Twenty-First Century Limited

The popularity of the idea that we have arrived at the “End of History” coincides strangely with the popularity of its direct opposite—the view that a wholly new and unsettling era has opened. For forty-five years many Europeans felt geographically, culturally, militarily, and economically trapped between the two competing superpowers. Now we seem to have a tripolar world, anchored on the US, Japan, and the European Community. This is a world whose history is about to begin, and whose future is entirely unpredictable, at any rate by contemporary social science.

“Tripolarity” can be a slogan that spares us thought in much the same way as “the end of history,” however, and never more dangerously than if it suggests that the main parties to the new historical order understand their future roles, and are ready to play them. Recent events in fact suggest that our three leading actors are in considerable disarray. The US and Japan are just too engrossed with domestic problems to attend to anything else. But Europe is in disarray along several dimensions simultaneously; the European Economic Community has thirteen members, and this is visibly both too many and too few—Britain, Italy, Greece, and Portugal can’t keep up with the economic policies demanded by their membership of the common monetary system, while the struggling ex-comecon countries such as Hungary, Poland, Czechoslovakia, Rumania, and Bulgaria, which are infinitely less capable of full membership, nonetheless have to be brought into some association with the Community if they are ever to catch up. Every one of these relationships has its own complications, and while the problems of the pound and the lira are hardly in the same league as the social and political disintegration of the former Soviet bloc, British and Italian politicians might be forgiven for feeling that if the EC can’t cope with the former, it is unlikely to do better with the latter.

There are innumerable European institutions besides the EC; indeed, Europe has an “alphabet soup” of overlapping and competing organizations. The Council of Europe has existed since 1948 to promote democracy and human rights throughout Europe and it already embraces many more countries than the Economic Community—Poland, Hungary, Czechoslovakia are members, and Russia and Ukraine will probably join soon. On the security front, the Western European Union is as old as NATO; the Conference on Security and Cooperation in Europe is another umbrella that has now been opened to take in the former Soviet dependencies. But none of these organizations has been any use in meeting the military challenge of the civil wars in Bosnia and Croatia; none offers much prospect for doing better in Moldavia or Armenia, and none has helped to concentrate European efforts to relieve starvation in Somalia. They may do more for the political and legal education of the former Soviet dependencies, but whether in time to stem the disintegrating effects of economic and political disillusionment is another matter.

The concept of tripolarity is indeed more hope and expectation than description, a gesture toward the thought that Japan, the EC, and the US must take the economic, cultural, and strategic lead in their respective geographical regions, that economic growth in the developed world, and the sponsoring of growth—along with peace, democracy, and a respect for human rights—in the less developed world must depend on their efforts and their cooperation.

Not, to be sure, on their cooperation alone. These are capitalist economies whose health depends on the energy—what Keynes aptly labeled “animal spirits”—that they bring to the familiar tasks of inventing new products and stimulating a demand for them. They are competitors as well as cooperators. Contrary to Lester Thurow’s view in his recent book, Head to Head, this is generally all to the good. Just as a competitive market economy that keeps individual firms on their toes is the best way we know for generating resources for public purposes, international competition that keeps the major economies on their toes is as good a way as we can imagine of producing the resources for international public purposes—whether these are peace-keeping forces under a UN banner, global public works schemes to save the environment, or modest educational efforts to teach the elements of economic efficiency and political accountability to societies that have spent the postwar years neglecting them in the name of Marxist or nationalist fundamentalism. Just as competition in a single national economy constantly educates firms and consumers about products, techniques, costs, and markets, so it should internationally.

But here is the rub. We know that capitalism is vastly productive only when it is controlled by reasonably effective political arrangements. We know that governments are staffed by people whose conceptions of public policy, along with their willingness to govern uncorruptly and efficiently, are sustained by all sorts of local cultural and legal conditions. What we don’t know is what we need to know if we are to borrow intelligently from one another’s institutions and pass the knowledge on to the rest of the world. We don’t know whether one set of political and cultural arrangements is uniquely effective or how easily they can be transplanted—whether parliamentary systems work better than an American “separation of powers” system for instance, or whether it would be worth investing in an Ecole nationale d’administration in Washington, or indeed whether foreign revisions of such institutions can be successfully erected.

