawyers” by Philip K. Howard
In these recessionary times, Americans are divided along partisan lines on many important issues, such as whether to give tax breaks to the rich versus extending unemployment benefits. Democrats and Republicans argue about government spending, taxation, health care reform, immigration, foreign wars, and a host of other issues. But away from the spotlight of media attention and political debate is a cancer that has gnawed away at the social fabric of American society. This cancer has been growing for the last four decades, and shows no signs of improvement. I am speaking about the litigation and regulation explosion that has reduced Americans' ability to take risks, exercise authority, fire incompetent employees, maintain discipline in schools, and to take responsibility for their actions. The tragic part of this is that there is a bipartisan consensus for reform that is stymied by self-serving special interests such as trial lawyers and public-sector unions. Philip K. Howard takes up this issue in his latest book Life Without Lawyers: Restoring Responsibility in America
Howard, author of the best-selling The Death of Common Sense, has talked about the issue of excessive and nonsensical lawsuits and regulation in previous books. Since the problem hasn’t gotten any better, Howard revisits these issues, presenting newer examples, but also suggesting solutions. He also is trying to improve things via his organization Common Good.
There are two main points in the book. One, is that there are too many rules prescribing how to do things. These rules derive from the assembly-line mentality that arose from the Industrial Revolution. While some rules are necessary in any complex endeavor, such as a business, government, or school, our society has gone overboard with rules and organization. Too many rules stifle individual initiative and decision making. Howard presents many examples of this in the public schools. Teachers in New York City are forbidden from calling on students who raise their hands during the first part of class. A mother of a third grader, who arrived with a supply of birthday cupcakes, was turned away because there is a rule against parents in the classroom. Teachers write out detailed course plans every week that no one ever reads. Loudspeakers constantly blare out announcements, interrupting classes and making it impossible for teachers and students to concentrate. No Child Left Behind made things worse by focusing on standardized testing. Teachers’ union contracts dictate hours worked, limit teacher duties, and make it virtually impossible to fire incompetent teachers. Paint crumbles at the top of walls in some New York City schools because unions prohibit painting walls higher than ten feet.
The second main point is that since the 1960’s individual rights have trumped concerns over the common good. “Let any individual who feels aggrieved bring a legal claim for almost anything” (p. 23). This mindset arose from a desire to remedy abuses due to racial and gender discrimination. The problem is, however, that “[u]nlike constitutional rights, which shield citizens from state power, these new rights gave citizens a sword against other free citizens” (p. 23). It isn’t hard to find examples of how citizens utilize lawsuits as swords against other citizens. In 2007, a Washington, D.C. lawyer sued his dry cleaner for $54 million because he claimed that they lost a pair of pants. This idiotic and absurd case, which should have been immediately dismissed, was allowed to go on for more than two years, costing the family owning the dry cleaner over $100,000 in legal fees. While they won the case, they ended up having to close the store. Another example is a medical malpractice case. A dermatologist advised a patient to remove skin based on a biopsy indicating malignancy. The patient got a second opinion which indicated no malignancy, and didn’t get the skin removed. After getting terminal cancer several years later, the patient sued the first doctor on the basis that the doctor should have been more insistent about getting the skin removed. While the doctor prevailed in the case after seven years of legal battling, it could hardly be called a victory.
The result of out-of-control lawsuits is that Americans don’t trust the justice system anymore. They become defensive in their behavior, refusing to take risks out of fear of being sued. The most familiar and costly example of defensive behavior is in the field of medicine. Unnecessary care accounts for 30% of total health care spending. Nursing homes send dying ninety-year-olds to intensive care units, so that they can’t be sued for negligence in the person's death. Doctors have to document everything, in case they have to justify their decisions in court. Minor surgeries require expensive and unnecessary preoperative tests to prevent the providers from being sued.
