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November 29, 2008

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Wasn't all this free-market stuff supposed to be the hot new way of doing things during the Enlightenment? Like, we're all supposed to be Adam Smithing out against the old-fashioned mercantilists? Not that I'm a big fan of futuristic utopian libertarian types, but I think that way of doing it has a more authentic flavor.

Throughout history, philosophers have debated the question: what's Charles Krauthammer's excuse?

Socrates thought it was ignorance, since no man intentionally does wrong. Plato thought the dark horse of Krauthammer's soul overpowered the charioteer. Aristotle more prosaically attributed it to weakness of the will. Augustine went for concupiscence. Down through the ages the debate has raged.

Throughout history, philosophers have debated the question: what's Charles Krauthammer's excuse?

I'll wager that Nietzsche's explanation (the one involving abysses and gazing) makes the most sense, at least in terms of having both explanatory power with regard to past Krauthammer columns, and predictive power with regard to future columns as yet unwritten.

> nobles moved to Paris and devoted themselves
> to competing for the unearned income handed out by the king.

These are the same folks who, it is said, would bow to the king's food as it was carried past them into the royal chambers.

Man, even Greenspan never got that kind of fealty.

Krauthammer is the epitome of the bitter, angry malign soul whose shriveled black heart cripples him far more than his physical disability ever could.

Krauthammer is a malign disturbance in the cosmic matter. Never has so much bile, hate, fear, and evil condensed down into such an blackhole of preversion.

I was going to say the Charles Krauthammer is an idiot, but I like anon's phrasing much better.

I really do need to pop open one of Mancur Olsen's greatest hits, don't I?

"...executed for wearing calicoes"??

I guess we have made some progress since Louis XIV's day: that does seem a bit harsh a way of enforcing a dress code....

The local guild wardens even obtained the right to search people's houses and to arrest anyone in the street who wore the evil and illegal buttons.

We now know which old laws were ripped off for DMCA.

Kant said that Krauthammer's arguments were synthetic and prior to experience.

Does anyone notice that reading a balance sheet has almost nothing in common with anticipating Intel's third-quarter earnings? The first is used to invest long-term, by finding a company that's well-capitalized and can manage its expenses. The other is for a short-term gamble.

And it's almost too obvious to mention that anyone who figured that Cheney's ascension would be good for Haliburton made out like a bandit.

Does anyone notice that reading a balance sheet has almost nothing in common with anticipating Intel's third-quarter earnings? The first is used to invest long-term, by finding a company that's well-capitalized and can manage its expenses. The other is for a short-term gamble.

Any half decent accountant can falsify your balance sheet. If there's anyone here who is desperate to improve the short term stock price of their company, I'd be more than happy to do it for a lot less than it would take to hire a fancy CEO who would provide bogus strategic advice that isn't any more productive.

I'd love find out if Krauthammer even knows what a balance sheet is.

I'd like to give him a bunch of transactions and ask him to construct a balance sheet and income statement. Nothing complicated, just the sort of thing you'd give as an exercise in an introductory accounting class. Wonder how he'd do.

Object: If I can associate Krauthammer's leadin with papers written by ignorant freshmen then I won't have to address his main thesis at all.

My readers will all pile on with clever references to show that they are in agreement with my characterization. [Adam Smith, Socrates, Plato, Aristotle, Augustine, Nietzsche, "bitter, angry malign soul whose shriveled black heart cripples him", "malign disturbance...blackhole of preversion {sic}", Kant,]

Character assassinated: my work here is done.

To paraphrase:
//I don't normally read Charles Krauthammer, but Heather Hurlburt at Democracy Arsenal does, and she flagged this startling paragraph:...so now you don't have to read Krauthammer either.//

my work here is done.

Sure, actually having to defend Krauthammer's many bogus propositions would be the work of several lifetimes.

"Object: If I can associate Krauthammer's lead[-]in with papers written by ignorant freshmen then I won't have to address his main thesis at all."

