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THESE ARE OUR SAVIORS? SPARE US!

THESE ARE OUR SAVIORS? SPARE US!

It is interesting that people who hate government are so desperate to be involved in its epicenter. Thus we have Bennett of Utah and now Lugar of Indiana who are insufficiently right wing to cut the mustard, and must go – and have gone.

 Apparently the rationale of the far right wing is to get into government so that they can destroy it. There seems to be an attitude that government is inherently bad and that we must follow the constitution in order to defray its excesses, real or imagined. This view is the opposite of the view of the Founders who wrote the constitution and considered government to be a noble exercise of representative democracy, the central thread/rationale for having a government in the first place.

I am of the opinion that a lot of the line we hear from the right is false by design; that they care little of the real issues of the day (unemployment, international trade issues, the environment etc.), but use them very cynically for the purpose of effectuating their real design, which is to make the rich and corporate class richer with a view toward a form of a latter day feudalist state in which we are the vassals and corporations are (effectively) the state. I have blogged on this topic a couple of times to this effect.

Methodologies to make this happen include privatization efforts (designed to make profits and remove public control over public matters such as education, social security and other now government programs where lots of money is there for the taking). It is important in such a scheme of things that all such programs subject to privatization be trashed by pre-takeover propaganda about how  cost ineffective and un-American they are, how government cannot do anything right, and how private enterprise can come in on the white horse and save the day.

There are those of us who disagree with this cozy assessment; we have seen the bankrupt prone Trumps, Gilded Age trusts, the Enrons, Madoffs et al. and have witnessed firsthand the performances of those on the white horses in our recent bailouts of these intrepid horsemen, who never met an asset that could not be securitized.

These are our saviors? Spare us!

It appears that the role of government should properly be to bail out the rich but leave the poor and the veterans under the bridge in the far right wing’s philosophy of government. It seems to me that if the only real purpose of government is to serve as a blocking back for the rich ball carrier to make money, whatever the pretense and propaganda, then it is time to cancel the game. I, for one do not wish to participate in such a phony excuse for government, where money capital writes and enforces the rules ranging from sexual mores to the air we breathe. There are numerous and better options, and all involve an active engagement of the citizenry and a refusal to sell our public wealth and our futures as serfs serving a corporate culture.

 We should show corporate privatizers the gate and proceed to flesh out our own futures (financed in part by more equitable taxation rates – the latest outrage being that GE has paid an annualized rate of only 2.3% on its billions in profits over the last decade, a far less rate than many pay who are on food stamps)! Such disparities in financing America (among other things) must cease – now!  GERALD E

A REVISIT OF RECENT HISTORY IN RE INVESTMENT PRACTICES

A REVISIT OF RECENT HISTORY IN RE INVESTMENT PRACTICES

At the Bretton Woods Conference in 1944 in New Hampshire when the Allies had a meeting to determine WW II postwar policies for the world’s economies, my favorite all time economist, John Maynard Keynes (who represented Britain), warned against unregulated domestic and international finance. It appears that his warning has gone unheeded since, and especially since Bill Clinton signed a repeal of the Glass Steagall Act of 1933, one of FDR’s New Deal attempts to rein in the disastrous investment practices by the big Wall Street banks which gave us The Great Depression. Glass-Steagall separated commercial banking from investment banking; its repeal put them back together again.

The big banks took the ball and ran with it. Freshly minted MBAs from Harvard and Wharton fighting to make partner and bigger bonuses in such banks as Goldman Sachs and JP Morgan Chase came up with new and esoteric instruments, securitizing anything that wiggled, instruments such as collateralized debt obligations (CDOs), credit derivatives and the like. Worthless to subpar mortgages were packaged and sold to teachers, firemen, police and nurses’ retirement funds, as though they were real collateral backed 100 percent by the value of the property represented by the paper sold.

I need not go through what happened as a result of removing the protections of Glass-Steagall and its regulatory effect on the investment practices of the big banks. We all know that Bush’s Great Recession came about because of the reckless investment practices of the big banks unleashed by the repeal of Glass-Steagall. We know of a world of then near international depression, the bailouts of our insolvent banks and other such ancillary economic disasters (millions of bankruptcies, plunging demand, a Dow gone south, high unemployment etc.). We paid a heavy price for our “let the market decide” policy rather than regulate the market for the good of all those affected and stability of the market itself.

So what did we do about it after the mortgage foreclosures put millions of unemployed Americans out of their homes and into the sidewalks and under the bridges, mortgages that never should have been made but for the greed of the big banks who knew or should have known that such mortgages were subpar but who made handsome commissions and fees from approving and financing such transactions, and then having the colossal chutzpah to securitize bundles of such lousy mortgages and selling them for further commissions and fees to unsuspecting retirement funds as above noted?

What did we do about it? We bailed them out, the Fed bought a lot of their subpar paper at par; we even bailed out their vendors, insurers and shareholders, and, oh, mortgage fraud? Yes, we made them pay a chump change fine but no banking executives went to jail. The AG said that the banks were “too big to fail” and he feared an international depression if we were too tough on such bankers.

