Identity Politics in the 2008 Democratic Presidential Primary

This presidential year is the Democrats' to lose, and they seem to be losing it. The gleam through the cracked mortar of the Democratic Party's foundation is identity politics. Identity politics is the 1960s' ugly offspring that differs from its older brother racism in style but not substance.

Liberalism and Moral Relativism

The impulse underlying Progressive-liberalism was the late nineteenth century's moral angst at the expanded power of big business, its lack of moral foundation and the disorder and uncertainty that the railroads, the expanding market and the increased homogeneity of the American market had caused. Americans of that time were mostly religious Protestants. Their reaction to the increased power of business and the railroads was in part informed by their religious values. The economy had been a source of moral training and discipline when producers were small and life was local, what Robert H. Wiebe calls "island America" in his book The Search for Order. The late nineteenth century response to expanding markets included Populism, trade unionism, and Mugwumpery. The Progressives arose from the introduction of the ideas of the German historical school to this mix. It held that the state ought to be strengethened in order to manage big business. The underlying impulse was the moral one of correcting the moral abuses of big business and the new mass production.

The moral impulse behind Progressivism carries through to liberalism and its more extreme variants. Progressive-liberalism claims to rectify moral abuses through government or the marshalling of public opinion. Thus, Wal-Mart is evil because its prices are too low; oil companies are evil because their prices are too high; banks are evil because they demand that borrowers repay; and fast food restaurants are evil because they serve too much food. Liberalism is thus a moral movement that derives from late nineteenth angst about business. Liberals believe that the business system requires their moral guidance.

But liberalism pretends to derive from science, not religion. In part because of its scientism liberalism adopts Enlightenment skepticism about morality. But it applies its skepticism only to others', not to its own moral claims. Liberalism holds that the school system ought not to advocate religion. It insists that American values are not superior to those of other cultures. In its more extreme variants it holds that 9/11 victims are "little Eichmanns". It assumes that public morality is a convention and that rules about public morality amount to infringement on freedom of speech. It argues that morals are locally derived, have no logical foundation, and that their chief purpose is to justify power. Philosophy and literature have been written by dead white males; and natural rights have no meaning because morals have no logical meaning.

Given Progressive-liberals' skepticism with respect to American values, natural rights and morals, the liberal position faces an irreconciliable dilemma. No argument about morality is possible if there is no such thing as morality. If there is such a thing as morality, then liberalism has to explain why it is to be preferred over nationalism, religion or other locally derived moral systems.

Progressive-liberals wish to have it both ways. They offer one emotionally charged moral argument after the next: Global warming is wrong; Wal-Mart is evil; America is the Great Satan. But at the same time, liberals deny that there is such a thing as morality.

From whence do liberals' derive their moral sense? If morals have meaning, liberals must be able to show that their causes are morally superior to those whom they attack. If natural rights have meaning, then liberal causes are generally immoral, for liberalism depends on redistribution of property by violence. If economic inequality is wrong, why is it worse than stealing? By what moral system does liberalism justify forcing me to pay taxes? What makes liberal causes more moral than natural rights?

Liberalism has not attempted to answer such questions. It is an ideology, not a philosophical system. It is an ideology whose aim is to justify the assumption of power by educated elites.

Howard S. Katz and Market Psychology

I had the opportunity to observe market psychology first hand during the past couple of weeks. My friend, Howard S. Katz, had called a market top in gold this past Monday when gold was about $950. He also called a bottom in stocks and shifted from gold stocks into construction stocks. The first few days after Howard's call, gold continued to go up. It hit $1002 toward the end of the week. The stock market had become very volatile as bulls and bears battled in response to Fed easing. Subscribers to Howard's newsletter contacted Howard to argue that he had called the top too early. I mentioned Howard's call to a few MBA students and they too argued that he had been too early.

It is very difficult to call a turn precisely, but to make it more so, social pressure opposes a correct call. The gold market indeed topped at about $1000 and the construction stocks are up about 50% since Howard's call. I'm not sure how he does it (he uses technical analysis which is Greek to me), and I don't believe that contra-opinion is necessarily right. Delusional markets can continue for several years or more. Look at politics.

One thing is certain. If you are right about a change in market patterns there is going to be alot of argument against your position and not too much social support. It takes confidence in addition to the rare insight. The insight alone is rare enough. The combination of courage wtih insight is difficult to sustain.

The same is likely true of ideas. It takes guts to tell the truth.

Organizational Learning and the Progressive Model

The natural evolution of organizational learning should over time shift the relationship between business and government from more to less. Early in their history, capitalist firms lacked the ability to think and plan strategically; to research markets; to assess competition. Over time, the professionalization of management, the development of tools and learning processes, new methods of management and new planning processes and models not only provide businesses with tools that were not available to them in the 19th century, but also are less accessible to government because the personnel are not available. In David Ames Wells's time, Wells did not believe that firms could strategically plan investment; could perform market research; could persuade workers to purchase consumer goods; or could assess the long run profitability of a plant or business unit. By the 1960s, John Kenneth Galbraith overstating the case argued that firms plan and manage demand. Clearly the role of the state must change in response to the evolution of managerial knowledge. But the state's role can change only if it develops sophistication about the same processes that the firms learn about. But of course such learning is beyond the budget, the ability and the organizational flexibility of government agencies. Hence, the role of government will quickly become outdated.

The problem facing government is not just a matter of organizational learning. It is a matter of being able to anticipate the insights, deviations and failures of ever-evolving organizations. Such learning is so far beyond the ability of government, that government will inevitably prove to be disruptive to firms' learning processes.

An example is the case of Enron. Enron's failure was in large part due to its accounting emphasis on mark to market accounting. But mark to market accounting was the very policy that the SEC approved in response to Jeff Skilling's application. Another example is the California degregulation of the power market. The state adopted a regulatory system that facilitated Enron's and other power firms' manipulation of the power grid that caused massive power outages.

The results of the relationship between a state which aims to guide organizations that learn at a faster rate than the state does is one of four things. One, the state becomes irrelevant and adopts a de facto laissez faire approach. Two, the state enforces its prerogatives to control or influence industry and limits organizational learning and economic progress. Three the state attempts to ritually mimic firms' organizational learning and its supposed role of providing support to industry, squandering resources while in fact adopting a laissez faire approach. Four, the state becomes captive or subject to the influence of the industry and competing interest groups, resulting in policies that reflect political power and economic resources rather than rationality.

Government has adopted all three approaches. In human resource regulation such as OSHA and ERISA, the federal government has adopted costly regulation that has done little to improve safety or security, reducing economic opportunity. With respect to education, education schools continue to advocate progressive education approaches that reduce educational outcomes. In finance, the state has gradually backed off various regulations but continues to maintain regulation that makes it difficult for entrepreneurial financial firms to compete. In most fields the fourth likelihood has occurred. The brokerage of special interests has become a key characteristic of the American economy.