The early twentieth century saw the triumph of Progressivism. By the time Theodore Roosevelt assumed the presidency following the assassination of William McKinley in 1901 Progressive doctrines had become dominant in elite circles. As Martin J. Sklar shows in his monumental Corporate Reconstruction of American Capitalism 1890-1916, the key debate in the Progressive era was among three or four schools of thought. Both today's conservatism and today's liberalism are offshoots of those schools of thought. The first school was small business populism which held that all big business was undesirable. In response to this movement, the US Supreme Court held for about 15 years that all business combinations were in violation of the Sherman Anti-Trust Act beginning with the 1897 decision in United States v. Trans-Missouri Freight Association. Progressives were troubled by this decision because they believed that only unreasonable restraints of trade should be illegal under the Sherman Anti-Trust Act, and that was the opinion of the law's authors. In response to this decision, Progressives held that corporations should be permitted to exist but should be regulated. The most aggressive advocate of regulation was Theodore Roosevelt, who evolved into the position that the state should largely control and set policy for corporations (Sklar provides rich detail about Roosevelt's ideological evolution). In contrast, William H. Taft, who succeeded Roosevelt as president in 1908. Taft believed in very minimal regulation of the trusts with aggressive enforcement of the Sherman Anti-trust Act through the courts. This was so following the Supreme Court's Standard Oil decision, which broke up Standard Oil (arguably to satisfy populists and the left) but overturned the Trans-Missouri decision and reinstated the common law interpretation of the Sherman Act that only unreasonably uncompetitive trusts are illegal. Thus Taft's Republican position was that corporations ought to be minimally regulated with aggressive enforcement of the anti-trust law to satisfy small business interests, anti-union small manufacturers and the left. Roosevelt might have agreed with Taft's approach during his presidency, but had veered to a highly statist viewpoint and so ran against Taft as the Bull Moose candidate in 1912. The third view, that of Democrat Woodrow Wilson, was that big business was natural but there needed to be a combination of meaningful regulation (but less than the Republican Roosevelt advocated) but also enforcement through the courts. Taft can be viewed as the progenitor of today's Republicans while Roosevelt can be viewed as the progenitor of today's "progressives". Both were Progressives in the early twentieth sense, so today's politics can be viewed as a battle between forms of Progressivism. By 1900 there was no serious advocate of laissez faire and this was not part of any significant conservative movement. Nor did the advocates of laissez fair in the late nineteenth century grasp the arguments of the twentieth century Austrians, Friedman and Schumpeter. Thus, today's free market economics, while relying on marginalism that John Bates Clark, an advocate of the kind of big business statism that the Progressives adopted, as well as crucial insights of Smith and Ricardo, was a twentieth century develop and appeared after progressive-liberalism, the conservative Progressivism of Taft, the evolutionary Progressivism of Wilson and the radical Progressivism of Roosevelt.
That said, there was a devolution of Progressive ideas that occurred in the twentieth century's subsequent 8 decades. Progressivism was largely concerned with molding of the system of regulation of business. Theodore Roosevelt was most concerned with balancing labor and corporate interests, and all the Progressives were interested in developing a system of business regulation and corporate enterprise that would be dynamic and productive but would not permit excessive power to corporations. However, the Progressives were overly impressed with the size and power of contemporary business. They did not realize that technology had the potential to overturn large firms fairly quickly. Thus, they implemented systems of support and structure that served to protect the very power of big business that they claimed to wish to minimize. The establishment of regulatory systems raised entry costs; the establishment of the income tax created barriers to capital formation among the poor and small business interests; the establishment of the Federal Reserve Bank facilitated a monopoly of capital by big business, commercial banking and the investment banks that tended to foreclose entrepreneurship; and the labor regulations that Roosevelt, Herbert Croly and other Progressives advocated that saw much of its realization later in the 20th century, also created entry barriers and high fixed costs for small business. The result was excessive protection to big business.
The model of manufacturing that the Progressives reinforced was mass production or continuous flow, in the terminology of Joan Woodward. This model was characteristic of the late nineteenth through the mid twentieth century. It involved a degree of technology and managerial sophistication, but it relied on large scale production runs. This kind of technology requires consistency of output. Its apex was the Model T Ford, which had little variation and could be produced at low cost but had poor quality. The American regulatory system thus geared itself to protecting the modernist, mass production model by allocating credit; at various times via protectionism; and by creating entry barriers.
Franklin D. Roosevelt's New Deal of the 1930s reinforced the Progressive model in a number of key respects. First, it established a modernist labor regulation system which assumed that labor unions that required large bargaining units would represent employees. In response, the industrial labor unions of the Congress of Industrial Organizations was formed. In short order following the National Labor Relations Act the number of unionized workers more than doubled and by 1945 about 35% of the workforce was unionized. The NLRA labor system assumed that unions would face the same modernist model that the Progressives thought firms would eternally face: large work units characterized by low skill workers who could be organized in large groups by industrial unions (unions that represent all the workers in the plant) such as the United Auto Workers union. However, this model was not to materialize.
The chief problem facing union organization is the same as the chief problem facing the Progressive regulatory regime. Within 40 years of the establishment of the Progressive regime Toyota Motor Company in Japan began experimenting with a process known as lean production. Taiichi Ohno, Toyota's executive vice president for manufacturing in the post-World War II era and the creator of lean production says that he worked on the lean production or kanban model for 15 years, from the late 1940s until the early 1960s, before Toyota finally iron out the process. The important point about lean manufacturing is that it inverts the assumptions of modernism. It depends on producing one unit at a time; it depends on teamwork; it depends on highly committed workers who cannot be in a conflictual relationship with the firm and who need to feel secure in their jobs; it emphasizes not mass production but coordination; and it views the factory as a series of supermarkets where line workers are consumers who obtain just enough inventory from the next lower level of the production process. Thus, information becomes critical, and highly trained workers who are flexible are equally crucial. Likewise, single units are produced at a time.
The characteristics of Ohno's lean manufacturing are amplified by the ideas of Edward I Deming, who was also appreciated in Japan before being recognized in the United States in the 1980s and 1990s. Deming argued that quality is a process rather than an outcome; that quality depends on both management and employee; that teamwork is crucial; that systems are the foundation of quality and that employees need to be trained and have long term relationships with their firms. Decision making is profound and subtle, and often criteria used to improve processes are impossible to communicate to outsiders. They depend on the knowledge that only workers possess. Therefore, the assumption of Progressivism that rational knowledge is fundamental to good management is overturned by quality management processes. No expert can replace the profound knowledge of simple line workers who are familiar with machinery.
While these management developments were occurring, there were no changes in the Progressive and New Deal regulatory formation. Indeed, quite the opposite. In 1931 Franklin D. Roosevelt abolished the gold standard, which released banking from market discipline. Banks could lend entirely on the basis of personal relationships rather than market performance, and firms could be rewarded with capital infusions regardless of performance. At the same time, American firms did not suffer from competition in part because of World War II and in part because firms had not yet reached the scale sufficient to compete with the American firms. However, continued American ascendency would have depended upon competitive quality developments; rapid innovation; and a market-drive economy, and these patterns were increasingly absent from the economy. Small businesses had increasing trouble forming because of high marginal tax rates, regulation and inability to obtain credit, which was locked by the Fed and given to connected large banks and their client large corporations. The corporations, such as General Motors, felt no need to compete with smaller foreign firms that were still learning how to manufacture. This began to end in the 1950s, when Ford built the Falcon which imitated Volkswagons, but American manufacturing firms had little concept of lean manufacturing or TQM until these processes were well familiar to Japanese firms. Thus, American firms lost their ascendency due to the protective, stable system that the Progressives and the New Deal had created; the lax management in fields like steel and autos that flourished because of the stable system and lack of competition; and the inability of the US government which oversaw the Progressive regulatory model to understand or to anticipate the fundamental changes in production knowledge that the Japanese were accruing.
Thus, the early twentieth century saw the formation of a Progressive regulatory model that aimed to adjust the economy to the rise of big business. But the system the Progressives created did not contemplate the possibility of progress. The Progressives could not foresee that Franklin D. Roosevelt would ratchet up the degree of regulation and take a number of steps that inhibited the formation of new businesses. But the Progressives also did not grasp that the big business system of large scale mass production was only a step in the development of industry, a process which will continue well beyond this and the next centuries.
Progressivism's rigidity and inability to attract experts with the requisite ability to understand developments like lean production was only part of the reason for the inability of the Progressive model to anticipate progress. The model of Progressivism is based on a faulty concept of planning. It contemplated the existing business structure as capable of innovation and that scale rather than process and new ideas were the key variables. AS the twentieth century progressed, though, it was new ideas, the ability to anticipate change and the ability for nimble, often small firms, to cooperate in innovation that mattered most. Yet, such firms are crippled by the banking and credit systems, which allocate credit to secure risks such as large corporations and real estate developers. Thus, the American economy has seen a frenzy of large retail and home building but considerably less innovation in a wide range of fields outside of electronics and telecommunications that might have occurred.
Moreover, there are a number of artifacts of Progressivism that the Progressives themselves attribute to markets, but can do so only by claiming that the Progressive/New Deal model had not been established in the first place by Taft and Franklin D. Roosevelt. First, the skewness in accessibility to credit has facilited a higher degree of income inequality than would exist in a market economic system. This has occurred because the Federal Reserve Bank has inflated asset levels, notably the stock and real estate markets, at the expense of wages. Second, relatively high paid manufacturing jobs have left the United States because of financial manipulation by the Fed, most directly the propping of the value of the dollar through encouragement of foreign governments to hold United States bonds. Third, the stimulaton of the stock market coupled with corporate emphasis on stock options has made executives sensitive to low-risk means of increasing short term profits, which would suggest moving plants to Mexico and overseas. This was done while the Progressive system provided loan guarantees to Chrysler and various protectionism measures to the automobile firms in the 1970s and 1980s.
Thus, Progressivism is responsible for US manufacturing firms' lack of emphasis on quality management, which they felt little pressure to adopt during the 1960s and 1970s, and the rewarding of corporate executives despite their firms' poor performance because of outsourcing. Indeed, Progressivism devolved into a system of special interest brokerage which ensures that little of benefit occurs on the public's behalf; that large firms benefit at the expense of small; and that the public is harmed by the Progressive regulatory regime.
Tuesday, March 18, 2008
Monday, March 17, 2008
Of Market Bottoms and Economic Literacy
This past Monday my friend Howard S. Katz has called a market top in gold and commodities and an incipient intermediate term bull market in stocks. This is because, he argues, the recession fears and investment banking losses have caused a primarily psychological market correction and the Fed's injection of large amounts of liquidity (counterfeit paper money) into the economy will stimulate a new stock market bubble. It will likely be of shorter duration than the most recent 5 year run-up, in Howard's view. Howard has gone long on several construction stocks which had quite roller coaster ride. He bought on Monday and the stocks went up 10 to 20% in a single day on Tuesday. On Wednesday they fell a similar amount, on Thursday they rose a similar amount and on Friday they were down slightly. Should Howard's prediction of a bottom this week turn out to be true, these stocks will have risen in the 100% range.
Financial drama aside, my business seminar class today surprised me. Not a single student in the class had heard of David Ricardo's theory of comparative advantage. It is difficult to discuss business, trade and current events when college graduates in business programs lack a modicum of economic literacy. I am curious as to whether the students' lack of knowledge of the most elementary theory of trade is due to ideological bias in their education; their failure to do their homework; or some other cause.
Financial drama aside, my business seminar class today surprised me. Not a single student in the class had heard of David Ricardo's theory of comparative advantage. It is difficult to discuss business, trade and current events when college graduates in business programs lack a modicum of economic literacy. I am curious as to whether the students' lack of knowledge of the most elementary theory of trade is due to ideological bias in their education; their failure to do their homework; or some other cause.
Saturday, March 15, 2008
Why Democrats and Republicans Are Mostly the Same: the Roosevelts
The two Roosevelts were founders of post-modern progessivism. Theodore Roosevelt was a Republican who believed in a statist corporate system. He became the most radically left-wing of all American presidents, including his cousin Franklin. Roosevelt believed that corporations should be licensed to engage in interstate commerce and that the federal government should tell firms what prices to charge and how to function. Although his ideas were too extreme, and ultimately were rejected by his appointed successor, William H. Taft, the model of a state-regulated economy was the product of the Progressive Republicans and of Roosevelt's presidency. Today, Democrats are calling themselve Progressive, but the fact is that Progressivism was a Republican more than a Democratic movement. Wilson was a Progressive because he had to be. His Mugwump background was consistent with a belief in freedom and private enterprise, and although many Mugwumps, including Theodore Roosevelt, had turned to statism in the Progressive era, Wilson did so in response to political pressure.
The Republican Party, then, was not a small government party in the twentieth century until Barry Goldwater ran on those views in the 1964 presidential election. The Republican Party included a minority of small business advocates (who were NOT libertarian in philosophy-- this was the group that had fought for the Sherman Ant-trust Act and the Interstate Commerce Commission in the 1880s). It included a minority of laissez faire advocates in the late 19th century, the Mugwumps, but but their laissez faire orientation had diminished by 1900, and they were too few in number to be of any importance until Goldwater, who lost by a landslide in the federal election.
The laissez-faire Republican Mugwumps of the late 19th century were not loyal to the Republican Party because the Republicans were indifferent to laissez faire and in their minds good government (civil service) principles. The laissez-faire Democrats in the late 19th century were known as the Bourbon Democrats, and included President Grover Cleveland. But these groups were small even in the 19th century (certainly less than 5 percent of the electorate). Laissez faire was not the philosophy of late nineteenth century Americans, many of whom were immigrants who benefitted from political machines in the cities and had no understanding of the economics of Smith or the opinions of EL Godkin. Thus, it is impossible that laissez-faire conservatives reflected even a small fraction of the Republican Party by the 1930s, when Roosevelt was elected.
Those conservatives who saw themselves adversely affected by the Franklin Roosevelt policies (at least in the public relations sphere) reaped what they had sown. They had not funded opposition to Progressivism in the early twentieth century, and there was no intellectual foundation to fight the New Deal in the 1930s.
Thus, while the founder of the modern Republicans was the Progressive Theodore Roosevelt and his protege (and more conservative but still rather statist) William H. Taft, the founder of the modern Democrats was the social Democrat Franklin D. Roosevelt, who adopted many of the ideas of Herbert Croly with respect to legislation.
Thus, the debate of the twentieth century has been largely among progressive Republicans, who follow the Taft position, and the progressive Democrats, who follow the Roosevelt position. Both are descendents of Theodore Roosevelt, who may be viewed as the founder of twentieth century ideological debate.
John Lukacs has argued that the dominant ideology of the twentieth century was national socialism. Stalin advocated "socialism in one country" as did Mao, while Hitler coined the term Nazi-Sozi. Progressivism is the American strain of the national socialist movement, and most Americans believe in it. The twenty or thirty percent of Americans who do not must clarify a few points among themselves.
1. The difference between national socialist Americans and those who believe in "none of the above" is that "none-of-the-above" Americans believe in a limited state. That should be the glue that binds them. Other issues distract from the need to restrain state power, which is the chief threat to freedom, progress and economic gain. These are difficult to withstand, because nationalism is a highly emotional cause.
2. Many of the supposed arguments between conservatives and the left are spurious. They are instituted by statists on both left and right. Both the statist left, in its radical as well as liberal forms, and the right, in its converstive talk-show form, are progressive, national socialist movements, even though the right claims to be for small government (but of course belies those claims when elected). Those who would change in the direction of less government have to change habits of thought. That means asking what others who believe in reductions in state power are least likely to believe and avoiding emphasis on those issues for political purposes.
3. Advocates of "none of the above" ought to think of ways to include each other, not to exclude each other because of shibboleths, code words, racial divides, or side issues that serve only to distract.
4. It is a mistake for libertarians to believe that big business Republicans and neo-conservatives are on their side. There is no alliance between those who do not believe in left or right wing national socialism and libertarians, small scale liberals and those who oppose the extension of state power and favor economic development. The conservative right is and always has been as statist as the radical left. The libertarian right has been bamboozled much as the libertarian left has been bamboozled by Stalin and Mao.
The Republican Party, then, was not a small government party in the twentieth century until Barry Goldwater ran on those views in the 1964 presidential election. The Republican Party included a minority of small business advocates (who were NOT libertarian in philosophy-- this was the group that had fought for the Sherman Ant-trust Act and the Interstate Commerce Commission in the 1880s). It included a minority of laissez faire advocates in the late 19th century, the Mugwumps, but but their laissez faire orientation had diminished by 1900, and they were too few in number to be of any importance until Goldwater, who lost by a landslide in the federal election.
The laissez-faire Republican Mugwumps of the late 19th century were not loyal to the Republican Party because the Republicans were indifferent to laissez faire and in their minds good government (civil service) principles. The laissez-faire Democrats in the late 19th century were known as the Bourbon Democrats, and included President Grover Cleveland. But these groups were small even in the 19th century (certainly less than 5 percent of the electorate). Laissez faire was not the philosophy of late nineteenth century Americans, many of whom were immigrants who benefitted from political machines in the cities and had no understanding of the economics of Smith or the opinions of EL Godkin. Thus, it is impossible that laissez-faire conservatives reflected even a small fraction of the Republican Party by the 1930s, when Roosevelt was elected.
