Corporate Analogies: Money-Making as War-Games as a Sign of Boredom

What to do when analogies go over the top. As an aspiring writer, I was chastised by more than one writing tutor for mixing analogies. The device can add color to otherwise drab prose to be sure, but too many colors at once can be daunting to even a captivated reader. Consider, for example, the following passage from Larry McDonald about the management at Lehman Brothers:

“In a way, Lehman was run by a junta of platoon officers . . . I think of them as battle-hardened, iron-souled regulars”[1] (p. 89). Richard Fuld, Lehman Brothers’ former CEO, was “our spiritual leader and battlefield commander . . . surrounded by a close coterie of cronies, with almost no contact with anyone else. . . . I suppose that was fine so long as the place was chugging along without civil war or mutiny breaking out, and continuing to coin money, which is after all the prime objective of the merchant bank.”[2] Fuld “worked within a tight palace guard, protected from the lower ranks, communicating only through his handpicked lieutenants.”[3] 

The full essay has been incorporated into On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, which is available in print and as an ebook at Amazon. 

1. Lawrence McDonald, A Colossal Failure of Common Sense: The Inside Story of the Colapse of Lehman Brothers (2010), p. 89.

2. Ibid., p. 90.

3. Ibid.

On the Nineteenth-Century Eclipse of Democratic Governance by Capitalism

I contend that a trajectory wherein capitalism came to eclipse or capture democratic governance occurred in the nineteenth century in the United States. President Andrew Jackson’s actions in the early 1830s can be viewed as a benchmark wherein government officials were still willing to relegate the interests of capitalists for the good of the whole. 

According to Brands, “Andrew Jackson embodied the democratic ethos, by both his humble origins and his reverence for the people as the wellspring of political legitimacy. Jackson waged political war on the pet projects of the big capitalists of his day, smashing the Bank of the United States, vetoing federal funding on roads and canals, and beating down tariff rates.” (1)  Actually, Jackson’s object was not to reduce the capitalists of his day; rather, he was attempting to protect the balance between the general and state governments in the federal system.

For example, President Jackson vetoed federal funding for the Mayville road because it was confined to the territory of Missouri. That is, the road did not cross state lines, so it did not involve interstate commerce directly. The state itself had jurisdiction. Had Jackson not vetoed the funding, then interstate commerce “regulation” as spending would have opened the floodgates to Congressional power. Jackson was also rejecting the argument that spending for the general welfare goes beyond the enumerated power domains. In refusing to fund the public works project, Jackson was not acting in the interest of the potential private construction bidders. Hence as a byproduct the president was standing up to capitalists in his effort to contain federal power from encroaching on the state governments.

Second, Jackson feared that having a bank of its own would give the general government in Washington too much power relative to the state governments. For example, the Second Bank of the United States could conceivably print an unlimited number of bank notes to fund its government’s spending “for the general welfare”—eviscerating the enumerated powers in the process. Jackson refused to fund the bank before his re-election. Thus he risked having the financial sector turn against him in an election season. The long term viability of the American federal system was worth more to him than his own continuance in office.

Notably, Jackson was willing to cross Wall Street (something notably absent in President Obama’s financial “reform” law) for the good of the republic’s governance system. Put another way, the president’s protection of the system of democratic governance wherein governments check and balance governments in federalism trumped the particular financial interests of capitalists. By the time of Lincoln’s tight re-election race in 1864, capitalists would find a president willing to use (and defraud) the government to benefit them financially.  The balance of power between capitalism and democracy had already shifted.

1. Henry W. Brands, American Colossus: American Colossus: The Triumph of Capitalism 1865-1900 (New York: Doubleday, 2010), p. 5

On the Politics of Hate Speech: Wilders in the Netherlands

Geert Wilders, head of the Party for Freedom (PVV) in the Netherlands, went on trial on October 4, 2010, in the Netherlands on charges of inciting hatred, less than a week after entering parliament as a linchpin in the coalition government. The far right political leader faced five charges of inciting hatred and discrimination against Muslims and people of non-Western immigrant origin, particularly Moroccans. “He divides, he creates hate, he creates conflicts between people,” said Mohammed Rabbae of the National Council for Moroccans. Wilders told the court he was being persecuted for “stating my opinion in the context of public debate,” adding: “I can assure you, I will continue proclaiming it.” In an opinion piece in a Dutch daily, he compared Islam to fascism and the Koran to Adolf Hitler’s book “Mein Kampf.”[1] Wilders also made the film “Fitna” in 2008 which portrayed the Koran as inciting violence and mixed images of terrorist attacks with quotations from the Islamic holy book.

