The illusion which exalts us is dearer to us than ten thousand truths. –Aleksandr Pushkin, poet, novelist, and playwright (1799-1837)

There is a general consensus that our political system is broken. The electorate views with disdain the inability of those in charge of our government to treat opponents with civility, let alone to govern efficiently, forgetting all the while that it is we who continuously place such people in office. We thus now, to paraphrase Robert Louis Stevenson, are having to sit down at our banquet of consequences. Among citizens, those on opposite sides of issues often also fall on each other like wolves. As illustrated in the following table, the irreconcilable policy chasm between our two political parties has now reached seismic proportions.

Percentage who rate their support for issues at 8-10 on a 1-10 scale

Source: Wall Street Journal/NBC News poll, taken in mid-December (Margin of error = +/- 4.9%)

ISSUE REPUBLICANS DEMOCRATS
Traditional Definition of Marriage 69% 25%
Support Gay Rights 14% 63%
Support “Right-to-Life” 57% 23%
Supporters of “Black Lives Matter” movement 6% 46%
Support the NRA 59% 11%
Combat Climate Change Immediately 13% 62%
Support Unions 15% 52%
Support Business Interests 49% 26%

Worse still, the disrespect that each party has for the other further jeopardizes the possibility of any meaningful dialogue. According to a 2014 PEW Research Study, 79% of democrats hold an unfavorable view of republicans, almost half of whom (38%) harbor a “very unfavorable” view, and over a fifth of whom (27%) view republicans as being a threat to the country. Similarly, 82% of republicans view as unfavorable the democrat party, over half of these (43%) hold a “very unfavorable” view, and 36% (nearly 45% of those in this category) view democrats as a threat to the country.

Look closely, however, and the eight major issues of contention in the above table. What problem do any of the positions solve? Does what the proponents and opponents of each issue advocate serve the principles of American constitutional traditions? Moreover, most of those positions are empty slogans. “Right-to-Life” is not opposed by “pro-choice” advocates; it is simply that the latter deems the quality of life of the mother as a higher priority. Similarly, “Right-to-Life” proponents are hardly anti-choice; it is just that their choice is the one that they believe should be enforced. A larger, wholly ignored, issue however is that there is no agreement on what “life” is. How is it possible to resolve the controversy of legalized aborton when some define life as beginning at conception, whereas others view it as being when the fetus takes its first breath. If we could first come to an agreement on what is life, the debate might well be different.

What we are witnessing at work however is a focus on issues that is the product of ideological simplification. By definition, an ideology is a worldview that explains why things are and how things work. It is not, therefore, a hypothesis that was arrived at through empirical research and trial and error, nor is it the product of a non-result-oriented search to discover what works. It is, however, a simplified, top-down approach to address infinitely complex problems; problems which, because of the myriad of actors within a society, each of whom influences and changes the behavior of others, cannot possibly be correct all the time.

The damage of ideological decision making is not limited to occasional failures. It also exacerbates problems in two crucial ways. First, as a belief system an ideology is a self-contained set of principles built upon one or more major premises or values. These major premises or values are taken as “givens” and thus are not subject to contestation. Thus, each side of the ideological divide cannot debate each other as neither will critically analyze the propriety of their own fundamental postulates. This, of course, leads to the ad hominem assaults that now permeate our political debates. As the Italian economist Vilfredo Pareto observed, “Men follow their sentiments and their self-interest, but it pleases them to imagine that they follow reason. And so they look for, and always find, some theory which, a posteriori, makes their actions appear to be logical. If that theory could be demolished scientifically, the only result would be that another theory would be substituted for the first one, and for the same purpose.”

Second, and both more troubling and fundamental, ideologies lead to a focus on the wrong issues, issues that are not the problem. In the words of Thomas Pynchon, “If they can get you asking the wrong questions, they don’t have to worry about the answers.” Perhaps the clearest example of this is the current debate between the progressives and the conservatives on the benefits and detriments of socialism versus capitalism. This is a false debate. As will be shown in the balance of this piece, socialism is not an alternative to capitalism; under our American system, it is an alternative to liberty.

To begin with, capitalism is a policy pursued in all socialist countries, such as in the United Kingdom, France, Sweden, etc, while the United States, a country that primarily pursues capitalist principles, has also adopted some socialist programs. Thus is it clear that capitalism and socialism are neither opposites nor necessarily incompatible with each other. However both socialism and liberty, as the latter term is defined under our American constitution, are approaches to how our society deals with and protects rights in property, and that is precisely where the conflict arises. The types of rights that are the focus of socialism, for example, are the right to a free education, the right to a guaranteed income or minimum wage, and the right to healthcare. By its very definition, however, since such “entitlements” do not fall like mana from heaven, socialism operates by making claims on property of others.

Our Founding Fathers drafted our Constitution with a focus on property rights. Contrary to current, progressive misconceptions, this was not because they were primarily “propertied” – as we use that term today – patricians. Rather, the term property encompassed all rights to which a citizen was entitled as a matter of natural law, whether tangible or intangible, as a consequence of being a member of a republic that cherished liberty above all things. Indeed, the most valuable “property right” within a free society was not material wealth, but access to knowledge, the principal protector of which is the “property” right of freedom of speech. As succinctly stated by John Adams in his 1765 “A Dissertation on the Canon and Feudal Law:”

Be it remembered, however, that liberty must at all hazards be supported . . . cannot be preserved without a general knowledge among the people . . . And the preservation of the means of knowledge among the lowest ranks, is of more importance to the public than all the property of all the rich men in the country.