The evidence of the postwar years is that very different arrangements can work equally well, but also that they may work well for a while but then eventually stagnate unpredictably—Sweden, for instance, combined high growth rates, low unemployment, and an elaborate and expensive welfare state for many years, and now seems to have lost the knack of it, while the occasional heretical voice has already been heard to suggest that the Japanese economy is not merely faltering but may face deeper trouble. If the leaders of the tripolar world have something to teach everyone else—other than that communism, militarism, and the cruder sorts of nationalism are bad for your health, welfare, and human rights—what is it? How much do we know about what mixtures of culture, politics, and economics will prosper in the new world?

It’s easy to see what is at stake—what we would like the social sciences to tell us—by considering the way Americans so widely believe that in the near to medium term they face economic disaster because of the inadequacies of American education. Anyone working in the educational field in the contemporary US is aware that all is not well and that American public high schools, for example, produce on the whole a badly educated group of eighteen year olds. Even good schools are exceedingly bad at teaching foreign languages; even the best schools teach history and geography very poorly, and give little real understanding of the literature and culture of other societies. In mathematics, the best 5 percent of American high-school students learn calculus; but calculus is taught to the best 75 percent of Japanese students. The worst schools are simply nightmarish. Ought we not to spend whatever it takes to remedy this at once?

For all the gloom, the rottenness of American education seems (at any rate so far) to be less damaging than one might expect. Part of the reason seems to be that America’s universities are much better than its high schools, partly that Japanese universities do not make the same efforts as Japanese high schools, so that by the time the American young are twenty-five, those who have been through an advanced graduate education are formally better educated than their peers anywhere in the world, save for the traditional American deficiency in language and general cultural knowledge. The fact that over 40 percent of Ph.D.s in mathematics and engineering and around 30 percent of Ph.D.s in computer science and physical science are awarded to nonresident aliens suggests where the American advantage lies. And the proportion of Americans who go to colleges and universities is still unrivaled elsewhere.¹

Other possibilities might be considered. Perhaps the ill effects of poor secondary education have just been slow to show up; perhaps American college education has been so effective in encouraging the inventiveness of entrepreneurs that the educational deficiencies of much of the work force has to some degree been offset. Perhaps the American economy is elaborately divided internally, with a sophisticated, highly paid, intellectually demanding information-processing sector and a poorly paid, intellectually undemanding manual and service sector—the view that Robert B. Reich’s The Work of Nations puts forward. Whichever view we accept, the deficiencies of American education might not matter very much—in gross.

As a matter of distributive justice, they remain intolerable. The defects of public high-school education would matter very much to the manual working class no matter what their effect on the overall efficiency of the economy, because they would determine that in the global economy the most sophisticated production jobs will tend to go to Japan and Germany—while what British managers once called “low value-added metal bashing” would be carried on in the US and Britain, and otherwise in the third world. But the badness of the worst education would not necessarily matter to the economy overall, and particularly not to the better off. Nor would the traditional defects of the best American education. The deficiency in linguistic skills and general culture of managers, public servants, and political leaders might make for a rather coarse ruling elite, but it would be economically irrelevant.

This view is morally ugly, if only because it takes for granted an increasingly wide income and welfare gap between better and worse off. Its moral ugliness alone would not be enough to discredit it, however. More significantly, it seems unlikely that the US can allow itself the luxury of running that sort of economy very much longer, and that the deficiencies of both the best and the worst American education will matter increasingly. It is a commonplace that what makes modern economies tick is their “human capital”—a point made long ago by both J.S. Mill and Marx, but now coming increasingly to the fore. Human capital—the qualities of commitment, skill, adaptability, and so on that make one work force more productive than another—is very much man-made, or, to put it more elaborately, culturally produced. The tripolar world can only promote global economic sophistication if we can understand better than we do now how to foster the cultural capacities that support it. I do not mean that only one kind of culture can support a sophisticated economy—that is plainly false for we know that different cultures will do it differently. But some combinations of cultural characteristics will be possible and fruitful, some impossible, some possible and destructive, and it is increasingly important to know which is which. The importance of the influence of the political, legal, and social culture on the economy emerges particularly vividly when one considers the negative example of the baleful influence of a Leninist political culture on the economies of the former Communist bloc.

The lesson of the collapse of the Soviet bloc is not just that the one-party regime and the command economy can’t deliver the goods—as economists say, they gave the USSR the most impressive nineteenth-century industrial infrastructure in the world, seventy-five years too late—but it is at least that; and understanding why the disaster was so comprehensive is of more than intellectual interest. Whatever the case in pure economic theory, command economies really did suffer from the inability to secure and process information that writers like Friedrich von Hayek and Ludwig von Mises claimed was the Achilles heel of socialism. But an even more important feature of such systems was the moral rot that they engendered. The distortion of information was as extreme and as damaging as it was because too many people had perverse incentives to present misleading and inaccurate data, and too many had perverse incentives to pretend to believe what they knew to be entirely false.

In his book East European Alternatives, written just as communism was collapsing in his native Hungary, the social scientist Elemér Hankiss gave a deeply depressing and deeply convincing account of the way in which the corruption of a regime that claimed to “mobilize” resources had produced what Hankiss called “the demobilized society.” In the demobilized society corruption flourished; everyone was forced to make deals with employers and officials to achieve the least result; and distrust of anyone other than friends and family was rampant. The impact on economic modernization and growth hardly needs describing.

The alternative to the degeneration caused by the vain pursuit of the wholly managed society, in which innovation and inspiration is supposed to be provided by a cadre of Party enthusiasts, is not schematic laissez-faire capitalism. One of the innumerable problems in post-Communist Eastern Europe has been the inadequacy of the local understanding of the enormous role that the state must play even in a laissez-faire economy, as well as the limited initial understanding of such matters by Western economists who have gallantly been offering help.

The immense prestige in which economics is held in the American academy, together with the current contempt for sociology, has diverted the cleverest students of the social sciences away from institutional economics and into the theoretical analysis of elaborate financial matters where their mathematical skills have the freest play. Only when they encounter a really barren landscape in former Communist countries do they appreciate the extent to which they have taken for granted the existence of an efficient legal regime with the abilities to define and enforce property rights and contracts and also to supply individuals and enterprises with the legal means to create new transferable interests in the goods and services they propose to produce.

That is merely one part of a vast problem: imagine running an industry with managers who are entirely unfamiliar with the concept of depreciation, or who find it hard to understand how checkbooks work in a banking system. The Eastern European hope that “civil society” would emerge from beneath the stifling blanket of one-party politics is understandable—there was a wonderful uncrushed vitality in the opposition to communism—but it does leave many observers wondering how a state that has lost so much of its authority will be able to create the legal institutions on which the new world is to depend. The moral of the situation in the former Communist bloc is one that applies to the three partners in the new tripolar world system. There is a creative role for the state in the economy of the twenty-first century, but that role is both circumscribed by culture and facilitated by culture in ways that we find hard to describe, let alone to measure with any exactness. Three examples—concerning American industry, education, and health care—point the same moral about our need for social understanding that is sensitive to the interplay of culture and institutions.

The degree to which American industry currently is competitive or uncompetitive remains debatable. American automobiles are unloved by American consumers, but American airplanes still dominate the world market. The mass production of computer chips now lies largely in the hands of NEC Toshiba and Hitachi, but it is widely believed that the American firm Intel will wipe the floor with them during the next decade. American television manufacturing is a thing of the past, but Japanese television producers apparently also lose money on sales of television sets, and they remain in the business for the sake of the next generation of “high-definition TV” and the like. American industry is very good at turning out astonishingly cheap but simple products that never get onto a world market, partly because of transport costs, partly because consumer tastes preclude their doing so. American washing machines, for instance, are cheaper than anyone else’s, but are huge and clumsy, and not plausible items of export. The US can be a paradise for consumers with standard tastes, but it is not so clear that it is a paradise for producers of exportable products that will make money during the next century.

