Battle Declined

The President of the United States went to a funeral this week, to express his condolences for those killed in an explosion at the West Fertilizer Company, most of them first responders battling a fire that apparently caused several thousand pounds of ammonium nitrate to detonate, demolishing homes and schools in the area and leaving a crater in the ground nearly one hundred feet in diameter.

If the firefighters had known about the ammonium nitrate, their priority almost certainly would have been to organize an evacuation. But they did not know.

West Fertilizer is something of a poster child for the present state of what is casually referred to as ‘government regulation’, or rather the state to which it has devolved 30-odd years after Ronald Reagan famously declared that ‘government is the problem’, energizing his conservative disciples in a decades-long battle to de-fang and de-fund regulation and its enforcement, especially, but not exclusively, at the national level. Libertarians who honestly believe all government interference is wrong may wish to ponder the consequences of a purely private-sector decision to store without notice enough hazardous material to cause an accidental explosion capable of registering 2.1 on the Richter scale, as this one did. And those who cry, “But they’ll be held accountable in the courts!” may also wish to ponder the fact that West Fertilizer is owned by Adair Grain, Incorporated. It is highly unlikely that anyone involved can ever be legally held personally liable. And, in a laissez-faire world, I’m not sure what other kind of accountability matters.

But West Fertilizer also illustrates another consequence of chronic neglect in the field of regulation, which is the unmanageable and sometimes irreconcilable maze of interlocking rules and agencies. In this case alone: EPA. OSHA. DHS. DOT. The U.S. Pipeline and Hazardous Materials Safety Administration. The Texas Department of State Health Services. The Texas Commission on Environmental Quality. The Texas Feed and Fertilizer Control Service. The City of West zoning board and planning commission, assuming they have them. The point is not that the complexities of modern regulation are unwarranted. The point is the complexity is poorly managed; and sometimes it appears deliberately so.

The President has another small task to perform this week, which is to sign into law a hurriedly-passed bill to allow the FAA to move money from airport improvements over to air traffic control, to end the furloughs of federally-employed air controllers which have caused irritating delays in airline travel, and more poignantly public complaint. While this may be the first time in recent memory that Congress has paid any attention to the public at large, there  is reason to believe that with a stroke of his pen President Obama is about to sign his final capitulation in the Republican war on regulation.

The sequester (or Tea-quester, as some would have it), was enacted as an across-the-board cut in federal spending. Leaving aside its recklessness in an economy still constrained by private debt deleveraging,  it was the result of a deadlock between two opposing political parties, and it could have been resolved in one of two ways: by using inexorably growing public pressure to force compromise; or by allowing doctrinaire conservatives to cherry-pick which parts of government will enjoy their favor, and which will be left to wither. Unaccountably, the President appears to have ducked the pressure and acquiesced in the second.

Somewhere in his monumental Decline and Fall of the Roman Empire, historian Edward Gibbon once noted that “Civilization means fighting.” This is not the kind of thing technocrats like to think about, which is undoubtedly why so few of them are politicians. It is also said that politics is “the art of the possible”, yet I think this merely pretties up what Gibbon had to say, because what’s possible is not a given. It depends on your objectives, on where and when you’re willing to do battle. Because in the end, whether your weapons are spears or dollars or words, it is a battle.

The Arrogance of Revenge

“He said…the usual rubbish, talking about God again, that whatever wrong he had done on His behalf, he would like to be forgiven.”

 

The violence, and the drama, have ended.

The shock is dissipating. The crime scenes will be restored to normalcy, the blood will be cleansed away, and the memories will slowly fade into old news items, like Newtown, Aurora, and Columbine. People will ask why, but, finding no real answer, will forget, except for lobbyists and politicians and religious leaders, who will invoke a great and beautiful city in sermons and speeches and position papers, to illustrate an evil only they can correct, if people will just listen and accept their nostrums, or pass their legislation.

What happened this week began with what can only be described as an act of revenge, for what else is deliberately planned lethal violence with no conceivable goal, other than itself?

When political militants launch rockets across a border into nearby cities, or detonate themselves in crowds of people, this too is revenge, but revenge of the militarily helpless against a dominant power that is directly or indirectly involved with their miserable state. Thus, terrorism. Not quite senseless, although nearly, and still hopeless.

