The (False) Myth of the Invisible Hand

 

 

The concept of the “invisible hand” of the market is one of the all-time misunderstood concepts of both our era and economics in general. The idea, so simply put by Milton Friedman — one of the high priests of economics — is that individuals, acting for their own self interest, bring about the social benefit without having intended to do so.

Milton is wrong. Not just about the general point but also about who benefits from the invisible hand –Milton asserts its customers but Smith describes the general welfare. Milton’s myopic (mis/dis)interpretation pervades common understanding of economics; and it justifies all the selfish impulses of individuals; as well as that ultimate self-collective expression: corporations. Again: this is NOT what Adam Smith said. To see what he meant, let’s go to the source: An Inquiry into the Nature and Causes of the Wealth of Nations.

The invisible hand is mentioned in Book IV, chapter II (the only place in this 1000+-page tome where this phenomenon is ever mentioned). The chapter is entitled, “Of Restraints Upon The Importation From Foreign Countries of Such Goods As Can Be Produced At Home.” The passage reads as follows:

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

In this chapter, Smith is discussing the preference for one’s domestic industry over that of foreign industry in so far as there is a comparative advantage in the production of goods and services domestically, vis-à-vis the value of those goods and services. In other words, holding both cost and value as constant, if goods at home can be produced as advantageously – at least – as they can be produced overseas, then the capitalist will produce at home. The “invisible hand” here is, in short, the restraining force of economic patriotism: concern for his/her fellow countrymen/nation. This is the only “invisible hand” Smith ever mentions.

Not only is this original meaning entirely divorced from contemporary economics, it is also paradoxical. On the one hand, Smith argues that capitalists do not intend to promote the public interest but only their own gain; on the other hand, Smith explicitly states that capitalists simultaneously support domestic industry by preferring it in so far as it may be of the greatest value to their own society, by increasing the annual revenue of it, i.e. the wealth of nations. Therefore, capitalists are, indeed, intending to promote social welfare – they are actively engaged in it – by preferring domestic labor to that of foreign labor. It seems as if Smith himself had some trouble reconciling these seemingly contradictory ends or articulating this antagonism in satisfactory ways.

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What does this mean, exactly? Why is it significant? Starting with the first question: it means that contemporary Economics gets the meaning of the invisible hand wrong. The discipline, like Milton, confuses it with the forces of supply and demand and, even here, Milton oversimplifies to the point of caricature. Moreover, and more importantly, if these experts – the priesthood of the religion of economic capitalism – get such a simple idea like the “invisible hand” wrong – what else have they gotten wrong? Which segues into the second question of significance.

Why this is relevant can be seen globally and domestically. U.S. companies, like Apple, more often than not have their products manufactured and assembled by foreign labor in foreign countries. Not because it is more efficient but because foreign labor can be exploited, and this means even greater profits – a practice known as “outsourcing.” This is because foreign labor is not paid the wages to which U.S. labor has grown accustomed; is not protected by labor laws that have been won by unions and activists; and it works in conditions that create misery and which frequently lead to the mass deaths (from exhaustion, to factory fires and collapses, and even suicides) of workers.

For domestic labor markets, U.S. workers lose their benefits, pensions, raises, or in some cases: their jobs – this is the practice of “downsizing.” Similarly, those workers who remain in their jobs are given extra work, without raises, often with work hours that increasingly encroach into their personal lives, exhausting them to the point where civic engagement or family rearing become evermore-difficult activities for which to devote time (or afford). All this amidst a rate of inflation that outpaces real wage growth and living standards for the majority of U.S. citizens.

Why this matters, in short, is that mis-/disinformed ideas about what the invisible hand is has profound and detrimental effects on society (U.S. society in this example). According to Smith, outsourcing would – and should – not occur because capitalists would be concerned with their fellow countrymen to the point that they would restrain their greed: for this is the true invisible hand. However, this notion is not only misunderstood it is actively violated – this is how policies such as NAFTA and other “trade agreements” (although, they are more accurately designated as “investors’ rights” agreements) get codified into law, contradicting capitalist notions such as the “invisible hand.” Yet, the current economic system continues to use the language of Smith in confusing and deceitful ways.

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What is often referred to as a capitalist economic system is in reality not that at all. Many concepts, like the “invisible hand,” are misinformed and misapplied; as such they do not describe the capitalist system envisioned by Adam Smith. Smith’s capitalism was concerned with ethical behavior, labor conditions, public education and healthcare, the plight of widows and orphans, tempering the consolidation of power and money of capitalist and investor classes, etc. – this should come as little surprise given he was an ethicist and not an economist.

Contemporary economics is not concerned with social justice, income and wealth inequality, or any of the other “negative externalities,” like pollution, that its actors create; it is a system concerned only with the rapacious accumulation of money (primarily) by the richest within “capitalist-economic” society: it is an ideological cancer, rationalizing the leeching of resources away from the social body, weakening its host to the point of destruction. A system that diverts most of the prosperity of a society to a handful of actors in the financial, investment, and real estate (FIRE) sectors – as evinced by growing income and wealth inequality, the increase in poverty and food insecurity, declining wages despite increasing productivity, and higher costs of living; local, state, and national budget shortfalls, decrease funding for social welfare programs, and an ever increasing military budget as well as aggressive foreign interventionist posture – is not sustainable.

The U.S. is fast approaching a day of reckoning. And this is largely due to the fact that it abides by an economic system divorced from the one it professes. It uses the language of that economics to both rationalize its own parasitic behavior and deceive the victims of it so that they may not properly identify the problems of such a system and correct for them. While there are many predicaments with the current economic system in terms of fidelity to theoretical capitalism, the major one is similar to that of the problem of Milton’s understanding of what the “invisible hand” is: namely, the “experts” are simply wrong (and in many instances are outright lying). The U.S., and most of the West, does not abide by the tenets of Capitalism any more than the Soviet Union, China, or even Vietnam abided by the tenets of Communism.

We must recognize that words and concepts have meanings. We must also recognize when meanings shift, change, are misunderstood, and/or mis-/disapplied. This is true of the “invisible hand,” and this is true of Capitalism proper. The Rational must adhere to established and stated meanings of words, or else chaos.

 

The Deep State

Deep State.jpg

The “Deep State” has been a popular buzzword in the media lately. But what is it, exactly? As always, beginning with definitions is often illuminating. Unfortunately, the OED does not have a definition for this word, so we must approach the definition in a different way.

As is typical, reading and listening to the media is largely uninformative. The most gleaned from the media is that a “deep state” exists, but it does not clarify what this phenomenon is in any meaningful sense. Wikipedia gives a definition: a coordinated effort by career government employees and others to influence state policy without regard for democratically elected government; also, entrenched government institutions wielding power. But this definition is weak in that it doesn’t really explain what it is to the extent that one could clearly identify it. A previous post on conspiracies lays out two different types of what could easily be considered the “deep state,” but neither fully captures the meaning of the phrase.

A portion of the Farewell Address of President Dwight Eisenhower gets closer to a proper definition:

This segment contains the notorious phrase, the “military-industrial complex,” but this does not exemplify the phenomenon because it leaves out a core component. This component was originally included in the Address but was removed for fear of alienating his friends in Congress. In the original version of the speech, the term was “Military-Industrial-Congressional” complex. This omission may seem trivial but it is not because it underlies how the military-industrial complex is most able to get its way to that “unwarranted influence” and “misplaced power” against which Eisenhower warned. However, in reality, it is not just the Congressional branch but also the Executive and Judicial branches as well. Furthermore, “think tanks,” too, have come to take an increasing role in this dynamic.

In this way, the deep state is the sum of those actors from the military, the financial, the political, and epipolitical spheres that entrench themselves behind the levers of government powers to pursue aims that benefit themselves (often at the expense of the public). Sociologist, C. Wright Mills, wrote a fascinating book highlighting the actors of this deep state (and their operational dynamic), referring to them as the “power elite.” It is an insightful book that should be mandatory reading for any High School but, unfortunately, goes unread even in today’s higher institutions of learning.

Mills’ definition is the core of the meaning but it is simultaneously anachronistic and outdated in many respects. For the complex he describes is but a new iteration of the one that had existed well before his exposé and an outdated model given its recent evolution. As a result of this shifting of Deep State in practice, it is worth informing and updating our understanding. Veteran reporter and author, David Talbot, recently published a significant book that traces the development of this new deep state.