If it is hard to tell whether American commercial and industrial culture promotes efficiency better or worse than other cultures do, it is at any rate clear that American commercial and industrial culture is very different from that of Germany or Japan. I hesitate to say it is unlike that of the EC as a whole, because Britain is (though not in the ways that led General de Gaulle to pronounce his successive “nons” back in the 1960s) something of a halfway case, right down to the features of its present recession. In contrast to the practice of many Japanese companies, American industry is run on nonconsensual principles in which the “us” and “them” line of demarcation between management and the work force is clear, and the conflict of interest between managers seeking returns for shareholders and workers seeking secure and well-paid employment is a simple fact of life. By the same token, the pay differentials between American managers and blue-collar workers are wider than anywhere else in the world, as are the levels of remuneration that CEOs feel entitled to. Donald Trump described some of the more spectacular buildings he owned as “trophies,” and one imagines that when the head of Coca-Cola takes home $86 million, that is similarly a “trophy” salary. It would certainly be hard to claim that it was a nicely calculated reflection of the value he adds to Coca-Cola’s business.

Paradoxically, American pay differentials are as wide as they are even though American industry supports more managers than its competitors. I do not know precisely how the figures are calculated, but it has been estimated that there are three times as many managers in proportion to the work force as in Japan and four times as many as in Finland.² Nor do the differentials reflect the fact that the American workers work short hours and at a low intensity. American working hours per year are only slightly lower than in Japan and a good deal higher than in Germany.

It is generally known that the US employs, or at any rate supports, far more lawyers than any other country on earth; on a per capita basis, the US supports one lawyer to 250 people, Japan, one lawyer to 7,500 people. Even if these estimates are exaggerated, the differences between the two cultures in this matter are clear. The interesting question is: what follows, if anything? One ought always to consider that perhaps nothing follows at all. There are many ways of doing business, many ways of handling relations between firms, between firms and customers or clients, between firms and governments, and so on; perhaps there is no reason to believe that any particular way is functionally more effective than any other.

This seems implausible, however, if only because the American public has been notably discontented with the behavior of the American political system and economy during the past several years. Even at the height of the Reagan boom, dissident voices pointed out that the benefits of prosperity were inequitably distributed; that financial services were promoted more than productive industry; that already rich persons in a good position to manipulate company finances for their own personal gain were creaming off resources that often were not, when taken, used for productive purposes. The incapacity of the economy to absorb all those who needed steady, reasonably well-paid employment was much commented on, as was rising crime, and the deteriorating condition of the schools. Where there was growth, it was chaotic and where there was not, as in the rustbelt, the results were appalling. Running an old-fashioned version of capitalism left much to be desired; even if it did not threaten immediate disaster.

The solutions proposed for this state of affairs vary widely. Some of the people who engineered the situation complained of think it was a great success, and all its costs were necessary costs. Even if we suppose that the economic policies of the Reagan years were on balance a success—a moral and political judgment on which it would be impossible to secure agreement—the question would remain whether they could have been carried out at lower cost. It would be impossible to get an agreement on this question as well, not because it requires a moral or political judgment, but because we do not know whether there are cultural, political, and other social obstacles to the institutional and behavioral changes that might have produced better results. Could American investment bankers have been imaginative in conceiving new forms of financing without engaging in the excesses of the kind that sent Michael Milken to jail? Could the management of General Motors have been so imbued with an unselfish devotion to the corporation that its executives might have accepted lower salaries, imagined ways of restructuring the business that would result in fewer job losses, and conducted relations with stock-holders that kept them loyal while the firm rebuilt itself instead of trying to prop up the share price on a short-term basis?