The threat of lawsuits, combined with burdensome regulation, has eroded discipline in public schools. In a 2001 survey, 43% of high school teachers said they spent more time maintaining order than teaching. One in seven teachers in urban schools has been physically assaulted by his students. In New York City more than 60 steps and legal considerations are required to suspend a student for over 5 days. “Just sending a disruptive student out of the classroom requires layers of bureaucratic compliance” (p. 104). A violent autistic child in Hartford, CT, was kept in a regular classroom because his parents, exercising their rights under federal law, refused to allow him to be transferred to special ed. The school had to institute formal legal proceedings and receive a judge’s order to remove the disruptive child. After 2 years of hearings and thousands of dollars of expense, the school finally received the order to move the child.
Howard uses the “broken windows” analogy to explain how this erosion of discipline has harmed schools. If broken windows in a building aren’t fixed, the tendency is for vandals to break more windows, and eventually break into the building. After a few unchecked incidents, disorder takes over a school. “Young people aren’t known for their maturity, and pushing the envelope becomes a sport” (p. 105). Zero tolerance rules, which were supposed to counteract school disorder, only make things worse. The problem with these rules is that they can’t distinguish trivial from severe infractions. In 2001, a National Merit scholar in a Florida high school was suspended because of a small kitchen knife found in the back seat of her car on school grounds. “Instead of bolstering school authority, zero tolerance rules have become a symbol of lack of authority to do what’s right” (p. 106).
The fear and distrust of authority that began in the 1960’s was a major factor that led to our current legalistic mess. We tried to outlaw any type of discretion by people in positions of authority—teachers, administrators, managers, and government executives—by replacing this discretion with a tangle of rules and threats of litigation. But there is no substitute for good judgment, and good judgment relies on subjective and intuitive factors. Having to prove the correctness of decisions in legal proceedings leads to worse decisions. It’s true that people can explain why they did something, but only to a point. These explanations rarely rise to the level of legal proof.
“The alternative to absolute rights is not absolute discretion” (p. 58). Legislatures can establish clear public goals, and give officials the responsibility to achieve these goals. But meeting these goals requires the use of individual judgment, such as the decision that a student is too violent to be mainstreamed. People in power will at times make mistakes, and they should be held accountable for their mistakes. But trying to prescribe decisions by legal rule is a self-defeating way to organize our society.
Some specific reforms that Howard advocates include:
1) Judges must draw legal boundaries of reasonableness as they pertain to lawsuits. The “lost pants” type of lawsuit should be immediately dismissed. For other suits that aren’t obviously ridiculous, judges need to take into account whether a claim might undermine reasonable activities of people not in the courtroom. For example, the threat of lawsuits has resulted in playgrounds being stripped of fun equipment. Many schools have eliminated recess, and parents are afraid to allow their children to engage in unstructured play. As a result of these changes, children today spend much of their time in front of television and computer screens. This lack of exercise is one important factor in the obesity epidemic plaguing our nation’s youth. By trying to eliminate risky behavior among children, we’ve succeeded in making many of them fat, a health problem which will eventually cause much more suffering and death than an occasional accident.
2) Special courts are needed for medical malpractice claims. The problem isn’t the setting of standards of care. The problem is finding courts that are trusted to uphold these standards. Allowing medical malpractice claims to be heard in regular courts, with greedy trial lawyers manipulating clueless juries, has led to an explosion of defensive medicine. Special courts for medical malpractice would have the following characteristics: judges dedicated to health care claims, written judicial opinions rather than jury verdicts, neutral experts in place of hired guns, and expedited proceedings with incentives for early settlements.
3) Abandon the due process model for social services, especially public schools. Daily choices in schools and other public institutions need to be made by teachers and administrators with the freedom to use their judgment, without fear of lawsuit. These choices should not be determined by burdensome detailed regulation. In successful private and charter schools, teachers and principals are free to do what they think is best for their students. For public schools to succeed, their teachers and principals need the same freedom. This freedom includes the freedom of school administrators to fire incompetent teachers.
4) Don’t tolerate disorder in public schools. Principals and teachers need the authority to promptly remove disruptive students without worrying about following regulations or being sued by parents. Some students are too disruptive or violent to be mainstreamed, and they need to be removed from the regular classroom. Allowing individual students to disrupt classes makes it very difficult to properly educate the other students. While one student and his parents may win, everyone else loses. This individualistic and selfish model needs to change.
