Confederacy of economic dunces

Inside Job

I particularly liked the fact that the filmmakers touched on the intellectual underpinnings of the crisis, in the Accountability section. Being frustrated at the sorry state of the economics discipline has been a hobby of mine for years, and while delving into it was outside the scope of the film, it was important that the filmmakers noted the connection between financial interests and the economic school of thought that gets funded in universities. The result is that the only worthwhile economics faculty in the country is at the University of Missouri-Kansas City, and every other economics department is fully in the grip of the neoclassical school. (The Post-Autistic Economics movement started in France, and so I hope that Europe is a little better.) This academic support of powerful economic interests goes back a while - the neoclassical school itself, from what I understand, broke away from the classical school because the classical school had taken a sharp turn to the left with Marx... and so the economists he called "sycophants of capital" turned toward focusing exclusively on mathematical abstractions about the economy and away from real world observation and analysis. (These mathematical abstractions all tended to show how swimmingly everything in capitalism went without government interference.) Anyhow, fast forward a hundred years and the tenuous relationship between economics and the actual economy has allowed a situation where politicians from Reagan to Obama can (in good faith, no doubt) listen to economic advisers who tell them (in good faith, no doubt) to adopt policies that will benefit only the very richest while impoverishing the rest. It's an infuriatingly frustrating situation - it's like if Freudian theory was the dominant paradigm in psychology, and whenever you went to see a psychologist s/he would tell you that all of your problems stem from Oedipal and Electra complexes and penis envy and whatever other creative rubbish came out of one man's imagination. Thankfully, the movie was pretty funny at times, and the absurdity of the whole situation does at least allow for a lot of humor, like this video making fun of the ridiculousness of (neoclassical) economic theory:

If only the Nazis had believed in theoclassical economics...

The Economic History of Germany

I love how deftly the authors avoid the conclusion that the heavy-government-intervention economic policies of the Nazis actually did achieve impressive results (viewed from a purely economic perspective, of course). Like with this Zen shit: "Often the apparent successes of such economies are just illusions. Outsiders who do not know how such economies really work are often fooled by these illusions." Yeah, the "outsiders who do not know how such economies really work" - comprising the entire European continent plus Russia - were pretty fucking fooled by the illusory successes of the German military, fueled as it was by the German economy, which of course was successful only in an illusory sense. If only Europeans and Russians during the war could have had the Zen consciousness of this article's author, they could have realized that the German war machine hadn't in fact decimated their homelands, because it was based on an illiberal economic system which can only ever boast of "illusory" successes.

Also, I love the fantasy-economic determinism of the author - as if the only independent variable on economic success is whether or not a liberal economic system is in place. So after the war, "near-famine" conditions were "[t]he net result" of government interference in the economy. (Or 'government molestation of the sacrosanct free market', to put it in terms more in keeping with the spirit of theoclassical economics.) Externalities - like the utter devastation of the country by years of carpet bombing, or the deaths of millions upon millions of citizens - are irrelevant. Hahahahahahaha!

FOL

Unemployment rate rises to 9.8 percent by Ben White

Fuck Our Lives. Of course, it's 9.8 percent measured the way we measure it now, after many rounds of statistical gerrymandering to lower the figure. If we measured unemployment the way it was measured thirty years ago, it would be double what it is now. Worst of all, the "ideas" this stat evokes in what passes for political discourse in the U.S. do not include actual job-creating programs.

I had always wondered how people could have been so retarded as to, say, worship a man as a living god, or engage in public ceremonies of self-flagellation... but this is helping me understand that human stupidity should never be underestimated. Thanks, Darrell Issa, for teaching me a lesson.

Modified Onion article: this time, for women

Study: Men Always Answer Their Phones Unless They're Having Great Sex With Someone Else

Researchers say this is what is happening 100 percent of the time when men don't answer their phones.

 

BLOOMINGTON, IN—A new study released Monday by sociologists at Indiana University found that men will always answer their telephones unless mind-blowing sex with a woman other than the caller prevents them from doing so.

The findings were consistent across all demographic groups in a sampling of 500 males between the ages of 18 to 35, which included men who were romantically involved with the caller but had requested some time apart to clear their heads, as well as men who had dated the caller briefly but assumed it was understood by both parties that the relationship had not worked out.

"No matter who they were, or what their perceived or actual relationship with the female caller was, men who failed to pick up the phone were statistically all but certain to be deep in the throes of coital passion with one or more sultry, feminine lovers at the time of the call," researcher Patrick Berger said. "In addition, a vast majority of the male participants we observed had seemingly forgotten all about the relationship they once had with the caller, and were, in fact, completely consumed by the sexual gratification they were currently receiving."

"A type of gratification they would hesitate to even call 'sex,' since it was so much more intense and transcendent than any kind of sex they had experienced before," Berger added.

The study revealed that 80 percent of the time, men who declined to answer their phones were, at that very moment, being sexually pleasured by a woman superior to the caller in terms of looks, sexual technique, and stamina. Researchers also found that a majority of men picked up the phone, examined the caller ID, and told their female lover "It's nobody" before continuing with sexual intercourse.

