Steven Douglas Maloney

Archive for the ‘Commercial Republic’ Category

I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms — Alan Greenspan (2008)

 

The outstanding discovery of recent historical and anthropologicalresearch is that man’s economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social cliams, his social assets. He values material goods only in so far as they serve this end. Neither the process of production nor that of distribution is linked to specific economic interests attached to the possession of goods; but every single step in that process are geared toward a number of social interests which eventually require that the step be taken. These interests will be very different in a small hunting or fishing community from those in a vast despotic society, but in either case the economic system will be run on noneconomic motives.”  – Karl Polanyi, The Great Transformation (1944)

I’m not an economist, but I believe I have heard repeatedly that the reason the Federal Reserve was reluctant to do an emergency rate cut at this point was because rates were so low, if they cut them anymore, they won’t be able to use it as a tool later because there will be nothing left to cut.  Now comes news today that the Fed Unanimously voted to cut the interest rate from 2 to 1.5%.  In terms of “solving” the financial crisis, it seems to me that we are running out of bullets.  Anyone else feel the same way?

I have sometimes bristled at the arguments presented by Geroge Will, and his dig at Obama seems particularly unneeccessary in his piece, nevertheless, I find myself very sympathetic to his arguments today. A must read in these troubled times.

The most important part of the piece is the linkage between economic regulation, executive power, and the clueless nature of the legislature.  As economic regulation grows, it strengthens the hand of the executive. It does this for two reasons.  First, the bureaucracy is primarily, though not solely, under the thumb of the Executive branch.  Secondly, and more importantly, because when bureacratizers are asked to use economic rationality to regulate means-ends calculations, it is desirable that the ends are as clear as possible, and the branch that can define the ends most clearly is the Executive since the executive speaks with one voice.  The bilout represents a triumph of the executive over de-centered economic rationality – economic decisions whose ends are freely chosen by the individuals who choose them based on the incentive structures they find around them – which portends the destabiliztion of the commercial republic on both of its axes.  The constitutional arrangment of our society that free commerce creates and the arrangement of separating and balancing powers between the institutions of government may find themselves altered so substantially by this “recovery” process, that they will be too far gone to recognize on the other side.

The Washington Post is up in arms about the truth with an article about falsehoods perpetuated by both campaigns and the EJ Dionne question “Does the Truth Matter Anymore?” Candidates poison the information market for their own gain, embarrssing themselves with such nonsensical logic as Republican Strategist Mr. John Feheery’s analysis in the article:

“The more the New York Times and The Washington Post go after Sarah Palin, the better off she is, because there’s a bigger truth out there and the bigger truths are she’s new, she’s popular in Alaska and she is an insurgent,” Feehery said. “As long as those are out there, these little facts don’t really matter.”

I do regret missing that day in philosphy when we examined the relationship between the varying sizes of facts. Of course, the reason why men and women of great accomplishment are forced to engage in such mind-numbing behvaior every election season (and it would be impossilbe to say that anyone who ran for President in either field was not a person of remarkable accomplishment) is because the competition for elective audience demands it.

No matter that a free and independent mind should rather incur physical pain than say such stupid things without accepting correction and apologizing, the core problem is the Mr. Feehery is, in his own perversley put way, telling the truth about what does and does not work in democratic politics in our age.  What he does for a living works. And before you start thinking up examples of people victimizing others that “work” for the vicitimizer like a sotry about an excellent bak robber or some such thing, you can spare me right now. It seems quite obvious that there is a “pull” in the information market for such lunacy, and Mr. Feehery and his colleagues and oppostie numbers on the Democratic side are as much rushing to fill demand as they are to create it. It is way harder to create demand for something than it is to supply something that people already want.

