The Socialist Boogie Man 21 September 2019.

When it comes to the trajectory of Socialism, critics of Bernie Sanders and Elizabeth Warren are either ignorant or liars.  Historically, Socialism is an economic system in which 1.) society, not the private individual, owns the “means of production”; 2.) planning, rather than the market, determines the production of goods; and 3.) co-operation, rather than competition, is the guiding principle.

Socialism arose as a response to what people saw as the “injustices” of Capitalism; poverty, frequent unemployment; the destruction of the old handicraft industries, awful living conditions in factory cities, and a political system that tilted hard in favor of the capitalists.  Unions and strikes were illegal; there were high property requirements to be able to vote or run for office in most places; and real power belonged to the bourgeoisie.

Early Socialism (1820s-1848) argued that a humane economy and society could be created by building co-operative factories and towns managed by the people who worked and lived in them.  Many amusing stories come from this time.  (See: phalanstery; see: Brook Farm.)

In 1848 the German intellectuals Karl Marx and Friedrich Engels published The Communist Manifesto, creating the form of Socialism later called Marxism.  Marxism argued that a) capitalist greed would lead to a few owners gobbling up all their competitors so that ownership would end in a few hands; b) capitalist greed would lead to wages being forced down to the bare survival level; c) poor people can’t buy the things they produced, so capitalist governments would fight wars to conquer new markets and destroy surplus production that they could not sell; and d) all the miserable poor people would recognize that they belonged to one class (“those who work”) and the few owners belonged to another class (“those that don’t”); and e) revolution would replace Capitalism with Socialism.  Everyone would live happily ever after.

Marxian Socialism became the dominant movement in Socialism after 1848.  However, capitalism began evolving: unions were legalized, wages and living standards rose, governments created social insurance systems, and the bourgeoisie accepted political democracy.  In the early 20th Century, Marxism split into two opposing groups.  Reformist or Democratic Socialists said that Marx’s predictions hadn’t worked out, that revolution had to give way to participating in democratic politics, and that politics required a willingness to bargain with the other classes.  In contrast, Communists said that to achieve Socialism it would take a small group of professional revolutionaries to organize “the masses” and then to lead a continuing revolution.

In practice, Communism turned out to represent “prison camps, overalls, and a damned long march to nowhere.”  Communism is what contemporary American conservatives describe as “Socialism.”

In fact, the British Labour Party, the French Socialist Party, and the German Social Democratic Party have never been anything but guardians of political democracy.  They have never tried to create a monopoly on political power and they have never failed to yield power when they lost a democratic election.  Sanders and Warren clearly fall within this tradition.

Fight them on the real and many failings of Socialism, but don’t scare-monger and lie.

Shareholders versus Stakeholders 1 21 September 2019.

Historically, American industry grew from a foundation based on prioritizing “shareholders” over “stakeholders.”  Labor and communities didn’t count for anything in the epic period of industrialization.  In my original home town, Seattle, the railroad tracks ran right along the shore of Elliot Bay because that led directly to the piers for loading cargo on ships. That’s where the railroads wanted their lines and the public be damned.   In my adopted home town, Easton, the Coal and Iron Police of the Lehigh Valley were deputized by the Commonwealth so that they could lawfully counter unionization.  Then came the Great Depression.  The great corporations were humbled and regulated by the federal government.

Then the Second World War devastated the industrial economies of most countries in the world.  Britain, France, Germany, Italy, and Japan emerged from the war with their industrial plant and agriculture in ruins.  After 1945, the pressing demands for economic reconstruction conflicted with pressing demands for higher standards of living and social welfare systems in many countries.  To make matters worse, Britain and France spent heavily on defense in order to maintain “great power” status.  All of these factors made for a slow revival of competitiveness on international markets.

In the meantime, the United States provided the goods demanded by the rest of the free world.[1]  Thus, during a “golden age” of the 1950s and 1960s, American corporations enjoyed huge profits without struggling very much.  They could reward shareholders and “stakeholders” in ways that satisfied all concerned.  Corporate social responsibility came to mean not laying-off workers or cutting wage and benefits, not closing down plants, not getting rid of unprofitable or incompatible divisions, and not off-shoring production.

