Streetwise Professor

Obama caused a kerfuffle with his remarks in Argentina on Thursday. The most common interpretation of his remarks was that he was drawing an equivalence between communism/socialism and capitalism. Yes, one can interpret his speech that way, but I don’t think that’s the most accurate way to parse it.

Obama was denigrating all ideological frames as interesting subject matter for academic debate, but of little interest or relevance to practical politics:

I guess to make a broader point, so often in the past there’s been a sharp division between left and right, between capitalist and communist or socialist. And especially in the Americas, that’s been a big debate, right? Oh, you know, you’re a capitalist Yankee dog, and oh, you know, you’re some crazy communist that’s going to take away everybody’s property. And I mean, those are interesting intellectual arguments, but I think for your generation, you should be practical and just choose from what works. You don’t have to worry about whether it neatly fits into socialist theory or capitalist theory — you should just decide what works.

In short, he advocated a rigorously pragmatic approach. Or put differently, a Chinese menu theory of government: take one item from menu A, another from menu B, depending on your taste and what “works” for you.

The criticism here should be directed at his vapidity and superficiality and question begging. By what criteria are the things that “work” to be determined? How do liberty, individual autonomy, and reliance on coercion and repression come into play when evaluating what works?

Further, real world decisions always involve trade-offs. Works-Doesn’t Work is binary: trade offs aren’t.

Obama also apparently believes that it is possible to design policies without a theoretical framework. Hayek was closer to the truth when he said without theory the facts are silent. Theories are about causal mechanisms, and policies are all about manipulating cause to achieve particular effects. You can’t make a reasonable evaluation ex ante of what policies will “work” (based on your objective function) without some theoretical framework. Further, those who don’t think deeply about cause and effect when designing policies inevitably unleash unintended consequences that are usually more baleful than beneficial.

All that said, the fact that Obama apparently believes that some socialist or communist policies “work” by any criteria held by non-socialists/communists is revealing. All empirical experience is that explicitly communist and socialist systems have delivered lower standards of living (often dramatically so), less freedom, and more coercion. Further, their alleged virtue–equality–is largely chimerical. There is always a privileged elite in socialist/communist systems, and what equality there is tends to be an equality of misery. What’s more, inequality can be palliated (and is considerably even in the US) by transfer programs that fall well short of communism or socialism. The Bernie worshipping millennial idiots who point to Denmark or Sweden as socialist paradises have no clue: they are welfare states, which is a very different kettle of fish.

The examples from Cuba that Obama cited as things that “work” in a communist system are something of a joke. Non-communist/socialist systems deliver better education and health care than Castro’s Cuba.

Obama was not revealing that he is a closet commie, although he clearly does not think communism is inherently a bad thing. In fact, he was being an old school progressive, making arguments old school progressives have made since Wilson and through FDR. The New Dealers were of a similarly pragmatic bent, and like Obama, openly advocated using policies adopted by fascist or communist countries if they “worked.” Stalin, Hitler, and Mussolini all had admirers among the New Dealers, who believed that they had found better policies than voluntary contract and exchange, and open competition.

When I read Obama’s remarks, I immediately thought of FDR’s speech at Oglethorpe University in May, 1932 (while he was running for president):

Do not confuse objectives with methods. When the Nation becomes substantially united in favor of planning the broad objectives of civilization, then true leadership must unite thought behind definite methods.

The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something. The millions who are in want will not stand by silently forever while the things to satisfy their needs are within easy reach.

“Bold experimentation” is basically a prescription to try anything and see if it “works.” If one thing doesn’t “work,” (i.e., “if it fails”) try something else. Once the “broad objectives” are defined, any method that achieves those objectives is fair game. Roosevelt in Georgia, like Obama in Argentina, was saying that all methods should be open for consideration and evaluated on purely pragmatic grounds.

Roosevelt was also making a favorable reference to planning, which at the time was associated with the USSR. Like Obama, he was saying don’t rule out a particular policy just because it originates in communism.

Of course, the implementation of this theory of government in the New Deal led to a confused hodge-podge of policies that largely failed to achieve their stated objectives, and indeed, in many cases worsened the nation’s economic crisis: that is, these policies were rife with unintended consequences.

This provides an excellent example of Hayek’s dictum. Those operating based on standard microeconomic (e.g., capitalist) principles/theories rightly predicted that cartelizing product and labor markets would not lead to higher output, and they were right. Contrary to Obama, “capitalist theory” was more than an intellectually interesting subject for classroom debate: it was a very useful guide to evaluating the practical effects of policies, which the New Dealers ignored, to the nation’s detriment.

And those progressives like Wilson, FDR, and now Obama who touted the superiority of pragmatism, and claimed their practicality and independence from theoretical abstractions and systems, were largely fooling themselves. The Pragmatism (note the capitalization) that has infused progressive thought for well over a century isn’t a-theoretical or a-ideological. It is an ideological and philosophical system developed in Germany in the 19th century. Not that Obama gets that.

No, Obama seems to be exactly the kind of man that Keynes so trenchantly described in the General Theory 80 years ago:

Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

What Keynes describes is a form of intellectual conceit common among politicians, and especially progressive ones. That conceit, rather than some soft spot for socialism, is the problem with Obama’s “do what works” nostrum.