Clause 61: The Pushback Blog

Because ideas have consequences

Archive for the ‘Winter is Coming’ Category

That Which Cannot Continue

leave a comment »

From time to time, I mention the idea of a day of reckoning for the United States. What would prompt it? How do I know? When will it happen?

The Cause

The cause of the reckoning will be inability to pay for all the entitlements. We have been voting ourselves rich for almost 85 years now. As we have moved through time and got away with it, we have become bolder. Like most other civilizations that were prosperous in their day, we have convinced ourselves that we are too cool, too rich and too slick to be constrained by the same reality that applies to others.

We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.
— Rudyard Kipling, “The Gods of the Copybook Headings” (1919)

I didn’t originate this idea myself. Not only do I have a degree in economics, but I have been reading the thoughts of others for decades. Howard Ruff was forecasting a day of reckoning before I graduated high school. He wrote books like How to Prosper During the Coming Bad Years. But the Coming Bad Years never came. So what happened?

What happened was an active defense. Washington is full of people whose job, really, is to postpone the day of reckoning, whether or not they accept the idea that one is coming. People in Treasury looked at the same data that Howard Ruff was looking at. They also saw that we were jeopardizing the health of the economy by financing entitlements through inflation. So, during the Eighties, they switched to financing entitlements through debt.

Economists have forecast twelve of the past seven recessions.
— Old economics joke

However, continued experience in getting away with it just emboldens people. They start reaching farther and grasping for more. As the decades have passed, politicians have promised more goodies to more people.

With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.
— Kipling, loc. cit.

How I Know

In the face of almost nine decades of experience, not to mention contrary assertions from Nobel laureate economists, how can I maintain that a day of reckoning is coming?

Moral Principles of Reality

I work in software engineering. The computer really doesn’t care how much pressure you are under or how badly you want the application to work. If you haven’t written the application properly, it has a defect. You can ignore the defect. You can claim it’s not a bug, but a feature. You can polish the turd: tell everyone who will listen why they should really want the behavior that they’re experiencing. At the end of the day, however, you have a defect, whether you recognize it or whistle past it.

Software does not respond to enthusiasm.
— William L. Livingston, Have Fun at Work (1988)

Economics, like other social sciences, has physics envy; practitioners seek quantitative support for their pronouncements, substituting precision for accuracy when necessary. Any serious normative discussion in economics — what should be, as opposed to what is — relies on assertions from below, from ethics.

A tree falling in the forest really does make a sound, whether or not anyone is there to hear it. Ideas and actions have consequences, whether or not anyone wants to acknowledge them. This is the moral aspect of reality. You can refuse to believe that you are walking off a cliff: on the way down, you can be proud of having given your life for your beliefs. Then — splat!

How Decline Works

I have seen a number of organizations decline and collapse over my lifetime. From my study of history, I have learned about many more. There is a pattern to decline.

How decline works.

How decline works.

The declining organization can marshal its resources to mask the extend of decline for some time. Most people want to believe that all is well, and seize upon favorable evidence provided by outward appearances, while ignoring or excusing the occasional crack in the wall. By the time intractable problems become really noticeable, the rot has become quite advanced.

At a national scale, the machinery to produce happy tunes is massive. It really has to be, since we have fiat money: if the leadership caused the people to lose confidence in the currency, it would in fact become worthless.

The Humanitarian Impulse

We have experienced a 250-year-long explosion in rampant humanitarianism. What’s wrong with that? Well, that depends on how humanitarianism is understood. By most people, it is understood poorly.

Irving Babbitt make a valiant attempt to distinguish between humanism and humanitarianism:

The humanist, then, as opposed to the humanitarian, is interest in the perfecting of the individual rather than in schemes for the elevation of mankind as a whole; and although he allows largely for sympathy, he insists that it be disciplined and tempered by judgement.
— Irving Babbitt, Literature and the American College (1908), p. 8

Babbitt found that the sentimental humanitarian was ready to deny the inner conflict between good and evil in each individual, launching into the expansive pursuit of utopian ideals.

With the progress of the new morality every one has become familiar with the type of the perfect idealist who is ready to pass laws for the regulation of everybody and everything except himself, and who knows how to envelop in a mist of radiant words schemes the true driving power of which is the desire to confiscate property.
— Babbitt, Rousseau and Romanticism (1919), p. 156.

Possessed of the moral force of an observed problem, such as poverty, and the expansive desire to make everyone else make his priority theirs also, whether they want to or not, the sentimental humanitarian seeks to wield the police power of the state to compel others to do what he deems to be good.

In the Carboniferous Epoch we were promised abundance for all, 
By robbing selected Peter to pay for collective Paul; 
But, though we had plenty of money, there was nothing our money could buy, 
And the Gods of the Copybook Headings said: “If you don’t work you die.” 
— Kipling, loc. cit.

Thus we have people who are now saying that a citizen has the right to health care. It’s understandable that they should say this, and understandable that people should want this. Health care has the potential to be ruinously expensive, and no one wants to watch a loved one die. However, how is this to be provided? Health care is a wealth-producing activity. Whom do we enslave to produce the wealth to pay for health care as a right? Apparently, the answer is: Everyone, a little bit. We can afford it, right?

Actually, no. Health care is about the worst thing you can make a right of, because the demand for health care is effectively insatiable. If we can get everyone to live to eighty, why not press on to ninety? Where are we prepared to stop? It is undiscussable.

When Will It End?

Events of this year have made it more clear to me than before that this people, firmly in the grip of sentimental humanitarianism, will heed no warning. Thus it has ever been:

When that day comes, you will cry out for relief from the king you have chosen, but the Lord will not answer you in that day.
— 1 Samuel 8:18

The people who run the country will continue to strive to keep the vote-buying engine running. It is their responsibility to do so, and they certainly do not want to have the collapse on their watch. They will continue to seek ways to postpone the consequences, preferably until they are dead and gone.

