Saturday, October 25, 2008

Ethics in Panic

Tibor R. Machan

Some people I have known for ages, who have held firm, as I have, to the conviction that only those public policies are worth one’s support that champion liberty above everything else, appear to me to be shaking their heads just now. They are even talking about how their earlier position may be some kind of idealism or utopianism in need of moderation.

But support for the free society is not idealism or utopianism. It’s the recognition that men and women live best if their communities are governed by the principles of individual rights, to life, liberty, private property, and by the complete renunciation of coercive force among people.

The perfect is, indeed, the enemy of the good and aiming for perfection, some kind of final answer, in human affairs is a mistake—maybe once time ends that will be reasonable to seek but while history is still in process, the best answers will always just be the most up to date, never the last.

Anyway, the current economic fiasco has shaken some people’s confidence in the soundness of the free society. To me that’s akin to being shaken in one’s conviction in an honest and loving marriage because, well, they are rare. Free markets do not produce the mess that we are witnessing. Free market champions have forecast this mess for over a century, making the point that the more we permit government to attempt to direct the economy, the more we are inviting catastrophe, just as this has happened elsewhere. The apparent exceptions occur where for a while some nearly free good, like oil or agricultural abundance, made it possible to be wealthy without free minds and free markets. Even a prison can flourish if supplied with innumerable valuables no one needs to think about and work for.

But that is not the normal state of things in human communities. So the principle that men and women must be free of government regimentation—which is, if you think about it, the regimentation of some men and women of all the rest of them—must not be compromised, let alone abandoned. For a while it is possible to fake reality, to have a measure of economic prosperity without freedom but in time that comes to a screeching halt. Trying to live off money that is borrowed without collateral, without the realistic prospect of paying it back, and with the groundless hope that yet unborn generations will simply take on the debt without protest, is a blueprint for economic disaster. And to try to cope with the disaster with more of the same is catastrophic.

But panic tends to test people’s resolve. Integrity is tough to maintain when the fruits of years and years of economic malpractice become unavoidable anymore. This is true, of course, in all cases of doing violence of good sense, to decency, to virtue, to justice. Such accommodating, “pragmatic” ways tend mainly to beget even worse malpractice.

An when one witnesses the few VIPs in one’s community—who gave at least lip service to the principles of the free market cave in before a bunch of bullies in Washington (and, yes, California Representative Henry Waxman, in front of whom Alan Greenspan betrayed his supposedly free market ideas, is the fiercest bully on the Hill)—no wonder that one’s resolve is weakened. That’s especially so when one’s confidence in liberty is mostly based on common sense, something that tends to become brittle when facing the ill effects of misguided political economy.

It is interesting that many people haven’t a clue as to what alternative to the free market they should support but announce simply that something needs to be done in Washington, the very place where all of this got started to go south. It is as if when a medical charlatan makes a royal mess of one’s health one insisted to going back to that quack for emergency treatment!

No. The answer is to ride this out with as little reliance on the policies that brought it all about, namely, government meddling in the economy. Let the referees of the game learn to do their proper job, then let the athletes resume play free of bureaucratic interference, instead of making things worse by inserting themselves even more into something they know nothing about.

Friday, October 24, 2008

Greenspan versus Rand on Self-Interest

Tibor R. Machan

Nearly every time Alan Greenspan is written about in the media, his early association with Ayn Rand is remarked upon. The impression is often left that Greenspan holds the same views as Rand did, especially about the ethics of egoism or selfishness.

Some will no doubt remember that Ayn Rand wrote a little book, The Virtue of Selfishness, A New Concept of Egoism, in which she defended the idea that everyone has a moral responsibility to strive to live successfully, to achieve happiness in life. This does include one’s economic flourishing but is by no means confined to it. Indeed, one interpretation of Randian egoism is that everyone must first discover what would make him or her happy and then seek to attain that goal.

When economists talk of self-interest—the way Alan Greenspan spoke of it in his testimony on October 23rd to the House Committee on Oversight and Government Reform—they have something very different in mind. What they tend to mean by self-interest is a supposed inner drive we all have to seek to further what we like, what pleases us, including, of course, our prosperity. From this view they derive many of their conclusions regarding the way people conduct themselves in the market place. So, for example, Greenspan said that “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.” To Representative Henry Waxman’s question of whether his ideology pushed him to flawed thinking that has contributed to the current financial fiasco, Greenspan replied “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

What exactly is the ideology that Waxman had in mind that supposedly “pushed [Greenspan] to make decisions that you wish you hadn’t made”? It was not made clear either by Waxman, Greenspan, or those who reported the exchange in The New York Times. But it is fairly evident from the context that they had in mind the standard neo-classical economic notion that everyone always, automatically, pursues his or her self-interest which has a substantial economic component to it. And this is supposed to be especially so with Wall Street firms, including “lending institutions.”