Most people were happy with this situation, but not all.  In a 1970 New York Times Magazine essay Milton Friedman, asserted that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.”  Radically at odds with recent experience, Friedman’s view did not receive wide acceptance.  Instead, America’s economy became increasingly uncompetitive without most people noticing.

Soon after Friedman had spoken, huge waves of change broke over the American economy.  Globalization unleashed rebuilt foreign industries on the international and American markets.  Deregulation allowed the entrance of hungry and innovative new competitors onto the domestic market.  Rapid technological change contributed to globalization, while also substituting machines for men.  Furthermore, the 1970s witnessed the two “oil shocks” (1973, 1979).  While impossible in economic theory, combined high inflation and high unemployment turned out to be all too possible in economic reality.

Forced to choose how to use shrinking profits, corporations prioritized “stakeholders” over shareholders.  Savers—you have to save before you can invest—felt themselves to be getting “skint” from management.  Then, in the 1980s, appeared the corporate raiders launching hostile takeovers.  Disgruntled stockholders unloaded their stock on the raiders.  Successful takeovers led to fat, dumb, and happy corporations getting put through the wringer.  Fairly quickly, many boards and managers began prioritizing shareholder value over stakeholder value as a defense.  By the end of the 20th Century, Milton Friedman’s formula had triumphed.

[1] Steven Pearlstein, “When Shareholder Capitalism Came to Town,” The American Prospect, 9 April 2014, https://prospect.org/article/when-shareholder-capitalism-came-town

ChiMerica 1 10 July 2019.

There are real grounds for alarm over China.[1]  Many economists believe that the continuing growth of the Chinese economy will lead it to supplant that of the United States as the world’s largest by 2030 or 2035.  Moreover, China is a dictatorship with apparent ambitions to push the United States out of its dominating position in the Far East and perhaps to exert Chinese influence more broadly.  China has been imprisoning he numbers of Uighurs (Muslims) in Xinjiang province.  Some people suspect that, under Xi Jinping, China has chosen a new course.   Abandoning a “liberalizing” path, the Chinese want to spread modern authoritarianism to other countries in the same way that the United States has been trying to spread democratic capitalism.

The Obama Administration saw the challenge in China.  However, it became mired in peripheral issues (the Middle East, Ukraine).  It never managed to mount an effective response to the central problem of China.  The “Trans-Pacific [Trade] Partnership” treaty fell victim to the populism of the right and the left.  It would not have been implemented even if Hillary Clinton had won the election.

Since 2017, the Trump Administration has pursued a different course.  In December 2017, the White House issued a “National Security Strategy” paper that claimed that China and Russia “want to shape a world antithetical to U.S. values and interests.”  In June 2018, Secretary of State Mike Pompeo said that “China wants to be the dominant economic and military power of the world, spreading its authoritarian vision for society and its corrupt practices worldwide.”  The head of the State Department’s Policy Planning Staff[2] said “This is a fight with a really different civilization and a different ideology, and the United States hasn’t had that before.  The Soviet Union and that competition, in a way, it was a fight within the Western family.”

So far, the struggle has been waged purely on the trade front.  For many years, China has been running a huge trade surplus in trade with the United States.  That is, it sells far more to the United States than it buys from the United States.  However, much of that production is done by American companies who have off-shored factories to cut costs.  If they have to charge higher prices to their American consumers because of the tariffs, then why make the stuff in China?  There’s Vietnam, the Philippines, and Indonesia.  In 2018, President Trump began slamming tariffs (taxes on imports) on Chinese exports to the United States.  Then, Trump tightened the screws with sanctions on the Chinese tech giant Huawei.  It has urged other countries to boycott Huawei and to refuse to participate in China’s “Belt and Road” infrastructure project.  Supply chains are going to start to move.

Because of the huge trade imbalance, China can’t exert much direct pressure on the United States by imposing tariffs of its own.  It can look for substitute suppliers for American exports, like soy.  It has started running lots of old Korean War movies (in black and white) in which China battles American aggression.

At the same time, neither side has pulled out all the stops.  For example, the U.S. has not made much of a deal about China imprisoning many Uighirs

However, we are in the early days of a huge struggle.  It is difficult to see yet how it will shake out.  Weak ending, I know, but true.

