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Monday, August 24, 2015

Reflections on the revolutions in America, and France

by John MacBeath Watkins




Reflections on the Revolution in France, published in 1790, is one of the core documents that defines conservatism. Edmund Burke wrote it in 1790 in response to the chaos he saw happening across the English Channel.

But why did he not write this sort of thing about the American Revolution, which had happened earlier?

One reason is that the American Revolution was a kinder, gentler, sort of war. In France, anti-clerical and anti-aristocracy feeling was part of the source of the problem. In America, there was no national established church, and no hereditary aristocracy.

In France, the clergy and the aristocrats had so many tax exemptions, most of the taxes fell on
Louis XVI:Hero of the American Revolution,
guillotined in the French Revolution
everyone else, the merchants, artisans, farmers, and laborers. This was a reflection of their power in the country. If you were rich enough, you could buy into this power by purchasing a title. The way this worked was, you bought a position in government that came with a title. The position could not be revoked, and the titles tended to become hereditary. Hard-up French monarchs tended to create such positions and sell them for a high price. As a result, it was the smaller merchants and the peasants and working class that paid the taxes, many of which went to the aristocracy.

And France was badly in debt, mostly because its kings liked to fight wars. The Seven Years War, known in the United States as the French and Indian War, dragged on from 1756 to 1763, and losing cost France many of its colonies, including Quebec. Louis XV did a lot of the damage, but when he was succeeded by his grandson, Louis XVI, the latter decided to get a bit of France's own back by helping deprive the Enlish of some of their New World possessions.

He backed the American Revolution. Without the rather expensive aid of the French Navy, there might not be a United States of America. It was the French fleet that prevented the British from relieving the troops commanded by Charles Cornwallis at the siege of Yorktown, resulting in his surrender.

But that aid to the colonies had to be paid for. One of the ideas that came to the French regime was a tax on salt. Everyone needs salt to survive, so it was in part a tax on being alive, sort of like a poll tax. But this was worse. The more you sweat, the more salt you need to keep moisture in your body. As a tax on sweat, it was a tax on labor: Those stuck with the hardest physical work would pay the most salt tax. The aristocrat sitting in the shade would pay less than those who labored in his fields.

The American revolution did not involve overthrowing the local power structure. Instead, it relieved them from outside influence.

This is the source of the notion of American exceptionalism. The idea, at least the way the phrase was first used, is that we never had a hereditary aristocracy to rebel against, so some of the more potent sources of working-class resentment that made Communism popular in Europe simply are not here. In fact, American Marxists coined the term in the 1930s to explain their lack of success.

The French Revolution was violent, and not particularly democratic. Their motto was liberté, égalité, fraternité. Démocratie wasn't a core value. Interestingly, the most famous liberal philosopher writing in French was a Swiss, Jean-Jacques Rousseau, who argued that even a dictator could represent the will of the people. A country the size of France, he said, should be ruled by an aristocracy. The word aristo is Greek, and means "best." So he wasn't arguing for a hereditary aristocracy, it could be the Committee for Public Safety, if they were the best.

And who would argue the question of whether they were the best with those who decided which heads rolled off the guillotine?

The French Revolution eventually produced the Emperor Napoleon Bonaparte. Now, one might think that an emperor would be regarded as an old-fashioned sort of ruler, but Napoleon had replaced the old power structure. Monarchs had relied on force, faith, and custom for their legitimacy. Napoleon had the force, but he was not a hereditary monarch, so he could not rely on custom, and he did not rely on the support of an established church.

For faith and custom, he substituted nationalism and victory in war. This is an unstable formula. Fist, you stir up the nationalism, and nothing does this better than a good, old-fashioned war. Then you have to win.

But if you fight for long enough, eventually you will lose, as Napoleon did at Waterloo. Nationalism is a dangerous tool for any regime, because the implicit bargain puts the ruler in a position that is difficult to maintain, the position of keeping the people stirred up against other countries but not being defeated and removed from office, either by popular revolt or by victorious enemies.

What made the French Revolution part of the enlightenment project was its reliance on reason to restructure society. The French foot, which was slightly longer than the English foot, found itself in the dustbin of history, replaced by the metric system. Celsius, a more rational system, replaced Fahrenheit This was a new world, replacing matters which had been adjudicated by custom with reasoned solutions.

Napoleon himself became a symbol of the Superman. In Crime and Punishment, Raskolnikov muses about his notion of the superman:


"...The real Master to whom all is permitted storms Toulon, makes a massacre in Paris, forgets an army in Egypt, wastes half a million men in the Moscow expedition and gets off with a jest at Vilna. And altars are set up to him after his death, and so all is permitted. No, such people it seems are not of flesh but of bronze!"

In the secular world, God is dead, Nietzsche would later tell us. This leaves a God-shaped hole in our heads, and who steps forward to claim the plinth on which he loomed over our minds?

The Superman, exemplified by Napoleon, steps up to the plinth. Hobbes, a dedicated materialist, had said that God had to be a material being, simply one of exceptional power. By the time Dostoevsky was writing, people were postulating men of exceptional power to whom ordinary rules did not apply, a sort of God-like man (and it always was a man.)

In a way, this might be seen as a return to the God-king, expected to deliver victory rather than rain for the crops.

And we see it still today, when we credit or blame the state of the economy on presidents. Jimmy Carter, for example, presided over some very good economic years in his term in office, but a recession at the end of his four years was one of the reasons for his narrow defeat.

The French went through a series of evolutions and finally settled on a democratic way of governance, but not without such experiments as the reign of Napoleon III. But the fact that the revolution itself had not been democratic was a warning sign. While the logic of liberalism leads to democracy, not all attempts to replace custom with reason in the ordering of society are democratic in nature.

Karl Marx, for example, tried to come up with a rational way to make society better. But most of the attempts to apply his ideas have been authoritarian. Marxism has replaced the role of faith in these societies, and combined with force to form the governing class. Those societies returned to faith and force as their formula for the legitimacy of their rulers substituting the Communist Party for the church. It is not an accident that in post-Soviet Russia, Vladimir Putin has come to rely upon the Russian Orthodox Church for support, and stir up nationalism to get the public to rally around him.

The Nazi movement made a cult out of race, claiming it was scientific. The doctrine of blood and soil (blut und boden) emphasized “blood” in the sense of descent (race), and romanticized nationalism and rural living. The link between race and territory was essential to the ideology. Because people were bonded together by race, the social contract Locke and Hobbes postulated was not needed. And because they preached biological determinism, there was no need for democracy. Certain people were born to lead (this was called the fuhrerprinzip, or leader principle) and the rest were born to follow. Fuhrerprinzip dictated that the fuhrer's word was above all written law, and a leader demanded absolute obedience to those below them. The supreme leader answered to God and the German people, the lesser leaders answered to those above them and demanded complete obedience from those below them.

Nazism was on odd hybrid. It had the trappings of science, but its biology was bogus, merely a disguise for old attitudes. Germany had pogroms in the 1500s and in the 1920s. The Holocaust could be seen as the culmination of attitudes that had been around for centuries, simply carried out on an industrial scale and by the government rather than by mobs. It's “scientific” racism was so lacking in any actual science that German authorities could not detect a number of Jews who went through the war with fake papers claiming they were of German descent. And in fact, by any rational standard, they were, since their ancestors had been living in Germany by that time for longer than there had been a German state.

Marxism began with the best of intentions, and spread tyranny and suffering from the purges of the Ukraine to the killing fields of Cambodia. Fascism exploited existing hatreds and a desire for order while adopting the trappings of science. Both demonstrated that attempts to remake society based on reason can be disastrous when reason starts with flawed premises.

Both ideologies lacked a notion of the social contract. For Marx, you were born into your class. For the Nazis, you were born into your race and class. The Nazis thought you should remain in your class, while the Marxist thought you should fight to abolish all but the working class. Neither ideology reasoned its way to a democratic form of government, because each was intent on defeating a demonized enemy, capitalists for Marxists and Jews and other “lesser” races for the Nazis. In war, command and control are far more important than discovering the desires of the people. Nations which adopted these ideologies were not democratic because they did not value democracy, and they did not value it because they had different ideas about the origins and purpose of society.


