31 January, 2009

Capitalism Snuffs out the Age of Enlightenment's Candle

Capitalism Snuffs out the Age of Enlightenment's Candle

by John Kozy

Suppose Paul Krugman, or any other Nobel Prize winning economist, owned an automobile that intermittently broke down but could be made to run again by tinkering with the mechanism.

Suppose the breakdowns happened unexpectedly in places that not only caused Mr. Krugman but countless others inconvenience and hardship, as for instance, on a major highway during rush hour, perhaps even causing injurious or even deadly accidents. How many times would Mr. Krugman allow this to happen before coming to the conclusion that the vehicle, regardless of how often it underwent tinkering, would never be a reliable mode of transportation and that it should be consigned to a junk yard? Only Mr. Krugman knows the answer, but I suspect that it would not take too long. Neo-classical Anglo-American economics in all of its variations, which have come about by tinkering, is just such an unreliable economic vehicle. The breakdowns are so frequent that economists have even incorporated them into the theory by referring to them as one aspect of "the business cycle;" yet Western economists display an absolute unwillingness to abandon the theory. Try doing the same thing with automobiles by calling intermittent breakdowns one aspect of the breakdown cycle. How would people react if automobile manufacturers tried to sell cars that had built in breakdown cycles? Since 1789, there has, on average, been one economic crisis every 12 years in the United States. Assuming that the average useful life of an automobile is eight years, interpolating American economic crises to automobile breakdowns comes out to one breakdown every four months. Who would buy such a vehicle?

Of course, the problems with classical economics are well known. Criticisms of it emerged at its beginning. But criticisms of any theory are always of two kinds: criticisms of the paradigm's details and criticisms of the paradigm itself.

Internal criticisms give rise to the kinds of tinkering that result in those sects that economists euphemistically call schools. We have Misesians, Hayekians, and Keynesians, to name just a few, just as Christianity has Papists, Lutherans, and Calvinists, and Islam has Sunnis, Shi'a, and Sufists. And classical economics shares all of the attributes of a religious ideology. True believers have a predilection to pick and choose those aspects of a doctrine that are liked while ignoring those that aren't. Regardless of how devastating the criticism or the amount of evidence provided, true believers have a propensity to ignore it. Empirical verification of claims is never even possible. I know of not a single "law" of classical economics for which an empirical counterexample cannot be found. Skepticism and doubt are absent. Those clerics who take their flocks to remote places intermittently to await the Second Coming never return and say they were wrong when the predicted event fails to happen. Economists never admit to being wrong either. Yves Smith (http://www.rgemonitor.com/us-monitor/255066/why_so_little_self-recrimination_among_economists) cites a plethora of proximate causes for the lack of economists' self-recrimination; he apparently has never heard of final causes. The real reason for this lack of self-recrimination is that Classical economics is merely a religious-like ideology and economists who advocate it act exactly those clerics whose predictions of the Second Coming always fail. Classical economists dissociate themselves from those who adopt religious ideologies, claiming that the theory is founded on "natural law," a long discredited concept, and the use of mathematical models. Somehow, it never occurs to them that Bishop Ussher used a mathematical model when he calculated the date of the universe's creation to be 23 October 4004 BC (according to the proleptic Julian calendar) or that numerology consists entirely of mathematical models. So much for them! And when really pressed, economists fall back on the classic dodge, "it is certainly preferable to any of the other socio-economic models humanity has witnessed." Not only is that not obviously true, since the questions of preferable in what respect and to whom can be asked, very few alternatives have ever been tried, and many of the few that have have not been tried on national scales.


External criticisms are much more serious, however, yet classical economists treat them as entirely irrelevant. Here are just a few.

Classical economics is not a unified theory. It is a hodgepodge of sometimes inconsistent pieces on various economic topics about which nothing is known but much is believed. Numerous disputes about the nature of wealth and value and of wages exist, for instance. Classical economists are not of one mind on any of the doctrine's principal postulates. Read the posts on economistsview and count the number of times the words "believe" and "think" are used and compare those counts to the number of times the word "know" is used. Then count the number of disagreements you find between respected economists.