But what is violence against people who have no link, however tenuous, with the destroyer, his family, or his ethnic identity? The answer is disturbingly simple. It is revenge against the living.

It strikes out from time to time as an aberration, but under the surface looms an alienation that is far more common than mass murder, and by this I mean ‘alienation’ in both the social sense of being painfully unable to maintain relationships, and the psychological sense of self-hatred, hatred of those impulses and feelings which cause the pain.

Not so much today, but in decades past much ink was spilled over alienation, particularly by spiritual leaders and critics of Western society. Ironically, it was Karl Marx (who was, let us recall, a contemporary of Abraham Lincoln) who commented extensively on alienation as a consequence of society’s material development, that forces man apart from his pastoral connection with the soil; and materialism has long been a bête noire of theologians and pulpit-masters everywhere (until latter day evangelists managed to marry God with Mammon).

“Man’s separation from God” is the fundamental precept of religious teaching, and equally fundamental is the promise that happiness on earth, not just salvation in Heaven, is had by ‘accepting’ God (or Jesus, or the Supreme Reality). Vanity of vanities, saith the preacher, vanity of vanities; all is vanity.

Devout Christians ascribe original separation to the eating of the fruit of the Tree of Knowledge. True believers of the Communist faith laid it to technology and capital. What is plain is that unquestioned belief can be a source of comfort to the disillusioned, and the brotherhood of true believers a substitute for failed relationships of the more conventional sort, but the younger Marx had the clearer vision. Human intelligence will always question, and the questions must needs disturb and disrupt the comforts of acceptance and the balm of tradition. We cannot, and will not, renounce the fruit of the Tree.

A young man tried to make his way in a world he did not understand, and he failed. It’s a story as old as time. Somehow he arrived at a personal narrative, a ‘faith’, if you will, as well as the means, to exact revenge on those who succeeded where he could not. This, too, is a story old as time.

We try to understand the reasons why, not just to find ‘closure’, as the grief counselors have it, but to ask how society might be organized to prevent its recurrence. Can we somehow salvage young souls before they slip away? Can we keep them from tools of destruction? Must we find them, isolate them, restrain them?

 It is clear that society must protect itself. It is also clear it must do so very carefully, very thoughtfully. Even Marx wrote, “The way to Hell is paved with good intentions.”

This is no more true than here, in a republic whose laws are all too human constructs of an all too fallible intelligence, and all too arrogant character.

Air it up!

The next time you fill up your car, instead of watching the numbers spin and musing over how much of it is helping to finance extravagant luxury in far-away places like Dubai, you might ponder instead the dark brake dust coating your wheels, because that is where a fair amount of the gasoline you’re pumping is going to end up.

An automobile engine is a very specialized machine for converting chemical energy into mechanical, and mechanical energy is what is needed to make an automobile do something besides depreciate in the driveway. Because to go anywhere at the speeds we’re accustomed to, the engine has to supply a steady flow of energy to do things like flex rubber treads and push large quantities of air out of the way very fast. That’s why soft tires and a large boxy exterior mean lower gas mileage, because the rubber flexes more, it’s harder to push air out of the way with something shaped approximately like a barn door, and because that flow of energy is fed by a corresponding flow of gasoline from the tank.

But first you have to accelerate.

Every driver is familiar with pressing the gas pedal harder to get the car moving, whether just a little bit harder for a longish time to slowly get up to speed, or quite a bit harder for that gratifying jack-rabbit start. Either way, extra gasoline is burned to create extra energy, and this is converted into kinetic energy, which is the energy represented by something massive moving fast.

So where does all that kinetic energy go? Well, as long as the car is moving, nowhere. It’s only gotten rid of when you stop.

What the brakes do is to use friction to drain the kinetic energy by converting it to heat and dust – the particles that wear off the brake pads. This is where the gasoline you used to accelerate ends up.

The more stopping you do to get from point A to point B, the more gasoline you use wearing out your brakes and heating up your wheels. Thus, EPA mileage estimates for city driving (stop and go) are always less than for highway driving (stop once).

Or, almost always.

What if, when decelerating the car, its kinetic energy could be recovered and reused?

