The Ponzi scheme that Baby Boomers are waiting to cash in on
Posted by Paul Mulshine December 26, 2008 11:19AM
(Note: This column ran in the Star-Ledger on Christmas Day)
I think it is fair to say that 2008 has been the worst year in the history of the Republican Party. Every conservative columnist in America has weighed in with a theory on how to rescue the right. So here's mine: Stop treating the young people of America the way Bernie Madoff treated his investors.
A lot of people have been comparing the Ponzi scheme allegedly run by Madoff to the Ponzi scheme run by the U.S. government, also known as Social Security.
That's entirely unfair.
To Madoff.
From what I can gather, Madoff at least made an attempt to invest the money he got from early investors to give them the returns he promised. Those investments failed to bring in enough money and the scheme was doomed to fail sooner or later. But if Madoff had been a more brilliant investor, it might have worked.
The federal government, on the other hand, never tried to make the Social Security system work. The feds didn't invest the money in the market. They took the money that we gave them and lent it to themselves, promising themselves interest. To be paid by themselves.
This scheme is even more crooked than Madoff's. But try and explain that to adults, especially Baby Boomers. The math is complicated, but the typical boomer seems to understand that he or she is on the winning side of the curve in this scheme. We will get a good return on our Social Security payments and a fantastic return on our payments into Medicare.
But try talking to kids about it. I do so regularly, often in college classes that I visit.
Whenever I am before a class, I make it a point to tell the students the truth about Social Security. And the truth is that when the current crop of college kids are in their peak earning years, each will be supporting half a retiree. "I'll be on the beach sipping a margarita and you'll be paying my bills," I tell the kids.
And those bills won't be cheap. When you look at the projected costs of Social Security and Medicare 20 years out, you see that each kid in that class will have as much as $500 a week deducted from his paycheck to support his half of a retiree.
"And you have to adjust that for inflation," I tell them. "In other words, you'll have to pay $1,000 or so a week to keep me in tequila and triple sec. I might pay for the lime juice, but that's about it."
But what about the trust fund? The government owes that money to itself. Therefore these kids will be paying our retirement costs both in their payroll taxes, which will go to Social Security and Medicare, and in their income taxes, some of which will go to pay back the money the feds are borrowing from Social Security today.
In a typical college class, half the kids are daydreaming or sending instant messages on their laptops. But they all pay attention when I tell them this. From the reaction, I can see that no one has explained this to them before. Neither political party will tell the truth about the trust fund for the same reason Bernie Madoff didn't tell the truth about his trust fund.
The only major-party presidential candidate who ever addressed this issue honestly was Republican Barry Goldwater in 1964. He wanted to make Social Security voluntary and he was opposed to Medicare, which was then in the planning stages.
Goldwater lost in a landslide. It's not hard to see why. Everyone who voted in that election was on the winning side of the Ponzi scheme.
That was still the case for the majority of voters in this year's election. But it won't be the case for long. If we assume that Barack Obama gets re-elected in 2012 - a likely assumption given the ineptitude of the current GOP leadership - then the next presidential election of consequence will be in 2016. By then a majority of Americans will be on the losing side of the scheme.
The party that first figures out a way to appeal to these voters will have a decisive advantage in the future. It won't be the Democrats. Obama proposes to "save" Social Security by raising taxes rather than trimming benefits.
As for the Republicans, they treated Texas congressman Ron Paul as a pariah in the presidential primaries for reviving the Goldwater worldview. But the oldest candidate in the GOP field had the youngest supporters. So that should be a word to the wise.
Or perhaps the Republican leadership will decide to dismantle this Ponzi scheme simply because they are honest and they realize it's the right thing to do.
And maybe Santa really did come down your chimney last night. Merry Christmas.
My Commentary:
Posted by Zemack on 12/26/08 at 7:35PM
My wife and I have paid precisely $312,551 in Social Security taxes over our working lives as of 12/31/07, according to our latest S.S. statements (not counting Medicare!!). This includes the employers' "share", a grossly dishonest means of camouflaging how much money each of us actually pays. If those taxes (dating back to 1966) had been placed into a personal, balanced investment account earning a reasonable, modest rate of return, we would have probably upwards of three-quarters of a million bucks, of our own money, to start drawing on in a few years. Instead, that money was spent by congress or transferred to other retirees who did not earn it.
Now, when we begin to collect in a few years, we will have to depend on other workers' taxes to collect on our contributions. This will include our own children and, eventually, our grandchildren. No honest person would voluntarily submit to such a scheme. This is the horrendous position that that hideous program forces on its "contributors".
Social Security turns everyone into first a slave, then a parasite.
If that is not a Ponzi scheme, then there is no such thing.
Social Security is thoroughly immoral, violates individual rights to life and property, and should be phased out and abolished.
Friday, December 26, 2008
Sunday, December 21, 2008
Commentari 52-Hirsh, Newsweek on the Fed
The Anti-Greenspan
He's probably the least-noted member of Barack Obama's new financial regulatory police, but Dan Tarullo may end up having the most impact. Think of Tarullo as the anti-Greenspan, or perhaps as a pro-regulation virus planted in the heart of a Federal Reserve System that for two decades has been predisposed to letting markets self-correct. Certainly Tarullo—who was named Thursday to fill one of two open spots on the seven-member Board of Governors—is far from you run-of-the-mill Fed official. Most governors have been academic economists, bankers or businessmen. Tarullo, a Georgetown law professor who specializes in bank regulation and international monitoring, is basically a high-toned cop. "Our regulatory system has let us down," he said on PBS's Lehrer show last April, before the worst of the subprime fallout hit. "We've had multiple opportunities in the last 10 or 15 years to take account of the new forms of financial activity. We haven't done so."
Most media attention is focused on Obama's nomination of Mary Schapiro, a tough-minded former futures regulator, to head the Securities and Exchange Commission, and Gary Gensler, a Treasury undersecretary in the Clinton administration, to chair the Commodities Futures Trading Commission. But those two may end up waiting on direction from the new super-empowered Fed. Many experts agree that one reason the subprime securitization disaster occurred is because it cut across so many once-segregated sectors; mortgage lending and securitization were once entirely separate practices. The SEC, for example, is only supposed to oversee publicly issued securities, and can't do anything about lending practices. Only the Federal Reserve Board can monitor the entire financial landscape. As a result, Tarullo could potentially play a bigger role than either Schapiro or Gensler in the future financial system, some experts say. "It just depends on what deal was made" with Federal Reserve Chairman Ben Bernanke, "or whether there was a deal," says Ted Truman, a former senior Fed official. "It's not automatic that someone with that kind of expertise would immediately have a role in banking policy. Board members are assigned in terms of seniority."
Bernanke, a conservative, has already expanded regulation. Under the Home Ownership and Equity Protection Act passed by Congress in 1994, the Fed was given the authority to oversee mortgage loans. But then-Chairman Alan Greenspan, an Ayn Rand libertarian who by his own admission believed that markets could mostly self-correct, kept putting off writing any rules and stoutly resisted other efforts to regulate derivatives on Wall Street. Bernanke, by contrast, earlier this year instituted "Regulation Z," which created common-sense rules such as forbidding loans without sufficient documentation. Bernanke has also vastly expanded the Fed's lending powers to deal with the crisis. He believes the Fed should at some point return to its old modest role as a regulator of the money supply and inflation. But since he is also known to want re-appointment as chairman next year—and incoming Obama economic advisor Larry Summers is said to covet the post—it's likely that Bernanke will go out of his way to satisfy Tarullo.
And that may mean a whole new regulatory structure that will dwarf anything Schapiro does at the SEC or Gensler can accomplish at the CFTC. Those who who've worked with the soft-spoken Tarullo says he brings the right blend of save-the-world zeal and balanced judgment. "I think it's a great choice," says a former senior member of the Clinton administration. "It's the right person with the right skill set and the right judgment at right time."
The question is whether Tarullo will push for too much regulation. In his 2008 book on international banking regulation, "Banking on Basel," Tarullo repeatedly argues that the subprime crisis is a once-in-a-lifetime opportunity to regulate. "The crisis has—at least for a time—altered the political environment for financial reform by placing banks on the defensive," he wrote. "Domestic reformers may have the upper hand if they move quickly." The debates at the Fed should tell us a lot in the coming months.
My Commentary:
Mike Hirsh's reference to Dan Tarullo as a "pro-regulation virus" is ingenious…and perfectly apt. Government economic regulation is a virus, and the cause of the current crisis is a whole swarm of such viruses having evolved over past years and decades. The resulting infections have made for a very sick patient.
In a free, unregulated, "uninfected" market:
*There is no central bank with monopoly power over money creation, interest rates, or to act as lender of last resort. An unregulated financial industry under the control of a government-imposed central bank is a logical impossibility.
*There are no government-created, politically pressured quasi-private GSEs like Fannie and Freddie, buying up untold $billions in unsound mortgages originated by imprudent private lenders and borrowers, for packaging and resale to the public with implicit government guarantees of safety.
*There is no Community Reinvestment Act to impose "flexible lending standards" in order to guarantee an alleged "right" to homeownership.
*There is no federal deposit "insurance" or government mortgage guarantees to encourage excessive lending risk, discourage prudent banking, and shift liability for bad banking to government…i.e., taxpayers.
*There is no excessive, artificial money creation (inflation) engineered by a central bank unconstrained by a gold standard to fuel asset bubbles such as the house-price explosion of the past number of years, which amounted to gasoline being poured onto a raging sub-prime fire.
*There is no government-imposed mark-to-market accounting rule (imposed under Sarbanes-Oxley, the disastrous regulatory law, passed after the Enron scandals, that punished the thousands of innocent companies that didn’t cook the books). Under mark-to-market, which Steve Forbes calls an accounting "weapon of mass destruction", many sound financial institutions with positive cash flow and mostly performing mortgages were driven into artificial insolvency "requiring" a government bailout. This may be the greatest "insider trading" scheme in history.
*Profits are privatized, as they should be, but so are losses, as they most certainly should be. Profit and loss, or risk and reward, are the countervailing market forces that work to the advantage of prudence long term. The socialization of risk and loss brought about by government intervention severed that connection, unleashing the quick-buck artists on a massive scale.
*Banks are not shielded from bankruptcy.
Part 2:
I could go on and on here. The private lenders and borrowers of bad mortgages, and any fraudsters that may have operated, are just the superficial face of the financial debacle. Their irresponsible behavior need not be excused to understand that it was taking place within the context of a myriad of market-distorting government interventions, which does not constitute laissez-faire in any way, shape, or form.
Any semblance of a free market in finance, housing, and the mortgage market have long since disappeared behind decades of ever-growing government efforts to "encourage" homeownership. The veritable conveyor belt of imprudent credit expansion revolving around the housing bubble is a creation of government, and wouldn’t have been able to remotely approach today’s levels in a free market. In a free market, bad private financial practices are regularly weeded out by bankruptcy, foreclosure, and investment losses long before they can infect the entire system. The common denominator of the entire financial crisis is the government.
This massive financial crisis represents the collapse of a heavily regulated and controlled financial industry operating in a housing and mortgage sector beset by massive government intervention. It is not a failure of a non-existent free market. The alleged "deregulation" is no such thing. There can be no deregulation as long as the government retains its market-distorting regulatory powers, whether or not it happens to have exercised them in some particular way or not (as the scapegoat-seeking Greenspan well knows). The pseudo-deregulation blamed for the crisis is just a rationalization for expanded government control over the economy, to the detriment of individual rights.
As to the continuing efforts to discredit Rand and Objectivism by linking them to Greenspan, it’s getting old, and it won’t work. Ideas cannot be refuted without openly confronting them, something Rand’s detractors steadfastly refuse to do. Any link between Greenspan and Objectivism has long since been severed when Greenspan accepted the job of monetary dictator in 1987.
Others' Comments:
Posted By: Too late smart @ 12/21/2008 2:35:03 PMThere is nothing in the Community Reinvestment Act requiring lenders to leverage and sell off mortgages. When it was found out that lending in the previously red-lined neighborhoods was profitable they pushed that business beyond all reason valuations went up. When the mortgagers lost jobs in the ressession, well you know what happened then.
My Commentary Response:
You’re technically correct, Too late smart, but only technically. The inherently corrupt nature of government’s arbitrary regulatory authority over the banking industry is the key here. That regulatory power itself was the leverage the government used to coerce banks into sub-prime lending under CRA. The packaging and selling off of risky mortgages was pioneered by Fannie and Freddie, and later emulated by private firms. But it is not innovative products such as mortgage-backed securities that are at fault here. It is the toxic mortgages that ended up in them. The CRA was instrumental in creating them.
When the politicians and their bureaucratic allies that have life and death control over your business tell you to do something…you’re going to sit up and take notice. For a non-complier, the government can call down retribution in a myriad of ways, from criminal investigations under antitrust laws, to tax audits, to fraud or discrimination allegations and prosecutions, to merger permission denials, to congressional subpoenas.
The CRA may not be the primary cause of the crisis, but it is an important piece of the puzzle. When politics, through government’s regulatory powers, mixes with private economic decision-making, the necessary result is corruption of markets. It can be no other way. In the “partnership” between government and business, it’s the guy with the gun…the bureaucrat, politician, or businessman with political connections…that wins over private voluntary economic decision-making. Political power works in mysterious, unpredictable, behind-the-scenes ways.
For example, check out this winter 2000 article in City Journal by Howard Husock, The Trillion Dollar Bank Shakedown that Bodes Ill for Cities, which described the role the Community Reinvestment Act played in the coming meltdown. The predictions here are eerie, but understated. It wasn’t just cities that got infected, but the whole country, thanks to the upcoming inflationary monetary policies of the Greenspan-Bernanke Fed.
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
Others' commentary and my Response:
Posted By: Too late smart @ 12/21/2008 5:00:40 PM
Zemack: you need a sense of humor. You might have put in an ethnic joke about people who live in ghettos. The fact is people will pay their rent or mortgage before buying food. Any landlord can tell you that.. Now speculators and people who own more than one home can and do default often on million dollars loans. I am glad that you agree with me that it has been the schoolyard bullies that have been making the rules recently.
Posted By: Zemack @ 12/21/2008 6:55:03 PM
I'll leave the ethnic jokes to you. That's not my style. Plenty of low-income folks continue to pay their mortgages on time. The sub-prime crisis spread to all income groups because banks that jumped into that game had to offer them to everyone, due to anti-discrimination statutes. Many banks did so enthusiastically, such as Mazzilo's Countrywide. As I said, CRA did not cause the crisis, but is a piece of a complex puzzle.
Posted By: Too late smart @ 12/21/2008 6:05:45 PM
Democracy and I suppose any other system needs certain quantities of intelligence and altrualism to not fail. An Ann Rand utopia has to have a Titan but what is more likely is a Hitler or a Stalin. Maybe Greenspan was lucky for twenty years. The CRA was not criticized for forty years. Social Security has been called a Ponzi scene for seventy years maybe by Ann Rand.
Posted By: Zemack @ 12/21/2008 7:13:39 PM
Too late smart, it's Ayn (rhymes with mine), not Ann. You should really familiarize yourself with Ayn Rand and Objectivism, so you don???t make uninformed comments like your "Titan" statement. A rights-protecting government under laissez-faire capitalism, which leaves everyone free to live their lives free from the initiation of physical force, makes utopian dictators like Stalin and Hitler impossible.
By the way, Social Security IS a Ponzi scheme. My wife and I have contributed over $300 K over our working lives, according to our S.S. statements, which means that if that money was placed into a personal investment account earning a reasonable rate of return, we would have probably three quarters of a million bucks to start drawing on in a few years. Instead, that money was spent or sent to other retirees. Now, when we begin to collect, we will have to depend on future workers' taxes to collect on our contributions. If that is not a Ponzi scheme, then there is no such thing.
Others' Comments:
Posted By: Too late smart @ 12/21/2008 3:16:41 PM
Any kindergarten teacher knows that there must be rules on the playground. Any good teacher knows that the rules should be fair. The last several years in the big playground in Lower Manhattan any rules there were made by bullies and wise guys. Some of them will be getting a time out of about five years in Club Fed.
And My Direct Reply:
Posted By: Zemack @ 12/21/2008 5:43:28 PM
Under laissez-faire capitalism, the rules are fair because they are based upon objective law designed to fulfill government’s proper role of protecting individual rights equally, for everyone, at all times. This includes the right of consenting adults to contract freely and voluntarily to mutual advantage free from coercive interference by government. Government’s role is to protect those contractual rights, via vigorous prosecution of fraud, enforcement of those contracts, and mediation of contractual disputes.
Your schoolyard bully analogy perfectly describes our mixed economy, where the “rules” are always changing based upon the whims of power-wielding bureaucrats, politicians, and the politically connected special interests of the moment. Rand describes our mixed economy as “…rule by pressure groups. It is an amoral, institutionalized civil war of special interests and lobbies, all fighting to seize a momentary control of the legislative machinery, to extort some special privilege at one another’s expense by an act of government—i.e., by force.” Check out her full description of our mixed economy:
http://aynrandlexicon.com/lexicon/mixedeconomy.html
The current crisis occurred in a mixed economy (a government of men), not a laissez-faire one (a government of laws).
He's probably the least-noted member of Barack Obama's new financial regulatory police, but Dan Tarullo may end up having the most impact. Think of Tarullo as the anti-Greenspan, or perhaps as a pro-regulation virus planted in the heart of a Federal Reserve System that for two decades has been predisposed to letting markets self-correct. Certainly Tarullo—who was named Thursday to fill one of two open spots on the seven-member Board of Governors—is far from you run-of-the-mill Fed official. Most governors have been academic economists, bankers or businessmen. Tarullo, a Georgetown law professor who specializes in bank regulation and international monitoring, is basically a high-toned cop. "Our regulatory system has let us down," he said on PBS's Lehrer show last April, before the worst of the subprime fallout hit. "We've had multiple opportunities in the last 10 or 15 years to take account of the new forms of financial activity. We haven't done so."
Most media attention is focused on Obama's nomination of Mary Schapiro, a tough-minded former futures regulator, to head the Securities and Exchange Commission, and Gary Gensler, a Treasury undersecretary in the Clinton administration, to chair the Commodities Futures Trading Commission. But those two may end up waiting on direction from the new super-empowered Fed. Many experts agree that one reason the subprime securitization disaster occurred is because it cut across so many once-segregated sectors; mortgage lending and securitization were once entirely separate practices. The SEC, for example, is only supposed to oversee publicly issued securities, and can't do anything about lending practices. Only the Federal Reserve Board can monitor the entire financial landscape. As a result, Tarullo could potentially play a bigger role than either Schapiro or Gensler in the future financial system, some experts say. "It just depends on what deal was made" with Federal Reserve Chairman Ben Bernanke, "or whether there was a deal," says Ted Truman, a former senior Fed official. "It's not automatic that someone with that kind of expertise would immediately have a role in banking policy. Board members are assigned in terms of seniority."
Bernanke, a conservative, has already expanded regulation. Under the Home Ownership and Equity Protection Act passed by Congress in 1994, the Fed was given the authority to oversee mortgage loans. But then-Chairman Alan Greenspan, an Ayn Rand libertarian who by his own admission believed that markets could mostly self-correct, kept putting off writing any rules and stoutly resisted other efforts to regulate derivatives on Wall Street. Bernanke, by contrast, earlier this year instituted "Regulation Z," which created common-sense rules such as forbidding loans without sufficient documentation. Bernanke has also vastly expanded the Fed's lending powers to deal with the crisis. He believes the Fed should at some point return to its old modest role as a regulator of the money supply and inflation. But since he is also known to want re-appointment as chairman next year—and incoming Obama economic advisor Larry Summers is said to covet the post—it's likely that Bernanke will go out of his way to satisfy Tarullo.
And that may mean a whole new regulatory structure that will dwarf anything Schapiro does at the SEC or Gensler can accomplish at the CFTC. Those who who've worked with the soft-spoken Tarullo says he brings the right blend of save-the-world zeal and balanced judgment. "I think it's a great choice," says a former senior member of the Clinton administration. "It's the right person with the right skill set and the right judgment at right time."
The question is whether Tarullo will push for too much regulation. In his 2008 book on international banking regulation, "Banking on Basel," Tarullo repeatedly argues that the subprime crisis is a once-in-a-lifetime opportunity to regulate. "The crisis has—at least for a time—altered the political environment for financial reform by placing banks on the defensive," he wrote. "Domestic reformers may have the upper hand if they move quickly." The debates at the Fed should tell us a lot in the coming months.
