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August 29, 2018

The Dialectics of Liberty: A Forthcoming Collection

I am honored to announce that our contract with Lexington Books, a subsidiary of Rowman & Littlefield, has been signed, sealed, and delivered [Hat Tip to Stevie! YouTube link] and that a superb new collection entitled The Dialectics of Liberty: Exploring the Context of Human Freedom will be published in 2019-2020.

The book, co-edited by Roger E. Bissell, Edward W. Younkins, and yours truly, features the contributions of eighteen extraordinary scholars in fields as diverse as aesthetics, business, economics, higher education, history, the humanities, law, philosophy, politics, psychology, and social theory. Despite spirited disagreements among them, and the diversity of perspectives represented, all of our authors work under the Big Tent that is "dialectical libertarianism"---a form of social analysis that seeks to understand the larger dynamic and systemic context within which freedom is nourished and sustained.

The homepage we have developed is sparse right now, because we are in the process of collecting, editing, and organizing essays from our contributors and integrating them into an organic unity; in other words, you might say that the very creation of this trailblazing volume will be an unfolding dialectical process---so, for now, we are purposely not providing a list of our contributors. That will come in time; indeed, very soon, we'll unveil our stellar cast of authors.

But the news of the book's acceptance for publication was just too wonderful not to share with you. I look forward to filling in the blanks very soon. But most importantly, I look forward to the publication of the volume itself.

And speaking only for myself, as a person who felt as if his was the voice of one crying in the wilderness over the past forty years, in championing the very notion of a "dialectical libertarianism" with my "Dialectics and Liberty Trilogy" (Marx, Hayek, and Utopia, Ayn Rand: The Russian Radical, and Total Freedom: Toward a Dialectical Libertarianism), I have immense personal satisfaction in having played a part in bringing together this remarkable group of contributors from whom I've learned so much---and who have honored us with their presence in what promises to be one of the most important and provocative contributions to the scholarly literature of its generation.

July 02, 2018

TDS vs. TWS: Two Sides of the Same Coin

There are a lot of folks out there who are still fighting the 2016 election: those who seem to wholeheartedly believe that Trump is Satan Incarnate and who are typically affected by "Trump Derangement Syndrome" and those who seem to believe there is nothing Trump can do wrong. Let us call this "Trump Worship Syndrome." In my view, both sides of this false alternative fundamentally misunderstand the problem. The problem is that whether Demon or Deity, no one man can alter the trajectory of the system, because the system itself is fundamentally committed to traveling down "the road to serfdom."

Ironically, this morning, I wake to a fabulous quote posted by Anoop Verma, written by Edith Efron, which goes to the core of what I'm driving at. It speaks implicitly to the need to think dialectically, that is, to think in terms of understanding and changing the larger context, upon which political and economic issues depend. Here is that eloquent quote that Anoop has shared with us this morning:

[The libertarian cultist] gulps down a few books by libertarian writers, and rushes to change this society before he has understood either this society or the books. He tends to restrict himself to a shrunken conceptual repertoire. It generally consists of a one-note opposition to the evil of government intervention, and frequently this is the only aspect of social reality of which he seems to be aware. Monumentally important political, social, cultural and intellectual problems leave the cultist indifferent. He is only concerned with government misdeeds. His "thinking", consequently, is eternally out of context, and his value system flattened and hostile. His disconnection from what he often refers to as "the real world" leaves him ignorant of the workings of this society. ~ Edith Efron in Secular Fundamentalism

I know that Anoop and I have had some differences in terms of our evaluation of Trump, but I agree fundamentally with what he is trying to convey in that Efron passage. I shared the post on Facebook, and added a "tongue-in-cheek" comment: "Sounds like the makings of a 'Dialectics and Liberty Trilogy' :) "

I have often argued on the basis of what I have called a "Tri-Level Analysis of Social Relations"---that is a tri-level model of understanding how power is exercised, and, consequently, the kinds of strategies that are needed to fundamentally alter that structure of power. I used it to describe the ways in which Ayn Rand typically approached the analysis of any social problem, but it is a model that one should keep in mind whether or not one accepts Rand's analysis in any specific instance.

The Tri-Level Model of Social Relations of Power

TriLevelModel.jpg


Readers interested in a fuller explication of the model should look at Part Three of my book, Ayn Rand: The Russian Radical and throughout my book, Total Freedom: Toward a Dialectical Libertarianism. But the approach is outlined briefly in my essay, "Dialectics and Liberty." In the context of how Rand used the model, I state in that essay:

In her examination of any social problem, Rand focused on the reciprocal connections among personal factors (Level I), that is, a person’s methods of awareness, or "psycho-epistemology," and ethics; cultural factors (Level II), that is, ideology, pedagogy, aesthetics, and language; and structural factors (Level III), that is, politics and economics. For Rand, each level of generality offers both a microcosm and a differential perspective on the growing statism of the mixed economy that was the object of her criticism. (Rand saw that system as an instance of the "New Fascism.") She traced the mutual implications and reciprocal interconnections among disparate factors, from politics and pedagogy to sex, economics, and psychology.
In terms of the implications for a dialectical-libertarian analysis, the important point here is that Rand never emphasized one level of generality or one vantage point to the exclusion of other levels or vantage points. So, for example, even when she'd focus attention on Level III---the nightmarish labyrinth of government taxes, regulations, prohibitions, and laws constraining trade---she was quick to dismiss those who thought that an attack on the state was a social panacea. In the absence of an alteration of Level I and Level II social relations, which have a powerful effect on the character of political and economic practices and institutions, a change in Level III is not likely to be sustainable. For Rand, then, just as statism exerts its nefarious influence on all the levels of human discourse, so too must freedom be understood as a multidimensional achievement.Think Russia or Iraq---where, in the absence of a culture of individualism, all the "democratic" procedural rules in the world are not likely to bring about a free society.
Much like Hayek, Rand proclaimed herself a radical "in the proper sense of the word: 'radical' means 'fundamental.'" And as a "radical for capitalism," Rand argued that "Intellectual freedom cannot exist without political freedom; political freedom cannot exist without economic freedom; a free mind and a free market are corollaries."

