The parallels between the rapid growth of US government bureaucracy and the Soviet bureaucracy is straight forward. As more and more of US economy was controlled by a narrow group of decision makers allocating government resources, the more sluggish the entire economy became (most of this was due to massive growth and mis-allocation in entitlements and defense). Further, the ability of government bureaucracies to extend their decision making to remaining majority of the economy through regulatory action, is also a form of centralization. However, even with all of this government growth, it’s is still not enough to account for the level of misallocation we are seeing.
There’s is something else at work.
The answer is that an extreme concentration of wealth at the center of our market economy has led to a form of central planning. The concentration of wealth is now in so few hands and is so extreme in degree, that the combined liquid financial power of all of those not in this small group is inconsequential to determining the direction of the economy. As a result, we now have the equivalent of centralized planning in global marketplaces. A few thousand extremely wealthy people making decisions on the allocation of our collective wealth. The result was inevitable: gross misallocation across all facets of the private economy.
David Brooks says that the U.S. “meritocracy” is less functional than before, He says it is based on an overly narrow definition of talent, has created new social chasms and less of a sense of connection, has less solidarity as a leadership class, is less into long-term thinking and more into fast response – “less emphasis on steady, gradula change and more emphasis on the big swing,” which “produces more spectacular failures and more uncertainty.” He alos says that we’re too transparent – “the more government has become transparent, the less people are inclined to trust it.” I’m not quite on board with that last, as one who has pushed for more transparency. Government should be functional, not mythic.
In another conversation, at Thrivable, Scott Reynolds Nelson expresses another view of transparency, speaking of banks rather than government:
Openness of books, transparency, clarity aren’t just things that are nice to have – they can make or break any institution that relies on trust to function. That includes banks but also NGO’s, funds, etc. Much of the internal workings of banks for example had been invisible to most folks. The so-called “stress test” that the federal government used on the banks in 2009 exposed some of the problems with bank operations. It turned out that many banks had much higher reserve ratios than they claimed. Likewise many of the big banks were forced to take off-the-books vehicles back into their firms for accounting purposes. In banks, anyways, that transparency can remove that semiotic doubt.
Finally, this RSA Animate video explains “Crises of Capitalism”: