Friday, June 5, 2009

Bertrand de Jouvenal on the Bush-Obama Bailouts

De Juvenal takes a quote from Rostovtzev's "Social and Economic History of the Roman Empire" (quoted on p. 190 of "On Power"). He may as well be talking about the bailouts, Wall Street and America's special interest economy, courtesy of Democrats and Republicans:

"The reforms of Diocletian and Constantine, by implementing a policy of systematic spoliation to the profit of the State, made all productive activity impossible. The reason is, not that there were no more large fortunes: on the countrary, their build-up was made easier. But the foundation of their build-up was now no longer creative energy, or the discovery and bringing into use new sources of wealth, or the improvement and development of husbandry, industry and commerce. It was, on the contrary, the cunning exploitation of a privileged position in the State, used to despoil peole and State alike. The officials, great and small, got rich by way of fraud and corruption."

De Juvenal remarks:

"All that can be said is that contemporaries get the feeling of progress right through the period in which the state is building up, a feeling comparable to the sense of well-being, which in an economic cycle accompanies the period of high prices. When the process nears its apogee, the more sensitive spirits are assailed by feelings of doubt and dizziness...

"Then the question is heard again whether the egalitarian society, which is the handiwork of the despotic state, is more or less advantageous to the mass of workers than a society of independent authorities..."

The irony about the United States is that in the 1880s and 1890s, before the establishment of the "Progressive" state, immigrants were flocking here at a rate of between 100,000 and over 500,000 per year, real wages were rising at more than 2% per year, and living standards of the common man had doubled in 40 years, between 1849 and 1889. More liberty was enjoyed than anywhere else in history and the savings rate of the average person was increasing rapidly.

In its place, led by the "Progressives" Theodore and Franklin Roosevelt and Woodrow Wilson and the establishment of the Federal Reserve Bank, Americans established a system whereby, since 1970, real wages have declined. In the past 10 years the number of years that the average person has needed to work to pay for a house with 100% of his untaxed wages has doubled from 3.6 years to 7.2 years. America went from a federal income tax of 10% in 1950 to a situation now where tax rates are so punitive that saving is all but impossible, where massive amounts of money are transferred to wealthy clients of the Democrats and Republicans via the Federal Reserve Bank's inflation (which subsidizes the stock and real estate markets at the expense of real wages), and the New York Times tells us that the only problem facing America is that taxes aren't high enough.

Thursday, June 4, 2009

How Universities Systemically Expand State Power

Bertrand de Jouvenal's argument concerning the relentless expansion of the state since the Middle Ages is based on the unfolding of monarchy from the twelfth to the twentieth centuries. In the nineteenth century monarchy changed its form of sovereignty from the divine right of kings to popular sovereignty, and the realization of sovereignty from the monarch in flesh to a reified "national will" that, of course, becomes the property of elites. De Juvenal points out that Philip Augustus, the king of France from 1180 to 1223, had to live off his own resources. His only army was a small bodyguard. He had no officials. He depended on Church resources for all official business. But by the reign of Louis XIV, the French king's army was 200,000 men. "He gives out laws and sets his dragoons at those who do not worship God in what he considers the right way; an enormous army of officials animates and directs the nation." (p. 141, On Power).

The expansion of the state continued unabated until World War II. Hitler, in 1939, could command the entire German nation to destroy itself and to murder entire ethnic groups. Since then, there has been further growth in state power in many parts of the world. In terms of relative size, the Soviet- and National-Socialist states could not push power further because those societies were 100% socialized. But in terms of absolute size, the creation of technology in the non-socialist states has been used to increase the state's size. In the United States, the process of monarchization of the nation has proceeded unabated. Government today is far larger than ever before.

One of the concomitants of increasing governmental size is political correctness or mono-thought across a large swathe of the population. The famous argument in Davud Riesmann's Lonely Crowd is that a psychological change occurred from inner to other-directedness. But this may be most characteristic of America, where monarchical power in the name of popular will replaced Lockean liberalism, not monarchy. Likely, other-directedness always had been characteristic of aristocratic Venice, London and Paris.

