The Enemy of Good

Our institutions are designed to minimize downside instead of maximizing upside

By Lyn Lomasi - Own work, CC0, https://commons.wikimedia.org/w/index.php?curid=15751024

In 1726, Charles Louis de Secondat, Baron de La Brède et de Montesquieu (the direct ancestor of all modern essayists) wrote that “the best is the mortal enemy of the good.” This was later rendered by philosopher Voltaire (whose real name was Francois Marie Arouet) as “the best is the enemy of the good,” a phrase he attributed to an Italian proverb in 1770.

In the modern world, the phrase has come down to us in English as “don’t let perfect be the enemy of good” and other similar variations. It contains a huge amount of wisdom, particularly when it comes to the institutions that evolved to keep us safe from our rulers.

In recent weeks, I have described how conspiracy theorists often hide their intentions when they attack our institutions. They will rarely tell you that they want to smash liberal democracy, a market-based economy and/or the welfare state because if they did nobody would take them seriously.

Who wants a dictatorship? Who is in favour of gangster capitalism? Or a supersized bureaucracy to run the economy? Do you really want to live in a society where sick people have to pay for their own treatment with no help from anyone else? Probably not! Instead, conspiracy theorists will seek to question the legitimacy of liberal democracy, markets and welfare in insidious ways, often with a questionable methodology.

All of these institutions are surprisingly modern. Liberal democracy only embraced universal human rights in 1948; the first limited-liability companies were created in New York after 1811; and Otto Van Bismark laid the foundations of the modern welfare state in Germany 1883. The combination of the mature forms of the three institutions has been in place for less than three generations.

As we have mentioned before, the three overlapping institutions embed contradictions. Political leaders will have to make certain types of promises to win elections; while business leaders will demand a contradictory policy. Meanwhile, lobbying organizations for doctors and teachers will often try and get an entirely different policy.

The result of this messy and contradictory combination of three systems is by far the least bad way of organizing society that humanity has ever developed. Even so, the combination is definitely imperfect. Even worse, it is difficult to improve. There is always a risk of throwing away the baby with the bathwater if we go back to the drawing board.

Liberal democracy isn’t designed to create good governments. There will always be a temptation for leaders to promise the impossible to win an election. Narcissists will always be tempted to see themselves as the true voice of the people; and if they win, they will try to corrode the institutions that are meant to hold them back.

Power corrupts. No one way of seeing the world can ever capture the whole of reality. As leaders become more isolated from ordinary people, groupthink among their inner circles will become increasingly inevitable, leading to worse and worse decisions.

Instead, the peaceful transition of power, the free press and the rule of law are all meant to stop the very worst governments. These often bring famines, genocides and wars in their wake. This is no mean feat, even though it is easy to take it for granted in a world where famines, genocides and wars have become rare in those societies that manage to run liberal democracy in parallel with healthy private and public sectors.

A market-based economy, based on permissionless innovation, works because it creates a way for highly driven people to capture vast fortunes by creating value for others. Sadly, though, grifters can also create fortunes by ripping people off. Crypto scams can co-exist alongside more sensible investment strategies based on the power of compound interest over the long term; or career plans designed to capture an exponential wave in a new area.

It is difficult to see how a market-based economy can work without free schooling, a state-backed health system and some kind of safety net to cope with the ups and downs of the business cycle. However, the welfare state is caught in the middle between a market-based economy and liberal democracy. Investors can easily move to other territories in protest at rising taxes and budget deficits to fund an expensive welfare state, with potentially disastrous results for the economy. Imperfect services are inevitable as a result of these tensions. However, if services get too bad, voters are likely to rebel. It is impossible to square this particular circle, which is why healthy societies often see the left and right alternating in power, with different emphases.

Some perfectionists will always be tempted to seek upside instead of preventing downside. Unfortunately, though, if you want to improve the combination of liberal democracy, a market-based economy and the welfare state, instead of working within the confines of the three systems, the burden of proof is always going to be on you.

Can you point to any examples of societies that have got better results than those in the West? If not, have you run any small-scale experimentation to test whether your ideas actually work? Have you read the literature on populism? If so, are you sure that you aren’t a populist yourself?

Have you thought about the role of feedback loops in liberal democracy and markets or in the relationship between investors, voters and public services? What are the blindspots of your ideology? Finally, if your theories turn out to be misguided, how can we remove you from power? The comments are open. I will be away on Saturday, so the next column will be on Sunday. See you next week!

Further Reading

What Is Populism? by Jan-Werner Muller

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