In 1960 sociologist Daniel Bell claimed that ideology had ended. It did not. Ideology is but a set of integrated assumptions, hypotheses or theories about the world. Without integration social order would disintegrate, and without assumptions action would be pointless. In the decades following 1960 universities were imbued with a more aggressive ideological tone than that which had preceded 1960. More importantly, the dominant ideology of the post-war period, state-activist liberalism, faltered. Yet its proponents in both major political parties became increasingly shrill about their respective ideological versions. What faltered most was state-liberalism's claim of pragmatism and economic rationality. In failing to consider the outcomes of its own decisions, state-liberalism failed its chief premise of pragmatism. State-liberalism faltered because business was not efficient, rational or pragmatic, but rather was coddled (Lindblom) and benefited from the activist liberal state that acted not in the public interest but rather in firms' private interests. Coddling connotes inefficiency, and inefficiency leads to the failure of state-activist liberalism's chief premise that it can produce economic growth and that the state can ameliorate inefficiencies, the business cycle and the anxieties characteristic of laissez-faire capitalism. Although economic growth in the immediate post-war period was ample and well distributed, by 1970 the liberal-Progressive system had failed to deliver what Herbert Croly called "the promise of American life". Real wages sputtered and income inequality grew in the wake of stock market growth and plant relocations. In the following decades, the decline has been mitigated by borrowing and the increasingly widespread distribution of credit, but little more. In other words, the American economy has been living on borrowed time. A few technological breakthroughs have masked a widespread failure of innovation. As executives have seen plant relocation as the sole avenue for increasing efficiency, they transferred America's rusting infrastructure to the third world. But the activist state displaced the innovation that ought to have replaced the now-globally based manufacturing infrastructure. The result is ever-slower economic and technological progress if not outright permanent declines.
Oswald Spengler argued that the west would decline because of natural historical cycles. The decline of American liberalism is not due to an inevitable cycle but rather to the choices that the American public has made in response to the failure of the progressive ideologies and institutions that came to dominate American politics beginning in the late 19th century and have increasingly dominated liberalism--those of the activist state. The proponents of the activist state claim that it serves the poor and argue for the establishment of large edifices to do so. But they have not solved the poor's problems, and in many cases have intensified them. State activist liberals, on behalf of their altruistic claims, establish a centralized monetary system whose chief result is not just the reduction of unemployment in ever-less productive jobs, but the distribution of credit hence wealth into the hands of large corporations, their stock holders, their executives, their service firms and Wall Street. State-activist liberalism calls itself "progressive" but progress in terms of real wage growth and innovation has fizzled. Hence, while the proponents of state activist liberalism claim to have improved things, much of what they have accomplished has been destructive of the ends that they proclaim. Following more than a century of state activist liberalism, Americans are less economically secure than they were under laissez-faire because job creation has slowed and has been funneled into the kinds of jobs in the kinds of firms to which entrenched economic interests have chosen. These are not the firms and jobs that best serve the public and do not produce sustainable growth. Alternatives have been staunched by the centralized approach to credit allocation that progressivism, backed by banking and corporate interests, has favored.
State activist liberalism has faltered because it has not fulfilled the promise of pragmatism that post-war liberals proclaimed. America's large corporations have not performed, and instead have relied on the public support that efficient private organizations ought to obviate. This is not because the public cannot afford seeing large companies fall or because industry is necessarily inefficient, but because the firms' control of the media is sufficient to forestall intelligent debate about policy options.
The state-activist liberal stance was always present in American history. In the late 18th century it was called Federalism and in the early 19th century it was represented by the Whig Party. The Republicans briefly rejected the state liberal philosophy in favor of social Darwinism in the late 19th century for two or three decades, which had the effect of preempting working class Jacksonian democracy, and then reasserted it in the form of Progressivism. The Democrats under Woodrow Wilson followed. Under Franklin Roosevelt the Democrats made one major change: painting the image that their Whig philosophy was in the interest of the poor and that the redistribution of wealth that Hamilton and the Whigs had advocated was a matter of social justice. At the same time, Roosevelt intensified the power of the Fed to transfer wealth to politically connected investment banks and their client corporations.
