Clause 61: The Pushback Blog

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Posts Tagged ‘corporatism

Thank You for Protecting Me from Myself

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Two very helpful persons at the Brookings Institution, Jonathan Rauch and Benjamin Wittes, have written a paper calling for more professionalism and less populism in American public life. The title of the paper claims, “voting makes us stupid.” Really?

Of course, Donald Trump is a walking testament to the stupidity of voters. But their argument goes beyond this. Let’s examine the points in detail.

More Participation Will Not Be Beneficial

The authors go back to, of all people, the Founders as a source of the idea that the Constitution was set up to limit participation. This is true. The Founders feared mob rule almost as much as government tyranny.

Drawing upon ample historical experience, they worried that democracies were vulnerable to demagoguery and prone to instability. Although they insisted that republican government required direct public input, they also constrained and balanced that input.
— Rauch and Wittes

So can we look forward to a shift in the policy of the Brookings Institution to call for a reduction in open primaries and restoration of the selection of Senators to the states?

The People are Incompetent

This is always going to be a seductive idea to a think tank that considers itself a repository of public policy expertise, but leave that aside for now.

This argument actually goes back to Walter Lippmann. In Public Opinion (1922), Lippmann attacked “the doctrine of the omnicompetent citizen.” Lippmann called for a structure modeled on his idea of the British foreign service, where disinterested and independent experts provide policy options to elected officials.

However, there is no such thing as a disinterested expert. The regime Lippmann visualized quickly degenerates into a system where the experts exercise political control because they control the menu of options under discussion.

In practice, the British foreign service wasn’t that great a model. It really worked out like this:

[Bernard] was concerned that the FO [Foreign Office] produces only one considered view, with no options and no alternatives. In practice, this presents no problem. If pressed, the FO looks at the matter again, and comes up with the same view. If the Foreign Secretary demands options, the FO obliges him by presenting three options, two of which will be (on close examination) exactly the same. The third will, of course, be totally unacceptable, like bombing Warsaw or invading France.
Yes, Prime Minister

That is what is going to happen when unelected experts are in control of the policy menu. Even Lippmann had lost faith in experts by 1925, when he wrote The Phantom Public:

[Government] is also subject to the same corruption as public opinion. For when government attempts to impose the will of its officials, instead of intervening so as to steady adjustments by consent among the parties directly interested, it becomes heavy-handed, stupid, imperious, even predatory.

There is really no such doctrine justifying public participation in politics as based on an “omnicompetent citizen.” The authority of the people is not contingent on them passing some sort of civics test. The legitimacy of the government is derived from the consent of the governed. It is not derived from the consent of that subset of the governed that those governing consider qualified.

We have the right to grant or withhold consent, not because we are omnicompetent, but because we have skin in the game. We live with the consequences of government actions. It’s our blood and treasure on the line.

  • In 1953, an Anglo-American effort in Iran instigated the ouster of Prime Minister Mohammed Mossadegh. This was undertaken primarily because Mossadegh wanted to extract more concessions from the British. The participants in the American government believed that the British economy was unable to withstand these concessions. However, the end result included both the breakup of the British monopoly on Iranian oil trade and a price increase to show the Shah was not a puppet of the west. Thus, for all the broken china, this foolish misadventure did not even accomplish its original intention. Did the American people really want what was done in their name?
  • In 2016, the Obama administration committed the United States to cut greenhouse gas emissions by 18% under the Paris Agreement. This commitment was made by executive order, bypassing the Constitutional requirement for treaties to be ratified by the Senate. The commitment, which has been revoked by Donald Trump, would have necessarily increased energy costs for American citizens in order to comply with the targets. Why did we want this? The Obama administration knew we did not, which is why it evaded review by our representatives in the Senate.

The People are Irrational

Sure, they are. But the professionals are people, too. How are they not any less irrational than the public at large?

There is a reason that David Halberstam titled his history of the Kennedy and Johnson administrations in Vietnam The Best and the Brightest. The best and the brightest can also go wrong. And when they do, the move in greater unison than the public at large. They largely drink from the same wells of information and have similar outlooks. Groupthink is particularly prevalent among professionals.