Friday, August 14, 2015

Used bookstore, threat or menace?

by Jamie Lutton

I found out that not every Chamber of Commerce in the Greater Seattle area like the idea of having a used bookstore in the their neighborhood.

I was discouraged directly via email by a member of the Chamber of Commerce of a that is community part of the greater Seattle a few days ago, as a follow up to an email inquiry I had made.

My company was considered too great a threat to the neighborhood's new book shop, and besides that I am an ''outsider' This is how it went: This Chamber of Commerce of this neighborhood was emailed by me asking if they thought that a used bookshop similar to the one I run and own on Capitol Hill would be welcome in their neighborhood. I was hoping for leads on buildings or landlords who would welcome a tenant like me. Also, wanted to be 'friendly' and get to meet the Chamber of Commerce. I got a swift reply back saying that the Counsel member had been in my bookstore.and that because they had a new bookstore, they did not need a used bookstore: here is the reply I got,verbatim with the names of the location and the agent redacted.

"I’m not sure how much you know about our local bookstore, but I would suggest you talk to (xxx) the current owners. You’ve probably met (xx) They know the business and the xxxx very well. While they don’t have a used book section, they do rare book searches for customers and have a very loyal client base for that service. XXXX is masterful at searching and tracking down books for people. 
As a resident, you’re aware of the on-going efforts to keep people shopping locally, i.e. X Books  has worked hard to promote that philosophy, establishing long-standing relationships with the schools, non-profit organizations and the residents. It has been very supportive of community and the community is very loyal to X Books."


So, basically.....go away. We don't want you here! you are not one of us. My business partner, John Watkins, helped draft a satirical response:
"Dear Xxx, 
Thank you for your response encouraging me to start a used bookstore in XXX. Yes, I have met X, and liked her a lot. I hope I can have as good a relationship with her as I do with other booksellers in the area. 
I'm encouraged to hear that X Books has a good relationship with the community, and hope to be at least as warmly welcomed by other as I have been by you. Chambers of Commerce typically do welcome new businesses, but I'm sure I'll have to win the loyalty of new customers by providing good service and filling needs not currently filled.
As an xxxx resident, of course I want to help people shop locally. That's why I'd like to start a store that, as you point out, is in a niche not currently filled. Thank you for confirming that Xbooks does not have a used book section. I'm sure customers will be delighted to be able to buy out of print books off the shelf rather than waiting for them to be ordered, which, as you have pointed out, they must now do.
You said the community is very loyal to xxxx books. That seems to imply that I should locate my store close to it. This is the sort of valuable advice I came to the chamber to seek. The suggestion is welcome.

Thanks,Jamie"


This is what I got back:

"Jamie,
                I’m afraid you may have misunderstood my note.  I was neither encouraging or discouraging you from starting a bookstore on the Island.   That is a decision you must make.  I was also remiss in not including information about sources of used books on the Island.  I was thinking in terms of X Books, but after I sent you the note I remembered that the (name of the local thrift shop) sells used books and a great many of them.   They even sell them on E-Bay.   Additionally, the Friends of the Library has quarterly sales of used books and raises  quite a bit of money at those sales.    I’m not sure how large the niche for used books is on the Island but there are already two well established sources for them and sales from both sources benefit Island non-profit organizations.   
                  I apologize for any misunderstanding.
Xxx"

So, I note again that she came into the Capitol Hill Twice Sold Tales and met me, looked around.

I jokingly surmised Xxx must have though I was a "lesbian, anarchist or a socialist" something
threatening to xxxx middle class values, and both prospects xxx felt were a menace to her neighborhood.

Tuesday, August 4, 2015

Polygamy, gay marriage, and the liberal mindset

by John MacBeath Watkins

For a lesson in traditional marriage, we should, I suppose, look to the Bible.

King Solomon is said to have had 300 wives. I have, in a previous post, pledge to settle down and get married as soon as I find the right 300 women to allow me to marry in the traditional style (that is, always outnumbered, always outgunned,.)

But although the Bible is replete with references to polygamous marriage, modern Americans are more comfortable with the notion of gay marriage, which is mentioned nowhere I know of in the Bible.

There are practical reasons for this. Conservatives fighting against gay marriage found it difficult to find proof that children raised in such households are harmed by this. Opponents of polygamy seem to suffer from no such difficulty. Communities that practice polygamy have been accused of forcing under-aged girls into marriage with older men, exploiting children and having them do unsafe work, being abusive to children, and kicking teenage boys out of the community when they start showing an interest in girls so that the girls will be available to older men. The boys are shunned by their families and forced to live in a world they know almost nothing about outside the community.

But I don't think such practical matters are really the key to why polygamy is less acceptable than gay marriage.to the modern Western mind.

The key is a revolution in how we think of people, codified by the philosophers of the Enlightenment, and especially the thinkers of liberalism.

Thomas Hobbes laid out a new system of value in Leviathan, published in the mid-17th century. He said that " The ‘value,’ or ‘worth,’ of a man is, as of all other things, his price; that is to say, so much as would be given for the use of his power; and therefore is not absolute, but a thing dependent on the need and judgment of another."

That sounds horribly philistine, but what was revolutionary was the last clause in that complicated sentence, in which he proposed a subjective system of value. We were now to be valued by each other, not by the priest or by the position of our birth.

John Locke, writing at the end of the 17th century, noticed that not only did we value each other, our relationships were often subject to the rules of property. The master of a household had something like a property right to those within it under the law of his time.

A married woman, for example, was regarded as a "feme covert," that is, she became, for property purposes, one with her husband, and subordinate to him. (A widow would be a "feme sole," in charge of herself.) If a woman at that time (and in fact until the late 19th century) in England held, for example, a copyright, it passed to her husband when she married and would not be returned to her if she divorced. In fact, all of the household's property remained with the husband, and a divorced woman would usually be impoverished unless a very good prenuptial agreement were negotiated.

Property was also connected intimately with the notion of citizenship. To vote in England at the time, you had to own property.

Locke's Second Treatise of Government contained a ticking time bomb. He proposed that we all own property in our own person, and cannot alienate -- that is sell -- that particular property. Every person, therefore, had inalienable property rights to themselves, that is, we are each of us our own master.

All that remained was to decide who was a person. A dawning realization that slaves are people meant that they must logically be their own masters, and slavery must be immoral. The Women's Rights movement brought about property rights for married women before it brought them the vote. The Married Women's Property Acts were not completed in England until 1882, though earlier acts had set the pattern.

But polygamous marriages worked, to the extent they did, because women and children were regarded as property of the master of the household. If wives are recognized as their own "master," this relationship no longer exists.

The term "feme covert" seems at first glance to have promise. One pictures a Thurber cartoon, with the wife in ninja clothing and the ineffectual husband looking on, the caption reading, "When you married me I was a blushing maid, but now I am a feme covert, Mr. Johnson!"

One of Thurber's main themes was "the war between men and women," which he seems to have lost to his domineering first wife. But by then, the feme covert was a thing of the past, community property was the future.

We still see conflict over the nature of marriage. Traditionalists still advocate "traditional marriage,"
sometimes even polygamous marriage. What they mean by this is a return to the concept of the feme covert, subordinate to her master. It is no coincidence that the same people often worry about keeping control of their children, worried that exposing them to public schools would cause them to learn things they shouldn't know, like evolution, and expose them to a system of values that would be distressingly modern. This could give them dangerous ideas of autonomy.

Birth control has meant that marriage doesn't have to be about child rearing, and many of the tasks of the household that used to consume a great deal of women's time, like spinning and weaving and sewing clothing, have been moved outside the home. Marriage is less about property and child rearing than it has ever been before, and more about love, and a partnership between equals.

As people are recognized as equals, old barriers have fallen. Miscegenation laws fell because, if African Americans are not a lesser race, why should they not marry whites? As the humanity of homosexuals has been recognized by society at large, the question comes up, why should they not marry who they love?

