Archive for category Economy

Treason in Defense of Wealth

Tyler Durden (this guy, or maybe this guy, or both, but definitely not the Fight Club guy) approvingly links to this ridiculous screed in the latest issue of Global Custodian magazine, a trade quarterly for the international securities industry (Roissy Approved as well!).

The core point in this rambling mess is that “unlimited democracy,” whatever that is, gives too many citizens the power to vote perks for themselves, and support “counterproductive” policies (read: policies Dominic Hobson doesn’t like).  For Hobson, unlimited Democracy is a “plague” which he wants to attack at its “moral foundation,” the “political equality of the citizen.”

This is a direct, and treasonous, attack on our Constitutional framework.  Hobson, Durden, and Roissy would relate political equality with property on the grounds that only those with a stake in society should have voting and other political rights.  This raises some interesting questions, such as how to define property, but the foundation of this argument is that only the successful (or the lucky) should have political power, as if they haven’t most of it already.

These selfish men only want to protect their wealth, and for all their talk about markets they don’t really want to compete with others for money.  They want to organize a political system that allows them to construct markets to their liking, whatever it means to others.  This is treason, pure and simple.

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The Nutty Professor Reads the Polls

Donald Douglas writes at American Power that the latest New York Times/CBS News poll shows “disastrous” numbers for Democrats.  To make his case, he cites two results which indicate a preference for smaller government, and a third showing more concern over the economy and jobs than health care.  Douglas then points out that a bare plurality has more faith in Republicans to “ensure a strong economy” and a bare majority who don’t think the President has offered reasonable solutions to the economic problems faced by their families.

Not so fast.  These cherry-picked results don’t tell the whole story, and “it doesn’t take a statistician” to see that this grossly exaggerates the bad news in the poll for the President and Democrats.  That’s a good thing, because for a political science professor, Douglas isn’t much of one if that’s what he gets from this poll.

Now on the face of it, this looks like a solid argument: Americans care about the economy, they think the GOP could fix it, and they think Obama doesn’t have his eye on the ball.  If all of this is so, perhaps The Nutty Professor™ is right.

Not so fast.  Douglas’ analysis ignores other results from the poll, not to mention the behavior or real life politicians.  For starters, the same poll shows a 47-34 plurality approving Obama’s handling of terrorism, and a 55-34 majority approval of his foreign policy, suggesting that not all has gone south for the Administration.  Moreover, only seven percent each say they blame the President for the current state of the economy or federal budget deficits, which suggests that even those who don’t think he’s found the right solution yet may not be prepared to turn to someone else in a search for it.  And the respondents were evenly split on whether or not the stimulus package will make the economy better–suggesting that the American popular jury is still out on whether they think it was a mistake by an overactive government.  Finally, though somewhat more respondents said that they think the GOP would be more likely to ensure a strong economy, the same group had more faith in Democrats when it comes to creating jobs or fixing health care.  It is not clear from these contradictory results that the President or his Party are in trouble.

Douglas’ claim that this poll shows an American preference for smaller government also stands on less solid ground than he thinks.  Respondents said they thing government should spend to create jobs, 47-45%, and 62% think Congress should let the Bush tax cuts expire, even though this would raise taxes on high earners.  Fifty-six percent would like to see more regulation of banks and financial institutions, and 52% think the President should do more to fix the economy.  Half say they would change Senate rules to make legislation easier to pass, and 58% think that Obama has expanded government “the right amount” or “not enough.”  It looks like Americans worry less about the size of government than they do its effectiveness–they want more policy that works and less that doesn’t.

It’s no secret that politicians–even conservative, small government politicians–don’t behave as if their constituents want smaller government.  Indeed, according to the Washington Times, over a dozen Republicans wrote letters to one agency alone seeking money from the stimulus package, even though they had voted against it and claimed it had no effect (except in letters like Kit Bond’s request from the USDA for stimulus money for a project in his state on the grounds that it would “create jobs and ultimately spur economic opportunities.”  Even Republicans know that Americans want more government action to solve problems on the ground.

Donald Douglas is not a very good political scientist and an even worse poll analyst, based on this example of his work.  He pulled a few results that support his preconceived notion of the state of American public opinion from a long survey while ignoring data points which might refute his claim.  This poll contains nothing particularly disastrous for Democrats or President Obama.  If Douglas cared about good analysis, he would have pointed this out.


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Rules for Whack Jobs

Roy Edroso does everyone a public service by wading through the mud of the right-wing-nutjob attack on President Obama’s speech to school kids.  I’m almost sorry I clicked through to any of the blogs he cites: the stupid, it burns.

It is difficult to overstate the amount of ignorance permeating the discussions and essays on these blogs.  The discussions of Saul Alinsky’s Rules for Radicals, for example, suggest that few have actually read the book.  Click over from WikiPedia to Amazon, folks, and order it.  Read it.