This is called regenerative braking, and it’s built in to most hybrids. The principle is that the electric motors that are part of a hybrid gas-electric car can be switched to work like generators instead, using the power of the moving car to help recharge the big lithium battery pack. It works when you’re decelerating from cruising speed, and then conventional brakes take over to finally bring the car to a halt.

This isn’t the only way to do regenerative braking. Engineers at Peugeot decided there might be an even better approach.

What they came up with was a way to recover the kinetic energy of a moving vehicle using hydraulics. In their Hybrid Air car, the car is slowed by a hydraulic motor that compresses gas in a long cylinder. The action is then reversed to allow the highly-compressed gas to assist the conventional engine in accelerating the car.

This is not a hybrid in the sense most of us are familiar with. The compressed gas can only power the car forward a few hundred yards, at best, but that may be enough to nearly double fuel economy in heavy stop and go driving. (One reason it is so effective is that the hydraulics and compressed gas cylinders are quite a bit lighter than the massive battery packs employed in more familiar hybrids.)

Another advantage cited by Peugeot is that, lacking the powerful electric motors of a Prius, say, there are no ‘rare earth’ magnets needed (except, perhaps, for the small engine starter). This frees them from the uncertainties of minerals that are mined almost exclusively in China.

If it still sounds a little farfetched, consider other examples of compressed gas supplementing or replacing internal combustion in a vehicle – functional, if not truly commercialized. For example, a company called Motor Development International has been testing a small runabout (or large golf cart, depending on your perspective) that runs entirely on compressed air. The driver recharges it at home with an air compressor. The technology is not very efficient yet, and it may never be, due to some irritating laws of thermodynamics, but it demonstrates that compressed-air motors work well enough to power a vehicle at speeds appropriate to city driving.

Then there is the liquid nitrogen car, which runs on the cryogenic gas that is a cheap byproduct of manufacturing liquid oxygen, re-using energy that might otherwise go to waste.

Peugeot’s technology is quite a bit less ambitious, combining as it does more conventional components to supplement a run-of-the-mill gasoline engine and make it drastically more efficient. Whether it will ever grace the polished floors a dealer’s showroom, of course, remains to be seen. But it seems like it ought to.

Partners and Nations

“How happy is the one who says ‘I am a Turk’.” - Mustafa Kemal Ataturk

“Every morning I make my students tell lies. None of the children are Turks. Everyone here, including us teachers, is Kurdish.” – School teacher in Turkey

“Listen, she’s not one of us.” – Christian radio host

In early 1919, what was to become the country of Turkey was prostrate, the middle of a defeated Ottoman Empire, partitioned and occupied by the victorious Allies.

Just four years later, in October 1923, Mustafa Kemal, who had organized and led an armed insurgency and nationalist movement against the Allies and their puppet Sultanate, repelling French, Greek, and British troops, was able to declare the independence of a new nation whose sovereignty was shortly recognized by the rest of the world.

Kemal was far more than a military leader. He was a true nationalist, and he realized that what was now the Republic of Turkey had to catch up. Education, the suffrage of women, even the alphabet became modernized and westernized under Kemal’s leadership.

Which seems a pretty glib way to summarize the career of someone who spent his life negotiating political and existential hazards to lead millions of people with diverse interests through traumatic change.

T. E. Lawrence, another larger-than-life leader of disparate peoples, wrote:

“All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dreams with open eyes, to make it possible. This I did.”

Indeed.

Lawrence and Kemal each overcame fractious petty tribalisms with the only weapon available: a much larger tribalism, nationalism. The tragedy for Lawrence was that it was a lie. Kemal’s accomplishment still lives.

Not surprisingly, Kemal’s nationalism did not enchant everyone. The abortive Sheikh Said Rebellion began as a conservative religious backlash against westernization, and became the first shot fired in the long and often violent movement of Kurdish separatism.

Separatist movements can be every bit as powerful as nationalist, and those who lead them understand two complementary weapons, both essential: something to mark a common identity (often race, ethnicity, or religion), and something to mark injustice at the hands of a common enemy. Anthropologists have a clumsy term, schismogensis, to describe (among other things) what skillful movement leaders have long understood: the endless tit-for-tat, that one side reacts in a way that goads the other to react ever more aggressively, ad infinitum. You can start a war in this way, make a new nation, or destroy one. Sheikh Said was hanged, and this was not forgotten. Kurdish separatism remains a belief and a movement to this day.