And this is why that passage from Edith Efron's Secular Fundamentalism resonates with me.

Since we have been discussing political and economic issues on the Facebook thread to which I posted, any Level III focus must take into account all that is entailed in the "political" and the "economic" (which is why I label that level "structural"). Even if one is attempting to alter the political and economic trends in this country, these trends cannot be changed without grasping the fundamental structures that both reflect these trends and sustain them.

On the eve of celebrating Independence Day, it might be worth remembering that this was a country "conceived in liberty"; it has traveled so far away from the origins of its conception such that the actions of one man cannot possibly change the systemic and dynamic complexities of a system that has been built up over the last century, one that embraces "perpetual war for perpetual peace" and that requires several key institutions that are only the tip of the "Deep State," unresponsive to the electorate, and firmly entrenched to serve the systems they were designed to protect. Three key institutions that must be mentioned in this context are:

1. The Federal Reserve System, which sustains a "state-banking nexus" that, in its policies of boom and bust, redistributes wealth to the most politically potent debtors (the biggest of which are financiers and big businesses that depend on both inflationary policies and government assurances that they are "too big to fail");

2. A National Security State, which even President Dwight D. Eisenhower warned against in his farewell address about the growing power of the "military-industrial complex"; and

3. A regulatory apparatus that, since the late nineteenth century, was designed and maintained to benefit the very businesses to be regulated, who have used its various tools to destroy competition and wield control over markets.

With all this in mind, I reproduce below my comments on the various threads dealing with some of the issues surrounding the Trump presidency---issues that go to the core of why a "welfare-warfare state" will not weaken, whether one believes Trump to be a Demon or a Deity.

My first Facebook musings yesterday were posted in response to an essay written by Jim Peron, which effectively dispensed with some of the more idiotic views of journalist David Brooks: "The Enemies of Individualism: Conservatism, Collectivism, and Tribalism." Brooks essentially argues that it is the "atomism" of individualism that leads to the tribalism that is now consuming our political culture. In fact, it is the exact opposite, as Peron argues. I wrote:

Just an aside, Jim: You mention Nathaniel Branden in your essay and, if I can use the phrase, Branden was among the more "dialectically"-minded thinkers within libertarianism who explicitly and completely rejected the so-called "atomism" with which individualism had been slurred. First, Branden attacked the notion that "efficacy" was some sort of Western-biased term:
. . . the need for cognitive efficacy is not the product of a particular cultural "value bias." There is no society on earth, no society even conceivable, whose members do not face the challenges of fulfilling their needs---who do not face the challenges of appropriate adaptation to nature and to the world of human beings. The idea of efficacy in this fundamental sense (which includes competence in human relationships) is not a "Western artifact." . . . We delude ourselves if we imagine there is any culture or society in which we will not have to face the challenge of making ourselves appropriate to life. (Branden, "The Power of Self-Esteem", 1992)
Branden added further:
There are a thousand respects in which we are not alone. . . . As human beings, we are linked to all other members of the human community. As living beings, we are linked to all other forms of life. As inhabitants of the universe, we are linked to everything that exists. We stand within an endless network of relationships. Separation and connectedness are polarities, with each entailing the other. (Branden, "The Psychology of Romantic Love", 1980)
If anything, Branden argued---as did Rand---it was statism and tribalism, not individualism and tribalism, that were reciprocally related to one another. I discuss the statist-tribalist connection in my essay, "Statism and Tribalism: Fraternal Twins"

I contributed an additional comment to that thread, in response to Jim's argument that Trump suffered from a typical narcissistic disorder that helped to explain his "authoritarian personality":

I agree that Trump has all the markings of a person with an authoritarian personality, but since I can't get inside that mind of his---and wouldn't dare try---I can do the next best thing: Look at his actions, and to me, there is nothing that he has done to fundamentally alter the trajectory of U.S. political economy. As an economic nationalist or neomercantilist, his "pragmatic" approach to policy is fully in keeping with how Rand described the U.S. political economy: a neofascist mixed economy, which has been rigged historically to benefit certain interests (mostly financiers and larger capital-intensive industries) at the expense of others. Moreover, I have always accepted the truth of Hayek's proposition that the more politics comes to dominate social and political life, the more political power becomes the only power worth having---which is why "the worst get on top."
Since the institutions of power---be it the Fed, the National Security State, or the regulatory apparatus---have not (and most likely cannot) be altered fundamentally in the absence of a huge cultural shift in this country, anyone who gets into a position of power (even those who profess commitment to Rand's ideas; see my essay, "The New Age of Rand? Ha!") is more likely to become a very part of the swamp they are claiming to be at odds with. And so it goes with Trump. I have absolutely no trust in him or any other politician to be a part of the solution; and as the old adage goes---if you're not part of the solution, you're part of the problem.
On the "narcissistic" aspects of Trump's personality, Jim Peron posted a provocative link, and I understand where he is coming from: all I'm saying is that ultimately, I don't have to wade into the muddy waters of anybody's mind. All I have to do is evaluate what they are doing in practice, and believe me when I tell you: That's enough for me!

A defender of Trump's policies took exception to my placing him in the "neofascist" swamp, in which virtually every politician swims, and I replied:

I think you're missing my point: The point I'm making is that it is the system that needs to be taken down. No one man, not even one with the rhetorical gifts of Ronald Reagan, who made it okay to talk about "free markets" again, and who called the Soviet Union an "Evil Empire," and who stood at the Bradenburg Gate and said, "Mr. Gorbachev, Tear Down This Wall!", was able to do anything to stop the U.S. path down the "road to serfdom." And he actually liked the works of Hayek!
Reagan appointed a Rand acolyte, Alan Greenspan, to run the Federal Reserve System. A "Rand acolyte" would have acted to dissolve the Fed, rather than embrace its inflationary powers to create a bubble that ended in the "Great Recession." My point is that once you get into a position of power, you are a part of the system, and even though you claim to fight it, you do nothing to alter the locus of control, the "state-banking nexus" upon which the Fed generates cycles of boom and bust, the "National Security State" that even Eisenhower warned against in his farewell speech about the "military-industrial complex," and the institutions of the regulatory apparatus that were created and supported by the very businesses to be regulated, who used that apparatus to crush competition. We have ended up with a "permanent war economy"---"perpetual war for perpetual peace" as Harry Elmer Barnes once described it---and not even a President with a moral compass can dismantle it. I'm afraid that tinkering around the edges will do nothing to fundamentally alter the course of national decay. And that's why I maintain that Mr. Trump, especially in his embrace of neo-mercantilist policies of economic nationalism---even if one wishes to believe that these are actually his way of using the "art of the deal" to compel all countries to embrace "free markets" (highly doubtful)---has crawled into the swamp he seeks to drain.

