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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
"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.