My Commentary:
Mike Hirsh's reference to Dan Tarullo as a "pro-regulation virus" is ingenious…and perfectly apt. Government economic regulation is a virus, and the cause of the current crisis is a whole swarm of such viruses having evolved over past years and decades. The resulting infections have made for a very sick patient.
In a free, unregulated, "uninfected" market:
*There is no central bank with monopoly power over money creation, interest rates, or to act as lender of last resort. An unregulated financial industry under the control of a government-imposed central bank is a logical impossibility.
*There are no government-created, politically pressured quasi-private GSEs like Fannie and Freddie, buying up untold $billions in unsound mortgages originated by imprudent private lenders and borrowers, for packaging and resale to the public with implicit government guarantees of safety.
*There is no Community Reinvestment Act to impose "flexible lending standards" in order to guarantee an alleged "right" to homeownership.
*There is no federal deposit "insurance" or government mortgage guarantees to encourage excessive lending risk, discourage prudent banking, and shift liability for bad banking to government…i.e., taxpayers.
*There is no excessive, artificial money creation (inflation) engineered by a central bank unconstrained by a gold standard to fuel asset bubbles such as the house-price explosion of the past number of years, which amounted to gasoline being poured onto a raging sub-prime fire.
*There is no government-imposed mark-to-market accounting rule (imposed under Sarbanes-Oxley, the disastrous regulatory law, passed after the Enron scandals, that punished the thousands of innocent companies that didn’t cook the books). Under mark-to-market, which Steve Forbes calls an accounting "weapon of mass destruction", many sound financial institutions with positive cash flow and mostly performing mortgages were driven into artificial insolvency "requiring" a government bailout. This may be the greatest "insider trading" scheme in history.
*Profits are privatized, as they should be, but so are losses, as they most certainly should be. Profit and loss, or risk and reward, are the countervailing market forces that work to the advantage of prudence long term. The socialization of risk and loss brought about by government intervention severed that connection, unleashing the quick-buck artists on a massive scale.
*Banks are not shielded from bankruptcy.
Part 2:
I could go on and on here. The private lenders and borrowers of bad mortgages, and any fraudsters that may have operated, are just the superficial face of the financial debacle. Their irresponsible behavior need not be excused to understand that it was taking place within the context of a myriad of market-distorting government interventions, which does not constitute laissez-faire in any way, shape, or form.
Any semblance of a free market in finance, housing, and the mortgage market have long since disappeared behind decades of ever-growing government efforts to "encourage" homeownership. The veritable conveyor belt of imprudent credit expansion revolving around the housing bubble is a creation of government, and wouldn’t have been able to remotely approach today’s levels in a free market. In a free market, bad private financial practices are regularly weeded out by bankruptcy, foreclosure, and investment losses long before they can infect the entire system. The common denominator of the entire financial crisis is the government.
This massive financial crisis represents the collapse of a heavily regulated and controlled financial industry operating in a housing and mortgage sector beset by massive government intervention. It is not a failure of a non-existent free market. The alleged "deregulation" is no such thing. There can be no deregulation as long as the government retains its market-distorting regulatory powers, whether or not it happens to have exercised them in some particular way or not (as the scapegoat-seeking Greenspan well knows). The pseudo-deregulation blamed for the crisis is just a rationalization for expanded government control over the economy, to the detriment of individual rights.
As to the continuing efforts to discredit Rand and Objectivism by linking them to Greenspan, it’s getting old, and it won’t work. Ideas cannot be refuted without openly confronting them, something Rand’s detractors steadfastly refuse to do. Any link between Greenspan and Objectivism has long since been severed when Greenspan accepted the job of monetary dictator in 1987.
Others' Comments:
Posted By: Too late smart @ 12/21/2008 2:35:03 PMThere is nothing in the Community Reinvestment Act requiring lenders to leverage and sell off mortgages. When it was found out that lending in the previously red-lined neighborhoods was profitable they pushed that business beyond all reason valuations went up. When the mortgagers lost jobs in the ressession, well you know what happened then.
My Commentary Response:
You’re technically correct, Too late smart, but only technically. The inherently corrupt nature of government’s arbitrary regulatory authority over the banking industry is the key here. That regulatory power itself was the leverage the government used to coerce banks into sub-prime lending under CRA. The packaging and selling off of risky mortgages was pioneered by Fannie and Freddie, and later emulated by private firms. But it is not innovative products such as mortgage-backed securities that are at fault here. It is the toxic mortgages that ended up in them. The CRA was instrumental in creating them.
When the politicians and their bureaucratic allies that have life and death control over your business tell you to do something…you’re going to sit up and take notice. For a non-complier, the government can call down retribution in a myriad of ways, from criminal investigations under antitrust laws, to tax audits, to fraud or discrimination allegations and prosecutions, to merger permission denials, to congressional subpoenas.
The CRA may not be the primary cause of the crisis, but it is an important piece of the puzzle. When politics, through government’s regulatory powers, mixes with private economic decision-making, the necessary result is corruption of markets. It can be no other way. In the “partnership” between government and business, it’s the guy with the gun…the bureaucrat, politician, or businessman with political connections…that wins over private voluntary economic decision-making. Political power works in mysterious, unpredictable, behind-the-scenes ways.
For example, check out this winter 2000 article in City Journal by Howard Husock, The Trillion Dollar Bank Shakedown that Bodes Ill for Cities, which described the role the Community Reinvestment Act played in the coming meltdown. The predictions here are eerie, but understated. It wasn’t just cities that got infected, but the whole country, thanks to the upcoming inflationary monetary policies of the Greenspan-Bernanke Fed.
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
Others' commentary and my Response:
Posted By: Too late smart @ 12/21/2008 5:00:40 PM
Zemack: you need a sense of humor. You might have put in an ethnic joke about people who live in ghettos. The fact is people will pay their rent or mortgage before buying food. Any landlord can tell you that.. Now speculators and people who own more than one home can and do default often on million dollars loans. I am glad that you agree with me that it has been the schoolyard bullies that have been making the rules recently.
Posted By: Zemack @ 12/21/2008 6:55:03 PM
I'll leave the ethnic jokes to you. That's not my style. Plenty of low-income folks continue to pay their mortgages on time. The sub-prime crisis spread to all income groups because banks that jumped into that game had to offer them to everyone, due to anti-discrimination statutes. Many banks did so enthusiastically, such as Mazzilo's Countrywide. As I said, CRA did not cause the crisis, but is a piece of a complex puzzle.
Posted By: Too late smart @ 12/21/2008 6:05:45 PM
Democracy and I suppose any other system needs certain quantities of intelligence and altrualism to not fail. An Ann Rand utopia has to have a Titan but what is more likely is a Hitler or a Stalin. Maybe Greenspan was lucky for twenty years. The CRA was not criticized for forty years. Social Security has been called a Ponzi scene for seventy years maybe by Ann Rand.
Posted By: Zemack @ 12/21/2008 7:13:39 PM
Too late smart, it's Ayn (rhymes with mine), not Ann. You should really familiarize yourself with Ayn Rand and Objectivism, so you don???t make uninformed comments like your "Titan" statement. A rights-protecting government under laissez-faire capitalism, which leaves everyone free to live their lives free from the initiation of physical force, makes utopian dictators like Stalin and Hitler impossible.
By the way, Social Security IS a Ponzi scheme. My wife and I have contributed over $300 K over our working lives, according to our S.S. statements, which means that if that money was placed into a personal investment account earning a reasonable rate of return, we would have probably three quarters of a million bucks to start drawing on in a few years. Instead, that money was spent or sent to other retirees. Now, when we begin to collect, we will have to depend on future workers' taxes to collect on our contributions. If that is not a Ponzi scheme, then there is no such thing.
Others' Comments:
Posted By: Too late smart @ 12/21/2008 3:16:41 PM
Any kindergarten teacher knows that there must be rules on the playground. Any good teacher knows that the rules should be fair. The last several years in the big playground in Lower Manhattan any rules there were made by bullies and wise guys. Some of them will be getting a time out of about five years in Club Fed.
And My Direct Reply:
Posted By: Zemack @ 12/21/2008 5:43:28 PM
Under laissez-faire capitalism, the rules are fair because they are based upon objective law designed to fulfill government’s proper role of protecting individual rights equally, for everyone, at all times. This includes the right of consenting adults to contract freely and voluntarily to mutual advantage free from coercive interference by government. Government’s role is to protect those contractual rights, via vigorous prosecution of fraud, enforcement of those contracts, and mediation of contractual disputes.
Your schoolyard bully analogy perfectly describes our mixed economy, where the “rules” are always changing based upon the whims of power-wielding bureaucrats, politicians, and the politically connected special interests of the moment. Rand describes our mixed economy as “…rule by pressure groups. It is an amoral, institutionalized civil war of special interests and lobbies, all fighting to seize a momentary control of the legislative machinery, to extort some special privilege at one another’s expense by an act of government—i.e., by force.” Check out her full description of our mixed economy:
http://aynrandlexicon.com/lexicon/mixedeconomy.html
The current crisis occurred in a mixed economy (a government of men), not a laissez-faire one (a government of laws).
Saturday, December 13, 2008
Commentary 51-Yaron Brook at Newsweek
Who Is To Blame?
Can Ayn Rand Survive the Economic Crisis?
By Barrett Sheridan | Newsweek Web Exclusive
Dec 10, 2008
It's not easy being Alan Greenspan these days. As the former Federal Reserve chairman, he urged government regulators to take a light touch while banks like Bear Stearns and Lehman Brothers buried themselves—and the economy more generally—under a mountain of debt. Now that his reputation is plummeting faster than the stock market, he's been forced to admit a "flaw" in his hands-off ideology.
Of course, things look entirely different to members of "free-market advocacy groups," as they like to be called. One such group is the Ayn Rand Institute, named after the matriarch of the movement, whose antigovernment and anti-regulation views are embodied in her best-selling novels "Atlas Shrugged" and "The Fountainhead." Indeed, Greenspan himself was a friend of Rand's, and a devotee of her extreme free-market philosophy, known as Objectivism. NEWSWEEK's Barrett Sheridan spoke with the head of the Ayn Rand Institute, Dr. Yaron Brook, about why he defends free markets while much of the rest of the world has turned away from them, and what he thinks of Greenspan today. Excerpts:
NEWSWEEK: Lack of regulation is being blamed for our current crisis, and free markets are in disrepute. Has Objectivism been dealt a deathblow?
Yaron Brook: No, not at all. From a public-relations perspective, it's been hurt. But in the long term there will be a backlash against what's going on in the markets today—the heavy government involvement, the nationalizations and the move toward socialism. If the free-market advocacy groups position themselves correctly, they can benefit from it.
How can they do that?
What we need to do is really make the case to the American people—and I think it's an easy case to make—that this is not a failure of free markets, this is not a failure of capitalism, but this is a failure of the exact opposite. It's a failure of the regulatory state. It's a failure of all the government policies of the last eight years. Actually, the last 95 years.
Why do you say the last 95 years?
I believe that the No. 1 cause of the current crisis is Federal Reserve policy. [The Federal Reserve was created in 1913.] The Federal Reserve, by necessity, creates economic problems; no matter how good a Federal Reserve chairman is, he's going to create cycles of booms and busts.
How did the Federal Reserve create today's mess?
The current crisis was caused by the housing bubble, and the primary cause of the housing bubble was the Federal Reserve keeping interest rates at 1 percent in 2003. They were asking people to borrow money, basically begging them. The financial problem we face today was a problem of overleverage, of too much debt—but that's exactly what Federal Reserve policy encouraged.
But during that time, the head of the Federal Reserve was Alan Greenspan, a close friend of Ayn Rand and the world's most famous Objectivist.
Yes. Alan Greenspan was quite close to Ayn Rand in the 1960s and 1970s. But from pretty early on, Greenspan was a part of economic policies that I don't think Ayn Rand would have approved of. Yes, he wanted less regulation, but he never talked about rolling back regulation. He never talked about significantly meaningful ways to cut spending, cut taxes. I believe he sold his soul to the devil. Power corrupts, and absolute power—which I think is what you have at the Federal Reserve—corrupts absolutely.
So it sounds like you're not bothered by his admission that he found a "flaw" in his "free-market ideology."
No, the only thing that bothers me is that the press took it to mean, "See, capitalism has failed, even according to this guru of capitalism." He was never a guru of capitalism! At least he hasn't been a guru of capitalism since the 1980s.
Do you have any contact with Greenspan?
No, I don't.
Have Objectivists largely disavowed him?
I think so, but I think he's disavowed us, as well, so it's mutual. I don't think he would have dinner with me if I asked.
What do you think of the various and numerous bailouts?
They're horrible. I think that the biggest mistake that was made was probably the bailout of Bear Stearns. I think they should have let Bear Stearns fail. The fact that everybody else now wants a bailout makes complete sense. Why bailout AIG and not General Motors? General Motors employs more people.
But scholars like Ben Bernanke, current head of the Federal Reserve, says one reason the Great Depression was so severe was that government waited three years before intervening, and let scores of banks fail before then.
Unfortunately, just because economists understand what caused the Great Depression doesn't mean they understand what needs to be done to prevent one. People today mistakenly think that FDR saved us from the Great Depression. But from 1932 until at least 1940, the U.S. was still in a depression. Government grew during the 1930s more than in any decade in history, and yet at the end of the 1930s, we still had more than 15 percent unemployment. So government growth and regulation is not a solution to a depression. I would argue it's the exact opposite.
What does that mean for the current situation?
Everything that [Treasury Secretary Henry] Paulson and Bernanke have done since day one of this crisis has made things worse, not better, if only because they have been so panicky and hysterical, and changed their minds so many times and offered so many different plans. The market has come to the conclusion that they have no idea what they're doing.
You want to do away with the Federal Reserve, but something that radical isn't going to happen, at least not anytime soon. In the meantime, wouldn't more regulation of the financial sector make sense?
No, I think quite the opposite—more financial regulation would be a disaster. Financial regulations created this mess. The Community Reinvestment Act, Freddie Mac and Fannie Mae—they're the institutions and proposals that got us into this. Regulators are not good at managing financial institutions. Think about the [savings and loan] crisis: the S&L industry was the most regulated industry in the United States. Did that stop the crisis from happening? No. Regulations don't prevent crises; they cause them.
But AIG's downfall was due largely to credit-default swaps.
There's nothing wrong with credit-default swaps. If they'd let AIG fold, we would have discovered that. There's been no problem with the credit-default swap-market to date. It's actually working better than the securitized mortgage market, which is a government creation through Fannie and Freddie.
But AIG had too many credit-default swaps on its books, and almost collapsed as a result. Shouldn't we prevent that level of risk-taking?
Yes, AIG made mistakes. And the company should suffer for those mistakes. But do you think that if federal regulators were regulating the credit-default-swap market, things would be better or worse? I suggest that things would probably be worse.
With free markets now in disrepute, what's going to happen to the popularity of Ayn Rand's most famous book, "Atlas Shrugged"?
I think it's going to go up dramatically. I think it already has. [People] are saying, "We're heading toward socialism, we're heading toward more regulation." "Atlas Shrugged" is coming true. How do we get out? How do we escape? Unfortunately, there is no escape. Businessmen are panicking, and I think they should be panicking. Many of them understand that this was not a crisis of free markets. There was no free market to fail. What we have is a regulated market, and the regulated market has failed.
My Commentary:
The introduction to this interview states that Ayn Rand was “anti-government”. This is one of many fallacies believed about her philosophy. Far from being anti-government, Rand understood that government is vital to the very existence of a free society…i.e., one based upon individual rights. That is because its proper, indispensable role is to protect man’s unalienable individual rights to life, liberty, and property under a set of objective laws (a government of laws and not of men, which includes strong anti-fraud laws and enforcement of contracts). This was understood by the Founding Fathers. Without government, no civilized society is possible. It is against a government that steps outside the bounds of protecting rights that Rand…and the Founders…stood opposed to. One can read Rand’s position on individual rights and government and see for himself. Those essays are available at the sight of the Ayn Rand Center for Individual Rights.
Can Ayn Rand survive the financial crisis? Ayn Rand has yet to be discovered by most people…and is deliberately misrepresented or at least misunderstood by her detractors. The era of Ayn Rand, if there is to be one, is still ahead of us.
Can Ayn Rand Survive the Economic Crisis?
By Barrett Sheridan | Newsweek Web Exclusive
Dec 10, 2008
It's not easy being Alan Greenspan these days. As the former Federal Reserve chairman, he urged government regulators to take a light touch while banks like Bear Stearns and Lehman Brothers buried themselves—and the economy more generally—under a mountain of debt. Now that his reputation is plummeting faster than the stock market, he's been forced to admit a "flaw" in his hands-off ideology.
Of course, things look entirely different to members of "free-market advocacy groups," as they like to be called. One such group is the Ayn Rand Institute, named after the matriarch of the movement, whose antigovernment and anti-regulation views are embodied in her best-selling novels "Atlas Shrugged" and "The Fountainhead." Indeed, Greenspan himself was a friend of Rand's, and a devotee of her extreme free-market philosophy, known as Objectivism. NEWSWEEK's Barrett Sheridan spoke with the head of the Ayn Rand Institute, Dr. Yaron Brook, about why he defends free markets while much of the rest of the world has turned away from them, and what he thinks of Greenspan today. Excerpts:
NEWSWEEK: Lack of regulation is being blamed for our current crisis, and free markets are in disrepute. Has Objectivism been dealt a deathblow?
Yaron Brook: No, not at all. From a public-relations perspective, it's been hurt. But in the long term there will be a backlash against what's going on in the markets today—the heavy government involvement, the nationalizations and the move toward socialism. If the free-market advocacy groups position themselves correctly, they can benefit from it.
How can they do that?
What we need to do is really make the case to the American people—and I think it's an easy case to make—that this is not a failure of free markets, this is not a failure of capitalism, but this is a failure of the exact opposite. It's a failure of the regulatory state. It's a failure of all the government policies of the last eight years. Actually, the last 95 years.
Why do you say the last 95 years?
I believe that the No. 1 cause of the current crisis is Federal Reserve policy. [The Federal Reserve was created in 1913.] The Federal Reserve, by necessity, creates economic problems; no matter how good a Federal Reserve chairman is, he's going to create cycles of booms and busts.
How did the Federal Reserve create today's mess?
The current crisis was caused by the housing bubble, and the primary cause of the housing bubble was the Federal Reserve keeping interest rates at 1 percent in 2003. They were asking people to borrow money, basically begging them. The financial problem we face today was a problem of overleverage, of too much debt—but that's exactly what Federal Reserve policy encouraged.
But during that time, the head of the Federal Reserve was Alan Greenspan, a close friend of Ayn Rand and the world's most famous Objectivist.
Yes. Alan Greenspan was quite close to Ayn Rand in the 1960s and 1970s. But from pretty early on, Greenspan was a part of economic policies that I don't think Ayn Rand would have approved of. Yes, he wanted less regulation, but he never talked about rolling back regulation. He never talked about significantly meaningful ways to cut spending, cut taxes. I believe he sold his soul to the devil. Power corrupts, and absolute power—which I think is what you have at the Federal Reserve—corrupts absolutely.
So it sounds like you're not bothered by his admission that he found a "flaw" in his "free-market ideology."
No, the only thing that bothers me is that the press took it to mean, "See, capitalism has failed, even according to this guru of capitalism." He was never a guru of capitalism! At least he hasn't been a guru of capitalism since the 1980s.
Do you have any contact with Greenspan?
No, I don't.
Have Objectivists largely disavowed him?
I think so, but I think he's disavowed us, as well, so it's mutual. I don't think he would have dinner with me if I asked.
What do you think of the various and numerous bailouts?
They're horrible. I think that the biggest mistake that was made was probably the bailout of Bear Stearns. I think they should have let Bear Stearns fail. The fact that everybody else now wants a bailout makes complete sense. Why bailout AIG and not General Motors? General Motors employs more people.
But scholars like Ben Bernanke, current head of the Federal Reserve, says one reason the Great Depression was so severe was that government waited three years before intervening, and let scores of banks fail before then.
Unfortunately, just because economists understand what caused the Great Depression doesn't mean they understand what needs to be done to prevent one. People today mistakenly think that FDR saved us from the Great Depression. But from 1932 until at least 1940, the U.S. was still in a depression. Government grew during the 1930s more than in any decade in history, and yet at the end of the 1930s, we still had more than 15 percent unemployment. So government growth and regulation is not a solution to a depression. I would argue it's the exact opposite.