Talbot defines the deep state as, “the subterranean network of financial, intelligence, and military interests that guide national policy regardless of president.” The key components of this definition are 1) an unseen network of interests that, 2) guide national policy (despite President [or resistance therefrom]).

But even Talbot’s precision seems to miss the mark in some important ways. What Talbot describes – and what others reference when invoking the “deep state” – is nothing short of a denotative conspiracy. As mentioned previously, this author wrote a post on conspiracy, and the “deep state” that easily qualifies as either a fantasy of nightmarish proportions or a matter of fact when it comes to power politics. This author does not view the deep state as a paranoid delusion but a real phenomenon with very real consequences. But then how does the deep state as an entity unto its own differ from the real conspiratorial politics that occur every day?

For example, interest groups (financial, national security, political, military, etc.) are by nature conspiratorial, especially when they seek to remain anonymous. And many succeed in determining policy even when a President resists, as was the case with the antiwar movement during the Vietnam era. But do interest groups like these constitute the “deep state?” The answer is no – at least, not necessarily. Then what is the difference between powerful interest groups and the deep state proper?

For one, it is the duration of pursuit of the interest group’s policy objectives. An interest group is one where there is a limited interest/goal, like banning the teaching of evolution in public schools, the legalization of marijuana, or, banning gay marriage. Once the goal is achieved, the interest group no longer has a reason to exist. A deep-state “interest group,” however, has a more broad and perpetual goal, like anti-communism, the “war on drugs,” or even the “war on terror.” The former has goals that once reached removes the impetus from the interest group; the latter is a continual campaign with almost no end in sight.

Secondly, and in the same vein, is the broad scope of the interest group. So, for example, the movement to legalize marijuana wants just, and only, that. The deep-state interest groups, conversely, want much more. During – an in the name of – the Cold War, for example, much was done to out communist sympathizers, quash labor unions, embargo certain countries from the world economy, set up military installations around the world, develop propaganda campaigns against enemies and allies alike to demonize communism, and even start wars and coups to counter perceived communist threats, even if it meant overthrowing democratically elected governments.

The third defining feature is the power of those groups. There is a significant difference between a marijuana-legalization advocacy group and the bureaucracy of either the Drug Enforcement Agency (DEA) and its principal: the Department of Justice (DOJ). But there is another important distinction worth mentioning here – one that Mills insightfully made: that between all individuals within powerful bureaucracies and those within the inner circles of those powerful institutions. Not all employees of the DEA or the DOJ think that marijuana is the threat it is deemed to be, but unfortunately, those voices rarely – if ever – make it to key positions like Secretary, Director, or Chairman. Those positions are held by individuals who have demonstrated their loyalty to an interest or ideology, which, in this particular instance, serve to guarantee the perpetuation of a particular type of bureaucracy. It should be noted that institutional survival is not the only reason that an inner circle selects its heirs. Often times it is purely ideological, like defeating communism. But the mechanism is the same: powerful figures choose like-minded, high-powered successors in order to ensure the continuation of their life’s work or philosophy. Again, this selective and self-perpetuating class in the upper echelons of power (politically, financially, militarily) is what Mills calls the “power elite.”

Lastly, and probably most importantly, as Talbot points out: that these individuals, groups, and institutions are part of a larger network. Interests groups often act alone but they can form alliances, but these alliances pale in comparison to those constituting the deep state. Coordination between power elites within the Department of Defense (DoD), the Department of State (DoS), the Executive, the Joint Chiefs of Staff, CEOs and other executives of various economic summits, and high-powered lobbying groups – not to mention the interchangeability of their officers – constitute a force truly terrifying in scope and breadth.

What emerges from this line of inquiry is a more complete definition of the term “deep state.” To use Tablot’s framework, a revised and more accurate definition then becomes: a deeply entrenched, wide-ranging, and powerful subterranean network of financial, intelligence, and military interests that guide national policy regardless of President. These additions may seem redundant or minor but they are not. To demonstrate the accuracy and significance of this definition, this essay will now give an example of how the deep state works.

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Let us begin near the end of World War II. At the Casablanca Conference in January 1943, President Roosevelt stated that the objective of the war was the “unconditional surrender of the axis powers [Germany, Italy, and Japan].” But before this time, Allen Dulles, then an officer of the Office of Strategic Services (OSS) – the precursor agency to the Central Intelligence Agency (CIA, which Dulles would come to direct for decades) – had been fraternizing with Nazi leadership. This was so because the Dulles brothers’ Wall Street law firm, Sullivan and Cromwell, and their network of clients – which included banks, investment firms, and industrial conglomerates – had helped rebuild Germany after World War I, and in the process befriending many high-powered German/Nazi and Fascist leadership. In fact, many of those same interests, including Sullivan and Cromwell itself, were doing business with the Nazis during WWII, all of which were illegal.

After the Casablanca Conference, Dulles began negotiating (an alternative peace process) with Nazi leadership, ensuring them safe transportation out of Italy and Germany and immunity from substantive prosecution under the future Nuremberg Trials. In effect, Dulles was collaborating with Nazi war criminals, and all this went against the policy of unconditional surrender laid out by President Roosevelt. Notorious operations like Operation: SunriseOperation: Paperclip and Operation: Overcast, which protected and placed Nazi officers and scientists – some of whom conducted horrific human experiments on concentration camp prisoners, and some who oversaw the concentration camps themselves – in various communities within the United States as well as other countries. (And this is to say nothing of the Catholic Church’s successful efforts to protect Fascist military officers by securing their escape out of Europe and from prosecution).

That Dulles was a staunch opponent of Roosevelt and his policies had little to do with this treasonous insubordination. Instead it had to do with, first, an old-world paradigm, of which the Dulles – and even the Roosevelt – family were part, a paradigm which lays the foundation for the modern deep state. Regardless of this paradigm, we see Talbot’s definition begin to take shape: an entrenched intelligence figure (an agent of the Executive branch) dictating policy and directing agencies regardless of Presidential policy.

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To demonstrate this first paradigm, let us return to the founding of the United States (which will also reveal the first deep state of this country). At its inception, the political power delegated to “We the people” was, in fact, relegated to a small minority of individuals, namely: white, male, landowners. The thinking was that: those who owned the country – because they have a vested interest in it – ought to govern it. And, indeed, there is no shortage of historical data confirming this philosophy and socio-political arrangement. Despite the eventual freedoms and rights granted to slaves, immigrants, and ultimately women, this perspective has never faded from (those who own) the country. And it shouldn’t entirely, and this author has written a previous post demonstrating why this is.

From this time on, the elites – those who owned the country and dictated its policy and course  – came from the same backgrounds, went to the same elite schools, socialized in the same social circles, and worked together, ultimately assuming leadership of the governing agencies that oversaw the great American experiment. In short, this privileged elite formed its own self-perpetuating class and network of like-minded individuals that governed the country (with few exceptions), similar to feudalistic, aristocratic, and monarchic dynasties of the past: this is the power elite.

This was especially pronounced in the early to mid twentieth century. In fact, most high-office individuals came from this (upper/capitalist) class, including both Roosevelt and Dulles (the “good old boys” or the “boys club” phrases are a reflection and epitome of this state of affairs). While the rest of the century saw a more “democratized” opportunity of power, the most powerful agents came from this privileged class, like Roosevelt and Dulles. And during that first half, the privileged elites cemented their positions.

Let us return to WWII…

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President Roosevelt saw the Soviet Union as an integral component to the post-war New World Order. For they were the decisive sword that cut down the axis powers, and he thought, rightly, that they would be a key figure in shaping that new world (this is why Russia today still has permanent member status at the U.N.). Unfortunately, Dulles – and this was the second paradigm that motivated his treason – saw the world and the Soviets differently. Dulles was a staunch ideologue who was even more against the “communist threat” than he was of Roosevelt. For that reason, he antagonized the U.S.S.R., especially after Roosevelt died in April of 1945 (and Dulles was hardly the only US official to do so). His Operation: Sunrise, for example, was a betrayal of the alliance between the U.S., the U.K., and the U.S.S.R. – and the Soviets, in particular: a paranoid Stalin, did not take this as a reassuring sign of post-war relations.