The application of this approach to property was expressly set out by James Madison in his March 29, 1792 essay in The National Gazette entitled “Property.” In it he established that under our American system of government, “property” is connected to all of our rights, including things such as freedom of speech and freedom of religion. The truly American thinking of Madison’s day was that a person’s rights in general – separate and apart from material possessions – were also an extremely important, if not the most valuable, part of his property; that, in Madison’s words, one has not only a right to property but a property in his rights. It is worth setting forth the opening of this piece at length:

This term in its particular application means “that dominion which one man claims and exercises over the external things of the world, in exclusion of every other individual.”

In its larger and juster meaning, it embraces every thing to which a man may attach a value and have a right; and which leaves to every one else the like advantage. [The emphasis is Madison’s.]

In the former sense, a man’s land, or merchandize, or is called his property.

In the latter sense, a man has a property in his opinions and the free communication of them.

He has a property of peculiar value in his religious opinions, and in the profession and practice dictated by them.

He has a property very dear to him in the safety and liberty of his person.

He has an equal property in the free use of his faculties and free choice of the objects on which to employ them.

In a word, as a man is said to have a right to his property, he may be equally said to have a property in his rights.

Where an excess of power prevails, property of no sort is duly respected. No man is safe in his opinions, his person, his faculties, or his possessions.

Where there is an excess of liberty [and here the expression “excess of liberty” refers to license], the effect is the same, tho’ from an opposite cause.

Madison’s expansive definition of property therefore was a reflection of his firm belief in his holistic view of human beings as a fully integrated and inseparable combination of both body and soul. The Constitution therefore was specifically constructed to adopt as its primary values, from which all of its specific provisions both were derived and intended to serve, the four cardinal virtues set forth by Plato in his Republic and adopted as an essential part of the Christian tradition; namely, courage, temperance, justice, and prudence.

This formulation of our property right of freedom necessarily deprives us of the false security and veneer of certainty that follows from ideological dogma. But then as Søren Kierkegaard noted, “Anxiety is the dizziness of freedom.”

The ideologues of the left and of the right thus seek to save us from this dizziness that only freedom can offer and seek to give us the inferior substitute of license. As the noted jurist Learned Hand warned,

I often wonder whether we do not rest our hopes too much upon constitutions, upon law and upon courts. These are false hopes, believe me, these are false hopes. Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can save it; no constitution, no law, no court can even do much to help it. While it lies there it needs no constitution, no law, no courts to save it.

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© Richard L Wise and RLWise.wordpress.com 2013. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Richard L Wise and RLWise.wordpress.com with appropriate and specific direction to the original content.
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The New McCarthyism

December 30, 2015

“You’re not going to use the story, Mr. Scott? [Maxwell Scott:] No, sir. This is the West, sir. When the legend becomes fact, print the legend.” The Man Who Shot Liberty Valance

America’s political dialogue has ceased to be about facts; it is only the narrative that matters now. Grand and petite juries speak, but when their evaluation of facts fails to support the narrative legend, the legend prevails and is what is discussed by a somnambulant press seeking to cater to the ideological fervor.  Computer models, whose predictions are regularly wrong and are thus recalibrated, are accepted as fact instead of recognized as fallible theories conflating coincidence with causation in their obeisance to the Ptolemaic narrative of man-made global warming. Those who disagree are ridiculed as believing in a flat earth and are shouted down with hosannas of “the subject is settled science.”

The narrative of Barak Obama’s presidency was set early in his first term. When a white, Cambridge, Massachusetts, police officer, responding to a citizen’s call that someone was trying to break into a black man’s home, arrested an arrogant, effete Harvard professor who happened to be black and a crony of the president, Mr Obama turned this minor incident into a national debate on racism in America because the professor was his buddy. Holding a press conference on the incident, the president began by conceding that he did not have all the facts, and then proceeded to express his judgment. Why proclaim judgment in advance of examining all the facts? Because the facts did not matter. It was all about the narrative.

I have little doubt that Mr Obama suffered some painful and repulsive discrimination because of his skin color when he was a youth. I, too, suffered and continue to suffer similar abuse due to my religion. So what? Must this nation repeatedly rend its garments and beat its breast because of the president’s childhood trauma? We cannot answer for the actions of others in the past; we can only answer for ourselves and for what we do today. We overwhelmingly elected a black president. Does that not speak volumes as to how we have changed as a nation? Is Mr Obama ridiculed by his opponents? Of course. That is what is done irrespective of skin color. The ridicule directed at Mr Obama is, frankly, tame compared to that experienced by past presidents such as Lincoln, Cleveland, and Bush Junior.

For Mr Obama, however, racism is everywhere and is the root cause behind all actions and positions with which he disagrees. It is the New McCarthyism. Ad hominem illogic has become the guiding principle. Jury decisions cannot be correct when they fail to support the major premise of this twenty-first century witch hunt. They are decisions based in racism and thus may justly be ignored. Of course there is not the slightest shred of evidence of racial motivation, but the narrative does not require this because we all know that we are a racist society at its core. Yet if one thinks about it, charges of racism only work against people who are not racist. Real racists, like the KKK, revel in the name.

The truth is that racism is as dead in this country as it will ever be. My generation did that job in the 1960’s. It is not gone, of course, but that is because there will always be envious, mean-spirited people and because we revere freedom of speech. Like the teachings in the ancient Nordic myths, we ought to make it disappear by turning our backs on it and forgetting those on both sides of the subject who seek to prolong its prevalence. We all know that publicity feeds evil.