Those conservatives who saw themselves adversely affected by the Franklin Roosevelt policies (at least in the public relations sphere) reaped what they had sown. They had not funded opposition to Progressivism in the early twentieth century, and there was no intellectual foundation to fight the New Deal in the 1930s.
Thus, while the founder of the modern Republicans was the Progressive Theodore Roosevelt and his protege (and more conservative but still rather statist) William H. Taft, the founder of the modern Democrats was the social Democrat Franklin D. Roosevelt, who adopted many of the ideas of Herbert Croly with respect to legislation.
Thus, the debate of the twentieth century has been largely among progressive Republicans, who follow the Taft position, and the progressive Democrats, who follow the Roosevelt position. Both are descendents of Theodore Roosevelt, who may be viewed as the founder of twentieth century ideological debate.
John Lukacs has argued that the dominant ideology of the twentieth century was national socialism. Stalin advocated "socialism in one country" as did Mao, while Hitler coined the term Nazi-Sozi. Progressivism is the American strain of the national socialist movement, and most Americans believe in it. The twenty or thirty percent of Americans who do not must clarify a few points among themselves.
1. The difference between national socialist Americans and those who believe in "none of the above" is that "none-of-the-above" Americans believe in a limited state. That should be the glue that binds them. Other issues distract from the need to restrain state power, which is the chief threat to freedom, progress and economic gain. These are difficult to withstand, because nationalism is a highly emotional cause.
2. Many of the supposed arguments between conservatives and the left are spurious. They are instituted by statists on both left and right. Both the statist left, in its radical as well as liberal forms, and the right, in its converstive talk-show form, are progressive, national socialist movements, even though the right claims to be for small government (but of course belies those claims when elected). Those who would change in the direction of less government have to change habits of thought. That means asking what others who believe in reductions in state power are least likely to believe and avoiding emphasis on those issues for political purposes.
3. Advocates of "none of the above" ought to think of ways to include each other, not to exclude each other because of shibboleths, code words, racial divides, or side issues that serve only to distract.
4. It is a mistake for libertarians to believe that big business Republicans and neo-conservatives are on their side. There is no alliance between those who do not believe in left or right wing national socialism and libertarians, small scale liberals and those who oppose the extension of state power and favor economic development. The conservative right is and always has been as statist as the radical left. The libertarian right has been bamboozled much as the libertarian left has been bamboozled by Stalin and Mao.
Progressivism and Globalization
In passing the Federal Trade Commission and Clayton Acts, which supplemented the Sherman Anti-Trust Act and the Interstate Commerce Commission, Congress established a system of federal regulation of business. The rationale for federal regulation as opposed to laissez faire competition was self contradictory. The chief argument was one that primarily served capitalists' interests: over-production and the need for liquidity in credit markets (which was accomplished via the Federal Reserve Bank and ultimately the abolition of the gold standard in 1933). However, the chief concern in the public mind was unreasonable restraints of trade, "bad trusts", who harmed the public via monopoly restrictions on prices. Note the contradiction: big business constitutes monopoly power which restrains production to raise prices; but the chief problem according to Progressive advocates of regulation of business was overproduction and too-low prices.
The Progressives also argued that a central government power was necessary to eliminate harmful competition or irrational decision making among some big businesses. But the Progressive argument begged the question. If managers of big businesses might be irrational, why might not officials of the Federal Trade Commission or Interstate Commerce Commision also be irrational, greedy, power hungry or unreasonable? Was Theodore Roosevelt necessarily more rational or moral than John D. Rockefeller? What would have made him so, a halo? Would he have made a better manager of oil companies than John D. Rockefeller was? What evidence was there that government bureaucrats or experts were more rational or effect at managing large concerns, or could contribute meaningfully to the management of the firms?
In today's world, a century after the Progressive era, firms are no longer national in extent, purpose and often allegiance. They are global. Competition is global. There is no agency to supervise the global firms. Toyota, Mercedes and GM all compete without the benefit of government guidance. Yet there is no monopoly power and there is no overproduction. These were imaginary problems claimed by primitive ideologues with little knowledge of how economies work.
The model of management that the Progressives advocated that experts in government agencies can provide management help to large firms is woefully out of date. The chief knowledge of importance to business is, as Hayek pointed out, on the spot. It is specific knowledge concerning production and quality improvement processes. It is not abstract or theoretical and it is not found in business schools or economics departments.
Taiichi Ohno's model of lean manufacturing and continuous production, like Hayek's concept of on-the-spot-information, suggests that the modernist view of expertise as generalizable knowledge is inappropriate to the post-modern world. Knowledge evolves from production processes, which dictate process improvements through specific constraints and requirements that differ from firm-to-firm. The idea that an expert with a Ph.D. can tell firms what processes to use or how to improve quality is as antiquated as the idea that government inspectors are necessary to ensure good quality meat.
The phenomena of big business was striking to the popular mind of the late nineteenth century. The spectacular rise of large firms such as Standard Oil, which were protected by high tariffs and likely would not have grown to the extent that they did without the tariffs impressed people who grew up toward the end of the era of the horse and buggy . The rise of large firms, and the tariffs and other government support for their rise, led to public concerns about monopoly, excessive power and unreasonable competition. But the public fear of large corporations did not reflect an understanding of their vulnerability to creative destruction. The owners themselves were afraid at the time and repeatedly complained about lack of profit, overcompetition and destructive competition. But this was very much in the public interest. Nothing should make the public happier than a capitalist who makes no money because prices are drive down by competition. But the public was unable to disect the pro-capitalist gist of the Progressive argument.
The left of the late nineteenth century, like the left today, is a pro-centralization movement, and therefore it is closely aligned with, despite its hatred of, big business Republicanism. The Progressives favored large scale firms managed by government bureaucracy because they believed that the highest development of industry had occurred in the early twentieth century. The spectacular growth of the large firms seemed to them the pinnacle of human economic achievement. They could not, as we cannot, envision future management and technological developments. To them, the oil mining technology of Standard Oil and the Ford assembly line were humanity's ultimate triumphs. These advances were important, but are primitive by today's standards.
In order to achieve these breakthroughs, capitalist free market competition was essential to innovation. Without "overproduction" cost saving technology would not have been the subject of creative thought. Without economic stress capitalists would not have supported the invention of new products that created competitive advantage (in 1980s lingo). But the Progressives could not see that the advance of capitalism was a dynamic process and the technology of the 20th century by the standards of the 24th century (assuming that progressivism does not prevail) will seem even more backward and primitive than the technology of the 16th century seems to us today.
Ray Kurzweil has argued that technology advances at ever quicker rates. Kurzweil's argument depends in part on Moore's law, which does not seem to be materializing now and assumes a rate of advance that is quicker than past and recent rates by orders of magnitude. One need not buy into Kurzweil's singularity argument to believe that future advance will be quicker than past advance. Technological advance depends on interaction and creativity. Informationi technology has increased the rate of interaction, so the rate of advance has been increasing. But much of the advance has been in information technology. Therefore, we can expect escalating rates of advance. This has occurred despite attacks on the flow of information. Much of the twentieth century world was darkened by dictatorship: communism covered China and Russia and a corrupt socialism dominated India. National socialism dominated the world's political systems, and progressive regulatory systems, income taxation and inflationary Federal Reserve policies that allocate credit away from innovative firms toward financial firms hammered at progress in the United States. Despite the Progressive assault on human progress, except for the period of high tariffs, depression and war from the late 1920s through the 1950s, the twentieth century still saw progress, although not at the rate that could have been, and perhaps slower than the late 19th century rate, which saw less circulation of information for less intervention.
The economy has become more global and competition is no longer "managed" (like a child who believes he is a policeman, so Theodore Roosevelt believed he could manage the economy) yet overproduction is not a problem, nor is unfair competition.
The Progressives also argued that a central government power was necessary to eliminate harmful competition or irrational decision making among some big businesses. But the Progressive argument begged the question. If managers of big businesses might be irrational, why might not officials of the Federal Trade Commission or Interstate Commerce Commision also be irrational, greedy, power hungry or unreasonable? Was Theodore Roosevelt necessarily more rational or moral than John D. Rockefeller? What would have made him so, a halo? Would he have made a better manager of oil companies than John D. Rockefeller was? What evidence was there that government bureaucrats or experts were more rational or effect at managing large concerns, or could contribute meaningfully to the management of the firms?
In today's world, a century after the Progressive era, firms are no longer national in extent, purpose and often allegiance. They are global. Competition is global. There is no agency to supervise the global firms. Toyota, Mercedes and GM all compete without the benefit of government guidance. Yet there is no monopoly power and there is no overproduction. These were imaginary problems claimed by primitive ideologues with little knowledge of how economies work.
The model of management that the Progressives advocated that experts in government agencies can provide management help to large firms is woefully out of date. The chief knowledge of importance to business is, as Hayek pointed out, on the spot. It is specific knowledge concerning production and quality improvement processes. It is not abstract or theoretical and it is not found in business schools or economics departments.
Taiichi Ohno's model of lean manufacturing and continuous production, like Hayek's concept of on-the-spot-information, suggests that the modernist view of expertise as generalizable knowledge is inappropriate to the post-modern world. Knowledge evolves from production processes, which dictate process improvements through specific constraints and requirements that differ from firm-to-firm. The idea that an expert with a Ph.D. can tell firms what processes to use or how to improve quality is as antiquated as the idea that government inspectors are necessary to ensure good quality meat.
The phenomena of big business was striking to the popular mind of the late nineteenth century. The spectacular rise of large firms such as Standard Oil, which were protected by high tariffs and likely would not have grown to the extent that they did without the tariffs impressed people who grew up toward the end of the era of the horse and buggy . The rise of large firms, and the tariffs and other government support for their rise, led to public concerns about monopoly, excessive power and unreasonable competition. But the public fear of large corporations did not reflect an understanding of their vulnerability to creative destruction. The owners themselves were afraid at the time and repeatedly complained about lack of profit, overcompetition and destructive competition. But this was very much in the public interest. Nothing should make the public happier than a capitalist who makes no money because prices are drive down by competition. But the public was unable to disect the pro-capitalist gist of the Progressive argument.
The left of the late nineteenth century, like the left today, is a pro-centralization movement, and therefore it is closely aligned with, despite its hatred of, big business Republicanism. The Progressives favored large scale firms managed by government bureaucracy because they believed that the highest development of industry had occurred in the early twentieth century. The spectacular growth of the large firms seemed to them the pinnacle of human economic achievement. They could not, as we cannot, envision future management and technological developments. To them, the oil mining technology of Standard Oil and the Ford assembly line were humanity's ultimate triumphs. These advances were important, but are primitive by today's standards.
In order to achieve these breakthroughs, capitalist free market competition was essential to innovation. Without "overproduction" cost saving technology would not have been the subject of creative thought. Without economic stress capitalists would not have supported the invention of new products that created competitive advantage (in 1980s lingo). But the Progressives could not see that the advance of capitalism was a dynamic process and the technology of the 20th century by the standards of the 24th century (assuming that progressivism does not prevail) will seem even more backward and primitive than the technology of the 16th century seems to us today.
Ray Kurzweil has argued that technology advances at ever quicker rates. Kurzweil's argument depends in part on Moore's law, which does not seem to be materializing now and assumes a rate of advance that is quicker than past and recent rates by orders of magnitude. One need not buy into Kurzweil's singularity argument to believe that future advance will be quicker than past advance. Technological advance depends on interaction and creativity. Informationi technology has increased the rate of interaction, so the rate of advance has been increasing. But much of the advance has been in information technology. Therefore, we can expect escalating rates of advance. This has occurred despite attacks on the flow of information. Much of the twentieth century world was darkened by dictatorship: communism covered China and Russia and a corrupt socialism dominated India. National socialism dominated the world's political systems, and progressive regulatory systems, income taxation and inflationary Federal Reserve policies that allocate credit away from innovative firms toward financial firms hammered at progress in the United States. Despite the Progressive assault on human progress, except for the period of high tariffs, depression and war from the late 1920s through the 1950s, the twentieth century still saw progress, although not at the rate that could have been, and perhaps slower than the late 19th century rate, which saw less circulation of information for less intervention.
The economy has become more global and competition is no longer "managed" (like a child who believes he is a policeman, so Theodore Roosevelt believed he could manage the economy) yet overproduction is not a problem, nor is unfair competition.
Thursday, March 13, 2008
Eliot Spitzer in The New York Times
Progressives argue that deliberative processes are essential to a just society. However, accurate information sources are necessary to deliberation. If news media fail to provide accurate information, then deliberative processes need to be curtailed. If one draws an analogy to business, news sources ought to be fiduciaries to the public, i.e., to serve the public trust, if the progressive goal of deliberation is achievable. If news sources see themselves as sellers of news, then they can ethically puff up and distort stories. But in that case good deliberation and decision making is impeded and the progressive model will fail.
The New York Times is widely regarded as the nation's chief news source and is the most likely candidate of all news sources to play the role of fiduciary to the public. The advent of the Times as a putative objective source of information was part of the development of Progressivism and twentieth century liberalism. But its handling of Eliot Spitzer's candidacy and gubernatorial administration took a marketing as opposed to a fiduciary tone. Rather than attempt to uncover facts and report accurately about Eliot Spitzer, from the beginning the Times saw its role as Spitzer's marketer and defender. While partisan news is fine, it does not lend itself to deliberative processes, because deliberation depends on sound information and trust rather than deception and distrust. The Times followed the 19th century journalistic advocacy model with respect to Spitzer. Assuming the Times's failure is generalizable, and there is no reason to think it is not, deliberative progressivism is an impossible chimera because information sources necessary to competent public deliberation are missing. Intelligent deliberation cannot be based on the liberal media's outright deception.
The Times had about ten years to observe Eliot Spitzer, who first campaigned for Attorney General in 1998 and then for Governor in 2006. Yet, the Times failed to highlight fundamental character flaws that are now evident to all and would have been evident to any objective observer. The matter is not of sexual vice but of Spitzer's bad judgment, willingness to lie, self-indulgence and lack of common sense. Spitzer publicly stated that he would avoid accepting campaign contributions over $10,000, and when he did accept such contributions the Times did all it could to minimize the story. Observers, including myself, had long suspected character problems. By late last year it was evident that Spitzer's inability to overcome political resistance to reform in Albany meant that he had been elected on false premises. But the Times did not reconsider its rigid support for Spitzer. Rather, it preferred to continue to lie. Public deliberation is impossible with such information sources.
In this blog I will review some of the Times's pre-election coverage of Spitzer and its unwillingness to raise ethical questions about contributions to Spitzer's campaign. In subsequent blogs I will review its biased handling of Spitzer's time in office.
The Times's Election Coverage
On October 22, 2006 the Times formally endorsed Eliot Spitzer. According to Nicholas Confessore the Times's editorial board had said that:
"Mr. Spitzer 'has been fearless and dogged in his pursuit of justice. We are eager to see what happens when he applies those attributes to Albany's immobile Legislature, which has a long, sad history in wearing would-be reformers down, waiting them out.'"
In the ensuing 16 months, during which Governor Spitzer did little or nothing to reform Albany and instead was involved in repeated fights with other politicians, the Times failed to flash any caution lights. It had to have been aware that time was of the essence for Spitzer to overcome resistance to reform, but it did not monitor or question Spitzer's timeliness.
During the campaign, the Times ran several articles discussing Republicans' support for then-candidate Spitzer. In an article entitled "A Secret Divide on Republican Turf", Manny Fernandez wrote about support for Spitzer in Broome County, New York:
"Mr. Spitzer appeals to Republicans for a number of reasons. As the state's top law enforcement officer, he made a name for himself as a tough prosecutor in a series of high-profile cases. But two factors drawing Republicans to Mr. Spitzer have less to do with the candidate himself than with the way the race for governor has played out."
In the ensuing months, when Governor Spitzer failed to engage not only with Republicans but also with his fellow Democrats, the Times never again mentioned the Republicans of Broome County and whether they had been misled.
At the same time that the Times boasted about Mr.Spitzer's ability to clean up Albany and win over Republican support, the New York Daily News already carried stories that questioned Spitzer's ethics. On September 5, 2006, Bill Hammond of the New York Daily News published a story entitled "High Flying Spitzer Hits Ethical Turbulence." In the story Hammond notes:
"(A)ccepting deeply discounted air travel from a gambling mogul doing lots of business with state government - as Spitzer and an aide did in May - is too cozy for comfort. The would-be Sheriff of Albany should be keeping a safe distance from favor seekers, not putting himself in a position where he owes them anything."
On September 2, 2006, the Times carried the story this way in an article entitled "Hammering at Spitzer, but With Nary a Dent to Show":
The Republican candidate, John Faso, hammered at Attorney General Spitzer for accepting flights on a private jet owned by Richard Fields, a developer who ferried Mr. Spitzer to fund-raisers across the country, and who has himself donated $200,000 through various entities he controls... Not that any of this came close to making a dent in Mr. Spitzer’s aura of invincibility. The attorney general leads Mr. Suozzi by more than 50 points in various polls.