5) Discrimination cases should only be allowed for systematic practices of discrimination. This was the original purpose of discrimination laws, which since the 1960’s have been corrupted by greedy trial lawyers and irresponsible minority advocates. If a minority feels he’s being discriminated against, his lawsuit would be dismissed unless he can present evidence that the employer discriminates against minorities in general. Individuals should not be allowed to bring claims only on behalf of themselves. An exception is for individual claims of sexual harassment, but only if they rise to the level of quid pro quo.
6) Washington needs to be fixed from the outside. Partisan politics and special interests have made it impossible for our representatives to achieve any important changes in the areas that Howard talks about. As with the No Child Left Behind law, they just pile layers of legal concrete on people and institutions that are already crushed by law. We must form a national coalition of citizen leaders, a shadow government, to propose an overhaul of government. The models for this are the base-closing commissions in the 1990’s, or the current deficit-reduction commissions. To effect change, public opinion must be mobilized in a way that it hasn’t been since the 1960’s. “America doesn’t need a new Constitution, just a healthy spring cleaning and a practical approach to making public choices without crushing us under endless law” (p. 177).
The only problem with this book is that it lacks an index. I don’t remember ever reading a nonfiction book without an index.
Due to excessive regulation and litigation, America in the early 21st century is a shell of its former self. We’ve become afraid to take risks, afraid to use our judgment, and afraid to do what we think is right. Is this the type of mentality that motivated the early pioneers, people who risked everything to settle an unknown and sometimes hostile country? Is this the type of mentality that motivated the great American inventors, entrepreneurs, and other creative people? Would Edison have invented the light bulb if he was afraid of being sued by the candle makers? Would Tesla have invented A/C electric power if he was afraid of being sued by the family of the rare person who was electrocuted? Would railroads, cars, and planes have been invented and made available to the masses if companies were afraid of being sued due to accidents? Would America have risen to a leadership position among nations if its public schools were always in the sorry shape they are in today? Would a legal and political system have been a model to the world if it allowed a greedy scumbag to sue his dry cleaner for $54 million dollars?
The problems that Howard describes in his book are not the only problems that America faces. Obviously, we need to be concerned about other things, including the recession, our government’s long-term fiscal health, and the threat of terrorism. But overregulation and overlitigation, although less publicized, nevertheless affect Americans in their daily lives—in their schools, workplaces, doctors offices, hospitals, and even their homes. The cost in money, worry, wasted time, and unhealthy behavior is severe. I recommend “Life Without Lawyers” to all Americans.
Howard, author of the best-selling The Death of Common Sense, has talked about the issue of excessive and nonsensical lawsuits and regulation in previous books. Since the problem hasn’t gotten any better, Howard revisits these issues, presenting newer examples, but also suggesting solutions. He also is trying to improve things via his organization Common Good.
There are two main points in the book. One, is that there are too many rules prescribing how to do things. These rules derive from the assembly-line mentality that arose from the Industrial Revolution. While some rules are necessary in any complex endeavor, such as a business, government, or school, our society has gone overboard with rules and organization. Too many rules stifle individual initiative and decision making. Howard presents many examples of this in the public schools. Teachers in New York City are forbidden from calling on students who raise their hands during the first part of class. A mother of a third grader, who arrived with a supply of birthday cupcakes, was turned away because there is a rule against parents in the classroom. Teachers write out detailed course plans every week that no one ever reads. Loudspeakers constantly blare out announcements, interrupting classes and making it impossible for teachers and students to concentrate. No Child Left Behind made things worse by focusing on standardized testing. Teachers’ union contracts dictate hours worked, limit teacher duties, and make it virtually impossible to fire incompetent teachers. Paint crumbles at the top of walls in some New York City schools because unions prohibit painting walls higher than ten feet.