In fact, it was under the influence of Dulles’ that the U.S., under President Harry Truman (though, Truman needed little nudging from Dulles given his own anti-Soviet ideology and racism towards the Japanese), bombed the Japanese despite their several attempts to surrender earlier that year. Moreover, many Nazi intelligence officers that Dulles spared from Nuremberg came to constitute the West German intelligence agencies fighting against the U.S.S.R. after the end of WWII. Dulles, and other powerful figures like him, wanted to send a message to the Soviets — and that message was received. The ultimate result was the Cold War.

So now we see that a powerful intelligence figure, defying the policies and intents of a U.S. President, to carry out policy objectives that he saw more fit, and in the process altering the course of history. And this influence succeeds Presidents, (from even before) Roosevelt up until Kennedy (and beyond). And it hardly ends here. But before going on, let us spend some time understanding Operation: Sunrise and the networks that made it possible.

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Allen Dulles had been in contact with SS General, Karl Wolff, a/k/a the “bureacrat of death” (chief of all SS and Gestapo units in Italy), negotiating the surrender of Nazis in Italy that protected the lives of the several high-ranking Nazi officers. This action was undertaken by Dulles despite express instructions to the contrary by both Presidents Roosevelt and Truman. In order to distance himself from any implication, Dulles employed an intermediary and upper-class German counterpart, Gero von Schultz-Gaevernitz, to carry the terms of this new surrender and to facilitate Wolff’s escape from Northern Italy at the war’s end.

Gero, a German economist and a Weimar minister, was also a scion of a wealthy European family that had at one time supported the Nazis, and was a relative of the Stinnes family, who were responsible for financially supporting Hitler’s rise to power. He and Dulles held the view that “moderate” members of the Nazi party must be salvaged and incorporated into “post-war plans for Germany.” Dulles also employed his top agent, Don Jones, within the OSS to lead the rescue mission of Wolff.

In addition to these contacts, Dulles was still a board member at Sullivan and Cromwell, and as such sought to protect his clients’ interests in Italy and Germany. For example, part of the terms negotiated were that Wolff and his soldiers not destroy any of the manufacturing and power plants owned by the multinational holding company, the Italian Superpower Corporation (incorporated in Delaware in 1928, whose executive board were made up of Italians and Americans, 50/50). Incidentally, one of these executives, James Russel Fogan, took over as the London chief for the OSS at the end of the war, professedly making him Dulles’ “boss.”

Dulles’ efforts weren’t entirely successful, though. For Wolff was “prosecuted” but not at Nuremberg – there he was only called on as a witness, not a criminal – but at a de-Nazification court. A major reason Wolff was never prosecuted at Nuremberg initially is that Dulles suppressed an OSS report detailing the horrific crimes Wolff had committed under the Third Reich. Instead, what the Nuremberg prosecutors received were reports from Dulles himself painting a picture of a neutral and moderate officer who was just following orders and knew nothing about the horrors of the “final solution.” Furthermore, at his trial at the de-Nazification court, Gero von Shultz-Gaevernitz testified on his behalf, lauding his character and stressing that he had made no deal with the Americans to save his own skin (which was false).

Despite all these mitigating efforts, Wolff was still jailed – but not for long. For Dulles had arranged that Wolff be diagnosed with a nervous disorder and had him transferred to a more comfortable psychiatric institution. But Wolff grew impatient and began to speak of Operation: Sunrise, even writing letters to Dulles and Major General Lyman Lemnitzer threatening to expose the embarrassing and treasonous truth of that alternative peace agreement. Major General Lemnitzer also shared with Dulles a deep anti-Soviet ideology and, since he too, had helped coordinate the operation, urged Dulles to do what they could to get Wolff total freedom. And this is ultimately what happened. Incidentally, this General went on to serve on the Joint Chiefs of Staff and eventually the Army Chief of Staff under President Kennedy.

Wolff went on to live a fairly innocuous life, even selling information to US intelligence agencies at one point. He was prosecuted a number of times, jailed only a minimal amount of time (5 years), and despite finally being convicted of war crimes in 1964, he lived out his days as a lecturer and minor public figure that one would think a Nazi War criminal ought never to have – and all thanks to Allen Dulles and his deep-state networks.

In sum, we see the workings of the deep state here on a minor scale. A powerful intelligence figure, who himself was already a powerful financial and legal broker, who protected his company’s clients (often illegally); tapping others within the intelligence community, the military, and the financial sectors of the United States, as well as other foreign agents to carry out his own operations; who made treasonous deals with war criminals against the behest of presidents due to his class affiliations with those war criminals, and his ultimate geopolitical, anti-communist ambitions. What we have here is a power player within the intelligence community, coordinating with other sympathetic power players in the military and financial sectors in order to affect policy against both a democratic functioning and the President of the United States: this dynamic is the deep state.

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So, what does the deep state want? What is its raison d’être? In short: to survive and pursue its objectives. The specific goals and the operations it undertakes to attain those goals differs from state to state. But there are some similarities between different regimes.

First, the deep state is almost always made up of individuals from the upper class (of wealth and power), particularly the ones who own (the means of production of a) society, and those goals sought are those of that upper class, i.e. the power elite. Often, however, individuals from the upper-middle classes – usually certain intellectuals and politicians – are recruited to serve on behalf of that power elite.

Second, are the goals of the deep state – the primary one being the protection of this wealth and power; the secondary goal is the accumulation of more power and wealth. This happens primarily through the exploitation of others, usually against the lower classes, occasionally against other upper/capitalist class members. Again, how these goals and operations play out depends upon the nation-state and the restrictive/protective (i.e. regulatory) nature of its laws.

Given this example of Dulles as well as other features of the phrase, “deep state,” one is inclined to think that this phenomena is much more sinister or cloak-and-dagger that it typically is. To disabuse this perspective, another more-recent, example will help to further clarify the influential and mundane extent of this opaque dynamic (at least within the United States): the financial crisis of 2007-2008.

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To put it in simplistic, yet clear, terms:

In September of 2008, investment banks in the U.S. became illiquid. This means that these banks no longer had any money with which to do anything banks normally do, i.e. to invest and pay share- and stockholders (particularly those who had put their retirement funds into mutual funds managed by these banks). Anyone who wanted to withdraw money from their investments or savings (since these banks also operate as commercial banks) could no longer get this money because these banks simply did not have the cash. This is what is known as a “run on the bank.” This is what happened to the banking system that led to the Great Depression: banks no longer had the money to give back to those who put money into them. In other words: there was no more money: no savings, no payrolls to pay to workers, no funds for investors to invest, and no returns to give to investors.

This affected local commercial banks because they, too, had assets in investment banks. So, this means that banks on city and state levels also didn’t have money because they couldn’t withdraw their money from the investment banks – that had no money – into which they were invested, to repay those who (on local and state levels) wanted to withdraw the money they put into these banks. In essence, there was no more money in the financial economy to pay debts/make good on assets held.

However, this was plain and simple: a HUGE lie. The reason for this is the simple reason of the Federal Deposit Insurance Corporation, or more simply: the FDIC.

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The FDIC is an agency of the U.S. government that insures/guarantees that commercial banking deposits will always be available. Those funds are ensured by the United States government. This is in order to prevent another run on banks. That said, the FDIC does not insure the deposits of investment banks, because investing is a risky behavior; putting money into a commercial bank is not. What this means is that during that crisis, many investment banks would have gone bankrupt, would have been purchased by other banks at discount prices, what good stocks remained would have been salvaged, and no doubt, new investment banks would have sprout up in their stead. All commercial banks – and their deposits – would have remained solvent because they are insured by the federal government (just like the bailouts [as well as U.S. debt in general] that were ultimately given to those investment banks).

What happened was one of the greatest scams of the 21st century (yes, there were others). The American public was plundered, and then when their plunderers got in trouble, they – in conjunction with their friends in the government – bailed most of them out, all at the extra expense of the American public.

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So, the U.S. government (beginning under President Bush but continuing under President Obama) began to pour – initially $700 billion, but ultimately $16.7 trillion – dollars into the financial banking system by purchasing those banks’ “toxic assets” {i.e. worthless loans/investments (mostly the bundled mortgages, called collateralized debt obligations [CDOs]) that could never be repaid}. In effect, the U.S. government bought the bad assets (loans) of these banks in order to ensure the survival of those investment banks, ostensibly. And these banks, then, could pay the other state and local banks, their commercial clients, as well as lend in general in order to keep the banking system solvent, i.e. functioning as banks in which people have faith.