The authors quoted Lee Drutman: “Informed, individualistic rationality is a chimera.” Actually, rationality in public life in general is overrated. One of the most rational politicians of the past hundred years was Neville Chamberlain. It is perfectly rational to want to avoid going to war to interfere “in a faraway country between people of whom we know nothing.” But history demonstrated it was a bad idea.

The madman is not the man who has lost his reason. The madman is the man who has lost everything except his reason.
— G. K. Chesterton, Orthodoxy

More Education Will Not Be Helpful

More than what? In 1918, the National Education Association completed Cardinal Principles of Secondary Education. This report called for seven objectives of secondary education, including Civic Education:

For such citizenship the following are essential: A many-sided interest in the welfare of the communities to which one belongs; loyalty to ideals of civic righteousness ; practical knowledge of social agencies and institutions; good judgment as to means and methods that will promote one social end without defeating others; and as putting all these into effect, habits of cordial cooperation in social undertakings.
Cardinal Principles of Secondary Education, p. 13.

Yet, here we are 99 years later. Every year students are reported to be in greater ignorance of civics, politics and economics than last. Rauch and Wittes cite a survey showing that most respondents cannot name the three branches of government, identify the Chief Justice of the Supreme Court or locate the entity with the power to declare war. Moreover, they cite the common belief that the government spends more on foreign aid than on Social Security or Medicare.

So how is this not an indictment of the existing education establishment? How has the education system delivered on the 1918 goals?

In Public Opinion, Lippmann famously wrote:

It is because they are compelled to act without a reliable picture of the world, that governments, schools, newspapers and churches make such small headway against the more obvious failings of democracy, against violent prejudice, apathy, preference for the curious trivial as against the dull important, and the hunger for sideshows and three legged calves. This is the primary defect of popular government, a defect inherent in its traditions, and all its other defects can, I believe, be traced to this one.

The education system has had a century to remedy the “preference for the curious trivial as against the dull important.” It has not done so, and we can only conclude that it does not want to. Better to keep people in their state of supposed ignorance, and then tell them to leave public policy to the professionals. This is a scam.

It is manifestly unfair to fail to educate people to be effective citizens and then tell them that they can’t participate in political life because they are living in civic ignorance.

The Return of Intermediaries

Rauch and Wittes make the case for intermediaries in public. Political intermediaries can be elected officials or representatives of political parties. What they call a substantive intermediary has specialist knowledge of a policy area, such as health care.

Political intermediaries are necessary. Here is one Rauch and Wittes omitted: states. The several states are a necessary counterweight to federal power. It is more than time to rediscover the role of states in our political process.

The specialist intermediary would be of value. No one without specialist knowledge is going to make sense of the Patient Protection and Affordable Care Act; I tried. It would be great to have intermediaries who could help the citizen navigate the issues.

The first logical candidate might be the media. Try spending a little less time on having two groups of mouthpieces talk over each other, and devote that time to providing information on how a segment of the economy works. If that seems scary, put on segments at 4 in the morning, when no one is watching anyway, and let us record them.

Want to discuss pricing of prescription drugs? Go through the history of the FDA and the decisions that were consciously made to make sure that new drugs were introduced in the US first. Follow the economic consequences of those decisions. Discuss the new drug application (NDA) process that generates enough paper to fill a semi-trailer. Visit (I am not going to give them free publicity by using their real domain name), where people seeking victim status can be gathered into a class to launch a lawsuit.

Corporatism hated intermediaries and sought to get rid of them at every opportunity, leaving the individual citizens alone with the all-knowing, almighty federal government. We need intermediaries that Brookings hasn’t even thought of.

However, we also need to be able to trust the intermediaries. We require that they are giving us all the information, not just a limited and purposeful set of options (two of which are identical and the third totally unacceptable). We need intermediaries to watch the intermediaries.