[1] Edward Wong, “U.S. vs. China: Why This Power Struggle Is Different,” NYT, 27 June 2019.

[2] See: https://en.wikipedia.org/wiki/Kiron_Skinner

The Worst President Ever 5 July 2019.

Typically, the popular understanding of American history is that the Revolution gave rise to the Articles of Confederation (the first government of the United States); then that ramshackle arrangement soon proved unsatisfactory to many people; and then the present Constitution created the legal framework for subsequent American history.  In fact, there existed deep divide over several issues.  First, federalism (a union of sovereign stares) versus nationalism (a union of states under a strong central government).  Second, the divide—which would only grow until our own time—over who got to be a full “American.”  Those arguments had to be fought out over many presidential administrations.

Many of the contentious issues that would shape American society down to the present day became evident in the administration of Andrew Jackson (1767-1845).  Jackson served as the seventh president of the United States (1830-1838)

He believed that the final interpreter of the Constitution was the President, not the Supreme Court or the individual states.  It is in this light that one must see his opposition to John Calhoun’s doctrine of “interposition,[1] rather than in some doctrine of general federal supremacy.

He believed in the forced removal of the Native Americans to lands west of the Mississippi.  In 1830, he signed a federal law, the Indian Removal Act, which ordered the rapid evacuation of Native Americans from the Southeastern United States.[2]  He defied the Supreme Court to do so.

He opposed the Second Bank of the United States.  The Bank sold government bonds to finance the deficit; it issued a “sound” paper currency that allowed the economy to expand; and it provided credit for business.  In this sense, it served as a predecessor for the Federal Reserve System.  He believed that the Bank endangered American democracy and prosperity by concentrating excessive wealth and power in a few hands.  He vetoed the renewal of its government charter.

Jackson then began shifting federal funds from the Bank to a number of “pet” banks in the state.  Many of the “pet” banks were located in the West.  The principal use of credit in the West was land speculation.  This led to easy credit from the “pet” banks and much speculation in land.  At the same time, Eastern banks found themselves with declining reserves, so they raised interest rates.  In 1836, in an effort to rein-in speculation, Jackson issued a requirement that federal lands sold to the public be paid for in gold or silver, rather than in the inflated paper currency issued by state banks.  This “Specie Circular” was one, important, factor among several causes of the “Panic of 1837.”   The resulting recession dragged on into the 1840s.

A pre-Keynesian, he eliminated the deficit and paid off the national debt.

He appointed Roger B. Taney to be Chief Justice of the Supreme Court.  In the “Dred Scott Decision” (1857), Taney and the majority held that a) African-Americans could not be citizens, and b) that slavery could not be prohibited in the territories.

So, arguably, America’s worst president.

[1] “Interposition” meant that individual states could block the local enforcement of federal laws which the state government considered to be unconstitutional.

[2] See: https://en.wikipedia.org/wiki/Indian_Removal_Act.  Enforcement of the Act resulted in the “Trail of Tears.”  See: https://en.wikipedia.org/wiki/Trail_of_Tears

My Weekly Reader 20 June 2019.

If you don’t like the Donald Trump Presidency, then there are some questions you need to address.  First, is Trump what the Brits call a “one off,” or is he the leading edge of a new wave in American politics?[1]  Second, what led to Trump’s election?  No, it wasn’t the Russians.  No, it wasn’t Hillary Clinton’s incompetence as a politician.  Both are real, but the decisive factors lay elsewhere.  On the one hand, Donald Trump decided to target the grievances of white, working-class men.  On the other hand, Donald Trump decided to run as a Republican, rather than in his natural home as a Democrat.  Like “Bud” White, “he’s not as stupid as he seems.”

The grievances of white working-class men are real.  Once upon a time, they were the mainstays of the “New Deal Coalition” that put Democrats into the White House from 1932 to 1952, from 1960 to 1968, and from 1976 to 1980, along with various majorities in Congress.  Unionized working-class jobs gave blue-collar workers middle-class incomes.  Then they fell by the wayside for complex reasons: mostly mechanization, but also the two successive oil “shocks” of the 1970s, organized labor’s attack on struggling employers in the 1970s, foreign competition, and ideological shifts in the two major parties.  Then, in the 1990s, China’s accession to the World Trade Organization (WTO) under favorable terms compounded the problems of American industry.