The second main point is that since the 1960’s individual rights have trumped concerns over the common good. “Let any individual who feels aggrieved bring a legal claim for almost anything” (p. 23). This mindset arose from a desire to remedy abuses due to racial and gender discrimination. The problem is, however, that “[u]nlike constitutional rights, which shield citizens from state power, these new rights gave citizens a sword against other free citizens” (p. 23). It isn’t hard to find examples of how citizens utilize lawsuits as swords against other citizens. In 2007, a Washington, D.C. lawyer sued his dry cleaner for $54 million because he claimed that they lost a pair of pants. This idiotic and absurd case, which should have been immediately dismissed, was allowed to go on for more than two years, costing the family owning the dry cleaner over $100,000 in legal fees. While they won the case, they ended up having to close the store. Another example is a medical malpractice case. A dermatologist advised a patient to remove skin based on a biopsy indicating malignancy. The patient got a second opinion which indicated no malignancy, and didn’t get the skin removed. After getting terminal cancer several years later, the patient sued the first doctor on the basis that the doctor should have been more insistent about getting the skin removed. While the doctor prevailed in the case after seven years of legal battling, it could hardly be called a victory.
The result of out-of-control lawsuits is that Americans don’t trust the justice system anymore. They become defensive in their behavior, refusing to take risks out of fear of being sued. The most familiar and costly example of defensive behavior is in the field of medicine. Unnecessary care accounts for 30% of total health care spending. Nursing homes send dying ninety-year-olds to intensive care units, so that they can’t be sued for negligence in the person's death. Doctors have to document everything, in case they have to justify their decisions in court. Minor surgeries require expensive and unnecessary preoperative tests to prevent the providers from being sued.
The threat of lawsuits, combined with burdensome regulation, has eroded discipline in public schools. In a 2001 survey, 43% of high school teachers said they spent more time maintaining order than teaching. One in seven teachers in urban schools has been physically assaulted by his students. In New York City more than 60 steps and legal considerations are required to suspend a student for over 5 days. “Just sending a disruptive student out of the classroom requires layers of bureaucratic compliance” (p. 104). A violent autistic child in Hartford, CT, was kept in a regular classroom because his parents, exercising their rights under federal law, refused to allow him to be transferred to special ed. The school had to institute formal legal proceedings and receive a judge’s order to remove the disruptive child. After 2 years of hearings and thousands of dollars of expense, the school finally received the order to move the child.
Howard uses the “broken windows” analogy to explain how this erosion of discipline has harmed schools. If broken windows in a building aren’t fixed, the tendency is for vandals to break more windows, and eventually break into the building. After a few unchecked incidents, disorder takes over a school. “Young people aren’t known for their maturity, and pushing the envelope becomes a sport” (p. 105). Zero tolerance rules, which were supposed to counteract school disorder, only make things worse. The problem with these rules is that they can’t distinguish trivial from severe infractions. In 2001, a National Merit scholar in a Florida high school was suspended because of a small kitchen knife found in the back seat of her car on school grounds. “Instead of bolstering school authority, zero tolerance rules have become a symbol of lack of authority to do what’s right” (p. 106).
The fear and distrust of authority that began in the 1960’s was a major factor that led to our current legalistic mess. We tried to outlaw any type of discretion by people in positions of authority—teachers, administrators, managers, and government executives—by replacing this discretion with a tangle of rules and threats of litigation. But there is no substitute for good judgment, and good judgment relies on subjective and intuitive factors. Having to prove the correctness of decisions in legal proceedings leads to worse decisions. It’s true that people can explain why they did something, but only to a point. These explanations rarely rise to the level of legal proof.
“The alternative to absolute rights is not absolute discretion” (p. 58). Legislatures can establish clear public goals, and give officials the responsibility to achieve these goals. But meeting these goals requires the use of individual judgment, such as the decision that a student is too violent to be mainstreamed. People in power will at times make mistakes, and they should be held accountable for their mistakes. But trying to prescribe decisions by legal rule is a self-defeating way to organize our society.
Some specific reforms that Howard advocates include:
1) Judges must draw legal boundaries of reasonableness as they pertain to lawsuits. The “lost pants” type of lawsuit should be immediately dismissed. For other suits that aren’t obviously ridiculous, judges need to take into account whether a claim might undermine reasonable activities of people not in the courtroom. For example, the threat of lawsuits has resulted in playgrounds being stripped of fun equipment. Many schools have eliminated recess, and parents are afraid to allow their children to engage in unstructured play. As a result of these changes, children today spend much of their time in front of television and computer screens. This lack of exercise is one important factor in the obesity epidemic plaguing our nation’s youth. By trying to eliminate risky behavior among children, we’ve succeeded in making many of them fat, a health problem which will eventually cause much more suffering and death than an occasional accident.