Yes, the world we live in requires tradeoffs and choices from among the unpalatable and the disastrous. The belief that ordinary people cannot understand these issues in a nuanced way is a piece of received wisdom. Populism is a rebellion against this, an assertion that legitimacy derives from the consent of the people, whether or not the people express themselves in a way pleasing to those who would wield power over them. Thank God the American people have the sand to push back on the professionals who would undermine them.

US Constitiution 1.1

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In 1979, Theodore Lowi released the second edition of his book The End of Liberalism: The Second Republic of the United States. Lowi teaches at Cornell and would be characterized as a liberal; for example, he advocates government planning. However, he is also a proponent of the rule of law. The evolution of the political processes away from law and representative government toward bargaining and interest-group government began to trouble him by the time he wrote the first edition of the book ten years earlier.

Where contemporaries saw government departure from formalism as pragmatic, Lowi saw it as corrupt. Where reality deviates from formalism, we find arbitrariness, influence-peddling and injustice. He wrote the best defense of political idealism I have seen:

The gap between form and reality gives rise to cynicism, for informality means that some will escape their fate better than others. There has, as a consequence, always been cynicism toward public institutions in the United States, and this, too, is a good thing, since a little cynicism is the parent of healthy sophistication. However, when the informal is elevated to a positive virtue, and when the gap between the formal and the informal grows wider, and when the hard-won access of individuals and groups becomes a share of official authority, cynicism unavoidably curdles into distrust. Legitimacy can be defined as the distance between form and reality. How much spread can a democratic system tolerate and remain both democratic and legitimate?
The End of Liberalism, p. 297.

Although he did not use the term, the mechanisms that Lowi describes are that of corporatism: public-private partnerships in rule-making and governance. Although Lowi did not name it, he described it well enough:

The state grows, but the opportunities for sponsorship and privilege grow proportionately. Power goes up, but in the form of personal plunder rather than public choice. If would not be accurate to evaluate this model as “socialism for the rich and capitalism for the poor,” because many thousands of low-income persons and groups have provided within the system. The more accurate characterization might be “socialism for the organized, capitalism for the unorganized.”
Ibid, pp. 278-9.

For the second edition, Lowi reverse engineered a new constitution for the government from actual practice, in an attempt to highlight the spread between form and reality.

There ought to be a national presence in every aspect of the lives of American citizens. National power is no longer a necessary evil; it is a positive virtue.

Article I. It is the primary purpose of this national government to provide domestic tranquility by reducing risk. This risk may be physical or it may be fiscal. In order to fulfill this sacred obligation, the national government shall be deemed to have sufficient power to eliminate threats from the environment through regulation, and to eliminate threats from economic uncertainty through insurance.

Article II. The separation of powers to the contrary notwithstanding, the center of this national government is the presidency. Said office is authorized to use any powers, real or imagined, to set our nation to rights by making any rules or regulations the president deems appropriate; the president may subdelegate this authority to any other official or agency. The right to make all such rules and regulations is based upon the assumption in this constitution that the office of the presidency embodies the will of the real majority of the American nation.

Article III. Congress exists, but only as a consensual body. Congress possesses all legislative authority, but should limit itself to the delegation of broad grants of unstructured authority to the president. Congress must take care never to draft a careful and precise statute because this would interfere with the judgment of the president and his professional and full-time administrators.

Article IV. There exists a separate administrative branch composed of persons whose right to govern is based upon two principles: (1) the delegation of power flowing from Congress, and (2) the authority inherent in professional training and promotion through an administrative hierarchy. Congress and the courts may provide for administrative procedures and have the power to review agencies for their observance of these procedures; but in no instance should Congress or the courts attempt to displace the judgment of the administrators with their own.

Article V. The judicial branch is responsible for two functions:
1. To preserve the procedural rights of citizens before all federal courts, state and local courts and administrative agencies, and
2. To apply the Fourteenth Amendment of the 1787 Constitution as a natural-law defense of all substantive and procedural rights.
The appellate courts shall exercise vigorous judicial review of all state and local government and court decisions, but in no instance shall the courts review the constitutionality of Congress’ grants of authority to the president or to the federal administrative agencies.