In another 15 percent of cases, male research subjects had just journeyed to a land of pure sexual delight with another woman and were, at the time the phone rang, smoking a cigarette while letting their fingertips graze over the unusually tight vagina that had just brought them to, on average, four orgasms. The remaining 5 percent of non-answerers consisted of men who were stimulating their own genitals, either while talking on the phone to another woman, instant-messaging another woman, or simply imagining another woman who had sexually rocked their world on a recent occasion.

"It's true that in a negligible number of cases, men did not answer because their cell battery had legitimately died," Berger said. "But in each instance, they had either failed to charge their phone because they'd spent the night in someone else's apartment, or had used up their battery's power sending powerfully erotic fantasies to another woman."

The study emphasized that while men who failed to answer the phone were almost unquestionably with someone else enjoying the most volcanic sensual escapade they'd ever had, there was also the possibility that they were busy gazing deeply into another woman's eyes, knowing and feeling a type of love they had never known or felt before.

"In many cases, during the time of the call, the man was spending the afternoon with the woman at that museum he's always wanted to visit, afterward watching the sunset from the deck of the woman's boat," said social psychologist Michael Corbin, a coauthor of the study. "In each case, the man didn't want a ringtone ruining a moment of true spiritual connection with the first woman he had ever really, truly loved with all his heart."

"Sex, however, always occurred subsequently," Corbin added.

According to the researchers, the findings of this latest study are fully consistent with their previous behavioral investigations.

"Our prior research has already demonstrated that any communication between men and their old high school girlfriends will result in sexual relations and that a guys' night out invariably leads to sexual contact with multiple women met in bars," Corbin said. "We won't be surprised if instances of men getting a drink after work with that cool, funny female coworker they're always talking about yield similar results."

The study also concluded that 99 percent of men who pick up the phone quickly and enthusiastically do so because they are expecting a call from another woman.

In addition to the core argument you laid out that government provides the skeleton for all economic activity, without which all of Ayn Rands' value-creating, rapist supermen would be useless puddles of muscle and entrails, there is also a historical argument. As if it needed to be made. But since the marketplace of ideas in this country seems to be overstocked with shoddy merchandise, here goes:

So, yes, without contract enforcement by the government, transaction costs on just about every deal would be so immense (think: hiring one's own private enforcement squad) as to snuff out all economic activity.

In addition to this, the business climate in this country that has allowed thousands of people to amass fortunes has been a product of government since the country's inception. One could start with the government's massive, let's say, appropriation of real estate, which provided a whole lotta Lebensraum for future John Galts to lay train tracks on. (Oops, bad choice of examples - the railroads weren't built by rugged capitalist individualists on their own, but through government subsidy, eminent domain, and trusts.) Or one could start with the protectionist policies the United States government enacted in the 19th century to protect and nurture its infant industries, which eventually grew to be internationally competitive, indeed dominant, providing cheap inputs and fat-walleted employees (customers) to other businesses.

Or one could do the proper American thing: forget history entirely, and limit one's scope to the present. In the present, government diplomacy twists arms to open country after country to U.S. products, allowing U.S. businesses to make more money (and preventing other countries from following the policies that countries from Britain to Korea used to become wealthy). Government subsidies keep agribusiness from collapsing under the pressure of cheaper food imports from countries with lower labor costs. Government regulation props up consumer confidence in the safety and quality of products in the marketplace, again lowering transaction costs. Government immigration policy keeps professions like medicine free from being completely overrun by millions of foreign professionals willing to work for far less than what domestic professionals currently enjoy behind a protectionist wall. Government environmental controls keep the commons and its wealth from being destroyed by individual self-interest. Government currency creation and maintenance prevents the deflation and economic contraction that would result from a precious metal-based system of exchange, and the inflation and busts that would result from competing currencies issued by private banks. Etc.

If you want to go somewhere where none of your wealth will be unjustly taxed by government, go to an uninhabited island to do your value-creating.

Sexual politics

Sexual Harassment in the Federal Workplace Revisited: Influences on Sexual Harassment by Gender by Robert A. Jackson and Meredith A. Newman

The underlying problem is a lack of democratic control in workplaces. If I start my own company, and I get enough business to hire a couple of female employees, I will have a great deal of power over them. If I have no regard for morality, I can torment them to the extent that losing their job is worse. In other words, if they fear losing their jobs - and in this economy, and without an economic social safety net or family financial support, they would certainly be afraid of losing their jobs - then they will put up with whatever seems less bad than the prospect of being homeless.

It's as simple as that. Of course, there are many moral people who want to avoid causing people pain. If such a person became a dictator, they would make a fine dictator. Obviously, in the formal political context, we know that some people would make fine dictators, but nonetheless are against dictators simply because of the catastrophe a bad dictator would be. So we democratize power.

In the economic realm, our society has not yet evolved to the realization that economic power must similarly be democratized. We made a big step when we realized that dictators or kings were a bad idea, and that our formal political structures should be democratized. One day, if we don't kill ourselves first, I hope we will realize that economic power needs to be democratized as well.

In a Koons' Age

It's been years since I was first introduced to Jeff Koons'... (word choice, word choice...) work, through this brilliant cartoon. If you haven't heard of Koons, lucky you: I can think of no better introduction.