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The Times Higher Education has an article from a part-time instructor teaching at Harvard. What I found interesting about the piece is not the specific claims of Mr. Summers’ discontent, but the general nautre of them. The discontent expressed is with “the game.” The fact that graders, students, administrators and parents all appear to be, in ever-growing numbrs, caught up in the game of educaiton and social status rather than the educating, liberating, self-strengthening character of what I would think most sincere university teachers would call “real education.” If one flips through the pages of the classics on education, from the Greeks to Locke and Rousseau, you will not find anything resembling the general aim of education in our nation today – the conferrence of particular status. This probably has, at least in part, to do with the fact that status was fixed in the “olden days,” which is probably not a desirable state of affairs either. Is there anything that can break the spell? I often doubt it. There has never been some golden era where most people loved learnign for their own sake – perhaps Mr. Summer would feel better comforted with a Strauss-like outlook that we should just make the world safe for our own kind and let the shallow bury the shallow… and pay for our private universities, art museums, and symphony halls. We should also remember that people are not often as serious for caring for themselves as young adults as they are when they get older and confront their responsibilities on more serious grounding. I would imagine that many of my high school and undergraduate (and probably even graduate) would be shocked to know just how much of the ideas that I said I wasn’t interested in or did not like have come back to me as important later in life, and have been absolutuely essential in my pursuit of doing the right thing in my own life. As teachers, we don’t get to witness these critical moments in the ife of our students, but I have a faith that they happen far more than we would dare to expect.

UPDATE: I’m an idiot and I forgot to link the piece to “The Wire” Season 4: where Former Major Colvin learns that troubled kids in the Baltimore School Pilot Program he is working on in retirement are learning in school, but what they are really learning is how to “game” authority.

I would say that one of the reasons that the entertainment industry tends to be left-leaning has nothing to do with hideous motives, but from the fact that the left tends to have stories about human life that have a compelling, sweeping dramatic arc that a radical free market capitalist just can’t tell because he or she would think it wrong to rpesume they know the “right way” that human story arc ought to be told or how it should end.

This flashed through my mind while I was watching the trailer last weekend for a forthcoming Greg Kinnear movie, called Flash of Genius. Since I was then subjected to Mama Mia! following the trailer, I had plenty of time to continue my thoughts.

Flash of Genius is about a college professor who invents the modern windshield wiper and, as it turns out, they steal his design and do not credit him with his invention. So he sues them by himself, acting as his own counsel. My first reaction to this was that it was one of many “proudly leftist” message movie trailers we saw, and that the Hollywood that was too scared to give Brokeback Mountain a Best Picture Oscar was striking back now that their critics influence appears to be receding.

My second reaction was to think that the film, and films like it, always seem to be intended to be anti-Hayekian or anti-Schumpeterian (I cannot tell which, probably neither are specifically targeted at this point, as the tropes are quite old now) stories about how unfettered capitalism, its powerful organizations with greedy, soulless elites plunder the little man and the little man fights for justice when justice wants to abandon them. We root for the person crushed about to be crushed by capitalism, and at the end of the day, we cheer for Mr. Little Guy.

However, my third reaction (Mama Mia! was not Indiana Jones IV bad, but close, so I had time) was is that really what stories like this prove out? I still think its intended as the trope above, but the story actually seems to vindicate (I’m assuming the little guy wins) a strong exceptional person who contributes substantially to the specialization of knowledge, is resourceful enough as an individual to fight for what he is rightly entitled to, is a college professor (Hayek and Schumpeter believe that intellectuals are hugely important for social order), and ultimately, since the state has the right property laws already on the books and enforces them correctly, the resourceful, well-developed individual defeats the once-great corporation who no longer is populated by the great but is a shadow of its former self because it leans to heavily on its ability to project power to get what it wants rather than being innovative and resourceful by its own devices.

I believe the second story to be the more accurate life-lesson, but I have a feeling the movie will try to pass off the first version of the story – presumably because praising the power of resourceful intelligentsia does not put enough people in seats. Still I wonder what people think about message movies like this if we make the leap and treat their messages as worth considering.

[youtube = http://www.youtube.com/watch?v=Cv-8FSGiOlQ]

The Washington Post reports that the Inspector General’s report indicates that high ranking Justice Department officials routiney violated civl service and Federal ethics standards in their hiring and promotion practices. I have two initial reactions to this. The first is that the impropriety of the Machiavellian literalness (see Harvey Mansfield’s books on “Taming the Prince” and “Manliness” to see the intellectual underpinnings) of this administrations governing philosophy has ecome sickeningly clear. Second, it would be nice if the Washington Post article would refer to what the report is and who wrote it somewhere within the first four paragraphs of the story as opposed to referring to it as “a report” for the first half of the article.The online version could really stand to lik to the actual report since it is available to the public.

For a direct link to the PDF of the report, click here.

The Federal Deficit has skyrocketed. The Vice President was on record as saying “deficits don’t matter.” I suppose we will find out.

