The United States of Trial and Error

“American democracy is in danger.” You will hear this argument from both sides of the political spectrum these days. The Left will warn you that if Donald Trump is elected, he will turn America into a totalitarian state, usurp the judiciary, and indulge in nepotistic practices all too familiar to many developing countries. The Right will warn you that if Kamala Harris is elected, we will descend into an Orwellian state where the mainstream media promotes a woke narrative that seeks to destroy American values and way of life, powered by waves of uncontrolled immigration.

But when focused on soundbites coming from the candidates and their most vocal supporters online, one is quick to forget the big picture: that America is—and always has been—something I like to call a trial-and-error (T&E) democracy.

A trial-and-error democracy is a system which carries a persistent incentive to change and improve itself. This process is not automatic; it is a product of deliberate social action. When we witness dysfunctionalities in modern democracies—like political gridlocks, corruption, vote buying, interest group state capture, media capture, etc—these are periods of error, necessary to go through before arriving at a more just and prosperous social outcome. 

Consider the state of the country back in the 1960s or 1970s. In the 1960s President John F. Kennedy, one of the most popular Presidents in history, was assassinated, as was his brother Robert Kennedy five years later, trying to run for office on the same platform. Two prominent Civil Rights leaders, Martin Luther King and Malcolm X, were also assassinated. Racism, 100 years after abolishing slavery, was at its peak (Ole Miss riots and the rise of George Wallace are just a few examples ), with the KKK brutalizing African Americans in the South. On top of all this, nuclear war was a constant threat during the height of the1960s Cold War era.

On the geopolitical front, America lost the war in Vietnam, signaling that it was no longer the military superpower it was 25 years earlier. The country was engulfed in anti-war protests as tens of thousands of young Americans died for nothing, and many more were left scarred for life. U.S. foreign policy was disastrous, in the Middle East in particular (think of the Iranian Revolution, or the Yom Kippur war, both of which led to major oil crises) not to mention a series of proxy wars and CIA-driven regime changes, each being a mistake on its own.

The economy went through stagflation, a period of double-digit inflation, high unemployment, and low growth, for almost a decade, to which the most prominent economists of the time had no idea how to solve. In fact, many of them made predictions that it’s only a matter of time before the Soviet economy overtakes the U.S. economy. Not to mention proclaiming the end of the U.S. dollar as the global reserve currency.

In terms of inequality and social mobility, the 1960s often being exemplary in the inequality literature for high tax rates and low official inequality numbers, African Americans and women were still treated as second-grade citizens, not to even mention any other minority. This was no equal society, regardless of the income gap being smaller. Political polarization in Congress was lower? Yes, because Congress was almost exclusively white men.

And yet, “the U.S. Empire” didn’t fall apart. Far from it, the country grew stronger than ever in the decades that followed, both economically and in terms of societal progress. Why? Because it learned from these errors. 

There is no doubt that we are currently undergoing a period of economic and geopolitical pain, unlike any of the past 30 years (with the exception of the 2008 crisis). We have been here before, not only the 60s and the 70s, but much worse during the 30s and 40s in the West in general, or the 19th century. But what sets the West apart from all its historical antecedents and modern counterparts is precisely its trial-and-error democracies, protected by politically and economically inclusive institutions. No matter how bad you think things are, times of error do end up producing periods of success. And each new period of error does not degrade societies to the previous time of error. Societal improvements and more inclusive institutions are irreversible. Even though moving forward from a period of error is by no means automatic, as long as people demand change and progress, it does happen. Gradually, as usual. There is no magic bullet, and no quick fixes.

Read More: DEI Isn’t Working. Inclusive Economics Might

The problem is that voters, however, rarely think that way. They all want quick fixes. When bad things happen, when the system seems weak, corrupt, absurd, captured by special interests, or plain unjust, people will actively seek alternatives. They will, for example, laud the stability of right-wing autocratic regimes, or reimagine socialism under new paradigms, both of which offer seemingly simple, easy and quick solutions. 

All of it is an illusion. 

We have seen this plenty of times after the 2008 crisis. In the 2010s, with Europe flattering on the brink of collapse, and U.S. going through various phases of social upheaval with the #metoo or BLM movements, the appeal of strongmen running autocratic regimes became all too obvious. But this is pseudo-stability. On the surface they project strength, but within they are rotten to the core. If a strongman leader is overthrown, the entire system quickly falls apart. We have seen this happen over and over again, in every single autocratic system with the first sign of instability.

The U.S., and in general, the Western model of trial-and-error democracy is the exact opposite of this. It is what Lebanese-American mathematical statistician Nassim Taleb calls “anti-fragile.” T&E democracies appear more fragile, but this consistent tinkering is exactly what delivers strength in the long run. Every skill known to man is a product of trial-and-error. Practice, make mistakes, and gradually you become a master. Nothing happens overnight, and no single sustainable success in the history of mankind ever came quickly.But we always seem to want fast and easy paths. It just doesn’t work that way.

Within the context of the U.S. undergoing its usual trial-and-error process, what should we expect from whoever wins the White House this November? For one thing, it’s time to move beyond simple partisan-based solutions, and consider the big picture. A trial-and-error democracy benefits from changing incentives, not enforcing unsustainable policies. 

Consider, for instance, the issue of economic inequality. Inequality is not an artefact of a particular economic system, but a man-made phenomenon deeply rooted within the often violent quest for political power. The real issue facing America today are not differences in incomes based on innovation or talent, but differences in outcomes based on proximity to power. This is encapsulated through elite networks— informal relationships between politicians in power and owners of capital or corporate executives. Through my research,I have empirically confirmed that top executives which are politically connected have much higher salaries than non-connected executives within the same firm. This is the key driver of inequality of the top 1% and top 0.1% of income earners. The issue is exacerbated when entrenched elites misuse power to gain access to privileged information or opportunity, or when they seek political protection. 

Understanding this means moving beyond one-dimensional policy solutions like taxation. Taxing the rich merely deals with the consequences. A top executive will benefit from proximity to political power regardless of their top marginal tax rate, especially if they can easily misuse loopholes (which is the very reason loopholes exist).

Read More: To Fight Inequality, America Needs to Rethink Its Economic Model

In order to truly lower inequality, whilst improving the strength of domestic democratic institutions, America would benefit from a Presidential administration that will shift power away from centralized systems back to the citizens and the community. In fact, we can propose a series of policies that would do just that; from implementing full budget transparency on all levels of government to imposing rule-based KPIs for office-holders. It wouldn’t be difficult to define precise KPIs for example for fiscal policy (a constraint on budget deficits and debts which punishes Congress and the sitting administration, much like the Fiscal cliff from 2012), or monetary policy (inflation and/or unemployment targets linked to the mandates of FOMC members), or climate change, or health and  education outcomes. 

Other paradigm-altering policies imply removing many public good allocation decisions away from bureaucracies and giving citizens more direct participation in forming their local budgets, thus directly determining where a part of their tax checks is being allocated to. The goal is to gradually encourage people to care more about their local communities first, after which national level engagement will gradually follow. 

These types of reforms develop massive second and third order effects, unlocking the full benefits after a gradual accumulation of democratic capital. The end result is greater trust, better selection into politics, lower incentives for elite network formation (as we are reducing political power), and consequently lower inequality. 

None of this is easy to implement. But starting now, during a period of error, would make sure we fully utilize the time of discord and build an even stronger and more inclusive democracy for the next generation. Whichever administration realizes the opportunity such reforms could bring will cement a long-lasting legacy.