German banker bailout

Euro-Bankers Demand of Greece: The wealthy won’t pay their taxes, so labor must do so, by Michael Hudson

Wondering just what is going on with the economy in Europe, with what is called "the Greek bailout"? Why not turn to the same witch-doctor economists whose massively wealth-destroying failure to warn about the present crisis hasn't yet convinced them to put down the magic eight ball and stop making predictions and explaining economic events through the lens of their thoroughly discredited ideology? If that interests you, turn on the TV or open a newspaper. If you want to read analysis by one of the rare economists who did predict the current mess, check this out.

Like wealth on white

Why some countries are poor and some rich - a non-Eurocentric view by Deniz Kellecioglu

Such an excellent paper, on why lighter skin color is closely correlated with greater economic wealth across the globe, between and within countries. Since the consensus in biology is that human concepts of "race" have no validity as biological categories but only as social constructs, this stark finding cannot be based on inherent "racial" superiority or inferiority. If you can't answer the question of why some countries are poor and some are rich, then you should read this article.

"...the lightest[-skinned] human ethnic group have [sic] about 1,6 times more GDP per capita than the second lightest group, six times more than the third group, and almost 12 times more than the fourth group. Put differently, the darkest ethnicities have only nine percent of the GDP levels of the lightest ones. This confirms the indication that there is a substantial orderly connection between nuances of morphological traits and economic levels in the world today."

Politics as fiesta de los toros: misdirected rage

(Click on image for larger version)

Thirty-two kilos times hundreds of millions

Thirty-two kilos by Ivonne Thein

Just like how the highest-paid professionals in the first world work similar hours to third world laborers, there's a cynical sort of poetic justice to how first world beauty standards are similar to the body types of those among the roughly 100,000 in the third world who die every day from lack of food.

Book Review: Tragedy and Hope by Carroll Quigley

Let me start this review of Tragedy and Hope by explaining how I am only two degrees of intellectual separation from Glenn Beck. (I figure: you're probably not going to read to the end of this anyway, so why string you along for any longer than the first sentence anyway?) Glenn Beck is a devotee of W. Cleon Skousen, whose very funny The Naked Capitalist (despite the name, it's funny only unintentionally) was a sort of mad Cliff's Notes version of Carroll Quigley's Tragedy and Hope. Therefore, because I rather enjoyed Tragedy and Hope, only the John Bircher-er W. Cleon Skousen separates me from Glenn Beck.

With that behind us, let's get started with a profound exploration of the most important issues of our age. Although Tragedy and Hope was written in 1966, so the light it has to shed on our future is faint (and probably energy inefficient), it does reveal a great deal about our present. By that, I do not mean anything regarding conspiracy theory. Tragedy and Hope does cover conspiracy theory (and by that, I mean conspiracy of the sort which is proved daily in courts of law during conspiracy trials, not that which in American English is a pejorative meant to elicit snickers from the enlightened orthodox at benighted heretics conspiracy theorists), but that did not interest me much. Quigley's description of networks of English and American Anglophile bankers and industrialists in the first half of the twentieth century may be accurate; but to me, largely uninteresting. I already believe that human beings have a tendency to organize together to achieve common interests, and that the most powerful human beings are likely to be a good deal more successful at such endeavors than the average Rotary club or machinists' union. But this, I would think, would be of interest to very few - aside from anarchist groups who might like to know the names (and addresses) of those comprising the networks of the powerful so as to bring about their downfall, accompanied by the spontaneous birth of an entirely new form of unorganized society that will somehow be immune from the predations of local power fetishists. Right.

But there are many aspects to Quigley's Tragedy and Hope - he does a fair amount of rambling in this 1300+ page book that he dictated to his wife (fancy that!) - and some are more worth the read than others. High on my list is Quigley's contention that so many of the Latin American wealthy are insufferable pricks because their culture was so influenced by the Arabs (p. 1115-1119). And that portion of his book which Americans have been conditioned to call "conspiracy theory" and ignore are actually fairly interesting. There is his naming of the New Republic as a Wall Street-financed outlet for left-wing steam (p. 938) - I always thought there was something intrinsically disordered about that magazine - and his description of intellectual buffoonery in the military being the cause of much suffering during World War I ("[The First World War] presents an extraordinary discrepancy between the facts of modern warfare and the ideas on military tactics which dominated the minds of men, especially the minds of military men"). And then there is his very frank and confident tone throughout: he may be a bit overconfident when painting the ebb and flow of thousands of years of human history in broad strokes (the first two chapters, "Western Civilization in its World Setting" and "Western Civilization to 1914"), but when revealing networks of the most powerful economic forces in society, his frank and confident tone strikes a pleasing note of: this is how it is, I think we should be open about it. Entirely absent from his exposition is the moralizing hysteria of the John Bircher-ers, hilariously screaming that global networks of powerful bankers are dragging us towards communism, or even any paranoid, low-self-confidence leftism moaning that everything that has ever happened was planned by someone evil, rich, well-connected - and omnipotent.

So I'll be done with Quigley's descriptions of how the world's most influential networks are those which comprise the world's wealthiest and most politically connected. On to the interesting stuff: the dismal science!

Quigley's 1966 perspective on economics has probably never been anywhere near as interesting as it is right now. While his theories about powerful Anglophile networks probably did cause some consternation back when he wrote them, his writings on matters economic must have seemed unremarkable. Yet today, in an age when we have reverted in many economic respects to the early 1930s, his 1966 perspective on economics is more trenchant than most everything that will be written this year.

