Prospects of a Revolution from the Right
February 28, 2009

Ethelbert Miller, the Washington poet, is right in expressing fears of a revolution-from-the-right. According to Southern Poverty Law Center, hate groups are on the rise.  Meanwhile “respectable” conservatives are already blaming Obama for aggravating the economic crisis.

For a discussion of  typical conservative doublethink as to what caused the housing and banking crisis.
http://www.splcenter.org/intel/intelreport/article.jsp?aid=1011

Unfortunately I frequently have students informing me, that the banking crisis was caused by the Community Reinvestment act!    That’s as big a joke as blaming minimum wage laws for unemployment, or blaming the Great Depression on the New Deal.  But don’t laugh!

The above dogmas are currently being taught and accepted in most economics departments and MBA programs.  The sad thing is that good kids regardless of gender, race, or class, are susceptible to such notions and absorb them indiscriminately.  It is ironic to contemplate working class students rising up in anger and protesting that they can no longer afford to attend business schools that indoctrinate them with propaganda that is tailored to undermine their own class interests.

How can we win against this sort of thing?

We must continue to inform them that Roosevelt increased taxes and created government jobs, and that his only fault was not being aggressive enough until the war provided him an opportunity.  One stage  of his recovery plan was the Lend Lease Act, which kept the factories humming by building tanks and giving them to Stalin.   Another part was the banking reforms, which kept us out of a depression for almost seventy years.

For thirty years under Reagan, Bush, Clinton, Bush, Democrats and Republicans conspired to dismantle the New Deal.  Under Alan Greenspan, appointed Fed Chairman by Reagan, and renewed by Clinton, and both Bushes, the government followed a course of constant inflation, in the prices of health, education, and housing.  The Congressional Budget office, Bureau of Labor and Statistics, Council of Economic advisers, etc., conspired to fudge the statistics and lie to us about inflation, telling us it didn’t exist.

In reality, real wages dropped constantly, tempting middle-class households to take out adjustable rate mortgages, foolishly hoping to benefit from constant inflation of housing prices to compensate for inadequate purchasing power — in other words speculating against the dollar

Meanwhile, their children were graduating from college owing tens of thousands of dollars, and unable to find jobs.  It became increasingly difficult to afford the costs of health care for our grandparents, our parents, our children, or ourselves.

The housing bubble has popped, and I predict this is nothing compared to what may be coming if the credit card bubble busts.

When people start pushing wheelbarrows full of worthless money to the supermarket, they will blame Obama, and that should be enough to bring out the Nazi armbands.  As it was in Germany, 1923.

General Motors and General Petraeus

General Motors and General Petraeus
by Wilson J. Moses, February 14, 2009

Americans have notoriously short memories, so I have to remind myself that the first $700 billion bail-out, the “Troubled Assets Relief Program” (TARP), was a product of the Bush administration.  It was presented to the Senate by former Treasury Secretary, Henry Paulson, who isn’t stupid.  Federal Reserve Chairman, Ben Bernanke, also not stupid, accompanied him on his trip to the Senate, but the proposal belonged to the Bush administration.  Paulson graduated from Dartmouth, where he demonstrated sufficient agility and mental quickness to become an All-Ivy linebacker, and to make Phi Beta Kappa, as well.  Paulson was obviously playing dumb, like a fox, in his intentionally inept responses to the questions of Richard Shelby (R-Ala) ranking member of the Senate Banking Committee.

Much as I oppose the ideology of Senator Shelby, I must give him credit for saying that “Even if the Paulson plan works perfectly, which many doubt, including nearly two hundred economists, it will not stimulate new lending, stop de-leveraging, help distressed home owners, or jump start the economy.”  The Senator’s doubts were obviously well-founded, for, so far the plan has not worked.  As many suspected, although Sen. Shelby did not say it, Mr. Paulson has shown himself to be no more than high quality stick-up artist.    Many bankers have lined their pockets, with the bail-out monies, and so have the executives at General Motors.

Paulson got away with playing dumb, but he knew exactly what he was doing when he got $750 billion from the government for his Wall Street bail out.  He knew the heads of insolvent banks had no intention of addressing the economic melt-down.  He knew the money would disappear into the pockets of brilliant, but incompetent executives.  Paulson himself, formerly employed by Goldman Sachs, one of the banks he arbitrarily selected for salvation, is estimated to have earned over $16,000,000 in the year he became Secretary of the Treasury.  His estimated worth is around $700,000,000.  Fair enough everybody wants to be rich, but why should I pay him, or people like him for performing no detectable public service, and lining their friends pockets?