For the young, progressive radicals, they are rebels in search of a cause and, in their inability to find a just cause that comports with their narrative – G-d forbid they condemn Islam’s violence against and abuse of women – they rend our society by resurrecting and railing against an apparition that exists in prevalence only in their own minds. Note that their narrative prescribes that it is currently racist to say that all lives – black, white, police – matter. One is only permitted to say that black lives matter.

George Santayana observed that “In every generation we face a barbarian threat in our own children.” Note that he said not “to” our children. Sadly, as a consequence of the neurosis caused by trauma in his youth, a lust for power, or both, our president’s narrative seeks to foment discord, urging the country to abandon the pursuit of reasoned debate in favor of a commitment to a futile ideology, dedicated, figuratively, to the building of a bridge in a place where there is no river.

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© Richard L Wise and RLWise.wordpress.com 2013. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Richard L Wise and RLWise.wordpress.com with appropriate and specific direction to the original content.

At least one way of measuring the freedom of any society is the amount of comedy that is permitted, and clearly a healthy society permits more satirical comment than a repressive, so that if comedy is to function in some way as a safety release then it must obviously deal with these taboo areas.  This is part of the responsibility we accord our licensed jesters, that nothing be excused the searching light of comedy.  If anything can survive the probe of humour it is clearly of value, and conversely all groups who claim immunity from laughter are claiming special privileges which should not be granted.  –Eric Idle, comedian, actor, and author

I tire of having to listen to the left’s incessant, public ranting of how Mr Sadek’s puerile trailer depicting Mohammed as a lecherous incompetent, in the words of a September 12, 2012 New York Times editorial “did true damage to the interests of the United States and its core principle of respecting all faiths.”  True, the purported denizens of free speech all gave the obligatory lip-service-condemnation of the savage murders in Libya, the simultaneous attacks on other United States embassies around the world, and the public burnings of American and Israeli flags.  However the juxtaposition of the two “wrongs” in the same breathe clearly implies some degree of empathy or understanding for the Islamic Neanderthals, even though the Times would never agree – at least openly – that two wrongs may have made a right.

Anyone with an intelligence quotient north of double digits who tried to view this trailer – I could only make it through around nine of its fourteen minutes before my brain waves started to flat line – would know instantly that it was not possible for any sentient human to be offended by this banal production.  Thus any purported outrage over this clip was simply a pretext to carry out the murders and terrorism that we now know had been planned for September 11th last.  This trailer is too trivial, too ridiculous to be able to rise to the level of being condemned.  I have seen better acting and better make-up in my children’s kindergarten plays.  The risible computer animation would, in comparison, make the “killer bunny” on a string in Monty Python and the Holy Grail appear to be worthy an Academy Award for special effects. 

The hypocrisy of the left’s double-standard political correctness is almost palpable.  Compare for example the New York Times’ support in its October 2, 1999 editorial of the Brooklyn Museum’s decision to display Chris Ofil’s painting entitled Holy Virgin Mary.  If you are unfamiliar with this vile but proper exercise of freedom of speech, the description of it from Artnet is as follows:

“A very black woman cloaked in a stippled, Prussian-blue robe hovers over an intricate golden ground of enamel dots and glitter. Her mantle is open to reveal a black breast made of elephant dung and festooned with pins. The painting rests on two clumps of dung; one is decorated with the word Virgin, the other with the word Mary.

The figure is surrounded by 100 cutouts of female genitalia and buns. At first these variously colored bottoms look like little putti, a celestial choir; it’s only when you get close to the painting that these flickering cherubs turn rude.  Ofili loves to mix the sacred and the profane — the image of the spirit with the stuff of the earth.  Absurdity and humor mingle with something intensely penetrating and rise off Ofili’s image like a dank perfume.

Here was the New York Times’ view of this exhibition:  “…[A] Daily News poll shows that the majority of New Yorkers support the museum over Mayor Giuliani by a ratio of two to one. Those numbers show a broad-based support for New York’s role as the nation’s cultural capital. The people understand intuitively what Mr. Giuliani ignores for political gain.  A museum is obliged to challenge the public as well as to placate it, or else the museum becomes a chamber of attractive ghosts, an institution completely disconnected from art in our time.”

So where is the outrage at this “painting’s” violating America’s “core principle of respecting all faiths”?  Is Roman Catholicism entitled to less respect that Islam?  Is it a second class religion?

Take also the Monty Python films The Life of Brian, which closes with a dancing “kick line” of crucifixions, or The Meaning of Life, where Catholics are skewered for their rejection of birth control in one vignette which shows a poor Catholic family with what seems like a hundred children and the mother unceremoniously dropping yet another baby from her womb as she continues to clean her house.

What would the Times have said if Italians murdered the American Ambassador to Italy in protest to any of these?  What would the Times have said if instead of the Virgin Mary, Ofil’s painting had been of Mohamed similarly depicted?

Obviously, no Roman Catholic ever considered engaging in any of the rabid responses as did the Islamic fundamentalists, no matter how they were offended, because they understood that such a response had no place in any civilized society, because they understood that freedom of speech meant that we must also suffer the utterances of fools who wished to make asinine and hurtful statements, and because they are a decent people, respectful of life and property.