Given that his main thesis is that "we have gone from a market-driven economy to a politically driven economy.", the post is certainly addressing it. Although to be fair, it seems to me that there wasn't really any intention to carry out an in-depth discussion of his borrowed thesis - rather, hilzoy is giving additional background to how not-even-wrong Krauthammer's being - basically, that's he's so full of fertilizer he's growing cabbages.

Now, if one really wanted to address his column, one would note that this thesis - however (in)accurate - is almost entirely besides the point; the purpose is to try to intimidate the Dems into not actually governing,especially not in ways that go against standard GOP ideology and of course the interests of those the GOP represents. ("Bank presidents" and oil companies is a bit crude and simplistic, but it's a start).

But that's not nearly as interesting as the actual post above.

Anyway, I would like to go on record as being absolutely against the consumption of calicos. What kind of sick . . . oh. Calico fabrics. Ah.

Anyway, back to work. Birthday presents to wrap . . . {yawn} . . .

I really enjoyed Hilzoy's history lesson, but it was a little facetious to go after his conceit with a full blown assault of literalism. It would have been more appropriate to point out how much easier on average it has been historically to make money by honestly defrauding investors through imaginary money-making schemes (Ponzi schemes, El Dorado, CDOs, ect.) than to work the political game. Then again, I would have never learned anything about Royal French protectionism, which is a huge part of the reason why I love this blog.

If you want other examples of how wrong his thesis is consider the East India Company or the American railroads. Remember the government stepping in and beating and killing union organizers for corporations in the U.S.

Maybe d'd'd'dave can do us a favour and explain what Krauthammer's thesis actually is. I read it as 'give the private sector enough money to "rescue the economy" but don't even think of attaching any conditions', but maybe I've missed the finer points.

At least nobody still pretends the road to riches used to lie in getting an education and working hard. It was all about unearned income (aka 'investing') after all.

Alternately, Krauthammer's thesis might be, the banks made mistakes, so they should be allowed to fail. Collateral damage be damned! Look how well it worked in Iraq.

What's Charles Krauthammer's excuse?

His job is to shill for his corporate paymasters, and they aren't as picky as you are about facts and logic.

Or, how does Krauthammer account for today's NY Times article on General McCaffrey's influence peddling?

http://www.nytimes.com/2008/11/30/washington/30general.html?_r=1&hp=&pagewanted=print

Why does anyone take Krauthammer seriously?

But the thing is: it isn't true of almost anywhere.

I think we have to differentiate a bit here. I know quite a few people who have become rich sometime in the last couple of decades by simply doing their job well, being good with money and maybe a bit of luck, without having paid much attention to those in positions of political power, let alone influenced or bribed them.

They're small to medium size business owners, lawyers, architects etc. and they're rich in the sense of owning high-value property, being able to afford an upper-middle class lifestyle and having significant amounts of money in the bank.

Of course, if you're talking about people owning medium to large size companies with personal wealth somewhere in the double-digit million range, the likelihood of them trying to influence politicians and in turn directly benefiting from their decisions rises.

Two words: Opium War.
Another two words: Barbary Pirates.
There has never been a minute in human history when politics, government, and law as a function of politics and government weren't at the root of economic success and failure. You don't have *ownership* without society, government, or in some cases the state.
Oh, hell, there are literally thousands of words. But you said it best.

aimai

Novakant,
We cross posted so I didn't see your post before I posted. Despite claims to the contrary very few members of the elite in this society make real money without some government aid or connections--I'd say your example of architects is a good one. I don't know about your architect friends but the architects I know who've made lots of money (real, folding money, as it were) were all very well connected politically. Zoning laws, labor laws, contractor issues, real estate deals all involve huge amounts of time and politics. Ever sat through a zoning board meeting? Any small to medium sized business owner is highly entangled with politics, at least at the local level. Garbage disposal, workman's comp, inspections? These all impact restaurant owners and they have to be pretty savvy politically to navigate those realms.

