Moderation as Vacuity

Americans sometimes claim to be moderate in their views.  "I don't believe in abolishing the Fed, for I am a moderate," is an example.  Moderation means limiting change to a moderate distance from present policy. But what if present policy is extreme?  Franklin Roosevelt might have said: "I don't believe in ending concentration camps for Japanese Americans. I believe in a more moderate course." Andrew Jackson might have said: "I don't believe in ending my policy of banishing all Native Americans east of the Mississippi. I believe in the moderate course of extending the Indian Removal Act to just one more tribe."

Is moderation as a mere increment meaningful in the context of policies whose effects are devastating or reprehensible?

There are other possible meanings, though. Perhaps moderation underlies a claim that state action is not a moral but a pragmatic question. "Only extremists hold that theft is wrong under all circumstances. We moderates hold that taxing some to redistribute to others is a pragmatic course."  Here, however, the claim is contradictory. If  morality that prohibits theft is extreme, why is the morality that motivates redistribution of wealth not an extreme? If it is wrong to say that theft is wrong, why is right to say that income inequality is wrong?

Since all government action involves violence, and since the elimination of violence is a prerequisite to the foundation of civilization, all government action involves moral choice.  Choice about violence,murder, or theft is inherently moral, and all government action involves violence, murder, or theft. Therefore, all government action is extreme if  extreme  is to be defined as making state decisions on the basis of morality.

A third possible meaning of moderation is that it accords with the majority.  The majority in America believe the claims made on television and in newspapers.  The writers in these sources are not well educated, and they have demonstrated a repeated capacity for advocating erroneous courses of action. One example was the Vietnam War.  Another was, in New York City, the urban renewal policies of Robert Moses.  A third was the Iraqi War and the strategy behind it. A fourth is America's monetary policy.  Ancient Athens lost the Peloponnesian War because it chose to invade Sicily, a decision that was politically popular. America's disastrous invasion of Iraq was similarly popular, and I was among the mistaken supporters.

In other words, defining moderation as incremental decision making, pragmatism, or accordance with majority rule potentially leads to policies that are extreme.  A fourth definition is mathematically certain, but it is also self-contradictory and equally vacuous.  The ancient Greeks defined sophrosyne (σωφροσύνη)  as temperance or moderation in the sense of  being well balanced.  Aristotle spoke of a range of virtues such as prudence, justice, and courage as well as sophrosyne. Moderation, in Aristotle's view, is the mean between two extremes.  Courage is the mean between rashness and cowardice, for instance.

Perhaps moderation in state action can mean the mean between two extreme courses of action.  In this sense, though, current American policies are not moderate.  An economy in which public debt is in excess of $55,000 per man, woman, and child, forty-four percent of whom have no savings, is hardly a mean between two extremes. It is an extreme. The same may be said of monetary policy. The tripling of the money supply in 2008 and 2009 can hardly be called a mean between two extremes: Historically, monetary expansion of that magnitude has led to economic collapse. Nor can we say that a nation that subsidizes one industry, banking, to the extent that the US government has is taking actions that are the midpoint between two extremes.

Moderation can be defined as a small increment over current policy, pragmatism, majority rule, or the mean between two extremes, but none of these meanings is inconsistent with policies that are genocidal, horrific, radically redistributive,  or economically destructive.  Americans' claim that their choices are moderate, like their claim that they are free or their claim that they are prosperous, is a chimera.

The Minimum Wage Is a Vicious Policy

PO Box 130

West Shokan, NY 12494

September 24, 2015

The Honorable Kevin Cahill

One Albany Avenue

Kingston, NY 12401

Dear Mr. Cahill:

In the course of a project that I have pursued over the past few months, I have reviewed the contents of 540 academic articles in the three leading industrial relations journals: Industrial and Labor Relations Review, Industrial Relations: A Journal of Economy and Society, and Journal of Labor Research.  The field of industrial relations was established as a left-wing response to mainstream economics, and its support for the minimum wage was one of the key reasons.

Nevertheless, the majority of the studies that appeared between 2008 and 2013 found that the minimum wage is associated with increased unemployment.  That is not surprising because the majority of mainstream economists have long agreed that the minimum wage causes unemployment.   The reason is that an enforced wage floor above the market rate increases the supply of labor but reduces demand.  The reduction in demand comes about because employers leave the state; higher wages lead to higher prices and customers leave the state; moreover, employers find new production methods that reduce demand.  The reduction in demand forces unskilled labor into permanent unemployment and dependency.

Until 2014 Germany did not have a federal minimum wage.  Its youth unemployment rate has been half that of Great Britain.   Britain, which has had a lower minimum wage than France, has had a slightly lower youth unemployment rate than France.  France, with its suburbs or Banlieue overflowing with unemployed minority youth who live lives of desperation and violence, has the one of the highest minimum wages.