I also added a note about a newly published collection of essays by Murray Rothbard that dealt with the origins of the modern U.S. political economy in the Progressive Era:

BTW, I would be remiss if I didn't mention that a new collection of essays, written years ago by the late Murray Rothbard, has been gathered in a book called The Progressive Era," with a foreword by Judge Andrew P. Napolitano. The book largely confirms your points, Jim, about the illiberal roots of Progressivism, whether it was used to further "conservative" or "liberal" state incursions into the lives of individuals. It follows the emergent history of Progressivism from the age of the railroads, the conflict between Pietists and Liturgicals, the collapse of laissez-faire politics, the rise of corporatism and of "war collectivism"---which ultimately served as a model for many of the welfare state institutions that emerged in the post-World War I era.

Since I'm likely to have more to say in the give-and-take, I'll update my commentary here, as time warrants. But before pursuing any further discussion, I might as well reproduce another comment I made on an entirely different FB thread, initiated by Aeon Skoble, where he bemoans the incivility of the dialogue on many threads, especially those devoted to current political and economic issues:

Well you don't have to convince me about the incivility of posting on public forums, which is why I shut down comments on my blog, never post on any public forums and only cross-post entries from Notablog here, where comments go out to folks who have been "friended"---and I expect that "friended" means civility, or, I'm "movin' out." Life is too short to be aggravated over that kind of incivility.

With that said, I refuse to be dragged into the TDS versus TWS boxing ring. The problems I am focused on here go far beyond the terms of the debate as framed by that false alternative.

Of course, my FB post elicited responses, and I'll devote the space below just to expanding on the comments I have already made on this topic.

On using tariffs as a response to countries that place tariffs on U.S. goods, I replied:

Even when your trading partners erect trade barriers, raising your own tariffs achieves two things: it penalizes American consumers who are forced to purchase imported goods at higher prices, and it artificially raises profits for domestic industries protected by the tariff. The "free market" is not of a bygone era---it is an era that has yet to come.
Don't take my comments to mean that I endorse NAFTA or any other government-arranged trade "deals": the U.S. government has been engaged in large-scale transfers of money to "friends" and "foes" alike, and often, what these programs require is that the money be spent to enrich U.S. producers (that has always been the basis of "foreign aid"---in essence, the global expropriation of American taxpayers to benefit U.S. producers of military hardware and other goods, who receive these funds circuitously). The whole system is rigged.
If Trump can use his "art of the deal" to try to "un-rig" the system, more power to him: But what I've been emphasizing is once you are part of the system, it is the system's dynamics that overtake the man, whether you believe him to be a Demon or a Deity.

With regard to remaining friends on Facebook, despite disagreement, I added:

Oh, for God's sake, I know that [it's okay to remain friends and disagree on issues]. None of us is perfect, and I'd be the last one not to engage in a respectful civil dialogue---or to encourage one---when I advocate something called "dialectical libertarianism", and "dialectic" had its root in the art of conversation, the art of engaging different points of view (long before I defined it as "the art of context-keeping").
If we can't disagree, in good spirit, then what's the point? Life would be very boring. And the moment we can't disagree, it will be a sign that "Time's Up"---in more than one way. I appreciate all this.

With regard to someone who remarked that I went "overboard" in my praise of Reagan and that my post went on a bit long, I responded:

[With regard to Ronald Reagan] I was only talking about the rhetorical Reagan: I think in the long run, he did shift the political culture a bit, but ultimately, the critiques of his administration offered by folks like David Stockman, are spot on. As for length: Jeez... that's to be expected from a guy who had to write three books to make one essential point.

In response to somebody who accepted the irrationality of those suffering from both TDS and TWS, but who argued that the TDS folks were far louder and numerous, I responded:

I think that the TDS folks are louder---but I think this is to be expected. When an administration is in power, it is the opposition that is always louder.
Do a mental experiment. Let's just say that Clinton was elected. Given that the electorate was practically split, do you not think that some folks who chanted "Lock Her Up" at the GOP convention would not be suffering from CDS ("Clinton Derangement Syndrome")---especially since Trump was "trumpeting" that if Clinton had won, it would only be because the election was "rigged"?
I can't offer an alternative reality, but I do suspect that if Clinton had won (and let me make one thing clear: I did not vote for Clinton OR Trump), the GOP-dominated House and Senate would have embarked on committee after committee hearing into everything from her "lost" emails to the machinations of the Clinton Foundation to reopening the Benghazi incident. And given the "Lock Her Up" sentiment among Clinton's opposition, I think we may very well have faced as divided and belligerent a dialogue as we are seeing now.

November 23, 2016

George Smith on Rand's Insights on the U.S. "Slide Toward Fascism"

Just wanted to alert readers to a fine article penned by George Smith, "Ayn Rand Predicted an American Slide Toward Fascism" on the FEE website.