Classical economics does not encompass all economic activity. Classical economics promotes laissez faire, laissez-passer, but there is much economic activity that no classical economist has ever attempted to apply laissez faire, laissez-passer principles to. First, most of what we call criminal activity is economic in nature. Burglary, theft, pick-pocketing, shop lifting, fraud, prostitution, the manufacture and sale of illegal substances, loan sharking, all kinds of corruption including political, kidnapping, bribery, and many others are economic activities that no economist claims should be unregulated, unforbidden, and unpunished even when the techniques used are identical to those used by "legal" businesses. For instance, much criminal activity involves deception, yet deception in business practices is legalized as "puffery." There is no essential difference between businesses entering higher prices into their scanning computers than are posted on shelves and picking a person's pocket. A local television channel runs a feature regularly, called "Deal or Dud," on which products heavily advertised on television are tested. Most turn out to be duds. But what essential difference is there between selling a consumer a product that is a dud, and a consumer's buying a product with a check that is a dud? Yet the latter is illegal while the former is not.

Those who promote classical economics have never believed in it themselves. To paraphrase Emerson, "What they do speaks so loud that we cannot hear what they say." The economic community despises regulation but esteems favor and always has corrupted governments to get it. From the East India Company's charter to today's political lobbying, so-called laissez faire has always been carried out with governmental help. Just another example of ideological pick and choose!


Finally, classical economics has institutionalized immorality, corrupted governments and even religion itself, and most of all, it has reversed the course of human progress.

Classical economics is topsy-turvy; it has turned economics on its head. Until the middle of the seventeenth century (1651), the word 'economy' referred to household management. Since then, the word has come to mean management of the resources of a country. What brought about the change was the emergence of unified nation states in Europe, monarchial in government, and structured by classes—mainly aristocratic and peasant. Wealth and property were held by the former, and the latter were considered disposable livestock whose only function was to support and defend the state and the status quo. Until then, human progress was aimed at moralizing humanity, and the Seven Deadly Sins defined the human attributes that were to be discouraged and eliminated. The proper beneficiaries of human endeavor were thought to be human beings. Since then, the Seven Deadly Sins have been transformed into the Seven Economic Virtues, and the consequences for humanity have been horrific. Mercantilism initially became the dominant economic theory and its implementation was carried out by imperial conquest and exploitation, and Adam Smith's classical economics was introduced merely as a more efficient way of expanding national wealth. The successful adoption of classical economists can be attributed to him and John Locke and those self-seeking aristocrats who recognized the license to steal that it provided.

Both Locke and Smith lived in a class-structured monarchial England. Although they themselves were not aristocrats, they certainly were not commoners. Both had aristocratic benefactors. The first Earl of Shaftsbury, who became Lord Chancellor, became Locke's benefactor, and Locke became the secretary of a very powerful board. Adam Smith's patron was Lord Kames. Smith obtained a lucrative post as tutor to the young duke of Buccleuch. So although neither Locke nor Smith was an aristocrat, their close associates were and both benefited from and shared in the privileges of the aristocracy. Sociologists claim that people who have a similar location within a system of property relations develop other important similarities of thought, values, style, behavior, and politics. Since both Locke's and Smith's principal associations were with members of the aristocracy, they both acquired and attempted to preserve and perhaps further establishment values.


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Although Locke has gained some standing as a philosopher while Smith has not (even though he was a professor of moral philosophy), Locke made a fundamental categorical mistake in his Second Treatise on Government which Thomas Jefferson was quick to notice. Locke named life, liberty, and property as natural rights. Even in Locke's England, society could at least try to protect the lives and liberty of even common people, but it could not attempt to protect their property since they had none. So Jefferson altered this list of natural rights to life, liberty, and the pursuit of happiness. Since, in most respects, only the English aristocracy held property, its protection became a protection of the status quo. And protection of establishment property even today is the fundamental reason for the distinction between those economic activities that are legitimate and those that aren't. That alone accounts for the difference between selling a consumer a product that is a dud, and a consumer's buying a product with a check that is a dud. The haves get to keep what they have while the have-nots get fleeced.

Smith, too, is an establishment philosopher. As Richard Reeb has pointed out in "An Historian on British History" (http://adamsmithslostlegacy.com/2008/12/historian-on-british-history.html),

"There were essentially two approaches that kings of the early modern nation states took toward the generation of national wealth. One supported acquisition of precious metals and hoarding them for national purposes ... Another view, favored in Britain, was that it was better to encourage merchants to build their fortunes with limited regulation, as a growing commerce funded government with minimal taxation. Adam Smith’s Wealth of Nations provided the most powerful argument for the second view of national wealth. The British government was no less tempted to commandeer the resources of the country than the Spanish, but Smith made a compelling case for laissez-faire (let them do as they please) as far more productive than national missions to exploit natural resources the world over to enrich the government’s coffers. Smith’s famous "invisible hand" was not blind to the avarice of businessmen (quite the contrary) but rather saw them as more efficient producers than any government could ever be." Smith's goal was not only to preserve the establishment but to make its economic avarice and exploitation more efficient. In effect, the adoption of classical/neo-classical economics not only succeeded, it extinguished the goals of the Age of Enlightenment and put an end to humanity's progress toward liberté, égalité, fraternité and what Lincoln so aptly expressed when he spoke of "a new birth of freedom" and a "government of the people, by the people, for the people." Not a single such government exists today, and our nation states, although slightly altered in form, mimic the monarchial states of seventeenth century Europe in which common people not only exist for the sake of the state and its institutions but are thought of as expendable.