I am staying out of the debate on Islam. Hence, I am not expressing an opinion on whether I agree or disagree with Wilders’ statements on Islam. I raise the matter of this case for its implications for free speech as it is practiced in political debate. The extreme-antisemitism of the Nazis resulted in some rather severe curbs on free speech in the state of Germany that would shock people in any of the American states.  While the EU is relatively restrictive on free speech, however, even in the US a person can not shout “fire!” in a crowded theater unless there really is a fire. The Wilders case is not being prosecuted as a “fire” case.  Rather, it is being portrayed as akin to hate crimes in the US, only in this case it involves speech in a political debate.  The Europeans may have been conflating a hate crime with an opinion in political debate.  Had Wilders urged people to kiss Muslims, his case would be much closer to a hate crime.  If a position in a political debate is itself to be treated as a hate crime, then politics itself is being criminalized.  This would be like saying that republican leaders who are against gay marriage and say it is sinful and akin to having sex with animals are somehow guilty of a hate crime. To say that something is odious does not in itself cross the line into urging people to kill those who believe in it or practice it. Were “dividing people” in a political speech or an opinion piece a crime, the republican party would find itself continually before a judge as one interest group after another feels marginalized by republican positions on particular issues. Political positions may well offend; that is the nature of politics. It doesn’t make it a crime. A clearer line between politics and crime needs to be drawn in Europe. Otherwise, prosecution will be increasingly used to cut out positions in the political discourse that some do not like. Politics is about conflict—hopefully resolving it. Part of the process may be identifying the conflict, and this may be perceived as dividing people when in fact there is already such a division. Where one side of a division is criminalized, the division itself cannot be known by society, and thus any resolution would be partial.  

Ideally, a division should be clearly and fully enunciated by each side, and then others not invested in either side will be sufficiently informed to be able to suggest viable and realistic solutions to the conflict. To ignore one of the positions would be to risk a solution that is merely partial and thus ultimately unsustainable.

1. Natalia Dannenberg and Gabriel Borrud, "Racial Hatred," DW., October 4, 2010.

Is States' Rights in the E.U. Racist?

Thousands of Romania’s Roma people (also known as Gypsies) headed for the wealthier Western E.U. states, setting off a clash within the European Union over just how open its “open borders” really were. Migration within the 27 states of the E.U. became a combustible issue during the economic downturn. The Union’s expansion that brought in the relatively poor states of Romania and Bulgaria in 2007 renewed concern that the poor, traveling far from home in search of work, would become a burden on the state governments of the wealthier states. The migration of the Roma also raised questions about the obligations of Romania and Bulgaria to fulfill promises their governments had made when they joined the Union. Romania, for instance, mapped out a strategy for helping the Roma, but financed little of it.

Nicolas Sarkozy of the E.U. state of France demanded in 2010 that the Romanian state government do more to aid the Roma at home. He vowed to keep dismantling immigrant camps and angrily rejected complaints from E.U. Commission officials that the French authorities were illegally singling out Roma for deportation.

Sarkozy, being oriented to state politics, tried to revive his support on the political right by deporting thousands of them, offering 300 euros, about $392, to those who go home voluntarily, and bulldozing their encampments.[1] The European Commission threatened legal action against the state of France over the deportation, calling it disgraceful and illegal. Perhaps it could also be called racist. If so, might Sarkozy’s action be comparable to a Southern state in the U.S. trying to kick black people out. That is, might Sarkozy’s action evince state rights perpetrating racism? Arizona’s immigration law requiring people being investigated by the police to show I.D. pales in comparison.  Might the association of state rights and racism have shifted from the U.S. to the E.U.? If so, it is doubtful that state rights would be marginalized in the E.U. as it has been in the U.S. on account of the association; the state governments in the E.U. enjoy more than enough loyalty by their citizens to defeat it.

More generally, this case illustrates the problems that the E.U. has had in enforcing compliance of the terms of the accession talks of new states. Prime facie, the case showcases the difficulty involved in integrating Europe, particularly as states such as Italy, Spain, France and Denmark have striven to keep out immigrants from Africa. The case of the Roma could be just the tip of the iceberg in how state rights may be fueled by racism to keep certain groups out. In other words, there could be a rather troubling pattern here, and Europeans may have been torn—looking to the E.U. to thwart the racism while supporting their state governments in keeping out “troubling” groups. It is part and parcel of the checks and balances in modern federalism that member governments can be called on their sordid policies even when they are popular within the particular states.

1.Suzanne Daley, “Roma, on Move, Test Europe’s ‘Open Borders’,” The New York Times, September 16, 2010.