I was especially happy to see this discussion resurrected since Rand herself has often been tagged by her detractors as a "fascist"; my own essays on Rand's insights into the U.S. tendencies toward neofascism ("The New Fascism," as she called it) are indexed here. The discussion is particularly important in the days since the election of Donald J. Trump as the 45th President of the United States. Following Rand and others in the libertarian tradition, I've argued that the system of "crony capitalism" or what Roy Childs and others once called "liberal corporativism," is the system that exists in this country; it is not a free market and whether it is peppered with the authoritarian rhethoric (and policies) of the left or of the right, it all comes down to a civil war of pressure groups, each vying for special privileges at the expense of one another, a "class" warfare that not even Karl Marx could have imagined. For as F. A. Hayek so powerfully observed, once political power becomes the central means of gaining social control, it becomes the only power worth having. That is why he argued, in The Road to Serfdom, "the worst get on top." I've expressed my concerns for months now, but it remains to be seen just how much worse this tendency will be manifested in the new administration. Whatever the campaign rhetoric, time will tell. (Ed: And I am reminded by a colleague that in a country where, within a single week, the Chicago Cubs can win the World Series and Donald J. Trump can win the White House, anything is possible!)

Tomorrow is Thanksgiving Day in the United States; I want to wish all my readers a Happy Thanksgiving [YouTube link]. Be thankful that, for now, at least in some crucial aspects, this country remains, in the words of Benjamin Franklin, "a republic, if you can keep it." Which makes Rand's insights into the degeneration of the American republic all the more trenchant.

July 20, 2016

The Donald and Mercer's "Trump Revolution"

For a political junkie like myself, every four years, watching and retching over the major political party conventions is a rite of passage into the Fall Election campaign for President of the United States. This week, I've watched wall-to-wall coverage of the GOP convention, and I will somehow get through the Democratic Party convention next week. A rite of passage is a ritual, and not all rituals are pleasant, but in my political playbook, they are necessary.

As a prelude to some of my observations on the Trump campaign, I just added a 5-star amazon.com review, "A Must-Read Book for Trump Fans and Foes," of Ilana Mercer's newest book, The Trump Revolution: The Donald's Creative Destruction Deconstructed. Much of what appears here is taken from that review, though I have added links and a few additional observations.

Starting with a quote from Mercer's book, I state: "Donald J. Trump is smashing an enmeshed political spoils system to bits: the media complex, the political and party complex, the conservative poseur complex. In the age of unconstitutional government—Democratic and Republican—this process of creative destruction can only increase the freedom quotient." So begins Ilana Mercer's provocative take on The Trump Revolution: The Donald's Creative Destruction Deconstructed.

Ilana Mercer is no fan of Obama or The W who came before him, but she thinks that "Trump is likely the best Americans can hope for." She’s “not necessarily for the policies of Trump, but for the process of Trump.” This, in itself, is the most interesting of her arguments in a well-constructed book of essays that builds the case for that process. Quoting favorably the views of Justin Raimondo of antiwar.com, Mercer drives home the point, most crucial in my view, and perhaps the most appealing aspect of Trump’s foreign policy views insofar as we know them: that there is something fundamentally wrong with the way NATO functions and that the role of the United States in foreign affairs must be fundamentally re-evaluated. Trump takes pride in being an opponent of the Iraq war, which many of us predicted would lead to the kind of chaos that has developed in the ensuing years [a .pdf link to my article, "Understanding the Global Crisis"]. But no one man or even a movement of disaffected voters behind him, a mere echo of the Old Right that was “usurped by neoconservatives,” will be able to fundamentally alter the “military-industrial complex” that lies at the root of American foreign policy, or the overall government intervention that fuels it both at home and abroad.

Though Trump is probably the least homophobic of GOPers, I am still uncomfortable with his mixed views on same-sex marriage and his stances on abortion. I am uncomfortable with his talk about deporting 11 million people, and the police power that would be required to do so; I am uncomfortable with talks about building walls when it was Ronald Reagan who talked about tearing walls down (and if the reason for the Mexican wall is to keep out criminals and drugs, as claimed by Trump, then he’s not as radical a thinker as some would have us believe … since he needs to re-evaluate the whole “war on drugs” that has fueled the crime coming out of our southern neighbor). I look back at the history of stopping certain types of people from entering this country, and I see a mixed bag; after all, many Muslims have run from their own countries, ruled by extremist Islamic dictatorial ideologues, because they have faced discrimination, torture, and death in their struggles against everything from centuries-old tribalism to oppressive misogyny. This country has had a history of being afraid of outsiders, even though it was built on the backs of so many of those who came to America seeking the freedom to live and produce in peace (not to mention the shameful chapter in our history when people came to this country unwillingly to live and produce in a state of involuntary servitude). Do we need to be reminded of the Japanese-American internment camps constructed during World War II? Or of how many German Jews were denied access to America, because of highly restrictive immigration quotas, in the years leading up to and including World War II? Incredibly, widespread anti-Semitism in this country fueled the fear that some Jews were seeking refuge here and might very well be working as agents of the Nazis! How many of them ended up in gas chambers rather than in that “shining city upon a hill” that beckoned them to the promise of America?

Mercer is completely correct that much of what corrupts our political economy is the role of the state in economic affairs; such is the root of crony capitalism, championed by Democrats and Republicans alike. And like all businesspeople, Trump knows he has to wheel and deal with city, state, and federal politicians, who are corrupt almost by definition. Using things like eminent domain, however, is not the language of the free marketer; Trump can never be confused with a libertarian, no matter how much better he might be in the eyes of some, than the Establishment Politicians (and none of what I’ve said here is meant as an endorsement of Hillary Clinton, whose politics I’ll address at the end of next week’s Democratic convention).

In the end, however, it is a testament to Mercer’s muscular writing and clever reasoning that I was able to read her book in a single sitting. That is a compliment in and of itself. She challenges all of us to think about what so many thought unthinkable: that this guy often dismissed as a reality-show clown, just might become President of the United States.

I should say that I have only one personal proviso to add with regard to the Trump family; in the last year of my mother’s life, it was Blaine Trump, ex-sister-in-law of Donald (she was married to his brother Robert), who paid for Mom’s Make a Wish Foundation round trip, via luxury limousine, with her immediate family (me, my sister, brother, and sister-in-law) to Trump Plaza in Atlantic City. At a time when mom was in the throes of her five-year battle against lung cancer, it was a charitable gesture that we will always remember and cherish, and the Trump family has always played a big role in funding that foundation. That charity aside, it certainly cannot influence my views of this man’s candidacy, even if it says something positive about his character. In any event, this proviso has absolutely nothing to do with my views of Mercer’s controversial, wonderfully readable book. Buy it, read it. You won’t be disappointed.