Article VI. The public interest shall be defined by the satisfaction of the voters in their constituencies. The test of the public interest is re-election.

Article VII. Article VI to the contrary notwithstanding, actual policymaking will not come from voter preferences or congressional enactments but from a process of tripartite bargaining between the specialized administrators, relevant members of Congress and the representatives of self-selected organized interests.

How did he do? How closely did he bring the form of his constitution to matches what actually happens?

Written by srojak

October 15, 2016 at 2:48 pm

Bad History

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This picture came my way on Facebook. It was too bad not to hang on to.

.. when you did what?

.. when you did what?

What’s wrong with it? Well, let’s review.

Ending the Depression

Roosevelt did not end the Depression; World War II did. See this article for the actual unemployment data.

Unemployment was never under 10% from the time FDR took office until war spending began in earnest in 1940. The economy went into a relapse in 1937, as Roosevelt’s Second New Deal created uncertainty and investment slowed. Amity Shlaes summarized it this way:

The story of the mid-1930s is the story of a heroic economy struggling to do recuperate but failing to do so because of perverse federal policy.
— Shlaes, The Forgotten Man, p. 392.

This is not a story you will hear on PBS specials or read in a high school textbook. But both the statistics and the memory of the generation that lived through the Depression substantiate it. My mother and others of her age cohort used to say that wars were good for the economy. That is obviously untrue: in a war, you take wealth out into a field and blow it up. But that is the way their generation experienced relief from the Great Depression.

Creating the Middle Class

In what universe do people making minimum wage constitute the middle class? The middle class as we came to know it by 1970 was created by World War II and the economic boom that followed it.

At the end of the war, it was not clear at all that there would be economic prosperity. The outcome considered most likely was inflation once prices were free to rise and money earned in wartime production that could not have been spent during the war was loosed to bid up prices. This did not happen, and the fact that it did not was the accomplishment of Harry Truman and Federal Reserve Chairman Marriner Eccles.

Ending Elderly Poverty

I reckon that this claim is factual, as far as it goes. Over the next 80 years, Social Security did end elderly poverty — by transferring wealth from the young. If this scheme were managed by a private enterprise, it would be fraud; but since the government is in charge, everything is just dandy.

Was Roosevelt a Socialist?

Many of his opponents accused Roosevelt of being a socialist, but the evidence does not really stack up.

You know I am a juggler, and I never let my right hand know what my left hand does … and furthermore I am perfectly willing to mislead and tell untruths if it will help win the war.
— FDR to Henry Morgenthau, 1942. Quoted in Fleming, The New Dealers’ War.

Before the war, Roosevelt was willing to mislead if it would help perpetuate him in office. Even if he had left a body of political thought, it would be risky to put too much stock in it. Roosevelt has to be evaluated on his actions.

The actions of the Roosevelt administration were fundamentally corporatist. Under corporatism, government, business, labor, education and social organizations would work together to plan the economy and implement these plans. What’s wrong with that? For starters, plan the economy is a pleasant euphemism for plan your daily life.

At the time, the smart money believed that planned states had inherent advantages over liberal republics because the former could realize cohesive action. This was augmented by the work of Ferdinand Tönnies (1855-1936), one of the early thinkers in sociology. Tönnies distinguished between the Gesellschaft and the Gemeinschaft. To give a quick-and-dirty distinction, think of the Gesellschaft as a market town or bustling port, whereas the Gemeinschaft is closer to a rural village with deep traditions, where “everybody knows everybody, and everybody looks after everybody.” Also where everybody sticks their nose into everybody else’s business, but some people like that.

 The 1930’s are remembered as the Red Decade. Democracy itself appeared to be inadequate to the task of managing the modern nation. The idea of Gemeinschaft was in vogue, and in Italy, Mussolini appeared to be having success implementing his vision of corporatism — if you didn’t look too closely or ask what happened to people who didn’t get with the program.