This is why “The End of History”, as predicted by Francis Fukuyama in his eponymous book, was just a bit premature:

“What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind’s ideological evolution…”

A comforting thought, but there are surely people with other plans, and always will be, and therefore it is a dangerously delusional thought.

Tanya Marie Luhrmann, a professor of anthropology, recently published a column describing some of her experiences as a religious skeptic among the openly religious, and she concludes with a predictable piece of advice for us all, as well as something a bit more intriguing.

The predictable advice? “We need to recognize something of what we share, and…keep the conversation going…” It’s another comforting thought, perhaps a peace offering to movement footsoldiers of one organized religion or another, but will just as predictably be rejected by any movement leader as counterproductive, perhaps even held aloft to demonstrate weakness and uncertainty among the infidels.

Here is the intriguing bit: “Good marriages work because couples learn to repair, rather than escalate, their conflicts.” This is in fact an element of strategy straight from the playbooks of the most successful nationalists, the Kemals and Titos of the world (see The Politics of Tinder). No nation is without its fault lines, some potentially lethal, and the effective leader is part healer, a constant job requiring tireless energy.

But there is something deeper here. Perhaps “good marriages work” because couples repair their conflicts, but on its face this is nothing more than tautology. A marriage that works is one that works. But why? Why does one couple repair its conflicts while the next self-destructs in an escalating chain of schismogenesis?

The deeper answer is that successful partners operate on the belief that they need each other in some way, and it is this need that moderates emotions that, left to themselves, keep the conflict inflamed and growing – moderates them enough to permit the operation of thought and dialog and compromise.

In the larger setting, this is what a successful leader does. It’s why the role of leadership is so often dangerous and uncertain. Kemal was the subject of religious fatwah and sentenced to death in absentia. And leadership that attempts to heal has no assurance of success. Lawrence managed with a lie that he probably knew was a lie, resulting in the cauldron known as the Middle East today. There may in the end be no convincing different partners, or different factions, that they need each other.

Luhrmann concludes her column with, “If we can’t, we’re in real trouble.” She’s talking about religion and marriage and other social topics, but the words apply to nations and leaders as well.

Keynes and David Brooks

“Now, of course, liberals have always believed in Keynesian countercyclical deficit spending.” – David Brooks, Editor at The Weekly Standard, The Progressive Shift, NYT, March 18, 2013

“We are all Keynesians now.” – Milton Friedman, author of “Free to Choose”, December 1965

“I am now a Keynesian in economics.” – Richard Nixon, U.S. President, August 1971

(And if political actions speak louder than words, there is the cavalier treatment of federal deficits in the administrations of Ronald Reagan and George W. Bush, against the fiscal conservatism of Bill Clinton.)

So, what is “Keynesian economics” all about?

The General Theory was about “Employment, Interest, and Money”, and how they interact in the real world of the modern capitalist economy.

According to Mr. Brooks, it’s about “countercyclical deficit spending”, i.e. government spending to boost the economy during a recession.

President Nixon had a characteristically subtler view. He made his statement when announcing the removal of the last vestige of the “gold exchange standard”, in response to a run on gold instigated by Charles de Gaulle, ever the French nationalist, who schemed to reduce the global influence of the U.S. and its dollar. Nixon realized his government could never hold enough gold to back a reserve currency that denominated trade around the world, and side-stepped the problem with a fait accompli. The result was the system of floating exchange rates we have today, not to mention the practical end of de Gaulle’s dreams of national greatness.

Sometimes the phrase “Ricardian equivalence” is bandied when asserting that government spending merely displaces private spending and so accomplishes zero stimulus, and is less efficient to boot. Apparently, invoking the name of an 18th century economist is intended to add weight to the argument, but it strikes me as a strawman. (The point of the argument, that is. Not David Ricardo.)

The serious arguments in favor of more spending assert that the economy is still held back by a lack of private demand. On the surface this might seem plausible, especially if the overhang of non-government debt accumulated during the Bush years is still a factor in restraining growth. But if so, there should be a measurable difference between what the economy could be producing right now, and what it actually is. In other words, an ‘output gap’, signifying underutilized capital and labor.

