Friday, April 24, 2009

"That All Groups Are Created Equal..."

If you are both old enough to remember the 1970s and a glass-half-full sort of person, you'll recall former California governor, and current California attorney general, Jerry Brown as an out-of-the-ordinary politician who is not afraid to follow his own muse. Here is the office of Atty. Gen. Brown on why Proposition 209, passed several years ago in California to outlaw discrimination (and in particular, affirmative-action) by the government of that state for any reason, violates the Golden State's constitution:

“Ironically, by effectively disadvantaging racial minorities and women in the political process, without an evident compelling governmental reason for doing so, [Proposition 209] seems to accomplish the very evil it purported to eliminate … racial and gender discrimination.” (Source)

It is, to be charitable, disappointing that a man who has reached the position of chief law-enforcement officer for the state of California has promulgated these views in public without embarrassment. Not just tradition but the full body of law in this country speaks only in terms of individuals. The landmark case on affirmative action in the United States, Bakke Versus Regents of the University Of California , explicitly rejected the idea that a state institution could discriminate to make up for generalized past discrimination against particular groups. Martin Luther King, Jr. marched on behalf of, and the landmark civil-rights legislation of the 1960s spoke in terms of, rights of individuals to be free from discrimination in housing and employment. (Such a policy raises issues of discrimination of a different sort, in that employees and tenants have greater rights than employers and landlords in the arena of commerce, but that is a post for another day.)

In the United States of America, in other words, groups have no rights. (Even if they did, it is hard to think of a less than infinitely elastic definition of a right to equality in the "political process.") It therefore makes no sense to talk about the rights of "women" to engage in political activism. An individual woman cannot be stripped of her right to vote, or to hold public office, merely because she is a woman. But "women" collectively have no "rights" in American law and philosophy relative to those of any other group. Spengler, as usual, puts it provocatively:

Abraham Lincoln, the next best thing to an American prophet, called his countrymen "this almost chosen people". Most Americans still would agree with him. Americans may not love their country more than other peoples, but they love it in a different way. This love is visible at any small-town celebration of Independence Day, in the tearful eyes of older people. They have not forgotten the humiliations that drove their antecedents out of their countries of origin European states always have been the instruments of an elite; Americans believe their government, is there to defend them against the predation of the powerful.

For all its flaws and fecklessness, America remains in the eyes of its people an attempt to order a nation according to divine law rather than human custom, such that all who wish to live under divine law may abandon their ethnicity and make themselves Americans. The rights of Americans are held to be inalienable precisely because they are a grant from God, not the consensus of the sociologists or the shifting custom of a particular historical period. Ridiculous as this appears to the secular world, it is embraced by Americans as fervently as it was during the Founding. Even worse for the secularists, it has raised a following in the hundreds of millions in the Global South among people who also would rather be ruled by the divine law that holds their dignity to be sacred, than by the inherited tyranny of traditional society.

This emphasis on the individual instead of the tribe is not just an idle philosophical difference. It is precisely because America is the ultimate individualistic nation that people from so many places, in so many cultures, have been able to come here and fit in relatively seamlessly. They possess the same rights to transact, to make contracts, to self-defense, and (very secondarily) to vote, as do any other individuals, regardless of race, religious affiliation, etc. (It has of course not always been thus, but it is our special genius that such injustices could be remedied by making an appeal to the inherent dignity of all individuals, not to the equal rights of all groups.)

America works only to the extent that people can be confident that their individual rights will be respected, in exactly the same measure as those of every other individual citizen. Once they are incentivized by the law and persuaded by the culture to think of themselves as members of groups first and individuals free to pursue their self-interest as they see fit last, the game is up. We become just another tribal society. I don't necessarily expect Jerry Brown, nor the vast tribal-grievance industry, to understand that, but I do expect them not to reinvent the law.

Tuesday, April 21, 2009

The People's Banking System

Larry Kudlow is arguing that the Obama administration is now seeking to gain actual control of banks, or at least a substantial voting role:

White House and Treasury officials are now talking about turning government TARP loans into common stock for the 19 biggest banks. It’s clearly a backdoor path to nationalization, as Uncle Sam would be the largest shareholder in these institutions. What’s more, it’s not at all clear that the administration will even let certain banks pay down their TARP loans.

Some of us have been saying that for a while.

Saturday, April 18, 2009

The New Chaos

Major depressions used to be common in the United States. We had them in 1837, 1857-8, 1873-8, 1897, and, most famously, 1929-1939. (As an aside, until 1929, the general attitude was to do nothing. It was not taken for granted that the president had a magic button in his office that he could push to end any economic problems that came along. Somehow, the economy always righted itself, and we continued to move forward.) But with one exception, we until recently had gone almost 70 years without one. The exception, the economic dysfunction of the late 1970s and early 1980s, was idiosyncratic because it was in a sense intentional, the result of having to wage extraordinarily contractionary monetary policy to fight the inflation caused by the misbegotten expansionary monetary policy during the oil-shock period.

But in 1994 on these events have been commonplace around the world. India in 1991, Mexico in 1994, East Asia in 1997, Brazil and Russia in 1998, Turkey in 2000, Argentina in 2001, the Arab Gulf states in 2006. And now, most of the planet.