As a result, men’s industrial employment declined, new jobs shifted to other geographic areas;[2] new jobs required “college” rather than “vocational” education; and the social world of the “left behind” disintegrated (single motherhood, alcohol and drug use, general demoralization).[3]

No one in either party had bothered to address those grievances.  The suburban base of the Republicans lives in blue oxford-cloth shirts and Dockers (or the female equivalent).  The Democrats have embraced “identity politics,” which excludes the identity of the white working class.  These are “post-industrial” societies.

As a result Trump’s campaign could drag into the ranks of the Republicans a bunch of normally Democratic voters or non-voters.  The opened the possibility of a Republican presidential victory that must have seemed far-fetched if any of the other munchkins running for the nomination won in the primaries.  Republicans lined up behind Trump and they will do so again in 2020.  They get to pack the federal courts for the lifetime of the appointees.  They get to stall and roll-back the imperial decrees of Barack Obama.

Are we—as a country—better for it?

[1] That’s a disturbing thought.  In twenty years we could be talking about John Carpenter’s “Trump Tower: Power Outage.”  In 2025, radical environmentalists (but I repeat myself) sabotage the federally-mandated coal-fired generating plants that power New York City.  Suddenly, the nightlight of the city-that-never-sleeps go dark.  The elevators (and escalators) and AC and cable-television stop working.  Chaos breaks out in the streets below, but atop Trump Tower a “celebrity roast” of former members of the Trump Administration is underway.  Comments by Jim Mattis, Reince Priebus, H.R. McMaster, Hope Hicks, Sarah Saunders, Jim Comey, Jeff Sessions, Rex Tillerson, Nancy Pelosi, Mike Pompeo, John Bolton, etc.  I suppose the deranged killer haunting Trump Tower could wear a Robert Mueller hockey mask.

[2] Try selling your house if you live in Erie, PA.

[3] See: Isabel Sawhill, The Forgotten Americans (2019) and Oren Cass, The Once and Future Worker (2019).  If this is what happened to white Americans, then what are we to make of the impact of “liberal paternalism” on African-Americans since the 1960s?

My Weekly Reader A 19 June 2019.

In traditional societies, people found their identity within and as members of groups.  In the Medieval and Early Modern West, for example, the Christian churches taught morality and sponsored religious confraternities.  The peasant agricultural societies portrayed by Pieter Breughel involved much group labor and existed within the framework of village life.  European cities were governed by professional groups (guilds) and had purchased various group “privileges” from local lords or more distant kings.  People belonged to hereditary “orders” like Commoners and Aristocrats.  These societies existed within belief systems and economic systems that offered little individual choice.

Then things changed.  It took hundreds of years, but intellectual, political, and economic systems all changed.  The Scientific Revolution and the Enlightenment created a skepticism about all received wisdom.  The Voyages of Discovery and the Agricultural Revolution began an economic revolution that spurred rapid growth in both population and wealth.  Rising distrust of received beliefs, an absolute confidence in the power of human Reason,[1] and the growth of a complex middle class then rocked the political system with an Age of Revolutions.[2]

A central feature of all these changes was the rise of Individualism.  Essentially, people aren’t Lego blocks.  Each person is different—if only in subtle and minor ways–from every other person.  Only the Individual person knows what is best for that person: strength and weaknesses, and hopes and fears.  Hence, society and government should seek to maximize the opportunity for Individual fulfillment.  This Individual freedom should be limited only by the requirement that one Individual’s freedom do no harm to the freedom of other Individuals.

This belief system gave rise to Nineteenth Century Liberalism and, by way of reaction, to Nineteenth Century Socialism.  Political Liberalism espoused individual equality before the law, individual rights guaranteed by law, governments answering to elected legislature, and freedom of the press and of thought.  Economic Liberalism espoused economic individualism, free markets, competition, free trade within and between nations, and a small government that concentrated on the essential functions of law and order and national defense.  What Liberals didn’t believe in was either equality or democracy.  Competition—between producers, political parties, and ideas—produced both winners and losers according to the informed choices of consumers.  The whole of society benefitted from competition even when individuals lost.  Similarly, people without the education necessary to understand the competition of ideas and parties, and people with no material stake (property) in the outcome of the debates should have no voice (vote) in the outcome.

