Wednesday, January 24, 2007

Jane Jacobs - Dark Age Ahead

A dark age happens when the institutions of a culture are not able to keep pace with social change and no longer serve the people they are meant to support. This usually happens because of two reasons, a more powerful culture overtakes the smaller culture (ie. North American Aboriginal populations). The other reason is that the institutions become inflexible and the mechanisms of feedback break. It is not long before the static institutions become irrelevant.

Jacobs then identifies five things that are signally the beginning of cultural decline in North America.

1. Families: The basic unit of social organization is the nuclear family, whether there is one parent or two, an uncle that lives with the family or some other variation the basic structure is generally the same. Families live out their lives in households. These household require knowledge to repair various structures and appliances, maintenance, dealing with various bureaucracies, a landlord or the bank, cleaning, cooking, clothing, and all of the other skills associated with survival in North American culture. All of these skills among others have to be transmitted to children. This daunting task is best fulfilled by a community with diverse individuals with a diverse knowledge and experience base. In a healthy community the children are offered opportunities for social exploration, the parents are able to have adult relationships which prevent their isolation and the associated emotional problems and insecurities that develop which the children must subsequently deal with.

Suburban North America has established an environment that hinders community. Instead of walking in the community and chatting with neighbours people are constantly in their vehicles, and when there is free time it is very easily spent in front of the television.

2. Credentialing v. Educating: A University degree is not an education but a credential that opens the doors to opportunity. Human resource departments are looking for people that are persistent, ambitious, and can cooperate in teams. A university degree is a good indicator of these qualities so having a degree is the requirement to be considered for a good job. In fact, a high-school graduate will earn $1.2 million working full-time from the age of 25 to 65, an undergraduate will earn $2.5 million, and a professional degree (Doctor, Lawyer, etc.) will earn $4.4 million. Education is no longer an investment made in the future generation, but an investment made by young adults in their future.

The change came in the 1960s when students started to protest the lack of exposure to their teachers. The impersonal lecture hall distanced busy professors who had to mark hundreds of exams from their students. The comments and dialogue ended. Answers were either right or wrong, there was no time for dialogue and opportunities to stretch students minds. I have personally experienced this and figured out the system resulting in a .5 gpa jump. The first two years I wrote what I thought. The reply was a grade and no explanation of why my thinking was worth a B instead of an A. I was supposed to figure out why I was wrong with no direction. I discovered that the answer was to keep my thoughts to myself and regurgitate my notes, even if I didn’t understand them. There was no room for trying to figure out the difference between what I thought and what the professor thought. I am not saying that I want to be conformed to the thinking of my professors. But I do appreciate the fact that they have a lot more experience thinking about the issues they are teaching. I would like to benefit from that experience and struggle through the knowledge they are presenting. The problem is that they present it and expect the students to know the knowledge instead of struggle through to an understanding of the knowledge.

General Studies 500 was a class that educated me. There was the opportunity for dialogue and discussion on the topics. We were able to start from where ever we were intellectually and get into the subjects we were studying and get something out of it. It could have been better with a smaller class and more time (it was 35 students and 3 hours a week for 8 months, plus about 6 hours a week of work and discussion). That class resulted in this blog; the purpose of which is to help me reflect and absorb what I am learning. In short it has helped me to learn how I learn, and it extends beyond the class.

3. Science Abandoned: Jacobs identifies traffic engineering as a fake science. There are dominant paradigms in the field that have been shown to directly contradict empirical evidence. These contradictions raise questions which would result in fruitful research, but the discipline instead ignores these questions and maintains the status quo.

The empirical evidence is drawn from Jacob’s own experience. While living in Toronto there was a busy road that commuters would avoid by going a block to the east, which was formerly a quite street and made the street quite busy. The proposal was to make it a one-way street going the direction in which commuters would have to make a left turn across a busy street to get to the lane. The traffic engineer argued that this would make other streets busy because traffic is like water, if it is blocked in one direction it will flow where the least resistance was. The one-way street change was made against professional advice, but the result was that the commuters stayed on the main street and did not inundate other quite streets with noisy traffic.

Another story about the loss of scientific inquiry was the Chicago heat wave. The Center for Disease Control (CDC) sent 80 researchers and found what everyone knew. All the people that died did so because they didn’t have enough water and air conditioning and did not seek help. This study did not reveal anything that people did not already know. One sociology graduate student didn’t accept this as an answer however. He compared districts to each other and found that there were significant differences between the death rates between districts. In one district the death rate was 40 per 100,000. This district was sparsely populated and the elderly did not trust strangers who came to check on them and did not feel safe leaving their homes. As a result these people turned away help and did not leave to spend time in air conditioned stores. Quite simply, these people acted as they always did. This community was contrasted with a community in the south of Chicago which had a death rate of 4 per 100,000. This community was more densely populated and people knew their neighbours and the storekeepers. When people would offer help it was accepted. Seniors felt comfortable leaving their homes and loitering in air-conditioned stores where they knew the owners and had access to water. Like the people in the other community, these people did what they normally do. The difference was that the community was able to provide support to each other and had a much easier time of adapting to the changing environment.