Until a few years ago the US minimum wage was low enough that modest increases had limited effect on unemployment. Nevertheless, Walter Wessels, an economist at North Carolina State University, realized that the minimum wage has led to a decline in training and the end of the great American tradition of working one’s way up from the bottom. That has occurred because in order to compensate for the minimum wage without layoffs, employers reduced what Wessels has called “fringe benefits”: training investments and other benefits.  They spend less on low-wage employees and they replace them with capital investment.  The result has been increasing income inequality because minimum wage employees are locked at the bottom.

At a meeting of the Labor and Employment Relations Association this past May, I asked a panel that was held concerning the minimum wage, including two of the zealots advocating the minimum wage here in New York, what the effect on business startups is.  The countries with high minimum wages are not famous for dynamic economies, innovation, or progress.  No one on the panel knew what the effects on innovation or startups will be.  Andrew Cuomo, the HUD chief who required that banks make subprime loans, may not be the best one to ask. 

The claim that the minimum wage is benevolent, progressive, liberal, altruistic, generous, or kind is false.   The minimum wage forces a section of the public into permanent unemployment and dependency.   The workers who cannot earn the $15 per hour that the minimum wage will require  are among the most vulnerable in society.  Compelling a large share of them to remain permanently unemployed and dependent on welfare because that’s what the SEIU and social democrats whose ideas have driven New York’s economy into the ground for the past century want is illiberal, reactionary, and vicious.   

Sincerely,

Mitchell Langbert

More on the Ulster County Railroad Dispute

Yesterday, I blogged about the Catskill Mountain Railroad dispute. This is an email that I sent to Senator James Seward:

Dear Senator Seward:

There has been an ongoing dispute between County Executive Mike Hein and the Catskill Mountain Railroad, which leases a railroad right of way that Ulster County bought about thirty years ago.  I have blogged about the dispute at  http://www.mitchell-langbert.blogspot.com/2015/06/an-open-bidding-process-is-needed-to.html  .  The best way out of the conflict is to introduce open bidding so that the party that can most efficiently use the right of way can acquire it through privatization at optimal gain to the county.  That can be accompanied with a tax credit to businesses local to the track, which have been hurt for a century by the Ashokan Reservoir and New York City’s predatory policies. 

The possible bidders are New York City, the existing railroad, and the railroad’s competitors, one of which has told me that it wishes to acquire the track.  The city has already offered a grant to fund removal of the track and replacement with a trail, but it is far from clear that the $2.5 million offer contemplates losses due to the ensuing depression in tourism.  In 2014, the existing railroad’s first good year, about 40,000 visitors came to the railroad.  This meant a million dollars in revenue. At three percent interest, the present value of lost [railroad] revenue of one million dollars per year into infinity is $33 million, but costs need to be subtracted. [In the email I omitted to mention that there may be as much as a $1 million annual loss-- an additional $33 million present value--to local diners, stores, and restaurants; that would reflect $25  in spending per visitor. The present value of the total loss may be closer to $20 million.]  A more complex estimate would need to determine what the value added to the county is; value added includes local wages and purchases of supplies from local businesses.  A $10 million price is probably closer to the value that the city should pay to remove the track.  The city has long exploited Ulster County through one-sided, manipulative deals, as David Soll’s Empire of Water makes clear.

The conflict has reached the point at which a Republican insurgent candidate, Terry Bernardo, has stepped forward.  The solution set of both sides has heretofore been limited to two artificial poles:  (1) the city and  the Catskill Mountainkeeper’s proposal for a trail, which makes artificial projections about the extent of potential use and is indifferent to the effects on small businesses, and (2)  the existing Catskill Mountain Railroad’s proposal to extend the existing arrangement, possibly through a rail plus trail. The Catskill Mountain Railroad  has failed to live up to its 25-year agreement to rebuild the track and has refused to make its financial statements public.  Its business plan does not contemplate its ability to raise the appropriate level of financing.  To be competitive, the city’s bid would need to add say $10 million to the bid that the CMRR or other railroads make to compensate the region for the loss of tourism.  That amount of money could be used, if the city’s bid is successful, to fund tax credits that will enable existing businesses to expand and develop alternative tourist attractions.

Although this issue is not in your direct domain, Senator Seward, I would like to suggest that you offer to procure expertise at the state level to help the county structure public hearings and a public bidding process that will enable the diverse interests to make competitive bids for the property so that it can be privatized and used for the best benefit of the people of Ulster County.  The competition between secretive lobbyists at the DEP and the Mountainkeepers versus the secretive lobbyists at the CMRR is no way to resolve a public debate.  I am copying the Ulster County Legislature with respect to this idea.

Thanks,

Mitchell Langbert

Thoughts on the Mugwumps

I just sent the following email to a colleague who was talking about the Mugwumps. The Mugwumps were a group of elite Republicans who switched sides and voted for Grover Cleveland in 1884.  The name derives from a bastardization of a Native American word for chief, but the above cartoon suggests a different interpretation.

I don't consider them moderates. They switched party because of strong political belief, specifically in rational government. They were laissez faire Republicans, and many had been abolitionists. There was nothing moderate about them even though they switched sides.

The confusion many people have about today's two extremist parties leads to the mistaken impression that if you don't favor either party you are in between.  The crank TV newscaster Bill O'Reilly makes a similar claim.  He is moderate because he splits the opinions of the two big parties.  

The two parties are close, and they are both extreme in their support for big government. By historical standards, today's America occupies the extreme Whig end of the spectrum, and that's true of both parties. Only an extremist can call two parties that both advocated lending as much as $29 trillion to Wall Street to be moderate.  Today's America is an extremist, authoritarian state. There is no Aristotelian mean here.

This is the email to my colleague:

A classic in the study of the Gilded Age is Edward Wiebe, The Search for Order http://www.amazon.com/Search-Order-1877-1920-Robert-Wiebe/dp/0809001047/ref=sr_1_1?ie=UTF8&qid=1427393497&sr=8-1&keywords=wiebe .

The first book I read on the Mugwumps was Nancy Cohen’s Reconstruction of American Liberalism 1865-1914, which is an intellectual history that gives a good overview. You can piece together a libertarian perspective from it.  See http://www.amazon.com/Reconstruction-American-Liberalism-1865-1914/dp/0807853542/ref=sr_1_1?ie=UTF8&qid=1427393591&sr=8-1&keywords=nancy+cohen+progressivism .

The third book I recommend is a little different. It is Burton Bledstein’s Culture of Professionalism: The Middle Class and the Development of Higher Education in America. http://www.amazon.com/culture-professionalism-development-education-America/dp/0393055744/ref=sr_1_3?ie=UTF8&qid=1427393672&sr=8-3&keywords=bledstein . It traces the creation of professionalism in a host of fields.  Professionalism was intimately connected to the Mugwumps’ interest in civil service reform. The impetus for rationalization led directly to Progressivism. Once the commitment to organized professions took hold, it was a small step to building legal standards and regulations for the professions.  That, in turn, was linked to the development of universities. Hence, big government, the organized professions, and universities have always been linked.

The institution of the modern university in 1876 via the founding of Johns Hopkins came near the heart of the Mugwump era, which was in 1884, during the election of Grover Cleveland.  I don’t think historians have a clear understanding of why the Mugwumps opposed James Blaine and turned against their own Republican Party to support Cleveland.  [My colleague] may be right that there was a laissez faire impetus, but showing that would require a new, or at least clearer,  historical treatment of it.  Among the interesting Mugwump figures (see Cohen) were EL Godkin, David Ames Wells, and William Graham Sumner.

I also don’t believe that historians have a clear understanding of the role of the greenbacks in stimulating the expansion of industry in the Civil War era and what the economic effects were on bondholders, so the post-1873 gold deflation, which harmed other asset holders (likely Western and Southern farmers as well as stockholders) and generated Populism and Bryan (and which Friedman calls “the crime of 1873” in an article that was published in the Journal of Economic History), may have been a reaction to the post-Civil War inflation. Godkin writes about his anger at the effects of inflation on redistributing wealth to Jay Gould and others. 

One question that no one has asked is whether there was a relationship between Wall Street and Bryan or the Populists.  Mark Hanna, a high school friend of John D. Rockefeller,  was, of course, McKinley’s close adviser. On the other hand, it may be that the election of McKinley (as propped by Wall Street) was not really opposition to silver, but rather it may have been preemptive and done in the hope for the central bank that was recommended fourteen years later, in 1910, by the same Rockefeller (with Morgan and Kuhn Loeb) interests.  It is unlikely that there is much public information on something like this.

In any case the 1896 election had an opposite dynamic from what today’s pro-inflation banking community offers, and I suspect that something is not being said about who the Populists were and, more importantly, who their opponents were.  Was a central bank being quietly considered by ‘96? 

The same is true of the conflict within the Democratic Party between Bryan and the Bourbon Democrats,* of whom Cleveland was the chief representative. Wilson had been a Bourbon Democrat, and I think that he voted for a third party, the Gold Democrats, in 1896.  His connection to Morgan is mentioned in my paper on colleges, and I suspect that his signing of the Federal Reserve Act came from his relationship with Morgan.  An interesting point in the biography of Frank Vanderlip is that Wilson dropped him as a friend, and Wilson would have nothing to do with Vanderlip once Wilson was elected. Wilson did not want to seem to be linked to bankers.  I wonder who thought up that plan of action.  Wilson went from voting for gold in 1896 to refusing to have to do with bankers so he could propose the Federal Reserve Bank.  As a result of secrecy, it may be hard to get data. But was the opposition of the banking community to silver a strategic one?
  

*Wikipedia: Bourbon Democrat was a term used in the United States from 1876 to 1904 to refer to a conservative or classical liberal member of the Democratic Party, especially one who supported Charles O'Conor in 1872, Samuel J. Tilden in 1876, President Grover Cleveland in 1884–1888/1892–1896 and Alton B. Parker in 1904. After 1904, the Bourbons faded away. Woodrow Wilson, who had been a Bourbon, made a deal in 1912 with the leading opponent of the Bourbons, William Jennings Bryan; Bryan endorsed Wilson for the Democratic nomination, and Wilson named Bryan Secretary of State. The term "Bourbon" was mostly used disparagingly, by critics complaining of old-fashioned viewpoints.