Let me take a moment to clarify things: by economics, I do not want you to understand "economics", the witch doctory that passes for a science in universities throughout the English-speaking world (at least). It is widely known that economists are a peculiarly boring sort: intellectually, they produce nothing but masturbation with all the purpose and vigor of a sixteen-year-old Catholic schoolboy. They create theories out of outdated (yet to the layman impossibly complex) mathematics that not only have no relation to the real world, but when actually implemented in the real world they invariably fuck it up.

Rather, I mean real economics: that which hundreds of thousands of college students across the planet seek to learn, but mistakenly take "economics" classes instead. Economics: the understanding of how humans organize themselves to produce things. This is what Quigley excels at. His analysis bears an indelible imprint from his age, and from those who experienced the worldwide economic collapse caused by the implementation of neoclassical economic ideas - and learned from it. Absent from his analysis are prescriptions derived from mathematical models of fantasy realms. He instead looks around the real world (sans, egads, mathematical models!) and draws conclusions from those economic systems that worked; "worked" in the sense that they produced more things, employed more people, and provided a better material life for those within the system. (Here one can find a glaring shortcoming in Quigley's analysis: no conception of how one system's wealth can be generated through expropriation of another.)

At times Quigley even seems something like a capitalist Marx, sharing the latter's morality and desire for a better life for the world's people, but believing that it was his preferred form of capitalism rather than communism that could carry humanity forward to a better existence. And his preferred form of capitalism is what Glenn Beck would call socialism (or communism, or fascism, or sadomasochism, or whatever Beck is shouting these days). With good reason, Quigley believed that the financial concepts of "pure" capitalism did not describe inescapable realities, nor circumscribe the limitations of human economic organization. Why would he, given that the mid-twentieth century's greatest economic successes were those that spurned orthodox economics and chose to organize human and natural resources along what-were-then-unconventional lines?

For instance: war. In World War II, the most successful economies were those that ignored the bleating of financiers and their economic witch doctors (also known as "economists"). Nazi Germany's unorthodox economic policy, and that of the Soviet Union and the United States, proved to be the most effective. Quigley blames Britain's and France's attachment to the conventional economic wisdom of their day for their unimpressive performance in arming to match Germany. Even during World War I, Quigley has nothing but derision for those we today call The Masters of the Universe: "The outbreak of war in 1914 showed these financial capitalists at their worst, narrow in outlook, ignorant, and selfish, while proclaiming, as usual, their total devotion to the social good. They generally agreed that the war could not go on for more than six to ten months because of the "limited financial resources" of the belligerents (by which they meant gold reserves). This idea reveals the fundamental misunderstanding of the nature and role of money on the part of the very persons who were reputed to be experts on the subject. Wars, as events have proved since, are not fought with gold or even with money, but by the proper organization of real resources."

One could say much the same about any other economic endeavor besides war. For instance: industrialization, as events have proved since Quigley's time, is not achieved by following orthodox economic prescriptions, but by the proper organization of real resources. Just ask South Korea, or China, or Japan, or the USSR.

But back to the narrative: Quigley wrote this book during the age of what he called the "pluralistic economy" and what others have called "monopoly capitalism" (not for Quigley - his definition of monopoly capitalism excludes the extent of state intervention that began in the U.S. during World War II): a capitalist economic system where large corporations dominate, and these are controlled by managers and technocrats who are recruited on a meritocratic basis. Corporate power is checked in turn by organized labor, financial interests, farmers, consumers, and most powerful of all, government. Sound like the economic system we are in presently? Nope.

What's the difference? The Great Depression dealt a serious blow to the power of financiers, and World War II proved that the contemporary financial orthodoxy was bunk. This hastened “the eclipse of the bankers, who [were] largely reduced in status from the masters to the servants of the economic system. This [was] brought about by [a] new concern with real economic factors instead of with financial counters, as previously." However, after Quigley's death there was a resurgence of financial capitalism, and financiers ascended once again to the commanding heights of the economy. This passage might sound more familiar: "The growth of financial capitalism made possible a centralization of world economic control and a use of this power for the direct benefit of financiers and the indirect injury of all other economic groups." Yet this is what Quigley wrote about the world economy circa the first few decades of the twentieth century – funny how history repeats itself.

Thankfully, not all of the stupidities of that period of history have reappeared. Gone, now, are the gold standards around the world which restricted money supply to a level far less than productive potential would allow, leading to a crushing deflationary depression that roiled the global economy. The Great Depression would ensnare all of the countries in the center of the global economy, but countries escaped it depending on how quickly they abandoned economic orthodoxy.

Quigley explains that it took World War II and its vast, successful deployment of economic and human resources to convince France, Britain, and the United States “that economic stagnation and underemployment of resources were not necessary and could be avoided if the financial system were subordinated to the economic system.” In Germany, however, “this was not necessary, since the Nazis had already made this discovery in the 1930's." The Nazi government had reduced “financial considerations to a point where they played no role in economic or political decisions. When decisions were made, on other grounds, money was provided, through completely unorthodox methods of finance, to carry them out. In France and England, on the other hand, orthodox financial principles, especially balanced budgets and stable exchange rates, played a major role in all decisions and was one of the chief reasons why these countries did not mobilize” in time to stop the Nazi war machine from laying waste to much of the continent.

