Life is full of pleasant things, regularly coming at times when they are least expected. Today just so happened to be one of those days. As I went out to check the mail, I noticed that my edition of The Week magazine had arrived. And there, on the cover, was a splendid picture of people rioting around the idol (i.e. the statue of the bull) in front of the New York Stock Exchange. The people with their fists in the air, shouting at the symbol of swinishness, pulling it down from its pedestal in a way reminiscent of the famous topple of Saddam’s statue, and the words “Populist Uprising” gracing the bottom of the page. The image beautifully captured the sentiment, and the words accurately reflected the image. It was spectacular in the truest sense of the word
Unfortunately, as with many articles of this nature, my joy was quickly and significantly diminished. The story was on page 18 in the Talking Points section and it only consumed the larger part of the upper-half of the page. That aside, the article was concerning to the $500,000 salary cap Obama has issued for all bank CEOs to receive per-annum. While I should have paid more attention to the cover of the magazine (which has the words “the new, $500,000 limit on CEO salaries” as the tag line), I figured that the story would deal with… well, the overall uprising of populism.
It was the earlier portion of January, 2008, when I began speaking more about populism, and in particular what I saw as the rise of populism in
I still stand by my predictions, and I believe most of the indicators are pointing in that direction. Sadly, I don’t see this rising tide lasting too long before it breaches.
People are angry, this much is sure. But they either don’t really know why they are angry or they are taking it out on the wrong things. A casual conversation with Johnny Q. Public will get you an earful of emotionally charged tirades concerning the salaries of CEOs, how Scooter’s Hardware is going out of business because they can’t compete with Wal-Mart, and how the average Joe just can’t make the kind of living he used to with a hard day’s work. In all likelihood, you’ll even hear them talk about the hucksters and swindlers in Washington and Wall Street.
None of this is necessarily problematic. What is problematic is how this tirade is followed up with the same old song and dance that got us here in the first place. The very same person will go to the grave defending state capitalism, quoting “the ole Gipper” by saying “Government is the problem.” This person may be on their way in (or even out!) of Wal-Mart, while Scooter’s is just one mile up the road. He’ll stand by the wage-slave concept, decrying a Living, Family, Just Wage or vocational organizations as socialism. And he’ll probably tell you (depending on how the next few years go) that all we need to do is get more “conservative” Republicans like Sarah Palin in office to begin “taking care of business.”
If you haven’t been formally introduced to this person, or the mass of individuals he happens to represent, you haven’t been in the
This isn’t to deny the ray of light peaking through the clouds. Not at all! It is simply admitting that, as of yet, it is little more than a sunbeam piercing through the clouds of convention tomfoolery. It’s a mere acknowledgment that the masses aren’t as angry with the socio-political apparatus as they are with who may be in control at the time. It’s a blame game, with all their bets being on top-down measures to make all the difference.
Yet even here it is not entirely doom and gloom. This underlying sentiment is real, it is emotional, and it is angry. What is required is good old distributist education. While a large portion of the populace may be experiencing frustration with the status quo, they need to realize that the answer is not found in merely tweaking the status quo, or even crossing their fingers in hope that those on Capitol Hill who just so happened to micromanage the status quo will make all the difference.
Distributists, then, are living in a time of great opportunity. People are dissatisfied, and they are willing to listen to “new” ideas. Better yet, most do not realizing that those “new” ideas are far from being “new.” Capitalists have had their chance. Socialists have had their chance. Now it is time for distributists to have their day in the sunbeam.
How long this uprising lasts is unknown. But it would be foolish not to take advantage of a brilliant opportunity to direct this populist moment towards a more humane political economy.
Read more...There are two strains which are not merely frequent but rather ubiquitous in society and business today. Both are largely similar in their effects, and fit neatly into right wing and left wing ideologies.
