Wednesday, January 26, 2005

And My Suspicions Were Right.

The tsunami disaster has, I think, affected us all. There are still references to it, though I still detect something distinct in coverage between it and 9/11, despite the ten-fold nature of the deaths. Vandana Shiva, for those who receive Z Net Commentaries, wrote an excellent article about the tsunami disaster. She pointed out a few things.

The pressures of globalizing tourist trade and trade writ large have been to build huge condos and skyscraping hotels on beaches, and the coastal ecosystems have been damaged by coral farming, cruise ships, shrimp farms, oil refineries, and all sorts of other ecological damage. The coastal and littoral vegetation and life, such as coral and mangrove trees, do something similar to their role in absorbing avalanches in the Alps and floods: they suck up some of the water and also serve as a sturdy impact breaker. Studies of the Orissa cyclone in 1999 showed that areas where mangroves still grew were much less strongly affected. Further, studies of the shrimp farms have shown that they scarcely produce anything, which makes sense given the size of the farms vs. the size of the ocean and a number of other obvious differences. These shrimp farms' costs far outweigh their impact: Each acre of a shrimp farm drastically affects 100 acres of coastal and littoral land, and every dollar made in exports costs ten dollars. (This is a great example of a small externality, incidentally, the type that traditional court systems just are not prepared to handle). Studies of the tsunami also showed that area with the most vegetation and least ecological damage did best. To quote Shiva:

"Nagapattinam, the worst impacted zone by the Tsunami was also the worst impacted by industrialshrimp farms. The indigenous tribes of Andaman and Nicobar, the Onges, the Jarawas, theSentinelese, the Shompen, who live with a light ecological foot print had the lowest casualitieseven though in the Indian subcontinent they were closest to the epicenter of the Earthquake. TheGovernment of Kerala, observing that the Tsunami left less destruction in regions protected bymangroves than barren and exposed beaches has started a Rs. 350 million project for insulatingKerala's coasts against tidal surges with mangroves (Ref : After the disaster, Kerala's greendrive, Indian Express, January 3, 2005)."

Shiva does make a few mistakes in her commentary, though. I agree that, were we to have a general better communal culture, information could have been communicated that was detected and there could have been some evacuation. After all, in several areas evacuations were stopped due to concerns over their cost and inconvenience. She also is correct in saying that our priorities are focused on the stock market being instantaneous up-to-the-second response time while our tsunami response takes some time. But it is also true that it's the real world, not information. It DOES take days to find bodies, and most of the time, relief agencies make guesstimates as to the number of dead and injured because there's no other way to do it. However, she is correct in noting that, as much as we pretend otherwise, we still live in a vulnerable age even with all of our instantaneous information systems. People noted that animal casualties were relatively minor. Elephants, for example, have essentially seismic pads in their feet, and there is essentially an animal crisis network where, if the birds and elephants start running somewhere, so do all the other animals.

Shiva also notes that people have been saying, on Indian media no less, that the market will not be affected by the tsunami. That indicates rather clearly how very limited the economic focus is. There'll be MASSIVE effects from all the dead who can no longer consume or produce, the widows and grieving families whose consumption patterns will change, the rubble and destruction that will have to be rebuilt.

Shiva points out that, although tsunamis are indeed rare in this part of the world, there will be other disasters, perhaps floods linked with earthquakes when an earthquake breaks a dam. As she says,

"The next disaster will not necessarily be a Tsunami. It could be a flood caused by dam-inducedearthquake on a Ganges where the Tehri dam is being built on a seismic fault. Water from the damwill be taken hundreds of miles to Delhi to be privatized by Suez, the worlds biggest watermarketeer. The 260.5 metre high dam will impound 3.22 million cubic metres of water which willextend up to 45 kms in the Bhagirathi valley and 25 kms in the Bhilangana Sq.kms.If the dam triggers an earthquake, in less than an hour and a half, a 260 meter high wall ofwater twenty times higher than the Tsunami would wide out the holy cities of Rishikesh andHaridwar, in 8 hours, a 10 meter high water wall would impact Meerut, 214 kms downstream, in 12hours, a 8.56 meter high surge would impact Bulanshahar, 286 kms away. "

What we need are economic and political systems that can respond to crises like these instantaneously and can further process ecological information and put those needs over the needs of some private actors to profit marvelously. I'm afraid that a much more universal disaster is on the way if we don't.

Tuesday, January 25, 2005

Markets and Reagonomics

Back to the econ grind.

I've been thinking about questions of freedom in a parecon. Now, I happen to think that for 95% of people, likely far more, parecon would be incredibly liberating. There would be no more bosses; jobs would be far more satisfying; one could work much less, perhaps 20 hours a week, and still still have commensurate productivity; and, morever, really undemocratic parts of markets would disappear. In discussions with lib-cons, I've frequently heard comments that like, "Well, I'd love to see parecon tried, and I suspect that it could really be a great economic system." And since their economic system would probably be the best markets possible as well as a very liberatory polity, I respect them quite a bit. One question has bothered me, though: What if someone wants to start a market inside the parecon?

Well, to some extent, one answer could be that it could be banned. At the least, it may be looked down upon. There are two theoretical justifications for this. The first is that a democratic economy does have the right to communally set the rules for involvement, as long as those rules don't violate essential rights or attack values we hold dear. If you don't want to play by the rules, fine, then you shouldn't get the benefits of the economy. This is true in all economies. For example: What about lying about your qualifications in this economy? There's no coercion there; both people acted without force, at least according to a lib-con. Yet the rules of the economy include a reasonable expectation that people are at least somewhat honest to each other; otherwise, the markets collapse. Lib-cons rarely complain about sanctions by either the state or the economy in the case out of outright fraud. Well, markets are similar, I'm afraid. The other reason is that one does not allow, from a good Randian deontological perspective, a system that may have the capacity to violate rights. Even if an instance of market interaction was mutually beneficial and non-coercive, if the market economy as a whole does not show those traits, then it is justifies to attack even the good aspects of it.

Nonetheless, I could see a parecon, say, allowing a farmer's market of what people make in their own time, or perhaps rare market responses. This would NOT be as an efficiency measure. There is a myth that markets respond quickly to crises, but I see no reason why a decentralized planning process where people have every incentive to quickly report to and respond to crises would be less effective than a process where actors are so dispersed and deprived of information that the crisis may take awhile to even reach them and, worse, where the system can be knocked out of equilibrium (as you learn from your basic microeconomics class) for quite some time, and actors can even prey on market dislocations (for example: Crassus, the source of our word "crass", had a fire department under his control that would only put out a fire in your house if you signed up with his insurance company). It's only in academia that markets instantly respond to changes of equilibrium; a bare look at the actual operation of market economies show that markets respond to crises just as often by demanding massive state intervention. No, the issue here would be freedom. Of course, I don't understand WHY someone would want to have a farmer's market, and the economy would certainly reduce the inputs and outputs for this essentially ignored black market down quite a bit.

I'd also like to comment on productivity once more. In parecon, Mike Albert, in his typical ass-kicking style, responds to critics who say parecon would be less productive. He says, "Maybe so. If this is the case, it'll be because people will voluntarily choose to lower productivity." He then points out that, even now, people who work the hardest and make the least money (rote laborers of all types) work without much desire for conspicuous consumption. I really doubt that people would voluntarily choose to work so little that they would themselves starve. After all, a parecon does reward effort and sacrifice, and it may not even contain social welfare prescriptions (that is, if someone simply refuses to work, the economy may not pay for them; I would ask that it would, but many people who like parecon would say that it shouldn't, and I happen to think that this would be a question settled by communities). What Michael doesn't say, though, is something me and my dad figured out. Not only is quite a bit of wealth in capitalism waste (military budgets in excess of any conceivable need, advertising to get people to buy products they don't really want, prisons to jail the poor, administrative fees because the system is so irrational, all sorts of money and intangible assets spent fighting each other due to adversarial roles of production, after-the-fact cleanup costs in health and with the ecology, etc. etc. etc.), and not only would the economy be more equal and thus people like Bill Gates would be making as much money as my dad and Bill Gates' entire Norway's GDP-sized portion of wealth would go into the economy evenly shared, and not only would more creativity and intelligence be going into the system and there would be less overproduction, but we don't even WANT as much production as we do now because it's unsustainable: the raw materials simply won't be there much longer. Michael pointed out that we've been through periods were we could either choose to lower the amount we worked or raise productivity, and the market precluded the discussion before it began. He estimates that people could work 13 hours a week and have 1950s-era opulence, with all the caveats above. I'd say that, with people working 20-30 hours a week, everyone could sustainably be living (thanks to all the social goods) at maybe 1980s levels, if not far better, and technology would be booming because of all the enhanced creativity and intelligent funding of research.

Finally, this is a VERY cool article from Murray Rothbard about Reagonomics.