Turns out, Quigley was being a bit premature in saying that this lesson had been learned. Or, if he was correct, it has certainly since been unlearned. Today, a dominant, if not the predominant narrative among Unitedstatesian intellectuals is that FDR's New Deal did not cure the Great Depression, but World War II did. This core of the narrative is correct. However, this narrative does not explain the cure to have been due to massive government spending leading to the employment of unused resources, but rather due to some inherent but unexplained aspect of war spending not shared by other forms of government spending.

Quigley's narrative is much more convincing. He explains that the New Deal did not make a clean break from the economic orthodoxy of prior decades which had caused the Great Depression. Roosevelt's “administration treated the symptoms rather than the causes of the depression and, while spending unorthodoxly to treat these symptoms, did so with money borrowed from the banks in the accepted fashion. The New Deal allowed the bankers to create the money, borrowed it from the banks, and spent it. This meant that the New Deal ran up the national debt to the credit of the banks, and spent money in such a limited fashion that no drastic re-employment of idle resources was possible.” Roosevelt's failure was to recognize that orthodox theories about the nature of money and its role in economic organization had been made outdated by the exponential rise in productive potential brought to society by the development of science and technology. The contemporary orthodoxy, with its reification of financial constructs and the attribution to them of powers they did not possess and laws they did not follow, had been helpful in earlier, simpler eras. But the system it advocated could not keep the money supply up with the increased ability of the economy to produce more wealth.

This orthodoxy was dealt another crippling blow after the 1937 rollback of New Deal spending sent the U.S. economy into a sharp tailspin. The idea behind the New Deal was that the economy was fundamentally sound, but just need a bit of a jump start in the form of limited government spending to replenish temporarily-depleted demand. But after the “jump start” spending stopped, and the economy froze in cardiac arrest, the Roosevelt administration “had to resume its treatment of symptoms but now without hope that the spending program could ever be ended, a hopeless prospect since the administration lacked the knowledge of how to reform the system or even how to escape from borrowing bank credit with its mounting public debt, and the administration lacked the courage to adopt the really large-scale spending necessary to give full employment of resources. The administration was saved from this impasse by the need for the rearmament program followed by the war.”

Quigley's conception of capitalist economic reality is worth discussing and quoting at length. He views the basic cycle of a capitalist economy as follows: “(a) purchasing power creates demand for goods; (b) demand for goods creates confidence in the minds of investors; (c) confidence creates new investment; and (d) new investment creates purchasing power, which then creates demand, and so on.” Conservatives tend to focus on point (c) in this cycle, and complain that high taxes on the wealthy undermine confidence and the incentive to invest, while liberals focus on point (a) and the need for the purchasing power of the poor to be increased through wealth transfers from the rich. Both views, Quigley argues, are misconceived to the extent that they are blind to the fact that they are points within a cycle, and are not the beginning or core of any economic problem. The problem is with the cycle in toto, because it is prone to falling into a “deflationary gap”, which Quigley defines as the result of “purchasing power [being] inadequate because of an excess of savings over investment.” Why does purchasing power become inadequate? Quigley explains that “the savings of a community are largely made by the richer persons in it, and savings increase out of all proportion as incomes rise. On the other hand, the incomes of the poor class are devoted primarily to expenditures for consumption. Thus, if it is correct that there is an increasing disparity in the distribution of the national income of a country, there will be a tendency for savings to rise and consumer purchasing power to decline relative to each other. If this is so, there will be an increasing reluctance on the part of the controllers of savings to invest their savings in new capital equipment, since the existing decline of purchasing power will make it increasingly difficult to sell the products of the existing capital equipment and highly unlikely that the products of any new capital equipment could be sold more easily.”

An increasing disparity in the distribution of national income is certainly what the United States and other countries have faced over the past decades, and the end result of this phenomenon has been, in general outlines, what Quigley described. The wild card has been the the financier's reconquest of the commanding heights of the economy, the financialization of the U.S. economy: the diversion of capital from productive investment to financial products. Income distribution in the United States has been concentrating at the top of pyramid for the past few decades, and with a lack of profitable investment options in the real economy, that concentrated wealth sought fantastic growth in the financial sector, which is nearly to say, in fantasy. Once the fantasy was realized for what it was, fictitious wealth evaporated and the economy went into shock.

Yet today in the United States, the Great Recession is being met with the same tepid half-measures – caused by a refusal to break from the contemporary economic orthodoxy – as the Great Depression was. After just a meager economic stimulus that featured no massive programs of direct job creation, economic witch doctors are already warning of overspending, unpayable debt and possible government default. These concepts do not exist in Quigley's narrative, because they had already been fatally discredited by the Great Depression and the thoroughly unorthodox economic strategies that had successfully cured it.

Perhaps the existence of the Soviet Union made it easier to see certain economic truths then than it is now. According to Quigley's account in Tragedy and Hope, good economics is not scrupulousness in adhering to the dictates of this or that economic theory, but rather ensuring that real resources are used productively, and not idled or wasted – however that is accomplished. The discrepancy between the U.S. and Soviet economies brought into contrast the fact that “the meaning of the word 'costs' and the limitations on ability to mobilize economic resources are entirely different in our system from the Soviet system and most others. In the Soviet economy 'costs' are real costs, measurable in terms of the allotment of scarce resources that could have been used otherwise. In the American system 'costs' are fiscal or financial limitations that have little connection with the use of scarce resources or even with the use of available (and therefore not scarce) resources. The reason for this is that in the American economy, the fiscal or financial limit is lower than the limit established by real resources and, therefore, since the financial limits act as the restraint on our economic activities, we do not get to the point where our activities encounter the restraints imposed by the limits of real resources (except rarely and briefly in terms of technically trained manpower, which is our most limited resource).” In our current economic situation, this is our tragedy. Financial phantasms we take for real economic limits cripple our productive potential, keeping sustainable agriculture, infrastructure and energy systems from being built, while the strange pair of unemployment and overwork ravage families and destroy individuals.