Any professional--doctor, dentist, lawyer etc... also probably belongs almost perforce to a professional lisensing organization which deals at a higher level with politics and politicians. The better business bureau is *entirely* an arm of the GOP as far as I can tell while the AMA was organized specifically around fighting off socialistic national health.

The myth of the millionaire next door who just got rich by virtuously working hard, saving their pennies, and just happening to have had access to the GI Bill (their house), or SS (big government spending), or free higher education and scholarship etc... is a myth.

aimai

novakant: if Krauthammer had restricted himself to the last century or two, in W. Europe and N. America, my response would have been more nuanced. But he was the one who dragged in the Venetian Republic, which was founded, iirc, in the 8th century or thereabouts. That means he's working on a larger time scale, within which the last century or two look pretty unrepresentative.

In the idealized world postulated by Mr.Cabbagesmasher entrepreneurs and businessbeings would not have to be politically connected because the state would be automatically pro-business, removing all obstacles*. The potential money accumulators under these conditions could safely limit themselves to reading their balance sheets.

*Like opening markets at gunpoint or wiping out foreign business rivals (like Venice did with Byzantium)

I resent that notion, amai.

The people I am talking about have neither broken nor undermined the law, they haven't had undue influence on government decisions and they haven't engaged in questionable business practices.

Of course, depending on the nature of their business, some of them have had to deal quite a bit with government regulations and have been active in professional organizations representing their interests, but that in itself is not nefarious at all. Unions haggle with the government all the time and try to shape policy, as do all sorts of associations representing all sorts of people. Unless you think that unions/employees = necessarily good and business/employers = necessarily bad, I really don't see where the moral fault is in that.

Anyway, such activity took maybe 10% of their time and my point was that these were mainly private people who made their money acting lawfully and, yes, "virtuously working hard" within the boundaries of a framework for business activity set by society.

And you don't have to push those boundaries to become rich. Instead you can be a lawyer who gets a stake in the companies he represents, an architect who builds wonderful houses for a price or a businessman who founds and runs a company successfully for a several years, reaps the profits or eventually sells it to a competitor.

Of course, if you are the CEO of a defense contractor, the head of a major bank or an oil magnate, things will probably be a bit different, but that is exactly the differentiation I wanted to make.

Of course, if you are the CEO of a defense contractor, the head of a major bank or an oil magnate, things will probably be a bit different, but that is exactly the differentiation I wanted to make.

But that's more of a difference of degree than of kind, isn't it? The larger the economic impact, the more the political impact; kinda unavoidable.

Not that there's a linear impact, though. Part of my job is to examine wealthy individual. I've seen a lot of wealthy people who are intimately involved in politics; a lot who aren't.

d^d^d^dave,

Maybe we can apply a simple empirical test to Krauthammer's proposition. If what is now important in getting rich is political influence and it wasn't before, we might see the emergence of a new phenomenon, in which groups with common business interests deliberately target politicians in the hope of making financial gains. They might indeed frequently meet with politicians they hope to influence in some place convenient to said politicians, such as, for example, the entrances to legislatures. When we confirm that such groups (for the sake of succinctness let's call such groups lobby groups, after where they congregate) are a new phenomenon of the twenty-first century, then we can conclude that Krauthammer's thesis has some merit. Otherwise, empirically, we have to say his argument is full of s***.

"In the spring of 2007 a tiny military contractor with a slender track record went shopping for a precious Beltway commodity . . . Access like this does not come cheap, but it was an opportunity potentially worth billions in sales, and Defense Solutions soon found its man. The company signed Barry R. McCaffrey, a retired four-star Army general and military analyst for NBC News, to a consulting contract starting June 15, 2007.

Four days later the general swung into action. He sent a personal note and 15-page briefing packet to David H. Petraeus, the commanding general in Iraq, strongly recommending Defense Solutions and its offer to supply Iraq with 5,000 armored vehicles from Eastern Europe. “No other proposal is quicker, less costly, or more certain to succeed,” he said."

