Re: Poor investments

I came across an interesting article in my local university paper:

Poor investments by Shay O’Reilly

This whole Solyndra mess is kind of a big deal — until you consider some of our more tenuous, poorly planned investments. There will not be a Congressional inquiry into the Bush administration’s pre-emptive war against Iraq founded on lies or into the Obama administration’s murder of more than 2,000 civilians, 160 of them children, in Pakistan as a result of continuing drone strikes.

Even on a purely monetary scale, the money lost to Solyndra is overwhelmed by the amount spent on other failed causes. The money squandered on Solyndra is measured in hundreds of millions, but a Brown University study released earlier this year puts the total cost of our “War on Terror” at $4 trillion — nearly one-third of the national debt.

There’s no return on investment, either: As I’ve written about before, the burgeoning security state and bloated surveillance industry have left us with a dearth of evidence that we are any safer now than we were 11 years ago. Meanwhile, both Afghanistan and Libya have fallen into civil war after their supposed “liberation.” And in purely humanist terms, our post-9/11 foreign policy has led to unquantifiable suffering in the form of the war crimes that inevitably stem from hostilities.

Of course I stand opposed to corporatism, whether it comes in the form of preferential treatment for loans or fat payouts to military contractors. If Solyndra circumvented the usual procedures because of politics or cronyism, there should rightfully be disciplinary actions extending to the highest level of government.

But I’m flummoxed by the incessant media attention given to these more mild cases of waste. War, and particularly the kind of nebulous open-ended war that we began after Sept. 11, 2001, is a far worse investment than Solyndra. But this is the truth that no one dares speak, and it is practically a civil heresy: Our wars have primarily been tremendous and catastrophic failures. Where they have “succeeded,” (and what counts as success?) they have led to suffering and moral compromise.

It’s a good article which I thought expressed well the problems we face. However, in the comments section, I was given example of how people can miss the point of such criticisms.

G_Dispersion wrote: “Good point Shay, It is just varying degrees of 1 F up after another.”

Here is my response to that comment:

Actually, that misses the point. It’s not about “1 F up after another”. Rather, it’s about how the money could be better spenton programs that help the American public and which the American public supports. Most Americans aren’t anti-government, although most Americans are against corporatism and the military-industrial complex.

However, it is easy to get people mad over the mistakes and corruption of government. That is the problem. The vast majority of things the government does well rarely gets much reporting. It’s the same reason deaths get reported all the time while people going on living isn’t news-worthy.

This is explained well by Francis Fukuyama in his book ‘The Origins of Political Order’:

It is quite legitimate to argue that modern governments have grown excessively large, and that they thereby limit economic growth and individual freedom. People are right to complain about unresponsive bureaucracy, corrupt politicians, and the unprincipled nature of politics. But in the developed world, we take the existence of government so much for granted that we sometimes forget how important it is, and how difficult it was to create, and what the world would look like without certain basic political institutions.

It is not only that we take democracy for granted; we also take for granted the fact that we have a state at all that can carry out certain basic functions. Fairfax County, Virginia, a suburb of Washington, D.C., where I lived for many years, is one of the richest countries in the United States. Every winter, potholes appear in the county’s roads as a result of the seasonal freezing and thawing after winter storms. And yet by the end of the spring, all of those potholes get magically filled so no one has to worry about breaking an axle in one. If they don’t get filled, the residents of Fairfax County get angry and complain about the incompetence of local government; no one (apart from a few specialists in public administration) ever stops to think about the complex, invisible social system that makes this possible, or why it takes longer to fill potholes in the neighboring District of Columbia, or why potholes never get filled in many developing countries.

Indeed, the kinds of minimal or no-government societies envisioned by dreamers of the Left and Right are not fantasies; they actually exist in the contemporary developing world. Many parts of sub-Saharan Africa are a libertarian’s paradise. The region as a whole is a low-tax utopia, with governments often unable to collect more than about 10 percent of GDP in taxes, compared to more than 30 percent in the United States and 50 percent in parts of Europe. Rather than unleashing entrepreneurship, this low rate of taxation means that basic public services like health, education, and pothole filling are starved of funding. The physical infrastructure on which modern economy rests, like roads, court systems and police, are missing. In Somalia, where a strong central government has not existed since the late 1980s, ordinary individuals may own not just assault rifles but also rocket-propelled grenades, antiaircraft missiles, and tanks. People are free to protect their own families, and indeed are forced to do so. Nigeria has a film industry that produces as many titles as India’s famed Bollywood, but films have to earn a quick return because the government is incapable of guaranteeing intellectual property rights and preventing products from being copied illegally.

The degree to which people in developed countries take political institutions for granted was very much evident in the way that the United States planned, or failed to plan, for the aftermath of its 2003 invasion of Iraq. The U.S. administration seemed to think that democracy and a market economy were default conditions to which the country would automatically revert once Saddam Hussein’s dictatorship was removed, and seemed genuinely surprised when the Iraqi state itself collapsed in an orgy of looting and civil conflict. U.S. purposes have been similarly stymied in Afghanistan, where ten years of effort and the investment of hundreds of billions of dollars have not produced a stable, legitimate Afghan state.

Political institutions are necessary and cannot be taken for granted. A market economy and high levels of wealth don’t magically appear when you “get government out of the way”; they rest on a hidden institutional foundation of property rights, rule of law, and basic political order. A free market, a vigorous civil society, the spontaneous “wisdom of crowds” are all important components of a working democracy, but none can ultimately replace the functions of a strong, hierarchical government. There has been a broad recognition among economists in recent years that “institutions matter”: poor countries are poor not because they lack resources, but because they lack effective political institutions. We need therefore to better understand where those institutions come from.

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