This memo to Mises Institute members was written in late 1987, and published in "The Free Market Reader," LH Rockwell, Jr., ed., 1988, pp. 3342–362 and is posted on in an edited edition.
I come to bury Reaganomics, not to praise it.
How well has Reaganomics achieved its own goals? Perhaps the best way of discovering those goals is to recall the heady days of Ronald Reagan's first campaign for the presidency, especially before his triumph at the Republican National Convention in 1980. In general terms, Reagan pledged to return, or advance, to a free market and to "get government off our backs."
Specifically, Reagan called for a massive cut in government spending, an even more drastic cut in taxation (particularly the income tax), a balanced budget by 1984 (that wild-spender, Jimmy Carter you see, had raised the budget deficit to $74 billion a year, and this had to be eliminated), and a return to the gold standard, where money is supplied by the market rather than by government. In addition to a call for free markets domestically, Reagan affirmed his deep commitment to free­dom of international trade. Not only did the upper echelons of the administration sport Adam Smith ties, in honor of that moderate free-trader, but Reagan himself affirmed the depth of the influence upon him of the mid-19th century laissez-faire economist, Frederic Bastiat, whose devastating and satiric attacks on protectionism have been anthologized in economics readings ever since.
The gold standard was the easiest pledge to dispose of. President Reagan appointed an allegedly impartial gold com­mission to study the problem—a commission overwhelm­ingly packed with lifelong opponents of gold. The commis­sion presented its predictable report, and gold was quickly in­terred.
Let's run down the other important areas:
Government Spending. How well did Reagan succeed in cutting government spending, surely a critical ingredient in any plan to reduce the role of government in everyone's life? In 1980, the last year of free-spending Jimmy Carter the fed­eral government spent $591 billion. In 1986, the last recorded year of the Reagan administration, the federal government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically not reducing government expenditures.
Sophisticated economists say that these absolute numbers are an unfair comparison, that we should compare federal spending in these two years as percentage of gross national product. But this strikes me as unfair in the opposite direc­tion, because the greater the amount of inflation generated by the federal government, the higher will be the GNP. We might then be complimenting the government on a lower percentage of spending achieved by the government's gener­ating inflation by creating more money. But even taking these percentages of GNP figures, we get federal spending as percent of GNP in 1980 as 21.6%, and after six years of Reagan, 24.3%. A better comparison would be percentage of federal spending to net private product, that is, production of the private sector. That percentage was 31.1% in 1980, and a shocking 34.3% in 1986. So even using percentages, the Reagan administration has brought us a substantial increase in government spending.
Also, the excuse cannot be used that Congress massively increased Reagan's budget proposals. On the contrary, there was never much difference between Reagan's and Congress's budgets, and despite propaganda to the contrary, Reagan never proposed a cut in the total budget.
Deficits. The next, and admittedly the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down com­fortably to about $200 billion, a level that seems to be perma­nent, despite desperate attempts to cook the figures in one-shot reductions.
This is by far the largest budget deficit in American his­tory. It is true that the $50 billion deficits in World War II were a much higher percentage of the GNP; but the point is that that was a temporary, one-shot situation, the product of war finance. But the war was over in a few years; and the cur­rent federal deficits now seem to be a recent, but still perma­nent part of the American heritage.
One of the most curious, and least edifying, sights in the Reagan era was to see the Reaganites completely change their tune of a lifetime. At the very beginning of the Reagan ad­ministration, the conservative Republicans in the House of Representatives, convinced that deficits would disappear im­mediately, received a terrific shock when they were asked by the Reagan administration to vote for the usual annual in­crease in the statutory debt limit. These Republicans, some literally with tears in their eyes, protested that never in their lives had they voted for an increase in the national debt limit, but they were doing it just this one time because they "trusted Ronald Reagan" to balance the budget from then on. The rest, alas, is history, and the conservative Repub­licans never saw fit to cry again. Instead, they found them­selves adjusting rather easily to the new era of huge permanent deficits. The Gramm-Rudman law, allegedly designed to eradicate deficits in a few years, has now unsurprisingly bogged down in enduring confusion.
Even less edifying is the spectre of Reaganomists who had inveighed against deficits—that legacy of Keynesianism—for decades. Soon Reaganite economists, especially those staffing economic posts in the executive and legislative branches, found that deficits really weren't so bad after all. Ingenious models were devised claiming to prove that there really isn't any deficit. Bill Niskanen, of the Reagan Council of Eco­nomic Advisors, came up with perhaps the most ingenious discovery: that there is no reason to worry about govern­ment deficits, since they are balanced by the growth in value of government assets. Well, hooray, but it is rather strange to see economists whose alleged goal is a drastic reduction in the role of government cheering for ever greater growth in gov­ernment assets. Moreover, the size of government assets is really beside the point. It would only be of interest if the fed­eral government were just another private business firm, about to go into liquidation, and whose debtors could then be satisfied by a parceling out of its hefty assets. The federal government is not about to be liquidated; there is no chance, for example, of an institution ever going into bankruptcy or liquidation that has the legal right to print whatever money it needs to get itself—and anyone else it favors—out of any fi­nancial hole.

Even less edifying is the spectre of Reaganomists who had inveighed against deficits—that legacy of Keynesianism—for decades. Soon Reaganite economists, especially those staffing economic posts in the executive and legislative branches, found that deficits really weren't so bad after all. Ingenious models were devised claiming to prove that there really isn't any deficit. Bill Niskanen, of the Reagan Council of Eco­nomic Advisors, came up with perhaps the most ingenious discovery: that there is no reason to worry about govern­ment deficits, since they are balanced by the growth in value of government assets. Well, hooray, but it is rather strange to see economists whose alleged goal is a drastic reduction in the role of government cheering for ever greater growth in gov­ernment assets. Moreover, the size of government assets is really beside the point. It would only be of interest if the fed­eral government were just another private business firm, about to go into liquidation, and whose debtors could then be satisfied by a parceling out of its hefty assets. The federal government is not about to be liquidated; there is no chance, for example, of an institution ever going into bankruptcy or liquidation that has the legal right to print whatever money it needs to get itself—and anyone else it favors—out of any fi­nancial hole.

There has also been a fervent revival of the old left-Keynesian idea that "deficits don't matter, anyway." Deficits are stimulating, we can "grow ourselves out of deficits," etc. The most interesting, though predictable, twist was that of the supply-siders, who, led by Professor Arthur Laffer and his famous "curve," had promised that if income tax rates were cut, investment and production would be so stimulated that a fall in tax rates would increase tax revenue and balance the budget. When the budget was most emphatically not bal­anced, and deficits instead got worse, the supply-siders threw Laffer overboard as the scapegoat, claiming that Laffer was an extremist, and the only propounder of his famous curve. The supply-siders then retreated to their current, fall-back posi­tion, which is quite frankly Keynesian; namely deficits don't matter anyway, so let's have cheap money and deficits; relax and enjoy them. About the only Keynesian phrase we have not heard yet from Reaganomists is that the national debt "doesn't matter because we owe it to ourselves," and I am wait­ing for some supply-sider to adopt this famous 1930s phrase of Abba Lerner without, of course, bothering about attribution.
One way in which Ronald Reagan has tried to seize the moral high road on the deficit question is to divorce his rhetoric from reality even more sharply than usual. Thus, the proposer of the biggest deficits in American history has been calling vehemently for a Constitutional amendment to require a bal­anced budget. In that way, Reagan can lead the way toward permanent $200 billion deficits, while basking in the virtue of proposing a balanced budget amendment, and trying to make Congress the fall guy for our deficit economy.
Even in the unlikely event that the balanced budget amendment should ever pass, it would be ludicrous in its lack of effect. In the first place, Congress can override the amend­ment at any time by three-fifths vote. Secondly, Congress is not required to actually balance any budget; that is, its actual expenditures in any given year are not limited to the reve­nues taken in. Instead, Congress is only required to prepare an estimate of a balanced budget for a future year; and of course, government estimates, even of its own income or spending, are notoriously unreliable. And third, there is no enforcement clause; suppose Congress did violate even the re­quirement for an estimated balanced budget: What is going to happen to the legislators? Is the Supreme Court going to sum­mon marshals and put the entire U.S. Congress in jail? And yet, not only has Reagan been pushing for such an absurd amendment, but so too have many helpful Reaganomists.
Tax Cuts. One of the few areas where Reaganomists claim success without embarrassment is taxation. Didn't the Reagan administration, after all, slash income taxes in 1981, and provide both tax cuts and "fairness" in its highly touted tax reform law of 1986? Hasn't Ronald Reagan, in the teeth of opposition, heroically held the line against all tax increases?
The answer, unfortunately, is no. In the first place, the fa­mous "tax cut" of 1981 did not cut taxes at all. It's true that tax rates for higher-income brackets were cut; but for the average person, taxes rose, rather than declined. The reason is that, on the whole, the cut in income tax rates was more than offset by two forms of tax increase. One was "bracket creep," a term for inflation quietly but effectively raising one into higher tax brackets, so that you pay more and proportionately higher taxes even though the tax rate schedule has officially remained the same. The second source of higher taxes was Social Security taxation, which kept increasing, and which helped taxes go up overall. Not only that, but soon thereafter; when the Social Security System was generally perceived as on the brink of bankruptcy, President Reagan brought in Alan Greenspan, a leading Reaganomist and now Chairman of the Federal Reserve, to save Social Security as head of a bi­partisan commission. The "saving," of course, meant still higher Social Security taxes then and forevermore.
Since the tax cut of 1981 that was not really a cut, fur­thermore, taxes have gone up every single year since, with the approval of the Reagan administration. But to save the president's rhetorical sensibilities, they weren't called tax in­creases. Instead, ingenious labels were attached to them; rais­ing of "fees," "plugging loopholes" (and surely everyone wants loopholes plugged), "tightening IRS enforcement," and even revenue enhancements." I am sure that all good Reaganomists slept soundly at night knowing that even though government revenue was being "enhanced," the pres­ident had held the line against tax increases.