What does that mean for the current situation?
Everything that [Treasury Secretary Henry] Paulson and Bernanke have done since day one of this crisis has made things worse, not better, if only because they have been so panicky and hysterical, and changed their minds so many times and offered so many different plans. The market has come to the conclusion that they have no idea what they're doing.
You want to do away with the Federal Reserve, but something that radical isn't going to happen, at least not anytime soon. In the meantime, wouldn't more regulation of the financial sector make sense?
No, I think quite the opposite—more financial regulation would be a disaster. Financial regulations created this mess. The Community Reinvestment Act, Freddie Mac and Fannie Mae—they're the institutions and proposals that got us into this. Regulators are not good at managing financial institutions. Think about the [savings and loan] crisis: the S&L industry was the most regulated industry in the United States. Did that stop the crisis from happening? No. Regulations don't prevent crises; they cause them.
But AIG's downfall was due largely to credit-default swaps.
There's nothing wrong with credit-default swaps. If they'd let AIG fold, we would have discovered that. There's been no problem with the credit-default swap-market to date. It's actually working better than the securitized mortgage market, which is a government creation through Fannie and Freddie.
But AIG had too many credit-default swaps on its books, and almost collapsed as a result. Shouldn't we prevent that level of risk-taking?
Yes, AIG made mistakes. And the company should suffer for those mistakes. But do you think that if federal regulators were regulating the credit-default-swap market, things would be better or worse? I suggest that things would probably be worse.
With free markets now in disrepute, what's going to happen to the popularity of Ayn Rand's most famous book, "Atlas Shrugged"?
I think it's going to go up dramatically. I think it already has. [People] are saying, "We're heading toward socialism, we're heading toward more regulation." "Atlas Shrugged" is coming true. How do we get out? How do we escape? Unfortunately, there is no escape. Businessmen are panicking, and I think they should be panicking. Many of them understand that this was not a crisis of free markets. There was no free market to fail. What we have is a regulated market, and the regulated market has failed.
My Commentary:
The introduction to this interview states that Ayn Rand was “anti-government”. This is one of many fallacies believed about her philosophy. Far from being anti-government, Rand understood that government is vital to the very existence of a free society…i.e., one based upon individual rights. That is because its proper, indispensable role is to protect man’s unalienable individual rights to life, liberty, and property under a set of objective laws (a government of laws and not of men, which includes strong anti-fraud laws and enforcement of contracts). This was understood by the Founding Fathers. Without government, no civilized society is possible. It is against a government that steps outside the bounds of protecting rights that Rand…and the Founders…stood opposed to. One can read Rand’s position on individual rights and government and see for himself. Those essays are available at the sight of the Ayn Rand Center for Individual Rights.
Can Ayn Rand survive the financial crisis? Ayn Rand has yet to be discovered by most people…and is deliberately misrepresented or at least misunderstood by her detractors. The era of Ayn Rand, if there is to be one, is still ahead of us.
Friday, December 12, 2008
Commentary 50-Wood on Public Pre-School
Funding pre-K and fighting crime
Posted by Fran Wood/ The Star-Ledger December 10, 2008 5:31AM
Categories: Family & Kids
If you're among the considerable number of New Jerseyans who question the value of taxpayer-funded preschool education, you may want to take note of some astonishing statistics reported in Trenton yesterday.
Fight Crime: Invest in Kids, a national nonprofit anti-crime organization of more than 4,500 police chiefs, sheriffs, prosecutors and violence survivors, unveiled a report touting the results of several studies contrasting violence and crime among children who were enrolled in early childhood education programs vs. those who were not.
Two such studies, conducted over a 40-year period, are particularly persuasive eye-openers.
The first comes out of the High/Scope Perry Preschool Program in Ypsilanti, Mich., begun in 1962 to gather data on the lifetime effects of preschool. It involved a group of at-risk, low-income 3- and 4-year-olds, half of whom were randomly enrolled in an education program of one to two years with a home visiting component. The companion group, also randomly selected, received no such program.
Data released in 2004, according to Fight Crime; Invest in Kids vice president Jeff Kirsch, showed that 23 years later, those who had no preschool program were five times more likely to be criminal offenders.
By age 40, according to the report, those not enrolled in the program were "more than twice as likely to become career offenders (with more than 10 arrests) and twice as likely to be arrested for violent crimes."
They also were more likely to abuse illegal drugs, four times more likely to be arrested for drug felonies and seven times more likely to be arrested for possession of dangerous drugs.
Comparable research in another study, conducted in Chicago, showed similar results.
That study involved 989 3- and 4-year-olds enrolled in the city's federally funded Child-Parent Centers as well as 550 nonparticipants. Comparison of these groups over time showed that those who did not participate in the program were "70 percent more likely to be arrested for a violent crime by age 18" and "24 percent more likely to have been incarcerated as young adults."
The conclusion: The Chicago program "will have prevented an estimated 33,000 crimes by the time the children who have attended the program reach 18."
That's a number that will get your attention.
Nationally, these are the programs with the greatest longevity and thus most convincingly demonstrate the impact of pre-K programs for at-risk children. But they are by no means the only such programs.
Low-income children not enrolled in North Carolina's Smart Start program, for instance, were shown to be twice as likely to engage in "aggressive acts and poor temper control, anxiety and hyperactivity in kindergarten" - behaviors shown to be precursors of "high levels of antisocial and delinquent behavior later in life."
The long-running, federally funded Head Start programs for low-income 3- to 5-year-olds have consistently shown that adults who attended them as children "are less likely to commit crimes than adults from similar backgrounds who did not attend."
It's long been understood that high-quality preschool programs for children who would otherwise get little preparatory training can make an enormous difference in their ability to succeed in school, which in turn makes them far more likely to become successful adults.
What has not been touted sufficiently is that such programs, by providing toddlers with a strong foundation of learning and socialization skills, can also help reduce crime.
"Law enforcement understands this, having dealt with parts of society most of us don't deal with very often," says Kirsch. He emphasizes that his group's members "are very conservative people who don't approach this from let's-help-these-poor-kids. They're hard-nosed realists dealing with very tough populations. They understand kids become who they are based on what happens to them in their early years, and if we miss that, we pay for many years to come."
He concedes the early education approach is not a quick fix.
"We're not saying every kid who gets pre-K is going to stay on the straight and narrow, nor that any kid who doesn't is going to be a criminal. But pre-K for at-risk kids changes the odds."
Here in New Jersey, there has been an abundance of public resentment at spending tax dollars on such programs. But without public programs, pre-K education simply won't happen for most low-income children.
"It's very, very expensive for families to afford quality pre-K," says Kirsch.
Many government programs are promoted as "investments," and it's true that some pay off better than others. Looking at this new data, it's hard to argue that pre-K isn't one of the smartest things we can do with our public dollars.
My Commentary:
Posted by Zemack on 12/12/08 at 4:32PM
The implication here is if you don't submit to a hostile government takeover of pre-schooling, you are pro-crime. This is a classic statist intellectual package-deal. Pre-school is not the issue here. Expanded government power over education, and the consequent violation of individual rights, is the issue.
Whose educational philosophy will be imposed on the parents and children? Will children be trained to subordinate their own judgement to the arbitrary will of some authority, whether the teacher or the class as a group? Or will they be encouraged to think independently? Will they be coerced into "sharing" their learning experiences with any other child who wants to nose in on their current activity? Or will they be allowed the freedom to concentrate their attention on the task at hand without interruption, thus discovering the principle of respect for the rights of others?
Will the government-run pre-schools be used as an indoctrination tool for the purpose of bringing about "social change", as the father of modern "progressive" education advocated...the self-described socialist John Dewey? Or will the pre-schools be an environment where children can develop their individual cognitive mental skills consistent with each child's unique developmental timetable, with the ultimate goal being intellectual independence, as advocated my Maria Montessori? Will children "learn" through rote memorization (i.e., Give them a fish.), or will they learn to use their conceptual, abstract faculty in order to hierarchize and integrate their acquired knowledge according to essential principles (Teach them to fish.)?
What is meant by "public dollars"? There is no such thing. The "Public" dollars of which Ms. Wood refers are the earnings of private citizens taken by force of taxation, to be used by politically powerful groups for purposes that the earners may oppose such as the ongoing hostile pre-school takeover by the coercive government education monopoly. To push public pre-school funded by money confiscated by force from unwilling taxpayers...including those parents taking responsibility for their own children's pre-school...under the pretense of preventing crime is a monumental conceptual evasion. At least street thugs are honest enough not to claim that they are robbing their victims for their own good, or for the good of "society".
Why is it "investment" when politicians spend other peoples' money, but not when spent by those who earned it? Why is it just to force parents to pay for the education of other peoples' children in accordance with someone else's agenda?
Rather than expand the government school monopoly, the pre-school market should be left free. Rather than having their earnings confiscated through taxation, parents should be able to claim a direct credit against their existing school taxes so that they can use their own money for their own child's pre-school education. That some parents would renege on their responsibilities is no reason to violate the rights of all other parents. To sacrifice the responsible parents to the irresponsible is a moral crime. Aiding responsible, but poor, parents is certainly a worthy undertaking, and I commend anyone who chooses to step up in that regard. But charity is a private, voluntary matter, engaged in by people of good will. Good will ends where physical coercion begins. Show me someone who strives to practice charity with other peoples' tax money, and I'll show you a phony.
This much Ms. Wood and I agree on. I believe that the first few years of any child's life is a critical time for mental development. Consequently, pre-school should be a cornerstone of that period. Because learning how to think, the essence of early childhood education, is exclusively a private undertaking, it is a time when the privacy needs of the child must be stringently respected. So the right pre-school, governed by the right philosophy, is critical here. I favor the "concentrated attention" method of Maria Montessori, which focuses on the development of the child's proper method of mental functioning, the conceptual faculty. Homeschooling, which at this age level is well within the means and capabilities of any motivated parent, is far preferable to an inferior pre-school, which can do more harm than good. The responsibility for these decisions rests with the parents.
The public schools should stay out of the pre-school area of education. But if it is going to offer pre-school, it must be offered strictly on a voluntary full tuition basis only. Their should be no taxpayer subsidy...no "public dollars"...whatsoever. Forcing already over-taxed parents (or anyone else) to foot the pre-school expenses of other parents is immoral. Forcing anyone to support educational ideas with which one disagrees is contrary to the principles of a free society. The educational needs of the child are fundamentally the responsibility of the parents who brought that child into the world. A free pre-school market protects the rights of all parents to fulfill their obligations according to their own rational judgement. Pre-school is too important to be placed under state control.
Others' Commentary:
Posted by DiscussedTed on 12/12/08 at 9:19PM
Zemack:
You make me realize how many extraordinary people there are out there among the "common people."
Believe me, I mean this as a compliment. More brains, more thought, and more intellectual honesty than the entire community of newspaper editors.
Whatever the appropriate holiday greetings are for you, I will simply wish you a Merry Christmas, and hope that you understand the intent.
Posted by blarneyboy on 12/13/08 at 2:23AM
Zemack, I echo Discussed Ted's sentiments. If there is a pre-K developed under your guidelines, it should be called "The Zemack School of Common Sense". Don't hold your breath.
My Commentary:
Posted by Zemack on 12/13/08 at 6:57PM
DiscussedTed:
You make me realize how many extraordinary people there are out there among the "common people."
Thank you. You and Blarneyboy, whose thoughtful commentary I have enjoyed reading elsewhere in NJVoices (although we don't always agree), prove that it is obvious I'm not the only one. There is much intelligent commentary on this forum.
I'm sure Ms. Wood is sincere in advocating pre-school. But the equating of "worthy causes" with rights-violating expansions of coercive government control is leading us piecemeal towards an omnipotent state. Package-dealing statists, particularly those on the Left, have been getting away with this tactic for far too long.
Blarneyboy, I'm more hopeful here ("Don't hold your breath"). There are already some good pre-schools out there, as well as many parents silently doing a good job at pre-K homeschooling. What people need to learn is to fight for their rights in this area, which means fighting for a free education market. The principle of individual rights is the crucial ingredient to stopping the pre-school market from being swallowed up by the bureaucratic establishment, thus destroying the existing network of private pre-schools. If I thought the task was hopeless, you wouldn't hear from me again. But fighting for individual rights is never hopeless.
Support for the idea of fighting against the public school monopoly and for parental control is coming from some surprising quarters. Check out Tom Moran's column of 10/13/07 (NJVoices, Vouchers are the obvious choice.). I'm against the government-financed voucher method, but he sees the same threat to private pre-schools as I do.
Though not a Christian, I'd still like to say Merry Christmas!
Others' Commentary:
Posted by plebeyo on 12/16/08 at 1:17PM
Different groups can be blamed for the failure of the educational system in some parts of the country. However, the biggest concern I have is that for decades now, this system has been turning out high school graduates with deficient math, science and language skills. Also, the drop out rates in urban America hovering at about 50 percent should be a alarming.
As far as NJ is concerned, some claim that the present situation is due to the NJEA's inflexible attitude regarding many issues. The blame can be passed around but the outcome of mediocre schools is a generation(s) of poorly educated minorities whose chances of reaching middle class have dwindled.
Whose responsibility is it to provide the citizen of a nation with a quality education? I guess the answer depends on whom you ask. Nevertheless, I feel it is a shame that in the richest country in the world, large segments of the population are receiving a poor education even by third world standards.
My Commentary:
Plebeyo, you are conflating multiple issues here.
The first question is, is the government's proper role to run the schools through the coercion of taxation and compulsory attendance laws, or is it to protect the rights of parents to fulfill their solemn responsibility to educate their own children according to their own values, judgements, and budgets? I believe the latter.
Second, the reference to "the richest country in the world" ignores the fact that the source of all wealth is produced by the efforts of individual people thinking and working productively. America is the "richest" country only figuratively. All wealth belongs to the individuals who make up a nation, who earned it each to the extent of his ability, ambition, and intelligence, essentially...and not to the nation as such; which is only a collection of individual human beings. The proper role of government is not to confiscate private wealth for any purpose it deems vital, but to protect its citizens' property right to their own earnings...on all levels of income.
This leads to the third issue, the most neglected one, the philosophy and method of education. This is the area to look to find the answer to American schools "turning out high school graduates with deficient math, science and language skills [and] the drop out rates in urban America hovering at about 50 percent". A government-run school system does not have to be as poor as ours. But money, I submit, is not the problem. The amount of money that our current system devours...reportedly $15-20,000 per student per year here in N.J., depending on the source (not including capital costs)...is the proof. A radical new philosophical approach that tosses out the mass production method of "education" in favor of a focus on students as individuals with interests, developmental timetables, and unique strengths and weaknesses is needed. Above all, learning to think...which means, the abstract conceptual level...must be prominent alongside knowledge acquisition. Getting good grades does not prove educational proficiency.
The public school system stifles innovation, as all coercive monopolies must. Ideas are germinated in individual minds, and only a free education market leaves educators and parents free to act on their ideas without begging permission from some board, politician, bureaucrat, or politically connected special interest group.
Posted by Fran Wood/ The Star-Ledger December 10, 2008 5:31AM
Categories: Family & Kids
If you're among the considerable number of New Jerseyans who question the value of taxpayer-funded preschool education, you may want to take note of some astonishing statistics reported in Trenton yesterday.
Fight Crime: Invest in Kids, a national nonprofit anti-crime organization of more than 4,500 police chiefs, sheriffs, prosecutors and violence survivors, unveiled a report touting the results of several studies contrasting violence and crime among children who were enrolled in early childhood education programs vs. those who were not.
Two such studies, conducted over a 40-year period, are particularly persuasive eye-openers.
The first comes out of the High/Scope Perry Preschool Program in Ypsilanti, Mich., begun in 1962 to gather data on the lifetime effects of preschool. It involved a group of at-risk, low-income 3- and 4-year-olds, half of whom were randomly enrolled in an education program of one to two years with a home visiting component. The companion group, also randomly selected, received no such program.
Data released in 2004, according to Fight Crime; Invest in Kids vice president Jeff Kirsch, showed that 23 years later, those who had no preschool program were five times more likely to be criminal offenders.
By age 40, according to the report, those not enrolled in the program were "more than twice as likely to become career offenders (with more than 10 arrests) and twice as likely to be arrested for violent crimes."
They also were more likely to abuse illegal drugs, four times more likely to be arrested for drug felonies and seven times more likely to be arrested for possession of dangerous drugs.
Comparable research in another study, conducted in Chicago, showed similar results.
That study involved 989 3- and 4-year-olds enrolled in the city's federally funded Child-Parent Centers as well as 550 nonparticipants. Comparison of these groups over time showed that those who did not participate in the program were "70 percent more likely to be arrested for a violent crime by age 18" and "24 percent more likely to have been incarcerated as young adults."
The conclusion: The Chicago program "will have prevented an estimated 33,000 crimes by the time the children who have attended the program reach 18."
That's a number that will get your attention.
Nationally, these are the programs with the greatest longevity and thus most convincingly demonstrate the impact of pre-K programs for at-risk children. But they are by no means the only such programs.
Low-income children not enrolled in North Carolina's Smart Start program, for instance, were shown to be twice as likely to engage in "aggressive acts and poor temper control, anxiety and hyperactivity in kindergarten" - behaviors shown to be precursors of "high levels of antisocial and delinquent behavior later in life."
The long-running, federally funded Head Start programs for low-income 3- to 5-year-olds have consistently shown that adults who attended them as children "are less likely to commit crimes than adults from similar backgrounds who did not attend."
It's long been understood that high-quality preschool programs for children who would otherwise get little preparatory training can make an enormous difference in their ability to succeed in school, which in turn makes them far more likely to become successful adults.
What has not been touted sufficiently is that such programs, by providing toddlers with a strong foundation of learning and socialization skills, can also help reduce crime.
"Law enforcement understands this, having dealt with parts of society most of us don't deal with very often," says Kirsch. He emphasizes that his group's members "are very conservative people who don't approach this from let's-help-these-poor-kids. They're hard-nosed realists dealing with very tough populations. They understand kids become who they are based on what happens to them in their early years, and if we miss that, we pay for many years to come."
He concedes the early education approach is not a quick fix.
"We're not saying every kid who gets pre-K is going to stay on the straight and narrow, nor that any kid who doesn't is going to be a criminal. But pre-K for at-risk kids changes the odds."
Here in New Jersey, there has been an abundance of public resentment at spending tax dollars on such programs. But without public programs, pre-K education simply won't happen for most low-income children.
"It's very, very expensive for families to afford quality pre-K," says Kirsch.
Many government programs are promoted as "investments," and it's true that some pay off better than others. Looking at this new data, it's hard to argue that pre-K isn't one of the smartest things we can do with our public dollars.
My Commentary:
Posted by Zemack on 12/12/08 at 4:32PM
The implication here is if you don't submit to a hostile government takeover of pre-schooling, you are pro-crime. This is a classic statist intellectual package-deal. Pre-school is not the issue here. Expanded government power over education, and the consequent violation of individual rights, is the issue.
Whose educational philosophy will be imposed on the parents and children? Will children be trained to subordinate their own judgement to the arbitrary will of some authority, whether the teacher or the class as a group? Or will they be encouraged to think independently? Will they be coerced into "sharing" their learning experiences with any other child who wants to nose in on their current activity? Or will they be allowed the freedom to concentrate their attention on the task at hand without interruption, thus discovering the principle of respect for the rights of others?
Will the government-run pre-schools be used as an indoctrination tool for the purpose of bringing about "social change", as the father of modern "progressive" education advocated...the self-described socialist John Dewey? Or will the pre-schools be an environment where children can develop their individual cognitive mental skills consistent with each child's unique developmental timetable, with the ultimate goal being intellectual independence, as advocated my Maria Montessori? Will children "learn" through rote memorization (i.e., Give them a fish.), or will they learn to use their conceptual, abstract faculty in order to hierarchize and integrate their acquired knowledge according to essential principles (Teach them to fish.)?
What is meant by "public dollars"? There is no such thing. The "Public" dollars of which Ms. Wood refers are the earnings of private citizens taken by force of taxation, to be used by politically powerful groups for purposes that the earners may oppose such as the ongoing hostile pre-school takeover by the coercive government education monopoly. To push public pre-school funded by money confiscated by force from unwilling taxpayers...including those parents taking responsibility for their own children's pre-school...under the pretense of preventing crime is a monumental conceptual evasion. At least street thugs are honest enough not to claim that they are robbing their victims for their own good, or for the good of "society".