De Jouvenal makes a crucial point--that there is a direct relationship among social theories, mass movements and state expansion. That is, the groupthink of other-directed political movements that generate widespread unison of thought by its own nature generates state expansion. Moreover, universities that advocate simplistic ideological cure-alls for society such as Keynesian economics, social work, government regulation and the like are inevitably generative of state expansion. This is so because of the combination of the egos of government officials, who derive gratification from imposing their ideas and their will on society; and the simplicity of the ideological solutions that universities propose and seldom if ever work. Big egos need simplistic solutions in order to feel good about themselves.

One of the ramifications of this is the derivation of ego-gratification by mass followers of Power. The majority of the population does not have a crack at implementing its own ideas and experiencing the ego-enhancement that power brings to the powerful. Rather, it is through psychological displacement that large numbers of people identify with one or other of the ego-elements in society--Barack Obama or George Bush--and gain ego-fulfillment by identification with a stronger element, father figure or the like. By parroting the half-baked claims of Harvard economists, members of mass society gain ego fulfillment by feeling that they are identified with the media or intellectual elite. For Democrats and RINO Republicans this is the role that the New York Times plays. For Republicans this is the role that Rush Limbaugh and other talk radio announcers play.

Of course, the theories of both Democrats and Republicans are wrong. Simple theories do not generally do well when confronted with reality. Rush Limbaugh claims to be for smaller government, but when his candidates are elected they expand government to a much greater degree than the candidates he opposes. Barack Obama claims to be for the middle class and poor, but when the opportunity arises to hand several trillion dollars to the very wealthy at the expense of the middle class and poor, he leaps at it like a terrier leaps at a Porterhouse steak.

Universities generate not solutions but ideologies. The powerful pick up on the simpletons' ideologies that universities generate and use state power to enhance their egos. Universities benefit from the support that power confers on them.

De Juvenal writes (p. 144, On Power):

"In the realm of nature there is nothing else to satisfy the human spirit's primitive passions. In love with his own experiments, with the simple relationships and direct causations his brain can grasp, and with the artless plans which he is wise enough to construct, man wishes that the whole created world may show itself built not only with the same instruments as he possesses but also by the same turns of skill as he has mastered. Rejoicing as he does in all that can be brought to uniformity, he is forever being disconcerted by the infinite variety which nature herself seems to prefer, as instanced by the chemical structure of organic bodies.

"It is an agreeable game, imagining how man, if he had the power, would reconstruct the universe--the simple and uniform lines on which he would do it. He has not that power, but he has, or thinks he has, the power of reconstructing the social order. This is a sphere in which he reckons that the laws of nature do not run for him, and there he tries to plant the simplicity which is his ruling passion and which he mistakes for perfection."

De Jouvenal on the Public Loss Function

The notion of a loss function is the basis of total quality management. Quality losses appear when the realization of an output deviates from its target qualities. For instance, if a nail is supposed to be 6 inches long, and it comes off the conveyer belt measuring 6.0000001 inches, the .0000001 is a loss. Total quality management is a process of reducing the loss by investigating deviations that are more than three standard deviations from the target.

De Jouvenal argues that Power, the governing elite, derives historically from conquest. In European history this took the form of the conquest of the Roman territories and Rome itself by the Franks, Goths, Angles, and other Barbarians. In China this took the form of the unification of China by the Duke of Zhou and Qin Shi Huang's reunification following the warring states period. Qin, by the way, buried China's scholars alive, a fate I have dreaded after seeing the movie The Vanishing.

The monarch or leader of the conquering tribe exploits the conquered population rather than kill them. The invention of slavery reduced the amount of killing because the conquerers learned to make use of the conquered economically. The king realizes that the nobility, the leaders of his army, pose a threat to his power. Over time, perhaps multi-generationally, the king realizes that by taking the side of the conquered against the nobility he can reduce the power of the nobility and enhance his own power. This happened in England in the 1500s. The establishment of the Chinese Civil Service was within roughly two centuries of the Qin Shi Huang's reunification of China. In America, the Progressives, representatives of big business, realized that they could work with populist and socialist movements by saying that they were against the trusts, and in doing so bring regulations that attacked the rising entrepreneurs and benefited big business to bear. Thus, the king creates a bureaucracy or civil service that aims to provide social benefits in order to unite the people against the nobility. This occurred in modified form in the United States. Abraham Lincoln had enhanced federal power in the 1860s, and Progressivism appeared within 40 years.