Although both political parties are genealogically descended from Jefferson, both advocate the ideology of Hamilton. But management theory has advanced since Hamilton's death. Today's state activist liberalism fails to integrate advances in management theory, and in effect is a relic-ideology that has slowed economic growth and has increasingly crippled the American economy.
It is time to consider alternatives. The current path is one of impoverishment and the failure of the American economic system.
Wednesday, May 20, 2009
Monday, May 4, 2009
Howard S. Katz on Floyd Norris
Howard S. Katz is back on Kitco and he has written an interesting piece in response to New York Times columnist Floyd Norris entitled "Response to Floyd Norris":
Dear Mr. Norris:
I approach the subject of economics from a slightly different point of view than the writers for the Times, and I wanted to take issue with your comments in Saturday’s paper about the “recession.”
First, there was an event that happened at the very beginning of the New Deal which sets the tone for the economic controversies of the past 80 years. F.D.R’s Brain Trust., freshly in office, came up with a plan to get the country out of the depression by means of killing pigs and plowing under crops. The plan, however, ran into one difficulty. (I owe this story to my good friend Warren Roberts.) The jackasses who pulled the plows had been carefully taught to walk between the rows. Now that they were being ordered to walk on the rows they rebelled. The reason for this is that the jackasses had more brains than the Brain Trust.
Supporters of the New Deal had an effective way to deal with this. They all carry a mental eraser in their heads, and when something embarrassing occurs, they simply erase it from their minds. To claim that you are going to save the country from depression by destroying wealth is akin to the math student who enters the class with the theory that 2 + 2 = 27. There is really no point in debating him. One is dealing with a nut case, and to attempt an intellectual discussion to show him the error of his ways is itself a mistake.
Further evidence of the Times’ incompetence in economics can be seen from their failed predictions over the past 30 years.
In 1982, with the DJI at 800, the Times kept telling the country that Henry Kaufman was the nation’s top economist. Dr. Kaufman was then known by the nickname “Dr. Doom” because he was predicting higher interest rates and lower stock prices. Millions of people took your advice and sold their stocks, just months before the greatest stock bull market in American history.
In 1985, with the DJI at 1350, the Times’ Op Ed page developed the theory that the chart pattern of the DJI bore an uncanny resemblance to late 1928 and early 1929. This implication was that stocks were on the verge of a massive decline which would cause them to lose 90% of their value. All over the country people were thrown into a panic and sold their stocks, knocking the DJI down below 1300. From there it turned and, over the next 2 years, rose to 2700. It never got below 1300 again.
In 1987, a gentleman named Ravi Batra wrote a book entitled The Great Depression of 1990. The Times, and the remainder of the nation’s media, became very excited over this prediction. Lester Thurow went ga-ga over the book. Leonard Silk, Christopher Lehmann Haupt and Thomas Hayes gave him high praise. The pessimism generated by the book may have contributed to the crash of October 1987. But when 1990 rolled around, the worst that happened was a 1.3% (2 quarter) decline in GDP. J. Scott Armstrong called this the seer-sucker theory: for every seer there is a sucker.
In 1999, the Times turned bullish and published Dow 36,000 by Glassman and Hassett, predicting that the DJI would rise to that number between 2002-04. By 2002, the DJI had declined to a low of 7,200, and its 2004 high was still below 11,000. Carried away by its own irrational exuberance the Times invested $2.7 billion in its own stock (then trading around 40). At present, one share of Times stock sells for about the same price as a Sunday paper, and the loss on those turn-of the century investments is about $2.3 billion. This has forced the Times to mortgage its new headquarters and to take a loan from Mexican billionaire Carlos Slim.
In short, this record of prediction is pretty much what one would expect if the student who believed the 2 + 2 = 27 theory were to take over the math class and start investing the school’s money.
Read the whole thing here.
Dear Mr. Norris:
I approach the subject of economics from a slightly different point of view than the writers for the Times, and I wanted to take issue with your comments in Saturday’s paper about the “recession.”