What was once common knowledge, that the master of the household is the master of all within it, has fallen before the revolutionary idea that we are all our own masters. Few people have read Hobbes or Locke, but their ideas permeate our society and are still reshaping it. Ideas travel though a society less by formal indoctrination than by a sort of mimetic contagion. It is :"common knowledge" now that we are our own men and women, when in an earlier age, it was common knowledge that this was not the case.


Wednesday, July 22, 2015

The intersection of virtue and power, and the justifications of policies related to race.

by John MacBeath Watkins

For much of human history, we have been ruled by faith and force. It's easy to understand why force -- the king with his troops -- can rule, but why is faith so important?

Faith is about how we should live. And one of the functions of those who are in charge of faith is to decide who is virtuous, and what actions are virtuous. That is a powerful thing: It means those who interpret virtue can say who is acting rightly, and who is not.

We like to believe we live in a just world, in which virtue is rewarded and vice punished. In a way, the arbiters of what is virtuous are there to reassure us that the world is unfolding as it should. But they are also meant to be a check on those who cheat.

It is therefore in the interest of those who succeed to influence the perception of virtue so that their gains are not regarded as ill-gotten. Kings would rather you believe they ruled by divine right -- the will of God -- than that they simply control a lot of soldiers. The rich of the Gilded Age liked to believe they were the product of social Darwinism, that their wealth was a sign that they were fitter than the poor, just as our modern-day rich like Objectivism, Ayn Rand's reboot of social Darwinism without the bogus biology.

Rand is an interesting case in the study of virtue. She did, after all, write the book on The Virtue of Selfishness. Rand admired the psychopathic killer Edward Wayne Hickman, because of his selfishness and unwillingness to be bound by social conventions such as not killing people.

Her ideas matured, of course. From the Ayn Rand website (original appearance was in an appendix to Atlas Shrugged:):
Man—every man—is an end in himself, not a means to the ends of others; he must live for his own sake, neither sacrificing himself to others nor sacrificing others to himself; he must work for his rational self-interest, with the achievement of his own happiness as the highest moral purpose of his life. Thus Objectivism rejects any form of altruism—the claim that morality consists in living for others or for society.
This is a nice philosophy for making a virtue of not helping others, which is fine if you have a nice life and don't wish to be bothered about those less fortunate. This is true not just between rich and poor, but between those advantaged by their race and those disadvantaged by it.

In reality, Rand's notions about morality make no sense in terms of the way people live their lives. Most parents would sacrifice a great deal for the sake of their children, a characteristic that is hardly unique to humans.

Rand's is a philosophy compatible with narcissism and psychopathy, and has no room for idealism, patriotism, or noble self-sacrifice of any sort. It does, however, fit perfectly with the age of the corporation as it now exists.

There was a time when corporations were managed as if they were a person, with shareholders, bondholders, customers and employees all considered as stakeholders. The switch to managing for shareholder value, which started in the 1970s, has remade corporations into a different kind of organization, closer to the Ayn Rand ideal of the selfish individual. And this new version of the right actions for a corporation appear to have seeped into the rest of the culture, with some surprising groups adopting its justifications and notions of what are right actions.

The rise of a libertarian right has given us an entire political movement built around this rather strange notion of virtue. This movement is the strange bedfellow of Christian conservatives who believe Christ dying for their sins is the essence of morality and paleoconservatives who believe in patriotism and the nobility of going to war and becoming a hero.

Our political divisions are as much moral as anything else, but there are deeper and darker emotions at work. To some extent, the morality of libertarians, Christian conservatives, and paleoconservatives are a sham and a justification for things less obviously related to virtue.

When Barry Goldwater, in his 1964 run for the presidency on the Republican ticket, opposed the Civil Rights Act on libertarian grounds, he did something a large part of the country wanted, regardless of how it was justified: He took a stand against civil rights. Strom Thurmond, who ran for president in 1948 on the States Rights Democratic Party ticket, preaching segregation and taking 39 electoral college votes, became a Republican.

Richard Nixon, sometimes called "the last liberal" for his actual policies, pursued a Southern strategy for election, and continued a transition that made the Republican Party the party of the South.

Now, it's easy to see how paleoconservatives would be attracted to a party that opposed the Civil Rights Act (many northern Republicans had voted for it, but having Goldwater at the top of the ticket opposing it changed how the party was perceived.) But why would Christian Conservatives be attracted to such a party?

Well, one thing that happened after the Civil Rights Act passed was integration of public schools. And white parents who didn't want their kids in schools with blacks started sending them to a new crop of private schools, colloquially known as "white academies." And many of those were associated with white Evangelical churches. When the nonprofit status of those schools was threatened by a crackdown on those that existed entirely to segregate, those churches became interested in politics, and in limited government.

The libertarian/small government justification for fighting federal efforts to desegregate and put an end to Jim Crow was also attractive to rich people who wanted to pay lower taxes. It was easy enough to demonize government spending if such spending was thought to help Those People, and another group fastened onto the libertarian justification machine like remora on a shark.

Because this is what happens when virtue bestows power. You have to put forward a moral justification for your political movement, and "government is the problem, not the solution" sounded so much better than the 19th century justifications that were no longer acceptable.

Alexander Stephens
Consider an excerpt from the "cornerstone speech" of Alexander Stephens, vice president of the Confederate States of America, in 1861:
 The prevailing ideas entertained by him (Thomas Jefferson) and most of the leading statesmen at the time of the formation of the old constitution, were that the enslavement of the African was in violation of the laws of nature; that it was wrong in principle, socially, morally, and politically. It was an evil they knew not well how to deal with, but the general opinion of the men of that day was that, somehow or other in the order of Providence, the institution would be evanescent and pass away. This idea, though not incorporated in the constitution, was the prevailing idea at that time. The constitution, it is true, secured every essential guarantee to the institution while it should last, and hence no argument can be justly urged against the constitutional guarantees thus secured, because of the common sentiment of the day. Those ideas, however, were fundamentally wrong. They rested upon the assumption of the equality of races. This was an error. It was a sandy foundation, and the government built upon it fell when the "storm came and the wind blew." 
Our new government is founded upon exactly the opposite idea; its foundations are laid, its corner- stone rests upon the great truth, that the negro is not equal to the white man; that slavery -- subordination to the superior race -- is his natural and normal condition. [Applause.] This, our new government, is the first, in the history of the world, based upon this great physical, philosophical, and moral truth. This truth has been slow in the process of its development, like all other truths in the various departments of science. It has been so even amongst us. Many who hear me, perhaps, can recollect well, that this truth was not generally admitted, even within their day. The errors of the past generation still clung to many as late as twenty years ago. Those at the North, who still cling to these errors, with a zeal above knowledge, we justly denominate fanatics. All fanaticism springs from an aberration of the mind -- from a defect in reasoning. It is a species of insanity. One of the most striking characteristics of insanity, in many instances, is forming correct conclusions from fancied or erroneous premises; so with the anti-slavery fanatics; their conclusions are right if their premises were. They assume that the negro is equal, and hence conclude that he is entitled to equal privileges and rights with the white man. If their premises were correct, their conclusions would be logical and just -- but their premise being wrong, their whole argument fails. I recollect once of having heard a gentleman from one of the northern States, of great power and ability, announce in the House of Representatives, with imposing effect, that we of the South would be compelled, ultimately, to yield upon this subject of slavery, that it was as impossible to war successfully against a principle in politics, as it was in physics or mechanics. That the principle would ultimately prevail.
History can change suddenly, but culture changes slowly. Beliefs such as Stephens voiced did not die with him, they live on, and are part of what many people think of as "right." Those people are now aware that their language and justifications have to change, even as their attitudes remain the same.
Lee Atwater, a Republican political strategist who worked for Ronald Reagan, put it this way in 1981:You start out in 1954 by saying, “Nigger, nigger, nigger.” By 1968 you can’t say “nigger”—that hurts you, backfires. So you say stuff like, uh, forced busing, states’ rights, and all that stuff, and you’re getting so abstract. Now, you’re talking about cutting taxes, and all these things you’re talking about are totally economic things and a byproduct of them is, blacks get hurt worse than whites.… “We want to cut this,” is much more abstract than even the busing thing, uh, and a hell of a lot more abstract than “Nigger, nigger.”
The conversation changes, new arguments about what is right action, but the old motivation are behind the new justifications. This is the corruption of virtue in the pursuit of power: People who cannot any longer justify the policies they want in honest terms find dishonest ones to make their intentions seem virtuous. One might call it policy laundering; a policy that can no longer be justified by its original moral logic seeks new moral logic to make it seem acceptable.