Ultimately the people realize that the king can be replaced with the popular sovereignty or national will, which of course are non-existent imaginings. The king is deposed and democracy replaces the monarchy. The unlimited definition of democracy, in turn, leads to tyranny. Thus, the French Revolution led to killings by Jacobins, Robespierre and the Committee of Public Safety; the democratic revolution of Sun Yat Sen led to the tyranny of Mao Tse Tung; and the overthrow of the Czar led to the Bolshevik Revolution.

In America De Jouvenal's model does not apply exactly because there was no monarch. Also, Rousseau's unlimited theory of democracy did not take hold. Rather, Lockean liberalism limits the power of democracy. Hence, the tyrannies and suffocating power of government that took hold in backward Europe and Asia did not occur here. However, America's elite, jealous of the wonderful triumphs in Europe, aimed to introduce Rousseauean unlimited democracy here. Just two decades before the ascension of both Hitler and Stalin, Herbert Croly, Walter Weyl and Theodore Roosevelt argued for Progressivism. Croly's book glorifies the state and is very much in the tradition of German historicism, as was Progressivism in general.

The notion of a loss function is that the action of a producer can be improved by reducing losses. Many will argue with the claim that unlimited democracy leads to tyranny. However, whether you believe that unlimited democracy leads to social justice and benefits society, or whether you believe that limited government is better at achieving those ends, the question needs to be asked what the method of achieving each citizen's best interests can be. In other words, even if unlimited democracy and the state apparatus can advantage society, the question needs to be asked what method of execution or production will work best. It is unlikely that the centralized state by which Progressives hoped to emulate European Christian Socialism and social democracy (and itself was but an extension of monarchy, according to De Juvenal) is best at meeting public needs even if the state is better at meeting public needs than are private firms. The reason is bounded rationality.

Bounded rationality was discussed by March and Simon with respect to organizations in their book Organizations. Walter Lippmann discussed the idea with respect to public opinion in his book Public Opinion. Ludwig von Mises discussed it with respect to centralized economic planning. And De Jouvenal discusses it with respect to the ability of the state to achieve the objective of the common good.

Naturally, he mocks the idea that Power (as he defines it, the elite that governs society) has the common good in mind. This is the assumption of all advocates of big government, socialism, Progressivism, social democracy and the like. The notion that people seek power out of altruistic ends is laughable. We see this today with the naive news broadcasters, like CNN's Jack Cafferty, who offer prayers to Saint Barack Obama and his colleague, Lou Dobbs, whose head touches the floor seven times whenever Saint Barack's name is mentioned. But De Jouvenal grants this assumption.

He notes:

"But as soon Power is conceived as being exclusively the agent of the common good, it must form a clear picture for itself of what this common good is. While Power was eogist, the vital necessity under which it lay of reaching every day a daily accommodation with society, itself sufficed to form in it pictures of public requirements which, though confused, were born of actual contacts. But as soon as Power, under the spur of altruism, has a vision of the entire community and what medicine it needs, the inadequacy of human intelligence to such a task appears in its fullness. What the judgment pronounces then shows itself a blinder guide than what the senses indicate--to put it another way, touch is superior to vision.

"It is a noteworthy fact that all the greatest political mistakes stem from defective appraisals of the common good--mistakes from which egoism, had it been called into consultation, would have warned Power off." (On Power, p. 137).

In organizational theory, it is well established that one of the cures for cognitive limits on rationality is decentralization or divisionalization of organizations. Thus, one way to address the problem of the social loss function that government creates is to reduce the scope of governance. In other words, to download responsibility to the states.

American government anticipated this idea in the form of Federalism. However, the tendency over the past two centuries has been to reduce the power of the states and increase the monarchical power of the federal government. The reason for this is, as De Jouvenal points out, the economic, political and egoistic interests of the ruling elite--the politicians in Washington, the Justices of the Supreme Court, the academics who cater to them and receive significant jobs and consulting contracts, and the military industrial complex.

The monarchical process thus results in one rather odd effect: that a key finding of the social sciences, that information is difficult to procure; that rationality is limited; and that experimentation is the best way to learn; is scoffed at by judges, economists and academicians, whose economic interests take precedence over their interest in pursuing justice or the truth.