It should be noted that these toxic assets are still on the accounting books of the U.S. government. They didn’t just disappear, and more importantly: they will never have any value because they will never be repaid. What this means is that the United States government didn’t just “bail out” the banks, but bought an expensive piece of junk. In other words, the U.S. government bought a worthless multitrillion dollar investment at the taxpayers’ expense. And how did these investment bank respond to such a generous public gesture? By giving their officers – the same ones that created the crises – raises, generous severance packages, and foreclosing (often illegally) on homebuyers.

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So, what does this have to do with the deep state? First, remember the power paradigm mentioned earlier: all of domestic political history has been a struggle between the rich and powerful (the power elite) versus the poor and powerless (i.e., everyone else). This isn’t a bad thing necessarily; fundamentally, it is the strife endemic to the human condition. A good government balances the interests of these two groups, while these two groups seek to have the government rule in their favor as much as possible.

Using this framework: what happened with the bailout? Obviously, the power elite had a policy passed that directly benefited them at the expense – literally – of everyone else (remember the government’s money is the people’s [tax] money). The bailout begs the question: was this transfer of wealth just(ified)? In order to answer this question, let us first look at those who proposed the bank bailout. Addressing this component will give us the second indicator of the deep state at work.

In the middle of September 2008, Secretary of Treasury, Henry Paulson, announced a bank bailout under the program called the Troubled Assets Relief Program (TARP). Initially, $700-800 billion was to be spent purchasing banks’ toxic assets in order to keep financial markets liquid, banks solvent, and the economy operating. This program was endorsed by both then-Federal Reserve Chairman, Ben Bernanke, and then-Chairman of the U.S. Securities and Exchange Commission (the S.E.C.), Christopher Cox. Then-President, George W. Bush, seeing TARP as necessary backed the program and helped sign it into law. Who are these people, and why does it matter? In a few words: powerful deep state actors; and, because these individuals oversaw the networks that allowed the bailout to happen in the first place).

First on the list is Henry Paulson, a Dartmouth and Harvard graduate. In addition to being Treasury Secretary starting in 2006, he previously worked for Goldman Sachs for 20 years before becoming Chairman and CEO of the corporation in 1999. It is little wonder that the former Chairman and CEO endorsed a $10 billion package in aid to Goldman Sachs from the U.S. Treasury, despite the fact that this same bank short-sold these CDOs – betting that they would fail – and making $4 billion dollars in profit in the process (off the bad debts they helped to create and knew were bad) before being given this $10 billion.

It is this connection between being the top executive of a major investment bank and being Secretary of Treasury – the agency entrusted with managing government revenue – that is telling here. How else would a former investment banker rule, especially given his long history with that investment bank? It really is no surprise that such a powerful figure in both the economic and political spheres would push a policy to protect large investment banks like his former employer. But what really happened was that this former Investment Banker, using his position as leader of the Government’s bank account, transferred public wealth (tax revenue) to private banks!

Second, is then-Federal Reserve Chairman, Ben Bernanke. Bernanke was an academic (a Harvard and MIT graduate) in his professional life before becoming Fed Chairman. He taught at Standford Graduate School of Business for six years before becoming a professor at Princeton University Department of Economics from 1996 until 2005 when he was named Chairman of the Federal Reserve (though, he previously served for three years on its governing board) by President George W. Bush. This affiliation is not insignificant, and serves as an example of an “ideological soldier” who becomes a representative for the regime in power.

Bernanke was able to obtain his position as Fed Chairman because he holds a certain ideological position. Namely, that powerful economic actors, such as investment banks, can do no-to-little harm (despite the vast, ample evidence) while the government and regulatory measures do moderate-to-great harm (while not without some element of truth to validate) to economies, a position he was able to solidify both as a mainstream, fundamentalist-“capitalist” economist and as Chairman of the Council of Economic Advisors.

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At the risk of another aside section, it is important to note that the American/Western view of economics operates much like a religion. Notions such as “free markets,” “laissez-faire,” “deregulation,” and “privatization” are taken as commandments – often without context, and more often wilfully blind to the caveats and negative effects of those commandments. Most economics classes in this country instill the virtues of “free enterprise” in their “students” but are silent on the excesses and evils of these so-called virtues. Furthermore, the history of capitalism as it is primarily understood is ignored altogether, and for this reason it is a flawed guide to sound economic and social policy. It is a profound problem, not only in the curriculum but in the American/Western mind when it comes to creating informed and fair economic policy. Ben Bernanke is a priest of this skewed curriculum, which is itself a reaction against the communism/socialism of the Cold War, but has its roots in feudalism.

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The third major player here is the then-Chairman of the S.E.C., Christopher Cox. Cox has an impressive resume but some of the highlights of his career will demonstrate both that he is a deep-state figure and why this is so. First, he is a graduate of Harvard, receiving his M.B.A. and J.D. in 1977. He worked for the prestigious law firm, Latham & Watkins for 9 years, eventually becoming partner. In 1988 he began his political career, being elected Representative to the 40th district in California. He has worked on several commissions, most notably Clinton’s Bipartisan Commission on Entitlement and Tax Reform where he helped publish a recommendation that entitlements (like Medicare) should not continue to be an increasing share of the federal budget. He also helped to enact the Private Securities and Litigation Reform Act which helped to protect investors (like investment banks) from “frivolous” lawsuits. He also coauthored legislation that privatized the National Helium Reserve. In short, what these key details demonstrate is that Cox is also a free-market fundamentalist who has worked in the government with much success and in various roles — a veritable career, neoliberal politician.

Unfortunately, his role as S.E.C. chairman, before and during, the financial crisis is not as impressive as the rest of his C.V., and it is telling of whose interests he was protecting. For example, during the lead-up to the crisis the S.E.C. had been working to deregulate markets, and downsizing the S.E.C. itself. Enforcement, too, was hamstrung in numerous ways by Cox; for example, he repeatedly urged regulators not to be so adversarial/aggressive with the banks. And this is to say nothing of the fact that the S.E.C. didn’t see the crisis until it happened, which is, in part, what it is supposed to do. During and after the crisis, the S.E.C. played little role in pursuing and prosecuting the banks that were criminally responsible for the crisis. Cox’s role at the S.E.C. was part of the well-known problem of financial regulators not doing their jobs like they should because of the type of relationships developed and maintained with those investment banks, i.e. behaving more as friends than watchmen. It is little wonder that he supported the bailout, or that the S.E.C. never saw the crisis coming.

While playing a minor role respective to the others in the bailout, it is worth noting that then-President Bush himself (also a Yale and Harvard graduate) is a former C.E.O. of his own oil exploration company, and then board member of the firm that took over his business. He also served as the managing general partner of the Texas Rangers baseball team. In short, the President is pro-business, and did not ultimately object to bailing out the investment banks (for obvious reasons).

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Those were the major architects and proponents of the bank bailout. But why did they advocate for this policy? So-called free-market proponents argued that without the bailout, the U.S. (and global) economy would see a downturn that would rival the Great Depression. There is some truth to this fear because financial runs on investment banks would have a systemic effect nationwide similar to what happened just before the Great Depression. The bailout was touted as the only solution to avoid an even worse catastrophe. However, and this is the crucial point: it was not the only solution, just the only one presented to the American people.

For example, Sal Khan (an academic polymath and MIT & Harvard graduate) presented an incredible option that a hedge fund manager and friend of his outlined. This option allowed these bad banks to fail but ensured that money would still be available for lending in the U.S. (and global) economy. In effect, capitalism takes effect – failed investment banks are free to fail – yet, the economy is protected from systemic failure, all the while minimizing moral hazard by setting an example. It is not a novel idea but it is one that was not presented by Paulson, Bernanke, Cox, Bush, or any others in the centers of power. Why is this so?

