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?

Why is European Civilization Collapsing?

By Son of Bastiat
  
“A culture of defeat and pessimism, abetted by faux compassion, brings the world down on its knees”

Scanning last week’s Time Magazine after this essay had been substantially written, after the Dow Jones Industrial average had again plunged down (at one point by as much as 528 points), and after parts of the smoldering city of London had quieted down into ashes and cinder, the author tried hard to discern what it will take for pundits to understand the reasons why civilizations explode violently with such suddenness.

Once again the economists blamed it on the effects of runaway sovereign debt and fiscal spending. The sociologists were blaming the withering effects of these cutbacks on the welfare state. There was recognition that something else more fundamental was at work, but few speculated on what it was. Slowing down economies and failing welfare programs are decades long phenomena no longer fit to report unless there is something new. . . like China’s impending societal collapse, though like Europe it eventually shows up as an economic one.

China’s collapse, a word that should no longer surprise considering what’s happening in Europe, is now increasingly suggested by decadal indicators showing marked slowdowns in export manufacturing, higher defaults among SOEs, steeply rising past dues of banks, increasing loans by local and provincial governments, and anemic consumer retail sales. These indicators have trended down for a while so “imminent” may still be warranted.

But unless China can quickly rev up its exports at a point when the global economy itself is in serious recession (by collapsing prices and letting its currency depreciate despite raging inflation), its only hope for growth is in ramping up public investments fueled by money creation or a drawdown of its reserves. With China’s capital to GDP ratio now at a precarious 5 x, more capital offers limited prospects. But these measures only tell the late, “economic” part of the story.   

After investing in big infrastructure projects to prop up demand, and cutting back on environmentally or technically flawed projects hastily implemented to boost GDP, China looks increasingly like chasing after a mirage. For the next few years China’s overinvestment will become an albatross to growth, further stressing out its already undercapitalized banking system, which in turn will then cut down on small and medium term loans that represent China’s last hope for growth, having for too long delayed the strategic restructuring needed to free up consumer spending.

A long period of slow growth is now the payback for China’s delayed exit from mercantilism, with all the ills (of degraded environment, extreme inequality, and limited consumer choices) attendant to that system. Command economies can always buck trends as China has done for the last two decades, but they can only delay the inevitable reckoning. File it under a materialist system that, well, fell short of delivering the materialist Shangri la.

The Skinny on Global Recessions

This extended reference to China’s economic woes is done not to criticize it (its economic and business managers must rate at the top given the problems they had to contend with) but to let the reader better appreciate the kinds of problems that are now hobbling the major economies, and why snapping out of the present global malaise is not a matter of revving up exports or ramping up capital spending.

For one, it highlights a key aspect about the present economic slowdown – that whereas previous global recessions could count on offsetting growth performances, the present recession is one where all three major economic engines (EU-US-China) are in 0,-1,2 (comatose-stalled-slowdown) mode. The other third of the global economy would have to miraculously double their share to nullify the losses from these 3. Second, whereas most past recessions were triggered by a collapse in effective demand, the most pernicious feature of the present slump is the compression of purchasing power as banks and households de-lever their massive debt accumulated during the prior decades of growth (added to fiscal irresponsibility).

For the first time in over a half century, psychological and institutional incapacity render the economy impervious to monetary and Keynesian stimulus. Pessimism over bankruptcy and lost net worth is driving the economy over the cliff, which deficit spending or liquidity infusions cannot easily reverse. 

The Strange Case of Europe and the EU

With China’s economy all but ready for major surgery, and the US badly gasping for sharper, bigger and targeted growth-oriented intravenous infusions, the Eurozone is the world’s last and only hope for recovery. But after months of indecisive deliberations and hectoring about the “evils” of Greece-type bail outs while doing little to reverse member country budgetary infirmities, the Eurozone is now about to reap the fruits of a peculiar “double barrel” approach to resolving conundrums: its two top economic workhorses all but technically in a recession – France which barely grew at 0.1 % Italy and Germany at 0.2 %. With lending in Western Europe and the former Eastern Bloc crimped by bad bank balance sheets, the chance of their picking up the slack opened by France and Germany is negligible if not zero.

So for all intents and purposes the “comatose” description for the EU is, or has not been, too far off the mark and with US and China heading to their respective gurneys, that can only bode ill for the prospects of global recovery within five years. The words “Europe” and “malaise” are synonymous in this regard.

In fairness to the Eurozone countries, their leeway for solving economic problems are lashed by a tight straightjacket that without careful thought they hastily rushed into – forming a common currency union without ascertaining its workability amidst differing taxation and spending regimes of 17 sovereign and disparate cultures. Eurozone banking practices and standards which were to have been harmonized for common monetary policy to work effectively could not accommodate the member countries’ different rates of growth, inflation and stages of financial development, causing lack of coordination and control right in the very heart of financial policy which is what a common currency tries to facilitate.

The result is the present ECB reduced to a de facto Central Bank unable to monetarily work with 17 separate fiscal entities all of whom are beholden to local constituencies and vested interests. For anyone who has lived and worked in Europe as the author did in the 80s, this is Europe at its classically, dysfunctional, worst.

