Do free markets corrode moral character?

My biggest concern about the fallout from the financial crisis–which lead to the Federal Rescue Plan–is whether the response to that will lead to over-regulation, i.e. trending towards the Rorschach-word of the day, socialism.

The use of the ‘s’ word is a political loser for us conservatives. Over-regulation can occur and do great damage before socialism ever formally arrives. Which raises the practical question anyone who throws around the ‘s word’ should feel obligated to answer; What constitutes formally arriving at a socialist society? Socialism is the ultimate failed policy prescription, but why warn and take a political stake in something whose arrival we would have a hard time defining?

Conservatism is the politics of reality. Here are some realities; our economy has had a moderately increasing level of governmental involvement since the 1960’s, but less than Europe during the same period. The US economy has also consistently and significantly outperformed the European economy during that time. People who think those two facts are unrelated, will push for additional regulation and subsidies; The golden goose will be just fine school of thought. They should be made to answer why similar prescriptions have failed so spectacularly in other countries, especially Europe, whose socio-economic conditions are most similar to the US.

The John Templeton Foundation has asked a wide cross-section of people a question which addresses these type issues; Does the free market corrode moral character? A great read.

One of my favorite blogs, Becker-Posner, chimed in. I provide a sample of their responses:

Becker – Many critics judge the performance of free markets relative to alternatives the way a judge might make her decision about the winner of a beauty contest between two contestants. She chose the second contestant after seeing the warts on the first one. Prominent and not so prominent businessmen in market economies have been involved in various scandals where they have provided misleading information, lie, sell shoddy and dangerous products, and the like. When such scandals arise, there is a clamor for greater regulation in the sectors where the scandals occurred, and sometimes even for government takeovers of these enterprises. This presumes that regulators and government officials act with sufficient knowledge about the industries involved, and with great wisdom and morality. Unfortunately, often that is not the case.Posner – History teaches that a commercial society is bound to be more prosperous and peaceful than an honor-based traditional society. The commercial culture creates incentives and constraints that, provided that economic activity is effectively regulated, (an important qualification) maximizes the values that are important to most people. This doesn’t mean that people in a commercial society are “better” than people in other types of society. The human race is genetically uniform, and our “moral” genes are not much different from the corresponding genes in chimpanzees. The success of commercial societies just illustrates that different institutional structures produce different human behavior.

Goosebumps right? Pass the popcorn.

All articles referenced are copied in full at end of post.

Ideology Has Consequences

Bush rejects the politics of prudence.

Jeffrey Hart

Many Republicans must feel like that legendary man at the bar on the Titanic. Watching the iceberg slide by outside a porthole, he remarked, “I asked for ice. But this is too much.” Republicans voted for a Republican and got George W. Bush, but his Republican Party is unrecognizable as the party we have known.

Recall the Eisenhower Republican Party. Eisenhower, a thoroughgoing realist, was one of the most successful presidents of the 20th century. So was the prudential Reagan, wary of using military force. Nixon would have been a good secretary of state, but emotionally wounded and suspicious, he was not suited to the presidency. Yet he, too, with Henry Kissinger, was a realist. George W. Bush represents a huge swing away from such traditional conservative Republicanism.

But the conservative movement in America has followed him, evacuating prudence and realism for ideology and folly. Left behind has been the experienced realism of James Burnham. Also vacated, the Burkean realism of Willmoore Kendall, who aspired, as he told Leo Strauss, to be the “American Burke.” That Burkeanism entailed a sense of the complexity of society and the resistance of cultures to change. Gone, too, has been the individualism of Frank Meyer and the commonsense Western libertarianism of Barry Goldwater.

The post-2000 conservative movement has abandoned all that to back Bush and has followed him over the cliff into our calamity in Iraq. On top of all that, the Bush presidency has been fueled by the moral authoritarianism of the current third evangelical awakening.

Yes, aware Republicans are like that man on the Titanic who asked for ice, and this iceberg is too much.

The problem is that Bush campaigned in 2000 as a “compassionate conservative.” Today, the media calls him a conservative, yet there is nothing at all conservative about his policies, whether foreign or domestic. William F. Buckley once said that conservatism is the “politics of reality.” But Bush has not pursued reality-based policies. Will we have to find another word? It certainly looks that way.