This evidence of the shallow fraudulence of Spitzer's claim to be an ethics leader did not, for some odd reason, give the Times's editors pause. On January, 19 2007 the Times carried another story in its Metro Briefing section entitled "New York: Albany: Spitzer Returns Campaign Cash". The story does not mention the Faso accusations several months earlier and merely notes:
"Mr. Fields was reimbursed because his companies exceeded the $50,100 limit on individual donations allowed under state law, said a Spitzer spokeswoman." The Times did not raise ethical issues. Indeed, in a November 12 article about Governor Spitzer's election the Times's Leslie Eaton wrote:
"Mr. Spitzer was not sure if he would seek private donations to pay for a celebration, as Gov. George E. Pataki did for his first swearing-in, in 1995. That practice has raised ethical questions in the past, Mr. Spitzer said, 'and we’re going to handle it in a very, very different way.'" Ms. Eaton did not raise the question of Richard Fields during Mr. Spitzer's beach holiday and why, if funding the inaugural celebration was an ethical problem, why accepting large donations from a casino developer was not. The Times chose to focus on Spitzer's supposedly ethical refusal to have private sources pay for a celebration, and ignored hundreds of thousands of dollars worth of donations from casino developers.
On September 17, 2006 in the Daily News , Michael Goodwin wrote with respect to Spitzer's ability to implement campaign finance reform:
"Eliot Spitzer says it over and over again: 'On Day One, everything changes.'... But Spitzer's vow is suspect in one key area because he comes to the job with dirty hands...Having trounced his primary opponent with more than 80% of the vote, and having a huge lead in fund-raising and the polls over Republican John Faso, Spitzer could take the high road before November. He could lead by example and give the tainted money back. That way, he'd be a true reformer on Day One...Among the $37 million he has collected is at least $350,000 from a handful of backers who had already reached the $50,100 limit, according to Common Cause."
On September 19, 2006 the Times's Mike McIntire notes in passing that AIG had contributed excessively to Spitzer's campaign. But on January 14, 2006 the Times's Patrick D. Healy had minimized ethical questions that had been raised about Spitzer:
"Mr. Suozzi continued that he believed Mr. Spitzer has 'been overly reliant' on donations from trial lawyers and lobbyists. He then asked to move that comment off the record as well...
"According to studies by Common Cause New York, Mr. Spitzer has raised many tens of thousands of dollars from lawyers and lobbyists, although a precise total was not available yesterday. Since 1999, Mr. Spitzer has received $94,300 from a political action committee for trial lawyers -- half of the amount that Gov. George E. Pataki received during that period, though Mr. Spitzer received a greater number of contributions from the committee...In an interview yesterday, Mr. Spitzer did not appear troubled by Mr. Suozzi's remarks, declining to comment on the expletive and reacting skeptically to the description of his fund-raising."
The Times was committed to Spitzer to a degree that would have been suicidal for a business investor. Isn't a political candidate something of a public investment? And isn't the media's role something of a public trust? If it is not, if the Times is partisan, the system of big government and public deliberation will not work.
The New York Times is widely regarded as the nation's chief news source and is the most likely candidate of all news sources to play the role of fiduciary to the public. The advent of the Times as a putative objective source of information was part of the development of Progressivism and twentieth century liberalism. But its handling of Eliot Spitzer's candidacy and gubernatorial administration took a marketing as opposed to a fiduciary tone. Rather than attempt to uncover facts and report accurately about Eliot Spitzer, from the beginning the Times saw its role as Spitzer's marketer and defender. While partisan news is fine, it does not lend itself to deliberative processes, because deliberation depends on sound information and trust rather than deception and distrust. The Times followed the 19th century journalistic advocacy model with respect to Spitzer. Assuming the Times's failure is generalizable, and there is no reason to think it is not, deliberative progressivism is an impossible chimera because information sources necessary to competent public deliberation are missing. Intelligent deliberation cannot be based on the liberal media's outright deception.
The Times had about ten years to observe Eliot Spitzer, who first campaigned for Attorney General in 1998 and then for Governor in 2006. Yet, the Times failed to highlight fundamental character flaws that are now evident to all and would have been evident to any objective observer. The matter is not of sexual vice but of Spitzer's bad judgment, willingness to lie, self-indulgence and lack of common sense. Spitzer publicly stated that he would avoid accepting campaign contributions over $10,000, and when he did accept such contributions the Times did all it could to minimize the story. Observers, including myself, had long suspected character problems. By late last year it was evident that Spitzer's inability to overcome political resistance to reform in Albany meant that he had been elected on false premises. But the Times did not reconsider its rigid support for Spitzer. Rather, it preferred to continue to lie. Public deliberation is impossible with such information sources.
In this blog I will review some of the Times's pre-election coverage of Spitzer and its unwillingness to raise ethical questions about contributions to Spitzer's campaign. In subsequent blogs I will review its biased handling of Spitzer's time in office.
The Times's Election Coverage
On October 22, 2006 the Times formally endorsed Eliot Spitzer. According to Nicholas Confessore the Times's editorial board had said that:
"Mr. Spitzer 'has been fearless and dogged in his pursuit of justice. We are eager to see what happens when he applies those attributes to Albany's immobile Legislature, which has a long, sad history in wearing would-be reformers down, waiting them out.'"
In the ensuing 16 months, during which Governor Spitzer did little or nothing to reform Albany and instead was involved in repeated fights with other politicians, the Times failed to flash any caution lights. It had to have been aware that time was of the essence for Spitzer to overcome resistance to reform, but it did not monitor or question Spitzer's timeliness.
During the campaign, the Times ran several articles discussing Republicans' support for then-candidate Spitzer. In an article entitled "A Secret Divide on Republican Turf", Manny Fernandez wrote about support for Spitzer in Broome County, New York:
"Mr. Spitzer appeals to Republicans for a number of reasons. As the state's top law enforcement officer, he made a name for himself as a tough prosecutor in a series of high-profile cases. But two factors drawing Republicans to Mr. Spitzer have less to do with the candidate himself than with the way the race for governor has played out."
In the ensuing months, when Governor Spitzer failed to engage not only with Republicans but also with his fellow Democrats, the Times never again mentioned the Republicans of Broome County and whether they had been misled.
At the same time that the Times boasted about Mr.Spitzer's ability to clean up Albany and win over Republican support, the New York Daily News already carried stories that questioned Spitzer's ethics. On September 5, 2006, Bill Hammond of the New York Daily News published a story entitled "High Flying Spitzer Hits Ethical Turbulence." In the story Hammond notes:
"(A)ccepting deeply discounted air travel from a gambling mogul doing lots of business with state government - as Spitzer and an aide did in May - is too cozy for comfort. The would-be Sheriff of Albany should be keeping a safe distance from favor seekers, not putting himself in a position where he owes them anything."
On September 2, 2006, the Times carried the story this way in an article entitled "Hammering at Spitzer, but With Nary a Dent to Show":
The Republican candidate, John Faso, hammered at Attorney General Spitzer for accepting flights on a private jet owned by Richard Fields, a developer who ferried Mr. Spitzer to fund-raisers across the country, and who has himself donated $200,000 through various entities he controls... Not that any of this came close to making a dent in Mr. Spitzer’s aura of invincibility. The attorney general leads Mr. Suozzi by more than 50 points in various polls.
This evidence of the shallow fraudulence of Spitzer's claim to be an ethics leader did not, for some odd reason, give the Times's editors pause. On January, 19 2007 the Times carried another story in its Metro Briefing section entitled "New York: Albany: Spitzer Returns Campaign Cash". The story does not mention the Faso accusations several months earlier and merely notes:
"Mr. Fields was reimbursed because his companies exceeded the $50,100 limit on individual donations allowed under state law, said a Spitzer spokeswoman." The Times did not raise ethical issues. Indeed, in a November 12 article about Governor Spitzer's election the Times's Leslie Eaton wrote:
"Mr. Spitzer was not sure if he would seek private donations to pay for a celebration, as Gov. George E. Pataki did for his first swearing-in, in 1995. That practice has raised ethical questions in the past, Mr. Spitzer said, 'and we’re going to handle it in a very, very different way.'" Ms. Eaton did not raise the question of Richard Fields during Mr. Spitzer's beach holiday and why, if funding the inaugural celebration was an ethical problem, why accepting large donations from a casino developer was not. The Times chose to focus on Spitzer's supposedly ethical refusal to have private sources pay for a celebration, and ignored hundreds of thousands of dollars worth of donations from casino developers.
On September 17, 2006 in the Daily News , Michael Goodwin wrote with respect to Spitzer's ability to implement campaign finance reform:
"Eliot Spitzer says it over and over again: 'On Day One, everything changes.'... But Spitzer's vow is suspect in one key area because he comes to the job with dirty hands...Having trounced his primary opponent with more than 80% of the vote, and having a huge lead in fund-raising and the polls over Republican John Faso, Spitzer could take the high road before November. He could lead by example and give the tainted money back. That way, he'd be a true reformer on Day One...Among the $37 million he has collected is at least $350,000 from a handful of backers who had already reached the $50,100 limit, according to Common Cause."
On September 19, 2006 the Times's Mike McIntire notes in passing that AIG had contributed excessively to Spitzer's campaign. But on January 14, 2006 the Times's Patrick D. Healy had minimized ethical questions that had been raised about Spitzer:
"Mr. Suozzi continued that he believed Mr. Spitzer has 'been overly reliant' on donations from trial lawyers and lobbyists. He then asked to move that comment off the record as well...
"According to studies by Common Cause New York, Mr. Spitzer has raised many tens of thousands of dollars from lawyers and lobbyists, although a precise total was not available yesterday. Since 1999, Mr. Spitzer has received $94,300 from a political action committee for trial lawyers -- half of the amount that Gov. George E. Pataki received during that period, though Mr. Spitzer received a greater number of contributions from the committee...In an interview yesterday, Mr. Spitzer did not appear troubled by Mr. Suozzi's remarks, declining to comment on the expletive and reacting skeptically to the description of his fund-raising."
The Times was committed to Spitzer to a degree that would have been suicidal for a business investor. Isn't a political candidate something of a public investment? And isn't the media's role something of a public trust? If it is not, if the Times is partisan, the system of big government and public deliberation will not work.
Failure of Progressivism
Writing in the tradition of John Dewey's progressivism, Peter Levine and others have argued that deliberation and democracy are key values and that society ought to be reformed to reinvigorate public participation and deliberation. Liberals now call themselves progressives and continue to argue for enhancement of the public sphere at the expense of the private sphere; increased government involvement in the economy; and a reinvention of policies that, over the past century, have failed. But Progressivism has failed and will continue to fail because its commitment to big government ignores the conditions for good decision making in a large economy and in the kind of large organizations that progressivism subsidizes.
In order to function, economies and institutions need to make best use of information. Such information is available through price fluctuations and on-the-spot shifts in demand. To make best use of informational change, economic decision makers must be local and/or flexible. Some patterns may be global, but even there continuous improvement is necessary to an efficient organization, and the ability to continously and at times radically improve is necessary to an efficient economy.
To be local, organizations must be decentralized. To be decentralized, they must be small actors who are profit oriented; or be decntralized large organizations. Institutions at the macro-economic level are too large and centralized to be able to make use of local information, as Friedrich Hayek has argued. Thus, to make best use of information in the economy, economic actors must be small, privately owned organizations with local knowledge or be able to emulate such organizations. For large governmental institutions to work they must emulate small organizations anyway, and there is no reason to characterize them as governmental institutions. To the extent that they are government institutions they will not function effectively.
There is a second reason for the failure of progressivism. In order to manage systems, feedback is necessary and reform of policy must be continuous. This is important in both the individual organization and the larger economy as well for two reasons. First, organizations need to maintain stability. If, for instance, prices rise, then the organization must be able to promptly adjust purchasing policies, pricing strategy and a host of similar variables in order to stabilize themselves with respect to the rising price. Second, in order to improve their products organization must be able to continuously change. This requires motive and ability to continuously improve organizational information systems. Such continuous improvement is impossible in a democratic setting. Democratic processes are global and require mass deliberation. Nor are such improvement processes possible via expert commissions. Experts are not privy to what the quality expert EI Deming called the "profound knowledge" of workers intimately involved in a production system. Moreover, the knowledge base that is required changes constantly because of shifting conditions.
Neither of these requirements hold with respect to deliberative democracy and so is precluded by progressivism. Deliberative processes are untimely; cannot integrate local information; are rigid; are unable to be revised because of the costliness of the deliberative process; are subject to opportunistic manipulation by self-interested parties and insiders; do not reflect a unitary profit motive; and often are subject to a range of contradictory motives.
Because of these limitations progressivism is necessarily at odds with progress. Progress requires innovation, which in turn is conditional upon incentives, a clear goal, a focus on improvement (continuous as well as radical), flexibility with respect to decision making and experimentation conditioned upon flexibility and unforeseen results and outcomes.
Thus, progressive-liberalism is inherently anti-progress. Its very name is self-contradictory.
In order to function, economies and institutions need to make best use of information. Such information is available through price fluctuations and on-the-spot shifts in demand. To make best use of informational change, economic decision makers must be local and/or flexible. Some patterns may be global, but even there continuous improvement is necessary to an efficient organization, and the ability to continously and at times radically improve is necessary to an efficient economy.
To be local, organizations must be decentralized. To be decentralized, they must be small actors who are profit oriented; or be decntralized large organizations. Institutions at the macro-economic level are too large and centralized to be able to make use of local information, as Friedrich Hayek has argued. Thus, to make best use of information in the economy, economic actors must be small, privately owned organizations with local knowledge or be able to emulate such organizations. For large governmental institutions to work they must emulate small organizations anyway, and there is no reason to characterize them as governmental institutions. To the extent that they are government institutions they will not function effectively.
There is a second reason for the failure of progressivism. In order to manage systems, feedback is necessary and reform of policy must be continuous. This is important in both the individual organization and the larger economy as well for two reasons. First, organizations need to maintain stability. If, for instance, prices rise, then the organization must be able to promptly adjust purchasing policies, pricing strategy and a host of similar variables in order to stabilize themselves with respect to the rising price. Second, in order to improve their products organization must be able to continuously change. This requires motive and ability to continuously improve organizational information systems. Such continuous improvement is impossible in a democratic setting. Democratic processes are global and require mass deliberation. Nor are such improvement processes possible via expert commissions. Experts are not privy to what the quality expert EI Deming called the "profound knowledge" of workers intimately involved in a production system. Moreover, the knowledge base that is required changes constantly because of shifting conditions.
Neither of these requirements hold with respect to deliberative democracy and so is precluded by progressivism. Deliberative processes are untimely; cannot integrate local information; are rigid; are unable to be revised because of the costliness of the deliberative process; are subject to opportunistic manipulation by self-interested parties and insiders; do not reflect a unitary profit motive; and often are subject to a range of contradictory motives.
Because of these limitations progressivism is necessarily at odds with progress. Progress requires innovation, which in turn is conditional upon incentives, a clear goal, a focus on improvement (continuous as well as radical), flexibility with respect to decision making and experimentation conditioned upon flexibility and unforeseen results and outcomes.
Thus, progressive-liberalism is inherently anti-progress. Its very name is self-contradictory.
Conformity and Fear in Modernism
One of the hallmarks of modernism is fear. Fear arises from modernism's emphasis on scale, its support for large organizations and institutions, i.e., bureaucracy, which its apologists defend on the grounds of economic efficiency. However, modernism depended on state support for those same institutions. In the 19th century state support involved tariffs, land grants, favors and subsidies to large organizations. The chief beneficiaries of big government, big businessmen, were able to convince Progressives, such as Theodore Roosevelt, that state management and stabilization were necessary. This led to the establishment of the Federal Reserve Bank in 1913, the chief source of subsidies to large coroprations, banks and the investment community.
In the 1920s, tariffs that had been abolished in the late 19th century were reestablished and in the 1930s the gold standard was abolished, freeing the central government to provide unlimited subsidies to large organizations. At the same time, government was centralized in the name of public welfare, making the ordinary citizen ever more dependent on large organizations. The alternatives presented as necessary to modern life were framed as a choice between large, inefficient, state-subsidized industries and even larger government-owned industries.
There was never any evidence that these were the only choices. In fact, the evidence suggested that only the capitalist class suffered from decentralized, competitive industry and that without centralization the average American saw increasing real wages and high demand for labor. The advocates of Progressivism argued that the competitive economy resulted in "overproduction". Yet overproduction suggests over-employment and excess demand for labor. Yet at the same time, the Progressives argued that over-production resulted in unemployment.
Fear arises because large scale institutional structure inhibits job formation. It does so through taxation, reallocation of capital from individuals to centrally controlled institutions via the Federal Reserve Bank, government regulation, the minimum wage and in the early twentieth century institutionalized racial discrimination. Government policies restrict the availability of jobs, making individuals increasingly independent on corporate and state employment. Income taxation and social security eliminate private saving so the individual lacks resources on which to depend if he loses his job and experimentation with new production and institutional forms is curtailed.