The highly ballyhooed Tax "Reform" Act of 1986 was supposed to be economically healthy as well as "fair"; sup­posedly "revenue neutral," it was to bring us (a) simplicity, helping the public while making the lives of tax accountants and lawyers miserable; and (b) income tax cuts, especially in the higher income brackets and in everyone's marginal tax rates (that is, income tax rates on additional money you may earn); and offset only by plugging those infamous loopholes. The reality, of course, was very different, In the first place, the administration has succeeded in making the tax laws so complicated that even the IRS admittedly doesn't understand it, and tax accountants and lawyers will be kept puzzled and happy for years to come.
Secondly, while indeed income tax rates were cut in the higher brackets, many of the loophole plugs meant huge tax increases for people in the upper as well as middle income brackets. The point of the income tax, and particularly the marginal rate cuts, was the supply-sider objective of lowering taxes to stimulate savings and investment. But a National Bureau study by Hausman and Poterba on the Tax Reform Act shows that over 40% of the nation's taxpayers suffered a marginal tax increase (or at best, the same rate as before) and, of the majority that did enjoy marginal tax cuts, only 11% got reductions of 10% or more. In short, most of the tax reduc­tions were negligible. Not only that; the Tax Reform Act, these authors reckoned, would lower savings and investment overall because of the huge increases in taxes on business and on capital gains. Moreover savings were also hurt by the tax law's removal of tax deductibility on contributions to IRAs.
Not only were taxes increased, but business costs were greatly raised by making business expense meals only 80% deductible, which means a great expenditure of business time and energy keeping and shuffling records. And not only were taxes raised by eliminating tax shelters in real estate, but the law's claims to "fairness" were made grotesque by the retroac­tive nature of many of the tax increases. Thus, the abolition of tax shelter deductibility was made retroactive, imposing huge penalties after the fact. This is ex post facto legislation outlawed by the Constitution, which prohibits making ac­tions retroactively criminal for a time period when they were perfectly legal. A friend of mine, for example, sold his busi­ness about eight years ago; to avoid capital gains taxes, he in­corporated his business in the American Virgin Islands, which the federal government had made exempt from capital gains taxes in order to stimulate Virgin Islands development. Now, eight years later, this tax exemption for the Virgin Islands has been removed (a "loophole" plugged!) but the IRS now expects my friend to pay full retroactive capital gains taxes plus interest on this eight-year old sale. Let's hear it for the "fairness" of the tax reform law!
But the bottom line on the tax question: is what hap­pened in the Reagan era to government tax revenues overall? Did the amount of taxes extracted from the American people by the federal government go up or down during the Reagan years? The facts are that federal tax receipts were $517 billion in the last Carter year of 1980. In 1986, revenues totaled $769 billion, an increase of 49%. Whatever that is, that doesn't look like a tax cut. But how about taxes as a percentage of the national product? There, we can concede that on a percent­age criterion, overall taxes fell very slightly, remaining about even with the last year of Carter. Taxes fell from 18.9% of the GNP to 18.3%, or for a better gauge, taxes as percentage of net private product fell from 27.2% to 26.6%. A large abso­lute increase in taxes, coupled with keeping taxes as a per­centage of national product about even, is scarcely cause for tossing one's hat in the air about a whopping reduction in taxes during the Reagan years.
In recent months, moreover; the Reagan administration has been more receptive to loophole plugging, fees, and reve­nues than ever before. To quote from the Tax Watch column in the New York Times (October 13, 1987): "President Reagan has repeatedly warned Congress of his opposition to any new taxes, but some White House aides have been trying to figure out a way of endorsing a tax bill that could be called some­thing else."
In addition to closing loopholes, the White House is nudging Congress to expand the usual definition of a "user fee," not a tax because it is supposed to be a fee for those who use a government service, say national parks or waterways. But apparently the Reagan administration is now expanding the definition of "user fee" to include excise taxes, on the as­sumption, apparently, that every time we purchase a product or service we must pay government for its permission. Thus, the Reagan administration has proposed not, of course, as a tax increase, but as an alleged "user fee," a higher excise tax on every international airline or ship ticket, a tax on all coal producers, and a tax on gasoline and on highway charges for buses. The administration is also willing to support, as an alleged user fee rather than a tax, a requirement that employ­ers, such as restaurants, start paying the Social Security tax on tips received by waiters and other service personnel.
In the wake of the stock market crash, President Reagan is now willing to give us a post-crash present of: higher taxes that will openly be called higher taxes. On Tuesday morning, the White House declared: "We're going to hold to our guns. The president has given us marching orders: no tax increase." By Tuesday afternoon, however, the marching or­ders had apparently evaporated, and the president said that he was "willing to look at" tax-increase proposals. To greet a looming recession with a tax increase is a wonderful way to bring that recession into reality. Once again, President Reagan is following the path blazed by Herbert Hoover in the Great Depression of raising taxes to try to combat a deficit.
Deregulation. Another crucial aspect of freeing the market and getting government off our backs is deregulation, and the administration and its Reaganomists have been very proud of its deregulation record. However, a look at the record re­veals a very different picture. In the first place, the most con­spicuous examples of deregulation; the ending of oil and gaso­line price controls and rationing, the deregulation of trucks and airlines, were all launched by the Carter administration, and completed just in time for the Reagan administration to claim the credit. Meanwhile, there were other promised deregulations that never took place; for example, abolition of natural gas controls and of the Department of Energy.
Overall, in fact, there has probably been not deregulation, but an increase in regulation. Thus, Christopher De Muth, head of the American Enterprise Institute and a former top official of Reagan's Office of Management and the Budget, concludes that "the President has not mounted a broad offen­sive against regulation. There hasn't been much total change since 1981. There has been more balanced administration of regulatory agencies than we had become used to in the 1970s, but many regulatory rules have been strengthened."
In particular, there has been a fervent drive, especially in the past year; to intensify regulation of Wall Street. A savage and almost hysterical attack was launched late last year by the Securities and Exchange Commission and by the Depart­ment of Justice on the high crime of "insider trading." Dis­tinguished investment bankers were literally hauled out of their offices in manacles, and the most conspicuous inside trader received as a punishment (1) a fine of $100 million; (2) a lifetime ban on any further security trading, and (3) a jail term of one year, suspended for community service. And this is the light sentence, in return for allowing himself to be wired and turn informer on his insider trading colleagues. [Editor's note: Ivan Boesky was sentenced to three years in prison.]
All this was part of a drive by the administration to pro­tect inefficient corporate managers from the dread threat of takeover bids, by which means stockholders are able to dis­pose easily of ineffective management and turn to new man­agers. Can we really say that this frenzied assault on Wall Street by the Reagan administration had no impact on the stock market crash [October 1987]?
And yet the Reagan administration has reacted to the crash not by letting up, but by intensifying, regulation of the stock market. The head of the SEC strongly considered clos­ing down the market on October 19, and some markets were temporarily shut down—a case, once again, of solving prob­lems by shooting the market—the messenger of bad news. October 20, the Reagan administration collaborated in an­nouncing early closing of the market for the next several days. The SEC has already moved, in conjunction with the New York Stock Exchange, to close down computer program trading on the market, a trade related to stock index futures. But blaming computer program trading for the crash is a Luddite reaction; trying to solve problems by taking a crow­bar and wrecking machines. There were no computers, after all, in 1929. Once again, the instincts of the administration, particularly in relation to Wall Street, is to regulate. Regulate, and inflate, seem to be the Reaganite answers to our eco­nomic ills.
Agricultural policy, for its part, has been a total disaster. Instead of ending farm price supports and controls and returning to a free market in agriculture, the administration has greatly increased price supports, controls and subsidies. Furthermore, it has brought a calamitous innovation to the farm program; the PIK program ["Payments In Kind"] in which the government gets the farmers to agree to drastic cuts in acreage, in return for which the government pays back the wheat or cotton surpluses previously held off the market. The result of all this has been to push farm prices far higher than the world market, depress farm exports, and throw many farmers into bankruptcy. All the administration can offer, however, is more of the same disastrous policy.
Foreign Economic Policy. If the Reagan administration has botched the domestic economy, even in terms of its own goals, how has it done in foreign economic affairs? As we might expect, its foreign economic policy has been the exact opposite of its proclaimed devotion to free trade and free markets. In the first place, Adam Smith ties and Bastiat to the contrary notwithstanding, the Reagan administration has been the most belligerent and nationalistic since Herbert Hoover. Tariffs and import quotas have been repeatedly raised, and Japan has been treated as a leper and repeatedly de­nounced for the crime of selling high quality products at low prices to the delighted American consumer.
In all matters of complex and tangled international eco­nomics, the only way out of the thicket is to keep our eye on one overriding question: Is it good, or bad, for the American consumer? What the American consumer wants is good qual­ity products at low prices, and so the Japanese should be wel­comed and admired instead of condemned. As for the alleged crime of "dumping," if the Japanese are really foolish enough to waste money and resources by dumping—that is selling goods to us below costs—then we should welcome such a pol­icy with open arms; anytime the Japanese are willing to sell me Sony TV sets for a dollar, I am more than happy to take the sets off their hands.
Not only foreign producers are hurt by protectionism, but even more so are American consumers. Every time the administration slaps a tariff or quota on motorcycles or on textiles or semiconductors or clothespins—as it did to bail out one inefficient clothespin plant in Maine—every time it does that, it injures the American consumer.
It is no wonder, then, that even the Reaganomist Bill Niskanen recently admitted that "international trade is more regulated than it was 10 years ago." Or, as Secretary of Treas­ury James Baker declared proudly last month: "President Reagan has granted more import relief to U.S. industry than any of his predecessors in more than half a century." Pretty good for a Bastiat follower.
Another original aim of the Reagan administration, under the influence of the monetarists, or Friedmanites, was to keep the government's hand completely off exchange rates, and to allow these rates to fluctuate freely on the mar­ket, without interference by the Federal Reserve or the Treas­ury. A leading monetarist, Dr. Beryl W. Sprinkel, was made Undersecretary of the Treasury for Monetary Policy in 1981 to carry out that policy. But this non-intervention is long gone, and Secretary Baker, aided by the Fed, has been busily engaged in trying to persuade other countries to intervene to help coordinate and fix exchange rates. After being removed from the Treasury after several years, Sprinkel was sent to Siberia and ordered to keep quiet, as head of the Council of Economic Advisors; and Sprinkel has recently announced that he will leave the government altogether. [Editor's note: Sprinkel was later rehabilitated, and given Cabinet status, in return for his agreement to take part in the disas­trous Baker dollar policy.]
Moreover, the policy of foreign aid and foreign lending conducted or encouraged by the government has proceeded more intensely than even under previous administrations. Reagan has bailed out the despotic government of Poland with massive loans, so that Poland could repay its Western creditors. A similar policy has been conducted in relation to many shaky or bankrupt third world governments. The spec­tre of bank collapse from foreign loans has been averted by bailouts and promises of bailout from the Federal Reserve, the nation's only manufacturer of dollars, which it can pro­duce at will.
Wherever we look, then, on the budget, in the domestic economy, or in foreign trade or international monetary rela­tions, we see government even more on our backs than ever. The burden and the scope of government intervention under Reagan has increased, not decreased. Reagan's rhetoric has been calling for reductions of government; his actions have been precisely the reverse. Yet both sides of the political fence have bought the rhetoric and claim that it has been put into effect.
Reaganites and Reaganomists, for obvious reasons, are trying desperately to maintain that Reagan has indeed ful­filled his glorious promises; while his opponents, intent on attacking the bogey of Reaganomics, are also, and for oppo­site reasons, anxious to claim that Reagan has really put his free-market program into operation. So we have the curious, and surely not healthy, situation where a mass of politically interested people are totally misinterpreting and even misrep­resenting the Reagan record; focusing, like Reagan himself, on his rhetoric instead of on the reality.
What of the Future? Is there life after Reaganomics? To assess coming events, we first have to realize that Reagan­omics has never been a monolith. It has had several faces; Reaganomics has been an uneasy and shifting coalition of several clashing schools of economic thought. In particular, the leading schools have been the conservative Keynesians, the Milton Friedman monetarists, and the supply-siders. The monetarists, devoted to a money rule of a fixed percentage increase of money growth engineered by the Federal Reserve, have come a cropper. Fervently believing that science is noth­ing else but prediction, the monetarists have self-destructed by making a string of self-confident but disastrous predic­tions in the last several years. Their fate illustrates the fact that he who lives by prediction shall die by it. Apart from their views on money, the monetarists generally believe in free markets, and so their demise has left Reaganomics in the hands of the other two schools, neither of whom are particul­arly interested in free markets or cutting government.
The conservative Keynesians—the folks who brought us the economics of the Nixon and Ford administrations—saw Keynesianism lose its dominance among economists with the inflationary recession of 1973-74, an event which Keynesians stoutly believed could never possibly happen. But while Keynesians have lost their old eclat, they remain with two preoccupations: (1) a devotion to the New Deal-Fair Deal-Great Society-Nixon-Ford-Carter-status quo, and (2) a zeal for tax increases to moderate the current deficit. As for gov­ernment spending, never has the thought of actually cutting expenditures crossed their minds. The supply-siders, who are weak in academia but strong in the press and in exerting enormous political leverage per capita, have also no interest in cutting government spending. To the contrary, both con­servative Keynesians and supply-siders are prepared to call for an increasing stream of goodies from government.
Both groups have also long been keen on monetary infla­tion. The supply-siders have pretty much given up the idea of tax cuts; their stance is now to accept the deficit and oppose any tax increase. On foreign monetary matters, the conserva­tive Keynesians and the supply-siders have formed a coali­tion; both groups embrace Secretary of Treasury Baker's Keynesian program of fixed exchange rates and an interna­tionally coordinated policy of cheap money.
Politically, the Republican presidential candidates can be assessed on their various preferred visions of Reaganomics. Vice-President Bush is, of course, a conservative Keynesian and a veteran arch-enemy of supply-side doctrine, which he famously denounced in 1980 as "voodoo economics." Secre­tary of Treasury James Baker is a former Bush campaign aide. White House Chief of Staff Howard Baker is also in the con­servative Keynesian camp, as was Paul Volcker, and is Alan Greenspan. Since former White House Chief of Staff Donald Regan was a fellow-traveller of the supply-siders, his replace­ment by Howard Baker as a result of Iranscam was a triumph of conservative Keynesians over the supply-siders. This year, in fact, our troika of Economic Rulers, Greenspan and the two Bakers, has all been squarely in the conservative Keynes­ian camp.
Senator Robert Dole, the other Republican front-runner for president, is also a conservative Keynesian. In fact, Bob Dole carried on the fight for higher taxes even when it was relatively unfashionable inside the administration. So de­voted to higher taxes is Bob Dole, in fact, that he is reputed to be the favorite presidential candidate of the Internal Revenue Service. So if you like the IRS, you'll love Bob Dole.
Congressman Jack Kemp, on the other hand, has been the political champion of the supply-siders ever since supply-side was invented in the late 1970s. Kemp's call for higher govern­ment spending, and approval of deficits, monetary inflation, and fixed exchange rates, all attest to his supply-side devotion.
Jack Kemp, however, has for some reason not struck fire among the public, so Mrs. Jeanne Kirkpatrick stands ready in the wings to take up the cause if Kemp should fail to rally. I confess I have not been able to figure out the economic views of the Reverend Pat Robertson, although I have a hunch they do not loom very large in his world outlook.
Although there are a lot of Democratic candidates out there, it is hard at this point to distinguish one from another, on economic policy or indeed on anything else. As Joe Klein recently wrote in a perceptive article in New York magazine, the Republicans are engaged in an interesting clash of differ­ent ideas, while the Democrats are all muddily groping to­ward the center. To make the confusion still greater, Klein points out that Republicans are busily talking about "com­passion," while the Democrats are all stressing "efficiency." One thing is fairly clear; Congressman Gephardt is an all-out protectionist, thoroughly jettisoning the old Democratic commitment to free trade, and is the most ardent statist in agricultural policy.
On monetary and fiscal policy, the Democrats are the classic party of liberal Keynesianism, in contrast to the Re­publican policy of conservative Keynesianism. The problem is that, in the last decade or two, it has become increasingly dif­ficult to tell the difference. Apart from supply-sider Kemp, we can expect the president of either party to be a middle-of-the-road liberal/conservative Keynesian. And so we can expect the next administration's economic policies to be roughly the same as they are now. Except that the rhetoric will be differ­ent. So we can, therefore, expect diverse perceptions and responses to a similar reality by the public and by the market. Thus, if Jack Kemp becomes president, the public will wrongly consider him a champion of hard money, budget cutting, and the free market. The public will therefore underestimate the wildly inflationist reality of a Kemp administration. On the other hand, the public probably perceives the Democrats to be wilder spenders relative to the Republicans than they really are. So should the Democrats win in 1988, we can ex­pect the market to overestimate the inflationary measure of a Democratic administration.
All of this, along with the universal misperception of Reaganomics, illustrates once more the wisdom of those incisive political philosophers, Gilbert and Sullivan: "Things are not always what they seem; skim milk masquerades as cream."