If I could identify the event that must trigger the day of reckoning, it would be the job of someone in Washington to make sure that triggering event does not occur. This active defense will continue until someone miscalculates or a series of unforeseen events box the government into a corner. There are really bright people in Washington, so the latter is more likely. In chess, it’s called zugzwang (move-compulsion); you must do something, but anything you do is profoundly disadvantageous. It’s how World War I started, among other disasters.

We are already getting a taste of how unpleasant this can be. We haven’t got to the difficult part yet. I wish I had a less unpleasant report to make, but I don’t see the country having the will to take the necessary measures until reality reveals the consequences so forcefully that only the truest of believers can ignore them.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began. 
That the Dog returns to his Vomit and the Sow returns to her Mire, 
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins, 
As surely as Water will wet us, as surely as Fire will burn, 
The Gods of the Copybook Headings with terror and slaughter return!
— Kipling, loc. cit.

Advertisements

Written by srojak

May 8, 2016 at 1:17 pm

Defending the West

leave a comment »

As is so often true, the nature of our civilization has been seen more clearly by its enemies than by most of its friends …
— F. A. Hayek, The Road to Serfdom (1944)

Several people have asked why Tashfeen Malik, the woman who participated with her husband in the San Bernardino attack last week, would abandon her infant daughter to go on a shooting rampage that was certain to lead to her death. It is a good question, provided we don’t settle for a platitude as an answer.

We will never know for sure what was going on in her mind; Tashfeen took her secrets with her to her demise. However, the current thinking is that she “self-radicalized,” meaning that she raised her hand into the ether and said, “Here I am; give me a mission.”

What would a person be thinking that she would do this?

Individualism

Her behavior doesn’t make sense to us, because we believe that it is wrong:

  • To throw your life away on a suicide mission;
  • To demand of another person to undertake a suicide mission except in a military combat situation (and then with restrictions);
  • To kill innocent people.

However, many people don’t know where these believes came from, or realize that through most of recorded history these principles were not accepted.

The idea that every person’s life is an end in itself — that your life is not the property of a king, priest or chieftain to preserve or end as he thinks best — is a Western idea. Most of the people who have ever lived did not live and die in societies that accepted this belief.

Even in the West, there have been retrograde movements. The Nazis did not believe these principles, and temporarily removed Germany from Western Civilization. To them, everyone’s life belonged to the Führer. The people of the master race existed so that he could work his will through them; everyone else existed to be used by the master race for their purposes. Even being in the master race was no shield; you could be called upon to sacrifice your life, and you should do so gladly. Yes, they mourned their family members who died, but in the Nazi belief system they had no moral leg to stand on to claim that the deaths were wrong.

What is life? Life is the Nation. The individual must die anyway. Beyond the life of the individual is the life of the Nation.
— Adolf Hitler, February 1943, speaking on the defeat at Stalingrad.

We don’t accept this thinking. While we recognize that the individual will die anyway, we don’t look at the nation — or the faith, or the ethnic group — as the source of meaning to which individuals are fungible members. We don’t consider the Nation to exist beyond the individual, and certainly not above the individual.

The proper definition of individualism is the belief in weighting the value of the individual over the value of the group, society or nation where these conflict. There is a spread range of individualistic beliefs, but all of them at their core assert that the default position is that it is not OK to sacrifice individual people for the good of the group.

People who do not hold individualists beliefs often have a simplistic way of viewing individualism, convincing themselves that there is no heroism possible in an individualistic society. This is not true. We have police and firefighters who put their lives on the line for others every day. We have soldiers, sailors and airmen with continuing traditions of heroism and sacrifice.

Autonomy

As individuals whose lives have value in and of themselves, we get to choose how we live, within certain parameters. We get to choose our own beliefs. We get to choose what we will do to earn a living and what we will do in our free time. We can choose where we will live and with whom we will associate. All this ability to choose is called autonomy. Provided we do not break the law or injure others, we are sovereign over ourselves.

Autonomy is fun when I get the benefit of it. It is less fun when my adult children assert their autonomy and they won’t listen to me. But they have to earn their own beliefs. Furthermore, they are individuals, too. In an individualist society, they get to choose for themselves what their lives will be like. Even if they have to learn things the hard way, it’s their way.

Periodically, people in the West get all misty-eyed about clans and folk community, with a sentimental idea of the benefits of giving up autonomy in order to belong. However, we have real, living examples of folk communities with low autonomy, such as the Pashtuns of Afghanistan:

Their ancient and eternal code of conduct is Pashtunwali, or “The Pashtun Way.” The reason for following Pashtunwali is to be a good Pashtun. In turn, what a good Pashtun does is follow Pashtunwali. It is self-reinforcing because any Pashtun who does not follow Pashtunwali is unable to secure the cooperation of other Pashtuns, and has very low life expectancy, because ostracism is generally equivalent to a death sentence. Among the Pashtuns, there is no such thing as the right to life; there is only the reason for not killing someone right there and then. If this seems unnecessarily harsh to you, then what did you expect? A trip to Disneyland?
— Dmitri Orlov, The Five Stages of Collapse

Yes, most of the Western-born detractors of Western Civilization do expect a trip to Disneyland, and if they ever got what they were asking for, they would be fatally disappointed. In a society such as the Pashtun, there is no autonomy for the individual. For example, you don’t get to choose not to carry out a vendetta; to fail to fulfill your obligation would make you less than a man and unworthy of respect from anyone. You do what the community demands you do if you want to belong to the community. Otherwise, you can go out on your own, where life is mean, solitary, nasty, brutish and short (not that the quality of life inside the community is all that great, either).