It seems to me that the fact to be explained is not just why we are having this crash, but why we went so long without one, particularly in the advanced economies of the West. Financial crashes, I think, are usually the follow-up to financial bubbles. And those bubbles occur when major positive disruption to production possibilities brings overall opportunity, but great ignorance about how the opportunity is best to be exploited. The frequent depressions in the US through 1929 were caused by an economy dramatically remaking itself from predominantly agrarian to predominately industrial, the replacement of small farms with large factories. This was a revolutionary process that was not well understood at the time, so mistakes were frequent. When the mistakes reached critical mass, they had to be cleared out, and that was the function of the crashes.

In this view, the disappearance of major bubbles and crashes after 1929 was not due to government learning how to manage the business cycle better but to the much slower pace of economic transformation. Western economies matured, and so chances for speculative bubbles to build up essentially disappeared.

So what would explain the chaos of recent years? We are once again in a time of truly radical transformation. Part of it is technological -- the mainstreaming of the Internet in the late 1990s led to a huge number of highly speculative commercial ventures, all of which are plausible at the time but with the passage of time and the learning of knowledge about what consumers want proving that some of them were mistaken. This, I think, is the explanation for the Internet bubble during that period.

But the truly big story is the emergence of literally billions of people into the global economic system. They bring with them their energy, their dreams, and their ideas. Clearly, in the aggregate, the removal of these people in places like India, China, and Brazil from the imposed stagnation of state-dominated economies is a tremendous step forward for humanity. But how will the merging of all these people into the modern world change our possibilities? This has yet to be decided, and entrepreneurs have to decide it one gamble at a time. Even the current financial crisis is in part due to the introduction of new financial instruments, which are not currently well-understood. This is not unprecedented. The introduction of common stock led to the South Sea bubble, the introduction by John Law of paper currency into France did much the same there, and even the famous Dutch tulip bubble was driven in part by the introduction of tradeable futures contracts. All of these tools are still in use centuries later, and so too will be securitized mortgages, credit default swaps, and the other financial exotica that are blamed for the current mess. Being novel, they were often used irresponsibly, but it takes a while to learn the limits of any new invention.

More broadly, this introduction of people, the generators of ideas that change what is possible, into the global system is the phenomenon; the technological changes are only the epiphenomenon. And the scale of this great merging has brought with it a new instability -- the end of the artificial stability caused by the relative stasis in the number of people participating in the global system owing to the popularity of socialism. For centuries most of the heavy lifting with respect to advancing the human condition has been done by a relatively small number of countries -- the UK first, then continental Europe, the US, Canada and Australia, then Japan and the other early East Asian Tigers. Now, huge numbers of people in countries all over the world are getting into the game, and they will bring disruption with them. This will bring tremendous benefits, but it will be a bumpy ride. The current financial turmoil will not be the last.

Labels: ,

The Boomers in the Academy

Sorry the posting has been so light, but I have been unusually busy this term. Posting will continue to be light for awhile.

The Chronicle of Higher Education has an article about job satisfaction among college professors. A primary finding is that professors from the baby-boom generation are less satisfied than both their younger colleagues and their elders:

In examining differences between the generations in their responses, the researchers found that Traditionalists and Xers were about equally satisfied with their jobs over all. But, for reasons the researchers could not explain, Baby Boomers stood out as discontented.

Moreover, the Baby Boomers seemed more preoccupied with money than younger faculty members were—the more satisfied Boomers were with their salaries, the more likely they were to express overall job satisfaction. Their being happy with their workload generally portended lower levels of overall job satisfaction.

The age of the faculty members that Baby Boomers worked alongside also appeared to have an influence on their job satisfaction. The happiest Boomers were those who worked in disciplines with the highest proportions of Generation X faculty members, and the unhappiest were those who worked in the disciplines with the highest proportions of Traditionalists. The researchers speculate that many Boomers who work around large numbers of Xers may feel energized by the company of junior faculty members, while many who work around large numbers of Traditionalist faculty members may feel they carry the load for people whose seniority gives them more control over their own work responsibilities.

Maybe. But it could be that baby-boom faculty members tended to come, first, from a generation that was unusually self-preoccupied. There was no history before them, and all that comes from now on is the fruit of their singularity. When they find that the University has other concerns beyond theirs, they become "discontented."

In addition, many baby-boom faculty members may have become professors precisely to wage revolution from within the academy walls, the ethical consequences be damned. (Ward Churchill is the iconic case.) Such faculty members would be made unhappy by their seniors precisely because they seem immune to the charms of the revolution, and because they are the enemy the boomers have long sought to disgorge. Younger faculty, in contrast, can still be wooed, and also provide baby boomers with the illusion that they themselves still have some relevance to the young.

I like this hypothesis, because I have now been in the academy long enough to see the crippling damage caused by the nihilism of the 1960s -- the infatuation with relativism, the distaste for the pursuit of excellence traditionally defined, the manifest ignorance of how these University came to be in the first place, and what it will take to keep them what they have been. But it seems not to have occurred to the authors of the study.