The AG missed the point – wrong verb – the banks had already failed. We resurrected them. That’s not capitalism, Darwinian or otherwise; that’s corporate socialism, and is found in many other areas of public largesse such as grossly unwarranted tax cuts, redefinition of ordinary income into “carried interest” and capital gains and other sleight of hand redefinitions constituting yet other giveaways to the rich and corporate class which substantially reduces their tax liability, thereby increasing the relative liability of the rest of us to pay for costs of governing.

This is the same class (a class that diverts our attention from the billions annually our politicians lavish in corporate welfare on their bottom lines) that pays millions for propaganda tirades against individual welfare such as food stamps, rental assistance and the like, calling such programs “socialistic.” Worse, the costs of such propaganda by this favored class are deductible, thus increasing the relative tax liability of the rest of us as we pay for our own brainwashing.

Back to our failure to regulate the investment practices of big banks – When ordinary corporations fail or can’t otherwise make it throughDIC-insured  a Chapter 11 process, their shareholders take the hit and frequently vulture corporations such as the one in which Romney was a member take over such failed corporations out of bankruptcy and either revive them or, alternatively, sell their parts off to other going corporations. Cannibalizing dead corporations is good business, especially if the cannibalizing corporations can buy the assets of such dead or dying corporations for a song, which they usually do, and though I find the idea of cannibalizing repugnant, I must concede that its practice is a capitalistic one and not one found in corporate socialism. Someone has to clean up the mess and assist the court in disposing of the remains and paying creditors perhaps pennies on the dollar for corporate failures, and good capitalists will find a way to make a profit out of someone else’s disaster. Capitalism – a brutal system – unless you are a banker or a vulture or both, as is sometimes the case.

So how have our politicians reacted with this near brush with another Great Depression? Democrats passed the Dodd-Frank Act of 2010 which, among other things, removed FDIC-insured funds from the clutches of the big banks in their investments. Republicans thereafter removed this impediment via an amendment to the Act deviously attached to a spending bill so that the big banks once again have our money available for their investments around the world, investments that are under-regulated as armies of big bank lobbyists and lawyers constantly descend upon the appropriate committees in Congress in their attempts to dismantle Dodd-Frank on behalf of their already coddled clients. Wall Street bankers have spent more than one billion dollars in lobbying and legal costs in their attempt to repeal Dodd-Frank or remove its regulatory teeth, or both.

One would think that we should have learned our lesson with the dismantling of Glass-Steagall in 1999 and would wish to strengthen Dodd-Frank in order to prevent another brush with catastrophe, but not so. The big banks are back to their old tricks (some of which is with our FDIC-insured money) in chasing investment deals around the globe with evermore esoteric instruments, and we are again at risk for international depression or recession. Will we never learn, or does greed and avarice stamp out reason and experience in investment policymaking, ostensibly for the common good?

You be the judge. I have made my judgment, and it is this: Elect people who among other stability- inducing promises pledge to make corporate America share the tax load fairly and regulate banking investment practices to not only the benefit of the rest of us but, ultimately, to the benefit of such banks themselves.      GERALD        E

 

SINGLE PAYER HEALTHCARE AND PRIVATIZATION

SINGLE PAYER HEALTHCARE AND PRIVATIZATION

We have been bombarded with propaganda by private interests on the supposed “evils” of government healthcare (single payer) who wish to keep the profit-oriented system in place. These private interests have little to say about other government programs such as Social Security and others which are not subjects of profit other than to complain about rates rather than the structure and purposes of such programs since such programs are rightly the subject of broad public support and resistant to propaganda.

They are openly at war with the conceptual basis for single payer healthcare in a desperate attempt to keep the nation’s healthcare tethered to profit opportunities, coming up with the usual arguments of socialism, “Big Government,” and other such putdowns in order to maintain the current privatization of healthcare, among other systems ripe for privatization (and lately even the military – to be peopled with renamed Blackwater Hessians aka thugs in talks between the Trump administration and Erik Prince, brother of Betsy DeVos, our anti-public education Secretary of Education, a billionaire who has never spent a day as a pupil in a public school). The plot is thickening; privatization is on the march.

Finance has already dictated our trade and investment policies both here and abroad through various ruses pretended to be for the public good but which have been disastrous to the interests of working Americans, including a race to the bottom for wages, the waning influence of unions as a countervailing force to corporate hegemony, right to work laws passed at the state level and other such tragedies in policymaking designed to suppress wages while fattening corporate bottom lines – and it’s working; the Dow is at 22,000 or thereabouts while median wages adjusted for inflation have been stagnant for some 40 years, all leading to tepid demand in the market and further impoverishment of working Americans.

It appears that no public program is immune to the reach of money and Wall Street and it securitization of debt or any other asset that moves (see collateralized debt obligations, or CDOs). Everything is up for grabs as we are in the process of voluntarily or involuntarily handing over public control of education, law, healthcare, medicine, our economy, our transportation system, perhaps the military, and even our air controller’s jobs to corporatized interests, thus not only adding to our costs but giving up our ability to hold such profiteers to account for what happens afterwards since it will be Wall Street rather than the rest of us who will inevitably make policy. Who elected Erik Prince or big bank CEOs on Wall Street?