Buckley has said that Bush has been “engulfed” by Iraq and that if he had been a European prime minister he would have resigned by now. Other commentators known as conservatives have agreed: Andrew Sullivan, George Will, Francis Fukuyama. It is worth considering a statement by Richard Cheney:

Once you get to Baghdad, it’s not clear what you do with it. It’s not clear what kind of government you put in place of the one that’s currently there now. Is it going to be a Shia regime, a Sunni regime, a Kurdish regime? Or one that tilts toward the Baathists, or one that tilts toward Islamic fundamentalists? How much credibility is that going to have if it’s set up by the American military there? How long does the United States military have to stay there to protect the people that sign on for that government, and what happens once we leave?

Smart man, that Cheney. The only problem is that he said that back in 1991 during the first Gulf War when he was secretary of defense in the administration of George H.W. Bush. At that time, Brent Scowcroft was national security adviser and James Baker was secretary of state. Recently, Scowcroft has said that though he has been friends with Cheney for more than 30 years, he no longer really knows him. What has happened to Cheney is anybody’s guess.

It can’t be 9/11. We know from many sources that Bush had decided to invade Iraq long before 9/11. In The Right Man, David Frum recounts being interviewed for a position by Michael Gerson, head Bush speechwriter and also policy adviser, not long after Bush became president. Gerson told Frum that Bush would topple Saddam. At that time nothing was being said about weapons of mass destruction.

National Review editor Rich Lowry sheds some light on the president’s motivation for invading Iraq in a column titled “The Revenge of Orthodoxy.” Following historian Walter Russell Mead, he notices that we are in the “Third Awakening” of Protestant evangelicalism and that the Bush presidency should be stamped “Brought to you by orthodox Christian believers.” He makes clear the implications of this for American foreign policy:

The reinvigorated Wilsonian foreign policy championed by Bush—and motivated less by Woodrow Wilson’s secular values (international law, etc.) and more by religious beliefs (the God-given rights of all people)—is a reflection of Bush’s Christian base.

Lowry, following Mead, is surely correct here. But just what is conservative about it? Historically, American evangelicalism has veered wildly from the crusading lyrics of Julia Ward Howe’s “Battle Hymn of the Republic” to the pacifism of William Jennings Bryan.

And has anyone ever claimed that Wilsonianism is conservative? To give Woodrow a bit of a break, his “Wilsonianism” was much more temperate than is sometimes thought: “It will now be our fortunate duty,” he said, “to assist by example, by sober, friendly counsel, and by material aid in the establishment of democracy through out the world.” That statement by Wilson reflects the original meaning of the torch the Statue of Liberty holds aloft: the United States is a beacon of liberty. Emma Lazarus’s famous lines about welcoming immigrants amounted to a misinterpretation. True enough, Lloyd George, when he returned to England from Versailles, remarked that he had not done badly considering that he had been sitting between Napoleon (Clemenceau) and Jesus Christ (Wilson). But just what did Wilson mean by “the world” when he spoke of “establishing democracy”? I hazard the thought that he focused on the West and was not thinking of Borneo or the Congo, nor, surely, of launching invasions and occupations of Mesopotamia. With Bush in mind, Woodrow’s “Wilsonianism,” though naïve and though certainly not conservative, can be declared Not Guilty.

To define what “conservative” in fact means, the place to turn is Edmund Burke, the founder of modern political philosophy, the first political thinker to base his thought on empirical fact and on history. Both Hobbes and Locke were empiricists, but in their political thought they reasoned from assumptions they posited about human nature.