Why is it "investment" when politicians spend other peoples' money, but not when spent by those who earned it? Why is it just to force parents to pay for the education of other peoples' children in accordance with someone else's agenda?
Rather than expand the government school monopoly, the pre-school market should be left free. Rather than having their earnings confiscated through taxation, parents should be able to claim a direct credit against their existing school taxes so that they can use their own money for their own child's pre-school education. That some parents would renege on their responsibilities is no reason to violate the rights of all other parents. To sacrifice the responsible parents to the irresponsible is a moral crime. Aiding responsible, but poor, parents is certainly a worthy undertaking, and I commend anyone who chooses to step up in that regard. But charity is a private, voluntary matter, engaged in by people of good will. Good will ends where physical coercion begins. Show me someone who strives to practice charity with other peoples' tax money, and I'll show you a phony.
This much Ms. Wood and I agree on. I believe that the first few years of any child's life is a critical time for mental development. Consequently, pre-school should be a cornerstone of that period. Because learning how to think, the essence of early childhood education, is exclusively a private undertaking, it is a time when the privacy needs of the child must be stringently respected. So the right pre-school, governed by the right philosophy, is critical here. I favor the "concentrated attention" method of Maria Montessori, which focuses on the development of the child's proper method of mental functioning, the conceptual faculty. Homeschooling, which at this age level is well within the means and capabilities of any motivated parent, is far preferable to an inferior pre-school, which can do more harm than good. The responsibility for these decisions rests with the parents.
The public schools should stay out of the pre-school area of education. But if it is going to offer pre-school, it must be offered strictly on a voluntary full tuition basis only. Their should be no taxpayer subsidy...no "public dollars"...whatsoever. Forcing already over-taxed parents (or anyone else) to foot the pre-school expenses of other parents is immoral. Forcing anyone to support educational ideas with which one disagrees is contrary to the principles of a free society. The educational needs of the child are fundamentally the responsibility of the parents who brought that child into the world. A free pre-school market protects the rights of all parents to fulfill their obligations according to their own rational judgement. Pre-school is too important to be placed under state control.
Others' Commentary:
Posted by DiscussedTed on 12/12/08 at 9:19PM
Zemack:
You make me realize how many extraordinary people there are out there among the "common people."
Believe me, I mean this as a compliment. More brains, more thought, and more intellectual honesty than the entire community of newspaper editors.
Whatever the appropriate holiday greetings are for you, I will simply wish you a Merry Christmas, and hope that you understand the intent.
Posted by blarneyboy on 12/13/08 at 2:23AM
Zemack, I echo Discussed Ted's sentiments. If there is a pre-K developed under your guidelines, it should be called "The Zemack School of Common Sense". Don't hold your breath.
My Commentary:
Posted by Zemack on 12/13/08 at 6:57PM
DiscussedTed:
You make me realize how many extraordinary people there are out there among the "common people."
Thank you. You and Blarneyboy, whose thoughtful commentary I have enjoyed reading elsewhere in NJVoices (although we don't always agree), prove that it is obvious I'm not the only one. There is much intelligent commentary on this forum.
I'm sure Ms. Wood is sincere in advocating pre-school. But the equating of "worthy causes" with rights-violating expansions of coercive government control is leading us piecemeal towards an omnipotent state. Package-dealing statists, particularly those on the Left, have been getting away with this tactic for far too long.
Blarneyboy, I'm more hopeful here ("Don't hold your breath"). There are already some good pre-schools out there, as well as many parents silently doing a good job at pre-K homeschooling. What people need to learn is to fight for their rights in this area, which means fighting for a free education market. The principle of individual rights is the crucial ingredient to stopping the pre-school market from being swallowed up by the bureaucratic establishment, thus destroying the existing network of private pre-schools. If I thought the task was hopeless, you wouldn't hear from me again. But fighting for individual rights is never hopeless.
Support for the idea of fighting against the public school monopoly and for parental control is coming from some surprising quarters. Check out Tom Moran's column of 10/13/07 (NJVoices, Vouchers are the obvious choice.). I'm against the government-financed voucher method, but he sees the same threat to private pre-schools as I do.
Though not a Christian, I'd still like to say Merry Christmas!
Others' Commentary:
Posted by plebeyo on 12/16/08 at 1:17PM
Different groups can be blamed for the failure of the educational system in some parts of the country. However, the biggest concern I have is that for decades now, this system has been turning out high school graduates with deficient math, science and language skills. Also, the drop out rates in urban America hovering at about 50 percent should be a alarming.
As far as NJ is concerned, some claim that the present situation is due to the NJEA's inflexible attitude regarding many issues. The blame can be passed around but the outcome of mediocre schools is a generation(s) of poorly educated minorities whose chances of reaching middle class have dwindled.
Whose responsibility is it to provide the citizen of a nation with a quality education? I guess the answer depends on whom you ask. Nevertheless, I feel it is a shame that in the richest country in the world, large segments of the population are receiving a poor education even by third world standards.
My Commentary:
Plebeyo, you are conflating multiple issues here.
The first question is, is the government's proper role to run the schools through the coercion of taxation and compulsory attendance laws, or is it to protect the rights of parents to fulfill their solemn responsibility to educate their own children according to their own values, judgements, and budgets? I believe the latter.
Second, the reference to "the richest country in the world" ignores the fact that the source of all wealth is produced by the efforts of individual people thinking and working productively. America is the "richest" country only figuratively. All wealth belongs to the individuals who make up a nation, who earned it each to the extent of his ability, ambition, and intelligence, essentially...and not to the nation as such; which is only a collection of individual human beings. The proper role of government is not to confiscate private wealth for any purpose it deems vital, but to protect its citizens' property right to their own earnings...on all levels of income.
This leads to the third issue, the most neglected one, the philosophy and method of education. This is the area to look to find the answer to American schools "turning out high school graduates with deficient math, science and language skills [and] the drop out rates in urban America hovering at about 50 percent". A government-run school system does not have to be as poor as ours. But money, I submit, is not the problem. The amount of money that our current system devours...reportedly $15-20,000 per student per year here in N.J., depending on the source (not including capital costs)...is the proof. A radical new philosophical approach that tosses out the mass production method of "education" in favor of a focus on students as individuals with interests, developmental timetables, and unique strengths and weaknesses is needed. Above all, learning to think...which means, the abstract conceptual level...must be prominent alongside knowledge acquisition. Getting good grades does not prove educational proficiency.
The public school system stifles innovation, as all coercive monopolies must. Ideas are germinated in individual minds, and only a free education market leaves educators and parents free to act on their ideas without begging permission from some board, politician, bureaucrat, or politically connected special interest group.
Sunday, December 7, 2008
Commentary 49- Deregulation [?]
Report: Banks torpedoed rules that could have saved them
By Matt Apuzzo, The Associated Press
WASHINGTON — The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.
"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.
Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the provisions were gone and the meltdown was underway.
"These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages," David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.
The administration's blind eye to the impending crisis is emblematic of a philosophy that trusted market forces and discounted the need for government intervention. Its belief ironically has ushered in the most massive government intervention since the 1930s.
"We're going to be feeling the effects of the regulators' failure to address these mortgages for the next several years," said Kevin Stein of the California Reinvestment Coalition, who warned regulators to tighten lending rules before it was too late.
Many of the banks that fought to undermine the proposals by some regulators are now either out of business or accepting billions in federal aid. Many executives remain in high-paying jobs, even after their assurances were proved false.
In 2005, faced with ominous signs the housing market was in jeopardy, bank regulators proposed new guidelines for banks writing risky loans. Today, in the midst of the worst housing recession in a generation, the proposal reads like a list of what-ifs:
•Regulators told bankers that exotic mortgages were often inappropriate for buyers with bad credit.
•Banks be required to increase efforts to verify that buyers actually had jobs and could afford houses.
•Regulators proposed a cap on risky mortgages so a string of defaults wouldn't be crippling.
•Banks that bundled and sold mortgages were told to be sure investors knew what they were buying.
•Regulators urged banks to help buyers make responsible decisions and clearly advise them that interest rates might skyrocket and huge payments might be due sooner than expected.
Those proposals all were stripped from the final rules. None required congressional approval or the president's signature.
"In hindsight, it was spot on," said Jeffrey Brown, a former top official at the Office of Comptroller of the Currency, one of the first agencies to raise concerns about risky lending.
Federal regulators were especially concerned about mortgages known as "option ARMs," which allow borrowers to make payments so low that mortgage debt actually increases every month. But banking executives accused the government of overreacting.
Bankers said such loans might be risky when approved with no money down or without ensuring buyers have jobs but such risk could be managed without government intervention.
"An open market will mean that different institutions will develop different methodologies for achieving this goal," Joseph Polizzotto, counsel to now-bankrupt Lehman Brothers, told U.S. regulators in a March 2006.
Countrywide Financial, at the time the nation's largest mortgage lender, agreed. The proposal "appears excessive and will inhibit future innovation in the marketplace," said Mary Jane Seebach, managing director of public affairs.
One of the most contested rules said that before banks purchase mortgages from brokers, they should verify the process to ensure buyers could afford their homes. Some bankers now blame much of the housing crisis on brokers who wrote fraudulent, predatory loans. But in 2006, banks said they shouldn't have to double-check the brokers.
"It is not our role to be the regulator for the third-party lenders," wrote Ruthann Melbourne, chief risk officer of IndyMac Bank.
California-based IndyMac also criticized regulators for not recognizing the track record of interest-only loans and option ARMs, which accounted for 70% of IndyMac's 2005 mortgage portfolio. This summer, the government seized IndyMac and will pay an estimated $9 billion to ensure customers don't lose their deposits.
Last week, Downey Savings joined the growing list of failed banks. The problem: About 52% of its mortgage portfolio was tied up in risky option ARMs, which in 2006 Downey insisted were safe — maybe even safer than traditional 30-year mortgages.
"To conclude that 'nontraditional' equates to higher risk does not appropriately balance risk and compensating factors of these products," said Lillian Gavin, the bank's chief credit officer.
At least some regulators didn't buy it. The comptroller of the currency, John Dugan, was among the first to sound the alarm in mid-2005. Speaking to a consumer advocacy group, Dugan painted a troublesome picture of option-ARM lending. Many buyers, particularly those with bad credit, would soon be unable to afford their payments, he said. And if housing prices declined, homeowners wouldn't even be able to sell their way out of the mess.
It sounded simple, but "people kind of looked at us regulators as old-fashioned," said Brown, the agency's former deputy comptroller.
Diane Casey-Landry, of the American Bankers Association, said the industry feared a two-tiered system in which banks had to follow rules that mortgage brokers did not. She said opposition was based on the banks' best information.
"You're looking at a decline in real estate values that was never contemplated," she said.
Some saw problems coming. Community groups and even some in the mortgage business, like Welch, warned regulators not to ease their rules.
"We expect to see a huge increase in defaults, delinquencies and foreclosures as a result of the over selling of these products," Stein, the associate director of the California Reinvestment Coalition, wrote to regulators in 2006. The group advocates on housing and banking issues for low-income and minority residents.
The government's banking agencies spent nearly a year debating the rules, which required unanimous agreement among the OCC, Federal Deposit Insurance Corp., Federal Reserve, and the Office of Thrift Supervision — agencies that sometimes don't agree.
The Fed, for instance, was reluctant under Alan Greenspan to heavily regulate lending. Similarly, the Office of Thrift Supervision, an arm of the Treasury Department that regulated many in the subprime mortgage market, worried that restricting certain mortgages would hurt banks and consumers.
Grovetta Gardineer, OTS managing director for corporate and international activities, said the 2005 proposal "attempted to send an alarm bell that these products are bad." After hearing from banks, she said, regulators were persuaded that the loans themselves were not problematic as long as banks managed the risk. She disputes the notion that the rules were weakened.
Marc Savitt, president of the National Association of Mortgage Brokers, said regulators were afraid of stopping a good thing.
"If it seems to be working, if it's not broken don't fix it, if everybody's making money, then the good times are rolling and nobody wants to be the one guy to put the brakes on," he said.
In the past year, with Congress scrambling to stanch the bleeding in the financial industry, regulators have tightened rules on risky mortgages.
Congress is considering further tightening, including some of the same proposals abandoned years ago.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
My Commentary:
Mike Zemack wrote: 4d 18h ago
In an unregulated market, there are no government officials holding regulatory powers to allow or forbid voluntary loan agreements between consenting adults. There are no pseudo-private banks seeking to influence the regulators who control their businesses, or to beg for permission to engage in unsound lending practices.
In an unregulated market, the government performs its proper function of protecting the rights of individuals to enter into voluntary contractual agreements, while vigorously protecting all parties against and prosecuting fraud. Borrowers, lenders, and investors are free to reap the rewards of sound and prudent financial decisions, as well as pay the price of their bad decisions through foreclosure, bankruptcy, and investment losses. Innocent taxpayers are not forced to “bail out” anyone’s bad financial judgements.
In an unregulated market, there is no central bank with monopoly power over money creation, interest rates, or to act as lender of last resort. An unregulated financial industry under the control of a government-imposed central bank is a logical impossibility.
This massive financial crisis represents the collapse of a heavily regulated and controlled financial industry operating in a housing and mortgage sector beset by massive government intervention. It is not a failure of a non-existent free market. The alleged “deregulation” is no such thing. There can be no deregulation as long as the government retains its market-distorting regulatory powers, whether or not it happens to have used them in some particular way or not. The pseudo-deregulation blamed for the crisis is just a rationalization for expanded government control over the economy, to the detriment of individual rights.
This article only proves the inherently corrupt nature of government regulation itself, and the need for true deregulation, starting with the abolition of two of the biggest culprits�Fannie and Freddie, and the Federal Reserve Central Bank. The causes of this crisis are complex and date back through decades of government interventions and policies. But the evidence is overwhelming. The current crises was caused and exacerbated by government.
By Matt Apuzzo, The Associated Press
WASHINGTON — The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.
"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.
Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the provisions were gone and the meltdown was underway.
"These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages," David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.
The administration's blind eye to the impending crisis is emblematic of a philosophy that trusted market forces and discounted the need for government intervention. Its belief ironically has ushered in the most massive government intervention since the 1930s.
"We're going to be feeling the effects of the regulators' failure to address these mortgages for the next several years," said Kevin Stein of the California Reinvestment Coalition, who warned regulators to tighten lending rules before it was too late.
Many of the banks that fought to undermine the proposals by some regulators are now either out of business or accepting billions in federal aid. Many executives remain in high-paying jobs, even after their assurances were proved false.
In 2005, faced with ominous signs the housing market was in jeopardy, bank regulators proposed new guidelines for banks writing risky loans. Today, in the midst of the worst housing recession in a generation, the proposal reads like a list of what-ifs:
•Regulators told bankers that exotic mortgages were often inappropriate for buyers with bad credit.
•Banks be required to increase efforts to verify that buyers actually had jobs and could afford houses.
•Regulators proposed a cap on risky mortgages so a string of defaults wouldn't be crippling.
•Banks that bundled and sold mortgages were told to be sure investors knew what they were buying.
•Regulators urged banks to help buyers make responsible decisions and clearly advise them that interest rates might skyrocket and huge payments might be due sooner than expected.
Those proposals all were stripped from the final rules. None required congressional approval or the president's signature.
"In hindsight, it was spot on," said Jeffrey Brown, a former top official at the Office of Comptroller of the Currency, one of the first agencies to raise concerns about risky lending.
Federal regulators were especially concerned about mortgages known as "option ARMs," which allow borrowers to make payments so low that mortgage debt actually increases every month. But banking executives accused the government of overreacting.
Bankers said such loans might be risky when approved with no money down or without ensuring buyers have jobs but such risk could be managed without government intervention.
"An open market will mean that different institutions will develop different methodologies for achieving this goal," Joseph Polizzotto, counsel to now-bankrupt Lehman Brothers, told U.S. regulators in a March 2006.
Countrywide Financial, at the time the nation's largest mortgage lender, agreed. The proposal "appears excessive and will inhibit future innovation in the marketplace," said Mary Jane Seebach, managing director of public affairs.
One of the most contested rules said that before banks purchase mortgages from brokers, they should verify the process to ensure buyers could afford their homes. Some bankers now blame much of the housing crisis on brokers who wrote fraudulent, predatory loans. But in 2006, banks said they shouldn't have to double-check the brokers.
"It is not our role to be the regulator for the third-party lenders," wrote Ruthann Melbourne, chief risk officer of IndyMac Bank.
California-based IndyMac also criticized regulators for not recognizing the track record of interest-only loans and option ARMs, which accounted for 70% of IndyMac's 2005 mortgage portfolio. This summer, the government seized IndyMac and will pay an estimated $9 billion to ensure customers don't lose their deposits.
Last week, Downey Savings joined the growing list of failed banks. The problem: About 52% of its mortgage portfolio was tied up in risky option ARMs, which in 2006 Downey insisted were safe — maybe even safer than traditional 30-year mortgages.
"To conclude that 'nontraditional' equates to higher risk does not appropriately balance risk and compensating factors of these products," said Lillian Gavin, the bank's chief credit officer.
At least some regulators didn't buy it. The comptroller of the currency, John Dugan, was among the first to sound the alarm in mid-2005. Speaking to a consumer advocacy group, Dugan painted a troublesome picture of option-ARM lending. Many buyers, particularly those with bad credit, would soon be unable to afford their payments, he said. And if housing prices declined, homeowners wouldn't even be able to sell their way out of the mess.
It sounded simple, but "people kind of looked at us regulators as old-fashioned," said Brown, the agency's former deputy comptroller.
Diane Casey-Landry, of the American Bankers Association, said the industry feared a two-tiered system in which banks had to follow rules that mortgage brokers did not. She said opposition was based on the banks' best information.
"You're looking at a decline in real estate values that was never contemplated," she said.
Some saw problems coming. Community groups and even some in the mortgage business, like Welch, warned regulators not to ease their rules.
"We expect to see a huge increase in defaults, delinquencies and foreclosures as a result of the over selling of these products," Stein, the associate director of the California Reinvestment Coalition, wrote to regulators in 2006. The group advocates on housing and banking issues for low-income and minority residents.
The government's banking agencies spent nearly a year debating the rules, which required unanimous agreement among the OCC, Federal Deposit Insurance Corp., Federal Reserve, and the Office of Thrift Supervision — agencies that sometimes don't agree.
The Fed, for instance, was reluctant under Alan Greenspan to heavily regulate lending. Similarly, the Office of Thrift Supervision, an arm of the Treasury Department that regulated many in the subprime mortgage market, worried that restricting certain mortgages would hurt banks and consumers.
Grovetta Gardineer, OTS managing director for corporate and international activities, said the 2005 proposal "attempted to send an alarm bell that these products are bad." After hearing from banks, she said, regulators were persuaded that the loans themselves were not problematic as long as banks managed the risk. She disputes the notion that the rules were weakened.
Marc Savitt, president of the National Association of Mortgage Brokers, said regulators were afraid of stopping a good thing.
"If it seems to be working, if it's not broken don't fix it, if everybody's making money, then the good times are rolling and nobody wants to be the one guy to put the brakes on," he said.
In the past year, with Congress scrambling to stanch the bleeding in the financial industry, regulators have tightened rules on risky mortgages.
Congress is considering further tightening, including some of the same proposals abandoned years ago.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
My Commentary:
Mike Zemack wrote: 4d 18h ago
In an unregulated market, there are no government officials holding regulatory powers to allow or forbid voluntary loan agreements between consenting adults. There are no pseudo-private banks seeking to influence the regulators who control their businesses, or to beg for permission to engage in unsound lending practices.
In an unregulated market, the government performs its proper function of protecting the rights of individuals to enter into voluntary contractual agreements, while vigorously protecting all parties against and prosecuting fraud. Borrowers, lenders, and investors are free to reap the rewards of sound and prudent financial decisions, as well as pay the price of their bad decisions through foreclosure, bankruptcy, and investment losses. Innocent taxpayers are not forced to “bail out” anyone’s bad financial judgements.
In an unregulated market, there is no central bank with monopoly power over money creation, interest rates, or to act as lender of last resort. An unregulated financial industry under the control of a government-imposed central bank is a logical impossibility.
