A Delusional Moment
We’ve begun to talk about the crisis, even to act—but our response remains dangerously inadequate to the scale of the challenges ahead
It’s a strange and dangerous moment for those concerned with the need for systemic change. On the one hand, there are signs of progress, albeit of a limited kind. On the other, there’s a real risk of being sucked into a delusional moment, a collective wish-fulfillment exercise in which we fool ourselves into believing that small change is making a real difference.
First, it’s important to recognize the progress that has been made. After decades of hubris and apathy—from the long national daydream of the Third Way period, when the End of History was proclaimed and the business cycle had supposedly been overthrown, to the complacency in the aftermath of the Great Financial Crisis, when Wall Street was bailed out but Main Street left underwater in a “non-recovery recovery” with disastrous consequences—we seem finally to have awoken to the perilous nature of the threat. The dashboard warning lights have been blinking insistently for long enough. But at last there is official recognition that something is profoundly wrong.
Back in March 2015, we at the Democracy Collaborative launched the Next System Project with a statement—signed by hundreds of leading scholars, activists and practitioners, and joined by thousands of others—called It’s Time to Face the Depth of the Systemic Crisis We Confront. We wrote an accompanying prospectus, New Political-Economic Possibilities for the Twenty-First Century. Back then, our contention that we were facing a crisis of the system, not just local political or economic difficulties, was a bold and provocative one. It’s now increasingly widely accepted in the halls of power, both domestically and internationally.
In her first day message to her departmental staff, Janet Yellen, U.S. Secretary of the Treasury, spoke of “four historic crises” facing the United States:
COVID-19 is one. But in addition to the pandemic, the country is also facing a climate crisis, a crisis of systemic racism, and an economic crisis that has been building for fifty years.
Ten years ago, such an admission would have been unheard of from such a high-ranking U.S. economic official. Today it’s commonplace. The Treasury Secretary is not alone in her use of such language, which can increasingly be found in official U.S. government communiqués and even in the pronouncements of international institutions such as the International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD).
System crisis
A political economy is a system, and our system is programmed not to meet basic needs but to prioritize the generation of corporate profits, the growth of GDP, and the projection of national power. It follows that if we are serious about addressing the challenges we face, we need to address the nature and basic operations of the system itself. Systemic problems require systemic solutions.
That argument we have increasingly won. It’s a sign of important progress that the profoundly systemic nature of the crisis has finally begun to cut through. In that respect, at least, the real and present dangers of the Trump era have had their effect.
Moreover, we have also seen the beginnings of action. Some good things are being done, and action is being taken—by the standards of recent decades, fairly significant action. The American Rescue Plan, the Bipartisan Infrastructure Law (BIL), the CHIPS and Science Act, the Inflation Reduction Act (IRA). Big federal interventions, trillions and trillions of dollars. The much ballyhooed “New Washington Consensus” has even proclaimed—prematurely—an end to neoliberalism.
This is where the danger lies. In the comforting illusions that we are finally making progress, that—after decades of misdirection, obfuscation, and inaction—the more thoughtful elements of the political center are at last awakening to the magnitude of the crisis. There is an accompanying risk of hubris—at least on the evidence of some recent Washington think tank events, where Biden Administration officials and their allies seem perilously close to high-fiving each other at all that they’ve managed to accomplish to save the world. It is all too easy to be seduced by encouraging signs, a possibility we would be the first to admit.
Falling short
But the bigger picture, unfortunately, is that we are still losing—losing badly—in our struggle to tackle long-run systemic trends. We have begun walking tentatively up a fast-moving downward escalator. And further systemic shocks are in store.
In the state of California, State Farm will no longer provide insurance on new build housing because of the dangers. Last month, the sky in New York City turned orange and a fog of smoke descended from wildfires in Canada—fires, unfortunately, that are part-located in vast monocultures of trees planted as carbon offsets, a double disaster. We do not yet fully understand the new inflation, driven by profiteering (“sellers’ inflation”) and supply shocks rather than excess demand, and risk turning to the hammer of interest rates that treats everything as if it’s a nail, a potential new Volcker Shock that would place the costs of the pandemic and of the multiple crises we are facing on workers, families and communities rather than on runaway corporate profits. Then there is the coming labor market impact of Artificial Intelligence.
