A few moments ago, I read a review of a new book, Uncivil Society: 1989 and the Implosion of the Communist Establishment, and the following sentences jumped out at me:
This is less a story of dissidents, so-called civil society, than of the bankruptcy of a ruling classâ€“communismâ€™s establishment, or â€œuncivil society.â€ The Communists borrowed from the West like drunken sailors to buy mass consumer goods, then were unable to pay back the hard-currency debts and so borrowed even more. In Eastern Europe, communism came to resemble a Ponzi scheme, one whose implosion carries enduring lessons.
I found myself wondering “And this differs from our political class…how?”
The U.S.’s very own nomenklatura, our permanent political class and its parasitic allies, has been on a borrowing binge since the Great Society programs of the 1960s. Just like the pre-1989 Communist elites, they’ve been piling up debt in order to buy the consent of the governed with ever-more-generous entitlement programs. It took another twenty years, but the insolvency of California is bringing those chickens home to roost here as well. With the CBO now projecting that Social Security will go cash-flow-negative next year, an equally cataclysmic collapse of the federal government’s finances won’t be long in coming — in fact, I now give it over 50% odds of happening before Obama’s first term ends in 2012.
I think the answer to Mancur Olson’s great question may be heaving itself into view. In The Logic Of Collective Action and later works, Olson developed the thesis that democratic politics must more or less inevitably degenerate into a mad scramble among interest groups seeking to corner ever-higher rents from their ability to swing votes; see my previous post Some Iron Laws of Political Economics for discussion. So, where does it end? Increasingly, it looks like the answer is “when the creditors of the resulting Ponzi scheme decide they’ve had enough”.
Under today’s conditions, given who’s holding the biggest wad of T-bonds, that decision will probably be made in Peking.