This massive financial crisis represents the collapse of a heavily regulated and controlled financial industry operating in a housing and mortgage sector beset by massive government intervention. It is not a failure of a non-existent free market. The alleged “deregulation” is no such thing. There can be no deregulation as long as the government retains its market-distorting regulatory powers, whether or not it happens to have used them in some particular way or not. The pseudo-deregulation blamed for the crisis is just a rationalization for expanded government control over the economy, to the detriment of individual rights.
This article only proves the inherently corrupt nature of government regulation itself, and the need for true deregulation, starting with the abolition of two of the biggest culprits�Fannie and Freddie, and the Federal Reserve Central Bank. The causes of this crisis are complex and date back through decades of government interventions and policies. But the evidence is overwhelming. The current crises was caused and exacerbated by government.
Tuesday, November 4, 2008
Commentary 47-Shuttleworth on Regulated Capitalism
This is not the end of capitalism
By Mark Shuttleworth
Tuesday, November 4th, 2008
Some of the comments on my last post on the economic unwinding of 2008 suggested that people think we are witnessing the end of capitalism and the beginning of a new socialist era.
I certainly hope not.
I think a world without regulated capitalism would be a bleak one indeed. I had the great privilege to spend a year living in Russia in 2001/2002, and the visible evidence of the destruction wrought by central planning was still very much present. We are all ultimately human, with human failings, whether we work for a state planning agency or a private company, and those failings have consequences either way. To think that moving all private enterprise into state hands will somehow create a panacea of efficiency and sustainability is to ignore the stark lessons of the 20th century.
The leaders and decision makers in a centrally-planned economy are just as fallible as those in a capitalist one - they would probably be the same people! But state enterprises lack the forces of evolution that apply in a capitalist economy - state enterprises are rarely if ever allowed to fail. And hence bad ideas are perpetuated indefinitely, and an economy becomes dysfunctional to the point of systemic collapse. It is the fact that private enterprises fail which keeps industries vibrant. The tension between the imperative to innovate and the consequences of failure drives capitalist economies to evolve quickly. Despite all of the nasty consequences that we have seen, and those we have yet to see, of capitalism gone wrong, I am still firmly of the view that society must tap into its capitalist strengths if it wants to move forward.
But I chose my words carefully when I said “regulated capitalism”. I used to be a fan of Adam Smith’s invisible hand, and great admirer of Ayn Rand’s vision. Now, I feel differently. Left to it’s own devices, the market will tend to reinforce the position of those who were successful in the past, at the exclusion of those who might create future successes. We see evidence of this all the time. The heavyweights that define an industry tend to do everything in their power to prevent innovation from changing the rules that enrich them.
A classic example of that is the RIAA’s behaviour - in the name of “saving the music industry” they have spent the past ten years desperately trying to keep it in the analog era to save their members, with DRM and morally unjustifiable special-interest lobbying around copyright rules that affect the whole of society.
Similarly, patent rules tend to evolve to suit the companies that hold many patents, rather than the people who might generate the NEXT set of innovative ideas. Of course, the lobbying is dressed up in language that describes it as being “in the interests of innovation”, but at heart it is really aimed at preserving the privileged position of the incumbent.
In South Africa, the incumbent monopoly telco, which was a state enterprise until it was partially privatized in 1996, has systematically delayed, interfered, challenged and obstructed the natural process of deregulation and the creation of a healthy competitive sector. Private interests act in their own interest, by definition, so powerful private interests tend to drive the system in ways that make THEM healthier rather than ways that make society healthier.
Left to their own devices, private companies will tend to gobble one another up, and create monopolies. Those monopolies will then undermine every potential new entrant, using whatever tactics they can dream up, from FUD to lobbying to thuggery.
So, I’m a fan of regulated capitalism.
We need regulation to ensure that society’s broader needs, like environmental sustainability, are met while private companies pursue their profits. We also need regulation to ensure that those who manage national and international infrastructure, whether it’s railways or power stations or financial systems, don’t cook the books in a way that lets them declare fat profits and fatter bonuses while driving those systems into crisis.
But effective regulation is not the same as state management and supervision. I would much rather have private companies managing power stations competitively, than state agencies doing so as part of a complacent government monopoly.
Good regulation is very hard. Over the years I’ve interacted with a few different regulatory authorities, and I sympathise with the problems they encounter.
First, to be an effective regulator, you need superb talent. And for that you need to pay - talent follows the money and the lights, whether we like it or not, so to design a system on other assumptions is to design it for failure. My ideal regulator is an insightful genius working for the common good, but since I’m never likely to meet that person, a practical goal is to encourage regulators to be small but very well funded, with key salaries and performance measures that are just behind the industries they are supposed to regulate. Regulators must be able to be fired - no sense in offering someone a private sector salary and public sector accountability. Unfortunately, most regulators end up going the other way, hiring more and more people of average competence, that they become both expensive and ineffective.
Second, a great regulator needs to be independent. You’re the guy who tells people to stop doing what will hurt society; it’s very hard to do that to your friends. A regulatory job is a lonely job, which is why you hear so many stories of regulators being wined and dined by the industries they regulate only to make sure they don’t look too hard in the back room. A great regulator needs to know a lot about an industry, but be independent of that industry. Again, my ideal is someone who has made a good living in a sector, knows it backwards, can justify their high price, but wants to make a contribution to society.
Third, a great regulator needs to have teeth and muscle. It has been very frustrating for me to watch the South African telecomms regulator get tied up in court by Telkom, and stymied by government department inadequacy. Regulators need to be able to drive things forward, they need to be able to change the way companies behave, and they cannot rely on moral suasion to do so.
And fourth, a regulator has to make very tough decisions about innovation, which amount to venture capital decisions - to make them well, you have to be able to tell the future. For example, when an industry changes, as all industries change, how should the rules evolve? When a new need for society is identified, like the need to address climate change early and systemically, how should the rules evolve? Regulators need to move forward as fast as the industries they regulate, and they need to make decisions about things we don’t yet understand. And even when you regulate, you may not be able to stop an impending crisis. It’s very easy to criticize Greenspan for his light touch regulation on hedge funds and derivatives today, but it’s not at all clear to me that regulation would have made a difference, I think it would simply have moved the shadow global financial system offshore.
So regulation is extremely difficult, but also very much worth investing in if you are trying to run a healthy, vibrant, capitalist society.
Coming back to the original suggestion that sparked this blog - I’m sure we will see a lot of failed capitalists in the future. Hell, I might join their ranks, I wouldn’t be the first ;-). But that doesn’t spell the end of capitalism, only the opportunity to start again - smarter.
My Commentary:
Mike Zemack says: (permalink)
November 5th, 2008 at 2:49 am
Mr. Shuttleworth’s essay conflates two separate and distinct issues…the government’s proper role as protector of individual rights, vs. the arbitrary power of government regulators, which results in the violation of those rights.
The answer to the issues of environmental pollution and fraud, for example, can be addressed with relation to individual rights. Here, it is proper for government to step in when the economic activities of one pollutes the property of another…a violation of that person’s property rights…by ordering fines and restitution be paid to the injured party (based upon the objective findings of a court). Objective, clearly defined environmental laws such as anti-littering laws, statutes banning the dumping of specific industrial wastes proven to be harmful into rivers, or legal bans on the selling of paints containing lead intended for sale to the general public are also appropriate.
Similarly, fraud (such as “cooking the books” or deliberate misrepresentation of products) is a violation of the rights of the injured party. Civil and criminal penalties against fraudsters can and should be a tool of government in its role as protector of individual rights.
The civil courts, another proper function of government, is a powerful “regulator” where people can settle disputes involving harmful products or breech of contract, in an objective forum.
None of these governmental functions involve groups of bureaucrats with the power to impose rules that carry the force of law.
But the arbitrary powers Mr. Shuttleworth would delegate to government regulators who would, for example, have the authority to “make very tough decisions about innovation” is scary indeed. This is odd, after Mr. Shuttleworth starts out with a strong denunciation of central planning. This is a call for dictatorial powers to be placed into the hands of one or a group of individuals that usurp the free and voluntary decisions of free individuals…i.e., the free market. Never mind the idea that some innovations may not flourish in a free market. To make a determination of that kind, a regulator would “have to be able to tell the future”-a logical impossibility given the kind of dynamics inherent in the billions of choices made by millions of participants of a free market. Short of the coercive roadblocks enabled by the kind of political connections endemic to a mixed economy…i.e. of “regulated capitalism”…there is virtually no way any company, no matter how large, can stop innovative new technologies in the long term. In any event, if the result of the voluntary, uncoerced trading decisions of private individuals pursuing their own best interests occasionally means that some “superior” product doesn’t “make it” in the market, then so be it. There is no inherent “societal” entitlement to “superior” or “innovative” products. No one should have the power, in a free society, to violate the rights of others through governmental coercion in order to impose his idea of which or whose products should “succeed” in the market.
Government regulation is inherently corrupt, leading to “many stories of regulators being wined and dined by the industries they regulate only to make sure they don’t look too hard in the back room”. Industry influence on the bureaucrats that regulate it is a necessary result of “regulated capitalism” (a contradiction in terms, actually). Mr. Shuttleworth’s solution, however, is far worse than the disease. He proposes to eliminate the corruption by trampling all over the first amendment right of “the people peaceably to assemble, and to petition the Government for a redress of grievances”. Regulated companies are made up of people who have the right to “assemble” (form lobbies) in order to “petition the Government (i.e., the politicians who create the regulatory agencies)”. To make a regulator “independent” means to shield government from the peoples’ influence…an inversion of a key American principle. The problems caused by rights violations in one area, end up leading to rights violations in another. Anyway, how do regulators get “to know a lot about an industry, but be independent of that industry”, in “capitalist economies [that] evolve quickly”…without maintaining a close relationship with the very companies being regulated?
Mr. Shuttleworth actually builds a stronger case against regulated capitalism than he does in its favor, in my view. His four steps to an “effective regulator” sounds contradictory and utopian after his description of central planning in the first few paragraphs. And if the government can’t even manage its copyright and patent functions without eliminating the undue influence of established players seeking to block innovative newcomers, how in the world can it ever hope to regulate entire industries in a capitalist system where “the imperative to innovate and the consequences of failure drives capitalist economies to evolve quickly”?
The biggest contradiction is perhaps the key to this confusing essay. After exposing the futility of centrally planned economies, Mr. Shuttleworth ends by declaring that “regulation is…very much worth investing in if you are trying to run a healthy, vibrant, capitalist society”. Nobody “runs” a capitalist society. You “run” a planned economy. Under capitalism, people run their own lives, and government protects their right to do so.
By Mark Shuttleworth
Tuesday, November 4th, 2008
Some of the comments on my last post on the economic unwinding of 2008 suggested that people think we are witnessing the end of capitalism and the beginning of a new socialist era.
I certainly hope not.
I think a world without regulated capitalism would be a bleak one indeed. I had the great privilege to spend a year living in Russia in 2001/2002, and the visible evidence of the destruction wrought by central planning was still very much present. We are all ultimately human, with human failings, whether we work for a state planning agency or a private company, and those failings have consequences either way. To think that moving all private enterprise into state hands will somehow create a panacea of efficiency and sustainability is to ignore the stark lessons of the 20th century.
The leaders and decision makers in a centrally-planned economy are just as fallible as those in a capitalist one - they would probably be the same people! But state enterprises lack the forces of evolution that apply in a capitalist economy - state enterprises are rarely if ever allowed to fail. And hence bad ideas are perpetuated indefinitely, and an economy becomes dysfunctional to the point of systemic collapse. It is the fact that private enterprises fail which keeps industries vibrant. The tension between the imperative to innovate and the consequences of failure drives capitalist economies to evolve quickly. Despite all of the nasty consequences that we have seen, and those we have yet to see, of capitalism gone wrong, I am still firmly of the view that society must tap into its capitalist strengths if it wants to move forward.
But I chose my words carefully when I said “regulated capitalism”. I used to be a fan of Adam Smith’s invisible hand, and great admirer of Ayn Rand’s vision. Now, I feel differently. Left to it’s own devices, the market will tend to reinforce the position of those who were successful in the past, at the exclusion of those who might create future successes. We see evidence of this all the time. The heavyweights that define an industry tend to do everything in their power to prevent innovation from changing the rules that enrich them.
A classic example of that is the RIAA’s behaviour - in the name of “saving the music industry” they have spent the past ten years desperately trying to keep it in the analog era to save their members, with DRM and morally unjustifiable special-interest lobbying around copyright rules that affect the whole of society.
Similarly, patent rules tend to evolve to suit the companies that hold many patents, rather than the people who might generate the NEXT set of innovative ideas. Of course, the lobbying is dressed up in language that describes it as being “in the interests of innovation”, but at heart it is really aimed at preserving the privileged position of the incumbent.
In South Africa, the incumbent monopoly telco, which was a state enterprise until it was partially privatized in 1996, has systematically delayed, interfered, challenged and obstructed the natural process of deregulation and the creation of a healthy competitive sector. Private interests act in their own interest, by definition, so powerful private interests tend to drive the system in ways that make THEM healthier rather than ways that make society healthier.
Left to their own devices, private companies will tend to gobble one another up, and create monopolies. Those monopolies will then undermine every potential new entrant, using whatever tactics they can dream up, from FUD to lobbying to thuggery.
So, I’m a fan of regulated capitalism.
We need regulation to ensure that society’s broader needs, like environmental sustainability, are met while private companies pursue their profits. We also need regulation to ensure that those who manage national and international infrastructure, whether it’s railways or power stations or financial systems, don’t cook the books in a way that lets them declare fat profits and fatter bonuses while driving those systems into crisis.
But effective regulation is not the same as state management and supervision. I would much rather have private companies managing power stations competitively, than state agencies doing so as part of a complacent government monopoly.
Good regulation is very hard. Over the years I’ve interacted with a few different regulatory authorities, and I sympathise with the problems they encounter.
First, to be an effective regulator, you need superb talent. And for that you need to pay - talent follows the money and the lights, whether we like it or not, so to design a system on other assumptions is to design it for failure. My ideal regulator is an insightful genius working for the common good, but since I’m never likely to meet that person, a practical goal is to encourage regulators to be small but very well funded, with key salaries and performance measures that are just behind the industries they are supposed to regulate. Regulators must be able to be fired - no sense in offering someone a private sector salary and public sector accountability. Unfortunately, most regulators end up going the other way, hiring more and more people of average competence, that they become both expensive and ineffective.
Second, a great regulator needs to be independent. You’re the guy who tells people to stop doing what will hurt society; it’s very hard to do that to your friends. A regulatory job is a lonely job, which is why you hear so many stories of regulators being wined and dined by the industries they regulate only to make sure they don’t look too hard in the back room. A great regulator needs to know a lot about an industry, but be independent of that industry. Again, my ideal is someone who has made a good living in a sector, knows it backwards, can justify their high price, but wants to make a contribution to society.
Third, a great regulator needs to have teeth and muscle. It has been very frustrating for me to watch the South African telecomms regulator get tied up in court by Telkom, and stymied by government department inadequacy. Regulators need to be able to drive things forward, they need to be able to change the way companies behave, and they cannot rely on moral suasion to do so.
And fourth, a regulator has to make very tough decisions about innovation, which amount to venture capital decisions - to make them well, you have to be able to tell the future. For example, when an industry changes, as all industries change, how should the rules evolve? When a new need for society is identified, like the need to address climate change early and systemically, how should the rules evolve? Regulators need to move forward as fast as the industries they regulate, and they need to make decisions about things we don’t yet understand. And even when you regulate, you may not be able to stop an impending crisis. It’s very easy to criticize Greenspan for his light touch regulation on hedge funds and derivatives today, but it’s not at all clear to me that regulation would have made a difference, I think it would simply have moved the shadow global financial system offshore.
So regulation is extremely difficult, but also very much worth investing in if you are trying to run a healthy, vibrant, capitalist society.
Coming back to the original suggestion that sparked this blog - I’m sure we will see a lot of failed capitalists in the future. Hell, I might join their ranks, I wouldn’t be the first ;-). But that doesn’t spell the end of capitalism, only the opportunity to start again - smarter.
My Commentary:
Mike Zemack says: (permalink)
November 5th, 2008 at 2:49 am
Mr. Shuttleworth’s essay conflates two separate and distinct issues…the government’s proper role as protector of individual rights, vs. the arbitrary power of government regulators, which results in the violation of those rights.
The answer to the issues of environmental pollution and fraud, for example, can be addressed with relation to individual rights. Here, it is proper for government to step in when the economic activities of one pollutes the property of another…a violation of that person’s property rights…by ordering fines and restitution be paid to the injured party (based upon the objective findings of a court). Objective, clearly defined environmental laws such as anti-littering laws, statutes banning the dumping of specific industrial wastes proven to be harmful into rivers, or legal bans on the selling of paints containing lead intended for sale to the general public are also appropriate.
Similarly, fraud (such as “cooking the books” or deliberate misrepresentation of products) is a violation of the rights of the injured party. Civil and criminal penalties against fraudsters can and should be a tool of government in its role as protector of individual rights.
The civil courts, another proper function of government, is a powerful “regulator” where people can settle disputes involving harmful products or breech of contract, in an objective forum.
None of these governmental functions involve groups of bureaucrats with the power to impose rules that carry the force of law.
But the arbitrary powers Mr. Shuttleworth would delegate to government regulators who would, for example, have the authority to “make very tough decisions about innovation” is scary indeed. This is odd, after Mr. Shuttleworth starts out with a strong denunciation of central planning. This is a call for dictatorial powers to be placed into the hands of one or a group of individuals that usurp the free and voluntary decisions of free individuals…i.e., the free market. Never mind the idea that some innovations may not flourish in a free market. To make a determination of that kind, a regulator would “have to be able to tell the future”-a logical impossibility given the kind of dynamics inherent in the billions of choices made by millions of participants of a free market. Short of the coercive roadblocks enabled by the kind of political connections endemic to a mixed economy…i.e. of “regulated capitalism”…there is virtually no way any company, no matter how large, can stop innovative new technologies in the long term. In any event, if the result of the voluntary, uncoerced trading decisions of private individuals pursuing their own best interests occasionally means that some “superior” product doesn’t “make it” in the market, then so be it. There is no inherent “societal” entitlement to “superior” or “innovative” products. No one should have the power, in a free society, to violate the rights of others through governmental coercion in order to impose his idea of which or whose products should “succeed” in the market.
Government regulation is inherently corrupt, leading to “many stories of regulators being wined and dined by the industries they regulate only to make sure they don’t look too hard in the back room”. Industry influence on the bureaucrats that regulate it is a necessary result of “regulated capitalism” (a contradiction in terms, actually). Mr. Shuttleworth’s solution, however, is far worse than the disease. He proposes to eliminate the corruption by trampling all over the first amendment right of “the people peaceably to assemble, and to petition the Government for a redress of grievances”. Regulated companies are made up of people who have the right to “assemble” (form lobbies) in order to “petition the Government (i.e., the politicians who create the regulatory agencies)”. To make a regulator “independent” means to shield government from the peoples’ influence…an inversion of a key American principle. The problems caused by rights violations in one area, end up leading to rights violations in another. Anyway, how do regulators get “to know a lot about an industry, but be independent of that industry”, in “capitalist economies [that] evolve quickly”…without maintaining a close relationship with the very companies being regulated?
Mr. Shuttleworth actually builds a stronger case against regulated capitalism than he does in its favor, in my view. His four steps to an “effective regulator” sounds contradictory and utopian after his description of central planning in the first few paragraphs. And if the government can’t even manage its copyright and patent functions without eliminating the undue influence of established players seeking to block innovative newcomers, how in the world can it ever hope to regulate entire industries in a capitalist system where “the imperative to innovate and the consequences of failure drives capitalist economies to evolve quickly”?
The biggest contradiction is perhaps the key to this confusing essay. After exposing the futility of centrally planned economies, Mr. Shuttleworth ends by declaring that “regulation is…very much worth investing in if you are trying to run a healthy, vibrant, capitalist society”. Nobody “runs” a capitalist society. You “run” a planned economy. Under capitalism, people run their own lives, and government protects their right to do so.
Saturday, October 18, 2008
Commentary 46- Mulshine on McCain
How the McCains really stick it to Joe Sixpack
Posted by Paul Mulshine October 17, 2008 12:59PM
Radley Balko of Reason Magazine has an interesting piece up on the politics of beer distributorships and how this has made John McCain a rich man.