2) Special courts are needed for medical malpractice claims. The problem isn’t the setting of standards of care. The problem is finding courts that are trusted to uphold these standards. Allowing medical malpractice claims to be heard in regular courts, with greedy trial lawyers manipulating clueless juries, has led to an explosion of defensive medicine. Special courts for medical malpractice would have the following characteristics: judges dedicated to health care claims, written judicial opinions rather than jury verdicts, neutral experts in place of hired guns, and expedited proceedings with incentives for early settlements.
3) Abandon the due process model for social services, especially public schools. Daily choices in schools and other public institutions need to be made by teachers and administrators with the freedom to use their judgment, without fear of lawsuit. These choices should not be determined by burdensome detailed regulation. In successful private and charter schools, teachers and principals are free to do what they think is best for their students. For public schools to succeed, their teachers and principals need the same freedom. This freedom includes the freedom of school administrators to fire incompetent teachers.
4) Don’t tolerate disorder in public schools. Principals and teachers need the authority to promptly remove disruptive students without worrying about following regulations or being sued by parents. Some students are too disruptive or violent to be mainstreamed, and they need to be removed from the regular classroom. Allowing individual students to disrupt classes makes it very difficult to properly educate the other students. While one student and his parents may win, everyone else loses. This individualistic and selfish model needs to change.
5) Discrimination cases should only be allowed for systematic practices of discrimination. This was the original purpose of discrimination laws, which since the 1960’s have been corrupted by greedy trial lawyers and irresponsible minority advocates. If a minority feels he’s being discriminated against, his lawsuit would be dismissed unless he can present evidence that the employer discriminates against minorities in general. Individuals should not be allowed to bring claims only on behalf of themselves. An exception is for individual claims of sexual harassment, but only if they rise to the level of quid pro quo.
6) Washington needs to be fixed from the outside. Partisan politics and special interests have made it impossible for our representatives to achieve any important changes in the areas that Howard talks about. As with the No Child Left Behind law, they just pile layers of legal concrete on people and institutions that are already crushed by law. We must form a national coalition of citizen leaders, a shadow government, to propose an overhaul of government. The models for this are the base-closing commissions in the 1990’s, or the current deficit-reduction commissions. To effect change, public opinion must be mobilized in a way that it hasn’t been since the 1960’s. “America doesn’t need a new Constitution, just a healthy spring cleaning and a practical approach to making public choices without crushing us under endless law” (p. 177).
The only problem with this book is that it lacks an index. I don’t remember ever reading a nonfiction book without an index.
Due to excessive regulation and litigation, America in the early 21st century is a shell of its former self. We’ve become afraid to take risks, afraid to use our judgment, and afraid to do what we think is right. Is this the type of mentality that motivated the early pioneers, people who risked everything to settle an unknown and sometimes hostile country? Is this the type of mentality that motivated the great American inventors, entrepreneurs, and other creative people? Would Edison have invented the light bulb if he was afraid of being sued by the candle makers? Would Tesla have invented A/C electric power if he was afraid of being sued by the family of the rare person who was electrocuted? Would railroads, cars, and planes have been invented and made available to the masses if companies were afraid of being sued due to accidents? Would America have risen to a leadership position among nations if its public schools were always in the sorry shape they are in today? Would a legal and political system have been a model to the world if it allowed a greedy scumbag to sue his dry cleaner for $54 million dollars?
The problems that Howard describes in his book are not the only problems that America faces. Obviously, we need to be concerned about other things, including the recession, our government’s long-term fiscal health, and the threat of terrorism. But overregulation and overlitigation, although less publicized, nevertheless affect Americans in their daily lives—in their schools, workplaces, doctors offices, hospitals, and even their homes. The cost in money, worry, wasted time, and unhealthy behavior is severe. I recommend “Life Without Lawyers” to all Americans.
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