Corporate liberalism extends its attack on private resources to the few individuals who manage to accumulate enough to live without dependence on large corporations. It establishes an inheritance tax so that independence cannot be transmitted intergenerationally, increasing the likelihood of near-universal dependence on large institutions. The inheritance taxes are structured so that trusts and legal exceptions are made for the very wealthy, insuring the establishment of an intergenerationally progressive-liberal artistocracy based on ownership of large-scale institutions. Beneficiaries of such privilege, such as the Ochs Sulzbergers of the New York Times and the Rockefellers, then argue for increased inheritance taxes on others who can afford less creative legal advice.
Fear arises because loss of employment can mean personal disaster. Risk increases with ability level. Corporate jobs are difficult to procure because of artificially induced shortages. Specialized knowledge is often firm specific, hence, the individual becomes politically, intellectually and morally dependent on the corporate system. The most talented individuals become the most inhibited. The inhibitions are reinforced through cultural institutions such as universities who incultate political correctness, uniformity of thought and cowardly political behavior.
Individuality erodes for additional reasons. First, in the workplace corporations discourage individuality in the name of coordination. This is done by requiring "interpersonal skills" or "managerial skills" of corporate employeesj; requiring that individuals be "team players" and in universities through "political correctness" and ideological litmus tests. Employees who do not conform to the corporate or academic value systems are regarded as troublemakers and are precluded from further engagement with the firm or from promotion even if their productivity is significantly higher than their wage. Hence, large institutions are generally inefficienct and do not maximize profit. This is possible in part because they are subsidized by regulation and Federal Reserve Bank credit and because they enjoy substantial monopoly power in their industries.
Fear and conformity result in a propensity toward mass thinking among modern citizens. Those who deviate, are "politically incorrect" do not behave appropriately are viewed as unemployable. A few are able to start businesses or find alternative ways to make a living. However, these are too few in number to alter the character of modern society.
Second, mass consumption and the mass media result in a high degree of uniformity of opinion. Mass consumption requires a uniform assortment of merchandise of modest quality that is attractive to large numbers of consumers. Coca-cola, McDonald's and network television become standards, and refusal to engage with these products becomes a stigma. Likewise, those who produce mass media are subject to the same corporate groupthink as the members of other corporate and professional communities, and the public mind is heavily influenced through repetition and frequent exposure to television and films.
Fear and conformity lead to fascination with mass entertainment, frivolous interpretations of what art, knowledge and literature are, declining standards in academia and higher education and failure of science. The achievement value of achievement is replaced by the value of conformity, other-directedness, groupthink and acceptance of authority and political correctness. Thus, left and right are alternative cults that aim to provide a "received" political value to conformist, modern citizens. Participation in a cult is necessary because modern citizens lose faith in their own ideas and opinions, and come to believe that newscasters, newspapers and others are necessary to make intelligent and informed choices. Of course, such sources are no better informed than the citizens themselves, and so the modern political world becomes a contest of wills among several groupings of opinion, each one ill-informed and each one emotionally comitted to its group, and each one unable to free itself from the fear and conformity that drive their spirits.
In the 1920s, tariffs that had been abolished in the late 19th century were reestablished and in the 1930s the gold standard was abolished, freeing the central government to provide unlimited subsidies to large organizations. At the same time, government was centralized in the name of public welfare, making the ordinary citizen ever more dependent on large organizations. The alternatives presented as necessary to modern life were framed as a choice between large, inefficient, state-subsidized industries and even larger government-owned industries.
There was never any evidence that these were the only choices. In fact, the evidence suggested that only the capitalist class suffered from decentralized, competitive industry and that without centralization the average American saw increasing real wages and high demand for labor. The advocates of Progressivism argued that the competitive economy resulted in "overproduction". Yet overproduction suggests over-employment and excess demand for labor. Yet at the same time, the Progressives argued that over-production resulted in unemployment.
Fear arises because large scale institutional structure inhibits job formation. It does so through taxation, reallocation of capital from individuals to centrally controlled institutions via the Federal Reserve Bank, government regulation, the minimum wage and in the early twentieth century institutionalized racial discrimination. Government policies restrict the availability of jobs, making individuals increasingly independent on corporate and state employment. Income taxation and social security eliminate private saving so the individual lacks resources on which to depend if he loses his job and experimentation with new production and institutional forms is curtailed.
Corporate liberalism extends its attack on private resources to the few individuals who manage to accumulate enough to live without dependence on large corporations. It establishes an inheritance tax so that independence cannot be transmitted intergenerationally, increasing the likelihood of near-universal dependence on large institutions. The inheritance taxes are structured so that trusts and legal exceptions are made for the very wealthy, insuring the establishment of an intergenerationally progressive-liberal artistocracy based on ownership of large-scale institutions. Beneficiaries of such privilege, such as the Ochs Sulzbergers of the New York Times and the Rockefellers, then argue for increased inheritance taxes on others who can afford less creative legal advice.
Fear arises because loss of employment can mean personal disaster. Risk increases with ability level. Corporate jobs are difficult to procure because of artificially induced shortages. Specialized knowledge is often firm specific, hence, the individual becomes politically, intellectually and morally dependent on the corporate system. The most talented individuals become the most inhibited. The inhibitions are reinforced through cultural institutions such as universities who incultate political correctness, uniformity of thought and cowardly political behavior.
Individuality erodes for additional reasons. First, in the workplace corporations discourage individuality in the name of coordination. This is done by requiring "interpersonal skills" or "managerial skills" of corporate employeesj; requiring that individuals be "team players" and in universities through "political correctness" and ideological litmus tests. Employees who do not conform to the corporate or academic value systems are regarded as troublemakers and are precluded from further engagement with the firm or from promotion even if their productivity is significantly higher than their wage. Hence, large institutions are generally inefficienct and do not maximize profit. This is possible in part because they are subsidized by regulation and Federal Reserve Bank credit and because they enjoy substantial monopoly power in their industries.
Fear and conformity result in a propensity toward mass thinking among modern citizens. Those who deviate, are "politically incorrect" do not behave appropriately are viewed as unemployable. A few are able to start businesses or find alternative ways to make a living. However, these are too few in number to alter the character of modern society.
Second, mass consumption and the mass media result in a high degree of uniformity of opinion. Mass consumption requires a uniform assortment of merchandise of modest quality that is attractive to large numbers of consumers. Coca-cola, McDonald's and network television become standards, and refusal to engage with these products becomes a stigma. Likewise, those who produce mass media are subject to the same corporate groupthink as the members of other corporate and professional communities, and the public mind is heavily influenced through repetition and frequent exposure to television and films.
Fear and conformity lead to fascination with mass entertainment, frivolous interpretations of what art, knowledge and literature are, declining standards in academia and higher education and failure of science. The achievement value of achievement is replaced by the value of conformity, other-directedness, groupthink and acceptance of authority and political correctness. Thus, left and right are alternative cults that aim to provide a "received" political value to conformist, modern citizens. Participation in a cult is necessary because modern citizens lose faith in their own ideas and opinions, and come to believe that newscasters, newspapers and others are necessary to make intelligent and informed choices. Of course, such sources are no better informed than the citizens themselves, and so the modern political world becomes a contest of wills among several groupings of opinion, each one ill-informed and each one emotionally comitted to its group, and each one unable to free itself from the fear and conformity that drive their spirits.
A Milestone Revisited: Governor Spitzer versus Governor Sulzer
On October 24, 2007 Sam Roberts, in the New York Times, noted that Governor Eliot Spitzer had outlasted another New York Governor, Governor William Sulzer. Governor Sulzer was impeached on October 17, 1913, less than 10 months after he had assumed office. Governor Spitzer lasted less than 15 months, so he failed to break the Sulzer brevity record for progressive-liberal New York governors, but he is probably the first New York governor to resign in less than 18 months.
As Roberts notes, there are a few parallels between Governors Spitzer and Sulzer besides their last names' beginning and ending with the same letters and including the letter z. Like Spitzer, Sulzer fought with the leadership of New York's corrupt state government. Like Spitzer, Sulzer was accused of spying on political opponents.
According to Wikipedia, in Sulzer's case "Silent Charlie" Murphy, sachem of Tammany Hall, orchestrated Sulzer's impeachment. Tammany accused Sulzer of corruption because Sulzer had refused to accept Tammany's instructions on which political cronies to appoint.
In October, Roberts wrote in the Times:
"Nobody has been comparing Governor Spitzer with Governor Sulzer. But even some of the biggest fans of Governor Spitzer, say that like Governor Sulzer, he has gone out of his way to invite retaliation from people he does not like, but still needs, to accomplish the lofty goals that he advanced during his campaign."
These remarks were unfair in October. By then, I and others had been calling for Spitzer's resignation for some time. The Times was busily defending the wisdom of Spitzer's crackpot plan to provide drivers' licenses to illegal aliens. It took Spitzer's side in his battle with Joseph Bruno, who, though without as much power, is a bit like Silent Charlie. It omitted stories about accusations about Spitzer and emphasized stories that embarrassed Bruno. It did not question why a former prosecutor who had made a name for himself as a reformer and had claimed to be able to clean up Albany had done nothing to clean up Albany; had appointed a board member of one of the organizations he had investigated, the New York Stock Exchange, to the board of SUNY; and had been accused of using air transport for political purposes, the very accusation he had levied against Bruno.
Roberts does injustice to Governor Sulzer. Sulzer managed to get himself reelected to the New York State Assembly in November 1913, just a month after he had been removed as governor. He re-ran for governor in 1914. Although he wasn't elected, he took enough votes away from Democrat Martin H. Glynn to cause Republican Charles S. Whitman to win the gubernatorial race.
Unlike Sulzer, Spitzer, right under the nose of the New York Times for the past decade, has been an infantile, hypocritical fraud who attacked numerous businessmen, all of whom were more ethical than Spitzer was. He destroyed lives and reputations in his self-indulgent quest for power. He claimed to be a reformer but lacked knowledge of basic processes and politics necessary for reform. The New York Times championed an incompetent, depraved fool like Eliot Spitzer for more than a decade. This suggests continued dysfunction not only of New York, but of the nation's media.
Friday, March 7, 2008
Decentralization in America's Future
The centralized solution to American economic development was characteristic of modernism. Modernism emphasized scale, mass production and was threatened by monopoly power. Post modernism emphasizes flexibility and change and is threatened by uncertainty. Continuous improvement was important to modernist production strategy. Strategic innovation is necessary for post modern production strategy.
Government has not changed to respond to the changes. One government policy ought not to fit all publics. Change and differentiation are healthy. The idea that a single model car ought to fit all consumers is as outdated as the idea that a single government policy ought to fit all citizens.
There were two key reasons that America abandoned its decentralized political policy: the shift to economic modernism and the problem of racial discrimination. The economic reason was the more important and preceded the racial one. Progressivism was the assertion of modernisn in the political realm, and it was a method of grappling with changes in public policy that were necessary to confront popular anxieties about the power of big business.
Progressivsim was always founded on contradictions. The rationale for government rationalization of markets was overproduction. Overproduction suggests decreasing prices and profits, and this was indeed the case. In the late nineteenth century profits were falling but real wages were rising. Thus, Progressivism needs to be viewed first as a corporate movement whose main goal was to protect corporate interests. However, the advocates of economic Progressivism, beginning with David Ames Wells in the 1880s, was that unemployment attended overproduction. This is a contradiction. Wells argued that on the one hand firms could not shut down because the costs of shutting down exceeded the cost savings from shutting down, thus overproduction became the norm. On the other hand he argued that unemployment attended overproduction. But if the plants could not shut down, why was there unemployment? Overproduction would imply over-employment. But the problem of unemployment was raised in Wells's book as associated with overproduction. This sounds suspiciously like a self-conscious rationale for business interests, which may have been legitimate. These include mergers to limit production output. But the mergers would result in unemployment plus higher prices, while overproduction and excess competition would result in overemployment. Common sense.
There is more in the way of prima facie contradiction for the rationale for Progressivism. The Progressives believed that monopoly power was a key threat that required government intervention to reduce the power that corporations had over production. But the rationale for government intervention was overproduction,which is the opposite problem of monopoly. Monopoly implies under-production as marginal revenue product equals marginal cost rather than price. That means under-production, not over-production. But the advocates of Progressivism based their arguments on continued over-production.
The problems with Progressivism's rationales are not the main point, though. For today we do not face problems of overproduction or underproduction, excessive competition or monopoly. Rather, the problem that industry faces is how to devise new and better products. To do this, the appropriate degree of government regulation is necessary. But how to determine the appropriate degree? The appropriate degree can only be determined by trial and error. Hence the monolithic federal government impedes progress. It does so because post-modernist progress depends on a complex optimality that cannot be discerned through logic. It is an experimental process.
The modernist world was simple. Production depended upon sequential technology, i.e., assembly lines that are modestly interactive. The post modernist world is complex. It depends on reciprocal technology that are highly interactive, i.e., skunk works, research teams and collaborations among innovators. The government policies most conducive to such collaboration are not the same as the government policies conducive to modernism. Economic security, predictability and long term relationship are not as important.
The improvement process that best fit the modern world was continuous improvement, and the Toyota Production system is the highest development of modernism. However, the Toyota Production system already has elements of post modernism, namely the power of employees to stop production and the greater degree of interaction along the supply chain.
The improvement process that best fits the post modern world is discontinuous innovation. New ideas, new products and new strategies need to be developed. Government that serves a stabilizing function that is essential to modernism serves only as an impediment to post modernist economic development. In post modernism, the small and flexible, not the stable, win.
How to determine the best approach to government in the post modern world? There are several possible learning tools. These include imitation, continuous improvement, electoral turnover and experimentation. Of these, experimentation is the most powerful. Firms that experiment the most find the best approaches. Conversely, the most successful firms tend to experiment.
The means by which the American government needs to learn to experiment is through decentralization. The reasons for centralization have whithered away. Racial discrimination is no longer a critical issue and the need for a strong-armed federal government to manage "trusts" is no longer a serious issue. Indeed, the most aggressive actions taken against Wal-Mart were by state and local governments; and the most aggressive prosecution of ethics violations in the late 1990s and earlier this decade were by the New York State district attorney, Eliot Spitzer.
Modernist federalism needs to be replaced by post-modernist federalism or decentralization.
Government has not changed to respond to the changes. One government policy ought not to fit all publics. Change and differentiation are healthy. The idea that a single model car ought to fit all consumers is as outdated as the idea that a single government policy ought to fit all citizens.
There were two key reasons that America abandoned its decentralized political policy: the shift to economic modernism and the problem of racial discrimination. The economic reason was the more important and preceded the racial one. Progressivism was the assertion of modernisn in the political realm, and it was a method of grappling with changes in public policy that were necessary to confront popular anxieties about the power of big business.
Progressivsim was always founded on contradictions. The rationale for government rationalization of markets was overproduction. Overproduction suggests decreasing prices and profits, and this was indeed the case. In the late nineteenth century profits were falling but real wages were rising. Thus, Progressivism needs to be viewed first as a corporate movement whose main goal was to protect corporate interests. However, the advocates of economic Progressivism, beginning with David Ames Wells in the 1880s, was that unemployment attended overproduction. This is a contradiction. Wells argued that on the one hand firms could not shut down because the costs of shutting down exceeded the cost savings from shutting down, thus overproduction became the norm. On the other hand he argued that unemployment attended overproduction. But if the plants could not shut down, why was there unemployment? Overproduction would imply over-employment. But the problem of unemployment was raised in Wells's book as associated with overproduction. This sounds suspiciously like a self-conscious rationale for business interests, which may have been legitimate. These include mergers to limit production output. But the mergers would result in unemployment plus higher prices, while overproduction and excess competition would result in overemployment. Common sense.
There is more in the way of prima facie contradiction for the rationale for Progressivism. The Progressives believed that monopoly power was a key threat that required government intervention to reduce the power that corporations had over production. But the rationale for government intervention was overproduction,which is the opposite problem of monopoly. Monopoly implies under-production as marginal revenue product equals marginal cost rather than price. That means under-production, not over-production. But the advocates of Progressivism based their arguments on continued over-production.
The problems with Progressivism's rationales are not the main point, though. For today we do not face problems of overproduction or underproduction, excessive competition or monopoly. Rather, the problem that industry faces is how to devise new and better products. To do this, the appropriate degree of government regulation is necessary. But how to determine the appropriate degree? The appropriate degree can only be determined by trial and error. Hence the monolithic federal government impedes progress. It does so because post-modernist progress depends on a complex optimality that cannot be discerned through logic. It is an experimental process.
The modernist world was simple. Production depended upon sequential technology, i.e., assembly lines that are modestly interactive. The post modernist world is complex. It depends on reciprocal technology that are highly interactive, i.e., skunk works, research teams and collaborations among innovators. The government policies most conducive to such collaboration are not the same as the government policies conducive to modernism. Economic security, predictability and long term relationship are not as important.
