Does focusing on failures in the "system" undermine... (Part 2 of 2)

Does focusing on failures in the "system" undermine the psychological basis for economic recovery?

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  • Jeff Madrick

    “The true grit of innovative democratic government determined to make all Americans equal defines the nation. We think too easily that true grit is only about individualism.”

    The development of government — more precisely, a sense of community obligation and possibility — is the best example of true grit in America. This, I grant, is not an easy case to make today. We require historical knowledge but also historical imagination to get at the truth, and the latter is more difficult to acquire than it may seem. We are too often defenseless against the onslaught of contemporary culture and myth. Movies romanticize outlaws, and some economists exaggerate the blessings of laissez-faire. These influence our sense of what the past must have been like.

    It is particularly difficult for a person to gain a sense of the concrete purposes and duties of government a century ago when government today, we believe, is so much more present in our lives, hidden behind seemingly monolithic buildings in our cities and grand neoclassical structures in Washington.

    But is it truly more present?

    True grit in America, I’d have to guess, is roughly equivalent in most Americans’ minds to “rugged individualism.” It is compelling to believe that going it alone against the forces of both nature and decadent civilization, epitomized by city life, made America great. Thus we adore the explorer and the cowboy, the entrepreneur and the thief, the lure of going west and the poisons of the stultifying east. Of thieves, we have a remarkable adoration. They are our mavericks. We are completely comfortable with Marlon Brando as a gallant mafia chieftain and Sterling Hayden as a corrupt police captain in the Godfather movies.

    But let us take one example of real “true grit” in American history: the role of American women in the Wyoming Territory. In the second half of the 1800s, the nation’s far west was being developed. In the mid-1800s, as Wyoming was carved out of other territories, women in particular demanded that schools be built for their children. They demanded law and order to make their town life wholesome and to protect their children, especially as itinerant railroad workers temporarily inhabited towns and took to heavy drinking in their few hours of leisure. It took true grit to settle these towns, and it was done through people getting together to form government. Women in Wyoming demanded and won the vote by 1869. They built their schools and hired lawmen. Some became justices of the peace and one or two even became sheriffs. Thus through government they built their lives, their families, and their dreams. Even in statehood the tradition continued; Wyoming elected America’s first female governor in 1924.

    Communities were built across America in much the same way, not always with women playing a leading part, but always by people getting together to form government to build roads, maintain law and order, protect commerce, and get their children educated. On the national stage, the same was true. We think of Thomas Jefferson as the nation’s great laissez-faire president. But foremost in Jefferson’s mind was making land readily available for Americans in an agricultural economy. He not only bought the Louisiana Territory from France despite intense political opposition — Alexander Hamilton thought it would be hard to control such an immense area — but he and other leaders, even before his presidency, demanded that land sales be regulated to keep prices cheap and limit corruption and over-speculation. On each grant there would also be a schoolhouse.

    Was government, even though small by modern standards, present in the lives of early Americans? Yes. They demanded it because they needed it to coordinate the many avenues of life, to provide law and its enforcement, to make investments in education and transport, and to make them secure.

    It took true grit to build the nation’s first canals, for example. It was accomplished by political leaders like DeWitt Clinton in New York City, who got local government to raise the money and initiate and oversee the projects. Thus, the Erie Canal made New York City a boom town.

    Imagine the effort required to build a free primary school system for America’s children. Political battles to keep education private were intense. Remarkable leaders, foremost among them Horace Mann of Massachusetts, fought hard to make education free and available to all. By 1850, America sent more school-age children to school than France or England, nourishing both its democracy and its economy.

    There are analogous examples of true grit in modern America. Racially integrating schools and other spheres of public life required the courage of a long list of African American and other activists, from Rosa Parks to Martin Luther King, Jr. Today, countless businesses pay $2 or $3 an hour for help, violating labor laws around the country. People with true grit are fighting these legal violations admirably. Gender discrimination requires battle after battle to minimize.

    Yes, true grit is of course about individual trials against the mob, against government, against religious persecution. It is about valor in war and it is about individual responsibility. But it is also importantly about forming communities of action to change society and protect rights. It is not about making life easy for people but about making opportunity available and inherent disadvantage obsolete.

    The true grit of innovative democratic government determined to make all Americans equal defines the nation. We think too easily that true grit is only about individualism. It is even more so about working together for a just, even vital cause. That is called government.


    Jeff Madrick is editor of Challenge magazine, senior fellow of the New School’s Schwartz Center for Economic Policy Analysis, and author most recently of The Case for Big Government (Princeton University Press).

  • Michael Novak

    “The entrepreneur is both an idealist and a realist. He or she would like to be loved, but most of all they want to create. Genuine appreciation from others warms up their willingness to bear the cold winds of reality.”