However, autonomy is complicated and somewhat scary, which is why there are Western-born thinkers who long for folk communities and other ways to lose oneself in the collective. There is no grace in autonomy; it’s just you, your choices and their consequences. If you succeed, however you define that, it is you that has succeeded. But if you fail, what then? Is it your fault? That does not appeal.

Autonomy Fail

Autonomy means you select your mission for your life. What if you can’t find one, or think of one? What if you want someone else to take the responsibility? What if you are looking for something greater than yourself to be a part of? You’re sitting around with your life in shambles, when a voice says, “Go kill the slaveowners.” No, sorry, that’s not Tashfeen Malik, but John Brown.

There are people who are don’t want to live in societies based on individualism and autonomy. They find themselves isolated, alienated and adrift. They want structure, cohesion and belonging. They want to be a part of something bigger than themselves. Some are even prepared to die rather than live in a society that does not offer this.

We just got done fighting a series of wars against the Total State. In the 1990’s, there was a certain amount of wishful thinking that all the ideological questions were now settled in favor of individualism, autonomy and the liberal state. Think again. There will probably always be people who don’t accept that outcome. Where we are going in the West is untried, uncertain and can be downright forbidding. Not everyone wants to go there with us.

The Next War

Individualist and collective societies cannot coexist peacefully along side one another. The individualist, autonomous society intrudes on the various true believers of the collectivist world. It did on the Soviets, it does on the radical Islamists and it always will on the collectivists. Over time, disaffected members of the collectivist society will leak out to the individualists, just like my father did in 1956. One must prevail and the other must go under.

The enemy is not Islam. There are Moslems who are not radical enemies of societies based on autonomy, and there are enemies of autonomy-based societies who are not Islamic.

The enemies are collectivists of all stripes who cannot tolerate our continuing to exist as an society that values individualism and autonomy. They think we are so chaotic and individualistic we can’t come together. They think we are too weak to prevail against them, despite our material advantages, because we do not have the will to fight.

They have never been right before. Are they right this time?

Written by srojak

December 7, 2015 at 11:59 am

Misadventures in the Middle East

leave a comment »

Events of the past week motivated me to do some re-reading. The book I consulted again was A Peace to End All Peace (1989) by David Fromkin, subtitled The Fall of the Ottoman Empire and the Creation of the Modern Middle East.

The Middle East before the Great War

Rand-McNally 1895 Map of the Ottoman Empire in Asia

Rand-McNally 1895 Map of the Ottoman Empire in Asia

This is a map of the Middle East in 1895, when it was largely controlled by the Ottoman Empire. It is somewhat busy, with several names layered over one another in places. The colored areas on the map are, roughly, the major administrative divisions of the land. Thus, you have the administrative region of Syria, shown in green in the lower center. The province of Syria spans that and extends into the neighboring region of Aleppo.

On the right, there is a part of the map labeled Kurdistan, extending into Persia. Kurdistan is not a political entity, as it remains today.

Under [the Sultan’s] rule civil, military and Holy Law administrations could be discerned in an empire carefully divided into provinces and cantons. But the appearance of orderly administration — indeed of effective administration of any sort — was chimerical. … Gertrude Bell, in the course of her travels, found that outside the towns, Ottoman administration vanished and the local sheikh or headman ruled instead. There were districts, too, in which local brigands roamed at will. … On the eve of the First World War, only about 5 percent of taxes was collected by the government; the other 95 percent was collected by independent tax farmers.
— Fromkin, pp. 35-36.

Egypt and Cyprus were factually part of the Ottoman Empire, but British protectorates had been established in both places. Russia and France had granted themselves the right to provide protection for the Orthodox and Catholic enclaves within the empire. The Ottoman Empire was losing ground in Europe and losing the ability to be master in its own house. It truly was “the sick man of Europe.”

However, it is clear from Fromkin’s description that many people within the empire thought of themselves not as citizens of the Ottoman Empire, but as members of their particular clan or tribe and believers in their particular sect.

The Ottoman Sultan was regarded as caliph (temporal and spiritual successor to the Prophet, Mohammed) by the majority group within Islam, the Sunnis. But among others of the seventy-one sects of Islam, especially the numerous Shi’ites, there was doctrinal opposition to the Sultan’s Sunni faith and to his claims to the caliphate.
— Fromkin, p. 35.

Dissolution and Revolt

Westerners saw the weakness of the Ottoman Empire. However, they also looked at its people in terms of modern, western nation-states. Further, under the guidance of Winston Churchill and Jackie Fisher, the Royal Navy was converting from coal to oil as a fuel for warships. Britain had abundant coal, but no oil. However, there were known deposits of oil in the Middle East.

In World War I, the Ottoman Empire sided with Imperial Germany and against Britain, France and Russia. The Entente Powers sought ways of knocking the Ottomans out of the war through invasions of Gallipoli, Mesopotamia and Arabia. After early failures, the Allies were ultimately successful and forced the Ottomans to capitulate. Russia was now the Soviet Union and of a whole different character. However, Britain and France expected to expand their influence in the Middle East by picking apart the carcass of the Ottoman Empire. But there was a problem:

The Prime Minister [David Lloyd George] claimed that Britain was entitled to play the dominant role in the Middle East, recalling that at one time or another two and a half million British troops had been sent there, and that a quarter of a million had been killed or wounded …
What Winston Churchill insistently repeated was that this situation — the occupation of the Middle East by a million British soldiers — was only temporary; the troops demanded to be brought home.
On 10 January 1919, Churchill’s first day in office as Secretary of State for War, the Chief of the Imperial General Staff urgently consulted him about a crisis in the ranks: soldiers had demonstrated, demanding immediate demobilization.
— Fromkin, p. 385.

Not only were the soldiers not inclined to stay on occupation duty, but the nation could not afford to maintain them. Britain and France were economically exhausted from the war. They had hoped to make good their sacrifices by imposing a Carthaginian peace on Germany (as had the Germans hoped to impose on France, had they won the war). But Germany, too, was exhausted; otherwise the Germans would have still been fighting. For the victors, there were precious few spoils and even those were not always the prizes they seemed.