James Lewis, who may be an American but is not much of a thinker (he thinks socialists are “deeply committed” to the “Internationalist Ruling Class!”), asserts that Alinsky’s prescription to “Pick the target, freeze it, personalize it, and polarize it” has something to do with scapegoating groups:

“That slogan defines mob scapegoating, of course. It is an exact prescription for whipping up mobs — by race, by gender, by ethnicity, by religion.”

This makes, of course, very little sense.  Personalizing and polarizing the target is about putting an individual, and preferably evil, face on class oppression, not about blaming rich white mortgage lenders for the problems caused by all those lazy poor people who bought houses they couldn’t pay for.

But what about Alinsky?  Lewis wants to paint him as a dangerous radical who means to bring down capitalism and the American way of life with the help of his protege, President Obama.  Capitalism has, of course, quite effectively begun the process of destroying itself without Alinsky’s help, thank you very much.

Lewis is bent out of shape because President Obama is scapegoating the “capitalists who run General Motors and Wall Street,” and some B-list comedienne thinks the tea partiers are racist, don’t you see.  Never mind that the executives who brought down our economy by mismanaging both its industrial and financial sectors sort of brought the blame upon themselves.

Saul Alinsky wrote Rules to show the politically weak how they could effect social change despite the efforts of the powerful to hold their priveleged economic and political positions.  He compared the book to The Prince:

What follows is for those who want to change the world from what it is to what they believe it should be. The Prince was written by Machiavelli for the Haves on how to hold power. Rules for Radicals is written for the Have-Nots on how to take it away.

Alinsky suggested that organizers identify privileged individuals and personalize social injustice–that is, show exactly who benefits from the perceived class differences they had organized to fight.  Lewis does not support his claim that the President has decided to use this technique to demonize groups rather than individuals except by assertion: he just knows they are doing this, because this is what the Dixiecrats did to blacks, don’t you see.  But the evidence suggests that people who wish to curb the excesses of Capitalism and capitalists have followed Alinsky’s lead by targeting the individual executives who made corporate decisions on things like bonuses.

This article, for example, targets Edward Liddy, the CEO of AiG, not capitalists in general.  Other discussion of Wall Street bonuses challenge them on capitalist grounds by making the credible claim that the poor performance of financial wizards should preclude bonuses–they should not be rewarded for destroying their companies.

“These bonuses should be zero,” wrote one poster on the firedoglake.com blog. “Not down 44%. Zero. These banks should be using their profits to reinvest in the shoring up of their capital reserves, so that they [can] start underwriting and lending again, not paying discretionary bonuses. It’s not about keeping the “best and the brightest”…if they were that sharp, we wouldn’t be in this mess, would we now?”

Janeane Garafalo’s assertion that racism pervades the Tea Party movement also has merit–at least StormFront thinks so.  They have asked members to join the Tea Parties, and along with other white supremacist groups believe they would find a fertile recruiting ground at such meetings.

In no sense can anyone characterize either as scapegoating.  Neither Wall Street bonus babies nor teabaggers are taking blame for others.  To the extent liberals use Alinsky’s methods to effect social change, they target the actual malefactors of wealth and privelege–along with the rubes who support an unjust system.  They do not blame innocent individuals or groups for the sins of others.

Indeed, it is arguably the right that favors Alinsky’s techniques.  They make a din that creates the impression of a larger movement at boisiterous town hall forums.  They force rules of civil conduct on liberals even while violating them.  They bully and ridicule, and attract activists who enjoy using these methods.  They use any event as a reason to attack, and offer no constructive alternatives.  And they picked, froze, personalized, and polarized Obama.

They also scapegoat amorphous groups–the liberal media, academic or Hollywood elites, unions,  socialists, communists,  and all those welfare mothers who think rich people owe them a Cadillac.

We should of course expect reactionaries–capitalists, corporatists, and religious leaders who see their base of political and economic power crumbling before changing social norms, demographics, and economic and scientific realities–to protect the foundations of their power.  They have to demonize cultural, political, economic and demographic changes as socialist in order to hold the support of uninformed masses who fear out groups, “socialism,” “secularism,” and “liberal elites” more than they fear losing everything when some corporation sends their job overseas or refuses to pay for the cancer treatment because they had acne ten years ago.  This is how they preserve the every-man-for-himself system that allows a small group of wealthy patriarchs to control the vast majority of US wealth.  But they have no stronger a claim to America, and what it means to be an American, than liberals who believe that we can improve society by acting collectively.

And if they believe that socialism is about commitment to the “International Ruling Class,” they come to the intellectual gun fight without a good understanding of what bullets are.