The form of U.S. corporatism was thus gradual, incremental, societal corporatism, not the abrupt, authoritarian state corporatism of so many of the interwar European countries. And it was “loose”: pragmatic, piecemeal, nonideological, pluralist, with few sanctions or tight controls, and very American. It tended to be advisory rather than compulsory, but that changed over time.
— Howard Wiarda, Corporatism and Comparative Politics, p. 138.

Corporatism offered Roosevelt limitless avenues to expand his power. The government could sit as mediator and honest broker in disputes between two large industries, or between big business and big labor.

However, World War II permanently associated corporatism with fascism, and the National Socialist implementation of Gemeinschaft led to war and genocide. That did not mean the methods had to be abandoned, just that they needed to be rebranded and repositioned.

Why Don’t People Know This?

Why should children believe what they learn in American history, if their textbooks are full of distortions and lies? Why should they bother to learn it?
Luckily, … they don’t.
— James Loewen, Lies My Teacher Told Me, p. 297.

Very few people want to hear that FDR’s programs were not effective in defeating the Depression. In part, this is because Progressives have a preponderance of control of the education system and the media, but there is a more basic reason. If it took a global war to see off the Depression of the 30’s, what will it take to defeat the next one? The fact is that we don’t know how to cure a large-scale economic depression, which is why government policy has been focused on making sure another one does not happen.

Books about the Roosevelt administration typically concentrate on what historians call the First New Deal, which ended in 1935 with the Schechter decision that voided Title I of the National Industrial Recovery Act. Jonathan Alter’s The Defining Moment focuses on the first Hundred Days. Adam Cohen’s Nothing to Fear contains one chapter that covers the time after 1933; it summarizes the standard legislative achievements that are revered among Progressives, including the Social Security Act, but does not discuss their effectiveness. Only Amity Shlaes stands out as a historian of the entire Depression.

The reason why we need to get the history right is simple. If we don’t even understand the history, we have almost no chance of learning from past mistakes. If we tell ourselves that the actions were not really mistakes, there is nothing to learn from.

Written by srojak

June 5, 2016 at 12:34 am

Will the Real FDR Please Stand Up?

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The Bernie Sanders campaign is seeking to make the Senator’s self-described socialism palatable by drawing parallels to Franklin Delano Roosevelt, pointing out that FDR’s enemies called him a socialist in his day.

Essential continuity of thought.

Essential continuity of thought.

There is some merit to this positioning, but what is there to learn about FDR and his policies? The memory of FDR that is kept alive in our high school history classes is a very incomplete picture of the man.

The key to understanding FDR is his own self-description:

You know I am a juggler, and I never let my right hand know what my left hand does … and furthermore I am perfectly willing to mislead and tell untruths if it will help win the war.
— FDR to Henry Morgenthau, 1942. Quoted in Fleming, The New Dealers’ War.

It was known at the time that Roosevelt was not only willing to put duplicity in service of a national war effort, but any other cause that would further his ends.

If [Roosevelt] became convinced tomorrow that coming out for cannibalism would get him the votes he needs so sorely, he would begin fattening a missionary in the White House yard come Wednesday.
— H. L. Mencken, 1936.

Roosevelt left no political testament that states his principles, but even if he had, we would be wise to treat it with skepticism. His book Looking Forward — a play, for those in the know, on the utopian science fiction novel Looking Backward — was essentially a repackage of previous speeches and articles he had written. The principles to which he committed himself in action can be briefly enumerated:

  1. Power;
  2. More power.

Bernie Sanders is much more ideological, whereas Roosevelt was totally pragmatic. Sanders has been a socialist through fair weather and foul. I have full confidence that Sanders’ positions in the campaign are those that he believes fully.

Roosevelt was much more willing to shift his positions and tack with prevailing winds. The most notorious example of this was his behavior in 1940-41, when he sensed the strong isolationist current in America but knew he could not allow Britain to fail. He promised the country to not become involved in foreign wars, while at the same time calling for every act he could get Congress to pass to aid Britain, China and, after June 1941, the Soviet Union. His embargo of oil to Japan pushed the Japanese into a corner where they had to either initiate war or back down.