So why is it that the left is offended by gross insults to Mohamed but not when made about the Virgin Mary?  Are they saying that they are only offended if the targeted group engages in extreme violence?  Are they saying that we know it is offensive only because it incited violence; indeed, if that be the case, are they not giving the Islamic fundamentalists an incentive to riot?

The fact is that, according to the left’s political correctness policy, Islam is a protected class, whereas the Catholic Church is not (perhaps due to its opposition to another sacred totem of the left, namely abortion).  According to that theory, cultural relativism requires that we Westerners engage in yet another affirmative action policy, and abase ourselves by being more sensitive to the mores of another culture and that not criticize it merely because its customs are not ours.

I contend that that dogma is obscene.  There are fundamental norms of all civilized societies which are universally true.  This therefore means that there are practices which are universally unacceptable as being reflective of a barbarous, uncivilized people.  The generally accepted practice in certain societies of clitoral circumcision is but one example.

But that is beside my point.  For these terrorists have, it appears, successfully brainwashed the liberal elite into sacrificing their otherwise stalwart defense of Freedom of Speech so as to be thought “tolerant” of what is in reality merely a barbaric sect. 

Neville Chamberlain in his well-intended, foolish politically correct belief that Hitler was a reasonable man who could be bargained with, allowed Europe to be plunged into our most destructive war yet rather than mobilizing to stop the entrenchment and spread of fanaticism.  Only time will tell if we intend to make the same mistake.


© Richard L Wise and RLWise.wordpress.com 2012tten permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Richard L Wise and RLWise.wordpress.com with appropriate and specific direction to the original content.

Neither a man nor a crowd nor a nation can be trusted to act humanely or to think sanely under the influence of a great fear. -Bertrand Russell

The financial meltdown that has resulted in a new American Crisis has engendered a pernicious panic of confidence. Now riddled with self-doubt, we assume, without analysis, that our system is fatally flawed and thus search for new ideas and a change in approach to replace all that which has served our nation so well for most of its 233 years. At the G-20 Summit that is concluding today, we hear the general consensus that unbridled capitalism has metamorphosized into something dangerous to the modern world; that the freedom afforded the financial markets has resulted in a “toxic cocktail” that has poisoned the economies of the world and that the blunt instrument of extensive government intervention, regulation and control of such markets—a panacea that has been the norm and which is being insisted upon by the other nineteen countries—needs now to be adopted globally; that is, here in the united States.

Living as I do in the quaint New England city of Salem, Massachusetts, I am most familiar with witch hunts and witch trials, and the well-intended, albeit wholly misguided, solutions that panic regularly engenders. As Marie Curie admonished us, “Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.” Thus, let us all therefore take a deep breath, gird our loins, suspend action and let reason intervene before setting in stone our future course.

First, let us ask ourselves what exactly caused this problem. Is there any doubt that the derivatives resulting from the securitization of real estate mortgages were the core problem? Had not these instruments existed, would there be any crisis today? So why would this discrete problem result in the automatic wholesale questioning of all of capitalism? At the very least, should we not first examine these derivatives to see if there was something peculiar and different about them or their treatment as opposed to their being indicative of a fatal flaw in all of capitalism?

The fact is: there is something different. The failures that led to this sub-prime mortgage crisis are, at their core, the same type of failures that caused the more widespread market crash of 1929. In both instances there was wild speculation in unregulated securities. As L. Gordon Crovitz pointed out in the March 30, 2009 edition of The Wall Street journal, FDR’s choices in the bleak days following his inauguration were extensive market regulation on the one hand, and laws mandating full transparency and disclosure on the other hand. In opting for Louis Brandeis’ philosophy that “sunlight is the best disinfectant,” FDR chose the disclosure route that took its form in the Securities Exchange Acts of 1933 and 1934. The result was that America’s capital markets led the world for the rest of the century in robustness, strength and prosperity. Innovation and entrepreneurship blossomed here like nowhere else in the world.

The problem with mortgaged-backed securities, however, was that they fell into a loop-hole in our system of transparency and disclosure, so their carcinogenic propensities could be hidden for many years. As Mr Crovitz points out, whereas the typical traded stock has tens of thousands of relevant data points that analysts use to make investment decisions, these derivatives have only around 600. With their flaws hidden from view, these instruments proliferated rapidly in the rich Petri dish of our financial exchanges.

So why not merely apply the same medicine to these new securities as that which worked so well with all others? What is the allure of abandoning our successful system and adopting the European system? Indeed, has anyone even asked if the underpinnings of the European system are at all consistent with decidedly American values, culture and approaches? Let me therefore first briefly look at the underpinnings of these two cultures.

The painful truth for Americans is that the two cultures are not compatible. The European model of governance arose within the context of monarchical legacies where businesses existed only with the “leave” of the government. Change was viewed as potentially dangerous and thus had to be supervised and “managed” by the sovereign with paternalistic care. As a consequence, the European business and governance model reflected more of what has been called a “mandatory” approach; that is, unless specifically permitted, everything would be prohibited. Further, it followed that corporations, as a creature of and deriving benefits—such as unlimited life, limited liability for owners, separate legal recognition—from the state, should in turn acknowledge and account for the needs of the society of which it was a part. This was particularly true for the large number of privatized corporations in which the State still retained a significant interest (through “golden shares”) so that the State could be assured that its social welfare policies would be followed.