"To be blunt, the entire industry is a farce. It's an artificial, anachronistic, government-created entity that's anti-competitive and full of lobbyists and special interests. It raises the cost of each bottle of beer you drink, though 'Joe Six Pack,' as McCain's running mate might put it, receives no value for the added cost."
Balko adds,
"What does the candidate lecturing Wall Street about greed think about the alcohol wholesaling industry? Is it fair? Should government be subsidizing (if not outright creating) an industry by forcing consumers to pay more for alcohol--for which they get little to no added value in return? And who's greedier, the family who exploits that system to amass a small fortune, or the brokers and traders McCain derides for pursuing profits in a free market?"
To which I can only add: Let us all hoist a beer in honor of Ron Paul, the only true adherent of the free market who ran for president this year and an opponent of rent-seeking behavior.
No wonder McCain hated him so much.
Other's Commentary:
Posted by hglindquist on 10/18/08 at 8:28AM
Ah so, a clear example of negative government intervention in the market ... in terms of market dynamics.
But control of the sale of alcohol is seen to be necessary for the collective good for a variety of reasons ... (there are other goods and services that are deemed to need to similar controls) ...
So the issue is the monopolistic nature of distributorships/wholesalers in those states that have the 3-tier system (explained in the articles you reference) ...
And there appears to have been some history as to why the 3-tier system was seen as a solution.
Which gets us to root of the economic problem: How do we control/pay for the costs that are directly tied to the consumption of alcohol -- for example, the devastating effect on families of alcoholism -- when they are not paid for out of the profits from the sale of alcohol for consumption? These costs are externalities like the dumping of mountaintops into fishing streams when mining. Cancer from second-hand smoke and earlier working with asbestos are other examples of externalities,
Quoting dear ol' Milton Friedman (my favorite quote of his): "'Free markets' is a very general term. There are all sorts of problems that will emerge. Free markets work best when the transaction between two individuals affects only those individuals. But that isn't the fact. The fact is that, most often, a transaction between you and me affects a third party. That is the source of all problems for government. That is the source of all pollution problems, of the inequality problem. There are some good economists like Gary Becker and Bob Lucas who are working on these issues. This reality ensures that the end of history will never come."
Aside, what it also assures is that there is no such thing as a "free market".
My personal view is that the more directly costs can be paid out of the profits that generated the costs, the more efficient (and effective) the market will be. But I am not an economist. On the other hand while Physicists can give a reasonable layperson explanation to the way atoms work, Economists have not been able to explain how free markets work ... in relation to reality ... and not even to themselves -- in my opinion.
In any case, you -- Mr. Mulshine -- are right in labeling Senator a McCain a hypocrite ... and pwc is right in questioning the Senator's character in regards to his treatment of his first wife.
My Commentary:
Mr. Mulshine's understanding of McCain as an enemy of free markets is right on. He is dangerous because he is a statist running under the free market banner...just as President Bush waved the free market banner while destroying it the last 8 years. I had decided that rather than vote for one of the two statist candidates, that I would abstain from voting for president this year...for the first time in my 4 decades as a registered voter. But maybe I'll write in Ron Paul, who Mr. Mulshine describes as "the only true adherent of the free market".
A free market is a crucial ingredient of capitalism, and of freedom. It is based on the recognition of individual rights, in which each individual is free to think and act on his own judgement, to associate and trade with others voluntarily to mutual advantage, in pursuit of his own goals, welfare, and happiness. Rights are a guide to freedom of action, not to the productive efforts of others (ex.-a home, food, health care, a job, etc.). Philosopher Ayn Rand described individual rights as "the means of subordinating society to moral law."
The concept of individual rights...including the all-important property rights, without which no other rights are possible...contains the answer to the problem of so-called "externalities". If the actions of one violates the rights of another...causes physical harm to another's person or property as objectively determined in a court of law...then the government may properly step in to require restitution to the injured party. Such would be the case of an individual or group of individuals (i.e., a corporation) polluting the property of another. In the case of second-hand smoke, as long as a non-smoker is free to leave an area occupied by smokers, his rights are not violated. It is solely the right of the property owner...ex., a restaurateur...to decide whether his establishment will allow smoking, and whether to segregate smokers from non-smokers.
The free market is not incompatible with government action to protect individual rights. Indeed, the protection of individual rights is the only proper function of government, and is vital to the functioning of a free market. The "free" in free market means to live one's life free from coercive interference (physical harm) by others, including by government officials and politicians, as well as criminals and the economic activities of others. The protection of rights, in a free society, is accomplished through objective laws against explicit types of behavior, or through the civil courts where grievances and disputes are resolved in an objective forum...and not through the arbitrary, dictatorial powers of government regulators.
Free market capitalism, properly understood, is the only practical and moral social system because it is the only system based on individual rights and a government limited to the job of protecting those rights. People can deal with each other in one of only two ways...by voluntary persuasion and logic, or by physical force. Under capitalism, rent-seeking pressure groups would not and can not exist because the government's power of economic interference on behalf of one private entity at the expense of others would not exist. The individual is protected against the predation of those seeking to trample his rights in the name of that mystic god of every power-luster...the "collective", or "common good".
It's either a free market, tyranny, or what we have today..a mixture of freedom and tyranny, in which tyranny steadily gains and freedom slowly recedes.
I choose free market capitalism.
Other's Commentary:
Posted by boobosie on 10/19/08 at 8:51AM
Free markets are responsible for the financial melt down on wall street. Tax payer protection is needed against the likes of fraudulent CEOS, bogus math gurus who eliminate risk, and unregulated credit default swaps.
Tariffs are needed to make the free market trade a level playing field.
Consumer protection is needed against the likes of "Joe the Plumber".
Free markets are great, for criminals.
Didn't your mommy ever tell you there is no 'free' lunch?
My Commentary:
Posted by Zemack on 10/19/08 at 9:46PM
On boobosie:
Free markets are responsible for the financial melt down on wall street.
Where do you see a free market in finances? You're committing the fallacy of equating the failures of private individuals and firms with a free market.
Who controls the money supply, the raw material of banking? The Fed
Who ended the gold standard? FDR, on the domestic front, by confiscating private gold currency and replacing it with fiat (i.e., counterfeit) paper. And Nixon, who closed the international gold window.
Who controls short-term interest rates? The Fed. (The Fed's inflationary policies and sudden tightening, based on control of money and interest rates, were largely responsible for the rampant 1920s stock market speculation and crash, as well as the recent housing boom and bust.)
The current crisis is rooted in the government's massive intervention in the housing and mortgage markets, beginning with FDR's "second bill of rights", which declared every family's "right" to own a home (which was reaffirmed in JFK's 1960 party platform.) Subsequent government policies were implemented to ensure that alleged "right." The home mortgage deduction; mortgage "insurers" (at taxpayer expense) FHA and FHLBB; the government-created quasi-private Fannie and Freddie that artificially created the mortgage resale "market."
Then when it was found that many low-income folks couldn't qualify for home loans, Carter created the CRA, to "encourage" lenders to extend loans to those folks. The government's extensive regulatory control over the banks was the club with which it enforced its "encouragement." Then when that wasn't enough, Clinton imposed "flexible" lending standards through the CRA, which led to no-doc and no-down-payment, or sub-prime, loans. But when banks that dove into these loans found that by restricting these gov.-mandated standards to just low-income folks they could run afoul of anti-discrimination laws, they had to extend these standards to all customers who wanted them. (Do not take this as a condemnation of low-income folks in general. It should be stressed that many low-income folks did purchase homes the old fashioned way...by saving for a down payment and then securing conventional loans. Many low-income, sub-prime borrowers continue to make their payments on time. And many of the defaulters are high earners.)
When it was found that Fannie and Freddie, the government-created giants with the implicit (now explicit) backing of Uncle Sam, wouldn't buy those sub-primes, Clinton, and later Bush, (and with the complicity of Congress) intervened to force them to. The flood gates were open for a virtual government-created conveyor belt of bad lending. CEOs like Mozilo of Countrywide latched on to the game with a vengeance.
It was Fannie and Freddie who pioneered the practice of bundling good and sub-prime loans together into Mortgage-Backed Securities (later emulated by many Wall Street firms) for sale to the public. The implicit taxpayer-guarantee created a false sense of safety for these securities. The "bubble mentality" of ever-rising home prices, fueled by the Fed's inflationary policies, took over from there.
The government's Federal Deposit "Insurance" and the "Too Big To Fail" bailout policy...as well as the Fed's lender of last resort status...has led to an atmosphere of reward without risk, or profit without loss. In a free market, the threat of having to face up to one's own failings is a built-in protector against the kind of system-wide catastrophe we are now seeing. The free market rewards long-term prudence and penalizes irrational, short-term lenders, investors, and borrowers (I don't let the irresponsible borrowers, which included outright speculators, off the hook. Without them, there would not have been a crisis.) When profits are privatized (as they should be), but losses are socialized (as they should not be), what kind of behavior does one expect to take hold?
The fact is that the heavily controlled and regulated financial industry was responding to the policies of its own government. The sound and prudent institutions that resisted the sub-prime mania were, for a time, placed at a competitive disadvantage, leading to a loss of business. (They are now in a very good position, once the economy turns around.) According to an article by Bloomberg's Michael Lewis (NY Post, 9/17/08), "if any of these men had behaved well and resisted the pressures and temptations of the moment, his firm would have, for several years, dramatically underperformed the competition. He probably would have lost his job." He was speaking of the Bear Stearns, Merrill Lynch, and Lehman Brothers CEOs. What created a situation where prudence is penalized and imprudence is rewarded? The quick-buck charlatans who gained a position to bring down decades-old financial powerhouses were unleashed by market distortions created by government intervention.
I could go on and add to this already too-long post. The private lenders, borrowers, and investors that participated in this fiasco are part villain, part victim. But they are only the face of this crisis. Without government's massive interventions, the imprudent would have been weeded out by bankruptcy, foreclosure, and investment losses long before they could infect the whole system. One does not have to excuse the failures of private participants in order to understand that the government-created culture of homeownership entitlement and the policies they spawned are the real culprit here. It's a simple matter of cause and effect.
In a Money magazine interview (with Janice Revell, Sept. issue, I believe), Rep. Barney Frank made this startling statement: "But we have made a mistake in this society. The assumption that everybody can be a homeowner is wrong. We pushed and encouraged people into home ownership - people who, in some cases, weren't ready for it. You can't act on wishes that are unrealistic without having negative consequences."
That is about as close to an admission of the real cause as you will find in Washington. The free market is getting tried and convicted, where no free market exists. And along with it, our freedom.
I apologize for this long-winded post. But it was necessary. I could not let boobosie's unsubstantiated statement go unchallenged.
Other's Commentary
Posted by hglindquist on 10/19/08 at 9:53PM
OK, zemack, I am safely ensconced in my hotel room in New Haven ... the traffic backup getting onto I-95 South to NYC at I-91 was too long, so I "went to Yale" and phoned home that I was staying north for the night.
It was a gorgeous day out in Connecticut's fall foliage.
Now in rebuttal: It is common knowledge that profits have been used to avoid the payment of known externalities and to hide externalities from becoming known. The market has been able to use profit to protect itself from paying costs the profit-seeking generated. And I agree with you, it is a proper role for we the people through our government to investigate the potential for harm caused by any product and to impose laws and regulations that protect we the people from such harm.
You seem to forget that in your example of the right of a non-smoking employee to leave smoking area has only been recently established ... and that I have absolutely no protection from the concentrations of tobacco smoke that sometimes accost me as I exit a building ... and that the children of smokers are still at risk in far too many cases. It is because of the market's failure to address the issue adequately that government has had to intervene with laws and regulations, and still has a ways to go to adequately protect the non-smoker. So I am pleased that you agree that we the people through our government should continue to move in that direction ... but then you go back to the free market concept.
And we continually have examples of companies hiding the harmful side effects of their products so the cost of the harm does not have to paid out of the profits, or costs are delayed or minimized.
History has shown that here in this country we are more at risk from the active pursuit of cost suppression for profit maximization than we are from "the arbitrary, dictatorial powers of government regulators."
And "the collective or common good" is not some "mystic, undefinable god of every power-seeker" -- in my opinion. We can simply start by identifying those "things" the individual has a right to expect from his/her community, and in turn recognizes that his/her community has a right to expect participation from him/her. Or to put it another way, what do we expect to share in common as Americans?
Security may be a place to start. Do we not believe it is the roll of the collective community to defend the community -- which is its members -- from its enemies? Don't we all share in our common defense against our enemies, generally speaking?
So if I expect to be defended then I expect to participate in the defense. And if I expect to participate in the defense, then I expect to be defended. That makes sense, doesn't it?
But in any case ... I really do think this latest socialization of the losses by the market fundamentalists will put the concept of a "free market" on ice for another -- what? -- 70 years. Maybe longer if we don't turn this sucker (the meltdown) around pretty quick ... which -- I'm afraid -- is looking less and less likely every day.
In any case, Senator McCain is a hypocrite for taking his second wife's largess, and he is what we used to call a low-life for the way he treated his first wife -- in my opinion after reviewing the facts.
And yes, I believe in redemption. But apparently McCain hasn't repented.
My Commentary:
Posted by Zemack on 10/20/08 at 7:50PM
Hglindquist, 10/19/08
I hope you're enjoying you're trip to New England. My wife and I plan on some day making a trip up there.
I'll address one more point...the key point...to hopefully clarify my philosophical position.
And "the collective or common good" is not some "mystic, undefinable god of every power-seeker" -- in my opinion. We can simply start by identifying those "things" the individual has a right to expect from his/her community, and in turn recognizes that his/her community has a right to expect participation from him/her. Or to put it another way, what do we expect to share in common as Americans?
I reject the collectivist premise in the entire statement. I consider the notion of "The collective or common good" to be invalid for two reasons. First; human beings...every one of us...are autonomous individuals each possessing his own independent mind, or rational faculty, which is the means by which he guides his life. This is a metaphysical fact of nature. The fundamental choice that each of us faces is...to think or not. That is exclusively a choice of the individual, and only the individual. No one can do another's thinking, nor force another to think.
Second; the collectivist, or tribal, premise is un-American. A recognition of the validity of the first reason formed the basis for the Founders' creation of a nation that, for the first time in history, was based on the premise that the individual, not the group, is the supreme value upon which a society would be organized. And they recognized that certain fundamental requirements are required for such a society...the individual's unalienable rights to life, liberty, property, and the pursuit of one's own welfare and happiness...protected by a government which, for the first time, was explicitly deemed to be the peoples' servant rather than ruler.
Thus, there is no such thing as the "collective", or "common" good that is separate from the good of the individual...every independent individual. And since every individual possesses the same unalienable rights, equally, and at all times, and protected equally and at all times by the government, any private or public (i.e., governmental) action that violates the rights of even a single individual is not and can not be in the "common" good.
There is no such entity as a "community". The community is a number of individuals, as described above. The "community" has no right to expect anything out of any individual, and the individual has no right to expect anything out of the "community"...save one. That one "thing" that each of us owes the other individuals that make up a "community" is to respect, and to reframe from violating, their aforementioned individual rights...i.e., to avoid compelling another person to act against his own judgement and will. In a free society based on individual rights, anyone who initiates physical force against another is a criminal, and is subject to prosecution by the government. This same principle applies to government. The government is the protector of the individual's unalienable rights. Therefor, no one in the "community" may use the legalized force of government to violate the rights of other members of that community, no matter how big his majority or how small the minority. The same principles apply to a group of ten, a thousand, a million or 320 million. This is what is meant by the principle that "Individual rights are the means of subordinating society to moral law."
The use of the term "the common or collective good" implies that the group or society or the community is the supreme value and can do whatever it wants to its individual members. It is always the justification for any rights-violating governmental action...and of all tyrannies. There is no "collective" good in a free society. There is only the necessity to ensure, via limited government, that each member is free to pursue his own good...which means to be free from human predators.
What do we... share in common as Americans? We share the right to think for ourselves, to act on our own judgement in the pursuit of our own individual well-being, to engage in voluntary and uncoerced association with one another, to engage in voluntary trade to mutual advantage, to engage in voluntary and uncoerced charity, and the obligation to respect the rights of all of our fellow community members. We share, in other words, the principles of free market capitalism. Or at least, as Americans, we should.
Posted by Paul Mulshine October 17, 2008 12:59PM
Radley Balko of Reason Magazine has an interesting piece up on the politics of beer distributorships and how this has made John McCain a rich man.
"To be blunt, the entire industry is a farce. It's an artificial, anachronistic, government-created entity that's anti-competitive and full of lobbyists and special interests. It raises the cost of each bottle of beer you drink, though 'Joe Six Pack,' as McCain's running mate might put it, receives no value for the added cost."
Balko adds,
"What does the candidate lecturing Wall Street about greed think about the alcohol wholesaling industry? Is it fair? Should government be subsidizing (if not outright creating) an industry by forcing consumers to pay more for alcohol--for which they get little to no added value in return? And who's greedier, the family who exploits that system to amass a small fortune, or the brokers and traders McCain derides for pursuing profits in a free market?"
To which I can only add: Let us all hoist a beer in honor of Ron Paul, the only true adherent of the free market who ran for president this year and an opponent of rent-seeking behavior.
No wonder McCain hated him so much.
Other's Commentary:
Posted by hglindquist on 10/18/08 at 8:28AM
Ah so, a clear example of negative government intervention in the market ... in terms of market dynamics.
But control of the sale of alcohol is seen to be necessary for the collective good for a variety of reasons ... (there are other goods and services that are deemed to need to similar controls) ...
So the issue is the monopolistic nature of distributorships/wholesalers in those states that have the 3-tier system (explained in the articles you reference) ...
And there appears to have been some history as to why the 3-tier system was seen as a solution.
Which gets us to root of the economic problem: How do we control/pay for the costs that are directly tied to the consumption of alcohol -- for example, the devastating effect on families of alcoholism -- when they are not paid for out of the profits from the sale of alcohol for consumption? These costs are externalities like the dumping of mountaintops into fishing streams when mining. Cancer from second-hand smoke and earlier working with asbestos are other examples of externalities,
Quoting dear ol' Milton Friedman (my favorite quote of his): "'Free markets' is a very general term. There are all sorts of problems that will emerge. Free markets work best when the transaction between two individuals affects only those individuals. But that isn't the fact. The fact is that, most often, a transaction between you and me affects a third party. That is the source of all problems for government. That is the source of all pollution problems, of the inequality problem. There are some good economists like Gary Becker and Bob Lucas who are working on these issues. This reality ensures that the end of history will never come."
Aside, what it also assures is that there is no such thing as a "free market".
My personal view is that the more directly costs can be paid out of the profits that generated the costs, the more efficient (and effective) the market will be. But I am not an economist. On the other hand while Physicists can give a reasonable layperson explanation to the way atoms work, Economists have not been able to explain how free markets work ... in relation to reality ... and not even to themselves -- in my opinion.
In any case, you -- Mr. Mulshine -- are right in labeling Senator a McCain a hypocrite ... and pwc is right in questioning the Senator's character in regards to his treatment of his first wife.
My Commentary:
Mr. Mulshine's understanding of McCain as an enemy of free markets is right on. He is dangerous because he is a statist running under the free market banner...just as President Bush waved the free market banner while destroying it the last 8 years. I had decided that rather than vote for one of the two statist candidates, that I would abstain from voting for president this year...for the first time in my 4 decades as a registered voter. But maybe I'll write in Ron Paul, who Mr. Mulshine describes as "the only true adherent of the free market".
A free market is a crucial ingredient of capitalism, and of freedom. It is based on the recognition of individual rights, in which each individual is free to think and act on his own judgement, to associate and trade with others voluntarily to mutual advantage, in pursuit of his own goals, welfare, and happiness. Rights are a guide to freedom of action, not to the productive efforts of others (ex.-a home, food, health care, a job, etc.). Philosopher Ayn Rand described individual rights as "the means of subordinating society to moral law."
The concept of individual rights...including the all-important property rights, without which no other rights are possible...contains the answer to the problem of so-called "externalities". If the actions of one violates the rights of another...causes physical harm to another's person or property as objectively determined in a court of law...then the government may properly step in to require restitution to the injured party. Such would be the case of an individual or group of individuals (i.e., a corporation) polluting the property of another. In the case of second-hand smoke, as long as a non-smoker is free to leave an area occupied by smokers, his rights are not violated. It is solely the right of the property owner...ex., a restaurateur...to decide whether his establishment will allow smoking, and whether to segregate smokers from non-smokers.