This is a mask of virtue on the face of an ancient evil, an effort to make a carnival of matters of conscience. But in the end, can they war successfully against a principle of politics? Can the notion that some people aren't worth as much as others because of some feature they cannot control, such as the color of their skin, triumph over the principle that "all men are created equal"?

"The arc of the moral universe is long but it bends toward justice."-- Martin Luther King, Jr.


Friday, July 10, 2015

Grexit, the Sinking Fund Act of 1790, and the unraveling of the European project

by John MacBeath Watkins

A friend from New South Wales asks, if Europe can't resolve the debt crisis on its periphery by means of the sort of fiscal union that would have a central authority bail out banks, why can the U.S. do so?

I've been following the Grexit controversy (potential Greek exit from the Euro zone) with interest, since it has the potential to disrupt one of the great internationalist projects of the last century, the European Union. I think I have the answer to my friend's question.

First, Americans identified with each other culturally much more than Europeans do. Second, we've had real fiscal union since 1790, thanks to the genius of Alexander Hamilton.

After the Revolutionary War, the original 13 colonies had quite a lot of debt, much of it owed to foreign banks and investors (primarily in the Netherlands.) Many were in a poor position to pay back the loans, and there was talk of default.

Hamilton pushed through the Sinking Fund Act of 1790, which was somewhat misnamed for political reasons. It didn't really pay down the debt so much as fund it, so it could be turned over periodically and become the basis for a market in securities that would help provide the financing to develop industry in the new nation.

But equally important was its political role. Hamilton saw that if the federal government took over the war debts and financed them through taxes, the states would be dependent on the federal government and the federal taxing authority to pay off their debts. This cemented the nation into one political and financial unit.

Not that this happened without difficulties or entirely peacefully. George Washington led a militia to put down the Whiskey Rebellion (1791-1794,) an insurrection against federal taxes on corn whiskey. This happened while George Washington was president, and he became the only sitting president to lead troops in the field while suppressing it.

Jared Bernstein writes that a German economist asked him,  “How do you think the people of Manhattan would like bailing out Texas?” And Paul Krugman points out that it did, big time, during the Savings and Loan crisis.

As it happens, I was there, as the business reporter for the Odessa American, a daily in West Texas. Bankers were getting convicted of crimes and sentenced to brief incarceration at hard summer camp in low-security prisons, the Resolution Trust Corporation was shutting down S&Ls and the federal government was guaranteeing the deposits, and we never heard a peep out of those parts of the country that contributed money to resolve the situation.

Krugman points out that the resolution of this crisis cost about $125 million "back when that was real money," and about $75 million went to Texas. It didn't go in the form of loans, it went in the form of outright transfers from areas like Manhattan that weren't having a banking crisis.

If the powers that be in Europe wanted a United States of Europe, they would act as Hamilton and Washington did to make sure the debts of the weaker states got paid off by a central authority. But they didn't, and they can't, because Europe is not about to become a United States of Europe. German voters won't stand for bailing out Greece, there is no central taxing authority and is not likely to be one, and a central European authority invading an area that rebelled against a centralized taxing authority is unthinkable.

All of which is why the Euro was a bad idea to start with. There are those in Europe who think that forcing Greece to exit the Euro will make the rest of the Euro area stronger, but actually, it demonstrates why the Euro can't work, and why the project to make a United States of Europe is a doomed enterprise.

America works as a currency area, in part, because large and ongoing transfers of wealth happen between productive states like Massachusetts and New York on the one hand, and low productivity states like Mississippi and Arkansas on the other.

Those wealth transfers go on year after year, in the form of welfare spending, federal unemployment insurance, social security, disability benefits, and other programs. Most of this is so invisible to recipients that they vote for people who want to cut the federal budget.

It's taken a long time for us to evolve our financial system, and there have been some pretty rough patches along the way. Andrew Jackson, one of our worst presidents, refused to renew the charter for the Bank of the United States, leaving the country without a central bank from 1836 to 1913. Between the end of bank's charter and the beginning of the Civil War, state banks were issuing currency, and how much it was worth depended, among other things, on how close you were to the issuing bank. Repeated financial crises between the 1870s and 1913 convinced the powers that be that we needed a central bank. We didn't get centralized deposit insurance until the bank failures of the 1930s demonstrated how badly that was needed.

But at least we had the basic ingredients for a proper currency union, even when we didn't have a workable currency system thanks to Old Hickory. And the basic principle that we were a nation was settled between 1790 and 1794, with the Sinking Fund Act and the suppression of the Whiskey Rebellion.

Europe is currently demonstrating that they do not have the unity the Sinking Fund Act of 1790 represented. Any attempt to set up such a mechanism would probably produce the European equivalent of the Whiskey Rebellion, and there is zero chance that Europe would put up with the military suppression of such a reaction.

Try to imagine German troops marching into Belgium to suppress a tax revolt. It would be déjà vu, and not in a good way. I feel confident that the German people would stand with the Belgians against such an action..

Perhaps there was a gentler path to a fiscal union, one in which the burden was shared without a central authority. For example, the banks that owned most of the Greek debt were Greek, German, French, and Italian. Each country could have bailed out its own banks. Instead, the troika (the European Central Bank, European Commission, and the International Monetary Fund) chose to paper over the issue, pretending that Greece suffered not from insolvency but from a liquidity problem. Some private lenders took a bit of a haircut, then the private debt got converted into ECB and IMF debt. In the end, Greece is on the hook to pay back all the debt, rather than having defaulted, as logic said they should, and having each country bail out its own banks.

We know that Angela Merkel has been saying privately since at least 2011 that the Greek debt was unsustainable, that they would, in the end, default. And yet the policy of the German government was and still is that Greece must pay back every penny with interest. This means that the German government has been pursuing a policy that they knew wouldn't work, so there must be some sort of hidden agenda served by this hypocrisy.

That agenda could be as simple as an unwillingness to face German voters with inconvenient and unpopular truths. The longer Merkel continues to fail to tell the German people the truth, that the Greek crisis will not be resolved by making them pay back every penny, the harder it becomes for her to tell them.

Or it could be that there is some other goal. Yanis Varoufakis, who until recently was the Greek finance minister in charge of negotiating a resolution to the crisis, recently wrote an op-ed piece in The Guardian claiming that Germany wants to scare the bejesus out of France.

"Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone," he wrote.

No doubt there is more than one reason for the policy of the German and other governments on the Greek debt crisis. Whatever the reasons are, they seem impervious to evidence. Had the initial bailout worked as the troika said it would, the crisis would be over. Here's a chart from Paul Krugman's blog showing the difference between the IMF's economic projections for Greece and what actually happened:

It's pretty obvious that if the Greek economy were the size the IMF said it would be at this point, they would have far less trouble paying back the debt. But after five years of failure, the troika offers nothing but more of the same policies.

These policies have resulted in the Greek economy shrinking more quickly than the debt is paid back. More of the same can be expected to have more of the same result, which means that the Greek ability to pay back the debt is undermined to the extent that the whole exercise is futile. It also means that since the denominator in the debt/GDP ratio is sinking, a Greek government that started with a debt of 100% of GDP now has a debt of about 170% of GDP, despite paying back billions of dollars.

It's not like the Germans should be unfamiliar with how this works. Debt forgiveness and the Marshall Plan following World War II rebuilt the German economy.

This is covered in a paper by London School of Economics Professor of Economic History Albrecht Ritschl

http://www.lse.ac.uk/researchAndExpertise/researchImpact/PDFs/germany-hypocrisy-eurozone-debt-crisis.pdf
"In a telling comparison Ritschl showed that the debts racked up by the struggling Eurozone economies – Portugal, Italy, Ireland, Greece and Spain – were equal in size to Germany’s current gross domestic product. In other words, debt cancellation for the Eurozone would be equivalent to the debts that were cancelled by the Allies after World War II. "
In addition, the Marshall Plan injected $17 billion -- equivalent to roughly $160 billion in today's money -- to rebuild the country we had spend so much money reducing to rubble.

