The Quiet Revolution

January 23rd, 2012

Words are witnesses which often speak louder than documents, wrote Eric Hobsbawm in The Age of Revolutions – Published on RGE Analysts Blog (first on global Policy gp), by William Omam, January 17, 2012.

… The collective action void:

But beyond the intensification of global trade and capital flows, perhaps the single most important commonality between the industrial and post-industrial revolutions is that both periods exposed in a stark way the deep-seated internal contradictions in advanced countries’ societal modes of organization.  

Chief among those contradictions is the fierce tension between individual and collective well-being.

This tension, and the contradictions inherent to the way modern democracies are organized, lie at the heart of the work Mancur Olson.  Olson is the most distinguished expositor of the structural inefficiency of collective action, notably in The Logic of Collective Action.  One of his main insights is that, paradoxically, a group of people who have a common interest and the means to pursue this interest (e.g., consumer protection) will not always spontaneously act this way.  Thus the extension from invididual to collective action is not automatic or spontaneous.  It depends on the existence of appropriate organizations and institutions.

Olson also argued that democracy, rather than causing the exploitation of the minority by a tyrannical majority, can sometimes cause the opposite, because the few have concentrated benefits while the many have diffuse costs.  According to Olson, democracy holds the seeds of economic decline, yet at the same time it protects societies against predatory behavior by private agents and autocratic governments.  Olson famously argued that a stable democracy inherently favors powerful interest groups that protect their vested interests, which in turn hampers economic dynamism.  In The Rise and Decline of Nations, for example, Olson draws a contrast between post-World War II Japan and Germany, both of which grew rapidly after overthrowing powerful elites, and the United Kingdom, which stagnated under the weight of old vested interests.

While democracy may, according to Olson contain the seeds of economic decline, it seems that democracy itself is currently under threat, with powerful interests capturing governments and shaping policy-making in most of the world’s rich nations.

More troubling still, the legacy we are collectively creating is a very dangerous one.  It is a legacy of immense instability and systemic risk: the risk of hugely disruptive climate change; the risk of deep financial instability with potentially disastrous effects on the real economy; finally, the risk of nuclear catastrophe.

The supply of key “public goods” – containment of climate change, financial stability, and nuclear security – is being undermined by a failure of collective action on an unprecedented scale.  One of the most troubling aspects of this situation is that the required international policy cooperation – or the appropriate domestic policy responses – to address the complex but immensely important question of the provision of these global public goods seems more elusive than ever.

The paradox is that the more international cooperation and domestic policy responses are needed, the more elusive they become.  The drama of Europe’s crisis and European elites’ woefully inadequate policy response to the crisis over the past two years are a case in point of the extreme fragility and deep contradictions of the West’s societal mode of organization.

Thus, far more than an economic crisis, what may be happening to the West in the wake of its post-industrial, financial revolution is something much more profound – the gradual realization, in its collective psyche, that it is on course to suffer the consequences of one the biggest collective action failures in history. (full long text, inkl. 10 charts).

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