In a less unnatural language the idea Greenspan gave voice to means roughly that those who work in the lending industry would be motivated by their professional responsibility to serve their clients properly, not unlike it is expected that doctors, attorneys, psychiatrists or other professionals do. But it is not part of this language that professionals are driven to serve their clients competently, conscientiously. No, outside of the social science of economics it is pretty much understood that professionals can carry on properly, ethically, or fail to do so. Indeed, their self-interest as professionals may well be neglected and they may yield to act to promote other objectives, some of them at times induced by various political pressures and contingencies.

For example, if politicians establish regulations that violate the laws of sound economics, this can promote irresponsible conduct on the part of professionals in lending institutions and throughout the widely integrated market place. And this possibility was not at all touched upon by Greenspan and others at the hearings although it was raised at an earlier time.

It is true that the professional interests or objectives of lenders would tend, in the main, to coincide with the best interest of their clients, as this is true in other professional-client relationships, except when various bureaucratic and political objectives interfere. But when President Clinton and many others in Washington, D.C., insisted that lenders ignore the standards of proper lending because adherence to them would leave out a pretty sizable segment of the voting population from among those who would receive loans to purchase homes, this changed the economic dynamics considerably. It created incentives for both lenders and buyers to act imprudently, rashly, wildly even, and the overall effect of it all came to be the current fiasco just as had been forecast at the time (and reported by, you guessed it, The New York Times—see Stephen A. Holmes’ report on September 30, 1999, for example).

The ideology that Greenspan seems to have embraced is not what Ayn Rand taught. Rand advised that we be prudent, strive for success, including in our economic lives. She didn’t believe, as Greenspan and others seem to have, that people, including “lending institutions,” will necessarily pursue their self-interest. Had market agents followed Rand’s advice, this fiasco would have been avoided. Greenspan himself should have studied Rand more carefully.

Thursday, October 23, 2008

Socialism and the Rich
Tibor R. Machan
There has been some silly outrage on the part of his supporters at the claim that Senator Barack Obama may be a socialist.  The idea arose after in his exchange with "Joe the Plumber"--and I haven't investigated whether Joe is a plumber--the Democratic presidential hopeful remarked that he supports "spreading the wealth."  Socialism is committed, in part, to the idea that all wealth apart from some purely personal stuff (like one's toothbrush) is in fact collective, public property.  In the Communist Manifesto Marx and Engels wrote that the first order of business for socialists is the abolition of private property.  
This notion, by the way, stems from something more basic.  That's that there are no human individuals, only social wholes or bodies of which those we take to be individual human beings are, in fact, mere cells. 
And then, of course, there is no room for private property either, nor to any right to it.  Which is why the wealth needs to be spread.  It belongs to us all.  (Only this  poses the problem of which individuals will decide what use will be made of this wealth!)
A colleague of mine disputed the view that Senator Obama is advocating socialist measures by observing that Warren Buffet is one of his economic ad visors.  This objection assumes that the rich are enemies of socialism, which, of course, is flatly wrong.  But it does again reflect a Marxist idea, namely, that of economic determinism: because the rich are surrounded by wealth, they will hold views that are favorable to wealth creation.  Only this is flatly contradicted by the plain historical fact that socialism has been supported by many wealthy people.  A most notable example is Armand Hammer, an American industrialist who was an avid fan of the Soviet Socialist Republic during Lenin's reign and even Stalin's, if I recall right.  And Buffet himself is a great fan of wealth redistribution, which is one reason he supports the death tax that deprives the relatives of wealthy people from making use of this wealth once the original owners dies.  (This would make continuing a productive enterprise impossible since the government would take possession of the wealth required for that)
Quite a few people who are personally savvy when it comes to running, let alone building, a vast business enterprise haven't much of a clue about what are the soundest principles of political economy.  We may say they are micro economically but not macro economically prudent. They are often sentimentalists, apart from running their own firms, and give their wealth to various utopian communities an projects.  Sometimes they feel guilty for having wealth in the first place, given how bad the reputation of riches has been from time immemorial.  Both in secular philosophers, such as Aristotle's, and a many theological systems, the idea of profit has been denounced as evil, even while poverty is decried as well.  One thing though is clear--just because someone is wealthy, it doesn't follow that one will support the system of economic and political principles that most effectively promote wealth creation.
Nor is it the case that someone who promotes socialist notions, like Senator Obama is, must do so in every instance, consistently.  One can be predominantly socialist but not go all the way, like a Hugo Chavez who will try to silence all of his opponents. Nonetheless, the socialist elements of such a person's outlook can undermine such goals as creating wealth in a society, lifting a poor from their poverty in something close to an ongoing, continuous fashion.
When someone sees that Senator Obama has very strong socialist tendencies it doesn't even mean that his opponent, Senator McCain is necessarily a better candidate for president.  After all, the continuation of the costly war in the Middle East could just as easily damage the American economy as the adoption of various socialist public policies can.
Most people haven't a fully worked out, consistent system of political economic ideas, even when they aspire to be president of the United States of America.  It is important, however, for American citizens to learn whether some of their more basic beliefs are likely to lead the country in the direction of a whole impractical and, ultimately, misanthropic political economic era. 