First, there was an event that happened at the very beginning of the New Deal which sets the tone for the economic controversies of the past 80 years. F.D.R’s Brain Trust., freshly in office, came up with a plan to get the country out of the depression by means of killing pigs and plowing under crops. The plan, however, ran into one difficulty. (I owe this story to my good friend Warren Roberts.) The jackasses who pulled the plows had been carefully taught to walk between the rows. Now that they were being ordered to walk on the rows they rebelled. The reason for this is that the jackasses had more brains than the Brain Trust.
Supporters of the New Deal had an effective way to deal with this. They all carry a mental eraser in their heads, and when something embarrassing occurs, they simply erase it from their minds. To claim that you are going to save the country from depression by destroying wealth is akin to the math student who enters the class with the theory that 2 + 2 = 27. There is really no point in debating him. One is dealing with a nut case, and to attempt an intellectual discussion to show him the error of his ways is itself a mistake.
Further evidence of the Times’ incompetence in economics can be seen from their failed predictions over the past 30 years.
In 1982, with the DJI at 800, the Times kept telling the country that Henry Kaufman was the nation’s top economist. Dr. Kaufman was then known by the nickname “Dr. Doom” because he was predicting higher interest rates and lower stock prices. Millions of people took your advice and sold their stocks, just months before the greatest stock bull market in American history.
In 1985, with the DJI at 1350, the Times’ Op Ed page developed the theory that the chart pattern of the DJI bore an uncanny resemblance to late 1928 and early 1929. This implication was that stocks were on the verge of a massive decline which would cause them to lose 90% of their value. All over the country people were thrown into a panic and sold their stocks, knocking the DJI down below 1300. From there it turned and, over the next 2 years, rose to 2700. It never got below 1300 again.
In 1987, a gentleman named Ravi Batra wrote a book entitled The Great Depression of 1990. The Times, and the remainder of the nation’s media, became very excited over this prediction. Lester Thurow went ga-ga over the book. Leonard Silk, Christopher Lehmann Haupt and Thomas Hayes gave him high praise. The pessimism generated by the book may have contributed to the crash of October 1987. But when 1990 rolled around, the worst that happened was a 1.3% (2 quarter) decline in GDP. J. Scott Armstrong called this the seer-sucker theory: for every seer there is a sucker.
In 1999, the Times turned bullish and published Dow 36,000 by Glassman and Hassett, predicting that the DJI would rise to that number between 2002-04. By 2002, the DJI had declined to a low of 7,200, and its 2004 high was still below 11,000. Carried away by its own irrational exuberance the Times invested $2.7 billion in its own stock (then trading around 40). At present, one share of Times stock sells for about the same price as a Sunday paper, and the loss on those turn-of the century investments is about $2.3 billion. This has forced the Times to mortgage its new headquarters and to take a loan from Mexican billionaire Carlos Slim.
In short, this record of prediction is pretty much what one would expect if the student who believed the 2 + 2 = 27 theory were to take over the math class and start investing the school’s money.
Read the whole thing here.
Wednesday, April 29, 2009
Exchange with Doug Ross Re Minor Parties
In response to my post regarding Phil Orenstein's blog on tea parties legendary blogger Doug Ross writes:
>As Mark Levin and Hugh Hewitt have stated on a number of occasions, any attempt at forming a third party would be disastrous: it would simply split the conservative vote when, even united, the job ahead will be monumentally difficult.
We must not and can not endorse the formation of a third party. It represents suicide for the conservative movement. We must instead reshape the Republican Party behind the aegis of Liberty vs. Tyranny.
Best Regards,
Doug Ross
Doug Ross @ Journal
My response:
I disagree with Hewitt and Levin as to the lack of viability of third parties. Third parties do not win but they influence future elections. There have been quite a few examples. One was the Anti-Masonic Party which never won but was instrumental in the formation of the Whig Party, and the Whig Party (a second party) was instrumental in the formation of the Republicans. Another was the Populists, which never won but succeeded in seeing the nomination of William Jennings Bryan. Although Bryan lost in 1896, his ideas were ultimately adopted via Franklin Roosevelt. This pattern also occurred via the Progressive Party in 1912. Although the Progressive Theodore Roosevelt lost, his socialist ideas, which were similar to Bryan's, ultimately won in 1932. Thus, there is typically a multi-step process involving third parties. They do not win but the major parties adopt their ideas.