Using ‘potential GDP’ data from the CBO, and actual GDP from the BEA, the output gap was essentially zero in 2007. It rose to a trillion dollars in 2009. This makes sense, given the $500 billion drop in measured GDP over that time, as well as the $500 billion increase in potential output as the working-age population grew, technology advanced, and so on.

Since the recovery began, the gap has fallen, but only to $800 billion or so, and this has remained fairly flat for a year or two. So, roughly speaking, the economy has recovered by 20%, and this seems to jibe with the employment numbers. But it has a long way to go, and without much momentum.

The ‘Keynesians’ might have a point, then. Where the economy has unutilized capacity, it ought to be possible to utilize some of it without crowding out private spending. This is of interest not only to relieve present-day economic distress, but also to put the compounding of growth on a more favorable track for the long term.

What gives us pause, though, are the already high levels of US debt. What of the risk that additional hundreds of billions in public borrowing may force tax rises in the future that will not only be unpopular but will themselves constrain growth?

One answer might be that, assuming the economy does tack up its slack, the Fed will at some point begin to worry about having to moderate inflationary pressure. Raising interest rates is the usual approach, along with selling treasuries to sop up liquidity. At the same time, however, when the economy is heating up enough that we worry about inflation, it isn’t unreasonable to think that measured tax increases (or at least eliminating tax expenditures) might be very timely. In fact, to a ‘classic Keynesian’ (if it’s not too much an absurdity to use ‘classic’ in reference to as unconventional a character as Keynes), fiscal policy should be counter-cyclical. The time for public austerity is arguably when the private sector has become ‘irrationally exuberant’, not when it’s in the doldrums.

But there is also a risk in doing nothing, not to mention piling public austerity on top of private. Underutilized capacity does not just sit unused waiting for better times. Not indefinitely. Skills are lost with age and retirement. Proficiency deteriorates with idleness. Capital is consumed through obsolescence and lack of maintenance. Nothing lasts forever, and what is set aside today may no longer be available later. In the language of business, if we do nothing now we may just have to write it all off as a loss.

That’s a pretty ominous risk in itself.

The Killer Instinct

I have been working with a certain company for nearly two years, trying to help them commercialize a technology acquisition. The product was released six months ago. The firm has yet to make its first sale.

It’s true the product is not simple to sell. The market consists of old-line telecommunications carriers whose problems – and opportunities – are quite complex, rooted in the history of their networks, and dependant on many things being brought into alignment. But that’s just the kind of market it is. Big, and mature.

This is a firm that got where it is today by marketing innovation. And it hasn’t done badly. But growth has stopped, and there have been painful reverses.

The employees are not any less innovative than they were in years gone by. In fact, they regularly dream up more innovations than the market seems willing to buy. Their response to this has been to work even harder at inventing new ones.

Management cultivates an environment very conducive to innovation. Technical prowess is highly prized. Engineers freely share ideas. Managers remain largely in the background, particularly senior ones, except when providing encouragement. Employee retention is a source of pride, and promotion is from within.

Yet in many ways the firm seems lost. The technical people are naturally drawn to exciting new concepts, but their salaries are mostly paid for by the less glamorous traditional business segments. Being less interesting, these segments receive much  less attention, and the people trying to maintain them little direction - other than standard corporate policy.

If this firm in fact fails, or continues its slow decline, it will be due to a very simple reason: the utter lack of a real business strategy.

There is a time in the early stages of a market or industry when innovation is rewarded, often and richly, when everyone is experimenting and there are no established rules. It’s a time when the most exciting stories are made, maybe a time of gold strikes, oil strikes, IPOs, or acquisitions. Think of Bell and Edison and Lindbergh, Jobs and Gates, even the insufferable Zuckerberg.

But markets commodify. Players become established. Innovation slows. Change is resisted. Because the industry has been successful and everyone knows what they’re doing. The barriers to entry are high, and opportunities for successful disruption fewer and farther between. It’s what a mature business feels like. Not thrills and triumph, but routine. Think of Detroit before the Japanese invasion. Think of Intel.

And yet…

Challengers appear. Maneuvering and jockeying for position continue, and the battle for a breakthrough goes on. But in a very different way.

A mature market or industry is like a complex puzzle. From a distance, there appears to be little room for maneuver. All the pieces fit nicely, the relationships are established, the puzzle is complete.

