Saturday, 26 March 2016

LSE Commencement Speech on July 14th, 2016

Hi everybody, I have been asked to be the keynote speaker for the graduation
ceremony at the London School of Economics on July 14th, 2016. It is no coincidence that I chose Bastille Day.
I think we are in the midst of a popular uprising of the disaffected. It's a revolution that, so far, is mainly taking place at the ballot box. But now and again we see signs that it could move into the streets.  Glimpses of this are seen when Ferguson erupts, when the Arab Spring unfolded, when people push back against the wave of new immigrants, when we hear the uneasy rumbling of the young and energetic who suffer from understated unemployment rates and when we see students being carried off to jail by Federal Marshals for non payment of student loans in a world that won't employ them. The middle class and even those we would call upper class in the old days are mad too. They are mad about the rising cost of housing, of rent, of education, healthcare and transportation especially as they suffer from the constant threat of higher taxes.
Why is everyone so mad? Both politicians and the world economy have failed to deliver on their promises. It used to be that the disaffected were small or isolated groups in society. Today, it's everybody. We are all feeling that we can't live the lives we want to lead because both politics and economics get in the way.

Protected vs Unprotected

Peggy Noonan was Ronald Reagan's speechwriter and now serves as one of America's strongest social conscience voices. She put the problem beautifully when she said, "There are the protected and the unprotected. The protected make public policy. The unprotected live in it. The unprotected are starting to push back, powerfully." She eloquently writes in the Wall Street Journal,
"We're in a funny moment. Those who do politics for a living, some of them quite brilliant, are struggling to comprehend the central fact of the Republican primary race, while regular people have already absorbed what has happened and is happening." "…only normal people are capable of seeing the obvious."
We are witnessing what happens when the social contract breaks down. There is always a "deal" or a "contract" between citizens and their states. Citizens agree to abide by the law and in exchange they expect the state to deliver certain agreed outcomes like a decent education for all or some sort of health care regardless of income or status. Today the state cannot deliver. It over promised and is now underfunded, hence the rise in surreptitious and direct taxation alike. The weight of  the overbearing debt problem has broken the social contract. This is exactly what prompted Jean Jacques Rousseau to write his The Social Contract and It's Discourses. It is what prompted the citizens of France to execute the King and to organize a new "deal" that would spread the wealth wider and more fairly. Our leaders today are trying to reform and repair the old social contract. But citizens everywhere are telling us they want a new social contract altogether. They want new leaders, new rules of the game, a new deal that feels fairer and more just. That's the job of the next generation of leaders – to forge the new social contract, hopefully a better one, which can usher us into a new era of prosperity.
Thomas Piketty says the way forward is to tax the rich and distribute to the poor. I say that will never work. It will kill the productivity and not solve the problem. The real answer is to create more GDP and wealth, but for everyone, not just the uber​-rich. The debt problem of the mid 1800s was similar to today's – overwhelming, seemingly unsolvable. How was it addressed? The Industrial Revolution. That's what is needed today: more innovation. But that means the state has to be kinder to both those with no resources and to those who have resources and want to deploy them into building a better economy.
See: Trump and the Rise of the Unprotected: Why political professionals are struggling to make sense of the world they created.
The Social Contract and Its Discourses

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