The debt cancellation, by the way, was supposed to be temporary -- only until Germany was unified. But Germany was unified in 1990, and Germany has still not been required to repay the debt.

Having itself relied upon the kindness of foreigners, Germany seems disinclined to pay it forward, and make no mistake, Germany is the driving force in negotiation over the Greek debt.

 I can only think that Germany is disenchanted with the European project, and has no wish for a stronger union. It seems they wish to make Greece an example, but what will Greece be an example of?

I think they will be an example of the fact that Europe, despite all the years of the European Union, does not wish to be a true union. Grexit is the beginning of a great unraveling of the dreams of the European elites.


Wednesday, July 8, 2015

A 21' catboat for public sail

by John MacBeath Watkins

During the Seattle Wooden Boat Festival last weekend, I learned that the era of using sharpies to do the free public sails at the Center for Wooden Boats may be coming to an end. We may get another Bristol Bay gillnetter, or find some other solution.

I propose a solution that has more to do with the history of the Center for Wooden Boats and the Northwest lumber industry than with traditional Northwest types.

The Center for Wooden Boats started out as a sort of summer job for Dick and Coleen Wagner, operating boat livery out of their houseboat on north Lake Union. The difference from most such operations is that they didn't choose some low-maintenance rubber ducky, they chose to open a livery featuring traditional wooden boats, especially Beetle Cats.

The boats attracted a following of people who didn't just want to rent a boat, they wanted to have classes on building boats. They wanted to preserve, not just the objects, but the skills associated with wooden boats. And they loved the fact that they could sail types of boats they would normally only see in books.

Well, it followed that the boat livery became, instead, a museum where you could sail the exhibits. And one of the outreaches that recruits people to volunteer and take classes is the free public sail offered every Sunday. It is, as someone told me over the weekend, the wide end of the funnel.

For most of its history, the public sail has relied upon a New Haven sharpie, the Betsy D, and an Egret replica, the Coleen Wagner. We also had a Bristol Bay sailing gillnetter, but for the first few years almost no one would sail it. I convinced Greg Reed, then the livery manager for CWB, to find enough ballast to make the stern sit lower than the bow, and the boat was transformed. It is now quite popular among the skippers for public sail, though still not terribly maneuverable.

We've had two other boats that have been successful in public sail, our Woods Hole spritsail boats, 13 1/2-foot catboats based on the 19th century lobster boats from Woods Hole, Mass.

Now, one of the major aspects of the lumber industry in the Northwest is the plywood mills. Some were co-op mills owned by the workers, most were owned by the big lumber companies. One of the things they did was launch a campaign to promote the use of plywood in boat building, spawning the great age of home-built boats in the 1950s. The Thunderbird class was the product of a contest for a plywood boat design sponsored by the plywood industry. Too few of the boats at CWB reflect this important age of wooden boating.

I propose a plywood catboat for public sail, and I think it would be easy enough to sail for CWB to use in our sailing instruction program and even the sailboat livery.

The boat would be laid out like a Woods Hole boat, with a large cockpit surrounded by a tall coaming only inches inside the deck.

It would have a deep, narrow centerboard, more efficient than the old fashioned pie-slice shaped boards. It would have a short, steep skeg instead of the traditional long skeg so that it would be more maneuverable than most catboats.

The boat would be about 21 feet long and about ten feet wide. It would have plenty of initial stability, which should enable it to get a good rating for carrying capacity from the Coast Guard.

It would carry the traditional catboat rig, with a low center of effort. I figure it should be fine with about 300 square feet of sail and about 500 lb. of ballast so the boat doesn't get squirrely when sailed light.

The plan is to build it in stitch and glue with 3/8 inch plywood, glassed for abrasion protection. The boat will probably weigh about 1,000 lb. without the ballast, and it's designed for a displacement of 2,900 lb., so with the weight of the boat and the ballast at 1.500 lb., that leaves about 1,400 lb. for payload. That's about eight people, or one crew and seven passengers.

The panels develop very well, and all are well under 24 ft. long and less than 4 ft. wide, which fits well with the dimensions of the plywood. There's actually less stress in the panel with the catboat bow than in the bilge panel.


The chine enters the water forward at about the same distance from the centerline as it leaves the centerline aft, so weather helm, always a problem with catboats, should be under control.

The underbody will look more modern than the topsides, so the boat should surprise some people with its performance.


I believe such a boat would offer low first cost, low maintenance costs, usefulness in at least three of the Center's programs, and deliver a good experience to those who sail it.

Dimensions are:  21' 10 inches, by 10 ft., draft of the hull about 10 inches, draft of the skeg and rudder 1' 6", displacement 2,900 lb.

Tuesday, June 23, 2015

Design exercize: Peaches, an 11 foot catboat

by John MacBeath Watkins


The idea here is to design an easy to build catboat that will also be inexpensive. The sail is a Laser practice sail, which saves at least $300 over a similar sized sail. This means keeping the waterline narrow enough for the boat to be pushed by 7 square meters of sail. We don't want the crew to have to hike too hard, so I've given it plenty of flare above the waterline to put the skipper's weight out there without too much stress on the stomach muscles.


The boat is stitch and glue, with two panels a side, and I've managed to get the panels to develop with fairly low stress. In fact, there's less stress in the panel that forms the bottom and the catboat bow than there is in the side panels. Still, you'd best build with 4 mm okume plywood, which is light, fairly flexible, and comes from sustainable plantations. One problem is that the boat is too wide to fit into my 1997 Nissan's bed, so I'd have to cartop it. All-up weight is going to be around 100 lb., and you only have to lift one end at a time, so that shouldn't be too bad. Cost of construction with the sail should be less than $1,000.

Now, I just need free time (I work six days a week), a space to build it, and a bit of cash to make the thing...well, they say man's reach should exceed his grasp, else what's a metaphor?

Update: On the advice of Tom Price, I've raised the freeboard, and I think that makes the boat better:



Tuesday, June 16, 2015

The charity of crows

by John MacBeath Watkins

My good friend John McCartney had an elderly cat who could eat only the softest of soft cat food, and didn't finish what he was served, so John would put the rest outside to be eaten by crows.

The crows were appreciative. John would put the bowl out, light a cigarette, and contemplate the crows at their dinner, a very soothing activity.

Then, the cat died. He achieved great age for a cat, and had a good life, so it was a fond farewell. It was the crows who really suffered, because there were no longer cat food leftovers to feed them. But crows adapt and survive, and they found food.

But they never forgot John's kindness to them, and still tended to hang around when he went out for a smoke.

One day, a crow walked up to him holding a worm in its mouth, and dropped it at his feet.

Now, there are different ways to interpret this. Perhaps the crow meant, "See? Food. Remember food? Why are't you feeding us?"

But I prefer a more anthropomorphic explanation. I prefer to think the crow was, in effect, saying:

"You know, we remember how generous you were to us when you had lots of food. We realize that you've fallen on hard times and no longer have dishes of extra meat to share, and well, me and the flock, we had a bit of a whip-'round, and, well, long story short -- here's a worm."

It's a bit like the story of the ravens feeding the prophet Elijah.
1 Kings, 17:6
And the ravens brought him bread and flesh in the morning, and bread and flesh in the evening; and he drank of the brook.
But was it the flesh of worms?



Monday, May 18, 2015

A design to make sailing more popular

by John MacBeath Watkins

I've been thinking about what would be needed to make sailing more popular, and I think one problem is the perception of it being expensive. What we need is a design that can be built for less than $1,500 including the rig with a professionally made sail.

It should have good performance, or at least the feel of good performance. It should be self-draining in case of a capsize. And it should have a big, friendly cockpit for when people want to sail with friends.

My approach would be to design it around the Laser practice sail, which costs around $150, about a third of what a sail this size normally costs. The boat would be stitch and glue, so it could be built quickly with a minimum of tools and skill. The panels should require no more than one scarf, which means the boat will be around 15 ft. I'd give it a full-length cockpit with a deck sloped to encourage water to leave through the stern.

