Wednesday, June 24, 2009

In the Flow of History

In 1946 George Keenan's long telegram from Moscow mapped out the policy of "Containment" and defined the nature of the Soviet threat in a way that America could structure long term strategic policies to address. Two years earlier, at the Bretton Woods conference, the armature of post war liberal finance was established between between Great Britain and the United States. Allied victory would secure their ability to impose this system on the Capitalist world and use it as an integral part of the military standoff shaping up with the U. S. S. R..

These events combined to end the territorial competition among States that had driven western politics since the collapse of the Holy Roman Empire. In that span, France, Britain, Sweden, Poland, Russia and Austria had competing territorially expansionist empires. The United States as well had embarked from its founding on a project of territorial expansion. With the peace following World War II this imperial competition transubstantiated from territorial to systemic form. It was Keenan's telegram that catalyzed this transformation and atomic power was the energy that drove the reaction.

Since before civilization first cohered around the nucleus of the written word the animating emotion of politics has been power. With the written word the institutionalization of power was given a previously unachievable stability. Power was given focus and direction by the institutions of the written word and it and those institutions have been wrestling with the limits of institutional constraints on power ever since.

Power crudely aggregates populations and, where successful imperial growth has occurred, institutions have integrated those populations into useful and productive geopolitical units that support the centralized power. At best, from the point of view of power, they give it a platform for further extension. It has been a hallmark of successfully growing powers that the decentralization of quotidian decision making yields a firmer base for the externally focused central power. The nature of this relationship between central authority and local decision making has been the primary focus of the evolving constitutional governments of the West.

The imperial competition of the sixteenth to twentieth centuries saw various political forms superimpose themselves over an array of economic forms and test the combined strengths thereof through trade and warfare. A competition that took root in the fertile soil of the expired Holy Roman Empire was among other things an intramural affair between Christian states. When this internal competition was faced with external pressure from the Huns or the Ottomans for instance, ranks were closed and alliances secured that sustained an otherwise fissiparous West.

With often crude brokering of the Pope the Western nations developed customs of war that tended to preserve the underlying populations of the contending polities. The exception was the Thirty Years War that through the idealism of religious zealotry disparaged the common Christianity of the contending states trying to exterminate or displace entire populations. Such idealistic barbarism vanished from Europe in that war's wake not returning for a quarter millennium until the genocidal wars of the twentieth century. With these exceptions then, the European competition was a constrained one. From that tradition of agreed constraints on the expression of power we have drawn the U. N. Charter, the Geneva Conventions and the Universal Rights of Man.

Like the Thirty Years War, World War II left a profoundly changed psychological landscape in its ashes. Not only had fifty million people been killed, but the victors emerged with the atomic power to annihilate all mankind. Our erstwhile ally in Russia sustained the outward appearance of historical territorial ambitions, but nuclear stalemate robbed the form of its substance. An apparent stasis in great power relations ensued, but behind this facade profound changes were taking place in the underlying economic organizations of the competing powers.

In the twenty years since the Soviet collapse the rich dynamics of the evolved Bretton Woods financial order has driven change so quickly it has been difficult to discern the newly developing power aggregating principles. The astringent of the current financial collapse has drawn for the first time clear outlines. Europe has internalized most deeply in economics the Rights of Man. America has stated them most clearly in politics, all but abandoning them in economics. Beginning in the Middle East and heading East from there are three new competing forms of power superimposed over economically functional populations.

The Iranian Theocracy is a prototype for the first. It entails an absolute central authority legitimized by divine right with a sort of managed plebiscite ritual of legitimacy. It has attempted to take the centralized form of an ecclesiastic hierarchy and set it over and just to the side of an educated modern industrial economy. Ironically this has resulted in a bizarre coalition between Imams and the ignorant who are at present pinching a liberal industrial society between them. As the educated and productive are murdered or repressed by the ideological and ignorant, the economic base, already tepid, will cool and decline. This self defeating relationship of power to economics has robbed one of the primary producers of the worlds most lucrative commodity, oil, of a viable domestic refining industry. Unless the relationship of power to economy is changed this kind of decay will propagate through the larger economy.

Variations on this arrangement obtain across the former Ottoman empire from Turkey in the west to the border of India. The roiling low level conflicts of the last seventy years in this region look like a slow motion reproduction of the Thirty Years War. The best hope here is some Islamic version of the Peace of Westphalia. But even this will not quite be enough to heal the schismatic sectarianism into which the former Ottoman empire has descended. An Islamic Glorious Revolution whereby Sunis, Shiites, Kurds, Armenians, Tajiks, Pashtuns etc learn to share political rights within common commercial and political systems will also be necessary. Domination, short of genocide, does not make the dominated dissappear and the cost of maintaining the relationship not only saps the dominant but also excludes the dominated in the larger economic base that sustains the system.

Next, moving East, India seems to be growing political and economic rights in parallel in an accelerated give and take between competing economic groups competing for political power. I don't know enough about the dynamics in India to make informed commentary except to point out that its political structures seem to be lagging its economic ones at the moment with the potential that economic change will outpace politics ability to distribute its benefits. This is a problem similar to the overwhelming of politics by economics that has recently devastated the United States economy.