As our compromised system stirs belatedly into action, there is a danger of a real complacency about what will actually be required. A daunting gulf remains between the magnitude of the systemic challenge and the scope and scale of the responses that are being conceived and proposed, and (partially) enacted—a gulf from which new monsters may soon begin to appear.
While the Biden Administration may have been more promising than many might have expected, it has run into the sands of political stalemate. But—and this is where it starts to get really tough—even if it had gone full steam ahead, if Congress had been able to pass Build Back Better and move on a raft of other positive legislative initiatives, we should not delude ourselves that this kind of modest “liberal reform” agenda, while it may do many good things, is anything like the level or depth of intervention necessary to bend the curve on the long-run negative trends we are facing.
Systemic trends
Under Democrat and Republican alike, in economic so-called “good times” and bad, the outcomes of the system for most Americans have been getting steadily worse in real terms. A few years back we produced something at The Democracy Collaborative we called the Index of Systemic Trends.
One of the signs that a crisis is systemic, rather than purely political or economic, is that key indicators decline or stay the same regardless of changes in political power or business cycles. Since 1970, the United States has experienced seven party changes in the White House, six party changes in control of the Senate, and four in the House of Representatives. It has also experienced seven recessions (and recoveries). Yet, as our Index demonstrates, on many very important indicators of economic, social, and democratic health there has been little improvement and, in many cases, substantial deterioration over this period.
The trends considered include poverty, wealth inequality, racial wealth inequality, income inequality, wage stagnation, the cost of higher education (and student loan debt), homeownership (and racial inequality), corporate taxation, taxation of the rich, union density, incarceration rates (including by race), labor force participation rates, healthcare costs, climate change, and life expectancy.
Our Index is by no means comprehensive. It is designed purely to be illustrative of what, we believe, is an important observation: that our current political-economic system is consistently failing to deliver improvement and/or competitive results compared to other advanced economies across a variety of different measures; and that this is indicative of a systemic crisis and the need to move in the direction of a new system that can and will produce better outcomes.
Our delusional moment
Progressives right now, liberals and radicals alike, run the risk of being seduced by what could easily become a delusional moment. Inadequate change, too little too late, might nevertheless provide a sense of comfort that we are at long last doing something. And this may stand in the way of a clear-eyed assessment of where we really stand and what is truly required of us in the struggles ahead.
We all like to live in hope. It is in the human condition to believe that we are making a difference, that we are making changes for the better, that there is progress. For progressive think tanks, politicians, and administrations, we must be wary of a hope that comes with a collective misconception that we are already on a path to a solution, or believing that our small victories are a clear sign of positive change. Such a delusion will blunt our edge and give sustenance to the reactionaries who don’t want change.
We must be unforgiving in our pursuit of a new economy and beware the perils of falling for our own public relations hype. Many exciting and progressive economic ideas and policy get watered down before implementation and/or remain on the margins. Far too little is being accelerated at the scale or pace required.
The generalized understanding that we need big change is not the same as strategic interventions and approaches capable of actually delivering it. In policy, academia and the news media, and on a growing basis in national and international conferences, we see an understanding that our economic model is increasingly failing a majority of our people, places, and the planet. There are decent administrations, enlightened politicians and public officials, who understand that big change is needed, and they eagerly seize upon progressive ideas in the hope that the policies they implement will address the underlying issues. The evidence, however, suggests otherwise—that such well-intentioned positivity is delusional and needs recognizing and calling out, in ourselves as much as in others.
Nor is this moment of delusion confined to centrists. We in more progressive and radical economic spaces are also not immune, albeit perhaps to a different variant. While we may be clear-eyed as to the limits of center-left reformism, we are not so incisive when it comes to our own preferred models and solutions.
