Markets & Civil Society Organization

I tend to be a bit hard on the idea of free markets. I grew up learning about the invisible hand and in a family that started a business and did well. I (mostly because of my family’s business) appreciated the idea that setting up a market and running a business was a good thing from the standpoint of finding an efficient point at which to price a product or service. Today however, perhaps as a result of my healthcare interests, I see numerous examples of markets falling short of the goal we establish in our minds based on the idea of the invisible hand.

 

Rather than seeing markets find an efficient point where competition drives efficiency and provides everyone with better products at better prices, I see too many externalities from free markets and unfettered competition. We are producing a lot of greenhouse gasses that harm life on the planet. CEOs are getting better (maybe deservedly so) at capturing greater salaries from their companies, driving economic inequality, and straining social stability. Private health insurance markets seem to drive overall healthcare costs up at every turn, and no one seems to be able to understand how health insurance actually works. The free market, and open competition, does not appear to function as clearly and organize as succinctly as my simple understanding from high school would have suggested.

 

What is missing is something that ties markets and capitalism back into civil society. Bruce Katz and Jeremy Nowak, in their book The New Localism, suggest that shifting political power and decision making back to local contexts within cities and metropolitan regions can help correct these problems. They write, “New Localism is a mechanism for converting the self-organizing power of markets and civil society into structured fiscal and financial resources, and ultimately, political power.”

 

National and multinational sized corporations often have a responsibility to maximize profits for shareholders or top executives. Their huge scale means that any local or regional place is less important for them, since there are always markets in other countries and other states. However, when local governments exert more control over such companies, the local contexts begin to matter more. When CEOs and executives from these companies are invited in to help shape policy beginning at the local level, and are held accountable to the local individuals in the places where their markets are strong or where their employees actually live, the business motives that encourage negative externalities are shifted. The dynamic becomes one where civil responsibility is elevated, and ultimately political power is shifted in a way to help organize business in a more responsible manner in relation to the local context.

 

The lesson that Katz and Nowak share is that businesses on their own are encouraged to organize themselves in a way that maximizes profit at the expense of the local communities in which they operate. By giving localities more power and better networked governance structures, big businesses can instead be a cooperative part of the political and social structure, re-organizing themselves within society in a way that helps make Adam Smith’s invisible hand dream a little more plausible. The Invisible hand in this model is not so invisible, but more of a structured handshake creating a commitment to more than just profits.

City Power

Where does power and authority come from? I think this is an interesting question to ask ourselves. What is it that makes a nation, a state, a city, or an institution powerful and authoritative? Thousands to hundreds of years ago we solved this question by outsourcing – we decided that a divine being had vested power and authority in a single individual. Today, what creates authority for our mayor, the supreme court, and our nation is not divine, but public trust, cooperation, and economic prospects. Building society with these blocks isn’t always perfect, but it has managed to work for humans for a few hundred years now.

 

Bruce Katz and Jeremy Nowak look at the implications of the authority and power philosophy I described above in their book The New Localism. They write, “The power of cities and counties is not like the power of nations or states. It is grounded in markets and civics more than in constitutions or charters.” The authors make a split between the local and national in terms of how power and authority play out to create a social structure of trust. Nations and states tend to be based on written charters agreed to by relatively diverse populations. Cities and local counties tend to be based on shared values, experiences, and backgrounds with shared economic prospects and motives being the ultimate binding glue.

 

I think there are two things that we can understand about national versus local systems from the description provided by Katz and Nowak. Nations and states, with authority grounded in written constitutions and charters, have a more permanent and stable feel to them. changing something in a drastic manner requires a change to the written founding documents. This gives national and state governments more structure and a form that is more likely to endure longer into the future, but at the cost of making them rigid and hard to adapt to changes in the economy, in social preferences, and other trends.

 

As a contrast, city and local governments, which are based more on shared interests, engaged civic actors, and local economic contexts are more flexible and adaptable to trends, changing social preferences, and new economic developments. This gives local and state governments the flexibility that is needed to take advantage of new innovations and technologies. It allows the governments to solve problems through the power of collective action, but it also leave them vulnerable to wild swings in economic fortunes and broader sociopolitical forces.