Tuesday, October 21, 2008

Why Not Socialism?

Tibor R. Machan

It is no scare tactic to raise the specter of a socialist America these days. First, it was Senator Hillary Rodham Clinton whose candidacy promised to take socialism front and center as America’s official ideology. Clinton’s book, It Takes A Village (Simon & Schuster, 1996), unabashedly affirms the socialist ideal, arguing that individualism must be rejected in favor of collectivism, wherein all of us are part of one social whole, exactly as Karl Marx had argued in several of his works. (See, most accessibly, Marx’s posthumously published Grundrisse for a very clear example.)

Senator Barack Obama, too, clearly shows a preference for the socialist system, as in his exchange with Joe the Plumber where he made it crystal clear that he wants to spread the wealth no matter whose wealth it is (certainly not his own) and in his life long association with socialist groups and projects.

Senator Joe Biden, too, has his socialist credentials. During the hearings of the Senate Judiciary Committee concerning the nomination to the U. S. Supreme Court of Clarence Thomas, Senator Biden openly ridiculed the ideas of those who champion the right to private property. He held up Professor Richard Epstein’s book, Takings: Private Property and the Power of Eminent Domain (Harvard University Press, 1985), which affirms that principle, in order to openly reject its ideas. (It was Marx and Engels, in their Communist Manifesto, who made it abundantly clear that to advance toward socialism and, in time, communism, the principle of the right to private property must be abolished!)

Variations of socialism have, of course, managed to get established in different societies without any violent revolution--just consider how National Socialism triumphed in Germany’s Weimar Republic, ushering in Hitler’s regime, and how Hugo Chavez got elected in Venezuela and promptly installed his version of fascistic socialism. Marx himself pointed this out in a speech he gave in Holland in 1983, arguing that in more or less democratic countries the revolution can be achieved via the ballot box.

The notion that it cannot happen here is completely silly. Yes, America has a pretty good constitution and its Bill of Rights would seem to be a good defense against establishing a socialist or fascist regime. In fact, however, no written constitution alone can fend off such a development, not without the beliefs of the bulk of the citizenry backing up the ideas and ideals of that anti-socialist constitution. Given how powerful the temptation is to seek the help of an all powerful government to promote one’s economic agenda of taking from Peter to provide for Paul--the central element of Senator Clinton’s and now Obama’s health care proposal and, of course, of the idea of "spreading the wealth" and given how weak is the conviction in America of the basic principles of the Declaration of Independence--all that stuff about everyone having unalienable rights to one’s life, liberty, and pursuit of happiness--the prospect of real socialism in the U. S. A. is no longer a version of McCarthyism.

Of course many Americans would be shocked to learn that they are being complicit in ushering in socialism in their country. They only want moderate wealth redistribution--they want to spread the wealth but within limits; they want their children to be socialized, along lines spelled out in Senator Clinton’s book, but only to a point. In short, most Americans believe in what political theorists now call market socialism--a kind of impossible combination of socialism and the free market. They want a robust welfare state.

Trouble is there is no coherent idea of market socialism or even the welfare state that provides solid limits to the power of government and secures an individual's rights to life and liberty, let alone property. The pursuit of the public interest, the common good, the welfare of society as a whole, necessarily amounts to pursuing the good of just some members of society as understood by a few of those members. The only valid public interest is what the American Founders identified, namely, securing everyone’s basic, individual rights to their lives, liberty and pursuit of happiness. Every other idea of the welfare of society or the public or some such notion amounts to handing power to some few members who will then wield it without a clue as to what else to aim for but their own agenda. There is, in other words, no valid socialist idea, no valid welfare of the state, nada! It all comes down to the dictatorship of a few, just as it did in Soviet Russia and Nazi Germany, Cuba, North Korea, China, and now Venezuela. The rest is all some feeble attempt to square the circle.