If, for instance, under Trump’s plan to involve Wall Street in the financing of our needed infrastructure repair and renewal becomes a reality, you and I may well be paying tolls and fees from our respective driveways to wherever we are coming or going. The chief interest of Wall Street, of course, is to make a profit, not provide for a modernized infrastructure – that’s merely the cover – and an unnecessary exercise. We need not hand over our public transportation system to private interests in this connection; we could do as many countries have, i.e., create a development bank which could handle the financing with retirement of the debt as incurred gradually and over time while our economy is stimulated as a result of efficiencies occasioned by such pubic improvements – thus maintaining public control over public assets free of private greed and usurpation of the public’s right to manage its own affairs.

I have been blogging for years in favor of modernizing our infrastructure, as other developed countries have long since done, but if Trump’s plan to hand our transportation system over to private interests when alternative means of financing are available is the price we must pay, then I am opposed to repair and renewal of our transportation system until we have an administration that will do so in the public interest and not that of Wall Street.

As for various Republican proposals to “reform” Medicare, I am wary. The last time we “reformed” Medicare under George Bush, for instance, we prohibited Medicare from using its bargaining power like the VA to bargain with Big Pharma for lower drug prices. Result? Billions of dollars unnecessarily spent for high-priced drugs that would have been far cheaper if Medicare could bargain for lower prices. Another result? Big Pharma’s stock took off after Bush signed the bill, speaking of corporate welfare run amok. Hahnel in his book, Economic Justice and Democracy, writes: “Seeing Medicare on the road to privatization with more public spending without cost controls in place is corporate welfare, and will only compound America’s healthcare problems. Instead, the solution begins with government medical insurance to cover all Americans, not privatizing public medical insurance for the elderly who have it, and using the monopoly power of single government payer to control medical costs.”

He further notes that “Only a single-payer, government insurance program can provide universal coverage while containing costs by eliminating the considerable administrative costs of private-insurance cherry picking. Only a single-payer program can eliminate the paperwork and confusion

associated with administering multiple insurance plans, all of which are worse deals than provided through single-payer systems in every other industrialized country in the world.” He is right; virtually every other developed country in the world has a single payer system and delivers better results at half the costs than our present mishmash of programs provide.

The only thing keeping us from having universal coverage at far less cost than at present is the campaign contribution lovefest of the Republican Party with Big Pharma, HMOs and big insurance companies, all in the business of profit making with little to no regard for either the costs or efficiencies single payer coverage would afford to America, an America where the chief cause of bankruptcy is medical bills that sick and disabled petitioners cannot afford to pay.

The present system reeks to high heaven of corporate welfare, and we should end this giveaway by adopting a single payer system that is fairer, cheaper and more efficient than the one we have, and socialism? Nearly all of the world’s capitalist countries have single payer coverage, and socialist countries like Cuba and others embrace such a system as well. Contrary to propaganda by Big Pharma and others interested in privatizing health care for their own bottom lines, the nation’s healthcare system as a system knows no politics. It’s about health. Let’s continue to agitate for adoption of single payer healthcare. As demonstrated by France, the U.K., Germany and many others, it makes economic as well as moral sense. Why not go for better coverage at half the cost and end this nonsense?     GERALD     E

WAGE INEQUALITY AND AGGREGATE DEMAND

WAGE INEQUALITY AND AGGREGATE DEMAND

My followers have been subjected to dozens of my posts dealing with wage inequality, which I consider our number one domestic problem, and I am continuing to write on this tragic failure in policy for good reason, since nothing is being done to ameliorate the situation. My followers know when there is less money in the hands of consumers that aggregate demand falters for the simple reason that such consumers don’t have the money to go to market to buy the goods and services produced by our economy (and that of others brought to our market from China and other such low-wage jurisdictions by the likes of Wal-Mart and other low-wage American corporations). This is a recipe for an underperforming domestic economy, one on the persistent edge of recession which, when added to politically-inspired austerity economics, is costing America trillions in production lost forever and not recoverable even with a change to Keynesian economics, which we should be practicing rather than the dead end austerity economics foisted off on us by a Republican Congress we are currently practicing.

Median wages as adjusted for inflation have not moved for some forty years even though the Dow has zoomed into the stratosphere and is currently hovering around the 22,000 mark, largely due to corporate hijacking of not only wages but worker productivity as the 1 percent hogs virtually all of the economy’s income and wealth and leaves the rest of us awaiting the next recession.

This post varies a bit from my usual wage inequality complaints in that I am going to quote language from an academic to bolster my continuing complaint in re wage inequality. The book, Economic Justice and Democracy, by economics professor Robin Hahnel, published in 2005, when the injustice of wage inequality was already in full swing (and still is), explains why wage inequality is destructive of demand in the marketplace. Hahnel feels that capitalism is not doing the job, and I agree that as presently practiced he is correct, but I am not ready to displace capitalism in favor of some other “ism” as he would, not yet, because I think it is a system that can work if appropriately regulated and reformed for the public good and not just another bounce in the Dow as the hijacking of worker wages and productivity by the rich and corporate class has been doing for some forty years.