So ends my review of the Mercer book. For Notablog readers, I would like to make a few additional points. I have long observed the pendulum phenomenon in politics, the one that emerges from the old adage: "The job of the new leader is to make the last one look good." So disgusted were Americans with the collapse of U.S. economic and foreign policy in the Bush years, that Obama was swept into office for two terms, no less, on the promises of "Yes, We Can!" Yes, we can change things fundamentally. Yes, we can end recession at home and a war without end abroad. Yes, we can. Well, as it turned out: We can't. So, disgusted Americans, especially those attracted to the GOP, but many of these partying among the Elephants for the first time as disenfranchised "blue collar" and "working class" people, have embraced Trump. They have given the Grand Old Party Establishment a Grand Middle Finger of revolt, precisely because they are revolted by the state of affairs in this country.

When I was 8 years old, I went to my first political rally, purely out of curiosity, with my Uncle Sam and my sister Elizabeth. We stood at the corner of 85th Street and Bay Parkway in Brooklyn, across from the Chase Manhattan Bank that still stands there (except the 4-sided clock that topped the building actually worked back then!)

In attendance was Vice President Hubert Horatio Humphrey fighting for the Democratic Party, in place of President Lyndon B. Johnson, who, despite having crushed the GOP's Barry Goldwater in a 1964 landslide, had announced that he would not seek re-election. The Great Society he sought to create was collapsing under the weight of an expanding welfare-warfare state. With the assassinations of Martin Luther King, Jr. and Robert F. Kennedy, Humphrey was left standing, fighting for his political life. That night in Brooklyn, the antiwar crowd, which had blamed LBJ for the thousands of soldiers coming back from Vietnam to America in body bags, drowned out Humphrey's speech by a constant refrain, screamed louder and louder: "Dump the Hump! Dump the Hump! Dump the Hump!"

Humphrey's battle was lost to the newest "Law and Order" man in town, who was actually part of the older long-time GOP Establishment. A former virulently hostile anti-communist Senator, Vice President to Dwight D. Eisenhower, Richard M. Nixon, went on to lose the 1960 election to JFK, but by 1968, he had reinvented himself into a winning candidate. And we all know what happened after that. The anti-communist shook hands with Brezhnev and Mao, one of history's greatest mass murderers (which may help us to put Obama's handshake with one of the Castro brothers into perspective). But neither law nor order followed, in the depths of Nixon's political corruption. And so, the pendulums of U.S. politics swung with ferocity against the Watergate-corrupted administration, forcing Nixon to resign, as he handed presidential power over to the thoroughly un-elected Gerald Ford. Ford went down to defeat, in the Bicentennial Year, in another pendulum swing, handing the presidency over to the bumbling ineffectiveness of one-term Jimmy Carter. And then came the ultimate swing for the fences, as former Democrat-turned-Barry Goldwater advocate, Ronald Reagan, ushered in the modern conservative movement.

And so the pendulum continues to swing from W to Obama to ... I don't know. And right now, "None of the Above" is looking mighty good to me. Given the excitement that so many have for the Trump candidacy, but who drop the context of the real dynamics of American politics, it would not surprise me if those disgusted with Obama-Clinton carry the day. It would not surprise me if Trump became President. And it would not surprise me to hear echoes of those 1968 chants all over again, as they morph from "Dump the Hump!" to "Dump the Trump!" We've been hearing variations on that, for months, in any event. Cliché though it is, time will tell.

Postscript: In discussions on Facebook, I make a few additional points. In response to one comment, raising the issue of the Libertarian Party, I write:

. . . I don't endorse Trump. Honestly, however dishonest Clinton is--and what politician isn't?--she is a known quantity, but that's not exactly a rousing endorsement either. Gary Johnson and William Weld are good men, though I have my criticisms. I would have voted for Weld way back, but he stood absolutely no chance in a socially conservative GOP. To echo the opening words from "Harry Potter and the Deathly Hallows, Part I": "These are dark times, there is no denying. Our world has perhaps faced no greater threat than it does today. But I say this to our citizenry: We, ever your servants, will continue to defend your liberty and repel the forces that seek to take it from you!" When those forces exist within your own country, you are in the darkest of times.

In reply to another comment, which stresses the point that we should concern ourselves with those things that are most within our power to control, things at the "local" level, I state:

. . . that's a very good observation. Unfortunately, however, what happens on the national level and even the global level can so intrude on the things that are more within our power to influence that it gets to the point where it becomes difficult even to make changes locally. The more complex and interrelated the world becomes, the more difficult it becomes for all of us. When an insane ideology from halfway around the world inspires local lone wolf nutjobs to attack a San Bernadino facility for people with developmental disabilities or to go into a gay nightclub in Orlando and kill 49 people, wounding another 53, the world starts to become smaller and smaller. That doesn't mean that I don't agree with your point that asserting ourselves on the local level is a good thing.

April 30, 2009

A Crisis of Political Economy (in The Freeman)

My essay, "A Crisis of Political Economy," which made its debut here on Notablog, appears in a slightly edited form in the May 2009 issue of The Freeman: Ideas on Liberty. Check it out here.

October 01, 2008

A Crisis of Political Economy

Oy, what a mess.

The "mess" of which I speak is, of course, U.S. Political Economy. And make no mistake about it: We are talking about political economy.

One of the things that I have long admired about Austrian-school theorists, such as Ludwig von Mises, F. A. Hayek, and Murray Rothbard, is their understanding of political economy, a concept that conveys, by its very coupling, the inextricable tie between the political and the economic.

When Austrian-school theorists have examined the dynamics of market exchange, they have stressed the importance not only of the larger political context within which such exchanges take place, but also the ways in which politics influences and molds the shape and character of those exchanges. Indeed, with regard to financial institutions in particular, they have placed the state at the center of their economic theories on money and credit.