The primary economic problem we face today is ideological. We lack economic ideas and intellectual tools that appropriately describe modern economic reality and potential. If Quigley were alive today, he would likely summarize our current predicament like this: “Briefly, the international and the domestic economic systems [have] developed to a point where the customary methods of thought and procedure in regard to them [are now] obsolete." Let us hope it does not take the successes of another Nazi state to move us past these stifling economic anachronisms.

Mao and Hayek: BFFs?

"[T]he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than commonly understood.  Indeed the world is ruled by little else.  Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.  Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.  I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas."
- John Maynard Keynes

Friedrich Hayek is probably the most influential economist of the 20th century. However, when his magnum opus, The Road to Serfdom, appeared in 1944 it was relegated to the fringe of respectable opinion. At the time, neoclassical economics was spurned for being unable to predict, or cure, the worldwide depression of the '30s. Economic planning – the bete noire of neoclassical economists – had demonstrated its potential in improving peoples' lives, from Japan to the Soviet Union to Germany to Britain to the United States. The future seemed to be one of an ever-greater role for government intervention in the economy, and an eternal sleep for laissez faire.

Neoclassical economics has since enjoyed a resurgence (much to the detriment of the world), and it would be hard to overemphasize Hayek's role in it. His anti-collectivist economic philosophy became and still is – in bastard form – the foundation of conservative and libertarian thought in the United States. Even the 'other' most influential economist of the 20th century, Milton Friedman, was an acolyte of Hayek's.

In fact, Hayek's influence spanned the world, reaching into post-revolution China and being adopted by Li Yining, an unorthodox economist who was interested in ways of making the Soviet economic model more flexible. Li became inspired by Hayek, and was pushed in a radical, capitalist direction by the rough treatment he received during the Cultural Revolution. Li is now one of China's most prestigious economists, known as “Mr. Stock Market” for his role in seeing through the creation of China's first post-revolution stock markets.

Although economists like Yi see the Cultural Revolution as an unmitigated economic and social disaster, Dongping Han's The Unknown Cultural Revolution provides a case study tending to show the opposite. Han's narrative of the Cultural Revolution is contrary not only to the dominant Western view, but also the seemingly official view of the Chinese Communist Party. The reason for this odd congruence of opinion, in the view of Han and others (like Minqui Li and Mobo Gao), is that the historically antagonistic West views all such revolutions unfavorably, and the Chinese Communist Party is today dominated by Mao's enemies and their intellectual heirs: precisely the targets Mao had in mind when initiating the Cultural Revolution.

What's strange is that the economic and political philosophy implicitly embraced by Han, and the philosophy explicitly propounded by Hayek, both share much in common while having much to inform the other.

...

Hayek is an apologist for classical liberalism, and how he defines liberalism is key to an understanding of his arguments. He defines liberalism as freedom, broadly speaking, but its most important aspect is “industrial freedom”, which he believes “opened the path to the free use of new knowledge” which before had been blocked by the “beliefs of the great majority on what was right and proper.” In The Road to Serfdom, Hayek's foray into economic history is maddeningly simple and short, and he conflates the development of philosophical, scientific and technological ideas with the development of liberal economics. Hayek knows that a truly liberal economy never actually existed during the 19th century, but it was a beginning that despite its infancy and at best partial implementation, should be credited with the material progress the Western world experienced during that time. One of many problems with this attribution of credit is his ignorance of the role the non-European world played in unwillingly enriching the former.

Hayek writes about liberalism in much the same way others do about capitalism; however, Hayek is writing about economic and political theory, not economic history. While in his actual usage, Hayek's “liberalism” and capitalism are coterminous, Hayek artfully evaded criticism of his theory by writing only about liberalism, an idea or ideology, instead of capitalism, an actually-existing economic system. Of course, an idea is much harder to criticize than its implementation. For instance, Hayek credited liberalism rather than capitalism with the rising standard of living Europe experienced around the Industrial Revolution: “[a]nd while the rising standard soon led to the discovery of very dark spots in society, spots which men were no longer willing to tolerate, there was probably no class that did not substantially benefit from the general advance.” If Hayek were writing about capitalism, this argument would seem a bit sophistic, since although standards of living improved on average, it would be impossible to argue that people occupying new classes and occupations, like the industrial wage-worker, enjoyed a better life than those in economic situations that no longer existed, such as the peasant with access to common land. Furthermore, there were many classes outside of Europe whose dark spots got only darker due to the “rising standard” enjoyed in Europe.

Hayek's conception of liberalism has competition as its core, which he defines as such: “parties in the market should be free to sell and buy at any price at which they can find a partner to the transaction and [...] anybody should be free to produce, sell, and buy anything that may be produced or sold at all,” without government, oligopoly or union interference.