Here's what I'm got so far:



The main deck follows the line of the upper chine. At the top of the gunwales, there would be a narrow deck to make the boat more comfortable to hike on.

Here's what the lines would look like, nice and simple so the water doesn't get confused:


With semi-skilled volunteer labor and somebody's garage, it should be possible to build four or five of these for the price of a new Laser. They wouldn't be quite as fast as a Laser, but they'd be as fast as each other.

Dimensions:

LOA  15'
Beam  4'9"
waterline beam at max load 3'3"
Displacement at which stem and transom touch the waterline: 490

I've rethought the rudder since I made the first illustration, substituting a lower-aspect version with more area, so that it will really crank the stern around when put over with authority. Built in 1/4 inch plywood, the boat should be able to carry four pre-teens, three slender teens, a trim couple, or one big galoot. The idea is a boat that could be built for about 1,200 in materials, including a professionally made sail, so that a yacht club, scout troop, or non-profit, could build about four boats for the cost of one new Laser. It won't be quite as fact as the Laser, but should keep the crew drier and allow for a more social sailing experience.


Wednesday, May 6, 2015

Ending the culture of police impunity: A modest proposal

by John MacBeath Watkins

Police have got to lose their feeling that they can hurt people with impunity, and the way to do that is to change how they are paid.

Any time armed men think they can break the law with impunity, they are a threat to civilization. It's my belief that a small number of police are resulting in huge settlements for their employers, and police departments are remarkably inept at rooting them out.

The city of Chicago has agreed to pay out $5.5 million because a group of police allegedly routinely tortured prisoners -- mainly poor black ones -- in the 1970s and '80s. The city of Baltimore has paid out even more over the last few years for police brutality settlements. We need to give police incentives that will change their behavior.

The police unions do their best to make sure the officers involved in most cases of police brutality, even those that prove expensive for the cities that employ them, are not fired. Police officers often try to cover up the behavior of their fellow cops.

We need to change the incentives. The Chicago police department's alleged torture happened between 1972 and 1991. It could not happen for nearly two decades without the knowledge police outside of the "midnight crew" said to have done this.

Cops cover for each other. We know this. In the Tamir Rice case, two cops were in the car that responded to the call, one of them shot almost immediately, and before they found out there was video of the incident, they told a story about the incident that did not match the vid that finally surfaced.

Now a prosecutor who works closely with the police must decide whether one of the cops committed a crime in shooting Rice, and whether the other committed a crime covering for him. The prosecutor has got to feel conflicted.

On the whole, things are stacked in favor of the cops in these events, which is why the midnight crew got away with torture for nearly two decades. The ubiquity of cell phone videos has revealed much about how police behave that we would not have known in the past. What should we do about it?

Punishment is one option, and when police commit crimes, they should be subject to the law like anyone else. But until we can make real changes in police culture, we're not going to fix the problem.

I suggest an incentive system that would change the way police behave. Establish a compensation fund, and what doesn't get paid out in settlements for police brutality can be released as a stipend to police. Anyone whose behavior causes a settlement or who covers up behavior that causes a settlement loses the stipend. The amount of everyone's stipend is reduced when the fund is run down by a settlement.

I think cops know who the bad apples are. There are social pressures to cover for them, an us-against-them attitude to all non-police, in most departments. Police unions have no incentive to try to weed them out, because they have no skin in the game when it comes to settlements. Their members misbehave, someone else pays. In the future, police contracts need to give the cops and their union some skin in the game.

Once, I interviewed a Native man who had been a bonded deputy of Island County. He put up a bond, I don't recall how large, and he'd lose it if he did something that resulted in the county having to pay out because of his behavior. I don't know what happened to this custom, but it seems to me that it was a good one.

One consequence of the ubiquity of video is that more cases are going to go against the police, and cities are going to have to pay out more money. It is quite reasonable to make police pay depend, in part, on whether they break the law and on whether they behave in ways that are expensive for their employers.


Thursday, April 30, 2015

On the political movement to create inequality: How an alliance based on money, race, and religion wrecked the middle class

by John MacBeath Watkins

By now, I suppose we've all seen the graph that demonstrates the decoupling of productivity and median income growth:

http://en.wikipedia.org/wiki/Middle-class_squeeze

It looks even worse expressed as hourly wage growth:

http://www.epi.org/publication/ib330-productivity-vs-compensation/

And now, that pinko rag The Wall Street Journal has an article showing that by some standards, wages peaked in 1972: http://blogs.wsj.com/economics/2015/04/17/by-one-measure-wages-for-most-u-s-workers-peaked-in-1972/

Several things had to happen to make things turn out this way. I think the best way to understand it is as a political movement in which the well-off waged a war of words, money, and organization to wrest control of public discourse and political power from working people. One of the first shots in this war was the Powell Memo, a document the United States Chamber of Commerce solicited in 1971 from Lewis Powell, a corporate lawyer who would eventually be appointed to the Supreme Court.

Powell responded with a memo that told businesses that they were losing to the left, and needed to build institution that would push for their interests. Looking at the charts above, it would appear that they were not losing -- wages were growing no faster than productivity, allowing business to make a decent profit. But this was a time when the New Left had not yet fallen by the wayside.

The full text of the Powell memo is here.

Powell told his readers that they were under attack, and were unable to exercise power in the political arena.

He wrote:
...as every business executive knows, few elements of American society today have as little influence in government as the American businessman, the corporation, or even the millions of corporate stockholders. If one doubts this, let him undertake the role of “lobbyist” for the business point of view before Congressional committees. The same situation obtains in the legislative halls of most states and major cities. One does not exaggerate to say that, in terms of political influence with respect to the course of legislation and government action, the American business executive is truly the “forgotten man.”

Current examples of the impotency of business, and of the near-contempt with which businessmen’s views are held, are the stampedes by politicians to support almost any legislation related to “consumerism” or to the “environment.”
 Powell wrote that they could gain power through the courts, through persuasion of the public with television and radio, through rewarding a "faculty of scholars" to publish work in support of their views, and through direct political lobbying:
Business must learn the lesson, long ago learned by labor and other self-interest groups. This is the lesson that political power is necessary; that such power must be assidously (sic) cultivated; and that when necessary, it must be used aggressively and with determination — without embarrassment and without the reluctance which has been so characteristic of American business.
 He also suggested that shareholder could use their power to sway politicians:
The question which merits the most thorough examination is how can the weight and influence of stockholders — 20 million voters — be mobilized to support (i) an educational program and (ii) a political action program.

Individual corporations are now required to make numerous reports to shareholders. Many corporations also have expensive “news” magazines which go to employees and stockholders. These opportunities to communicate can be used far more effectively as educational media.
A large part of what he proposed was propaganda. Whether because of his memo or because they were going to anyway, business interests have founded think tanks like The Heritage Foundation and helped publicize the work of people like Arthur Laffer, built funding mechanisms for political campaigns and supported model legislation by ALEC (the American Legislative Exchange Council) for state legislators to introduce in support of business aims.

But the business aims supported here are not those of the people working in non-supervisory jobs at businesses. In fact, those are defined as the enemy pretty much explicitly in Powell's memo. That's Labor, union bosses and strikers and malcontents all.

In fact, the aims supported by this political movement are those of top-level management and owners of large blocks of stock. They are the aims of the people Christopher Lasch was referring to in his 1996 book, The Revolt of the Elites and the Betrayal of Democracy.

From that book:
Today it is the elites, however - those who control the international flow of money and information, preside over philanthropic foundations and institutions of higher learning, manage the instruments of cultural production and thus set the terms of public debate - that have lost faith in the values, or what remains of them, of the West.

As Daron Acemoglu and James A. Robinson demonstrated in their book, Why Nations Fail, an arrogant and grasping elite can destroy the economy of a nation in order to retain their positional status. They argued that the success of a nation depends to a great degree on the inclusiveness of its economic and political institutions. Once you shut down entry into the elite, the rot sets in.