The free market is not incompatible with government action to protect individual rights. Indeed, the protection of individual rights is the only proper function of government, and is vital to the functioning of a free market. The "free" in free market means to live one's life free from coercive interference (physical harm) by others, including by government officials and politicians, as well as criminals and the economic activities of others. The protection of rights, in a free society, is accomplished through objective laws against explicit types of behavior, or through the civil courts where grievances and disputes are resolved in an objective forum...and not through the arbitrary, dictatorial powers of government regulators.
Free market capitalism, properly understood, is the only practical and moral social system because it is the only system based on individual rights and a government limited to the job of protecting those rights. People can deal with each other in one of only two ways...by voluntary persuasion and logic, or by physical force. Under capitalism, rent-seeking pressure groups would not and can not exist because the government's power of economic interference on behalf of one private entity at the expense of others would not exist. The individual is protected against the predation of those seeking to trample his rights in the name of that mystic god of every power-luster...the "collective", or "common good".
It's either a free market, tyranny, or what we have today..a mixture of freedom and tyranny, in which tyranny steadily gains and freedom slowly recedes.
I choose free market capitalism.
Other's Commentary:
Posted by boobosie on 10/19/08 at 8:51AM
Free markets are responsible for the financial melt down on wall street. Tax payer protection is needed against the likes of fraudulent CEOS, bogus math gurus who eliminate risk, and unregulated credit default swaps.
Tariffs are needed to make the free market trade a level playing field.
Consumer protection is needed against the likes of "Joe the Plumber".
Free markets are great, for criminals.
Didn't your mommy ever tell you there is no 'free' lunch?
My Commentary:
Posted by Zemack on 10/19/08 at 9:46PM
On boobosie:
Free markets are responsible for the financial melt down on wall street.
Where do you see a free market in finances? You're committing the fallacy of equating the failures of private individuals and firms with a free market.
Who controls the money supply, the raw material of banking? The Fed
Who ended the gold standard? FDR, on the domestic front, by confiscating private gold currency and replacing it with fiat (i.e., counterfeit) paper. And Nixon, who closed the international gold window.
Who controls short-term interest rates? The Fed. (The Fed's inflationary policies and sudden tightening, based on control of money and interest rates, were largely responsible for the rampant 1920s stock market speculation and crash, as well as the recent housing boom and bust.)
The current crisis is rooted in the government's massive intervention in the housing and mortgage markets, beginning with FDR's "second bill of rights", which declared every family's "right" to own a home (which was reaffirmed in JFK's 1960 party platform.) Subsequent government policies were implemented to ensure that alleged "right." The home mortgage deduction; mortgage "insurers" (at taxpayer expense) FHA and FHLBB; the government-created quasi-private Fannie and Freddie that artificially created the mortgage resale "market."
Then when it was found that many low-income folks couldn't qualify for home loans, Carter created the CRA, to "encourage" lenders to extend loans to those folks. The government's extensive regulatory control over the banks was the club with which it enforced its "encouragement." Then when that wasn't enough, Clinton imposed "flexible" lending standards through the CRA, which led to no-doc and no-down-payment, or sub-prime, loans. But when banks that dove into these loans found that by restricting these gov.-mandated standards to just low-income folks they could run afoul of anti-discrimination laws, they had to extend these standards to all customers who wanted them. (Do not take this as a condemnation of low-income folks in general. It should be stressed that many low-income folks did purchase homes the old fashioned way...by saving for a down payment and then securing conventional loans. Many low-income, sub-prime borrowers continue to make their payments on time. And many of the defaulters are high earners.)
When it was found that Fannie and Freddie, the government-created giants with the implicit (now explicit) backing of Uncle Sam, wouldn't buy those sub-primes, Clinton, and later Bush, (and with the complicity of Congress) intervened to force them to. The flood gates were open for a virtual government-created conveyor belt of bad lending. CEOs like Mozilo of Countrywide latched on to the game with a vengeance.
It was Fannie and Freddie who pioneered the practice of bundling good and sub-prime loans together into Mortgage-Backed Securities (later emulated by many Wall Street firms) for sale to the public. The implicit taxpayer-guarantee created a false sense of safety for these securities. The "bubble mentality" of ever-rising home prices, fueled by the Fed's inflationary policies, took over from there.
The government's Federal Deposit "Insurance" and the "Too Big To Fail" bailout policy...as well as the Fed's lender of last resort status...has led to an atmosphere of reward without risk, or profit without loss. In a free market, the threat of having to face up to one's own failings is a built-in protector against the kind of system-wide catastrophe we are now seeing. The free market rewards long-term prudence and penalizes irrational, short-term lenders, investors, and borrowers (I don't let the irresponsible borrowers, which included outright speculators, off the hook. Without them, there would not have been a crisis.) When profits are privatized (as they should be), but losses are socialized (as they should not be), what kind of behavior does one expect to take hold?
The fact is that the heavily controlled and regulated financial industry was responding to the policies of its own government. The sound and prudent institutions that resisted the sub-prime mania were, for a time, placed at a competitive disadvantage, leading to a loss of business. (They are now in a very good position, once the economy turns around.) According to an article by Bloomberg's Michael Lewis (NY Post, 9/17/08), "if any of these men had behaved well and resisted the pressures and temptations of the moment, his firm would have, for several years, dramatically underperformed the competition. He probably would have lost his job." He was speaking of the Bear Stearns, Merrill Lynch, and Lehman Brothers CEOs. What created a situation where prudence is penalized and imprudence is rewarded? The quick-buck charlatans who gained a position to bring down decades-old financial powerhouses were unleashed by market distortions created by government intervention.
I could go on and add to this already too-long post. The private lenders, borrowers, and investors that participated in this fiasco are part villain, part victim. But they are only the face of this crisis. Without government's massive interventions, the imprudent would have been weeded out by bankruptcy, foreclosure, and investment losses long before they could infect the whole system. One does not have to excuse the failures of private participants in order to understand that the government-created culture of homeownership entitlement and the policies they spawned are the real culprit here. It's a simple matter of cause and effect.
In a Money magazine interview (with Janice Revell, Sept. issue, I believe), Rep. Barney Frank made this startling statement: "But we have made a mistake in this society. The assumption that everybody can be a homeowner is wrong. We pushed and encouraged people into home ownership - people who, in some cases, weren't ready for it. You can't act on wishes that are unrealistic without having negative consequences."
That is about as close to an admission of the real cause as you will find in Washington. The free market is getting tried and convicted, where no free market exists. And along with it, our freedom.
I apologize for this long-winded post. But it was necessary. I could not let boobosie's unsubstantiated statement go unchallenged.
Other's Commentary
Posted by hglindquist on 10/19/08 at 9:53PM
OK, zemack, I am safely ensconced in my hotel room in New Haven ... the traffic backup getting onto I-95 South to NYC at I-91 was too long, so I "went to Yale" and phoned home that I was staying north for the night.
It was a gorgeous day out in Connecticut's fall foliage.
Now in rebuttal: It is common knowledge that profits have been used to avoid the payment of known externalities and to hide externalities from becoming known. The market has been able to use profit to protect itself from paying costs the profit-seeking generated. And I agree with you, it is a proper role for we the people through our government to investigate the potential for harm caused by any product and to impose laws and regulations that protect we the people from such harm.
You seem to forget that in your example of the right of a non-smoking employee to leave smoking area has only been recently established ... and that I have absolutely no protection from the concentrations of tobacco smoke that sometimes accost me as I exit a building ... and that the children of smokers are still at risk in far too many cases. It is because of the market's failure to address the issue adequately that government has had to intervene with laws and regulations, and still has a ways to go to adequately protect the non-smoker. So I am pleased that you agree that we the people through our government should continue to move in that direction ... but then you go back to the free market concept.
And we continually have examples of companies hiding the harmful side effects of their products so the cost of the harm does not have to paid out of the profits, or costs are delayed or minimized.
History has shown that here in this country we are more at risk from the active pursuit of cost suppression for profit maximization than we are from "the arbitrary, dictatorial powers of government regulators."
And "the collective or common good" is not some "mystic, undefinable god of every power-seeker" -- in my opinion. We can simply start by identifying those "things" the individual has a right to expect from his/her community, and in turn recognizes that his/her community has a right to expect participation from him/her. Or to put it another way, what do we expect to share in common as Americans?
Security may be a place to start. Do we not believe it is the roll of the collective community to defend the community -- which is its members -- from its enemies? Don't we all share in our common defense against our enemies, generally speaking?
So if I expect to be defended then I expect to participate in the defense. And if I expect to participate in the defense, then I expect to be defended. That makes sense, doesn't it?
But in any case ... I really do think this latest socialization of the losses by the market fundamentalists will put the concept of a "free market" on ice for another -- what? -- 70 years. Maybe longer if we don't turn this sucker (the meltdown) around pretty quick ... which -- I'm afraid -- is looking less and less likely every day.
In any case, Senator McCain is a hypocrite for taking his second wife's largess, and he is what we used to call a low-life for the way he treated his first wife -- in my opinion after reviewing the facts.
And yes, I believe in redemption. But apparently McCain hasn't repented.
My Commentary:
Posted by Zemack on 10/20/08 at 7:50PM
Hglindquist, 10/19/08
I hope you're enjoying you're trip to New England. My wife and I plan on some day making a trip up there.
I'll address one more point...the key point...to hopefully clarify my philosophical position.
And "the collective or common good" is not some "mystic, undefinable god of every power-seeker" -- in my opinion. We can simply start by identifying those "things" the individual has a right to expect from his/her community, and in turn recognizes that his/her community has a right to expect participation from him/her. Or to put it another way, what do we expect to share in common as Americans?
I reject the collectivist premise in the entire statement. I consider the notion of "The collective or common good" to be invalid for two reasons. First; human beings...every one of us...are autonomous individuals each possessing his own independent mind, or rational faculty, which is the means by which he guides his life. This is a metaphysical fact of nature. The fundamental choice that each of us faces is...to think or not. That is exclusively a choice of the individual, and only the individual. No one can do another's thinking, nor force another to think.
Second; the collectivist, or tribal, premise is un-American. A recognition of the validity of the first reason formed the basis for the Founders' creation of a nation that, for the first time in history, was based on the premise that the individual, not the group, is the supreme value upon which a society would be organized. And they recognized that certain fundamental requirements are required for such a society...the individual's unalienable rights to life, liberty, property, and the pursuit of one's own welfare and happiness...protected by a government which, for the first time, was explicitly deemed to be the peoples' servant rather than ruler.
Thus, there is no such thing as the "collective", or "common" good that is separate from the good of the individual...every independent individual. And since every individual possesses the same unalienable rights, equally, and at all times, and protected equally and at all times by the government, any private or public (i.e., governmental) action that violates the rights of even a single individual is not and can not be in the "common" good.
There is no such entity as a "community". The community is a number of individuals, as described above. The "community" has no right to expect anything out of any individual, and the individual has no right to expect anything out of the "community"...save one. That one "thing" that each of us owes the other individuals that make up a "community" is to respect, and to reframe from violating, their aforementioned individual rights...i.e., to avoid compelling another person to act against his own judgement and will. In a free society based on individual rights, anyone who initiates physical force against another is a criminal, and is subject to prosecution by the government. This same principle applies to government. The government is the protector of the individual's unalienable rights. Therefor, no one in the "community" may use the legalized force of government to violate the rights of other members of that community, no matter how big his majority or how small the minority. The same principles apply to a group of ten, a thousand, a million or 320 million. This is what is meant by the principle that "Individual rights are the means of subordinating society to moral law."
The use of the term "the common or collective good" implies that the group or society or the community is the supreme value and can do whatever it wants to its individual members. It is always the justification for any rights-violating governmental action...and of all tyrannies. There is no "collective" good in a free society. There is only the necessity to ensure, via limited government, that each member is free to pursue his own good...which means to be free from human predators.
What do we... share in common as Americans? We share the right to think for ourselves, to act on our own judgement in the pursuit of our own individual well-being, to engage in voluntary and uncoerced association with one another, to engage in voluntary trade to mutual advantage, to engage in voluntary and uncoerced charity, and the obligation to respect the rights of all of our fellow community members. We share, in other words, the principles of free market capitalism. Or at least, as Americans, we should.
Thursday, August 28, 2008
Commentary 45-Vision of a Better America
Vision of a better America becoming a reality
Posted on Wed, Aug. 27, 2008reprint print email
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By LEONARD PITTS JR.
lpitts@miamiherald.com
'I knew that I was witnessing something special,' Bob Adelman says of watching Martin Luther King Jr. deliver his famous 'I Have A Dream' speech. 'King had put down his prepared remarks and was speaking from emotion.''
He spoke of the promise before he spoke of the dream.
In the first part of the momentous speech he gave at the Lincoln Memorial, the part school children don't memorize and pundits never quote, Martin Luther King, Jr. reminded a watching world that in writing the Constitution and the Declaration of Independence, the founders were ``signing a promissory note to which every American was to fall heir.
''This note,'' said King, ''was a promise that all men, yes, black men as well as white men, would be guaranteed the unalienable rights of life, liberty, and the pursuit of happiness.'' His evocation of this great American promise may be less well-known than King's description, moments later, of his great American dream, but there is, nevertheless, a straightforward clarity to it that compels.
Because where race is concerned, what is American history if not the story of how that promise was repeatedly broken? As King put it five years later in the last speech of his life, 'All we say to America is, `Be true to what you said on paper.' ''
But America never did.
Except that now, here comes Barack Obama, son of a Kenyan and a Kansan, striding to the podium to accept the nomination of his party for president of the United States. It comes 45 years to the very day after King said he had a dream America's promise might someday be fulfilled, 100 years and a day after the birth of the president, Lyndon Johnson, who helped nudge that dream toward reality. The timing requires you, if you have any music in your soul, any soul in your soul, to reappraise both the promise and the dream.
That's what we've been doing lately in our various ways in our various Americas. On the sidewalk outside a Gladys Knight concert, a vendor sells a T-shirt depicting King and Obama shaking hands above the legend, ''Sometimes, dreams come true.'' Meanwhile, they are passing around a ''joke'' on the Internet that has Obama picking Sylvester Stallone as his running mate: ''Rambo and Sambo,'' goes the punch line.
The two extremes have one thing in common: slack-faced disbelief. Could it be? Could it really be?
Apparently, it could.
The realization coalesces something some of us never dared hope and others never dared fear: the idea that one day America would take its promise seriously.
And if that realization requires African-Americans to recalibrate their cynicism about what ''they'' will and will not allow black folks to achieve, it seems plain that the greater shock and sense of dislocation is borne by ''they,'' who must now recalibrate their assessment of what black folks can achieve. Small wonder ''they'' have responded frantically, crying with ever more shrillness that this Obama character is something other, something foreign, something strange. Something not really, truly American.
They have grown used to defining ''American'' as a certain skin color, a certain religion and heritage. They have forgotten that ''American'' was, first and foremost, a certain ideal.
Thomas Jefferson stated it thusly: all men are created equal.
The Pledge of Allegiance says: liberty and justice for all. And King, in that speech 45 years ago, spoke of the day ''all of God's children, black men and white men, Jews and Gentiles, Protestants and Catholics'' would harmonize upon a song of freedom.
Not truly American, they say? On Thursday, a nation whose credo holds equality to be a birthright will see a brown-skinned man, son of Kenya and Kansas, assume leadership of a major political party. No, it is not the panacea, not the End of Race in America. But it is striking evidence of a promise fulfilled, a dream redeemed.
How could anything be more American than that?
My Commentary:
Comments
MLK's reaffirmation of America's founding ideals was a vital foundation for the success of the early civil rights movement in abolishing legal segregation. But his later embrace of socialism as an ideal seriously undermined his legacy.
That is because socialism (i.e., collectivism) in all of its forms...communism, fascism, nazism, welfare statism, et al...is incompatible with those ideals. Collectivism means the supremacy of the group, and the subordination of the individual to group whims. The "the unalienable rights of life, liberty, and the pursuit of happiness"... which includes property rights, without which no other rights are possible...belongs to the individual human being, and only the individual human being. Collectivism is the denial of individual rights.
Rights are a moral concept that defines one?s freedom of action in a social context...i.e., in relation to everyone else. Socially, rights impose a single moral obligation on all of us...to respect the same rights in all others. Unalienable means that each individual is free to act in his own interest according to his own judgement free from coercive predation and exploitation by others...i.e., his rights are absolute. This means that there is no right to the unearned...to healthcare, to an education, to a job...provided by someone else, except in the case of voluntary, uncoerced charity. There is only the right to be free to achieve those things by one's own effort, and in voluntary association and trade with others. To be free from coercion means to be free of all coercion, including governmental coercion. The government's proper job is to protect those unalienable rights-"That to secure these rights, Governments are instituted among Men"- which are possessed by all people, at all times.
There is only one social system under which these conditions are possible. That system is laissez-faire capitalism.
Obama embraces the opposite. He implores Americans, especially the young, to abandon their own personal pursuit of happiness...their dreams, career goals, and desires...and instead embrace the theme of his campaign. Service and sacrifice, he says, are what America is about. But a call for servitude to one's neighbor, one's community, the state or the nation...and the call for Americans to sacrifice, not to pursue, their individual values and happiness...is as alien to American ideals as one can imagine. It is the siren song of socialism, not capitalism...of tyranny, not freedom.
Obama should correct the contradiction in MLK's legacy, by calling for policies that are consistent with every individual's unalienable rights to his life, his liberty, his property, and the pursuit of his own happiness. He won't, though, because he is a collectivist through and through. Obama's America is one of servitude and sacrifice, not the pursuit of happiness. His is a vision not of a better America, but of a poorer, less free America.
Yes, it is a significant American milestone that "a brown-skinned man, son of Kenya and Kansas, [will] assume leadership of a major political party." But only when all Americans recognize the true meaning of the words "the unalienable rights of life, liberty, and the pursuit of happiness" will we have "striking evidence of a promise fulfilled, a dream redeemed."
How could anything be more American than that?
Posted by: Zemack
8/28/2008 6:51 PM
Other's Commentary:
Zwemack labeling any program to even out the playing field and the wealth of this rich country with names such as socialism, communism welfare state or what ever is a shameful behavior in my opinion and only play for people who already share your world view.
Here is another label for you oligarchy as in the form of government we are now enjoying under the Republicans where we have government for and by the top 1 percent of the economic population.
Sorry if I am more concern about the sick and poor then I am for the shareholders and CEO of the health insurance companies and therefore wish us to join with the rest of the Western world and get universal health care for all.
Sorry if I don?t think that anyone should need to sleep and find food in a garbage container even if they are too mentally ill to take care of themselves.
Sorry if I don?t think that we should continue a system that have the top few percent of the population owning and controlling the whole country for their and their children benefit and the hell with the rest of us.
Yes you are right we could go too far in the other direction but I will start worrying about that after we start acting like a caring society for the least people amount us and stop the decline of the middle class.
Posted by: WRM
8/28/08 8:02pm
My Commentary:
WRM
"Zwemack labeling any program to even out the playing field and the wealth of this rich country with names such as socialism, communism welfare state or what ever is a shameful behavior in my opinion and only play for people who already share your world view."- WRM
Welfare statism is based on the principle that the state, acting for the "good" of the collective, holds the unlimited power to confiscate the privately produced wealth of its individual citizens and that that principle supercedes the good of those citizens. It holds that rights are a collective (i.e., group), not individual, attribute. It is the negation of individual rights. "Any program to even out the?the wealth of this rich country" is welfare statism. It is a form of socialism different from communism or Nazism only as a matter of degree, not substance. If you can tell me how welfare statism is fundamentally...i.e., in principle...different from any other form of socialism, I'd like to here it.
"To even out the playing field" is the very purpose of the words of the Declaration of Independence that Mr. Pitts, and MLK quote. That all men are created equal possessing the unalienable rights of life, liberty, [property,] and the pursuit of happiness is intended to do just that. It means that rights are inseparable (unalienable) from each as an individual, and are held equally, by all people, at all times. You can't get a more level field than that. All wealth is produced by people exercising those rights, and "any program to even out...the wealth of this rich country" through the coercive power of the state is nothing more than legalized theft and violates the principle of "unalienable rights" and negates this country?s founding ideals.