Throughout the modern history of the system that most people call "capitalism," banking institutions have had such a profoundly intimate relationship to the state that one can only refer to it as a "state-banking nexus." As I point out in my book, Total Freedom: Toward a Dialectical Libertarianism:

A nexus is, by definition, a dialectical unity of mutual implication. Aristotle (On Generation and Corruption 2.11.338a11-15) stresses that "the nexus must be reciprocal ... the necessary occurrence of this involves the necessary occurrence of something prior; and conversely ... given the prior, it is also necessary for the posterior to come-to-be." For Aristotle, this constitutes a symbiotic "circular movement." As such, the benefits that are absorbed by the state-banking nexus are mutually reinforcing. Each institution becomes both a precondition and effect of the other.

The current state and the current banking sector require one another; neither can exist without the other. They are so reciprocally intertwined that each is an extension of the other.

Remember this point the next time somebody tells you that "free market madmen" caused the current financial crisis that is threatening to undermine the economy. There is no free market. There is no "laissez-faire capitalism." The government has been deeply involved in setting the parameters for market relations for eons; in fact, genuine "laissez-faire capitalism" has never existed. Yes, trade may have been less regulated in the nineteenth century, but not even the so-called "Gilded Age" featured "unfettered" markets.

One of the reasons I have come to dislike using the term "capitalism" is that it has never, historically, manifested fully its so-called "unknown ideals." Real, actual, historically specific "capitalism" has always entailed the intervention of the state. And that intervention has always had a class character; that is, the actions of the state have always, and must always, benefit some groups differentially at the expense of others.

Mises understood this when he constructed his theory of money and credit. For Mises, there is no such thing as a "neutral" government action, just as surely as there is no such thing as "neutral" money. As he pointed out in his Theory of Money and Credit (pdf at that link), "[c]hanges in the quantity of money and in the demand for money . . . never occur for all individuals at the same time and to the same degree and they therefore never affect their judgments of value to the same extent and at the same time." Mises traced how, with the erosion of a gold standard, an inflation of the money supply would diffuse slowly throughout the economy, benefiting those, such as banks and certain capital-intensive industries, who were among its early recipients.

One of the reasons a gold standard was abandoned is that a gold standard is incompatible with a structural policy of inflation and with a system heavily dependent on government interventionism.

The profiteers of systematic inflation are not difficult to pinpoint. Taking their lead from Mises, Hayek, and Rothbard and such New Left revisionist historians as Gabriel Kolko and James Weinstein, Walter Grinder and John Hagel III point out in their classic article, "Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure" (pdf at that link):

Historically, state intervention in the banking system has been one of the earliest forms of intervention in the market system. In the U.S., this intervention initially involved sporadic measures, both at the federal and state level, which generated inflationary distortion in the monetary supply and cyclical disruptions of economic activity. The disruptions which accompanied the business cycle were a major factor in the transformation of the dominant ideology in the U.S. from a general adherence to laissez-faire doctrines to an ideology of political capitalism which viewed the state as a necessary instrument for the rationalization and stabilization of an inherently unstable economic order. This transformation in ideology paved the way for the full-scale cartellization of the banking sector through the Federal Reserve System. The pressure for systematic state intervention in the banking sector originated both among the banks themselves and from certain industries which, because of capital intensive production processes and long lead-times, sought the stability necessary for the long-term planning of their investment strategies. The historical evidence confirms that the Federal Reserve legislation and other forms of state intervention in the banking sector during the first decades of the twentieth century received active support from influential banking and industrial interests. ...
Most importantly, however, cartellization of banking activity permits banks to inflate their asset base systematically. The creation of assets made possible by these measures to a great extent frees the banking institutions from the constraints imposed by the passive form of ultimate decision-making exercised by their depositors. It thereby considerably strengthens the ultimate decision-making authority held by banks vis a vis their depositors. The inflationary trends resulting from the creation of assets tend to increase the ratio of external financing to internal financing in large corporations and, as a consequence, the ultimate decision-making power of banking institutions increase over the activities of industrial corporations. Since the capital market naturally emerges as a strategic locus of ultimate decision-making in market economies, it is reasonable to assume that, by virtue of their intimate ties with the state apparatus, banking institutions will acquire an additional function within the state capitalist system, serving as an intermediary between the leading economic interests and the state.

So one of the major consequences of inflation (especially in a monetary system stripped of a gold standard) is a shift of wealth and income toward banks and their beneficiaries. But this financial interventionism also sets off a process that Hayek would have dubbed a "road to serfdom," for inflation introduces a host of distortions into the delicate structure of investment and production, setting off boom-and-bust, and "a process of retrogression from a relatively free market to a system characterized by an increasingly fascistic set of economic relationships," as Grinder and Hagel put it.

Just as the institution of central banking generates a "process of retrogression" at home, engendering additional domestic interventions that try to "correct" for the very distortions, conflicts, and contradictions it creates, so too does it make possible a structure of foreign interventions. In fact, it can be said that the very institution of central banking was born, as Rothbard argues in The Mystery of Banking (pdf at that link), "as a crooked deal between a near bankrupt government and a corrupt clique of financial promoters" in an effort to sustain British colonialism. The reality is not much different today, but it is a bit more complex in terms of the insidious means by which government funds wars, and thereby undermines a productive economy. (Of course, the funding itself benefits certain interests too, but we'll leave our sermon on the "military-industrial complex" for another day.)

So where does this leave us today?

Much has already been said about the most recent financial crisis, viewed from a radical libertarian and Austrian perspective, which helps to clarify its interventionist roots (see, for example, the links in "The Bailout Reader"). The seeds for this particular crisis were planted some years ago but the interventionist policies now being proposed and implemented have been around even longer. They are tried and true methods of further concentrating the power of "ultimate decision-making" in the state-banking nexus. (Indeed, as Robert Higgs notes, even the Federal "authority" to take over AIG is rooted in a Depression-era law. See also this post by David Theroux and the links therein, as well as commentary by Ron Paul and Sheldon Richman.)