So the British attempted to impose their rule on their new subject peoples on the cheap. There was an immediate crisis, because the British didn’t have the resources to project power effectively. Between 1919 and 1921, a series of insurrections boiled over from Turkey to Egypt to Afghanistan. It is instructive to read about the British difficulties in Mesopotamia in 1920:

While [Civil Commissioner Arnold Wilson] was prepared to administer the provinces of Basra and Baghdad, and also the province of Mosul, he did not believe that they formed a coherent entity. Iraq (an Arab term that the British used increasingly to denote the Mesopotamian lands) seem to him too splintered for that to be possible. Mosul’s strategic importance made it seem a necessary addition to Iraq, and the strong probability that it contained valuable oilfields made it a desirable one, but it was part of what was supposed to have been Kurdistan; and Arnold Wilson argued that the warlike Kurds who had been brought under his administration “numbering half a million will never accept an Arab ruler.”
— Fromkin, p. 450.

Furthermore, religious tensions made the situation worse:

A fundamental problem, as Wilson saw it, was that the almost two million Shi’ite Moslems in Mesopotamia would not accept domination by the minority Sunni Moslem community, yet “no form of Government has yet been envisaged, which does not involve Sunni domination.” The bitterness between the two communities was highlighted when each produced a rival Arab nationalist society.
— Fromkin, p. 450.

Stop me if you’ve heard this one before.

British nerves were on edge as vague rumors, constant unrest and repeated killings took their toll. In the summer of 1919 three young British captains were murdered in Kurdistan. The Government of India sent out an experienced official to take their place in October 1919; a month later he, too, was killed.
— Fromkin, p. 451.

The continued stream of killings continued into the next year. In June, Mesopotamia exploded into open revolt. Armed insurgents overran British outposts, massacring the soldiers. In Karbalah, a Shi’ite cleric proclaimed a Holy War against Britain. By August, some of the rebels proclaimed a provisional Arab government.

Back home in Britain, the economy was in a state of collapse, with business failures and mass unemployment. This situation was not caused by the uproar in the Middle East, but the continued drain there was hardly the tonic the nation needed.

In a leading article on 7 August 1920, The Times demanded to know, “how much longer are valuable lives to be sacrificed in the vain endeavor to impose upon the Arab population an elaborate and expensive administration which they never asked for and do not want?”
— Fromkin, p. 452.

Many of the outpost towns that had been cut off by the revolt were isolated until October, and only after February 1921 could Britain consider itself to have re-established a grudging sense of order in the country. The cost to Britain was almost 2,000 casualties, including 450 killed.

Britain struggled to understand what had actually caused this crisis and sought causes from outside, including the Soviets, the Turks and even agents of the American oil companies.

“What we are up against,” said Wilson, “is anarchy plus fanaticism. There is little or no Nationalism.” The tribesmen, he said, were “out against all government as such” and had no notion what they were fighting for. In mid-August, he said that the “revolutionary movement has for some time past ceased to have any political aspect and has become entirely anarchic.”
— Fromkin, p. 453.

But the concept of government for men like Wilson was limited to governments like Britain or France had. This made no sense in the Middle East, where the understanding of capital-N Nationalism was mostly limited to radical intellectuals educated in the West.

Earning Self-determination

From David Lloyd George and Gertrude Bell to Paul Wolfowitz and Paul Bremer, there has been a tendency in the West to look at the peoples of the Middle East as a sort of White Man’s Burden: we will stand them up, teach them how to have democratic, pluralist, secular nation-state governments like we do and everyone will get rich and live happily ever after.

Fromkin offers a different perspective: what if the dissolution of the Ottoman Empire in 1918 was properly analogous to the collapse of the Roman Empire in the fifth century? He points out that it took nearly one thousand years for Europe to develop the nation-state as the primary form of political organization, and then a further five hundred years to work out which nations would get to have states and which would not. The process often featured bloody wars; the Thirty Years’ War is a particularly unpleasant example.

Whether civilization would survive the raids and conflicts of rival warrior bands; whether church or state, pope or emperor, would rule; whether Catholic or Protestant would prevail in Christendom; whether dynastic empire, national state or city-state would command fealty; and whether, for example, a townsman of Dijon belonged to the Burgundian or the French nation, were issues painfully worked out through ages of searching and strife, during which the losers — the Albigensians of southern France, for example — were often annihilated.
— Fromkin, p. 565.

It may be that the nation-state is the logical political goal toward which the peoples in the Middle East should be striving, or it may be that they can devise an alternative political form that makes more sense for them. In any event, the process of getting there has to be their process, which they have to own and pay for in their blood. It is not possible to give people self-determination. Our forbears had to earn it, we have to keep it (and it is an open question how good a job of it we are doing) and anyone else who wants it has to earn it. It is a messy process, full of wrong turns, overreaction and violence. People who have power don’t say, “yeah, I see your point about popular sovereignty,” and then retire peacefully to Florida, never to be heard from again.

I’m from Baghdad, and I’m Here to Help

In most of the world, it never bodes well when a representative of the central government comes to visit. Outside of the countries we know as The West, it is laughable to think that you would take your problems to the government and expect any kind of help. He is going to want something: your harvest, your labor, your son for his army.

Your country ain’t your blood. You remember that.
— Sonny Corleone

In most of the world, the people you can count on for help are the people you have relationships with. Your clan is your support system. The farther you get from your clan, the less reciprocal influence you have and the less you can trust. Sonny sounds cynical to a post-New Deal American audience, but his advice is real life outside of the developed West.

We have come far in the West, and I am certainly not knocking it. I wouldn’t trade life here for life in these other places. However, we need to understand what goes on in these other places so that we can create policies that have a hope of actually working.

