Tuesday, October 14, 2008

Social Complexity & Crises

Washington politicians and pundits are shocked that the bailout led to another drop in stock value, just as they were shocked that Iraqis did not welcome a brutal American invasion with flowers and just as they were shocked that the marginalized people of Pakistan’s border regions did not flock to support the Pakistani government as it adopted Washington’s tactic of attacking populated areas with helicopter gunships (not to mention the odd American missile). And if McCain wins and succeeds in transforming the health insurance system into an unregulated, private system (like the unregulated, private credit default swap system that has just made its seminal contribution to our financial stability), then we may soon see the collapse of the nation’s health insurance system.

It’s worth thinking about that last point for a moment. What would a “collapse” of the nation’s health insurance system look like? Premiums would skyrocket – except for those who could prove they were absolutely healthy. As with car insurance, those who got sick would be socked with penalties. Insurance agents would be increasingly aggressive about ordering doctors to kick the sick out of hospitals. And just maybe, health insurance would simply disappear. We would all have to invest money when young to pay for our health needs when we aged. Where would we invest? Obviously…in the stock market!

The lessons:

Don’t expect to make a profit on stocks any time soon;
Don’t expect terrorist attacks on America to end any time soon;
Don’t get sick.

The U.S. foreign policy system, financial system, and health care system are all huge, complicated social systems that are increasingly out of control, suggesting that some common underlying set of factors is to blame. Overwhelming violence has been the method of choice since 9/11 for resolving problems in U.S. foreign policy. An unrestricted rush for short-term profit has characterized the behavior of financial institutions, not to mention many individuals who knowingly bought houses they could not afford. The McCain health care plan would take the responsibility for providing Americans with affordable health care out of the hands of the Government. These are all examples of the same decision-making concept: relying on maximum force to achieve simplistic “solutions.”

Admittedly, the alternative in each case is messy. In foreign policy, long years of agonizing diplomacy plus step-by-step police work and, perhaps, a $700 billion bailout of the Islamic world’s poor. Who in Pakistan’s tribal areas would be supporting the Taliban now if, say, $100 billion in new roads, schools, and jobs were being offered to those people who as recently as this summer were still risking their lives to send their children (girls included) to modern schools and demanding that their officials provide economic opportunities for them?

In financial policy, Government regulation would have had to be beefed up significantly, always difficult in the absence of a crisis. Wall Street’s new instruments would have had to be banned or made less risky by requiring Wall Street to tell the Government exactly what it was doing and by providing costly collateral. Wall Street executives would have lost millions from their annual bonuses and golden parachutes because company profits would have declined.

In health care policy, a serious, good-faith effort would have to be made to provide a minimum level of coverage for all Americans: easy to say, tough to do. Kucinich took a stab at it during the primaries, and look what it got him.

So, we took the easy way out.

In foreign policy, the result, so far, is five years of war in Iraq; seven years of war in Afghanistan; two years of war in Somalia; the transformation of Gaza into a concentration camp; a war in Lebanon; the start of a new war in Pakistan; the destruction of the moderate democratic movement in Iran; rising nuclear tensions in the Mideast as Israel continues to threaten aggression against non-nuclear (so far) Iran. Not one of these situations has been resolved. The Iraqi situation is better than it was at the worst point (a low point caused by the U.S. invasion, not by Saddam, who was long dead) but decidedly worse than it was before the U.S. invasion. Each of the other situations is steadily worsening. U.S. national security is getting more tenuous; al Qua’ida is gaining support, enhancing its strategic position in Pakistan by the day and nearly fighting the West to a draw in Afghanistan. The U.S. image in the world is significantly more tattered than before 9/11.

In financial policy, the result is a nice crisis for everyone except the leaders of Wall Street, who all walked away with tens of millions of other people’s money in their pockets. The result is also a government in Washington that now appears utterly corrupt and incompetent, and this result is probably more important to U.S. national security than the collapse of the utterly immoral, irresponsible, and unpatriotic system of unrestrained greed that Wall Street had become. It is a sobering thought to wonder how the evident bumbling and declining mastery of events by Washington will affect the status and behavior of extremists in Tehran or Beijing or Moscow…or Tel Aviv.

As for health care policy, that system too is clearly under stress and appears, like the first two, to be slipping out of control. But if we draw general lessons from our mistakes in managing foreign and financial policy, perhaps we can avoid once again dropping the rock of simplistic solutions on our own feet.

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