Do believers in the unitary executive believe that the Constitution somehow supercedes the Congressional power to designate particular bureacracies and their activities?  Here’s what I don’t get: I do not see how the Unitary Theory of the Executive makes the President the unrestricted “boss” of the whole executive branch without invalidating the bureacracies themselves.  If people have to do whatever the President orders regardless of what Congress thinks of such behavior, then the particular bureacratic designations of different bureacracies by Congressional Act is just some non-binding nicety that the President does not really have to follow.  If everyone simply does what the President tells them to do, it is simply a matter of personal choice for the President that the FBI looks like a recognizable version of the FBI, or Treasury, or OLC, or NSA.  If this is the case, what is the point of the Congressional acts creating bueacracies?  What would it mean, if anything, for Congress to withold passage of legislation for the creation of a bureacracy if the President can simply command existing bureacrats to do whatever the President orders, so long as no laws are violated, anyway?  What I mean is that if Congress creates an executive agency, it seems like they are creating a particular agency with particular functions rather than creating some alternative type of agency which their legislation does not create. In doing so, they seem to in effect be setting the rules of behavior for what the agency can do, and by implication cannot do.  If the Unitary Executive Theory believes that all executive activities are truly “fully vested” in the President alone, then it seems to me that the Cognressional acts that create “Agency X (and “Not Agency Y”) cannot be meaningful because if creating “Agency X” comes with no guarantee that you have also created “Not Agency Y,” then the entire reating of bureacratic agencies seems to be nonsensical.

Let me put it in an absurd example to help clarify what I am asking. If Congress creates a Federal Bureau of Investigations and specificies generally what the stated hopes and positive benefits are for creating the agency, and that the do so knowing that they are authorizing payment forthe FBI and that if it is not a “plus value” use of tax money on the whole, voters will get upst with them.  According to the Unitary Theory of the Executive, if the President deemed it acceptable for all FBI employees to play basketball games all day, every day, Congress has no authority to intervene. It is on the President’s shoulders to decide what count as prudent and imprudent use of his employees time in executivng the laws.  So, If any federal bureacratic agecy can be turned into a pick-up basketball league wihtout Congressional intervention, what’s the point of creating the agency in the first place?  I fear the answer is that the legislature has to trust the executive, but I am suspicious that there is some stronger argument that I am missing. I also suspect that the trick in selling this legal theory in argument rests largely in hoping that no one notices the massive amount of esirable political relationships that are desirable.  I wish I could pose the question more clearly, but maye that’s part of the reason I am puzzled. Any help out there?

My friend Andrew hates when people misuse the term “catch-22.” So I hope I am using it correctly here to describe Charles Lindblom’s argument about the relationship between market economy and democratic rule. Lindblom writes:

No democratic nation state has ever arisen anywhere in the world except in conjunction with a market system -surely a historical fact of enormous importance. But, according to my argument today, no market society can achieve a fully developed democracy because the market imprisons the policy-making process. We may be caught in a vise. For minimal democracy, we require a market system. For fuller democracy, we require its elimination. But its elimination might pose more obstacles to a fuller dthan does its continuing imprisoning of policy making.

Fully developed democracy thus seems to require a component that negates its own possibility.  While you likely need access to academic databases to encounter the argument in full (or you can go buy Politics and Markets to get an idea of what’s at stake here), the idea is that the market “imprisons” political decisions because so much reform is repressed by the costs of structural economic change and its effects on retarding economic growth.  Because the market imprisons political decisions, it ensures that the government cannot be too successfully interventionist (think about market effects on China). The other side of the coin is that, if the political-business relationship wants to regulate environmental damage (for example), the effects would likely be costly, deter capital investment from the ownership class, and certainly reduce risky investments, thus slowing growth, causing job loss, etc. Hence, we may be cut off from doing things that may be quite democratically popular and desirable because of how much we have to “feed the beast” that is the market.

I find Lindblom’s argument quite interesting, but I think he undersells the reach of the democratic state. Fully realized democracy is off the table, but I do not think responsible government is off the table. Reforms may be slipped in by politicians during recessionary periods since no one will link them with the negative growth already occurring, situations emerge in which regulators ay prioritize which firms are dominant in an industry based upon broader policy concerns, and the market has made life so comfortable for so many that pulbich health and safety concerns stirke abject terror into the earts of voters even if the likelihood that they themselves will be victims of neglect may in fact be preposterously unlikely.  On this view, the market is still a prison, but perhaps a bit more like the versions of minimum security prisons one sees in the movies.