I will quote extensively from his book in which he is saying the same things I have been saying but with an academic fervor I do not possess. With a single degree in economics, I am an amateur. Hahnel is a pro, and though a bit to the left and not a Stiglitz or a Piketty, his is a strong voice for economic justice.

Thus, he writes: “In capitalism the low road growth strategy is to suppress wages to increase profits and hope the wealthy will plow their profits back into productive investments that expand the capital stock so as to increase economic productivity and potential GDP. Besides being highly inequitable, this strategy runs the risk that the wealthy will not invest their profits to expand the domestic capital stock but consume them, save them, or worse yet, send them abroad. In the latter two cases, not only will the profits not be used to add machines to the capital stock, aggregate demand may falter and reduce actual production even further below a stagnant potential GDP.”

Amen! We have seen the effects of our financial sector’s use of domestic profits to bankroll multinational American corporations who go to China and other low wage jurisdictions in search of cheap labor to assemble goods (and now services) for consumption in our country free of tariffs and import taxes via trade treaties (written by American corporations), all under the guise that such taxes and duties amount to protectionism, even though China and others are engaging in currency manipulation and subsidization of their exports which, along with their cheap slave labor costs, puts American labor at a competitive disadvantage of the first order. Cheap foreign labor costs are thus imported into America and have a depressing effect on wages paid to Americans, who are often threatened by their employers that they either take less wages and no pensions etc. or see their jobs go to Mexico or elsewhere, and grandstanding politicians who pretend that they are going to reverse this situation are blowing hot air. “Corporations,” as a former CEO once noted, “are in the business of making money and not babysitting the American economy.” He’s right; that’s why they need regulation.

Hahnel further notes that “The high road to growth in capitalism is to raise wages to keep aggregate demand high, trusting that if profitable sales opportunities exist capitalists will find ways to expand capacity to take advantage of them. Besides being more equitable, this strategy minimizes the risk of lost output due to a lack of aggregate demand, and reduces unemployment in economies where chronic underemployment is a major social problem.” I couldn’t (and haven’t) said it better – he is right on.

If, of course, there are too little savings to loan to businesses that want to expand their productive capacity, or that capitalists will go on strike demanding higher return on their investments, either of which could lead to recession if not worse, then there’s the rub. Laissez faire economists in their worship of the market will allow all of us to take the hit for the economic wrongdoing of the few and wait for the “magic of the market” to realign the economy. Keynesians such as Stiglitz and Piketty would have government provide public investment and employment to replace falling private investment and employment if capital goes on strike. (See FDR and the New Deal, where such Keynesian tactics were employed, resulting in some forty years of prosperity with wage equality and corporate profits rising in tandem marked by a burgeoning middle class, unlike now, where corporate profits are rising but median wages adjusted for inflation are stagnant and the middle class is evaporating.)

Hahhel writes that “The only golden age capitalism has ever known was during the forty years when the Keynesian program was ascendant, and the only capitalist economies where substantial segments of the workforce ever rose to middle-class status were economies guided by these policies.”

He is right to a fault. Philosophically speaking, why should the entire nation be subject to recession or even depression because we have to wait on the “market” to do its thing? If for any reason there is not sufficient capital investment by private sources to make the economy hum, then why not wax Keynesian and provide public investment and employment to avoid the downturn which, incidentally, the “market” may well have caused? What’s the difference where the investment funds come from when the real problem is how to provide investment to keep the economy on an even keel? Socialism? No. Investment savvy? Yes. Can’t be done? We already have, with forty years of Keynesian policies that led to (per Hahnel) the “golden age of capitalism.” My complaint in this connection is why do we keep on losing when we know how to win? Could it be subordination of the common good to the avarice and greed of the financial sector not designed to “baby sit the American economy?” Nah! Perish the thought.

In summary, Hahnel tells us how to solve the present dilemma: “Subordinating finance to the service of the real economy, rather than the reverse, pursuing full-employment fiscal and monetary policies and intelligent industrial policies, and embracing a wage-led, rather than profit-led growth strategy is nothing more than a full Keynesian program.” He is right. Such a strategy, as we have seen, will lead to an explosion in aggregate demand, the final arbiter of economic growth, and the reincarnation of the middle class. What’s (other than greed) not to like for those of us in the 99 percent?     GERALD       E

 

NO MORE COMPETING ECONOMIC THEORIES?

NO MORE COMPETING ECONOMIC THEORIES?

A friend who understands my interest in economics sent me a January 13, 2017 column written for the Bloomberg View by Noah Smith entitled “Tribal Warfare in Economics is a Thing of the Past.” Smith argues that the Keynesian and Austrian schools of thought have essentially merged and that economists today are not interested in keeping that distinction alive since most economists do not work in macroeconomics, and so the old debates between the two schools are mostly irrelevant. The second reason he assigns for such irrelevancy is that economics has developed a common language, heavy on math and statistics, which allows researchers to mix and match ideas from these old two schools of thought with regression analysis of one sort or another on data.