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I Love the Internet #1

I was reading this Roy Edroso post at the Village Voice about Jake DeSantis, the AIG Financial Products wiz who suddenly had an urge to cry publicly about his persecution by elected officials.  I don’t know enough about this guy’s tenure there to say anything about his grounds for doing so, but it seems to me that he either deserves the approbation of his fellow Americans or he has neither the stomach for making his case or the patriotism to stay around and help fix the problem in his Country’s time of need.

At any rate, Roy linked to a few sympathetic wingnut bloggers and their cries of injustice and “going Galt.”  That last, a self-described “Right-Wing Web Aggregator” that at least has the virtue of a cool name, also has a link to Strange Maps.

This is one of those blogs I never would have found without help, and I should thank the never melted guy for leading me there.  Only on the web–or an old library–could I have stumbled across thing like this and this.

I love the internet.

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Usury and Capital

Over the weekend I read two articles that gave me some new insight into how America got into its current economic fix and which policies might not just help us reverse the decline but also set the conditions for more effective markets in the future.

First, Thomas Geoghegan writes persuasively (Subscription Required) in Harper’s Magazine that the central cause of the current economic crisis is a shift of capital from manufacturing and production to financial markets after the repeal of usury laws made hedge funds and lending much more profitable than making stuff:

“That’s when we found out what happens when an advanced industrial economy tries to function with no cap at all on interest rates.  Here’s what happens: the financial sector bloats up.  With no law capping interest, the evil is not only that banks prey on the poor (they have always done so) but that capital gushes out of manufacturing and into banking.  When banks get 25 percent to 30percent on credit cards, and 500 or more percent on payday loans, capital flees from honest pursuits, like auto manufacturing.  Sure, GM is awful.  Sure, it doesn’t innovate.  But the people who could have saved GM and Ford went off to work at AIG, or Merrill Lynch, or even Goldman Sachs.  All of this used to be so obvious as not to merit comment.  What is history, really, but a turf war between manufacturing, labor, and the banks?  In the United States, we shrank manufacturing.  We got rid of labor.  Now it’s just the banks.”

This is not a socialist argument about how corporations exploit the poor by charging high rates of interest and constructing loan agreements to give consumers more information and power to make informed choices about whether and how they should borrow money.  Geoghegan is making a capitalist case that tax policy and regulatory institutions create incentives to which capital and investors will respond by shifting the components of production between sectors in search of the highest profits.  He is pointing out that the invisible hand sometimes slaps us.

In the same issue of Harper’s, Daniel Brook offers an example (Subscription Required) with the story of how Allan Jones invented the payday lending industry.  When Mr. Jones sought investment opportunities for his excess cash, he chose not to open a small factory, manufacturing plant, restaraunt or service industry firm (e.g., janitorial services).  Instead, he decided to lend it to people at usurious interest rates.  Jones might have opened his payday lending storefronts even with interest capped under 500 percent–the large numbers of transactions would deliver a profit even at a smaller margin.  And a careful reading of the story suggests that the high interest rates reflect exploitation of circumstances, not pricing of risk.

All of this suggests that the market predictably moved capital to its most profitable–if not its most efficient–use.  The problem then is not a structural problem with capitalism, but mismanagement of the capitalist system that delivered–whether or not intentionally–an unsustainable outcome.  We need to decide whether to accept market-delivered results like this just for the sake of ideology, or to make an effort to regulate the system sensibly so that we achieve mutually agreed upon goals.

Placing limits on interest rates could bring its own unintended consequences, and it is easy to see that this would likely limit access to needed short-term or consumer loans to those who need it least.  But Americans may find that moving capital back into making stuff makes the economy stronger and more resilient–and less dependent on too-big-to-fail banks.

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Representative Bill Posey Needs a Clue

Taking calls on Washington Journal this morning, Congressman Bill Posey (R-FL15) attempted to argue that too much regulation caused the current economic crisis.  He cited the Community Reinvestment Act as an example, and agreed with a caller’s claim that the Act forced lenders to make $200,ooo loans to people making $30,000 a year.*

This Business Week article points out the silliness of this notion:

“…most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: ‘In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.’”

So besides the nonsense of blaming a 1977 law for a 2008 crisis, it was in fact government failure to supervise subprime lending that contributed to the problem, not an Act intended to force banks to lend back to members of the community the deposits they took in from the customers who lived there.

Republicans know they can get attention by saying stupid things–this is the foundation of Rush Limbaugh’s success.  But if they want to win back the confidence of Americans, they need to find talking points with some basis in reality.  Blaming this crisis on goverment regulation and poor people who could not repay loans won’t help solve the problem because this didn’t cause it: unregulated investment bankers who packaged these loans into new forms of gambling instruments that could not be accurately valued did.

*Video avaliable here.  Mr. Posey is first up.

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