Karkhanis Blasts Professional Staff Congress

Sharad Karkhanis, who has been attacked in a Professional Staff Congress (PSC)-related law suit, has just released his latest newsletter, Patriot Returns. Karkhanis offers brilliant coverage of David Seidemann's case, about which Candace de Russy and I have blogged. The Chronicle of Higher Education has also covered the case. Karkhanis notes:

"Convinced that the PSC had treated agency-fee payers unfairly, David Seidemann, a Yale educated full professor of Geology at Brooklyn College, has been patient and tenacious in seeking justice. Since 2002, he's amassed voluminous documentation, collected and examined all relevant information and legal precedents, and pursued the PSC with the tenacity and conviction of an irate faculty member. Seidemann sensed that there was some hanky panky going on with his and your hard-earned dollars. The 1% of our gross salary that goes to union dues or agency fees should be spent for our benefit rather than being diverted to further the New Caucasians' political agenda."

Karkhanis asks:

"Our question is, although permissible in the eyes of the law for the union to spend monies to march, parade and shout out loud to bring pressure on the management on behalf of the dues paying members, how germane is it for the PSC to spend dues money on excessive participation in such activities?"

See the entire blog here. The PSC leadership has spent its time on anti-Iraqi War crusades while neglecting its function of representing faculty. Barbara Bowen and her colleagues have failed CUNY's faculty.

Are Left-Wing Speculators Causing the Run-Up in Fuel Prices?

A friend who is interested in gold and commodity investing just questioned whether well-heeled left wing or Democratic speculators might be causing a run-up in oil prices as part of a concerted anti-Republican campaign. I wonder if that argument has any merit. Is there an ideological component to the recent run up in oil prices?

Keywords: George Soros, Hollywood, oil prices, speculation, Republican Party, presidential campaign

Global Food Crisis Caused By Federal Reserve Bank

In a recent American Thinker post (hat tip Larwyn), JR Dunn is right to be concerned about potential United Nations and governmental interference in the food market, but in his capable discussion of causes of today's food shortages Dunn omits the fundamental cause: economic distortion or malinvestment for more than a decade due to the Federal Reserve Bank's monetary expansion. Those of us who remember the 1970s recall that the Nixon administration's monetary expansion's resultant price inflation was blamed on OPEC and oil prices. Dunn commits a similar fallacy and blames current food shortages on a litany of proximate causes,such as ethanol, which while important are not fundamental. Dunn is right that ethanol is a mistake that causes food shortages, but it is not the only mistake. For the past fifteen years, from America to China, economic resources have been diverted away from commodity and food production toward real estate investment and construction. In China, farmers have been uprooted to build dams and cities. In America, farmers have sold land to real estate developers. This amounts to malinvestment of artificially created credit. Now there are food shortages. The beneficiaries of the monetary expansion primarily have not been oil producing governments but Wall Street, hedge fund managers, real estate developers and the commercial banking system. Those who pay are those who cannot afford food now, those in dire poverty. Warren Buffett, George Soros and the new residents of Greenwich, Connecticut have waxed rich at the expense of those starving to death now.

Food shortages occur only if demand exceeds supply and supply cannot adjust. Several things can increase demand. These include the factors that Dunn enumerates in his blog: ethanol and the like. But in a free economy supply will expand to meet the higher demand. Supply shocks can be handled over a few year period. If this does not happen it is because there are blockages. None of the factors that Dunn enumerates explain the failure of farmers to anticipate or respond to shortages. Yet most economic theory suggests that firms are rational enough to at least approximately do this. What would explain farmers' hyper-irrationality? Distortion or malinvestment.

Worse, Dunn's analysis overlooks increasing prices across a range of commodities, not just food and oil. Gold has more than tripled in price in the past four years. Copper and other construction materials, rubber for instance, have increased since the millenium. The factors that Dunn enumerates do not explain an across-the-board increase in commodity prices. Does ethanol explain a three-fold increase in the price of gold?

Moreover, Dunn's discussion of OPEC omits the force of mistrust. OPEC has found it difficult to act in unison because of what game theorists call the prisoner's dilemma: economic actors find it difficult to act in unison in their own self interest when any one member can make side deals to sabotage collusion. That is why OPEC failed in the 1970s. Today, a broader swath of nations produce oil, so trust will be considerably less than it was then. Higher prices would motivate players to go behind the backs of their collaborators.

Dunn is correct to argue that the relationship between politics and food should be severed. But he omits the fundamental cause of the global food shortage: malinvestment away from commodity production toward real estate and stock market investment. This follows directly from Alan Greenspan's and Ben Bernanke's monetary policy, which is necessarily the cause of all general inflation.

Community, Progressivism and the States

Woodrow Wilson advocated states' rights as part of his progressive philosphy. In his book Constitutional Government in the United States, first published in 1908 and still considered a classic in the political science field, Wilson argues for the importance of the states. The model of centralized federal authority was a product of the two Roosevelts, not of Wilson, despite his inadvertent contribution by creating both the income tax and the Federal Reserve Bank. Theodore Roosevelt, the most statist of all of our presidents, argued for integration of government and business. Franklin Roosevelt extended state power in numerous areas, most importantly by abolishing the gold standard.

Despite the twentieth century's centralization of power, Wilson understood the importance of local government to community. Excessive centralizaton overlooks the importance of community and so is anti-democratic. Since the primary thrust of the New Deal was such centralization, it was at odds with the progressive era's emphasis on democracy, or at least Wilson's version of it.

Wilson writes (pp. 50-1):

"Not only are the separate and independent powers of the states based upon real economic and social differences between section and section of an enormous country, differences which necessitate adaptations of law and of administrative policy such as only local authorities acting in real independence can intelligently effect; but the states are our great and permanent contrbiution to constitutional development. I call them a great contribution because they have given to the understandings upon which constitutional government is based an intimacy and detail, an adjustment to local circumstances, a national diversity, an immediate adaptation to the variety of the people themselves, such as a little country may perhaps dispense with but a great continent cannot...They have furnished us with an ideal means of integrating a vast and various population, adapting law to changing and temporary conditions, modulating development and permanently securing each item of progress. They have been an incomparable means of sensitive adjustment between popular thought and governmental method, and may yet afford the world itself the model of federation and liberty it may in God's providence come to seek...Constitutional government can exist only where there is actual community of interest and of purpose, and cannot, if it be also self-government, express the life of any body of people that does not consitute a veritable community. Are the United States a community? In some things yes, in most things no. How impossible it is to generalize about the United States."

Big business has likely pressed for centralization, and it is likely in the interest of big business to have consistent regulation and policy across the states. But big business has exited the nation. Manufacturing has moved to Asia and Mexico. The remaining large firms often do not pay high wages. Do the American people owe a favor to the firms that have not been interested in supporting them? Moreover, the problems that confronted big business in decades past have been modified, reduced and eliminated by technology. The coordination of separate regulatory, accounting and legal systems today is far from the problem that it was in the 1930s and 1940s. Integrated computer systems make compliance across diverse regulatory systems simple. Thus, large firms will suffer little from decentralization. Moreover, given the globalization of business and the eagerness with which firms have entered foreign countries with diverse regulatory systems, it is difficult to understand why adding more diversity will pose much of a problem to them, or given the eagerness with which firms have adjusted to diverse regulatory systems they can properly claim that they are an impediment here in the United States.