The improvement process that best fit the modern world was continuous improvement, and the Toyota Production system is the highest development of modernism. However, the Toyota Production system already has elements of post modernism, namely the power of employees to stop production and the greater degree of interaction along the supply chain.
The improvement process that best fits the post modern world is discontinuous innovation. New ideas, new products and new strategies need to be developed. Government that serves a stabilizing function that is essential to modernism serves only as an impediment to post modernist economic development. In post modernism, the small and flexible, not the stable, win.
How to determine the best approach to government in the post modern world? There are several possible learning tools. These include imitation, continuous improvement, electoral turnover and experimentation. Of these, experimentation is the most powerful. Firms that experiment the most find the best approaches. Conversely, the most successful firms tend to experiment.
The means by which the American government needs to learn to experiment is through decentralization. The reasons for centralization have whithered away. Racial discrimination is no longer a critical issue and the need for a strong-armed federal government to manage "trusts" is no longer a serious issue. Indeed, the most aggressive actions taken against Wal-Mart were by state and local governments; and the most aggressive prosecution of ethics violations in the late 1990s and earlier this decade were by the New York State district attorney, Eliot Spitzer.
Modernist federalism needs to be replaced by post-modernist federalism or decentralization.
The American Ideological Divide
The differences between the American left and right are huge. The left is for big government and will increase government spending by 8%. The right is for small government and when elected increases government spending by 11%.
The left favors big government solutions with respect to healthcare, money, social security and regulation. The right favors big government solutions with respect to drug plans, money, social security and regulation.
The left favors a Federal Reserve Bank that would inflate the money supply by 8%. The right favors a Federal Reserve Bank that would inflate the money supply by 7.9% with an extra $800 sent to each taxpayer.
The left favors more Medicaid and is unconcerned with fraud. The right favors less Medicaid with a higher percentage of fraud.
The left opposes investigation of the Kennewick Man. The right opposes teaching of evolution in school.
The left hates white men. The right hates Mexican immigrants.
The left claims to favor the poor and working class but adopts policies that support wealthy contributors, cronies and themselves. The right claims to favor hard working Americans but adopts policies that support wealthy contributors, cronies and themselves.
As John Lukacs has pointed out, the right emphasizes the national, while the left emphasizes the socialism. Thankfully, ours is an intellectually diverse nation.
The left favors big government solutions with respect to healthcare, money, social security and regulation. The right favors big government solutions with respect to drug plans, money, social security and regulation.
The left favors a Federal Reserve Bank that would inflate the money supply by 8%. The right favors a Federal Reserve Bank that would inflate the money supply by 7.9% with an extra $800 sent to each taxpayer.
The left favors more Medicaid and is unconcerned with fraud. The right favors less Medicaid with a higher percentage of fraud.
The left opposes investigation of the Kennewick Man. The right opposes teaching of evolution in school.
The left hates white men. The right hates Mexican immigrants.
The left claims to favor the poor and working class but adopts policies that support wealthy contributors, cronies and themselves. The right claims to favor hard working Americans but adopts policies that support wealthy contributors, cronies and themselves.
As John Lukacs has pointed out, the right emphasizes the national, while the left emphasizes the socialism. Thankfully, ours is an intellectually diverse nation.
Thursday, February 21, 2008
Life at the Bottom
Theodore Dalrymple. Life at the Bottom: The Worldview that Makes the Underclass. Chicago: Ivan R. Dee, 2001.
Theodore Dalrymple is an eloquent writer with an important message. He is a physician who has spent much of his career ministering to Great Britain's permanent underclass, an underclass created by progressive-liberal and left-wing ideologies. Dalrymple writes beautifully, so his essays would be a pleasure to read even without their fascinating if unhappy content. His descriptions of the harm that academia, the media, the school system, the state and Britain's left-wing intellectuals have perpetrated on Britain's underclass are likely to catch the reader's attention.
Mr. Dalrymple is a better writer than most liberal media journalists, and his insights are much more interesting, realistic and important. This book is evidence that progressive-liberalism lives on borrowed time. Despite the enormous resources that the British have thrown at progessive education, welfare, housing and universities, the only breakthrough insights about Britain's poor are coming from this lone physician.
Theodore Dalrymple is an eloquent writer with an important message. He is a physician who has spent much of his career ministering to Great Britain's permanent underclass, an underclass created by progressive-liberal and left-wing ideologies. Dalrymple writes beautifully, so his essays would be a pleasure to read even without their fascinating if unhappy content. His descriptions of the harm that academia, the media, the school system, the state and Britain's left-wing intellectuals have perpetrated on Britain's underclass are likely to catch the reader's attention.
Mr. Dalrymple is a better writer than most liberal media journalists, and his insights are much more interesting, realistic and important. This book is evidence that progressive-liberalism lives on borrowed time. Despite the enormous resources that the British have thrown at progessive education, welfare, housing and universities, the only breakthrough insights about Britain's poor are coming from this lone physician.
Larwyn Is Still Alive
Larwyn and Doug Ross asked me to post this:
Larwyn is not dead yet!
If you haven't been receiving the "Best, Larwyn" collections for the past 3 days, please check that she's not being rejected as spam.
FYI: At approx 6 PM I sent out the collection, subject:
What would 'Will Bill' Donovan do w/ Eclipse & Sat Shoot Down?/ Princeton & Harvard grad take 2 days to spin Speech given TWICE!/If anything ALARMS YOU - Do Not Mention it/.."be very kind to Uncle Castro"/ Beating Obama-Beating Hill
My "collections" are normally sent to my three main lists which I follow up with a confirming "Yr Posts" email letting the bloggers know I've appreciated their posts included in the collection.
Suddenly beginning on Valentine's Day, all collections sent to AOL email addressees were returned to me.
So I pulled the AOL addressees out of all 3 lists and put in segregated group* to make it easier to track returns. Had one brief respite on the 18th. By the 19th Yahoo, HotMail, Cox and other network addresses began being returned to me.
I have the lists broken down as follows
1. 33 contacts
2. 33 contacts
3. 39 contacts in MILBLOG/INTL
*4. 1O AOL addressee contacts (temp list pulled from first three)
Last night subject collection: Email Proves CNN's Sick Bias For Marxist Thugs /OBAMA's GLOBAL POVERTY ACT HR3605 -Biden TRIES RUSH/Kosovo & Denmark/Galen brings tears using Lee Greenwood Lyrics in ALWAYS PROUD/ No one expects to leave the Canadian Inquisition!
was returned as follows:
1. (25) of the 33 sent via Gmail
2. (28) of the 33 sent via Gmail
3 (12) of the 39 sent via Comcast
4 (10) of the 10 sent via Gmail
and 4 of the 16 addressees for the "Yr Posts" confirmation were returned also sent via Gmail.
Larwyn is not dead yet!
If you haven't been receiving the "Best, Larwyn" collections for the past 3 days, please check that she's not being rejected as spam.
FYI: At approx 6 PM I sent out the collection, subject:
What would 'Will Bill' Donovan do w/ Eclipse & Sat Shoot Down?/ Princeton & Harvard grad take 2 days to spin Speech given TWICE!/If anything ALARMS YOU - Do Not Mention it/.."be very kind to Uncle Castro"/ Beating Obama-Beating Hill
My "collections" are normally sent to my three main lists which I follow up with a confirming "Yr Posts" email letting the bloggers know I've appreciated their posts included in the collection.
Suddenly beginning on Valentine's Day, all collections sent to AOL email addressees were returned to me.
So I pulled the AOL addressees out of all 3 lists and put in segregated group* to make it easier to track returns. Had one brief respite on the 18th. By the 19th Yahoo, HotMail, Cox and other network addresses began being returned to me.
I have the lists broken down as follows
1. 33 contacts
2. 33 contacts
3. 39 contacts in MILBLOG/INTL
*4. 1O AOL addressee contacts (temp list pulled from first three)
Last night subject collection: Email Proves CNN's Sick Bias For Marxist Thugs /OBAMA's GLOBAL POVERTY ACT HR3605 -Biden TRIES RUSH/Kosovo & Denmark/Galen brings tears using Lee Greenwood Lyrics in ALWAYS PROUD/ No one expects to leave the Canadian Inquisition!
was returned as follows:
1. (25) of the 33 sent via Gmail
2. (28) of the 33 sent via Gmail
3 (12) of the 39 sent via Comcast
4 (10) of the 10 sent via Gmail
and 4 of the 16 addressees for the "Yr Posts" confirmation were returned also sent via Gmail.
Friday, February 15, 2008
David Ames Wells on Creative Destruction
Joseph Schumpeter is generally cited as the economist who fashioned the concept of creative destruction in his book Capitalism, Socialism and Democracy, published in 1942. But David Ames Wells wrote this in 1889 in his well known book Recent Economic Changes (p. 31):
"In all commercial history, probably no more striking illustration can be found of the economic principle that nothing marks more clearly the rate of material progress than the rapidity with which that which is old and has been considered wealth is destroyed by the results of new inventions and discoveries."
In a footnote Wells quotes Edward Atkinson:
"'In the last analysis it will appear that there is no such thing as fixed capital; there is nothing useful that is very old except the precious metals, and all life consists in the conversion of forms. The only capital which is of permanent value is immaterial--the experience of generations and the development of science.'"
"In all commercial history, probably no more striking illustration can be found of the economic principle that nothing marks more clearly the rate of material progress than the rapidity with which that which is old and has been considered wealth is destroyed by the results of new inventions and discoveries."
In a footnote Wells quotes Edward Atkinson:
"'In the last analysis it will appear that there is no such thing as fixed capital; there is nothing useful that is very old except the precious metals, and all life consists in the conversion of forms. The only capital which is of permanent value is immaterial--the experience of generations and the development of science.'"
David Ames Wells on the Depression of 1873, George W. Bush and Today's Fed Policy
David Ames Wells, whom Abraham Lincoln first appointed to public office, was commissioner of revenue in the late 1860s and was a consultant to the nascent railroad industry. He became an advocate of free trade, a Mugwump supporter of President Grover Cleveland and an advocate of hard money.
In 1889 he copyrighted Recent Economic Changes. In the introduction he notes:
"The existence of a most curious and in many respects unprecedented disturbance and depression of trade, commerce and industry, which, first manifesting itself in a marked degree in 1873, has prevailed with fluctuations of intensity up to the present time (1889), is an economic and social phenomenon that has been everywhere recognized. Its most noteworthy peculiarity has been its universality...the maximum of economic disturbance has been experienced in those countries in which the employment of machinery, the efficiency of labor, the cost and standard of living and the extent of popular education are the greatest...It is also universally admitted that the years immediately precedent to 1873--i.e., from 1869 to 1872--constituted a period of most extraordinary and almost universal inflation of prices, credits and business; which in turn has been attributed to a variety or sequence of influences, such as excessive speculation; excessive and injudicious construction of railroads...the opening of the Suez Canal...the Franco-German War; and the payment of the war indemnity which Germany extracted from France...Under date of March 1873, the London Economist in its review of the commercial history of the preceding year, says:
"'Of all events of the year 1872, the profound economic changes generated by the rise of prices and wages in this country, in Central and Western Europe, and in the United States, have been the most full of moment.'"
And the London Engineer under date of February 1873 thus further comments on the situation:
'...In 1872 scarcely a single step in advance was made in the science or practice of mechanical engineering. No one had time to invent, or improve, or try new things...'" (emphasis in the original).
In 1889 he copyrighted Recent Economic Changes. In the introduction he notes:
"The existence of a most curious and in many respects unprecedented disturbance and depression of trade, commerce and industry, which, first manifesting itself in a marked degree in 1873, has prevailed with fluctuations of intensity up to the present time (1889), is an economic and social phenomenon that has been everywhere recognized. Its most noteworthy peculiarity has been its universality...the maximum of economic disturbance has been experienced in those countries in which the employment of machinery, the efficiency of labor, the cost and standard of living and the extent of popular education are the greatest...It is also universally admitted that the years immediately precedent to 1873--i.e., from 1869 to 1872--constituted a period of most extraordinary and almost universal inflation of prices, credits and business; which in turn has been attributed to a variety or sequence of influences, such as excessive speculation; excessive and injudicious construction of railroads...the opening of the Suez Canal...the Franco-German War; and the payment of the war indemnity which Germany extracted from France...Under date of March 1873, the London Economist in its review of the commercial history of the preceding year, says:
"'Of all events of the year 1872, the profound economic changes generated by the rise of prices and wages in this country, in Central and Western Europe, and in the United States, have been the most full of moment.'"
And the London Engineer under date of February 1873 thus further comments on the situation:
'...In 1872 scarcely a single step in advance was made in the science or practice of mechanical engineering. No one had time to invent, or improve, or try new things...'" (emphasis in the original).
Thursday, February 14, 2008
Toward the Democratization of Capital
Wealth can only be created by work or invention. It cannot be created by monetary expansion. In recent years there has been an increasing interest in expansion of the money supply in order to increase stock market and real estate prices. The reason for the Federal Reserve Bank's interest in easing is that there is political pressure from wealthy interest groups on the Fed. The result of the excessive easing has been that those who hold equities have become wealthier relative to those who do not. As well, property, commodity and other asset holders have benefitted.
There are two effects. One is increasing income inequality and the other is a reduction in innovation and hard work. There are persistent shortages of workers in certain fields such as auto technicians and construction crafts. At the same time, innovation has been limited to a few narrow fields where capitalists feel comfortable financing new technology, notably computer, biotech and telecommunications. Innovation in alternative fields has slowed.
Progressive-liberals have advocated taxing the rich to equalize incomes. There are several problems with this. First, taxation is subject to exceptions that result in continuation of the pre-existing biases. The current income tax system is proof enough that progressive taxation does not work, and those at the high end of the system are least likely to actually pay. I sometimes wonder where the progressive-liberals who advocate progressive income taxation and the inheritance tax have been for the past 80 years. Have the Rockefellers paid any inheritance tax?
Second, taxation may inadvertently deter innovation. It may be true that many billionaires have profited from Fed easing and it is likely that there has been a crowding out effect whereby those in the riskiest and most innovative businesses have been crowded out by financiers, large businesses and technology firms who have monopolized access to credit. Imposing taxes on the wealthiest Americans may redistribute income or wealth from those who have benefitted from federal policy but may also deter those who have to overcome the massive disincentives that federal policy places on risk taking. The result may be even less productive innovation in the economy.
Third, some, including myself, object to taxation on philosophical grounds. It is compulsory and therefore creates an atmosphere of distrust.
Rather than an income tax on the wealthy, why not provide a tax credit to people who invest in assets like stocks and real estate? The tax credit could involve a sliding scale that maxes out at the top 5 or 10 percent of the income distribution and is indexed for CPI increases. Anyone who invests in assets would do so on a dollar for dollar tax reduced basis. That way, the middle class could more easily participate in the inflationary boondoggle and there need not be any compulsion involved in doing so.
There are two effects. One is increasing income inequality and the other is a reduction in innovation and hard work. There are persistent shortages of workers in certain fields such as auto technicians and construction crafts. At the same time, innovation has been limited to a few narrow fields where capitalists feel comfortable financing new technology, notably computer, biotech and telecommunications. Innovation in alternative fields has slowed.
Progressive-liberals have advocated taxing the rich to equalize incomes. There are several problems with this. First, taxation is subject to exceptions that result in continuation of the pre-existing biases. The current income tax system is proof enough that progressive taxation does not work, and those at the high end of the system are least likely to actually pay. I sometimes wonder where the progressive-liberals who advocate progressive income taxation and the inheritance tax have been for the past 80 years. Have the Rockefellers paid any inheritance tax?
Second, taxation may inadvertently deter innovation. It may be true that many billionaires have profited from Fed easing and it is likely that there has been a crowding out effect whereby those in the riskiest and most innovative businesses have been crowded out by financiers, large businesses and technology firms who have monopolized access to credit. Imposing taxes on the wealthiest Americans may redistribute income or wealth from those who have benefitted from federal policy but may also deter those who have to overcome the massive disincentives that federal policy places on risk taking. The result may be even less productive innovation in the economy.
Third, some, including myself, object to taxation on philosophical grounds. It is compulsory and therefore creates an atmosphere of distrust.
Rather than an income tax on the wealthy, why not provide a tax credit to people who invest in assets like stocks and real estate? The tax credit could involve a sliding scale that maxes out at the top 5 or 10 percent of the income distribution and is indexed for CPI increases. Anyone who invests in assets would do so on a dollar for dollar tax reduced basis. That way, the middle class could more easily participate in the inflationary boondoggle and there need not be any compulsion involved in doing so.
Wednesday, February 13, 2008
Review of Nancy Cohen's Reconstruction of American Liberalism 1865-1914
Nancy Cohen. The Reconstruction of American Liberalism 1865-1914. Chapel Hill: University of North Carolina Press, 2002, 318 pages.
Nancy Cohen's Reconstruction of American Liberalism 1865-1914 is a history book that reads like a detective novel. The book deserves a wider audience than that of academic historians. As a layman, I was riveted, in part because the book has important policy implications but also because of Cohen's brilliant scholarship and rich depiction of a wide range of 19th and early 20th century social thinkers. Libertarians and conservatives as well as progressive-liberals will find much of interest.