Hilzoy,

I don't think this is like what undergraduates do at all, in this sense: sure, in both cases there's a flippant disregard for the truth, but while an undergraduate is probably just being careless about something he or she isn't much invested in, Krauthammer is being careless about something that's become a part of conservative mythology, Namely, that markets were always free, open, and laissez-faire, because free markets are the *natural state of things*, until the 20th century with its new-fangled Marxist and Keynesian ideas started tampering with them.

A whole *book* -- hell, a whole academic industry of books -- could be written about this. There are SO MANY ways in which conservatives use historical exemplars and take the upper hand in arguments, positioning themselves as experts, by appealing to a chronicle that's more fable than history.

It's in their economic history with this assumption that open markets are the unimpeded state of things. It's in their political history when they imagine democracy is the natural state of things, the very next form of organization after anarchy and riots. It's in their military history with the constant pigeonholing of every single conflict into either WWII or the Cold War. It's in their American history when they fantasize about some English-only time in the country's past. Or maybe when they forget that the pledge of allegiance wasn't written by the founding fathers.

If we started an Obsidian Wings wiki, it would be good fun to compile a list.

Novakant,
I didn't say, and certainly never implied, that a person who is politically connected or works through the political system to get things done and profits from it is committing some kind of crime or breaking a law. That is a complete and somewhat childish misreading of what I wrote and of the issue.


The issue under discussion is whether there are "ordinary" "virtuous" "non political" ways of making good money in our modern capitalist system that are opposed in kind from "evil" "based on connections" or "based on government handouts" ways of making money. My answer would be, well, no. Never have been. Never will be. All societies that have any kind of private or communal property or labor rest on a cultural construct of property or labor that is either enforced or unenforced by law. You don't even have *work* and its rewards without a legal system that recognizes your entitlement to ownership of your own labor. This is obviously true in slave states and within the family with unpaid female labor. But its equally true of all societies at all times. The government and the law have to recognize and defend your work and its earnings for you to enjoy it. There is no state of nature where the virtuous work and enjoy their earnings without the state.

This entire country was founded on communal, corporate, and later government action--the taking of land from the native americans? the founding of towns? the instituting of laws guaranteeing private or public property? civil courts? regulation of worker's issues? slavery? the Indian wars? the Louisiana Purchase? the homesteading acts? the system of irrigation and land management in the west? These are all examples of the central role that government has played, and will always play, in creating and regulating the economic realm that individual architects, doctors, home owners, workers simply play in at the lowest level. The very professional designations doctor and lawyer as well as architecht are themselves forms of regulation (sometimes self regulation, sometimes imposed from outside the profession) that enable some practitioners to edge others out, to hold a monopoly that makes their services more costly to the consumer. All people who opt into those professional groups, to the extent that they rely on government enforcement of their monopoly, are relying on government connections and government power to increase their earnings or safeguard their monopoly.

Just because these things are rendered socially invisible in our modern education system and by republican habits of mind doesn't mean they aren't real, and really constitutive of the economy and society we see around us. As cleek pointed out in a recent thread over at Baloon juice the book Cadillac Desert pretty thoroughly debunks any claims that our sturdily independent western states have for being...well...sturdily independent of government handouts. Its just that one man's welfare queen is another man's western rancher.

aimai

If I can associate Krauthammer's leadin with papers written by ignorant freshmen then I won't have to address his main thesis at all.

OK, I read Krauthammer's piece. I'm with Dan S., here's his thesis:

we have gone from a market-driven economy to a politically driven economy

Yes, Charles K, quite right. The market is now responding to a large degree to actions in the political sphere.

Why would that be?

Here's russell's thesis:

The reason we're in that perhaps undesirable state is because the folks in the private capital markets blew those markets up.

So, somebody has to step in and make sure that whole show doesn't go belly up. The only actor with the resources to do that is uncle sam.

Regrettable? Perhaps. But the regrettable part is the "they blew it up" part, not "so the feds have stepped in to try to stop the bleeding".