Unlike the European models of government which evolved from constitutional monarchies, our system established a constitutional democracy. In doing so, James Madison and our other founders sought expressly to reject historical monarchical traditions that, originally at least, provided for the establishment of rules based on the naked preferences of a monarch, and to replace them with a tradition founded on the concept of a “republic of reason.” When one combines that major premise with our derivative traditions, such as all individuals being endowed with equal rights, and that “The history of liberty is a history of the limitation of government power, not the increase of it,” (Woodrow Wilson), we find our culture placing a high value on individualism, and on promoting freedom of contract and choice. In the business context, this resulted in the establishment of a legal environment that sought to enable and enhance whatever a business’ organizers desired to do, leaving to market forces the decision as to which entities would thrive and which entities, fail. Thus, U.S. law is said to follow an “enabling approach;” that is, everything would be permitted unless it was specifically prohibited.

Viewed in this light, it is easy to see why Europeans find greater comfort and harmony in more government regulation and control. However we can also see that this approach is incompatible with American cultural traditions. This, however, only brings me to the more painful question of which system is better.

Capitalism has long been a favorite whipping-boy for both the European elites and the politically-correct liberal left. From a social standpoint, it has little to commend it: success or failure under such a system has nothing to do with your lineage or family background. Pity or sympathy for those who fail is not a variable among its formulations. It ascribes all of the “fault” of a failure to the individual as it does with all of the successes. It gives us no set, pre-ordained formulations as to how to succeed. Under a capitalist system being granted equal rights does not give one any equal share of the country’s wealth; it is one’s talents and industry that are the primary determinants of one’s prosperity. Similarly, the guaranty of freedom of speech does not entitle anyone to have his or her ideas count as much or to be as listened to by our fellow citizens. Not all ideas worth the same.

Capitalism has as basic tenets the unity of responsibility with authority: if you have responsibility without authority, you have no incentive to stick your neck out, no reward for risk; and the spirit of entrepreneurship dies. If you have authority without responsibility, you have a fertile environment for moral hazard; such as a Congress. As George Bernard Shaw pointed out, “Liberty means responsibility. That is why most men dread it.” True, this system, as do all systems, has abuses and may becomes corrupted for a period; but that is why the tree of capitalism—to paraphrase Thomas Jefferson—must from time to time be refreshed with the economic blood of such economic tyrants.

In sum, like the hard and immutable laws of economics to which capitalism is wed, it is regarded as a dismal and unfeeling system.

In contradistinction to capitalist structures that highlight individualism and hold us both in control of and accountable for our destinies, European socialism and liberal political correctness serves to absolve us of our failures and “level” the playing field by putting control of our lives in a paternalistic government that denies our differences and seeks to ameliorate the “harsh” consequences of economic realities. Yet seeking to legislate away our differences and repeal basic laws of economics, ultimately can only have as much effect as legislating control of the weather. Facts do not cease to exist merely because they are ignored. We may seek to walk across a lake based upon legislation that it is now terra firma, but that will not save us from drowning in the attempt.

Men and women are markedly different, and this is a very good thing. It results in the whole being stronger and greater than the sum of its parts. A very good friend and colleague once pointed out to me that if women viewed sex the same way as men viewed sex, there would probably be no inventions and we all would still be living in caves. This may be somewhat of an exaggeration, but it is illustrative of the point. Similarly, my wife has delighted in the joke that the reason why God gave men brains was so that they would not hump women’s legs at cocktail parties. If you reverse the roles of “men” and “women” in that jest, the joke makes no sense and sounds like some banal, misogynistic ranting. Why? Because the sexes are markedly different. Similarly, each sex, religious or other group, culture, country, profession, and human being all have their own strengths, weaknesses, talents and foibles. Ty Cobb was a miserable failure as a human being; but he would be among our choices were we to put together an all-time baseball team.

Putting this in classical economic terms, each individual has the potential of realizing upon his or her own, particular comparative advantage. When such comparative advantages are ignored by mandating an artificial homogeneity among citizens, we all lose out on potential excellence that can advance our civilization, and we doom ourselves to mediocrity, and ultimately, to failure.


© Richard L Wise and RLWise.wordpress.com 2009. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Richard L Wise and RLWise.wordpress.com with appropriate and specific direction to the original content.

Perhaps it is only a matter of the weight of the additional years that I now carry; perhaps it is only the blessed respite from this bitter winter that has dogged us here in New England the past several months. But I found my mind wandering back to reveries of what at least seemed like simpler, better times as I began to sip my morning coffee and parse through the histrionics that passes nowadays for commentary and analysis from the right and the left by those who apparently have the monopoly on wisdom that somehow has always eluded me. Anyway, two remembrances floated forward from some reptilian part of my brain that set me to write these paragraphs.

The first thought was the echo of the words of Kurt Vonnegut’s, “Cold Turkey”, back in 2004: “There is a tragic flaw in our precious Constitution, and I don’t know what can be done to fix it. This is it: Only nut cases want to be president.” Now I did not vote for Mr Obama, but I was truly satisfied that this time I had a choice between two principled and honourable men—in stark contradistinction to having to choose between Tweedledum and Tweedledummer last time. And like most Americans, I accepted the mandate of The People and gave him my full support. He is entitled to have a fair chance to see if his new ideas and approaches can work to get us out of this decline and fall from grace that we have brought upon ourselves.