Closely related questions can be raised about education. It is not a simple task to transplant other societies’ working practices and executive culture; nor is it absolutely impossible. But any discussion of the question should recognize that schools, universities, and particularly graduate professional schools do much to inculcate goals and standards of success, the images of a flourishing personal life and community that guide people’s actions.

One of the interesting, but faintly absurd, features of the present discontent with American education and the widespread hope that we might borrow what we need from Japan or Europe is that many of the educational methods applied in Asian elementary and junior schools were advocated in 1899 in John Dewey’s most famous book, The School and Society. But Dewey was usually, and inaccurately, accused by his critics of having corrupted American education by his advocacy of a secular, practical, child-centered education, thus slighting eternal religious values, high culture, and the virtues of hierarchy. His admirers have equally overstated his impact on American practice, but naturally think it was all for the best. Dewey himself thought that teacher training institutions often paid lip service to his ideas, but that he had made very little difference to the practice of elementary schools. He denied that his views were “child-centered”—the progressive educators’ view of a “child-centered” education, he thought, sometimes suggested that there was no need for teachers at all, and this he thought quite mad.

What his views really were, he insisted, were practice-based; learning was both an activity in its own right and sprang most naturally out of practical activities. At its simplest, this amounted to an appeal to teach chemistry by first letting young children learn to cook, and to teach geometry by first letting them build boxes to hold their pens and pencils. As it got increasingly complicated, it meant that teachers should always stress applications rather than rote-learned principles. Since practice was essentially social, learning ought always to be a group activity; instead of holding children to assessment by individual examinations that set child against child, schools should encourage them to engage in collective projects where each had to contribute something to the group’s achievements where knowledge was pooled, and a variety of skills was drawn on to get a project accomplished. Such anecdotal evidence as there is suggests that one reason why Asian students in American universities do strikingly better in difficult mathematics courses than most Caucasian or African American students is that they work together on problems, pooling skills and working their way from easier to harder problems with much less strain on the individual student than occurs when students study alone.

What is curious is this. Dewey is widely thought to be the archetypical American thinker; commentators on his work commonly suggest that his philosophy is, so to speak, the American heartland thinking aloud. He did not really think that, though he did think that his ideas were implicit in the consciousness of any “modern” society, and that the US was in some ways the archetypical modern society. Yet any claim that one could easily make Dewey’s ideas the working theory of American elementary and subsequent education would simply be false. In spite of the lip service paid to them for the past sixty years, they do not inform current practice. Presumably there is something about American culture that explains why not—though no one has plausibly suggested what it is. It is not enough to talk hopefully of “individualism.” Were individualism a sufficiently precise concept, it might be argued that the characteristic American vice is to think of the individual knower, not of knowledge as a collective resource; to fixate on individual creativity as the intellectual ideal; to think of the classroom as the individual teacher’s property, not as one more place in which children grow up. Yet none of these things is entirely true, and to an English observer, America often seems astonishingly group-minded, and the local school culture can be deeply unsympathetic to the child who is out of step. It is, after all, the country in which the concept of “other-directedness” took hold.

Similar issues arise in the current debates over health care. In several respects, the US runs a welfare state like almost any other welfare state. This is especially true for the old-age pensions that consume most of welfare state spending that is not for health; Americans have the same sort of not-quite-contributory old-age insurance schemes that one finds in Britain and most European countries. Where the US is odd is in health care for the non-elderly. No other developed country leaves such a large proportion of its young and working-age population without adequate health insurance.

No other country, moreover, wastes so much money on providing unnecessary health care; and no other country wastes so much money on administrative costs. (Those are the costs that are counted; in view of the way the American system requires the patient, who does not charge for his or her time, to fill out endless forms, the true cost of the administrative overhead is even greater than appears in the accounts.) For a far higher expenditure in absolute terms, and a greater proportionate share of GNP than any other country in the world, the US provides very poor health care or none at all to about 15 percent of its population; at the other end of the spectrum, a well-to-do person over fifty-five can expect better care than any comparable person in the world. The inefficiency of the system is astonishing. To give poor medical care to mothers before and during the birth of children, as too often happens, is a terrible failure of investment in human capital. One of the absurdities of health insurance run for profit is that job mobility decreases as people are reluctant to work for companies that don’t provide benefits; and pervasive anxiety about health care and its cost is a great source of unhappiness.

