Institutional failures

Institutional failures have become the scapegoats of our age. We blame juries for failing to convict policemen who shoot men during traffic stops; we blame management agencies for not protecting tower blocks from fire, we blame governments for fighting terrorism ineptly. We blame Silicon Valley behemoths for tax-dodging, undermining labour unions and tolerating sexism. We blame politicians for financial deregulation and the crisis that ensued. Then we blame them for the bailouts and austerity measures that defund education, healthcare, public works and infrastructure. We often blame the media for not insisting on greater transparency and accountability. Every complaint is justified, but their recurrence suggests that lasting reforms may require more than outrage.

Hell, wrote C S Lewis, is probably “something like the bureaucracy of a police state or the office of a thoroughly nasty business.” In our Managerial Age, he warned, the greatest evils are not perpetrated by criminals, nor even in concentration and labour camps, but “conceived and ordered (moved, seconded, carried, and minuted) in clean, carpeted, warmed and well-lighted offices, by quiet men with white collars and cut fingernails and smooth-shaven cheeks who do not need to raise their voices.” Without oversight these men can wreak untold harm without facing any reckoning.

In The Great Deformation a searing post-mortem of the 2008 financial crisis, David Stockman argues that the “so-called financial meltdown was purely in the canyons of Wall Street where it would have burned out on its own and meted out to speculators the losses they deserved.” But even though the American public never faced jeopardy from an AIG default, nor was a “Great Depression 2.0 remotely in prospect” the titans of Wall Street peddled these scenarios in order to “purposely petrify congressmen” into saving their institutions. The “alleged threat to millions of policyholders was a beard,” writes Stockman, “behind which stood the handful of giant financial institutions which had purchased what amounted to wagering insurance from the AIG holding company.” At the height of the 2008 crisis key government institutions were controlled by Wall Street insiders like US Treasury Secretary Henry Paulson, a former Goldman Sachs CEO. These men panicked because their peers were panicking. Revealingly, none of them seriously questioned the bankers’ narrative and this allowed Wall St to escape from the consequences of its folly. The government’s unprecedented intervention in the markets, via the Troubled Asset Relief Program, socialized Wall Street’s losses – by lending hundreds of billions of dollars effectively interest-free – and then soon afterwards allowed the most irresponsible institutions to reward themselves with large bonuses and privatized profits made with their hefty interest-free loans.

A similar case of institutional blindness was noticeable in the United States earlier this week. While there has been considerable criticism of the structural racism within American law enforcement, and of a criminal justice system that repeatedly acquits murderous policemen, perhaps the case of Philando Castile will be most remembered for the silence of the National Rifle Association (NRA). The Daily Show host Trevor Noah pointed out that in other circumstances the NRA would “be losing their goddam minds” over the unprovoked killing of a licensed firearm holder by an agent of the state. Noah showed a clip of NRA CEO Wayne LaPierre, speaking at  the 2014 Conservative Political Action Conference, insisting that there is “no greater freedom” than defending oneself with “all the rifles, shotguns, and handguns we want.” Noah interrupted this righteous assertion with the comment: “‘Unless you’re black,’ is what it should have said.” Then he concluded that “It’s interesting how the people who define themselves by one fundamental American right, the right to bear arms, show that once race is involved, the only right that they believe in is their right to remain silent.”

Given the seemingly endless recurrence of similar failures, it may seem tempting to dismiss hopes of building genuinely robust institutions as mere pipe-dreams, but in The Open Society and Its Enemies, a magisterial analysis of democracy, the political philosopher Karl Popper presciently refuted such a counsel of despair. “It is quite wrong to blame democracy for the political shortcomings of a democratic state,” wrote Popper: “We should rather blame ourselves. In a non-democratic state, the only way to achieve reasonable reforms is by the violent overthrow of the government, and the introduction of a democratic framework. Those who criticize democracy on any ‘moral’ grounds fail to distinguish between personal and institutional problems. It rests with us to improve matters. The democratic institutions cannot improve themselves. The problem of improving them is always a problem of persons rather than of institutions.”

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