But Is Lack of Policy Coordination THE Reason for EU’s Malaise?

Those folks who have monitored these broad trends for other than quarterly or year-end assessments cannot help but wonder whether there is anything more, other than the parochial and exclusionist mindsets that are the standard indictments of its culture that explains why Europe is what it is today. There is in fact an honest answer to this question, although it tends to be ignored if not violently ridiculed by the elites, an effete group of faux glitterati and pseudo-intelligentsia, children of the Enlightenment who have long been in denial but who now must confront it unless they wish to become even more irrelevant and parasitical than they are now.

The real answer is that Europe is what it is today because it has turned its back on the roots which for centuries have been the nurturers and anchors of its vibrant, optimistic and creative culture, supplanting them with a culture of death and despair that now turns most ordinary decisions into epic struggles for survival. It is called atheistic humanism.

There is nothing novel or even earth-shaking with this statement, being the underlying theme of the writings of perceptive men like George Weigel (“The Cube and the Cathedral”) and Niall Ferguson (“Eurabia?” and “War of the World: 20th C. Conflict and the Descent of the West”). In their view, Europeans’ contempt for religious and secular tradition pushes them to the cult of the contemporary (Brague) which prevents their drawing the most obvious conclusions about the impending bankruptcy of their economic culture. One sign of this pessimism is its refusal to provide for its own defense, and engage in the most fundamental duty of raising the next generation, with the result that “Europe’s biggest problem is senescence” (Ferguson).

Once thought to be a rejection of and withdrawal from the most shameful aspects of their history, it is now believed instead to result from a deliberate denial of the transcendent roots of its religious traditions. If the reader wants proof, just look at the EU Constitution that Europeans adapted in June 2004 – at 70,000 words (7 times longer than the US Constitution) and not one word or phrase acknowledging Europe’s Christian patrimony.

The inevitable culmination of such beliefs (and the policies they give rise to) is the demographic suicide and pessimism about the future that is so rampant everywhere in the Europe of today. That attitude is inimical to achievement, generating the growth-paralyzing confusion now so rife in that Continent.

The Modern Economy’s Cornerstone in Faith

One reason why Europeans who see themselves as modern in both outlook and intellect have so little regard for transcendent values, is their arrogant belief that anything that cannot be sensibly grasped or even only comprehended by the mind in the context of past or contemporary experience, has no valid standing in reality and should therefore be discarded as pure fictions or figments of imagination. This empirical and physical criterion for what is real flies in the face most ordinary phenomena which many people who call themselves “reasonable”, take to without much doubt or incredulousness, such as most hypotheses about people’s motives or expectations about near term events.

If this skepticism was a mere result of hidden complexes or repressed behaviors, the same intellectual elites would readily adapt to them without question. No, the problem is much deeper, and a useful insight to it is a dialogue between the followers of the medieval friars Aquinas and Ockham, whose views about reality would determine the course of modern philosophy over the next five hundred years. That debate concerned the question of whether Platonic universal concepts can exist outside the mind, with those who deny it (the “Nominalists”) saying that universal ideas only exist inside our minds, meaning that there are no such things as “human nature” or “freedom”, only particulars like persons and the choices they make.

Pushed to its ultimate conclusion it means that there are no objectively good or bad things, only events; it is the heart of the materialistic creed that in totalitarian form has caused so much evil and mayhem during the 20th C. If the reader needs proof of the power of bad ideas and their consequences, this is it.

Those deeply into philosophy see in nominalism (and its modern day offshoots) a vain attempt to put an objective spin to what in essence are transcendental matters, finding its highest expression in the harsh empiricism of Hume, Locke or Hobbes, to whom there are no such things as morality; in the Positivist ideas of Comte who taught that science was humanity’s only reliable beacon; all the way to the “usefulness” criterion of Pragmatists Mead and Dewey. The problem with these ideas is that their bold claims of logical validity all run smack against the upper limits of the scientific method, which insists on complete un-falsifiability as the only legitimate test of validity. But as Kuhn said, scientific paradigms at best reflect the “objective” views of parties with vested interest in its progress.

In spite of this, philosophers’ bent on denying the scientific existence of universals have fought hard to win the mantle of scientific objectivity, with little sympathy from scientists. This is a warrant against those who work in the social sciences and humanities, who keep aspiring to scientific objectivity when studying human beings and their institutions; science itself is, at bottom a conjectural and culturally suffused endeavor.

This detour into the innards of scientific philosophy and theory of knowledge is crucial because its gross misunderstanding is what lies at the heart of all the problems that bug the modern economy – the claim that a scientific or empirical approach without consideration of transcendental values can help derive the best solutions for improving society and perfecting man. In this deformed interpretation of reality, only a values free approach to economics (or indeed to social sciences) can guarantee objectivity and optimal results.

The results of that arrogant assumption are now seen in the grotesquely deformed global economy. How else to explain the durability of such views in modern endeavors (politics, economics, management, etc.) except as a rejection of universal, transcendent values? Why should it surprise us to see the sorts of behaviors that led to the financial crisis, or that poverty continues amidst so much plenty? Or, for that matter, why does Europe continue to meander despite its claims to cultural and scientific enlightenment? If the reader is wondering whether he’d ever see a day when not believing in transcendental values could actually cause material society to crumble, he is not without company.

Europe’s malaise, which ultimately is rooted in inordinately high pride, makes its reversion to spiritual redemption too difficult, deferring any prospect for a return to the origins of its civilization. If the greatest drag to recovery is now Europe’s disarray and its dispirited economy, isn’t this proof that atheistic humanism abetted by the faux liberal view of compassion is the greatest threat to world order? [If a humbled EU is the warning that the Apocalypse referred to, then China would be wise to listen]. 

This is why the Pope’s recent visit to Spain to bring the message of hope and renewal was directed at the young who are, after all, both the inheritors and fount of such values, sending the message that there is no hope in secular humanism and atheism that reek of the stench of death and pessimism.

Isn’t it sweet irony and comeuppance that Europe’s (and the world’s) only hope of material survival now lies in the transcendent values which they vehemently deny?

[http://sonofbastiat.blogspot.com; copyrights VRR@NYC2011]  

Is Warren Buffett Smart?

By Son of Bastiat

“Financial genius is before the Fall” - John Kenneth Galbraith

Almost by universal acclaim, the answer would have to be a resounding Yes! For how else would it be responded to except affirmatively, based on what “popular wisdom” knows and says about the man:

a.  The world’s second or third wealthiest man (only Slim and Gates are wealthier according to Forbes). Better yet he found his way there through patient value digging, not market rigging

b.  A lot of this wealth is in liquid form, being shares in large, established publicly traded companies

c.  Unlike Gates or Slim whose wealth are tied up in narrow sectors (telecom, software) Buffett’s wealth is diversified across sectors that the first two wealthiest men can only dream of.

So, from the narrow standpoint of investment quality, Buffet is not only smart but astute in ways that the other two aren’t. The real question is: How does his “smartness” fair outside of this narrow area?

Probably Not As Smart As Supposed

We’re not talking about his stock picking abilities which based on his mistakes in later years have not been as legendary or exceptional as the ten baggers (like Coke, W. Post or Geico) of his early years in the stock market. We are also not referring to his mediocre currency derivative bets that turned out poorly (disclosed in the Annual B-H Shareholders’ Letter) that luckily got offset by spectacular stock futures option trades (from hedge fund gossip) which tells those who know how these markets work, that his prowess is now based more on selecting the right stock options traders and managers than any innate value creating abilities unlike during his early stock picking career. In fairness to the man, he eschews esoteric investment ideas beyond the OPT so he does not invest and hence eats the kind of losses that reckless hedge fund traders do with loads of chutzpah. This Graham disciple remains so today despite the fact that very volatile markets are not kind to value investors.

No, we are here talking about the fact that outside of his stock-picking (and manager’s selecting) skills, the man is a complete novice, if not a dodo in the larger economic environment of which investing is a tiny part. This is based on only one, but a very central aspect of that reality, the question of what taxes ought to be paid by people like him. As explained below, it reveals a lot about whether his smarts are innate or merely of the acquired kind. None of this is to denigrate businessmen the way enemies do.

The First signs of Cluelessness

Buffett has for years been quoted as saying that the rich are getting off from their obligation to pay a fairer share of the nation’s tax burden. Last July 7, in a series of interviews that the liberal media quickly picked up and disseminated (for a reason), he said that “I think the rich have a responsibility to pay higher taxes” followed by a statement that his wealthy friends “are paying lower taxes than the people who are serving the food” after an earlier disclosure that his personal tax rate was a mere 17.7 % compared to that of his receptionist of 30 %.

All these populist sounding nonsense fitted in so well with one of the left’s most durable and cherished myths, which is a war among classes, down to the fact that they are mostly wrong:

a.  Effective Tax Rates. From 2008 data supplied by the IRS itself, the share of Federal taxes in household income after deductions and exemptions amounted to 23.3 % for the top 1 % of all household income earners (above $ 380,000); 19 % for the top 10 % of household income earners (above 114,000); and 22.7 % for the top 0.1 % of household income earners ($ 2 MM and above). Contrast this with the 4 % paid by median income households ($ 35,000 and above), or the high, negative effective taxes paid by almost 60 % of all households who either receive incomes too low to be taxed, and/or receive some form of public assistance and entitlement. Talk about equity.

b.  Total Federal Tax Rates. Based on CBO data, the share of total Federal taxes (not just on income but on Social Security and Medicare payroll taxes) paid by middle class families ($ 34-50 thousand bracket) was 14.3 % of income, versus the 27.9 % and 29.5 % paid by the top 1 % and 5 % of all tax payers. Or the 32 % of all Federal taxes paid by the highest income earners. The reader is invited to calculate Gini concentration coefficients to show that these tax rates are indeed progressive.

c.  Effective Tax Rates After Considering the Source. In a 2010 IRS limited study of the taxes paid by a sample of 400 of the nation’s richest personal tax payers, the effective share of taxes to reported- income came to about 18 %. This is the study that Buffett probably referred to, as he would most likely have been one of those 400. Except that most if not all of these tax payers derived their income from investments, meaning that they reported incomes that had been taxed twice, either at the level of dividends (35 % on ordinary income) and capital gains (15 %) for a total tax burden closer to 45 % and not the 18 % that came out from the simplistic division of two numbers. Quite definitely not the level of expertise expected from a seasoned financial analyst like Buffett.

d.  Shelters, Loopholes and Tax Base Reduction Gimmicks. Buffett’s claims would have been more morally defensible had he eschewed the usual gimmicks used by the wealthy to reduce their basis and not just the incomes they were free to report (or defer to a lower tax rate phase in their lives as is commonly done). Buffett is being facetious in comparing his after tax position vis a vis the middle income classes for three reasons: as a wealthy tax payer he is able to take advantage of the tax shielding allowed on donations to charitable causes; he is able to effectively reduce his taxable base by booking most of his income as “carried interest” 20 % of which he can later pay taxes on under a favorable 15 %; and most outrageously of all, with the bulk of his assets already donated to a foundation, he is able to shield them from the high taxes during distribution. These tax preferences for the wealthy the middle income classes can only drool of, but which of course Buffett neither mentions in the same interviews, nor corrects on his own, if he was that convinced of its injustice, by just quietly writing a check for the underpayment towards the right tax amount.

More Evidence of Poor Smarts

If Mr. Buffett was really that smart (not just an astute investor and businessman) he would have figured out in ten minutes why a tax policy based on such idiosyncratic assumptions (ie, provided they were empirically right, which they aren’t), would eventually to the destruction of the very wealth that he along with millions of entrepreneurs labored so hard to create:

a.  Taxes have behavioral, not just fiscal impacts as any simpleton understands. Regional tax data reveal that states with low taxes attract rich and even middle income tax payers away from the high tax states and indeed explains the erosion in tax bases of such states as California and Wisconsin and the surge in tax receipts in tax advantaged states like Texas and Florida

b.  Ditto, but with even worse consequences when US wide data about rich tax filers are taken to consideration. In a study recently released by the IRS, it was found out that the number of rich tax filers shrunk 39 % between 2009 and 2010, representing a 42 % decline in tax receipts over the same period. The favorite explanation is of course the recession, but the really “smart” folks know the true reason, unfortunately they will be apocryphal tales for now until proven otherwise.

c.  Not just that “billionaires and millionaires” ceased to exist, but that those who stayed put in their respective domiciles, apparently indulged in less economically rewarding activities just exactly as predicted by the famous Laffer Curve (a backward looping effort vs. tax rate curve posited by the Chicago economist A. Laffer). A sample of b respondents should easily verify this. These data are not harbingers of the business climate that nurture future successes like him unless he wants it.

Given this obvious conclusion, Buffett’s plea to be assessed a higher tax can’t be viewed any other way than that he is not being smart. As far as can be seen, he is not an ideologue, or a Democratic partisan, and because he is too mature to play the sort of political games indulged in by folks like Obama, he must be pretty dumb to entertain and spouse these views. Ironically it was Galbraith, a liberal economist, who said that smart (finance) people tend to get dumb before they fall. Could he been thinking of W. Buffett?

Concluding Comments

Which brings us to the core question: Why is the liberal class making hay out of these nonsensical ideas (which they have to be dumb to even consider, unless they haul their worn out pleas for fairness-at-all costs)? The answer, once again, is simply this: by shaming the rich into agreeing to pay a higher fraction of their incomes, the path is clear to coercing the middle classes into paying higher taxes.

The fact is that 3.2 million middle income households earning above $ 200,000 paid $434 billion in 2009 taxes, the rich revenue lode that liberals like Obama, checkmated in their borrowing plans by conservatives have been eyeing to grab at all costs. Read that again: At All Costs, meaning, no matter if these folks will flee and take jobs along with them, and regardless of whether the outcome is fair as they like to loudly proclaim.

It is the very imbecility of this idea that has turned off the author from the liberal agenda, realizing that what they are about is mostly Big Government programs that everywhere has bankrupted countries and states.

None of these excuse Americans from having to pay higher taxes eventually, if only because of the mistakes committed by the politicians they have elected previously. But such policy decisions have to be done smartly, or else automatically (like what the author has advocated along the lines of Miller’s The 2 % Solution idea wherein a set portion of the nation’s output is set aside from welfare and social spending) to eliminate these kinds of politically abhorrent decisions that turn folks like Buffett into big disappointments especially in their twilight years. [Copyrights: The Son of Bastiat, VRR@NYC2011]  

Why Not Put Welfare on Auto-Pilot?

“Plus ca change, plus c’est la meme chose” – French for “something’s got to give”
By Vincent Ricasio

Yesterday’s devastating 260 points decline in the Dow, the 7^th or 8^th consecutive drop in as many days, an event which has had no precedent since 1987, despite (or perhaps because of) the president’s signing into law of the debt ceiling increase negotiated last weekend by both houses of Congress, is a portent that things are not going well on the economic front. Many pundits have, of course, have said as much right after the Senate voted on the amended version of the House Bill, but their arguments were more focused on the impacts of the new law on the deficit, and, through that, on job creation, wedded as most of them are to the discredited Keynesian prescription of using government spending to stimulate economic growth, in contrast to the less known but more insightful debt-deflation theories proposed by the Yale economist I. Fisher and F. Machlup, which requires “real” economics to bow down to the “veil”, a not very pleasant prospect for many economists who to this day still dismiss finance as economics "on stilts"

Well, not only has the evidence shattering that myth come again 70 years after the New Deal (the sorry job creation record post TARP II, the $ 787 B stimulus blowout, the mortgage write downs, the cash-for-clunkers and the extension of unemployment insurance, etc.) but there are again rumblings of a second contraction, a reprise of the earlier massive 3.3 million job elimination that more careful studies of the past century’s FINANCIALLY triggered recessions always seem to bring about once the stimulus is stopped, somewhat akin to the catharsis that drug withdrawal brings about. This coming recession is evidence that the markets are discounting the impact of the debt ceiling agreement, seeing ahead of the curve, the dysfunction that interventionist fiscal policies have never overcome, in the form of timing errors that always bedevil all attempts to “beat the cycle”. Unfortunately the lessons are always painful, borne not by the economists who deftly bailed out of this administration as soon as they saw the writing on the wall, but by the millions of workers who will lose jobs, again, not only in the US but abroad. As if it was not enough devastation.

Which brings me to the real purpose of this brief memo: If based on the recent debt ceiling debates, it doesn’t seem any more possible that political consensus can pacify people’s (which is what markets are made up of) unease about settling the great debate between liberals and conservatives on what to do with social spending, then why not do the second best – fully disclosed policies and rules, agreed to beforehand by both sides, as to the amount and composition of government spending on such things as welfare and entitlement? This way the room for maneuver is known if not with full certainty then at least with some allowance as to timing, the uncertainty which spooks markets the most. Compare this to the current practice wherein politicians, always with an eye to their future electoral prospects, posture and preen before their respective bases, which in turn excite the extremists on both sides, making real consensus all but impossible. The only reason the debt ceiling debate turned out the way it did, despite the fact that conservatives were the minority in this tri-partite government, is because the negotiators were aware that slowing down government spending was what the Nov. 2010 elections was all about. You wouldn't hear that from the commentariat/blogsphere.

But look at what the “agreement” cost America: other than a no-tax increase provision, all that the law accomplished was a one time spending cut that stretches over ten years, to be matched by pledges to cut some more based on the recommendations of a bipartisan commission. Anyone who understands how DC defines budget “cuts” and has a modicum of knowledge of their unique syntax knows that commissions are mere ploys to defer hard decisions past elections. The $ 2.3 T increase in the debt ceiling was meaningless, both because it is just an imaginary line-in-the-sand that will be increased, again and again once the deficits roll in as they will. And besides the credit raters won’t base their downgrades on such an inchoate variable, knowing full well that nothing real was done on the cause of the deficits and aware that the US has long breached its “mental” debt ceiling. So what was the point about the law? Exactly this: to keep this radioactive (but symbolic) topic away from public consciousness until at least 2013, a year after the elections. So, in that sense, President Obama the ineffective leader that he was shown to be, still managed to win. If you think the conservatives will abide by that, there is a bridge for sale on the East River. It will be business as usual in a while.

So what will a welfare policy “on autopilot” do? Answer: it will take away (or at least reduce) from politicians their power to tinker around with social policies as a vehicle to enhance electoral chances by manipulating the poor and even the not-so-poor (who thrive on the social largesse). A policy that, say, sets down public spending on social programs at a preset level (absolute + some amount that varies based on a GDP above a certain level, etc) will take a lot of the ideological hot air, acrimony and moral posturing that keep radicals on both sides agitated for nothing. One need not revisit that largely, ugly, unresolvable debate: the liberals, on the one side, accusing the right of callousness and lack of concern for the poor; and conservatives charging liberals of being patsies for the institutions and vested interests that thrive on the poverty cottage industry. The fact is that they both deserve each other as excuses for their not acting more responsibly: the conservatives for lacking in moral conscience, and liberals for advocating woozy policies that respect no limits and suffer from slippery slope inadequacies.

For economists, the details are mind boggling (what social policy isn’t) but instead of wasting their time debating whether Keynesian multipliers are 2 or 0 (or even -1), they could be more socially useful in helping design these practical rules. One particular issue they will have to address is whether “rules” could exacerbate cyclical imbalances, although automatic stabilizers do work to correct it without the discretion that bedevils human interferences in the economy. Over the longer run, nothing short of a truly radical restructuring of the economy would be needed, along the lines propounded by economists like B. Hodgkinson and others, where the “rich landowners” (proxy for unearned income and other privileges accrued merely for being present when the goodies were distributed), would be assessed for their social tuitions to fund welfare, which also reduces policy discretion and leeway for agitation. Here is where liberals are correct in essence, but wrong in tactics (if only because they still lost the debate).

Such questions are a worthy of the best minds to address, for the status quo is simply too terrifying to contemplate: the three top items in US social spending (Medicare and Medicaid and repaying Social Security) would, unless something truly radical was done, eat up as much as 70 % of the US government budget in about two decades. That guarantees that every time America enters through another serious fiscal dysfunction, the economic health of the world would be in grave peril. And all due to unresolved inner conflicts that show up as political hostilities? Why punish the rest of the world for US government dysfunction? People who still think that that debate in DC was about politics do not understand the real causes here: Read my lips, cut government down!

In a way this is really sad, to have to use “formulas” and “rules” to handle what ideally should be dealt with using natural human empathy for others and restraints on uncontrolled passions. But this is man as he has become now, and until religion has returned to its true function in society as Jung once pointed out, these solutions will be mere stop gaps that will blow up again and again. Or maybe that’s part of the Plan. 

[V. Ricasio, copyrights NYC2011]

What Tuesday's Impending Debt Debacle is All About

By Son of Bastiat

“Law One of Life: what goes around, comes around”

This essay, a follow up on the subject of raising America’s public debt ceiling, elaborates on some issues often ignored in the current debates. They deserve a second look because how this debate is resolved will matter to the world like no other event has in the past 75 years. Whether it will be a one-off rise or a series of increases in the ceiling, what combinations of tax increases or spending cuts will be involved, or whatever mix of discretionary and mandatory items will be traded off to satisfy the fiscal constraints, those are mere details in a complicated drama whose lessons apply with equal force to America and to every country that has funded development plans and social commitments with debt (or more precisely, by running budget deficits that are covered by borrowing in the open markets or monetizing obligations.

What we cut out are the maneuvering, the posturing, and the brinkmanship that happened en route to the political resolution. Those theatrics and situational decisions reflect more on the personality quirks and political talents of the contending players, many of whom, if it means anything, have been educated in the law. More revealing are the breathtaking demagoguery and schadenfreude that were used to set the public up, which indicates that DC thinks this impasse is just another routine item in their to do lists. The real disappointment however is in the way the significance of the issues have been swept under the carpet, which is why whatever comes out of DC on Tuesday will probably not amount to much. As such it would be more instructive to refer to the sociology and economic history books for insights on how to view this debate, of which it can be said, with just an iota of exaggeration, the economic world’s fate now depends. In short, nothing but the low down, although it will take a detour before it arrives there. 

How Moral Precepts Shape Economic Debates

What is amazing about the debt ceiling debate is how much of it is the offshoot of two innocent errors (OK, one was a tragic omission) that happened during the founding of economics. The first error was a faulty interpretation of a phrase in the writings of economics’ founder Adam Smith. That phrase, which because of its importance deserves a future essay of its own, had the unfortunate effect of taking “morality” from out of economics, an ironic and surely unintended outcome from a man who was a moral philosopher first before he was an economist (in his later works Smith himself sought to clarify it, to no avail). At any rate the mistake led economics down a path that in the course of centuries would forever stamp it with the idea of being mostly concerned with material things such as the efficiency of producers than the welfare of its beneficiaries (ie, consumers). But as if all this was not bad enough, the young discipline committed a serious omission – it ignored the crucial issue of distribution in its laws altogether. It contended that the sharing of the fruits of production was to be left to local customs and practices, an after-thought almost. Workers are paid such amounts as they needed to survive, at wages and working conditions that reflected their scarcity value as developed in the dismal theories of Ricardo and Malthus. This neglect was bad enough to cause the philosopher John Stuart Mill to propose that a proper distribution theory be included, but his views did not gain as much currency as those of Smith’s (and founders); that is simply how this fatal omission got embedded in classical economics orthodoxy.

The rest, as they say, is history: the appalling working and living conditions of workers were picked up social reformers whose capacity for outrage were matched only by their naivety about business realities. Soon the demands for more equitable distribution of the gains of production rose in tandem with advances in social thinking and the growth in mass movements such as labor unions and workers’ rights; these passions generated the ideas that now animate the liberal and progressive philosophies that underpin the pro-entitlement and pro-big government side of the debt ceiling debate. From this viewpoint, the conservatives’ unmitigated greed and insufficient compassion for the welfare of their partners in enterprise had now met comeuppance in the strident liberal opposition to their cause. As Newtonian Mechanics put it, for every action there is an equal opposite reaction.

For the sake of balance it must be pointed out that conservatives’ resistance to progressive reforms have, by no means, left workers as gravely exploited as Marx and socialists had predicted. More workers have been lifted out of poverty and their conditions ameliorated by capitalism than under any other economic system, while ensuring that society built up its capacity to produce and distribute the gains, as unsatisfactory as those may have seemed to others. Today, almost 300 years after its founding principles were laid, the market economy remains the primary generator of society’s largesse. Even if it remains true that some capitalists, if given the chance will exploit and cheat workers of their dues, that once ugly feature of the workplace has been corrected in many countries by progressive legislation and enlightened regulation, their effectiveness subject only to lawmakers’ or enforcers’ own limitations. Clearly what was going on was no longer the Dickensian exploitation (that inexorably condemns workers to poverty) that is the core of the liberal belief, as much as subjective perceptions of deprivation relative to some notion of a “fair” reward for participating in enterprise. Sometimes these are merely expectations that reality can never meet; once given, they take on the nature of “rights” that cannot be easily withdrawn. The stickiness of entitlements is one reason why debt ceilings are biased against taxes. 

The Institutional Roots of the Economic Problem

This is why liberals and conservatives part company. Conservatives are too quick to resist workers’ demands due to the incompleteness and slippery nature of moral arguments, being more astute observers of human nature and aware of other factors (eg, the complexities of motivation and low wage offshore competition) that affect this issue, whereas liberals are too quick to rely on raw emotions and are generally less caring about the other factors that affect enterprise (eg, the need to incentivize risk capital) other than economic justice. In fact, dispassionate analyses using ideas from game theory (eg., co-opetition instead of competition)  have shown, time and time again, the wide room for compromise and settlement of these competing claims, benefiting not only both sides but society overall. The failure to join this issue lies at the heart of the unfortunate and wasteful conflict that has bedeviled modern society. It is the root cause of the economic instability that now threatens, in the form of a debt bomb and not terrorists’ IEDs, to blow up not only America but society as well. Debating how to raise debt ceilings do not come close to touching it; it only shows how the craft of politics has fallen behind reality.  

Here astute readers would have noticed that the substantive issues underlying the distribution debate have moved away from the purely economic or even business concerns towards the dynamics of social psychology and institutional behavior. Realizing how “non-economic” these ideas are, and completely forgetting how their omission and misinterpretation have led economics down to the thorn laden paths it is treading on now, some economists tried to side-step the issues and came up with one more avenue of exploration – what today is known as institutional economics, but which in reality is nothing else but the study of economics as if people and institutions mattered. Nowadays the names frequently associated with this inquiry are Douglass North and Oliver Williamson, but in fact their ideas draw from deeper and older roots, specifically those of political economist Joseph Schumpeter and the social critic Thorstein Veblen. Already dead long ago, what dismays people is that their ideas are still ignored. 

Space does not permit a fuller exposition of their ideas so suffice it to say that these men, seeing how hopeless capitalism’s prospects then and yet never confident of any alternative to it, offered a peculiar critique of it that sought to “criticize capitalism in order to save it”. (Schumpeter once described capitalism as being a spectacular economic success but a staggering sociological failure, even if he also taught that capitalism’s end game was socialism, albeit in its “democratic” variety). There is only one problem with their analyses of capitalism – what appeared to be prescient when compared to Marx’s crude analysis - were in hindsight gross exaggerations of its demise because they were based on the social realities that prevailed then. So, both for lack of any better alternative as well as the fact that capitalism continues to improve on its failings, institutional economics as a way to revise it again proved to be a failure. The score was zero for socialism and floating for capitalism because it kept evolving.  

In case the reader has missed it, the reason Schumpeter’s visions (and that of newfangled institutional economic theories (NIE) have failed, despite throwing in human and organizational factors into the pot, it is because there is still something missing in their recipes. What could this mysterious ingredient be? Could a radically revised economics, along the lines suggested variously by Fr. Lonergan, B. Hogdkinson and complexity/evolutionary economists such as R. Nelson perhaps save the world in ways that today’s grandstanding and demagogue-spewing DC politicians can’t?   

Back to Square One – the Mind   

All of these new ideas no doubt can supply much needed improvisations over the basic economic framework that after 230 years is now falling into irrelevance on account of unforeseen events. Some like the radical revisions proposed by Hodgkinson could help immensely in rationalizing the creaky technical apparatus and policy mechanisms that John S. Mill never got around to incorporating in the Classical Economic system. Some like the evolutionary economic ideas of S. Winter would help dispose of the nonsensical ideas of value theory (like the Labor Surplus Theory of Value) that have supplied so much defective ammunition to the Socialist arsenal, that has not only wasted the lives of millions who perished in utopian communist experiments, but serves to distract even their latter day fellow travelers. These are all fine, except that they are only simple technocratic refinements to a vastly more complicated and inscrutable phenomenon called man. Unless this latter entity is truly understood, many of those gains would be temporary as well. For sure they will buy society some more time than is now allowed by the public debt ticking time bomb that somehow ought to be reset before midnight of August 1st. How much time it buys though, is anyone’s guess. But it is definitely worth a guess, though.

This writer is convinced that the one, true and permanent solution consists in a behavior modification effort whose purpose is to overcome a fatal defect that even the Classical Economists and all other economists from John S. Mill all the way down to Schumpeter and Veblen have tried hard but failed to incorporate in their own modifications to the basic capitalist economic framework (despite the former’s morbid wit). But this is because the culprit is also part of the very same essence that animates capitalism itself and is responsible for its unusual success. This cancer (for it is what it is) is called materialism, one manifestation of which is the grasping for achievement and monetary rewards, without which much of the mainsprings of economic success would ground to a halt. In this sense materialism’s grip is not only universal but intimately bound with the capitalistic system itself so that any attempt at reforming its claddings and superstructure would not be fundamental enough to make a real difference. In this case what needs changing is nothing less than man’s inner nature itself, an idea that economists would consider weird, to say the least. But weird or not, it looks like the only arrow remaining in man’s quiver.

Yet, exactly what does “fundamental behavioral modification” mean? Years ago, in a small bookshop in Zurich the writer found the answer in the pages of a book written (in 1957 when this writer was barely 3rd grade) by the Swiss Carl Jung, one of the world’s greatest psychiatrists. This slim, brittle and now frayed book was among the first attempts to answer the riddle of the Undiscovered Self which is also its title. What is remarkable about this book is how it explains religion’s crucial role in helping man to attain the critical balance that individuals need as they navigate the treacherous shoals of modern life. But what is tragic is how this vital function has been thwarted by institutional religion’s excessive emphasis on rituals, ceremonies and hierarchies that have distracted it from providing man with the assistance he needs. Bereft of it, man has morphed into an automaton that was easily manipulated by big, powerful institutions whose policies now threaten to enslave and reduce him to an imperfect caricature of the Creator in whose image he was made. Today tens of thousands of books have been written on this subject but the ideas first propounded in this slim book hold the key to the dilemma confronting society.

Conclusion: The Painful Realities of Just Deserts

What an irony then, that man who was created to harness and master the whole of creation ends up being dominated, not by the lower hierarchies of that same creation but by material and tangible products made by them. Instead of using his mind to edify society and His works, he ends up trapped in the mindless pursuit of faux trinkets, including the meaningless adulation of peers whose judgments are as flawed as his. The ongoing impasse on the debt ceiling is a perfect example of the meaningless pursuits engaged in by the members of the elite classes. In these debates the economists, who supposedly are trained to render judgments that transcend the narrow criterion of efficiency, either end up completely silenced like the economists at the CBO, or like Krugman co-opted in their views by their professional affiliations or ideological cohorts. On the other hand the masses are, like lemmings, led by leaders who know nothing better than use the tools of technology to divert them from the real issues.

For the implications are ugly, to say the least; there is no conceivable plan or policy that can bring that monstrous $ 14 T PUBLIC debt down to manageable levels given the spending cuts, tax increases and growth scenarios that are assumed in DC. Adding up to public debt all of the government’s unfunded liabilities for Medicare, Medicaid and Social Security, along with US guarantees on failing pensions and the actual liabilities of state and municipal governments, the total exceeds $ 100 T!. Even a moron would have long ago concluded – when viewed in the context of the 75 years when the Federal government started to intrude over the economy (IN PURSUIT OF NOBLE AIMS THAT PRIVATE SECTOR, IF ONLY IT WAS MORE RESPONSIBLE AND COMPASSIONATE, COULD HAVE HELPED MITIGATE), that this is not a revenue (or tax problem) but a proclivity to spend on social programs using debt, PERIOD!

One wouldn’t hear that from this country’s leaders, especially this sitting President who instead of providing much needed leadership, has actually turned this into an opportunity to enhance his 2012 chances by hosting five press conferences in a month to talk about how others’ fiscal plans (he didn’t put up one) are not meeting expectations set down by him. In other words, all by his lonesome self. Me, myself and I, in the capacity of the strict parent lining up the kids for a much needed whipping until they are all behaved, ready to eat their cereals and carrots before jumping to their beds. But wait, that is not yet the icing on this cake! The ultimate tragedy is that Americans are already getting close to the point of seeing all of this as a mere drama, a charade and a very boring one too. Holy Smokes, $ 100 + trillion that the next ten generations would be saddled to death servicing, yet still looked at as mere par for the course! Making things worse, there are actually many Americans who think that all of this stuff is just for economists, or worse, for philosophers who have nothing else better to do than read and think. Well, if they are stupid enough to think that philosophy is useless stuff, they had unwittingly just condemned a philosophy which they themselves had formulated (shades of Anselm’s Proof of the Existence of God).

How did things get to this? How did politicians this self-absorbed get elected to these lofty positions of power? Again, Jung had the answers down pat: the undiscovered realms of the self. Having been condemned to a non-life of perpetual labor because of poor redistribution policies, and getting no relief from institutional religion that is also too absorbed in its own rituals, they are now falling back on their innate resources (the ego) to get back at the society that makes it so hard for them to live normal lives. It is in a way a corrective mechanism that lets those who don’t get what is due to them, to get back just the same at all those who failed to give it to them.

Today it comes in the form of a debt bomb; tomorrow a real WMD? Truly, what goes around, comes around. VRR@NYC2011