Wednesday, June 3, 2009

Bertrand De Jouvenal on the Equivalence of Progressivism and Corporate Conservatism

"Every association of men shows us the same spectacle. When once the social end ceases to be continuously pursued in common (as happens, for instance, in an association of pirates, where there must be a chief, but where no active body emerges over a passive generality) and becomes the permanent charge of one differentiated group, to be interfered with by the rest of the associates only at stated intervals--when once the differentiation has come about, then the responsible group becomes the elite, which acquires a life and interest of its own.

"It withstands on occasion the mass whence it came. And it carries the day. It is hard in reality for private persons attending a meeting, taken up as they are with their own concerns and without having concerted among themselves beforehand, to feel the confidence necessary to reject the proposals which are cleverly presented to them from the platform, and the necessity for which is supported by arguments based on considerations of a kind to which they are strangers."

De Juvenal shows that power is monarchical in nature. The popular sovereignty-based power of Progressivism is an imitation of European monarchy. Europe arrived at this model, shows de Juvenal, via monarchy. Dirgisme, strong state power, is the function of monarchy legitimized by popular sovereignty that has replaced the monarch with the "national will", an abstract concept that is vacuous of meaning. Thus, power becomes the possession of a group of self-interested activists or demagogues who claim to reflect the "national will". In the case of corporate conservatism, the argument is that the efficiency of corporations entitles them to special consideration. This is the corporate conservative view. But the corporations are not efficient and they cannot be because if they were there would be no motive to act as special interests in claiming state privilege.

Both corporate interests and social democratic cliques claim to serve the public. The corporate interest claims to do so through efficiency, when it is actually inefficient. The social democratic clique claims to do so when it actually serves itself.

Progressivism and progressivism, corporate conservatism and social democracy, are the same ideology with two rival gangs competing for power.

What is to be done? The alternative ideology to Progressivism and progressivism is Lockean liberalism: the insistence on individual rights; the insistence on no special treatment for any party; and skepticism that the state has the ability to create benefits out of thin air. This skepticism leads directly to a rejection of Keynesian economics; of socialism; and of social programs that have caused more harm than good.

Tuesday, June 2, 2009

Bertrand de Jouvenal on the Divorce Between Socialism in Theory and in Practice

"Once it is admitted that Power may forswear its true reason and end, and as it were, detach itself from society to form far above it a separate body for its oppression, then the whole theory of Power's identity with society breaks down before this simple fact.

"At this point nearly all who have written on the subject look the other way. A Power which is both illegitimate and unjust is off their intellectual beat. This feeling of repugnance, while it is understandable, has to be overcome. For the phenomenon is of too frequent occurrence to give any chance to a theory which does not take account of it.

"It is clear enough how the mistake arose: it was from basing a Science of Power on observations made, as it is history's business to make them, of Powers whose relations with society were of one kind only; what are in fact only its acquired characteristics were thus mistaken for Power's essence. And so the knowledge acquired, while adequate to explain one state of things, was quite useless in dealing with the times of the great divorces between Power and society.

"It is not true that Power vanishes when it forswears its rightful begetter and acts in breach of the office which has been assigned to it. It continues as before to command and to be obeyed: without that, there is no Power--with it, no other attribute is needed."

----Bertrand de Jouvenal, On Power: The Natural History of Its Growth, p. 108

In the 1950s Stanley Milgram showed that conformity to authority comes naturally to a large segment, and likely a majority, of the population. All that is required to confer legitimacy on a Sovereign is an appropriate title or costume. Under laboratory conditions between 30 and 60 percent of the population will be willing to kill another person upon a scientist's command.

De Jouvenal points out that two restraints on European kings limited their exercise of power to a greater degree than modern democracy is limited. These were custom and the Church. Legal doctrines received from the Barbarian Codes and from the Romans left European kings with strictly delineated authority. Moreover, the power of the nobility, the dux, countered the power of the rex. Viewed historically, power seemed limited to historians of the 19th century because the kings never knew unlimited power until the Protestant Reformation, which overthrew custom and created the conditions for the argument of the divine right of kings. At the same time, the argument of popular sovereignty derived unlimited power from the popular will. Thus, the two doctrines of the divine right of kings and popular sovereignty evolved at the same time and considerably extended the possibility of power.

Historians could not anticipate the tragic consequences that would emanate from the unrestrained popular will of Rousseau, Hobbes, Hegel and Marx. Even the arch-capitalist Herbert Spencer was taken by surprise. He had argued that the organic evolution of the state in light of popular sovereignty would be in the direction of reductions in state power rather than more.