Look at the world the way many Russians look at it. Dmitri Orlov did a great job describing the mindset in his book The Five Stages of Collapse. He sets up a human relationship pyramid, modeled on the nutrition pyramids:

The base of my pyramid, representing a royal share of a healthy human interaction diet, is made up of family, extended family, clan or tribe — those people who are closed to you, and whom you have known all your life. These are your people — before whom you have irrevocable obligations, who you can trust completely and will support, defend and protect unconditionally as a matter of family honor. … Next, a somewhat smaller slice is made up by friends and allies — those people with whom you are united by bonds of friendship or solemn promise, but who are not your people. Next, an even smaller sliver is made up of strangers: those with whom you are drawn together, not through blood relations or personal allegiance, but through accident or necessity or fleeting circumstance. … [A] fleeting circumstance such as hosting a performance by an itinerant musician may be pleasant, but it cannot be prioritized above the needs of those who are not strangers.
— Orlov, pp. 85-86.

Through this lens, government is a racket. You pay tribute for protection against violence. You accept that the entity to whom you pay tribute will have a monopoly on violence, because if they don’t, you will likely be caught in the middle between two very violent claimants for exclusive control. You just hope that the racketeer doesn’t start turning his violence on you. It’s been like this since time out of mind.

None of this excuses the violence that the Islamic State is spreading around the world. The people running the show there are showing themselves to be human viruses, much as the Nazis were human viruses. They were a mortal threat to civilization. Even Winston Churchill was prepared to make common cause with the Communists, because he saw that the Nazis were the clear and present danger.

Nor is containment a strategy. You don’t win wars by not losing. You win wars by winning, by defeating your opponent. But then what?

Nature Abhors a Vacuum

What would be a least-worst outcome in Syria, for example? Clearly the Assad regime has to go. But what to replace it with? And what will happen after that?

Assad is a member of the Alawite subgroup of Twelver Shia Islam, and has made extensive political use of the Alawite minority in Syria. It is hard to imagine a future for Syria where Assad falls that does not involve bloody reprisals against the Alawites.

Images of continued violence will be beamed around the world by Western news feeds and bother influential people in the West. These people are well-intentioned, but as we learned long ago, the road to Hell is paved with good intentions.

What has to happen in places such as Syria is that we need to find the least offensive candidates who can hold power and support them. These people will be corrupt. They will probably turn a blind eye to the violent reprisals that Syria needs to go through if it is ever to come together again politically. Many innocent people will pay for the evil deeds others have done in their name. As long as the successor regimes don’t make trouble for the neighbors and do not support international terrorism, they need a breathing space to get their own house in order.

At some point in the future, it is possible that Arab people will be able to take ownership of their own societies and reshape them. Many of them have been educated in the West and exposed to western political standards. First they need to be able to exist in their own societies. The people who are all about killing each other and killing anyone they can must be swept away. That will require international help.

However, the international community is limited in what it can achieve to bring these peoples into modernity. We can’t give them modern politics where governments are under the law. No one gave it to us. Our predecessors fought and died for that. Arabs will have to do likewise. They don’t have to follow our path, but they have to follow some path, which they must choose themselves and take ownership of their choices.

Written by srojak

November 18, 2015 at 10:33 am

The July Crisis

leave a comment »

The diplomatic crisis that began World War I played out 101 years ago this month. On 28 June, the casus belli occurred, when the Austro-Hungarian heir and his wife were murdered by Serbian nationalists. By 31 July, Austria-Hungary and Serbia were at war and Russia and Germany were mobilizing.

One of the most interesting features of the crisis was that, reading the accounts of the various participating governments, no one believed that they started the war. Everyone spoke as if they had no choice to do what they had done:

  • Austro-Hungarian leaders believed they could not allow their neighbor to instigate assassination without reprisal;
  • Russian leaders believed that they could not abandon their brother Slavs without losing credibility;
  • German leaders had predicated all their plans on the slowness of the Russian mobilization, and therefore believed that they could not allow it a head start.

People went to war saying, “Home before the leaves fall.” They were cavalier about the risks of the actions that they were taking. Few had any notion of the character of the war they were beginning.

I do not expect the current July crisis, centered on the Greek economy, to result in a shooting war. But what it will result in is serious enough. Like its forerunner a century ago, it features people who don’t understand the consequences of their actions and who see themselves as having no choice but to do what they are doing.

The Greek voters have not helped matters. While poll results had been predicting a close result, the actual vote was a thumping 61-39% result in support of Alexis Tsirpas and his hard-line approach. One ray of hope appeared in the form of the resignation of his finance minister, Yanis Varoufakis, who had made ill-considered remarks comparing the Greek creditors to terrorists last week. But the horse is out of the barn now, and Tsirpas can be sure of his political backing as he resumes negotiations.

Many of the Mediterranean countries are shot through with corruption and clientelism. Favored political groups have become dependent on state handouts. The fact that the state can no longer afford them doesn’t enter into their reckoning. Under these conditions, attempts at reform from above are political suicide missions.

Greece was able to gain admission to the Eurozone in 1999 by showing data meeting the European Union targets, including annual budget deficits below 3% of GDP and public debt below 60% of GDP. By 2004, it had become apparent that the Greek government had cooked the books and these targets had not been met in reality. However, there was no framework in which to handle this.

The Eurozone had been dedicated to expand for expansion’s sake. The dream was of a unified economic entity of 500 million people — larger than the United States — with a single currency and free movement across internal political borders. The European Central Bank would prevent the politicians from inflating the currency in order to hand out candy to their clientele. Within this structure, each country could pursue its own political preferences, but their politicians would have to take the heat for economic consequences of those preferences.

It hasn’t worked out that way. Since 2008, Portugal, Spain, Italy and Greece have all gone through debt-driven troubles. Greece is the worst of the lot, but Spain is not in great shape either. Spanish voters are watching what happens in Greece with great interest.