Americans do not like their health care system. When polled, they say they much prefer the Canadian national health service. Yet it is extraordinarily difficult to change over to anything resembling the Canadian system. Is this a matter of American culture, or is it simply that the beneficiaries of the present system are well placed to block change? The Princeton health economist Uwe Reinhardt insists that the professions and industries that benefit from the current system are the problem. On this matter Americans and Canadians tend to think identically, he argues, but the Canadian political system offers fewer opportunities for veto groups such as doctors and large corporations to prevent dramatic changes in the system from occurring, and Canadian politicians are not dependent on PAC money in the way American politicians are. Most Canadian experts think this is only a small part of the answer; it is not negligible, but it makes as large a difference as it does only because the American political and economic culture has less social solidarity than the Canadian culture, and puts more emphasis on making contracts for services, and is less imbued with an image of the “caring state.”

In spite of the vast amount of research on political culture that has gone on since World War II it is astonishingly difficult to test any of these hypotheses empirically. There are good reasons why it is difficult—the popular view that social scientists are chronically idle and not very intelligent is not one. In the first place it is almost impossible to identify attitudes that one might think of as intrinsic to “being American” as opposed to being Japanese or Canadian or European—that is attitudes that are durable and constrain institutional change as distinguished from those that are simply responses to the local institutions. Many attitudes change quite swiftly when institutions change and many do not; few social scientists are such rationalists that they think most of our attitudes can be instantly changed, or such antirationalists that they think we are stuck with whatever social and cultural attitudes we have been socialized into by the age of twenty-five. But until we have a much surer grasp of cross-cultural political psychology than we currently do, it is impossible to say anything very reliable about how far each view is correct.

What might social scientists do? On my reading of the matter, they ought to promote what I would want to call multiculturalism if it weren’t that the term has been stolen for other purposes. That is, they ought to be readier than most of us usually are to try to answer large, messy questions about the interaction of cultural, political, and economic phenomena, globally as well as locally. The odds are that they will be wrong much of the time, but they will at any rate not be wholly irrelevant to the emerging world that their children will inhabit.

The three components of the tripolar world system each have strengths and weaknesses of a distinctive kind in fostering this kind of work. The US has a mass higher education system that reaches out to a higher percentage of the population than most other countries dream of. On the other hand its students are poorly educated, and American academic culture is in general insular—even though popular culture is multifaceted, vivid, and at the level of McDonald’s and Madonna highly exportable. Japan and Europe devote much more effort to the sort of linguistic and cultural formation that is needed, but the European universities currently have a small part in the political lives of their societies—they have not been central to the current debate over the future shape of Europe, for example—and the elite universities in Japan train only a small proportion of the appropriate age group. Again, the cultural and ethnic solidarity that has made it easier for Germany to develop the social market economy comes at a high price—German citizenship is largely a matter of blood not allegiance, and Japanese social cohesion appears to exact an equally high price.

Here the US has a real advantage; for all the horrors of racial inequality in this country the US has had two centuries of not unsuccessful practice in the art of combining ethnic diversity with political unity; it continues to absorb a remarkable mixture of immigrants and even its failures imply ambitions that few other societies have ever entertained. How much of this experience can be passed on to the Balkans, East Germany, or the fringes of the former Soviet Union is anybody’s guess. Even when it comes to shared intellectual assumptions, tripolar cooperation may be harder to achieve than the obvious coincidence of interests between the US, the EC, and Japan suggests it should be. Still, unless we aspire, as the great sociologists and anthropologists of the nineteenth century did, to the understanding of our brave new world that all this demands, we shall no more be masters of our fates in the next half century than we have been in the past half century.