We all have buzzy concepts and approaches, we do research, we write reports, we suggest change, and we even have some experiments that show the new way. There is no shortage of solutions. However, in political power terms many of these solutions are either ignored or embraced in warm words but not in deeds. And too often there is more talk than substance, more virtue signaling than pointed action.
A whole catalog of potential solutions are ground down and never come to full realization or radical fruition. They are never truly amplified and scaled at pace. By any honest reckoning, we are currently failing. At best we may think we are going far too slow, at worst we are already too late.
The real rub here is that aside from a few deniers, most of those with wealth and power also know that change is needed. However, they stop shy of the big changes commensurate with the scale of the challenges we are facing. Resources flow accordingly, with the imperative being to minimize disruption to the existing system rather than ensuring that we don’t fall short of the radicalism of the change that is required.
Ultimately, real workable ideas for change are ignored or neutered and trimmed by power and wealth, by those who have too much to lose from economic system change and the essential transformation it necessitates. They cannot or will not make the really big calls on wealth distribution and fossil fuel usage.
In this context, we progressives through our work are forging small cogs of change to build a new economy through demonstration projects and bottom-up change. However, we need to get real: we are also locked into a bigger system which is continually cranking on in the same old way, absorbing challenges rather than being truly disrupted by them. As the political theorist Jodi Dean has put it, “Goldman Sachs doesn’t care if you raise chickens.”
The challenge of scale
Many people do understand that current action is not enough. But what if our counterproposals for further action are themselves also inadequate?
People say we need a Green New Deal, and we at TDC support that. But looking at the original New Deal, it’s pretty sobering. We all know the flaws and shortcomings—not least its exclusionary racial politics. But the New Deal did represent a significant victory for labor, unions, social movements in demanding action from what had previously been a laissez faire federal government.
The New Deal is an inspiring example of what a democratic government can accomplish even in very difficult circumstances. FDR’s first “Hundred Days”—deftly packaged as such for the first time—blitzed the country with one of the most rapid and audacious legislative reform packages in history, and remains a model for how a radical reforming government can roll out its program. The Hundred Days encompassed legislation on everything from agricultural relief (the Emergency Farm Mortgage Act and the Farm Credit Act) and industrial regeneration (the National Industrial Recovery Act) to transport (the Emergency Railroad Transportation Act), energy (creation of the Tennessee Valley Authority), and banking and monetary reform (the Glass-Steagall Banking Act and abandonment of the gold standard). All this took place at the lowest point of the Great Depression, with a quarter of the workforce (upwards of fifteen million people) unemployed, and the American banking system on the brink of collapse.
Here’s the problem. Ultimately, it didn’t work. As Richard B. DuBoff explains, in his Accumulation & Power: An Economic History of the United States, despite the efforts of Franklin Roosevelt’s New Deal, real GNP did not regain its 1929 volume until 1939, when per capita income was still 7 percent below its 1929 level. It was the Second World War that ended the Great Depression, not the New Deal. Military spending rose to 42 percent of GNP in 1943-44 and as a result national product increased by 65 percent and industrial production by 90 percent.
What if we have the wrong historical analogy, the wrong scale? We don’t need another New Deal but rather the climate and economic equivalent of the experience of wartime planning—a very different prospect requiring a very different kind of leadership and vision.
A systemic response?
Let’s try a thought experiment, based on Janet Yellen’s four crises. What would a systemic response even look like?
In analytical terms, we might look to identify hard constraints of these overlapping crises such that the “landing zone” for effective remedial and transformative action becomes increasingly clear, and can be articulated as part of boosting the overall level of ambition. In broad-brush terms, it should be possible to delineate, even model, the magnitude of the required transition.