America was spared the Rousseauean tragedy because Locke did not claim that the people bestow all liberties on the general will, or that there is a general will at all. Unlike Rousseau and Hobbes, Locke saw only a limited granting of rights to the state. This limitation on state power creates a considerable distance between American and European democracy. Jefferson did not see this difference between the French and American Revolutions. That is one point on which Hamilton and Washington, the Federalists, were right and the Democratic Republicans were wrong. In America, Thomas Paine was exalted. In France, he was imprisoned.

Progressivism is a reassertion of Rousseauean values. The extent of the damage that Progressivism has done has yet to be seen.

Monday, June 1, 2009

Michael Mooron Aims to Build Mass Transit For Suburbanites

General Motors went bankrupt in 1919, 90 years ago, and the current bankruptcy has antecedents that are instructive. GM also was reorganized in the 1920s, when the DuPonts, the firm's chief stockholders, removed its founder, William Durant, for manipulating the firm's stock price. Pierre DuPont ran the firm briefly and hired Alfred Sloan, a managerial genius after whom are named MIT's Sloan School of Management (Sloan was an MIT alum) and the Sloan-Kettering Memorial Cancer Center in Manhattan. (Kettering was Sloan's R&D vice president and inventor of the self starting engine and many other automotive breakthroughs.)

The management policies that Sloan implemented transformed GM from a poor second to Ford to the world's largest manufacturing firm. Part of Sloan's insight involved decentralizing or divisionalizing the firm; creating price-based target markets for the automotive divisions; using return on investment to evaluate performance; and targeting higher-priced cars in order that used GMs would compete with the lowest price car--the Ford Model T. Sloan envisioned the used car market, and indeed, by the 1920s used GMs and other brands began to compete with the cheap Model Ts, but not the higher-end GM cars.

The reason Sloan was able to turn around GM was his managerial ability. In particular, Sloan understood markets; he established a market research system; he understood customers; he enhanced and utilized relationships with dealers; he developed cost efficient organizational structures; and he provided incentives for competent management and innovation. Sloan's sharp management skills contrast with the examples of public mismanagement that Michael Moore presents in his film Roger and Me. In the film, the Flint municipal government squanders millions on nonsensical investments like a theme park called "Auto World"; a useless hotel; and an effort to draw tourists to visit Flint.

But the mechanistic management style that Sloan represented had several flaws. Sloan was bad at labor relations and politics. As a result, he became a sacrificial lamb to Franklin D. Roosevelt's New Deal. The unionization of GM could have been implemented in a way to enhance GM's strategic advantage, but instead Sloan created an atmosphere of adversarial labor relations from which the firm never recovered. He was attacked not only by sit down strikers but also by Secretary of Labor Frances Perkins and, if I recall, Roosevelt himself.

Likewise, Sloan failed to develop a succession plan. The executives who followed him at GM were not his equals. Managerial breakthroughs were being made in Japan by the 1950s, yet the GM management was not able to imitate the ideas that Toyota pioneered.

The failure of GM was well documented in the 1972 On a Clear Day You Can See General Motors by De Lorean and Wright. As well, Peter Drucker had written a rather positive account of the firm in the late 1940s entitled Concept of the Corporation, to which the management reacted with considerable hostility. Sloan responded with his 1962 classic My Years with General Motors which is one of the best management books ever written. GM's paranoia about criticism ran deep, and its culture of conformity and groupthink undoubtedly contributed to its demise.

There is a long litany of critics of General Motors and the automobile industry, one of whom is Ralph Nader and another is Michael Moore. Moore's Roger and Me is a darn good film. Unfortunately, Moore's political ideas are downright Mooronic.

Jim Crum just sent me this drivel that Moore wrote about socializing the firm and turning it into a mass transit manufacturer. Moore's strategy is similar to the woman's in his film who conceptualized Flint as a tourist Mecca--and who upon failure made her destination to be tourism czar of Tel Aviv just as the Palestinian Intafada was about to start.

If GM is to be turned around it needs to clean house; eliminate management at the departmental head level and above; and institute nuts-and-bolts, quality-oriented managers who can institute lean manufacturing and a culture of innovation and cooperation. Imposition of the rancid, socialistic tripe that Moore has on offer will create another New York City subway system in the form of General Motors.