Hobbes took a relatively dark view of human nature, seeing human life in a mythical pre-social state of nature as “solitary, nasty, brutish and short.” Such creatures needed firm control. Locke, in contrast, was more optimistic, seeing man in a state of nature as governed by reason and thus requiring a much less intrusive government. The empiricism reflected by Locke, however, represented a new way of seeing the world and made political philosophy, beginning with Burke, possible. The opening pages of Locke’s Essay on Human Understanding (1690) possess the promise of a new and innocent dawn as Locke brushes aside much of Western philosophy, judging metaphysics to be a distraction from his focus on the facts of this world, with a view to improving it. As a result, we have the facticity reflected in the birth of the novel (Defoe), history (Gibbon, Hume), biography (Boswell), and Burke. In Robinson Crusoe (1719) we have the thrill of Locke’s empiricism as it appears in the prose of our first novel, that is, in the first distinctively modern form of literature:

The sixth day of our being at sea we came into Yarmouth Roads; the wind having been contrary, and the Weather calm, we had made but little Way since the Storm. Here we were obliged to come to an Anchor, and here we lay, the Wind continuing contrary—viz. at South-west—for seven or eight Days, during which time a great many Ships from Newcastle came into the same Roads, as the common Harbour where the ships might wait for a wind from the river.

Never before in literature had man been placed so thoroughly in a physical (empirical) environment. Never before had biography come to us with the detail Boswell uses in his Life of Samuel Johnson.

Burke does not begin with hypothetical “states of nature” but with the facts of history and human behavior. His great breakthrough into new territory—he wrote that he had been “alarmed into reflection” by the completely unique events in France—came in his Reflections on the Revolution in France (1790). To see his thought develop here in an exploratory way, then see him make further discoveries a year later, is to experience enormous intellectual excitement.

Once, while I was a graduate student at Columbia, I took a seminar in important thinkers with Jacques Barzun and Lionel Trilling. Barzun, in particular, liked to start by identifying the core of a great thinker’s thought. When it came to Burke’s Reflections on the Revolution, I offered: “Burke knows that if you tried to tie your shoes in the morning by means of reason you would never get out of the house.” That is, you tie your shoes by habit. Barzun nodded approval but gave this a social dimension, saying, “Burke wanted his morning newspaper delivered on time.” That is, the writing, manufacture, and delivery of that newspaper require a great many actions that are accomplished by habit. Social institutions are the habits of society.

What Burke faced in the radical philosophes across the Channel was something new: an actual society in France being attacked by abstract “rights of man.” To this he opposed the historic liberties of England. He saw the abstraction-based attack on an actual society as something new in history—and inherently dangerous. Part of the excitement of the Reflections consists in Burke confronting this novelty, searching for a vocabulary to describe it: “abstract theory,” “metaphysical dogma.” Burke was seeking terms to describe a belief system impervious to fact or experience, and he brought to bear a permanently valid analysis of human behavior and the role of social institutions. Burke’s “abstract theory” and “metaphysical dogma” we would call ideology.

Burke’s thought, however, did not conclude with the Reflections. And it is exciting to watch him responding to events as they unfold. By 1791, in his “Thoughts on French Affairs,” he recognized that the social forces converging against the absolute monarchy had made revolution inevitable. Saying that the French Revolution had occupied him for two years, he now recognized that:

If a great change is to be made in human affairs, the minds of men will be fitted to it; the general opinions and feelings will draw that way. Every fear, every hope will forward it; and they, who persist in opposing this mighty current in human affairs, will appear rather to resist the decrees of Providence itself, than the mere designs of men. They will not be resolute and firm, but perverse and obstinate.

Burke there moved from social structure in the Reflections to social process. In his great essay “The Function of Criticism at the Present Time” (1865) Matthew Arnold rightly described this as one of the great moments in modern thought.

In the free nations of the world at the present time, we have experienced changes that can be called revolutions, certainly the biomedical, also the women’s revolution, which has been one of the most far reaching in its implications. Not until 1912 was women’s suffrage on the agenda of a major American political party, Theodore Roosevelt’s Progressive (“Bull Moose”) Party. And women’s suffrage implied women’s equality. The sources of women’s demand for equality surely went back before 1912. The result today can be seen in almost any college or university graduate school, indeed in the armed forces. I know the subject is fraught with emotion and contention, but I consider analytically that the demand for the availability of abortion is a derivative of women’s equality: that is, equality requires that women be able to shape their lives as freely as men do. Many will find that analytical conclusion disagreeable. No doubt Burke hated to see that the French Revolution had been inevitable. Yet he knew that those who “persist in opposing [the implications of] this mighty current in human affairs … will not be resolute and firm but perverse and obstinate.”