Sal and Todd makes the reason very clear: “it would be political suicide with key financial donations to political campaigns.” Banking lobbyists do have a strong hold on the government and an unwarranted influence on the types of policies that are passed — this comes as no great shock. However, the issue is more than just lobbying and campaign donations. Remember, these 4 powerful politicians described previously all came from the financial sector. The don’t just take directions from lobbyists, they think like those whom employ lobbyists in the first place (a process known as indoctrination). As former bankers, CEOs, and graduates of elite universities responsible for dictating “sound” economic policy, there really was no need for the lobbyists to exert this influence [lobbyists work mostly on the uninitiated, undecided, and ambitious/opportunistic/greedy]; for the influence had been instilled in their schooling and experience in the private sectors. These individuals then go into economic and political spheres where they occupy high-ranking positions, and then act on behalf of the institutions that molded their minds. This is the deep state at work on an economic/financial level. And this deep state benefits, again, the power elite.

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A quick point of consideration. When outlined in this way, the Deep State seems intimately tied to ideology. In this, and the Dulles, instances: that ideology serves the perpetuation of the power elite, but also (in the U.S.) so-called capitalism (as the means to ensure that perpetuation). Other power elites in different countries will uphold different ideologies but the end is the same: self-preservation of the power elite and its privileges. In this way, we must be vigilant not only against the power elite but also of ideology itself, especially when it is propounded by the power elite. This is why a vigilant and thorough epistemology is necessary (on a socio-political level): to protect and make prosperous all those within a society and not just certain segments within it, as well as society as a whole.

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In closing, this author hopes that a few things have become more clear. First, is the definition of the deep state: a deeply entrenched, wide-ranging, and powerful subterranean network of financial, intelligence, and military interests that guide national policy regardless of President. Second, is how this dynamic plays out, and what makes it different from other interest groups and factions within any given socio-political system. Namely, that certain powerful actors within these spheres of influence uphold the power elites’ will, and that they do this by being an interchangeable class of people who move from one sector to another.

Third, that the deep state doesn’t necessarly involve cloak-and-dagger operations, though when it comes to the Executive office, particularly when it involves intelligence agencies, the military, and financial sectors, this is often the case; however, more often than not, the deep state is a mundane force hiding in plain sight. Lastly, that to understand the totality of the deep state, one must understand the history of a nation-state, its institutions, the figures leading these institutions, and how they all interact with one another. It is no easy task, but it is one most imperative to the proper functioning of a good government (regardless of size).

There is still much to be explored concerning the deep state but this will serve as a proper introduction to this fascinating phenomenon.

Literally, Socialism, and the Need for a Dictionary in American Discourse

Oxford-English-Dictionary-001

A recent article by the Economist magazine has exposed Bernie Sanders for what any of us familiar with the meanings of words is: NOT a socialist. Despite the obvious reasons why Sanders is not a socialist, there are many who – despite the clarification in the article – still insist that Sanders is, indeed, a socialist in the proper sense of the word. What follows is a delineation of terms (including “socialism”), a look at this phenomenon of semantic confusion, and a prescription for correcting it and, ultimately, improving not only linguistic precision but political discourse.

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A few years ago, I discovered, much to my chagrin, that the word “literally,” defined as, “in the literal or strict sense,” has come to mean its exact opposite: “in effect; in substance; very nearly; virtually.” This means that the word “literally” now literally means “figuratively!” Why? No doubt it is because it has been largely and continuously misused over time as a filler word in the conversations of most people. If it is in the nature of language to change, why is a semantic shift (a reversal) like this so irksome – and dangerous?

The most obvious problem with a reversal like this the confusion it creates. What does a person mean when they use a word like “literally” in a conversation? While context and common sense can go a long way in determining which meaning is intended, there are other instances where this is not so. The most recent example is the use of the word “socialism” vis-a-vis Bernie Sanders’ political stance.

Socialism is defined as, “a theory or system of social organism that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.” The key feature of economic -isms is who controls the means of production: in socialism, it is society as a whole; in capitalism, it is private individuals/corporations. While it is difficult to distill comprehensive and variable economic systems in a sentence, these are the essential features of those words and so anyone who claims to endorse the philosophies which those words represent must, at least, meet such basic criteria.

So, do the policies Sanders’ propose meet these basic criteria? The answer is a resounding “no,” even according to Sanders himself. In an interview with Amy Goodman, Sanders was asked to define what he meant by “socialism.” Sanders replied,

Well, I think it [socialism] means the government has got to play a very important role in making sure that as a right of citizenship, all of our people have healthcare; that as a right, all of our kids, regardless of income, have quality childcare, are able to go to college without going deeply into debt; that it means we do not allow large corporations and moneyed interests to destroy our environment; that we create a government in which it is not dominated by big money interest. I mean, to me, it means democracy, frankly. That’s all it means. And we are living in an increasingly undemocratic society in which decisions are made by people who have huge sums of money. And that’s the goal that we have to achieve.

What Sanders describes is not socialism, proper – where society controls the means of production – but a more fair and equitable form of democratic capitalism. In fact, he has said outright that, “I don’t believe government should take over the grocery store down the street, or own the means of production.” So, Sanders is not a socialist according to the original meaning of the word; he is, in fact, a capitalist. The problem, though, is that he gives his own definition of the word, “socialism,” and if we accept and use it the way he does then, technically, Sanders is a “socialist,” but only according to this new definition.

Back to the confusion of contradictory definitions: is Sanders a socialist or not? According to traditional socialist philosophy in which society owns the means of production, “no, Sanders is not a socialist.” However, if we take his Jeffersonian-esque interpretation of democracy as a definition, then, “yes, he is.” But are the electorate making this significant distinction between socialism proper and Sanders’ version of it when “debating” his presidential bid and the policies he advocates? There are plenty of indications that the vast majority of Americans are not. But, ultimately, does this matter?

In short, yes. First, words have meaning, and when those meanings change so much that they no longer mean what they originally did, or worse: the exact opposite, then effective communication becomes all but impossible. Second, semantic shifts of the type that have occurred to “literally” and “socialism,” can be used in ways that can confuse, mislead, and deceive. A perfect example is the negative labelling of Sanders as a “socialist.” Such a label turns off many potential supporters because of the connotation the word has received due to the history of the Cold War. That said, the word “socialism” underscores the major political shift Sanders does endorse, so it does indicates a “revolution” in political goings-on that Sanders’ promises if elected. In this way, the obfuscation is strategic, even if somewhat disingenuous. In these ways, political discourse becomes double speak and there is a real danger that, if we’re not vigilant, it devolves into duckspeak.

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In conclusion: Sanders is not a socialist in any meaningful sense; he is a democrat and a capitalist, by his own admissions. Furthermore, words have meaning and we who use language have the responsibility to protect the integrity of those meanings. Though, we must allow for – and adapt to – the inevitable evolution of language when those changes do not degrade communication. The best way to do this is to know the meanings of words and to insist upon clarification and discipline when using language. And the best way to know these meanings is to read the dictionary, regularly. Look up words not known; refresh understanding of words that are known; and build vocabularies on a daily basis (David Foster Wallace went so far as to call the dictionary one of the, “great bathroom books of all times”). In this way, human communication, thought, and socio-political processes can improve in ways that will benefit us all.

The (Aristotelian) Art of Democracy

justice-is-blind

Aristotle is an incredibly important democratic thinker, and probably the very first. Much of Western political tradition is owed to him, and there is great value in re-examining his ideas in order to better inform our present. There is a great deal to cover so this author will briefly outline Aristotle’s theory on democratic rule in order to provide the foundation necessary for the main argument of this post.

First, Aristotle asserts that man is a “political animal” (Book I, chapter 2). By this he means that humans have a natural tendency for society. Individual man and woman come together, they form a household; several households come together to form a village; and these several villages come together to form a city, all for the sake of self-sufficiency. (For ancient societies, the city was the equivalent of the state or nation, and so the reader should not limit the city to what is typically thought of as a city but should include nation-states). But, as Aristotle admits, other animals do this, too. So what makes man unique? What separates the human animal from the other social animals? He argues that it is humankind’s perception of, “good and bad and just and unjust and other things [of this sort].” It is these perceptions that give humankind the ability to live well, not merely survive. And it is to this end: to live well, that humankind should and must strive in order to maintain its unique ontological position. He goes so far to say that an individual who, “is incapable of participating or who is in need of nothing through being self-sufficient is no part of a city and so is either a beast or a god.”