But my second thought had more ancient origins. In the latter half of the 1970’s when I was first admitted to the bar, the practice of law was still a collegial profession and not a pure business. Yet new and automated formulations on how to determine partner compensation were just coming to the fore and creating the only annual discord in otherwise harmonious firms. At that time, however, the partners generally accepted a governing principle that overrode any numbers that a computer might spit out; a principle that reflected the idealism, innocence and, hell, dare I say “purity” of a world now long since vanished. That principle was that in every just and well-governed firm, there must not be too broad a range between the lowest and the highest paid partner. Specifically, the ratio of the highest to the lowest could not be more than three or four to one.

This fundamental “governor” on the engine of compensation was deemed necessary to preserve the collegiality and esprit de corps of the enterprise; it was to signify to all that the individual was there to serve the whole and that no partner, no matter how talented, could be successful without his brothers, nor were any partner’s contributions insignificant. Alas, but that principle has now long been out of fashion.

What brought this recollection to mind was probably catalyzed by my taking my thirteen-year-old daughter to see a marvelous production of Thornton Wilder’s Our Town at nearby Gordon College. One cannot help but being awed by the eloquent power that overwhelms us from a stark and simple stage and the characters’ quiet, small town life. Its message is an application of Occam’s razor to life.

But back to my point. I recalled this “archaic” compensation principle when reading more of the recent debate on that aspect of Mr Obama’s economic recovery plan that seeks to “redistribute wealth,” “tax the rich,” or, on the more extreme end, to “impose socialism” on us all. Of course, with our having just emerged from years devoted to the golden calf of greed, avarice, and solipsism that led to our current debacle, such laments also immediately brought to mind the thought that “the Lady doth protest too much, methinks.”

So let us drop the emotionally-charged buzz-words that are adduced to tempt us into somnambulistic, automated reactions as opposed to the rigors of critical thought. No intelligent, moral capitalist operates his business other than with an overriding approach of enlightened self interest. Democracies such as ours require an educated populace that has basic, shared moral values. It is only in third world countries, failed states and dictatorships or oligopolies where the mean of the bell curve of wealth is skewed grossly toward the poverty level. I cannot believe that we desire to emulate those.

Maybe, just maybe, there was something to that old way. Perhaps there truly is a sinister evil that can destroy the vitality and fellowship of our American community if wealth becomes more and more polarized; if more and more of our fellow citizens find their tether to the American Dream becoming a mere tow line to the party barge of the privileged few.

Bertrand Russell observed that “In all affairs it’s a healthy thing now and then to hang a question mark on the things you have long taken for granted.” This, of course, would be painful for those on the right side of the bell curve; for it is indeed difficult to get a man to understand something when his income depends on his not understanding it. But the dream that a return to such long-forgotten values might achieve is more than worth the effort. Emerson said it best:

Each man takes care that his neighbor shall not cheat him. But a day comes when he begins to care that he does not cheat his neighbor. Then all goes well — he has changed his market-cart into a chariot of the sun.


© Richard L Wise and RLWise.wordpress.com 2009. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Richard L Wise and RLWise.wordpress.com with appropriate and specific direction to the original content.

THUS SPAKE CASSANDRA

February 22, 2009

THUS SPAKE CASSANDRA

Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action. -George Washington

A dear learned colleague of mine whom I respect highly recently sent me a link to an article entitled “The Growing Anger in the Heartland” (http://www.ourfuture.org/blog-entry/2009020819/growing-anger-heartland). In it, the author brings to light the growing consensus that “that we live in a country whose ruling class is deeply insane. Hardly a day goes by when you don’t see sociopathy packaged as Serious Opinion.” The commentary includes the clip of a passionate tirade of Lansing, Michigan Mayor Virg Bernero that “exemplifies a level of rage out in the country that isn’t being fully appreciated in Washington, D.C.”

This led me to reply to my friend with a story that my wife told me that I just do not know what to do with.  I recount it to you here:

We were watching the news one day several months ago, listening to reports of the hundreds of billions of dollars that were going to AIG, BOA, Citicorp, etc with apparently no fixed and clear standards, and of the heads of the Big Three automakers whose team few into Washington on separate private jets to state their case for receiving more tens of billions of dollars so they could continue their incompetent policies.

My wife looked up at me in disbelief and said “Well, I know what my grandfather Ellsworth would have said about all this.  He used to say it all the time.”

Ellsworth Brown, whom I regrettably did not have the pleasure of knowing, was a proud immigrant from Sweden who worked hard to care for his family.  A deeply religious man, he had no prejudices except against Catholics, and that was only based on his prescient belief that they permitted their clergy sexually to abuse children. (He accordingly reveled in the knowledge that his granddaughter—my wife—was born on Orangeman’s Day.) Ellsworth imparted his lack of prejudices to my wife who, for example, as a child in school did not raise her had when the teacher asked her class, as part of a discussion about civil rights, if anyone in their all white school had any black friends. When recounting the days’ events later at dinner, my wife’s mother laughed at having to remind her daughter about one of her best friends who was an African American. My wife’s response: “She’s black? Oh, yeah; I guess she is black.” She had just never been trained to notice.

Ellsworth was an imposing figure and carried himself as one would imagine of a quintessential patriarch. Standing at around six-foot-four, Ellsworth had “muscles on top of muscles” (as the inimitable Johnny Most used to describe the Celtics’ enforcer “Jungle” Jim Luscotoff).  Coming from hard-scrabble beginnings, he once found himself seeking a living in his youth as a punishing, bare-knuckle boxer of some ability, reportedly even having killed a man in the ring.  He also had a passion for the virtues of Freemasonry where he rose to the status of a thirty-second degree Mason and became a long time Worshipful Master of his Lodge.