This multi-step process has to be the case with a within-party insurgency as well. The reason is that there are no Republicans capable of leading a Lockean insurgency, and the party infrastructure is missing. Either way (insurgency or third party) there will have to be a multi-year process. An in-party insurgency will require several election cycles. The Goldwater election of 1964 was an insurgency that paved the way for Reagan in 1980. Similarly, the Bourbon Democrats, the pro-gold conservative Democrats, were around after the Civil War and saw their candidate, Grover Cleveland, win in 1884.
Messers. Levin and Hewittt overstate the distinction between an in-party insurgency and a third party. Either way (insurgency or third party) Lockean Republicans have little chance in the next two presidential cycles.
Additionally, I suspect that any Republican Presidential candidate who is put up to run in '12 will be just another big government type masquerading as a small government type unless there is a radical ideological cleansing of the entire Republican Party now. But I don't see how that could happen. So in a word, the Republicans serious about ideas ought not to think about winning an election in '12. If they do, they will just get more garbage. It is better to work on two things: building a new party and destabilizing the Democrats.
To give you an idea of how bad the Bush administration was, I went to Washington in 2005 to protest the accreditation of the National Council on Accreditation of Teacher Education (NCATE), a left wing extremist body that has taken control of accrediting education schools. Rather than abolish the Department of Education, the Bush administration used the DOE as a patronage plum. But who received the patronage? Left wing extremists who supported NCATE---Many of the appointees on the board before which I spoke argued with me in favor of NCATE. So Bush appointed Lockean Republicans' enemies. It was more important to him to be able to do this than to abolish the DOE. That's how incompetent and stupid the incumbent Republicans are.
Do you really think a perpetuation of the current Republican Party is crucial? One of two things must occur in order to change: a third party or a serious insurgency. Otherwise, we will keep running around in circles forever.
>As Mark Levin and Hugh Hewitt have stated on a number of occasions, any attempt at forming a third party would be disastrous: it would simply split the conservative vote when, even united, the job ahead will be monumentally difficult.
We must not and can not endorse the formation of a third party. It represents suicide for the conservative movement. We must instead reshape the Republican Party behind the aegis of Liberty vs. Tyranny.
Best Regards,
Doug Ross
Doug Ross @ Journal
My response:
I disagree with Hewitt and Levin as to the lack of viability of third parties. Third parties do not win but they influence future elections. There have been quite a few examples. One was the Anti-Masonic Party which never won but was instrumental in the formation of the Whig Party, and the Whig Party (a second party) was instrumental in the formation of the Republicans. Another was the Populists, which never won but succeeded in seeing the nomination of William Jennings Bryan. Although Bryan lost in 1896, his ideas were ultimately adopted via Franklin Roosevelt. This pattern also occurred via the Progressive Party in 1912. Although the Progressive Theodore Roosevelt lost, his socialist ideas, which were similar to Bryan's, ultimately won in 1932. Thus, there is typically a multi-step process involving third parties. They do not win but the major parties adopt their ideas.
This multi-step process has to be the case with a within-party insurgency as well. The reason is that there are no Republicans capable of leading a Lockean insurgency, and the party infrastructure is missing. Either way (insurgency or third party) there will have to be a multi-year process. An in-party insurgency will require several election cycles. The Goldwater election of 1964 was an insurgency that paved the way for Reagan in 1980. Similarly, the Bourbon Democrats, the pro-gold conservative Democrats, were around after the Civil War and saw their candidate, Grover Cleveland, win in 1884.
Messers. Levin and Hewittt overstate the distinction between an in-party insurgency and a third party. Either way (insurgency or third party) Lockean Republicans have little chance in the next two presidential cycles.