One of my favorite economists, Joseph E. Stiglitz, who won a Nobel for his work on the asymmetry of information, is a Keynesian (as I am), but Smith says such designation makes “absolutely no sense whatsoever.” I am no economist, having only a single degree in the discipline, but I disagree with Smith.

I think that the areas in which economists work and how they compile their data for analysis he cites as reason for amalgamation of the two schools are more irrelevant than the fundamental approach to the study of the so-called “dismal science,” aka economics, and that Keynesianism and the Chicago School (heir of the Austrian School personified by Milton Friedman and his trickledown nonsense  and the “magic of the market” as announced by a clueless Reagan) are far from merged among the academic class and amateur economists like me.

I cannot see how a Keynesian could possibly agree with Milton Friedman, founder of the Chicago School, and neither could Stiglitz, whose books I have read. I also do not see how a common language and the use of regression and other analyses can provide a rational basis for merger of Keynesian spending when in recession with austerity economics where spending dries up during such downturns leading (in my view) to deepening downturns. I think Smith’s views are of apples and oranges, substance vs. procedure.

Smith writes that the old Chicago School is no more. I disagree; I say that the practice of austerity economics now in vogue both here and in Europe is a direct descendant of Friedman’s “free market” theories and that such theories plus trickledown and political giveaways to the rich and corporate class via tax cuts and lax regulation of their predatory activities (especially banking corporations) is responsible for the underperforming economies both here and in Europe today.

I say that the “free markets” envisioned by Friedman never existed beyond the lecture stage and that such ideas were designed to give libertarian license to corporations to pursue profit unimpeded by public regulation of such activities, as though our economy belongs to the rich and corporate class to the exclusion of the rest of us and that we are bound to do their bidding irrespective of how their activities affect the rest of us.

I say that all of us have a stake in our economy and how it is run and that all parties concerned have a right to be involved in corporate governance in view of the history of corporate collusion, price-fixing, reckless investments and other such practices both here and abroad which brought on international depression and deep recession (see Coolidge’s and Hoover’s Great Depression and Bush’s Great Recession, both brought on by laissez faire politics leading to a tragic lack of regulation of banks and bond and equity markets). As it happens, I claim to personally know of the consequences, having lived through both the Great Depression and Bush’s Great Recession, and it was no fun.

We have been warned of the dangers of uncontrolled corporatism by luminaries in history starting with Adam Smith through Thomas Jefferson, Abraham Lincoln, Teddy Roosevelt and his cousin, FDR, Woodrow Wilson, Joseph E. Stiglitz and Thomas Piketty, among other such politicians and economists. Apparently we weren’t and aren’t listening since we have been persuaded by rich and corporate propaganda (and their Ayn Rand toadies in the Congress) that we have no stake in our own economy and how it is to be run today, which in fact is now being run for the sole benefit of the rich and corporate class under the banner of such wild west libertarians as the Kochs and Mercers, buyers extraordinaire of elections.

I think Smith’s observations are inaccurate, and worse, that they have the effect of preservation of the status quo, perhaps an externality with which he did not reckon. It seems clear to me that Keynesianism and the Chicago School are still at substantive odds with one another and that methodologies and measures of treating data are secondary to the real economic issues of the day, especially the ultimate issue of whether the rest of us have a stake in the economy via regulation of corporate activities or whether the corporate culture will continue to dominate us. Smith did not treat that ultimate issue in his essay, perhaps because, as he wrote: “The idea of different schools makes the public think that the econ discipline is more divided, and more politicized, than it really is.”

Nice try, Mr. Smith, but I think the evidence, both in the real and theoretical worlds, is that the econ world is very divided and more politicized than it has ever been as we sink lower into the Second Gilded Age, and that common research patterns and common language have little or nothing to do with such substantive disagreements. After all, accountants often disagree though all use arithmetic.

What to do? Reassert the right of the public to regulate the corporate culture by electing those who are in favor of such regulation, all to the benefit of all of the participants in our economy rather than just to the benefit of the deep-pocketed and coddled few with their “free trade” and other meaningless chatter, and the sooner the better – for all of us – even the rich and corporate class.     GERALD       E

 

 

BIOLOGY AND ECONOMICS (PART II)

BIOLOGY AND ECONOMICS (PART II)

Before plunging into Sumner’s post-death paper tardily published (On the Concentration of Wealth), I think it appropriate to expand on my earlier observation that Trump is a Social Darwinist, but one in accord with Sumner’s earlier view that “capitalism rewards the smartest and most deserving among us.”

Piketty put that theory to rest in his book Capital in the Twenty-First Century with his discussion of patrimonial capitalism in which he noted among other things that capitalism rewards those who are the recipients of inherited wealth and punishes who do not inherit wealth. Thus Bush and Trump, both of whom had access to inherited wealth, must somehow fantasize that they are “the smartest and most deserving among us,” as though the accident of their birth equals merit.