Reacting against this position, Nineteenth Century Socialism called for co-operation over competition, planning instead of the market, collective ownership of the “means of production” in place of private property, and democracy with vote for all adult males.  After a while, revolutionary Marxism dominated Socialist thought.

The success of industrialization created immense wealth and immense numbers of industrial workers who were excluded from the political system while living in misery.  Something had to give.  Beginning in the late Nineteenth Century, it did.

[1] See Carl Becker, The Heavenly City of the Eighteenth Century Philosophers (1932).  Hilarious.

[2] I stole that from Eric Hobsbawm, Age of Revolutions: Europe, 1789-1848 (1962).  Remarkable.

Just typing out loud here 12 June 2019.

You challenged me on my enthusiasm for Joe Hill’s “Rebel Girl.”  https://www.youtube.com/watch?v=e_tz3wPgLUw  Didn’t have a good response at the moment, but it got me thinking.  My mind works slower than do those of most people.  Hence the delay.

To my mind, the Democrats are generically anti-business.  Sure, they talk about income inequality and anti-monopoly and this, that, and another New Deals.  But what they mean to apply is an anti-business policy that will fall on all businesses, great and small.  Taxes.  Regulations by decree.  You never see Democrat candidates who have ever worked in/for a business.  You never see ones who have had their own business.  Barack Obama was a “community organizer.”   (George McGovern’s post-presidential experience is instructive here.)  They’ve all spent their lives as lawyers or “in public service.”  Public service is just another way of saying “public employment.”  You don’t get laid off in a recession and you get good benefits.  For following an elaborate set of rules.

They have a fantasy of returning to the Fifties: a few big industries that don’t have any global competition; high wages and good benefits achieved through government-sponsored union-bargaining; owners who inherited their wealth from their rough-and-ready ancestors who actually created it; and a horde of professional managers who deploy B-School-certified skills in return for a generous, but socially-acceptable, salary.  That—at best—is what the Democrats want to recreate.  Basically, Rudolf Hilferding seventy years on.   (See: https://en.wikipedia.org/wiki/Rudolf_Hilferding )

None of this has anything to do with contemporary reality.  It has been one, but only one, of the factors that have driven the American economy—and society—into the ground over the last fifty years.

Yes, there is a lot to criticize in Republican policies.  Mostly, to my mind, it is the starving/shrinking of the necessary regulatory functions of the Federal bureaucracy.  To take some examples: the IRS can’t audit; the FAA has shifted airline safety to the plane manufacturer (singular); the FDA can’t keep up with the companies trying to poison us for fun and profit.  Theodore Roosevelt theorized that only a strong government could mediate the conflicting demands of Capital and Labor.  Republicans are gutting the system projected by their second-greatest president.  The reduction of the corporation tax to international (i.e. Canada) norms seems to me a good idea.  All the tax cut-spend-elect stuff to counter Democrats’ tax-spend-elect stuff is wrong, but wrong for both parties.  And wrong for the American voters who gobbled it up.   Maybe “snorted” would be better?

As for “bigness,” see Ellis Hawley, The New Deal and the Problem of Monopoly.  Yes, we’ve been down this road before.

In the end, what I’m fighting for is my Dad and all the people like him.  He didn’t want to work for the government and he didn’t want to work for a giant business.  He had done both (Army, Shell Oil).  He just wanted his own show.  Win or lose, it was on him.   What’s wrong with that?  He provided a service that people wanted.  He paid his employees the best he could.  Wasn’t great money, but it was the same deal for them that he made.  They weren’t working for the government or big business.  There weren’t procedures to deal with.  Just people.  He and my Mom did a lot of unpaid work to make the business run.  I guess I don’t see much difference between my Dad and an artist: they’re both self-actualizing and creative.  Along the way, he put a roof over our head and food in our mouths and paid his taxes.  Some of those taxes went to pay for public competition with his private business.  Why?  Because not all high-school teachers wanted to coach, so some of them would rather work extra as driving instructors.  Teachers had a union, but private business did not.