Additionally, I suspect that any Republican Presidential candidate who is put up to run in '12 will be just another big government type masquerading as a small government type unless there is a radical ideological cleansing of the entire Republican Party now. But I don't see how that could happen. So in a word, the Republicans serious about ideas ought not to think about winning an election in '12. If they do, they will just get more garbage. It is better to work on two things: building a new party and destabilizing the Democrats.
To give you an idea of how bad the Bush administration was, I went to Washington in 2005 to protest the accreditation of the National Council on Accreditation of Teacher Education (NCATE), a left wing extremist body that has taken control of accrediting education schools. Rather than abolish the Department of Education, the Bush administration used the DOE as a patronage plum. But who received the patronage? Left wing extremists who supported NCATE---Many of the appointees on the board before which I spoke argued with me in favor of NCATE. So Bush appointed Lockean Republicans' enemies. It was more important to him to be able to do this than to abolish the DOE. That's how incompetent and stupid the incumbent Republicans are.
Do you really think a perpetuation of the current Republican Party is crucial? One of two things must occur in order to change: a third party or a serious insurgency. Otherwise, we will keep running around in circles forever.
Phil Orenstein on the Tea Parties
Phil Orenstein, a seminal blogger and activist who introduced the Academic Bill of Rights to New York State and is active in the Queens (NYC) Republican Party, has written an important blog on the recent "tea parties". I am gratified that hundreds of thousands of Americans have begun to stand up to the collectivism of the Bush-Obama years and have started to reject the failed two-party system. Contrary to multi-millionaire Nancy Pelosi's self-serving claim that the tea party participants are wealthy people, I know better and you know better. These are hard working Americans for whom government does not work. It does not work because it oppresses the public; imposes excessive, tyrannical taxes; regulates business to death; creates economic instability via the advice of quack, university-based economists like Paul Krugman; and imposes secular humanist values on those who do not share such views.
Millionairess Pelosi's reaction to the tea parties is indicative. Like any tyrant, Pelosi blames the victims of her tyranny. Imagine if 100,000 people demonstrated against a private firm, say Toyota or Hewlett Packard. Would the managements of those firms say: "Oh these are all millionaires who were put up to it by the competition. Their views do not count." No, only in government, where tyrannical bigots enjoy power without responsibility and do not need to concern themselves with the effects of their decisions are such opinions possible.
Phil notes that hundreds of thousands gathered on April 15 to protest excessive government, taxes and subsidies to incompetent big businesses of which Ms. Pelosi and Mr. Krugman have long been affiliated. These big businesses on the Democratic and Republican Gravy Train do not create value but rather loot the public with the full support of Barack Obama, Republicans and Democrats.
Obama, probably the most divisive president in American history, has achieved the support of Congressional Republicans, who no longer represent their constituents. Obama is a president who has "signed a pork laden stimulus package of $787 billion". Calling this legislation "stimulus" is a joke along the lines of calling the medieval ideology of today's mercantilists "progressive". The Bush-Obama legislation does not help the economy. It transfers wealth from poor to rich. It is the most divisive legislation in American history, signed by the investment bankers' water boy, Barack Obama and his assistant, Millionairess Pelosi.
Orenstein observes that "Days before the Tea Parties, Janet Napolitano released an alarming Department of Homeland Security (DHS) report on 'Rightwing Extremism' targeting War Veterans returning from Iraq and Afghanistan and ordinary Americans holding conservative viewpoints as potential terrorist suspects." Thus, the divisive Obama administration takes its cues from the early days of Mussolini. It is rather pathetic that Obama's followers think that the nation can unite behind this totalitarian thug and his half witted appointees, tax cheat Timothy Geithner and Black Shirt Wannabe Janet Napolitano.
Phil attacks the opinions of investment banker shill Paul Krugman, who has spent his journalism career saying how he dislikes income inequality but fights as hard as he can to create as much income inequality as possible, specifically through transfers to his former students and Princeton donors on Wall Street. It is Krugman who has worked tirelessly for Ken Lay at Enron and the Ochs Sulzbergers, and who aggressively argues for ever greater subsidies to Goldman Sachs's clients. Then, he suggests that taxes be increased on working people who work two or three jobs and take home $100K.