While it is not incorrect to call Burke a conservative, it is also correct to call him an analytical realist. And I suggest that they may be the same thing. Indeed there is a sense in which any successful government must be based upon such analytical realism. Today, many historians judge that Franklin Roosevelt and Dwight Eisenhower were among the best presidents in the 20th century and rank them among the best in American history. I think Ronald Reagan will join them. All were realistic in handling the challenges they faced.

Bush has offered two justifications for his invasion of Iraq. First, that Saddam had weapons of mass destruction. None were discovered, and Bush’s claims, upon examination, have been found suspect. He has also projected a democratic Iraq, some of his statements being so disconnected from actuality as to qualify as pure ideology.

For example, at the American Enterprise Institute on Feb. 26, 2003, Bush put forth the following theory of human behavior:

Human cultures can be vastly different. Yet the human heart desires the same good things, everywhere on earth. In our desire to be safe from brutal and bullying oppression, human beings are the same. For these fundamental reasons, freedom and democracy will always and everywhere have greater appeal than the slogans of hatred and the tactics of terror.

Yes, human beings do dislike “brutal and bullying oppression,” but everything else there is false. The people going to work at the World Trade Center on 9/11 did not want the same things as Mohammed Atta. Historically, holiness, power, glory, conquest, and empire have had greater appeal than freedom and democracy. But Bush’s belief in the convergence and even identity of goals apparently is unshakable.

Speaking in Whitehall later in 2003, Bush was at it again, claiming, “The establishment of a free Iraq in the heart of the Middle East will be a watershed event in the global expansion of democracy … as the alternative to instability and hatred and terror.” Sure, “global expansion of democracy.” Andrew Bacevich of Boston University, a strategic thinker, wrote of Bush’s

fusion of breathtaking utopianism with barely disguised machtpolitik. It reads as if it were the product not of sober, ostensibly conservative Republicans but of an unlikely collaboration of Woodrow Wilson and the elder Field Marshal von Moltke.

On April 24, Bush repeated his fantastic theory in a speech in Irvine, California:

I based a lot of my foreign policy decisions on some things I think are true. One, I believe that there’s an Almighty, and secondly, I believe one of the great gifts of the Almighty is the desire in everybody’s soul, regardless of what you look like or where you live, to be free. I believe liberty is universal. I believe people want to be free. And I know that democracies do not war with each other. And I know that the best way to defeat the enemy, the best way to defeat their ability to exploit hopelessness and despair is to give people a chance to live in a free society.

Well, it is certainly taking a long time for what the Almighty wants to make its appearance in the actual world. Most of the world today is far from democratic. Over the long span of human history, democracy is almost invisible. In the real world, many people want a society in which the rules laid down in the Koran govern all activities and take absolute precedence over liberty. In Iraq, the radical cleric Moqtada al-Sadr has no interest in freedom, and al-Sadr is the power behind the present Prime Minister Maliki. What planet is Bush living on? He makes the “metaphysical dogma” of the radical philosophes seem sober by comparison.

Before long, students may be allowed to take entire history courses in the expanding library of books analyzing Bush’s Iraq calamity and other failures of his administration, which also derive from his tendency to privilege ideology over realism. Supply-side ideology led to large tax cuts and mountainous deficits. Privatization ideology led to an incomprehensible and unnecessarily expensive prescription-drug plan. No previous administration has produced such an outpouring.

Is Bush a conservative? Of course not. When all the evidence is in, I think historians will agree with Princeton’s Sean Wilentz, who wrote a carefully argued article judging Bush to have been the worst president in American history. The problem is that he is generally called a conservative, perhaps because he obviously is not a liberal. It may be that Bush, in the magnitude of his failure, defies conventional categories. But the word “conservative” deserves to be rescued. Against the misconception that Bush is a conservative, and appealing to Burke, all of our analytical energies must be brought to bear. I hope I have made a beginning here.

Jeffrey Hart is a senior editor of National Review and author, most recently, of The Making of the American Conservative Mind.

Administration speeding up on economic problems

The Associated Press
Thursday, November 6, 2008; 7:48 AM

WASHINGTON — At a time when most administrations are slowing down, the Bush White House appears to be speeding up _ at least when it comes to getting the $700 billion financial rescue program up and running.