Beyond the challenges of (post-)Covid economic reconstruction looms the longer-run triple crisis: of economic inequality, environmental collapse, and racial injustice. This brings with it a very severe challenge if we are to strike simultaneously at all three together:
The racial wealth gap in the United States is estimated at around $10 trillion—wealth that has been extracted and stolen from and denied to communities of color—which is equivalent to around half of annual U.S. gross domestic product (GDP).
At the same time, we are currently consuming at a rate of throughput that is beyond regeneration and equivalent to one and a half planet Earths. To get back within planetary boundaries and avert climate collapse, even with technology and “green growth” in some sectors, will inevitably require major cutbacks in consumption or degrowth of some kind, however unpalatable that may be.
Meanwhile, the economic inequality and stagnant median wages and living standards for so many pose the stark challenge of building a majoritarian political coalition that is both predistributive and redistributive, without relying on growth and at the same time delivering reparative justice, avoiding the pitfalls of reactionary politics, racialized division, and instincts to pull up the ladder by semi-privileged groups.
The intersection of these three challenges presents a wicked problem in political economy terms.
The landing zone for accomplishing all of this at once is by definition pretty narrow and circumscribed—it is certainly not a world that contains billionaires. It will likely require a shift in the ownership and control of capital that dwarfs even such radical previous episodes in history as the industrial revolution or the upheavals of the twentieth-century, whilst seeking to do so peaceably and on the basis of a rebuilding and reconstruction of community in democratic public life.
Only certain pathways forward will deliver the fundamental changes in outcomes that are necessary, and these must become the de facto contours of a possible, practicable, and desirable “next system”—one that does not rely on correcting anti-social externalities after the fact through taxation and regulation but is capable in and of itself of producing the desirable outcomes—economic, environmental, social, and political—that we want and need as a result of its everyday operations. We need a democratic economy in support of a democratic politics.
There will also be a concomitant challenge—as has already been evidenced by much of the climate change debate—in framing what are in effect real hard constraints on solutions in a manner that is expansive rather than restrictive of future possibilities and potentialities.
Developing the politics and strategy that can pull this off is the fundamental epochal challenge of our age—and must become the central mission of transformative political action in the years ahead.
Open minds
At TDC, like many think tanks, we are grappling with this delusional moment. We think we have some of the answers. We also have our own small victories. But like many progressive organizations we are under the relentless cosh of convention, precedent, timidity, and the power of wealth. Our anger and frustration rise in equal measure to each latest episode of trimming and dilution.
For us, we battle on three fronts. We think and build radical policy ideas. We do in that we have various test-beds of experimentation—not least our work on Community Wealth Building, which is starting to offer a means by which to rewire our municipal and regional economies across the United States and elsewhere, especially in Scotland. But we need to go faster and deeper. Finally, we seek to change the world, by building alliances, collaborations and movements with activists and those who also see the need for rapid progressive change to our current failed economic model.
At the core of our work is the burning need to democratize our economy. On many fronts we seek to grow the capacity and power of people to have a genuine stake in their economy and society. We believe this is a true reflection of the human condition and a matter of fundamental right.
To address the catastrophes and crises before us, we need to acknowledge the risks of the present delusional moment. We should see our successes in the context of deeper failure and push harder. We should expect dilution and cooption, plan for it, and call it out. We should accept, but never be beguiled by, praise from the powerful. We need to be brave with our funders and supporters and lay out the above impediments to progress, and hence the limits on our impact. Above all, we need to collaborate with and stay alive to those who suffer the most.
To be an effective force for radical systemic change under present conditions we must become fully awake to and cognizant of the dangers of delusion. We are not yet winning; we are losing—and badly. Failure to be open to the implications of this will mean heading further into the abyss, even if we still have our eyes wide open to the stars. Ultimately, it is our minds which must remain open, including to the radical implications of continuing progressive failure.
We must identify and enact the right strategy for systemic change—and fast. Truly, the stakes could hardly be much higher.
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Joe Guinan is President of The Democracy Collaborative.
Neil McInroy is Global Lead for Community Wealth Building at The Democracy Collaborative
Photo by 愚木混株 cdd20 on Unsplash