Obama's Economic Stimulus: Insufficiently Focused

The $800 billion stimulus law had as much (or more) to do with improving the education system and rail lines, installing universal broadband, and modernizing electrical grids as reducing the unemployment rate.[1] Consequently, the best that can be said regarding the spending is that it probably played a role in keeping unemployment from getting even worse than it did. 

As an alternative, Barak Obama could have proposed something akin to Roosevelt’s Civilian Conservation Corps (CCC), which was a public work relief program for unemployed men between the ages of 18 and 24; the program ran from 1933 to 1942. The corps was primarily geared to providing work (and a pay check) to unemployed youth. The conservation and development of natural resources in rural areas of the U.S. was merely the application. The CCC was the most popular New Deal program among the general public, providing jobs for 3 million from families on relief.

Essentially, had providing an on-going paycheck to those on or off unemployment compensation been Obama’s priority, the president would have sought more labor-intensive uses for the $800 billion. A new CCC for men and women over 18 could have operated in many towns and cities throughout the U.S. In keeping with the enumerated powers in American federalism, the federal government could have made the funds available for states to use (or not use) as they saw fit.  Job retraining oriented to vocational areas least over-supplied could have gone along with the program.

In short, the $800 billion could have been more focused on the immediate problem of unemployment.  This would not have hurt Obama’s prospects for getting re-elected. I am not surprised that the republicans are able to portray the stimulus spending as ineffective with respect to jobs, though to ignore the unemployment problem or argue that a tax cut would somehow prompt companies to hire seems naïve at best.

1, Matt Bai, “Crisis Past, Obama May Have Missed a Chance,” The New York Times, September 8, 2010.

The U.S. Tea Party: Anti-War and Pro-States?

When he was the republican nominee for the U.S. Senate from Kentucky, Rand Paul claimed that there was not enough money in entitlement programs to counter the federal government’s deficit for 2010. Approximately 40% of the budget was military. Accordingly, the candidate said, “Part of the reason we are bankrupt as a country is that we are fighting so many foreign wars and have so many military bases around the world.”[1] The Tea Party is animated by opposition to the exorbitant levels of federal spending and indebtedness. Applying their frugality to foreign policy, the party could make a clean break from the neo-cons such as Dick Cheney.

According to Randolph Bourne, in War is the Health of the State (1918), “As a general rule, the longer a war lasts, the more centrally planned and government-controlled the entire economy becomes.” Robert Higgs wrote in Crisis and Leviathan (1992) that among the effects of WWI were “massive government collusion with organized special-interest groups; the de facto nationalization of the ocean shipping and railroad industries; the increased federal intrusion in labor markets, capital markets, communications, and agriculture.” Thomas DiLorenzo points to these quotes and adds that inflationary war finance “inevitably leads to calls for price controls, which inflict even greater damage on the private enterprise system by generating shortages of goods and services.”[1] Such shortages in turn can serve as an excuse for even greater central-planning powers.

The Tea Party could thus have good reason for opposing even a standing army. Rand Paul wanted the federal budget to be 80% national defense, yet this did not mean he was for giving the Pentagon a black check. “So I believe that the defense of our country may be the primary enumerated power,” he said, “Does that mean I believe in a blank check for the military? No.”[2] This, in short, is the argument for why the Tea Party could come out against the war machine while still viewing the federal government as being primarily occupied with providing the Union’s united defense and foreign policy. The accent on the military here has more to do with the U.S. Government being on the imperial, or empire, level than on any desire to increase defense spending.

Futhermore, the Tea Party being in favor of federalism could mean that social spending should be raised and spent by the several states individually, rather than by the general government. In being for this shift, the Tea Party would not necessarily be opposing social spending per se—only that which is at the empire-level of government of the United States. Rarely is this distinction made; it allows for the federalists in the Tea Party to accept even universal health-care in any state where the majority vote for it through their legislatures.

It is typically assumed that if someone opposes a federal program, one does not want it at all; it could be that the person is oriented to re-establishing federalism rather than being opposed to the policy itself. Although the Tea Party has been oriented to both, this need not be so. The Tea Party could be agnostic on whether a given state has a sustenance net while being against the U.S. Government having any involvement in entitlement programs. The question for the Tea Party would be whether there is any sustenance-floor to which any American has a right.

1. W. James Antle, “Rand Plan: Will the Tea Parties Turn Anti-war?” The American Conservative (August, 2010), 8-9. See Thomas Di Lorenzo, “Inflating War: Central Banking and Militarism are Intimately Linked,” The American Conservative (August, 2010), 16-18.

2. Ibid.

See "In Defense of the Tea Party."

Weening Businesses off Debt: A Difficult Recovery?

We might view the recovery from the financial crisis of 2008 as a systemic correction in which managers were weened off their reliance (i.e., addition) on debt. Of course, the key lies in holding to the correction rather than falling off the wagon. Perhaps there should be an AA for debt-ridden businesses.