4. Dumbed down taxes: This section focuses on two ideas; accountability and proximity. Citizens need to be able to see where their taxes are going, and tax dollars have to be spent meeting local needs across the nation.

National or even provincial strategies are just too broad to meet specific needs. The example Jacobs provides is that Toronto tourism was declining so the hotels in Toronto proposed a small tax on hotel rooms for the city to spend on tourism promotion. The province wouldn’t let the city set up the taxation scheme because it wasn’t their constitutional jurisdiction. The province could set up the scheme but it would have to apply it province wide. This strategy did not enjoy support in Windsor which is right across the border from Chicago and enjoyed high amounts of tourism. The result was that the strategy that would have been appropriate if applied locally was scrapped. The problem is that the need to universalize answers to local problems kills innovation. If a society can’t innovate then it is on the slope to stagnation.

This problem has a constitutional basis. When the BNA act was established in 1867 the only cities were Quebec City and Montreal, French cities, the rest were just trading and military forts. The constitution does not consider the need of cities to have powers to come up with strategies to meet their needs.

Accountability would help in understanding the problem further, but it is just not available. The mayor of Winnipeg estimated that the residents of the city paid $7 billion to the federal government and the city received about 6% of that sum back. Toronto paid $20 billion and received a similar percentage. These huge amounts of money were paid while schools were being closed, roads couldn’t be repaired, affordable housing programs were cut, transit lines didn’t have the operating budget to run some lines that had been dictated by the federal government, etc. No one knows where the money is going.

Jacobs isn’t arguing that all of the money should be returned, some of it comes from corporations that are headquartered in Toronto but create their income from the extraction of natural resources in more rural parts of Canada. Also, there are municipalities that don’t have the economic activity to make it financially so the economic capital of Canada should contribute to their continuation out of a sense of fraternity and national unity.

5. Self-Policing Subverted: Professional associations inspire awe and respect for a particular profession. Doctors, lawyers, engineers, nurses, architects, and accountants are just some of those professions. They are institutions of western culture. They police themselves, the argument being that the moral authority to make judgements on the actions of a member requires knowledge to understand the context in which the action was undertaken. Only members can judge other members because the public just doesn’t understand, for example, if a building collapses was it just a mistake or was there negligence in the design? Only another engineer can answer this question. The problem with this system occurs when self-policing breaks down as members cover for each other out of loyalty.

The honest reporting of financial performance is so crucial to investment in the market economy that firms must have external verification of the truth of their reporting. The profession of public accountancy was established around this fact. In the 1980s corporations began merging like there was no tomorrow. The result was that the number of firms that needed to be audited drastically decreased and so auditors were put out of work. At the same time all of the mergers were costly and caused cash flow problems for corporations so they pressured and paid their auditors to write letters to banks saying they were in a strong enough financial position to guarantee loans. They paid their auditors up to half a million dollars for one of these letters. Several of these companies went insolvent. But the problem was far from over. Enron and Arthur Anderson were the culmination of this phenomenon. The auditors had to fight the mergers of corporations so they merged themselves into five large auditor firms (one of which is Arthur Anderson). Enron was over reporting their income and under reporting their expenses and losses. This artificially kept the stock price high so the CEOs could cash in on their stock options, making millions. Then the truth came out and they pulled the CIA trick of deniability. If the boss isn’t told about the scheme on paper or in conversations anyone heard then he can deny that anything ever happened and get away with it. Nixon tried it during Watergate.

While the CEO made millions middle management and many other people saving for retirement invested in a good stock. When the stock sunk through the floor a lot of people lost a lot of money. Money they had invested because they trusted the audited financial performance of the firm.

The troubles in the accounting profession don’t stop at the outright liars. The question of what constitutes capital is another technical question that can have ethical implications because it can influence the financial performance of a firm and thus the investing practices of people saving for their children’s educations (or credentials =) or retirement. Capital is a resource that can be used to produce a profit, so what about an idea? It can produce profit. Jacobs suggests an answer to this question, capital assets are those that can be resold. This idea stems from the idea that you can borrow money against an asset and if you default on the loan the bank will seize the asset and sell it to recover the amount outstanding on the loan. This is an innovative idea for the profession and systems and institutions need to be free to implement innovations and ideas that address the current problems that are making the current systems ineffectual.

This gets back to the point about remaining open to change and feedback to create relevant institutions and systems that support our culture and help North America solve the problems it faces.

No comments: