Sunday, November 6, 2011

The Clueless Occupiers from La La Land

By Son of Bastiat

“I’m not the 1 %. I’m not the 99 %. I’m me” – Vinnie, a self-made art entrepreneur

One of these days, without wishing that fate on them, an Occupier, a pedestrian, a bystander along with scores of others will have their asses kicked, heads cracked, ribs broken, limbs severed or worse, in an orgy of violence that will erupt over issues that few of them have clearly grasped, and thus have little chance to influence: economic justice, income distribution, bankers’ greed, corporate power, welfare or whatever other causes of their disempowerment. Apart from providing critical mass and excitement that liberal media love to hype, they will end up as little more than cannon fodder for clever agitators with more focused and sinister agenda, the useful fools that revolutions since time immemorial have relied on for the dirty job of capturing mass movements that just as quickly fade into egoistic fantasies.

When it happens they will experience the imperfect, unforgiving world first hand. They will learn about the millions who, just like them aspire to better lives, but the pursuit of which result in making life less than ideal for themselves and everybody else. They will meet the legions who, day after day, suffer the cruel stings of unintended consequences, their best efforts and purest intentions notwithstanding. Maybe they’ll appreciate how sordid the “human condition” is, from which their efforts to escape embroil them in all sorts of transference problems. If they’re lucky they’ll learn how the complications in their lives grow in proportion to the degree they fantasize “how the world ought to be”, rather than “seeing it as it is”. They might conclude that much of their beef about life is delusion willfully indulged.

Parsing Egalitarian Entrails

They hate it that the world is too unequal? Well, so do I, but to get anywhere, a precise definition of “inequality” is needed. Time magazine offers one aspect of it: average incomes of $ 1.5 MM and $ 50,000 for the 1 % and 99 % of all Americans respectively. But do they really think that eliminating differences between two figures is all there is to it? Sadly it isn’t, because income (or wealth) gaps hide more things than are apparent on the surface. Just ask: will dragging the 1 % down and bringing the 99 % up make things better? The answer is no, because even if the latter are numerically superior, it punishes the few “heavy lifters” and rewards lots of underperformers, with the result that society as a whole ends up less productive.

And why should productivity matter? Because in the long run, redistributions that do not ensure wealth creation end up making things worse – just look at how farmers who receive land after land reform without provisions for making them productive promptly lose them, leaving agriculture worse off than before. Instead of bringing people down it would be better to create opportunities; taking away the fruits of work of the 1 % will lead to a capital strike that reduces those opportunities. Few Occupiers realize that this nasty “come back” is what causes their joblessness.

But what if perceptions of “just” differences are frivolous or subjective? If there is no objective basis for doing it, income and wealth will be redistributed with neither the support of givers nor the gratitude of recipients. It’ll not be easy but even assuming that it can be done, keeping it there will require constant infringements on every one’s freedom or expectations, which as Machiavelli pointed out, endears the egalitarian to neither. Thus redistributions don’t last long, especially if people are free to do what they
want, from refusing to create wealth to running away from it altogether (now rampant in the US and even China) . Instead of removing inequalities, they only end up making them worse and permanent.

Voluntary redistributions via taxes are only a tad less chaotic, requiring one to reconcile peoples’ differing needs for, and respective contributions to the creation of that which is sought to be equalized. Unless everyone yields to reason or sense of moral worth, disagreement will lead to discontentment. Redistribution even with volition means that one doesn’t care how motivations and capacity to generate wealth are affected; all that matters is less inequality at whatever the consequences. Coercion can effect and maintain it, but eventually egalitarians will have to make up for what is lost in the process, with the result that the 99 % will have less income and no jobs. Such are the calculations of fantasists.

This is why the most practical distribution policy (Rawls’) aims not at full equality, but the toleration of some of it in exchange for motivating those who contribute more towards wealth creation and income generation, provided that that those at the lower end of the distribution scale are not made worse off as a result of the policy. It admits that no human society – even the most truculently egalitarian - can avoid inequality; it is a matter of how well members can tolerate it, and of where they have a better chance at rectifying it if they can’t. If that approach still creates too much inequality, blame those who formulated policies that produced such outcome, even if they did it in error; make them pay dearly for such outrage especially if they did it with malice. Just don’t redistribute wealth or income arbitrarily as not only would it fail to solve that problem, but will likely end up worsening it. To Proudhon’s “Wealth is theft” must be added: “Punish the thief, suffer the loss of what he gives you”. Even bad men do produce a lot of good.

Do You Understand the Moral Roots of Greed?

As with inequality, much depends on what “greed” exactly means and whose vice it is. Unlike inequality which is retrospective and is not an absolute requirement of growth, greed is prospective and central to the achievement of that growth. This is why greed is a double edged sword that can do a lot of good (when used by the right folks) or evil, if otherwise. What one can’t simply do is judge those who indulge in it, without inquiring as to why and what their roles are. Like inequality, perceptions about greed tend to be colored by subjective understanding of what is required in such roles. This is why folks find greed by others offensive (but not as much if done by themselves) – it’s the resentment in being excluded from the benefits especially if they don’t know whether they deserve them, or whether they can deliver what’s expected in those roles. Like inequality, greed defies analysis using subjective, overt comparisons; greed goes beyond by being self-referential, never looking at what the other side needs.

If those perceptual problems are not bad enough, one will also be held hostage by moral baggage that he acquired in the society he grew up. Philosophers have pointed out how moral judgments arise from extending beliefs outside of their proper boundaries, while psychologists link them to the mysterious operations of the subconscious, but let’s skip those because they require making shaky assumptions about the purpose and meaning of life. Let us focus on how thinking processes are affected by language and word usage, largely without individual awareness. It turns out that a lot (not all) of moral judgments flow from nothing more than beliefs shaped by personal, family, tribal and community values. A lot of moral judgments (again not all) have little to back them up save for local values (e.g., fairness, justice, etc) that a community holds as sacrosanct. To make matters worse, this error of thought is compounded by carelessness in sentence construction and meaning of words. To Vaggini errors of moral judgment result from illogical transpositions of the subject and object in certain types of sentence structures. As astonishing as that sounds, what the above claims mean is that excessive concern for greed (and also inequality) are the products of self-awareness; anything beyond that is pure, unadulterated fluff.

At any rate there is no need for these uneasy assumptions for there is a simpler explanation for the mental aberration that disposes one to view everything that does not align with his personal ideas of what is just, as greed and “therefore” immoral: the arrogant belief premised in one’s having ALL the facts needed to make a particular moral judgment. In today’s volatile and extremely complex world, that assumption betrays irrational hubris. How else to explain why, in the aftermath of the financial crisis, the sanctimonious quickly and totally blamed it on “greedy bankers” when, in light of perfect hindsight, it turns out that their legitimate roles (as a class, for particular behaviors can never be explained by any general theory) as maximizers of gains were enabled by bad regulation and politically tainted policies which relaxed origination standards and encouraged leverage in pursuit of a policy goal (mass housing).

Unlike politicians, the bankers were performing what they were trained to do, which is to generate profits within silo-like environments that were bereft of sufficient information and understanding, thus amplifying unknown events occurring elsewhere. Save for a prescient few who “boasted” of being right early on, the character and severity of the crisis was generally not foreseeable even by economists who lacked market insights and experience to predict it, let alone prove conclusively that an emergent system could not “right” itself, especially that what finally pushed the system over the cliff are not these mistakes but the flawed decisions of the system’s liquidity managers who erred in dealing with, what else, a no-precedent crisis. Folks who blame greed for the crisis sans any qualifiers (e.g., errors of judgment or irresponsible behavior under complexity), are at best being naïve about human behavior in dynamic systems; at worst they are romanticists who can’t psychologically cope with uncomfortable causes for events that they can’t mentally grasp, so they default to the easier search for demons to exorcise. The fact that conflicted “greed”, if properly harnessed is vital to wealth and job creation should caution those inclined towards simplistic judgments, to ponder the risks of demonizing a vital part of economic life. An inability to entertain two opposed ideas without hiding psychic baggage is a sign of a weak, delusional mind ever seeking relief in transference. Moral outrage is a sop to a guilty conscience.

The Dilemmas of Corporations and the Welfare State

Let’s go right to the heart of issues that protesters are correct to raise even if they can’t quite articulate them well: the legitimacy of Corporations because of the unprecedented powers they have amassed, both outside the sphere of market operations and in their ability to corrupt society through their strong influence over the political process. Who in his or her right mind would question such motive, but it is also true that such ideal goals involve tradeoffs at a stiff price. But if that isn’t bad yet, Occupiers compound their woes by thinking that a non-market solution – the welfare state – can solve the problems they decry, namely slow economic and job growth. Like democracy, the corporation is far from being an ideal solution, save all other alternatives are worse – their tradeoffs are more expensive.

A little history should remind one that the modern corporation is a recent phenomenon, a caricature of the weak entity that it was in the last years of the 19th century or even up to the early years of the 20th. Massive needs for capital by technology, the imperative to diversify markets for stability of growth, and the centralization of authority to deal with efficiency issues and control the resulting complexity – all these led to the amassing of power (and thus its abuse) by those who lead these organizations. That most of them were self-appointed and not responsible to society or even to the corporation’s owners (who got castrated in the process) is not their fault; say what you want about the Law’s failure to come up with the proper legal safeguards or about regulators’ duties to properly enforce the rulings, the fact is that the corporation is the suboptimal solution that has successfully delivered on two of society’s most critical survival desiderata – employing the hundreds of thousands of its members who must earn a living at the least expenditure of time, money and effort; and effecting the efficient conversion of resources into sustainable growth. That many corporations have failed these tests or thwarted their attainment is no reason to reject all of them, unless one is sure that he has a superior alternative.

As one scans the landscape, he finds that few of those are worthwhile candidates to replace it. For the criteria boils down to what extent those vehicles’ decisions can take place within the influence of market discipline, especially as they undertake decisions that have non-market ramifications and “external” influences, such as is the character of social decisions today. The problem is that the boundaries delineating these decisions are booby-trapped with unknown costs and outcomes, which sets this back to the old nemesis, unanticipated consequences. Folks of a disposition akin to those we have met above – a moral repugnance for any inequality and the slightest hint of (unqualified) greed, prefer that non-market solutions predominate. What they claim little or no awareness of (or if they do, are uncomfortable to admit), is that such alternatives involve an explicit if seldom acknowledged tradeoff between two opposed ways of thinking about modern society: a market-responsive one typified by corporations (economically successful but rapacious if uncontrolled) and a non-market driven welfare state (inefficient, wasteful, unsustainable), its only tested alternative. The harsh reality is that one can only choose between two, imperfect solutions, but one of which tends to make the outcomes worse.

None of this defends (let alone excuses) the modern corporation’s hideous handiwork in vital concerns as environmental degradation, unsustainable exploitation of natural reserves, manufacture and exports of death-dealing weapons or drugs, aggressive lobbying to influence regulatory and electoral outcomes, all the way to outsourcing jobs that have no logic other than maintaining “competitive presence”. On the other hand, one has the welfare state, ostensibly set up to take care of those with neither the means nor the knowledge to protect themselves against the vagaries of nature or the rapacity of the markets. What it achieved instead was to siphon the resources that could have been used to get the economy to grow faster in order to lift those at the bottom of the social pyramid, which it diverted to politicians, bureaucrats and parties such as labor unions, with interests vested in perpetuating inefficiency and the sense of entitlements that resisted all reforms that threatened their hold over votes and sources of patronage. It is supreme irony the real threat to the world economy today comes not from the much excoriated “corporate greed” but from explosive public debt, a legacy of the welfare state. In matters that affect society the most – jobs and economic security- the corporate economy, warts and all, trumps the welfare state. To want to kill it while growing the welfare state is not only ludicrous but inane.

Hence the question is: what are Occupiers’ beef against corporations, and why their quixotic preference for such losers as the inept, inefficient and stodgy welfare state to deliver what is important to society? Could it be that the reason they condemn the corporate economy and praise the welfare state is that
they are psychologically insecure with competing in the marketplace where they can get their asses kicked in spite of a (academically indulged) pretense that they’re good. Well one is not THAT good if he must seek solace for his wounds from the womb-like comforts of a nanny, which the welfare state is. The tragedy is that Occupiers do not see that they are ditching imperfect solutions that work in favor of worse ones that have failed miserably, as close to the definition of delusion as one can have.

What Their Real Problem Is: Externalizing Inner Failures

Three years ago a young man asked to talk to me one on one. Thinking that it had to do with his long put off marriage plans, I braced for some unanticipated news: an unplanned wedding, or worse a split. As soon as he sat down gravely on the couch, I sensed that this was a devastating issue, and indeed it was: his job would not be renewed the very next year when he and his fiancé had planned to finally marry. I sat down silently as I listened to him detail the reason for the painful news: that despite being a talented art teacher, well-liked by peers and adored by his students, the artist in him just was not up to the administrative and routine demands of the job. As I observed his face turn grim and his eyes shed tears of anger, frustration and fear, I fought hard to explain and reassure him that being fired was not the end of the world; how I, too, once faced such a disaster, which I overcame by acquiring more expertise than my “firers”, which facilitated my foray into opportunities far beyond what I could find working for others. After going through this human moment we knew that there were serious things we had to do; none of those was about blaming our immigrant fates or the society that gave us our breaks. It was all about coping with life’s challenges as best as we can, as they unfolded in all of their stark harshness.

I wasn’t expecting to see how such an experience could be improved upon and surpassed by this young man who rose above this depressing episode, so well that in the span of less than three years, with a little less than a thousand dollars in seed money, he built a business that his peers now rate highly as an upcoming global sports art licensing and branding business, with fans from all corners of the world so rabid as to tattoo his art work on their bodies. Recently he capped this feat by co-branding and licensing his products to, and partnering as creative designer for, a leading US apparel firm that sells to 1,400 outlets. Looking at it now his dramatic turnaround owed mostly to personal discipline, adhesive-like perseverance, a refusal to get overwhelmed by lots of handicaps (we are outsiders), and a can-do spirit that drives him to excel amidst all odds. Instead of ending up as a loser he turned himself into a self-made entrepreneur who neither gave up nor depends on others for support, refusing to externalize his problems by blaming America for his share of life’s trials. Recently we had occasion to watch a rowdy O.W.S rally blaming the 1 % for their problems, and here is what he said: “I’m not the 1 %. I’m not the 99 %. I’m me, doing what I can to change the world”. I copyrighted and used it as the idea for this essay.

Other than the fact that terribly misguided can be useful in waking up society’s often moribund senses, there is not an iota of logic or fact to back up the O.W.S. positions, no matter how well meant and sincerely they are held. This is why they cannot come up with concrete proposals, and why they prefer to wallow in ambiguities, fearing that taking positions will force them to confront extremely painful realities, not the least being their conflicted inner selves. Why risk the embarrassment of a firm position when in vagueness one can indulge the airs of moral superiority? Could it be that this phenomenon called O.W.S. is the escapism of a bunch of badly raised losers who have succumbed to life’s vicissitudes and blamed America for their misfortunes?

Instead of wasting energy occupying idle real estate, why not build something concrete and useful on top of it?

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