And while Hayek hereby impliedly revealed himself as an advocate of a competitive market in child pornography whose members are free to hire the services of contract killers, he was not even half as daft as his latter day followers. He was not an ideologue with a pathological aversion to government. He also wrote that “[t]o prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements, is fully compatible with the preservation of competition. The only question here is whether in the particular instance the advantages gained are greater than the social costs which they impose. Nor is the preservation of competition incompatible with an extensive system of social services...” Try running that line by a modern-day self-styled follower of Hayek.

Hayek was also cognizant of the evils of what are today called externalities: the imposition of costs upon the surrounding society by profit-seeking players in the market. “There are, finally, undoubted fields where no legal arrangements can create the main condition on which the usefulness of the system of competition and private property depends: namely, that the owner benefits from all the useful services rendered by his property and suffers for all the damages caused to others by its use. […] In all these instances [where] there is a divergence between the items which enter into private calculation and those which affect social welfare; and, whenever this divergence becomes important, some method other than competition may have to be found to supply the services in question.” Why, that's enough to drive a tea-bagging libertarian nuts! Not for Hayek the deification of free markets preferred by his intellectual descendants, the theoclassical economists; unlike people such as Alan Greenspan, who disastrously believed the competitive market to be self-correcting, Hayek (perhaps due to his closer proximity to the Great Depression) knew that free markets were no panacea. For Hayek, government intervention into the economy was necessary as a matter of fundamental political and economic principle. Instead of the fervent market-fellating engaged in by his modern admirers and self-styled followers, what motivated Hayek was a true passion for freedom. However, his was a blinkered freedom blind to the tyranny of non-governmental power.

...

Mao was driven by a similar passion for freedom, but of a different sort – freedom from want, injustice and exploitation – that was blinkered by a blindness to the potential tyranny of governmental power. He seems to have believed, perhaps only initially, that the purity of government officials' revolutionary ideals would prevent government from approaching tyranny. When the first decade and a half of revolutionary government revealed either the falsity of this belief, the impurity of government officials' ideals, or both, Mao initiated the Cultural Revolution. Its goal was to realize the goals of the revolution by empowering the common people against the government. Mao was concerned that “capitalist roaders” – those who wanted China to take the capitalist road – were close to taking control of the government. He was also worried that government officials were corrupt, unaccountable to the peasantry, and had betrayed the peasant base of the revolution by appropriating the kind of power and privilege that pre-revolution officials had enjoyed – and that this lack of morality in itself was evidence that they wanted China to take the capitalist road.

The Cultural Revolution was an anti-government movement. Mao initiated it by end-running the state apparatus, appealing to the Chinese people directly and asking for their allegiance to a set of ideas: radically egalitarian ideas that ran counter to those prevalent within the bureaucracy. Ideas and traditions die hard, and people often overestimate the power of a revolution to give a country a fresh start. Rather, as in the Chinese case, the revolution successfully overthrew the previous government, but was unable to wipe clean centuries of societal and institutional culture. Former Red Army revolutionaries had taken up comfortable positions in the government, and carried themselves as if their wartime exploits had earned them a more comfortable, commanding life, just as generation upon generation of government officials had enjoyed throughout Chinese history. Furthermore, at the top of society, former business owners who had supported the Communists out of nationalistic motives were working to push China towards the path of capitalist development so as to make the journey more advantageous for themselves. Hence by appealing directly to the people to embrace revolutionary ideals, and by stamping civil disobedience with his own official seal of approval, Mao gave common people the courage and justification to rebel against corrupt or incompetent government officials.*

This is where the similarities between Mao and Hayek begin to appear. Hayek believed that an economic system like post-revolutionary China's would inevitably lead to the formation of unaccountable government cliques who would become the society's elite, hoarding goods for themselves and dooming the populace to a life of shackled penury. There is much in this analysis that Mao would have agreed with; except for the “inevitably” bit. Mao would likely have taken a more Critical Realist stance, identifying that economic system as tending to lead to, or allow, the formation of an unaccountable, exploitative government elite. However, this tendency can be effectively countered by structuring government in such a way as to make officials directly accountable to the people. This is precisely what the Cultural Revolution – in a necessarily hasty, unplanned and messy way – did. In Han's study of Jimo county during the Cultural Revolution demonstrates that the revolutionary devolution of economic control to common people radically undermined entrenched government power, unleashed the creativity and freedom of the people, and resulted in economic and social progress that continues to form part of the backbone of China today.

Hayek's economic reductionist philosophy was blind to factors such as history, culture, and the myriad possibilities of government structure. (No, Friedrich, political evolution did not stop with the United States' Constitution.) While Hayek believed that only “liberty” and “industrial freedom” could guarantee political democracy – in the sense of political power, equally shared by one and all – Han's book provides an illustration that democratic economic control can be just as effective. That is, instead of guarding the economic freedom of individuals, which includes the freedom to control others, it is possible to guarantee political democracy – Hayek's “liberty” – by creating a structure of economic control shared in equally by each citizen. Hayek's concept of economic freedom allows individuals to amass economic power and to lord it over the less powerful**; Mao's idea of spreading economic control to the people as a whole (as against officialdom) likewise allows individuals economic freedom – but only no more than one's neighbor has. In this way, Hayek's love of negative liberty – the freedom to be free of restriction and coercion (at least at the hands of a government, if not at the hands of an individual employer) – can be seen to be reconcilable with positive liberty, or freedom from want, hunger, domination and the like.