One of the problems with America today is that America's wealthy, including Moore, are economically illiterate and persistently self serving. Moore is one of the few who can afford an expensive apartment in Manhattan. He lived on 83rd off Broadway when I lived on Riverside Drive and 87th. I was there because my in-laws lived there. He was there because plunking down $1 or $2 million for an apartment is chicken feed for a Hollywood guy.

Thus, Moore makes the assumption that all Americans live in Manhattan and can afford the $1 million for a one bedroom apartment, just like he can. As a result, all Americans will benefit from more mass transit.

But if anything is worse managed than GM, it is New York City's subways. Moore probably doesn't take the subway. Rather, he is likely chauffeured around, possibly in a specially built hybrid Humvee to accommodate his frame. I doubt he could fit into one of those mini-van style taxis that are environmentally friendly and coming to dominate the New York taxi scene. As well, I suspect his flatulence is a bigger problem than the bovine flatulence and porcine waste about which environmentalists like to complain.

The New York City subway is a nightmare institution. Rats scurry hither and yon. When I travel to Brooklyn, there are 20 people in the subways and thousands above ground in Humvees and Cadillacs. Maybe most of the cars aren't GMs, but building more subway cars isn't going to change that because the subway system is so incompetently managed by the Metropolitan Transit Authority that it would have gone bankrupt 40 years ago if it were a private firm. Of course, before the city took it over in the 1930s, the subways were clean and attractive and the subway firms viable. Now, Moore is looking to turn GM into another incompetently managed subway system. To him, the way to turn around GM is to turn a third rate private firm into a twentieth rate public sector one.

Moore is right to criticize GM's management, but he is one of the few people who feel themselves qualified to comment on management issues whose ideas are more blundering and stupider than Wall Street's or GM's. Socializing GM is guaranteed to establish a management even stupider than Roger Smith. And Moore, a robotized advocate of socialism who has never seen a public institution he was willing to criticize, no matter how putrid, won't be around to tell the tale.

Moore writes:

1. Just as President Roosevelt did after the attack on Pearl Harbor, the President must tell the nation that we are at war and we must immediately convert our auto factories to factories that build mass transit vehicles and alternative energy devices. Within months in Flint in 1942, GM halted all car production and immediately used the assembly lines to build planes, tanks and machine guns. The conversion took no time at all. Everyone pitched in. The fascists were defeated.

Sunday, May 31, 2009

The Coming Crisis of Legitimacy in American Government

Legitimacy refers to a concurrence of belief. In American government and politics, political legitimacy has been associated with the Constitution. The traditional American value system, Lockean liberalism, requires a limited state, and the Constitution reflects that value. There has always been debate among Americans as to how limited the state ought to be. Traditionally, special interests, to include the wealthy, manufacturing and banking interests, favored government intervention to further their goals. The working class, while poor, favored greater limits on government intervention to permit their acquisition of wealth. In the early twentieth century to the 1930s the model was modified. A strong element of social democracy was introduced. American social democracy was reconciled to Lockean liberalism in an uneasy balance. A social minimum or floor was established, as reflected in Social Security and Aid to Families with Dependent Children. Standards of professionalism were established in a wide range of fields. For example, with respect to the workplace, laws concerning health and safety, retirement plans, discrimination, and overtime were established. Although the late nineteenth century doctrines of free contract were overturned, a wide latitude for contracting remained. The social democratic laws did not interfere with a wide range of economic activity. Taxes were kept moderately low, at least in comparison with Europe. Where taxes were high, as with respect to inheritance, numerous loopholes were created.

This system is unstable because there is no dividing line between the principles of Lockean liberalism on which the system is based and the system of social democracy that was superimposed on it. To achieve balance Americans needed to constantly reformulate the principles of Lockean liberalism and social democracy. But to reformulate the balance, Americans must understand Lockean liberalism and social democracy. Yet, many Americans never bought into the social democratic system, and many never bought into Lockean liberalism. From the beginning some Federalists rejected principles of limited government. Europeans who immigrated here by the 20th century were unfamiliar with Lockean liberalism. The education system kept their descendants in the dark. On the one hand, Locke is not part of the education of American students today. He is ignored in the curriculum, and the education schools shun him. Therefore, there is no avenue by which many Americans can learn the foundation of one half of the equation.