Such a view necessarily and logically holds that those who are not rich and successful are losers, lazy, and even immoral and should be responsible for their own futures with regard to their health, income, education and other such means of becoming successful, responsibilities that Bush and Trump did not encounter in their coddled lives. My view is that accidental wealth by reason of birth has nothing to do with merit and a lot to do with a system that rewards those who claim to be “the smartest and most deserving among us,” and that the description of “losers, lazy and immoral” has application to both Bush and Trump irrespective of their trove of assets in Switzerland or elsewhere. I accordingly continue to reject Sumner’s earlier application of biology to economics via some Darwinian theoretical offshoot.

However, it appears that Sumner had a change of heart with his paper above cited which was suppressed by Keller until after Sumner’s death, apparently because Keller thought Sumner got it right the first time. I think Sumner did not get it right the first time, but did the second time. So what is it in his post-death paper that suggests he had a change of heart?

Curtis notes in a footnote to his paper published by The Journal of American History that Keller left Sumner’s essay here discussed as well as a number of others unpublished after Sumner’s death which left the image of a Sumner who appears more unchangingly dogmatic and unimaginative than was actually the case. Apparently, if such other papers were not in accord with Keller’s views, they went unpublished. Keller’s hardcore views of an early Sumner were demonstrated later when Keller viciously attacked FDR and his New Deal policies, policies which rightly treated reality with no regard to a Darwinian mix of biology and economics.

In the essay in question, Sumner quotes Daniel Webster who in his famous oration at Plymouth given on December, 1820, presciently noted that “We are perplexed by the presence of huge corporate possessions, which by their size are able to dominate markets, to affect government through influences whose strength we cannot measure, and national consciousness is much exercised by the problem how to restore the old conditions of equality upon which our social philosophy has always rested.” Sumner also quotes with approval Webster’s further observations that “The purpose of democratic government is to secure equal opportunities to each of its citizens. . . . equal sharing in government that each may have equal opportunities of life, liberty and the pursuit of happiness; that “private right and distributive justice may coincide. A right to vote, a right to be represented, is worth nothing if it be not worth this. Democratic government which does not protect these rights has abandoned it first and essential function. . . . The freest government, if it could exist, would not long be accepted, if the tendency of the laws were to create a rapid accumulation of property in few hands, and to render the great mass of the people dependent and penniless. In such a case, the popular power would be likely to break in upon the rights of property, or else the influence of property to limit and control the exercise of popular power.”

This wonderful oration, given only three years short of two hundred years ago, not only establishes Webster as the Nostradamus of his time, but could be given today with minor editing, and with his approval marks a drastic change in Sumner’s thinking away from his previous “survival of the fittest” Darwinian views. He was right to modify his past views with the realities of unregulated corporate trusts which were running amok with no public restraint on price fixing and other monopolistic practices, and Keller’s reluctance to publish this and other papers Sumner wrote misled policy makers and even people such as me and my wife. We were laboring under the misapprehension that Sumner was the hard right inventor of Social Darwinism for a market that was anything but free and who ignored merit and the public good, and we responded accordingly, rejecting such attempted union of biology and economics.

Sumner’s paper is largely devoted to Webster’s two-century old speech that could be given today as well as to the then-developing menace of trusts. He was opposed to the great concentration of wealth held by late 19th and early 20th century corporations and in favor of regulation of such leviathans lest the popular will (see civil commotion in the streets) do the job the policy makers refuse to do. He had little regard for apologists for such monopolists with their chatter about how concentration of wealth would lead to lower prices for consumers etc. in view of their history to the contrary. I here note that if he thought the concentration of wealth and corporate power was bad in his day, he should be around today where it is far worse, and where, as in Webster’s terms, a rapid accumulation of property in few hands renders the great mass of the people “dependent and penniless.” Proof? A 22,000 Dow and speaking of wage inequality) a median wage adjusted for inflation that has not moved in forty years.

I am now a disciple of Sumner’s altered views though still rejecting his earlier views. Curtis rightly notes that Sumner’s loyalty to “democratic civilization” impelled him to an analysis of industrial monopolies. . . and while his remedies remain vague and incomplete. . . he clearly indicated that his 19th century liberalism was not utterly rigid and that his adherence to middle class values had led him to call upon the state for succor. In other words, monopolies and great corporate concentrations of corporate power must be publicly regulated lest we all go down with the ship, rich and poor. He was and is right to a fault.

So, in summary, is there any rational connection between a Darwinian subset and its application to our capitalistic system. No, none. Economics is man-made; there is nothing “natural” about it and there is no “invisible hand” of Adam Smith or any other metaphysical force at work in our market. It is on its own and it is up to us to fashion and police it to the benefit of all of us and not just the chosen few who claim to be deserving by reason of birth or other happenstance.