Treasury Secretary Henry Paulson, President Bush’s point man on the gigantic program, is pushing his staff to do everything possible to show markets that the government is getting the money out the door to bolster the financial system and get banks to resume more normal lending.

On Wednesday, one day after Sen. Barack Obama won the presidency, the Treasury Department detailed how it planned to borrow a record $550 billion before the end of this year to back the bailout. Treasury said it would sell $55 billion in bonds next week, including a reintroduction of the three-year note _ all part of a massive borrowing effort required because of the cost of the bailout and a budget deficit that some believe could hit nearly $1 trillion next year.

The government’s surging financing needs are a stark reminder of the challenges awaiting Obama even as the current administration moves to implement its rescue program and the Fed fine-tunes its approach to the crisis.

The financial turmoil flared anew Wednesday with the Dow Jones industrial average plunging 486.01 points, or more than 5 percent, as investors absorbed more bad economic news with a report on the manufacturing sector showing that the segment of the economy where most Americans work had dipped into recession territory in October.

The selling carried over to Asia, where Japan’s Nikkei stock average retreated 5.7 percent and Hong Kong’s Hang Seng Index lost 6.7 percent in early trading Thursday.

Investors were braced for more bad news Thursday with the number of newly laid-off workers filing claims for unemployment benefits expected to remain around 480,000, a level that usually signals a recession.

Economists expect a separate report will show productivity slowed to a weak 0.8 percent rate of gain in the third quarter, far below the 2.8 percent increase in the second quarter. And they were looking for the slowdown in productivity to be accompanied by a rise in labor pressures with unit labor costs climbing at a rate of 2.8 percent, compared with the 0.5 percent rate of decline turned in during the second quarter.

And those reports were coming one day before the government was scheduled to report on unemployment for October, a report expected to show that the jobless rate shot up to 6.3 percent last month as businesses cut 200,000 workers from their payrolls, the 10th straight month of joblessness since January.

The government said last week that the overall economy, as measured by the gross domestic product, fell at an annual rate of 0.3 percent in the July-September quarter, reflecting the biggest drop in consumer spending in 28 years. Analysts are forecasting that GDP will fall by an even larger amount of around 2 percent in the current quarter. That would meet the classic definition of a recession of two consecutive quarters of declining GDP.

Mark Zandi, chief economist at Moody’s, said he thinks GDP will keep shrinking through the first half of next year, pushing the unemployment rate up to 8 percent before a solid rebound can begin.

Zandi expects this downturn to produce the most severe unemployment since the 1981-82 recession, when the jobless rate jumped to 10.8 percent, the highest since the 1930s.

“I think we are through the worst of the financial panic, but I expect the recession will last through next summer,” Zandi said.

While major bond trading firms are projecting that the government will need to borrow a record $1.4 trillion during the current budget year, which began Oct. 1, Zandi expects the borrowing costs to be closer to $2 trillion.

He noted the size of the rescue program that needs to be financed and the likelihood that Obama and a Congress with larger Democratic majorities will pass a second economic stimulus program of between $150 billion and $300 billion.

On Wednesday, the Federal Reserve said it will slightly boost the interest rates it pays banks on their required reserves and the excess reserves they choose to deposit with the Fed. The rescue bill authorized the central bank to start paying interest rates to commercial banks on the reserves. Policymakers hope the move will further bolster the banks’ reserves.

In other developments, Treasury also gave Congress its first report on the operation of the bailout fund, detailing the $125 billion the government spent last week to buy stakes in nine of the country’s biggest banks. The bailout legislation requires Treasury to issue reports each time its spending passes a $50 billion marker.

Paulson has pledged to work with Obama to ensure a smooth transition. He has already set up desks and phone lines at the department where Obama’s incoming Treasury team can work between now and the inauguration on Jan. 20.

In light of the crisis, Obama is expected to quickly name members of his economic team. Former Treasury Secretary Lawrence Summers, who served in the Clinton administration, and Timothy Geithner, president of the New York Federal Reserve Bank, are among the names being mentioned for Treasury secretary.


AP Business Writers Marcy Gordon and Ellen Simon contributed to this report.


About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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