On the current crisis, Steven Horwitz has written a superb open letter to those on the left, from which I'd like to quote at length. It explains the origins of the housing bubble in the creation of Fannie Mae and Freddie Mac, and places that crisis in a wider political-economic context shaped by governmental and Federal Reserve policies. By all means, read Horwitz's whole essay, and follow the links therein as well, which are missing in the passage cited here:

For starters, Fannie Mae and Freddie Mac are "government sponsored enterprises." Though technically privately owned, they have particular privileges granted by the government, they are overseen by Congress, and, most importantly, they have operated with a clear promise that if they failed, they would be bailed out. ... In 1995, Fannie and Freddie were given permission to enter the subprime market and regulators began to crack down on banks who were not lending enough to distressed areas. ... In addition, Congress explicitly directed Fannie and Freddie to expand their lending to borrowers with marginal credit as a way of expanding homeownership. What all of these [policies] did together was to create an enormous profit and political incentives for banks and Fannie and Freddie to lend more to riskier low-income borrowers. However well-intentioned the attempts were to extend homeownership to more Americans, forcing banks to do so and artificially lowering the costs of doing so are a huge part of the problem we now find ourselves in.
At the same time, home prices were rising making those who had taken on large mortgages with small down payments feel as though they could handle them and inspiring a whole variety of new mortagage instruments. What's interesting is that the rise in prices affected most strongly cities with stricter land-use regulations, which also explains the fact that not every city was affected to the same degree by the rising home values. ...
While all of this was happpening, the Federal Reserve, nominally private but granted enormous monopoly privileges by government, was pumping in the credit and driving interest rates lower and lower. [Ah... one way to keep those funds flowing for the Iraq war... --CS] This influx of credit further fueled the borrowing binge. With plenty of funds available, thanks to your friendly monopoly central bank (hardly the free market at work), banks could afford to continue to lend riskier and riskier.
The final chapter of the story is that in 2004 and 2005, following the accounting scandals at Freddie, both Freddie and Fannie paid penance to Congress by agreeing to expand their lending to low-income customers. Both agreed to acquire greater amounts of subprime and Alt-A loans, sending the green light to banks to originate them. From 2004 to 2006, the percentage of loans in those riskier categories grew from 8% to 20% of all US mortgage originations. ... The banks were taking on riskier borrowers, but knew they had a guaranteed buyer for those loans in Fannie and Freddie, back[ed], of course, by us taxpayers. Yes, banks were "greedy" for new customers and riskier loans, but they were responding to incentives created by well-intentioned but misguided government interventions. It is these interventions that are ultimately responsible for the risky loans gone bad that are at the center of the current crisis, not the "free market."
The current mess is ... clearly shot through and through with government meddling with free markets, from the Fed-provided fuel to the CRA and land-use regulations to Fannie and Freddie creating an artificial market for risky mortgages in order to meet Congress's demands for more home-ownership opportunities for low-income families. Thanks to that intervention, many of those families have not only lost their homes, but also the savings they could have held onto for a few more years and perhaps used to acquire a less risky mortgage on a cheaper house. All of these interventions into the market created the incentive and the means for banks to profit by originating loans that never would have taken place in a genuinely free market.
It is worth noting that these regulations, policies, and interventions were often gladly supported by the private interests involved. Fannie and Freddie made billions while home prices rose, and their CEOs got paid lavishly. The same was true of the various banks and other mortgage market intermediaries who helped spread and price the risk that was in play, including those who developed all kinds of fancy new financial instruments all designed to deal with the heightened risk of default the intervention brought with it. This was a wonderful game they were playing and the financial markets were happy to have Fannie and Freddie as voracious buyers of their risky loans, knowing that US taxpayer dollars were always there if needed. The history of business regulation in the US is the history of firms using regulation for their own purposes, regardless of the public interest patina over the top of them. This is precisely what happened in the housing market. And it's also why calls for more regulation and more intervention are so misguided: they have failed before and will fail again because those with the profits on the line are the ones who have the resources and access to power to ensure that the game is rigged in their favor.

This is precisely correct; indeed, there are those of a certain political bent, who might seek to place blame for the current financial crisis on the recipients of subprime mortgages, particularly those in minority communities. But if elements of the current housing bubble can be traced to Clinton administration attempts to appeal to traditional Democratic voting blocs, it's not as if the banks were dragged kicking and screaming into lending those mortgages. This is, in a nutshell, the whole problem, the whole history, of government intervention, as Horwitz argues. Even if a case can be made that the road to this particular "housing bubble" hell was paved with the "good intentions" of those who wanted to nourish an "ownership society," their actions necessarily generated deleterious "unintended consequences." When governments have the power to set off such a feeding frenzy, government power becomes the only power worth having, as Hayek observed so long ago. If our Presidential candidates wish to end the influence of Washington lobbyists, they should consider ending the power of Washington to dispense privilege. Because that privilege will always be dispensed in ways that benefit "ultimate decision-makers."

It is not simply that intervention breeds corruption; it's that corruption is inherent in the process itself.

It is therefore no surprise that the loudest advocates for the effective nationalization of the finance industry are to be found on Wall Street; at this point, failing financiers welcome any government actions that will socialize their risks. But such actions that socialize "losses while keeping the profits in private hands" are a hallmark of fascist and neofascist economies. They are just another manifestation of "Horwitz's First Law of Political Economy": "no one hates capitalism more than capitalists."

In the end, the proposed Paulson Plan is nothing more than a "heist," as Robert P. Murphy argues, "a grand scheme in which the public will end up owing hundreds of billions of dollars to holders of new debt claims issued by the US Treasury." Such a plan will only compound the problem. As Frank Shostak explains, government policies that try to prevent

a fall in the stock market cannot prevent a fall in the real economy. In fact, the real economy has already been damaged by the previous loose monetary stance. All that the fall in the stock market does is inform us about the true state of economic conditions. The fall in the price of stocks just puts things in a proper perspective. The fall in the stock price is just an acknowledgment of reality.

By not allowing market participants to work through the distortions therein created, government might very well plunge "the economy into the mother of all recessions."