 

While nations are able to define their populaces and establish binding rules for citizens across decades or centuries, cities often find it hard to create structures and institutions that are guaranteed to last as long. City populations are more prone to leave when things go south, and the strength of institutions can be greatly diminished when the population falls and a few actors exert undue influence in local decision making. Nevertheless, humans seem to be drawn toward cities and seem to be willing to reinvent cities on a continual basis. This creates the dynamic power that cities are exerting today to solve problems and address global challenges that seem to be paralyzing nations.

The Location of Power

Power in the United States, at least the power to actually get things done and make changes, is transforming. National politics exist at such a polarized level that bipartisan lawmaking and any action in general is almost impossible. As a result, political decision making and dynamic policy changes are occurring at a different level of governance, the hyper-local level. From my vantage point, state governments are muddling through as normal, with some big legislation passing here and there in some states, but simultaneously a lot of state level legislation seems to me to symbolic and broad, and often hung up in courts.

 

The New Localism by Bruce Katz and Jeremy Nowak explores how and why power in American public policy is shifting to the city, municipality, and metropolitan arenas. Dynamic changes and transformations are not occurring nationally, are not occurring in all states, and are not occurring in all counties. Some regions of the United States are growing, booming, and adapting, while others seem stagnant and stuck.

 

The authors write, “The location of power is shifting as a result of profound demographic, economic, and social forces. Power is drifting downward from the nation-state to cities and metropolitan communities, horizontally from government to networks of public, private, and civic actors, and globally along transnational circuits of capital, trade, and innovation.”

 

The thing about city governments and metropolitan communities is that they can act with a sense of informality that large national governments and bureaucracies cannot. They can be quicker to respond and more targeted with their actions. We are coming out of a period in American history where policies and actions moved upward to the Federal government. Lobbyists moved from small town capitals across the nation to Washington DC, to be closer to the big decision makers. As congress has fallen into gridlock, local governments have taken up action to innovate and re-imagine their futures. New actors come into play at local levels, and connections in both public and private organizations are driving the changes of governance, economies, and communities.

 

It is important that we embrace these changes, but recognize the potential for inequality with these changes. We have to find ways to embrace the new drivers of innovation, knowledge, and development while equitably ensuring that our communities are strengthened and not fractured from this new localism. Metropolitan areas are booming, but they must not become exploitative or this shift in power can become dangerous and further the divisions in our country. In order for new localism to be sustainable, it must also become equitable to bridge the gaps we see in our current politics.

The Bill of Rights, Factions, and the Power of the Government

One of the debates that took place before the 1788 ratification of our Constitution was whether or not the constitution should include a Bill of Rights, guarantees of freedoms that limit the power of government over the states and citizens. As written, Madison thought the Constitution was complete, and did not see the need for a Bill of Rights. The majority of delegates to the Constitution Convention, however, approved of amendments to the Constitution, and in the end, our founders added 10 amendments to create the Bill of Rights we know today.

In his book The Quartet, Joseph Ellis describes Madison’s thoughts regarding the Bill of Rights, an area where Madison and his political mentor, Thomas Jefferson differed in their opinions. Madison believed that a Bill of Rights would not be effective in stopping government from overstepping its authority, and he felt the amendments to be irrelevant. Ellis wrote the following about Madison:

“Jefferson’s problem, as Madison saw it, was that he believed that the primary threat to personal rights came from government. That might be true in Europe, “but in our Governments the real power lies in the majority of the community.” So the real threat came “from acts in which the Government is the mere instrument of the major number of the constituents.”

This is consistent with Madison’s thoughts as written in the Federalist Papers #10 and #51, in which Madison wrote about the dangers of factions and majoritarian groups of citizens. Madison did not see power as flowing from the government and did not see our political rights and stemming from government. He was developing a constitution and a framework of governance where “the people,” as ambiguous as the term is, held authority and power and a written bill of rights, he argued, was not sufficient to dissuade a majority of citizens from violating the rights of others. His suggestion was not to tie the hands of government with a bill of rights, but instead to ensure that power was divided among many factions so that a tyrannical few could not dominate the interests of the many.