Evidence for this view is overwhelming. The Congress of the United States can find billions of dollars overnight to fight wars of dubious merit and to support failing establishment institutions, but money for programs to support people in need can never be found. The wages of automobile workers are criticized as "too high," but not the wages of Wall Street brokers or elected officeholders. Raising the minimum wage is opposed and union membership is discouraged, but so-called professional organizations, which are nothing but unions, are not only tolerated, they are allowed to engage in activities that influence governmental policies in their favor. Not a single labor leader holds a Congressional seat but lawyers who are members of the ABA abound. Young men and women, mostly common people are sent off to war often to be sacrificed, but when they are fortunate enough to return alive find themselves being denied benefits and services which they have been promised. These people who were considered expendable when recruited remain expendable when discharged. The Congress can quickly find $700 billion for bankers but not .07¢ for the elderly living on Social Security (what a misnomer!). Medicare was originally set up to pay physicians to see patients, but unless the patients had the means to buy the medications prescribed, no treatment was possible. What was called a benefit to the elderly in reality was little more than a physicians' income protection plan.


Some economists may claim that this is mere happenstance, not a necessary result of the economic system, but that claim is vacuous. Under classical economics, individuals supposedly act in their own self-interest as economic agents who dedicate themselves to those economic activities that bring the greatest income. But if this were so, society would be impossible. No one would be willing to do the low-paying jobs that the existence of society requires. Who would be a minimum-wage sewer worker? Who would be a public school teacher? Who would be a nurse? Who would be an artist, a serious (as opposed to a popular) composer, a social worker, an ambulance driver, a fireman, a policeman, a janitor, a door man, a porter, an factory worker, an oil rig worker, a lumberjack, a garbage collector, a checkout clerk at a grocery store, a college professor in a public institution, or even a cleric? People would do most of these jobs only out of necessity, which means that the system impales its adherents on the horns of a dilemma. Either Classical economics is founded on the completely false postulate of economic self-interest or it must be designed so that the largest numbers of people in a society are never allowed to pursue their own self-interests as economic agents. (Anyone who believes that adopting a theory that impales its adherents on the horns of a dilemma is rational is delusional.) One economic aspect of this design is Smith's subsistence theory of wages. (Only a person with a low opinion of common humanity could even have proposed such a thing.) The masses must either accept their social status or attempt to escape it by either winning huge payoffs through lotteries or game shows or turning to prohibited alternate economic endeavors (usually called crime). Even education is not an effective path for most. So crime becomes an essential characteristic of Capitalism, and the growth of it in both Russia after the abandonment of Communism and Israel after the abandonment of Socialism are ample enough proof. Unless Americans are genetically predisposed to criminal behavior, that the United States has the most laissez faire Capitalist economy must be responsible for the fact that America also has the highest criminal population per capita of any nation. So this economic system must be exploitive to be effective. Two hundred years of Capitalism and common people are still serfs, wars are still fought to protect our "national interests," and the extermination of human beings occurs at ever increasing rates. John Locke, Adam Smith, and Classical economists snuffed out the Age of Enlightenment's candle! They brought human progress to a dead stop.


To make this result possible, however, governments that nominally call themselves democratic have to be corrupted; true representatives of the people would never allow it. American government has become an establishment oligarchy whose elected officials legislate the protection of the status quo. Attempts to change the system are almost impossible, since the political establishment controls how elections are run and how votes are counted, and the for-profit establishment press controls which candidates the people can even hear. During the French revolution, the press became a fourth estate that reported establishment abuses and supported change; whereas today's American press promotes establishment values and uncritically disseminates governmental propaganda. Truth has vanished. When the CEOs of our financial institutions were being pilloried publicly by a Senatorial committee, not one of these establishment figures had the courage to say, "Yes, we are greedy and took advantage of the opportunities the law provided to increase our wealth and we spent large amounts of money on lobbying the Congress to have these opportunities written into law. But we did not put guns to your heads to get you to take the money or to write the laws. So, Senator, if you want to see the truly corrupted, go to the nearest restroom and look in the mirror." No one asks why Congressmen, many of whom are independently wealthy and who earn well over $150,000 yearly, need government supported medical insurance and retirement plans when many ordinary Americans lack both. No one asks questions about those numerous Congressmen who employ, in one way or other, relatives. No one asks why millionaire Congressmen expect ordinary people to finance their campaigns or pay off their campaign debts. The only conclusion that can be drawn is that becoming a Congressman is an establishment, economically self-interest vocation. Benjamin Franklin tried to convince the Constitutional Convention that service in Congress should be unpaid. If only he had succeeded.