The referendum now looks like a shrewd calculation by Tsirpas. He now can be sure of his political situation at home as he attempts to shake down the IMF and Germany for yet another bailout and a debt haircut. Tsirpas can point to the result and say that he has no choice; he is only doing what his voters want him to do.

Now we will see what the real consequences of the Eurozone are. Did they leave the central bank in charge of the currency, forcing the elected officials to face the music for their policies? Or did they change the central bank into a fire brigade, committed to do whatever it takes to save the Euro?

The choices now faced by the creditors are all bad. Caving in to the Greeks will encourage the other Mediterranean countries, who don’t want reform either, to push back all the harder. Angela Merkel will face all kinds of heat at home; the Germans are not eager to prop up these other nations at their expense.

However, a hard line position by the creditors has problems of its own. It could force Greece out of the euro. While that in itself might seem desirable, it opens a door in what was meant to be a solid wall. Given the expansive nature of the intent of the euro, there was never a plan to have countries leave. No one knows how it would work. Worse for its proponents, it is a move in a direction opposite to their goals. What becomes of the euro if it is not a permanent arrangement?

Meanwhile, what happens to Greece outside the euro? They would be free to inflate their own currency at the expense of pauperizing themselves in real terms. Exporters would gain, but anyone on a fixed income would lose, as would anyone with money in the bank. The worst-case scenario is a Zimbabwe on the doorstep of Europe.

Events of July 2015 will go far to decide how this mess will play out. Your grandchildren will be reading about this in their history books.

Written by srojak

July 6, 2015 at 8:32 am

Voting Ourselves Rich

leave a comment »

A former co-worker sent me a link to a polemic on Social Security by Michael Goodwin, the author of Economix. Since the material is presented as a series of drawings, I have to include the drawings in order to quote them. All the drawings on this page are the work of the author, Michael Goodwin, and the illustrator, Dan Burr.

There is a lot of misinformation on this site, so let’s dig in.

The Pay-As-You-Go System?

"pay-as-you-go" system, from Economix
They way Social Security was advertised to the GI generation was as a pay-as-you-go system: your Federal Old Age Benefit payments (some pay stubs used to have a column F.O.A.B.) went into a fund to pay for your retirement. The first year anyone actually received Social Security benefits was 1940.

In fact, such a system would be unimplementable. What would the government do with such an enormous pile of money, anyway? Stick it in a vault? It would never keep up with normal economic growth. Invest it? The position would be impossible to manage and would swamp competing private investments.

Meanwhile, there would be this enormous pile of money in the Treasury, and somehow politicians were going to be able to keep their hands off it?

So what Mr. Goodwin describes, a pay-as-he-goes system, is actually closer to how the system worked than was the story that was sold to people who were voting adults back in the day. However, there is a fundamental problem with this. If you were to set up a private investment fund along this model, paying earlier participants out of the proceeds from later entrants, it would be called a Ponzi scheme and you would be slung in jail.

And Reagan Screwed Us All, Right?

Reagan borrowing, from Economix

Actually, no. This was getting out of control before Ronald Reagan ever came to town. Howard Ruff was calling Social Security a Ponzi scheme back when Jimmy Carter was still president.

Any fund that a government sets up to collect taxes now and pay benefits in the future is going to have a hard time keeping up with normal economic growth. Government is not a wealth-producing entity. You can’t “invest” in government, because there is no wealth production from which to obtain returns. It is just one big cost center.

Some of those costs are unavoidable and necessary, such as law enforcement, road repair, diplomats, soldiers and food inspectors. You may not agree with the levels at which they are funded, but they are necessary. However, their necessity doesn’t change the fact that none of them are producing wealth, and therefore none of them can contribute returns to an investment designed to provide for citizens in their old age.

But the event that really put Social Security underwater was the inflation of the seventies. Given that there was nothing in which the government could invest a fund of that size and keep up with normal economic activity, there was absolutely no chance of the government being able to keep up with the currency inflation it was driving back then.

By 1980, mortgage rates were pushing 13% and the prime rate for commercial borrowing was near 15% (See this New York Times article). This was completely unsustainable and a threat to the proper function of the economy. Business managers were beginning to question their ability to extend 30-day payment terms. Banks were starting to get interested in workarounds to avoid state usury laws, which would change the credit card business forever.

There are only 3 ways to finance government operations:

  • Levy taxes;
  • Borrow;
  • Print the money.

Taxes were off the table, because they would have pitted some voters against others. Uncle Feelgood didn’t want that. States were already experiencing tax revolts, such as the one led by Howard Jarvis in California that passed Proposition 13 in 1978. Having pushed inflation to the apparent limit, borrowing was the only unexplored avenue. Well, other than not spending — what do you think of that, Mr. Goodwin?

I’m Entitled

Social security entitlement, from Economix

Apparently not much.

Hey, wait — previously, you said that our social security payments were paying for current retirees’ benefits. So how, exactly, does this entitlement thing work?

This touches on another idea that periodically lumbers out of the woods to be beaten to a bloody pulp: means-testing Social Security. Every so many years, somebody floats it, and you will hear it trotted out again before long. But it never goes anywhere, because politicians know that means-testing Social Security will be the death of large-scale political support for the program. If a significant number of voters never expected to receive Social Security benefits, it wouldn’t be long before a revolt against Social Security started. However, with all of us in the system, expecting to receive benefits if we live long enough, there are payoffs for everyone. We can vote ourselves rich!

Only one problem: what happens when we go to collect our entitlement and the cupboard is bare?

The New Dealers never believed that there was enough wealth to make everyone above average. That is why they allowed unfavored groups, such as blacks and Asians, to be shoved to the back of the line. That mentality did not survive the sixties, and I can’t say I’m sorry about that. Nevertheless, the mentality that replaced it was that we were so rich, cool and smart that we really could vote ourselves rich. All of us.