What I find interesting here is that Madison is in effect arguing for what we today would call identity politics. The most basic definition of politics is “who gets what and when?” We will always lack the resources to make sure that everyone’s self interest and desires are entirely fulfilled, and some resources, such as status and prestige, cannot be evenly separated among men, women, and differing groups. Politics is about how we decide to distribute what we have, and it is inherently unequal and identity based. The term identity politics now refers to the distribution of resources based entirely on individual characteristics of certain groups rather than on the good of the majority, but as Madison may argue, operating on the basis of the good of the whole is impractical because you cannot give the whole the same opinion, and what you instead have is a tyrannical majority dominating the few. A bill of rights, paper barriers to liberty, are easily ignored when a powerful majority can silence the voice of a minority. Giving minorities more power and influence is a Madisonian idea that was formed in the founding documents of the nation, well before our current tussle of identity politics.

Centralization of Power

A political question attached to every decision and baked into every system of governance is the question of centrality. The center of the political system can be thought of as the legislative body that creates the laws or the administrative body that designs rules and regulations within the laws and is responsible for implementation. For every law and every program, fidelity to the intent of the decision-maker is important, but also in conflict with the ambiguity required to pass legislation and the flexibility needed by street level bureaucrats to implement policy. There is no one answer that tells us how centralized decision-making and implementation should be for any given issue or solution. Another factor that makes it difficult to determine the appropriate level of centralization is where power is located. Strong leaders may be able to demand more oversight and adherence to policy, while strong unions or popular street level agents may be able to shape policy from the periphery.

 

In Political Realism, Jonathan Rauch looks at the dynamics between centralization and power within congress and within our national political parties. Rauch is critical of some of the power grabs of congressional leaders and argues that increasing power through centralization does not always lead to improved governance. He writes,

 

“Similarly, centralizing a machine is not at all the same as strengthening it. A corporate CEO who concentrates decision-making in the C-suite while hollowing out the divisions might expand her authority at the expense of her effectiveness. In much the same way, House leader’s centralization of power over the past several decades and their weakening of the committee system and regular order seem to have diminished their governing capacity more than it increased their personal authority, weakening them on net.”

 

Centralization, whether within government or within a corporate structure as Rauch demonstrated, has the appearance of bringing more power to the lead decision-makers, but may lead to less creative solutions, less productive and effective systems and organizations, and weaker long-term performance. Rauch would argue that political power and centralization are tools to use to set agendas and push forward the most important items, but should not be used for every decisions in every context. Taking authority away from those who are responsible for the bulk of policy implementation can weaken the system overall and demoralize those who can provide creative solutions, innovative and effective design, and do the tough implementation work. Our country often gets into arguments about centralization as if there was a clear answer, but the right level of centralization for any given issue is always fluid. The right level of centralization is contextual, with influence from who holds power to how the public thinks about a given issue and about government more broadly.

Power

Howard Zinn wrote a letter to James Harmon for him to publish in his book Take My Advice, and in his letter he wrote about the incredible connections between people and the power that unified people can generate. He encourages the reader to find their own truths in life, and to seek an independence built through mindfulness. Zinn writes, “Understand that money and weapons are fragile forms of power.” He is criticizing institutions and their leaders in this statement.  To me, this sentence builds the idea that the most powerful people are the people who are connected with others through real and meaningful relationships.  These people are not powerful in the way that the winner of Shark Tank or high profile attorney’s are powerful. Their power is not built by influence, but rather empathy and a true concern for the people around them.  While money can dwindle and is not a true representation of the value of an individual, and weapons can be used by government to coerce and intimidate people, Zinn writes that people, when united, become more powerful through relationships than weapons and money (the use of both weapons and money against a united people will only strengthen the bond which empowers those people).
A book I plan to read is called, Generation Me, and it focuses on the psychological differences between generations.  The author was recently on a political podcast that I listen to frequently, and she stated that as our society becomes more individualistic our attitudes towards institutions, government, and other people begin to become more negative.  We loose trust in each other and in institutions, adopting an every man for himself attitude where we focus on obtaining our own wealth regardless of the state of others.  This is interesting to me because it seems to slightly contrast Zinn’s message while at the same time supporting it.  Zinn is advocating that we try to connect with more people to build powerful and lasting relationships, yet he is decidedly anti-institutional.  The author of Generation Me would certainly advocate for greater social connections and interactions which would strengthen our sense of community through relationships, yet she would not implore people to hold such a rebellious attitude towards government and other institutions.