As though all of this were not bad enough, even religion itself has been corrupted. For about fifteen centuries, the churches in Europe attacked sin. Obedience to the Decalogue and avoidance of the Seven Deadly Sins were promoted. Today the American Christian right, even though it advocates publicly posting the Ten Commandments, has reduced its moral concerns to the outlawing of abortion and homosexuality, the outlawing of which have only a meager Biblical basis and the bedroom is not where most moral issues arise. Yet nothing is ever said about commercial and political violations of the Commandments or the commission of the Seven Deadly Sins.

So the question that economists need to answer is what kind of world do we want to live in? Yet this question is not among those economists investigate. Do we want to live in a world in which human beings exist for the sole sake of institutions or do we want to live in a world in which institutions exist for the sake of human beings? If economists were forced to answer this question honestly, how many would admit that they want the former? And if that is their answer, what can be said of such people? Are they good, honest, and decent people or are they not? I don't know the answer, but some are openly calling them evil. Paul Bloom, a professor of psychology at Yale, has said, "The problem is not that economists are unreasonable people, it’s that they’re evil people" (http://www.blogrunner.com/snapshot/D/5/0/economists_dissect_the_8216yuck_factor/). Economists, of course, will dismiss such comments out of hand, but there are reasons that give them credibility. First, economists are, for the most part, members of the establishment that pursues its own economic self-interest, and many are notorious for having enriched themselves in some rather questionable ways. In fact, Greg Mankiw (http://gregmankiw.blogspot.com/2009/01/why-major-in-economics.html) recommends majoring in economics because of its "earnings premium of 0.33 log points and a premium of 0.19 including occupation controls." Second, some economists have argued that no system is immoral, only people are, which is a variation on the familiar aphorism used by opponents of gun control: guns don't kill, people do. But although I have not claimed that the economic system is immoral, only that it institutionalizes and promotes immoral behavior, this economists' claim is non-probative. Just as the gun is an instrument which enables killing to be done, the economic system is an instrument which enables immorality to be practiced. But if society wants to reduce or eliminate the killing and people can't be reformed, the only alternative is to remove the instrument, the gun. The same is true of our economic system. If we want a better world for humanity in general, if we want to eliminate virtual serfdom and exploitation, and if we can't harness the greed of economic actors, the only alternative is to remove the instrument by abandoning the economic theory. Otherwise, nothing will ever change and human beings will continue to act in satanic ways.

And most horridly, some economists shamelessly and openly advocate the grossest immorality as a benefit. Nicholas D. Kristof (http://www.nytimes.com/2009/01/15/opinion/15kristof.html) writes, "But while it shocks Americans to hear it, the central challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough. Talk to these families in the dump, and a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children." Apparently, Mr. Kristof never studied logic and has never heard of non sequitur. Asking people who have no alternative is not the way to evaluate a situation. The central challenge to all countries is how to change the established economic system so that people don't have to be placed in the position of having to choose between working in a hazardous dump and something even worse. Having tuberculoses is better than having lung cancer but neither is commendable. A lesser evil is nevertheless an evil and so is anyone who attempts to justify it. Any person who doesn't understand this needs to seriously reorient his moral compass. It is because of people like Mr. Kristof that Adam Smith's The Theory of Moral Sentiments never attained any standing, for a moral theory based on sympathy could hardly influence the unsympathetic.

Is there any real hope for change? Doubtful at best! Those in control, those steeped in immorality and motivated by greed are not likely to support it; they are more likely to resist until they die. Perhaps the only hope, and it may be imminent, is the total collapse of the Anglo-American economy and the horrid consequences that it entails internationally. Should that happen, perhaps the other world will, in revulsion, reject its reconstruction and start anew, making households, not institutions and nations, the beneficiaries of all economic activity, eliminating the prevarication, the greed, the exploitation, the corruption, and the empires which characterize today's world.

Smith, religious-like ideologies, Adam Smith, John Locke, Richard Reeb, Age of Enlightenment, Paul Bloom, Greg Mankiw, Nicholas D. Kristof

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posted by u2r2h at Saturday, January 31, 2009


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