The libertarian implication arises from the lack of empirical support for the views of the Gilded and Progressive Age social philosophers that Cohen describes beyond a few government case studies. In particular, the underlying assumption of theorists from EL Godkin to Herbert Croly that large size was necessary for modern production, efficiency and consumerism was taken for granted both by those who favored more socialistic reforms and by those who favored market oriented approaches. As well, the model of efficiency based on expertise and professionalism was, as McFarland has pointed out, partly due to the Mugwumps' professional interest (the Mugwumps were often lawyers and academics). But in both cases, the emphasis on scale and the emphasis on civil service systems, the policies that the Gilded Age theoreticians advocated, were primitive from today's management standpoint.
At the same time, the most important progress that was made during the Gilded Age came from developments that most historians have omitted, specifically from individual or small-scale inventors such as Alexander Graham Bell, Thomas Edison, Nikola Tesla and the discoverers of kerosene, who functioned at the margin of society.
Thus, Professor Cohen's excellent review of the Gilded Age reformers suggests (in part by omission) that the Gilded and Progressive Age reformers may have inadvertently staunched the source of innovation and progress that was the most valuable development of the period through emphasis on rationalization, large scale, professional interests and corporate interests at the expense of spontaneity and flexibility. For instance, postbellum subsidies to large business included land grants to the railroads, high tariffs and incipient regulation of industry such as the creation of the Federal Reserve Bank in 1913, which facilitated allocation of credit to large banks and industry at the expense of small inventors.
This may be so even as many of the Progressive-era reforms, especially under Roosevelt, aimed to control "bad trusts" and were not targeted at small business. By establishing regulatory rules and the Federal Reserve Bank the Gilded Age reformers, Mugwumps and Progressives created high fixed costs and inflation which may have deterred innovation and facilitated allocation of credit to the largest and not the most innovative firms.
Virtually all business historians assume that scale was essential to economic development, an assumption that the Gilded Age dogmatists themselves held. It is impossible to prove a counter-factual, but perhaps the pervasive Gilded Age assumption was just a failure of imagination. Today, large firms do not out-perform smaller ones as Google, for instance, demonstrates vis-a-vis Microsoft. Firms like General Motors limp along for decades, aided by Federal Reserve and protectionist policies, while nimble small firms develop new ideas such as the personal computer and the Internet but we never hear of many of them because they are prevented from adopting ideas by rigid credit markets (technology is an exception).
Was it necessary for large scale modernism to replace producerism in the ante-bellum period? I'm not as sure of that as business historians are. If big business had been necessary, prices would have been sufficient to reap profits sufficient to buy land or rights of way and to function without subsidies. But there were subsidies aplenty, often won through corruption. Common sense suggests that, were scale essential, then market performance would have eliminated the need for subsidies. But the problems of the Gilded Age, the corruption, the Jay Goulds and Jim Fisks, the political bosses, the tariffs, all revolved around the inability of large organizations and government to produce value without help from government. Perhaps the Gilded Age should be called the Age of Gilded Corporate Welfare.
Moreover, Cohen argues that today's big business liberalism had been shaped by Gilded Age intellectuals "who had little direct involvement in corporate enterprise". Many of the arguments of the Gilded Age intellectuals were dogmatic. None of the theorists had any grasp of key concepts that we understand today such as Schumpeterian creative destruction, the use of knowledge in free markets and the Hayekian importance of price. Thus, the shaping of today's corporatist system was largely based on dogmatic philosophical debates, none of which were well grounded in theory or evidence. As Cohen points out, a crucial theory like marginalism was not invented until the late nineteenth century at the earliest.
The implications for the modern corporatist state may be that it was an atavistic attempt to reassert medieval tribal relations at the expense of more innovative individualist approaches which existed in embryo in antebellum America. The designers of the corporatist state did not understand the importance of business life cycles, to include bankruptcy, and the importance of environment to stimulation of innovation. Many of them understood the role of credit in creating business cycles, but the widespread belief that, as DA Wells put it, "overproduction" was the cause of the depressions of the 1870s, 1880s and 1890s is evidence of the primitive knowledge base on which corporate reform through big government was based.
The book also has important implications for conservatives. There is little question, after reading Cohen's work, that conservatism and liberalism were created at the same time in reaction to the same phenomena, namely, the expansion of markets and scope of industrial firms. Conservatism does not reassert the values of an earlier age any more than liberalism does. The very terms "conservatism" and "liberalism" are utter misnomers. President Theodore Roosevelt's reaction to large scale enterprise was to expand government control to a greater degree. President William H. Taft's reaction was to limit government control. Roosevelt called Taft a reactionary. But both approaches were developed at the same time in reaction to the same phenomenon. As it turns out, Taft's approach is the more progressive because it permits a greater degree of flexibility and allows a greater likelihood of corporate death. Government programs rarely die, hence Roosevelt, who would have put utilities and other large concerns under government control, had ideas that would have lead to a more conservative approach than Taft did. Advocates of flexible social arrangements have been bamboozled into allowing their position to be called conservatism.
Cohen begins her brilliant and fascinating discussion by pointing out (p. 5) that Gilded Age liberals were in large part analyzing the defeat of producers' movements and the rise of corporate capitalism. The liberalism that the Gilded Age reformers devised was very close to the Progressivism of Herbert Croly and Walter Lippmann. Today's progressive-liberalism was the result of Gilded Age theory. The Gilded Age debate, argues Cohen (p. 6) involved a "triangular struggle for power between liberals, conservatives and socialists." Part of the debate involved a struggle between the Mugwumps or earlier independent Republicans such as EL Godkin and a post 1890 group led by Richard T. Ely that aimed to introduce the views of the German historical school into public policy. The Mugwumps, who were relatively conservative, stopped the socialists and leftists from succeeding. At the end of the 19th century, the marginalism of John Bates Clark, who had been a leftist but became a corporatist, argued for a regulated corporate economy and consumerism. Subsequent Progressive reforms did not significantly modify Clark's corporatist model.
Cohen argues (p. 29) that the "producerist" philosophy of free labor held that "economic independence, gained through ownership of real property or the possession of a skill that could provide a solid competence and independence was a precondition of true freedom." But "other Northerners, particularly those directing and financing the new industrial economy" emphasized freedom of contract.
The Civil War enhanced workers' claims and contributed to labor organizing. Radical Republicans felt uncomfortable with the labor movement, to include the eight-hour day movement in Massachusetts (p. 35). The conflict that the Radical Republicans experienced between the old free labor ideology and their defense of capital from the demands of the eight-hour and other labor movements led to their abandonment of the "producerism" of Andrew Jackson's day.
Cohen goes on to discuss the evolution of EL Godkin's attitude toward the labor movement. At first, Godkin argued that although workers had the right to contract, they labored under unequal bargaining power. "Unions acted as collective evaluators of the individual worker's interest and, in doing so, served as the main actors in the last phase of the emancipation of workers into the regime of contract" (p. 49). Later, though, Godkin was to oppose trade unions (p. 50). As workers demonstrated an interest in radicalism, Godkin became less supportive of unions (p. 57). Ultimately (p. 59), "Damning Mill, the intellectual idol of his youth (who had become a socialist late in life), he instead scrapped the greatest happiness principle and consecrated individual liberty as the one, supreme object in politics." This contrasts with John Dewey, who, a few decades later, consecrated democracy as the supreme object.
The problem that organized labor posed to the independent Republicans matched the problem that the emancipated slaves posed.
Part of the problem in the Mugwumps' eyes was that (p. 86) large scale capitalism "unsettled the moral order, in which property anchored individual selfhood and individual proprietors" Thus, in Cohen's view, consumerism replaced individualism as the basis for liberalism.
Thus, David Ames Wells (p. 88), 1860s commissioner of revenue and civil service advocate, argued for "a vibrant export trade" and against greenback inflation. "Wells...worried about the eclipse of the moral order of propietary capitalism. In condemning the spirit of trading and speculation and praising the spirit of production, Wells drew on the ideal conception of the self-directed, autonomous property owner" In general, Cohen's arguments about Wells are fascinating. I think Wells's ideas are applicable to the Federal Reserve policies of today. In fact, our post-modern world is very susceptible to Wells's arguments about speculation versus production. This is a fascinating section of the book. But Cohen is too pessimistic when she writes that "no nation has ever achieved the industrial development Wells desired and at the same time preserved 'thousands of little separate industries.'" Arguably that situation exists today.
Another really interesting point that Cohen makes is that the modern corporation as it is currently legally constituted did not get established until 1890 or so (p. 96). The corporation is not a product of laissez faire capitalism. It is a legal construction of relatively recent origin.
One of Cohen's chief themes, along with the relationship between consolidation of industry, producerism and labor relations, is the relationship among democracy, efficiency and consumerism. Charles Francis Adams, a railroad executive, argued that regulation by legislatures harmed the public and brought "community and corporation into conflict". Adams argued for "state-supported economic development and that required a rational form of state regulation." In Adams's view, regulation should be shifted from legislatures to expert administrations that would understand the limits of regulation and how to enhance rather than interfere with efficiency. Adams (p. 130) was for industry consolidation coupled with government ownership of some business, what Cohen calls "mixed ownership". Today this plan sounds hopelessly naive. As he learned that rational administrative solutions were indeed a naive plan, Adams switched to a laissez faire orientation (p. 131).
In chapter 4 Cohen argues that the late 19th century theorists', such as William Dean Howells's (pp. 110-112) emphasis on rationalization was often anti-democratic (I would add that it never resulted in much efficiency either.) It is undoubtedly true that the legislatures were incompetent at administrating regulatory systems and were corrupt, but there was little real evidence that experts would be any better at it, but this is what the postwar Radicals claimed. At the same time, though, the Mugwumps like George W. Curtis (editor of Harper's Weekly Magazine) opposed Greenback inflation on the grounds that it was "debt repudiation" (p. 115). Was this for moral reasons or was it because they were debt holders? Maybe a little of both. There are few today with such moral scruples, though. The rule today is inflate and if the bond holders and wage earners are harmed, well too bad because Lord Keynes and Jim Cramer say it is ok.
Cohen argues (p. 121) that historians overrate the limited government aspect of the Gilded Age reform movement as well as the "Liberal Republican" movement. Rather, she argues that it was the goal of administrative rationality that characterized most of the reform movement and that the inability to win support for the administrative vision "turned many to a more extreme classical liberal vision". This makes sense. It is likely the case that if they were acting in good faith they would have found that government reform, civil service, administrative rationalization and the like failed anyway, so they would have ultimately gone the route of laissez faire. The liberals focused mainly on local corruption and political bosses, but also maladministration of the national economy.
One example of the Gilded Age reformers' emphasis on rationality was the commission that New York's Governor Samuel Tilden appointed in 1875. The commission, which included EL Godkin and Simon Sterne, recommended that only taxpayers be allowed to vote and (I'd have to check this because the paragraph is a bit unclear) that the city be turned into a corporation. Too bad the ideas weren't adopted. I wonder if you could buy stock in New York City or Los Angeles if the cities wouldn't be better run by corporate boards than by voters. When I graduated from college a century later New York City was midway through a massive economic decline due to maladministration and excessive wages.
Cohen disapproves of the anti-democratic aspects of the Gilded Age reformers' emphasis on rationality. I would argue that the belief in rationality was a chimera. There is no such thing as rationality in government because incentives to respond to the environment are missing. Government mostly serves elites and its own organizational needs. If the Mugwumps were acting in good faith they would have been disappointed with the results of government reform, and many were and so turned to laissez faire. Cohen attributes this to the popularity of collective action and socialist ideology among the working class.
According to Cohen (p. 148) William Graham Sumner, a Yale professor in the 1870s, was a popularizer of laissez faire capitalism in the Gilded Age who aimed to "exterminate" socialism. State action amounted to malevalent anti-civil libertarianism. Sumner and other Mugwumps opposed rights for women and minorities. He was a social Darwinist. He couched his arguments in the social science of the day. Cohen argues that Sumner's writings were derivative of other thinkers, such as Spencer and Godkin. Likewise, David A. Wells (p. 185) advocated the gold standard, free trade and laissez faire. But Cohen also emphasizes that Wells believed in "economic consolidation and corporate administered markets".
Henry Carter Adams was one of the first American economists to adopt the German historical school paradigm that became foundations to the ideas of John R. Commons and other Progressives. Adams attended Johns Hopkins University, where he earned the university's "first doctorate in the social sciences" (p. 157). He then went on to study at the University of Berlin. The German historical school (p. 157) argued that economies were the products of particular histories so there is no governmental policy inevitably dictated abstract economic laws. They rejected laissez faire and strongly supported statism (one wonders whether this rejection contributed to the rise of the Nazi-Sozi Party 54 years later). It is somewhat puzzling, though, why if history and culture determine the appropriate policy, Adams did not conclude that given US history and culture a limited government approach would be most appropriate. If the German historical school really thought that history ought to determine policy (and not statism under all circumstances), why did he argue for reforms that overlooked American history? The German historical school philosophy seems extremely conservative to me. Some of the professors were, according to Cohen "right wing Bismarckians" but others were "left wing socialists". This suggests that the difference between the two is one of tone. Both German nationalism and German socialism were conservative in their objectives (namely the reassertion of tribal European social relations) but radical in method and led to the tragedies of national socialism in Germany and Russia. The German historical school's emphasis on statism ought deserves credit for more than Henry Carter Adams's apostasy from the independent reformers.
Adams adopted the socialism of his German professors. He became (p. 159) the leader of the "ethical" economics movement in America (p. 159). These were American academics sent to Germany who came back advocating the German historical school's ideas, to include socialism. EL Godkin had thought that universities would produce "sober" social scientists who could help manage the laissez faire economy. Instead, the ethical economists turned out to be socialists. John Bates Clark was among them.
Clark began as a socialist but he couldn't shake his individualistic outlook. He argued that true socialism involved social organization rather than individual ownership(p. 161). That sounds like Progressivism, but Clark wrote it in 1879. As part of this ethical economics movement, Cohen points out that Richard T. Ely, whom she regards as a less important thinker than Adams or Clark, founded the American Economics Association. Ely suffered from the fact that his pro-labor book Labor Movement in America appeared at the time of the Haymarket riot in 1886, and Ely barely held on to his job at Johns Hopkins and Henry Carter Adams was fired from Cornell but wound up at the University of Michigan when he recanted his radicalism. In the 1880s (p. 230) Carter worked for the Interstate Commerce Commission and continued to advocate government intervention in labor relations. He also advocated business school education post 1896 (p. 231). Adams was concerned that corporations could not be moral and so social morality would deviate from economic behavior under a corporatist system.
Clark on the other hand was the theoretical progenitor of marginalism and neoclassical economics. He would seem to be the most important of all of the thinkers of that period but not the most relevant to the establishment of liberalism. Clark's ideas were more conservative. He argued that the marginalist principle applied even to large firms and large blocks of labor.
In the final chapter Cohen makes clear how the ideas of the Gilded Age social thinkers was carried forward by Progressive politicians like President Roosevelt, Taft, and Wilson and writers like Herbert Croly and Walter Lippmann. Much of Progressivism came out of the Mugwumps' emphasis on rationality and government reform.
Overall, this is an absolutely mind blowing book and I heartily recommend it. Thank you, Professor Cohen.
Nancy Cohen's Reconstruction of American Liberalism 1865-1914 is a history book that reads like a detective novel. The book deserves a wider audience than that of academic historians. As a layman, I was riveted, in part because the book has important policy implications but also because of Cohen's brilliant scholarship and rich depiction of a wide range of 19th and early 20th century social thinkers. Libertarians and conservatives as well as progressive-liberals will find much of interest.
The libertarian implication arises from the lack of empirical support for the views of the Gilded and Progressive Age social philosophers that Cohen describes beyond a few government case studies. In particular, the underlying assumption of theorists from EL Godkin to Herbert Croly that large size was necessary for modern production, efficiency and consumerism was taken for granted both by those who favored more socialistic reforms and by those who favored market oriented approaches. As well, the model of efficiency based on expertise and professionalism was, as McFarland has pointed out, partly due to the Mugwumps' professional interest (the Mugwumps were often lawyers and academics). But in both cases, the emphasis on scale and the emphasis on civil service systems, the policies that the Gilded Age theoreticians advocated, were primitive from today's management standpoint.
At the same time, the most important progress that was made during the Gilded Age came from developments that most historians have omitted, specifically from individual or small-scale inventors such as Alexander Graham Bell, Thomas Edison, Nikola Tesla and the discoverers of kerosene, who functioned at the margin of society.
Thus, Professor Cohen's excellent review of the Gilded Age reformers suggests (in part by omission) that the Gilded and Progressive Age reformers may have inadvertently staunched the source of innovation and progress that was the most valuable development of the period through emphasis on rationalization, large scale, professional interests and corporate interests at the expense of spontaneity and flexibility. For instance, postbellum subsidies to large business included land grants to the railroads, high tariffs and incipient regulation of industry such as the creation of the Federal Reserve Bank in 1913, which facilitated allocation of credit to large banks and industry at the expense of small inventors.