President Barack Obama seems to think that people like Henry Paulson have expertise for which we must pay whatever astronomical salaries the market supposedly demands.  Compensation in the $15 million range is the unavoidable cost of the superior expertise of people like Stan O’Neil, who ran Merril Lynch into bankruptcy.  But Ben Bernanke, presumably an expert of similar acuteness, draws a salary of only $191,300, and we trust him to clean up the mess.  It seems unlikely the quoted figure is Bernanke’s entire annual income, but if he is willing to serve the Fed for such a reasonable salary, why can’t the government find other people of his caliber to work in banking for similar amounts?

General David Howell Petraeus does his job for less than $250,000 per year

General Petraeus, who holds a Ph.D. from Princeton University, isn’t stupid, but he too works for a reasonable salary.  Even his critics must admit that he is capable, intelligent, ambitious, and loyal.  He has shown far more competency at his job than the people who have been managing General Motors, Chrysler, Bear Stearns, Lehman Brothers, Freddie Mac, Fannie Mae, Wells Fargo, Bank of America, Morgan Stanley, or Goldman Sachs.  Most of them are compensated with salaries and bonuses in the multi-millions.

And General Petraeus does his job for less than $250,000 per year.

I say nationalize all corporations that benefit from any government bail-out, and immediately rescale all executive salaries to correspond to salaries paid in the United States Military.  If senior business executives don’t want to work for $250,000, then let them walk.  Every year a considerable number of military officers, above the rank of major, but below the age of fifty go into retirement.  Why cannot we dip into this reservoir of talent to replace the parasites who are currently leeching off the taxpayers?  This question is somewhat rhetorical, for retired colonels and brigadiers are not the only pool of available talent.   There are other persons in this economy, besides younger military retirees, who are capable of running businesses and industries for reasonable salaries.  But the candidate pool for a nationalized business or industry would logically include military retirees, many of whom have demonstrated administrative ability along with their records of commitment to public service.

Thomas Friedman? Benjamin Franklin? Which do you Trust?

Thomas Friedman? Benjamin Franklin?  Which do you Trust?

Copyright©2008 by Wilson J. Moses

Thomas Friedman, the author of “All Fall Down” NY Times (Nov 25, 08) often gets things wrong, before getting them half-right.  He is unfair in placing any blame for this real estate bubble on the “People who had no business buying a home, with nothing down and nothing to pay for two years.”  People who fall into that category are of ordinary intelligence, and have need, as we all do, of  “the kindness of strangers,” in order to survive.  Although some people with IQs of 90 are capable of  graspin household microeconomics, others with IQs above 140 are not.  Our current crisis provides incontrovertible evidence that, most Americans, including college graduates with high achievements on standardized tests, lack a basic understanding of saving and investment.

Benjamin Franklin created Poor Richard’s Almanack to teach many things, among these, a non-confrontational class-consciousness, an appreciation for saving, and an awareness that personal prosperity sometimes, if not always, requires a moderate parsimony.  Serviceable as it is, few Americans today can put Poor Richard’s common-sense ethic into practice, to guide an enlightened self interest.

It is thus necessary and proper for a civilized nation to sustain such structures as fire departments, public schools, a well-regulated  banking system, social security, and public health, in order to protect the masses, both bright and dim, from clever but unscrupulous risk-takers.

Another category of Friedman culprits, “people who had no business pushing such mortgages,” did not for the most part make “fortunes doing so.”   Most of these are people of mediocre understanding, honest, but credulous, who work at the local bank on Main Street.  These people also lack class consciousness and have never learned from Poor Richard’s catechism how to serve their own interests.  These people did not make millions, but currently find themselves in danger of losing their homes, victims of their own irrational exuberance and blind faith in the conventional wisdom of their leaders.

Friedman’s third category, the people who were “bundling those loans into securities and selling them to third parties,” are somewhat more culpable.   These products of the Wharton, Chicago, and Stanford MBA programs, and lesser institutions, are capable of understanding their errors, and might have known better, but they are so lacking in creativity, imagination and skepticism (despite their vaunted grade point averages and standardized test scores) that they really are not to blame either.  They were simply following the teachings of their mentors in business school.   They are ideologically screwed up and dreadfully spoiled, but not bad people at heart.  It is simply that the typical MBA began with the intelligence of a playboy bunny, and was further dumbed-down by their business school.

More to blame are the professors, in the humanities and social sciences, who abandon the field of political economy to a few “experts” in the “appropriate departments”.   We stick to our syllabi, and allow our students to be mislead that the reforms of the New Deal were the cause, not the cure of the Great Depression of 1929-1940.   We fear to confront our colleagues who “validate” their positions with mathematical models, so elegant as to outdo the most artful constructions of classical and medieval astronomers.   These hire teams of graduate students to crunch numbers to “prove” that the sun circles the earth, and the rest of the planets move in exotic epicycles.