There's a lot of good economics mixed in there (sorry about the formatting.) For those of you who don't know: Rothbard is a lib-con along the lines of Hayek, Mises and Rand, so this is a broadside from the very fiscal conservatives that Reagan supposedly represented. I'd like to note a few disagreements (I could debunk quite a bit here, but I'll let this flawed beauty stand on its own). It actually IS the case that "deficits don't matter"; or, rather, that while deficits do matter, if the government borrows some small amount of money and uses it to invest in infrastructure, it will easily recoup its benefits. Where I think I and Rothbard would be in agreement is that Reagan did no such thing. Instead, Reagan's money went almost exclusively to boondoggles for the rich and military spending, the very spending that supposedly sank the Soviet Union but in fact nearly brought the world to the brink of nuclear war. I think his comments about the increasing unity of the two parties is also very well taken, though I do think that the two parties have always supported massive state-sector intervention (read: the Pentagon, universities, etc.)

The main problem with fiscal conservatives is that they ask for the government to be a business and then pretend that the government isn't. Any business will begin in debt, and small businesses will continually borrow money if they have to make essential investments. I have no problem with mounting a broadside on the gargantuan waste spending that Congress does for patronage games and to enrich a few capitalists, but lib-cons tend to go after "retail waste" like welfare.

This is why I like lib-cons. They always come out and surprise you at just the best times.

I Hate Atkins.

The "low carb revolution" aggravates the crap out of me. It is rare that one person has an insight that turns all of established science on its head, and I don't believe that Atkin's work nearly approaches the compelling nature necessary to make one alter both one's perception of a fairly vast body of medical science, but also traditional diets. There are also class implications to Atkin's, but let me go through what I understand of the science first.

The first key thing to note is that the Atkins diet isn't new: people tried it in the '70s. Perhaps this time it'll stay around longer. We are facing even more of an obesity crisis than we were in the '70s, and it may be easier to stay with it now that the food industry has attempted to appeal to low carb fanatics.

However, the ultimate response to Atkins advocates is this: The measure of a diet is not whether or not someone can lose weight on it, but whether or not one can healthily and comfortably maintain it. One can lose quite a bit of weight by fasting under a tree for a month, but doing it for much longer is a sure way to die. This brings up two immediate questions: First, can you continue to cut the carbs; second, are there other issues with the diet aside from the weight loss? The first question is fairly simple. Even Atkins concedes, and it's obvious to see, that if one steps back onto the carb bandwagon, one will regain the weight one lost (perhaps balloon up even faster as someone retains the habits of eating too much meat). If you can comfortably not drink milk or smoothies and eat pasta, bread, cereal, bananas, berries, fruits of all types, candy, ice cream, cake, pie, desserts of most types, etc., then yes, you may be able to stay low weight on a low carb diet.

There's another, marginally more nuanced observation that studies of the low carb diets have made. Most of the time, low carb diets are in fact low calorie diets in disguise. A lot of the things you attack on a low carb diet are heavy in calories, and thus you reduce your net calorie consumption. It's a simple biological fact about calories: if you consume more than you use (i.e. have more biological energy than you need), then those calories are metabolized as fat for long-term storage.

Another fairly obvious observation is that someone can be low weight and unhealthy. Weighing in at 130 pounds doesn't help if you're eating arsenic. One can be consuming high degrees of fat, say, that clog arteries and raise the risk of various cardiovascular problems as well as cancer. This is where the social issues start to come in. We don't see obesity problems as drastic as the US' even in other industrialized and rich societies. There are some diet differences, of course, but those countries do have fast food joints and meat. The Belgians and the French developed french fries, and the Japanese bred the king of beef. A major problem is food additives, running the gamut from preservatives to artificial sweeteners and coloring agents.