Closer up, though, there are gaps between the pieces. Something can be shifted, and that might allow something else to move, and then something else, and so on, until there is room for a new piece, maybe at the expense of some of the old ones.

This takes strategy.

The job of the strategist is to figure out how to rearrange the puzzle, and the first step is to spot the opportunity that can be attacked with the particular strengths and assets of the firm, or those it can reasonably acquire.

An objective is plausibly identified and its value assessed, and now a plan has to be worked out for how to get there. What needs to be done. What are all the steps in between. Who is going to do what, when, where, how, and with what resources. How will the whole effort be coordinated and monitored. What are the risks, what could be their impact, and how should the firm respond.

A market strategist develops a deep understanding of potential buyers, identifies the potential for change (or continued survival), analyzes what the firm might deliver and when, and synthesizes a prospective set of products or changes and a business plan. An operating strategist understands the demands on the firm, the business objectives, the resources needed and available, and works out a plan for financing and managing those resources and the risks. And so on.

This is strategy. Don’t confuse it with ‘vision’ or ‘policy’. Strategy is less abstract and far more mundane. And harder.

It’s why the jobs of senior  managers are difficult ones – or should be.

Strategy is obviously not peculiar to business. There is probably no market so mature and competitive, and yet so changeable, as retail politics, and not surprisingly accomplished political strategists are highly prized by the parties, perhaps more so than candidates. Successful investment banks are brilliant at planting their flags in pots of money no one else could reach. Generals strategize to win wars, or else lose them.

Yet business seems to have its own special capacity for wishful thinking. Perhaps this is because approaching defeat is so seldom heralded by loud screams or violent noise, or possibly because the rules of limited liability keep managers from suffering the fate often visited upon losing generals. The prospect of the gibbet must certainly focus the mind. When your chief executive is granted a handsome golden parachute, you should probably feel much the same as you would if the airline supplied parachutes to the crew on your next flight.

The most important qualification for a successful business strategist is a keen instinct for the jugular. It becomes the job of the managing directors to ensure this instinct is employed in the right service, outward rather than inward, and then let the battle begin.

Politics, Tribes, and Stupid Words

I often like to say that politics is the art of marrying public ideology to private agendas. Many find this overly cynical. After all, most people seem to have political opinions, often very strong ones at that, without any private agenda at all. Sometimes this is true even among the political class. No one should doubt that Roger Ailes truly despises liberals, and did so long before he built Fox News into a conservative powerhouse and made millions in the process.

Opinions, political and otherwise, are rarely the result of research and reflection. That is undoubtedly why they so seldom change. Everyone seems to have a narrative of how the world works, invariably bolstered by experience. Some people may mellow with age, or with greater security. Others are what they are, and always will be, only more so with passing years.

Certain endeavors, such as science and engineering, are about ‘what’. Politics is about ‘who’. More specifically, it’s about who is on our side, who constitutes our tribe, and who is against us. Conservatives see their enemies as liberals who tax and spend and take their guns away. Liberals see the wealthy as coldly united in taking advantage of everyone else, and other conservatives as duped by demagoguery over guns and gay marriage into voting against their own interests.

Before you can have common enemies you must have a tribe, and this is why politics is personal. We automatically identify preferences and traits in people we are comfortable with, and equally in people who disturb us. If your iPod is stuffed with hip-hop, there will very likely be a large gulf between you and devotees of the symphony.

Tribes do not have to be hard and fast to be real. If you make a lot of money as a business owner, chances are you socialize mainly with people who are not your employees. But your employees will likely coalesce into their own varying social groups. A small group of women from the assembly shop will probably bond much more easily than a larger coed group ever could. Tribes of football fans seem to find a great deal to get emotional over that strikes most other people as completely pointless.

The heated public debate surrounding ‘entitlements’ is filled with facts and figures and projections, and yet very few people are ever truly animated over data. Probably not even actuaries. The heat comes from something else.

Last week I pointed out that we are a society of two-earner households (and sometimes more), and entitlements are the (admittedly flawed) social insurance that makes that possible. But entitlements disproportionately benefit the poor, and this rankles many in the tribes of the quite well-off with vivid images of no-earner households.