Mathematicians and physicists, are thus blamable because, despite the lessons of the Long Term Capital debacle of the 1990’s, they collaborated in the credit swap fantasies, inventing hypothetical choirs of angels to dance on the heads of hypothetical pins.  Professors in the liberal arts and sciences betrayed ourselves and our students by our cowardly silence.  A little faith in our own common sense might have led us at least to suggest, that the empire’s clothiers were half-naked themselves.

These sorcerers and their Mickey Mouse grad students have interests overlapping those of their Wall Street chums, who did indeed make a lot of money from pumping up the real estate balloon.   Also culpable are the Federal Reserve bankers, the Secretaries of the Treasury, the House and Senate committee members, whose buddies marketed and rated the bonds, sold them, bought them, refused to regulate them, and convinced ordinary people that unrestrained price inflation (whether in real estate, commodities, or securities) is inevitable, eternal, and benevolent.

There are plenty of Americans who really do try to live within their means; people who are content to have fixed-rate, 30-year mortgages at reasonable rates, who establish monthly budgets, who drive modest cars for a decade or more, pay their taxes, and try to accumulate capital by thrift and saving.

Controlled inflation can be beneficial to small capitalists, small farmers, and even to wage earning people.  Benjamin Franklin realized as much when, at the age of twenty-one, he called for an increase in the colonial money supply.  But the American dream of a perpetually expanding “South Sea Bubble” of the sort that Mr. Henry Paulson and his Wall Street cronies seek to restore is unrealistic.

Americans’ realistic expectations during our most prosperous era, were solidly grounded in the Henry Ford principle of a living wage, and the Thomas Malthus principle of public spending towards development of public infrastructure.  No restoration of economic security will be possible if we start with the assumption that these principles, which eventually came to be called “Keyneanism,” have been entirely discredited.

The Roosevelt-Truman-Eisenhower economy provided a factory worker with a thirty year mortgage at 8%.  It also provided a four percent return on a pass book account at a Main Street bank.  An eighth grade graduate could afford to send two or three children to college, without taking out loans, and a young couple could afford a 20% down payment on their first home.  Evolving world conditions may never allow for America to revert to that economy,

Thanks to Reaganomics, the Roosevelt structure has been so mindlessly vandalized that Eisenhower Era expectations are no longer realistic.  But whatever the cause of our present ills, no cure will be found in the pseudo-patriotic bravado of so-called “conservative” think tanks, or in the pep talks of MSNBC pundits.  Any solution must be found in a completely new appreciation of those areas of the economy that are actually productive, including industry, agriculture, communications, transportation, and trade.  We need producers like Ford and Rockefeller, Carnegie and Gates, who despite their predatory tendencies, at least created material industries.

Finance is not an industry but a service, where we do not need those who commit the semantical crime of referring to securitized mortgages as “products.”   The demand of the hour is not for buccaneers or risk-takers, but for sober anti-inflationists like Nicholas Biddle and J. P. Morgan to guard against the speculative borrow-and-spend bubbles that accompanied Reagan’s voodoo economics.

Friedman states an obvious and almost redundant truth, obvious to at least some of us.  The system is broken, and the American dream, insofar as it is based on a perpetual spiral of borrowing to speculate, is completely unrealistic.  Friedman admits that certain irrational aspects of the dream may not be retrievable in the short run.  My reading of Poor Richard’s Almanack leads me to the common-sense assumption that they are not realizable in the long run either.

Wilson’s Obama Poem

Wilson’s Obama Poem
Copyright©2008, by Wilson J. Moses

Obama married black America
The mighty wife
And two precocious little girls
Innocent, elite, dainty
Prettiness comes as naturally to them
As skipping.

But lest we forget
(And this to me is important)
His folk were not from Niger or from Congo
They spoke a Nilotic language
And fought for cattle on Afric’s eastern plains
They did not furnish captives
For the dungeon of Cape Coast Castle
Or dance under the lash
On decks of slave ships
No dreams deferred of forty acres
And a skinny mule

The father he barely knew
Was a Kenyan goatherd
With a Disneyland T-shirt
And a bright American scheme
Leaving on a jet plane
Crossing a continent to gaze on the Pacific
Towards a land where palm trees swayed
And a cute whte girl from Kansas swam within his ken
Doing a hippy love-dance

Mather’s University was Cotton
That seemed within his reach
But beyond, alas, his grasping fingers
The apostate father slipped back
To Africa.  Resourceful mom
Moved on to Indonesia

Thus from a global meeting of East and West
A black Irishman with midwestern roots
Offspring of an Atheist/Transcendentalist Union
(Never Catholic. Never Muslim)
Came to Chicago
Where a Dark Madonna with big shoulders
Taught him the black Jeremiad
And becoming African American for the first time
Obama Married black America.