It gets worse. (For citation purposes, I'm using Dr. Gregory Ellis, a purveyor of an alternative low carb diet; Keith Klein, a TaeBo nutritionist who is focused on body building and exercise; and Kathy Goodwin, a nutritionist for The Diet Channel). Klein says that low carb diets may alter T3 levels, thereby playing havoc with someone's metabolic rate; most of the weight loss is actually water, also an unhealthy fact; those who return to a carb diet after losing the pounds with Atkin's will find that their body equilibrium has changed to horde carbohydrates rather than burn them off; can cause a situation called gluconeogenesis, which is caused by the low carb's diet assault on the protein balance, thereby harming muscle and long-term protein storage; threaten diabetes and diabetes-like symptoms by reducing the regularity of insulin flow; and, in essence, let one "look good in [one's] coffin." He also notes that the bodybuilders of the late 80s and 90s, by eating nutritionally dense (high protein, moderate carbs, low fat), had definition and tone and in general superior muscles to the bodybuilders of the 70s and 80s who relied heavily on low carb diets. Let me quote some of the best articles I've found on the topic, from Goodwin.

"Low carb plans arouse an irrational fear about the hormone insulin. Insulin, like other hormones in the body, has many vital functions. One function is to enable our cells to take up glucose from the bloodstream and use it for energy. This gives us the ability to do everything from lifting a finger to recalling memories to running a marathon. Insulin has become unpopular (in obese countries) due to the fact that it helps the body store fat. Because of this fat storing function, low carb plans have condemned insulin to eternal damnation. Unfortunately, it's a very undeserved reputation based on false and twisted truths. One false theory is that only carbohydrate in the diet will stimulate insulin production. The truth is that all ingested foods stimulate insulin production. The second false theory is that insulin stores fat only when high carb foods are eaten. The bottom line with regard to the body's biochemistry is that fat will only be stored if too much food (from any source) is eaten. If the body takes in less calories than it uses in a day, all those calories will be "burned" or used for energy. It does not matter what percentage of those calories came from fat, protein or carbohydrate. On the other hand, if the body takes in more calories than it burns, insulin will help to store those extra calories as fat. Again, it does not matter where the extra calories come from. In fact, if the extra calories are from carbohydrate, the body actually burns some calories in order to turn carbohydrate into fat for storage. In contrast, extra fat calories can be immediately stored as fat. To blame insulin as the sole contributor to obesity is not only ludicrous, it's irresponsible thinking. What about all those days when we got into our cars, sat at the office all day, got the supersize meal from the drive-through, "remote-controlled" the TV all night while devouring ice cream to comfort our stress and emotions? Might this be a better explanation for rampant obesity in America? Obesity is an extremely complex issue. It has to do not only with excess calories and lack of exercise, but also genetics, psychological issues, social issues, medical problems and so many other things. The fact that normal portion sizes at restaurants are growing ever more outrageous, and that high calorie, high fat foods are cheaper and more accessible than ever doesn't help either. Obesity is not a simple issue and insulin is not the cause.

The idea that a high carb diet is responsible for obesity and illness (a concept supported by low carb plans) is completely contradicted by many population-based studies. For instance, in Japan, carbohydrates compose the overwhelming majority of daily caloric intake. High carb foods like grains, rice, and vegetables are daily staples of Japanese life, and intake of high protein, high fat animal products is minimal. In contrast to the reported "evils" of carbohydrates touted by low carb plans, Japan has some of the lowest rates of obesity, heart disease, cancer and diabetes in the world. Enough said.

The Atkins diet places no limit on the amount of saturated-fat-laden products one can have each day. Large portions of foods like butter, red meat and bacon are advocated and encouraged. The Atkins plan contradicts numerous studies which have demonstrated the significant correlation between diets high in saturated fat and increased heart disease risk. Dean Ornish, M.D., a renowned cardiologist and author of the book Dr. Dean Ornish's Program For Reversing Heart Disease, showed an actual reversal of the heart disease process through a diet limited to only 10% of daily calories from fat. Prior to Ornish's findings, significant reversal of heart disease was only thought possible through surgery. Ornish's study participants followed a diet abundant in fruits, vegetables, and whole grains, with the overwhelming majority of calories coming from carbohydrates. Dr. Atkins has not published a single study showing the long term effects of his diet on heart health. Considering his diet has been around since the 70's he's certainly had ample time to do so. Bottom line - heart disease is America's number one killer - if you have heart disease or a family history, stay away from low carb, high saturated fat diets."

I must be fair here: The low carb revolution is not simply Atkins. There are a number of low carb plans that are more sensible. There are some shows hosted on the Food Network, for example, such as George Stella's Low Carb and Loving It, which say some interesting and I think very promising things. 1) Low carb can let you lose some weight temporarily, but the way to truly reach your target goal and stay healthy is also to try to cut calories and fat. 2) Not all carbs are identical. Stella does not count carbs coming from fiber, for example, because fiber is essential. 3) With proper cooking, one can have a lot of taste without a lot of fat, calories or carbohydrates. This is what I can agree with, and I think this is the perfect segue to the broader social issues.

Why do we have obesity in this country in particular? Well, let's look at other countries. First of all, the US has a particular type of opulence that allows even poor individuals (ESPECIALLY poor individuals) to have dirt cheap meals at McDonalds and Carl's Jr. These meals are filled with meat, cheese, and low quality vegetables. Now, this opulence wouldn't be a problem if it was gained legitimately, but it takes a fairly cursory look at the history of the country to see the way that this wealth was obtained. Second, other countries have effective regulatory regimes. Due to the incredible corporatist nature of this country, regulatory capture is the rule, not the exception. In fact, corporations often annotate the cost of breaking the law as part of their budgets because the fines are so infinitesimal. (For this and a wealth of other great information, see Take the Rich Off Welfare). We have an incredibly polluted food and drink supply, filled with low quality products with massive amounts of additives. After all, elementary market assumptions tell us that if corporations can sell low cost products, they will. To say that people "want" this type of food is ridiculous: People "want" good food as much as anything else. If you were to offer someone fresh fruit and vegetables and good quality meat, who would turn you down? The problem is that, for many, the price of living is going up, wages are going down, and further, even if they are conscientious consumers with some money, they often don't have the time to cook good meals or to learn how to cook good meals, and they also don't have the individual wherewithal to sort through the thousands of products at a grocery store and find the ingredients with the least problems. The organic food industry's successes really raise my hopes in this regard. And remember, one can believe in markets and nonetheless see a necessary government task in establishing regulations as to what type of food can be produced, from a public health standpoint and for a market sustainability standpoint. Regulations can be good for business, and I think this is a concrete case of such a situation.

The fact is that the low carb diet is a suburban, opulent way out of the simple way to lose weight: Exercise more, eat less. In particular, one should be eating high quality calories that contain fiber, vitamins, minerals, and protein. One has to ingest a certain number of calories to be full, so those calories had better as dense as possible. Archaeologists have noted something strange about old corpses: Their teeth are not much worse than modern teeth, mainly because the amount of sugar in the food supply was far less, so they didn't have as much of a need for toothpaste, floss and Listerine. Our ancestors ate diets heavy in high-quality cereals and fresh ingredients, and this tradition carries on in the healthier industrialized countries. So why do we seek the easy way out despite all evidence to the contrary?

That's America, my friends.

Some other Spiritual Observations

I'd like to tell a spiritual story from my younger days. Throughout my early years, I meditated and tried Buddhist practices (I must admit, somewhat to impress cute girls, but that's a different matter). Then, in 5th grade, in a class I will always remember fondly, we studied Native American philosophy and culture, and I was asked to develop my totem. Now, I never have been much for anger, but I chose as my totem a snake, because I felt it showed a quiet rage and strength.

In retrospect, I believe I should have chosen the dolphin. Yet because of my emotional issues of not being able to communicate with people, my lack of self-esteem and a societal entrapment of rage and power, I felt that I was quite a bit more angry and violent than I actually was.

This seems to me to say many things, but I'll leave this as is.

Libertarian Paradise v. Parecon: How do the Two Stack Up?

Frequent readers may seem to notice that I wish to bridge the gap between consistent libertarians of the left and right. My support for parecon stems first and foremost from a desire for freedom. In my own experience, I have been viscerally disgusted at having to work at another's behest, not by the work per se. So, I have decided to take up a vision of a more conservative lib-con world: one with a participatory and democratic polity, truly free markets, perhaps some limts to corporatism such as in David Korten's mindful market concept, and so on. I'm simultaneously addressing Rothbard, Korten and similar advocates. The initial question: Would this society be an improvement?

Yes, of course, but the reason why is of some dispute. I'd argue that most of the benefits would stem from the participatory polity and the liberty enjoyed in that respect, not the economic vision to match. To be more concrete: Let's go through common criticisms of the left and see how this society would address them.

1) Externalities? Yes and no. The federation of the markets, the enhanced decentralization, and the legal system would at least partially address these issues. If someone polluted or harmed their workers, Rothbardian-style courts would be able to enforce sanctions. However, there'd be a few problems. First of all, this is a classic bureaucratic after-the-problem response: because the economy provides incentives to externalize costs on others, the polity must play a catch-up game. Libertarians can't have it both ways: If central planning is faulty, then this solution will suffer for roughly the same reasons. The idea that leftists of my ilk and rightists agree upon is that the economy, if at all possible, should be engineered to do as much as it can, and there should be as little political intervention as possible. This is for both ethical and practical reasons. My fear is that a) these courts could not possibly respond to most problems, solving only the most egregious ones, b) would become horribly clogged, c) would be attacked by the capitalist class, and d) would tend to favor those with money to hire better lawyers. After all, these are the problems we face now, and I see no reason to see that they'd change.

2) Commodity fetishism? No. The incomplete encoding of information within markets wouldn't change even under the most liberalized market. Because all markets are encoded in buyer-seller interactions, even a farmer's market won't adequately communicate the information one would need to buy conscientiously. Those who try to buy with a social conscience regularly notice the problem of not being able to know enough about the commodities they buy.