China, Korea, Japan and the other Asian Tigers represent the third and only rising model. Here, broad freedoms are granted to economic actors who embody the priorities of the state. The larger these actors become the more bound they end up being to the state by the freedoms it has given them. It seems to be a kind of corporatism that gives the individual the right to change work, but not the kinds of freedoms our bill of rights proposes. Central planning directs regionally autonomous economic leadership that is empowered to express state aims. A broad prosperity based on mercantilism and bounded by both political and economic monopolies is now challenged be the collapse of export markets. Equally important for this model is that central power has centralized the wealth created in vast sovereign wealth funds and holdings of US Treasuries. The dictatorial relationship of the state to the economy does not require that the value added by labor be confiscated largely by the state, but that is precisely what has happened to a considerable extent in all of these countries. The result is that while the nations are wealthy, most of their population is poor and incapable of sustaining the economic demand required for State economic aims.

This array of contenders, now under the market pressures of a collapsed mercantilism are squaring off against the prostrate western models of the EU and the US. And while the EU is the wealthiest, it is the least powerful of the lot because its Union is an economic aggregation formed for economic reasons without the necessary political aggregation to give coherence to its motives. The EU is an economic, not a government model and doomed to the fate of the American Articles of Confederation at best. At worst, a disaggregation back into its constituent parts.

The US, by allowing the judicial fiat that money is protected free speech, has allowed its political system to be overwhelmed by its economic actors. At just the moment that the political apotheosis of universal suffrage was reached in practice as well as in law, the achievement was obviated by a court ruling that empowered money with free speech rights. While any one who cared to could now vote, only the well funded could participate fully. After three decades of this arrangement, a thousand tiny tiltings of the field have so favored the concentration of money that the twenty percent of the populous that isn't broke or bankrupt is a plutocracy now visibly dominating two if not all three branches of our government.

Some adaptation of any of these forms of political economy could be the next dominant model and which ever one achieves it will have done a single thing better than the others. That single thing will be the engagement its people the most effectively in common aims. A state that is not interested in the well being, engagement and productivity of all of its people will always be handicapped in competing with one that is. The dominance that the United States still holds is based on its institutional structure granting the greatest freedoms to individuals in economic competition and our governments relative prudence in guaranteeing the rewards. To the extent that such a regime holds, it precludes the prejudgment of where value will arise leaving open the greatest opportunity and possibility for improvement and then rewards the initiative to exploit opportunity where it arises.

But those freedoms alone are not enough. They are a foundation condition for wealth creation that Iran, India, China, Europe and America all embody in their own specific ways. Even in Iran entrepreneurs have been creating wealth for the last thirty years. To succeed a Civilization must believe in progress and value it enough make the public investments in the education, health and material well being of its population. In addition it must hold out the hope of positive change to focus popular motives toward the common good. These conditions were met by the United States of my childhood, but today there are too many well funded beneficiaries of government largess who say , "the market will give you what you deserve" all the while with their foot on the political scale tilting the market toward themselves.

The outlines of our future competitors are now clear. They are populous and increasingly wealthy. With the exception of the EU and India they are more authoritarian than we are. While their systems grant their citizens certain kinds of freedom that support state aims, they systematically deny citizens access and input to the political process that governs both society and economy. The last thirty years with the enfranchisement of cash by the Supreme Court in Buckley v Valeo our system has converged to a dangerous extent with these competing systems. While I can vote, I can not get my representatives attention. I have a formal political power that has been robbed of substance by money. In the Peoples Republic of China, what the Party wants the Party gets. In the United States, the Republic of Cash, what money wants money gets.

Sunday, June 21, 2009

The Shadows on Liberty

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed. That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it." In 1776 certain American people embarked on a project of liberty which ennobled "We the People" fifteen years latter into the project of citizenship. Braver always in conception than fact, the Constitution goes on to define which of our fellow humans were worth a mere 3/5 count of a true blue voting citizen as enshrined by statute in those States now incorporated into the newly United body.

The bravery of the written word is matched only by its stubborn persistence. Endowed by our creator with certain unalienable rights, those of us deprived of active expression of said rights by the persistence of prejudice and bad habit have stubbornly held those words to their manifest and simple meaning over these several hundred years. By 1971 through Constitutional process this obvious meaning had been imposed by combat and by vote over the sophistries of secessionists, segregationists, misogynists, bigots and racists. In the tumultuous aftermath of this intergenerational apotheosis, an achievement bourn trough the roiling seas of each of these hateful oppositions by the progressive faith of a Christian nation in the simple meaning of these words, the cataclysmic coincidence of Viet Nam and Watergate blinded us to the Constitutional Coup of 1976.