The Democratic Party has been a cancer on American working people since 1896. The fact that so many are bamboozled by apologists for the super-rich like Krugman and Pelosi is a testimony to the weakness of democracy: You can fool all of the people some of the time.
Phil notes:
"The Tea Party participants utterly reject the Republican Party and its pathetic leadership, in their eyes. Not only do they believe Republicans are part of the problem for the past eight years of big government spending, but also that the McCain campaign purposely threw away the 2008 election...They are even more disgusted with the performance of the GOP today..."
I think this movement will amount to something only if (a) it creates an insurgency within the current Republican Party and throws out all past leadership, from Gingrich on down or (b) it starts a third party. Any association with the past 20 years of Republican leadership is poison. The current Republicans are equal to the Democrats. That is the worst insult I can think of. As Phil points out, the New York Republicans are the worst of all.
Phil's post is excellent and should be read in full here.
Millionairess Pelosi's reaction to the tea parties is indicative. Like any tyrant, Pelosi blames the victims of her tyranny. Imagine if 100,000 people demonstrated against a private firm, say Toyota or Hewlett Packard. Would the managements of those firms say: "Oh these are all millionaires who were put up to it by the competition. Their views do not count." No, only in government, where tyrannical bigots enjoy power without responsibility and do not need to concern themselves with the effects of their decisions are such opinions possible.
Phil notes that hundreds of thousands gathered on April 15 to protest excessive government, taxes and subsidies to incompetent big businesses of which Ms. Pelosi and Mr. Krugman have long been affiliated. These big businesses on the Democratic and Republican Gravy Train do not create value but rather loot the public with the full support of Barack Obama, Republicans and Democrats.
Obama, probably the most divisive president in American history, has achieved the support of Congressional Republicans, who no longer represent their constituents. Obama is a president who has "signed a pork laden stimulus package of $787 billion". Calling this legislation "stimulus" is a joke along the lines of calling the medieval ideology of today's mercantilists "progressive". The Bush-Obama legislation does not help the economy. It transfers wealth from poor to rich. It is the most divisive legislation in American history, signed by the investment bankers' water boy, Barack Obama and his assistant, Millionairess Pelosi.
Orenstein observes that "Days before the Tea Parties, Janet Napolitano released an alarming Department of Homeland Security (DHS) report on 'Rightwing Extremism' targeting War Veterans returning from Iraq and Afghanistan and ordinary Americans holding conservative viewpoints as potential terrorist suspects." Thus, the divisive Obama administration takes its cues from the early days of Mussolini. It is rather pathetic that Obama's followers think that the nation can unite behind this totalitarian thug and his half witted appointees, tax cheat Timothy Geithner and Black Shirt Wannabe Janet Napolitano.
Phil attacks the opinions of investment banker shill Paul Krugman, who has spent his journalism career saying how he dislikes income inequality but fights as hard as he can to create as much income inequality as possible, specifically through transfers to his former students and Princeton donors on Wall Street. It is Krugman who has worked tirelessly for Ken Lay at Enron and the Ochs Sulzbergers, and who aggressively argues for ever greater subsidies to Goldman Sachs's clients. Then, he suggests that taxes be increased on working people who work two or three jobs and take home $100K.
The Democratic Party has been a cancer on American working people since 1896. The fact that so many are bamboozled by apologists for the super-rich like Krugman and Pelosi is a testimony to the weakness of democracy: You can fool all of the people some of the time.
Phil notes:
"The Tea Party participants utterly reject the Republican Party and its pathetic leadership, in their eyes. Not only do they believe Republicans are part of the problem for the past eight years of big government spending, but also that the McCain campaign purposely threw away the 2008 election...They are even more disgusted with the performance of the GOP today..."
I think this movement will amount to something only if (a) it creates an insurgency within the current Republican Party and throws out all past leadership, from Gingrich on down or (b) it starts a third party. Any association with the past 20 years of Republican leadership is poison. The current Republicans are equal to the Democrats. That is the worst insult I can think of. As Phil points out, the New York Republicans are the worst of all.
Phil's post is excellent and should be read in full here.
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