3) War? Yes and no. People responding to leftist critiques typically say that the economy isn't the sole factor, that resources or market extraction won't singlehandedly determine a war. Their assumption is that the polity is the force making war. While this is true, the polity rarely decides things all on its own: few wars are fought exclusively for personal reasons or because of corrupt states. That's even less plausible than the idea that all wars are fought for economic reasons. Cultural, gender, economic, personal, accidental and political reasons, to name a few, all form wars. Nonetheless, it is simply true that, as much as wars can harm economies, the victor typically gets ample compensation, and wars can also serve as stimuli as well, creating waste production and facilitating complete economic conversion. To say that war's destabilizing effects make it not net beneficial is to ignore the entirety of human history. The liberatory nature of the polity and the decentralization of markets will probably reduce the impetus for war, but I'm afraid that markets will still engender some degree of war unless the polity is globally representative. In that case, war would only be caused by situations where economic actors got enough political clout to gain localized control or were able to develop their own private armies. It is true that corporate actors can themselves wage war, as with the Pinkerton detectives.

4) Inequity? No. Because markets reward output, power and productive property, as well as particular character traits, inequity is simply going to prosper, unless the polity does something, and that's typically excluded out of hand by these advocates. Classism will also continue virtually inevitably; Michael Albert has explained this ad infinitum in his treatments of parecon.

5) Unemployment? Maybe. It is in capitalists' interests and possibly the populations' interests to keep some people unemployed (by unemployed, I mean the standard definition of people who are looking for a job but do not have one).

6) Freedom? Maybe. In Parecon, I think Michael Albert shows that even with group stock ownership schemes and similar, there will be pressures in markets to create coordinator and capitalist classes who seek to enhance their power at the cost of the economy and at the cost of liberty. These coordinator and capitalist classes make the same choice 99% of the time: top-down hierarchical work norms.

7) Adversarial roles of production? Mostly no. Markets are defined by buyers and sellers acting against each other in an adversarial manner, such as haggling in a bazaar.

I think this teaches an important lesson: Just as the best economy could potentially suffer from a totalitarian polity or gender or culture system, the best polity could suffer from a bad economy. What marketeers say is something reasonable: If the economy can accomplish essential jobs, as a practical matter the state should not be involved. But I think this exercise proves that even with the best polity, the capitalist economy is an abject failure. Maybe I'm painting an inaccurate or distorted picture, but I think not.

On a lighter note: My econ class is getting better. Wee!

I'd also like to make a tangential comment: There's a myth of Keynes creating a viable capitalism. Now, I agree Keynesian economic policy makes capitalism more livable, certainly, but Keynes did say that capitalism was a failure of an economic system. It doesn't take much to derive from Keynes an anti-capitalism: admittedly not a Marxist or even anarchist anti-capitalism, but an economists' anti-capitalism.

Saturday, January 22, 2005

The Laughability of Intellectuals

It's amazing how dumb smart people can be. Take, for example, the myth propagated by some libertarian capitalists that the media is saturated with socialists. Even in leftist magazines, parecon has received criticism that has nothing to do with the vision of parecon, and it's scarcely reviewed elsewhere. Manufacturing Consent and Necessary Illusions prove the propaganda model practically beyond a doubt. Yet these individuals continue to argue that, say, movies never focus on how bad Communism is.

This is a copy of an e-mail I wrote to someone making this comment, called "Hollywood's Missing Movies:"

"The argument you make about why Communism is not featured too often in Hollywood movies is laughable. American movies take for granted capitalism's triumph, by and large; even Michael Moore's work is made far more reformist by the silver screen (trust me, I know from hearing him speak in person). How come Manufacturing Consent has received virtually no American attention but widespread European applause? It can't be due to American opinion, which overwhelmingly agrees with Chomsky on the rare opportunities that they get to hear something like what he says.

Certainly Rambo, a movie focused on POW camps in Vietnam but not the murderous bombardment of an entire country killing millions and still extracting a death toll through mines and Agent Orange, disproves your theory entirely. In fact, American action movies in particular are filled with trite cliches about domestic crime, conservative-style vigilantism (even the films like Boondock Saints that I enjoy), Third World dictators that we surely do not prop up and offer crucial support, Communist intrasigence, etc.

Why no films about how the US, along with the fascists and the socialists, quashed the Spanish Revolution? Why no documentary on Vasili Arkhipov, the Russian sub commander who may have saved the world by rescinding a nuclear launch order during the Cuban missile crisis? Why is the current anti-Kerry documentary being shown all over on most national networks?

Sure, exploration into what Pol Pot did would not be bad; particularly since, due to our support for Democratic Kampuchea and carpet bombing of Cambodia (conditions that helped create the condition for the rise of the Khmer Rouge), we bear responsibility. Or what about Ceausescu, a monster who was overthrown by his own people while we gleefully supported to the end?

Heck, let's take it to the current day, with the anti-terror myth. Why not talk about how the Israelis created Hezbollah and Hamas, how we incited the Soviets to invade Afghanistan and supported the moujahadeen (essentially leading to the Taliban by logical development of events), how we flew in radical Islamists into the former Yugoslavia to support our clients, how we support Saudi Arabia/Uzbekistan/Turkmenistan/Turkey (despite its repression of Kurds)/Indonesia (despite its horrible days with Suharto)...

And heck, why not an exciting film about Operation Paperclip, the operation that spirited away Nazis like Reinhard Gehlen and Klaus Barbie for US counter-insurgency?

Even if Communists "took over the film industry", something laughable (and something that you support with quotes taken out of context and made to make arguments that the sources would find eminently ludicrous), that surely isn't the case now..."

I bring this up because I'm watching Rocky IV. It's an honestly good movie, but there are assumptions that dominate Cold War thought: Rocky (white America, while Apollo being even more a central symbol of America) is too stupid to be evil or deceitful; Ivan is angry, bringing down Apollo and killing him in a joke fight (though Ivan does say "I fight for me"); the totalitarian masses of the Russians cheer for Drago until they see the purity of Rocky; etc. While there is some deviation (America is stupid, Russia is admirable), the basic assumption fits the Cold War mold.

Now, I must admit, for the sake of full disclosure, that it is definitely the case (from my own study of film and by simply looking at most film) that Hollywood is probably fairly liberal. This liberalism is limited, though: The response to Mike's politicization of the Oscars shows how much these people often care about politics. Also, it is probably the case that explicitly anti-Communist movies rarely came out (though if you watch movies from MST3K like "Invasion USA" and some shorts of theirs, you see how truly vapid the 50s propaganda movies were), but there's a good reason: Hollywood rarely produces anything explicitly anti-anything or pro-anything. The majority of films are stock films: Romantic comedies, action, horror, what have you. The applicable categories don't leave a lot of room for politics. Among those films, there is probably a left-leaning slant, but I think that the case is probably the same as among the film industry before WW2: left-leaning, but still supporting the basic elite doctrine. In fact, the film industry collaborated with the Fascists to a surprising degree, much like the entire US economy and political system did for quite some time. The amount of films that I can think of with an evil Third World dictator, terrorist group, or something is surprising. Further, a lot of action movies are revenge or vigilante movies, everything from The Punisher to Boondock Saints (movies I really liked, by the way). There are some movies that come to mind that do break from this mold:

1) The Rock. Good movie, excellent action, this has a terrorist group, but the terrorist group is composed of former Marines with a real, legitimate plea and with admirable (and not-so-admirable) characters. It also makes oblique references to conspiracy theories and criticizes to some extent the US military-industrial complex and our prison system.

As I think of others, I'll edit this post.

The Pathologies of Virtues and the Demons of the Mind; Innovation and Autarky

My philosophy has always realized that, hidden in the seeds of every virtue, pathologies are ubiquitous. My mother keeps her house spotlessly clean, but at the cost of personal anguish every time she sees a messy space; what does this suffering accomplish? Friends of mine suffer viscerally when their attempts to help others do not succeed; what does this suffering accomplish? Recently, I had a reflection while discussing in a class of where this applies to myself.

I spend a lot of time trying to discover ways to broaden my rational thought: my education, understanding and skills at debate. Now, I feel this helps me understand the world; it helps me reduce my suffering, as I can see consciously that suffering does nothing for me or anybody or anything I love; it helps me reach out to people using a universal language. But there are many pitfalls when using rational thought to avoid, and one of them is something I realized recently: I have a visceral fear of mu, void, death, nothingness. Others who have constructed less of an intellectual edifice can probably relate to death in a more comfortable way, while my thought processes make me try to seek understanding of everything, not nothing. At some time, I shall have to face being deprived of that rational mind and find peace with it.

This has made me consider the demons hidden behind every angel, and how we can tame and quell that demon, reaching into the darkness and pulling out the gold hidden in the abyss. I seek a golden mean, where the precise combination of two dichotomies creates something qualitatively different and unique.

1) Demon of the glutton: This is a potentially obvious one, but it can occur in people who are cultured, who truly seem to enjoy life: good food, good wine, good cars. There is something positive about enjoying what you have and seeking the best of the world, but the demon rises from this desire overwhelming other considerations and making one suffer when one does not have the best.

2) Demon of the thinker: The demon of the thinker is one that I often deal with because it is so important both to me and to the broader culture. Those who have intellect and rational thought oftentimes use it as a bludgeon against others. It becomes an effective way of shoring up the ego. It can be used to conflate value and factual judgments, bringing everything under the gaze of science and rational thought, even those questions that cannot be answered rationally. All too often, racists and those who simply don't care about injustice in society say, "Let's be rational", and then proceed to not only be irrational (or at least arational) but immoral (or at least amoral). The intellectual mind also suffers when it cannot understand, and is often highly competitive. It has problems with understanding and coping with nothingness.