Not that this is the only thing a nation needs to succeed. They note the disparity in wealth between the Arizona side of the border and the Mexican side, and suggest one of the problems is the weak and corrupt Mexican state, which has never been an effective guarantor of life and property.

Which makes the nature of the alliances formed by the elite Powell was addressing in order to have the votes to control the country all the more alarming.

The Republican Party had long been allied with business elites, but faced with the New Deal alliance of the Democrats they were long a minority party. One of the pivotal figures of 20th century politics, Richard Nixon, attacked the problem by rebuilding the Republican coalition after his own image -- resentful, conservative, and a bit racist.

The Democrats had been strong in the South, essentially from the passage of the Posse Commitatus Act in 1878 until the Democrats re-started the work of Reconstruction with the passage of the 1964 Civil Rights Act and the 1965 Voting Rights Act.

The Posse Commitatus Act ended the role of federal troops in the South in enforcing the voting rights and civil rights of the black citizens of the former Confederate states. It freed state and local authorities to deprive blacks of their voting rights and civil rights. Since congressional seats and electoral college votes are distributed by population, not number of registered voters, this gave racists a disproportionate influence in our politics.

In 1964, Barry Goldwater was the Republican nominee for president, and he opposed the Civil Rights Act. Nixon seized on Southern resentment to rebuild the party around disgruntled white voters.

George Packer wrote a brilliant account of this in The New Yorker, an article titled somewhat optimistically The Fall of Conservatism. From that article:
The Southerners were the kind of men whom Nixon whipped into a frenzy one night in the fall of 1966, at the Wade Hampton Hotel, in Columbia, South Carolina. Nixon, who was then a partner in a New York law firm, had traveled there with Buchanan on behalf of Republican congressional candidates. Buchanan recalls that the room was full of sweat, cigar smoke, and rage; the rhetoric, which was about patriotism and law and order, “burned the paint off the walls.” As they left the hotel, Nixon said, “This is the future of this Party, right here in the South.”
Law and order? The South was the home of one of the most notorious extra-legal customs in America, the lynching, and home to one of the most notorious organizations, the Klu Klux Klan. The Klan existed to terrorize blacks and whites who sympathized with them.

Ronald Reagan gave a speech on the topic of states rights during his 1980 run for the presidency at the Neshoba County Fair, a few miles from Philadelphia, Mississippi, site of the 1964 murder of civil rights workers. I'm sure the symbolism wasn't wasted on his audience. States' rights during the run-up to the Civil War had meant the right to hold slaves, states' rights after the war ended meant the right to discriminate without federal interference.

A friend has long insisted that the Republican Party consisted of an alliance of the rich and the stupid. I would have said an alliance of the rich and the racist. Moderate Republicans of the sort who voted for the Civil Rights Act in 1964 are now called RINO -- Republican In Name Only. They've largely been ridden out of the party at this point, much to the disappointment of voters like me who have historically voted a split ticket.

Tapping into the South's deep well of resentment to support an agenda really set by the economic elite was deeply cynical. When Southern churches began setting up "white academies" -- private schools intended to preserve segregation -- they found a welcoming ally in business interests that wanted to do down the Internal Revenue Service. The result was a lot of rhetoric in support of the cultural agenda of the churches, and a lot of tax cuts and relaxed regulation on their business allies.

The churches got some of what they wanted. Evangelical churches in the 1960s had no particular stand on abortion, but when they found themselves in a coalition with norther Catholics, they changed their stance and demanded legislation to restrict abortion. Business interests didn't mind giving them that.

But for the most part, the votes were coming from segments of the population that harbored racial resentment against the policies of the Democrats, and the benefits were going to the business elites. What was said to get the votes was just the prolefeed, a term George Orwell invented in his novel, 1984, in which the Ministry of Truth manufactures a sort of literature that is designed to keep the proletariat content and not too knowledgeable.

The propaganda arm of the movement harnessed agnotology, the science of creating ignorance, which had been pioneered by the tobacco industry. If scientists say you are harming people, pay some other scientists to say you aren't. The truth doesn't matter, just the bottom line.

And if your pundit is continually wrong, as Arthur Laffer has been, that doesn't matter. Just keep quoting him as if he were a reliable source of information.

Not that all were obviously wrong. One of the great controversies of the 1970s was about the viability of Keynesian economics in general and the Phillips curve in particular. The Phillips curve describes how higher inflation tends to be related to lower unemployment, but was challenged in the 1970s by a period of high inflation and high unemployment, called stagflation.

Milton Friedman, the great monetarist, claimed that the unemployment rate could not fall below a certain level without sparking a wage-price spiral, which he called the "natural rate" of unemployment. The ModiglianiPapademos paper of 1975 introduced it as the non-inflationary rate of unemployment.

There are other contributing factors, but it's probably not entirely coincidental that real hourly wages for non-supervisory jobs have not increased since the Federal Reserve Board started using the non-accelerating inflation rate of unemployment (NAIRU) as a tool in setting monetary policy.

The movement Powell was associated with paid attention to many things most people don't, like who gets appointed to the Federal Reserve Board. They backed, with cash, candidates who drank the Kool-Aid about low taxes on rich people stimulating the economy and generating more tax revenues, and the idea that regulations could be eliminated with no harm and a stimulating effect on the economy.

Robert Bork wrote a book published in 1978 titled The Antitrust Paradox, in which is said, sometimes you get lower prices with one large company than with several competing companies, so why penalize predatory pricing? With the election of Ronald Reagan in 1980, this became the official policy of the Justice Department, and still is. Walmart used tactics that were illegal up until then to become the largest employer on America.

(As noted in a previous post, In 1967, the Safeway grocery store chain, then the second largest in the country, signed a consent decree with the Justice Department in which they agreed to stop engaging in predatory pricing -- selling below cost in order to drive the competition out of business.  A generation later, in 1983, Safeway correctly perceived that the Reagan Justice Department would take a different view of their activities, and asked to be released from the consent decree, and was freed of its restrictions.)

One result of this is that predatory pricing, which is hard on small business and only possible for large businesses, has, as one might expect, resulted in many small businesses closing. Another is that Walmart exercises enormous power over wages of their workforce and of prices for their suppliers. This redistributes power in ways that destroys workers' and suppliers' negotiating power.

Another theory that got a lot of support at about that time was managing corporations for shareholder value. Strangely enough, given our current beliefs, this is not how corporations were usually managed prior to the 1970s. Public corporations had been managed on the theory that they were persons, and their chief purpose was to survive and thrive. Shareholders did not have the rights of property, they only had a claim on future earnings should the board decide to issue a dividend. One might compare this to 'owning' a fighter, in which you own part of the fighter's future winnings. You can't actually take the fighter apart and eat the bit you own if you get peckish.

Under this system of managing corporations, shareholders had an important stake in the company, as did bondholder, customers, and employees. The public corporation was a sort of gestalt being, made up of many other beings occupying its metaphorical body.

When Milton Friedman and others began promoting the idea that the shareholders were owners more in the sense that partners are owners, they found ready support for this view among people who could make money on it. Changes in the banking industry made it possible for corporate raiders to raise money to buy up companies. What they did then was described in a paper by Larry Summers and Andrei Schleiferwere titled Breach of Trust in Hostile Takeovers.

From that paper:

One striking fact militating in favor of. the importance of wealth transfers as opposed to pure efficiency gains is that a significant fraction  of hostile acquisitions are initiated and executed by only a few raiders. It is hard to believe that Carl Icahn has a comparative advantage in running simultaneously a railcar leasing company (ACF), an airline  (TWA) and a textile mill (Dan River). It is more plausible that his comparative advantage is tough bargaining and a willingness to transfer value away from those who expect to have it. In fact, those who describe  him (including he himself) point to this as his special skill. The industrial diversity of many raiders' holdings suggests that their particular skill is value redistribution rather than value creation.
Now, consider the reason companies exist. Ronald Coase explored this question in a highly influential 1937 paper, The Nature of the Firm. Coase noted that you could hire individuals to do everything you need done, no matter how big the job, so why have companies in which the employer has obligations to long-term employees instead?