In the first place, it is incumbent to focus on the faults of business, since leftist views are in reaction to it, while right wing views are in spite of it. The first is the immoral practices of businesses which are technically "legal". They hit a wide variety of issues, from advertising to payment. Advertising is perhaps the most immoral and the greatest corrupter of social morals and practices. An example which sticks out in my mind clearly is that of Axe body spray. I doubt I have ever met a woman who liked the smell, yet every adolescent of today's generation wears it, because several years ago they came out with a commercial where a man wearing that spray is riding in the elevator and has women jumping all over him. The message is clear. The use of sex in general, and the pornographic nature of advertising in particular has done more to promote promiscuity amongst the youth than Kinsey could have hoped to do with the publication of his two books on sexuality. This is an example of where "market forces" promote immorality for the sake of selling a product. This is an area where the market has failed morally while succeeding materially. It sold the product, but to do it engendered sins against the 6th and 9th commandments.
Another area where advertising promotes immorality is a lack of thrift through social obsolescence. Peer pressure is a powerful tool, created by advertising, that forces people through fear of being blackballed to buy a given product, even though they don't need it, even though their money could be used for the benefit of their families elsewhere, or for suffering members of society. Examples could be multiplied ad nauseam, but to stray too deep into an analysis of advertising will take us away from our overall point.
Businesses also use a tactic which is called planned obsolescence, by which products are made either defective or poorly so that they will break down within a short time in order that you will need to buy another one. They might also be made so that successive upgrades will require you to replace entirely an otherwise usable product. The immorality here is both a lack of thrift (as with social obsolescence) and also a devaluation of human work and of wealth. The things we have no longer have value in as much as they are made by ourselves, our neighbor, they are not heirlooms to be passed to the next generation but rather to the landfill or the ocean.
Another area is the concentration of the majority of wealth into a limited number of hands. This has been decried since Capitalism's inception, and is usually countered with the rhetoric that the wealthy pay most of the taxes. Yet, if more people produced their own wealth not only would there be less need for burdensome and expensive government social structures, but the populace as a whole would have the ability to shoulder a just tax that could cover the legitimate expenses of government. What occurs as a consequence is the wealthy wield an inordinate amount of power within a polity, and create laws to their own benefit. So much of environmental and social regulation for example is sponsored by big business because while they can shoulder the costs of higher inspection fees, the smaller entity, the family owned business can not and that form of government regulation allows the capitalist to eliminate competition he doesn't want to deal with.
Another area where the inordinate power of wealth creates unjust competition is in underselling and unlimited advertising. Through this vehicle the family owned entity doesn't stand a chance, even though it can provide in most cases better services or produce better products. Lastly, since wages are the most controllable expense in business, the push is always for minimizing wages not increasing them, and as such the wages of the average worker do not rise at a rate consummate with inflation, while wages of CEO's and those who don't create the wealth rise to a level 30 times that of those who do create the wealth.
The reaction of the left on the other hand, doesn't seek in the slightest to amend these evils. Instead, it seeks to assuage the symptoms of the problem. So when the worker is paid badly, the left proposes continuing to pay the worker badly, but give him money to go on vacation, or to give the worker so much paid sick time. The left says we will make the employer pay for your health care. All of these things would be anathema in an ownership society, because they represent payment for work not rendered.
The left promotes unions as the answer to big business, but these unions impart no skills to the workers to increase either their abilities, or to advance them in any means of ownership. Rather, unions are a vehicle for social discord, advocating strikes and lawsuits to pursue what are ultimately its own interests, while workers' money taken for dues is sent to their favorite political guru. At the end of the day big business remains big business, while the plight of the worker might improve marginally, after attorney's fees and political contributions have been paid out.
The left also promotes programs which pay the worker (again for work he did not do) as a means of helping the little guy. The right does the same thing but does so as a boost to big business. The left suggest taxing the public to give to the less well off, the right proposes it to build a stadium, or a Home Depot, in order to bring tax revenue into the city's coffers.