3) Demon of the martyr: This is actually a source of anorexia nervosa, to some extent. Who doesn't want a perfect world? The problem is that the perfect world is something we must build, not something out there that can be easily fixed back to normality. Those with this demon suffer viscerally when they cannot help or save others; instead of taking the pain of others on their shoulders, they project their own inadequacy. When things do not go their way, they get cranky and irritable, often self-righteous. Those who have anorexia are mostly girls who want things to be perfect and find that they cannot be, so they essentially manifest suicidal urges. Martyrs also have difficulty accepting love: they can spend hours working to help others, but refuse to have assistance in return when they are exhausted. Sometimes, one should simply smile and let someone else do their thing.

4) Demon of the monk: Those who walk the spiritual path face their own challenges. One can, for example, logically conclude that since suffering is caused by attachment and death ends attachment, genocide is appropriate. Self-righteousness, a divorcing from common concerns, a lack of humility and, worse, a renewed ego with even stronger spears and walls are symptoms. Oftentimes, those with this demon also err so much to pacifism and "compassion" that they do not confront the pathologies of others. While a punishment model isn't an appropriate one, it is also not appropriate to simply acquiesce and encourage others' pathologies. "Tough love" is sometimes a good model, and it stems directly from the understanding of the fragmented I.

As more come to my mind, I shall post and comment.


Now, another comment on the balance between autarky and comparative advantage (i.e. between self-sufficient small scale production and between two or more individuals/communities deciding to focus on products and trade or exchange goods somehow to drive down per unit prices and raise quality). There are those who want to eliminate all barriers to trade, citing comparative advantage as the justification. Never mind that comparing Britain and Portugal, as Ricardo did, now leads you to conclude that Britain industrialized and Portugal did much later and now Britain is doing far better. Never mind that opening barriers to trade not only lets existing countries smash fledgling industry elsewhere, and that the rich countries continue to retain tariffs, subsidies, and all sorts of protection. Let me offer some examples to show that these people are just letting theory obfuscate obvious fact:

Situation: A company comes out called the Floss Depot. Yup, all they offer is floss, in millions of varieties, and all they produce is floss.
Problem: Who the hell would buy from a floss store? They can get floss, maybe a little more expensive, at the Rite Aid and get a six pack of beer and some candy too. Too narrow of specialization, particularly in the allocation process, causes bottlenecks. There's also the problem that is covered brilliantly in Calvin and Hobbes: The dad can't buy potato chips or peanut butter because the amount of varieties are totally nonsensical. This is because firms have to essentially throw out as much variety as they can, based on their focus groups, and hope to God that someone will actually buy it. Parecon, on the other hand, prevents this nigh-existential mush: There will be varieties of peanut butter, but not from so many brands and sold at so many stores that one actually has to learn skills to shop. If someone wants a new type of peanut butter, they simply propose it to their consumer council.

Situation: The world decides that, hey, since comparative advantage is hecka good, let's build all bicycles in a huge factory in Calcutta.
Problem: Well, Jesus, I'd like to be able to get bicycles in less than a month. Comparative advantage has diminishing returns from things like transportation: Eventually, it becomes more cost-effective to build more factories and raise the degree of autarky.

Situation: You have competing companies.
Problem: Not comparative advantage, is it? Were these companies to consolidate, they may be able to lower per unit prices... maybe at the cost of innovation, who knows?

I go into this so much because I hear it so often from defenders of capitalism: Comparative advantage is somehow captured by capitalism. No, it's not. Even if comparative advantage were 100% always good and autarky always bad, capitalism's pretense of competition would eliminate that. It comes down to a simple fact: Having some kind of decentralized democratic planning model will always be better than letting an unconscious pseudo-entity called "the market" (which is in fact a lot of very confused humans operating selfishly in adversarial roles in a zero sum game with no incentive to cooperate and no information to do so even if they wanted to) do the job.

Finally, a comment on innovation: Capitalist advocates seem to think that innovation is somehow a province of competition and of capitalism in particular. Let me say some reasonably uncontroversial historical facts:

1) Capitalism has only been around for 200 years, and never in a complete form; hence Ayn Rand talking about it as the unrealized ideal. The amount of information out there isn't nearly large enough to ensure confidence.
2) We see that major inventions in the pre-capitalist era were indeed made, and were made across a variety of societies, some due only to internal structures that were decidedly non-capitalist. All sorts of factors, such as luck, various incentive systems, types of resources locally available, etc. guided these decisions. Moreover, while we do see an increased rate of innovation, there is a good theory to explain this prima facia with no reference to particular economic systems: As more and more data is accumulated, more and more can be made to be useful simply by inter-correlating the data, meaning that the growth of information should follow an exponential and linear path. Isaac Asimov makes this comments a few places.
3) Even in the modern era, capitalism's actual contributions are somewhat minimal. Large companies get touted for achievements that they did not develop; huge amounts of "innovation" are in fact new ways of marketing (i.e. psychic warfare) and of adding onto, say, Microsoft Word even though no one is ever going to use those new features (and, worse, the added complexity making computers open to spyware and viruses and consumers confused and reliant on customer service); university R&D is relied upon extensively, and the capitalists who donate money to their alma mater recognize this (hence the SLAC at Stanford and MIT's math department); some of the areas with the greatest growth, say, math, are in fact done in a variety of institutions; a lot of innovation is also used to precisely mimic other firms' developments and to make many copycat drugs, also reducing comparative advantage; and, most damning, Russian scientists are recognized to be brilliant, having come back from behind and producing nuclear weapons, supercavitating torpedoes, space travel and hypersonic cruise missiles.

There is a good theoretical reason to doubt capitalism's innovation. As Mike Albert points out in Parecon: Life after Capitalism, the assumption is that every person in the market as an incentive to innovate because that way they can use that innovation to make money, and the decentralized nature of the market encourages actors to try to use that new innovation in creative ways. But the two assumptions are diametrically opposed. The incentive for me to innovate also is an incentive for me to keep my information secret, so others cannot profit from it. In a parecon, these insane degrees of competition are kept in check.

Wednesday, January 19, 2005

Moving Here

For those of you who have read my Bloglines blog: I'm discontinuing it. This service seems superior, so I'm moving here. I'm archiving my Bloglines posts below.

Prevailing Doctrinal Assumptions, Part II (and some other Observations)

Earlier today, I was discussing with my dad about various topics. My dad, for those of you who don't know me personally, is a MIT math graduate with a very keen intellect. My smart side, insofar as it's there, comes from my dad. (Most else of importance probably from my mom.).
We were discussing alternative economies, and a few things came to my mind:

1) The degree of infiltration of dominant ideology makes me increasingly confident of the true revolutionary nature of parecon. Though we were discussing a non-capitalist future vision, he continued to talk about markets, using that terminology even when he meant something decidedly non-market or distinct from our markets. People simply don't get the idea until we say it very openly that, yes, we want no markets, not even bazaars or farmer's markets (except possibly in cases where people wish to establish a small "black" market and the community seeks to ignore it). And the reason why was fairly clear: Dad himself said it, describing what a co-op institution would have to do to appeal to the market. People on the left are often committed to state or political intervention, and they are really surprised when pareconists try to reduce state or political intervention. My Dad even argued that a political structure is any situation where people sit down to make policy. While that's one definition, I don't think it's a useful one, because it applies to corporations, families, church groups, whatever you want. When we talk about politics, we more mean the discussions people have as public actors, as citizens, and I believe that the economy should rationally respond in a decentralized manner to economic problems rather than having a separate political entity that does the job, insofar as this is possible.

For example: The solution with a state or alternate polity-interventionist paradigm, say, to deal with carbon emission, is to tax gasoline after the fact and use that money to pay for some other program. The solution of a parecon is to directly include that price into the price for gas.

This may make me sound like a marketeer saying that the government shouldn't interfere with the economy. And I agree at least in principle, but there's a key caveat: If the economy can't do the job, as in our economy, then outside regulation from somewhere will be a necessity, and unfortunately that outside regulation as a practical matter must frequently be done by the state. I think Chomsky put it succintly when he said (I'm paraphrasing) that he doesn't like cages, but if there's a tiger outside, he'll be willing to temporarily use the cage to protect his family while the tiger is being killed. That doesn't mean that you can't cozy up the cage (i.e. fight for certain types of civil liberties and democratic change within the government, one area where right libertarians and I see mostly eye to eye), but you sure as hell can't take down the cage while tigers are around. The analogy does somewhat fall down at another level of analysis, but I think it's a good initial thought experiment.

2) Real issues of sustainability come up with work, and this is where parecon can really appeal to green bio-regionalists and other people who put the ecology first. We want people to be working, because people want to satisfy their creative interests; and, when they don't work, they tend to not be doing something useful and even be doing counter-productive things like crime. It isn't of course universal, but a culture of work does help. But our productive system increasingly requires fewer and fewer people, and we don't want to increase production excessively because that strains resources. So the answer is to have everyone, or a good portion of people, be doing things that don't require high material inputs but are quality of life labors: teaching, researching, art and writing, counseling, and so on. Balanced job complexes are exactly the solution to this problem.

3) Questions of autarky vs. comparative advantage are treated too cavalierly. Capitalists claim that comparative advantage characterizes their favored economic system, yet that's hardly true. Notice the homogenization of global culture, forced by particular economic arrangements: that doesn't cause cultural comparative advantage, but rather the reverse. The fragmentation of the market into small totalitarian actors also prevents comparative advantage from reaching its pinnacle. For comparative advantage to be truly successful, it has to be balanced vs. autarky and be rationally designed, by a democratic and instantly responsive economy.

Let's get more concrete. We don't want every town making bikes, even small villages. But we don't want a global bicycle plant: shipping costs make it too ludicrous. These are the balances of autarky vs. comparative advantage, and the law of diminishing returns applies in both cases.

On a drastically different topic: Today, I read The Lottery. It is truly a disturbing story, and it was supposed to illustrate the dark side of human nature. Yet I think it shows some distinct things.