Roosevelt had no animosity toward business, banks or Wall Street provided they would do what he wanted them to do. His practical course of action is properly understood as corporatism: a private-public partnership of Big Business, Big Labor, Big Government, Big Education and Big Media. While all the sloganeers of the 1930s talked about “the little guy”, the only way the little guy had any chance was to become a member of something big.

In 1935, the Supreme Court handed down the Schechter decision that invalidated the National Recovery Administration. FDR launched a vendetta against the Supreme Court that has altered juridical history from then to now. No court has ever challenged broad delegation from Congress to the executive branch since.

The 2016 candidate who best matches the principles displayed in the actions of FDR is Donald Trump. It is undoubtedly true that FDR would have considered Trump vulgar, but much of public life has changed in eighty years.

Written by srojak

February 15, 2016 at 10:59 am

Liberal Capitalist Democracy

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When words have no defined meanings, it is hard to hold an intelligent conversation. It should really be no surprise that our national conversation is so shrill and so inconclusive, when we can’t even agree on what the words mean.


The words liberal and liberty have a common root, the Latin liber, meaning free. In late medieval England, a liberty was a piece of land in possession of a lord or abbot, into which royal officials such as sheriffs may not enter without permission of the possessor [Roberts and Roberts, A History of England, vol. 1, p. 339]. By 1630, the meaning of the word liberty had been broadened to mean freedom for anyone from domination by the king and court. A person who supported the rights of persons against the divine right of the monarch became a liberal.

The word was also used by opponents to include persons who did whatever they wanted without moral restraint, seeking to imply that those who would defy the will of the king today would act without any limits tomorrow. However, by 1700 there was general understanding that such a person was not a liberal, but a libertine.

In nineteenth century terms, the opposite of a liberal was a reactionary, someone who reacted to threats to established order and privilege. Liberals sought freedom of speech, assembly and worship, and to end slavery and involuntary servitude. Liberals wanted all people (well, initially all men, but the program did broaden to include women over time) to have the freedom to choose their residence, occupation and avocations.

In the United States in the 1930s, political activists who were not at all liberal adopted the term for themselves in order to give themselves the appearance of continuity with existing political traditions. They sought to paint themselves as the heirs of liberalism and their opponents as the party of reaction. The success model for this was Lenin: in 1903, after a split within the Russian Communist Party, he and his followers began calling themselves bolshevik (majority) and their opponents menshevik (minority), even though it was quite the other way around. Lenin and his followers had lost the vote, were marginalized within the party and ultimately sought exile abroad. However, through endless repetition, they have succeeded in being known to history as Bolsheviks.

Irving Babbitt had seen this coming: in his 1924 book Democracy and Leadership, he devoted an entire chapter to “True and False Liberals.”

It is a matter of no small importance in any case to be defective in one’s definition of liberty; for any defect here will be reflected in one’s definition of peace and justice; and the outlook for a society which has defective notions of peace and justice cannot be regarded as very promising. [p. 262]

The history of the twentieth century has demonstrated the wisdom of this observation.

Most people who we identify as liberals are not really liberals at all. They are prepared to sacrifice liberal goals such as individual self-determination and rule of law to ends that they consider to be higher priorities. This in itself does not invalidate their programs, but we should not mistake them for liberals. It confuses everyone’s thinking.


Capitalism was named by Marx and primarily defined by its detractors. It seems that those who understand capitalism go out and make money, while those who do not write content complaining how unfair the system is.

Partly as a result of the ideological conflicts during the Cold War, capitalism has typically been identified with private property, but not all economic systems featuring private ownership of property are inevitably capitalist. Manorialism, which was the economy of feudalism, included private property but also enforced servitude and restricted economic growth. Fascist states have typically allowed private ownership of property, but restricted how the individual could make use of it. You can have all the headaches of owning and caring for property; we’ll just tell you what you can and cannot do with it.

