Several events in the last few years - including the election of Barack Obama as US President, the rise of the Tea Party movement, and the SEC charges against Goldman Sachs - have convinced me that there is a profound changing of the order underway in US society. We are seeing the emergence of what, for lack of a better term, I will call a New Establishment.
The existence of something like the establishment is a quaint kind of notion, seemingly a remnant from a far away time. I put together my own definition, based on Wikipedia’s definition of the term:
“The Establishment refers to the ruling group that defines the conventional social, political and economic principles of a society. Its members do not just represent the centers of official power - though they are certainly part of it - but rather the whole matrix of official and social relations within which power is exercised. Most stable communities of social animals, including humans, have such a visible or invisible ruling group.”
Over the centuries, members of the establishment have come from various centers of power in society, including the church, nobility, feudal lords, the upper classes, the military, politicians, industrialists, financiers and media figures. In democratic countries, no one group can be said to rule the establishment, which typically represents different segments of society.
Not all groups are equally represented, and some segments feel left out altogether. To better appreciate the value people place in being part of the establishment, just consider the fierce social, political and at times armed battles that have been fought through the ages between the groups in control, and those on the outside trying to break in.
Major establishment transitions are particularly tumultuous, as was the case with the sixties in the US and other countries around the world. Societal and cultural battles were fought in a number of critical areas, including civil rights, feminism and the sexual revolution. These battles were fought in the shadows of the Vietnam War, with one side shouting, “Make love, not war,” and the other, “America, love it or leave it.”
Most people will agree that post-sixties America was quite different from the America of the 1950s. The country’s culture started to radically change, even though many of the changes unleashed in the sixties would play out over the next few decades. So did the composition, values and responsibilities of the country’s establishment as newly empowered minorities and women started to join the centers of power; young people embraced sex, drugs and rock and roll to the dismay of their elders; and government, business and other institutions were held accountable for practices like lying and discrimination that they could more easily get away with in the past.
We are now going through another such major transition. Once more, the composition, values and responsibilities of the country’s centers of power are changing with the emergence of a New Establishment. I believe that these battles are now being played out on three main fronts: diversity and multiculturalism; competitiveness and education; and business and social responsibility. Let me say a few words about each.
Diversity and multiculturalism: The Composition of the New Establishment
From its inception, the US has been a diverse, multicultural society of immigrants. We have long celebrated our melting pot nature as one of the country’s major strengths.
But through the years, it has also been a big source of conflict between those already here, and the new groups that continue to arrive to our shores. In the19th century, for example, the largely Protestant populations of the US were appalled at the Catholic immigrants who were coming over from Ireland, Italy, Germany and other European countries. In the 1840s and 1850s, the Know Nothing movement feared that the country was being overrun by these Catholic immigrants who were regarded as hostile to US values, and whose allegiance would be to the Pope in Rome, not to America.
At present, US demographics are undergoing very rapid changes:
“Currently, population growth is fastest among minorities as a whole, and according to the Census Bureau's estimation for 2005, 45% of American children under the age of 5 belonged to minority groups. . . Immigrants and their U.S.-born descendants are expected to provide most of the U.S. population gains in the decades ahead. Since the liberalization of immigration policy in 1965, the number of first-generation immigrants living in the United States has quadrupled, from 9.6 million in 1970 to about 38 million in 2007. Almost 97% of residents of the 10 largest American cities in 1900 were non-Hispanic whites. In 2006, non-Hispanic whites were the minority in thirty-five of the fifty largest cities.”
Multiculturalism and diversity apply not just to immigration and demographics, but to inclusion in the establishment or centers of power in the country. Continuing the civil rights and feminist trends of the sixties, previously disenfranchised groups are no longer willing to stand by while others make important decisions that affect their lives, and those of their families and communities. More than ever before, they now demand a seat at the table.
But not everyone is comfortable expanding the ruling groups and sharing power. I am not surprised that the start of the Tea Party movement coincides with the election of Barack Obama as US President. In many ways, the Tea Party has a common lineage with the Know Nothing and other nativist movements that sprout up in the US from time to time.
Surveys of Tea Party members show that they really don’t like President Obama. Eighty-eight percent disapprove of the way he is handling his job as President; 75 percent believe that he does not share the values most Americans are trying to live by; and 30 percent still believe that he was not born in the US, despite all the evidence to the contrary. They are committed to Take America Back.
Some Tea Party members may be true libertarians who believe in a minimal role for government and want to Take America Back from what they perceive as a growing government intrusion into their lives. But I believe that the vast majority of Tea Party members resent the educational, economic and political advances made by women, blacks, Hispanics and other minorities over the past few decades, so concretely symbolized by the election of Barack Obama. They want to Take America Back from these upstarts who are now members of the establishment, and with whom they now have to share power.
Many of us continue to believe that a major part of America’s global leadership is a result of its culture of diversity, where people and ideas from all over the world have been welcome to our shores as long as they are willing to work hard and contribute to our national goals, so well captured in Thomas Jefferson’s memorable phrase, “life, liberty and the pursuit of happiness”. But others have forgotten where they came from and want an America that only resembles people like them. This battle is once more being played out.
Competitiveness and education: the Values of the New Establishment
Everyone knows that we are living in an increasingly global, competitive world. In such a changing world, how can the US best preserve the leadership position it attained in the 20th century? What should be our attitude toward the powerful emerging economies, like China, India and Brazil, that are trying to significantly improve the standard of living of their large populations and are both US allies in many fronts, as well as economic competitors in others?
These are not easy questions. Let me discuss two major competing approaches, even though the reality is not quite so black and white.