While the right promotes a social Darwinist model for business, the left promotes what amounts to a promotion of theft by another name. In both cases, work in and of itself is devalued, and what fails to impart value avails little for man's ultimate end, which is not a 401k retirement plan but the heavenly 401k promised in the Bible: salvation.
Thus helping people stay in their houses, or redistributing the wealth, is not sufficient to create morality in the business world. Increased stock options and dental plans impart no more value to the goods proposed for our consumption or the work we do marketing them. Rather, the vehicle to promote increased morality in society is increased ownership of the means of production.
This should be a common sense approach. People take better care of their homes than rented ones, they take better care of their gardens than they do the gardens in a public park, and for good reason. They do not own them. People look after their own. Thus, if a man's livelihood was dependent upon a certain trade, he is going to do more to satisfy his customer than the large corporation whose bosses are more interested in their time share sin Tahiti than helping those who buy from them.
However creating an ownership society is more difficult than merely establishing new government policy, or expanding co-ownership model cooperatives. It is establishing a conversion of society back to the idea of work, of true work and its benefits, as well as its worth. Secondly, people need to recognize the freedom which comes from owning their own work and their own production. Then with those factors in place can a situation where conditions favorable to Distributist ideals can take root. Principally, we need to convert people away from the idea that our Economy needs to double and triple in order to be prosperous. Our opponents are replete with charts and mathematical concepts showing how many "results" (hoarded up in New York and LA) result from Capitalism, in an effort to strong arm the critic into submission. However, it is shifting the burden of proof. Capitalism's claims to success are based on mere production and wealth. The results have no relation to people, to society, to cultural morals or revealed religion. The economy does not need to grow significantly every year and hit targets pre-set by market gurus (all of whom have been wrong recently) in order for wealth to be created. A sufficient amount of wealth can be created to support the needs of society if it were marked by the characteristic of ownership of private productive property.
The goal of any healthy society should be faith, family and the common good, not net worth points or the extreme individualism promoted by the market. This is why I consider the activism and energy spent by pro-family advocates in National elections to be rather vain and worthless. At the end of the day anti-family initiatives live on stronger than ever and will continue to do so until the social roots by which moral evils are fought have been replanted, and a healthy society of family life through ownership and private production of wealth by small units comes again to predominate the scene. Social conservatives who embrace libertarianism are kidding themselves just as much as left wing activists for the poor or the worker are kidding themselves if they think socialism will protect the worker.
When the tide goes out, you get to see who's been swimming naked. --Warren Buffet
Conservatives of a certain school are found of speaking of the moral hazards of a welfare system. Living on government handouts creates a dependency, a servile status that weakens the human spirit. But the same conservatives often abandon this rhetoric when it comes to bailing out big business, a process that happens repeatedly. At this point, liberals chime in with “moral hazard” arguments of their own.
The problem with both of these arguments is that they are both true and both miss the point. Chronic welfare does indeed create a chronically servile population, and bailing out the rich does indeed create reckless behavior in the market. But isn't it a curious thing that both sides object, and object with objectively good arguments, yet both sides encourage the hazards, each in their own way? What is going on here? Why do we have situation to which nearly everyone objects and to which nearly everyone acquiesces?
Periodically, there are campaigns to limit the extent and generosity of the welfare system. The most recent “reforms” have reduced welfare and, in the process, have destroyed what little remained of the family structure of many poor people. Those who tout “family values” have made it impossible for families by forcing mothers into the labor market at subsistence levels. Still, one can understand the frustration people have with seeing large numbers of unemployed people living at taxpayers' expense. The campaigns to limit big-business welfare have been less successful, and when the irresponsibility of the rich puts the whole economy at risk, the government does not hesitate to act, and act in ways and amounts that dwarf the paltry sums given to the poor.