I finally note that we can live up to the language of Webster and Sumner by effectively regulating Wall Street banks in the public interest, a decided change in policy since the Wall Street banks are now effectively regulating us.      GERALD      E

 

 

 

BIOLOGY AND ECONOMICS (PART I)

BIOLOGY AND ECONOMICS (PART I)

First things first: What is Social Darwinism? Jonathan Chait in the June 26-July 9 edition of New York correctly defines it as follows: “Social Darwinism is a philosophy that treats the market as a perfectly efficient and moral mechanism for allocating wealth. Just as natural selection favors those species best adapted for survival, the theory goes, capitalism rewards the smartest and most deserving amount us. It is the intellectual scaffolding, constructed by writers like Ayn Rand and various Austrian economists, behind the vision of conservatives like Paul Ryan and David Koch.” Well said, and if the market is perfect in picking winners and losers, then who needs government or any other kind of regulation of our economy? How can we improve on perfection?

Back to the topic – I first encountered William Graham Sumner’s Social Darwinism while studying for a degree in economics preparatory to going to law school. I was not impressed with his views of Darwin’s survival of the fittest as applied to economics since, after all, and to use a baseball metaphor, some are born on third base and others have two strikes and no balls while still at the plate, which led me to conclude that the prize went to the richest and not the fittest. However, his views in the late 19th and early 20th centuries are still with us, as exemplified by the current occupant of the Oval Office, who is both rich (to hear him tell it) and a Social Darwinist.

My second encounter with Sumner’s Social Darwinism was some twenty years later, when my wife was working on her doctorate in education at the University of Illinois. One of the courses she took had to do with the usual academic lineup of Marx, Aristotle, Dewey and, of course, Sumner, among others. We had many lively discussions about Sumner’s contribution to economics as well as well as its ripple effects on education. We agreed that his views were at odds with democracy and that there was nothing “natural” or predestined in transferring a survival of the fittest model to economics, which is a purely man-made order already set forth by such as Adam Smith and David Ricardo long before Sumner’s day.

My third encounter was yesterday, when an old friend and retired archivist of the Truman Library sent me some papers having to do with Sumner that I never knew existed. It seems from such a trove that I may have been too harsh in my judgment of Sumner since he mellowed with age per an unpublished paper written in 1909 that has since been retrieved from the archives.

Sumner apparently had second thoughts on his previous hard right theory of a rigid “survival of the fittest” view as applied to economics when it became obvious during the days of John D. Rockefeller and Andrew Carnegie that the unregulated and even unmoderated capitalism of that day was inimical to the public good and whose then ruthless capitalists were finally brought to heel with Republican progressives such as Teddy Roosevelt and William Howard Taft and such laws as the Sherman Anti-Trust and Clayton Acts, even though we are now back into the second Gilded Age and combinations via mergers and acquisitions and other ultimate price-fixing and restraint of trade practices in a monopolistic fervor that today’s politicians are paid via “campaign contributions” to ignore.

The paper my friend sent me is from The Journal of American History written by Bruce Curtis, a professor at Michigan State University, whose dissertation was on Sumner’s middle class progressivism, and whose findings in the paper sent to me include the surprising (to me) a heretofore unpublished paper written by Sumner that sounds as though it were written by a modern day liberal Democrat even though written one hundred and eight years ago. This paper is entitled “On the Concentration of Wealth,” and ranges from Daniel Webster’s famous oration in Plymouth on French law of equal inheritance to the date he wrote his Concentration of Wealth paper.

Webster, of course, was writing just after the horrors of the French Revolution and Napoleonic Wars, a time of confusion and fear in a revolutionary Europe (only to worsen with the coming of Marx), and Sumner was writing in a time of a post-Civil War America and a rapidly industrialization and innovation marked by unregulated excesses of such ruthless capitalists as John D. Rockefeller and his Standard Oil Company (which was finally broken up by Supreme Court edict). My point in mentioning the era in which such orations were given and papers written is to give context to the motivations of such orators and writers. They, like we today, were victims of the political and economic environments of their day.

Curtis opines that the reason we did not have access to Sumner’s 1909 treatise is that Albert Galloway Keller, Sumner’s good friend, academic heir-apparent and editor, not want to publish it because its tone and contents were not consistent with Sumner’s previous social and political attitudes, attitudes that Keller continued to fervently embrace after Sumner’s death. Also ignored for publication by Keller were many other such papers including 150 sermons which Sumner, a former Episcopalian priest, had preserved. It is apparent that Keller served as Sumner’s gatekeeper and only allowed publication of Sumner’s efforts that were in accord with the views of the gatekeeper, thus misleading people like me who believed that Sumner was an apologist for ruthless capitalism under some Darwinian banner.

The views expressed in Sumner’s post-death paper could largely have been written today as the propaganda of the rich and corporate class at this moment has seemingly and successfully brought public opinion to the digressed view that survival of the fittest should be the measure of how our economy should function, with the exception of Wall Street banks, of course, whose insolvency and accompanying bailouts violated this principle of survival of the fittest in favor of political intervention under the banner of “too big to fail” and other such framing designed to create an aberration to the Darwinian rule. The real rule, it is plain to see, is that the rich and corporate class have finally found their economic nirvana, i.e., privatization of the profits and socialization of the risks in which you and I are mere ATM machines, innovations that were not available in the days of Adam Smith and William Graham Sumner.