At one end are those whose positions are guided by a strong belief in American Exceptionalism, that is, “the theory that the United States occupies a special niche among the nations of the world in terms of its national credo, historical evolution, political and religious institutions, and its being built by immigrants.”
The concept was first used by Alexis de Tocqueville in 1831 in Democracy in America. He believed that Americans felt singularly exceptional because it was the first modern democracy. Many factors contributed to this belief, including the country’s Puritanical origin, which emphasized that God selected the United States to serve as an example for the rest of the world. America’s geography, climate, and availability of natural resources have strongly added to the frontier mentality of Manifest Destiny, where everything is possible and there are few limits.
At the other end are those of us who believe that the US attained its position of leadership with a culture of hard work, fair competition and open markets; through innovation and entrepreneurship; a commitment to universal education, world class research and leading edge technologies; and by attracting and nurturing the best possible talent from all over the world. We cannot look to American Exceptionalism or Manifest Destiny to help us in the 21st century competitive battles ahead. The same factors that made it possible for the US to attain its present economic, scientific and political leadership need to be re-examined and turbocharged for the tough competition ahead.
The conflict between these two approaches can be seen on a variety of fronts, such as free trade versus protectionism and control of the education curriculum. Look at the conflicts, for example, over the teaching of evolution versus creationism in public school science classes. Regardless of your religious beliefs, this feels like an artificial conflict given the urgency of educating good scientists and engineers in order to be in fighting shape for the global economic competition we will encounter.
It is telling that many of those who strongly dislike President Obama dismiss his educational and professional achievements as elitism. Instead of celebrating America’s wonderful meritocracy, wherein individual achievement is based on demonstrated talent, ability and hard work, they seem to be suspicious of such people. It is ironic that a time when the rest of the world is buying into America’s ideals of education, hard work and open opportunities, a major segment of our own country seems to be moving away from these ideals.
Business and Society: the Responsibilities of the New Establishment
While the first two battlegrounds can be viewed as a continuation of the sixties culture wars re-interpreted in a Blue State - Red State framework, this last one is somewhat different. This battle has to do with the nature of capitalism in our society; the checks and balances between free markets and government regulation; and arguably most important, the societal responsibilities we can expect of powerful and influential institutions.
Just about all affluent economies in the world practice a hybrid form of capitalism. Few advocate the extremes of state-directed socialism at one end, or laissez-faire capitalism at the other. Most reasonable people are working along a wide spectrum with free markets at its center. The key question then is to find the right checks and balances between letting markets perform their magic on their own, and intervening when the interests of the larger society require it, so we can end up with a more humane and sustainable economy.
But this is much easier said than done. As healthcare transformation, financial reform and other major political debates have recently shown, the country is in the middle of major ideological battles over these issues.
Over the past three decades, the mood in the US has been decidedly anti-government. Politicians, including some at the highest level, have run for office by putting down the very government they want to be part of, perhaps best exemplified by Ronald Reagan’s famous 1981 phrase, “Government is not the solution to our problem; government is the problem.”
For years, a number of top economists, including former Federal Reserve Chairman Alan Greenspan, embraced this anti-government ideology, assuming that there was something new out there that would enable free markets to operate smoothly and self-correct as needed with minimal oversight. They believed that derivatives and other financial instruments were enough to distribute risks, thus lessening the need for regulating the increasingly complex financial markets.
Others strongly disagreed with these views, such as Harvard economics professor and 1998 Nobel Prize winner Amartya Sen. In an excellent 2009 FT opinion piece, he argued that what we had in fact distributed were obligations and responsibilities, not risk:
“There were, in fact, very good reasons for mistrust and the breakdown of assurance that contributed to the crisis today. The obligations and responsibilities associated with transactions have in recent years become much harder to trace thanks to the rapid development of secondary markets involving derivatives and other financial instruments . . . A subprime lender who misled a borrower into taking unwise risks could pass off the financial instruments to other parties remote from the original transaction. The need for supervision and regulation has become much stronger over recent years. And yet the supervisory role of the government in the US in particular has been, over the same period, sharply curtailed, fed by an increasing belief in the self-regulatory nature of the market economy. Precisely as the need for state surveillance has grown, the provision of the needed supervision has shrunk.”
I think that the continuing global financial crisis has now put an end to the ideological fantasy that highly complex markets can effectively function with minimal government oversight.
But given the increasing complexity and interdependence of the world around us, what kind of societal responsibility should we expect from business, especially from large global companies whose actions can have a profound impact on individuals, communities and whole nations? While regulators can serve as reasonable checks on the actions of such companies, there is no way that regulators on their own can possibly police all their actions, especially if the companies go out of their way to obfuscate their behavior. Complex societies and economies do not function efficiently without mutual trust and confidence. In a capitalist system, mistrust and lack of confidence in others have far-reaching consequences.
When looked at in this context, the SEC charges against Goldman Sachs are quite serious from a societal point of view, even if it is ultimately decided their actions were not illegal. We should all expect that highly respected and influential companies like Goldman Sachs will behave in an honorable manner. It is fine to try to make as much money as possible, but companies, especially very powerful ones, should only do so while respecting the trust and confidence of clients, governments and society at large. Caveat emptor - that is, let the buyer beware - is no excuse even when dealing with large clients who should have known better. Once you start on that slippery slope, where do you stop?
For individuals as well as companies, being part of the establishment is a privilege. But along with that privilege come major responsibilities. Regardless of the composition, values and responsibilities of a ruling group in any given era of history, if you are part of that group, you must do more than watch over your personal interests. You will also be held accountable for those of your community, your business and industry, and the greater good of society.