“War Criminal says Sorry, Sobs,” was the headline in the Nation on February 9th, 2004. Robert McNamara had just done something extraordinary for Secretaries of War: with tear in his eyes, he apologized for his role in the Vietnam War. The war made ghosts out of 58,000 American soldiers. On the Vietnamese side, the total was over a million. This week, McNamara went to meet them.
Why do smart people do such stupid things? The French had already shown what Western powers were up against in Indochina. De Gaulle had warned Kennedy that it was a “rotten” country. Still, the United States sent in troops…and McNamara, to his credit, spent the last 40 years of his life regretting it.
We do not disrespect the shades here on the back page. But once they are down, we can hardly wait for the autopsy report. We want to know what was wrong with them. McNamara had a brain “like a computer,” say the morticians. Too bad. He needed more than that.
Robert McNamara was described in the obituaries as the “architect” of the Vietnam War. This is libelous to real architects; as near as we could tell, the war went on without plans or blueprints. Instead, Robert McNamara took an economist’s approach to war. His formula had only three numbers: how much damage he could inflict on the enemy; at what price; and how much pain the Vietcong/North Vietnamese could stand. Later, he discovered that the enemy wasn’t even counting.
Long gone are the days when economists thought deeply about how life actually works. Adam Smith, Adam Ferguson, Anne-Robert Turgot – the great “moral philosophers” – all died hundreds of years ago. Since then, the trade has gone bad. They’re all numbers guys now. An economist, of the modern variety, is a statistician…an extrapolator…and a mountebank. If numbers go up two months in a row, he predicts they will go up another one. He rarely stops to ask whether his numbers really make any sense.
Instead, he merely adds them up and rolls them out. Thus – at the bubbly top in 2006 – he was he able to describe the likelihood of default on a certain derivative instrument as a “Six Sigma event” without laughing. A Six Sigma event happens once every 2,500,000 days. Then again, when the Bubble of 2002-2007 popped, they happened once a week. The blogs are full of chatter on the subject. What good is the economics profession, asks Paul Samuelson, if it cannot foresee the biggest single economic event in at least a quarter-century?
Yet, those same economists – who had failed so miserably at diagnosis and prevention – they barely hesitated. Rather than spend months in drunken shame, contemplating their own incompetence, and wondering what a bubble really is, they denied the wild bubble side of life altogether…and tried their hands at prescription. President Obama’s economics advisors went to Congress last autumn to predict that without the stimulus measure joblessness in the United States could rise to 8%! Bernanke made it seem that if the bill wasn’t passed that day, the economy may cease to exist all together. How he could know the future, when he demonstrably knew so little about the recent past, was a mystery. Still, the politicians responded by enacting the biggest bank bailout boondoggle in history.
What would have happened had the legislators failed to jump when economists threw them a bone? We don’t know. But we know what happened after the stimulus measures were passed – they failed to stimulate. The
employment numbers for June showed that economists had misjudged both the direction and the speed of the oncoming bus. Instead of shifting down, the rate of job losses increased to 9.5% in the United States. Instead of going forward, the economy was backing up!
Do these setbacks cause economists to stop and wonder if their theories are bogus and their numbers are nonsense? Nope, they do what McNamara did. They turn up the heat. They propose to spend more money they don’t have on more programs that don’t work. Predictably, Obama advisor Laura
Tyson now suggests that the stimulus thus far is “too small.” Other economists too are talking about a “son of stimulus,” that will offer even more credit to the debt-saturated consumer. Only trouble is, neither consumers, businesses nor banks cooperate. Despite trillions in cash and credit to the financial system, lending is still going down.
Robert McNamara was as smart as any of today’s number crunchers. A Harvard “whiz kid’ with a ‘can do’ attitude, he was one of the ‘brightest and the best,’ the kind of American that makes you proud to be one. He was an efficiency expert. But everything has its place. Poetry is not much in demand from bridge builders. In love, war and bubbles, on the other hand, rational efficiency is at best a second tier concern.
When asked to take the job at the Defense Department, McNamara replied to John Kennedy that he was “not qualified.” That was the last thing he was right about. As to everything else, he missed the point completely.
Sometimes it is the brain that fails. Sometimes, it is something else.
Until next time,
for Markets and Money