"Sorry if I am more concern about the sick and poor then I am for the shareholders and CEO of the health insurance companies..."- WRM
That statement inverts an immutable fact of nature...production comes before consumption. The wealth that humans need to live and flourish...from nails to computers to food to healthcare...does not just materialize in nature but must be produced through a process of reason and productive work. Wealth production requires certain social conditions to occur...freedom and a rights-protecting government. Every individual must be free to think and act on his own rational judgement, to set his own goals and to strive to achieve them by his own effort, and to engage in voluntary trade with others, free from coercive interference by others. The American ideal of unalienable, equal rights is the principle that guarantees the proper social conditions for man to produce. Anyone who disregards the unalienable rights of life, liberty, [property,] and the pursuit of happiness of "shareholders and CEOs and the top few percent of the population" or any other producers cannot claim "concern about the sick and poor." Production comes before consumption, and individual rights comes before production. That is not my worldview. That is an indisputable fact of man's nature and of reality.
It is not your concern for the sick or of those down on their economic fortunes that I object to. It is your means of helping them. Charity is a worthwhile pursuit only if it is uncoerced and voluntary. Each individual, possessing unalienable rights, must be free to decide who, when, and in what capacity he will assist others based on his own value-judgements and his own available resources. Someone who wants "a caring society" would not force his own idea of worthwhile charity on others. Claiming "concern about the sick and poor" and then demanding a government program to force others to pay for the luxury of your compassion makes you out to be thoroughly PHONY.
If charitable help for the down and out and increased economic opportunity for the poor is your goal, then increased production of wealth should be your first goal. This means unalienable rights and capitalism, not welfare state programs that confiscate wealth and violate rights and thus diminish production and economic opportunity.
Posted by: Zemack
8/29/2008 6:14 PM
Other's Commentary:
Zemack the society as a whole set the structure for wealth creating and as such, we all therefore have a right to share in that wealth. No individual have the power to create wealth without using the inter-structure that the social as a whole had build.
Is it not strange that the granting of public lands by the millions of acres for example to the railroad companies in the 1800s for the public good is fine but not the transfer of some of the wealth to the poor also for the public good is somehow wrong?
It is somehow fine to grant land and share the cost of a ball park in down town Miami to a private firm to the tune of hundred of millions of dollars but not to build low income housing costing millions!
The poor should not to have to plea for health care it should be their right to not die due to being on the bottom of the economic ladder and that right is accepted by every Western Country but for our.
There is a balance in everything and maintaining a strong self interest in creating wealth to benefit you and your family is in the society interest, however so is taking care of the mentally ill and the sick even if they are on the bottom of the economic pile.
Posted by: WRM
8/29/2008 10:30 PM
My Commentary:
WRM, 8/29/08
The "structure"...the proper social conditions...for wealth creating are "set" by nature and the requirements of man's survival, not "society as a whole". Those social conditions need to be discovered, not "set" by the arbitrary whim of "society as a whole" or any group or individual. There is no "society as a whole", as opposed to its individual members. The great achievement of the Enlightenment thinkers and of America?s Founding Fathers was to discover, and implement, those social conditions. The result was the first nation on earth to be established based on the supreme value of the individual...all individuals...his unalienable rights, and a government designed to protect those rights. They recognized the power of every person's rational faculty...his reason...and established the individual freedom to act on his reason, which is nature's requirement for man to survive and thrive.
All wealth is produced by individuals, whether acting alone or in voluntary cooperation with one another. It is not produced, nor owned, by "society as a whole". There is no "whole," no supreme tribe, in America. There are only individuals possessing rights to freedom of action and freedom from predators. The only proper way to "share" wealth in a free and just society is through voluntary trade to mutual advantage...not by force, governmental or otherwise. Likewise, America's infrastructure (roads and bridges) was built mostly by private contractors and paid for by taxes. If your property rights are forfeited because you use the roads and bridges that your taxes helped pay for, as you seem to be claiming, then that is one of the best arguments for why governments shouldn't own or finance any infrastructure.
The building of the railroads was a great achievement of productive industrial geniuses who brought great benefits to their fellow men and helped lay the foundation for the great prosperity to come. Unfortunately, that achievement was marred by government interference. Some of the railroad builders used political connections to obtain government grants, subsidies, franchises, and legal protection from competition (which created the infamous coercive railroad monopolies). That was wrong and so is taxpayer funding of sports stadiums and a whole host of socialism-for-the-rich schemes. Corporate welfare handed out by politicians flush with taxpayer money in the name of "the public good" is a violation of individual rights.
There is no right to healthcare. There is no right to any manmade product of any kind. There is no right to wealth created by someone else. For a right of that kind to be ensured, the government would have to force others to pay for it through taxation, and force producers of that product to provide it...I.E., to rob and to enslave. A power of that kind in the hands of politicians is the path to tyranny, which is where we are heading. The government's only proper function is to protect individual rights, not violate them. People who are not poor should not be punished for their economic achievements, by being forced to support people who have the same freedom to achieve but didn't.
I agree on this much, WRM. Acting in your own self-interest to create "wealth to benefit you and your family" is, indeed, a benefit to "society." That is because of one simple reason?"society" is only so many individuals. And you, and every individual, is a part of society. When an individual benefits himself through his own productive work, he thus benefits society because he is society. He benefits ?society? in another very important way...by providing a product or service that others find valuable enough to buy (to trade for). By "maintaining a strong self interest in creating wealth to benefit you and your family," you are lifting others up as well. And the most productive individuals?those that grow businesses (without government favors) provide jobs as well. But you cannot reverse cause-and-effect. When the state starts violating, rather than protecting, your right to the pursuit of your own self-interest and happiness by confiscating your wealth for someone else?s unearned benefit...however needy...then the engine of prosperity and freedom is headed for destruction. There is no balance between wealth creation and wealth confiscation?between production and theft...between voluntary charity and forcible redistribution...between the protection of individual rights and their violation. Once you?ve granted to government the power to trample the people's rights some of the time, you have crossed the line to where rights are no longer unalienable. And once you?ve abandoned the principle that rights are unalienable, where do you draw the line on government?s expanding power and the people's shrinking freedom? You can't. You no longer have any principle to stand on.
Voluntary, private charity is the way to help those few who are truly unable to help themselves. Destroying the freedom that enables wealth production will not help them, or anyone else, except the rulers.
Posted by: Zemack
8/31/2008 7:58 AM
Posted on Wed, Aug. 27, 2008reprint print email
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By LEONARD PITTS JR.
lpitts@miamiherald.com
'I knew that I was witnessing something special,' Bob Adelman says of watching Martin Luther King Jr. deliver his famous 'I Have A Dream' speech. 'King had put down his prepared remarks and was speaking from emotion.''
He spoke of the promise before he spoke of the dream.
In the first part of the momentous speech he gave at the Lincoln Memorial, the part school children don't memorize and pundits never quote, Martin Luther King, Jr. reminded a watching world that in writing the Constitution and the Declaration of Independence, the founders were ``signing a promissory note to which every American was to fall heir.
''This note,'' said King, ''was a promise that all men, yes, black men as well as white men, would be guaranteed the unalienable rights of life, liberty, and the pursuit of happiness.'' His evocation of this great American promise may be less well-known than King's description, moments later, of his great American dream, but there is, nevertheless, a straightforward clarity to it that compels.
Because where race is concerned, what is American history if not the story of how that promise was repeatedly broken? As King put it five years later in the last speech of his life, 'All we say to America is, `Be true to what you said on paper.' ''
But America never did.
Except that now, here comes Barack Obama, son of a Kenyan and a Kansan, striding to the podium to accept the nomination of his party for president of the United States. It comes 45 years to the very day after King said he had a dream America's promise might someday be fulfilled, 100 years and a day after the birth of the president, Lyndon Johnson, who helped nudge that dream toward reality. The timing requires you, if you have any music in your soul, any soul in your soul, to reappraise both the promise and the dream.
That's what we've been doing lately in our various ways in our various Americas. On the sidewalk outside a Gladys Knight concert, a vendor sells a T-shirt depicting King and Obama shaking hands above the legend, ''Sometimes, dreams come true.'' Meanwhile, they are passing around a ''joke'' on the Internet that has Obama picking Sylvester Stallone as his running mate: ''Rambo and Sambo,'' goes the punch line.
The two extremes have one thing in common: slack-faced disbelief. Could it be? Could it really be?
Apparently, it could.
The realization coalesces something some of us never dared hope and others never dared fear: the idea that one day America would take its promise seriously.
And if that realization requires African-Americans to recalibrate their cynicism about what ''they'' will and will not allow black folks to achieve, it seems plain that the greater shock and sense of dislocation is borne by ''they,'' who must now recalibrate their assessment of what black folks can achieve. Small wonder ''they'' have responded frantically, crying with ever more shrillness that this Obama character is something other, something foreign, something strange. Something not really, truly American.
They have grown used to defining ''American'' as a certain skin color, a certain religion and heritage. They have forgotten that ''American'' was, first and foremost, a certain ideal.
Thomas Jefferson stated it thusly: all men are created equal.
The Pledge of Allegiance says: liberty and justice for all. And King, in that speech 45 years ago, spoke of the day ''all of God's children, black men and white men, Jews and Gentiles, Protestants and Catholics'' would harmonize upon a song of freedom.
Not truly American, they say? On Thursday, a nation whose credo holds equality to be a birthright will see a brown-skinned man, son of Kenya and Kansas, assume leadership of a major political party. No, it is not the panacea, not the End of Race in America. But it is striking evidence of a promise fulfilled, a dream redeemed.
How could anything be more American than that?
My Commentary:
Comments
MLK's reaffirmation of America's founding ideals was a vital foundation for the success of the early civil rights movement in abolishing legal segregation. But his later embrace of socialism as an ideal seriously undermined his legacy.
That is because socialism (i.e., collectivism) in all of its forms...communism, fascism, nazism, welfare statism, et al...is incompatible with those ideals. Collectivism means the supremacy of the group, and the subordination of the individual to group whims. The "the unalienable rights of life, liberty, and the pursuit of happiness"... which includes property rights, without which no other rights are possible...belongs to the individual human being, and only the individual human being. Collectivism is the denial of individual rights.
Rights are a moral concept that defines one?s freedom of action in a social context...i.e., in relation to everyone else. Socially, rights impose a single moral obligation on all of us...to respect the same rights in all others. Unalienable means that each individual is free to act in his own interest according to his own judgement free from coercive predation and exploitation by others...i.e., his rights are absolute. This means that there is no right to the unearned...to healthcare, to an education, to a job...provided by someone else, except in the case of voluntary, uncoerced charity. There is only the right to be free to achieve those things by one's own effort, and in voluntary association and trade with others. To be free from coercion means to be free of all coercion, including governmental coercion. The government's proper job is to protect those unalienable rights-"That to secure these rights, Governments are instituted among Men"- which are possessed by all people, at all times.
There is only one social system under which these conditions are possible. That system is laissez-faire capitalism.
Obama embraces the opposite. He implores Americans, especially the young, to abandon their own personal pursuit of happiness...their dreams, career goals, and desires...and instead embrace the theme of his campaign. Service and sacrifice, he says, are what America is about. But a call for servitude to one's neighbor, one's community, the state or the nation...and the call for Americans to sacrifice, not to pursue, their individual values and happiness...is as alien to American ideals as one can imagine. It is the siren song of socialism, not capitalism...of tyranny, not freedom.
Obama should correct the contradiction in MLK's legacy, by calling for policies that are consistent with every individual's unalienable rights to his life, his liberty, his property, and the pursuit of his own happiness. He won't, though, because he is a collectivist through and through. Obama's America is one of servitude and sacrifice, not the pursuit of happiness. His is a vision not of a better America, but of a poorer, less free America.
Yes, it is a significant American milestone that "a brown-skinned man, son of Kenya and Kansas, [will] assume leadership of a major political party." But only when all Americans recognize the true meaning of the words "the unalienable rights of life, liberty, and the pursuit of happiness" will we have "striking evidence of a promise fulfilled, a dream redeemed."
How could anything be more American than that?
Posted by: Zemack
8/28/2008 6:51 PM
Other's Commentary:
Zwemack labeling any program to even out the playing field and the wealth of this rich country with names such as socialism, communism welfare state or what ever is a shameful behavior in my opinion and only play for people who already share your world view.
Here is another label for you oligarchy as in the form of government we are now enjoying under the Republicans where we have government for and by the top 1 percent of the economic population.
Sorry if I am more concern about the sick and poor then I am for the shareholders and CEO of the health insurance companies and therefore wish us to join with the rest of the Western world and get universal health care for all.
Sorry if I don?t think that anyone should need to sleep and find food in a garbage container even if they are too mentally ill to take care of themselves.
Sorry if I don?t think that we should continue a system that have the top few percent of the population owning and controlling the whole country for their and their children benefit and the hell with the rest of us.
Yes you are right we could go too far in the other direction but I will start worrying about that after we start acting like a caring society for the least people amount us and stop the decline of the middle class.
Posted by: WRM
8/28/08 8:02pm
My Commentary:
WRM
"Zwemack labeling any program to even out the playing field and the wealth of this rich country with names such as socialism, communism welfare state or what ever is a shameful behavior in my opinion and only play for people who already share your world view."- WRM
Welfare statism is based on the principle that the state, acting for the "good" of the collective, holds the unlimited power to confiscate the privately produced wealth of its individual citizens and that that principle supercedes the good of those citizens. It holds that rights are a collective (i.e., group), not individual, attribute. It is the negation of individual rights. "Any program to even out the?the wealth of this rich country" is welfare statism. It is a form of socialism different from communism or Nazism only as a matter of degree, not substance. If you can tell me how welfare statism is fundamentally...i.e., in principle...different from any other form of socialism, I'd like to here it.
"To even out the playing field" is the very purpose of the words of the Declaration of Independence that Mr. Pitts, and MLK quote. That all men are created equal possessing the unalienable rights of life, liberty, [property,] and the pursuit of happiness is intended to do just that. It means that rights are inseparable (unalienable) from each as an individual, and are held equally, by all people, at all times. You can't get a more level field than that. All wealth is produced by people exercising those rights, and "any program to even out...the wealth of this rich country" through the coercive power of the state is nothing more than legalized theft and violates the principle of "unalienable rights" and negates this country?s founding ideals.
"Sorry if I am more concern about the sick and poor then I am for the shareholders and CEO of the health insurance companies..."- WRM
That statement inverts an immutable fact of nature...production comes before consumption. The wealth that humans need to live and flourish...from nails to computers to food to healthcare...does not just materialize in nature but must be produced through a process of reason and productive work. Wealth production requires certain social conditions to occur...freedom and a rights-protecting government. Every individual must be free to think and act on his own rational judgement, to set his own goals and to strive to achieve them by his own effort, and to engage in voluntary trade with others, free from coercive interference by others. The American ideal of unalienable, equal rights is the principle that guarantees the proper social conditions for man to produce. Anyone who disregards the unalienable rights of life, liberty, [property,] and the pursuit of happiness of "shareholders and CEOs and the top few percent of the population" or any other producers cannot claim "concern about the sick and poor." Production comes before consumption, and individual rights comes before production. That is not my worldview. That is an indisputable fact of man's nature and of reality.
It is not your concern for the sick or of those down on their economic fortunes that I object to. It is your means of helping them. Charity is a worthwhile pursuit only if it is uncoerced and voluntary. Each individual, possessing unalienable rights, must be free to decide who, when, and in what capacity he will assist others based on his own value-judgements and his own available resources. Someone who wants "a caring society" would not force his own idea of worthwhile charity on others. Claiming "concern about the sick and poor" and then demanding a government program to force others to pay for the luxury of your compassion makes you out to be thoroughly PHONY.
If charitable help for the down and out and increased economic opportunity for the poor is your goal, then increased production of wealth should be your first goal. This means unalienable rights and capitalism, not welfare state programs that confiscate wealth and violate rights and thus diminish production and economic opportunity.
Posted by: Zemack
8/29/2008 6:14 PM
Other's Commentary:
Zemack the society as a whole set the structure for wealth creating and as such, we all therefore have a right to share in that wealth. No individual have the power to create wealth without using the inter-structure that the social as a whole had build.
Is it not strange that the granting of public lands by the millions of acres for example to the railroad companies in the 1800s for the public good is fine but not the transfer of some of the wealth to the poor also for the public good is somehow wrong?
It is somehow fine to grant land and share the cost of a ball park in down town Miami to a private firm to the tune of hundred of millions of dollars but not to build low income housing costing millions!
The poor should not to have to plea for health care it should be their right to not die due to being on the bottom of the economic ladder and that right is accepted by every Western Country but for our.
There is a balance in everything and maintaining a strong self interest in creating wealth to benefit you and your family is in the society interest, however so is taking care of the mentally ill and the sick even if they are on the bottom of the economic pile.
Posted by: WRM
8/29/2008 10:30 PM
My Commentary:
WRM, 8/29/08
The "structure"...the proper social conditions...for wealth creating are "set" by nature and the requirements of man's survival, not "society as a whole". Those social conditions need to be discovered, not "set" by the arbitrary whim of "society as a whole" or any group or individual. There is no "society as a whole", as opposed to its individual members. The great achievement of the Enlightenment thinkers and of America?s Founding Fathers was to discover, and implement, those social conditions. The result was the first nation on earth to be established based on the supreme value of the individual...all individuals...his unalienable rights, and a government designed to protect those rights. They recognized the power of every person's rational faculty...his reason...and established the individual freedom to act on his reason, which is nature's requirement for man to survive and thrive.
All wealth is produced by individuals, whether acting alone or in voluntary cooperation with one another. It is not produced, nor owned, by "society as a whole". There is no "whole," no supreme tribe, in America. There are only individuals possessing rights to freedom of action and freedom from predators. The only proper way to "share" wealth in a free and just society is through voluntary trade to mutual advantage...not by force, governmental or otherwise. Likewise, America's infrastructure (roads and bridges) was built mostly by private contractors and paid for by taxes. If your property rights are forfeited because you use the roads and bridges that your taxes helped pay for, as you seem to be claiming, then that is one of the best arguments for why governments shouldn't own or finance any infrastructure.
The building of the railroads was a great achievement of productive industrial geniuses who brought great benefits to their fellow men and helped lay the foundation for the great prosperity to come. Unfortunately, that achievement was marred by government interference. Some of the railroad builders used political connections to obtain government grants, subsidies, franchises, and legal protection from competition (which created the infamous coercive railroad monopolies). That was wrong and so is taxpayer funding of sports stadiums and a whole host of socialism-for-the-rich schemes. Corporate welfare handed out by politicians flush with taxpayer money in the name of "the public good" is a violation of individual rights.
There is no right to healthcare. There is no right to any manmade product of any kind. There is no right to wealth created by someone else. For a right of that kind to be ensured, the government would have to force others to pay for it through taxation, and force producers of that product to provide it...I.E., to rob and to enslave. A power of that kind in the hands of politicians is the path to tyranny, which is where we are heading. The government's only proper function is to protect individual rights, not violate them. People who are not poor should not be punished for their economic achievements, by being forced to support people who have the same freedom to achieve but didn't.
I agree on this much, WRM. Acting in your own self-interest to create "wealth to benefit you and your family" is, indeed, a benefit to "society." That is because of one simple reason?"society" is only so many individuals. And you, and every individual, is a part of society. When an individual benefits himself through his own productive work, he thus benefits society because he is society. He benefits ?society? in another very important way...by providing a product or service that others find valuable enough to buy (to trade for). By "maintaining a strong self interest in creating wealth to benefit you and your family," you are lifting others up as well. And the most productive individuals?those that grow businesses (without government favors) provide jobs as well. But you cannot reverse cause-and-effect. When the state starts violating, rather than protecting, your right to the pursuit of your own self-interest and happiness by confiscating your wealth for someone else?s unearned benefit...however needy...then the engine of prosperity and freedom is headed for destruction. There is no balance between wealth creation and wealth confiscation?between production and theft...between voluntary charity and forcible redistribution...between the protection of individual rights and their violation. Once you?ve granted to government the power to trample the people's rights some of the time, you have crossed the line to where rights are no longer unalienable. And once you?ve abandoned the principle that rights are unalienable, where do you draw the line on government?s expanding power and the people's shrinking freedom? You can't. You no longer have any principle to stand on.
Voluntary, private charity is the way to help those few who are truly unable to help themselves. Destroying the freedom that enables wealth production will not help them, or anyone else, except the rulers.
Posted by: Zemack
8/31/2008 7:58 AM
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