The next few books of his Politics investigate the proper functioning of the household and its parallels to the proper functioning of government, i.e. the management of the city. He also outlines three basic forms of good government: kingship, aristocracy, and polity; and their corrupt counterparts: tyranny, oligarchy, and democracy, respectively. Without getting bogged down in theory, suffice it to say that the first three are just and good because the government rules for the benefit of all*; the last three governments rule for the advantage of those who rule and so are unjust and bad. It is worth noting that Aristotle’s conception of democracy is different from our contemporary conception. By democracy, Aristotle meant mob rule of the generally poor masses. Our contemporary conception of democracy – that form of government by citizens who have the ability-potential to rule collectively for the benefit of society – is what Aristotle calls polity. In this essay, I will use democracy in our contemporary conception of the word (what Aristotle refers to as polity); and when Aristotle uses the word, the reader must remember that he speaks of mob rule.

Though Aristotle was very distrustful of mass rule, he reluctantly concluded that the polity would best be able to inculcate justice and humanity and thus preserve the city and mankind because it is the most moderate form of government (Chapter IV, chapter 2, section 2). But it wasn’t polity alone that ensured and protected the justice of the city and its inhabitants. For it is possible that a polity could easily become corrupt and devolve into one of the perverted forms of the government. In all of the good forms of government there is a foundation and guide, and justice is this guide. For Aristotle, the “political good is justice,” what he calls the, “common advantage,” or the well-being of the whole society (Book III, chapter 12, section 1). Aristotle continues, stating that laws are the operational manifestations of that justice. If justice is maintained, then good laws will follow and a king, an aristocracy, or a polity could properly rule according to the laws derived from it; if justice was absent, then the laws would also be unjust, and government would misrule, becoming corrupt, and the people with it.

Aristotle writes:

One who asks law to rule, therefore, is held to be asking god and intellect alone to rule, while one who asks man adds the beast. Desire is a thing of this sort; and spiritedness perverts rulers and the best men. Hence law is intellect without appetite (Book III, chapter 16, section 5).

For Aristotle – as most of Western philosophical tradition – Reason is the domain of Justice and as such is best able to identify and articulate it. The laws that govern both the government and the city it manages are to be derived through Reason. It needs to be stated that both Justice and Reason are thought to emanate from some source, what Aristotle called the Prime Mover, or what has been traditionally – and problematically – referred to as god. This premise (or conclusion, depending on the direction in which it is argued) is not without its problems and is in need of reconsideration for a variety of reasons, but that is another subject altogether. For now, it is enough to say that the laws of a (just) city derive from a higher source and that Reason is the means to access this source. And to reiterate: accessing this higher source through Reason is what makes us uniquely human.

Now that I’ve outlined a very truncated primer to Aristotle’s democratic theory, I can proceed to the main argument. But, again, some context is necessary, first.

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There has been much talk in that past few years of economic inequality, prosperity, the proper role of government, and who is best to lead the U.S. starting in 2016. But this author asserts that these issues are ancillary to the true issue: is the U.S. just? – is it being ruled justly? – how can we know for sure? – and, what can be done about it? There are a myriad of ways to address these questions – and that need to be – in order to fully answer and resolve them; however, for the sake of concision, this essay will focus on the economic aspect given its salience and relevance in contemporary times. Focused in this way, the questions become: is the U.S. just in domestic economic matters (production, distribution, and consumption of goods and services)? Is the social economy being governed justly? How can we know? If so, how do we continue such rule? And if not, then what can be done about it?

This essay attempts to answer the easiest of these questions through the lens of Aristotle’s democratic philosophy. These questions then become: “Is the U.S. economically just?” and “How do we know?” Let us begin with Aristotle, who writes of material/economic justice and how it does not work:

What, then, ought one to say is the extreme of injustice? Again, taking all [the citizens] into consideration, if the majority distributes among itself the things of a minority, it is evident that it will destroy the city. Yet it is certainly not virtue that destroys the element possessing it, nor is justice destructive of a city; so it is clear that this law cannot be just… But is it just, therefore, for the minority and the wealthy to rule? If they act in the same way and rob and plunder the possessions of the multitude, is this just? If so, then the other is as well (Book III, chapter 10, sections 2-3).

What Aristotle describes here are two (of the three) corrupt forms of government: oligarchy (the rule by the rich) and democracy (the rule of the masses/mob). He concludes that it is as unjust for the masses to plunder the possessions of the rich as it is for the rich to plunder the possessions of the masses. He concludes that if one is just, then so is the other; in other words: neither is just. In fact, both are extremes of economic (re)distribution and as such necessarily unjust. And the discussion of the extremes bring into the discussion of the mean, or moderation.

The “mean” is an important concept for Aristotle. He argues that moderation is virtue, and that extremes are vices. He writes:

First, then, let us consider this, that it is the nature of such things to be destroyed by defect and excess, as we see in the case of strength and health (for to gain light on things imperceptible we must use the evidence of sensible things); exercise either excessive or defective destroys the strength and similarly drink or food which is above or below a certain amount destroys the health, while that which is proportionate to both produces and increases and preserves it. So too it is, then, in the case of temperance and courage and the other virtues. For the man who flies from and fears everything and does not stand his ground against anything becomes a coward, and the man who fears nothing at all but goes to meet every danger becomes rash; and similarly the man who indulges in every pleasure and abstains from none becomes self-indulgent, while the man who shuns every pleasure, as boors do, become in a way insensible; temperance and courage, then are destroyed by excess and defect, and preserved by the mean (Nichomachean Ethics Book II, chapter 2).

Similarly: for Aristotle, excessive wealth or poverty destroys virtue and ultimately the citizen and the city. The cardinal virtue at threat here is Justice, which – defined by Aristotle as the “virtue characteristic of partnerships” (Book III, chapter 13, sec 3) – is the proper governing-goal of a city. And as mentioned earlier, neither too much can be allowed to the wealthy elites or too little to the masses – and they are not allowed to plunder one another. Both are destructive of virtue and ultimately justice. This is easier to understand when one considers that being just individually means participating in Reason so as to develop individual virtue. If one hasn’t the means even to eat, or has to endure excessive hardship to merely survive then it is difficult, if not impossible, to allot time to such lofty activities [Maslow’s Hierarchy of Needs is most instructive here] – such a restriction is to deny the individual of what makes one human.

For Aristotle, the concerns of both classes – the wealthy elites and the un-wealthy masses – must be taken into consideration and managed appropriately. In other words, proper government must balance both the needs of the masses and the needs of the wealthy. For Aristotle, this is the art of democratic rule: moderation.

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This analysis begs several questions. Is the U.S. moderate in its economic distribution? Is the U.S. ruled moderately with the interests of the wealthy elites and the masses appropriately balanced? What is the appropriate balance and distribution of wealth, exactly? Here, Aristotle gives few specific instructions. For each city/nation is different and its laws will necessarily reflect these differences; although, their pursuits of justice will/should remain identical. Given this lack of specificity on Aristotle’s part, however, it is still possible to answer such questions.

Of all the data and the methods available to us for answering these questions, the first this essay will focus on is that of economic productivity relative to income. The rationale is as follows: as a nation gets richer, those who work more often or harder to increase national wealth should see concomitant raises in personal income. It should be noted that these 2 indicators are but one way of measuring this question and in no way should be construed as being complete or total, but it will shed some light on the matter.

The Economic Policy Institute published a study in 2012 that looked at, among other things, these data provided by the Bureau of Labor Statistics. They found that from the year 1979-2007, income gains from the increase in productivity and GDP have gone primarily to the top 1% of families. In fact, 59.9% of the gains went to the top 1%, with 36.6% going to the top 0.1%, and a mere 8.6% of these gains to the bottom 90%. In this same time frame, total productivity has increased by roughly 70%. However, the average hourly compensation has only increased by about 34%. Keep in mind that increases in productivity prior to the early 70s rose commensurately as hourly compensation in the previous decades. Since 1973, however, hourly compensation has stagnated while productivity has increased. What happened to all the ever-increasing income (roughly a difference of 35% of output/income that hasn’t been given in terms of wages to the workers who are actually producing goods and services)? In short, the owners of the capital – the 1%, but really the 0.1% – have been collecting it all for themselves. So the question: is this fair? Or rather: is this just? Does this distribution take care of both the wealthy elites and the masses of workers in ways proper for each?

