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The Disease of Short-Termism

Wednesday 25 September 2013, by John Feffer

How "the end of history" is precipitating the end of the planet.

It was famously described as the “end of history.” The collapse of Communism and the victory of liberalism near the end of the 20th century seemed to suggest that the great ideological conflicts of the previous eras had come to an end. A new and powerful consensus formed around the notion that market capitalism was the only way to organize the economy and democracy was the only way to organize political life. This was Margaret Thatcher’s famous TINA: There Is No Alternative.

Of course some leaders didn’t quite fit the new consensus – in Beijing, Tehran, Harare, Riyadh – but these outliers were clearly on the wrong side of history. It was just a matter of time before the whole world looked, more or less, like Brussels. Bureaucracy might be bland and boring, but it was better than war, genocide, and the violent clash of rival worldviews.

Nearly a quarter century later, the picture is somewhat different. The outliers have proven rather durable in Beijing, Tehran, Harare, and Riyadh. The persistence of nationalist movements and various forms of religious extremism suggests, moreover, that history has not yet exited the stage.

But the real challenge has come not from outside of the triumphant model of market democracy. Rather, it comes from within. TINA has come down with what might be a fatal illness.

In many ways, the flexibility of both capitalism and democracy has proven ideally suited to the fast-paced technological change of our current era of Twitter, speed dating, and satellite TV. But there is a major flaw at the core of market democracy. Our politicians and our bankers can deal with instant gratification. They appear incapable, however, of dealing with long-term problems. They are infected, in short, with a disease so cunning and powerful that they don’t even realize they’ve been hit: the disease of short-termism.

Consider, for example, the problem of democratic elections. In the United States, members of the House of Representatives barely have any time to focus on legislation. During their two-year terms, they have to spend virtually the entire period raising money for the next election. The problem is only slightly better for the president, who has an 18-month window of opportunity to push through important laws before turning attention to the next campaign.

Campaigning is only one of the side effects of this disease of short-termism. Because of the necessity of thinking in terms of party interests, politicians rarely sit down across ideological lines to address problems of national interest. Institutions like the Supreme Court, with lifetime appointments, are supposed to be a check on the short-termism of democratic politics. But the justices often reflect the political passions of the moment—or, worse, of the president who appointed them—rather than take the long view.

The short-term preoccupations of politicians—whether they focus on financing their electoral campaigns or enriching themselves at public expense—has generated protests around the world: in Bulgaria, Egypt, Turkey, Brazil, and elsewhere. Even in the United States, the center of “democracy promotion,” the congressional disapproval rating just rose to an all-time high of 83 percent.

The response to this nosedive in public support for political elites has invariably been: “we need leadership” or “we need politicians with vision.” In other words, our democratic politicians have not transcended the short-term demands of politics to offer transformative policies that go beyond quick fixes.

It’s not only politics. Capitalist economics is also geared to short-term gain. In a hostile takeover, a corporate raider will take charge of a moderately profitable firm and fire a large number of the employees in order to increase the profit margin. Often the hijacked firm collapses—but not before a few people make a lot of quick money on the deal. Similarly, the brokers who devised the new financial instruments—such as sub-prime mortgages—that served as the basis for the financial crisis in 2008 were unconcerned about the long-term effects of their innovation. They saw only the prospect of high-risk, short-term profit.

In economics, too, there are exceptions—for instance, long-term investments in pension funds or the money held in Social Security. But increasingly, investors want to tap into these sources of capital and “marketize” them: that is, make them more subject to short-term profit (or loss).

According to economic and political theory, quantity somehow produces quality. Thanks to the magic of the marketplace and the multiple levels of democratic governance, voters and investors act in their own short-term self-interest and thereby produce aggregate policies or trends that add up to economic and political stability and, ultimately, progress.

It sounds nice in theory. But in practice, our political and economic institutions have proven singularly incapable of dealing with such long-term problems as climate change, income inequality, and the proliferation of dangerous weapons. Politicians are subject to the short-term interests of lobbying interests (coal companies, for instance). And market actors have helped to exacerbate these problems through unsustainable economic growth, increased salaries for CEOs, and ramped up markets for profitable arms transfers.

It is tempting to look at how a country like China has been able to address climate change. Over the last couple decades, the government has invested large sums of money in Green technologies like solar panels and wind turbines. China is now a leading manufacturer of both. Through economic planning and autocratic decision-making, it managed to redirect resources into a long-term solution to the country’s energy needs.

But China, with its lack of democracy, is not immune to the disease of short-termism. To take only one example, the country is rapidly using up its water resources and relying on a quick fix—a huge transfer of water from south to north—to deal with the problem. It’s spendingmore than $65 billion to postpone addressing the harder challenge of reducing consumption and making water management more efficient.

So, if China is no model, what can be done to cure the disease of short-termism in market democracies?

There are two parallel efforts in the United States to build long-range planning into a system that appears to be fatally addicted to short-termism. In the political sphere, many communities are experimenting with “deliberative democracy,” in which citizens come together to have longer and more informed discussions about policy issues that then feed into the larger debate on political choices.

In the economic sphere, the Obama government attempted to increase the role of government interaction in the economy—through stimulus spending, universal health care, regulation of the banking industry, and so on. This more conventional approach relies on government to impose a long-term perspective on an economy geared toward short-term profit.

The problem is that the magnitude of the problems facing us today is enormous. We must ask ourselves whether our system can be altered sufficiently at this late stage to prevent the world from suffering irreparable ecological damage. As the temperatures rise and the waters swallow up our islands and coastlines, many might be tempted by the promises of Green dictators who impose long-term solutions on desperate populations.

In 1989, we smugly contemplated the “end of history.” But now, precisely because of the triumph of a model infected by the disease of short-termism, we might be forced to contemplate a far worse fate.

Open Society Fellow John Feffer is on leave from his position as co-director of Foreign Policy In Focus.