The near credit-freeze that came to a head in September of 2008 meant that even in the ensuing recovery, managers at American companies would be hesitant to spend their companies’ cash reserves. $838 billion for S & P’s 500 Index in March, 2010, was up 26% from March, 2009. Accordingly, managers have been hesitant to hire. From late 2007 to late 2009, payroll employment dropped by nearly 8.4 million by July, 2010; only 11% of the lost jobs were regained.[1] 

Robert Gordon, an economist at Northwestern University, points to the shift in executive compensation more in the direction of stock options. This arrangement gives managers more incentive to cut costs more in recessions and hold off in hiring in recoveries so that profits might surge first. However, one could point to the mandatory delay stipulated in some executive’s options to buy stock as giving them an incentive to look to the longer term.  Lynn Reaser, another economist, points to the lack of available external credit even more than a year after the financial crisis of 2008. She argues that managers conserved cash because they couldn’t rely on outside financing. 

However, firms like Apple, Yahoo, and Google are debtless and doing very well, so I would question the premise that outside credit is something to be desired.  Managers betting on leverage typically allow their irrational exuberance to distort their debt-to-assets and debt-to-profit benchmarks. If managers have become more averse to debt, maintaining higher cash reserves is not a bad thing, even when little interest is made on the cash. Once the new level is achieved, then only replenishments would be needed, so the diminishment of a firm’s investing in equipment or new hires would be temporary—to build the reserves and then to keep them stocked.  Drawing on their firm’s cash reserves rather than asking a bank for a loan or selling bonds proffers more freedom and self-reliance—qualities that are valuable even though they are difficult to quantify.  

1. Robert J. Samuelson, “The Big Hiring-Freeze,” Newsweek (August 2, 2010), p. 26.

The U.S. Supreme Court Deciding Federalism Cases: A Structural Conflict of Interest

Regarding the US Supreme Court being the decider of last resort, Madison’s Report of 1800 reads in part, “this resort must necessarily be deemed the last in relation to the authorities of the other departments of the government; not in relation to the rights of the parties to the constitutional compact, from which the judicial as well as the other departments hold their delegated trusts.”  The government being referred to is the U.S. The parties to the compact are the states.  Therefore, the theory here is that the U.S. Supreme Court can have its say after the U.S. President and the Congress, but not as binding on the States.  John Breckinridge, who sponsored the Kentucky Resolutions in the Kentucky House, wrote, “Who are the judiciary? Who are they, but a part of the servants of the people created by the Federal compact?”[1] The Federal Courts are part of the US Government that was created by the states, so those courts can’t be the final deciders with respect to the states.

The complete essay is at Essays on Two Federal Empires.

1. James J. Kilpatrick, The Sovereign States: Notes of a Citizen of Virginia (Chicago: Henry Regnery, 1957), p. 75.

Immigration and Federalism in the U.S.: Should Border States Participate?

On July 1, 2010, on the precipice of another July 4th celebration, President Obama told an audience that immigration was, in sum, “broken.” Furthermore, “everybody knows it.”  Yet neither he nor the Democratic leadership in Congress had any expectation of passing an immigration law in 2010.  Into this void, Arizona had months earlier passed its own law aimed at tightening enforcement. The New York Times reported that in his speech in July, Obama “used the opportunity to repeat his opposition to Arizona’s new law requiring law enforcement officers to question the immigration status of anyone they stop for other reasons if they suspect that they are in the country illegally, calling it ‘ill conceived’ and ‘divisive’.” The President said, “We face the prospect that different rules for immigration will apply in different parts of the country, a patchwork of different immigration rules where we all know one clear national standard is needed… . Our task then is to make our national laws actually work, to shape a system that reflects our values as a nation of laws and as a nation of immigrants.”  Different rules sounds like different immigration policies—as in who can enter the US.  If the President meant this, then he had a point. However, if he was arguing that tailoring different enforcement mechanisms to different regions, it could be argued counterwise that e pluribus union in a federal system not only allows for it, but thrives by it. In other words, the empire-scale of the US warrants a diversity of approaches. Furthermore, a federal system enables and indeed is strengthened by it.

The complete essay is at Essays on Two Federal Empires.

A Recipe for Regulatory Recidivism: the MMS and FAA

In 2010, the Inspector General of the US Interior Department made public a report on the federal Minerals Management Service, which regulates the oil industry and profits from leases to it.  In addition to this glaring conflict of interest, MMS has apparently not only been “cozy” with the industry it is regulating, the two have been as one.   One inspector said, “We are all the oil industry.” 


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.