I will discuss Sumner’s now-published bombshell paper in Part II. Stay tuned.      GERALD      E

FIRE AND FURY – THE AGONY AND THE ECSTASY

FIRE AND FURY – THE AGONY AND THE ECSTASY

There is rapidly accumulating evidence today that Trump’s unrehearsed and off the cuff comments on such matters as threats to North Korea that their designs will be met with fire and fury are doing nothing more than an attempt to scare the American people into submission to his own design to be the authoritarian in charge. If you scare them, as Hitler did with his one-man show about subversion of Germany by communists, Jews et al., they will look to you as the messiah to put down such treachery, and if someone who is likewise running a one-man show such as the dictator of North Korea will not be outdone by a fellow narcissist, you will have created an unnecessary situation that, considering that we are talking about a possible atomic war and our last one, is fraught with real danger to humanity.

It is not the presence of atomic capability that is the problem since many countries have such capability; it is rather the presence of bigmouth narcissists who refuse to be silenced in their psychotic race for the top. It seems that Trump has forgotten (if he ever knew) that he has a diplomatic corps that can (through such as Swiss and Swedish non-aligned diplomats) quietly and perhaps effectively negotiate sticky problems with the worst actors on the globe. (Secretary of State, take note.)

We negotiated our way out of the Cuban missile crisis with the then Soviet Union, a country with far greater atomic capability than that possessed by North Korea today. We negotiated a Chinese withdrawal from the battlefront during the Korean War and kept McArthur from his wish to invade then communist (and now state capitalistic) China. We have negotiated our way out of more crises than not, thus avoiding one war after another with all the agony and ecstasy entailed whether winner or loser.

There is no good reason to fall for the threats of narcissists, whether in North Korea or at home, as the stakes are too high for such an adventure, and even narcissists might look to a blank future for humanity (including their own) and instead decide, however reluctantly, to pursue a diplomatic rather than a military solution to the issue. This is, in isolated context, a battle between narcissists for bragging rights and has little if anything to do with, for instance, conflicting trade or territorial expansion issues. North Korea is not threatening to invade China, Japan or (more than via casual propaganda) even South Korea itself, and trade is a non-issue.

What we have is a fruitcake dictator in North Korea who is flexing his military muscle for no discernible purpose other than in gathering attention to himself, a situation Trump has apparently decided via his policy by tweet to emulate without discussion with his Secretary of State and intelligence agencies and who is a wannabe dictator inspired by Bannon to draw “tough guy” attention to himself. Trump’s threat of fire and fury sounds very much like Hitler’s condemnation of Jews and communists he successfully sold to Germans as a cover for his acquisition of dictatorial control – and we all know the dreadful result.

I for one am more concerned with Trump’s mouth than I am that of the North Korean dictator. We need not throw gasoline on the fire and pretend the enthat that will put the fire out when the real intention of Trump’s depraved mind may well be to use such an exercise in stoking fear as a front to seize authoritarian control of this country which will flesh out Bannon’s self-professed as a Leninist to “destroy the administrative state” much as Hitler and his Nazi party did in Germany in the 1930s.

I would never think of comparing the Republican Party with the Nazi party that gave rise to a madman in that day and age, but their continuing refusal to do anything today about this cancer on democracy they have unleashed on the rest of us for their own selfish legislative purposes may give me pause since those who do nothing in the face of mounting disaster they have caused have a responsibility to do something about reversing our lemming-like rush to the cliff engineered by Trump and Bannon, a self-professed Leninist.  Republican approval of Trump’s government by tweet (whether real or pretended) does nothing to suppress irresponsible and narcissistic chatter from a plainly out of touch chief executive and is tantamount to going along with whatever future he has decided as an authoritarian in his otherworld is best for the rest of us, one that signals the end of democracy.

I say that is too big a price to pay because, as I often write, democracy is our most valuable asset held in common and is not for sale to Democrats, Republicans, Koch libertarians, Trump, Bannon or anyone or anything else since it is a hard-earned system of the right to self-govern paid for by the blood of millions of patriots. Without such a system, America as we know it is over, Democrats and Republicans will cease to exist, and it will not take an atomic attack by North Korea or any other country or countries to do us in; we will have done ourselves in via internal rot and decay, much like Rome.

So, Republican leadership, you have a choice. You can do your duty as Americans or you can blindly follow the leader in his otherworld fantasies fed by libertarian “campaign contributions,” but you cannot do both simultaneously because, as Supreme Court Justice Lewis J. Brandeis (a confidant of President Woodrow Wilson) pointed out the year I was born: “You can have great wealth concentrated in the hands of the few, or you can have democracy, but you cannot have both.” So whose side are you on, Republican leadership, that of accelerated accumulation of great wealth in the hands of the few, the necessarily resultant impoverishment of the rest of us and the loss of our democracy, or an America with a self-governing future with wealth fairly distributed among all of us and an active diplomatic corps to maintain international equilibrium?

I have made my choice. Trump and Bannon are wrong and Brandeis was right to a fault.      GERALD       E