On the other hand, the scale is heavily weighted toward social democracy. But the American system of business, innovation and progress depends on Lockean liberalism. Socialism and social democracy are incapable of generating progress, and there has been no progress of substance made in socialist or state-dominated countries. Sweden, for instance, grants prizes in innovation to others but itself has been responsible for little in the past century. In Japan, the most famous principles of business, lean manufacturing and total quality management, were created by Toyota's Taiichi Ohno and by the American consultant Edward I. Deming. The government policies in Japan, subsidies to banks, infrastructure, bailouts, and centralized planning have failed.

The educational system has been particularly aggressive in its rejection of Lockean liberalism. But no system of rights is based on logical necessity. The German university, the prototype of the American educational system, claimed to derive the necessity of social democracy from historical forces. Yet in America historical forces tended toward laissez-faire. But the adherents of the German historical school, such as John R. Commons, claimed to derive the necessity of social democracy from historical forces anyway.

Likewise, conservatives claimed to derive the precariously balanced system of Progressivism from tradition. Yet, there was no Progressive tradition. Indeed, there is no American political tradition. American government was created from scratch by colonists in the 17th and 18th centuries. The Declaration of Independence was a logical assertion of Lockean liberalism, and the Constitution imposed a Federalist superstructure. None of these institutions were derived from ancient tradition as in tribal and Roman Europe, the Middle East or Asia.

American conservatism can have meaning only to those who believe that social democracy is the future. To counterpoise "conservatism" to social democracy is to start by stating that you aim to lose the argument. Thus, the American conservative movement failed.

There is no logical coherence to social democracy. Social democracy depends on the mystical assumption that one must obey the state. Yet there is no moral necessity of obedience to social democracy any more than there is a moral necessity of unlimited laissez-faire. As de Jouvenal points out, democracy is attended with increasing levels of state compulsion to enforce the increasingly aggressive dictates of the democratic state. De Tocqueville called this the tyranny of the majority. Social democracy depends on mystical assertions of a "general will" which directly parallels the monarchical "divine will" of Filmer. Social democracy claims a moral foundation based on the logical necessity of risk aversion or minimizing the maximum possible loss, but there is no such logical necessity. Lockeans believe that progress depends on risk, and history has substantiated this opinion. Minimizing maximum loss is the philosophy of tribal cave men, not of free republicans. Yet the cave man theory of government is the one to which social democrats adhere. If many Americans have adopted the minimizing-maximum-loss value system it is because they have never been given a chance to learn what the American philosophy is.

Thus, American higher education has replaced the moral superstructure of Lockean liberalism with the moral superstructure of social democracy. Neither has foundation in logic, but the effects of both can be tested. Germany first adopted social democracy in the 1880s. The century following the adoption of social democracy in Europe and Progressivism in America was the ugliest and bloodiest in Germany's and the world's history. America's adoption of Progressivism in the 1890s led to its foray into imperialism. The adoption of the Federal Reserve Bank in 1913 was followed by the Great Depression of the 1930s.

The progress that liberalism, England and the United States had generated in the 19th century continued to unfold fifty or sixty years into the twentieth century so that the 19th century innovations of television and radio waves provided for continued innovation. But the rapid, universal innovation levels of the 19th century ended. By the 1970s real wages were declining, a result uncharacteristic of any prior period of American history, and firms had decided that the way to profit was by moving plants into low labor cost regions rather than through innovation. Although the personal computer and Internet were notable exceptions, in broad swathes of American industry innovation stalled. Today, once-proud American firms like GM beg for public money. Yet, in the historical context it would seem that innovation should be ever increasing in pace because new ideas generate yet additional ideas. Creativity experts have long observed that innovation begets innovation. That is the process of brainstorming. Thus, the failure of innovation in America suggests not the failure of capitalism, but the failure of social democracy.

The educational system has thus generated a belief system that is empirically unfounded and is likely to disrupt and disappoint most Americans' expectations. The increasing level of taxation since 1950; the transfer of wealth to established businesses and the wealthy via the Federal Reserve Bank and the recent bailouts; the increasing levels of regulation; and the unquenchable expansion of state power to reflect every moral or ethical fantasy of America's elite (so long as the fantasies do not disrupt the investment holdings of the Ochs Sulzbergers, Warren Buffett or George Soros) will all disappoint Americans, who have been told to expect improvement in living standards even though they have not been told how to achieve such improvement or what the system of government and economy is that creates such improvement.