People can stick to the most horrendous of rituals as practice, saying that any change will make it worse. It's very applicable to suburban America, which conjures the frontier life without acknowledging the dark side of that same life.

Monday, January 17, 2005

Iron Chef America, Iraq, Capitalism and other structures of oppression

A lot was going through my head today as I was alternately cleaning the floor, digging a trench and doing dishes. On three distinct topics:

I hope this doesn't sound like an out-of-the-closet admission when I say I'm a hardcore, diehard Iron Chef fan. I like watching masterful chefs use big knives to cut through things, creating impromptu strategies to defeat their opponent and finally conjuring up world-class meals. A lot of Iron Chef fans out there in the forum and blog worlds happen to not like Bobby Flay. Now, I can see someone saying, as I do (and as a non-initiate said last night when we watched Flay v. Bayless Buffalo battle), that Bobby has seem to have some unpleasant aspects: maybe a hot temper and a very weird energy. He's a lot nicer out of the stadium than he is in, that's for sure. That doesn't mean that he's a bad chef or that he didn't legitimately deserve to split with Morimoto 1-1 or beat Sakai. It just means that he has some personal problems. This criticism is made to seem more legitimate by the fact that Bobby makes some mistakes when competing. So far, I have yet to see him make something that people have literally said is bad; Morimoto, who escapes these fans' scorn, has done so (in Battle Asparagus, as well as elsewhere). Nakamura also made something that forced Kaga to declare a rematch. Bobby seems to have a competitive urge that makes him a great cook, but also makes him make mistakes while striving for greatness in the kitchen. He, like Morimoto, goes for inspiration and experiments a lot. Like Morimoto, that leads him to make mistakes.

I bring this up because last night he went against Bayless and fought a very close and very good match, making saliva-inducing food in Battle Buffalo. Both men did an excellent job, I felt, and the judging reflected that: One point in plating (a well-deserved point, as Bobby's usage of the colors of the sauces was that step more complex than Rick's work) sealed the deal; the judges felt that both Rick and Flay produced beautifully tasting and creative dishes showcasing the flavor of Buffalo. Flay did make some mistakes: his sous chef messed up a mango chutney, for example. I'm willing to bet that a lot of mistakes that Flay makes are actually caused because he doesn't get a very good synergy with his sous chefs. There are some, though, who felt that this was an illegitimate win, as was his win over Sakai and Morimoto. Folks, at some point you have to stop making conspiracy theories. Bobby almost won over the judges in his first battle against Morimoto, won a 4-1 in his rematch and made the judges comment that he showed a new way for treating Ise-ebi as well as astounding Akebono, produced excellent dishes with Morimoto in the tag team (even though I was rooting for Sakai/Batali), and also won over the judges in Trout and Buffalo. There are so many judges that it can't just be that everyone is out there to appease him, especially with the attitudes of people like Jeffrey "The Man Who Ate Everything" Steingarten. (On a side note: Jeffrey seems cultured, but he is ill-mannered, gluttonous, provides little useful commentary and is an egotistical pompous moron. Please, someone bring back Kishi-San! I'll even take Masaaki Hirano!) Sakai took his battle with Flay lightly, having a good time and experimenting, and he just didn't appeal as much to the American judges. Call it "small-minded" if you wish, but Flay has won over a Japanese judging table: The judging table for his rematch had Akebono, Lafleur (an American diplomat) and three Japanese judges. If he had only won over one Japanese judge, then I could see the critique of anti-Flay fans; yet he won over two, including the famously hard-to-please Kishi. Against Bayless, he has four more years of experience and fought a well-done and technically sound battle, producing eye-popping dishes that really showed Iron Chef America to be worthy of its moniker.

Now, moving from that diatribe: I'm always impressed to see the cowardice of even liberals regarding Iraq. The common liberal pap is, "Well, we shouldn't have gone to war, but now we're there so we should fix it." First of all, I'd hardly call turning Iraq into a neo-colonial platform for US interests in the Middle East "fixing" anything. Even Pat Buchanan has termed what's going on here "imperialism", because it is blatantly obvious to anyone not totally deluded by propaganda. Second of all, we have no right to stay in Iraq irrespective of what may happen if we may leave. If people in Japan during World War II had said, "Well, gee, sorry critics, but now that we're in Manchuria, we shouldn't leave because they'll fall to the Communists", would we have applauded them as our lefist candidate or we would have called them moral lunatics in the guise of angels? I'd say the latter, and yet Kerry won approbation from normally right-minded members of the left and liberals. Sorry, everybody, but in foreign affairs, the only advantage Kerry would have is that he's so wooden we'd know he's a puppet. Domestically, of course, is a different story, and that's the real reason to protest Bush's illegitimate and illegal bid for power that he got away with for a second time (see Greg Palast's excellent reporting on this topic). Third, people like Scott Ritter, no one's leftist, can recognize that American bombing and continued presence is disempowering moderates and empowering conservative and extremist factions. The loose coalition against American interests that we so laughably call "insurgents" (i.e. revolutionaries fighting for their own country against foreign invaders) is composed of Ba'athists, religious fundamentalists, foreigners (just as in Afghanistan against the Russians, but nobody mentions that, calling the moujahadeen "Afghan" even though they're mostly Saudi) and mostly ordinary people. The Ba'athists had successfully infiltrated the religious right, associating Saddam more and more with the conservative power bloc in Iraq. The longer we stay in, the more likely that this coalition will become even more extreme and undemocratic. As of now, their message to the American people is fairly inspiring. Whether or not its insipid propaganda is only something we can test through one way: Near-immediate pullout, with a timetable for transfer of authority to Iraqis, and with the US taking a far less active role. We have disgraced ourselves by supporting Saddam, then destroying the revolution against him, then putting into place the sanctions regime; we have no right to do anything. America should, out of its own pockets, provide money to rebuild hospitals, schools, and so on, but should have very little influence whatsoever.

And finally, I was thinking: How true is it that capitalism is anti-racist, anti-homophobic, etc.? At first glance, the claim has little credence; capitalism co-exists all the time with institutionalized or de facto inequity, as it did, say, in the Jim Crow days, or in other countries where a small foreign minority has accrued a vast majority of the wealth of the market (see Amy Chua's World on Fire, a very balanced and non-partisan tome). But there is some truth: Because capitalism encourages the economy to view people simply as producers and consumers, as atoms of consumption, and not as humans, it will in the end have anti-racist tendencies.

The key points to remember are: 1) This doesn't exonerate capitalism. Were a system to be put into place saying, "Every day, one of you will be shot. It will be determined randomly, with no preference for any race, gender, sexual orientation or social status.", only the most deranged would say that that would be a just system. Of course, in this case, capitalism enshrines power based on wealth and status, so that's not really even a fair comparison. Nonetheless, the point remains clear: A system being devoid of racism or any other type of prejudice does not become excused if it has internal faults. In this case, the internal faults are myriad: personality distortion, inefficiency, ecological destruction, inequity of power and wealth, starvation, and a wholesale assault on liberty. 2) Capitalism may have anti-racist tendencies, but they don't appear very strong. They're certainly not strong enough to back up the consistent and facile conservative claim to "Let the market take care of it" when speaking about racism and sexism (a claim that, of course, repljcates the Marxist economism of attributing every problem in society to the economic system). If, say, a product can be made more profitable by exploiting racist imagery (news shows or TV shows like COPS, home security systems, and so on) or sexist urges (the entire array of beauty cremes and products whose ads have one underlying message: "You're not good enough"; such as an ad for a skin creme designed to deal with wrinkles that showed women in their mid 30s seriously concerned about wrinkles and even saying they wanted this creme 10 years ago, IN THEIR MID 20S), then the most basic market analysis will show that the marketing scheme will appeal to those prejudices. If workers are poor because of racism, such as in South Africa, and thus are willing to do certain tasks for cheaper, then a capitalist would be unlikely to move against it. (In South Africa, certain disinvestment programs did have an effect, but that was as much due to the effects of the African National Congress and economic changes in South Africa than due to any good natured behavior on the part of capitalists). Even people like Nozick, no one's statist and an unabashed free marketeer, could see that racial prejudice created by non-market forces could not be dealt with justly and effectively except by non-market forces. Further, if inequity exists, markets are likely to enhance them by giving more and more power to the already empowered, and increase tension in a distinct way.

Like I pointed out in my comment on the Stepford Wives: If our economy would be more equal, then the people in the economy wouldn't be as concerned about their privilege relative to one another. If I stand to gain 100 dollars from racism and I'm making 1000, the fact that racism costs so many billions of dollars a year (as it does) matters little to me: I'd prefer the relative gain more than the absolute gain. If I'm making, say, 100,000, then despite my racist feelings, I may opt to attack prejudice if only for efficiency purposes. Simply put: Capitalism, by enhancing inequity of wealth and power, serves to make people wish to gain more wealth and power to fight their racial/gender/sexual "rivals", causing either a rush to control the market or a rush to the state. This conclusion was made by Chua, incidentally. Conversely, a good economy reducing inequity would reduce those pressures and make racism, sexism and homophobia seem more irrational and less necessary. If everyone's pie is about the same size, then I have less incentive to steal from my neighbor: I have more than enough pie as it is.

This is one of the many reasons why I continue to advocate parecon (look at Robin Hahnel and Mike Albert's many books on the topic, a lot of which is available free on and ). While thinking on these topics, I also ruminated myself into an interesting observation. I oppose capitalism out of a deep moral sensation, so my search for an alternative is an "Anything but" sort of search. However, someone who was of a more capitalist or raw economic bent could say: "Hmm, I don't like central planning [whether or not Keynesianism is necessary in a market economy is another discussion; I, of course, believe it is, others may disagree]. It tends to encourage authoritarianism and tends to have all sorts of inefficiencies. But I can see that even the best markets are often flawed and markets rarely reach the kind of competitive equilibrium they'd need to reach. I'd therefore opt for something decentralized that surpassed these market problems." That's exactly where parecon comes into play.