The other metric this essay will use to help answer this question is inflation – the rising cost of goods and services over time – relative to income earned. Using data from the Department of Labor, Bureau of Labor Statistics the inflation rate from 1979 to 2007 is 196.34%. (This means that over an almost 30-year period, something that cost $5 in 1979 cost $9.82 in 2007.) Similarly, median household income in 1979 was $50,342 and in 2007 it was $57,717 (both figures are measured in 2015 dollars). This is a median household income increase of 13.65%. Compare this to the 196.34% increase in the cost of living – a difference of 182.69%! It is difficult to imagine that such a difference is just in any meaningful sense, let alone allows for the masses to maintain a standard of living reflective of the wealthiest nation on Earth (without going into debt, that is).

Granted, this is only one way of looking at the question, and any single analysis cannot provide a final determination for a question this complex. That said, there are other similar trends that underscore systemic disequilibrium: decreasing employment and social benefits; weakening of labor unions; increased prevalence of lobbying for rich corporations; increased prevalence of legislation benefitting the very wealthy; increase CEO pay relative to average workers (which increased almost 800% from 1980-2010 while the typical worker only saw a 5.7% increase over the same time); an effective corporate tax rate in the teens, and sometimes zero or even negative; subsidies for wealthy corporations, the most recent being the bank bailouts which highlight an exceptionally hypocritical – if not a contradictory and simultaneously self-destructive – “capitalist” ethos that governs those “too big to fail;” as well as a continued lack of meaningful and aggressive oversight of financial institutions and processes, to name but a few.

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So what does all this mean? First, that it is important to always define terms and concepts. Aristotle’s conceptions of “democracy,” “justice,” and the “mean” aren’t typically what come to mind when one comes across these words. Despite the non-association, most people would probably agree that an important element of democracy is balancing the various interests of a nation, particularly the wealthy and the masses; that justice is – or at least should be – a concern of the state; and that moderation, or the mean between excesses, is an ideal to which an individual and nation-state should strive.

Second, that the analysis presented in this essay illuminates some disturbing trends. One, that despite an ever-increasing level of productivity, wages and income for the vast majority of workers in the US have effectively remained the same for the last 40 years. Two, that until the early ‘70s, productivity and worker compensation rose together; after that, productivity rose and compensation leveled off. Three, inflation, too, has increased non-stop. Four, that inflation has vastly outpaced what little increases to income there has been since the ‘70s. All together, what emerges is a picture of a socio-economic system that since the 1970s has rewarded the wealthy disproportionately more than the masses despite an ever-increasing level of productivity.

If Aristotle’s notion of balancing the interests of the wealthy against those of the masses is sound policy, then what is clear is that the U.S. socio-political system is out of balance, in favor of the wealthy. The conclusion implied here is that a re-redistribution is necessary in order to bring the system back in to balance. As mentioned earlier, this is but one analysis, and that many more are required to verify this phenomenon and conclusion. Also, mentioned, however, is that there are a myriad of social, political, and economic phenomena that have been taking place that, collectively, support this analysis and conclusion. There is, also, no shortage of data and studies confirming what has been concluded in this essay so verification will not be a difficult task. What is difficult is deciding how to rectify the problem. But the political solutions tend to fall into one of two camps: policies that directly benefit the wealthy (with the hope/assumption that those benefits will “trickle down” to the masses), or those that directly benefit the masses (which are often qualified in ways that show deleterious effects upon the wealthy’s ability to benefit the whole [economy], usually by not being able to create jobs): the qualifications for both solutions – that is, the way they are framed – are indicative of a power-structure at play that goes a long way in explaining why conditions have gotten to the point at which the U.S. finds itself currently.

Third, it should be clarified that while a re-redistribution – or a rebalancing, to use Aristotle’s language – does entail an equalizing it does not entail and equalization. In other words, a re-redistribution does not mean that all are now millionaires or that everyone has the same amount of income and/or wealth; instead, it means that, for the vast majority of people, their compensation in income is brought up to levels commensurate with current levels of productivity, national wealth, and standards of living – in other words: what they have earned through their collective work over the last four decades. As Aristotle maintains: for the sake of civil society, the property of the wealthy must be maintained and not pillaged, but so, too, must be that of the masses. It follows that if the masses have been plundered – as the data suggest – then their property is to be confiscated and returned.

In conclusion, the answer to the question – “Is the U.S. economically just?” – is “No.” Increases in productivity and inflation have outpaced income for the vast majority of U.S. citizens and both domestic and global trends do not support the interpretation that this is some unfortunate accident. (And the means by which this redirection of wealth has occurred would be an interesting topic for another essay…) For the sake of good empirical procedure, this essay encourages further analysis, but this author is certain these conclusions are easy to verify given the decades of previous research, analysis, and policy recommendations.

The U.S. is at the tipping-point of a phenomenon 40 years in the making – 20 of which has been spent forewarning the arrival of this point. Will its democratic government rule justly, bringing the nation back into balance? Or will it continue to unevenly stack the scales, threatening the foundation of its polity?

Slavery, Wage Labor, and the Inversion of Work

This scene from the 1969 film, Burn! is certainly thought-provoking. However, it operates under – as this blog will argue – a defunct paradigm. It has been replaced by one more ruthlessly efficient and fantastical! It is they hyperreal component of our contemporary society-economy. This is the third blog in a row on the topic of hyperreality – and it will be the last (for a while, at least) – but this particular situation is not only fascinating but relevant for us all.

But first things first: definitions.

Work. Work, in economic-productive terms (i.e., what you do at a job), is defined by the OED as a particular act or piece of labour; a task, job.

Labour, by the same meaning, is similarly defined as physical exertion [can be and often is mental in contemporary society] directed to the supply of the material wants of the community; the specific service rendered to production by the labourer or artisan.

Job is defined as a piece of work; especially a small definite piece of work done in the way of one’s special occupation or profession.

But work, in this context, and in the context of our contemporary society – one in which mass material production as the basis of the economy is largely obsolete, replaced  by services and other intangibles as the new consumables, and all this being facilitated by a global network of mass communications systems – takes on a new and terrifying meaning. Crimethinc’s most recent publication, Work, gets into the specifics of what work used to be, what it has become, and what we can do about it. For them, work is the leasing of one’s creative powers to others. They continue:

Selling our time rather than doing things for their own sake, we come to evaluate our lives on the basis of how much we can get in exchange for them, not what we get out of them. As freelance slaves hawking our lives hour by hour, we think of ourselves as each having a price; the amount of the price becomes our measure of value. In that sense, we become commodities, just like toothpaste and toilet paper. What once was a human being is now an employee, in the same way that what once was a pig is now a pork chop. Our lives disappear, spent like the money for which we trade them.

But it isn’t just the person that is transformed from human into commodity, but the socioeconomic system as well. Guy Debord wrote, in Society of the Spectacle, of what likely preceded such a personal transmutation:

When economic necessity is replaced by the necessity for boundless economic development, the satisfaction of primary human needs is replaced by an uninterrupted fabrication of psuedo-needs which are reduced to the single psuedo-need of maintaining the reign of the autonomous economy.

We, especially as Westerners see this all around us, every day. The sacred importance of the economy is as ubiquitous as the priests of the economy – CEOs, economists, politicians, and laymen alike – seeking to construct endless GDP as surely as the Babylonians sought the heights of omnipotence. These caste-members give pronouncements as if they were oracles: lower interest rates!reduces taxes on the most profitable!; disempower labor unions!; cut domestic aid programs!open up foreign markets!privatize!!: as if the economy were a fickle god, whimsically bestowing upon its subjects profit or poverty depending on the value of their prostrations. The economy has become the God of the West (and Jesus admonished us: Matthew 6:24), and we serve it now (not the other way around).

But this is not the end of the analysis. For Baudrillard infuses the chimerical into work:

The whole world still produces, and increasingly, but subtly work has become something else: a need (as Marx ideally envisioned it but not in the same sense), the object of the social “demand,” like leisure, to which it is equivalent in the course of everyday life. A demand exactly proportional to the loss of a stake in the work process… :the scenario for work is there to conceal that the real of work, the real of production, has disappeared. And the real of strike as well…

So… Our work is not really our own; it is not even meaningful in a social sense since it no longer truly serves us; and as a result, the work we do has become a farce of the process of human being. But what if one of us were to find happiness and meaning in our work – could we somehow contradict this conclusion? It doesn’t seem likely. For it amounts to a Sisyphean feat: eternally pushing the boulder up the hill, only to have it roll back down again and again (And Camus argued that we can – we must! – find happiness in this).