Capitalism could not take root until ordered conditions such as rule of law and enforcement of agreements over time — contracts — had been firmly established. Even today, in countries where one cannot count on enforcement of a contract, economic development is next to impossible.

The deployment of capital necessitates risk. Lenders have relatively low risk; they are senior to investors in their legal rights to recover their money. Investors have greater risk than lenders, and expect greater rewards when successful.

Owners have the greatest risk of all. Being an owner just means that you get paid after everyone else is paid, if there is anything left to pay you with. If not, you get the losses.

A person who can form capital and manage risks in its use can obtain rewards far greater than a hard-working person who takes no risks. This is the part that Marx, who was wedded to the labor theory of value, did not comprehend. Marx, along with many others, could not understand why a hard-working laborer should be rewarded less than a man who sent his money out to work for him. The answer is that you can find a thousand persons who are willing to work hard for every one person who is willing to take risks. However, without the person who is willing to take risks, you don’t get the benefit of capital. At best, you have people piling their surplus up and storing it under the mattress. At worst, you have a peasant society, where people eat their surplus when times are good and starve en masse when times are bad.

It is human nature to try to fob the risk off to someone else but keep the reward. However, this breaks capitalism. An economy that allows this is not capitalist, but something rather different. Theodore Lowi noticed this decades ago:

Privileges in the form of money or license or underwriting are granted to established interests, largely in order to keep them established, and largely done in the name of maintaining public order and avoiding disequilibrium. The state grows, but the opportunities for sponsorship and privilege grow proportionately. Power goes up, but in the form of personal plunder rather than public choice. It would not be accurate to evaluate this model as “socialism for the rich and capitalism for the poor,” because many thousands of low-income persons and groups have profited within the system. The more accurate characterization might be “socialism for the organized, capitalism for the unorganized.”
— Lowi, The End of Liberalism, 2nd ed. (1979), pp. 278-279.

Lowi developed his characterization of the new political economy this way:

Permanent receivership would simply involve public or joint public-private maintenance of the assets in their prebankrupt form and never disposing of them at all, regardless of inequities, inefficiencies, or costs of maintenance.
— Lowi, p. 279.

The enterprise in question need not be on the verge of bankruptcy or a candidate for liquidation. It could simply be large enough to represent a risk of dislocation to the economy if it were to collapse: too big to fail.

This could be called anticipatory receivership suggesting that the policy measures appropriate for the concept give the government a very special capacity to plan. Permanent receivership can be extended outward to include organizations that are not businesses. If there are public policies which are inspired by or can be understood in terms of this expanded definition, then we have all the elements of a state of permanent receivership.
— Lowi, pp. 279-280.

This is not capitalism at all. There is no creative destruction; it is a goal of policy to avoid destruction in any form. There is no risk, provided you are included in an approved group. There is no profit-and-loss discipline. And all organization, including but not limited to business enterprises, become “public-private partnerships” directed to obtain public policy goals. Properly understood, this is a species of corporatism:

A U.S.-style corporate state has arrived unsung, unheralded and almost never mentioned. The emergence of corporatism has to do with the parallel emergence of Big Labor, Big Agriculture, Big Business, Big Universities, Big Defense, Big Welfare and Big Government, all operating in a symbiotic relationship. It also has to do with the growth of modern social policy, with the government assuming a great role in the management of the economy, with the greater emphasis on group rights and group entitlements over individual rights, and with the growth of a large administrative-state regulatory apparatus.
— Howard J. Wiarda, Corporatism and Comparative Politics, p. 147.

Main Street may be mostly capitalist, but Wall Street and K Street are solidly corporatist.


There is a material difference between a democracy and a republic. Although many people use the terms interchangeably, they are not in fact synonymous.

In The Federalist #10, James Madison makes clear that a republic can offer safeguards against mob rule that a democracy cannot.

A republic, by which I mean a government in which the scheme of representation takes place, opens a different prospect, and promises the cure for which we are seeking. Let us examine the points in which it varies from pure democracy, and we shall comprehend both the nature of the cure and the efficacy which it must derive from the Union.