    People who are inventors, discoverers, and uncoverers of new ways are a different breed: overtime economic activists, creators of new wealth, launchers of small businesses (of which some become quite large).

    When such entrepreneurs look at economic realities, they see something quite different from what economists see. Economists measure the past; creators make new futures.

    Even when economists forecast the future, they must base their projections on accomplished fact, on things as they have been. Economic creators see things that do not yet exist. They anticipate new proximate possibilities and have the know-how to make nonexistent things come to be.

    What makes economic creators tick? What gets their juices flowing?

    Creators see reasons why things that aren’t yet can soon be. They are willing to risk their whole welfare — all their savings, most of their resources — in order to bring these practicable visions into existence.

    What gets their juices running is a dream of changing (if only by so little) the present direction of things. By their own creative and risk-taking actions they create goods and services that have not yet been brought to market. They imagine new realities that others do not yet see. Many entrepreneurs leave higher-paying, more secure jobs at major corporations for the pure joy of creating something new. Money is not usually their primary aim, but comes in second or third to enjoying freedom of action and practical invention.

    What about skeptics? Of these they meet plenty. “If it could be done, it would have been done already.” “You’re going to lose your shirt!” Behind almost all successful people there stands a loving, trusted mate who tells them they are wrong.

    Perhaps that is how people in business come to learn that, in the end, it all comes down to their individual unyielding will and their own thick skin.

    Determination, perseverance, and that wonderful American quality (and term) “stick-to-it-iveness”: these must be strong enough to endure opposition, even failures, and audacious enough to see in every failure a new creative possibility.

    Entrepreneurs are both idealists and realists. They would like to be loved, but most of all they want to create. Genuine appreciation from others warms up their willingness to bear the cold winds of reality. But they are fairly accustomed to following their own judgments, overcoming adversity, and trusting in their dreams.

    And yet. Their judgment about timing may be chilled by official hostility. Ignorant opposition arouses the creators’ well-practiced paranoia about the millions of ways in which what they are trying to do can fail. Official unfriendliness raises risks.

    Even so, opposition makes the competitive animal within them stir. Fierce opposition only hardens its feral will to prove to the opposition who is more in touch with reality.

    If stick-to-it-iveness is a wonderfully American word, there is also a four-letter Anglo-Saxon word for what it takes: grit. A lot of people in business get pushed back into corners. From there, curled like tigers, they eventually lunge forward.

    As I read the narrative our nation is now living through, the White House and its surrounding cast seem woefully ignorant about economic activists, ignorant, resentful, and seething with punitive desire.

    So there is some reason for concluding (even tentatively) that the reflexes of unchecked presidential power in Washington will blow through the nation like an ill wind. One senses in it a pestilential and destructive lust to destroy the entrepreneurial class, whose prestige and success they resent.

    Some leftists have expressed publicly the wish that the “rich” will be taken down a couple of pegs, so that the “poor” may be lifted up a few. Actually, there seems to be more passion in the fervor to bring down the rich than practicality about how to lift up the poor.

    Will economic activists react to this ill wind by hunching down and hibernating until the winter passes? Or will they flip the bird and give our new and inexperienced administration some lessons in reality?


    • There cannot be employees without employers, that is, creators, risk-takers, activists of a quite different sort than neighborhood organizers.
    • There cannot be profits without expanding, thriving businesses.
    • There cannot be growing government revenues unless businesses keep leaping into existence and putting out those cheering notices: Employees Wanted. 


    It is a small price to pay for a good society to experience in its midst growing numbers of ever wealthier, ever more successful creators of new wealth raising with themselves new employment. The poor can scarcely rise without growing numbers of the “rich.” Arithmetically, greater “disparities” of wealth are an unavoidable consequence. Ten percent of a $200,000 income amounts to $20,000, but 10 percent of a $20,000 income amounts to only $2,000.

    The more new wealth created, and the more payrolls mount, the more securely is the common good achieved. As Winston Churchill said, “The inherent vice of capitalism is the unequal sharing of blessings. The inherent blessing of socialism is the equal sharing of misery.”

    Mayor Michael Bloomberg of New York recently noted that the top 40,000 income earners in his city pay 50 percent of the city’s taxes. If even 10 percent of them (4,000) move to another state, the city’s shortfall in revenues will hurt a lot.


    • The “rich,” then, are the price that a city must pay if it wishes to make life better for all its citizens. Even the rich contribute to the common good. (“I’m shocked, shocked!”)
    • Economic creators prefer to be recognized as good and indispensable citizens. If you want fewer of them, show contempt for them.
    • Having more small businesses is the cheapest way to generate more jobs for the poor and middle class.