But if we look at the history of these questions, we find something rather remarkable: welfare, whether to families or businesses, is co-extensive with the capitalist system. Capitalism is the one system which has a fixed starting date, 1535. This is the date that the monastery lands (and later the guild lands) were seized by the British Crown and transferred to private owners, usually for pennies on the pound, immediately creating a new class of capitalists with decisive power over economic and political affairs. One of the immediate results was a collapse of wages and a huge increase in crushing poverty. In order to prevent social chaos, it was necessary to establish the “Poor Laws,” the foundation and prototype of modern welfare systems. At the same time, the Capitalist system, which begins with an act of government violence against traditional rights, sustains itself only by granting greater and greater privileges and subsidies to the rich. Indeed, by 1776, Adam Smith devotes 3/4ths of the Wealth of Nations to documenting, in excruciating detail, the amount of subsidy and privilege given to the “mercantile” class.
There was an attempt to reform the system. In 1832, the liberal party gains control of England and attempts to impose a laissez-faire system of pure capitalism. These efforts continue until the long depression of the 1870's, and collapse entirely with the Great Depression of the 1930's. Since the Second World War, capitalism has achieved a fair degree of stability by a combination of welfare systems, one for the rich and one for the poor. But that system itself may now be on the verge of collapse. We are coming to the point where the moral hazards, on both sides, outweigh the financial benefits, benefits which are evaporating before our eyes. But this is not news, but the entire history of capitalism, a system that has never been able to stabilize itself (see Does Capitalism Work?) Indeed, all attempts to return to the purity of laissez-faire have resulted in the opposite: a growth in government power and debt (see Hayek's Super-Highway).
The dual problem of capitalism was noted by Hilaire Belloc in The Servile State. Capitalism creates uncertainty for both workers and investors. The former lose all bargaining power in the matter of wages, while for the latter, competitive anarchy imposes unacceptable risks. The result is a compromise, the Servile State, which guarentees both sides, more or less. This is system is the opposite of capitalism and the essence of oligarchy. Thus capitalism, a system that claims to be based in liberty, inevitably leads to its opposite, servility on one hand, and aristocratic privilege on the other.
Which brings us to Bear Stearns. Ben Bernanke has received any amount of criticism for bailing them out, but in fact he is just doing his job, and the system would collapse if he did not. It may collapse anyway, but at least he has bought some time to see if there is a way out. Up until now, there always has been a way out, more or less. When something has threatened the system, the government has stepped in to bail out the miscreants. The list of bailouts is impressive: Long-Term Capital Management, the Chrysler Corporation, the Savings and Loan banks, etc. So how do these institutions become so important that their health is a matter of concern to the government?
In the case of Bear Stearns, the Fed reasoned that its failure would presage a failure in the entire credit system, and they were likely correct in that judgment. To take just one area, derivatives, BSC was carrying derivatives with a notional value of $15 Trillion. That's “trillion,” with a “T”. That's more than the entire GDP of the United States of America. Of course, the notional amounts do not represent the actual amount of risk; a derivative links its holder to the risks and rewards of owning an underlying financial instrument without actually owning the financial instrument. Holders of derivatives are betting on small changes in the value of some underlying asset which they do not actually own. Notional amounts are more a measure of the extent of risk rather than the amount; you get such large numbers because a large number of investors are placing bets on the same underlying assets. The actual amount at risk may be only a tiny fraction of the $15 Trillion, but it is a risk which spreads through the entire system. Now, consider that the entire derivatives market exceed $500 Trillion. A failure in one dealer might collapse the whole market. Now, add to that the holdings in sub-primes and other risky instruments, and it is not hard to envision a failure in BSC leading to a failure in the economy. BSC cannot cover their risks; they are “swimming naked,” to use Warren Buffet's colorful term. Therefore it is necessary to “socialize” their risks, which is a fancy way of saying, “let the taxpayer take the risk,” which is to say, “Socialism for the Rich.”
Capitalism has always led to its opposite: socialism for the rich and servility for the poor. This is its entire history. It cannot sustain itself without the combination of socialism and servility. It is itself a moral hazard, and there is simply no use for either side to complain about what is an historical fact.
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