It isn’t hard to see why. One can find (or imagine) many examples of people who are reasonably content in conditions that others would find intolerable, say a middle-class teenager sprawled in a bedroom that would be immediately sealed and condemned by OSHA, were an inspector to stumble upon it, or the local health department. Or a strapping young man living off his girlfriend’s pittance of a wage. Or an ageless vagrant snuggling all night in a filthy corner of an alley with a bottle of something indeterminate but alcoholic. Why not someone perfectly employable, if only at minimum wage, spending her days vegetating comfortably in front of a television set purchased with her welfare check? How many of the ‘down-trodden’, one might ask, remain that way out of acquiescence?

Of course, where one tribe sees acquiescence, another sees defeat. It’s easy to imagine the workings of a market economy relentlessly separating the able from the less adept, the energetic from the ill, the naively honest and caring from the serenely unscrupulous, and tossing those of lesser pecuniary accomplishments onto the scrap heap, to rot.

Human beings, and some other mammals, sometimes have a way of dealing with problems that is shockingly counterintuitive:

There seems to be a very human trait, when faced with overwhelming adversity, to feel abused, misunderstood, or just plain cursed. To lash out, and then close up and shut down. To lay oneself down and wait to die. It’s so deeply ingrained that it must be a product of evolution. Maybe as a signal to the group of danger. Maybe to conserve energy, until the storm that is outside your control passes.

(The Blind General)

Nearly twenty years ago these opposing tribal views converged into a battle over welfare, with the result that a very complex politician by the name of William Jefferson Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, otherwise known as Welfare Reform. And it was a battle. Three senior officials of the Clinton administration resigned over it.

The law ended Aid for Families with Dependent Children, and created Temporary Assistance to Needy families, then tagged as Workfare. It’s effects were doubtlessly painful for many, perhaps sometimes unjustly. Yet they also provided some vindication for the conservative view.

Data from the St. Louis Federal Reserve.
Clink to enlarge.

(You can open a clearer version of this chart in another window. Welfare recipients were, and are, divided approximately evenly among white, African-American, and Hispanic. The selection of data was made according to what was readily available.)

• Black line – The percentage of the labor force represented by women.
• Blue line – The labor force participation rate of all women 20 years and older.
• Red line – The labor force participation rate of African-American women 20 years and older.

From the end of the Second World War, American women made up a larger and larger portion of the labor force (a source of tribal – er, cultural – friction well into the ’70s and ’80s), until men and women were working in approximately equal numbers. But the labor force participation of African-American women – already high – ramped up even further with the elimination of AFDC and the introduction of TANF. A tantalizingly similar pattern seems to emerge in the labor force participation of all Americans over 25 years of age but with less than a high school diploma (the lower purple line), who were presumably over-represented on the welfare rolls.

In contrast, the upper pink line shows an opposite trend for Americans over 25 with at least some college, and this contrast tends to bolster the view that  it was ‘Workfare’ that was at least partially successful in achieving it’s stated purpose of getting welfare recipients, largely single mothers, off the rolls and into the workforce - and some of their dependent children as well, although it is true the law probably forced many of these to give up on school.

For liberals, the law’s apparent effects on rates of poverty, even among minor children, are the most confounding. There weren’t any. The rates had begun to trend downward well before the law was enacted, almost certainly the result of the Clinton economic expansion, and continued that way for some years after TANF went into effect. Poverty has risen since the ’00s, as work at an hourly wage has generally become less and less remunerative, but that is another problem altogether.

The ‘A’ in TANF stands for ‘Assistance’, and this came in the form of things like cash and vouchers, childcare, transportation, subsidies to employers, training, and tax credits. By all accounts, the assistance (albeit “Temporary”) was, and is, crucial, that stopping the welfare checks might not by itself have done much to put people to work.

One lesson from this is that if  you pay people not to work, even a pittance, a number will take you up on it. Another is that many people, if perhaps not all, stuck in seemingly intractable life situations, can be helped from government support, and even if their personal lives don’t get any easier the evidence suggests their children often end  up on a better path. (For example, this article from USA Today.)

But perhaps the larger lesson is that the word ‘entitlement’ is a stupid one, probably a vestige of distinguishing programs requiring specific appropriation from those based instead on eligibility. We need to understand these things as insurance, for society as well as individuals, and debate them accordingly.