Of course, there is a lot more that needs to be done to correct this economy structurally, but have no fear: Such structural change will not come to this economy without fundamental intellectual and cultural change. That, my friends, is not on the menu. The chefs who prepare the current menu of "choices" belong to a loosely defined political-economic class, centered around that "state-banking nexus" I mentioned earlier. The "choices" they offer might modify the regulations here or there, free up some institutions, while regulating others more heavily. They can only hope that their limited choices will guide them out of the current crisis, while still enabling them to retain their hold on "ultimate decision-making." And they have been, in the past, remarkably effective at steering a course between "extremes," which is why the system has never toppled. (With regard to the "stability" of the current system, I strongly recommend a book by Sanford Ikeda on the Dynamics of the Mixed Economy: Toward a Theory of Interventionism, though it might make you feel that we're doomed and that nothing will ever change fundamentally.)

If all of this sounds diabolically conspiratorial, well, it is, in a sense, even if the "ultimate decision-makers" are not getting together in a single room trying to hatch the next great conspiracy. In fact, the reality is uglier: The culture of conspiracy is such that these plans are being hatched, ad hoc, by those within that state-banking nexus, presented to the public as the next great "rescue plan" for the "common good." Yet nobody inside or outside that nexus has the knowledge to coordinate any centrally-guided plan to "correct" the economy. But try to "correct" it, they will. Lord help us.

That's why, I maintain, it does not matter one iota who gets elected President. The emphases might vary slightly under Obama or McCain, but the fundamentals of U.S. political economy, and, I should add, U.S. foreign policy, will not change. Indeed, even for those of us who view the current Bush administration as the worst in our history, well, certainly the worst in our lifetime.... it is clear that nothing proposed by Obama or McCain is going to change the structural defects of this system.

It is the government's monetary, fiscal, and global policies that have created insurmountable debt and record budget deficits, speculative booms and bubble bursts. In such a "crisis of global statism," nationalizations and bailouts are not the only goodies in this "rescue package," being wrapped up as an unwanted gift for taxpayers. And because there is an organic link between domestic and foreign policy, be prepared for even more tragic fiscal and monetary irresponsibility at home, and an ever-expanding institutionalized war abroad.

Indeed, the "ultimate decision-makers" of U.S. political economy have a host of new battlefields on which to wage war, both literally and figuratively, in their efforts to stabilize the ship of state. None of the choices being offered will challenge their hegemony or topple them from their positions of power.

But a war beckons; it is primarily an intellectual and cultural one, and it must begin by questioning the fundamental basis of the current system---in any effort to overturn it.

Mentioned at L&P and Mises.org.

September 16, 2005

Bush, Krugman, and the Old Deal

Today's NY Times article by Paul Krugman, "Not the New Deal," gave me a few chuckles.

With George W. Bush projecting a huge federal government effort to reconstruct Louisiana and Mississippi and other areas affected by the devastation of Hurricane Katrina, fiscal conservatives are already murmuring. But little stands in the way of this vast projected increase in government spending.

As my colleague Mark Brady has asked: "Did You Really Expect Anything Else?"

A Bush critic such as Paul Krugman is busy objecting to a Heritage Foundation-inspired plan that would include "waivers on environmental rules, the elimination of capital gains taxes and the private ownership of public school buildings in the disaster areas." But he also believes that "even conservatives" must recognize that "recovery will require a lot of federal spending." Since this will have an appreciable effect on the deficit, Krugman wonders "how ... discretionary government spending [can] take place on that scale without creating equally large-scale corruption." Given the Bush administration's penchant for awarding so much pork to favored corporations in places like Iraq, Krugman is understandably concerned about "cronyism and corruption."

This, says Krugman, is in marked contrast to the efforts of Franklin Delano Roosevelt, whose "New Deal" provided "a huge expansion of federal spending" without corruption or cronyism. The New Deal, says Krugman, "made almost a fetish out of policing its own programs against potential corruption. In particular, F.D.R. created a powerful 'division of progress investigation' to look into complaints of malfeasance in the W.P.A. That division proved so effective that a later Congressional investigation couldn't find a single serious irregularity it had missed." For Krugman, FDR was committed to "honest government," because he understood that "government activism works. But George W. Bush isn't F.D.R. Indeed, in crucial respects he's the anti-F.D.R."

Is Krugman kidding me?

Throughout his presidency, Bush has looked to such American Presidents as Woodrow Wilson and FDR for inspiration. Bush believes that FDR himself "gave his soul for the process" of taking America out of the Depression and into a world war against authoritarianism.

As for the New Deal: There are no "honest government" spending programs that don't involve some kind of structurally constituted cronyism and corruption. That's just the nature of the beast. And FDR's New Deal is no exception. It was, in many ways, a paradigmatic case, no different from the "war collectivism" policies of World War I or World War II, all of which entailed using the vastly expanding power of government to privilege certain groups at the expense of other groups. Not even Herbert Hoover's response to the government-engendered Great Depression was "laissez faire" (see Rothbard's "Herbert Hoover and the Myth of Laissez-Faire" in A New History of Leviathan, and, of course, his fine book on the subject).

A cursory look at Jim Powell's recent book, FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression reveals "why so much New Deal relief and public works money [was] channeled away from the poorest people." From its inception, the New Deal was inspired by the corporatist model of Italian fascism. Even Krugman's beloved Works Progress Adminstration was constructed on the basis of patronage schemes. Citing economic historian Gavin Wright, Powell tells us that "a statistical analysis of New Deal spending purportedly aimed at helping the poor" gives us evidence that "80 percent of the state-by-state variation in per person New Deal spending could be explained by political factors."

Mainstream politics offers no genuine opposition to FDR's Old "New Deal" or Bush's New "Old Deal," not when "conservatives" and "liberals" are united in their support for massive government intervention.

Comments welcome. Cross-posted to L&P and Mises Economics Blog.

December 21, 2004

Social Security Links

I recommended to Arthur Silber (Eureka!) a host of links on Social Security reform, posted by Ari Armstrong at Colorado Freedom Report. It's good reading.

November 23, 2004

PBS and Wal-Mart

I comment on Keith Halderman's L&P post, "End Taxpayer Support of PBS Propaganda," with a question of my own: "End Taxpayer Support of ... Walmart?"