As Newton to Galileo; so Marx to Adam Smith

Newton said, “If I have seen further it is by standing upon the shoulders of giants.”   Many scholars have assumed that principal among these giants was Galileo.    I suggest that Marx stood on the shoulders of Smith in the same metaphorical respect.  One of Marx’s feet was placed on the shoulder of Smith with respect to labor theory of value, which Smith so staunchly defended against the physiocrats of the ancienne regime.  The other foot was placed on Smith’s other shoulder, an understanding ot the inevitability of class conflict.

Here the metaphore breaks down, because we run out of shoulders.  Other important components of Smith’s theory, were as compatible with Marx as they were irreconcilable with the theories of Thomas Jefferson.  Smith was opposed to slavery, on economic and on moral grounds, while Thomas Jefferson defended it at length in Notes on the State of Virginia.  Smith understood the importance of the industrial process and the legitimate moral claims of the artisans and mechanics, who were objects of Jefferson’s profoundest contempt.

JOE THE PLUMBER & ADAM SMITH

JOE THE PLUMBER & ADAM SMITH
by Wilson J. Moses

This election is a continuation of the culture wars, and it is likely that cultural symbols may trump economic interests.  On the cultural level, this plays out the Vietnam war all over again.   That is one reason that Ayers has emerged as an icon.  Previously the election of 2004 was about Vietnam, with John Kerry serving as an icon.  McCain, also an icon, sees the Presidency as his opportunity to vindicate not only the Iraq war, but Vietnam, as well.

On the economic level, Republicans, see the election as a way of further destroying the Keynesian economic policies that predominated from Roosevelt through Truman, Eisenhower, Kennedy, and Johnson.  People like Joe the Plumber foolishly believe that if they were not taxed, they could take their money and use it to invest on their own.  It is obvious to everyone but themselves that they lack the capacity to do so.   Indeed, most of us lack the capacity to do so, and it is this knowledge that distinguishes a working-class liberal from a working class conservative.   The Sarah Palins lack all humility, and really do believe that they are as smart as Warren Buffett.  They forget that a guy like McCain begins life with tremendous advantages, and proceeds thereafter, with access to information and institutions that they are unavailable to most of the working class.  Far too many workers foolishly believe that they can succeed outside institutional structures supported by government and taxation.

Adam Smith, who is so frequently mis-charactrized by Marxist historians, said in 1776:

“It sometimes happens, indeed, that a single independent workman has stock sufficient both to purchase the materials of his work, and to maintain himself till it be completed. He is both master and workman, and enjoys the whole produce of his own labour, or the whole value which it adds to the materials upon which it is bestowed. It includes what are usually two distinct revenues, belonging to two distinct persons, the profits of stock, and the wages of labour.
Such cases, however, are not very frequent; and in every part of Europe twenty workmen serve under a master for one that is independent, and the wages of labour are everywhere understood to be, what they usually are, when the labourer is one person, and the owner of the stock which employs him another.
What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible. The former are disposed to combine in order to raise, the latter in order to lower, the wages of labour.”

Joe the Plumber does not see the need to have a plumber’s license, or a union card, or to pay his taxes.   He earns $40,000 annually, and yet he identifies with people earning $250,000.   This ordinary wage earner does not, and cannot understand what Adam Smith is talking about.   His vision is too occluded by his his abstract fears, his unrealizable American Dream, and his subliminal recognition of his inferiority to hereditary aristocrats like John McCain, who are stronger and smarter than himself.  He is unaware of his interests and incapable of acting in accord with them.  Adam Smith is often misrepresented as standing in opposition to Karl Marx.   In fact Marx stood on the sturdy shoulders of Smith.

Paul Craig Roberts, was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of The Wall Street Journal editorial page and Contributing Editor of National Review. This erstwhile Reaganite quotes the following statement from Pravda in his article at COUNTERPUNCH http://www.counterpunch.org/roberts08132008.html

“Suppose Russia for instance declares that Georgia has weapons of mass destruction? And that Russia knows where these WMD are, namely in Tblisi and Poti and north, south, east and west of there? And that it must be true because there is ‘magnificent foreign intelligence’ such as satellite photos of milk powder factories and baby cereals producing chemical weapons and which are currently being ‘driven around the country in vehicles’? Suppose Russia declares for instance that ‘Saakashvili stiffed the world’ and it is ‘time for regime change’?