*Of course, not all of those damaged by the Cultural Revolution were corrupt or incompetent; unavoidably, many innocent people were denounced, harassed, beaten, unfairly lost their positions of authority, etc. But it is hard to disagree with the analysis of conservative historian Thomas Babington Macaulay: "We deplore the outrages which accompany revolutions. But the more violent the outrage, the more assured we feel that a revolution was necessary. The violence of these outrages will always be proportioned to the ferocity and ignorance of the people; and the ferocity and ignorance of the people will be proportioned by the oppression and degradation under which they have been accustomed to live."


**Here again Hayek was far less ideologically lobotomized than his self-styled followers. Hayek recognized that state intervention was required to overcome the tendency within capitalism towards concentration of economic power, hence opportunity, which was the cornerstone of his ideological justification of capitalism. He wrote that there is “much that could be done to improve the opportunities of choice open to the people. Here as elsewhere the state can do a great deal to help the spreading of knowledge and information and to assist mobility.” Also, “in a system of free enterprise chances are not equal, since such a system is necessarily based on private property and (though perhaps not with the same necessity) on inheritance, with the differences in opportunity which these create. There is , indeed, a strong case for reducing this inequality of opportunity as far as congenital differences permit...” Also, “some voluntary labor service on military lines might well be the best form for the state to provide the certainty of an opportunity for work and a minimum income for all.”

Patents on toliet paper

Drug Makers Decry Indian Patent Law by Geeta Anand

Hahaha, great article, love this quote: "The U.S. would grant a patent to a piece of toliet paper". Sorry silly Indian, that's "anal-area feces-removal and cleaning technological device, new and improved, now with sparkles" to you! Check out the comments section: some dumbfuck Unitedstatesian chick suggests that India is poor due in part to its lack of intellectual property laws (I'm not kidding)...

Court Jester Supreme

Court decision opens floodgates for corporate political spending by Kenneth P. Vogel

Reason #5,784 why Antonin Scalia's highest and best purpose would be beautifying a flower garden by serving as its fertilizer: He's a fucking moron, in a powerful position.
Evidence: his concurring opinion in Citizens United v. Federal Election Commission.

Supreme Court Jester Antonin Scalia: "it is far from clear that by the end of the 18th century corporations were despised. If so, how came there to be so many of them?"
Anyone capable of accessing a minimum of functioning brain cells: "There are four million pedophiles in the United States according to the Justice Department. I would not presume to speak for Scalia, but in general child molesters are quite despised. 'How came there to be so many of them'? Really? That's the best rhetoric you can come up with? Scalia, I'd call you 'shit-for-brains' if I weren't so certain that an earthworm's excrement has more functioning neuronal connections than you."

Supreme dumbfuck Scalia, his very next sentence: "The dissent’s statement that there were few business corporations during the eighteenth century—'only a few hundred during all of the 18th century'—is misleading."
Any entity with greater intelligence than a rock: "I'll quote your subsequent sentence, Scalia: 'There were approximately 335 charters issued to business corporations in the United States by the end of the 18th century.' So what exactly is misleading about saying that 'only a few hundred [corporations existed] during all of the 18th century' when, as you say, '[t]here were approximately 335 charters issued to business corporations in the United States by the end of the 18th century'? See, on earth, 'a few hundred' is an accurate, not a misleading, way to convey '335'. What is misleading is dropping the dissent's use of the word 'hundred', leaving only the word 'few' to modify 'corporations' when you paraphrase their proposition at the beginning of your first sentence - making it seem like they meant to imply that there were 'few business corporations', rather than 'a few hundred', in the U.S. by the end of the 18th century. You loathsome weasel."

Cheney's buddy Antonin Scalia: "To be sure, in 1791 (as now) corporations could pursue only the objectives set forth in their charters; but the dissent provides no evidence that their speech in the pursuit of those objectives could be censored. [...] Instead of taking this straightforward approach to determining the Amendment’s meaning, the dissent [demonstrates that the Framers didn't like corporations]."
Any animate or inanimate object other than Scalia: "Providing evidence that the Framers intended that corporations' 'speech' in the pursuit of political objectives - i.e., propaganda - could be censored is hardly a 'straightforward' approach. It would be an utterly nonsensical approach, given that the few hundred - that is 335 to you, Scalia - corporations that existed at any point in time during the 18th century in the United States did not engage in propaganda. You had might as well ask one to prove that the Framers intended the First Amendment to allow censorship of email spam. Why? Because propaganda is a 20th century creation, born out of new media like mass-circulation newspapers and radio (then television), exploited with the use of developments in psychology. Also, the extension of constitutional protections like those contained in the First Amendment to corporate "persons" was a 19th century bit of judicial activism on behalf of the railroads - nothing the Framers would have dreamt of, so much as contemplated. Therefore, the dissent's approach is the only reasonable approach possible: discerning the Framers' opinion of corporations so as to extrapolate as accurately as possible how they would have wanted the First Amendment to be interpreted in light of 20th century developments. Scalia, can you provide any evidence that your conception wasn't the result of Satan (assuming the form of the man listed on your birth certificate) sodomizing a mentally retarded goat (transformed by Satan into the woman listed on your birth certificate)?"