I think he’s right: it is possible for a slave to love his condition, but then again: a slave isn’t a subject, but an object; not a person, but a commodity.

The Fallacy of the Broken Window

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The following excerpt is taken form Henry Hazlitt’s book, Economics in One Lesson, though the origins of the concept of “opportunity cost” are attributed to French theorist, Frederic Bastiat. I chose to quote verbatim because he does an excellent job of portraying the parable in a readable and relatable form. The significance of this teaching cannot be overstated – too much of today’s thinking involves such terrible and short-sighted thinking, even outside the field of economics. While there is truth to the notion of “creation from destruction,” how it can be rightly applied to human systems is much more limited than is typically thought. It would serve us well to remember this parable often. Surely, I will refer to it in posts to come.

A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has a bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate of glass window cost? Two hundred and fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants and so on ad infinitum. The smashed window will go on providing money and employment  in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.

Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper wil be out $250 that he was planning to spend for a new suit. Because he has had to replace the window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.

The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. The will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.

*  *  *  *  *

One evening at the University I was attending, I was walking with a friend who, when she had pulled out her last cigarette, crumpled up the box and threw it on the ground of the parking lot. I looked at her in shock for her brazen littering. Quick to see my environmentalist outrage she quickly began to rationalize her own version of the broken-window fallacy. “Littering is good because it will create a job for someone to clean it up.” My rebuttal was an unsophisticated, near inarticulate, diatribe about how we need to take better care of the Earth and our shared human spaces – I even had to pick up the cigarette box and threw it away in the receptacle not far from where we walked. Had I known then what I know now, I could have argued more effectively and in a manner that was to her self-interest. I could have said, “Yes, that is true. But, if you throw it away yourself, that job will go unneeded and the money to pay that person a salary can be saved. Eventually, this savings can be passed on to us by lower tuition because the University has one less employee to pay; or, similarly, they could afford to pay higher salaries to better teachers thus improving the quality of our education, or some other more productive project.” Yet one of many “I should have said” stories I have. But the lesson has been learned, and my argument awaits new specious reasonings.

There is no shortage of similar sophistries in contemporary American life. My hope is that if we are mindful, we can identify and counter them. Maybe in this way, our individual efforts will be more effective in improving our lives and society.

Labor: How Private Enterprise Today Gets Capitalism Wrong

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The annual labor of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consists always either in the immediate produce of that labour, or in what is purchased with that produce from other nations.

Adam Smith, The Wealth of Nations

The opening lines of most works are often the most important in terms of underlying message. This was the lesson illustrated many years ago by a professor of mine as we studied Machiavelli’s, The Prince. Indubitably, whether ones reads the tract as genuine or satire, the message Machiavelli conveys is the acquisition of power. Here is the first sentence from chapter 1 of his work:

All states, all dominions that have held and do hold empire over men have been and are either republics or principalities.

From the first line, alone, we understand Machiavelli is discussing the ways in which dominions are held over the masses of people, and the specifics of this dominion/power is the subject of the rest of the work. Even his dedicatory letter that precedes his first chapter speaks of the way in which one may acquire their own power (favor) with a prince:

It is customary most of the time for those who desire to acquire favor with a Prince to come to meet him with things that they care most for among their own or with the things that they see please him most.

Similarly, Adam Smith speaks of an underlying theme in his most famous – and surprisingly unread – work, The Wealth of Nations. That first line indicates to the reader what “the wealth of nations” really is: labor. Without labor, there would be no produce, nothing to trade, and nothing in which to invest; indeed labor is the most fundamental unit of both wealth and economies. Without labor, there would be no wealth.

It is disheartening, then, to see that in the United States laborers – those who perform the labor – are not only vilified but denied its significance as an economic force; that laborers, i.e suppliers, are being stripped of their right to negotiate with the buyers of their commodity in the labor market. Today, corporatists-capitalists and “free-market” proponents speak of the evils of unionized labor – how it makes business hard to function, how it drives the cost of goods up, how it’s wrecking the economy as a whole, and is a socialist institution threatening the very existence of American enterprise. But Smith, father of Capitalism, the ideological inspiration for this country’s economic model, couldn’t disagree more with such sentiments.

Smith was a moral philosopher by training; he was an economist insofar as he used he philosophical inclination to look at economics and best methods of economic organization. As such, he was primarily concerned with human beings. But Smith was no utopian, he knew people were motivated by self-interest (for the most part). So he devised his system based on observations about people and industry, but that had infused into it moral elements in order to make it just and equitable. Most people are rarely familiar with the morality that Smith infused into Capitalism but it suffuses the work, throughout. For example, he was concerned about workers rights and well-being, promoted public education, a welfare system, a progressive tax system, and on and on. And he was acutely aware of the exploitation that could be wrought by financially powerful interests. But these elements of his philosophy are rarely mentioned, if not ignored altogether.

This begs the question: “Why?”

Is it because the morality of such systems is hard to quantify mathematically and as such keeps the economic theory of capitalism unscientific? It’s possible to argue that point but anyone familiar even with the basics of economic theory know that while there are some good working models, economics is hardly a “hard,” science, the ways physics, chemistry, or biology are; in fact, much of it remains theory (lower case “t”). This is why Alan Greenspan, Federal Reserve Chairman at the time, was unable to see the lead up to the economic meltdown as it was happening in front of him (despite warnings from other economists and forecasters) – because the real-world data contradicted the theory of how it should have played out. The same goes with advertising – dominant economic theory asserts that consumers will seek information that will allow them to make the best purchase of a good/service of all the options presented; but advertising is a direct undermining of that information-seeking because it appeals not to a sense of understanding of the product but of feelings about a product upon which advertisement plays.

The answer may, ironically enough, be answered by Smith himself: self interest. Like advertising, if consumers had all the information they needed they would make the best purchase possible, or more than likely: none at all. This would make it hard to persuade a consumer into buying an inferior product or good (Remember: we live in an economic society who’s credo is “buyer beware”). In fact, it is likely consumers would consume less than they do because they would be informed of the fact that companies want them to buy products, even if they do not need them – this would definitely affect a nation conditioned to consume, and whose consumption constitutes 70% of its annual GDP. Similarly, if laborers in an economy were aware of just how important they were, it’d be less likely that businesses could exploit their labor so brazenly.

Does this sound cynical? Then I would remind the reader of the history of labor movements in this United States – there was a time when children worked; when adults worked to scrape by a meager living (and still do – most households fund their living with revolving debt, for example); when American immigrants were unabashedly and shamefully exploited (and still are – see: Mexicans); when working conditions were unsafe and often led to worker deaths; when the only weekend was a half-day on Sunday, and the work-day was 12 hours or more; when monopolies existed and the government had to break them apart. And let’s not forget the ultimate exploitation – that which gave America a head start as an economic powerhouse: slavery. The exploitation of labor is a part of American history, although, it is seldom discussed; and it continues to this day Another example: do major corporations outsource manufacturing jobs in the U.S. to foreign countries because they can’t turn a profit? or is it because they want to selfishly increase their profits as much as possible by paying foreign labor a fraction of what it takes to pay a U.S. worker living wages (a practice that Smith was opposed to)?

Whatever the explanation, it is no secret that Corporations are rapacious profit-seekers and that they disproportionately influence the markets (and the government that makes the laws that govern the rules of the market place). And, though, this is just one of many examples of the incongruity, it is clear that the U.S. version of “Capitalism” is not Adam Smith’s version. And this discrepancy is costing labor in the U.S. significantly.

This train of thought begs another question: if several major tenets of the original Capitalism are stripped away, is what remains still Capitalism? It reminds me of a question about identity that another professor asked class one day: “What is essential in a thing? What parts of the whole are necessary in order for the whole to still be considered that essential thing? For example: a table. If we remove one leg, is it still a table? If we remove, two? three? if we remove all four legs, is it still a table?”

Are there enough legs left of Smith’s philosophy in today’s Capitalism to be truly considered Capitalism? And what do we do about the mistreatment of the wealth of our nation? Let us labor together to discover the answers.