And, yes, you’ll get your entitlement — sort of.

Furthermore, we have the capacity under the Constitution, the Congress does, to coin money, as well as to regulate the value thereof. And therefore, we have the power to provide that money. And we are going to do it. It may not be worth anything when the recipient gets it, but he is going to get his benefits paid.
— Senator William Proxmire, Senate hearings, 1976

Sure, you can have your $2,000/month Social Security benefit. Of course, a gallon of gas might be $1,000 and a gallon of milk $500. Remember that the Core Consumer Price Index does not include food or energy. The feds are never going to overtly default on federal obligations. They are going to constructively default by inflating the currency to the vanishing point.  The process is already under way:

 

Monetary Base 1979-2014. Federal Reserve Bank of St. Louis.

Monetary Base 1979-2014. Federal Reserve Bank of St. Louis.

The right side of that graph shows a 5x increase in the monetary base since 2008. Ultimately, that means more dollars chasing the same amount of wealth. Why do you think there are all these people advertising to buy your gold?

You can be entitled to something, but you still can’t get blood out of a stone. Imagine how much fun it is going to be when five people with competing claims to a dollar meet in the public square to fight over 35 cents. What do you think all that rioting in the Club Med countries was about? People there had made life decisions in the expectations of receiving benefits, and suddenly the government pulls out its pocket linings. Coming soon to a nation uncomfortably near you.

So Can’t We Default on Someone Else?

So here is Mr. Goodwin’s solution:

Components of debt, from Economix

OK, let’s think about this practically and realistically. Our plan is to flip off the people who are lending us the money to live beyond our means. That won’t cause a problem, will it?

The politicians are hooked on vote buying. Wall Street is their connection that makes it possible. Both Wall Street and Washington believe that Wall Street has the federal government by the short hairs.

As of 2012, $5 trillion in federal debt was to mature within 36 months (see this Wall Street Journal article). It’s not like the feds have the means to pay it off; they have to roll it over. And over. And whose co-operation do they need to do that?

Without the active assistance of Wall Street, elected officials have no chance of buying the votes they need to stay in office. In 2008, we had an election that sent the Senator with the most progressive voting record to the White House. And what changed in the financial sector? The heavens opened up — and a feather fell to earth. Yes, we can … keep on going just the way we have been.

You’ve heard it on the radio all your life:

Meet the new boss
Same as the old boss
— Pete Townshend

By the way, the foreigners are all too familiar with the concepts on these panels. When the wheels really start to come off, you will see foreigners dumping both government debt and dollars.

But Everything’s Cool

Social Security trust fund, from Economix

Try this simple experiment: Apply for a home mortgage. Write yourself an IOU for $1 million and list it as an asset on your mortgage application. Note the reactions of the mortgage originators. Do they laugh? Make rude gestures? Call the men with nets?

Remember the plan to stiff the rich people who lend the money? The intended suckers are the holders of government bonds. The Social Security trust fund is a very large rich person, weighing in at about $2.6 trillion as of mid-2012. When — not if — the government can’t keep with the vote-buying treadmill, the value of those bonds will be significantly impaired. As in a 99% haircut. The kind of haircut that leaves you with a razor through your throat.

What, Exactly, Do You Do Here?

with 2 comments

Back in 1982, two Harvard MBA students published a book in the Official Handbook mold, titled The Official M.B.A. Handbook, or How to Succeed in Business without a Harvard M.B.A.. The authors didn’t want to impair their future chances to recapture their educational investment, so they wrote under pseudonyms.

It turned out that they were ten minutes ahead of their time. They captured the issues around the aspirations of the decade.

One particular item in the book has stuck with me. The authors were discussing how to choose a career. They presented an overlooked but important consideration.

 

The Line of Direct Labor. Fisk and Barron, p. 104.

The Line of Direct Labor. Fisk and Barron, p. 104.

M.B.A.’s, having a rather oversized opinion of their own worth, are very sensitive about being underpaid. In addition, they know that pay levels are often keyed to one’s level of tangible output, if output is actually measurable. Thus, managers who work in jobs with tangible output get paid appropriate salaries, while managers whose output cannot be measured can earn absolutely stratospheric ones.
— Fisk and Barron, p. 104.

Yes, it’s satire, but satire has to have some grounding in recognizable truth in order to be funny. Moreover, in our time, yesterday’s satire will be left behind as stale and unimaginative by what people say and do in all earnestness tomorrow. As Tom Wolfe had written not five years before, “No sooner do you think you have hit upon a piece of Rabelaisian hyperbole for our times than reality shrinks you like a wool sock.”

What actually happened in the past thirty years is that everyone in the middle class has made a run for the right side of the Line of Direct Labor. The goal has been to find a setup where you have no tangible output, or even better, no output at all. This has led to corporate environments that I described in an earlier post. Even if you can’t get into a line of business that has no tangible output, you can set yourself up away from the tangible output within the business by being a gatekeeper or a professional critic. A substantial portion of the people who have middle-class jobs have done exactly this.

However, the relatively few people hitched to responsibilities with tangible output are carrying all those others who are above such mundane considerations. This leads to less wealth production and more people claiming credit for the wealth that is produced.

You would never know it to look at the published figures:

 

St. Louis Federal Reserve Economic Data (FRED): Real Gross Domestic Product, Downloaded 4 May 14. http://research.stlouisfed.org/fred2/series/GDPC1

St. Louis Federal Reserve Economic Data (FRED): Real Gross Domestic Product, Downloaded 4 May 14. http://research.stlouisfed.org/fred2/series/GDPC1

But this is completely meaningless if you want to understand the wealth picture. Gross domestic product (GDP) is a backed-into number. We have no way of measuring what was actually produced. We measure what was spent and say, “Well, if someone spent the money, they must have got something for it.”