This may be so even as many of the Progressive-era reforms, especially under Roosevelt, aimed to control "bad trusts" and were not targeted at small business. By establishing regulatory rules and the Federal Reserve Bank the Gilded Age reformers, Mugwumps and Progressives created high fixed costs and inflation which may have deterred innovation and facilitated allocation of credit to the largest and not the most innovative firms.
Virtually all business historians assume that scale was essential to economic development, an assumption that the Gilded Age dogmatists themselves held. It is impossible to prove a counter-factual, but perhaps the pervasive Gilded Age assumption was just a failure of imagination. Today, large firms do not out-perform smaller ones as Google, for instance, demonstrates vis-a-vis Microsoft. Firms like General Motors limp along for decades, aided by Federal Reserve and protectionist policies, while nimble small firms develop new ideas such as the personal computer and the Internet but we never hear of many of them because they are prevented from adopting ideas by rigid credit markets (technology is an exception).
Was it necessary for large scale modernism to replace producerism in the ante-bellum period? I'm not as sure of that as business historians are. If big business had been necessary, prices would have been sufficient to reap profits sufficient to buy land or rights of way and to function without subsidies. But there were subsidies aplenty, often won through corruption. Common sense suggests that, were scale essential, then market performance would have eliminated the need for subsidies. But the problems of the Gilded Age, the corruption, the Jay Goulds and Jim Fisks, the political bosses, the tariffs, all revolved around the inability of large organizations and government to produce value without help from government. Perhaps the Gilded Age should be called the Age of Gilded Corporate Welfare.
Moreover, Cohen argues that today's big business liberalism had been shaped by Gilded Age intellectuals "who had little direct involvement in corporate enterprise". Many of the arguments of the Gilded Age intellectuals were dogmatic. None of the theorists had any grasp of key concepts that we understand today such as Schumpeterian creative destruction, the use of knowledge in free markets and the Hayekian importance of price. Thus, the shaping of today's corporatist system was largely based on dogmatic philosophical debates, none of which were well grounded in theory or evidence. As Cohen points out, a crucial theory like marginalism was not invented until the late nineteenth century at the earliest.
The implications for the modern corporatist state may be that it was an atavistic attempt to reassert medieval tribal relations at the expense of more innovative individualist approaches which existed in embryo in antebellum America. The designers of the corporatist state did not understand the importance of business life cycles, to include bankruptcy, and the importance of environment to stimulation of innovation. Many of them understood the role of credit in creating business cycles, but the widespread belief that, as DA Wells put it, "overproduction" was the cause of the depressions of the 1870s, 1880s and 1890s is evidence of the primitive knowledge base on which corporate reform through big government was based.
The book also has important implications for conservatives. There is little question, after reading Cohen's work, that conservatism and liberalism were created at the same time in reaction to the same phenomena, namely, the expansion of markets and scope of industrial firms. Conservatism does not reassert the values of an earlier age any more than liberalism does. The very terms "conservatism" and "liberalism" are utter misnomers. President Theodore Roosevelt's reaction to large scale enterprise was to expand government control to a greater degree. President William H. Taft's reaction was to limit government control. Roosevelt called Taft a reactionary. But both approaches were developed at the same time in reaction to the same phenomenon. As it turns out, Taft's approach is the more progressive because it permits a greater degree of flexibility and allows a greater likelihood of corporate death. Government programs rarely die, hence Roosevelt, who would have put utilities and other large concerns under government control, had ideas that would have lead to a more conservative approach than Taft did. Advocates of flexible social arrangements have been bamboozled into allowing their position to be called conservatism.
Cohen begins her brilliant and fascinating discussion by pointing out (p. 5) that Gilded Age liberals were in large part analyzing the defeat of producers' movements and the rise of corporate capitalism. The liberalism that the Gilded Age reformers devised was very close to the Progressivism of Herbert Croly and Walter Lippmann. Today's progressive-liberalism was the result of Gilded Age theory. The Gilded Age debate, argues Cohen (p. 6) involved a "triangular struggle for power between liberals, conservatives and socialists." Part of the debate involved a struggle between the Mugwumps or earlier independent Republicans such as EL Godkin and a post 1890 group led by Richard T. Ely that aimed to introduce the views of the German historical school into public policy. The Mugwumps, who were relatively conservative, stopped the socialists and leftists from succeeding. At the end of the 19th century, the marginalism of John Bates Clark, who had been a leftist but became a corporatist, argued for a regulated corporate economy and consumerism. Subsequent Progressive reforms did not significantly modify Clark's corporatist model.
Cohen argues (p. 29) that the "producerist" philosophy of free labor held that "economic independence, gained through ownership of real property or the possession of a skill that could provide a solid competence and independence was a precondition of true freedom." But "other Northerners, particularly those directing and financing the new industrial economy" emphasized freedom of contract.
The Civil War enhanced workers' claims and contributed to labor organizing. Radical Republicans felt uncomfortable with the labor movement, to include the eight-hour day movement in Massachusetts (p. 35). The conflict that the Radical Republicans experienced between the old free labor ideology and their defense of capital from the demands of the eight-hour and other labor movements led to their abandonment of the "producerism" of Andrew Jackson's day.
Cohen goes on to discuss the evolution of EL Godkin's attitude toward the labor movement. At first, Godkin argued that although workers had the right to contract, they labored under unequal bargaining power. "Unions acted as collective evaluators of the individual worker's interest and, in doing so, served as the main actors in the last phase of the emancipation of workers into the regime of contract" (p. 49). Later, though, Godkin was to oppose trade unions (p. 50). As workers demonstrated an interest in radicalism, Godkin became less supportive of unions (p. 57). Ultimately (p. 59), "Damning Mill, the intellectual idol of his youth (who had become a socialist late in life), he instead scrapped the greatest happiness principle and consecrated individual liberty as the one, supreme object in politics." This contrasts with John Dewey, who, a few decades later, consecrated democracy as the supreme object.
The problem that organized labor posed to the independent Republicans matched the problem that the emancipated slaves posed.
Part of the problem in the Mugwumps' eyes was that (p. 86) large scale capitalism "unsettled the moral order, in which property anchored individual selfhood and individual proprietors" Thus, in Cohen's view, consumerism replaced individualism as the basis for liberalism.
Thus, David Ames Wells (p. 88), 1860s commissioner of revenue and civil service advocate, argued for "a vibrant export trade" and against greenback inflation. "Wells...worried about the eclipse of the moral order of propietary capitalism. In condemning the spirit of trading and speculation and praising the spirit of production, Wells drew on the ideal conception of the self-directed, autonomous property owner" In general, Cohen's arguments about Wells are fascinating. I think Wells's ideas are applicable to the Federal Reserve policies of today. In fact, our post-modern world is very susceptible to Wells's arguments about speculation versus production. This is a fascinating section of the book. But Cohen is too pessimistic when she writes that "no nation has ever achieved the industrial development Wells desired and at the same time preserved 'thousands of little separate industries.'" Arguably that situation exists today.
Another really interesting point that Cohen makes is that the modern corporation as it is currently legally constituted did not get established until 1890 or so (p. 96). The corporation is not a product of laissez faire capitalism. It is a legal construction of relatively recent origin.
One of Cohen's chief themes, along with the relationship between consolidation of industry, producerism and labor relations, is the relationship among democracy, efficiency and consumerism. Charles Francis Adams, a railroad executive, argued that regulation by legislatures harmed the public and brought "community and corporation into conflict". Adams argued for "state-supported economic development and that required a rational form of state regulation." In Adams's view, regulation should be shifted from legislatures to expert administrations that would understand the limits of regulation and how to enhance rather than interfere with efficiency. Adams (p. 130) was for industry consolidation coupled with government ownership of some business, what Cohen calls "mixed ownership". Today this plan sounds hopelessly naive. As he learned that rational administrative solutions were indeed a naive plan, Adams switched to a laissez faire orientation (p. 131).
In chapter 4 Cohen argues that the late 19th century theorists', such as William Dean Howells's (pp. 110-112) emphasis on rationalization was often anti-democratic (I would add that it never resulted in much efficiency either.) It is undoubtedly true that the legislatures were incompetent at administrating regulatory systems and were corrupt, but there was little real evidence that experts would be any better at it, but this is what the postwar Radicals claimed. At the same time, though, the Mugwumps like George W. Curtis (editor of Harper's Weekly Magazine) opposed Greenback inflation on the grounds that it was "debt repudiation" (p. 115). Was this for moral reasons or was it because they were debt holders? Maybe a little of both. There are few today with such moral scruples, though. The rule today is inflate and if the bond holders and wage earners are harmed, well too bad because Lord Keynes and Jim Cramer say it is ok.
Cohen argues (p. 121) that historians overrate the limited government aspect of the Gilded Age reform movement as well as the "Liberal Republican" movement. Rather, she argues that it was the goal of administrative rationality that characterized most of the reform movement and that the inability to win support for the administrative vision "turned many to a more extreme classical liberal vision". This makes sense. It is likely the case that if they were acting in good faith they would have found that government reform, civil service, administrative rationalization and the like failed anyway, so they would have ultimately gone the route of laissez faire. The liberals focused mainly on local corruption and political bosses, but also maladministration of the national economy.
One example of the Gilded Age reformers' emphasis on rationality was the commission that New York's Governor Samuel Tilden appointed in 1875. The commission, which included EL Godkin and Simon Sterne, recommended that only taxpayers be allowed to vote and (I'd have to check this because the paragraph is a bit unclear) that the city be turned into a corporation. Too bad the ideas weren't adopted. I wonder if you could buy stock in New York City or Los Angeles if the cities wouldn't be better run by corporate boards than by voters. When I graduated from college a century later New York City was midway through a massive economic decline due to maladministration and excessive wages.
Cohen disapproves of the anti-democratic aspects of the Gilded Age reformers' emphasis on rationality. I would argue that the belief in rationality was a chimera. There is no such thing as rationality in government because incentives to respond to the environment are missing. Government mostly serves elites and its own organizational needs. If the Mugwumps were acting in good faith they would have been disappointed with the results of government reform, and many were and so turned to laissez faire. Cohen attributes this to the popularity of collective action and socialist ideology among the working class.
According to Cohen (p. 148) William Graham Sumner, a Yale professor in the 1870s, was a popularizer of laissez faire capitalism in the Gilded Age who aimed to "exterminate" socialism. State action amounted to malevalent anti-civil libertarianism. Sumner and other Mugwumps opposed rights for women and minorities. He was a social Darwinist. He couched his arguments in the social science of the day. Cohen argues that Sumner's writings were derivative of other thinkers, such as Spencer and Godkin. Likewise, David A. Wells (p. 185) advocated the gold standard, free trade and laissez faire. But Cohen also emphasizes that Wells believed in "economic consolidation and corporate administered markets".
Henry Carter Adams was one of the first American economists to adopt the German historical school paradigm that became foundations to the ideas of John R. Commons and other Progressives. Adams attended Johns Hopkins University, where he earned the university's "first doctorate in the social sciences" (p. 157). He then went on to study at the University of Berlin. The German historical school (p. 157) argued that economies were the products of particular histories so there is no governmental policy inevitably dictated abstract economic laws. They rejected laissez faire and strongly supported statism (one wonders whether this rejection contributed to the rise of the Nazi-Sozi Party 54 years later). It is somewhat puzzling, though, why if history and culture determine the appropriate policy, Adams did not conclude that given US history and culture a limited government approach would be most appropriate. If the German historical school really thought that history ought to determine policy (and not statism under all circumstances), why did he argue for reforms that overlooked American history? The German historical school philosophy seems extremely conservative to me. Some of the professors were, according to Cohen "right wing Bismarckians" but others were "left wing socialists". This suggests that the difference between the two is one of tone. Both German nationalism and German socialism were conservative in their objectives (namely the reassertion of tribal European social relations) but radical in method and led to the tragedies of national socialism in Germany and Russia. The German historical school's emphasis on statism ought deserves credit for more than Henry Carter Adams's apostasy from the independent reformers.
Adams adopted the socialism of his German professors. He became (p. 159) the leader of the "ethical" economics movement in America (p. 159). These were American academics sent to Germany who came back advocating the German historical school's ideas, to include socialism. EL Godkin had thought that universities would produce "sober" social scientists who could help manage the laissez faire economy. Instead, the ethical economists turned out to be socialists. John Bates Clark was among them.
Clark began as a socialist but he couldn't shake his individualistic outlook. He argued that true socialism involved social organization rather than individual ownership(p. 161). That sounds like Progressivism, but Clark wrote it in 1879. As part of this ethical economics movement, Cohen points out that Richard T. Ely, whom she regards as a less important thinker than Adams or Clark, founded the American Economics Association. Ely suffered from the fact that his pro-labor book Labor Movement in America appeared at the time of the Haymarket riot in 1886, and Ely barely held on to his job at Johns Hopkins and Henry Carter Adams was fired from Cornell but wound up at the University of Michigan when he recanted his radicalism. In the 1880s (p. 230) Carter worked for the Interstate Commerce Commission and continued to advocate government intervention in labor relations. He also advocated business school education post 1896 (p. 231). Adams was concerned that corporations could not be moral and so social morality would deviate from economic behavior under a corporatist system.
Clark on the other hand was the theoretical progenitor of marginalism and neoclassical economics. He would seem to be the most important of all of the thinkers of that period but not the most relevant to the establishment of liberalism. Clark's ideas were more conservative. He argued that the marginalist principle applied even to large firms and large blocks of labor.
In the final chapter Cohen makes clear how the ideas of the Gilded Age social thinkers was carried forward by Progressive politicians like President Roosevelt, Taft, and Wilson and writers like Herbert Croly and Walter Lippmann. Much of Progressivism came out of the Mugwumps' emphasis on rationality and government reform.
Overall, this is an absolutely mind blowing book and I heartily recommend it. Thank you, Professor Cohen.
CANDIDATE FOR ASSEMBLY FINDS HOLES IN PROPERTY TAX PLAN
Norma Segal just sent me the following press release:
"Bill Gouldman, candidate for Assembly in the 90th District, today criticized a new property tax proposal that would give relief to only half of the families that the current program includes.
"Gouldman once again called on the Democratic Leadership in the Assembly to put forth a property tax cap, which studies have shown to be the most effective way to curb the problem.
"'Residents in Putnam and Westchester County are feeling the squeeze everywhere, whether it's filling up our gas tanks, heating our homes or paying our outrageous property taxes," said Gouldman. "It is time for some relief and we need to start with property taxes. Our current representative in the Assembly has come up with a plan that simply doesn't provide enough relief and leaves out many who need help. After 16 years in office, shouldn't we expect a better solution from the Chairwoman of the Committee on Real Property Taxation? She's the most powerful woman in Albany on the issue of property taxes and unfortunately we've gotten rhetoric, not action and misguided proposals, not real relief.'
"Gouldman contends that the best way to solve the property tax problem is to impose a cap on the increase to our property taxes. By tying it to the rate of inflation, homeowners will be able to better afford the taxes and our schools will still get the funding they need. However, the latest proposal does nothing to slow down spending, which is the root of the problem. Property taxes will continue to grow unless the rate of spending decreases.
"'I'll be the first person to say that my opponent is a nice woman," stated Gouldman, "but unfortunately, she has been in Albany too long and has become an insider, simply voting for spending increase after spending increase with the political bosses from New York City. Evenworse, her committee has turned into the place where promising property tax relief proposals go to die. We don't need more elected officials who simply 'taxand spend' with no regard for what a budget means. We need someone with a business background who has the common sense to rein in spending and give middle class families a real break."
"After extensive analysis, Gouldman has found that the proposal is little more than a band-aid that is actually a step backwards from the current relief that is provided. Under this new plan, homeowners would still have to pay their entire bill before they receive a rebate, but the checks will go out to 1 million fewer people. In addition, homeowners who have owned their home for less than five years are excluded. Often, the people who fall into this category are new families and they need the help as much as anyone. Nevertheless, the biggest flaw in the plan is a
failure to rein in spending.
"'Even Governor Spitzer recognized he was wrong, when an overwhelming majority of the public disapproved of his plan to give driver's licenses to illegal aliens," added Gouldman. "Now it is time for our Assemblywoman to listen to the public and push for the property tax cap that we so desperately want and need. Regardless of what she chooses, I guarantee that I'll fight for it.'
(mailto:WJGouldman@aol.com)
"Bill Gouldman, candidate for Assembly in the 90th District, today criticized a new property tax proposal that would give relief to only half of the families that the current program includes.
"Gouldman once again called on the Democratic Leadership in the Assembly to put forth a property tax cap, which studies have shown to be the most effective way to curb the problem.
"'Residents in Putnam and Westchester County are feeling the squeeze everywhere, whether it's filling up our gas tanks, heating our homes or paying our outrageous property taxes," said Gouldman. "It is time for some relief and we need to start with property taxes. Our current representative in the Assembly has come up with a plan that simply doesn't provide enough relief and leaves out many who need help. After 16 years in office, shouldn't we expect a better solution from the Chairwoman of the Committee on Real Property Taxation? She's the most powerful woman in Albany on the issue of property taxes and unfortunately we've gotten rhetoric, not action and misguided proposals, not real relief.'