Any way, my wife continued.  “My grandfather often said that what happens next in times like these is obvious.  The same thing has happened over and over again for thousands of years and there is no reason why this wouldn’t happen again now. When the leaders of a nation, both industrial and political, become so corrupt and so incompetent, the solution is easy.  He people rise up, take them outside, line them up and shoot them.  Done.”  I could not help but laugh, although it was a suppressed one; for the thought was indeed delicious and elegantly simple.  “Ockham’s razor,” I thought.

But that is not the story that perplexes me.  The one that I am having trouble with is this: Since chuckling over my wife’s tale, I have probably a score or two of times, when the same topic about the bailout has since come up, repeated it to professionals, professors, C-suite occupants, workers in the line, and so forth.  Without exception, everyone laughed; no one disagreed, tried to say what an absurd idea it was or objected in any way.  Indeed, the usual response was, “I wish I could disagree with that; but I just can’t”

So what the hell does this mean?


© Richard L Wise and RLWise.wordpress.com 2009. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Richard L Wise and RLWise.wordpress.com with appropriate and specific direction to the original content.

I confess to having a strong partiality for deductive logic. Conclusions that have been derived deductively are not refutable, save only if one’s main premises are faulty. Inductive logic on the other hand, like all axiomatic theories, may give us innumerable points on a curve so as to lull us into a sweet semblance of security, but is always susceptible to that one case that we have not as yet found that proves the rule. Moreover, it is based upon that most fundamental of logical fallacies; namely that of “post hoc, ergo propter hoc” (or, for those of you disdainful of classical Latin, “after this, therefore because of this”). For those reasons, in structuring any analysis I endeavour to tarry as long as possible in that perfect, halcyon tranquility of the analytic a priori, before venturing forth into the unknown, treacherous shoals of those Sirens who beckon unsuspecting thinkers with the temptations of their “scientific method.”

It was with this approach in mind that I began to wonder what exactly was entailed in our government’s concern that the money-centered institutional banks together with the Big Three Automakers “had” to be bailed out with hundreds of billions of our tax dollars. Those who have written on the subject begin and end with the question of when it is that a firm becomes “too big to fail.” Whilst defining where on the spectrum of size and importance an enterprise crosses that gossamer line of infallibility is a subject that I intend to explore another day, I am prepared, for purposes of this exposition, to deal with only the obvious, undisputed cases wherein we may apply by analogy the Supreme Court’s “stand-up-and-be-counted” definition of pornography to this situation: we may not be able to define it, but we know it when we see it. Rather, my concern is with the implications of a firm being “too big to fail;” implications which have been almost universally ignored, but which, like a two-ton, long dead elephant in the middle of the living room that everyone is trying to ignore, is beginning to stink.

For the standpoint of purely normative logic, therefore, what then does it mean to say that a firm is “too big to fail”? What do the attributes of a “failure” entail? Why and how did our society provide for the firm to achieve such status? On the macroeconomic level, such behemoths have become so inextricably intertwined in the very functioning of our economic structure that their sudden demise would lead to a chain reaction of failures and, ultimately, the collapse of the system itself. At some crucial point in their development, the nurturance provided by our capitalistic and governmental structures made them peers of those systems, with the resulting consequence that they, in turn, developed their own, independent gravitational sphere of influence. From that point forward, a symbiotic equilibrium began to develop with their environment: the larger they grew, the more they became a source of economic prosperity off of which other enterprises could feed, and this added prosperity in turn, because, they were a principal beneficiary of the political-economic environment, increased the prosperity, power and influence of these multi-national titans.

But just as a black hole warps the space around it, so do these “black holes” of economic power and social influence warp the normal rules that we take for granted and which are applicable to small to medium sized enterprises. That is also why we have different rules for our governmental units than we do for private firms. By way of example, at the beginning of the twentieth century, minimum wage laws and laws limiting the number of hours that women or children could work were held to be unconstitutional violations of the right of freedom of contract. But by 1937, however, it had become clear that the rapid and unbridled growth of the power of the barons of industry effectively had eliminated any meaningful right of “free contract” such that the new facts of economic life warranted the repudiation of the old law. Thus it became appropriate to burden industry with minimum wages and maximum hours to counterbalance the unintended economic power that our system had enabled them to acquire. Clearly, neither any American nor any of its leaders foresaw or intended industry to obtain such power; but we did encourage and intend to create an environment that would reward excellence, punish incompetence, and provide a comparative advantage to economies of scale. The adverse effects from their accumulating too much power was just an unintended consequence, although one that, in hindsight, seems obvious.

So it is with these behemoths that have grown to the point of being “too big to fail.” As with their early twentieth century ancestors, their status in our society may not have been the result of any intentional plan on their part, but was nonetheless a direct result of their having taken advantage—albeit properly—of the nurturance that our society had established. In this sense, the result too was foreseeable. So now we must ask the next question: With their having nonetheless grown in power and influence to the point whereby society cannot permit their demise so that special rules become applicable to them, have not the rules also been altered with respect to times of plenty? Putting this question another way, with their having chosen—intentionally or not—to have crossed the Rubicon of size and power so that they are so infected with a public interest that their failure is no longer a private concern, have they not also forfeited their right to claim to be governed by private company rules in general? That is, as their fate affects us all and their fortunes must be supported in lean times, should not the benefits of their success be shared as well in times of bounty? Should not as well their management be answerable to all stakeholders in the enterprise, rather than only to those transient investors who happen to hold shares of stock at any given time?