But this is not true. All those people who don’t have tangible output, or any output at all, are also getting paid, eating food, buying houses and putting gas in their cars. All their expenditures show up in GDP, even if they don’t contribute anything — even if they actually obstruct wealth production. Furthermore, they are competing in the marketplace with those who do produce for scarce goods, bidding the prices up.

This is the dark, seamy, stinky story no one wants to touch: what if the middle class, as a whole, isn’t producing enough to earn its keep? Far better to stroke everyone with stories about how they are ripping you off. You, the salt of the earth, are out working hard every day and hanging on to what you have by your fingernails. Why is that? Because they are taking advantage of you.

But we have been down this road before, and it wasn’t pretty.

 

Written by srojak

May 4, 2014 at 3:33 pm

The Republican Coalition

leave a comment »

Could it really be happening? Some new political party birthing itself out of the side of the Republican Party?

The Atlantic finds evidence for it: http://www.theatlanticwire.com/politics/2013/09/meet-congress-new-third-party-and-its-leader-junior-senator-texas/69976/. The article claims that Speaker John Boehner’s control of the House depends on a coalition of two parties, and Boehner has to make moves he would not otherwise make in order to hold his coalition together.

However, I beg to differ in one important respect: this is not a new third party, but a candidate for a second party.

The Lite-Democratic Party

Following the defeat of Barry Goldwater in 1964, the Republicans sought to come to terms with Progressivism. The GI generation was deeply Progressive, and to politicians such as Richard Nixon and Robert Dole, the way forward seemed to be to embrace Progressive goals while directing their implementation.

However, this made the difference between Republicans and Democrats paper-thin. Seen from the perspective of 1970, there was still a significant difference between the parties in terms of their attitudes to order, experimentation and central control. However, from the vantage point of 2010, both parties have bought into an expansive reading of government authority that moves accountability away from elected legislators and toward the permanent bureaucracy.

In order to stay in office, the Republican establishment has been willing to compromise. I have addressed this perspective in a previous posting. However, in the face of current conditions, the Republican establishment is too compromising, being “in office but not in power.”

So on Election Day, we continually find ourselves with the choice between Frick and Frack. Each candidate mouths the platitudes, comes out in favor of such controversial issues as motherhood and the flag, and tries to light up the opposing candidate with attack ads. Whoever we vote for, the end result has been the same: more intrusion, more spending and more dependency. We had choices that were really no choices at all. The Republicans were often the Democrats-lite, with 65% less distribution of benefits.

Sitting on a sofa on a Sunday afternoon.
Going to the candidate’s debate.
Laugh about it, shout about it
When you’ve got to choose
Every way you look at this you lose.
— Paul Simon, “Mrs. Robinson”

The Progressives are bankrupt. They have promised too much to too many people, and the wealth to make good on the promises simply does not exist. As the claimants all come together in the public square, asserting the priorities of the promises made to them, the conversation will get ugly. There will be no room for compromise: many people are going to go home empty-handed.

President Obama has no private sector experience and no concept of how wealth is created. He chose to double down on the Progressive agenda by establishing a right to health care. He did not get all he wanted, but he got plenty. However, health care is truly a bottomless pit; there is no satiety. Furthermore, if health care is a right, how is it provided? It’s not like life or liberty: to deliver health care requires production of wealth. Whom do we enslave to provide those who cannot afford it the care to which they are deemed to be entitled?

The heirs of Nixon and Dole, such as John McCain and Karl Rove, are not ready to address these questions. They want to go along with Progressives in order to get along, continuing to divide up the pie. But they are all committing money to promises faster than Ben Bernanke can print it. Soon there is not going to be enough pie to go around. The day of reckoning is coming to an economy near you.

The Something-else Party

There have been an increasing number of people who were aware of something painfully wrong here. Is that number reaching critical mass to support political candidates?

We need a credible alternative to the Democrats so that we have a meaningful choice in elections. The Lite-Democrats that we have come to know as the Republican party do not offer that choice. They buy into the same corporatist beliefs as the Democrats.

What’s Missing?

Although the idea of a new political party is intriguing, there is far to go before it would be a viable political actor.

Voters in Metropolitan Areas

As Ryan Lizza notes in The New Yorkerthere are not many Representatives with districts including metropolitan areas:

  • Cobb County, outside Atlanta, is represented by Phil Gingrey.
  • James Sensenbrenner has some of the west suburbs of Milwaukee.
  • Randy Hultgren has a district in Illinois that gets as close to Chicago as Wauconda and Warrenville.
  • Some suburbs northwest of Detroit are represented by Kerry Bentivolio.
  • Some suburbs north of Dallas are in the district of Kenny Marchant.
  • Ted Poe represents some suburbs north of Houston.
  • The district of Keith Rothfus cuts as close to Pittsburgh as Ross and O’Hara Townships, but most of the district is rural.

There is the danger that the growing political entity could also be identified, or even identify itself, with anti-urbanism. This is a force that is underappreciated in American politics; it helped push through Prohibition and the National Origins Act of 1924, and has never really gone away. A new political party that is nativist and anti-urban would not be seen as a positive development, at least by this writer.

Coalition Building

Success in politics depends on addition, not subtraction. If this new force is to be successful, they will have to broaden their appeal beyond their current core constituency. This will be difficult, because their energy comes from highly motivated supporters rebelling against what they don’t like about the Republican Party, and these people will strive for purity. However, they will have to decide what are the important issues on which they can make common cause with other disaffected segments, and to what issues they must hold firm.

Similarly, I don’t offer an unqualified endorsement to this group or their followers. I am less than impressed by what I know of people like Michelle Bachmann. Nevertheless, I also recognize that success in politics requires making common cause with others with whom I may disagree on some points.

Written by srojak

October 7, 2013 at 10:12 pm