The two great points of difference between a democracy and a republic are: first, the delegation of the government, in the latter, to a small number of citizens elected by the rest; secondly, the greater number of citizens, and greater sphere of country, over which the latter may be extended.

Neither Madison nor most of his contemporaries — possibly excepting Jefferson — saw direct democracy as a desirable outcome. This viewpoint was not limited to southern planters:

It is a besetting vice of democracies to substitute publick opinion for law. This is the usual form in which masses of men exhibit their tyranny. When the majority of the entire community commits this fault it is a sore grievance, but when local bodies, influenced by local interests, pretend to style themselves the publick, they are assuming powers that belong to the whole body of the people, and to them only under constitutional limitations. No tyranny of one, nor any tyranny of the few, is worse than this. All attempts in the publick, therefore, to do that which the publick has no right to do, should be frowned upon as the precise form in which tyranny is the most apt to be displayed in a democracy.
— James Fenimore Cooper, The American Democrat (1838), p. 71.

The framers of the Constitution sought safeguards to prevent the tyranny of the mob. They divided the government into distinct branches that could block the initiatives of the others. They also set specific limits on what each branch could do.

The framers also divided power between the federal government and the governments of the sovereign states. An unfortunate casualty of the civil war was this balance. The Secession Crisis discredited the concept of states’ rights, and there was a subsequent erosion of state power. In 1913, the 17th Amendment was ratified; this replaced the election of senators by state legislators with election by the citizens of the states directly. This, together with the increasing cost of running a statewide election campaign, has turned the Senate from the legislative body representing the states and a counterweight to the House of Representatives into an American House of Lords. The attempt by Caroline Kennedy to obtain the seat from New York being vacated by Hillary Clinton in 2008 was symptomatic of this state of affairs.

Even Irving Babbitt must be questioned; after all, he titled his book Democracy and Leadership, not Republicanism and Leadership. What did he really want? He clearly did not support egalitarian democracy:

If we go back, indeed, to the beginnings of our institutions, we find that America stood from the start for two different views of government that have their origin in different views of liberty and ultimately of human nature. The view that is set forth in the Declaration of Independence assumes that man has certain abstract rights; it has therefore important points of contact with the French revolutionary “idealism.” The view that inspired our Constitution, on the other hand, has much in common with Burke. If the first of these political philosophies is properly associated with Jefferson, the second has its most distinguished representative in Washington. The Jeffersonian liberal has faith in the goodness of the natural man, and so tends to overlook the need of a veto power either in the individual or in the state. The liberals of whom I have taken Washington to be the type are less expansive in their attitude toward the natural man. Just as man has a higher self that acts restrictively on his ordinary self, so, they hold, the state should have a higher or permanent self, embodied in institutions, that should set bounds to its ordinary self as expressed by the popular will at any moment. The contrast that I am establishing is, of course, that between a constitutional and a direct democracy.
— Babbitt, pp. 272-3.

More properly, it is the contrast between a republic and a democracy.

A direct democracy is, in fact, a sentimentalist fantasy. Each citizen must allocate her time among the demands of citizenship and other interests and occupations she may have. Some citizens will make the economic decision to relinquish participation in governance, delegating their voice to others and accepting the results. There can never be an effective direct democracy, because even if everyone can participate, not everyone will. This is not alleviated by technology; it is a natural consequence of the different priorities and time allocation decisions of the citizens. As Madison believed, a republic in which citizens were represented by those who had chosen to commit their time to the responsibility is the only practical approach to self-government.

The sentimentalist also ignores the possibility that some citizens may not view political responsibility as a good at all. Anyone who is out in the world paying attention knows some persons who would rather relinquish power to others than have to take responsibility for their own decisions. Such persons are easily led, and their scope for malignant effects on the body politic are much greater in a democracy than a republic.

Before calling for reforms to increase democracy, we must review whether democracy is something we really want. Our predecessors who founded this country did not, and there is no evidence that they were wrong.

Written by srojak

May 26, 2013 at 11:02 pm