The answer, he said, is that contracting individually for each person need to perform the tasks of the firm would require exorbitant transaction costs to negotiate and enforce the contracts. Much better to gather a group of people to work for a common goal, such as making better and cheaper widgets to make a profit in the widget business.

Summers and Schleiferwere argued that what Icahn and others were doing was appropriating money by violating those implicit contracts.

This is not one of their examples, but consider the case of the Boeing aircraft corporation. In the late 1960s, management bet the company on the first jumbo jet, the 747. Engineers worked so enthusiastically that they came to be called 'the incredibles.' Management would tell people to go home, only to have them drive around the block and come back to work when management wasn't looking.

Their devotion paid off. The company dominated the commercial airliner market to the point where Lockheed withdrew from the market and Boeing took over McDonnell Douglas and cancelled all their airliners.

However, McDonnell Douglas executives proved more adept at corporate infighting, and gained considerable influence over the company, resulting in some big changes.

In July 2014, Boeing CEO Jim McNerney created a controversy by saying he wouldn't retire at 65 because “The heart will still be beating, the employees will still be cowering, I’ll be working hard.”

This is a major change in attitude. And Boeing was not subject to a hostile takeover, it is simply that public corporations are run differently than they were in the past.


Summers and Schleiferwere noted that employees in companies that had been subject to a takeover found that the company had no loyalty to its employees. They cite a number of employee reactions, but the one that put the issue most clearly to me was, "How can you go to another company now and give 100 percent of your effort?"
Leeham Co. LLC, which describes its business as "intelligence for the aviation industry," examined the Boeing situation on their blog in a Nov. 2013 post titled Loyalty is a One-Way Street at Boeing...
The problem is, if a company is not "managed for shareholder value," it becomes a target for takeover. As a consequence, companies that invest their profits in the business instead of starving research to pay stockholders are the companies that become a target for takeovers.

Would Boeing in its current position benefit from the fierce loyalty and enthusiasm of "the incredibles" on a project launched today? It seems unlikely.

The new, more extractive model used by Boeing is the rule rather than the exception today. Once the banking business changed in ways that encouraged takeovers, the very nature of the publicly traded corporation changed. And when money is changing things, it can call out the justifications for what it is doing. In an earlier time, when the question was whether such corporations existed to serve the shareholders or if the shareholders were just one of the stakeholders in the company, the latter view had won out.

In fact, people in the business world overwhelmingly believe that corporations have a fiduciary duty to maximize shareholder value, even though the case law doesn't support this, and the case most often cited in support of this is an odd one.

The case usually cited is Dodge Brother vs. Ford. Henry Ford owned 58% of the company, the Dodge brothers owned 10%, and five other individuals owned the rest. Prior to WW I the Dodge Brothers were both a major investor in the company and a major supplier of engines, transmissions, and chassis. Ford was planning to build a factory that would make him no longer dependent on the Dodge Brothers for his manufacturing, and trying to drive down the price of the stock so he could buy the brothers out.

As chairman, president, and the majority stockholder, he was in a great position to do this. He decided to withhold a dividend that the brothers would need to complete their own plant in which they planned to start building their own line of cars.

Now, if Gordon Gekko's golden rule -- "he who has the gold makes the rules" -- were applied, Ford as majority stockholder should have been able to decide what dividend, if any, the company paid out. This was not a publicly traded company, it was a closely held corporation which Ford owned most of. The Michigan Supreme Court, which is not usually considered an authority on corporate law, ruled that Ford had an obligation to pay out a substantial dividend.

Lynn Stout, a Columbia law professor and author of The Shareholder Value Myth, argues rather credibly that Dodge v Ford is about a majority shareholder's obligation to minority shareholders, not about the obligations of publicly traded corporations. She also raises the question of why this case is cited rather than later cases from more expert courts (such as Delaware's Supreme Court, which rules in the state most large corporations choose to incorporate in.)

The answer, I"m afraid, is that intellectuals can serve more than one purpose. They can seek truth, or they can manufacture justifications for actions influential players want to take. Even when they do not view themselves as doing the latter, they may take a view that is picked up by those players and used as a justification.

In some cases, it is hard to assume altruism on the part of the intellectual involved. Arthur Laffer may once of believed that cutting taxes on the richest people would spur the economy and generate higher tax revenues, but it strains belief to think that he continues to hold this assumption for purely altruistic reasons. Saying exactly what the rich wanted to hear was the making of him. Admitting he was mistaken would be the unmaking of him.

Laffer first described the Laffer curve to Dick Cheney and Don Rumsfeld at a lunch meeting in 1974. The curve shows that at some point between 0% and 100% tax rates, there is a rate that maximizes revenue. It was first proposed by and Arab philosopher and historian, Ibn Khaldun. Laffer's innovation appears to have been to propose that we are always at a higher point than optimum on the curve whenever he is asked.

However, research since 1974 has shown that cutting top marginal rates does not increase gross domestic product above the rate that would have occurred without the cuts. And research on the rate at which tax revenues are maximized seem to show that it is about a 70% top marginal rate, which it was in 1974, before Laffer's theory was applied. (Economists Peter Diamond and Emmanuel Saez calculated in a 2011 paper that the revenue maximizing top marginal rate is 73%.)

Laffer wasn't bothered when the Reagan administration increased payroll taxes, because he was more concerned with top marginal rates.  By the end of Reagan's term in office, it was evident that Laffer was wrong, but he still reliably says what his audience wants to hear, and he has been rewarded with several directorships at large corporations.

Lowering the top rate from 70% to 28% didn't quite stick, but the top marginal rate of 35% on ordinary income and 28% on capital gains is still far below where it was when the U.S. economy was growing more rapidly. Lower taxes on high earners and higher payroll taxes represented a large shift in wealth to the high earners.

One consequence of lower tax revenues was a reduction in investment in things that benefit us all, such as roads and bridges. Federal infrastructure investment has fallen from a peak of about 1.2 percent of GDP to about .2 percent, our about 1/6th.

The result is a loss of productivity and international competitiveness. A truck waiting for a train to pass rather than driving on an overpass is a job lost for someone. Corporations have no national loyalty, and move their income around to the countries that allow them to minimize taxes. If America becomes less competitive, that's fine, they can always invest in some other country. The stateless income of international corporations does not support the well being, let alone the greatness, of countries.

These companies lobby for lower taxes, lobby for the freedom to flee to tax havens, and donate money to politicians. Public investment only interests them if it benefits them and they don't have to pay for it. The case of Citizens United v. Federal Election Commission, decided by the U.S. Supreme Court in 2010, ruled that prohibiting expenditures by corporations or unions violated the First Amendment guarantee of free speech, which means that although a corporation is not a voting citizen, it is sufficiently a person to finance a campaign for or against a candidate.

In his last book, The Revolt of the Elites and the Betrayal of Democracy, Christopher Lasch in 1995 argued that the privileged class had managed to isolate themselves from the crumbling social structure and decaying cities around them. In becoming international in their outlook, "citizens of the world," they have given up on the responsibilities of citizenship in their own countries and communities, and pursue only the interest of their class.

Lasch had no clear solution to this problem, nor do I. We seem to have developed an Ayn Rand elite, narcissistic and self-serving, who have the wealth and the connections to run things. They do not seem restrained by empathy for the less fortunate or a sense of duty to their nation or community. As inequality increases, there are reasons to think that the wealthy become less empathetic.

Studies of the effects of wealth on compassion and fairness have shown, as a report in Scientific American put it, that "as people climb the social ladder, their compassionate feelings towards other people decline."

And given the psychological effects of wealth, it is not surprising that the justifications for these attitudes are often couched in terms of freedom. Berkeley psychologists Paul Piff and Dacher Keltner suggest that "The less we have to rely on others, the less we may care about their feelings. This leads us towards being more self-focused."

We are living in a world built by a political movement driven by these people -- people alienated from community and nation, from any but their own class of wealthy cohorts. They are able to remain in power because of the alliance they formed with others, who are alienated from nation and community by prejudice and resentment. Both sides of this alliance wrap themselves in the flag while displaying contempt for the very notion of the national government.

You seem confused, fella, which is it?