If Krauthammer wants to preserve a purely market economy, he should be advocating structural reforms to keep the big boys from flushing everybody else's money down the toilet.

If all he has to contribute is "federal intervention is interfering with the market" then he can talk the hand.

OF COURSE federal intervention is interfering with the market. If it didn't, the market would sink like a rock and take the rest of us with it.

I understand his point. The problem is that his point has all the relevance of a member of the Flat Earth Society complaining that all globes are round.

Thanks -

hilzoy, I don't agree with Krauthammer, of course the entirely free and just market is a myth and there has always been corruption, cronyism and arbitrary government intervention - but these are parasitic activities and they rely completely on the talent, skill and hard work of those who actually drive innovation and prosperity and without whom there wouldn't be anything to siphon off. I'm not a historian, but I would think that such honest people have always existed, and some of them got rich in the process. That's all I was trying to point out and I don't think we actually disagree all that much.

Amai, I have already mentioned that these people operate "within the boundaries of a framework for business activity set by society", and that is completely obvious, none of us start at zero or operate in a vacuum. So your little overblown lecture was completely unnecessary. As for "government handouts", none of the people I was talking about have ever received any, instead they paid a lot of taxes. And if I want an architect to build a house for me or a doctor to take out my appendix, I would find it rather reassuring if they were certified by the government and members of a professional association.

How all this is supposed to be unjust or makes these people guilty of corruption or cronyism by default is a mystery to me. Are you talking about some form of original sin?

If Krauthammer is correct (sidenote: my computer is underlining this phrase as if it needed correction, but afaict the grammar is Ok), then I suppose the next thing we should expect are hirelings hanging around the legislature hoping to get advanced knowledge of- or even influence- legislation. Of course these newfangled creatures won't be on the legislature floor, so they'll probably hang about in the hallways, cloakrooms, and perhaps even the lobbies, waiting to buttonhole the people's representatives.
But what shall we call these lobby-dwelling gadflies, once they inevitably arise?

Novakant is my hero on this thread.

and what's this label //somewhat childish// for?

They must always condescend. It is their first instinct. "You don't agree? You must be ignorant like a child."

I'd like to respectfully submit that the distinction between the political and economic spheres that seems to be at the heart of Krauthammer's thesis is a false one.

The politics of a community always influences it's economy. It's economy always influences it's politics. And there's nothing about any of that that either requires, or rules out, corruption.

novakant is, of course, correct. Lots and lots of people become wealthy through their own insight and hard work.

aimai is, of course, correct. They do this in a context that is created by the political organization (formal and informal) of the community they live in.

The reason that political actors are playing a larger role in market dynamics right now is because the private actors screwed up, and that right royally, and the public sector has, correctly, stepped in to provide whatever assistance and oversight it can to keep the whole damned show from blowing up.

Krauthammer's objections are, to me, farcical, because they see that intervention as some kind of unwarranted and undesirable intrusion.

It *is* undesirable, because it *does* interfere with the markets, and it *is* costing all of us a hell of a lot of money.

Unfortunately, it is not only not unwarranted, it is necessary, if the greed and stupidity of folks in the financial sector are to be prevented from destroying the livelihoods of the rest of us.

They must always condescend. It is their first instinct.

Unlike you, frex.

Thanks -

"If Krauthammer is correct (sidenote: my computer is underlining this phrase as if it needed correction, but afaict the grammar is Ok)"

That new AI module is working out better than you expected.

Ara at November 30, 2008 at 03:15 PM otherwise got it right.

"They must always condescend. It is their first instinct."

It's another instinct to perceive that They are after you.

not after, farber.
they are arrayed before me
like lambs in the spring.

If Krauthammer is correct (sidenote: my computer is underlining this phrase as if it needed correction, but afaict the grammar is Ok)

You need to upgrade your grammar checker. The ones from the 18th century and earlier want you to use the subjunctive too much (as in "If Krauthammer be correct...").

IKIC, the new internet meme.

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