    Michael Novak is the George Frederick Jewett Scholar in Religion, Philosophy, and Public Policy at the American Enterprise Institute. His books include No One Sees God (Doubleday), Washington’s God (Basic Books), and The Universal Hunger for Liberty (Basic Books). 

  • Star Parker

    “Now, as companies get bailed out by taxpayers, and as a result we put these companies under bureaucratic oversight, executives will be focused on how to keep the bureaucrats happy rather than thinking about how to keep the marketplace and customers happy so that they can restore themselves quickly to real economic viability.”

    The impact of first impressions is well known. They say that you never get a second chance to make a first impression.

    I think it’s this reason that my feelings are as strong as they are about the destructiveness of the welfare state. It was really my first experience, my first impression if you will, with our country. I began my adult life in America on welfare. When I was on it, I knew it was a game. But I really did not appreciate the depth of its destructiveness until I got off it.

    Now I’m watching the same destructive paternalism of the welfare state take hold in mainstream America, and there is little doubt in my mind that welfare will do the same thing to corporate CEOs, to middle managers, and to homeowners with underwater mortgages as it did to poor black women. 

    During the recent uproar about executive compensation at companies that have received taxpayer bailouts, I couldn’t help but see the parallels to the bureaucratic oversight of women on welfare. The rules were “don’t save, don’t work, and don’t get married.” If you did any of these things — all healthy behaviors in normal life — you’d lose your welfare check.

    As result, women on welfare had little motivation to think about how to straighten out their lives. Their energy and creativity was aimed at how to satisfy welfare officers to keep approving their checks.

    Now, as companies get bailed out by taxpayers, and as a result we put these companies under bureaucratic oversight, executives will be focused on how to keep the bureaucrats happy rather than thinking about how to keep the marketplace and customers happy so that they can restore themselves quickly to real economic viability. Once cash flow originates from politicians and bureaucrats rather than from customers in a free market, behavior fundamentally changes.

    It is, in fact, the welfare state mentality that pushes government bailouts and safety nets to begin with. It’s in the nature and power of freedom and free markets that outcomes are unpredictable, and the only predictable is the unforeseen.

    And this is why no economic arrangement produces more creativity and prosperity than freedom. It allows individuals to take responsibility for their lives and to use their God-given creative faculties to see what no one else sees and do what no one else would do.

    I believe the economic key is private property. Private property keeps your neighbor and the government out of your personal affairs. This means individuals take responsibilities, take risks, sometimes succeed, and sometimes fail.

    When the fence around private property is damaged, and politicians are allowed in at will, the world changes. When failure occurs, rather than letting individuals take responsibility and come up with unique new answers, politicians step in. Politicians pretend that they know what the answers are, which are invariably yesterday’s answers for tomorrow’s problems. Once politicians have the power to step in, they feel they must and they will. And we all wind up worse off.

    And the cycle is vicious. Once those in business know that politicians can and will step into their affairs, those business owners and managers will take risks that they would not take if they felt full responsibility for the consequences of their actions.

    I often marvel at the almost perfect parallel between out-of-wedlock births and the growth of government. A hundred years ago, government amounted to about 10 percent of our economy. And the percentage of out-of-wedlock births was less than 10 percent. Now government approaches 40 percent of our economy and about 40 percent of our babies are born to unwed mothers.

    The less personal responsibility individuals feel they have for their own lives, the more irresponsibly they will behave. And, invariably, that irresponsibility will cause problems in the lives of others.

    What we hear from our political class is about the need for them to get involved. About companies being too big to fail. About what will happen to neighborhoods if mortgages are foreclosed. What we don’t hear about are the costs of government involvement. And the costs to our society when we do not have private property and personal responsibility.

    When welfare was reformed in 1996, responsibility was shifted back to individuals and welfare rolls dropped by 50 percent. Women did things they never dreamed or thought they could do. It doesn’t happen until you have to do it.

    Similarly, when freedom is allowed to work, and individuals take responsibilities for their failures as well as for their successes, we get the individual creativity that will deliver the new and the unknown. It’s why capitalism works and socialism and communism do not.

    We should not lose perspective that the current economic turmoil did not start from private enterprise but with government intervention and social engineering. There is little doubt in my mind that the major government intervention that has occurred under the pretense of remedy for all of this will produce less creative, less responsible, and less energetic Americans. In totality it will prolong our distress and diminish our future prosperity and the uniqueness and greatness of our country.


    A former single mother on welfare, Star Parker is the founder and president of CURE, the Coalition on Urban Renewal & Education, a non-profit think tank that focuses on issues of race and poverty in the media, inner-city neighborhoods, and public policy. She is a syndicated columnist and author most recently of White Ghetto: How Middle Class America Reflects Inner City Decay (Thomas Nelson)