"Gouldman contends that the best way to solve the property tax problem is to impose a cap on the increase to our property taxes. By tying it to the rate of inflation, homeowners will be able to better afford the taxes and our schools will still get the funding they need. However, the latest proposal does nothing to slow down spending, which is the root of the problem. Property taxes will continue to grow unless the rate of spending decreases.
"'I'll be the first person to say that my opponent is a nice woman," stated Gouldman, "but unfortunately, she has been in Albany too long and has become an insider, simply voting for spending increase after spending increase with the political bosses from New York City. Evenworse, her committee has turned into the place where promising property tax relief proposals go to die. We don't need more elected officials who simply 'taxand spend' with no regard for what a budget means. We need someone with a business background who has the common sense to rein in spending and give middle class families a real break."
"After extensive analysis, Gouldman has found that the proposal is little more than a band-aid that is actually a step backwards from the current relief that is provided. Under this new plan, homeowners would still have to pay their entire bill before they receive a rebate, but the checks will go out to 1 million fewer people. In addition, homeowners who have owned their home for less than five years are excluded. Often, the people who fall into this category are new families and they need the help as much as anyone. Nevertheless, the biggest flaw in the plan is a
failure to rein in spending.
"'Even Governor Spitzer recognized he was wrong, when an overwhelming majority of the public disapproved of his plan to give driver's licenses to illegal aliens," added Gouldman. "Now it is time for our Assemblywoman to listen to the public and push for the property tax cap that we so desperately want and need. Regardless of what she chooses, I guarantee that I'll fight for it.'
(mailto:WJGouldman@aol.com)
John McCain's Brother and the Dachau Death Camp
Recently LGF reported that a member of Barack Obama's campaign staff hung a Cuban flag and a picture of Che Guevara on the wall of the Obama Houston campaign office. The Obama staffer's indifference to Cuban mass murder reminds us that the possibility of equivalent tragedy remains. This is especially because of the American education system's agenda of belittling limited government in the interest of unlimited democracy, political correctness and left wing groupthink.
John Lukacs has argued that all socialism in the twentieth century was national socialism. In Germany, the Nazi-Sozi Party rejected Marx's internationalism, as did Stalin, who like Hitler advocated "socialism in one country". Mao's socialism was also nationalistic. In Stalin's and Mao's cases, the New York Times and American mass media overlooked the murder of tens of millions of human beings in the interest of precious left-wing ideology. Today, Barack Obama's staffers, educated in benighted American schools, continue to apologize for mass murder. How much butchery is enough for the left?
Merle Levine just sent me a post that appears on several sites, such as Menorah Blog that quotes Joe McCain, John McCain's brother, about Jewish history. McCain notes that he went to the concentration camp memorial at Dachau:
"I stood in the center of Dachau for an entire day, about 15 years ago, trying to comprehend how this could have happened. I had gone there on a side trip from Munich, vaguely curious about this Dachau. I soon became engulfed in the enormity of what had occurred there nestled in this middle and working class neighborhood. How could human beings do this to other human beings, hear their cries, their pleas, their terror, their pain, and continue without apparently even wincing? I no longer wonder. At some times, some places, ANY sect of the human race is capable of horrors against their fellow man, whether a member of the Waffen SS, a Serbian sniper, a Turkish policeman in 1920's Armenia, a Mississippi Klansman."
I too took the commuter train from Munich to Dachau in the winter of 1975. Too, the scene depressed me. The proximity of the town to the concentration camp struck me. There is no possibility that the events there weren't known to the local citizens. While I was there, four mindless American tourists were clowning around the ovens, pretending to push each other in. While on the plane home from Europe I read Hannah Arendt's Eichmann in Jerusalem, which served to reinforce what I had intuited in the concentration camp, which was the same as Joe McCain.
The fact that a campaign staffer could put the flag of a mass murderer in the campaign office of a major American candidate is one more bit of evidence that the left has learned little from its persistent failures and butchery.
John Lukacs has argued that all socialism in the twentieth century was national socialism. In Germany, the Nazi-Sozi Party rejected Marx's internationalism, as did Stalin, who like Hitler advocated "socialism in one country". Mao's socialism was also nationalistic. In Stalin's and Mao's cases, the New York Times and American mass media overlooked the murder of tens of millions of human beings in the interest of precious left-wing ideology. Today, Barack Obama's staffers, educated in benighted American schools, continue to apologize for mass murder. How much butchery is enough for the left?
Merle Levine just sent me a post that appears on several sites, such as Menorah Blog that quotes Joe McCain, John McCain's brother, about Jewish history. McCain notes that he went to the concentration camp memorial at Dachau:
"I stood in the center of Dachau for an entire day, about 15 years ago, trying to comprehend how this could have happened. I had gone there on a side trip from Munich, vaguely curious about this Dachau. I soon became engulfed in the enormity of what had occurred there nestled in this middle and working class neighborhood. How could human beings do this to other human beings, hear their cries, their pleas, their terror, their pain, and continue without apparently even wincing? I no longer wonder. At some times, some places, ANY sect of the human race is capable of horrors against their fellow man, whether a member of the Waffen SS, a Serbian sniper, a Turkish policeman in 1920's Armenia, a Mississippi Klansman."
I too took the commuter train from Munich to Dachau in the winter of 1975. Too, the scene depressed me. The proximity of the town to the concentration camp struck me. There is no possibility that the events there weren't known to the local citizens. While I was there, four mindless American tourists were clowning around the ovens, pretending to push each other in. While on the plane home from Europe I read Hannah Arendt's Eichmann in Jerusalem, which served to reinforce what I had intuited in the concentration camp, which was the same as Joe McCain.
The fact that a campaign staffer could put the flag of a mass murderer in the campaign office of a major American candidate is one more bit of evidence that the left has learned little from its persistent failures and butchery.
Friday, February 8, 2008
John Lukacs' Democracy and Populism: Fear and Hatred
John Lukacs, Democracy and Populism: Fear and Hatred. New Haven: Yale University Press, 2005. 248 pages.
Democracy and Populism is a set of essays by an eminent, very talented historian. As would be expected, given the breadth of Lukacs's historical knowledge and his ability to imaginatively apply it, there are many fascinating essays in the book. The fear and hatred part of the title refers to his argument that fear primarily drives the left while hatred primarily drives the right. The most interesting claim in the book is that nationalism has been the driving force behind the rise of much of the last century's extremism. Lukacs argues that national socialism is the proper name for most kinds of totalitarianism (a word that he does not like) and that the reason that many writers have called Nazism "fascism" was due to Stalin's decision to forbid his journalists from using the more accurate term "national socialism". Western journalists voluntarily adopted Stalin's position on terminology.
The reason for Stalin's forbidding use of the term "national socialism", according to Lukacs, was that he realized that his own brand of "socialism in one country" was in fact also "national socialism". Thus, argues Lukacs, populism and nationalism have been the driving force behind all of the last century's totalitarian movements. He also emphasizes that populism and what we call "conservativism" are linked. In reality, nationalism or national socialism are not conservative, but for example the immigrant question today is most closely linked to conservatism. Being opposed to immigration is a position associated with Progressivism, not with traditional American liberalism of the late eighteenth century. Lukacs points out that a fundamental error that conservatives of the early to mid twentieth century, like Robert A. Taft, made was that they were too willing to align themselves with nationalists, who were in fact Volkish national socialists and had little in common with traditional liberalism. The fatal error of the European and American classical liberals of the twentieth century in Lukacs's view was that they feared communism so much that they were willing to make deals with the nationalist right, which was really no different from the communists. At the same time, though, liberalism failed, in Lukacs' view, because it was insufficiently nationalist (the two points seem to contradict).
Although the notion that the Nazis were a socialist movement is nothing new to most people I know well, Lukacs raises some new points, for example that the name Nazi was shortened from Nazi-Sozi.
One bone I have to pick with the book is that on page 57 Lukacs describes the mugwumps as early Progressives who believed in social and political planning. This is true to a degree, but the mugwumps differed significantly from the Progressives, who appeared in the 1890s, and their commitment to "social and political planning" was a small part of a largely laissez faire, free trade and hard money platform. It is true that some of the mugwumps advocated early kinds of progressive reforms in areas like improving the New York slums, but for the most part they were far more committed to laissez faire economics than almost any movement of the twentieth century besides the Libertarian Party that emerged in the 1970s.
Lukacs's theme is that liberalism's (in the classical sense) nemesis has been nationalism. In one interesting passage on p. 36 he writes:
"After 1870, nationalism, almost always, turned anti-liberal, especially where liberalism was no longer nationalist. The contempt for money-minded bourgeoisie that moved artists and writers a generation before was now changing into a contempt for liberals. The great Norwegian writer Knut Hamsun, for instance, hated not only Gladstone, in whom he saw the prototype of a hypocrite and a liberal, but all liberals. Confronted with someone whom he suspected to be a liberal, 'it is the logic of my blood expressing itself.' Eventually this led Hamsun to become an unrepentant admirer of Hitler."
One of the themes of the book that I found fascinating is the pivotal role that anti-Semitism played in the development of nationalism. In other words, European hatred for Jews created the nationalist mindset, which went on to dominate the governments of most of the repressive governments and even democracies around the world (p.41):
"Mussolini, Hitler, Peron, Stalin: all of them nationalist socialists, with the emphasis on the first word. In 1870s and even decades later it seemed impossible that nationalism and socialism would ever be allied. Yet--considering the ubiquity of the welfare state--we are at least in one sense all national socialists now...The diverse comibinations of nationalism and socialism marked most of the history of the twentieth century."
Populism, the earliest variant of national socialism that appeared from the late nineteenth to mid twentieth century, especially in Austria and Germany (but also in the United States) included anti-Semitism targeted against assimilated Jews. (Recall E.L. Godkin's remarks about Archibald Primrose Rosebery, 5th Earl of Rosebery . Godkin was no populist, socialist or nationalist, though.) Think of Hitler's frequent use of the word "Volk" as related not only to populism (and the late nineteenth century US Populist Party was called the People's Party) but also socialists' emphasis on "the People" (p. 63). Lukacs argues that late nineteenth century populism had three elements: anti-Semitism, nationalism and philo-Germanism even when adopted in other countries. In contrast, "Liberalism to most people meant philo-Semitism" (p. 64).
Lukacs suggests that we are nowhere near the end of the triumph of populism. He mentions the issue of inflation several times, but does not mention that inflation was one of the key populist positions of the late nineteenth century. Bryan's cross of gold speech marked the end of the Peoples' Party in America because the Democrats had integrated populist ideas into their own ideology.
Although Lukacs doesn't mention Patrick Buchanan, I kept thinking of him as I read the book. Anti-communist and nationalist, and at least mildly anti-Semitic, Buchanan fits the national socialist or populist model closely.
The book covers many different areas. Although it is probably not Lukacs's most important book, it makes for an interesting evening, more interesting than watching Bill Maher, to say the least.
Democracy and Populism is a set of essays by an eminent, very talented historian. As would be expected, given the breadth of Lukacs's historical knowledge and his ability to imaginatively apply it, there are many fascinating essays in the book. The fear and hatred part of the title refers to his argument that fear primarily drives the left while hatred primarily drives the right. The most interesting claim in the book is that nationalism has been the driving force behind the rise of much of the last century's extremism. Lukacs argues that national socialism is the proper name for most kinds of totalitarianism (a word that he does not like) and that the reason that many writers have called Nazism "fascism" was due to Stalin's decision to forbid his journalists from using the more accurate term "national socialism". Western journalists voluntarily adopted Stalin's position on terminology.
The reason for Stalin's forbidding use of the term "national socialism", according to Lukacs, was that he realized that his own brand of "socialism in one country" was in fact also "national socialism". Thus, argues Lukacs, populism and nationalism have been the driving force behind all of the last century's totalitarian movements. He also emphasizes that populism and what we call "conservativism" are linked. In reality, nationalism or national socialism are not conservative, but for example the immigrant question today is most closely linked to conservatism. Being opposed to immigration is a position associated with Progressivism, not with traditional American liberalism of the late eighteenth century. Lukacs points out that a fundamental error that conservatives of the early to mid twentieth century, like Robert A. Taft, made was that they were too willing to align themselves with nationalists, who were in fact Volkish national socialists and had little in common with traditional liberalism. The fatal error of the European and American classical liberals of the twentieth century in Lukacs's view was that they feared communism so much that they were willing to make deals with the nationalist right, which was really no different from the communists. At the same time, though, liberalism failed, in Lukacs' view, because it was insufficiently nationalist (the two points seem to contradict).
Although the notion that the Nazis were a socialist movement is nothing new to most people I know well, Lukacs raises some new points, for example that the name Nazi was shortened from Nazi-Sozi.
One bone I have to pick with the book is that on page 57 Lukacs describes the mugwumps as early Progressives who believed in social and political planning. This is true to a degree, but the mugwumps differed significantly from the Progressives, who appeared in the 1890s, and their commitment to "social and political planning" was a small part of a largely laissez faire, free trade and hard money platform. It is true that some of the mugwumps advocated early kinds of progressive reforms in areas like improving the New York slums, but for the most part they were far more committed to laissez faire economics than almost any movement of the twentieth century besides the Libertarian Party that emerged in the 1970s.
Lukacs's theme is that liberalism's (in the classical sense) nemesis has been nationalism. In one interesting passage on p. 36 he writes:
"After 1870, nationalism, almost always, turned anti-liberal, especially where liberalism was no longer nationalist. The contempt for money-minded bourgeoisie that moved artists and writers a generation before was now changing into a contempt for liberals. The great Norwegian writer Knut Hamsun, for instance, hated not only Gladstone, in whom he saw the prototype of a hypocrite and a liberal, but all liberals. Confronted with someone whom he suspected to be a liberal, 'it is the logic of my blood expressing itself.' Eventually this led Hamsun to become an unrepentant admirer of Hitler."
One of the themes of the book that I found fascinating is the pivotal role that anti-Semitism played in the development of nationalism. In other words, European hatred for Jews created the nationalist mindset, which went on to dominate the governments of most of the repressive governments and even democracies around the world (p.41):
"Mussolini, Hitler, Peron, Stalin: all of them nationalist socialists, with the emphasis on the first word. In 1870s and even decades later it seemed impossible that nationalism and socialism would ever be allied. Yet--considering the ubiquity of the welfare state--we are at least in one sense all national socialists now...The diverse comibinations of nationalism and socialism marked most of the history of the twentieth century."
Populism, the earliest variant of national socialism that appeared from the late nineteenth to mid twentieth century, especially in Austria and Germany (but also in the United States) included anti-Semitism targeted against assimilated Jews. (Recall E.L. Godkin's remarks about Archibald Primrose Rosebery, 5th Earl of Rosebery . Godkin was no populist, socialist or nationalist, though.) Think of Hitler's frequent use of the word "Volk" as related not only to populism (and the late nineteenth century US Populist Party was called the People's Party) but also socialists' emphasis on "the People" (p. 63). Lukacs argues that late nineteenth century populism had three elements: anti-Semitism, nationalism and philo-Germanism even when adopted in other countries. In contrast, "Liberalism to most people meant philo-Semitism" (p. 64).
Lukacs suggests that we are nowhere near the end of the triumph of populism. He mentions the issue of inflation several times, but does not mention that inflation was one of the key populist positions of the late nineteenth century. Bryan's cross of gold speech marked the end of the Peoples' Party in America because the Democrats had integrated populist ideas into their own ideology.
Although Lukacs doesn't mention Patrick Buchanan, I kept thinking of him as I read the book. Anti-communist and nationalist, and at least mildly anti-Semitic, Buchanan fits the national socialist or populist model closely.
The book covers many different areas. Although it is probably not Lukacs's most important book, it makes for an interesting evening, more interesting than watching Bill Maher, to say the least.
John Lukacs on Hitler
"But here we come to the mistaken view that many conservatives adopted during the twentieth century and that they have even now. This is that the rise of nationalist anti-liberalism meant a great historical reaction against 1789.* In 1933 and 1934 the then-leading German conservative, Franz von Papen, said that what was happening in Germany in 1933 was the great answer of history against the largely French-inspired idea of 1789 (And this is the enduring mistake of many conservatives, who despise the "Left" more than they distance themselves from "extremists" on the "Right".) But Hitler was someone very different from a counterrevolutionary; and the German 1933 was not a counterrevolutionary movement. Nothing was further from Hitler (or even from Mussolini, or from Peron, etc., etc.) than to see anything good in monarchy or aristocracy (let alone in the world of the eighteenth century). He was a populist; and a revolutionary; and at least in some ways, a democrat. Evidences of this, in his words and acts, could fill a small book."
----John Lukacs
Democracy and Populism: Fear and Hatred, New Haven: Yale University Press, 2005, 248 pp.
*The French Revolution occurred in 1789.
----John Lukacs
Democracy and Populism: Fear and Hatred, New Haven: Yale University Press, 2005, 248 pp.
*The French Revolution occurred in 1789.
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