Think, too, about the fact that the Fortune Global 100 would rank between the 32nd and the 96th largest countries in the world if their revenues were simply called “gross domestic product.” Yet these companies’ governance structure is effectively a dictatorship with legal obligations only to serve the interests of a small stockholder oligopoly. Is such a governance structure for any political and economic organization of such a magnitude and influence proper in a civilized and democratic society?

R.L.W.


© Richard L Wise and RLWise.wordpress.com 2009. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Richard L Wise and RLWise.wordpress.com with appropriate and specific direction to the original content.

 

It’s foolish for society to cling to its old ideas in new times, just as it’s foolish for a grown man to try to squeeze into the coat that fit him in his youth.—Thomas Jefferson

             The American Revolution was more than a mere fight over who should rule this country.  It was a rejection of the principal that people should be governed based on the naked preferences of a monarch; that our rights and actions should be permitted only by leave of the ruler.  In its place, our forefathers established a “republic of reason,” true to the Lockean philosophy that it is best in most matters for free men to “wage their own law” with respect to their activities.  Our culture came to place a high value on individualism, and on promoting freedom of contract and choice.  In the corporate context, this created a political environment that sought to enable and enhance what a corporation’s organizers desired to do, leaving to market forces the decision as to which entities should thrive and which entities, fail.  In short, everything would be permitted unless it was specifically prohibited.

 

            There have been few, major modifications to this weltanschauung since that fateful break in 1776.  Perhaps the most famous such change was the New Deal Supreme Court’s decision in the 1937 West Coast Hotel case.  That case overruled the fourteen year old precedent of the Lockner Court’s holding that minimum wage legislation for women and children was an unconstitutional violation of the right of contract, as it imposed an “above market” premium to be paid to labor.  Implicit in this reversal was a recognition that, in modern times, the “status quo” had effectively eliminated an individual’s ability to bargain equally with big business.

 

            However little change has been made to our corporate governance structure and culture since the first corporation, the East India Company, was formed on December 31, 1600.  The primary objective of a corporation, and hence of its directors, has been and still is only to maximize profits and shareholder value for shareholders.  (ALI Principles of Corporate Governance)  In contrast, our European counterparts follow a “stakeholder” model whereby corporations must recognize their interdependence with suppliers, labour, banks, government and all others who have a “stake” in the enterprise.  Under this European model, the board of directors is chiefly responsible for monitoring managerial performance and achieving an adequate return for shareholders.  (Organization for Economic Co-operation and Development Principles of Corporate Governance) 

 

            As recently as this year, our multinational corporations continued to bristle at the idea of any government intervention into their rights of “free enterprise” and self governance.  Laws like the Sarbanes-Oxley Act were viewed as expensive acts of officious intermeddling in what were essentially private affairs.  It was asserted to be a private matter of contract—a view that was subsequently upheld by our courts—that the New York Stock Exchange could pay Dick Grasso $190 million for acting as chairman of an eleemosynary organization.  It was asserted to be a private matter of contract that the giants of the lending industry could charge consumers twenty to forty percent interest on credit card debt.  And yet no one has deemed it proper to ask whether the rules and principles that worked so well in those quaint and slower-paced days of the seventeenth, eighteenth and nineteenth centuries fit the demands of the twenty-first century:  a century where the 100 largest of our behemoth multi-national corporations have revenues that, if called “gross domestic product,” would have each of them ranking in size between the thirty-third and the ninety-sixth largest countries in the world.

 

            Then, and of a sudden, the market forces of “creative destruction” that the captains of industry lauded as vouchsafing for the integrity of the capitalist system took their hold, and these giants began to stumble and fall.  We began to hear cries of “too big to fail” and how the survival of these institutions was so intertwined with the very stability and financial health of our society, that unlike consumers or all other small to medium enterprises, it was a matter of governmental priority that they be bailed out, and that their losses be borne by the public.  AIG, Citigroup, Goldman Sachs Group, JPMorgan Chase & Co., Wells Fargo, GE Capital, and others, and now General Motors, Chrysler and Ford lined up at the public trough for monetary sustenance. 

 

            I do not argue that such assistance is not now prudent.  Clearly, the essential, intrinsic part of our basic economic structure that these institutions play requires their being healed.  But what I do ask, is that if they are so affected with a public interest, was that not also the case before they fell into trouble.  And if you answer that question in the affirmative, does that not mandate that such institutions should be required to serve all stakeholders, rather that merely those who from time to time buy their shares?

            The importance of a properly functioning governance system, both for bodies politic and corporate, cannot be overstated.  As noted professor Mauro Guillén of the Wharton School has pointed out, “a poorly conceived [governance] system can wreak havoc on the economy by misallocating resources or failing to check opportunistic behaviors.”  This current crisis was the result of both of those errors.

            In 1624, John Donne presented us with the truth that a society is at its best and its worst, an integrated whole.  In a certain sense, we are all partners in this American experiment; all men and businesses and corporations affect, benefit or diminish each other because they all are “involved in mankind.”  Is this not thus the time to cast off our blinders of greed and revisit our corporate governance system to recognize the interdependence that businesses have with all of us, and to constrain their decision-making accordingly?  When the giants began to die, “the bell tolled for us,” and we answered its call.  Should they not similarly be required to care for society’s well being in times of plenty?


© Richard L Wise and RLWise.wordpress.com 2009. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Richard L Wise and RLWise.wordpress.com with appropriate and specific direction to the original content.

 

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