Paul Craig Roberts concludes: “The US is not a superpower. It is a bankrupt farce run by imbeciles who were installed by stolen elections arranged by Karl Rove and Diebold. It is a laughing stock, that ignorantly affronts and attempts to bully an enormous country equipped with tens of thousands of nuclear weapons.” Shocking when one reflects that Paul Craig Roberts was a prominent Reaganite!

We are now being forced to face a number of myths: Myth no. 1. Reagan won the Cold War. Myth no. 2. We live in a post-industrial age. Myth no. 3. The United States is the only super-power.

If we were in a post-industrial age, we would not be trying to set up NATO in all the states of the former Soviet Union in order to break the Russian monopoly on central Asian oil. If we had left the industrial age, we wouldn’t be competing with the Chinese for oil. Obviously we are willing to risk a nuclear war in order to control the energy sources, necessary for life in an industrial era.

I am not inclined to see things from the Russian point of view, so correct me if I am wrong: Couldn’t any fool see that the Russians have their own peculiar version of a Monroe Doctrine? And can’t any fool see that if the United States doesn’t want Russian missiles in Cuba, the Russians don’t want NATO forces in Georgia.

George Bush once said of Putin: “I looked the man in the eye. I found him to be very straightforward and trustworthy. We had a very good dialogue. I was able to get a sense of his soul; a man deeply committed to his country and the best interests of his country. And I appreciated so very much the frank dialogue.

There was no kind of diplomatic chit-chat, trying to throw each other off balance. There was a straightforward dialogue. And that’s the beginning of a very constructive relationship. I wouldn’t have invited him to my ranch if I didn’t trust him.”

Obama has wisely kept his mouth shut with respect to Georgia, as much as possible.

McCain continues to talk big while carrying a wet noodle. Unless he wants to launch the nukes.

Why are you so quick to say “We are all Georgians,” Mr. McCain? I am not prepared to follow you there. We are both old enough to remember that Joseph Stalin is Georgia’s most important contribution to the history of our times. In fact, whenever we hear of Georgia, Stalin is our first if not our only association. Georgia is the victim of Russia in the same way that Austria is the victim of Germany. The worst crimes of the “evil empire” were perpetrated by a Georgian. I am not prepared to blow up the world for Georgia’s newfound national integrity.

What is McCain proposing to do, follow in Napoleon’s footsteps with a march on Moscow? This is typical McCainism, patriotic bravado, backed up, in this instance, by good ol’ Joe Lieberman. Let us hope and pray that all this dangerous posturing is purely for domestic consumption. Aside from its control of gas and oil reserves, Russia’s trump card is, of course, increased support for Iran’s nuclear program. McCain supports the very Bush policies that provoked this crisis. His saber-rattling could be the start of something big.

Bush is dispatching Condoleezza Rice to Paris and then Tbilisi and sending military and Naval forces with “humanitarian aid and medical supplies.” Uh huh.

Let McCain have the presidency, then he can go ahead a blow up the world. Why should I care? I am sixty six, and five months older than the late Isaac Hayes. As for the McCain supporters, they will continue to sell bravado — even when they see their children dying from radiation sickness, their hair falling off, their skins peeling away.

Not a Democracy, but a Republic

The Constitution of the United States is not democratic, and anyone with the inclination to study Madison’s and Hamilton’s writings in The Federalist can see that the Constitution was intended as a safeguard against that tyranny of the majority, that unchecked democracy, which must inevitably present a threat to personal freedom and individual talent. The Constitution was framed, as Madison says in Federalist 10, to protect inequality. The letters of John Adams to Thomas Jefferson assert that the recognition of an inequality of talents is necessary to a rational theory of government. Jefferson conceded that there was an aristocracy of “the wise, the good, and the just” and that government must be in the hands of this natural aristocracy, in order to preserve “life, liberty, property, and peace.” The following sentences from Federalist 10, among the most insightful ever written by Madison, are neither egalitarian nor democratic:

“The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests. The protection of these faculties is the first object of government. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors, ensues a division of the society into different interests and parties.”

At least half the American population lack the “faculties” necessary to acquire impressive amounts of unencumbered property. The present sub-prime mortgage crisis raises a suspicion that substantial numbers have little idea of how to amortize debt, or why it might be in their interests to do so. There are also many people of normal, or even higher intelligence, who find it difficult or impossible, to keep roofs over their heads.

Are all people truly created equal? We might wish to examine that question carefully if we seek to work towards a kinder, gentler republic, and a more secure world.