In a stroke, the Justices of the United States Supreme Court obliterated this bicentennial accomplishment in the ruling handed down in Buckley v Valeo. Legislating from the bench a devastating equivalence between money and speech, the Court conjoined for the first time economic and political processes through the medium of money. Until this time the citizen's voice in politics was limited to the active energy they could give to the process and their single vote. Given a political voice, money has motivated a near infinity of "political" activity with which our better angles will never compete with. "Think Tanks" "Political Action Committees" and entire new industries of well paid political manipulators and participants have captured our politics in the interest of money.

376 years earlier in 1600 Queen Elizabeth chartered the first modern Corporation to exploit the opportunities of the East Indies and Africa. With the law that chartered the East India Company a new type of citizen was introduced to proto-Capitalist society. It was one without a body or a vote in parliament, but otherwise all the same rights as any other English Gentleman. This citizen would soon become the marionette of a continually evolving cabal of conspiratorial puppeteers and would at the end of their strings commit a rainbow of picaresque criminal offenses for which its non-existent body would be punished.

The generations of Civil Law between these two events has through fits and starts turned the Corporate citizen into a law abiding and wealth creating meta-being that has been, in the hands of liberal western governments who have house broken it from its initial state of nature, the envy of the world as a generator of wealth. In 1976 it was given the vote and in my adult lifetime it has learned how to use that vote to throw off the shackles of generations of law to return to a sophisticated version of its primal state. This is why no one is to blame for the current melt down. The Corporate voter once enfranchised voted down the laws that treated its voice, money, as anything other than free speech and wherever money chooses to go now it is a legal right of free speech.

The nations future was borrowed, securitized and sold. The sale value was distributed in bonuses to the bankers and brokers who booked the deals by which it was done. Once the money was safely theirs it became apparent that there was no economic future because it had been borrowed, sliced up and deposited in limited number of individuals personal accounts and the nation no longer had access to it. We all should have known better, but we’re human. A very similar thing happened 80 years ago and a bunch of dead white men figured out how to prevent it happening again by not allowing you to earn a bonus by mortgaging the future. This is what the Glass Steagall Act had done, but we humans live only once and for so short a time. Notice that J P Morgan, not the man, the Corporate citizen is having the last laugh: if he looks after his health properly he is immortal and can see things invisible to men.

At the same time that the modern Corporation was re-cutting it teeth in the United States Congress, those Congress members doing its bidding needed to maintain the pretense that they were doing the people’s business as well. In fairness, I believe that the majority of legislators, though maybe a thin one, really believed that they were doing the peoples business. Because the Corporate citizen has a longer time horizon and a statistically focused self interest absent in legislators and humans in general, it has a larger view of the chess board than is visible to mortals. As the Corporation, and the Financial Corporation in particular, chipped away at its bonds it saw to it that there were bread and circuses for the mortals. These are what we now call “entitlements”. They are roughly all we have left and they increasingly look useless because the future with which we would have paid for them has been redeemed by the above mentioned bankers and brokers.

Representative government has always favored organized and focused interests over general and public ones and it has always taken crisis to force the hands of legislators to serve the public and diffuse common interests of the Nation over the parochial interests of their nearest supporters. Buckley v Valeo robbed even crisis of its public power. Now not even bankruptcy itself, the inability of the Government to either make or get the money it needs to operate can force the common interest on our Legislators so beholden, so completely encapsulated in well funded information flows, are they to an industrially monetized political process.

In our last Depression, one in five Americans still worked in agriculture: in the worst pinch, they still had access to food or knew someone who did. Now it is less than one in fifty that does. Day care, preparation of meals, most health care and transportation in that era were non-monetzed services produced by the family unit outside the formal market place. All of these life functions have now been formally incorporated into the money economy and subjected to Smith's divisions of labor and the pressures of economic efficiency. To lack money is to face some tough existential issues today.

That economic efficiency and biological efficiency are almost perfect opposites is best represented by the relationship between real estate developers and wetlands: neither has any user for the other because they represent opposite and irreconcilable values. Your money or your life. And this now is the state of our political economy. Without money the citizen looses access to many of the basic operations of life, but money never looses access to the governing institutions. Even when the Government itself is broke as it is now, money has more influence on governments course than voters. And the individuals position grows increasingly fragile.

Money, once enfranchised, has found its political form. It can sustain attention, focus and communicative manipulation better than any mere human as it has the ability to aggregate and focus efforts over time equal to the abilities of even government itself. Confronted with systematic and focused communicative efforts of dozens if not hundreds of individuals paid to pursue the common interests of money, it is no wonder our legislators have succumbed. The interests of money are concentration and power, it has always been thus. Those who pursue these ask "what else is there". The citizen answers "life". This is what the interests of money now threaten. Most of our law makers sincerely believe that they are serving he public interest, but as mortals they are no match for the patient, systematic and scientific manipulations to which they are subjected. And as for citizens, we live in the Republic of Cash and are reduced to being a Greek Chorus on the stage of our own lives.

04/09/18 Update:

For some reason, this antique post is getting new hits. This was written in the throes of the Global Financial Crisis before the outcome of that event caused me to research and understand what deficits mean for the fiat currency issuer of the worlds reserve currency. A year and a half latter, in What Everyone Should Know About Money, I explained that.