The belief system that the educational system inculcates is mystical in nature. It claims a universal morality of state action; and it holds that the changing and often whimsical beliefs of university professors and newspaper editors morally require blind adherence. It sets up silly "saviors" such as Franklin Roosevelt and Barack Obama, whose divine right to exercise power; deprive Americans of traditionally defined rights and property; and to be believed is rigidly proclaimed as moral. Just as late medieval Europeans believed in a divine right of kings, American social democrats believe in a divine right of state power and the cult of the presidential savior.

An essential part of social democrat mysticism is the replacement of God by the state. Thus, just as a religious Catholic might have a picture of a Saint in their home, social democrats have a picture of their Divine Savior-President Barack Obama in their homes. Just as blasphemous language is contemned by the religious, so is language disrespectful of Savior-Divine President Barack Obama contemned by social democrats.

Thus, the inculcation of blind moral obedience to the state by the Progresssive-Republicans and social democrat-Democrats leads to an inherent instability in the legitimacy of American government. This is seen most clearly in the US Supreme Court. Through a series of judicial decisions the Supreme Court has arrogated the power to legislate. This is not provided by the Constitution. With respect to Dred Scott, in the 1850s, the Supreme Court held that it had the power to regulate contracts. This incursion into state power increased through the 19th century. While cases like Brown v. Board of Education may have had morally laudable results, the arrogation of power by the Supreme Court lacks legitimacy. It is not provided in the Constitution. Many Americans do not believe that the Supreme Court ought to function like a moral dictator. And many Americans do not share the Supreme Court's value system. The Supreme Court cannot function as an overseer of the nation's morals because a sizable percentage of Americans do not share the Supreme Court's values.

The reason again speaks to the failure of America's educational system to educate Americans as to Lockean liberalism. As a result, although I do not question the intelligence and sophistication of the members of the Court, the Court's value system reflects in large part the social democratic training that the Justices received in American schools and universities. Their values are elitist and do not reflect justice as most Americans define it. The court has become increasingly illegitimate. The same is true of other American institutions. Congress's approval ratings are very low, but no one seems to be able to say why. The bailout was opposed by the majority of Americans, and there was no real reason for it save crackpot Keynesian arguments in elitist, pissant newspapers and television stations, but Congress went with the elitist newspapers and television stations.

The end result of the increasing tyranny of social democracy and tyranny of elitist opinion over American values and rights is de-legitimacy of the US government. We live in a period of instability because Americans have refused to confront the failure of social democracy and Progressivism. They continue to accept that conservative insistence on Progressivism and elitist social democracy are the only two options. Yet, the economic policies that the nation has adopted will deprive Americans of the standard of living to which they have become accustomed. This failure will mark the end of the American state as we know it. If the nation were doing as well as it could, reflecting Lockean values to a large degree and striving to balance reason, tradition and innovation in public affairs, minor modifications would be possible. But the two Progressive/social democratic parties have followed an avenue that has led them to the side of a cliff. And the public is going to have to back up and push the two parties over the side.

Democracies are More Coercive Than Monarchies

"It may be argued that there are really two Powers which are different in kind; that one is the Power of a small number of men over the mass, as in a monarchy or aristocracy, and that Power of this kind maintains itself by force alone; and that the other is the Power of the mass over itself, and that Power of this kind maintains itself by partnership alone.

"If that were so, we should expect to find that in monarchical and aristocratic regimes the apparatus of coercion was at its zenith, because there was no other driving power, and that in modern democracies it was at its nadir, because the demands made by them on their citizens are all the decisions of the citizens themselves. Whereas what we in fact find is the very opposite, and that there goes with the movement away from monarchy to democracy an amazing development of the apparatus of coercion. No absolute monarch ever had at his disposal a police force comparable to those of modern democracies. It is, therefore, a gross mistake to speak of two Powers differing in kind, each of which receives obedience through the play of one feeling only. Logical analyses of this kind misconceive the complexity of the problem."

---Bertrand de Jouvenal
On Power: The Natural History of Its Growth, p. 23